<PAGE> 1
As filed with the Securities and Exchange Commission on January 24, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report: January 9, 1997
(Date of earliest event reported)
INLAND REAL ESTATE CORPORATION
(Exact name of registrant as specified in the charter)
Maryland 000-28382 36-3953261
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
2901 Butterfield Road
Oak Brook, Illinois 60521
(Address of Principal Executive Offices)
(630) 218-8000
(Registrant's telephone number including area code)
n/a
(Former name or former address, if changed since last report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
Maple Park Place Shopping Center, Bolingbrook, Illinois
On January 9, 1997, the Company acquired a Neighborhood Retail Center
located at Naperville and Boughton Roads in Bolingbrook, Illinois known as
Maple Park Place Shopping Center ("Maple Park") from KBS Retail Limited
Partnership, a Delaware limited partnership, an unaffiliated third party, for
approximately $15.3 million. The Company funded the purchase using: (i) the
proceeds of a short-term loan maturing April 7, 1997 in the amount of
approximately $8.0 million from Inland Mortgage Investment Corporation
("IMIC"), an Affiliate of the Company (the "Short-Term Loan"); and (ii) cash
and cash equivalents. The Company did not pay any fees in connection with the
Short-Term Loan, which bears interest at a rate of 9% per annum. A majority of
the Company's board, including a majority of the Independent Directors, has
approved the terms and conditions of the Short-Term Loan. It is anticipated
that the proceeds of a loan from an unaffiliated third party will be used to
refinance the Short-Term Loan on or before its maturity date. The purchase
price for Maple Park was approximately $69.52 per square foot, which the
Company concluded was fair and reasonable and within the range of values
indicated in an appraisal received by the Company and presented to the
Company's board of directors.
Maple Park was built in 1992, with expansions made in 1994, and
consists of a one-story building aggregating 220,095 rentable square feet. As
of January 9, 1997, Maple Park was 100% leased. In evaluating Maple Park as a
potential acquisition, the Company considered a variety of factors including
location, demographics, tenant mix, price per square foot, existing rental
rates compared to market rates, and the occupancy of the center. The Company
believes that the center is located in a vibrant economic area. Although 75.3%
of the rentable square feet at Maple Park is leased to two tenants, the
Company's management believes that retenanting of any space which is vacated in
the future should be accomplished relatively quickly and at rental rates
comparable to those currently paid by the tenants at the facility. The Company
did not consider any other factors materially relevant to the decision to
acquire the property.
The Company does not anticipate making any significant repairs and
improvements to Maple Park over the next few years. Nevertheless, a
substantial portion of any such cost would be paid by the tenants.
The table below sets forth certain information with respect to the
occupancy rate at Maple Park expressed as a percentage of total gross leasable
area and the average effective annual base rent per square foot.
<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
------------ -------------------- ---------------
<S> <C> <C>
1996 100% $7.58
1995 94 8.15
</TABLE>
Tenants leasing more than 10% of the total square footage are Kmart,
which leases 109,033 square feet, or approximately 49.5% of the rentable square
feet and Eagle Foods, which leases 56,706 square feet, or approximately 25.8%
of the rentable square feet. Kmart is a national discount retailer of
household goods and clothing and Eagle Foods is a national grocery store chain.
The lease with Kmart requires Kmart to pay base rent equal to $5.40 per square
foot per annum payable monthly until January 31, 2020. The Kmart lease
contains no option to renew. The lease with Eagle Foods requires Eagle Foods
to pay base rent equal to $10.16 per square foot per annum payable monthly
until October 31, 2002 and $10.41 per square foot per annum payable monthly
until August 31, 2017. The Eagle Foods lease contains no option to renew.
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For federal income tax purposes, the Company's depreciable basis in
Maple Park will be approximately $12,205,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.
Real estate taxes payable in 1996 for the tax year ended 1995 (the
most recent tax year for which information is available) were $358,415. The
real estate taxes payable were calculated by multiplying Maple Park's assessed
value by an equalizer of 1.00 and a tax rate of 8.0013%.
At January 9, 1997, a total of 220,095 square feet were leased to
twenty tenants at Maple Park. The following tables set forth certain
information with respect to the amount of and expiration of leases at this
Neighborhood Retail Center.
<TABLE>
<CAPTION>
Rent
Square Current per
Feet Lease Renewal Annual Square
Lessee Leased Ends Options Rent Foot
------ ------ ----- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Forrestor 1,400 02/1997 1/5 yr. $22,400 $16.00
Vision
Jamaica Me 1,400 04/1999 19,600 14.00
Crazy
One Hour 1,400 03/1997 1/5 yr. 23,800 17.00
Cleaners
Cellular One 1,610 03/1998 1/5 yr. 20,930 13.00
Fantastic 1,190 02/2002 2/5 yr. 19,040 16.00
Sams
Pet Club 2,730 1/1997 30,712 11.25
Joann's 5,070 10/2000 1/4 yr. 55,770 11.00
Hallmark
Sonia Video 4,124 10/1997 43,302 10.50
GNC 1,600 10/1999 1/5 yr. 25,600 16.00
Dentist 1,600 09/2005 2/5 yr. 30,912 19.32
Gold Gym 13,200 04/2006 105,600 8.00
Associates
Financial 3,200 10/1999 1/5 yr. 41,600 13.00
Inbound 4,012 08/1999 1/5 yr. 60,180 15.00
Sports
Mail Boxes 1,200 12/1999 1/5 yr. 19,200 16.00
Prudential
Properties 3,600 08/1999 1/5 yr. 46,800 13.00
Once Upon a 2,400 03/2000 1/5 yr. 33,600 14.00
Child
Brueggers 2,295 01/2005 36,720 16.00
Bagels
Prairie Paint,
J.C. Licht 2,325 11/1998 1/3 yr. 37,200 16.00
Eagle Foods 56,706 08/2017 576,133 10.16
Kmart 109,033 01/2020 588,778 5.40
</TABLE>
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<TABLE>
<CAPTION>
Average Percent
Base Percent of of
Rent Total Annual
Approx. Per Building Base
GLA of Annual Square GLA Rent
Number Expiring Base Rent Total Foot Represented Represented
Year of Leases of Annual Under by by
Ending Leases (square Expiring Base Expiring Expiring Expiring
December 31, Expiring feet) Leases Rent(1) Leases Leases Leases
- ------------ -------- ----- ------ ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 4 9,654 $120,214 $1,809,262 $12.45 4.39% 6.53%
1998 2 3,935 58,130 1,728,492 14.77 1.80 3.36
1999 6 15,012 217,386 1,676,871 14.48 6.82 12.96
2000 2 7,470 96,705 1,462,096 12.95 3.39 6.61
2001 - - - 1,363,455 - - -
2002 1 1,190 22,015 1,368,279 18.50 0.50 1.61
2003 - - - 1,358,219 - - -
2004 - - - 1,359,610 - - -
2005 2 3,895 74,923 1,359,610 19.24 1.77 5.51
2006 1 13,200 105,600 1,284,687 8.00 6.00 8.22
</TABLE>
(1) No assumptions were made regarding the releasing of expired leases. It
is the opinion of the Company's management that the space will be released at
market rates.
The Company received a letter appraisal prepared by an independent
appraiser who is a member in good standing of the American Institute of Real
Estate Appraisers which reported a fair market value for the Maple Park
property, as of December 10, 1996, of not less than $15.3 million. Appraisals
are estimates of value and should not be relied on as a measure of true worth
or realizable value.
Item 7. Financial Statements and Exhibits
To be subsequently filed
(c) Exhibits
10.1 Agreement of Purchase and Sale by and between KBS Retail Limited
Partnership and Inland Real Estate Corporation dated December 20, 1996
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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 hereunto duly authorized.
Inland Real Estate Corporation
(Registrant)
By: /s/ Kelly Tucek
----------------------------------
Kelly Tucek
Chief Financial and Accounting Officer
Date: January 24, 1997
-------------------
<PAGE> 1
Exhibit 10.1
AGREEMENT OF PURCHASE AND SALE
Inland Real Estate Corporation, a Maryland corporation ("Purchaser")
agrees to purchase, and KBS Retail Limited Partnership, a Delaware limited
partnership ("Seller") agrees to sell, the land situated in the Village of
Bolingbrook, County of Cook, State of Illinois, commonly known as the Maple
Park Place Shopping Center and legally described on Exhibit A attached hereto
and made a part hereof (the "Property"). Additionally included are all rights,
privileges, easements and appurtenances thereto, including, but not limited
to, any easement for ingress, egress and parking, and all contracts,
agreements, utility contracts or other rights relating to the ownership, use
and operation of the Property.
1. Purchase Price. The purchase price for the Property shall be
$15,262,150.00, subject to customary prorations, payable by wire transfer of
immediately available funds at Closing, at which time Seller shall cause, at
its sole cost, the release of any liens and encumbrances secured by the
Property, subject to the provisions of Paragraph 4.
2. Deposit. On or before December 24,1996, Purchaser shall deposit
$250,000.00 (the "Deposit") with Chicago Title Insurance Company ("Escrow
Holder") pursuant to the terms of an escrow in Escrow Holder's form of Strict
Joint Order Escrow Trust Instructions, to secure Purchaser's performance
hereunder. All interest payable with respect to the Deposit, less investment
fees, if any, shall be added to and become a part of the Deposit. The Escrow
Holder shall return the Deposit to Purchaser or Seller only upon a written
joint order from Seller and Purchaser. Notwithstanding the foregoing, prior to
December 20, 1996, Purchaser shall have the unilateral right to request the
return of the Deposit from the Escrow Holder if the Board of Directors
approval has not been obtained as provided in Paragraph 7 below.
3. Review of Property. Purchaser acknowledges that Seller has delivered
to Purchaser the documents referred to in the correspondences attached hereto
as Exhibit D. Seller has made available to Purchaser its files relating to the
Property and provided Purchaser and its agents or consultants with access to
the Property to inspect the Property to determine its present condition.
Purchaser has determined, in its sole discretion, that all matters relating to
the Property, including, without limitation, the physical, economic and
environmental condition of the Property, are
<PAGE> 2
acceptable. Prior to and for the three (3) year period following Closing,
Purchaser shall have the right to have its auditors and/or accountants conduct
an audit of Seller's books and records relating solely to the Property and the
Property's operations for the period of time prior to Closing. Seller will
cooperate with Purchaser and its accountants/auditors and will make a
representation to its accountants/auditors on form prepared by Seller based
solely upon Seller's best knowledge and belief, without independent
investigation, that the income and expense information contained in Seller's
Property books and records are materially complete, true and correct and
fairly represent the operations of the Property for the period represented.
Purchaser hereby agrees to forever indemnify, defend and hold harmless Seller
from and against any claim, damage, loss, liability, cost or expense
(including reasonable attorney's fees and court costs) to which Seller is at
anytime subjected by any party as a result of Seller's compliance with the
terms and conditions of this Section 3, except as a result of Seller's breach
of the above representation. Purchaser further agrees that no information,
books or records provided pursuant to this Section 3 shall be the basis of any
claim by Purchaser against Seller with respect to the sale of the Property to
Purchaser or any representation or warranty given by Seller with respect to
the Property. This covenant will survive the Closing.
4. Title and Survey. Seller has delivered to Purchaser a copy of a title
commitment for the Property, copies of all documents relating to title
exceptions referred to therein, and a copy of a recent survey of the Property
(the "Existing Survey"), which Purchaser has approved. Seller shall deliver to
Purchaser, prior to the Closing, an updated survey of the Property
substantially similar to the Existing Survey and certified to Purchaser, its
land trust, its beneficiary, and Lasalle National Bank, N.A. ( the "New
Survey"), which certification shall be in the form of Exhibit F attached
hereto. Purchaser agrees to take title subject to the title exemptions listed
on Exhibit D attached hereto (the "Permitted Exceptions"). Seller shall use
reasonable efforts to cure any title or survey objection (i.e., any survey
defect reflected on the New Survey which was not reflected on the Existing
Survey) other than the Permitted Exceptions, either by removing same or by
insurance over such objected-to exception, subject to the provisions set forth
below. The policy of title insurance to be issued by Escrow Holder shall be a
1970 ALTA Form B Owner's Title insurance Policy in an
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<PAGE> 3
amount equal to the purchase price, subject to the Permitted Exceptions and
shall contain full extended coverage over all general title exceptions
contained in such policy, a 3.1 zoning endorsement with parking, a tax parcel
identification endorsement confirming that all property included with each tax
parcel identification number affecting the Property consists solely of
property included within the definition of Property herein, a location
endorsement, an access endorsement, a contiguity endorsement, and an
endorsement insuring no violation of building lines, covenants, easements or
restrictions pertaining to the Property (collectively, the "Title Policy").
Seller shall work with the Escrow Holder to obtain such endorsements.
Purchaser shall satisfy itself (i) with regard to the form of the above
endorsements and (ii) that the New Survey does not raise any new title
defects, and the Closing shall be contingent upon the satisfaction of such
matters. If, prior to Closing, Seller is unable to remove or provide insurance
over any exceptions to title or survey matters that arise after the date
hereof and are not Permitted Exceptions, and Purchaser is unwilling to take
title subject thereto, then Purchaser may terminate this Agreement and the
Deposit, and all interest thereon, shall be returned to Purchaser. However, if
such exceptions to title or survey matters are not removed or insured over by
the date of the Closing, Purchaser may elect to accept title subject thereto
and to discharge any tax, mortgage, financing or mechanic's lien of any amount
or any other unpermitted monetary liens or encumbrances which can be
discharged by the payment of $150,000 or less and to deduct from the purchase
price the amount necessary to do so. The above referenced $150,000 limit shall
not be applicable to mortgages or liens recorded against the Property with the
consent of Seller.
5. Representations and Warranties.
5.1 Representations and Warranties of Seller. As used in this Section
5.1, the phrase "to the best knowledge of Seller" shall mean and be limited to
the actual knowledge of Hersch M. Klaff, Renee Epstein, the person responsible
for the day to day management of the Property, or Margaret Fogarty. Seller
hereby warrants and represents to Purchaser as follows:
(a) Seller has received no written notice of any litigation,
special assessments, condemnation, environmental, zoning or other
land-use regulation proceedings and, to the best knowledge of Seller,
none of the above proceedings are
3
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either pending or planned to be instituted with respect to the
Property or any part thereof
(b) That this Agreement has been, and all the documents to be
delivered by Seller to Purchaser at Closing will be when so delivered,
duly authorized, executed, and delivered by Seller, are or will be
legal, valid and binding obligations of Seller, will be sufficient to
convey title, and do not and will not at Closing violate any
provisions of any agreement to which Seller or the Property is
subject.
(c) That Seller is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended,
and that Seller will furnish to Purchaser, prior to Closing, an
affidavit in form satisfactory to Purchaser confirming the same.
(d) That the documents previously delivered to Purchaser are true
and correct and complete copies, and, to the best knowledge of Seller,
are in full force and effect, without default by any party and without
any right of set-off except as disclosed in writing at the time of
such delivery.
(e) To the best knowledge of Seller, the Property is not in
violation of any federal, state or local law, ordinance or regulation,
including those relating to industrial hygiene, environmental
conditions, hazardous wastes or toxic materials on, under or about the
Property, including, without limitation, soil and groundwater
conditions. Seller further represents and warrants that neither Seller
nor, to the best knowledge of Seller, any third party has used,
manufactured, stored or disposed of on, under or about the Property or
transported to or from the Property, any flammable explosives,
radioactive materials or wastes, hazardous materials or wastes, toxic
materials or wastes, asbestos, asbestos-containing materials, PCBs,
underground storage tanks, or other similar materials or wastes.
(f) Except for Seller and the tenants of the Property (the
"Tenants"), to the best knowledge of Seller, there are no persons in
possession or occupancy of the
4
<PAGE> 5
Property or any part thereof, nor are there any persons who have
possessory rights in respect to the Property or any part thereof.
(g) The only leases affecting the Property are listed on Exhibit
B attached hereto and made a part hereof (the "Leases"), which Leases
have not been amended, modified or supplemented since the date
thereof, which Leases have been previously provided to Purchaser and
approved by Purchaser. Except as set forth in the Leases, to the best
knowledge of Seller, there are no options to purchase or rights of
first refusal, no rights of off-set against Seller as a result of any
work performed or monies advanced by the tenant and, to the best
knowledge of Seller, no delinquencies. To the best knowledge of
Seller, neither the landlord nor the Tenants under the Leases are in
default under the Leases and no event has occurred or condition exists
which would, with the passage of time or giving of notice, constitute
a default under the Leases.
(h) Other than the Leases, the Permitted Exceptions and any
agreements that may have been entered into by the Tenants with any
person or entity other than Seller or any agent or employee of Seller,
to the best knowledge of Seller, there are no construction contracts,
service contracts (which will survive the Closing) or other agreements
or contracts or commitments or oral or written understandings in
existence affecting the Property or the use thereof.
(i) Seller has not (i) made a general assignment for the benefit
of creditors, (ii) filed any voluntary petition in bankruptcy or
suffered the filing of any involuntary petition by Seller's creditors,
(iii) suffered the appointment of a receiver to take possession of all
or substantially all of Seller's assets, (iv) suffered the attachment
or other judicial seizure of all, or substantially all, of Seller's
assets, (v) admitted in writing its inability to pay its debts as they
come due, or (vi) made an offer of settlement, extension or
composition to its creditors generally.
(j) From and after the date hereof through and including the
Closing, Seller shall not do, suffer or permit, or agree to do, any of
the following:
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<PAGE> 6
(i) enter into any transaction affecting the Property out
of the ordinary course of business which will diminish or
otherwise affect Purchaser's interest under this Agreement or
in or to the Property or which will prevent Seller's full
performance of its obligations hereunder, or
(ii) sell, lease, encumber (or permit the principal
outstanding balance of any mortgage or mortgages encumbering
the Property, or any part hereof, to exceed the Purchase
Price), or grant any interest in the Property or any part
thereof in any form or manner whatsoever, or
(iii) enter into, amend, waive any rights under,
terminate or extend the Leases without Purchaser's prior
written consent thereto, which consent shall not be
unreasonably withheld or delayed by Purchaser.
(k) Seller shall furnish to Purchaser all disclosures and other
information required pursuant to the Illinois Responsible Property
Transfer Act of 1988, as amended, or shall execute and deliver at
closing an "IRPTA Affidavit" stating that no filing is required
pursuant to the provisions of the Illinois Responsible Property
Transfer Act of 1988, as amended.
(1) To the best knowledge of Seller, all lease commissions and
tenant improvement expenses, if any, incurred by Seller in connection
with the Leases have been paid in full by Seller, and no leasing
commissions or tenant improvement expenses will become due and owing
after the Closing in connection with the Leases as a result of lease
renewal or otherwise.
(m) To the best knowledge of Seller, the information to be
furnished by Seller on which the computation of prorations is based
shall be true, correct and complete in all respects.
(n) To the best knowledge of Seller, the operating and financial
statements provided by Seller are true, correct and complete as of the
date thereof and fairly represent the income and expenses of the
Property for the periods covered by such
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statements, but are not, in any way, a representation or warranty with
respect to the future operations, revenues or expenses of the
Property.
(o) There are no items of personal property used for the specific
and ongoing maintenance and operation of the Property owned by Seller
and located at the Property.
(p) Seller has not received written notice of any code violation
pertaining to the Property and, to the best knowledge of Sellers, do
not know of any such code violations.
5.2 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller that this Agreement has been, and all the
documents to be delivered by Purchaser to Seller will be, duly authorized,
executed, and are or will be legal, valid, and binding obligations of
Purchaser, are or will be enforceable in accordance with their respective
terms, and do not and will not at Closing violate any provisions of any
agreement to which Purchaser is subject.
5.3 Continuation. The continued accuracy in all respects of the aforesaid
representations and warranties shall be a condition precedent to the parties'
obligation to close. Seller shall promptly advise Purchaser if at any time
prior to Closing any of the representation or warranties of Seller are
incorrect or untrue. If any of said representations and warranties of Seller
shall not be correct at the time the same is made or as of the Closing,
Purchaser, as its sole remedy, may elect in its discretion to terminate this
Agreement whereupon the Deposit shall be returned to Purchaser and there shall
be no further liability on the part of either party to the other, except that
if the breach of the representation or warranty was willful or intentional,
Purchaser may pursue any rights it may have in law or in equity.
Notwithstanding the foregoing and provided the Closing occurs, any fact,
condition or circumstance known or disclosed in writing to Purchaser as of the
Closing, and contradicting or rendering untrue any warranty or representation
made by Seller under this Agreement, shall render such warranty or
representation superseded and of no effect to the full extent of such
contradiction or untruth. Seller shall only be responsible for breaches of
representations and warranties where the breach in question existed as of the
Closing. If Purchaser first discovers, after the Closing, a breach
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<PAGE> 8
of any such representation or warranty made in this Agreement by Seller then,
in addition to the survival limitations set forth below in Paragraph 8.13
below, Purchaser shall, as a condition of enforcing its rights under this
Agreement, notify Seller, in writing of the specifics of such breach and, if
curable, shall further afford Seller a cure period consisting of thirty (30)
days. If Seller fails to so cure or remedy such breach to Purchaser's
reasonable satisfaction, then Purchaser's sole remedy against Seller shall be
to file an action or proceeding against Seller (but not against any general or
limited partners of Seller) for the actual (not consequential) damages suffered
by Purchaser as a direct result of such breach(es), which damages may be
recoverable from the Fund (as hereinafter defined).
5.4 Condition of Property. Purchaser acknowledges that it has made a
thorough investigation of the Property. Purchaser also acknowledges that,
except as set forth in Section 5.1 above, Seller has not made and does not
hereby make any representations, warranties or other statements as to the
condition of the Property and Purchaser acknowledges that at Closing it is
purchasing the Property on an "as is", "where is" basis and without relying on
any representations and warranties of any kind whatsoever, express or implied,
from Seller, its partners, employees, shareholders, officers, directors,
agents or brokers as to any matters concerning the Property, except as
expressly provided elsewhere in this Agreement. Except as expressly provided
elsewhere in this Agreement, Seller specifically disclaims any and all
warranties, express or implied, as to fitness, merchantability or otherwise,
relating to the physical, legal, economic or other condition or status of the
Property, and, except as expressly provided elsewhere in this Agreement, all
such warranties and representations are forever waived and released by
Purchaser.
6. Closing.
6.1 Closing of Sale. The purchase and sale contemplated herein shall
close (herein referred to as the "Closing") at the office of the Escrow Holder
on January 8, 1997. At Closing, Seller will deliver to Purchaser a statutory
special warranty deed in form and substance reasonably satisfactory to
Purchaser and other closing documents required hereunder and Purchaser will
cause payment of the purchase price, plus or minus prorations, to be made to
Seller. The sale (payment of purchase price and delivery of deed) shall be
closed through escrow with the Escrow Holder in
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<PAGE> 9
accordance with the general provisions of the usual form of escrow agreement
used in similar transactions by such holder with special provisions inserted
as may be required to conform with this Agreement.
6.2 Proration, Adjustments. Taxes (relating solely to any vacant space
within the Property since January 1,1996, but only to the extent such space
was vacant at any time after January 1,1996), rental, and other income, and
operating or other expenses of the Property, shall be prorated as of 12:00
Midnight prior to the date of Closing. Seller shall also give Purchaser a
credit against the purchase price for all security deposits held pursuant to
the Leases and all interest due thereon and any overpayments of real estate
taxes made by Tenants for the 1996 calendar year, which shall be calculated as
follows: (i) the total real estate taxes paid by Tenants (other than Kmart and
Eagle) in 1996, minus (ii) the real estate taxes paid by Seller in 1996
relating to such Tenants. Purchaser shall also receive a credit for any
monthly real estate tax payments made by Tenants for October, November and
December, 1996 and January, 1997. Any 1995 real estate taxes (payable in 1996)
due from Kmart and Eagle shall belong to Seller. Within 120 days after the
Closing, Seller shall reconcile the common area maintenance payments made by
Tenants for the 1996 calendar year. It is anticipated that Tenants have
underpaid their common area payments by approximately $49,000 (approximately
$32,000 from Eagle who pays their common area maintenance charges on an annual
basis.). In the event Tenants have overpaid their common area maintenance
obligations for the 1996 calendar year, Seller shall pay Purchaser such
overpayment. In the event Tenants have underpaid their common area maintenance
obligations for the 1996 calendar year, Seller shall be entitled to collect
such underpayment directly from Tenants. Purchaser shall cooperate with Seller
in attempting to get Tenants to pay their underpayment and attempting to get
Eagle to pay its outstanding obligations to Seller relating to taxes
(approximately $10,000), l995 common area maintenance (approximately $26,000
which will be assigned to Holmes-Barile) and an outstanding obligation to
Kmart (approximately $18,500). If any Tenant pays their underpayment to
Purchaser, Purchaser shall pay to Seller such underpayment as collected from
each Tenant. Seller and Purchaser shall prorate collected base rent, capital
reimbursements or other income paid by Tenants for the month of the Closing,
but Seller shall not be
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<PAGE> 10
entitled to credit for delinquent sums at the Closing. Seller shall have the
right, after Closing, to seek collection of any delinquent or uncollected
amounts due from Tenants and any delinquent or uncollected amounts received by
Purchaser after Closing related to the period prior to Closing shall be paid
by Purchaser to Seller promptly upon receipt; provided that amounts received
from Tenants by Purchaser shall be first applied to current charges, and the
balance shall be applied to make up delinquencies; provided, however, that if
any amounts received from Tenants by Purchaser are specifically designated as
being applicable to future rent obligations, such amounts should be so
applied. Purchaser shall deliver the purchase price to Seller in good funds by
2:00 p.m. local time on the day of Closing. If Seller does not receive the
funds by such time, prorations shall be made as of Midnight on the day Seller
does receive funds.
6.3 Closing Costs. Seller shall pay the cost of Purchaser's Title Policy,
the cost of the updated Survey, all state and county transfer taxes, recording
of release deed or the documents referred to in the Permitted Exceptions and
one-half of the cost of the deed and money escrow. Purchaser shall pay all
recording costs of the deed, the endorsements to the title policy (including
extended coverage), money lender's escrow fees and one-half of the cost of the
deed and money escrow. Any municipal transfer taxes shall be split equally
between Seller and Purchaser. Any other fees and charges shall be apportioned
according to prevailing local custom.
6.4 Possession. Subject to the rights of Tenants under the Leases,
possession of the Property shall be delivered to Purchaser on the date of
Closing and Seller shall thereupon deliver to Purchaser the originals of all
Leases for Tenants of the Property, all correspondence with Tenants and any
Tenant ledger cards, supplies and advertising materials, booklets, keys, or
other items used in connection with operation of the Property.
6.5 Closing Documents. As part of the Closing, Seller shall deliver to
Purchaser: (a) an assignment of leases; (b) an assignment of any other
contracts, warranties, or rights relating to the Property; (c) letters to the
Tenants at the Property instructing the Tenants to pay rent to Purchaser and
recognize Purchaser as landlord under their Leases; (d) an affidavit in form
that Seller is not a "foreign person" within the meaning of Section 1445(e)
of the Internal Revenue Code of 1986; the foregoing
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to be in form prepared by Purchaser and reasonably satisfactory to Seller,
with an indemnity as to subsections (a) and (b) above, from Purchaser as to
obligations accruing subsequent to Closing and from Seller as to obligations
accruing on or prior to Closing; and (e) an Illinois bulk sale tax release or
other reasonable evidence that regarding the release of bulk sales tax
liability. Seller shall also provide an affidavit of title, the Title Policy,
and the updated Survey, and such other documents as are reasonably required by
Purchaser.
6.6 Proration of Service Charges. To the extent Seller, as opposed to
Tenants, is responsible for payment of utility charges, Seller will have
utility meters read as of the Closing Date. To the extent that this is not
possible and to the extent that any other obligation for continuing services
is incurred, and statements are rendered for such services covering periods
both before and after the Closing Date, the amount will be adjusted between
the parties as of the Closing Date on a time-elapsed basis. Seller will
forward any such statements which it receives to Purchaser and Purchaser shall
pay its proportionate share. Seller will remit to Purchaser its proportionate
share immediately upon demand.
6.7 Estoppel Letters. Seller shall deliver to Purchaser promptly upon
receipt, but not later than the date of Closing, an estoppel letter addressed
to Seller, and assignable to Purchaser and Purchaser's lender, from Kmart,
Eagle and Tenants occupying 70% of the remaining square footage of the
Shopping Center substantially in the form of Exhibit C attached hereto and
containing information substantially in conformance with the Leases and not in
violation of the representations hereunder, provided, however, that Seller
shall use reasonable efforts to obtain estoppel letters from all Tenants. To
the extent an estoppel letter is not obtained, Seller shall certify such
estoppel letter, except if said estoppel letter is Kmart or Eagle.
Notwithstanding anything to the contrary contained in this Agreement and to
the extent an estoppel letter from any Tenant contains information which is
(i) not in conformance with the Lease to which the estoppel letter
corresponds, or (ii) is in violation of a representation hereunder, Seller
will use reasonable efforts to resolve the nonconformity prior to Closing or
Seller will indemnify Purchaser against any claim, cost or loss as a result of
such nonconformity. The Fund will be available to Purchaser for any loss or
cost covered by Seller's
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indemnity hereunder. Purchaser agrees to accept and approves the estoppel
letter submitted by Eagle Foods dated December 11, 1996 (subject to
Purchaser's review of items 2, 3, 4, 5, 6, 9, 10, and 11 listed on Exhibit A
to the estoppel letter). Purchaser agrees to raise any issues it has with
regard to any estoppel letter within five (5) days of Purchaser's receipt of
such estoppel letter.
7. Board of Directors Approval. This Agreement and Purchaser's and
Seller's obligations hereunder shall be contingent upon Purchaser obtaining
the approval of its board of directors to acquire the Property on or before
December 20, 1996. If Purchaser does not inform Seller in writing on or before
December 20, 1996 that the board of directors have not approved the
acquisition of the Property, this contingency shall be deemed expired and
Purchaser shall be deemed to have elected to proceed with this transaction
upon the terms and conditions contained herein.
8. Miscellaneous.
8.1 Modifications. This Agreement can be amended only in writing and
supersedes any and all agreements between the parties hereto regarding the
Property which are prior in time to this Agreement.
8.2 Casualty and Condemnation. If the improvements on the Property are
destroyed or damaged to the extent that repairs cost in excess of $150,000, or
if condemnation proceedings are commenced against the Property or any part
thereof, between the date hereof and the Closing, Purchaser may terminate this
Agreement. If Purchaser elects to accept the Property in its then condition,
all proceeds of insurance or condemnation awards payable to Seller by reason
of such damage or condemnation shall be paid or assigned to Purchaser, except
that Purchaser shall pay to Seller one half of all insurance proceeds in
excess of the amount necessary to repair the Property. If Purchaser elects to
terminate this Agreement, insurance proceeds or condemnation awards recovered
by Seller in excess of the purchase price shall be divided equally between
Seller and Purchaser. In the event of any other damage to the Property the
repairs of which shall not exceed $150,000, which damage Seller is unwilling
or unable to repair prior to Closing, Purchaser shall accept the Property in
its then condition, in which case Purchaser shall be entitled to a reduction
in the purchase price to the
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extent of the cost of repairing such damage, as certified by an independent
contractor selected by the parties.
8.3 Time of Essence. Time is of the essence of this Agreement.
8.4 Notices. All tenders and any notice required or permitted to be given
under this Agreement shall be in writing and shall be said to have been given
as of: (I) the date of personal delivery; (ii) when deposited in the United
States mail, registered or certified mail, postage prepaid, return receipt
required; (iii) when delivered by a private contract carrier; or (iv) when
send by facsimile (provided such notice is also send by one of the above
referenced methods of delivery), as the case may be, and addressed as follows:
If to Purchaser: Inland Real Estate Corporation
2901 Butterfield Road
Oak Brook, Illinois 60521
Attn: Steven D. Sanders
with a copy to: Inland Real Estate Corporation
2901 Butterfield Road
Oak Brook, Illinois 60521
Attn: Gary Pechter
If to Seller: c/o Klaff Realty LP
111 West Jackson Boulevard
Suite 1300
Chicago, Illinois 60604
Attn: Mr. Hersch M. Klaff
with a copy to: D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
Attn: Marc S. Joseph
Either party may by notice to the other designate a different address. Any
notice sent (i) by registered or certified mail shall be deemed effective five
(5) days after deposit thereof, as aforesaid, (ii) by personal delivery or
facsimile shall be deemed effective upon delivery or transmission, and (iii)
by private contract carrier shall be deemed effective one (1) business day
after deposit thereof, as aforesaid.
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8.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the heirs, successors, and assigns of the parties
hereto, provided Purchaser may not assign its rights or obligations hereunder
without the prior written consent of Seller.
8.6 Governing Law. The performance and interpretation of this Agreement
shall be controlled by the law of the State of Illinois.
8.7 Continuation Until Closing. Between the date of execution of this
Agreement and the Closing, Seller shall keep and perform all of the
obligations to be performed by landlord under any leases or applicable laws.
Seller shall not permit or consent to any new leases, amendments, or subleases
or contracts (which will survive the Closing) without first submitting them to
Purchaser for Purchaser's approval, which approval shall not be unreasonably
withheld. Purchaser shall have five (5) days after receipt of Seller's request
accompanied by copies of such lease, amendment, sublease or contract to notify
Seller of its approval of such leases, amendments, subleases or contract, and
in the event that Purchaser does not so notify Seller, the leases, amendments
subleases or contract, as the case may be, shall be deemed approved. Seller
shall maintain or cause the Tenants to maintain the Property and personal
property in condition at least as good as at the time of this Agreement and
will otherwise operate the Property in the same manner as before the making of
this Agreement, the same as though Seller were retaining the Property.
8.8 Brokers. Seller and Purchaser each (a) represents and warrants to the
other that it has not dealt with any broker or finder in connection with the
transaction contemplated by this Agreement other than the party, if any, to be
paid a commission as specified in Paragraph 8.l2, and (b) agrees to
indemnify and hold the other harmless from and against any losses, damages,
costs, or expenses (including attorneys' fees) incurred by such other party
due to a breach of the foregoing warranty by the indemnifying party.
8.9 Attorneys' Fees. If any action is brought by either party against the
other party, the party in whose favor final judgment shall be entered shall be
entitled to recover court costs incurred and reasonable attorneys' fees, at
trial, upon appeal and on any petition for review.
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8.10 Exculpation Clause. The obligations of Seller contained herein are
intended to be binding only on the Property shall not be personally binding
upon, nor shall any resort be had to the properties of, any partner,
shareholder, officer, director, employee, advisor or agent of Seller or any
other property or asset owned by Seller. All documents to be executed by
Seller shall also contain the foregoing exculpation.
8.11 Remedies for Non-Performance. If Seller defaults hereunder,
Purchaser's sole remedies shall be to either terminate this Agreement and
receive the return of the Deposit or enforce specific performance of this
Agreement, except as provided in Paragraph 5.3 above; provided, however, that
if the breach is wilful or intentional, Purchaser may pursue any rights it
may have in law or in equity provided the recovery against Seller can not
exceed $200,000. If said sale is not consummated because of a default under
this Agreement solely on the part of Purchaser, the Deposit shall be paid to
and retained by Seller as liquidated damages and as Seller's sole remedy. The
parties have agreed that Seller's actual damages, in the event of Purchaser's
default, would be extremely difficult or impracticable to determine.
Therefore, by placing their initials below, the parties acknowledge that the
Deposit has been agreed upon, after negotiation, as the parties' reasonable
estimate of Seller's damages and as Seller's exclusive remedy against
Purchaser, at law or in equity, in the event of such a default under this
Agreement solely on the part of Purchaser.
INITIALS: SELLER /s/ PURCHASER /s/
---- ----
8.12 Brokers Commission. Seller agrees to pay the commissions due
Holmes-Barile for services rendered in effecting the sale in the amount of
$79,721.00
8.13 Continuation and Survival. All representations, warranties and
covenants by the respective parties contained in this Agreement or made in
writing pursuant to this Agreement are intended to and shall remain true and
correct as of the Closing. All of Seller's representations, warranties and
covenants contained herein, as well as all claims, damages or injury for the
breach shall survive the date of Closing for a period of twelve ( 12) months
and any claim by Purchaser of a breach by Seller of a representation, warranty
or covenant must be asserted by Purchaser within such twelve (12) month
period, provided, however, that the representations set forth in Sections 5.1
(b) and (c)
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shall survive forever. At the Closing (as hereinafter defined), Seller agrees
to escrow $200,000 of the purchase price (the "Fund") with Escrow Holder
pursuant to escrow instructions mutually acceptable to Seller and Purchaser,
to secure Seller's post-closing representation, warranty or covenant
obligations. The funds in the escrow shall be invested on behalf of Seller and
shall be returned to Seller at the end of such twelve (12) month period;
provided no claim is made with respect to the Fund within such twelve (12)
month period, in which case the amount in the Fund shall be returned to Seller
when such claim has been resolved.
8.14 Merger of Prior Agreements. This Agreement constitutes the entire
agreement between the parties with respect to the purchase and sale of the
Property and supersedes all prior agreements and understandings between the
parties hereto relating to the subject matter of this Agreement.
8.15 Invalidity of Provisions. In the event any provisions of this
Agreement are declared invalid or are unenforceable for any reason, such
provisions shall be deleted from such document and shall not invalidate any
other provision.
8.16 Entry and Indemnity. In connection with any prior or further entry
by Purchaser, or its agents, employees or contractors onto the Property,
Purchaser shall give, or shall have given, Seller reasonable advance notice of
such entry and shall conduct, or shall have conducted, such entry and any
inspections in connection therewith so as to minimize, to the greatest extent
possible, interference with Seller's business and the business of Seller's
tenants and otherwise in a manner reasonably acceptable to Seller. Without
limiting the foregoing, prior to any entry to perform any on-site testing,
Purchaser shall give, or shall have given, Seller written notice thereof,
including the identity of the company or persons who will perform such testing
and the proposed scope of the testing. Seller shall approve or disapprove the
proposed testing (if invasive) within three (3) business days after receipt of
such notice. If Purchaser or its agents, employees or contractors take, or
have taken, any sample from the Property in connection with any such approved
testing, Purchaser shall provide, or shall have provided, to Seller a portion
of such sample being tested to allow Seller, if it so chooses, to perform its
own testing. Seller or its representative may be present to observe any
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testing or other inspection performed at the Property. In the event this
Agreement is terminated, Purchaser shall promptly deliver to Seller copies of
any reports relating to any testing or other inspection of the Property
performed by any independent third party contractors hired by or on behalf of
Purchaser or its agents, employees or contractors. Purchaser shall maintain,
and shall assure that its contractors maintain, public liability and property
damage insurance in amounts and in form and substance adequate to insure
against all liability of Purchaser, its agents, employees or contractors,
arising out of any entry or inspections of the Property pursuant to the
provisions hereof, and Purchaser shall provide Seller with evidence of such
insurance coverage upon request by Seller. Purchaser shall indemnify and hold
Seller, its officers, employees, shareholders, directors, partners, members,
managers and agents harmless from and against any costs, damages, liabilities,
losses, expenses, liens or claims (including, without limitation, reasonable
attorney's fees) arising out of or relating to any entry on the Property by
Purchaser, its agents, employees or contractors in the course of performing
the inspections, testings or inquiries provided for in this Agreement whether
prior to or after the date hereof. The foregoing indemnity shall survive beyond
the Closing for one (1) year, or if the sale is not consummated, beyond the
termination of this Agreement for a period of three (3) years.
8.17 Confidentiality. Purchaser agrees to keep all information relating
to the Property, Seller and this Agreement confidential in accordance with the
terms of that certain Confidentiality Agreement executed by Purchaser dated
November 12, 1996.
8.18 Recording. This Agreement shall not be filed of record by or on
behalf of Purchaser in any office or place of public record unless Seller is
in default hereunder and, if Purchaser shall violate the terms hereof by
recording or attempting to record the same, such act shall not operate to bind
or cloud the title to the Property.
8.19 Construction. This Agreement shall not be construed more strictly
against one party than against the other merely by reason of the fact that it
may have been prepared by counsel for one of the parties, it being recognized
that both Seller and Purchaser have contributed substantially
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and materially to the preparation of this Agreement. Each party acknowledges
and waives any claim, contesting the existence and the adequacy of the
consideration given by the other in entering into this Agreement.
8.20 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
8.21 Execution of Agreement. In the event that this Agreement is not
executed by Purchaser and received by Seller by 5:00 P.M. Central Daylight
Time on December 20, 1996, this Agreement shall become null and void.
8.22 Headings. Headings and captions have been inserted for convenience
and shall in no manner modify or limit the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the dates set forth below.
Dated: December 20, 1996. Dated: December 20, 1996.
-- --
SELLER: PURCHASER:
KBS Retail Limited Partnership, Inland Real Estate Corporation,
a Delaware limited partnership a Maryland corporation
By: /s/
-------------------------
Its:
---------------------
By: HKK-I, L.P., an Illinois
limited partnership,
a general partner
By: HKK-I, Inc., an
Illinois corporation,
its general partner
By: /s/
-----------------------
Its:
------------------
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