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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission file number: 000-21731
HIGHWOODS REALTY LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
NORTH CAROLINA 56-1864557
<S> <C>
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
3100 SMOKETREE COURT, SUITE 600, RALEIGH, N.C.
(Address of principal executive office)
27604
(Zip Code)
Registrant's telephone number, including area code:
(919) 872-4924
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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
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<PAGE>
HIGHWOODS REALTY LIMITED PARTNERSHIP
QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 1999
TABLE OF CONTENTS
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<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION -----
<S> <C> <C>
Item 1. Financial Statements 3
Consolidated balance sheets of Highwoods Realty Limited
Partnership as of March 31, 1999 and December 31, 1998 4
Consolidated statements of income of Highwoods Realty Limited
Partnership for the three month periods ended March 31, 1999 and
1998 5
Consolidated statements of cash flows of Highwoods Realty Limited
Partnership for the three month periods ended March 31, 1999 and
1998 6
Notes to consolidated financial statements of Highwoods Realty
Limited Partnership 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Results of Operations 10
Liquidity and Capital Resources 11
Year 2000 13
Funds From Operations and Cash Available for Distributions 16
Disclosure Regarding Forward-Looking Statements 17
Property Information 19
Inflation 28
Item 3. Quantitative and Qualitative Disclosures About Market Risk 29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 31
Item 2. Changes in Securities and Use of Proceeds 31
Item 3. Defaults Upon Senior Securities 31
Item 4. Submission of Matters to a Vote of Security Holders 31
Item 5. Other Information 31
Item 6. Exhibits and Reports on Form 8-K 31
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
We refer to (1) Highwoods Properties, Inc. as the "Company," (2) Highwoods
Realty Limited Partnership as the "Operating Partnership," (3) the Company's
common stock as "Common Stock" and (4) the Operating Partnership's common
partnership interests as "Common Units."
The information furnished in the accompanying balance sheets, statements
of operations and statements of cash flows reflect all adjustments that are, in
our opinion, necessary for a fair presentation of the aforementioned financial
statements for the interim period.
The aforementioned financial statements should be read in conjunction with
the notes to consolidated financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations and our 1998 Annual
Report on Form 10-K.
3
<PAGE>
HIGHWOODS REALTY LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT UNIT AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
---------------- ------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate assets, at cost:
Land and improvements ............................................... $ 485,792 $ 538,814
Buildings and tenant improvements ................................... 2,937,708 3,173,825
Development in process .............................................. 223,545 189,465
Land held for development ........................................... 154,020 150,622
Furniture, fixtures and equipment ................................... 7,863 7,665
---------- ----------
3,808,928 4,060,391
Less -- accumulated depreciation .................................... (201,401) (168,508)
---------- ----------
Net real estate assets .............................................. 3,607,527 3,891,883
Property held for sale ................................................ 396,160 131,262
Cash and cash equivalents ............................................. 37,900 30,696
Restricted cash ....................................................... 11,668 24,263
Accounts receivable ................................................... 21,786 27,644
Advances to related parties ........................................... 3,166 10,420
Notes receivable ...................................................... 19,208 12,865
Accrued straight line rents receivable ................................ 30,016 27,194
Investment in unconsolidated affiliates ............................... 31,008 15,234
Other assets:
Deferred leasing costs .............................................. 51,419 45,785
Deferred financing costs ............................................ 43,409 38,750
Prepaid expenses and other .......................................... 15,139 15,162
---------- ----------
109,967 99,697
Less -- accumulated amortization .................................... (26,986) (23,458)
---------- ----------
82,981 76,239
---------- ----------
$4,241,420 $4,247,700
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Mortgages and notes payable ........................................... $1,927,349 $1,906,216
Accounts payable, accrued expenses and other liabilities .............. 105,948 125,168
---------- ----------
Total liabilities ................................................... 2,033,297 2,031,384
Redeemable operating partnership units:
Class A Common Units outstanding, 8,586,222 at March 31, 1999 and
10,111,978 at December 31, 1998 .................................... 202,291 260,383
Class B Common Units outstanding, 291,756 at March 31, 1999 and
291,756 at December 31, 1998 ....................................... 6,873 7,513
Series A Preferred Units outstanding, 125,000 at March 31, 1999 and
December 31, 1998 .................................................. 121,809 121,809
Series B Preferred Units outstanding, 6,900,000 at March 31, 1999 and
December 31, 1998 .................................................. 166,346 166,346
Series D Preferred Units outstanding, 400,000 at March 31, 1999 and
December 31, 1998 .................................................. 96,842 96,842
Partners' capital:
Class A Common Units:
General partner Common Units outstanding, 697,252 at
March 31, 1999 and 690,955 at December 31, 1998 ................... 16,140 15,634
Limited partner Common Units outstanding, 60,441,704 at March 31,
1999 and 58,292,597 at December 31, 1998 .......................... 1,597,822 1,547,789
---------- ----------
Total partners' capital ........................................... 1,613,962 1,563,423
---------- ----------
$4,241,420 $4,247,700
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
HIGHWOODS REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED AND IN THOUSANDS EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
REVENUE:
Rental property ...................................................... $145,868 $100,331
Equity in earnings of unconsolidated affiliates ...................... 121 --
Gain on disposition of assets ........................................ 569 --
Interest and other income ............................................ 4,597 2,053
-------- --------
151,155 102,384
OPERATING EXPENSES:
Rental property ...................................................... $ 45,292 $ 29,728
Depreciation and amortization ........................................ 28,074 17,113
Interest expense:
Contractual ........................................................ 29,845 17,162
Amortization of deferred financing costs ........................... 778 616
-------- --------
30,623 17,778
General and administrative ........................................... 5,793 3,784
-------- --------
Income before extraordinary item ................................... 41,373 33,981
EXTRAORDINARY ITEM -- LOSS ON EARLY EXTINGUISHMENT OF DEBT ............ -- (46)
-------- --------
Net income ........................................................... 41,373 33,935
DIVIDENDS ON PREFERRED UNITS .......................................... (8,145) (6,145)
-------- --------
Net income available for Class A Common Units ........................ 33,228 27,790
======== ========
NET INCOME PER COMMON UNIT -- BASIC:
Income before extraordinary item ..................................... $ 0.48 $ 0.47
Extraordinary item -- loss on early extinguishment of debt ......... -- --
-------- --------
Net income ......................................................... 0.48 0.47
======== ========
NET INCOME PER COMMON UNIT -- DILUTED:
Income before extraordinary item ..................................... $ 0.48 $ 0.47
Extraordinary item -- loss on early extinguishment of debt ......... -- --
======== ========
Net income ......................................................... 0.48 0.47
======== ========
WEIGHTED AVERAGE COMMON UNITS OUTSTANDING -- BASIC:
Class A Common Units:
General partner .................................................... 693 588
Limited partners .................................................. 68,640 58,252
Class B Common Units:
Limited partners ................................................... 292 269
-------- --------
Total ................................................................ 69,625 59,109
======== ========
WEIGHTED AVERAGE COMMON UNITS OUTSTANDING -- DILUTED:
Class A Common Units:
General partner .................................................... 695 595
Limited partners .................................................. 68,775 58,882
Class B Common Units:
Limited partners ................................................... 292 269
-------- --------
Total ................................................................ 69,762 59,746
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
HIGHWOODS REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income .......................................................... $ 41,373 $ 33,935
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ..................................... 28,074 17,113
Loss on early extinguishment of debt .............................. -- 46
Gain on disposition of assets ..................................... (569) --
Changes in operating assets and liabilities ....................... (17,344) 3,410
---------- ----------
Net cash provided by operating activities ........................ 51,534 54,504
---------- ----------
INVESTING ACTIVITIES:
Additions to real estate assets ..................................... (122,847) (311,408)
Proceeds from disposition of assets ................................. 124,463 --
Cash from contributed net assets .................................... -- (12,383)
Advances to subsidiaries ............................................ 7,254 --
Cash paid in exchange for partnership net assets .................... (1,008) --
Other ............................................................... (30,557) (2,179)
---------- ----------
Net cash used in investing activities ............................ (22,695) (325,970)
---------- ----------
FINANCING ACTIVITIES:
Distributions paid .................................................. (38,072) (30,097)
Payment of preferred unit dividends ................................. (8,145) (6,145)
Payment of prepayment penalties ..................................... -- (46)
Borrowings on mortgages and notes payable ........................... 16,885 287,188
Repayment of mortgages and notes payable ............................ (3,252) (102,450)
Borrowings on revolving loans ....................................... 81,500 247,000
Repayment on revolving loans ........................................ (74,000) (240,500)
Net proceeds from contributed capital ............................... 8,108 137,763
Net (payment) receipt of deferred financing costs ................... (4,659) 1,860
---------- ----------
Net cash (used in) provided by financing activities .............. (21,635) 294,573
---------- ----------
Net increase in cash and cash equivalents ........................... 7,204 23,107
Cash and cash equivalents at beginning of the period ................ 30,696 8,816
---------- ----------
Cash and cash equivalents at end of the period ...................... $ 37,900 $ 31,923
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest .............................................. $ 28,014 $ 12,324
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
HIGHWOODS REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED AND IN THOUSANDS)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
The following summarizes the net assets contributed by holders of Common
Units in the Operating Partnership or acquired subject to mortgage notes
payable:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
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<S> <C> <C>
ASSETS:
Rental property and equipment, net .......... $2,241 $76,125
LIABILITIES:
Mortgages and notes payable assumed ......... $ -- $61,303
------ -------
Net assets ............................... $2,241 $14,822
====== =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
<PAGE>
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
The Operating Partnership is a subsidiary of Highwoods Properties, Inc.
(the "Company"). At March 31, 1999, the Company owned 87% of the Common Units
of the Operating Partnership.
The consolidated financial statements include the accounts of the
Operating Partnership and its majority controlled affiliates. All significant
intercompany balances and transactions have been eliminated in the consolidated
financial statements.
The Operating Partnership's 125,000 Series A Preferred Units are senior to
the Class A and B Common Units and rank pari passu with the Series B and D
Preferred Units. The Series A Preferred Units have a liquidation preference of
$1,000 per unit. Distributions are payable on the Series A Preferred Units at
the rate of $86.25 per annum per unit.
The Operating Partnership's 6,900,000 Series B Preferred Units are senior
to the Class A and B Common Units and rank pari passu with the Series A and D
Preferred Units. The Series B Preferred Units have a liquidation preference of
$25 per unit. Distributions are payable on the Series B Preferred Units at the
rate of $2.00 per annum per unit.
The Operating Partnership's 400,000 Series D Preferred Units are senior to
the Class A and B Common Units and rank pari passu with the Series A and B
Preferred Units. The Series D Preferred Units have a liquidation preference of
$250 per unit. Distributions are payable on Series D Preferred Units at a rate
of $20.00 per annum per unit.
The Class A Common Units are owned by the Company and by certain limited
partners of the Operating Partnership. The Class A Common Units owned by the
Company are classified as general partners' capital and limited partners'
capital. The Class B Common Units are owned by certain limited partners (not
the Company) and only differ from the Class A Common Units in that they are not
eligible for allocation of income and distributions. The Class B Common Units
will convert to Class A Common Units in 25% annual installments commencing one
year from the date of issuance. Prior to such conversion, such Class B Common
Units will not be redeemable for cash or shares of the Company's Common Stock.
Generally one year after issuance, the Operating Partnership is obligated
to redeem each of the Class A Common Units not owned by the Company (the
"Redeemable Operating Partnership Units") at the request of the holder thereof
for cash, provided that the Company at its option may elect to acquire such
unit for one share of Common Stock or the cash value thereof. The Company's
Class A Common Units are not redeemable for cash. The Redeemable Operating
Partnership Units are classified outside of the permanent partners' capital in
the accompanying balance sheet at their fair market value (equal to the fair
market value of a share of Common Stock) at the balance sheet date.
The extraordinary loss represents the write-off of loan origination fees
and prepayment penalties paid on the early extinguishment of debt.
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which is
required to be adopted in fiscal years beginning after June 15, 1999. The
Statement will require the Operating Partnership to recognize all derivatives
on the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of derivatives will
either be offset against the change in fair value of the hedged assets,
liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The fair market value of the Operating Partnership's
derivatives at March 31, 1999 is discussed in Item 2.
8
<PAGE>
The "Year 2000" issue is a general term used to describe the various
problems that may result from the improper processing of dates and calculations
involving years by many computers throughout the world as the Year 2000 is
approached and reached. We have reviewed the impact of Year 2000 issues and do
not expect Year 2000 issues to be material to our business, operations, or
financial condition. The Year 2000 issue is discussed more fully in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The accompanying financial information has not been audited, but in the
opinion of management, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of our financial position, results
of operations and cash flows have been made. For further information, refer to
the financial statements and notes thereto included in our 1998 Annual Report
on Form 10-K.
2. SEGMENT INFORMATION
The sole business of the Operating Partnership is the acquisition,
development and operation of rental real estate properties. The Operating
Partnership operates office, industrial and retail properties and apartment
units. There are no material inter-segment transactions.
The Operating Partnership's chief operating decision maker ("CDM")
assesses and measures operating results based upon property level net operating
income. The operating results for the individual assets within each property
type have been aggregated since the CDM evaluates operating results and
allocates resources on a property-by-property basis within the various property
types.
The accounting policies of the segments are the same as those described in
note 1. Further, all operations are within the United States and no tenant
comprises more than 10% of consolidated revenues. The following table
summarizes the rental income, net operating income and assets for each
reportable segment for the quarter ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------
1999 1998
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
RENTAL INCOME:
Office segment ........................................ $ 120,355 $ 91,412
Industrial segment .................................... 13,054 8,919
Retail segment ........................................ 7,568 --
Apartment segment ..................................... 4,891 --
---------- ----------
$ 145,868 $ 100,331
========== ==========
NET OPERATING INCOME:
Office segment net operating income ................... $ 81,909 $ 63,225
Industrial segment net operating income ............... 10,943 7,378
Retail segment net operating income ................... 5,069 --
Apartment segment net operating income ................ 2,655 --
---------- ----------
$ 100,576 $ 70,603
Reconciliation to income before extraordinary item:
Equity in income of unconsolidated affiliates ......... 121 --
Gain on disposition of assets ......................... 569 --
Interest and other income ............................. 4,597 2,053
Interest expense ...................................... (30,623) (17,778)
General and administrative expenses ................... (5,793) (3,784)
Depreciation and amortization ......................... (28,074) (17,113)
---------- ----------
Income before extraordinary item ...................... $ 41,373 $ 33,981
========== ==========
TOTAL ASSETS:
Office segment ........................................ $3,196,262 $2,725,906
Industrial segment .................................... 490,452 304,175
Retail segment ........................................ 256,869 --
Apartment segment ..................................... 136,339 --
Corporate and other ................................... 161,498 87,295
---------- ----------
Total Assets .......................................... $4,241,420 $3,117,376
========== ==========
</TABLE>
9
<PAGE>
3. JOINT VENTURE ACTIVITY
JOINT VENTURE ACTIVITY. On March 15, 1999, we closed a transaction with
Schweiz-Deutschland-USA Dreilander Beteiligung Objekt-DLF 98/29-Walker Fink-KG
("DLF"), pursuant to which the Operating Partnership sold or contributed
certain office properties valued at approximately $142 million to a newly
created limited partnership (the "Joint Venture"). DLF contributed
approximately $55 million for a 77.19% interest in the Joint Venture, and the
Joint Venture borrowed approximately $71 million from third-party lenders. The
Operating Partnership retained the remaining 22.81% interest in the Joint
Venture, received net cash proceeds of approximately $124 million and are the
sole and exclusive manager and leasing agent of the Joint Venture's properties,
for which the Operating Partnership receives customary management fees and
leasing commissions. The Operating Partnership used the cash proceeds received
in the transaction to fund existing development activity either through direct
payments or repayment of borrowings under the Revolving Loan.
4. CONTINGENCIES
LITIGATION
On October 2, 1998, John Flake, a former stockholder of J.C. Nichols
Company, filed a putative class action lawsuit on behalf of himself and the
other former stockholders of J.C. Nichols in the United States District Court
for the District of Kansas against J.C. Nichols, certain of its former officers
and directors and the Company. The complaint alleges, among other things, that
in connection with the merger of J.C. Nichols and the Company (1) J.C. Nichols
and the named directors and officers of J.C. Nichols breached their fiduciary
duties to J.C. Nichols' stockholders, (2) J.C. Nichols and the named directors
and officers of J.C. Nichols breached their fiduciary duties to members of the
J.C. Nichols Company Employee Stock Ownership Trust, (3) all defendants
participated in the dissemination of a proxy statement containing materially
false and misleading statements and omissions of material facts in violation of
Section 14(a) of the Securities Exchange Act of 1934 and (4) the Company filed
a registration statement with the Securities and Exchange Commission containing
materially false and misleading statements and omissions of material facts in
violation of Sections 11 and 12(2) of the Securities Act of 1933. The
plaintiffs seek equitable relief and monetary damages. The Company believes
that the defendants have meritorious defenses to the plaintiffs' allegations.
The Company intends to vigorously defend this litigation and has filed a motion
to dismiss all claims asserted against the defendants. Due to the inherent
uncertainties of the litigation process and the judicial system, the Company is
not able to predict the outcome of this litigation. If this litigation is not
resolved in our favor, it could have a material adverse effect on the Operating
Partnership's business, financial condition and results of operations.
In addition, the Operating Partnership is a party to a variety of legal
proceedings arising in the ordinary course of our business. The Operating
Partnership believes that it is adequately covered by insurance and
indemnification agreements. Accordingly, none of such proceedings are expected
to have a material adverse affect on the Operating Partnership's business,
financial condition and results of operations.
5. SUBSEQUENT EVENTS
The Operating Partnership recently entered into agreements to sell
approximately 3.3 million rentable square feet of non-core office and
industrial properties and 49 acres of development land in the South Florida
area for gross proceeds of approximately $323.2 million. The South Florida
transaction is expected to close by June 1, 1999. The Operating Partnership
recently also entered into agreements to sell approximately 737,000 rentable
square feet of non-core and industrial properties and 10.5 acres of development
land in the Baltimore area for gross proceeds of approximately $82.2 million.
The Baltimore transaction is expected to close by June 30, 1999. Non-core
office and industrial properties generally include single buildings or business
parks that do not fit our long-term strategy. The Operating Partnership can
provide no assurance that all or parts of the transactions will be consummated.
Both transactions are subject to customary closing conditions, and the
Baltimore transaction is also subject to the completion of due diligence.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with all of the
financial statements appearing elsewhere in the report. The following
discussion is based primarily on the consolidated financial statements of the
Operating Partnership.
10
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999. Revenues from rental operations
increased $45.6 million, or 45%, from $100.3 million for the three months ended
March 31, 1998 to $145.9 million for the comparable period in 1999. The
increase is primarily a result of our acquisition of 9.6 million square feet of
majority owned office, industrial and retail properties and 2,325 apartment
units and the completion of 4.2 million square feet of development activity
during the last nine months of 1998 and the first three months of 1999. Our
in-service portfolio increased from 33.9 million square feet at March 31, 1998
to 43.6 million square feet at March 31, 1999. Same property revenues, which
are the revenues of the 471 in-service properties owned on January 1, 1998,
increased 4% for the three months ended March 31, 1999, compared to the same
three months of 1998.
During the three months ended March 31, 1999, 373 leases representing 2.3
million square feet of office, industrial and retail space commenced at an
average rate per square foot which was 5% higher than the average rate per
square foot on the expired leases.
Interest and other income increased $2.5 million, or 119%, from $2.1
million for the three months ended March 31, 1998 to $4.6 million for the
comparable period in 1999. The increase was a result of higher cash balances in
1999, and additional income generated from management fees, development fees
and leasing commissions. The Operating Partnership generated $313,000 in
auxiliary income (vending and parking) as a result of acquiring multifamily
communities in the merger with J.C. Nichols.
Rental operating expenses increased $15.6 million, or 53%, from $29.7
million for the three months ended March 31, 1998 to $45.3 million for the
comparable period in 1999. The increase is a result of our addition of 13.8
million square feet of office, industrial and retail space and 2,325 apartment
units through a combination of acquisitions and developments during the last
nine months of 1998 and the first three months of 1999. Rental operating
expenses as a percentage of related revenues increased from 30% for the three
months ended March 31, 1998 to 31% for the comparable period in 1999.
Depreciation and amortization for the three months ended March 31, 1999
and 1998 was $28.1 million and $17.1 million, respectively. The increase of
$11.0 million, or 64%, is due to an increase in depreciable assets over the
prior year. Interest expense increased $12.8 million, or 72%, from $17.8
million for the three months ended March 31, 1998 to $30.6 million for the
comparable period in 1999. The increase is attributable to the increase in the
outstanding debt for the entire quarter. Interest expense for the three months
ended March 31, 1999 and 1998 included $778,000 and $616,000, respectively, of
amortization of non-cash deferred financing costs and the costs related to the
Operating Partnership's interest rate hedge contracts. General and
administrative expenses increased from 3.8% of rental revenue for the three
months ended March 31, 1998 to 4.0% for the comparable period in 1999.
Net income before extraordinary item equaled $41.4 million and $33.9
million for the three months ended March 31, 1999 and 1998, respectively. The
Operating Partnership recorded $8.1 million and $6.1 million in preferred unit
dividends for the three months ended March 31, 1999 and 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
STATEMENT OF CASH FLOWS. For the three months ended March 31, 1999, cash
provided by operating activities decreased by $3.0 million, or 6.0%, to $51.5
million, as compared to $54.5 million for the same period in 1998. The decrease
is primarily due to the payment of real estate taxes due in the first quarter
of 1999 offset by the increase in net income resulting from our property
acquisitions in 1998 and 1999. Cash used for investing activities decreased by
$303.3 million, to $22.7 million for the first three months of 1999, as
compared to $326.0 million for the same period in 1998. The decrease is due to
the decline in acquisition activity in the first three months of 1999. Cash
provided by financing activities decreased by $316.2 to $(21.6) million for the
first three months of 1998, as compared to $294.6 million for the same period
in 1998. Payments of distributions increased by $8.0 million to $38.1 million
for the first three months of 1999, as compared with $30.1 million for the same
period in 1998. The increase is due to the greater number of Common Units
outstanding and a 6% increase in the distribution rate. Payment of preferred
unit dividends increased by $2.0 million to $8.1 million for the first three
months of 1999, as compared to $6.1 million for the same period in 1998. The
increase is due to the issuance of Preferred Series D Units in the first
quarter of 1998.
11
<PAGE>
CAPITALIZATION. The Operating Partnership's total indebtedness at March
31, 1999 totaled $1.9 billion and was comprised of $622.9 million of secured
indebtedness with a weighted average interest rate of 7.7% and 1.3 billion of
unsecured indebtedness with a weighted average interest rate of 7.0%. Except as
stated below, all of the mortgage and notes payable outstanding at March 31,
1999 were either fixed rate obligations or variable rate obligations covered by
interest rate hedge contracts. A portion of our $600 million unsecured
revolving loan (the "Revolving Loan") and approximately $73 million in floating
rate notes payable assumed upon consummation of the merger with J.C. Nichols
were not covered by interest rate hedge contracts on March 31, 1999.
To meet in part our long-term liquidity requirements, we borrow funds at a
combination of fixed and variable rates. Borrowings under our Revolving Loan
bear interest at variable rates. Our long-term debt, which consists of
long-term financings and the issuance of debt securities, typically bears
interest at fixed rates. In addition, we have assumed fixed rate and variable
rate debt in connection with acquiring properties. Our interest rate risk
management objective is to limit the impact of interest rate changes on
earnings and cash flows and to lower our overall borrowing costs. To achieve
these objectives, from time to time we enter into interest rate hedge contracts
such as collars, swaps, caps and treasury lock agreements in order to mitigate
our interest rate risk with respect to various debt instruments. We do not hold
or issue these derivative contracts for trading or speculative purposes.
The following table sets forth information regarding our interest rate
hedge contracts as of March 31, 1999:
<TABLE>
<CAPTION>
NOTIONAL MATURITY FIXED FAIR MARKET
TYPE OF HEDGE AMOUNT DATE REFERENCE RATE RATE VALUE
- ---------------- ---------- ---------- ----------------------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Treasury Lock $100,000 10/1/99 10-Year Treasury 5.725% $ (3,331)
Treasury Lock 50,000 6/10/99 10-Year Treasury 5.276 114
Treasury Lock 100,000 7/1/99 10-Year Treasury 5.674 (3,166)
Swap 100,000 10/1/99 3-Month LIBOR 4.970 22
Swap 20,970 6/10/02 1-Month LIBOR + 0.75% 7.700 (1,333)
Collar 80,000 10/15/01 1-Month LIBOR 5.40 - 6.25 (482)
</TABLE>
We enter into swaps, collars and caps to limit our exposure to an increase
in variable interest rates, particularly with respect to amounts outstanding
under our Revolving Loan. The interest rate on all of our variable rate debt is
adjusted at one- and three-month intervals, subject to settlements under these
contracts. We also enter into treasury lock agreements from time to time in
order to limit our exposure to an increase in interest rates with respect to
future debt offerings.
In addition, we are exposed to certain losses in the event of
nonperformance by the counterparties under the interest rate hedge contracts.
We expect the counterparties, which are major financial institutions, to
perform fully under these contracts. However, if the counterparties were to
default on their obligations under the interest rate hedge contracts, we could
be required to pay the full rates on our debt, even if such rates were in
excess of the rates in the contracts.
CURRENT AND FUTURE CASH NEEDS. Historically, rental revenue has been the
principal source of funds to pay operating expenses, debt service, stockholder
distributions and capital expenditures, excluding nonrecurring capital
expenditures. In addition, construction management, maintenance, leasing and
management fees have provided sources of cash flow. We presently have no plans
for major capital improvements to the existing in-service properties, other
than normal recurring building improvements, tenant improvements and lease
commissions. We expect to meet our short-term liquidity requirements generally
through working capital and net cash provided by operating activities along
with the Revolving Loan.
Our short-term (within the next 12 months) liquidity needs also include,
among other things, the funding of approximately $310 million of our existing
development activity. We expect to fund our short-term liquidity needs through
a combination of:
o additional borrowings under our Revolving Loan (approximately $144
million was available as of March 31, 1999);
o the issuance of secured debt;
o the selective disposition of non-core assets; and
12
<PAGE>
o the sale or contribution of some of our wholly owned properties to
strategic joint ventures to be formed with selected partners interested in
investing with us, which will have the net effect of generating additional
capital through such sale or contributions.
Because of certain financial covenants set forth in the Revolving Loan, we
intend to finance a significant portion of our short-term development expenses
through asset sales and joint ventures. Although we believe that we will be
able to fund our short-term development commitments, an inability to sell a
sufficient number of non-core assets or to enter into significant joint venture
arrangements of the type described above could adversely affect our liquidity.
See " -- Recent Developments."
Our long-term liquidity needs generally include the funding of existing
and future development activity, selective asset acquisitions and the
retirement of mortgage debt, amounts outstanding under the Revolving Loan and
long-term unsecured debt. We remain committed to maintaining a flexible and
conservative capital structure. Accordingly, we expect to meet our long-term
liquidity needs through a combination of (1) the issuance by the Operating
Partnership of additional unsecured debt securities, (2) the issuance of
additional equity securities by the Company and the Operating Partnership as
well as (3) the sources described above with respect to our short-term
liquidity. We expect to use such sources to meet our long-term liquidity
requirements either through direct payments or repayment of borrowings under
the Revolving Loan. We do not intend to reserve funds to retire existing
secured or unsecured indebtedness upon maturity. Instead, we will seek to
refinance such debt at maturity or retire such debt through the issuance of
equity or debt securities.
We anticipate that our available cash and cash equivalents and cash flows
from operating activities, together with cash available from borrowings and
other sources, will be adequate to meet our capital and liquidity needs in both
the short and long term. However, if these sources of funds are insufficient or
unavailable, the Company's ability to make the expected distributions to
stockholders discussed below and satisfy other cash requirements may be
adversely affected.
DISTRIBUTIONS TO STOCKHOLDERS. In order to qualify as a REIT for Federal
income tax purposes, the Company is required to make distributions to its
stockholders of at least 95% of REIT taxable income. The Company expects to use
its cash flow from operating activities for distributions to stockholders and
for payment of recurring, non-incremental revenue-generating expenditures. The
following factors will affect cash flows from operating activities and,
accordingly, influence the decisions of the Board of Directors regarding
distributions: (1) debt service requirements after taking into account the
repayment and restructuring of certain indebtedness; (2) scheduled increases in
base rents of existing leases; (3) changes in rents attributable to the renewal
of existing leases or replacement leases; (4) changes in occupancy rates at
existing properties and procurement of leases for newly acquired or developed
properties; and (5) operating expenses and capital replacement needs.
RECENT DEVELOPMENTS
JOINT VENTURE ACTIVITY. On March 15, 1999, we closed a transaction with
Schweiz-Deutschland-USA Dreilander Betriligung Objekt-DLF 98/29-Walker Fink-KG
("DLF"), pursuant to which we sold or contributed certain office properties
valued at approximately $142 million to a newly created limited partnership
(the "Joint Venture"). DLF contributed approximately $55 million for a 77.19%
interest in the Joint Venture, and the Joint Venture borrowed approximately $71
million from third-party lenders. We retained the remaining 22.81% interest in
the Joint Venture, received cash proceeds of approximately $126 million and are
the sole and exclusive manager and leasing agent of the Joint Venture's
properties, for which we receive customary management fees and leasing
commissions. We used the cash proceeds received in the transaction to fund
existing development activity either through direct payments or repayment of
borrowings under the Revolving Loan.
PENDING DISPOSITION ACTIVITY. We recently entered into agreements to sell
approximately 3.3 million rentable square feet of non-core office and
industrial properties and 49 acres of development land in the South Florida
area for gross proceeds of approximately $323.2 million. The South Florida
transaction is expected to close by June 1, 1999. We recently also entered into
agreements to sell approximately 737,000 rentable square feet of non-core and
industrial properties and 10.5 acres of development land in the Baltimore area
for gross
13
<PAGE>
proceeds of approximately $82.2 million. The Baltimore transaction is expected
to close by June 30, 1999. Non-core office and industrial properties generally
include single buildings or business parks that do not fit our long-term
strategy. We can provide no assurance that all or parts of the transactions
will be consummated. Both transactions are subject to customary closing
conditions, and the Baltimore transaction is also subject to the completion of
due diligence.
YEAR 2000
BACKGROUND. The Year 2000 compliance issue refers to the inability of
computer systems and computer software to correctly process any date after
1999. The date change to the new millennium may be a problem because some
computer hardware and software was designed to use only two digits to represent
a year. As a result, some systems may interpret 1/1/00 to be the year 1900. In
addition, some systems may not recognize that the Year 2000 is a leap year.
Both problems could result in system failure or miscalculations, which may
cause disruptions of operations.
The Year 2000 issue, if not corrected, could result in the failure of the
information technology ("IT") systems that we use in our business operations,
such as computer programs related to property management, leasing, financial
reporting, employee benefits, asset management and energy management. In
addition, computerized systems and microprocessors are embedded in a variety of
products used in our operations and properties, such as HVAC controls, lights,
power generators, elevators, life safety systems, phones and security systems.
APPROACH AND STATUS. Our Year 2000 compliance efforts are divided into two
areas -- "operations level" and "property level." Operations level includes
those information technology systems used in our corporate and division offices
to perform real estate, accounting and human resources functions. Property
level includes the non-information technology systems at our individual
properties. Our Y2K remediation plan at both the operations and property levels
has three phases:
o assessment (inventory and testing of computer systems),
o renovation (repairing and or replacing non-compliant systems), and
o validation (testing of repaired or replaced systems).
Our Information Technology Department is overseeing our operations level
compliance program. With respect to our operations level IT software, we have
completed all three phases of our Year 2000 remediation plan. As part of a
standardization of our technology infrastructure in 1998, computer software
that was not Year 2000 compliant was upgraded or replaced. These software
upgrades were off-the-shelf Year 2000 compliant packages. Additionally, we
successfully upgraded and tested a Year 2000 compliant version of our corporate
accounting and property management software in December 1998. With respect to
our operations level IT hardware, we have completed the assessment phase of our
remediation plan and are 90% complete (in terms of labor) with the renovation
and validation phases of the plan. We expect to complete the renovation and
validation phases with respect to our operations level hardware by the third
quarter of 1999.
Our Chief Operating Officer is overseeing our property level compliance
program. We are near completing our inventory of all of our properties'
non-information technology systems. This assessment process is 100% complete.
As part of the inventory process, we requested appropriate vendors and
manufacturers to certify that their products are Year 2000 compliant. Most
indicated that their products are Year 2000 compliant. We are approximately 75%
complete (in terms of labor) with the renovation and validation phases of our
remediation plan at the property level. We expect to complete both phases in
the third quarter.
With respect to Year 2000 issues relating to our customer base, we have
not sought representations from our tenants with respect to their Year 2000
readiness because no one tenant represents more than 3% of our annualized
rental revenue. With respect to suppliers and vendors, our material purchases
are generally from those in competitive fields where others will be able to
meet any of our needs unmet by suppliers or vendors with Year 2000
difficulties. (Although we have no reason to expect a significant interruption
of utility services for our properties, we have not received (nor sought)
written assurances from utility providers that Y2K issues will not cause an
interruption in service.)
COSTS. To date, the costs directly associated with our Year 2000 efforts
have not been material, and we estimate our future costs to be immaterial as
well.
14
<PAGE>
RISKS ASSOCIATED WITH THE YEAR 2000 ISSUE. We do not expect Year 2000
failures to have a material adverse effect on our results of operations or
liquidity because:
o we do not rely on a small number of tenants for a significant portion of
our rental revenue;
o we stand ready to switch vendors or suppliers whose Year 2000 failures
adversely affect their products or services; and
o our remediation plan is expected to be complete prior to the Year 2000.
As a result, we do not expect to develop a contingency plan for Year 2000
failures.
Our assessment of the likely impact of Year 2000 issues on us, which is a
forward-looking statement, depends on numerous factors, such as the continued
provision of utility services, and we remain exposed to the risk of Year 2000
failures. See " -- Disclosure Regarding Forward-Looking Statements."
Our disclosures and announcements concerning our Year 2000 programs are
intended to constitute "Year 2000 Readiness Disclosures" as defined in the
recently-enacted Year 2000 Information and Readiness Disclosure Act. The Act
provides added protection from liability for certain public and private
statements concerning an entity's Year 2000 readiness and the Year 2000
readiness of its products and services. The Act also potentially provides added
protection from liability for certain types of Year 2000 disclosures made after
January 1, 1996, and before the date of enactment of the Act.
POSSIBLE ENVIRONMENTAL LIABILITIES
In connection with owning or operating our properties, we may be liable
for certain costs due to possible environmental liabilities. Under various
laws, ordinances and regulations, such as the Comprehensive Environmental
Response Compensation and Liability Act, and common law, an owner or operator
of real estate is liable for the costs to remove or remediate certain hazardous
or toxic chemicals or substances on or in the property. Owners or operators are
also liable for certain other costs, including governmental fines and injuries
to persons and property. Such laws often impose liability without regard to
whether the owner or operator knew of, or was responsible for, the presence of
the hazardous or toxic chemicals or substances. The presence of such
substances, or the failure to remediate such substances properly, may adversely
affect the owner's or operator's ability to sell or rent such property or to
borrow using such property as collateral. Persons who arrange for the disposal,
treatment or transportation of hazardous or toxic chemicals or substances may
also be liable for the same types of costs at a disposal, treatment or storage
facility, whether or not that person owns or operates that facility.
Certain environmental laws also impose liability for releasing
asbestos-containing materials. Third parties may seek recovery from owners or
operators of real property for personal injuries associated with asbestos-
containing materials. A number of our properties have asbestos-containing
materials or material that we presume to be asbestos-containing materials. In
connection with owning and operating our properties, we may be liable for such
costs.
In addition, it is not unusual for property owners to encounter on-site
contamination caused by off-site sources. The presence of hazardous or toxic
chemicals or substances at a site close to a property could require the
property owner to participate in remediation activities or could adversely
affect the value of the property. Contamination from adjacent properties has
migrated onto at least three of our properties; however, based on current
information, we do not believe that any significant remedial action is
necessary at these affected sites.
As of the date hereof, we have obtained Phase I environmental assessments
(and, in certain instances, Phase II environmental assessments) on
substantially all of our in-service properties. These assessments have not
revealed, nor are we aware of, any environmental liability at our properties
that we believe would materially adversely affect our financial position,
operations or liquidity taken as a whole. This projection, however, could be
incorrect depending on certain factors. For example, material environmental
liabilities may have arisen after the assessments were performed or our
assessments may not have revealed all environmental liabilities or may have
underestimated the scope and severity of environmental conditions observed.
There may also be unknown
15
<PAGE>
environmental liabilities at properties for which we have not obtained a Phase
I environmental assessment or have not yet obtained a Phase II environmental
assessment. In addition, we base our assumptions regarding environmental
conditions, including groundwater flow and the existence and source of
contamination, on readily available sampling data. We cannot guarantee that
such data is reliable in all cases. Moreover, we cannot provide any assurances
(1) that future laws, ordinances or regulations will not impose a material
environmental liability or (2) that tenants, the condition of land or
operations in the vicinity of our properties or unrelated third parties will
not affect the current environmental condition of our properties.
Some tenants use or generate hazardous substances in the ordinary course
of their respective businesses. In their leases, we require these tenants to
comply with all applicable laws and to be responsible to us for any damages
resulting from their use of the property. We are not aware of any material
environmental problems resulting from tenants' use or generation of hazardous
or toxic chemicals or substances. We cannot provide any assurances, however,
that all tenants will comply with the terms of their leases or remain solvent.
If tenants do not comply or do not remain solvent, we may at some point be
responsible for contamination caused by such tenants.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which is
required to be adopted in fiscal years beginning after June 15, 1999. The
Statement will require us to recognize all derivatives on the balance sheet at
fair value. Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of derivatives will either be offset against
the change in fair value of the hedged assets, liabilities or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's
change in fair value will be immediately recognized in earnings.
COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT
Under the Americans with Disabilities Act (the "ADA"), all public
accommodations and commercial facilities are required to meet certain federal
requirements related to access and use by disabled persons. These requirements
became effective in 1992. Compliance with the ADA requirements could require
removal of access barriers, and noncompliance could result in imposition of
fines by the U.S. government or an award of damages to private litigants.
Although we believe that our properties are substantially in compliance with
these requirements, we may incur additional costs to comply with the ADA.
Although we believe that such costs will not have a material adverse effect on
us, if required changes involve a greater expenditure than we currently
anticipate, our results of operations, liquidity and capital resources could be
materially adversely affected.
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTIONS
We consider funds from operations ("FFO") to be a useful financial
performance measure of the operating performance of an equity REIT because,
together with net income and cash flows, FFO provides investors with an
additional basis to evaluate the ability of a REIT to incur and service debt
and to fund acquisitions and other capital expenditures. FFO does not represent
net income or cash flows from operating, investing or financing activities as
defined by Generally Accepted Accounting Principles ("GAAP"). It should not be
considered as an alternative to net income as an indicator of our operating
performance or to cash flows as a measure of liquidity. FFO does not measure
whether cash flow is sufficient to fund all cash needs, including principal
amortization, capital improvements and distributions to stockholders. Further,
FFO as disclosed by other REITs may not be comparable to our calculation of
FFO, as described below. FFO and cash available for distributions should not be
considered as alternatives to net income as an indication of our performance or
to cash flows as a measure of liquidity.
FFO means net income (computed in accordance with generally accepted
accounting principles) excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. In March 1995, the National
Association of Real Estate Investment Trusts ("NAREIT") issued a clarification
of the definition of FFO. The clarification provides that amortization of
deferred financing costs and depreciation of non-real estate assets are no
longer to be added back to net income in arriving at FFO. Cash available for
distribution is defined as funds from operations reduced
16
<PAGE>
by non-revenue enhancing capital expenditures for building improvements and
tenant improvements and lease commissions related to second generation space.
FFO and cash available for distribution for the three month periods ended
March 31, 1999 and 1998 are summarized in the following table (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1999 1998
----------- ----------
<S> <C> <C>
FUNDS FROM OPERATIONS:
Income before extraordinary item ............................. $ 41,373 $ 33,981
Add (deduct):
Dividends to preferred unitholders.......................... (8,145) (6,145)
Gain on disposition of assets .............................. (569) --
Depreciation and amortization .............................. 28,074 17,113
Depreciation on unconsolidated affiliates .................. 477 --
-------- --------
FUNDS FROM OPERATIONS ..................................... 61,210 44,949
CASH AVAILABLE FOR DISTRIBUTION:
Add (deduct):
Rental income from straight-line rents ..................... (3,985) (3,116)
Amortization of deferred financing costs ................... 778 616
Non-incremental revenue generating capital expenditures (1):
Building improvements paid ................................ (1,518) (1,019)
Second generation tenant improvements paid ................ (6,009) (2,436)
Second generation lease commissions paid .................. (3,531) (1,726)
-------- --------
CASH AVAILABLE FOR DISTRIBUTION ......................... $ 46,945 $ 37,268
======== ========
Weighted average Common Units outstanding -- basic ........... 69,625 59,109
======== ========
Weighted average Common Units outstanding -- diluted ......... 69,762 59,746
======== ========
DIVIDEND PAYOUT RATIO -- DILUTED:
Funds from operations ...................................... 61.5% 67.8%
======== ========
Cash available for distribution ............................ 80.2% 81.8%
======== ========
</TABLE>
- ----------
(1) Amounts represent cash expenditures.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this Quarterly Report on Form 10-Q may contain
forward-looking statements. Such statements include, in particular, statements
about our plans, strategies and prospects under "Management's Discussion and
Analysis of Financial Condition and Results of Operations." You can identify
forward-looking statements by our use of forward-looking terminology such as
"may," "will," "expect," "anticipate," "estimate," "continue" or other similar
words. Although we believe that our plans, intentions and expectations
reflected in or suggested by such forward-looking statements are reasonable, we
cannot assure you that our plans, intentions or expectations will be achieved.
When considering such forward-looking statements, you should keep in mind the
following important factors that could cause our actual results to differ
materially from those contained in any forward-looking statement:
o our markets could suffer unexpected increases in development of office,
industrial and retail properties;
o the financial condition of our tenants could deteriorate;
o the costs of our development projects could exceed our original
estimates;
o we may not be able to complete development, acquisition, disposition or
joint venture projects as quickly or on as favorable terms as anticipated;
o we may not be able to lease or release space quickly or on as favorable
terms as old leases;
o we may have incorrectly assessed the environmental condition of our
properties;
17
<PAGE>
o an unexpected increase in interest rates would increase our debt service
costs;
o we may not be able to continue to meet our long-term liquidity
requirements on favorable terms;
o we could lose key executive officers; and
o our southeastern markets may suffer an unexpected decline in economic
growth or increase in unemployment rates.
Given these uncertainties, we caution you not to place undue reliance on
forward-looking statements. We undertake no obligation to publicly release the
results of any revisions to these forward-looking statements that may be made
to reflect any future events or circumstances or to reflect the occurrence of
unanticipated events.
18
<PAGE>
PROPERTY INFORMATION
The following table sets forth certain information with respect to our
majority owned in-service and development properties (excluding apartment
units) as of March 31, 1999 and 1998:
<TABLE>
<CAPTION>
RENTABLE NUMBER OF PERCENT LEASED/
MARCH 31, 1999 SQUARE FEET PROPERTIES PRE-LEASED
- ---------------------------- ------------- ------------ ----------------
<S> <C> <C> <C>
IN-SERVICE:
Office .................... 30,032,000 443 94%
Industrial ................ 11,883,000 184 91%
Retail .................... 1,661,000 18 91%
---------- --- --
Total .................... 43,576,000 645 93%
========== === ==
REDEVELOPMENT:
Office .................... 207,000 4 49%
Industrial ................ 194,000 4 1%
---------- --- --
Total .................... 401,000 8 26%
========== === ==
DEVELOPMENT:
COMPLETED -- NOT STABILIZED
Office .................... 1,564,000 15 79%
Industrial ................ 777,000 6 87%
Retail .................... -- -- --
---------- --- --
Total .................... 2,341,000 21 82%
========== === ==
IN PROCESS
Office .................... 3,764,000 30 64%
Industrial ................ 131,000 1 50%
Retail .................... 200,000 2 65%
---------- --- --
Total .................... 4,095,000 33 63%
========== === ==
TOTAL:
Office .................... 35,567,000 492
Industrial ................ 12,985,000 195
Retail .................... 1,861,000 20
---------- ---
Total .................... 50,413,000 707
========== ===
MARCH 31, 1998
- -----------------------------
IN-SERVICE:
Office .................... 26,501,000 382 94%
Industrial ................ 7,429,000 148 90%
Retail .................... -- -- --
---------- --- --
Total .................... 33,930,000 530 93%
========== === ==
REDEVELOPMENT
Office .................... N/A N/A N/A
Industrial ................ N/A N/A N/A
---------- --- ----
Total .................... N/A N/A N/A
========== === ====
DEVELOPMENT:
COMPLETED -- NOT STABILIZED
Office .................... N/A N/A N/A
Industrial ................ N/A N/A N/A
Retail .................... N/A N/A N/A
---------- --- ----
Total .................... N/A N/A N/A
========== === ====
IN PROCESS
Office .................... 3,182,000 27 53%
Industrial ................ 396,000 5 25%
Retail .................... -- -- --
---------- --- ----
Total .................... 3,578,000 32 50%
========== === ====
TOTAL:
Office .................... 29,683,000 409
Industrial ................ 7,825,000 153
Retail .................... -- --
---------- ---
Total .................... 37,508,000 562
========== ===
</TABLE>
19
<PAGE>
The following table sets forth certain information with respect to our
properties under development as of March 31, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
RENTABLE
SQUARE ESTIMATED
NAME LOCATION FEET COSTS
- --------------------------------- ------------------- ------------ -----------
<S> <C> <C> <C>
IN-PROCESS
OFFICE:
Highwoods Center II @
Tradeport Atlanta 53,000 $ 4,825
Peachtree Corner Atlanta 109,000 9,238
Highwoods I Baltimore 125,000 15,300
Mallard Creek V Charlotte 118,000 12,262
Parkway Plaza 14 Charlotte 90,000 7,690
Lakefront Plaza I Hampton Roads 77,000 7,477
Belfort Park C1 Jacksonville 54,000 4,830
Belfort Park C2 Jacksonville 31,000 2,730
Valencia Place Kansas City 241,000 34,020
Southwind Building D Memphis 64,000 6,800
Caterpillar Financial Center Nashville 313,000 54,000
Lakeview Ridge III Nashville 131,000 13,100
Westwood South Nashville 125,000 13,530
C N A Maitland III Orlando 78,000 9,885
Capital Plaza Orlando 303,000 53,000
Concourse Center One Piedmont Triad 86,000 8,400
3737 Glenwood Ave. Research Triangle 107,000 16,700
4101 Research Commons Research Triangle 73,000 9,311
Capital One Bldg 1 Richmond 126,000 14,795
Capital One Bldg 2 Richmond 44,000 5,125
Capital One Bldg 3 Richmond 126,000 14,380
Highwoods Common Richmond 49,000 4,840
Stony Point II Richmond 136,000 13,881
Sportsline USA South Florida 80,000 10,000
Intermedia Building 1 Tampa 200,000 27,040
Intermedia Building 2 Tampa 30,000 4,056
Intermedia Building 3 Tampa 170,000 22,984
Intermedia Building 4 Tampa 200,000 29,219
Intermedia Building 5 Tampa 200,000 29,219
Lakepoint II Tampa 225,000 34,106
------- --------
In-Process Office Total or
Weighted Average 3,764,000 $492,743
========= ========
INDUSTRIAL:
Newpoint II Atlanta 131,000 5,167
--------- --------
In-Process Industrial Total or
Weighted Average 131,000 $ 5,167
========= ========
RETAIL:
Seville Square Kansas City 119,000 32,100
Valencia Place Kansas City 81,000 14,362
--------- --------
In-Process Retail Total or
Weighted Average 200,000 $ 46,462
========= ========
Total or Weighted Average of all
In-Process Development
Projects 4,095,000 $544,372
========= ========
<CAPTION>
COST AT PRE-LEASING ESTIMATED ESTIMATED
NAME 3/31/99 PERCENTAGE(1) COMPLETION STABILIZATION(2)
- --------------------------------- ----------- --------------- ------------ -----------------
<S> <C> <C> <C> <C>
IN-PROCESS
OFFICE:
Highwoods Center II @
Tradeport $ 994 57% 3Q 99 4Q 99
Peachtree Corner 3,042 -- 3Q 99 3Q 00
Highwoods I 8,048 -- 2Q 99 4Q 99
Mallard Creek V 5,948 -- 4Q 99 4Q 00
Parkway Plaza 14 3,236 58 2Q 99 1Q 00
Lakefront Plaza I 5,122 31 2Q 99 1Q 00
Belfort Park C1 1,579 -- 3Q 99 2Q 00
Belfort Park C2 1,130 -- 3Q 99 2Q 00
Valencia Place 16,879 41 1Q 00 4Q 00
Southwind Building D 3,869 56 2Q 99 4Q 99
Caterpillar Financial Center 16,743 79 1Q 00 2Q 00
Lakeview Ridge III 8,523 88 2Q 99 2Q 99
Westwood South 8,068 79 3Q 99 1Q 00
C N A Maitland III 5,648 100 3Q 99 3Q 99
Capital Plaza 15,721 30 1Q 00 4Q 01
Concourse Center One 4,817 32 2Q 99 1Q 00
3737 Glenwood Ave. 8,903 56 3Q 99 1Q 00
4101 Research Commons 3,919 35 3Q 99 2Q 00
Capital One Bldg 1 8,647 100 2Q 99 2Q 99
Capital One Bldg 2 3,064 100 3Q 99 3Q 99
Capital One Bldg 3 4,401 100 4Q 99 4Q 99
Highwoods Common 3,902 100 2Q 99 2Q 99
Stony Point II 9,148 52 2Q 99 4Q 99
Sportsline USA 3,153 100 3Q 99 3Q 99
Intermedia Building 1 1,298 100 1Q 00 1Q 00
Intermedia Building 2 123 100 1Q 00 1Q 00
Intermedia Building 3 1,674 100 1Q 00 1Q 00
Intermedia Building 4 -- 100 2Q 00 2Q 00
Intermedia Building 5 -- 100 3Q 01 3Q 01
Lakepoint II 8,334 52 4Q 99 4Q 99
-------- ---
In-Process Office Total or
Weighted Average $165,933 64%
======== ===
INDUSTRIAL:
Newpoint II 2,964 50% 2Q 99 2Q 00
-------- ---
In-Process Industrial Total or
Weighted Average $ 2,964 50%
======== ===
RETAIL:
Seville Square 26,913 75% 2Q 99 4Q 99
Valencia Place 3,876 50 1Q 00 4Q 00
-------- ---
In-Process Retail Total or
Weighted Average $ 30,789 65%
======== ===
Total or Weighted Average of all
In-Process Development
Projects $199,686 63%
======== ===
</TABLE>
- ----------
(1) Includes the effect of letters of intent.
(2) We generally consider a development project to be stabilized upon the
earlier of the first date such project is at least 95% occupied or one
year from the date of completion.
20
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
SQUARE ESTIMATED
NAME LOCATION FEET COSTS
- ----------------------------------- ------------------- ------------ -----------
<S> <C> <C> <C>
COMPLETED -- NOT STABILIZED
OFFICE:
Ridgefield III Asheville 57,000 $ 5,500
10 Glenlakes Atlanta 254,000 35,100
Highwoods Center I @ Tradeport Atlanta 45,000 3,717
Parkway Plaza 11 Charlotte 32,000 2,600
Parkway Plaza 12 Charlotte 22,000 1,800
Patewood VI Greenville 107,000 11,400
Highwoods Centre Hampton Roads 103,000 9,925
Cool Springs I Nashville 153,000 16,800
Highwoods Centre Research Triangle 76,000 8,300
Overlook Research Triangle 97,000 10,500
Red Oak Research Triangle 65,000 6,000
Situs II Research Triangle 59,000 6,300
Eastshore II Richmond 76,000 7,842
Highwoods Square South Florida 93,000 12,500
Interstate Corporate Center Tampa 325,000 19,100
------- --------
Completed -- Not Stabilized Office
Total or Weighted Average 1,564,000 $157,384
========= ========
INDUSTRIAL:
Bluegrass Lakes I Atlanta 112,000 4,700
Tradeport 1 Atlanta 87,000 3,100
Tradeport 2 Atlanta 87,000 3,100
Air Park South Warehouse II Piedmont Triad 136,000 4,200
Air Park South Warehouse VI Piedmont Triad 189,000 8,000
HIW Distribution Center Richmond 166,000 5,764
--------- --------
Completed -- Not Stabilized
Industrial Total or Weighted
Average 777,000 $ 28,864
--------- --------
Total or Weighted Average of all
Completed -- Not Stabilized
Development Projects 2,341,000 $186,248
========= ========
Total or Weighted Average of all
Development Projects 6,436,000 $730,620
========= ========
<CAPTION>
COST AT PRE-LEASING ESTIMATED ESTIMATED
NAME 3/31/99 PERCENTAGE(1) COMPLETION STABILIZATION(2)
- ----------------------------------- ----------- --------------- ------------ -----------------
<S> <C> <C> <C> <C>
COMPLETED -- NOT STABILIZED
OFFICE:
Ridgefield III $ 5,046 44% 3Q 98 4Q 99
10 Glenlakes 27,469 77 1Q 99 4Q 99
Highwoods Center I @ Tradeport 2,776 100 1Q 99 2Q 99
Parkway Plaza 11 2,212 66 1Q 99 3Q 99
Parkway Plaza 12 1,401 61 1Q 99 4Q 99
Patewood VI 11,882 92 3Q 98 2Q 99
Highwoods Centre 8,103 60 4Q 98 4Q 99
Cool Springs I 15,076 66 3Q 98 3Q 99
Highwoods Centre 8,313 100 4Q 98 3Q 99
Overlook 9,509 91 4Q 98 2Q 99
Red Oak 4,767 80 4Q 98 2Q 99
Situs II 5,986 83 3Q 98 2Q 99
Eastshore II 6,275 100 1Q 99 2Q 99
Highwoods Square 8,842 47 1Q 99 4Q 99
Interstate Corporate Center 16,527 90 1Q 99 2Q 99
-------- ---
Completed -- Not Stabilized Office
Total or Weighted Average $134,184 79%
======== ===
INDUSTRIAL:
Bluegrass Lakes I 3,856 100% 1Q 99 2Q 99
Tradeport 1 2,605 87 3Q 98 2Q 99
Tradeport 2 2,587 96 3Q 98 2Q 99
Air Park South Warehouse II 3,216 100 4Q 98 3Q 99
Air Park South Warehouse VI 6,784 100 1Q 99 2Q 99
HIW Distribution Center 5,831 46 1Q 99 4Q 99
-------- ---
Completed -- Not Stabilized
Industrial Total or Weighted
Average $ 24,879 87%
-------- ---
Total or Weighted Average of all
Completed -- Not Stabilized
Development Projects $159,063 82%
======== ===
Total or Weighted Average of all
Development Projects $358,749 70%
======== ===
</TABLE>
- ----------
(1) Includes the effect of letters of intent.
(2) We generally consider a development project to be stabilized upon the
earlier of the first date such project is at least 95% occupied or one
year from the date of completion.
21
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
SQUARE ESTIMATED PRE-LEASING
FEET COSTS PERCENTAGE(1)
DEVELOPMENT ANALYSIS ----------- ----------------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
SUMMARY BY ESTIMATED STABILIZATION DATE:
Second Quarter 1999 ................... 1,555,000 $116,494 93%
Third Quarter 1999 .................... 599,000 56,910 89
Fourth Quarter 1999 ................... 1,543,000 191,981 57
First Quarter 2000 .................... 885,000 107,877 75
Second Quarter 2000 ................... 802,000 105,257 67
Third Quarter 2000 .................... 109,000 9,238 0
Fourth Quarter 2000 ................... 440,000 60,644 32
Third Quarter 2001 .................... 200,000 29,219 100
Fourth Quarter 2001 ................... 303,000 53,000 30
--------- -------- ---
Total or Weighted Average ........... 6,436,000 $730,620 70%
========= ======== ===
SUMMARY BY MARKET:
Asheville ............................. 57,000 5,500 44%
Atlanta ............................... 878,000 68,947 69
Baltimore ............................. 125,000 15,300 0
Charlotte ............................. 262,000 24,352 33
Greenville ............................ 107,000 11,400 92
Hampton Roads ......................... 180,000 17,402 48
Jacksonville .......................... 85,000 7,560 0
Kansas City ........................... 441,000 80,482 52
Memphis ............................... 64,000 6,800 56
Nashville ............................. 722,000 97,430 78
Orlando ............................... 381,000 62,885 44
Piedmont Triad ........................ 411,000 20,600 86
Research Triangle ..................... 477,000 57,111 74
Richmond .............................. 723,000 66,627 79
South Florida ......................... 173,000 22,500 72
Tampa ................................. 1,350,000 165,724 90
--------- -------- ---
Total or Weighted Average ........... 6,436,000 $730,620 70%
========= ======== ===
Build-to-Suit ....................... 1,254,000 $166,703 100%
Multi-tenant ........................ 5,182,000 563,917 63
--------- -------- ---
Total or Weighted Average ........... 6,436,000 $730,620 70%
========= ======== ===
</TABLE>
<TABLE>
<CAPTION>
RENTABLE
SQUARE FEET ESTIMATED COSTS PRE-LEASING(1)
------------- ----------------- ---------------
PER PROPERTY TYPE:
<S> <C> <C> <C>
Office Weighted Average ............. 118,400 $14,447 68%
Industrial Weighted Average ......... 129,714 4,862 81
Retail Weighted Average ............. 100,000 23,231 65
--------- ------- --
Total Weighted Average .............. 119,400 $13,378 70%
========= ======= ==
</TABLE>
- ----------
(1) Includes the effect of letters of intent.
22
<PAGE>
The following table sets forth certain information with respect to our
properties under redevelopment as of March 31, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
RENTABLE ESTIMATED
SQUARE ESTIMATED COST AT PRE-LEASING ESTIMATED STABILIZATION
NAME LOCATION FEET COST 3/31/99 (1) COMPLETION (2)
- --------------------------- --------------- ---------- ----------- --------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE:
Highwoods Park B South Florida 27,000 $ 2,296 $ 1,834 99% 1Q 00 3Q 00
Highwoods Park C South Florida 77,000 6,667 5,347 47 1Q 00 3Q 00
Highwoods Park E South Florida 78,000 6,782 5,248 50 1Q 00 3Q 00
Highwoods Park F South Florida 25,000 2,394 1,730 -- 1Q 00 3Q 00
------ ------- ------- --
Total or Weighted Average 207,000 18,139 14,159 49
======= ======= ======= ==
INDUSTRIAL:
Highwoods Park G South Florida 66,000 4,241 2,578 1% 1Q 00 3Q 00
Highwoods Park H1 South Florida 20,000 1,426 771 -- 1Q 00 3Q 00
Highwoods Park H2 South Florida 36,000 3,022 2,385 -- 1Q 00 3Q 00
Highwoods Park J South Florida 72,000 4,501 2,725 -- 1Q 00 3Q 00
------- ------- ------- --
Total or Weighted Average 194,000 13,190 8,459 --
======= ======= ======= ==
Grand Total 401,000 31,329 22,618 26%
======= ======= ======= ==
</TABLE>
- ----------
(1) Includes the effect of letters of intent.
(2) We generally consider a development project to be stabilized upon the
earlier of the first date such project is at least 95% occupied or one
year from the date of completion.
23
<PAGE>
The following tables set forth certain information about leasing
activities at our majority-owned in-service properties (excluding apartment
units) for the three months ended March 31, 1999, December 31, September 30 and
June 30, 1998:
<TABLE>
<CAPTION>
OFFICE LEASING STATISTICS
THREE MONTHS ENDED
-----------------------------------------------------------------------------------
3/31/99 12/31/98 9/30/98 6/30/98 AVERAGE
-------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
NET EFFECTIVE RENTS RELATED TO
RE-LEASED SPACE:
Number of lease transactions (signed
leases) 276 308 326 285 299
Rentable square footage leased 1,406,170 1,291,297 1,645,913 1,099,805 1,360,796
Average per rentable square foot over
the lease term:
Base rent $ 14.84 $ 16.54 $ 16.18 $ 15.53 $ 15.77
Tenant improvements ( 0.84) ( 0.85) ( 0.71) ( 1.00) ( 0.85)
Leasing commissions ( 0.42) ( 0.38) ( 0.42) ( 0.27) ( 0.37)
Rent concessions 0.00 0.00 0.00 ( 0.03) ( 0.01)
---------- ---------- ----------- ---------- ----------
Effective rent 13.58 15.31 15.05 14.23 14.54
Expense stop(1) ( 3.55) ( 3.96) ( 4.45) ( 4.22) ( 4.05)
---------- ---------- ----------- ---------- ----------
Equivalent effective net rent $ 10.03 $ 11.35 $ 10.60 $ 10.01 $ 10.49
========== ========== =========== ========== ==========
Average term in years 5 4 5 5 5
========== ========== =========== ========== ==========
CAPITAL EXPENDITURES RELATED TO
RE-LEASED SPACE:
Tenant Improvements:
Total dollars committed under
signed leases $6,848,279 $4,886,517 $ 6,754,100 $5,849,409 $6,084,576
Rentable square feet 1,406,170 1,291,297 1,645,913 1,099,805 1,360,796
---------- ---------- ----------- ---------- ----------
Per rentable square foot $ 4.87 $ 3.78 $ 4.10 $ 5.32 $ 4.47
========== ========== =========== ========== ==========
Leasing Commissions:
Total dollars committed under
signed leases $3,047,978 $2,005,094 $ 3,694,473 $1,356,002 $2,525,887
Rentable square feet 1,406,170 1,291,297 1,645,913 1,099,805 1,360,796
---------- ---------- ----------- ---------- ----------
Per rentable square foot $ 2.17 $ 1.55 $ 2.24 $ 1.23 $ 1.86
========== ========== =========== ========== ==========
Total:
Total dollars committed under
signed leases $9,896,257 $6,891,611 $10,448,573 $7,205,411 $8,610,463
Rentable square feet 1,406,170 1,291,297 1,645,913 1,099,805 1,360,796
---------- ---------- ----------- ---------- ----------
Per rentable square foot $ 7.04 $ 5.34 $ 6.35 $ 6.55 $ 6.33
========== ========== =========== ========== ==========
RENTAL RATE TRENDS:
Average final rate with expense pass
throughs $ 14.28 $ 13.57 $ 14.51 $ 13.91 $ 14.07
Average first year cash rental rate $ 15.01 $ 14.47 $ 15.43 $ 14.87 $ 14.95
---------- ---------- ----------- ---------- ----------
Percentage increase 5.11% 6.63% 6.34% 6.90% 6.24%
========== ========== =========== ========== ==========
</TABLE>
- ----------
(1) "Expense stop" represents operating expenses (generally including taxes,
utilities, routine building expense and common area maintainance) for
which we will not be reimbursed by our tenants.
24
<PAGE>
<TABLE>
<CAPTION>
INDUSTRIAL LEASING STATISTICS
THREE MONTHS ENDED
--------------------------------------------------------------------------
3/31/99 12/31/98 9/30/98 6/30/98 AVERAGE
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET EFFECTIVE RENTS RELATED TO RE-LEASED
SPACE:
Number of lease transactions (signed leases) 72 44 56 41 53
Rentable square footage leased 837,616 582,758 314,549 194,014 482,234
Average per rentable square foot over the lease
term:
Base rent $ 5.12 $ 4.71 $ 6.59 $ 6.99 $ 5.85
Tenant improvements (0.22) (0.20) (0.23) (0.29) (0.24)
Leasing commissions (0.10) (0.09) (0.09) (0.19) (0.12)
Rent concessions 0.00 0.00 0.00 0.00 0.00
---------- -------- -------- -------- --------
Effective rent 4.80 4.42 6.27 6.51 5.50
Expense stop(1) (0.28) (0.25) (0.44) (0.52) (0.37)
---------- -------- -------- -------- --------
Equivalent effective net rent $ 4.52 $ 4.17 $ 5.83 $ 5.99 $ 5.13
========== ======== ======== ======== ========
Average term in years 4 3 4 3 3
========== ======== ======== ======== ========
CAPITAL EXPENDITURES RELATED TO RE-LEASED
SPACE:
TENANT IMPROVEMENTS:
Total dollars committed under signed leases $ 821,654 $712,108 $248,359 $239,348 $505,367
Rentable square feet 837,616 582,758 314,549 194,014 482,234
---------- -------- -------- -------- --------
Per rentable square foot $ 0.98 $ 1.22 $ 0.79 $ 1.23 $ 1.05
========== ======== ======== ======== ========
LEASING COMMISSIONS:
Total dollars committed under signed leases $ 315,101 $173,017 $ 99,574 $130,243 $179,484
Rentable square feet 837,616 582,758 314,549 194,014 482,234
---------- -------- -------- -------- --------
Per rentable square foot $ 0.38 $ 0.30 $ 0.32 $ 0.67 $ 0.37
========== ======== ======== ======== ========
Total:
Total dollars committed under signed leases $1,136,755 $885,125 $347,933 $369,591 $684,851
Rentable square feet 837,616 582,758 314,549 194,014 482,234
---------- -------- -------- -------- --------
Per rentable square foot $ 1.36 $ 1.52 $ 1.11 $ 1.90 $ 1.42
========== ======== ======== ======== ========
RENTAL RATE TRENDS:
Average final rate with expense pass throughs $ 4.91 $ 4.62 $ 5.40 $ 6.09 $ 5.26
Average first year cash rental rate $ 4.91 $ 4.72 $ 5.54 $ 6.50 $ 5.42
---------- -------- -------- -------- --------
Percentage increase 0.00% 2.16% 2.59% 6.73% 3.04%
========== ======== ======== ======== ========
</TABLE>
- ----------
(1) "Expense stop" represents operating expenses (generally including taxes,
utilities, routine building expense and common area maintainance) for
which we will not be reimbursed by our tenants.
25
<PAGE>
<TABLE>
<CAPTION>
RETAIL LEASING STATISTICS
THREE MONTHS ENDED
--------------------------------------------------------
3/31/99 12/31/98 9/30/98 AVERAGE
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
NET EFFECTIVE RENTS RELATED TO RE-LEASED SPACE:
Number of lease transactions (signed leases) 25 15 11 17
Rentable square footage leased 62,638 29,706 37,258 43,201
Average per rentable square foot over the lease term:
Base rent $ 15.37 $ 16.34 $ 13.59 $ 15.10
Tenant improvements ( 0.45) ( 1.66) ( 0.14) ( 0.75)
Leasing commissions ( 0.39) ( 0.76) ( 0.44) ( 0.53)
Rent concessions 0.00 0.00 0.00 0.00
-------- -------- -------- --------
Effective rent 14.53 13.92 13.01 13.82
Expense stop ( 0.27) ( 1.79) ( 0.09) ( 0.72)
-------- -------- -------- --------
Equivalent effective net rent $ 14.26 $ 12.13 $ 12.92 $ 13.10
-------- -------- -------- --------
Average term in years 6 5 6 6
======== ======== ======== ========
CAPITAL EXPENDITURES RELATED TO RE-LEASED SPACE:
TENANT IMPROVEMENTS:
Total dollars committed under signed leases $248,531 $319,620 $ 21,000 $196,384
Rentable square feet 62,638 29,706 37,258 43,201
-------- -------- -------- --------
Per rentable square foot $ 3.97 $ 10.76 $ 0.56 $ 4.55
======== ======== ======== ========
LEASING COMMISSIONS:
Total dollars committed under signed leases $153,872 $123,047 $ 99,268 $125,396
Rentable square feet 62,638 29,706 37,258 43,201
-------- -------- -------- --------
Per rentable square foot $ 2.46 $ 4.14 $ 2.66 $ 2.90
======== ======== ======== ========
TOTAL:
Total dollars committed under signed leases $402,403 $442,667 $120,268 $321,779
Rentable square feet 62,638 29,706 37,258 43,201
-------- -------- -------- --------
Per rentable square foot $ 6.42 $ 14.90 $ 3.23 $ 7.45
======== ======== ======== ========
RENTAL RATE TRENDS:
Average final rate with expense pass throughs $ 10.92 $ 15.91 $ 8.55 $ 11.79
Average first year cash rental rate $ 16.22 $ 18.16 $ 10.53 $ 14.97
-------- -------- -------- --------
Percentage increase 48.53% 14.14% 23.16% 26.94%
======== ======== ======== ========
</TABLE>
- ----------
(1) "Expense stop" represents operating expenses (generally including taxes,
utilities, routine building expense and common area maintainance) for
which we will not be reimbursed by our tenants.
(2) The operating partnership did not own any retail property during the
quarter ended 6/30/98.
26
<PAGE>
The following tables set forth scheduled lease expirations for executed
leases at our majority owned in-service properties (excluding apartment units)
as of March 31, 1999 assuming no tenant exercises renewal options.
OFFICE PROPERTIES:
<TABLE>
<CAPTION>
AVERAGE
ANNUAL RENTS ANNUAL PERCENTAGE OF
TOTAL PERCENTAGE OF UNDER RENTAL RATE LEASED RENTS
YEAR OF RENTABLE LEASED SQUARE FOOTAGE EXPIRING PER SQUARE REPRESENTED
LEASE NUMBER OF SQUARE FEET REPRESENTED BY LEASES (1) FOOT FOR BY EXPIRING
EXPIRATION LEASES EXPIRING EXPIRING LEASES (IN THOUSANDS) EXPIRATIONS (1) LEASES
- -------------------- ----------- ------------- ----------------------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Remainder of 1999 955 3,288,450 11.6% $ 51,652 $ 15.71 11.4%
2000 897 4,098,481 14.4 65,965 16.09 14.6
2001 850 4,463,076 15.7 71,864 16.10 15.8
2002 671 4,159,527 14.6 67,013 16.11 14.8
2003 587 3,978,439 14.0 64,482 16.21 14.3
2004 209 2,145,807 7.5 33,410 15.57 7.4
2005 92 1,349,324 4.7 20,673 15.32 4.6
2006 49 1,267,839 4.5 19,872 15.67 4.4
2007 31 870,058 3.1 14,321 16.46 3.2
2008 54 1,707,657 6.0 24,240 14.19 5.4
Thereafter 55 1,103,252 3.9 18,311 16.60 4.1
--- --------- ----- -------- -------- -----
Total of average 4,450 28,431,910 100.0% $451,803 $ 15.89 100.0%
===== ========== ===== ======== ======== =====
</TABLE>
INDUSTRIAL PROPERTIES:
<TABLE>
<CAPTION>
AVERAGE
ANNUAL PERCENTAGE OF
TOTAL PERCENTAGE OF ANNUAL RENTS RENTAL RATE LEASED RENTS
RENTABLE LEASED SQUARE FOOTAGE UNDER EXPIRING PER SQUARE REPRESENTED
YEAR OF LEASE NUMBER OF SQUARE FEET REPRESENTED BY LEASES (1) FOOT FOR BY EXPIRING
EXPIRATION LEASES EXPIRING EXPIRING LEASES (IN THOUSANDS) EXPIRATIONS (1) LEASES
- ------------------- ----------- ------------- ----------------------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Remainder of 1999 203 1,820,161 17.0% $ 9,150 $ 5.03 17.7%
2000 172 2,157,591 20.1 10,681 4.95 20.6
2001 159 1,998,739 18.6 8,986 4.50 17.4
2002 83 1,267,253 11.8 5,929 4.68 11.5
2003 57 772,642 7.2 4,124 5.34 8.0
2004 23 1,369,816 12.8 5,275 3.85 10.2
2005 11 187,833 1.8 1,210 6.44 2.3
2006 5 224,099 2.1 1,110 4.95 2.1
2007 4 489,125 4.6 1,726 3.53 3.3
2008 8 376,536 3.5 3,245 8.62 6.3
Thereafter 3 58,876 0.5 335 5.69 0.6
--- --------- ----- ------- ------- -----
Total or average 728 10,722,671 100.0% $51,771 $ 4.83 100.0%
=== ========== ===== ======= ======= =====
</TABLE>
- ----------
(1) Includes operating expense pass throughs and excludes the effect of future
contractual rent increases.
27
<PAGE>
RETAIL PROPERTIES:
<TABLE>
<CAPTION>
AVERAGE
ANNUAL RENTS ANNUAL PERCENTAGE OF
TOTAL PERCENTAGE OF UNDER RENTAL RATE LEASED RENTS
YEAR OF RENTABLE LEASED SQUARE FOOTAGE EXPIRING PER SQUARE REPRESENTED
LEASE NUMBER OF SQUARE FEET REPRESENTED BY LEASES (1) FOOT FOR BY EXPIRING
EXPIRATION LEASES EXPIRING EXPIRING LEASES (IN THOUSANDS) EXPIRATIONS (1) LEASES
- -------------------- ----------- ------------- ----------------------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Remainder of 1999 87 320,973 15.7% $ 3,060 $ 9.53 12.0%
2000 72 238,381 11.7 2,940 12.33 11.5
2001 61 235,825 11.5 3,209 13.61 12.5
2002 41 162,767 8.0 2,161 13.28 8.4
2003 47 210,935 10.3 3,214 15.24 12.6
2004 19 168,129 8.2 1,260 7.49 4.9
2005 13 64,999 3.2 1,294 19.91 5.1
2006 12 109,066 5.3 1,172 10.75 4.6
2007 8 63,125 3.1 946 14.99 3.7
2008 14 105,765 5.2 2,223 21.02 8.7
Thereafter 23 366,156 17.8 4,118 11.25 16.0
-- ------- ----- ------- ------- -----
Total or average 397 2,046,121 100.0% $25,597 $ 12.51 100.0%
=== ========= ===== ======= ======= =====
</TABLE>
TOTAL:
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL PERCENTAGE OF ANNUAL RENTS LEASED RENTS
RENTABLE LEASED SQUARE FOOTAGE UNDER EXPIRING REPRESENTED
YEAR OF LEASE NUMBER OF SQUARE FEET REPRESENTED BY LEASES (1) BY EXPIRING
EXPIRATION LEASES EXPIRING EXPIRING LEASES (IN THOUSANDS) LEASES
- --------------------- ----------- ------------- ----------------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Remainder of 1999 1,245 5,429,584 13.2% $ 63,862 12.1%
2000 1,141 6,494,453 15.8 79,586 15.0
2001 1,070 6,697,640 16.2 84,059 15.9
2002 795 5,589,547 13.6 75,103 14.2
2003 691 4,962,016 12.0 71,820 13.6
2004 251 3,683,752 8.9 39,945 7.5
2005 116 1,602,156 3.9 23,177 4.4
2006 66 1,601,004 3.9 22,154 4.2
2007 43 1,422,308 3.5 16,993 3.2
2008 76 2,189,958 5.3 29,708 5.6
Thereafter 81 1,528,284 3.7 22,764 4.3
----- --------- ----- -------- -----
Total or average 5,575 41,200,702 100.0% $529,171 100.0%
===== ========== ===== ======== =====
</TABLE>
- ----------
(1) Includes operating expense pass throughs and excludes the effect of future
contractual rent increases.
INFLATION
Historically inflation has not had a significant impact on our operations
because of the relatively low inflation rate in our geographic areas of
operation. Most of the leases require the tenants to pay their pro rata share
of increased incremental operating expenses, including common area maintenance,
real estate taxes and insurance, thereby reducing our exposure to increases in
operating expenses resulting from inflation. In addition, many of the leases
are for terms of less than seven years, which may enable us to replace existing
leases with new leases at a higher base rent if rents on the existing leases
are below the market rate.
28
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
THE EFFECTS OF POTENTIAL CHANGES IN INTEREST RATES AND EQUITY PRICES ARE
DISCUSSED BELOW. OUR MARKET RISK DISCUSSION INCLUDES "FORWARD-LOOKING
STATEMENTS" AND REPRESENTS AN ESTIMATE OF POSSIBLE CHANGES IN FAIR VALUE OR
FUTURE EARNINGS THAT WOULD OCCUR ASSUMING HYPOTHETICAL FUTURE MOVEMENTS IN
INTEREST RATES OR EQUITY MARKETS. THESE DISCLOSURES ARE NOT PRECISE INDICATORS
OF EXPECTED FUTURE LOSSES, BUT ONLY INDICATORS OF REASONABLY POSSIBLE LOSSES.
AS A RESULT, ACTUAL FUTURE RESULTS MAY DIFFER MATERIALLY FROM THOSE PRESENTED.
SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS --
LIQUIDITY AND CAPITAL RESOURCES" FOR A DESCRIPTION OF OUR ACCOUNTING POLICIES
AND OTHER INFORMATION RELATED TO THESE FINANCIAL INSTRUMENTS.
INTEREST RATE RISK
To meet in part our long-term liquidity requirements, we borrow funds at a
combination of fixed and variable rates. Borrowings under the Revolving Loan
bear interest at variable rates. Our long-term debt, which consists of
long-term financings and the issuance of debt securities, typically bears
interest at fixed rates. In addition, we have assumed fixed rate and variable
rate debt in connection with acquiring properties. Our interest rate risk
management objective is to limit the impact of interest rate changes on
earnings and cash flows and to lower our overall borrowing costs. To achieve
these objectives, from time to time we enter into interest rate hedge contracts
such as collars, swaps, caps and treasury lock agreements in order to mitigate
our interest rate risk with respect to various debt instruments. We do not hold
or issue these derivative contracts for trading or speculative purposes.
CERTAIN VARIABLE RATE DEBT. As of March 31, 1999, the Operating
Partnership had approximately $241.3 million of variable rate debt outstanding
that was not protected by interest rate hedge contracts. If the weighted
average interest rate on this variable rate debt is 100 basis points higher or
lower during the 12 months ended March 31, 2000, our interest expense would be
increased or decreased approximately $2.4 million. In addition, as of March 31,
1999, we had $80 million of additional variable rate debt outstanding that was
protected by an interest rate collar that effectively keeps the interest rate
within a range of 85 basis points. We do not believe that a 100 basis point
increase or decrease in interest rates would materially affect our interest
expense with respect to this $80 million of debt.
INTEREST RATE HEDGE CONTRACTS. For a discussion of our interest rate hedge
contracts in effect at March 31, 1999, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- CAPITALIZATION." If interest rates increase by 100 basis
points, the aggregate fair market value of these interest rate hedge contracts
as of March 31, 1999 would increase by approximately $21.1 million. If interest
rates decrease by 100 basis points, the aggregate fair market value of these
interest rate hedge contracts as of March 31, 1999 would decrease by
approximately $23.1 million.
In addition, we are exposed to certain losses in the event of
nonperformance by the counterparties under the hedge contracts. We expect the
counterparties, which are major financial institutions, to perform fully under
these contracts. However, if the counterparties were to default on their
obligations under the interest rate hedge contracts, we could be required to
pay the full rates on our debt, even if such rates were in excess of the rates
in the contracts.
EQUITY PRICE RISK
On August 28, 1997, we entered into a purchase agreement with UBS AG,
London Branch ("UB-LB") involving the sale of 1.8 million shares of Common
Stock and a related forward contract providing for certain purchase price
adjustments. The forward contract (as amended) generally provides that if the
market price (defined as the weighted average closing price of the Common Stock
for the period beginning March 31, 1999 and ending when UB-LB has sold all of
the shares issued under the forward contract) is less than a certain amount,
which we refer to as the "Forward Price," we must pay UB-LB the difference
times 1.8 million. (Similarly, if the Market Price of a share of Common Stock
is above the Forward Price, UB-LB must pay us the difference in shares of
Common Stock.)
29
<PAGE>
On February 28, 1999, the Company and UB-LB amended the forward contract.
Pursuant to the amendment:
o UB-LB applied $12.8 million in Company collateral to "buy down" the
Forward Price by approximately $7.10 (at March 31, 1999, the forward price
was approximately $25.12);
o We issued 161,924 shares of Common Stock to UB-LB as an interim
settlement payment; and
o UB-LB agreed not to sell any of the shares that we had issued to it
until not later than March 31, 1999.
If the weighted average closing price of one share of Common Stock during
the period during which UB-LB sells the shares is 10% lower or higher than on
March 31, 1999, our cost of settling the forward contract would increase or
decrease by approximately $5 million, payable in cash or shares of Common
Stock. The Company has retained the option of repurchasing any of UB-LB's
remaining shares for cash prior to their distribution by UB-LB.
30
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
On October 2, 1998, John Flake, a former stockholder of J.C. Nichols,
filed a putative class action lawsuit on behalf of himself and the other
former stockholders of J.C. Nichols in the United States District Court
for the District of Kansas against J.C. Nichols, certain of its former
officers and directors and the Company. The complaint alleges, among
other things, that in connection with the merger of J.C. Nichols and the
Company (1) J.C. Nichols and the named directors and officers of J.C.
Nichols breached their fiduciary duties to J.C. Nichols' stockholders,
(2) J.C. Nichols and the named directors and officers of J.C. Nichols
breached their fiduciary duties to members of the J.C. Nichols Company
Employee Stock Ownership Trust, (3) all defendants participated in the
dissemination of a proxy statement containing materially false and
misleading statements and omissions of material facts in violation of
Section 14(a) of the Securities Exchange Act of 1934 and (4) the Company
filed a registration statement with the SEC containing materially false
and misleading statements and omissions of material facts in violation of
Sections 11 and 12(2) of the Securities Act of 1933. The plaintiffs seek
equitable relief and monetary damages. We believe that the defendants
have meritorious defenses to the Plaintiffs' allegations. We intend to
vigorously defend this litigation and have filed a motion to dismiss all
claims asserted against the defendants. Due to the inherent uncertainties
of the litigation process and the judicial system, we are not able to
predict the outcome of this litigation. If this litigation is not
resolved in our favor, it could have a material adverse effect on our
business, financial condition and results of operations.
Item 2. Changes in Securities and Use of Proceeds
(c) In connection with the acquisition of real estate, the Operating
Partnership frequently issues Common Units to sellers of real estate
in reliance on exemptions from registration under the Securities Act.
During the quarter ended March 31, 1999, the Operating Partnership
issued 96,188 Common Units in offerings exempt from the registration
requirements of the Securities Act. The Operating Partnership
exercised reasonable care to assure that each of the offerees of
Common Units during the quarter ended March 31, 1999 were "accredited
investors" under Rule 501 of the Securities Act and that the
investors were not purchasing the Common Units with a view to their
distribution. Specifically, the Operating Partnership relies on the
exemptions provided by Section 4(2) of the Securities Act or Rule 506
of the rules promulgated by the Commission under the Securities Act.
Item 3. Defaults Upon Senior Securities -- NA
Item 4. Submission of Matters to a Vote of Security Holders -- NA
Item 5. Other Information -- NA
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------------
<S> <C>
10.1 Purchase and Sale Agreement dated March 22, 1999, by and among Highwoods/Florida
Holdings, L.P. and America's Capital Partners, LLC, as amended by First Amendment to
Purchase and Sale Agreement Agreement dated April 21, 1999.
10.2 Purchase and Sale Agreement dated March 22, 1999, by and among Highwoods/Florida
Holdings, L.P. and America's Capital Partners, LLC, as amended by First Amendment to
Purchase and Sale Agreement Agreement dated April 21, 1999.
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K -- None
31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HIGHWOODS REALTY LIMITED PARTNERSHIP
By: Highwoods Properties, Inc., its
general partner
By:
/s/ RONALD P. GIBSON
----------------------------------------
RONALD P. GIBSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
/s/ CARMAN J. LIUZZO
----------------------------------------
CARMAN J. LIUZZO
CHIEF FINANCIAL OFFICER
(PRINCIPAL ACCOUNTING OFFICER)
Date: May 17, 1999
32
FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT is made and entered
into the 21st day of April, 1999, by and between HIGHWOODS/FLORIDA HOLDINGS,
L.P., a Delaware limited partnership ("Seller"), and AMERICA'S CAPITAL PARTNERS,
LLC, a Florida limited liability company ("Purchaser").
Seller and Purchaser have previously entered into that certain Purchase
and Sale Agreement dated as of March 22, 1999 (the "Agreement"). All terms used
but not defined herein shall have the meanings given for such terms in the
Agreement.
Seller and Purchaser wish to amend certain of the provisions of the
Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the mutual
covenants and agreements herein and in the Agreement set forth and other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Seller and Purchaser hereby agree as follows:
1. RECITALS. The foregoing recitals are true and correct.
2. THE PROPERTY. Section 1.1 and Exhibit "1.1" are hereby amended to
delete therefrom the properties described as "Highwoods Development Parcels" in
Exhibit "1.1," I.E. Cypress Creek Land consisting of approximately 11 acres and
Highwoods Sawgrass consisting of approximately 38 acres, and to delete the
"Sunrise Office Building." The Agreement is further amended to delete therefrom
all references in the Agreement, including all exhibits thereto, to said
"Highwoods Development Parcels" and "Sunrise Office Building."
<PAGE>
3. DEFINITION OF CONTRACT. Section 1.5 is hereby amended to add the
words "set forth in Exhibit "12.1"" after the word "agreements" in the first
line of Section 1.5.
4. PURCHASE PRICE. Section 5 is hereby amended to reduce the Purchase
Price by the amount of Seventeen Million Two Hundred Eighty Four Thousand
Dollars ($17,284,000.00), to a total of Two Hundred Thirty-One Million Seven
Hundred Fifty Thousand Dollars ($231,750,000.00) plus an amount equal to the
book value of the Development Assets as described in Section 5.1 of the
Agreement.
5. PAYMENT OF PURCHASE PRICE. Section 5.2 is hereby amended to change
the approximate balance of the Purchase Price due in cash at Closing, subject to
prorations and adjustments as provided in the Agreement, to $226,750,000.00.
6. TITLE OBJECTIONS. Section 9.1 is hereby amended to provide that April
28, 1999 is the last day on which Purchaser may notify Seller of any title and
survey objections.
7. INVESTIGATION PERIOD. Sections 11.1 and 11.2 are hereby amended to
provide that the Investigation Period shall expire on April 30, 1999 at 5:00
p.m. Eastern Daylight Time.
8. APPROVAL OF AMENDMENT BY SELLER'S BOARD OF DIRECTORS. Seller and
Purchaser hereby acknowledge that this First Amendment must be approved by
Seller's Board of Directors. Seller agrees to present the terms of this First
Amendment to Seller's Board of Directors for its approval not later than April
27, 1999. Section 12.8 of the Agreement is hereby amended accordingly.
-2-
<PAGE>
9. BROKERS. Section 20 is amended to provide that the brokerage
commission to be paid to Redwood Real Estate Services Corp. shall be One Million
Dollars ($1,000,000.00).
10. HIGHWOODS PARK CONTRACTS. There are two (2) existing contracts for
HVAC repairs, each between Seller and Airstron, dated March 1, 1999 and March
17, 1999, respectively, and one (1) existing contract for roof repairs, between
Seller and Murton Roofing, dated March 1, 1999, in each case for work that is
currently being done on the Improvements in the Highwoods Park property. At
Closing, Seller shall credit to Purchaser an amount equal to the then-remaining
balance due to said contractors for work completed and then unpaid and for the
balance of the work contemplated by said contracts in order to achieve
completion thereunder, and Seller shall provide to Purchaser proof (a) that the
three (3) construction contracts are in good standing and full force and effect,
(b) of the amounts that the contractors have been paid to the date of Closing,
(c) that neither contractor has the right to file a lien against the Highwoods
Park property, and (d) that the respective contractors have consented to the
assignment of said contracts to Purchaser without change in the terms thereof.
Section 19 of the Agreement is hereby amended to provide that Seller shall
deliver, at Closing, appropriate assignments to Purchaser of said construction
contracts.
11. SELLER FINANCING. At Closing, Seller shall provide purchase money
financing in the amount of Thirty Million Dollars ($30,000,000.00) to Purchaser,
for the purpose of closing the subject transaction. Said financing shall be for
a term of three (3) years, shall be repaid in three (3) Ten Million Dollar
($10,000,000.00) increments on each anniversary date of the Closing, shall
accrue interest at the rate of eleven percent (11%) per annum, which interest
shall be payable quarterly in arrears, and shall be prepayable at any
-3-
<PAGE>
time, in whole or in part, without penalty. The loan shall be secured in a
manner acceptable to Seller, in its sole and absolute discretion, pursuant to
loan and security documents reasonably acceptable to Purchaser and Seller, the
forms of which shall be agreed upon by Purchaser and Seller by the end of the
Inspection Period.
12. TRUE, CORRECT AND COMPLETE AGREEMENT. Seller and Purchaser hereby
acknowledge that several pages in the Agreement have been substituted to clarify
certain issues and, pursuant to the terms of the Agreement, certain exhibits
were annexed thereto after the Effective Date. Seller and Purchaser acknowledge
and agree that the copy of the Agreement attached hereto is a true, correct and
complete copy of the Agreement as it existed prior to the date of this First
Amendment.
13. NO FURTHER MODIFICATION. Except as set forth in this First
Amendment, the Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the Seller and Purchaser have executed this First
Amendment the day and year first written above.
-4-
<PAGE>
WITNESSES: SELLER:
HIGHWOODS/FLORIDA HOLDINGS, L.P., a
Delaware limited partnership
- -------------------------------
By: Highwoods/Florida G.P. Corp., a
Delaware corporation, as general partner
- -------------------------------
(As to Seller) By: /s/ Mark D. Pridgen III
----------------------------------
Title: Vice President
--------------------------------
Dated: April 21, 1999
PURCHASER:
AMERICA'S CAPITAL PARTNERS LLC, a
Florida limited liability company.
_______________________________ By: /s/ Allen C. de Olazarra
----------------------------------
Title: Managing Member
-------------------------------
_______________________________ Dated: April 21, 1999
(As to Purchaser)
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<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made and entered into as of the 22nd day of March,
1999, by and between HIGHWOODS/FLORIDA HOLDINGS, L.P., a Delaware limited
partnership ("Seller"), and AMERICA'S CAPITAL PARTNERS, LLC, a Florida limited
liability company and/or its permitted assigns hereunder ("Purchaser"). In
consideration of the mutual covenants and promises set forth in this Agreement
and other good and valuable consideration, the receipt and sufficiency of which
are acknowledged by the parties to this Agreement, the parties agree to the
following terms and conditions:
1. PURCHASE AND SALE. Subject to the terms of this Agreement, Seller
agrees to sell to Purchaser and Purchaser agrees to purchase from Seller the
following property (collectively, the "Property" or "Properties"):
1.1 Those fee and leasehold parcels of property located in
Dade, Lee and Broward Counties, Florida consisting of approximately 2,813,123
rentable square feet and 49 acres of land as more particularly described in
Exhibit "1.1" as the "Existing Properties" (collectively, the "Realty"),
together with the projects presently under construction and Seller's rights with
respect to the "Allied Signal Option Parcel" as more particularly described in
Exhibit "1.1" as the "Development Assets" (collectively, the "Development
Assets");
1.2 The land and all buildings, structures and other
improvements situated on the Realty (the "Improvements");
1.3 All fixtures, equipment, furnishings and other items of
property whatsoever used or useful in the operation, repair and maintenance of
the Realty, situated on the Realty, and owned by Seller (the "Personalty");
<PAGE>
1.4 All of the landlord's interest in and to tenant leases for
space in the Improvements or on the Realty;
1.5 All transferable contracts and agreements (each a
"Contract", and collectively, the "Contracts"), deposits, licenses, permits, and
contract rights pertaining to ownership, development and/or operation of the
Realty, the Improvements, the Personalty and the Development Assets;
1.6 All of Seller's rights in and to the name and all logos,
trademarks and other rights in connection with the name, and general intangible
rights pertaining to the ownership and/or operation of the Realty other than the
name "Highwoods" and any logos, trademarks, tradenames or other intangible
rights relating to the name "Highwoods"; and
1.7 All strips, gores, easements, privileges, rights-of-way,
riparian and other water rights, rights to lands underlying any adjacent streets
or roads, and other tenements, hereditaments and appurtenances, if any,
pertaining to or accruing to the benefit of the Realty, the Improvements and the
Development Assets.
2. EFFECTIVE DATE. If this Agreement is not executed and delivered by
each party to it to all parties on or before March 25, 1999, at 5:00 p.m.,
Eastern time, then this Agreement shall be null and void and of no force or
effect. Execution and delivery shall be defined as the receipt of the fully
executed Agreement by the parties by means of the U.S. mails, delivery by a
nationally recognized overnight delivery service, hand delivery or facsimile
transmission. In the event delivery is by facsimile, the party delivering this
Agreement shall deliver to all other parties an original copy of the fully
executed Agreement within two (2) business days; failure to do so shall not
affect the validity of the execution and delivery of this Agreement. The date of
this Agreement,
2
<PAGE>
for purposes of performance, shall be the date when the last one of Seller or
Purchaser has signed this Agreement, as stated on the signature page (the
"Effective Date").
3. CLOSING DATE. Subject to other provisions of this Agreement for
extension or termination, the closing of the transactions contemplated by this
Agreement (the "Closing") shall be held at the offices of the attorneys for
Purchaser, Holland & Knight LLP, 701 Brickell Avenue, Miami, Florida 33131 on or
before May 19, 1999 (the "Closing Date"); provided, however, that, as to the
properties identified as "Gulf Atlantic Center" and "The 1800 Eller Drive
Building" on Exhibit "1.1" only, either Seller or Purchaser may, by written
notice to the other party, extend the Closing Date on said two (2) properties
for up to three (3) successive periods of thirty (30) days each, solely for the
purpose of satisfying the condition precedent in Section 13.2.2, but any such
extension shall not affect Purchaser's obligation to close in a timely manner
with respect to the other properties comprising the Property.
4. DEPOSIT.
4.1 To secure the performance by Purchaser of Purchaser's obligations
under this Agreement, Purchaser will deliver, within two (2) business days of
the Effective Date, to the law firm of Holland & Knight LLP, as escrow agent
("Escrow Agent"), the sum of One Million Dollars ($1,000,000.00) by wire
transfer to a depository designated by Escrow Agent, the proceeds of which shall
be held in trust as an earnest money deposit (the "Initial Deposit") by Escrow
Agent, and disbursed only in accordance with the terms of this Agreement. If
Purchaser elects not to cancel this Agreement during the Investigation Period,
as more particularly described in Section 11.2 of this Agreement, then, within
two (2) business days following the expiration of said Investigation Period,
Purchaser shall deliver to Escrow Agent a check or wire transfer in the sum of
Four Million Dollars
3
<PAGE>
($4,000,000.00) (the "Additional Deposit") to be held together with, and upon
the same terms and conditions as, the Initial Deposit. Once the Additional
Deposit is paid to Escrow Agent, the term "Deposit" shall mean the Initial
Deposit plus the Additional Deposit; prior to such payment, whenever used in
this Agreement, the term "Deposit" shall mean only the Initial Deposit. In
addition, on the Closing Date, in the event that the extension respecting the
Gulf Atlantic Center and/or The 1800 Eller Drive Building properties is
exercised by either party, the aggregate $5,000,000.00 Deposit shall be applied
to the Purchase Price as provided in Section 5.2, and Purchaser shall be
obligated to make a new deposit in the amount of Two Hundred Fifty Thousand
Dollars ($250,000.00) for each such property for which the Closing Date is
extended, up to a maximum aggregate amount of $500,000.00, by wire transfer to
Escrow Agent on the Closing Date, which amount shall thereafter become the
"Deposit" for all purposes hereunder, and shall be applied to the portion of the
Purchase Price to be paid upon the closing of the Gulf Atlantic Center and/or
The 1800 Eller Drive Building properties or otherwise returned to Purchaser or
paid to Seller as provided herein.
4.2 Escrow Agent shall use its reasonable efforts to invest the Deposit
in an interest bearing account or certificate of deposit maintained with or
issued by a commercial bank reasonably acceptable to Purchaser and Seller. All
interest accrued or earned on the Deposit shall be paid or credited to
Purchaser, except in the event of a default by Purchaser, without any default of
Seller, in which event the interest shall be disbursed to Seller, together with
the Deposit, as liquidated damages in accordance with Section 15.
4.3 Purchaser and Seller acknowledge that, if the Deposit is at any time
in excess of $100,000.00, then the amount over $100,000.00 shall not be insured,
and both parties hold
4
<PAGE>
Escrow Agent harmless from all losses and costs and liabilities which may accrue
or be incurred related to such lack of insurance.
5. PURCHASE PRICE.
5.1 The total purchase price (the "Purchase Price") to be paid by
Purchaser to Seller for the Property is Two Hundred Forty-Nine Million
Thirty-Four Thousand Dollars ($249,034,000.00), plus an amount equal to the book
value of the Development Assets as described in Exhibit "1.1". For purposes of
this Agreement, "book value" is defined as $650,000.00 for the "Allied Signal
Option Parcel" and Seller's current cost basis as of the Closing Date,
determined using generally accepted accounting principles, as to the other
Development Assets. The Purchase Price shall be allocated among the Properties
within two (2) business days prior to the end of the Inspection Period, which
allocation, once completed, shall be attached to each copy of this Agreement as
Exhibit "5.1."
5.2 The Purchase Price shall be paid to Seller as follows:
$5,000,000.00, the Deposit described in Section 4 of this Agreement,
which shall be paid to Seller at Closing;
$244,034,000.00, approximately, in cash at Closing, subject to
prorations and adjustments as provided in this
Agreement, to be paid by cashier's check or by wire
transfer; and
an amount equal to the book value of the Development
Assets as described in Section 5.1.
In the event that the extension respecting the Gulf Atlantic
Center and/or The Eller Drive Building properties is exercised by either party,
the Purchase Price payable hereunder shall be reduced by Seller's aggregate net
book value of the Gulf Atlantic and/or Eller Drive properties, and such amount
shall thereafter become the "Purchase Price" hereunder for the Gulf
5
<PAGE>
Atlantic Center and/or The 1800 Eller Drive Building properties.
6. CONFIDENTIAL NATURE OF AGREEMENT. Except for information obtained by
Purchaser from third parties or which is otherwise available to the public,
Purchaser shall keep all information obtained by Purchaser relative to the
Property (including, without limitation, the Due Diligence Documents), as it
relates to this transaction, confidential. Purchaser shall have the right to
disclose such information notwithstanding such limitation to Purchaser's
professionals, consultants, lenders, officers, employees, stockholders,
purchasers and affiliates for the sole purpose of evaluating the Property to
determine its value and suitability for Purchaser's needs and financing and as
may be required by applicable law. Seller shall have the right, in its sole
discretion, to terminate this Agreement in the event of a material breach by
Purchaser of this Section 6, whereupon Escrow Agent, subject to the provisions
of Section 11.3, shall return the Deposit, together with all interest earned
thereon, to Purchaser, and both parties shall be released from all further
obligations under this Agreement, except for those which expressly survive such
termination.
7. TITLE EVIDENCE. Within fifteen (15) days following the Effective
Date, Purchaser shall, at Purchaser's expense, obtain an ALTA marketability
title insurance commitment (the "Commitment"), with fee and leasehold owner's
title policy premium to be paid by Purchaser at Closing, issued by Holland &
Knight LLP, as agent for one or more national title insurers acceptable to
Purchaser (collectively, the "Title Insurer"), with hard copies of all
exceptions. The Commitment shall show Seller to be vested with good and
marketable and insurable fee simple or leasehold title to the Realty and the
Development Assets other than the Allied Signal Option Parcel, insurable in an
amount equal to the Purchase Price in accordance with the standards adopted from
6
<PAGE>
time to time by The Florida Bar, at standard rates, and Seller believes that the
Commitment will show the Realty and the Development Assets other than the Allied
Signal Option Parcel to be free and clear of all liens, encumbrances, leases,
tenancies, covenants, conditions, restrictions, rights-of-way, easements and
other matters affecting title, except the following (which, if not objected to
by Purchaser pursuant to the terms of Article 9 below, shall be deemed the
"Permitted Exceptions"):
7.1 Ad valorem real estate taxes for 1999 and subsequent years;
7.2 All applicable zoning ordinances and regulations;
7.3 Matters of record which are common to the subdivision;
7.4 Matters described in Seller's existing title policies with respect
to the Properties, including, with respect to the Gulf Atlantic Center and The
1800 Eller Drive Building properties, the ground leases (collectively, the
"Ground Leases") pursuant to which Seller obtained its leasehold interest in the
subject Realty; and
7.5 Tenants in possession.
8. SURVEY.
8.1 Within the time period for providing the Commitment, Purchaser shall
obtain and deliver to Seller ALTA surveys (the "Surveys") of the Realty and the
Improvements. The Surveys shall:
8.1.1 meet the minimum technical standards of the Florida
Board of Land Surveyors;
8.1.2 be certified to Purchaser, to Purchaser's attorney, to
the Title Insurer and to Purchaser's mortgage lender;
7
<PAGE>
8.1.3 be certified (or recertified) as of a date subsequent to
the Effective Date;
8.1.4 set forth the total number of square feet and acres in
the Realty;
8.1.5 show the location of all improvements, parcels (if any)
in the legal descriptions of the Realty, number of square feet and parking
spaces in the Improvements, utility, setback and other lines; easements, either
visible or recorded, and recording references of them; and
8.1.6 include elevation and flood zone information.
8.2 If the Survey shall reflect any encroachments, overlaps,
unrecorded easements or similar rights in third parties, or any other adverse
matters not specifically provided for in this Agreement, then the same shall be
deemed "title defects" as set forth in Section 9.
9. TITLE DEFECTS.
9.1 Purchaser shall have until April 21, 1999 in which to examine the
Commitment and the Surveys. If Purchaser finds title to be defective, Purchaser
shall, no later than 5:00 p.m. Eastern time on April 21, 1999, notify Seller in
writing, specifying the title defect(s). If Purchaser fails to give Seller
written notice of any title defect(s) before 5:00 p.m. Eastern time on April 21,
1999, the defects shown in the Commitment or the Surveys shall be deemed to be
waived as title objections to closing this transaction.
9.2 If Purchaser has given Seller timely written notice of defect(s) and
the defect(s) render the title other than as represented in this Agreement or if
any new defects appear from the date of the Commitment through the Closing Date,
Seller shall use commercially reasonable efforts to cause only those defects
recorded after October 7, 1997 to be cured by the Closing Date. Seller agrees to
remove, by payment, bonding or otherwise, any such lien (other than
8
<PAGE>
environmental liens) against the Property capable of removal by the payment of
money or bonding. Seller shall not be obligated to (but may, in its sole and
absolute discretion) cure any other defect or to buyout or settle any other
claim or lien against the Property. At Seller's option, the Closing Date may be
extended for a period not to exceed sixty (60) days for purposes of eliminating
such title defects. If such additional time is reasonably required by Seller to
cure such title defects, Seller's failure to extend the Closing Date shall be
commercially unreasonable.
9.3 If Seller does not eliminate such defects as of the Closing Date, as
the same may be extended under the preceding sentence, or if any new "title
defects" appear between the date of the Commitment through the Closing Date
which Seller does not eliminate as of the Closing Date, Purchaser shall have the
option to:
9.3.1 Close and accept the title "as is," without reduction in
the Purchase Price and without claim against Seller for such title defects
(except for any lien that Seller is required to cure pursuant to Section 9.2
that can be removed by the payment of money or bonding, for which credit shall
be given Purchaser at the Closing unless Seller pays the same at the Closing)
(and in such event, the Closing shall take place on the Closing Date); or
9.3.2 Cancel this Agreement, whereupon Escrow Agent, subject
to the provisions of Section 11.3, shall return the Deposit, together with all
interest earned thereon, to Purchaser, and both parties shall be released from
all further obligations under this Agreement, except for those which expressly
survive such termination, unless such title defects were caused by Seller's
willful act or willful omission, in which event Seller shall remain liable to
Purchaser for damages caused by such title defects.
10. EXISTING LEASES. Seller represents and warrants to Purchaser that
attached to
9
<PAGE>
this Agreement as Exhibit "10" is a rent roll of all leases, tenancies, and
other occupancies, whether written or oral, affecting all or any portion of the
Property (the "Leases"), setting forth, for each tenant (each a "Tenant", and
collectively, the "Tenants"), the name of the tenant, the space(s) affected, the
rents, the lease term, the security deposit as required by the subject Lease, if
any, prepaid rent and any rent arrearages. Upon execution of this Agreement by
Seller, Seller shall deliver to Purchaser true, correct and complete copies of
all of the Leases. Seller further represents and warrants to Purchaser that:
10.1 No other parties have any rights of occupancy or possession
(including, without limitation, renewal options, rights of first refusal,
options to purchase, free rent, tenant improvement allowances or other special
concessions) of all or any portion of the Property except as set forth in the
rent roll which is a part of Exhibit "10" or as set forth in the lease files
provided by Seller to Purchaser pursuant to Section 11.1;
10.2 All of the Leases are, as of the date of this Agreement, in good
standing, without default on the part of Seller, and shall remain without
default on the part of Seller through the date of the Closing;
10.3 Seller shall use its diligent, good-faith, commercially reasonable
efforts to deliver to Purchaser, at least ten (10) days prior to the Closing,
appropriate estoppel letters from all Tenants occupying more than 10,000 square
feet ("Major Tenants") and from a sufficient number of Tenants occupying the
remaining occupied square feet in the Property, and not occupied by Major
Tenants, necessary to provide estoppel coverage on eighty percent (80%) of the
occupied square footage in the Property, such estoppel letters to confirm in all
material respects the information contained in Exhibit "10" and provided to
Purchaser by Seller pursuant to Sections 11.1.5 and
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11.1.6 and to be in the form attached hereto as Exhibit "10.3". If the estoppel
letters required by the preceding sentence are not timely obtained after
diligent effort by Seller, then Seller shall execute an affidavit as to each
such Lease for which it has not obtained an estoppel letter, setting forth the
information which would have been contained in the estoppel letter, which shall
substitute for such missing estoppel letters until such time as estoppel letters
are received from the subject Tenants; provided, however, that Seller shall not
be obligated to give, and Purchaser shall not be obligated to accept, substitute
affidavits for more than 100,000 occupied square feet in the aggregate with
respect to missing estoppel letters from Major Tenants. If Seller is unable to
comply with the provisions of this Section 10.3 by the Closing Date, Purchaser
shall have the options set forth in Sections 14.1 and 14.2;
10.4 There are no modifications, understandings or agreements with
respect to the Leases except as reflected in the Leases or as set forth in the
lease files provided by Seller to Purchaser may be disclosed to Purchaser
pursuant to Section 11.1;
10.5 Seller has not received any prepaid rent under any of the Leases
except as may be disclosed to Purchaser in the rent roll which is part of
Exhibit "10"; and
10.6 Seller shall not accept payment of any rent under any Lease for
more than one (1) month in advance. Seller shall have the right, prior to the
end of the Inspection Period, to modify any existing Lease or Contract and enter
into any new lease or agreement affecting all or any portion of the Property,
provided that Seller shall give Purchaser prompt notice of any such modification
or new lease or agreement, and provided further that Seller shall not exercise
its option, or enter into any lease respecting, the Allied Signal Option Parcel
without Purchaser's prior written consent, which shall not be unreasonably
withheld or delayed. After the end of the
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Investigation Period, Seller shall modify any existing Lease or Contract or
enter into any new lease or agreement affecting all or any portion of the
Property only with the prior written consent of Purchaser, which shall not be
unreasonably withheld. Seller shall immediately provide to Purchaser a copy of
any such proposed modification, lease or agreement, and Purchaser shall have two
(2) business days from the delivery thereof in which to withhold its consent to
the terms thereof in writing, if it so chooses, or else the same shall be deemed
consented to by Purchaser. If Purchaser timely withholds its consent, Purchaser
shall have the right to terminate this Agreement, whereupon Escrow Agent,
subject to the provisions of Section 11.3, shall return the Deposit, together
with all interest earned thereon, to Purchaser, and both parties shall be
released from all further obligations under this Agreement, except for those
which expressly survive such termination. If Purchaser elects not to terminate
this Agreement at the end of the Investigation Period, all new leases and
agreements entered into by Seller prior to the end of the Investigation Period
shall become "Leases" and "Contracts," respectively, hereunder. In addition, all
new leases and agreements entered into by Seller after the end of the
Investigation Period with Purchaser's consent or deemed consent shall become
"Leases" and "Contracts," respectively, hereunder.
11. INVESTIGATION PERIOD.
11.1 During the period from the Effective Date until April 23,
1999 (the "Investigation Period"), Purchaser shall have the right to conduct, at
Purchaser's expense, whatever reasonable investigations, analyses and studies of
the Property that Purchaser may deem appropriate to satisfy Purchaser with
regard to:
11.1.1 the physical condition of the building(s) and other
improvements included in the Property, including their structure, roofs, air
conditioning, heating, electrical,
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plumbing and other mechanical systems;
11.1.2 the physical condition of all fixtures, equipment,
furnishings and other items of property referred to in Subsection 1.3 above, an
inventory of which shall be furnished by Seller at Seller's expense within
fifteen (15) days after the Effective Date;
11.1.3 the permitted uses of and improvements to the Property
under applicable building and zoning ordinances and the present compliance or
non-compliance with the same;
11.1.4 evidence of any hazardous waste or similar materials,
and of Radon, in, on, under or about the Property;
11.1.5 all existing Contracts, Leases, lease files, lease
abstracts, historical MRI reports (not including prospective information, such
as budget projections, which are proprietary to Seller) and tenancies affecting
the Property; and
11.1.6 Seller's historical operating statements for calendar
year 1998 and year-to-date 1999 (as and when available).
11.2 Purchaser and its agents and employees shall have the right to
enter upon the Property for the purpose of making inspections, at Purchaser's
sole risk, cost and expense, and subject to the rights of tenants. No
destructive testing shall be permitted. All of such entries upon the Property
shall be at reasonable times during normal business hours and after at least one
(1) business day's prior notice to Seller or Seller's agent, and Seller or
Seller's agent shall have the right to accompany Purchaser during any activities
performed by Purchaser on the Property. Seller shall make available to Purchaser
at all times during business hours during the Investigation Period, and after
the Investigation Period until the Closing Date, upon one (1) business day's
prior notice, all
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documents relating to the matters described in Section 11.1 above which are in
Seller's possession for review and copying by Purchaser (the "Due Diligence
Documents"). In addition, within five (5) business days after the Effective
Date, Seller shall provide Exhibits "12.1" and "12.6" to Purchaser. Purchaser
shall promptly provide to Seller copies of all environmental and engineering
reports which Purchaser may obtain from third parties relating to the Property.
If Purchaser is dissatisfied, for any reason and in Purchaser's exclusive
judgment, with the result of Purchaser's investigations, then Purchaser may
cancel this Agreement by notifying Seller of such cancellation on or before 5:00
p.m. on April 23, 1999, whereupon Escrow Agent, subject to the provisions of
Section 11.3, shall return the Deposit, together with all interest earned
thereon, to Purchaser, and both parties shall be released from all further
obligations under this Agreement, except for those which expressly survive such
termination.
11.3 If Purchaser or Seller cancels this Agreement pursuant to the terms
hereof, Purchaser shall deliver to Seller all of the Due Diligence Documents.
Upon receipt of said documents by Seller, Escrow Agent shall disburse the
Deposit, together with all interest earned thereon, to Purchaser.
11.4 Upon Purchaser's waiver of or failure to duly exercise its right to
terminate described in this Section 11, Purchaser shall have accepted the
Property "as is", with no representations or warranties regarding the Property
other than any which may be specifically stated in this Agreement.
11.5 Notwithstanding any provisions in this Agreement to the contrary,
Purchaser does and shall indemnify and hold harmless Seller and its agents,
employees, successors and assigns, to the extent of the Deposit, against all
losses, claims, damages, liability, attorneys' and
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accountants' fees and costs of litigation and all other expenses related to,
growing out of, or arising from the investigation of or entry upon the Property,
or other acts undertaken by Purchaser or its agents, employees or assigns, under
this Agreement, including, without limitation, mechanic's or materialmen's
liens. If Purchaser does not close on the purchase of the Property under this
Agreement, it shall return the Property to the condition in which it existed
prior to any investigations undertaken by Purchaser or its agents, employees and
assigns pursuant to this Agreement.
11.6 Except as otherwise expressly provided herein, Seller makes no
representations or warranties as to the accuracy or completeness of the Due
Diligence Documents.
11.7 The inspections under this Section 11 may include a Phase I
environmental inspection of the Property, but no Phase II environmental
inspection shall be performed without the prior written consent of Seller, which
may be withheld in its sole and absolute discretion, and if consented to by
Seller, the proposed scope of work and the party who will perform the work shall
be subject to Seller's review and approval. Upon Seller's request, Purchaser
shall deliver to Seller copies of any Phase II or other environmental report to
which Seller consents as provided above. Purchaser, for itself and any entity
affiliated with Purchaser, waives and releases Seller and its employees, agents,
officers, trustees, directors, beneficiaries and partners from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs or
expenses of whatever kind or nature, known or unknown, existing and future,
contingent or otherwise (including any action or proceeding, brought or
threatened, or ordered by any appropriate governmental entity) made, incurred,
or suffered by Purchaser or any entity affiliated with Purchaser relating to the
presence, misuse, use, disposal, release or threatened release of any hazardous
or toxic materials, chemicals or wastes as the Property and any liability or
claim related to the Property arising under
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the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1986, the Resource
Conservation and Recovery Act, and the Toxic Substance Control Act, all as
amended, or any other cause of action based on any other state, local, or
federal environmental law, rule or regulation; provided, however, the foregoing
release shall not operate or release any claim by Purchaser against any person
or entity other than described above in this Section 11.7. The provisions of
this Section 11.7 shall survive indefinitely the Closing or any termination of
this Agreement and shall not be merged into the closing documents.
11.8 To the maximum and extent permitted by applicable law, and except
for Seller's representations and warranties (collectively, "Seller's
Warranties") in this Agreement and the documents of conveyance and assignment to
be delivered at the Closing, this sale is made and will be made without
representation, covenant, or warranty of any kind (whether express, implied, or,
to the maximum extent permitted by applicable law, statutory) by Seller. As a
material part of the consideration of this Agreement, Purchaser agrees to accept
the Property on an "AS IS" and "WHERE IS" basis, with all faults and any and all
latent and patent defects, and without any representation or warranty, all of
which Seller hereby disclaims, except for Seller's Warranties. Except for
Seller's Warranties, no warranty or representation is made by Seller as to (a)
fitness for any particular purpose, (b) merchantability, (c) design, (d)
quality, (e) condition, (f) operation or income, (g) compliance with drawings or
specifications, (h) absence of defects, (i) absence of hazardous or toxic
substances, (j) absence of faults, (k) flooding, or (1) compliance with laws and
regulations including, without limitation, those relating to health, safety, and
the environment. Purchaser acknowledges that Purchaser has entered into this
Agreement with the intention of
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making and relying upon its own investigation of the physical, environmental,
economic use, compliance and legal condition of the Property and that, except as
otherwise provided in this Agreement, Purchaser is not now relying, and will not
later rely, upon any representations and warranties made by Seller or anyone
acting or claiming to act, by, through or under or on Seller's behalf concerning
the Property. The provisions of this paragraph shall survive indefinitely the
Closing or any termination of this Agreement and shall not be merged into the
closing documents.
12. REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller represents and
warrants to Purchaser, to Seller's knowledge, and covenants and agrees with
Purchaser as follows:
12.1 Seller has not entered into any contracts, subcontracts,
arrangements, licenses, concessions, easements or other agreements, either
recorded or unrecorded, written or oral, affecting all or any portion of the
Property, or the use of it, other than the Leases set forth in Exhibit "10" and
those agreements set forth in Exhibit "12.1";
12.2 There are no (i) existing or pending improvement liens affecting
the Property; (ii) violations of building codes and/or zoning ordinances or
other governmental or regulatory laws, ordinances, regulations, orders or
requirements affecting the Property; (iii) existing, pending or threatened
lawsuits or appeals of prior lawsuits affecting the Property; (iv) existing,
pending or threatened condemnation proceedings affecting the Property; or (v)
existing, pending or threatened zoning, building or other moratoria, downzoning
petitions, proceedings, restrictive allocations or similar matters that could
affect Purchaser's use of the Property;
12.3 Seller is vested with good and marketable title to all fixtures,
equipment, furnishings and other items of property referred to in Section 1 and
owned by Seller, free of all
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financing and other liens or encumbrances;
12.4 Seller shall maintain the Property in the same manner as it has
been maintained prior to the Effective Date until the Closing Date and shall
comply prior to the Closing in all material respects with all laws, rules,
regulations, and ordinances of all governmental authorities having jurisdiction
over the Property;
12.5 There is no radon in the Improvements which are above government
approved levels; Seller has not done nor allowed anything which could cause
toxic or hazardous materials or waste to be present in, on or about the
Property, and has no knowledge of any such materials or waste being or ever
having been in, on, or about the Property or adjacent properties, in each case,
except as described in Exhibit "12.6" attached hereto, which, for purposes
hereof, constitutes all of Seller's knowledge;
12.6 Seller shall provide, and keep in force through the Closing,
policies of fire, flood, windstorm, hazard and other casualty insurance on the
improvements portion of the Realty and all items of other property referred to
in Section 1 above;
12.7 There are no agreements currently in effect which restrict the sale
of the Property;
12.8 Subject to approval of Seller's Board of Directors as provided in
this Section 12.8, Seller has the right, power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby;
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor the fulfillment of nor the compliance with
the terms, conditions and provisions of this Agreement will conflict with or
result in a violation or breach of Seller's partnership agreement, or any other
instrument or
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agreement of any nature to which Seller is a party or by which it is bound or
may be affected, or constitute (with or without the giving of notice or the
passage of time) a default under such an instrument or agreement; no consent,
approval, authorization or order of any person is required with respect to the
consummation of the transactions contemplated by this Agreement. Seller agrees
to present the terms of this Agreement to its Board of Directors (the "Board")
for its approval not later than March 23, 1999. Seller further agrees to notify
Purchaser of the decision of such Board no later than the end of business on
such date. A Board decision to approve this transaction shall be final except
that in the event of a material change in a term as embodied in this Agreement,
the parties acknowledge that such change in terms may be subject to
reconsideration by the Board, at its election.
12.9 No commitments or agreements have been or will be made by or on
behalf of Seller to any governmental authority, utility company, school board,
church or other religious body, any homeowners or homeowners' association, or
any other organization, group or individual, relating to the Property which
would impose an obligation upon Purchaser to make any contributions or
dedications of money or land to construct, install or maintain any improvements
of a public or private nature on or off the Realty or the Development Assets, or
otherwise impose liability on Purchaser.
12.10 The Ground Leases are, as of the date of this Agreement, in good
standing, without default on the part of Seller, and have not been modified,
changed, altered or amended in any respect since Seller acquired its leasehold
interest in the Ground Leases, and the lessors under the Ground Leases are not
in default, nor has there occurred any event which, by lapse of time or
otherwise, will result in any default under the Ground Leases.
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12.11 At all times during the term of this Agreement and as of the
Closing, all of Seller's representations, warranties and covenants in this
Agreement shall be true and correct; no representation or warranty by Seller
contained in this Agreement and no statement delivered or information supplied
to Purchaser pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements or information contained in them or in this Agreement not misleading.
For purposes of this Section 12, "to Seller's knowledge" shall mean the
actual knowledge of Troy Cox, James Heistand, Dale Johannes and Richard Nash,
without independent inquiry.
Purchaser warrants and represents to Seller that Purchaser has the
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by it, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
by it nor the fulfillment of nor the compliance with the terms, conditions and
provisions of this Agreement will conflict with or result in a violation or
breach of Purchaser's organizational documents, or any other instrument or
agreement of any nature to which Purchaser is a party or by which it is bound or
may be affected, or constitute (with or without the giving of notice or the
passage of time) a default under such an instrument or agreement; no consent,
approval, authorization or order of any person is required with respect to the
consummation of the transactions contemplated by this Agreement. At all times
during the term of this Agreement and as of the Closing, all of Purchaser's
representations, warranties and covenants in this Agreement shall be true and
correct.
13. CONDITIONS PRECEDENT.
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13.1 An express condition precedent to Purchaser's obligation to close
this transaction is the truth and correctness of all of Seller's representations
and warranties and the fulfillment of all of Seller's covenants at all times
during the term of this Agreement and as of the Closing, and no inquiry,
analysis or examination made by Purchaser (or the results of them) shall reduce,
limit or otherwise affect said representations, warranties and covenants.
13.2 The following items are additional conditions precedent to
Purchaser's obligation to close the transactions contemplated by this Agreement:
13.2.1 The Property shall remain zoned at the time of the
Closing so as to permit each and every use now being made of the Property; there
shall be no additional limiting conditions or restrictions under any zoning
resolution, ordinance, covenant, agreement, or the like that could prohibit or
frustrate any use of the Property now being made or otherwise permissible under
said zoning classification in the absence of such conditions or restrictions.
13.2.2 As to the Gulf Atlantic Center and The 1800 Eller Drive
Building properties only, Purchaser shall have received consents to the
assignment of the lessee's interests under the Ground Leases by Seller and the
assumption thereof by Purchaser, and Purchaser shall also have received estoppel
certificates from the ground lessors under the Ground Leases in form and
substance reasonably satisfactory to Purchaser; provided, however, that if one
or both of such consents are not received by the Closing Date and Seller or
Purchaser extends the Closing Date as to the Gulf Atlantic Center and/or The
1800 Eller Drive Building properties, the foregoing shall be a condition to
closing of the Gulf Atlantic Center and/or The 1800 Eller Drive Building
properties only.
14. DEFAULT BY SELLER. Prior to the Closing Date, in the event that
Purchaser
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becomes aware of facts or circumstances indicating that a representation or
warranty of Seller contained herein is inaccurate, untrue or breached, as the
case may be, Purchaser shall promptly so notify Seller in writing, and Seller
shall have the right to cure the same on or before the Closing Date, failing
which Purchaser shall have the right, by written notice to Seller given on the
Closing Date, to terminate this Agreement, whereupon Escrow Agent, subject to
the provisions of Section 11.3, shall return the Deposit, together with all
interest earned thereon, to Purchaser, and both parties shall be released from
all further obligations hereunder, except for those which expressly survive such
termination. If any of Seller's representations and warranties are not true and
correct in all material respects as of the Closing Date or Seller's covenants
are not fulfilled in all material respects or all other conditions precedent are
not met in all material respects as of the Closing (or earlier specified date,
if any), or if Seller fails to perform any of the terms and conditions of this
Agreement in all material respects or is otherwise in default under this
Agreement, then Purchaser, at Purchaser's sole option, may elect to:
14.1 Waive the default or failure and close "as is"; or
14.2 Cancel this Agreement by written notice to Seller given on or
before the Closing Date, whereupon Escrow Agent, subject to the provisions of
Section 11.3, shall return the Deposit, together with all interest earned
thereon, to Purchaser, and both parties shall be released from all further
obligations under this Agreement, except for those which expressly survive such
termination, unless the default was caused by the willful act or willful
omission of Seller, in which event Seller shall continue to be liable for
damages and attorneys' fees caused by such default); or
14.3 Seek specific performance of Seller's obligations under this
Agreement.
In the event that any representation or warranty made by Seller herein
is found to be
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inaccurate, untrue or breached, as the case may be, after the Closing Date,
Purchaser shall have the right, for a period of one (1) year after the Closing
Date, to seek actual (but not consequential or punitive) damages from Seller;
provided, however, that Purchaser must commence a legal action or proceeding
seeking such damages within said one (1)-year period, or its claims shall
thereafter be barred.
15. DEFAULT BY PURCHASER. In the event of the failure or refusal of
Purchaser to close this transaction, Escrow Agent shall pay to Seller the
Deposit, together with all interest earned thereon, as agreed and liquidated
damages for said breach, and as Seller's sole and exclusive remedy for default
of Purchaser, whereupon this Agreement shall terminate and both parties shall be
released from all further obligations under this Agreement, except for those
which expressly survive such termination.
16. PRORATIONS.
16.1 Real estate and personal property taxes and ground rents under the
Ground Leases shall be prorated as of midnight of the day before the Closing
Date. In the event that the taxes for the year of the Closing are unknown, the
tax proration will be based upon such taxes for the prior year and, at the
request of either party, such taxes for the year of the Closing shall be
reprorated and adjusted when the tax bill for the year of the Closing is
received and the actual amount of taxes is known.
16.2 Utility bills or charges, where applicable, shall be prorated as of
midnight of the day before the Closing Date. The parties shall, to the extent
reasonably possible, have utility meters read the day preceding the Closing Date
and Seller shall be responsible for paying all utility bills or charges which
accrued against the Property prior to midnight of the day before the Closing
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Date and Purchaser shall be required to pay all utility bills or charges
accruing against the Property on or subsequent to midnight of the day before the
Closing Date, with any charge for which a reading could not be made as of the
day preceding the Closing Date being prorated as of midnight of the day before
the Closing Date using an estimate based on the most recent reading for such
utility. Purchaser shall, as of the day prior to the Closing Date, post with
each utility company such deposit as each such utility company shall require, to
the end that Seller's utility deposits shall be refunded to Seller following the
Closing, after appropriate charge for Seller's utility bills. Purchaser shall
secure its own insurance on the Property as of the Closing Date, and Seller
shall cancel all existing insurance policies as of the Closing Date. Purchaser
and Seller shall, before and after the Closing, reasonably cooperate with each
other in connection with this Section 16.2.
16.3 The parties agree that, except as otherwise specifically stated
elsewhere in this Agreement, all income and expenses of the Property are
intended to be prorated as of midnight of the day before the Closing Date.
Purchaser shall be deemed the owner of the Property, for the purpose of such
calculation, for the entire Closing Date. Income shall include all revenue of
Seller derived from the operation of the Property. Expenses shall include all
expenses from the operation of the Property. Income actually received by Seller
prior to the Closing in payment for a period subsequent to the Closing shall
appear on the closing statement as a credit to Purchaser. Expenses actually paid
by Seller prior to the Closing in payment for a period subsequent to the Closing
shall appear on the closing statement as a credit to Seller.
16.4 Notwithstanding anything to the contrary in Section 16.3 above,
rents under the Leases, including, without limitation, fixed rent and additional
rent, including operating expense and real estate tax pass-throughs
(collectively, "Rents"), shall be addressed in the manner set forth in
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this Section 16.4. All collected Rents for the month in which the Closing occurs
shall be prorated as of midnight the day before the Closing Date. All
uncollected Rents for the months prior to the month in which the Closing occurs
and all uncollected Rents for the month of the Closing (the "Delinquent Rents"),
shall remain Seller's property, and Seller shall receive no proration credit
therefor at the Closing. Purchaser, however, shall receive a proration credit
for its prorated portion of all Rents for the month of the Closing whether such
Rents have been collected or remain uncollected. All prepaid Rents (for the
months following the Closing) paid to or in possession of Seller shall be
credited to Purchaser at the Closing. Purchaser agrees to use good faith and
commercially reasonable efforts, for a period of six (6) calendar months after
the Closing, to collect Delinquent Rents from each tenant ("Tenant or Tenants")
remaining in possession of its space under a Lease. If any Tenant identifies in
writing at the time of payment what its payment is for or how such payment
should be applied, such payment shall be used or applied in such manner. Any and
all other amounts received by Purchaser from any party owing the Delinquent
Rents which are received by Purchaser after the Closing Date shall first be
applied to the Rent due for the then current month, then to Purchaser's
reasonable collection costs (including reasonable attorneys' fees and costs),
then to accrued obligations of such Tenant due prior to the Closing (in the
order of accrual), and then to accrued obligations due after the Closing.
Purchaser shall promptly deliver to Seller any funds to be applied to Delinquent
Rents in accordance with the preceding sentence. No portion of Delinquent Rents
attributable to a particular Tenant shall be applied against the Rents or
Delinquent Rents attributable to another Tenant, or the expenses incurred by
Purchaser in collecting such Rents or Delinquent Rents from other Tenants.
Purchaser shall not be obligated to file suit to collect the Delinquent Rents.
After the Closing, Seller shall be entitled to commence and/or
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continue any collection efforts against any Tenants owing Delinquent Rents,
including, but not limited to, commencing and/or continuing prosecuting lawsuits
against such Tenants, so long as such lawsuits are for money damages only and do
not seek the remedy of eviction.
16.5 All security deposits or prepaid Rent held by or under the control
of Seller, as required by the Leases, reflected on the tenant estoppel letter
with respect to the Leases and as set forth on Exhibit "10" (less any offsets
indicated thereon as hereinafter defined, if applicable), shall be paid or
credited to Purchaser as of the Closing Date, and Purchaser shall, with respect
to all matters arising or accruing after the Closing, assume all liability
therefor. Seller shall not, after the Effective Date and prior to the Closing,
further offset all or any portion of such security deposits or prepaid Rent
without the prior written consent of Purchaser.
16.6 Except as otherwise provided in this Agreement, any lease
commissions or tenant improvement costs which are (i) incurred by Seller in
connection with any existing Leases or new leases entered into prior to the end
of the Investigation Period or entered into after the end of the Investigation
Period and approved by Purchaser in writing; or (ii) associated with currently
existing renewal, expansion or refusal rights of Tenants under the Leases
exercised after the Effective Date but prior to the Closing shall be prorated
between the parties in proportion to the percentage of the Lease term in the
case of (i) above, or the renewal or expansion term or term applicable to the
expansion or refusal rights in the case of (ii) above, which falls before
midnight of the day before the Closing Date (which shall be Seller's portion)
and the percentage of same which falls after midnight of the day before the
Closing Date (which shall be Purchaser's portion). Any other lease commissions
or tenant improvement costs incurred by Seller in connection with the Leases
shall be the responsibility of Seller; provided, however, that Purchaser shall
bear the cost of
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any lease commissions or tenant improvement costs associated with currently
existing renewal, extension, expansion or refusal rights of Tenants under the
Leases exercised after the Closing.
16.7 Seller agrees to pay to the appropriate taxing authority sales tax
collected by Seller in connection with Rent received by Seller under the Leases
for the month in which the Closing occurs promptly after the Closing. Not later
than one hundred twenty (120) days after the Closing Date, Seller shall deliver
to Purchaser the receipt or certificate from the Florida Department of Revenue
provided for in Section 212.10(1), Florida Statutes (such as a "letter of good
standing"), evidencing that the sales taxes for such month and for previous
months have been paid in full and that no interest or penalties are due in
connection with same.
16.8 Notwithstanding anything to the contrary which may be contained
herein:
16.8.1 Seller and Purchaser acknowledge and agree that to the
extent the annual reconciliation of pass-throughs for the 1998 calendar year are
not completed prior to the Closing, Seller, rather than Purchaser, shall have
the right and obligation to complete such reconciliations and to collect and
retain reimbursements from Tenants or pay reimbursements to Tenants, as
applicable.
16.8.2 Upon the annual reconciliation of such pass-throughs
with the Tenants of the Property for the 1999 calendar year, (i) if such
reconciliation results in there being refunds due and payable to the Tenants,
Seller shall promptly pay to Purchaser, upon Purchaser's request (accompanied by
appropriate documentation), Seller's share of such refund amounts prorated for
the portion of the year during which Seller owned the Property, and (ii) if such
reconciliation results in Tenants owing funds, Purchaser shall have the right to
collect such funds from the Tenants and Purchaser shall promptly pay to Seller a
portion of the funds so collected,
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prorated for the portion of the year during which Seller owned the Property.
16.9 The provisions of this Section 16 shall survive the Closing under
this Agreement.
17. IMPROVEMENT LIENS. All installments due and owing under certified,
confirmed or ratified liens for governmental improvements or special assessments
as of the Closing Date, if any, shall be paid in full by Seller, and pending
liens and installments thereof not yet due and owing for governmental
improvements or special assessments as of the Closing Date shall be assumed by
Purchaser, provided that where the improvement has been substantially completed
as of the Closing Date, such pending lien shall be considered certified.
18. CLOSING COSTS. At the Closing, Seller shall pay the documentary
stamps and surtax, if any, due on the deed of conveyance. Purchaser shall pay
the owner's title insurance premium. Seller and Purchaser shall equally bear the
cost of the Surveys. Each party shall pay its own attorneys' fees and bear the
recording costs of any instruments received by that party, except that Seller
shall pay the recording costs on documents necessary to clear title.
19. CLOSING.
19.1 Seller shall convey title to the Property owned in fee by Special
Warranty Deed, subject only to the Permitted Exceptions (which, if Purchaser
requests, shall not be specifically enumerated) and its leasehold interests in
the Gulf Atlantic Center and The 1800 Eller Drive Building properties by
assignment of the Ground Leases and assumption thereof by Purchaser, which
assignment and assumption shall contain reciprocal indemnities for matters
arising before and after the Closing Date and shall address such other matters
as the ground lessors under the Ground Leases may require. Seller shall also
deliver to Purchaser at the Closing:
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19.1.1 a mechanic's lien affidavit, to the title insurer and
Purchaser, in form acceptable to the Title Insurer to delete the standard
exception relating to such liens in Purchaser's owner's title insurance policy;
19.1.2 an affidavit, to the Title Insurer and Purchaser, that
there are no unrecorded easements and that Seller has exclusive possession of
the Property, except for the rights of tenants shown on Exhibit "10" or
hereafter approved in writing by Purchaser and that Seller has done nothing to
change the state of facts shown on the Surveys, in form acceptable to the Title
Insurer to delete the standard exceptions relating to such matters in
Purchaser's owner's title insurance policy;
19.1.3 a gap affidavit and indemnification agreement
acceptable to the Title Insurer for purposes of deleting the "gap" from
Purchaser's title commitment and policy;
19.1.4 instruments necessary to clear title, if any, including
those required to remove standard exceptions from the title policy;
19.1.5 an appropriate bill of sale with warranty of title for
the Personalty;
19.1.6 appropriate assignments of the Leases and all other
assignable leases, deposits, licenses, easements, rights-of-way, contract
rights, intangible rights and other property and rights included in this
transaction, containing reciprocal indemnities for matters arising before and
after the Closing which instruments shall contain assumptions by Purchaser of
the Leases and Contracts;
19.1.7 appropriate restatements of Seller's covenants,
representations and warranties which are to survive the Closing;
19.1.8 appropriate evidence of Seller's partnership existence
and authority
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to sell and convey the Property;
19.1.9 any and all guarantees and warranties on all property
conveyed pursuant to this Agreement, with assignment of all assignable rights
under the guaranties and warranties;
19.1.10 a non-foreign certificate and other documentation as
may be appropriate and satisfactory to Purchaser to meet the non-withholding
requirements under FIRPTA and any other federal statute or regulations (or, in
the alternative, Seller shall cooperate with Purchaser in the withholding of
funds pursuant to FIRPTA regulations);
19.1.11 an appropriate reporting form to be submitted with the
deed at time of recordation;
19.1.12 Tenant notice letter regarding payment of rent; and
19.1.13 A consent and certification from Andreyev Engineering,
authorizing Seller, Purchaser and its lenders to rely upon its reports.
19.2 Purchaser shall pay the balance of the Purchase Price in excess of
the Deposit, and shall provide Seller with analogous proof of entity existence
and authority and an appropriate restatement of Purchaser's covenants,
representations and warranties which are to survive the Closing. Seller and
Purchaser shall each execute such other documents as are reasonably necessary to
consummate this transaction.
20. BROKERS. The parties each represent and warrant to the other that the
only real estate broker, salesman or finder involved in this transaction is
Redwood Real Estate Services Corp., to whom Seller shall pay a real estate
brokerage commission in the amount of the lesser of one (1%) percent of the
Purchase Price (excluding the amount paid for the Development Assets) or
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Two Million Four Hundred Fifty Thousand ($2,450,000.00) Dollars, and Seller
shall indemnify, defend and hold Purchaser harmless from claims for such
payments. If a claim for brokerage or similar fees in connection with this
transaction is made by any broker, salesman or finder other than the above-named
broker claiming to have dealt through or on behalf of one of the parties to this
Agreement, then that party shall indemnify, defend and hold the other party
under this Agreement harmless from all liabilities, damages, claims, costs, fees
and expenses whatsoever (including reasonable attorneys' fees and court costs,
including those for appellate matters and post judgment proceedings) with
respect to said claim for brokerage. The provisions of this section shall
survive the Closing or the earlier termination of this Agreement.
21. ASSIGNABILITY. Purchaser shall be entitled to assign Purchaser's rights
and obligations under this Agreement to any entities owned or controlled by
Allen C. de Olazarra and Rodolfo Prio Touzet.
22. INSPECTIONS. Purchaser, and Purchaser's agents and contractors, shall
have the right during the term of this Agreement, upon one (1) business day's
advance notice, to enter upon the Property at all reasonable times for purposes
of inspection and making tests and studies. Purchaser hereby agrees to and does
indemnify, defend and hold Seller harmless, to the extent of the Deposit, from
all liabilities, damages, claims, costs, or expenses whatsoever (including
reasonable attorneys' fees and court costs) for bodily injury, death, or
property damage resulting from any such inspection, test or study. The
provisions of this Section 22 shall survive the Closing or the termination or
cancellation of this Agreement.
23. ESCROW AGENT.
23.1 Escrow Agent undertakes to perform only such duties as are
expressly set
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forth in this Agreement. Escrow Agent shall not be deemed to have any implied
duties or obligations under or related to this Agreement. Escrow Agent is the
law firm representing Purchaser. In the event of a dispute between the parties,
the parties consent to Escrow Agent continuing to represent Purchaser,
notwithstanding that Escrow Agent shall continue to have the duties provided for
in this Agreement.
23.2 Escrow Agent may (a) act in reliance upon any writing or instrument
or signature which it, in good faith, believes to be genuine; (b) assume the
validity and accuracy of any statement or assertion contained in such a writing
or instrument; and (c) assume that any person purporting to give any writing,
notice, advice or instructions in connection with the provisions of this
Agreement has been duly authorized to do so. Escrow Agent shall not be liable in
any manner for the sufficiency or correctness as to form, manner of execution,
or validity of any instrument deposited in escrow, nor as to the identity,
authority, or right of any person executing any instrument; Escrow Agent's
duties under this Agreement are and shall be limited to those duties
specifically provided in this Agreement.
23.3 The parties to this Agreement do and shall indemnify Escrow Agent
and hold it harmless from any and all claims, liabilities, losses, actions,
suits or proceedings at law or in equity, or other expenses, fees, or charges of
any character or nature, including attorneys' fees and costs, which it may incur
or with which it may be threatened by reason of its action as Escrow Agent under
this Agreement, except for such matters which are the result of Escrow Agent's
gross negligence or willful malfeasance.
23.4 If the parties (including Escrow Agent) shall be in disagreement
about the interpretation of this Agreement, or about their respective rights and
obligations, or about the
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propriety of any action contemplated by Escrow Agent, Escrow Agent may, but
shall not be required to, file an action in interpleader to resolve the
disagreement; upon filing such action, Escrow Agent shall be released from all
obligations under this Agreement. Escrow Agent shall be indemnified for all
costs and reasonable attorneys' fees, including those for appellate and post
judgment matters and for paralegals and similar persons, incurred in its
capacity as escrow agent in connection with any such interpleader action; Escrow
Agent may represent itself in any such interpleader action and charge its usual
and customary legal fees for such representation, and the court shall award such
attorneys' fees, including those for appellate and post judgment matters and for
paralegals and similar persons, to Escrow Agent from the losing party. Escrow
Agent shall be fully protected in suspending all or part of its activities under
this Agreement until a final judgment in the interpleader action is received.
23.5 Escrow Agent may consult with counsel of its own choice, including
counsel within its own firm, and shall have full and complete authorization and
protection in accordance with the opinion of such counsel. Escrow Agent shall
otherwise not be liable for any mistakes of fact or errors of judgment, or for
any acts or omissions of any kind unless caused by its gross negligence or
willful misconduct.
23.6 Escrow Agent may resign upon five (5) days' written notice to
Seller and Purchaser. If a successor escrow agent is not appointed jointly by
seller and Purchaser within the five (5) day period, Escrow Agent may petition a
court of competent jurisdiction to name a successor.
24. NOTICES. Any notices required or permitted to be given under this
Agreement shall be delivered by hand, by facsimile providing a transmission
receipt or delivered by a nationally
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recognized overnight delivery service, and addressed as described below; notices
shall be deemed effective only upon receipt or refusal of delivery or, if by
facsimile sent after 5:00 p.m., Eastern Time, on the next business day after
transmission.
34
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Notices to Seller:
Highwoods/Florida Holdings, L.P.
3100 Smoketree Court
Suite 600
Raleigh, NC 26704-1051
Attn: Mack D. Pridgen, III, Esq.
Fax: 919-876-6929
With a copy to:
Alston & Bird
3605 Glenwood Avenue
Suite 310
Raleigh, NC 27622-1107
Attn: William R. Klapp, Jr. Esq.
Fax: 919-420-2260
Notices to Purchaser:
America's Capital Partners, LLC
444 Brickell Avenue
Suite 1001
Miami, Florida 33131
Attn: Allen C. de Olazarra, CEO
Fax: 305-995-9993
With a copy to:
Holland & Knight LLP
701 Brickell Avenue
Suite 3000
Miami, Florida 33131
Attn: Stuart K. Hoffman, Esq.
Fax: 305-789-7732
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Notices to Escrow Agent:
Holland & Knight LLP
701 Brickell Avenue
Suite 3000
Miami, Florida 33131
Attn: Stuart K. Hoffman, Esq.
Fax: 305-789-7732
25. RISK OF LOSS.
25.1 The Property shall be conveyed to Purchaser in the same condition
as on the date of this Agreement, ordinary wear and tear excepted, free of all
tenancies or occupancies except those set forth in Exhibit "10", or hereafter
approved by Purchaser in writing). Seller shall not remove anything from the
Property between the date of this Agreement and the Closing.
25.2 Upon receipt of an offer or any notice or communication from any
governmental or quasi-governmental body seeking to take under its power of
eminent domain all or any portion of the Property, Seller shall promptly notify
Purchaser of the receipt of same and shall send such communication, or a copy of
it, to Purchaser. Upon receipt of such notice, Purchaser shall have the right to
rescind this Agreement by delivery of written notice to Seller within fifteen
(15) days of Purchaser's receipt of the communication from Seller. In the event
Purchaser elects to rescind, Escrow Agent, subject to the provisions of Section
11.3, shall return the Deposit, together with all interest earned thereon, to
Purchaser, and both parties shall be released from all further obligations under
this Agreement, except for those which expressly survive such termination. In
the event that Purchaser elects not to rescind, then Purchaser shall be entitled
to all condemnation awards and settlements. Seller and Purchaser agree to
cooperate with each other to obtain the highest and best price for the condemned
property.
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25.3 In the event that any of the Property is damaged or destroyed by
fire or other casualty prior to Closing, Seller shall repair and restore the
Property to the same condition as before the fire or casualty, and the closing
shall be deferred for up to one hundred twenty (120) days to permit such repair
and restoration. If Seller is unable to repair and restore within such one
hundred twenty (120)-day period, then Purchaser shall have the option of (a)
terminating this Agreement by written notice to Seller, whereupon Escrow Agent,
subject to the provisions of Section 11.3, shall return the Deposit, together
with all interest earned thereon, to Purchaser, and both parties shall be
released from all further obligations under this Agreement, except those which
expressly survive such termination, or (b) proceeding with the Closing, in which
case Purchaser shall be entitled to all insurance proceeds (subject to the
rights of the holder(s) of any existing mortgages), and to credits equal to the
insurance deductibles and to the replacement cost not covered by insurance
proceeds and deductibles.
26. INDEMNITY. Seller shall and does indemnify and hold Purchaser
harmless from any and all liability, including costs and attorneys' fees,
including those for appellate proceedings:
26.1 to the State of Florida for sales tax due on any rentals or sales
prior to Closing, under Florida Statutes Section 212.10;
26.2 for services rendered prior to the Closing under any contracts for
services to the Property existing now or at any time prior to the Closing;
26.3 for any security deposits of tenants received by Seller prior to
the Closing and not credited to Purchaser at the Closing;
26.4 for any personal property taxes remaining unpaid for calendar years
prior to the year of the Closing.
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27. RADON GAS NOTICE. Pursuant to Florida Statutes Section 404.056(8),
Seller hereby makes, and Purchaser hereby acknowledges, the following
notification:
RADON GAS: Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of radon
that exceed federal and state guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from your county public health unit.
28. MISCELLANEOUS.
28.1 This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida, without application of choice of law or
conflicts of laws principles.
28.2 In the event any term or provision of this Agreement is determined
by appropriate judicial authority to be illegal or otherwise invalid, such
provision shall be given its nearest legal meaning or be construed as deleted as
such authority determines, and the remainder of this Agreement shall be
construed to be in full force and effect.
28.3 In the event of any litigation between the parties under this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees.
Wherever provision is made in this Agreement for "attorneys' fees," such term
shall be deemed to include accountants' and attorneys' fees and court costs,
whether or not litigation is commenced, including those for appellate and post
judgment proceedings and for paralegals and similar persons.
28.4 Each party has participated fully in the negotiation and
preparation of this Agreement with full benefit of counsel. Accordingly, this
Agreement shall not be more strictly construed against either party.
28.5 Whenever used in this Agreement, the singular shall include the
plural, the
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plural shall include the singular, any gender shall include every other and all
genders, and captions and paragraph headings shall be disregarded.
28.6 The captions in this Agreement are for the convenience of
reference only and shall not be deemed to alter any provision of this Agreement.
28.7 Any reference in this Agreement to time periods less than six (6)
days shall, in the computation thereof, exclude Saturdays, Sundays, and legal
holidays; any time period provided for in this Agreement which shall end on a
Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of the next full
business day. Time is of the essence.
28.8 This Agreement constitutes the entire agreement between the
parties and may not be changed, altered or modified except by an instrument in
writing signed by the party against whom enforcement of such change would be
sought.
28.9 All references in this Agreement to exhibits, schedules,
paragraphs, subparagraphs and sections refer to the respective subdivisions of
this Agreement, unless the reference expressly identifies another document.
28.10 All of the terms of this Agreement, including but not limited to
the representations, warranties and covenants of Seller, shall be binding upon
and shall inure to the benefit of the parties to this Agreement and their
respective successors and assigns.
28.11 Typewritten or handwritten provisions which are inserted in or
attached to this Agreement as addenda or riders shall control all printed or
pretyped provisions of this Agreement with which they may be in conflict.
28.12 All covenants and agreements which expressly survive the Closing
and all representations and warranties of Seller in this Agreement, all remedies
related to them, and the
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<PAGE>
provisions of this Section 28.12 shall survive the Closing for a period of one
(1) year.
29. SECTION 1031 EXCHANGE. Purchaser hereby acknowledges it is the
intention of the Seller to effect a Section 1031 tax deferred exchange at no
additional expense to Purchaser. The Seller's rights and obligations under this
Agreement may be assigned to a qualified intermediary for the purpose of
completing such an exchange. Purchaser agrees to cooperate with Seller and said
qualified intermediary to complete the exchange.
30. OTHER AGREEMENT. Seller and Purchaser acknowledge that they have
entered into one (1) other Purchase and Sale Agreement (the "Other Agreement")
contemporaneously herewith, and that, if this Agreement is terminated in
accordance with its terms, then the Other Agreement shall also terminate.
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<PAGE>
EXECUTED as of the date first written above in several counterparts,
each of which shall be deemed an original, but all of which constitute only one
agreement.
Signed, sealed and delivered
in the presence of:
SELLER:
_________________________ HIGHWOODS/FLORIDA HOLDINGS, L.P., a
Delaware limited partnership
_________________________
(As to Seller) By: Highwoods/Florida GP Corp., a Delaware
corporation, its general partner
By: /s/ Edward Fritsch
----------------------------------
Title: Executive Vice President
-------------------------------
PURCHASER:
AMERICA'S CAPITAL PARTNERS
_________________________
By: /s/ Allen C. de Olazarra
_________________________ Its: Managing Member
(As to Purchaser) ----------------------------------
Dated: March 25, 1999
----------------------------------
41
FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT is made and entered
into the 21st day of April, 1999, by and between HIGHWOODS/FLORIDA HOLDINGS,
L.P., a Delaware limited partnership ("Seller"), and AMERICA'S CAPITAL PARTNERS,
LLC, a Florida limited liability company ("Purchaser").
Seller and Purchaser have previously entered into that certain Purchase
and Sale Agreement dated as of March 22, 1999 (the "Agreement").
Seller and Purchaser wish to amend certain of the provisions of the
Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the mutual
covenants and agreements herein and in the Agreement set forth and other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Seller and Purchaser hereby agree as follows:
1. RECITALS. The foregoing recitals are true and correct.
2. THE PROPERTY. Section 1.1 and Exhibit "1.1" are hereby amended to
add the properties described as (a) "Highwoods Development Parcels" I.E.,
Cypress Creek Land consisting of approximately 11 acres and Highwoods Sawgrass
consisting of approximately 38 acres and (b) the "Sunrise Office Building,"
consisting of approximately 51,831 rentable square feet.
3. DEFINITION OF CONTRACT. Section 1.5 is hereby amended to add the
words "set forth in Exhibit "12.1"" after the word "agreements" in the first
line of Section 1.5.
<PAGE>
4. CLOSING DATE. Section 3 is amended to provide that the Closing Date
shall be on December 1, 1999.
5. ADDITIONAL DEPOSIT. The amount of the Additional Deposit in Section
4.1 is hereby changed to Three Million Dollars ($3,000,000.00).
6. PURCHASE PRICE. Section 5.1 is hereby amended to increase the
Purchase Price by the amount of Fifteen Million One Hundred Thirty Four Thousand
Dollars ($15,134,000.00), to a total of Eighty-Five Million One Hundred Thirty
Four Thousand Dollars ($85,134,000.00).
7. PAYMENT OF PURCHASE PRICE. Section 5.2 is hereby amended to change
the amount of the Deposit to $3,005,000.00 and the approximate balance of the
Purchase Price due in cash at Closing, subject to prorations and adjustments as
provided in the Agreement, to $82,129,000.00.
8. TITLE OBJECTIONS. Section 9.1 is hereby amended to provide that
April 28, 1999 is the last day on which Purchaser may notify Seller of any title
and survey objections.
9. INVESTIGATION PERIOD. Sections 11.1 and 11.2 are hereby amended to
provide that the Investigation Period shall expire on April 30, 1999 at 5:00
p.m. Eastern Daylight Time.
10. APPROVAL OF AMENDMENT BY SELLER'S BOARD OF DIRECTORS. Seller and
Purchaser hereby acknowledge that this First Amendment must be approved by
Seller's Board of Directors. Seller agrees to present the terms of this First
Amendment to Seller's Board of Directors for its approval not later than April
27, 1999. Section 12.8 of the Agreement is hereby amended accordingly.
-2-
<PAGE>
11. BROKERS. Section 20 is amended to delete the brokerage commission
to be paid to Redwood Real Estate Services Corp.
12. TRUE, CORRECT AND COMPLETE AGREEMENT. Seller and Purchaser hereby
acknowledge that several pages in the Agreement have been substituted to clarify
certain issues and, pursuant to the terms of the Agreement, certain exhibits
were annexed thereto after the Effective Date. Seller and Purchaser acknowledge
and agree that the copy of the Agreement attached hereto is a true, correct and
complete copy of the Agreement as it existed prior to the date of this First
Amendment.
13. NO FURTHER MODIFICATION. Except as set forth in this First
Amendment, the Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the Seller and Purchaser have executed this First
Amendment the day and year first written above.
-3-
<PAGE>
WITNESSES: SELLER:
HIGHWOODS/FLORIDA HOLDINGS, L.P.,
a Delaware limited partnership
_______________________________
By: Highwoods/Florida G.P. Corp., a
Delaware corporation, as general
partner
_______________________________
(As to Seller) By: /s/ Mark D. Pridgen III
------------------------------
Title: Vice President
---------------------------
Dated: April 21, 1999
PURCHASER:
AMERICA'S CAPITAL PARTNERS LLC, a
Florida limited liability company.
_______________________________ By: /s/ Allen C. de Olazarra
------------------------------
Title: Managing Member
---------------------------
_______________________________ Dated: April 21, 1999
(As to Purchaser)
-4-
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made and entered into as of the 22nd day of March,
1999, by and between HIGHWOODS/FLORIDA HOLDINGS, L.P., a Delaware limited
partnership ("Seller"), and AMERICA'S CAPITAL PARTNERS, LLC, a Florida limited
liability company and/or its permitted assigns hereunder ("Purchaser"). In
consideration of the mutual covenants and promises set forth in this Agreement
and other good and valuable consideration, the receipt and sufficiency of which
are acknowledged by the parties to this Agreement, the parties agree to the
following terms and conditions:
1. PURCHASE AND SALE. Subject to the terms of this Agreement, Seller agrees
to sell to Purchaser and Purchaser agrees to purchase from Seller the following
property (collectively, the "Property" or "Properties"):
1.1 Those fee parcels of property located in Palm Beach County, Florida
consisting of approximately 506,735 rentable square feet as more particularly
described in Exhibit "1.1" (collectively, the "Realty");
1.2 The land and all buildings, structures and other improvements
situated on the Realty (the "Improvements");
1.3 All fixtures, equipment, furnishings and other items of property
whatsoever used or useful in the operation, repair and maintenance of the
Realty, situated on the Realty, and owned by Seller (the "Personalty");
1.4 All of the landlord's interest in and to tenant leases for space in
the Improvements or on the Realty;
1.5 All transferable contracts and agreements (each a "Contract", and
<PAGE>
collectively, the "Contracts"), deposits, licenses, permits, and contract rights
pertaining to ownership, development and/or operation of the Realty, the
Improvements and the Personalty;
1.6 All of Seller's rights in and to the name and all logos, trademarks
and other rights in connection with the name, and general intangible rights
pertaining to the ownership and/or operation of the Realty other than the name
"Highwoods" and any logos, trademarks, tradenames or other intangible rights
relating to the name "Highwoods"; and
1.7 All strips, gores, easements, privileges, rights-of-way, riparian
and other water rights, rights to lands underlying any adjacent streets or
roads, and other tenements, hereditaments and appurtenances, if any, pertaining
to or accruing to the benefit of the Realty and the Improvements.
2. EFFECTIVE DATE. If this Agreement is not executed and delivered by each
party to it to all parties on or before March 25, 1999, at 5:00 p.m., Eastern
time, then this Agreement shall be null and void and of no force or effect.
Execution and delivery shall be defined as the receipt of the fully executed
Agreement by the parties by means of the U.S. mails, delivery by a nationally
recognized overnight delivery service, hand delivery or facsimile transmission.
In the event delivery is by facsimile, the party delivering this Agreement shall
deliver to all other parties an original copy of the fully executed Agreement
within two (2) business days; failure to do so shall not affect the validity of
the execution and delivery of this Agreement. The date of this Agreement, for
purposes of performance, shall be the date when the last one of Seller or
Purchaser has signed this Agreement, as stated on the signature page (the
"Effective Date").
3. CLOSING DATE. Subject to other provisions of this Agreement for
extension or
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<PAGE>
termination, the closing of the transactions contemplated by this Agreement (the
"Closing") shall be held at the offices of the attorneys for Purchaser, Holland
& Knight LLP, 701 Brickell Avenue, Miami, Florida 33131 on or before November
30, 1999, on a date designated by Seller upon not less than sixty (60) days'
prior written notice to Purchaser (the "Closing Date").
4. DEPOSIT.
4.1 To secure the performance by Purchaser of Purchaser's obligations
under this Agreement, Purchaser will deliver, within two (2) business days of
the Effective Date, to the law firm of Holland & Knight LLP, as escrow agent
("Escrow Agent"), the sum of Five Thousand Dollars ($5,000.00) by wire transfer
to a depository designated by Escrow Agent, the proceeds of which shall be held
in trust as an earnest money deposit (the "Initial Deposit") by Escrow Agent,
and disbursed only in accordance with the terms of this Agreement. If Purchaser
elects not to cancel this Agreement during the Investigation Period, as more
particularly described in Section 11.2 of this Agreement, then, on the "Closing
Date" under the Other Agreement (as hereinafter defined), Purchaser shall
deliver to Escrow Agent a check or wire transfer in the sum of Two Million
Dollars ($2,000,000.00) (the "Additional Deposit") to be held together with, and
upon the same terms and conditions as, the Initial Deposit. Once the Additional
Deposit is paid to Escrow Agent, the term "Deposit" shall mean the Initial
Deposit plus the Additional Deposit; prior to such payment, whenever used in
this Agreement, the term "Deposit" shall mean only the Initial Deposit.
4.2 Escrow Agent shall use its reasonable efforts to invest the Deposit
in an interest bearing account or certificate of deposit maintained with or
issued by a commercial bank reasonably acceptable to Purchaser and Seller. All
interest accrued or earned on the Deposit shall
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<PAGE>
be paid or credited to Purchaser, except in the event of a default by Purchaser,
without any default of Seller, in which event the interest shall be disbursed to
Seller, together with the Deposit, as liquidated damages in accordance with
Section 15.
4.3 Purchaser and Seller acknowledge that, if the Deposit is at any
time in excess of $100,000.00, then the amount over $100,000.00 shall not be
insured, and both parties hold Escrow Agent harmless from all losses and costs
and liabilities which may accrue or be incurred related to such lack of
insurance.
5. PURCHASE PRICE.
5.1 The total purchase price (the "Purchase Price") to be paid by
Purchaser to Seller for the Property is Seventy Million Dollars
($70,000,000.00). The Purchase Price shall be allocated among the Properties
within two (2) business days prior to the end of the Inspection Period, which
allocation, once completed, shall be attached to each copy of this Agreement as
Exhibit "5.1."
5.2 The Purchase Price shall be paid to Seller as follows:
$2,005,000.00, the Deposit described in Section 4 of this
Agreement, which shall be paid to Seller at
Closing; and
$67,995,000.00, approximately, in cash at Closing, subject to
prorations and adjustments as provided in this
Agreement, to be paid by cashier's check or by
wire transfer.
6. CONFIDENTIAL NATURE OF AGREEMENT. Except for information obtained by
Purchaser from third parties or which is otherwise available to the public,
Purchaser shall keep all information obtained by Purchaser relative to the
Property (including, without limitation, the Due
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Diligence Documents), as it relates to this transaction, confidential. Purchaser
shall have the right to disclose such information notwithstanding such
limitation to Purchaser's professionals, consultants, lenders, officers,
employees, stockholders, purchasers and affiliates for the sole purpose of
evaluating the Property to determine its value and suitability for Purchaser's
needs and financing and as may be required by applicable law. Seller shall have
the right, in its sole discretion, to terminate this Agreement in the event of a
material breach by Purchaser of this Section 6, whereupon Escrow Agent, subject
to the provisions of Section 11.3, shall return the Deposit, together with all
interest earned thereon, to Purchaser, and both parties shall be released from
all further obligations under this Agreement, except for those which expressly
survive such termination.
7. TITLE EVIDENCE. Within fifteen (15) days following the Effective Date,
Purchaser shall, at Purchaser's expense, obtain an ALTA marketability title
insurance commitment (the "Commitment"), with fee owner's title policy premium
to be paid by Purchaser at Closing, issued by Holland & Knight LLP, as agent for
one or more national title insurers acceptable to Purchaser (collectively, the
"Title Insurer"), with hard copies of all exceptions. The Commitment shall show
Seller to be vested with good and marketable and insurable fee simple title to
the Realty, insurable in an amount equal to the Purchase Price in accordance
with the standards adopted from time to time by The Florida Bar, at standard
rates, and Seller believes that the Commitment will show the Realty to be free
and clear of all liens, encumbrances, leases, tenancies, covenants, conditions,
restrictions, rights-of-way, easements and other matters affecting title, except
the following (which, if not objected to by Purchaser pursuant to the terms of
Article 9 below, shall be
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deemed the "Permitted Exceptions"):
7.1 Ad valorem real estate taxes for 1999 and subsequent years;
7.2 All applicable zoning ordinances and regulations;
7.3 Matters of record which are common to the subdivision;
7.4 Matters described in Seller's existing title policies with respect
to the Properties; and
7.5 Tenants in possession.
8. SURVEY.
8.1 Within the time period for providing the Commitment, Purchaser
shall obtain and deliver to Seller ALTA surveys (the "Surveys") of the Realty
and the Improvements. The Surveys shall:
8.1.1 meet the minimum technical standards of the Florida
Board of Land Surveyors;
8.1.2 be certified to Purchaser, to Purchaser's attorney, to
the Title Insurer and to Purchaser's mortgage lender;
8.1.3 be certified (or recertified) as of a date subsequent to
the Effective Date;
8.1.4 set forth the total number of square feet and acres in
the Realty;
8.1.5 show the location of all improvements, parcels (if any)
in the legal descriptions of the Realty, number of square feet and parking
spaces in the Improvements, utility, setback and other lines; easements, either
visible or recorded, and recording references of them; and
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8.1.6 include elevation and flood zone information.
8.2 If the Survey shall reflect any encroachments, overlaps, unrecorded
easements or similar rights in third parties, or any other adverse matters not
specifically provided for in this Agreement, then the same shall be deemed
"title defects" as set forth in Section 9.
9. TITLE DEFECTS.
9.1 Purchaser shall have until April 21, 1999 in which to examine the
Commitment and the Surveys. If Purchaser finds title to be defective, Purchaser
shall, no later than 5:00 p.m. Eastern time on April 21, 1999, notify Seller in
writing, specifying the title defect(s). If Purchaser fails to give Seller
written notice of any title defect(s) before 5:00 p.m. Eastern time on April 21,
1999, the defects shown in the Commitment or the Surveys shall be deemed to be
waived as title objections to closing this transaction.
9.2 If Purchaser has given Seller timely written notice of defect(s)
and the defect(s) render the title other than as represented in this Agreement
or if any new defects appear from the date of the Commitment through the Closing
Date, Seller shall use commercially reasonable efforts to cause only those
defects recorded after October 7, 1997 to be cured by the Closing Date. Seller
agrees to remove, by payment, bonding or otherwise, any such lien (other than
environmental liens) against the Property capable of removal by the payment of
money or bonding. Seller shall not be obligated to (but may, in its sole and
absolute discretion) cure any other defect or to buyout or settle any other
claim or lien against the Property. At Seller's option, the Closing Date may be
extended for a period not to exceed sixty (60) days for purposes of eliminating
such title defects. If such additional time is reasonably required by Seller to
cure such title defects, Seller's
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failure to extend the Closing Date shall be commercially unreasonable.
9.3 If Seller does not eliminate such defects as of the Closing Date,
as the same may be extended under the preceding sentence, or if any new "title
defects" appear between the date of the Commitment through the Closing Date
which Seller does not eliminate as of the Closing Date, Purchaser shall have the
option to:
9.3.1 Close and accept the title "as is," without reduction in
the Purchase Price and without claim against Seller for such title defects
(except for any lien that Seller is required to cure pursuant to Section 9.2
that can be removed by the payment of money or bonding, for which credit shall
be given Purchaser at the Closing unless Seller pays the same at the Closing)
(and in such event, the Closing shall take place on the Closing Date); or
9.3.2 Cancel this Agreement, whereupon Escrow Agent, subject
to the provisions of Section 11.3, shall return the Deposit, together with all
interest earned thereon, to Purchaser, and both parties shall be released from
all further obligations under this Agreement, except for those which expressly
survive such termination, unless such title defects were caused by Seller's
willful act or willful omission, in which event Seller shall remain liable to
Purchaser for damages caused by such title defects.
10. EXISTING LEASES. Seller represents and warrants to Purchaser that
attached to this Agreement as Exhibit "10" is a rent roll of all leases,
tenancies, and other occupancies, whether written or oral, affecting all or any
portion of the Property (the "Leases"), setting forth, for each tenant (each a
"Tenant", and collectively, the "Tenants"), the name of the tenant, the space(s)
affected, the rents, the lease term, the security deposit as required by the
subject Lease, if any,
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prepaid rent and any rent arrearages. Upon execution of this Agreement by
Seller, Seller shall deliver to Purchaser true, correct and complete copies of
all of the Leases. Seller further represents and warrants to Purchaser that:
10.1 No other parties have any rights of occupancy or possession
(including, without limitation, renewal options, rights of first refusal,
options to purchase, free rent, tenant improvement allowances or other special
concessions) of all or any portion of the Property except as set forth in the
rent roll which is a part of Exhibit "10" or as set forth in the lease files
provided by Seller to Purchaser pursuant to Section 11.1;
10.2 All of the Leases are, as of the date of this Agreement, in good
standing, without default on the part of Seller, and shall remain without
default on the part of Seller through the date of the Closing;
10.3 Seller shall use its diligent, good faith, commercially reasonable
efforts to deliver to Purchaser, at least ten (10) days prior to the Closing,
appropriate estoppel letters from all Tenants occupying more than 10,000 square
feet ("Major Tenants") and from a sufficient number of Tenants occupying the
remaining occupied square feet in the Property, and not occupied by Major
Tenants, necessary to provide estoppel coverage on eighty percent (80%) of the
occupied square footage in the Property, such estoppel letters to confirm in all
material respects the information contained in Exhibit "10" and provided to
Purchaser by Seller pursuant to Sections 11.1.5 and 11.1.6 and to be in the form
attached hereto as Exhibit "10.3". If the estoppel letters required by the
preceding sentence are not timely obtained after diligent effort by Seller, then
Seller shall execute an affidavit as to each such Lease for which it has not
obtained an estoppel letter, setting forth the
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information which would have been contained in the estoppel letter, which shall
substitute for such missing estoppel letters until such time as estoppel letters
are received from the subject Tenants; provided, however, that Seller shall not
be obligated to give, and Purchaser shall not be obligated to accept, substitute
affidavits for more than 100,000 occupied square feet in the aggregate with
respect to missing estoppel letters from Major Tenants. If Seller is unable to
comply with the provisions of this Section 10.3 by the Closing Date, Purchaser
shall have the options set forth in Sections 14.1 and 14.2;
10.4 There are no modifications, understandings or agreements with
respect to the Leases except as reflected in the Leases or as set forth in the
lease files provided by Seller to Purchaser may be disclosed to Purchaser
pursuant to Section 11.1;
10.5 Seller has not received any prepaid rent under any of the Leases
except as may be disclosed to Purchaser in the rent roll which is part of
Exhibit "10"; and
10.6 Seller shall not accept payment of any rent under any Lease for
more than one (1) month in advance. Seller shall have the right, prior to the
end of the Inspection Period, to modify any existing Lease or Contract and enter
into any new lease or agreement affecting all or any portion of the Property,
provided that Seller shall give Purchaser prompt notice of any such modification
or new lease or agreement. After the end of the Investigation Period, Seller
shall modify any existing Lease or Contract or enter into any new lease or
agreement affecting all or any portion of the Property only with the prior
written consent of Purchaser, which shall not be unreasonably withheld. Seller
shall immediately provide to Purchaser a copy of any such proposed modification,
lease or agreement, and Purchaser shall have two (2) business days from the
delivery
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thereof in which to withhold its consent to the terms thereof in writing, if it
so chooses, or else the same shall be deemed consented to by Purchaser. If
Purchaser timely withholds its consent, Purchaser shall have the right to
terminate this Agreement, whereupon Escrow Agent, subject to the provisions of
Section 11.3, shall return the Deposit, together with all interest earned
thereon, to Purchaser, and both parties shall be released from all further
obligations under this Agreement, except for those which expressly survive such
termination. If Purchaser elects not to terminate this Agreement at the end of
the Investigation Period, all new leases and agreements entered into by Seller
prior to the end of the Investigation Period shall become "Leases" and
"Contracts," respectively, hereunder. In addition, all new leases and agreements
entered into by Seller after the end of the Investigation Period with
Purchaser's consent or deemed consent shall become "Leases" and "Contracts,"
respectively, hereunder.
11. INVESTIGATION PERIOD.
11.1 During the period from the Effective Date until April 23, 1999
(the "Investigation Period"), Purchaser shall have the right to conduct, at
Purchaser's expense, whatever reasonable investigations, analyses and studies of
the Property that Purchaser may deem appropriate to satisfy Purchaser with
regard to:
11.1.1 the physical condition of the building(s) and other
improvements included in the Property, including their structure, roofs, air
conditioning, heating, electrical, plumbing and other mechanical systems;
11.1.2 the physical condition of all fixtures, equipment,
furnishings and other items of property referred to in Subsection 1.3 above, an
inventory of which shall be furnished
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by Seller at Seller's expense within fifteen (15) days after the Effective Date;
11.1.3 the permitted uses of and improvements to the Property
under applicable building and zoning ordinances and the present compliance or
non-compliance with the same;
11.1.4 evidence of any hazardous waste or similar materials,
and of Radon, in, on, under or about the Property;
11.1.5 all existing Contracts, Leases, lease files, lease
abstracts, historical MRI reports (not including prospective information, such
as budget projections, which are proprietary to Seller) and tenancies affecting
the Property; and
11.1.6 Seller's historical operating statements for calendar
year 1998 and year-to-date 1999 (as and when available).
11.2 Purchaser and its agents and employees shall have the right to
enter upon the Property for the purpose of making inspections, at Purchaser's
sole risk, cost and expense, and subject to the rights of tenants. No
destructive testing shall be permitted. All of such entries upon the Property
shall be at reasonable times during normal business hours and after at least one
(1) business day's prior notice to Seller or Seller's agent, and Seller or
Seller's agent shall have the right to accompany Purchaser during any activities
performed by Purchaser on the Property. Seller shall make available to Purchaser
at all times during business hours during the Investigation Period, and after
the Investigation Period until the Closing Date, upon one (1) business day's
prior notice, all documents relating to the matters described in Section 11.1
above which are in Seller's possession for review and copying by Purchaser (the
"Due Diligence Documents"). In addition, within five (5)
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business days after the Effective Date, Seller shall provide Exhibits "12.1" and
"12.6" to Purchaser. Purchaser shall promptly provide to Seller copies of all
environmental and engineering reports which Purchaser may obtain from third
parties relating to the Property. If Purchaser is dissatisfied, for any reason
and in Purchaser's exclusive judgment, with the result of Purchaser's
investigations, then Purchaser may cancel this Agreement by notifying Seller of
such cancellation on or before 5:00 p.m. on April 23, 1999, whereupon Escrow
Agent, subject to the provisions of Section 11.3, shall return the Deposit,
together with all interest earned thereon, to Purchaser, and both parties shall
be released from all further obligations under this Agreement, except for those
which expressly survive such termination.
11.3 If Purchaser or Seller cancels this Agreement pursuant to the terms
hereof, Purchaser shall deliver to Seller all of the Due Diligence Documents.
Upon receipt of said documents by Seller, Escrow Agent shall disburse the
Deposit, together with all interest earned thereon, to Purchaser.
11.4 Upon Purchaser's waiver of or failure to duly exercise its right to
terminate described in this Section 11, Purchaser shall have accepted the
Property "as is", with no representations or warranties regarding the Property
other than any which may be specifically stated in this Agreement.
11.5 Notwithstanding any provisions in this Agreement to the contrary,
Purchaser does and shall indemnify and hold harmless Seller and its agents,
employees, successors and assigns, to the extent of the Deposit, against all
losses, claims, damages, liability, attorneys' and accountants' fees and costs
of litigation and all other expenses related to, growing out of, or arising
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from the investigation of or entry upon the Property, or other acts undertaken
by Purchaser or its agents, employees or assigns, under this Agreement,
including, without limitation, mechanic's or materialmen's liens. If Purchaser
does not close on the purchase of the Property under this Agreement, it shall
return the Property to the condition in which it existed prior to any
investigations undertaken by Purchaser or its agents, employees and assigns
pursuant to this Agreement.
11.6 Except as otherwise expressly provided herein, Seller makes no
representations or warranties as to the accuracy or completeness of the Due
Diligence Documents.
11.7 The inspections under this Section 11 may include a Phase I
environmental inspection of the Property, but no Phase II environmental
inspection shall be performed without the prior written consent of Seller, which
may be withheld in its sole and absolute discretion, and if consented to by
Seller, the proposed scope of work and the party who will perform the work shall
be subject to Seller's review and approval. Upon Seller's request, Purchaser
shall deliver to Seller copies of any Phase II or other environmental report to
which Seller consents as provided above. Purchaser, for itself and any entity
affiliated with Purchaser, waives and releases Seller and its employees, agents,
officers, trustees, directors, beneficiaries and partners from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs or
expenses of whatever kind or nature, known or unknown, existing and future,
contingent or otherwise (including any action or proceeding, brought or
threatened, or ordered by any appropriate governmental entity) made, incurred,
or suffered by Purchaser or any entity affiliated with Purchaser relating to the
presence, misuse, use, disposal, release or threatened release of any hazardous
or toxic materials, chemicals or wastes as the Property and any liability or
claim related to the Property arising under
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the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1986, the Resource
Conservation and Recovery Act, and the Toxic Substance Control Act, all as
amended, or any other cause of action based on any other state, local, or
federal environmental law, rule or regulation; provided, however, the foregoing
release shall not operate or release any claim by Purchaser against any person
or entity other than described above in this Section 11.7. The provisions of
this Section 11.7 shall survive indefinitely the Closing or any termination of
this Agreement and shall not be merged into the closing documents.
11.8 To the maximum and extent permitted by applicable law, and except
for Seller's representations and warranties (collectively, "Seller's
Warranties") in this Agreement and the documents of conveyance and assignment to
be delivered at the Closing, this sale is made and will be made without
representation, covenant, or warranty of any kind (whether express, implied, or,
to the maximum extent permitted by applicable law, statutory) by Seller. As a
material part of the consideration of this Agreement, Purchaser agrees to accept
the Property on an "AS IS" and "WHERE IS" basis, with all faults and any and all
latent and patent defects, and without any representation or warranty, all of
which Seller hereby disclaims, except for Seller's Warranties. Except for
Seller's Warranties, no warranty or representation is made by Seller as to (a)
fitness for any particular purpose, (b) merchantability, (c) design, (d)
quality, (e) condition, (f) operation or income, (g) compliance with drawings or
specifications, (h) absence of defects, (i) absence of hazardous or toxic
substances, (j) absence of faults, (k) flooding, or (1) compliance with laws and
regulations including, without limitation, those relating to health, safety, and
the environment.
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Purchaser acknowledges that Purchaser has entered into this Agreement with the
intention of making and relying upon its own investigation of the physical,
environmental, economic use, compliance and legal condition of the Property and
that, except as otherwise provided in this Agreement, Purchaser is not now
relying, and will not later rely, upon any representations and warranties made
by Seller or anyone acting or claiming to act, by, through or under or on
Seller's behalf concerning the Property. The provisions of this paragraph shall
survive indefinitely the Closing or any termination of this Agreement and shall
not be merged into the closing documents.
12. REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller represents and
warrants to Purchaser, to Seller's knowledge, and covenants and agrees with
Purchaser as follows:
12.1 Seller has not entered into any contracts, subcontracts,
arrangements, licenses, concessions, easements or other agreements, either
recorded or unrecorded, written or oral, affecting all or any portion of the
Property, or the use of it, other than the Leases set forth in Exhibit "10" and
those agreements set forth in Exhibit "12.1";
12.2 There are no (i) existing or pending improvement liens affecting
the Property; (ii) violations of building codes and/or zoning ordinances or
other governmental or regulatory laws, ordinances, regulations, orders or
requirements affecting the Property; (iii) existing, pending or threatened
lawsuits or appeals of prior lawsuits affecting the Property; (iv) existing,
pending or threatened condemnation proceedings affecting the Property; or (v)
existing, pending or threatened zoning, building or other moratoria, downzoning
petitions, proceedings, restrictive allocations or similar matters that could
affect Purchaser's use of the Property;
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12.3 Seller is vested with good and marketable title to all fixtures,
equipment, furnishings and other items of property referred to in Section 1 and
owned by Seller, free of all financing and other liens or encumbrances;
12.4 Seller shall maintain the Property in the same manner as it has
been maintained prior to the Effective Date until the Closing Date and shall
comply prior to the Closing in all material respects with all laws, rules,
regulations, and ordinances of all governmental authorities having jurisdiction
over the Property;
12.5 There is no radon in the Improvements which are above government
approved levels; Seller has not done nor allowed anything which could cause
toxic or hazardous materials or waste to be present in, on or about the
Property, and has no knowledge of any such materials or waste being or ever
having been in, on, or about the Property or adjacent properties, in each case,
except as described in Exhibit "12.6" attached hereto, which, for purposes
hereof, constitutes all of Seller's knowledge;
12.6 Seller shall provide, and keep in force through the Closing,
policies of fire, flood, windstorm, hazard and other casualty insurance on the
improvements portion of the Realty and all items of other property referred to
in Section 1 above;
12.7 There are no agreements currently in effect which restrict the
sale of the Property;
12.8 Subject to approval of Seller's Board of Directors as provided in
this Section 12.8, Seller has the right, power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby;
neither the execution and delivery of this
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Agreement nor the consummation of the transactions contemplated hereby nor the
fulfillment of nor the compliance with the terms, conditions and provisions of
this Agreement will conflict with or result in a violation or breach of Seller's
partnership agreement, or any other instrument or agreement of any nature to
which Seller is a party or by which it is bound or may be affected, or
constitute (with or without the giving of notice or the passage of time) a
default under such an instrument or agreement; no consent, approval,
authorization or order of any person is required with respect to the
consummation of the transactions contemplated by this Agreement. Seller agrees
to present the terms of this Agreement to its Board of Directors (the "Board")
for its approval not later than March 23, 1999. Seller further agrees to notify
Purchaser of the decision of such Board no later than the end of business on
such date. A Board decision to approve this transaction shall be final except
that in the event of a material change in a term as embodied in this Agreement,
the parties acknowledge that such change in terms may be subject to
reconsideration by the Board, at its election.
12.9 No commitments or agreements have been or will be made by or on
behalf of Seller to any governmental authority, utility company, school board,
church or other religious body, any homeowners or homeowners' association, or
any other organization, group or individual, relating to the Property which
would impose an obligation upon Purchaser to make any contributions or
dedications of money or land to construct, install or maintain any improvements
of a public or private nature on or off the Realty or the Development Assets, or
otherwise impose liability on Purchaser; and
12.10 At all times during the term of this Agreement and as of the
Closing,
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all of Seller's representations, warranties and covenants in this Agreement
shall be true and correct; no representation or warranty by Seller contained in
this Agreement and no statement delivered or information supplied to Purchaser
pursuant to this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements or
information contained in them or in this Agreement not misleading.
For purposes of this Section 12, "to Seller's knowledge" shall mean the
actual knowledge of Troy Cox, James Heistand, Dale Johannes and Richard Nash,
without independent inquiry.
Purchaser warrants and represents to Seller that Purchaser has the
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by it, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
by it nor the fulfillment of nor the compliance with the terms, conditions and
provisions of this Agreement will conflict with or result in a violation or
breach of Purchaser's organizational documents, or any other instrument or
agreement of any nature to which Purchaser is a party or by which it is bound or
may be affected, or constitute (with or without the giving of notice or the
passage of time) a default under such an instrument or agreement; no consent,
approval, authorization or order of any person is required with respect to the
consummation of the transactions contemplated by this Agreement. At all times
during the term of this Agreement and as of the Closing, all of Purchaser's
representations, warranties and covenants in this Agreement shall be true and
correct.
13. CONDITIONS PRECEDENT.
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13.1 An express condition precedent to Purchaser's obligation to close
this transaction is the truth and correctness of all of Seller's representations
and warranties and the fulfillment of all of Seller's covenants at all times
during the term of this Agreement and as of the Closing, and no inquiry,
analysis or examination made by Purchaser (or the results of them) shall reduce,
limit or otherwise affect said representations, warranties and covenants.
13.2 The following items are additional conditions precedent to
Purchaser's obligation to close the transactions contemplated by this Agreement:
13.2.1 The Property shall remain zoned at the time of the
Closing so as to permit each and every use now being made of the Property; there
shall be no additional limiting conditions or restrictions under any zoning
resolution, ordinance, covenant, agreement, or the like that could prohibit or
frustrate any use of the Property now being made or otherwise permissible under
said zoning classification in the absence of such conditions or restrictions.
14. DEFAULT BY SELLER. Prior to the Closing Date, in the event that
Purchaser becomes aware of facts or circumstances indicating that a
representation or warranty of Seller contained herein is inaccurate, untrue or
breached, as the case may be, Purchaser shall promptly so notify Seller in
writing, and Seller shall have the right to cure the same on or before the
Closing Date, failing which Purchaser shall have the right, by written notice to
Seller given on the Closing Date, to terminate this Agreement, whereupon Escrow
Agent, subject to the provisions of Section 11.3, shall return the Deposit,
together with all interest earned thereon, to Purchaser, and both parties shall
be released from all further obligations hereunder, except for those which
expressly survive such termination. If any of Seller's representations and
warranties are not true and correct in
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all material respects as of the Closing Date or Seller's covenants are not
fulfilled in all material respects or all other conditions precedent are not met
in all material respects as of the Closing (or earlier specified date, if any),
or if Seller fails to perform any of the terms and conditions of this Agreement
in all material respects or is otherwise in default under this Agreement, then
Purchaser, at Purchaser's sole option, may elect to:
14.1 Waive the default or failure and close "as is"; or
14.2 Cancel this Agreement by written notice to Seller given on or
before the Closing Date, whereupon Escrow Agent, subject to the provisions of
Section 11.3, shall return the Deposit, together with all interest earned
thereon, to Purchaser, and both parties shall be released from all further
obligations under this Agreement, except for those which expressly survive such
termination, unless the default was caused by the willful act or willful
omission of Seller, in which event Seller shall continue to be liable for
damages and attorneys' fees caused by such default); or
14.3 Seek specific performance of Seller's obligations under this
Agreement.
In the event that any representation or warranty made by Seller herein
is found to be inaccurate, untrue or breached, as the case may be, after the
Closing Date, Purchaser shall have the right, for a period of one (1) year after
the Closing Date, to seek actual (but not consequential or punitive) damages
from Seller; provided, however, that Purchaser must commence a legal action or
proceeding seeking such damages within said one (1)-year period, or its claims
shall thereafter be barred.
15. DEFAULT BY PURCHASER. In the event of the failure or refusal of
Purchaser to close this transaction, Escrow Agent shall pay to Seller the
Deposit, together with all interest earned
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thereon, as agreed and liquidated damages for said breach, and as Seller's sole
and exclusive remedy for default of Purchaser, whereupon this Agreement shall
terminate and both parties shall be released from all further obligations under
this Agreement, except for those which expressly survive such termination.
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16. PRORATIONS.
16.1 Real estate and personal property taxes shall be prorated as of
midnight of the day before the Closing Date. In the event that the taxes for the
year of the Closing are unknown, the tax proration will be based upon such taxes
for the prior year and, at the request of either party, such taxes for the year
of the Closing shall be reprorated and adjusted when the tax bill for the year
of the Closing is received and the actual amount of taxes is known.
16.2 Utility bills or charges, where applicable, shall be prorated as
of midnight of the day before the Closing Date. The parties shall, to the extent
reasonably possible, have utility meters read the day preceding the Closing Date
and Seller shall be responsible for paying all utility bills or charges which
accrued against the Property prior to midnight of the day before the Closing
Date and Purchaser shall be required to pay all utility bills or charges
accruing against the Property on or subsequent to midnight of the day before the
Closing Date, with any charge for which a reading could not be made as of the
day preceding the Closing Date being prorated as of midnight of the day before
the Closing Date using an estimate based on the most recent reading for such
utility. Purchaser shall, as of the day prior to the Closing Date, post with
each utility company such deposit as each such utility company shall require, to
the end that Seller's utility deposits shall be refunded to Seller following the
Closing, after appropriate charge for Seller's utility bills. Purchaser shall
secure its own insurance on the Property as of the Closing Date, and Seller
shall cancel all existing insurance policies as of the Closing Date. Purchaser
and Seller shall, before and after the Closing, reasonably cooperate with each
other in connection with this Section 16.2.
16.3 The parties agree that, except as otherwise specifically stated
elsewhere in
23
<PAGE>
this Agreement, all income and expenses of the Property are intended to be
prorated as of midnight of the day before the Closing Date. Purchaser shall be
deemed the owner of the Property, for the purpose of such calculation, for the
entire Closing Date. Income shall include all revenue of Seller derived from the
operation of the Property. Expenses shall include all expenses from the
operation of the Property. Income actually received by Seller prior to the
Closing in payment for a period subsequent to the Closing shall appear on the
closing statement as a credit to Purchaser. Expenses actually paid by Seller
prior to the Closing in payment for a period subsequent to the Closing shall
appear on the closing statement as a credit to Seller.
16.4 Notwithstanding anything to the contrary in Section 16.3 above,
rents under the Leases, including, without limitation, fixed rent and additional
rent, including operating expense and real estate tax pass-throughs
(collectively, "Rents"), shall be addressed in the manner set forth in this
Section 16.4. All collected Rents for the month in which the Closing occurs
shall be prorated as of midnight the day before the Closing Date. All
uncollected Rents for the months prior to the month in which the Closing occurs
and all uncollected Rents for the month of the Closing (the "Delinquent Rents"),
shall remain Seller's property, and Seller shall receive no proration credit
therefor at the Closing. Purchaser, however, shall receive a proration credit
for its prorated portion of all Rents for the month of the Closing whether such
Rents have been collected or remain uncollected. All prepaid Rents (for the
months following the Closing) paid to or in possession of Seller shall be
credited to Purchaser at the Closing. Purchaser agrees to use good faith and
commercially reasonable efforts, for a period of six (6) calendar months after
the Closing, to collect Delinquent Rents from each tenant ("Tenant or Tenants")
remaining in possession of its space under
24
<PAGE>
a Lease. If any Tenant identifies in writing at the time of payment what its
payment is for or how such payment should be applied, such payment shall be used
or applied in such manner. Any and all other amounts received by Purchaser from
any party owing the Delinquent Rents which are received by Purchaser after the
Closing Date shall first be applied to the Rent due for the then current month,
then to Purchaser's reasonable collection costs (including reasonable attorneys'
fees and costs), then to accrued obligations of such Tenant due prior to the
Closing (in the order of accrual), and then to accrued obligations due after the
Closing. Purchaser shall promptly deliver to Seller any funds to be applied to
Delinquent Rents in accordance with the preceding sentence. No portion of
Delinquent Rents attributable to a particular Tenant shall be applied against
the Rents or Delinquent Rents attributable to another Tenant, or the expenses
incurred by Purchaser in collecting such Rents or Delinquent Rents from other
Tenants. Purchaser shall not be obligated to file suit to collect the Delinquent
Rents. After the Closing, Seller shall be entitled to commence and/or continue
any collection efforts against any Tenants owing Delinquent Rents, including,
but not limited to, commencing and/or continuing prosecuting lawsuits against
such Tenants, so long as such lawsuits are for money damages only and do not
seek the remedy of eviction.
16.5 All security deposits or prepaid Rent held by or under the control
of Seller, as required by the Leases, reflected on the tenant estoppel letter
with respect to the Leases and as set forth on Exhibit "10" (less any offsets
indicated thereon as hereinafter defined, if applicable), shall be paid or
credited to Purchaser as of the Closing Date, and Purchaser shall, with respect
to all matters arising or accruing after the Closing, assume all liability
therefor. Seller shall not, after the Effective Date and prior to the Closing,
further offset all or any portion of such security deposits or
25
<PAGE>
prepaid Rent without the prior written consent of Purchaser.
16.6 Except as otherwise provided in this Agreement, any lease
commissions or tenant improvement costs which are (i) incurred by Seller in
connection with any existing Leases or new leases entered into prior to the end
of the Investigation Period or entered into after the end of the Investigation
Period and approved by Purchaser in writing; or (ii) associated with currently
existing renewal, expansion or refusal rights of Tenants under the Leases
exercised after the Effective Date but prior to the Closing shall be prorated
between the parties in proportion to the percentage of the Lease term in the
case of (i) above, or the renewal or expansion term or term applicable to the
expansion or refusal rights in the case of (ii) above, which falls before
midnight of the day before the Closing Date (which shall be Seller's portion)
and the percentage of same which falls after midnight of the day before the
Closing Date (which shall be Purchaser's portion). Any other lease commissions
or tenant improvement costs incurred by Seller in connection with the Leases
shall be the responsibility of Seller; provided, however, that Purchaser shall
bear the cost of any lease commissions or tenant improvement costs associated
with currently existing renewal, extension, expansion or refusal rights of
Tenants under the Leases exercised after the Closing.
16.7 Seller agrees to pay to the appropriate taxing authority sales tax
collected by Seller in connection with Rent received by Seller under the Leases
for the month in which the Closing occurs promptly after the Closing. Not later
than one hundred twenty (120) days after the Closing Date, Seller shall deliver
to Purchaser the receipt or certificate from the Florida Department of Revenue
provided for in Section 212.10(1), Florida Statutes (such as a "letter of good
standing"), evidencing that the sales taxes for such month and for previous
months have been paid in full and
26
<PAGE>
that no interest or penalties are due in connection with same.
16.8 Notwithstanding anything to the contrary which may be contained
herein:
16.8.1 Seller and Purchaser acknowledge and agree that to the
extent the annual reconciliation of pass-throughs for the 1998 calendar year are
not completed prior to the Closing, Seller, rather than Purchaser, shall have
the right and obligation to complete such reconciliations and to collect and
retain reimbursements from Tenants or pay reimbursements to Tenants, as
applicable.
16.8.2 Upon the annual reconciliation of such pass-throughs
with the Tenants of the Property for the 1999 calendar year, (i) if such
reconciliation results in there being refunds due and payable to the Tenants,
Seller shall promptly pay to Purchaser, upon Purchaser's request (accompanied by
appropriate documentation), Seller's share of such refund amounts prorated for
the portion of the year during which Seller owned the Property, and (ii) if such
reconciliation results in Tenants owing funds, Purchaser shall have the right to
collect such funds from the Tenants and Purchaser shall promptly pay to Seller a
portion of the funds so collected, prorated for the portion of the year during
which Seller owned the Property.
16.9 The provisions of this Section 16 shall survive the Closing under
this Agreement.
17. IMPROVEMENT LIENS. All installments due and owing under certified,
confirmed or ratified liens for governmental improvements or special assessments
as of the Closing Date, if any, shall be paid in full by Seller, and pending
liens and installments thereof not yet due and owing for governmental
improvements or special assessments as of the Closing Date shall be
27
<PAGE>
assumed by Purchaser, provided that where the improvement has been substantially
completed as of the Closing Date, such pending lien shall be considered
certified.
18. CLOSING COSTS. At the Closing, Seller shall pay the documentary stamps
and surtax, if any, due on the deed of conveyance. Purchaser shall pay the
owner's title insurance premium. Seller and Purchaser shall equally bear the
cost of the Surveys. Each party shall pay its own attorneys' fees and bear the
recording costs of any instruments received by that party, except that Seller
shall pay the recording costs on documents necessary to clear title.
19. CLOSING.
19.1 Seller shall convey title to the Property by Special Warranty
Deed, subject only to the Permitted Exceptions (which, if Purchaser requests,
shall not be specifically enumerated). Seller shall also deliver to Purchaser at
the Closing:
19.1.1 a mechanic's lien affidavit, to the title insurer and
Purchaser, in form acceptable to the Title Insurer to delete the standard
exception relating to such liens in Purchaser's owner's title insurance policy;
19.1.2 an affidavit, to the Title Insurer and Purchaser, that
there are no unrecorded easements and that Seller has exclusive possession of
the Property, except for the rights of tenants shown on Exhibit "10" or
hereafter approved in writing by Purchaser and that Seller has done nothing to
change the state of facts shown on the Surveys, in form acceptable to the Title
Insurer to delete the standard exceptions relating to such matters in
Purchaser's owner's title insurance policy;
19.1.3 a gap affidavit and indemnification agreement
acceptable to the Title
28
<PAGE>
Insurer for purposes of deleting the "gap" from Purchaser's title commitment and
policy;
19.1.4 instruments necessary to clear title, if any, including
those required to remove standard exceptions from the title policy;
19.1.5 an appropriate bill of sale with warranty of title for
the Personalty;
19.1.6 appropriate assignments of the Leases and all other
assignable leases, deposits, licenses, easements, rights-of-way, contract
rights, intangible rights and other property and rights included in this
transaction, containing reciprocal indemnities for matters arising before and
after the Closing which instruments shall contain assumptions by Purchaser of
the Leases and Contracts;
19.1.7 appropriate restatements of Seller's covenants,
representations and warranties which are to survive the Closing;
19.1.8 appropriate evidence of Seller's partnership existence
and authority to sell and convey the Property;
19.1.9 any and all guarantees and warranties on all property
conveyed pursuant to this Agreement, with assignment of all assignable rights
under the guaranties and warranties;
19.1.10 a non-foreign certificate and other documentation as
may be appropriate and satisfactory to Purchaser to meet the non-withholding
requirements under FIRPTA and any other federal statute or regulations (or, in
the alternative, Seller shall cooperate with Purchaser in the withholding of
funds pursuant to FIRPTA regulations);
19.1.11 an appropriate reporting form to be submitted with the
deed at time
29
<PAGE>
of recordation;
19.1.12 Tenant notice letter regarding payment of rent; and
19.1.13 A consent and certification from Andreyev Engineering,
authorizing Seller, Purchaser and its lenders to rely upon its reports.
19.2 Purchaser shall pay the balance of the Purchase Price in excess of
the Deposit, and shall provide Seller with analogous proof of entity existence
and authority and an appropriate restatement of Purchaser's covenants,
representations and warranties which are to survive the Closing. Seller and
Purchaser shall each execute such other documents as are reasonably necessary to
consummate this transaction.
20. BROKERS. The parties each represent and warrant to the other that the
only real estate broker, salesman or finder involved in this transaction is
Redwood Real Estate Services Corp., to whom Seller shall pay a real estate
brokerage commission in the amount of the lesser of one (1%) percent of the
Purchase Price or Seven Hundred Thousand ($700,000.00) Dollars, and Seller shall
indemnify, defend and hold Purchaser harmless from claims for such payments. If
a claim for brokerage or similar fees in connection with this transaction is
made by any broker, salesman or finder other than the above-named broker
claiming to have dealt through or on behalf of one of the parties to this
Agreement, then that party shall indemnify, defend and hold the other party
under this Agreement harmless from all liabilities, damages, claims, costs, fees
and expenses whatsoever (including reasonable attorneys' fees and court costs,
including those for appellate matters and post judgment proceedings) with
respect to said claim for brokerage. The provisions of this section shall
survive the Closing or the earlier termination of this Agreement.
30
<PAGE>
21. ASSIGNABILITY. Purchaser shall be entitled to assign Purchaser's rights
and obligations under this Agreement to any entities owned or controlled by
Allen C. de Olazarra and Rodolfo Prio Touzet.
22. INSPECTIONS. Purchaser, and Purchaser's agents and contractors, shall
have the right during the term of this Agreement, upon one (1) business day's
advance notice, to enter upon the Property at all reasonable times for purposes
of inspection and making tests and studies. Purchaser hereby agrees to and does
indemnify, defend and hold Seller harmless, to the extent of the Deposit, from
all liabilities, damages, claims, costs, or expenses whatsoever (including
reasonable attorneys' fees and court costs) for bodily injury, death, or
property damage resulting from any such inspection, test or study. The
provisions of this Section 22 shall survive the Closing or the termination or
cancellation of this Agreement.
23. ESCROW AGENT.
23.1 Escrow Agent undertakes to perform only such duties as are
expressly set forth in this Agreement. Escrow Agent shall not be deemed to have
any implied duties or obligations under or related to this Agreement. Escrow
Agent is the law firm representing Purchaser. In the event of a dispute between
the parties, the parties consent to Escrow Agent continuing to represent
Purchaser, notwithstanding that Escrow Agent shall continue to have the duties
provided for in this Agreement.
23.2 Escrow Agent may (a) act in reliance upon any writing or
instrument or signature which it, in good faith, believes to be genuine; (b)
assume the validity and accuracy of any statement or assertion contained in such
a writing or instrument; and (c) assume that any person
31
<PAGE>
purporting to give any writing, notice, advice or instructions in connection
with the provisions of this Agreement has been duly authorized to do so. Escrow
Agent shall not be liable in any manner for the sufficiency or correctness as to
form, manner of execution, or validity of any instrument deposited in escrow,
nor as to the identity, authority, or right of any person executing any
instrument; Escrow Agent's duties under this Agreement are and shall be limited
to those duties specifically provided in this Agreement.
23.3 The parties to this Agreement do and shall indemnify Escrow Agent
and hold it harmless from any and all claims, liabilities, losses, actions,
suits or proceedings at law or in equity, or other expenses, fees, or charges of
any character or nature, including attorneys' fees and costs, which it may incur
or with which it may be threatened by reason of its action as Escrow Agent under
this Agreement, except for such matters which are the result of Escrow Agent's
gross negligence or willful malfeasance.
23.4 If the parties (including Escrow Agent) shall be in disagreement
about the interpretation of this Agreement, or about their respective rights and
obligations, or about the propriety of any action contemplated by Escrow Agent,
Escrow Agent may, but shall not be required to, file an action in interpleader
to resolve the disagreement; upon filing such action, Escrow Agent shall be
released from all obligations under this Agreement. Escrow Agent shall be
indemnified for all costs and reasonable attorneys' fees, including those for
appellate and post judgment matters and for paralegals and similar persons,
incurred in its capacity as escrow agent in connection with any such
interpleader action; Escrow Agent may represent itself in any such interpleader
action and charge its usual and customary legal fees for such representation,
and the
32
<PAGE>
court shall award such attorneys' fees, including those for appellate
and post judgment matters and for paralegals and similar persons, to Escrow
Agent from the losing party. Escrow Agent shall be fully protected in suspending
all or part of its activities under this Agreement until a final judgment in the
interpleader action is received.
23.5 Escrow Agent may consult with counsel of its own choice, including
counsel within its own firm, and shall have full and complete authorization and
protection in accordance with the opinion of such counsel. Escrow Agent shall
otherwise not be liable for any mistakes of fact or errors of judgment, or for
any acts or omissions of any kind unless caused by its gross negligence or
willful misconduct.
23.6 Escrow Agent may resign upon five (5) days' written notice to
Seller and Purchaser. If a successor escrow agent is not appointed jointly by
seller and Purchaser within the five (5) day period, Escrow Agent may petition a
court of competent jurisdiction to name a successor.
24. NOTICES. Any notices required or permitted to be given under this
Agreement shall be delivered by hand, by facsimile providing a transmission
receipt or delivered by a nationally recognized overnight delivery service, and
addressed as described below; notices shall be deemed effective only upon
receipt or refusal of delivery or, if by facsimile sent after 5:00 p.m., Eastern
Time, on the next business day after transmission.
33
<PAGE>
Notices to Seller:
Highwoods/Florida Holdings, L.P.
3100 Smoketree Court
Suite 600
Raleigh, NC 26704-1051
Attn: Mack D. Pridgen, III, Esq.
Fax: 919-876-6929
With a copy to:
Alston & Bird
3605 Glenwood Avenue
Suite 310
Raleigh, NC 27622-1107
Attn: William R. Klapp, Jr. Esq.
Fax: 919-420-2260
Notices to Purchaser:
America's Capital Partners, LLC
444 Brickell Avenue
Suite 1001
Miami, Florida 33131
Attn: Allen C. de Olazarra, CEO
Fax: 305-995-9993
With a copy to:
Holland & Knight LLP
701 Brickell Avenue
Suite 3000
Miami, Florida 33131
Attn: Stuart K. Hoffman, Esq.
Fax: 305-789-7732
34
<PAGE>
Notices to Escrow Agent:
Holland & Knight LLP
701 Brickell Avenue
Suite 3000
Miami, Florida 33131
Attn: Stuart K. Hoffman, Esq.
Fax: 305-789-7732
25. RISK OF LOSS.
25.1 The Property shall be conveyed to Purchaser in the same condition
as on the date of this Agreement, ordinary wear and tear excepted, free of all
tenancies or occupancies except those set forth in Exhibit "10", or hereafter
approved by Purchaser in writing). Seller shall not remove anything from the
Property between the date of this Agreement and the Closing.
25.2 Upon receipt of an offer or any notice or communication from any
governmental or quasi-governmental body seeking to take under its power of
eminent domain all or any portion of the Property, Seller shall promptly notify
Purchaser of the receipt of same and shall send such communication, or a copy of
it, to Purchaser. Upon receipt of such notice, Purchaser shall have the right to
rescind this Agreement by delivery of written notice to Seller within fifteen
(15) days of Purchaser's receipt of the communication from Seller. In the event
Purchaser elects to rescind, Escrow Agent, subject to the provisions of Section
11.3, shall return the Deposit, together with all interest earned thereon, to
Purchaser, and both parties shall be released from all further obligations under
this Agreement, except for those which expressly survive such termination. In
the event that Purchaser elects not to rescind, then Purchaser shall be entitled
to all condemnation awards and settlements. Seller and Purchaser agree to
cooperate with each other to obtain the
35
<PAGE>
highest and best price for the condemned property.
25.3 In the event that any of the Property is damaged or destroyed by
fire or other casualty prior to Closing, Seller shall repair and restore the
Property to the same condition as before the fire or casualty, and the closing
shall be deferred for up to one hundred twenty (120) days to permit such repair
and restoration. If Seller is unable to repair and restore within such one
hundred twenty (120)-day period, then Purchaser shall have the option of (a)
terminating this Agreement by written notice to Seller, whereupon Escrow Agent,
subject to the provisions of Section 11.3, shall return the Deposit, together
with all interest earned thereon, to Purchaser, and both parties shall be
released from all further obligations under this Agreement, except those which
expressly survive such termination, or (b) proceeding with the Closing, in which
case Purchaser shall be entitled to all insurance proceeds (subject to the
rights of the holder(s) of any existing mortgages), and to credits equal to the
insurance deductibles and to the replacement cost not covered by insurance
proceeds and deductibles.
26. INDEMNITY. Seller shall and does indemnify and hold Purchaser
harmless from any and all liability, including costs and attorneys' fees,
including those for appellate proceedings:
26.1 to the State of Florida for sales tax due on any rentals or sales
prior to Closing, under Florida Statutes Section 212.10;
26.2 for services rendered prior to the Closing under any contracts for
services to the Property existing now or at any time prior to the Closing;
26.3 for any security deposits of tenants received by Seller prior to
the Closing and not credited to Purchaser at the Closing;
36
<PAGE>
26.4 for any personal property taxes remaining unpaid for calendar
years prior to the year of the Closing.
27. RADON GAS NOTICE. Pursuant to Florida Statutes Section 404.056(8),
Seller hereby makes, and Purchaser hereby acknowledges, the following
notification:
RADON GAS: Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of
radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding radon and radon
testing may be obtained from your county public health unit.
28. MISCELLANEOUS.
28.1 This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida, without application of choice of law or
conflicts of laws principles.
28.2 In the event any term or provision of this Agreement is determined
by appropriate judicial authority to be illegal or otherwise invalid, such
provision shall be given its nearest legal meaning or be construed as deleted as
such authority determines, and the remainder of this Agreement shall be
construed to be in full force and effect.
28.3 In the event of any litigation between the parties under this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees.
Wherever provision is made in this Agreement for "attorneys' fees," such term
shall be deemed to include accountants' and attorneys' fees and court costs,
whether or not litigation is commenced, including those for appellate and post
judgment proceedings and for paralegals and similar persons.
28.4 Each party has participated fully in the negotiation and
preparation of this
37
<PAGE>
Agreement with full benefit of counsel. Accordingly, this Agreement shall not be
more strictly construed against either party.
28.5 Whenever used in this Agreement, the singular shall include the
plural, the plural shall include the singular, any gender shall include every
other and all genders, and captions and paragraph headings shall be disregarded.
28.6 The captions in this Agreement are for the convenience of
reference only and shall not be deemed to alter any provision of this Agreement.
28.7 Any reference in this Agreement to time periods less than six (6)
days shall, in the computation thereof, exclude Saturdays, Sundays, and legal
holidays; any time period provided for in this Agreement which shall end on a
Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of the next full
business day. Time is of the essence.
28.8 This Agreement constitutes the entire agreement between the
parties and may not be changed, altered or modified except by an instrument in
writing signed by the party against whom enforcement of such change would be
sought.
28.9 All references in this Agreement to exhibits, schedules,
paragraphs, subparagraphs and sections refer to the respective subdivisions of
this Agreement, unless the reference expressly identifies another document.
28.10 All of the terms of this Agreement, including but not limited to
the representations, warranties and covenants of Seller, shall be binding upon
and shall inure to the benefit of the parties to this Agreement and their
respective successors and assigns.
28.11 Typewritten or handwritten provisions which are inserted in or
attached to
38
<PAGE>
this Agreement as addenda or riders shall control all printed or pretyped
provisions of this Agreement with which they may be in conflict.
28.12 All covenants and agreements which expressly survive the
Closing and all representations and warranties of Seller in this Agreement, all
remedies related to them, and the provisions of this Section 28.12 shall survive
the Closing for a period of one (1) year.
29. SECTION 1031 EXCHANGE. Purchaser hereby acknowledges it is the
intention of the Seller to effect a Section 1031 tax deferred exchange at no
additional expense to Purchaser. The Seller's rights and obligations under this
Agreement may be assigned to a qualified intermediary for the purpose of
completing such an exchange. Purchaser agrees to cooperate with Seller and said
qualified intermediary to complete the exchange.
30. OTHER AGREEMENT. Seller and Purchaser acknowledge that they have
entered into one (1) other Purchase and Sale Agreement (the "Other Agreement")
contemporaneously herewith, and that, if the Other Agreement is terminated in
accordance with its terms, then this Agreement shall also terminate. In the
event that "Closing" (as defined in the Other Agreement) occurs under the Other
Agreement on or before May 19, 1999 (or on such later date as may be permitted
by the Other Agreement), Seller and Purchaser shall enter into a management
agreement and a leasing agreement in the forms attached hereto as Exhibit
"30(a)" and Exhibit "30(b)". Purchaser shall manage and lease the Property
pursuant to such agreements from the date of such "Closing" until the Closing
Date hereunder or earlier termination of, or default by Purchaser under, this
Agreement.
39
<PAGE>
EXECUTED as of the date first written above in several counterparts,
each of which shall be deemed an original, but all of which constitute only one
agreement.
Signed, sealed and delivered
in the presence of:
SELLER:
_________________________ HIGHWOODS/FLORIDA HOLDINGS, L.P., a
Delaware limited partnership
_________________________
(As to Seller) By: Highwoods/Florida GP Corp., a Delaware
corporation, its general partner
By: /s/ Edward Fritsch
----------------------------------
Title: Executive Vice President
-------------------------------
PURCHASER:
AMERICA'S CAPITAL PARTNERS
__________________________
By: /s/ Allen C. de Olazarra
_______________________________ Its: Managing Member
(As to Purchaser) ---------------------------------
Dated: March 25, 1999
--------------------------------
40
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
HIGHWOOD REALTY LIMITED PARTNERHSIP 3/31/99 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 49,568
<SECURITIES> 0
<RECEIVABLES> 46,053
<ALLOWANCES> 1,893
<INVENTORY> 0
<CURRENT-ASSETS> 89,659
<PP&E> 3,808,928
<DEPRECIATION> 201,401
<TOTAL-ASSETS> 4,241,420
<CURRENT-LIABILITIES> 105,948
<BONDS> 1,927,349
0
384,997
<COMMON> 0
<OTHER-SE> 1,823,126
<TOTAL-LIABILITY-AND-EQUITY> 4,241,420
<SALES> 145,868
<TOTAL-REVENUES> 151,155
<CGS> 45,292
<TOTAL-COSTS> 73,366
<OTHER-EXPENSES> 5,793
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,623
<INCOME-PRETAX> 41,373
<INCOME-TAX> 0
<INCOME-CONTINUING> 41,373
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,228
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
