UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2005
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-11002
CONSOLIDATED CAPITAL PROPERTIES IV
(Exact Name of Registrant as Specified in Its Charter)
California 94-2768742
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Registrant's telephone number)
Check 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 proceeding
12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past
90 days. Yes X No ___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes ___ No X_
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ___ No _X_
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
September 30, December 31,
2005 2004
(Unaudited) (Restated)
(Note A)
Assets
Cash and cash equivalents $ 3,307 $ 4,539
Receivables and deposits 1,467 1,187
Restricted escrows 5,387 426
Other assets 1,960 1,359
Investment properties:
Land 11,030 11,030
Buildings and related personal property 119,857 107,750
130,887 118,780
Less accumulated depreciation (78,445) (76,096)
52,442 42,684
$ 64,563 $ 50,195
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 385 $ 3,704
Tenant security deposit liabilities 381 306
Accrued property taxes 977 991
Other liabilities 1,128 868
Due to affiliates (Note B) -- 33
Distributions payable 1,313 715
Mortgage notes payable 85,356 53,520
89,540 60,137
Partners' Deficit
General partners (6,759) (5,791)
Limited partners (342,773 units issued and
outstanding) (18,218) (4,151)
(24,977) (9,942)
$ 64,563 $ 50,195
Note: The consolidated balance sheet at December 31, 2004, has been derived from
the audited financial statements at that date but does not include all the
information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Revenues:
Rental income $ 4,965 $ 4,033 $13,513 $11,727
Other income 570 494 1,543 1,499
Casualty gain (Note C) 40 129 92 528
Total revenues 5,575 4,656 15,148 13,754
Expenses:
Operating 2,795 2,254 7,449 6,052
General and administrative 193 240 570 750
Depreciation 976 520 2,410 1,600
Interest 1,321 971 3,134 2,872
Property taxes 446 264 1,200 886
Loss on early extinguishment of debt
(Notes E & F) 12 278 12 278
Total expenses 5,743 4,527 14,775 12,438
(Loss) income from continuing operations (168) 129 373 1,316
Income from discontinued operations (Note A) -- 205 -- 434
Gain on sale of discontinued operations
(Note D) -- -- -- 3,141
Net (loss) income $ (168) $ 334 $ 373 $ 4,891
Net (loss) income allocated to general
partners (4%) $ (7) $ 13 $ 15 $ 196
Net (loss) income allocated to limited
partners (96%) (161) 321 358 4,695
$ (168) $ 334 $ 373 $ 4,891
Per limited partnership unit:
(Loss) income from continuing operations $ (0.47) $ 0.37 $ 1.04 $ 3.69
Income from discontinued operations -- 0.57 -- 1.21
Gain on sale of discontinued operations -- -- -- 8.80
Net (loss) income $ (0.47) $ 0.94 $ 1.04 $ 13.70
Distributions per limited partnership unit $ 42.08 $ -- $ 42.08 $ --
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited Total
Partnership General Limited Partners'
Units Partners Partners Deficit
Original capital contributions 343,106 $ 1 $171,553 $171,554
Partners' deficit at
December 31, 2004,
as restated (Note A) 342,773 $ (5,791) $ (4,151) $ (9,942)
Distributions to partners -- (983) (14,425) (15,408)
Net income for the nine months
ended September 30, 2005 -- 15 358 373
Partners' deficit at
September 30, 2005 342,773 $ (6,759) $(18,218) $(24,977)
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2005 2004
Cash flows from operating activities:
Net income $ 373 $ 4,891
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,410 1,992
Amortization of loan costs 149 107
Casualty gain (92) (528)
Loss on early extinguishment of debt 12 326
Gain on sale of discontinued operations -- (3,141)
Change in accounts:
Receivables and deposits (280) 21
Other assets (288) (473)
Accounts payable (278) 2
Tenant security deposit liabilities 75 (67)
Accrued property taxes (14) 13
Other liabilities 257 (209)
Due to affiliates 12 75
Net cash provided by operating activities 2,336 3,009
Cash flows from investing activities:
Property improvements and replacements (15,209) (13,141)
Net deposits to restricted escrows (4,961) (212)
Insurance proceeds received 92 528
Net proceeds from sale of discontinued operations -- 3,794
Net cash used in investing activities (20,078) (9,031)
Cash flows from financing activities:
Payments on mortgage notes payable (364) (609)
Proceeds from mortgage notes payable 47,950 3,810
Repayment of mortgage notes payable (15,750) (7,604)
Loan costs and prepayment penalties paid (474) (318)
Advances from affiliate 5,984 12,073
Payments on advances from affiliate (6,029) (2,019)
Distributions to partners (14,807) (7)
Net cash provided by financing activities 16,510 5,326
Net decrease in cash and cash equivalents (1,232) (696)
Cash and cash equivalents at beginning of period 4,539 1,537
Cash and cash equivalents at end of period $ 3,307 $ 841
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities.
Cash paid for interest was approximately $3,307,000 and $3,922,000 for the nine
months ended September 30, 2005 and 2004, respectively.
At September 30, 2005, property improvements and replacements of approximately
$266,000 were included in accounts payable. At December 31, 2004, property
improvements and replacements of approximately $3,307,000 were included in
accounts payable. At December 31, 2003, property improvements and replacements
of approximately $243,000 were included in accounts payable.
At September 30, 2005 distributions to partners and other liabilities were
adjusted by approximately $598,000 and $3,000 respectively for accrued and
unpaid distributions.
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL PROPERTIES IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties IV (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of ConCap Equities, Inc. ("CEI" or the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine months ended September 30, 2005, are not necessarily indicative
of the results that may be expected for the fiscal year ending December 31,
2005. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Partnership's Annual Report on Form 10-K/A
No. 1 for the fiscal year ended December 31, 2004. The General Partner is a
subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust.
The Partnership amended its Form 10-K for the year ended December 31, 2004 and
its Form 10-Q for the three months ended March 31, 2005 to adjust for
capitalizing interest expense related to the redevelopment of one of the
investment properties. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 34, the Partnership should have considered the total
consolidated debt of the Partnership in determining the amount of interest
expense to capitalize. In addition, the Partnership paid a pre-payment penalty
associated with the retirement of the mortgage encumbering the investment
property in 2004 and this pre-payment penalty should also have been capitalized,
as the Partnership was required by the mortgage lender to repay the mortgage.
Because of the errors noted above, the balance sheet as of December 31, 2004,
including the partners' deficit, has been restated to reflect the correction of
these errors.
In accordance with SFAS No. 144, the consolidated statements of operations for
the three and nine months ended September 30, 2004 reflect the operations of
Briar Bay and Nob Hill Villa Apartments as income from discontinued operations
due to their sales in October 2004 and Point West Apartments due to its sale in
March 2004. For the nine months ended September 30, 2004, the operations of
Briar Bay, Nob Hill Villa Apartments and Point West Apartments include
approximately $1,425,000, $1,935,000, and $189,000 respectively, of revenue
generated by the properties.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and depends on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for certain payments to affiliates for
services and for reimbursements of certain expenses incurred by affiliates on
behalf of the Partnership.
Affiliates of the General Partner receive 5% of gross receipts from all the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $720,000 and
$819,000 for the nine months ended September 30, 2005 and 2004, respectively,
which is included in operating expenses and income from discontinued operations.
Affiliates of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $596,000 and $715,000 for the
nine months ended September 30, 2005 and 2004, respectively, which is included
in general and administrative expenses and investment properties. The portion of
these reimbursements included in investment properties for the nine months ended
September 30, 2005 and 2004, are fees related to construction management
services provided by an affiliate of the General Partner of approximately
$203,000 and $155,000, respectively. The construction management service fees
are calculated based on a percentage of additions to investment properties.
The Partnership Agreement provides for a special management fee equal to 9% of
the total distributions made to the limited partners from cash flow provided by
operations to be paid to the General Partner for executive and administrative
management services. There were no such special management fees paid or earned
during the nine months ended September 30, 2005 and 2004.
For acting as real estate broker in connection with the sale of South Port
Apartments in 2003, the General Partner was paid a real estate commission of
approximately $295,000. When the Partnership terminates, the General Partner
will have to return this commission if the limited partners do not receive their
original invested capital plus a 6% per annum cumulative return.
In accordance with the Partnership Agreement, an affiliate of the General
Partner advanced the Partnership approximately $5,984,000 and $12,073,000 during
the nine months ended September 30, 2005 and 2004, respectively, primarily to
assist with the construction of Belmont Place Apartments and to repay the
mortgage encumbering the property. During the same periods, the Partnership
repaid principal and interest of approximately $6,083,000 and $2,033,000,
respectively. Interest on advances is charged at prime plus 2%, or 8.75% at
September 30, 2005. Interest expense was approximately $54,000 and $32,000 for
the nine months ended September 30, 2005 and 2004, respectively. At September
30, 2005, there were no outstanding loans or accrued interest due to affiliates
of the General Partner.
The Partnership insures its properties up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty, general
liability and vehicle liability. The Partnership insures its properties above
the AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the General Partner. During the nine months ended September
30, 2005 and 2004, the Partnership was charged by AIMCO and its affiliates
approximately $282,000 and $377,000, respectively, for insurance coverage and
fees associated with policy claims administration.
Note C - Casualty Gains
In October 2003, Citadel Village Apartments suffered fire damage to five
apartment units. Insurance proceeds of approximately $92,000 were received
during the nine months ended September 30, 2004. The Partnership recognized a
casualty gain of approximately $92,000 during the nine months ended September
30, 2004 as the damaged assets were fully depreciated at the time of the
casualty.
In November 2003, Lake Forest Apartments suffered water damage to some of the
rental units. Insurance proceeds of approximately $44,000 were received during
the nine months ended September 30, 2004. The Partnership recognized a casualty
gain of approximately $44,000 during the nine months ended September 30, 2004 as
the damaged assets were fully depreciated at the time of the casualty.
In February 2004, The Apartments suffered damage to 180 apartment units due to
an ice storm. During the nine months ended September 30, 2004, the Partnership
received insurance proceeds of approximately $319,000, which included
approximately $29,000 for emergency expenses. The Partnership recognized a
casualty gain of approximately $290,000 during the nine months ended September
30, 2004 as the damaged assets were fully depreciated at the time of the
casualty.
In February 2004, Knollwood Apartments suffered fire damage to some of the
rental units. Insurance proceeds of approximately $47,000 were received during
the nine months ended September 30, 2004. The Partnership recognized a casualty
gain of approximately $47,000 during the nine months ended September 30, 2004 as
the damaged assets were fully depreciated at the time of the casualty. During
the nine months ended September 30, 2005, the Partnership received approximately
$2,000 in additional proceeds which was recognized as a casualty gain.
In March 2004, Village East Apartments suffered an electrical fire that damaged
six apartment units. Insurance proceeds of approximately $55,000 were received
during the nine months ended September 30, 2004. The Partnership recognized a
casualty gain of approximately $55,000 during the nine months ended September
30, 2004 as the damaged assets were fully depreciated at the time of the
casualty.
In July 2004, Citadel Village Apartments suffered hail and wind damage to some
of its rental units. Insurance proceeds of approximately $50,000 were received
during the nine months ended September 30, 2005. The Partnership recognized a
casualty gain of approximately $50,000 during the nine months ended September
30, 2005 as the damaged assets were fully depreciated at the time of the
casualty.
In May 2005, Knollwood Apartments suffered fire damage to some of its rental
units. Insurance proceeds of approximately $40,000 were received during the nine
months ended September 30, 2005. The Partnership recognized a casualty gain of
approximately $40,000 during the nine months ended September 30, 2005 as the
damaged assets were fully depreciated at the time of the casualty.
Note D - Disposition of Investment Property
On March 31, 2004, the Partnership sold Point West Apartments to a third party,
for a gross sales price of $3,900,000. The net proceeds realized by the
Partnership were approximately $3,794,000 after payment of closing costs of
approximately $106,000. The Partnership used approximately $2,204,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $3,141,000 for the nine months ended September
30, 2004, as a result of this sale. The property's operations, a loss of
approximately $39,000 for the nine months ended September 30, 2004 includes
revenues of approximately $189,000 and are included in income from discontinued
operations. In addition, the Partnership recorded a loss on early extinguishment
of debt of approximately $48,000 for the nine months ended September 30, 2004
due to the write off of unamortized loan costs, which is also included in income
from discontinued operations in the accompanying consolidated statements of
operations.
Note E - Redevelopment of Belmont Place Apartments
During 2003, the General Partner determined that Belmont Place Apartments
suffered from severe structural defects in the buildings' foundation and as
such, demolished the property. The General Partner designed and approved a
redevelopment plan for the property. Site work on the redevelopment began during
the fourth quarter of 2003. At September 30, 2005, all 326 units had been
substantially completed. As part of the redevelopment, during the nine months
ended September 30, 2004 the mortgage and associated accrued interest
encumbering Belmont Place Apartments was repaid. In addition to the repayment
the Partnership paid prepayment penalties of approximately $169,000 and wrote
off unamortized loan costs of approximately $109,000 which is shown as loss on
early extinguishment of debt for the three and nine months ended September 30,
2004.
The Partnership entered into a construction contract with Casden Builders, Inc.
(a related party) to develop the new Belmont Place Apartments at an estimated
cost of approximately $26.9 million. The construction contract provides for the
payment of the cost of the work plus a fee without a maximum guaranteed price.
Construction was completed in 2005 at a total project cost of approximately
$32.2 million. At September 30, 2005, total costs of approximately $31.7 million
had been incurred. The Partnership has funded construction expenditures from
operating cash flow, proceeds from a cross collateralized loan, Partnership
reserves, loans from an affiliate of the General Partner and sales proceeds.
During the nine months ended September 30, 2005 and 2004, approximately
$7,443,000 and $12,332,000 of construction costs were incurred, respectively.
Included in these construction costs are capitalized interest costs of
approximately $394,000 and $299,000 for the nine months ended September 30, 2005
and 2004, respectively, capitalized tax and insurance expenses of approximately
$6,000 and $186,000 for the nine months ended September 30, 2005 and 2004,
respectively and other construction period operating costs of approximately
$10,000 for 2005. The Partnership anticipates additional construction costs of
approximately $500,000 during 2005, which will be funded from Partnership
reserves.
Note F - Mortgage Financing
On August 31, 2005, the Partnership refinanced the first mortgage encumbering
its investment property, Arbours of Hermitage. The Partnership recognized a loss
on early extinguishment of debt of approximately $5,000 during the nine months
ended September 30, 2005 due to the write off of unamortized loan costs. The new
mortgage loan, in the principal amount of $11,000,000, replaced the existing
mortgage loan, which had an outstanding balance at the time of the refinancing
of $5,650,000. Closing costs of approximately $89,000 were capitalized and are
included in other assets. The new mortgage requires monthly payments of
principal and interest of approximately $59,000, beginning on October 10, 2005
until the loan matures on September 10, 2015, with a fixed interest rate of
5.06% and a balloon payment of approximately $8,964,000, due at maturity. The
Partnership is prohibited from prepaying the loan prior to October 10, 2007. On
or after October 10, 2007, the loan may be prepaid with the payment of a
prepayment penalty, as defined in the loan agreement. As a condition of the
loan, the lender required AIMCO Properties, L.P., an affiliate of the
Partnership, to guarantee the obligations and liabilities of the Partnership
with respect to the new mortgage financing.
On August 30, 2005, the Partnership refinanced the first mortgage encumbering
one of its investment properties, Foothill Place Apartments. The Partnership
recognized a loss on early extinguishment of debt of approximately $7,000 during
the nine months ended September 30, 2005 due to the write off of unamortized
loan costs. The new mortgage loan, in the principal amount of $17,700,000,
replaced the existing mortgage loan, which had an outstanding balance of
$10,100,000. Closing costs of approximately $180,000 were capitalized and are
included in other assets. The new mortgage requires monthly payments of
principal and interest of approximately $92,000, beginning on October 1, 2005
until the loan matures on September 1, 2008, with a fixed interest rate of 4.72%
and a balloon payment of approximately $16,836,000 due at maturity. The
Partnership may extend the term of the loan for two successive one-year periods
by exercising the extension options as defined in the loan agreement. The
Partnership may prepay the loan with no penalty if prepayment in full is made no
more than twelve months before the maturity date or during the extension
periods. However, if the loan is prepaid prior to twelve months before the
maturity date then a prepayment penalty, as defined in the loan agreement, will
apply.
On April 29, 2005, the Partnership obtained a mortgage in the principal amount
of $19,250,000 on Belmont Place Apartments. The Partnership received proceeds
from the mortgage of approximately $14,084,000 after payment of closing costs
and the funding of two letters of credit, as discussed below. Closing costs of
approximately $205,000 were capitalized and are included in other assets. The
new mortgage requires monthly payments of interest beginning on June 1, 2005
until November 1, 2006. Beginning December 1, 2006, monthly payments of
principal and interest of $108,180 are required until the loan matures November
1, 2034. The lender can exercise a call option on the mortgage on June 1, 2012
and every fifth anniversary thereafter. The interest rate is fixed at 5.14% for
the life of the mortgage.
In conjunction with the mortgage, the Partnership has provided to the lender two
letters of credit, each in the amount of $2,500,000, to secure the Partnership's
obligations under the mortgage. The letters of credit are secured by proceeds
from the mortgage financing which were deposited into an escrow account. The
lender will release the first letter of credit when the property has achieved
annual rental income of approximately $2.9 million from 60% of the rental units
and will release the second letter of credit when the property has achieved
annual rental income of approximately $3.9 million from 88% of the rental units.
Subsequent to September 30, 2005 the first letter of credit for $2.5 million was
released and the funds were returned to the Partnership. The amount returned
included interest of approximately $33,000.
On June 8, 2004, the Partnership obtained a second mortgage loan on Lake Forest
Apartments in the amount of $2,500,000. The second mortgage requires monthly
payments of interest beginning August 1, 2004 until the loan matures July 1,
2007. Interest is variable and is equal to the one month LIBOR rate plus 300
basis points (6.49% at September 30, 2005). Capitalized loan costs incurred on
the financing were approximately $83,000.
In connection with the new financing, the Partnership agreed to certain
modifications on the existing mortgage loan encumbering Lake Forest Apartments.
The modification of terms consisted of an interest rate of 7.43%, a payment of
approximately $44,000 due on July 1, 2004 and monthly payments of approximately
$42,000, commencing August 1, 2004 through the maturity of July 1, 2014, at
which time a balloon payment of approximately $5,255,000 is due. The previous
terms consisted of monthly payments of approximately $51,000 with a stated
interest rate of 7.13% through the maturity date of October 1, 2021, at which
time the loan was scheduled to be fully amortized.
On June 18, 2004, the Partnership obtained a second mortgage loan on Citadel
Apartments in the amount of $1,310,000. The second mortgage requires monthly
payments of interest beginning August 1, 2004 until the loan matures July 1,
2007. Interest is variable and is equal to the one month LIBOR rate plus 300
basis points (6.49% at September 30, 2005). Capitalized loan costs incurred on
the financing were approximately $66,000.
In connection with the new financing, the Partnership agreed to certain
modifications on the existing mortgage loan encumbering Citadel Apartments. The
modification of terms consisted of an interest rate of 8.55%, a payment of
approximately $38,000 due on July 1, 2004 and monthly payments of approximately
$33,000, commencing August 1, 2004 through the maturity of July 1, 2014, at
which time a balloon payment of approximately $3,748,000 is due. The previous
terms consisted of monthly payments of approximately $40,000 with a stated
interest rate of 8.25% through the maturity date of March 1, 2020, at which time
the loan was scheduled to be fully amortized.
Note G - Contingencies
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities that were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, during the third quarter of 2001, a
complaint captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. On or
about August 6, 2001, plaintiffs filed a first amended complaint. The Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution. On January 28, 2002, the trial
court granted defendants motion to strike the complaint. Plaintiffs took an
appeal form this order.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action. On June 13, 2003, the
court granted final approval of the settlement and entered judgment in both the
Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an
appeal (the "Appeal") seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. On May 4, 2004 the Objector filed a
second appeal challenging the court's use of a referee and its order requiring
Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeal reversed the trial Court's order striking the
first amended complaint.
On August 18, 2005, Objector and his counsel filed a motion to disqualify the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion
to intervene and on or about October 19, 2005 filed both a motion to take
discovery relating to the adequacy of plaintiffs as derivative representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
AIMCO Properties L.P. and NHP Management Company, both affiliates of the General
Partner, are defendants in a lawsuit alleging that they willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. The complaint, filed in the
United States District Court for the District of Columbia, attempts to bring a
collective action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. and NHP Management Company failed to
compensate maintenance workers for time that they were required to be "on-call".
Additionally, the complaint alleges AIMCO Properties L.P. and NHP Management
Company failed to comply with the FLSA in compensating maintenance workers for
time that they worked in excess of 40 hours in a week. In June 2005 the Court
conditionally certified the collective action on both the on-call and overtime
issues, which allows the plaintiffs to provide notice of the collective action
to all non-exempt maintenance workers from August 7, 2000 through the present.
Those employees will have the opportunity to opt-in to the collective action,
and AIMCO Properties, L.P. and NHP Management Company will have the opportunity
to move to decertify the collective action. Because the court denied plaintiffs'
motion to certify state subclasses, on September 26, 2005, the plaintiffs filed
a class action with the same allegations in the Superior Court of California
(Contra Costa County). Although the outcome of any litigation is uncertain,
AIMCO Properties, L.P. does not believe that the ultimate outcome will have a
material adverse effect on its consolidated financial condition or results of
operations. Similarly, the General Partner does not believe that the ultimate
outcome will have a material adverse effect on the Partnership's consolidated
financial condition or results of operations.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment properties that are not of a routine
nature arising in the ordinary course of business.
Environmental
Various Federal, state and local laws subject property owners or operators to
liability for management, and the costs of removal or remediation, of certain
hazardous substances present on a property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The presence of, or the
failure to manage or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and
remediation actions brought by government agencies, and potential fines or
penalties imposed by such agencies in connection therewith, the presence of
hazardous substances on a property could result in claims by private plaintiffs
for personal injury, disease, disability or other infirmities. Various laws also
impose liability for the cost of removal, remediation or disposal of hazardous
substances through a licensed disposal or treatment facility. Anyone who
arranges for the disposal or treatment of hazardous substances is potentially
liable under such laws. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the disposal facility.
In connection with the ownership, operation and management of its properties,
the Partnership could potentially be liable for environmental liabilities or
costs associated with its properties.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims arising from the presence of mold and for personal injury
claims related to mold exposure. Affiliates of the General Partner have
implemented a national policy and procedures to prevent or eliminate mold from
its properties and the General Partner believes that these measures will
minimize the effects that mold could have on residents. To date, the Partnership
has not incurred any material costs or liabilities relating to claims of mold
exposure or to abate mold conditions. Because the law regarding mold is
unsettled and subject to change the General Partner can make no assurance that
liabilities resulting from the presence of or exposure to mold will not have a
material adverse effect on the Partnership's consolidated financial condition or
results of operations.
SEC Investigation
The Central Regional Office of the United States Securities and Exchange
Commission (the "SEC") continues its formal investigation relating to certain
matters. Although the staff of the SEC is not limited in the areas that it may
investigate, AIMCO believes the areas of investigation have included AIMCO's
miscalculated monthly net rental income figures in third quarter 2003,
forecasted guidance, accounts payable, rent concessions, vendor rebates,
capitalization of payroll and certain other costs, tax credit transactions and
tender offers for limited partnership interests. AIMCO is cooperating fully.
AIMCO is not able to predict when the investigation will be resolved. AIMCO does
not believe that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations. Similarly, the
General Partner does not believe that the ultimate outcome will have a material
adverse effect on the Partnership's consolidated financial condition or results
of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment properties consist of eleven apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 2005 and 2004:
Average Occupancy
Property 2005 2004
The Apartments (1) 94% 91%
Omaha, NE
Arbours of Hermitage Apartments 92% 94%
Nashville, TN
Belmont Place (2) 39% --
Marietta, GA
Citadel Apartments 94% 92%
El Paso, TX
Citadel Village Apartments 85% 87%
Colorado Springs, CO
Foothill Place Apartments (3) 93% 86%
Salt Lake City, UT
Knollwood Apartments (4) 95% 90%
Nashville, TN
Lake Forest Apartments 93% 95%
Omaha, NE
Post Ridge Apartments (4) 94% 91%
Nashville, TN
Rivers Edge Apartments 94% 96%
Auburn, WA
Village East Apartments (5) 71% 77%
Cimarron Hills, CO
(1) The General Partner attributes the increase in occupancy at The
Apartments to an improved tenant base, more effective marketing, and an
improved pricing structure developed to maintain competitiveness with
other properties in the market.
(2) The General Partner attributes the increase in occupancy at Belmont
Place Apartments to units becoming available as the redevelopment
project is completed. (see discussion below).
(3) The General Partner attributes the increase in occupancy at Foothill
Place Apartments to an improved local economy.
(4) The General Partner attributes the increase in occupancy at Knollwood
and Post Ridge Apartments to a more stable tenant base after stricter
credit policies were enacted in 2004 and strong marketing efforts by the
leasing staff.
(5) The General Partner attributes the low occupancy at Village East
Apartments to a weak economy in the local area as a result of military
deployments.
During 2003, the General Partner determined that Belmont Place Apartments
suffered from severe structural defects in the buildings' foundation and as
such, demolished the property. The General Partner designed and approved a
redevelopment plan for the property. Site work on the redevelopment began during
the fourth quarter of 2003. At September 30, 2005, all 326 units had been
substantially completed. As part of the redevelopment, during the nine months
ended September 30, 2004 the mortgage and associated accrued interest
encumbering Belmont Place Apartments was repaid. In addition to the repayment
the Partnership paid prepayment penalties of approximately $169,000 and wrote
off unamortized loan costs of approximately $109,000 which is shown as loss on
early extinguishment of debt for the three and nine months ended September 30,
2004.
The Partnership entered into a construction contract with Casden Builders, Inc.
(a related party) to develop the new Belmont Place Apartments at an estimated
cost of approximately $26.9 million. The construction contract provides for the
payment of the cost of the work plus a fee without a maximum guaranteed price.
Construction was completed in 2005 at a total project cost of approximately
$32.2 million. At September 30, 2005, total costs of approximately $31.7 million
had been incurred. The Partnership has funded construction expenditures from
operating cash flow, proceeds from a cross collateralized loan, Partnership
reserves, loans from an affiliate of the General Partner and sales proceeds.
During the nine months ended September 30, 2005 and 2004, approximately
$7,443,000 and $12,332,000 of construction costs were incurred, respectively.
Included in these construction costs are capitalized interest costs of
approximately $394,000 and $299,000 for the nine months ended September 30, 2005
and 2004, respectively, capitalized tax and insurance expenses of approximately
$6,000 and $186,000 for the nine months ended September 30, 2005 and 2004,
respectively and other construction period operating costs of approximately
$10,000 for 2005. The Partnership anticipates additional construction costs of
approximately $500,000 during 2005, which will be funded from Partnership
reserves.
The Partnership's financial results depend upon a number of factors including
the ability to attract and maintain tenants at the investment properties,
interest rates on mortgage loans, costs incurred to operate the investment
properties, general economic conditions and weather. As part of the ongoing
business plan of the Partnership, the General Partner monitors the rental market
environment of its investment properties to assess the feasibility of increasing
rents, maintaining or increasing occupancy levels and protecting the Partnership
from increases in expenses. As part of this plan, the General Partner attempts
to protect the Partnership from the burden of inflation-related increases in
expenses by increasing rents and maintaining a high overall occupancy level.
However, the General Partner may use rental concessions and rental rate
reductions to offset softening market conditions, accordingly, there is no
guarantee that the General Partner will be able to sustain such a plan. Further,
a number of factors that are outside the control of the Partnership such as the
local economic climate and weather can adversely or positively affect the
Partnership's financial results.
Results of Operations
The Partnership's net loss and net income for the three and nine months ended
September 30, 2005 was approximately $168,000 and $373,000, respectively,
compared to net income of approximately $334,000 and $4,891,000 for the three
and nine months ended September 30, 2004, respectively. The decrease in net
income for the three months ended September 30, 2005 is due to a decrease in
income from discontinued operations and an increase in total expenses partially
offset by an increase in total revenues from continuing operations. The decrease
in net income for the nine months ended September 30, 2005 is primarily due to
the gain on sale of discontinued operations recognized in 2004, a decrease in
income from discontinued operations as well as an increase in total expenses for
2005 partially offset by an increase in total revenues.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the consolidated statements of operations for the three and nine months ended
September 30, 2004 reflect the operations of Briar Bay and Nob Hill Villa
Apartments as income from discontinued operations due to their sales in October
2004 and Point West Apartments due to its sale in March 2004. For the nine
months ended September 30, 2004 the operations of Briar Bay, Nob Hill Villa
Apartments and Point West Apartments include approximately $1,425,000,
$1,935,000 and $189,000, respectively, of revenue generated by the properties.
On March 31, 2004, the Partnership sold Point West Apartments to a third party,
for a gross sales price of $3,900,000. The net proceeds realized by the
Partnership were approximately $3,794,000 after payment of closing costs of
approximately $106,000. The Partnership used approximately $2,204,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $3,141,000 for the nine months ended September
30, 2004, as a result of this sale. The property's operations, a loss of
approximately $39,000 for the nine months ended September 30, 2004 includes
revenues of approximately $189,000 and are included in income from discontinued
operations. In addition, the Partnership recorded a loss on early extinguishment
of debt of approximately $48,000 for the nine months ended September 30, 2004
due to the write off of unamortized loan costs, which is also included in income
from discontinued operations.
Excluding the discontinued operations and gain on sale of discontinued
operations, the Partnership's income from continuing operations for the three
and nine months ended September 30, 2004 was approximately $129,000 and
$1,316,000, respectively. Income from continuing operations decreased for the
three and nine month periods due to an increase in total expenses partially
offset by an increase in total revenues.
Total revenues for the three and nine month periods increased due to an increase
in rental and other income partially offset by a decrease in casualty gains.
Rental income increased due to an increase in the average rental rates at all
eleven of the investment properties, an increase in occupancy at six of the
investment properties, and a decrease in bad debt expense at most of the
Partnership's investment properties, partially offset by a decrease in occupancy
at five of the investment properties. Other income increased due to an increase
in fees at Belmont as the property began leasing completed units.
In October 2003, Citadel Village Apartments suffered fire damage to five
apartment units. Insurance proceeds of approximately $92,000 were received
during the nine months ended September 30, 2004. The Partnership recognized a
casualty gain of approximately $92,000 during the nine months ended September
30, 2004 as the damaged assets were fully depreciated at the time of the
casualty.
In November 2003, Lake Forest Apartments suffered water damage to some of the
rental units. Insurance proceeds of approximately $44,000 were received during
the nine months ended September 30, 2004. The Partnership recognized a casualty
gain of approximately $44,000 during the nine months ended September 30, 2004 as
the damaged assets were fully depreciated at the time of the casualty.
In February 2004, The Apartments suffered damage to 180 apartment units due to
an ice storm. During the nine months ended September 30, 2004, the Partnership
received insurance proceeds of approximately $319,000, which included
approximately $29,000 for emergency expenses. The Partnership recognized a
casualty gain of approximately $290,000 during the nine months ended September
30, 2004 as the damaged assets were fully depreciated at the time of the
casualty.
In February 2004, Knollwood Apartments suffered fire damage to some of the
rental units. Insurance proceeds of approximately $47,000 were received during
the nine months ended September 30, 2004. The Partnership recognized a casualty
gain of approximately $47,000 during the nine months ended September 30, 2004 as
the damaged assets were fully depreciated at the time of the casualty. During
the nine months ended September 30, 2005, the Partnership received approximately
$2,000 in additional proceeds which was recognized as a casualty gain.
In March 2004, Village East Apartments suffered an electrical fire that damaged
six apartment units. Insurance proceeds of approximately $55,000 were received
during the nine months ended September 30, 2004. The Partnership recognized a
casualty gain of approximately $55,000 during the nine months ended September
30, 2004 as the damaged assets were fully depreciated at the time of the
casualty.
In July 2004, Citadel Village Apartments suffered hail and wind damage to some
of its rental units. Insurance proceeds of approximately $50,000 were received
during the nine months ended September 30, 2005. The Partnership recognized a
casualty gain of approximately $50,000 during the nine months ended September
30, 2005 as the damaged assets were fully depreciated at the time of the
casualty.
In May 2005, Knollwood Apartments suffered fire damage to some of its rental
units. Insurance proceeds of approximately $40,000 were received during the nine
months ended September 30, 2005. The Partnership recognized a casualty gain of
approximately $40,000 during the nine months ended September 30, 2005 as the
damaged assets were fully depreciated at the time of the casualty.
Total expenses for the three and nine months ended September 30, 2005 increased
due to increases in operating, depreciation, interest and property tax expenses
partially offset by a decrease in general and administrative expenses and loss
on early extinguishment of debt. Operating expenses for both periods increased
due to increases in advertising and property expenses. Advertising expenses
increased due to increased leasing promotions at Belmont Place Apartments as the
property begins leasing completed units. Property expense increased due to
increases in payroll and related benefits and utilities at most of the
investment properties partially offset by decreases in maintenance salaries and
leasing payroll at Citadel Village and Village East Apartments. Depreciation
expense for both periods increased primarily due to completed assets being
placed into service at Belmont Place Apartments. Interest expense for both
periods increased due to the new mortgage financing at Belmont Place Apartments
and the second mortgages obtained on Lake Forest and Citadel Apartments in June
2004 coupled with a decrease in capitalized interest costs associated with the
reconstruction at Belmont Place Apartments. Property tax expense for both
periods increased due to an increase in assessed value at five of the investment
properties and fewer capitalized costs associated with the reconstruction of
Belmont Place Apartments.
General and administrative expense decreased due to a decrease in management
reimbursements to the General Partner, due to the sale of investment properties
in 2004, as allowed under the Partnership Agreement. Also included in general
and administrative expenses for the nine months ended September 30, 2005 and
2004 are costs associated with the quarterly and annual communications with
investors and regulatory agencies and the annual audit required by the
Partnership Agreement.
Liquidity and Capital Resources
At September 30, 2005, the Partnership had cash and cash equivalents of
approximately $3,307,000 compared to approximately $841,000 at September 30,
2004. The decrease in cash and cash equivalents of approximately $1,232,000 from
December 31, 2004, is due to approximately $20,078,000 of cash used in investing
activities partially offset by approximately $16,510,000 of cash provided by
financing activities and approximately $2,336,000 of cash provided by operating
activities. Cash provided by financing activities consisted of advances received
from an affiliate of the General Partner, and proceeds from the new mortgages
encumbering Belmont Place Apartments, Arbours of Hermitage Apartments and
Foothill Place Apartments partially offset by payments made on advances from the
General Partner, principal payments on the mortgages encumbering the investment
properties, repayment of mortgages encumbering Arbours of Hermitage Apartments
and Foothill Place Apartments, distributions to the limited partners and loan
costs paid. Cash used in investing activities consisted of property improvements
and replacements and net deposits to restricted escrows partially offset by
insurance proceeds received. The Partnership invests its working capital
reserves in interest bearing accounts.
On August 31, 2005, the Partnership refinanced the first mortgage encumbering
its investment property, Arbours of Hermitage. The Partnership recognized a loss
on early extinguishment of debt of approximately $5,000 during the nine months
ended September 30, 2005 due to the write off of unamortized loan costs. The new
mortgage loan, in the principal amount of $11,000,000, replaced the existing
mortgage loan, which had an outstanding balance at the time of the refinancing
of $5,650,000. Closing costs of approximately $89,000 were capitalized and are
included in other assets. The new mortgage requires monthly payments of
principal and interest of approximately $59,000, beginning on October 10, 2005
until the loan matures on September 10, 2015, with a fixed interest rate of
5.06% and a balloon payment of approximately $8,964,000, due at maturity. The
Partnership is prohibited from prepaying the loan prior to October 10, 2007. On
or after October 10, 2007, the loan may be prepaid with the payment of a
prepayment penalty, as defined in the loan agreement. As a condition of the
loan, the lender required AIMCO Properties, L.P., an affiliate of the
Partnership, to guarantee the obligations and liabilities of the Partnership
with respect to the new mortgage financing.
On August 30, 2005, the Partnership refinanced the first mortgage encumbering
one of its investment properties, Foothill Place Apartments. The Partnership
recognized a loss on early extinguishment of debt of approximately $7,000 during
the nine months ended September 30, 2005 due to the write off of unamortized
loan costs. The new mortgage loan, in the principal amount of $17,700,000,
replaced the existing mortgage loan, which had an outstanding balance of
$10,100,000. Closing costs of approximately $180,000 were capitalized and are
included in other assets. The new mortgage requires monthly payments of
principal and interest of approximately $92,000, beginning on October 1, 2005
until the loan matures on September 1, 2008, with a fixed interest rate of 4.72%
and a balloon payment of approximately $16,836,000 due at maturity. The
Partnership may extend the term of the loan for two successive one-year periods
by exercising the extension options as defined in the loan agreement. The
Partnership may prepay the loan with no penalty if prepayment in full is made no
more than twelve months before the maturity date or during the extension
periods. However, if the loan is prepaid prior to twelve months before the
maturity date then a prepayment penalty, as defined in the loan agreement, will
apply.
On April 29, 2005, the Partnership obtained a mortgage in the principal amount
of $19,250,000 on Belmont Place Apartments. The Partnership received proceeds
from the mortgage of approximately $14,084,000 after payment of closing costs
and the funding of two letters of credit, as discussed below. Closing costs of
approximately $205,000 were capitalized and are included in other assets. The
new mortgage requires monthly payments of interest beginning on June 1, 2005
until November 1, 2006. Beginning December 1, 2006, monthly payments of
principal and interest of $108,180 are required until the loan matures November
1, 2034. The lender can exercise a call option on the mortgage on June 1, 2012
and every fifth anniversary thereafter. The interest rate is fixed at 5.14% for
the life of the mortgage.
In conjunction with the mortgage, the Partnership has provided to the lender two
letters of credit, each in the amount of $2,500,000, to secure the Partnership's
obligations under the mortgage. The letters of credit are secured by proceeds
from the mortgage financing which were deposited into an escrow account. The
lender will release the first letter of credit when the property has achieved
annual rental income of approximately $2.9 million from 60% of the rental units
and will release the second letter of credit when the property has achieved
annual rental income of approximately $3.9 million from 88% of the rental units.
Subsequent to September 30, 2005 the first letter of credit for $2.5 million was
released and the funds were returned to the Partnership. The amount returned
included interest of approximately $33,000.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The General Partner monitors
developments in the area of legal and regulatory compliance. For example, the
Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures
with regard to governance, disclosure, audit and other areas. In light of these
changes, the Partnership expects that it will incur higher expenses related to
compliance. Capital improvements planned for each of the Partnership's
properties are detailed below.
The Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $165,000 of capital improvements at The Apartments, consisting
primarily of appliance, floor covering and gutter replacements, building
improvements, and light fixture upgrades. These improvements were funded from
operating cash flow. The Partnership regularly evaluates the capital improvement
needs of the property. While the Partnership has no material commitments for
property improvements and replacements, certain routine capital expenditures are
anticipated during 2005. Such capital expenditures will depend on the physical
condition of the property as well as anticipated cash flow generated by the
property.
Arbours of Hermitage Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $1,869,000 of capital improvements at Arbours of Hermitage
Apartments, consisting primarily of balcony upgrades, retaining walls, cabinet
improvements, electrical upgrades, water/sewer upgrades and floor covering and
appliance replacements. These improvements were funded from operating cash flow.
The Partnership regularly evaluates the capital improvement needs of the
property. While the Partnership has no material commitments for property
improvements and replacements, certain routine capital expenditures are
anticipated during 2005. Such capital expenditures will depend on the physical
condition of the property as well as anticipated cash flow generated by the
property.
Belmont Place Apartments
During 2003, the General Partner determined that Belmont Place Apartments
suffered from severe structural defects in the buildings' foundation and as
such, demolished the property. The General Partner designed and approved a
redevelopment plan for the property. Site work on the redevelopment began during
the fourth quarter of 2003. At September 30, 2005, all 326 units had been
substantially completed. As part of the redevelopment, during the nine months
ended September 30, 2004 the mortgage and associated accrued interest
encumbering Belmont Place Apartments was repaid. In addition to the repayment
the Partnership paid prepayment penalties of approximately $169,000 and wrote
off unamortized loan costs of approximately $109,000 which is shown as loss on
early extinguishment of debt for the three and nine months ended September 30,
2004.
The Partnership entered into a construction contract with Casden Builders, Inc.
(a related party) to develop the new Belmont Place Apartments at an estimated
cost of approximately $26.9 million. The construction contract provides for the
payment of the cost of the work plus a fee without a maximum guaranteed price.
Construction was completed in 2005 at a total project cost of approximately
$32.2 million. At September 30, 2005, total costs of approximately $31.7 million
had been incurred. The Partnership has funded construction expenditures from
operating cash flow, proceeds from a cross collateralized loan, Partnership
reserves, loans from an affiliate of the General Partner and sales proceeds.
During the nine months ended September 30, 2005 and 2004, approximately
$7,443,000 and $12,332,000 of construction costs were incurred, respectively.
Included in these construction costs are capitalized interest costs of
approximately $394,000 and $299,000 for the nine months ended September 30, 2005
and 2004, respectively, capitalized tax and insurance expenses of approximately
$6,000 and $186,000 for the nine months ended September 30, 2005 and 2004,
respectively, and other construction period operating costs of approximately
$10,000 for 2005. The Partnership anticipates additional construction costs of
approximately $500,000 during 2005, which will be funded from Partnership
reserves.
Citadel Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $136,000 of capital improvements at Citadel Apartments, consisting
primarily of roof enhancements, floor covering and appliance replacements and
parking lot resurfacing. These improvements were funded from operating cash
flow. The Partnership regularly evaluates the capital improvement needs of the
property. While the Partnership has no material commitments for property
improvements and replacements, certain routine capital expenditures are
anticipated during 2005. Such capital expenditures will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Citadel Village Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $228,000 of capital improvements at Citadel Village Apartments,
consisting primarily of structural improvements, exterior painting and appliance
and floor covering replacements. These improvements were funded from operating
cash flow and insurance proceeds. The Partnership regularly evaluates the
capital improvement needs of the property. While the Partnership has no material
commitments for property improvements and replacements, certain routine capital
expenditures are anticipated during 2005. Such capital expenditures will depend
on the physical condition of the property as well as anticipated cash flow
generated by the property.
Foothill Place Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $942,000 of capital improvements at Foothill Place Apartments,
consisting primarily of kitchen upgrades, appliance and floor covering
replacements, structural upgrades and balcony replacements. These improvements
were funded from operating cash flow. The Partnership regularly evaluates the
capital improvement needs of the property. While the Partnership has no material
commitments for property improvements and replacements, certain routine capital
expenditures are anticipated during 2005. Such capital expenditures will depend
on the physical condition of the property as well as anticipated cash flow
generated by the property.
Knollwood Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $438,000 of capital improvements at Knollwood Apartments,
consisting primarily of appliance and floor covering replacements, lighting
upgrades, and structural upgrades. These improvements were funded from operating
cash flow and insurance proceeds. The Partnership regularly evaluates the
capital improvement needs of the property. While the Partnership has no material
commitments for property improvements and replacements, certain routine capital
expenditures are anticipated during 2005. Such capital expenditures will depend
on the physical condition of the property as well as anticipated cash flow
generated by the property.
Lake Forest Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $209,000 of capital improvements at Lake Forest Apartments,
consisting primarily of interior common area painting, floor covering
replacements, and swimming pool upgrades. These improvements were funded from
operating cash flow. The Partnership regularly evaluates the capital improvement
needs of the property. While the Partnership has no material commitments for
property improvements and replacements, certain routine capital expenditures are
anticipated during 2005. Such capital expenditures will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Post Ridge Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $447,000 of capital improvements at Post Ridge Apartments,
consisting primarily of exterior light fixtures, floor covering replacements,
swimming pool upgrades, and structural improvements. These improvements were
funded from operating cash flow. The Partnership regularly evaluates the capital
improvement needs of the property. While the Partnership has no material
commitments for property improvements and replacements, certain routine capital
expenditures are anticipated during 2005. Such capital expenditures will depend
on the physical condition of the property as well as anticipated cash flow
generated by the property.
Rivers Edge Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $96,000 of capital improvements at Rivers Edge Apartments,
consisting primarily of structural improvements, major landscaping, roof
replacements and floor covering replacements. These improvements were funded
from operating cash flow. The Partnership regularly evaluates the capital
improvement needs of the property. While the Partnership has no material
commitments for property improvements and replacements, certain routine capital
expenditures are anticipated during 2005. Such capital expenditures will depend
on the physical condition of the property as well as anticipated cash flow
generated by the property.
Village East Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $195,000 of capital improvements at Village East Apartments,
consisting primarily of floor covering, stairwell, swimming pool, and heating
improvements. These improvements were funded from operating cash flow. The
Partnership regularly evaluates the capital improvement needs of the property.
While the Partnership has no material commitments for property improvements and
replacements, certain routine capital expenditures are anticipated during 2005.
Such capital expenditures will depend on the physical condition of the property
as well as anticipated cash flow generated by the property.
Capital expenditures will be incurred only if cash is available from operations
or from Partnership reserves. To the extent that capital improvements are
completed, the Partnership's distributable cash flow, if any, may be adversely
affected at least in the short term.
The Partnership's assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering the Partnership's investment properties of
approximately $85,356,000 matures at various dates between 2005 and 2022 with
balloon payments of approximately $11,380,000, $3,810,000, $16,836,000,
$8,964,000, $9,003,000 and $173,000 due in 2005, 2007, 2008, 2014, 2015 and
2022, respectively. The General Partner intends to refinance the indebtedness
maturing in 2005 before the maturity dates. The General Partner will attempt to
refinance the other indebtedness and/or sell the properties prior to their
maturity dates. If a property cannot be refinanced or sold for a sufficient
amount, the Partnership will risk losing such property through foreclosure.
The Partnership distributed the following amounts during the nine months ended
September 30, 2005 and 2004 (in thousands, except per unit data).
Nine Months Per Nine Months Per
Ended Limited Ended Limited
September 30, Partnership September 30, Partnership
2005 Unit 2004 Unit
Operations $ 382,000 $ -- $7,000 $ --
Sale (1) 15,026,000 42.08 -- --
Total $15,408,000 $42.08 $7,000 $ --
(1) Remaining sale proceeds from the sale of Southport Apartments in March
2003, sale proceeds from the sale of Point West Apartments in March 2004
and Nob Hill Apartments in October 2004 and a portion of the sale proceeds
from the sale of Briar Bay Apartments in October 2004.
In conjunction with the transfer of funds from their certain majority-owned
sub-tier limited partnerships to the Partnership, approximately $382,000 and
$7,000 was distributed to the general partner of the majority owned sub-tier
limited partnerships during the nine months ended September 30, 2005 and 2004,
respectively.
Future cash distributions will depend on the levels of cash generated from
operations and the timing of debt maturities, property sales and/or
refinancings. The Partnership's cash available for distribution is reviewed on a
monthly basis. There can be no assurance, however, that the Partnership will
generate sufficient funds from operations, after planned capital improvement
expenditures, to permit any distributions to its partners in 2005 or subsequent
periods.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 224,486 limited partnership units
(the "Units") in the Partnership representing 65.49% of the outstanding Units at
September 30, 2005. A number of these Units were acquired pursuant to tender
offers made by AIMCO or its affiliates. It is possible that AIMCO or its
affiliates will acquire additional Units in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private purchases or tender offers. Pursuant to the Partnership
Agreement, unitholders holding a majority of the Units are entitled to take
action with respect to a variety of matters that include, but are not limited
to, voting on certain amendments to the Partnership Agreement and voting to
remove the General Partner. As a result of its ownership of 65.49% of the
outstanding units, AIMCO is in a position to control all such voting decisions
with respect to the Partnership. Although the General Partner owes fiduciary
duties to the limited partners of the Partnership, the General Partner also owes
fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of
the General Partner, as general partner, to the Partnership and its limited
partners may come into conflict with the duties of the General Partner to AIMCO
as its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require the
Partnership to make estimates and assumptions. The Partnership believes that of
its significant accounting policies, the following may involve a higher degree
of judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line basis over the term of the lease. The Partnership evaluates all
accounts receivable from residents and establishes an allowance, after the
application of security deposits, for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.
Item 3. Market Risk Factors
The Partnership is exposed to market risks from adverse changes in interest
rates. In this regard, changes in U.S. interest rates affect the interest earned
on the Partnership's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Partnership does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for
trading purposes. The Partnership is exposed to changes in interest rates
primarily as a result of its borrowing activities used to maintain liquidity and
fund business operations. To mitigate the impact of fluctuations in U.S.
interest rates, the Partnership maintains 83% of its debt as fixed rate in
nature by borrowing on a long-term basis. Based on interest rates at September
30, 2005, a 100 basis point increase or decrease in market interest rates would
have no material impact on the Partnership.
The following table summarizes the Partnership's fixed rate debt obligations at
September 30, 2005. The interest rates represent the weighted-average rates. The
fair value of the total debt obligations approximated the recorded value as of
September 30, 2005.
Principal amount by expected maturity:
Long Term Debt
Fixed Rate Debt Average Interest Rate
(in thousands)
2005 $11,607 6.952%
2006 1,004 6.751%
2007 1,360 6.751%
2008 18,204 6.751%
2009 1,217 7.005%
Thereafter 48,154 7.005%
Total $81,546
ITEM 4. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the General Partner, who are the equivalent of the Partnership's principal
executive officer and principal financial officer, respectively, has evaluated
the effectiveness of the Partnership's disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report. Based on such evaluation, the principal executive
officer and principal financial officer of the General Partner, who are the
equivalent of the Partnership's principal executive officer and principal
financial officer, respectively, have concluded that, as of the end of such
period, the Partnership's disclosure controls and procedures are effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities that were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, during the third quarter of 2001, a
complaint captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. On or
about August 6, 2001, plaintiffs filed a first amended complaint. The Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution. On January 28, 2002, the trial
court granted defendants motion to strike the complaint. Plaintiffs took an
appeal from this order.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action. On June 13, 2003, the
court granted final approval of the settlement and entered judgment in both the
Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an
appeal (the "Appeal") seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. On May 4, 2004, the Objector filed a
second appeal challenging the court's use of a referee and its order requiring
Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeal reversed the trial Court's order striking the
first amended complaint.
On August 18, 2005, Objector and his counsel filed a motion to disqualify the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion
to intervene and on or about October 19, 2005 filed both a motion to take
discovery relating to the adequacy of plaintiffs as derivative representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
AIMCO Properties L.P. and NHP Management Company, both affiliates of the General
Partner, are defendants in a lawsuit alleging that they willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. The complaint, filed in the
United States District Court for the District of Columbia, attempts to bring a
collective action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. and NHP Management Company failed to
compensate maintenance workers for time that they were required to be "on-call".
Additionally, the complaint alleges AIMCO Properties L.P. and NHP Management
Company failed to comply with the FLSA in compensating maintenance workers for
time that they worked in excess of 40 hours in a week. In June 2005 the Court
conditionally certified the collective action on both the on-call and overtime
issues, which allows the plaintiffs to provide notice of the collective action
to all non-exempt maintenance workers from August 7, 2000 through the present.
Those employees will have the opportunity to opt-in to the collective action,
and AIMCO Properties, L.P. and NHP Management Company will have the opportunity
to move to decertify the collective action. Because the court denied plaintiffs'
motion to certify state subclasses, on September 26, 2005, the plaintiffs filed
a class action with the same allegations in the Superior Court of California
(Contra Costa County). Although the outcome of any litigation is uncertain,
AIMCO Properties, L.P. does not believe that the ultimate outcome will have a
material adverse effect on its consolidated financial condition or results of
operations. Similarly, the General Partner does not believe that the ultimate
outcome will have a material adverse effect on the Partnership's consolidated
financial condition or results of operations.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index.
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.
CONSOLIDATED CAPITAL PROPERTIES IV
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: November 14, 2005
CONSOLIDATED CAPITAL PROPERTIES IV
EXHIBIT INDEX
Exhibit
3 Certificate of Limited Partnership, as amended to date.
10.64 Multifamily Note dated November 30, 1995 between CCP IV
Associates, LTD., a Texas limited partnership, and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc.* (mortgage for Village East)
10.65 Multifamily Note dated November 30, 1995 between CCP IV
Associates, LTD., a Texas limited partnership, and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc.* (mortgage for Knollwood)
10.66 Multifamily Note dated November 30, 1995 between CCP IV
Associates, LTD., a Texas limited partnership, and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc.* (mortgage for Citadel
Village)
10.67 Multifamily Note dated November 30, 1995 between CCP IV
Associates, LTD., a Texas limited partnership, and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc.* (mortgage for Arbour East)
10.78 Multifamily Note dated February 2, 2000 between Apartment
Associates, Ltd., a Texas limited partnership and ARCS
Commercial Mortgage Co., L.P., a California limited
partnership. (Incorporated by reference to Annual Report on
Form 10-K ended December 31, 1999).
10.79 Multifamily Note dated February 28, 2000 between ConCap
Citadel Associated, Ltd., a Texas limited partnership and
ARCs Commercial Mortgage Cl., L.P., a California
corporation. (Incorporated by reference to Annual Report on
Form 10-K ended December 31, 1999).
10.81 Multifamily Note dated August 29, 2000 between ConCap
Rivers Edge Associates, Ltd., a Texas Limited Partnership,
and GMAC Commercial Mortgage Corporation, a California
Corporation. (Incorporated by reference to Quarterly Report
on Form 10-Q for quarter ended September 30, 2000.)
10.85 Multifamily Note dated September 27, 2001 between Consolidated
Capital Properties IV, a California limited partnership, doing
business in Nebraska as Consolidated Capital Properties IV
Limited Partnership and AIMCO Properties, L.P., a Delaware
limited partnership, in favor of GMAC Commercial Mortgage
Corporation, a California corporation.** (mortgage for Lake
Forest)
10.86 Multifamily Note dated December 20, 2001 between Post Ridge
Associates, Ltd., a Tennessee limited partnership, and GMAC
Commercial Mortgage Corporation, a California
corporation.***
10.89 Form of Multifamily Note dated October 22, 2003 between Post
Ridge Associates, Ltd., Limited Partnership, a Tennessee
limited partnership, and GMAC Commercial Mortgage Corporation,
a California corporation.****
CONSOLIDATED CAPITAL PROPERTIES IV
EXHIBIT INDEX - CONTINUED
10.90 Form of Replacement Reserve Agreement dated October 22,
2003 between Post Ridge Associates, Ltd., Limited
Partnership, a Tennessee limited partnership, and GMAC
Commercial Mortgage Corporation, a California
corporation.****
10.91 Form of Repair Agreement dated October 22, 2003 between Post
Ridge Associates, Ltd., Limited Partnership, a Tennessee
limited partnership, and GMAC Commercial Mortgage Corporation,
a California corporation.****
10.92 Form of Cross-Collateralization Agreement dated October 22,
2003 between Post Ridge Associates, Ltd., Limited Partnership,
a Tennessee limited partnership, and Federal Home Loan
Mortgage Corporation, a corporation organized and existing
under the laws of the United States of America.****
10.93 Form of Cross-Collateralization Agreement dated October 22,
2003 between Foothill Chimney Associates Limited Partnership,
a Georgia limited partnership, and Federal Home Loan Mortgage
Corporation, a corporation organized and existing under the
laws of the United States of America.****
10.94 Form of Debt Service Escrow Agreement dated October 22, 2003
between Foothill Chimney Associates Limited Partnership, a
Georgia limited partnership, and Federal Homes Loan Mortgage
Corporation, a corporate instrumentality of the United States
of America.****
10.95 Form of Second Modification to Replacement Reserve Agreement
dated October 22, 2003 between Foothill Chimney Associates
Limited Partnership, a Georgia limited partnership, and
Federal Homes Loan Mortgage Corporation, a corporate
instrumentality of the United States of America.****
10.96 Purchase and Sale Contract between Point West Associates
Limited Partnership, a Georgia limited partnership, as Seller
and Focus Development, Inc., a Georgia corporation, as
Purchaser, effective November 17, 2003. (Incorporated by
reference to Form 8-K dated March 31, 2004).
10.97 First Amendment to Purchase and Sale Contract dated January
23, 2004 between Point West Associates Limited Partnership, a
Georgia limited partnership, as Seller and Focus Development,
Inc., a Georgia corporation, as Purchaser. (Incorporated by
reference to Form 8-K dated March 31, 2004).
10.98 Multifamily Note dated June 21, 2004 between Concap Citadel
Associates, Ltd., a Texas limited partnership, and GMAC
Commercial Mortgage Bank. (Incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter ended September
30, 2004).
10.99 Replacement Reserve Agreement dated June 21, 2004 between
Concap Citadel Associates, Ltd. a Texas limited
partnership, and GMAC Commercial Mortgage Bank.
(Incorporated by reference to the Quarterly Report on Form
10-Q for the quarter ended September 30, 2004).
CONSOLIDATED CAPITAL PROPERTIES IV
EXHIBIT INDEX - CONTINUED
10.100 Allonge and Amendment to Multifamily Note dated June 21,
2004 between Concap Citadel Associates, Ltd., a Texas
limited partnership, and Federal Home Loan Mortgage
Corporation. (Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended September 30,
2004).
10.101 Multifamily Note dated June 8, 2004 between Consolidated
Capital Properties IV, a California limited partnership,
doing business in Nebraska as Consolidated Capital
Properties IV Limited Partnership and GMAC Commercial
Mortgage Bank. (Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended September 30,
2004).
10.102 Replacement Reserve Agreement dated June 8, 2004 between
Consolidated Capital Properties IV, a California limited
partnership, doing business in Nebraska as Consolidated
Capital Properties IV Limited Partnership and GMAC Commercial
Mortgage Bank. (Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended September 30, 2004).
10.103 Allonge and Amendment to Multifamily Note dated June 8, 2004
between Consolidated Capital Properties IV, a California
limited partnership, doing business in Nebraska as
Consolidated Capital Properties IV Limited Partnership and
Federal Home Loan Mortgage Corporation. (Incorporated by
reference to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004).
10.104 Purchase and Sale Contract between Briar Bay Associates,
Ltd., a Texas limited partnership, as Seller, and Victoria
Real Estate Management, Inc., a Florida corporation, as
Purchaser, effective September 13, 2004. (Incorporated by
reference to Form 8-K dated September 13, 2004).
10.105 Purchase and Sale Contract between Nob Hill Villa Apartments
Associates, L.P., a Tennessee limited partnership, as Seller,
and DAMA Realty Investors, LLC, a New York limited liability
company, as Purchaser, effective August 18, 2004.
(Incorporated by reference to Form 8-K dated October 29,
2004.)
10.106 Assignment and Assumption of Real Estate Agreement between The
DAMA Realty Investors, LLC, and Nob Hill General Partnership,
dated August 18, 2004. (Incorporated by reference to Form 8-K
dated October 29, 2004.)
10.107 Promissory Note dated April 29, 2005 between Foothill Chimney
Associates Limited Partnership, a Georgia limited partnership
and ING USA Annuity and Life Insurance Company.(Incorporated
by reference to Form 8-K dated April 29, 2005)
10.108 Form of Letter of Credit dated April 29, 2005 between Foothill
Chimney Associates Limited Partnership, a Georgia limited
partnership and ING USA Annuity and Life Insurance
Company.(Incorporated by reference to Form 8-K dated April 29,
2005)
CONSOLIDATED CAPITAL PROPERTIES IV
EXHIBIT INDEX - CONTINUED
10.109 Deed to Secure Debt and Security Agreement dated April 29,
2005 between Foothill Chimney Associates Limited Partnership,
a Georgia limited partnership and ING USA Annuity and Life
Insurance Company.(Incorporated by reference to Form 8-K dated
April 29, 2005)
10.110 Deed of Trust, Assignment of Leases and Rents and Security
Agreement dated August 31, 2005 between AIMCO Arbours of
Hermitage, LLC, a Delaware limited liability company and New
York Life Insurance Company. (Incorporated by reference to
Form 8-K dated August 31, 2005)
10.111 Promissory Note dated August 31, 2005 between AIMCO Arbours of
Hermitage, LLC, a Delaware limited liability company and New
York Life Insurance Company. (Incorporated by reference to
Form 8-K dated August 31, 2005)
10.112 Guarantee Agreement dated August 31, 2005 between AIMCO
Properties, L.P., a Delaware limited partnership and New
York Life Insurance Company. (Incorporated by reference to
Form 8-K dated August 31, 2005)
10.113 Deed of Trust, Security Agreement and Fixture Filing dated
August 30, 2005 between Foothill Chimney Associates L.P., a
Georgia Limited partnership and Transamerica Financial Life
Insurance Company.
10.114 Promissory Note dated August 30, 2005 between Foothill
Chimney Associates, L.P., a Georgia limited partnership and
Transamerica Financial Life Insurance Company.
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of equivalent of Chief Executive Officer and
Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
*(Incorporated by reference to the Annual Report on Form 10-K for the year
ended December 31, 1995).
**(Incorporated by reference to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001).
***(Incorporated by reference to the Annual Report on Form 10-K for the
year ended December 31, 2001).
****(Incorporated by reference to the Annual Report on Form 10-K for the
year ended December 31, 2003).
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Consolidated Capital
Properties IV;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 14, 2005
/s/Martha L. Long
Martha L. Long
Senior Vice President of ConCap Equities,
Inc., equivalent of the chief executive
officer of the Partnership
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Consolidated Capital
Properties IV;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 14, 2005
/s/Stephen B. Waters
Stephen B. Waters
Vice President of ConCap Equities, Inc.,
equivalent of the chief financial officer
of the Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Consolidated Capital
Properties IV (the "Partnership"), for the quarterly period ended September 30,
2005 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), Martha L. Long, as the equivalent of the chief executive officer
of the Partnership, and Stephen B. Waters, as the equivalent of the chief
financial officer of the Partnership, each hereby certifies, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Martha L. Long
Name: Martha L. Long
Date: November 14, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: November 14, 2005
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Exhibit 10.113
Prepared by, and after recording return to:
David H. Rockwell
Stoel Rives LLP
600 University Street, Suite 3600 Seattle,
Washington 98101
ATTENTION: COUNTY RECORDER--THIS INSTRUMENT COVERS GOODS THAT ARE
OR WILL BECOME FIXTURES ON THE DESCRIBED REAL PROPERTY AND SHOULD
BE FILED FOR RECORD IN THE REAL PROPERTY RECORDS WHERE
DEEDS OF TRUST ON REAL ESTATE ARE RECORDED.
DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE
FILING
FOOTHILL CHIMNEY ASSOCIATES LIMITED PARTNERSHIP,
Borrower,
having an office at
4582 South Ulster St. Parkway
Denver, Colorado 80237
to
BONNEVILLE TITLE COMPANY,
Trustee
for the benefit of
TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY,
a New York corporation,
Lender,
having an office
c/o AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-5443
Loan Amount: $17,700,000
Premises: 2260 S. Foothill Drive, Salt Lake County, Salt Lake City, Utah
Loan No. 89539
Deed of Trust, Security Agreement and Fixture Filing
(Salt Lake County, Utah)
This Deed of Trust, Security Agreement and Fixture Filing (this "Deed of Trust")
is made and given as of the 30th day of August, 2005, by FOOTHILL CHIMNEY
ASSOCIATES LIMITED PARTNERSHIP, a Georgia limited partnership, as trustor, whose
address is 4582 South Ulster St. Parkway, Denver, Colorado 80237 (the
"Borrower"), to BONNEVILLE TITLE COMPANY, as Trustee, whose address is 1518 N.
Woodland Park Drive, Layton, Utah 84041 (the "Trustee"), for the benefit of
TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY, a New York corporation, as
beneficiary, having an administrative office c/o AEGON USA Realty Advisors,
Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Linn County, Iowa 52499-5443, and
a home office in Purchase, New York (the "Lender"). The definitions of
capitalized terms used in this Deed of Trust may be found either in Section 3
below, or through the cross-references provided in that Section.
1. RECITALS
A. Under the terms of a commercial Second Revised Loan
Application/Commitment dated June 9, 2005 (the "Commitment"), AEGON
USA Realty Advisors, Inc. ("AEGON"), as agent for the Lender,
agreed to fund a loan in the principal amount of Seventeen Million
Seven Hundred Thousand Dollars ($17,700,000) (the "Loan").
B. The Lender has funded the Loan in the principal amount of Seventeen
Million Seven Hundred Thousand Dollars ($17,700,000) in accordance
with the Commitment, and to evidence the Loan, the Borrower has
executed and delivered to the Lender a certain Secured Promissory
Note, of even date, in the amount of $17,700,000.
C. The Commitment requires that the Loan be secured by all of the
Borrower's existing and after-acquired interest in certain real
property and by certain tangible and intangible personal property.
2. GRANTING CLAUSE
To secure the repayment of the Indebtedness, any increases, modifications,
renewals or extensions of the Indebtedness, and any substitutions for the
Indebtedness, as well as the performance of the Borrower's other
Obligations, and in consideration of the sum of Ten Dollars ($10.00) and
other valuable consideration, the receipt and sufficiency of which are
acknowledged, the Borrower grants, bargains, warrants, conveys, alienates,
releases, assigns, sets over and confirms to the Trustee, in trust with
the power of sale for the benefit of the Lender and to its successors and
assigns forever, all of the Borrower's existing and after acquired
interests in the Real Property.
3. DEFINED TERMS
The following defined terms are used in this Deed of Trust. For ease of
reference, terms relating primarily to the Security Agreement are defined
in Subsection 22.1.
"Absolute Assignment of Leases and Rents" means the Loan Document bearing
this heading.
"Appurtenances" means all rights, estates, titles, interests, privileges,
easements, tenements, hereditaments, titles, royalties, reversions,
remainders and other interests, whether presently held by the Borrower or
acquired in the future, that may be conveyed as interests in the Land
under the laws of Utah. Appurtenances include the Easements and the
Assigned Rights.
"Assigned Rights" means all of the Borrower's rights, easements,
privileges, tenements, hereditaments, contracts, claims, licenses or other
interests, whether presently existing or arising in the future. The
Assigned Rights include all of the Borrower's rights in and to:
(a) any greater estate in the Real Property;
(b) insurance policies required to be carried hereunder, including
the right to negotiate claims and to receive Insurance
Proceeds and unearned insurance premiums (except as expressly
provided in Subsection 8.1);
(c) Condemnation Proceeds, provided that the award does not
reduce, directly or indirectly, the award to the owner of the
Real Property;
(d) licenses and agreements permitting the use of sources of
groundwater or water utilities, septic leach fields, railroad
sidings, sewer lines, means of ingress and egress;
(e) drainage over other property;
(f) air space above the Land;
(g) mineral rights;
(h) party walls;
(i) vaults and their usage;
(j) franchises;
(k) commercial tort claims that arise during the Loan term in respect of
damages to the Real Property or to its operations, in respect of any
impairment to the value of the Real Property, or in respect of the
collection of any Rents;
(l) construction contracts;
(m) roof and equipment guarantees and warranties;
(n) building and development licenses and permits;
(o) tax credits or other governmental entitlements, credits or
rights, whether or not vested;
(p) licenses and applications (whether or not yet approved or issued);
(q) rights under management and service contracts;
(r) leases of Fixtures;
(s) and trade names,
trademarks, trade styles, service marks, and copyrights that are directly
related to the Property and reasonably necessary for operation of the Property
or the principal manner with which the Improvements are identified, and
agreements with architects, environmental consultants, property tax consultants,
engineers, and any other third party contractors whose services benefit the Real
Property.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended, 11
U.S.C. Sections 101 et seq., and the regulations promulgated pursuant to
those statutes.
"Business Day" means any day when state and federal banks are open for
business in Cedar Rapids, Iowa.
"Carveout Guarantee and Indemnity" means that certain "Carveout Guarantee
and Indemnity Agreement" entered into by the Carveout Obligor on the date
of this Deed of Trust.
"Carveout Obligations" means those obligations described in Section 21.
"Carveout Obligor" means AIMCO Properties, L.P. Any other person who
expressly assumes liability for the Carveout Obligations during the term
of the Loan shall become a "Carveout Obligor" for purposes of this Deed of
Trust.
"Carveouts" means those matters from which Carveout Obligations may arise,
which are described in Section 21.
"Condemnation Proceeds" means all money or other property that has been,
or is in the future, awarded or agreed to be paid or given in connection
with any taking by eminent domain of all or any part of the Real Property
(including a taking through the vacation of any street dedication or
through a change of grade of such a street), either permanent or
temporary, or in connection with any purchase in lieu of such a taking, or
as a part of any related settlement, except for the right to condemnation
proceeds awarded to the tenant in a separate proceeding in respect of the
lost value of the tenant's leasehold interest, provided that the award
does not reduce, directly or indirectly, the award to the owner of the
Real Property.
"Curable Nonmonetary Default" means any of the acts, omissions, or
circumstances specified in Subsection 10.3 below.
"Default" means any of the acts, omissions, or circumstances specified in
Section 10 below.
"Default Rate" means the rate of interest specified as the "Default Rate"
in the Note.
"Development Agreements" means all development, utility or similar
agreements included in the Permitted Encumbrances.
"Easements" means the Borrower's existing and future interests in and to
the declarations, easements, covenants, and restrictions appurtenant to
the Land.
"Environmental Indemnity Agreement" means the Loan Document bearing that
heading.
"Environmental Laws" means all present and future laws, statutes,
ordinances, rules, regulations, orders, guidelines, rulings, decrees,
notices and determinations of any Governmental Authority to the extent
that they pertain to: (A) the protection of health against environmental
hazards; (B) the protection of the environment, including air, soils,
wetlands, and surface and underground water, from contamination by any
substance that may have any adverse health effect on humans, livestock,
fish, wildlife, or plant life, or which may disturb an ecosystem; (C)
underground storage tank regulation or removal; (D) wildlife conservation;
(E) protection or regulation of natural resources; (F) the protection of
wetlands; (G) management, regulation and disposal of solid and hazardous
wastes; (H) radioactive materials; (I) biologically hazardous materials;
(J) indoor air quality; or (K) the manufacture, possession, presence, use,
generation, storage, transportation, treatment, release, emission,
discharge, disposal, abatement, cleanup, removal, remediation or handling
of any Hazardous Substances. "Environmental Laws" include the
Comprehensive Environmental Response, Compensation, and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. ss.9601 et seq., the Resource Conservation and Recovery Act, 42
U.S.C. ss.6901 et seq., the Federal Water Pollution Control Act, as
amended by the Clean Water Act, 33 U.S.C. ss. 1251 et seq., the Clean Air
Act, 42 U.S.C. ss.7401 et seq., the Toxic Substances Control Act, 15
U.S.C. ss.2601 et seq., all similar state statutes and local ordinances,
and all regulations promulgated under any of those statutes, and all
administrative and judicial actions respecting such legislation, all as
amended from time to time.
"ESA" means the written environmental site assessment of the Real Property
obtained under the terms of the Commitment.
"Escrow Expenses" means those expenses in respect of real and personal
property taxes and assessments, Insurance Premiums and such other
Impositions as the Lender pays from time to time directly from the Escrow
Fund using monies accumulated through the collection of Monthly Escrow
Payments.
"Escrow Fund" means the funds deposited by Borrower with the Lender
pursuant to Section 9 hereof, as reflected in the accounting entry
maintained on the books of the Lender as funds available for the payment
of Escrow Expenses under the terms of this Deed of Trust.
"Fixtures" means all materials, supplies, equipment, apparatus and other
items now or hereafter attached to or installed on the Land and
Improvements in a manner that causes them to become fixtures under the
laws of Utah, including all built-in or attached furniture or appliances,
elevators, escalators, heating, ventilating and air conditioning system
components, emergency electrical generators and related fuel storage or
delivery systems, septic system components, storm windows, doors,
electrical equipment, plumbing, water conditioning, lighting, cleaning,
snow removal, lawn, landscaping, irrigation, security, incinerating,
fire-fighting, sprinkler or other fire safety equipment, bridge cranes or
other installed materials handling equipment, satellite dishes or other
telecommunication equipment, built-in video conferencing equipment, sound
systems or other audiovisual equipment, and cable television distribution
systems. Fixtures do not include trade fixtures, office furniture and
office equipment owned by tenants who are unrelated to the Borrower.
Fixtures expressly include HVAC, mechanical, security and similar systems
of general utility for the operation of the Improvements as leasable
commercial real property.
"Governmental Authority" means any political entity with the legal
authority to impose any requirement on the Property, including the
governments of the United States, the State of Utah, Salt Lake County,
Salt Lake City, and any other entity with jurisdiction to decide,
regulate, or affect the ownership, construction, use, occupancy,
possession, operation, maintenance, alteration, repair, demolition or
reconstruction of any portion or element of the Real Property.
"Hazardous Substance" means any substance the release of or the exposure
to which is prohibited, limited or regulated by any Environmental Law, or
which poses a hazard to human health because of its toxicity, including,
without limitation: (A) any "oil," as defined by the Federal Water
Pollution Control Act and regulations promulgated thereunder (including
crude oil or any fraction of crude oil), (B) any radioactive substance,
and (C) Stachybotrys chartarum or other molds. However, the term
"Hazardous Substance" includes neither (A) a substance used in the
cleaning and maintenance of the Real Property, if the quantity, storage
and manner of its use are customary, prudent, and do not violate
applicable law, nor (B) automotive motor oil in immaterial quantities, if
leaked from vehicles in the ordinary course of the operation of the Real
Property and cleaned up in accordance with reasonable property management
procedures and in a manner that violates no applicable law.
"Impositions" means all real and personal property taxes levied against
the Property; general or special assessments; ground rent; water, gas,
sewer, vault, electric or other utility charges; common area charges;
owners' association dues or fees; fees for any easement, license or
agreement maintained for the benefit of the Property; and any and all
other taxes, levies, user fees, claims, charges and assessments whatsoever
that at any time may be assessed, levied or imposed on the Property or
upon its ownership, use, occupancy or enjoyment, and any related costs,
interest or penalties. In addition, "Impositions" include all documentary,
stamp or intangible personal property taxes that may become due in
connection with the Indebtedness, including Indebtedness in respect of any
future advance made by the Lender to the Borrower, or that are imposed on
any of the Loan Documents.
"Improvements" means, to the extent of the Borrower's existing and future
interest, all buildings and improvements of any kind erected or placed on
the Land now or in the future, including the Fixtures, together with all
appurtenant rights, privileges, Easements, tenements, hereditaments,
titles, reversions, remainders and other interests.
"Indebtedness" means all sums that are owed or become due pursuant to the
terms of the Note, this Deed of Trust, or any of the other Loan Documents
or any other writing executed by the Borrower relating to the Loan,
including scheduled principal payments, scheduled interest payments,
default interest, late charges, prepayment premiums, accelerated or
matured principal balances, advances, collection costs (including
reasonable attorneys' fees), reasonable attorneys' fees and costs in
enforcing or protecting the Note, the Deed of Trust, or any of the other
Loan Documents in any probate, bankruptcy or other proceeding,
receivership costs, fees and costs of the Trustee and all other financial
obligations of the Borrower incurred in connection with the Loan
transaction, provided, however, that this Deed of Trust shall not secure
any Loan Document or any particular person's liabilities or obligations
under any Loan Document to the extent that such Loan Document expressly
states that it or such particular person's liabilities or obligations are
unsecured by this Deed of Trust. Indebtedness shall also include any
obligations under agreements executed and delivered by Borrower which
specifically provide that such obligations are secured by this Deed of
Trust.
"Insurance Premiums" means all premiums or other charges required to
maintain in force any and all insurance policies that this Deed of Trust
requires that the Borrower maintain.
"Insurance Proceeds" means (A) all proceeds of all insurance now or
hereafter carried by or payable to the Borrower with respect to the Real
Property, including with respect to the interruption of rents or income
derived from the Property, all unearned insurance premiums and all related
claims or demands, and (B) all Proceeds (as defined in Subsection 22.1).
"Land" means that certain tract of land located in Salt Lake City, Salt
Lake County, Utah, which is described on the attached Exhibit A, together
with the Appurtenances.
"Leases" means all leases, subleases, licenses, concessions, extensions,
renewals and other agreements (whether written or oral, and whether
presently effective or made in the future) through which the Borrower
grants any possessory interest in and to, or any right to occupy or use,
all or any part of the Real Property, and any related guaranties.
"Legal Control" means the power, either directly or indirectly, to
exercise the authority of the owner of the Real Property, either as the
majority shareholder of the common stock of a corporation, as the sole
general partner of a limited partnership, as the managing general partner
of a general partnership, or as the sole manager of a limited liability
company, provided the entity exercising such authority cannot be divested
of such authority without its consent, either directly or indirectly,
except for cause.
"Legal Requirements" means all laws, statutes, rules, regulations,
ordinances, judicial decisions, administrative decisions, building
permits, development permits, certificates of occupancy, or other
requirements of any Governmental Authority.
"Loan Documents" means all documents evidencing the Loan or delivered in
connection with the Loan, whether entered into at the closing of the Loan
or in the future.
"Maximum Permitted Rate" means the highest rate of interest permitted to
be paid or collected by applicable law with respect to the Loan.
"Monthly Escrow Payment" means the sum of the Monthly Imposition
Requirement, the Monthly Insurance Premium Requirement, and the Monthly
Reserve Requirement.
"Monthly Imposition Requirement" means one-twelfth (1/12th) of the annual
amount that the Lender estimates will be required to permit the timely
payment by the Lender of those Impositions that the Lender elects, from
time to time, to include in the calculation of the Monthly Imposition
Requirement. Such Impositions shall include real and personal property
taxes and may include, at the Lender's sole and absolute discretion any
Impositions that the Borrower has failed to pay or to escrow for on a
timely basis during the term of the Loan. The Lender shall base its
estimate on the most recent information supplied by the Borrower
concerning future Impositions. If the Borrower fails to supply such
information or if it is unavailable at the time of estimation, the Lender
shall estimate future Impositions using historical information and an
annual inflation factor equal to the lesser of five percent (5%) and the
maximum inflation factor permitted by law.
"Monthly Insurance Premium Requirement" means one-twelfth (1/12th) of the
annual amount that the Lender estimates (based on available historical
data and using, if future Insurance Premiums are as yet undeterminable, a
five percent (5%) inflation factor) will be required to permit the timely
payment of the Insurance Premiums by the Lender.
"Monthly Reserve Requirement" means the monthly payment amount which the
Lender estimates will, over the subsequent twelve (12) months, result in
the accumulation of a surplus in the Escrow Fund equal to the sum of the
Monthly Imposition Requirement and the Monthly Insurance Premium
Requirement.
"Net Worth Requirement" means a minimum net worth of the Carveout
Obligor's publicly reported net shareholder's equity of Five Hundred
Million Dollars ($500,000,000).
"Note" means the Secured Promissory Note dated of even date herewith to
evidence the Indebtedness in the original principal amount of Seventeen
Million Seven Hundred Thousand Dollars ($17,700,000), together with all
extensions, renewals and modifications.
"Notice" means a notice given in accordance with the provisions of
Subsection 26.13.
"Obligations" means all of the obligations required to be performed under
the terms and conditions of any of the Loan Documents by any Obligor,
except for obligations that are expressly stated to be unsecured under the
terms of another Loan Document.
"Obligor" means the Borrower, the Carveout Obligor, or any other Person
that is liable under the Loan Documents for the payment of any portion of
the Indebtedness, or the performance of any other obligation required to
be performed under the terms and conditions of any of the Loan Documents,
under any circumstances.
"Participations" means participation interests in the Loan Documents
granted by the Lender.
"Permitted Encumbrances" means (A) the lien of taxes and assessments not
yet due and payable, and (B) those matters of public record listed as
special exceptions in the Lender's title insurance policy insuring the
priority of this Deed of Trust.
"Permitted Transfer" means a transfer specifically described in Section 14
as permitted.
"Person" means any individual, corporation, limited liability company,
partnership, trust, unincorporated association, government, governmental
authority or other entity.
"Property" means the Real Property and the Personal Property (as defined
in Subsection 22.1 below).
"Rating Agencies" means one or more credit rating agencies approved by
Lender.
"Real Property" means the Land, the Improvements, the Leases and the
Rents.
"REIT" means Apartment Investment and Management Company.
"Rents" means all rents, income, receipts, issues and profits and other
benefits paid or payable for using, leasing, licensing, possessing,
operating from or in, residing in, selling, mining, extracting minerals
from, or otherwise enjoying the Real Property, whether presently existing
or arising in the future, to which the Borrower may now or hereafter
become entitled or may demand or claim from the commencement of the Loan
term through the time of the satisfaction of all of the Obligations,
including security deposits, amounts drawn under letters of credit
securing tenant obligations, minimum rents, additional rents, common area
maintenance charges, parking revenues, deficiency rents, termination
payments, space contraction payments, damages following default under a
Lease, premiums payable by tenants upon their exercise of cancellation
privileges, proceeds from lease guarantees, proceeds payable under any
policy of insurance covering loss of rents resulting from untenantability
caused by destruction or damage to the Real Property, all rights and
claims of any kind which the Borrower has or may in the future have
against the tenants under the Leases, lease guarantors, or any subtenants
or other occupants of the Real Property, all proceeds of any sale of the
Real Property in violation of the Loan Documents, any future award granted
the Borrower in any court proceeding involving any such tenant in any
bankruptcy, insolvency, or reorganization proceedings in any state or
federal court, and any and all payments made by any such tenant in lieu of
rent.
"Restoration" means (A) in the case of a casualty resulting in damage to
or the destruction of the Improvements, the repair or rebuilding of the
Improvements to a condition that is at least equivalent to that as of the
date of this Deed of Trust, or (B) in the case of the condemnation of a
portion of the Real Property, the completion of such work as may be
necessary in order to remedy the effects of the condemnation so that the
value and income-generating characteristics of the Real Property are
restored.
"Securities" means mortgage pass-through certificates or other securities
evidencing a beneficial interest in the Loan, issued in a rated or unrated
public offering or private placement.
"Securitization" means the issuance of Securities.
4. TITLE
The Borrower represents to and covenants with the Lender and with its
successors and assigns that, at the point in time of the grant of the lien
created by this Deed of Trust, the Borrower is well seized of good and
indefeasible title to the Real Property, in fee simple absolute, subject
to no lien or encumbrance except the Permitted Encumbrances. The Borrower
warrants this estate and title to the Lender and to its successors and
assigns forever, against all lawful claims and demands of all persons. The
Borrower shall maintain mortgagee title insurance issued by a solvent
carrier, covering the Real Property in an amount at least equal to the
amount of the Loan's original principal balance. This Deed of Trust is and
shall remain a valid and enforceable first lien on the Real Property, and
if the validity or enforceability of this first lien is attacked by
appropriate proceedings, the Borrower shall diligently and continuously
defend it through appropriate proceedings. Should the Borrower fail to do
so, the Lender may at the Borrower's expense take all necessary action,
including the engagement and compensation of legal counsel, the
prosecution or defense of litigation, and the compromise or discharge of
claims. The Borrower shall defend, indemnify and hold the Lender harmless
in any suit or proceeding brought to challenge or attack the validity,
enforceability or priority of the lien granted by this Deed of Trust. If a
prior construction, mechanics' or materialmen's lien on the Real Property
arises by operation of statute during any construction or repair of the
Improvements, the Borrower shall either cause the lien to be discharged by
paying when due any amounts owed to such persons, or shall comply with
Section 12 of this Deed of Trust.
5. REPRESENTATIONS OF THE BORROWER
The Borrower represents to the Lender as follows:
5.1 FORMATION, EXISTENCE, GOOD STANDING
The Borrower is a limited partnership duly organized, validly
existing and in good standing under the laws of Georgia and has
obtained all licenses and permits and filed all statements of
fictitious name and registrations necessary for the lawful operation
of its business in Georgia.
5.2 QUALIFICATION TO DO BUSINESS
The Borrower is qualified to do business as a foreign limited
partnership under the laws of Utah and has obtained all licenses and
permits and filed all statements of fictitious name and
registrations necessary for the lawful operation of its business in
Utah.
5.3 POWER AND AUTHORITY
The Borrower has full power and authority to carry on its business
as presently conducted, to own the Property, to execute and deliver
the Loan Documents, and to perform its Obligations.
5.4 ANTI-TERRORISM REGULATIONS
Neither the Borrower, any affiliate of the Borrower, nor to the
Borrower's actual knowledge, shareholder of the REIT or limited
partner of the Carveout Obligor, is a "Specially Designated
National" or a "Blocked Person" as those terms are defined in the
Office of Foreign Asset Control Regulations (31 CFR Section 500 et
seq.).
5.5 DUE AUTHORIZATION
The Loan transaction and the performance of all of the Borrower's
Obligations have been duly authorized by all requisite partnership
action, and each individual executing any Loan Document on behalf of
the Borrower has been duly authorized to do so.
5.6 NO DEFAULT OR VIOLATIONS
To the best of Borrower's knowledge, the execution and performance
of the Borrower's Obligations will not result in any breach of, or
constitute a default under, any contract, agreement, document or
other instrument to which the Borrower is a party or by which the
Borrower may be bound or affected, and to the best of Borrower's
knowledge, do not and will not violate or contravene any law to
which the Borrower is subject; nor to the best of Borrower's
knowledge, do any such other instruments impose or contemplate any
obligations which are or will be inconsistent with the Loan
Documents.
5.6 NO FURTHER APPROVALS OR ACTIONS REQUIRED
To the best of Borrower's knowledge, no approval by, authorization
of, or filing with any federal, state or municipal or other
governmental commission, board or agency or other governmental
authority is necessary in connection with the authorization,
execution and delivery of the Loan Documents by the Borrower.
5.7 DUE EXECUTION AND DELIVERY
Each of the Loan Documents to which the Borrower is a party has been
duly executed and delivered on behalf of the Borrower.
5.8 LEGAL, VALID, BINDING AND ENFORCEABLE
Each of the Loan Documents to which the Borrower is a party
constitutes the legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms.
5.10 ACCURATE FINANCIAL INFORMATION
All financial information furnished by the Borrower to the Lender in
connection with the application for the Loan is true, correct and
complete in all material respects and does not omit to state any
fact or circumstance necessary to make the statements in them not
misleading, and there has been no material adverse change in the
financial condition of the Borrower since the date of such financial
information.
5.11 COMPLIANCE WITH LEGAL REQUIREMENTS
To the best of Borrower's knowledge, all governmental approvals and
licenses required for the conduct of the Borrower's business and for
the maintenance and operation of the Real Property in compliance
with applicable law are in full force and effect, and the Real
Property is currently being operated in compliance with the Legal
Requirements in all material respects.
5.12 CONTRACTS AND FRANCHISES
To the best of Borrower's knowledge, all contracts and franchises
necessary for the conduct of the Borrower's business and for the
operation of the Real Property in accordance with good commercial
practice are in force.
5.13 NO CONDEMNATION PROCEEDING
As of the date of this Deed of Trust, the Borrower has no knowledge
of any present, pending or threatened condemnation proceeding or
award affecting the Real Property.
5.14 NO CASUALTY
As of the date of this Deed of Trust, no damage to the Real Property
by any fire or other casualty has occurred, other than damage that
has been completely repaired in accordance with good commercial
practice and in compliance with applicable law.
5.15 INDEPENDENCE OF THE REAL PROPERTY
The Real Property may be operated independently from other land and
improvements not included within or located on the Land, and it is
not necessary to own or control any property other than the Real
Property in order to meet the obligations of the landlord under any
Lease, or in order to comply with the Legal Requirements.
5.16 COMPLETE LOTS AND TAX PARCELS
The Land is comprised exclusively of tax parcels that are entirely
included within the Land, and, if the Land is subdivided, of
subdivision lots that are entirely included within the Land.
5.17 OWNERSHIP OF FIXTURES
The Borrower owns the Fixtures free of any encumbrances, including
purchase money security interests, rights of lessors, and rights of
sellers under conditional sales contracts or other financing
arrangements.
5.1 8 COMMERCIAL PROPERTY
The Real Property is used as a multifamily apartment complex and the
Loan is for commercial purposes and not made for personal, family or
household purposes.
5.19 PERFORMANCE UNDER DEVELOPMENT AGREEMENTS
To the best of Borrower's knowledge, all of the obligations of the
owner of the Real Property due under the Development Agreements have
been fully, timely and completely performed and such performance has
been accepted by the related governmental agency or utility company,
and no Governmental Authority has alleged that any default exists
under any of the Development Agreements.
5.20 STATUS OF CERTAIN TITLE MATTERS
To the best of Borrower's knowledge, each of the Easements included
within the Appurtenances (a) is valid and in full force and effect
and may not be amended or terminated, except for cause, without the
consent of the Borrower, (b) has not been amended or supplemented,
(c) requires no approval of the Improvements that has not been
obtained, (d) is free of defaults or alleged defaults, (e) does not
provide for any assessment against the Real Property that has not
been paid in full, and (f) has not been violated by the owner of the
Real Property or, to the best of the Borrower's knowledge, by any
tenant of the Real Property.
5.21 NO PROHIBITED TRANSACTIONS
The Borrower represents to the Lender that either (a) the Borrower
is not an "employee benefit plan" within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), that
is subject to Title I of ERISA, a "plan" within the meaning of
Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"), or an entity that is deemed to hold "plan assets" within
the meaning of 29 C.F.R. ss.2510.3-101 of any such employee benefit
plan, or (b) the entering into of the Loan Documents, the acceptance
of the Loan by the Borrower and the existence of the Loan will not
result in a non-exempt prohibited transaction under ss.406 of ERISA
or Section 4975 of the Code. The Borrower further warrants and
covenants that the foregoing representation will remain true during
the term of the Loan.
6. COVENANTS
6.1 GOOD STANDING
The Borrower shall remain in good standing as a limited partnership
under the laws of Georgia and shall maintain in force all statements
of fictitious name and registrations necessary for the lawful
operation of its business in Georgia during the term of the Loan.
6.2 QUALIFICATION TO DO BUSINESS
The Borrower shall remain qualified to do business as a foreign
limited partnership under the laws of Utah and shall maintain in
force all licenses and permits, filings and statements of fictitious
name and registrations necessary for the lawful operation of its
business in Utah.
6.3 NO DEFAULT OR VIOLATIONS
The Borrower shall not enter into any contract, agreement, document
or other instrument, if the performance of the Borrower's
Obligations would result in any breach of, or constitute a default
under, any such contract, agreement, document or other instrument,
or if the contract, agreement, document or other instrument would
impose or contemplate any obligations the performance of which would
result in a Default under the Loan Documents or would be
inconsistent with the performance of the Borrower's Obligations.
6.4 PAYMENT AND PERFORMANCE
The Borrower shall pay the Indebtedness and perform all of its other
Obligations, as and when the Loan Documents require such payment and
performance.
6.5 PAYMENT OF IMPOSITIONS
The Borrower shall pay the Impositions on or before the last day on
which they may be paid without penalty or interest, and shall,
within thirty (30) days, furnish the Lender with a paid receipt or a
cancelled check as evidence of payment. If the Lender does not
receive such evidence, the Lender may obtain it directly. If it does
so, the Lender will charge the Borrower an administrative fee of Two
Hundred Fifty Dollars ($250) for securing the evidence of payment.
The payment of this fee shall be a demand obligation of the
Borrower. The Borrower may meet the Imposition payment requirements
of this Subsection 6.5 by remitting the Monthly Escrow Payments when
due, by immediately providing Notice to the Lender of any new
Imposition or increased Imposition unknown to the Lender, and by
paying to the Lender on demand any amount required to increase the
Escrow Fund to an amount sufficient to permit the Lender to pay all
Impositions from the Escrow Fund on time. If the Borrower wishes to
contest the validity or amount of an Imposition, it may do so by
complying with Section 12. If any new Legal Requirement (other than
a general tax on income or on interest payments) taxes the Deed of
Trust so that the yield on the Indebtedness would be reduced, and
the Borrower may lawfully pay the tax or reimburse the Lender for
its payment, the Borrower shall do so.
6.6 MAINTENANCE OF THE REAL PROPERTY
The Borrower shall not commit or permit any waste of the Real
Property as a physical or economic asset, and agrees to maintain in
good repair the Improvements, including structures, roofs,
mechanical systems, parking lots or garages, and other components of
the Real Property that are necessary or desirable for the use of the
Real Property, or which the Borrower as landlord under any Lease is
required to maintain for the benefit of any tenant. In its
performance of this Obligation, the Borrower shall promptly and in a
good and workmanlike manner repair or restore, as required under
Subsection 6.16, any elements of the Improvements that are damaged
or destroyed. The Borrower shall also replace roofs, parking lots,
mechanical systems, and other elements of the Improvements requiring
periodic replacement. The Borrower shall carry out such replacements
no less frequently than would a commercially reasonable owner
intending to maintain the maximum income-generating potential of the
Real Property over its reasonable economic life. The Borrower shall
not, without the prior written consent of the Lender, demolish,
reconfigure, or materially alter the structural elements of the
Improvements, unless such an action is the obligation of the
Borrower under a Lease approved by Lender or for which the Lender's
approval is not required under the Absolute Assignment of Leases and
Rents. The Lender agrees that any request for its consent to such an
action shall be deemed given if the Lender does not respond within
fifteen (15) Business Days to any written request for such a
consent, if the request is accompanied by all materials required to
permit the Lender to analyze the proposed action.
6.7 USE OF THE REAL PROPERTY
The Borrower agrees that the Real Property may only be used as a
residential apartment complex and for no other purpose. The Real
Property may not be converted to a cooperative or condominium
without Lender's prior written consent, which consent may be
withheld in Lender's sole and absolute discretion.
6.8 LEGAL REQUIREMENTS
The Borrower shall maintain in full force and effect all
governmental approvals and licenses required for the conduct of the
Borrower's business and for the maintenance and operation of the
Real Property in compliance with applicable law, and shall comply
with all Legal Requirements relating to the Real Property at all
times.
6.9 CONTRACTS AND FRANCHISES
The Borrower shall maintain in force all contracts and franchises
necessary for the conduct of the Borrower's business and for the
operation of the Real Property in accordance with good commercial
practice.
6.10 COVENANTS REGARDING CERTAIN TITLE MATTERS
The Borrower shall promptly pay, perform and observe all of its
obligations under the Easements included within the Appurtenances or
under reciprocal easement agreements, operating agreements,
declarations, and restrictive covenants included in the Permitted
Encumbrances, shall not modify or consent to the termination of any
of them without the prior written consent of the Lender, shall
promptly furnish the Lender with copies of all notices of default
under them, and shall cause all covenants and conditions under them
and benefiting the Real Property to be fully performed and observed.
6.11 INDEPENDENCE OF THE REAL PROPERTY
The Borrower shall maintain the independence of the Real Property
from other land and improvements not included within or located on
the Land. In fulfilling this covenant, the Borrower shall neither
take any action which would make it necessary to own or control any
property other than the Real Property in order to meet the
obligations of the landlord under any Lease, or in order to comply
with the Legal Requirements, nor take any action which would cause
any land or improvements other than the Land and the Improvements to
rely upon the Land or the Improvements for those purposes.
6.12 COMPLETE LOTS AND TAX PARCELS
The Borrower shall take no action that would result in the inclusion
of any portion of the Land in a tax parcel or subdivision lot that
is not entirely included within the Land.
6.13 COMMERCIAL PROPERTY
The Real Property shall be used for commercial purposes as a
multifamily residential apartment complex and not by Borrower for
residential, personal, family or household purposes.
6.14 PERFORMANCE UNDER DEVELOPMENT AGREEMENTS
The Borrower shall fully, timely and completely perform all of the
obligations of the owner of the Real Property due under the
Development Agreements and shall cause no default under any of the
Development Agreements.
6.15 STATUS OF CERTAIN TITLE MATTERS
The Borrower shall not take or fail to take any action with respect
to the Easements included within the Appurtenances or the reciprocal
easement agreements, operating agreements, declarations, and
restrictive covenants included in the Permitted Encumbrances, if as
the result of such an action or failure, the subject Easement or
other title matter would (a) be rendered invalid or without force or
effect, (b) be amended or supplemented without the consent of the
Lender, (c) be placed in default or alleged default, (d) result in
any lien against the Real Property, or (e) give rise to any
assessment against the Real Property, unless immediately paid in
full.
6.16 RESTORATION UPON CASUALTY OR CONDEMNATION
If a casualty or condemnation occurs, the Borrower shall promptly
commence the Restoration of the Real Property, to the extent that
the Lender has made Insurance Proceeds or Condemnation Proceeds
available to the Borrower for such Restoration.
6.17 PERFORMANCE OF LANDLORD OBLIGATIONS
The Borrower shall perform its obligations as landlord under the
Leases, shall cause the Real Property to be professionally leased
and managed in a manner that is consistent with good commercial
practices for institutional owners of multifamily apartment
projects, and shall neither take any action, nor fail to take any
action, if the action or failure would be inconsistent with the
commercially reasonable management of the Real Property for the
purpose of enhancing its long-term performance and value. The
Borrower shall not, without the Lender's written consent, extend,
modify, declare a default under, terminate, or enter into any Lease
of the Real Property.
6.1 8 FINANCIAL REPORTS AND OPERATING STATEMENTS
(a) Maintenance of Books and Records
During the term of the Loan, the Borrower shall maintain
complete and accurate accounting and operational records,
including copies of all Leases and other material written
contracts relating to the Real Property, copies of all tax
statements, and evidence to support the payment of all
material property-related expenses.
(b) Delivery of Financial and Property-Related Information
Within one hundred twenty (120) days after the end of each of
its fiscal years, or, if a Default exists, on demand by the
Lender, the Borrower shall deliver to the Lender (A) copies of
the financial statements of the Borrower and its general
partner, including balance sheets and earnings statements, (B)
a complete and accurate operating statement for the Real
Property, and (C) a complete rent roll, all in form
satisfactory to the Lender. The rent roll must be certified by
the Borrower to be true and correct and must include each
tenant's name, unit type and number, premises, rent, lease
expiration date, renewal options and related rental rates,
delinquencies and vacancies. If the Borrower fails to deliver
the items required in this Subsection, the Lender may engage
an accounting firm to prepare the required items. The Borrower
shall cooperate fully with any investigative audit required to
permit the accounting firm to produce these items, and the
fees and expenses incurred in connection with their
preparation shall be paid on demand by the Borrower.
(c) Efect of Failure to Deliver Financial and Property Reports
If no Default exists and the Borrower fails to provide the
financial and property reports required under this Section or
the Carveout Obligor fails to provide its financial statements
as required under the Carveout Guarantee and Indemnity
Agreement within one hundred twenty (120) days of the close of
any fiscal year, the Lender will provide a Notice of this
failure and a thirty (30)-day opportunity to cure before a
Default shall exist. All monthly payments of principal and
interest under the Note that become due after this cure period
has elapsed but before the reports are received by the Lender
must be accompanied by a fee of .000834 times the principal
balance of the Loan at the beginning of the previous month,
regardless of whether the Notice has asserted that the failure
constitutes a Default under this Deed of Trust. This fee is to
compensate the Lender for (A) the increased risk resulting
from the Lender's inability to monitor and service the Loan
using up-to-date information, and (B) the reduced value and
liquidity of the Loan as a financial asset.
(d) Certification of Information
The financial and operating statements provided under this
Subsection need not, as an initial matter, be certified by an
independent certified public accountant as having been
prepared in accordance with generally accepted accounting
principles, consistently applied, or, in the case of financial
statements prepared on a cash or income tax basis, or of
operating statements, as not materially misleading based on an
audit conducted in accordance with generally accepted auditing
standards. The Borrower shall, however certify that such
statements are true and correct, and the Lender expressly
reserves the right to require such a certification by an
independent certified public accountant if a Default exists or
if the Lender has reason in the exercise of its reasonable
discretion to believe that any previously provided financial
or operating statement is misleading in any material respect.
6.19 ESTOPPEL STATEMENTS
Upon request by the Lender, the Borrower shall, within ten (10)
Business Days of Notice of the request, furnish to the Lender or to
whom it may direct, a written statement acknowledging the amount of
the Indebtedness and disclosing whether, to the best of Borrower's
knowledge, any offsets or defenses exist against the Indebtedness.
Thereafter, the Borrower shall be estopped from asserting any other
offsets or defenses alleged to have arisen as of the date of the
statement.
6.20 PROHIBITION ON CERTAIN DISTRIBUTIONS
If Default exists under Subsection 10.1 or under any of
Subparagraphs (b), (c), (d), (e) or (f) of Subsection 10.2, the
Borrower shall not pay any dividend or make any partnership, trust
or other distribution, and shall not make any payment or transfer
any property in order to purchase, redeem or retire any interest in
its beneficial interests or ownership.
6.21 USE OF LOAN PROCEEDS
The Loan proceeds shall be used solely for commercial purposes.
6.22 PROHIBITION ON CUTOFF NOTICES
The Borrower shall not issue any Notice to the Lender to the effect
that liens on the Real Property after the date of the Notice will
enjoy priority over the lien of this Deed of Trust.
6.23 PROHIBITED PERSON COMPLIANCE
Borrower warrants, represents and covenants that neither Borrower
nor any Obligor nor any of their respective affiliated entities is
or will be an entity or person (i) that is listed in the Annex to,
or is otherwise subject to the provisions of Executive Order 13224
issued on September 24, 2001 ("EO 13224"), (ii) whose name appears
on the United States Treasury Department's Office of Foreign Assets
Control ("OFAC") most current list of "Specifically Designated
National and Blocked Persons," (which list may be published from
time to time in various mediums including, but not limited to, the
OFAC website, http:www.treas.gov/ofac/t11sdn.pdf), (iii) who
commits, threatens to commit or supports "terrorism", as that term
is defined in EO 13224, or (iv) who is otherwise affiliated with any
entity or person listed above (any and all parties or persons
described in subparts [i] - [iv] above are herein referred to as a
"Prohibited Person"). Borrower covenants and agrees that neither
Borrower, nor any Obligor nor any of their respective affiliated
entities will (i) conduct any business, nor engage in any
transaction or dealing, with any Prohibited Person, including, but
not limited to the making or receiving of any contribution of funds,
goods, or services, to or for the benefit of a Prohibited Person, or
(ii) engage in or conspire to engage in any transaction that evades
or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in EO13224. Borrower
further covenants and agrees to deliver (from time to time) to
Lender any such certification or other evidence as may be requested
by Lender in its sole and absolute discretion, confirming that (i)
neither Borrower nor any Obligor is a Prohibited Person, and (ii)
neither Borrower nor any Obligor has engaged in any business,
transaction or dealings with a Prohibited Person, including, but not
limited to, the making or receiving of any contribution of funds,
goods, or services, to or for the benefit of a Prohibited Person.
The representations and warranties in this Section regarding the
current status of Borrower and any Obligor are given to Borrower's
actual knowledge.
7. INSURANCE REQUIREMENTS
At all times until the Indebtedness is paid in full, the Borrower shall
maintain insurance coverage and administer insurance claims in compliance
with this Section.
7.1 REQUIRED COVERAGES
(a) Open Perils/Special Form/Special Perils Property
The Borrower shall maintain "Open Perils," "Special Form," or
"Special Perils" property insurance coverage in an amount not
less than one hundred percent (100%) of the replacement cost
of all insurable elements of the Real Property and of all
tangible Personal Property, with coinsurance waived, or if a
coinsurance clause is in effect, with an agreed amount
endorsement acceptable to the Lender. Coverage shall extend to
the Real Property and to all tangible Personal Property.
(b) Broad Form Boiler and Machinery
If any boiler or other machinery is located on or about the
Real Property, the Borrower shall maintain broad form boiler
and machinery coverage, including a form of business income
coverage.
(c) Flood
If the Real Property is located in a special flood hazard area
(that is, an area within the 100-year floodplain) according to
the most current flood insurance rate map issued by the
Federal Emergency Management Agency and if flood insurance is
available, the Borrower shall maintain flood insurance
coverage on all insurable elements of Real Property and of all
tangible Personal Property.
(d) Business Interruption
The Borrower shall maintain a form of business income coverage
in the amount of eighty percent (80%) of one year's business
income from the Property.
(e) Comprehensive/General Liability
The Borrower shall maintain commercial general liability
coverage (which may be in the form of umbrella/excess
liability insurance) with a One Million Dollar ($1,000,000)
combined single limit per occurrence and a minimum aggregate
limit of Two Million Dollars ($2,000,000).
(f) Liquor Liability
The Borrower shall maintain liquor liability coverage, if
applicable law may impose liability on those selling, serving,
or giving alcoholic beverages to others and if such beverages
will be sold, served or given on the Real Property by the
Borrower.
(g) Elective Coverages
The Lender may require additional coverages appropriate to the
property type and site location. Additional coverages may
include earthquake, windstorm, mine subsidence, sinkhole,
personal property, supplemental liability, or coverages of
other property-specific risks.
(h) Waiver of Earthquake Coverage Requirement
The Lender agrees that no earthquake coverage shall be
required unless the Real Property is now or in the future
located in a Seismic Zone IV or its equivalent, that is, a
zone where major damage may occur, and that is adjacent to a
major fault system. If such a requirement is imposed, the
Borrower may at its expense obtain a study, prepared by a
consultant approved in advance by the Lender, opining that the
probable maximum loss in the event of an earthquake would be
less than twenty-five percent (25%) of the value of the Real
Property. If such a study is obtained, the Lender will waive
its requirement.
7.2 PRIMARY COVERAGE
Each coverage required under this Section shall be primary rather
than contributing or secondary to the coverage Borrower may carry
for other properties or risks, provided, however, that blanket
coverage shall be acceptable if (a) the policy includes limits by
property location, and (b) the Lender determines, in the exercise of
its sole and absolute discretion, that the amount of such coverage
is sufficient in light of the other risks and properties insured
under the blanket policy.
7.3 HOW THE LENDER SHALL BE NAMED
On all property insurance policies and coverages required under this
Section (including coverage against loss of business income), the
Lender must be named as "first mortgagee" under a standard mortgagee
clause. On all liability policies and coverages, the Lender must be
named as an "additional insured." The Lender shall be referred to
verbatim as follows: "Transamerica Financial Life Insurance Company
and its successors, assigns, and affiliates; as their interest may
appear; c/o AEGON USA Realty Advisors, Inc.; Mortgage Loan Dept.;
4333 Edgewood Rd., NE; Cedar Rapids, Iowa 52499-5443."
7.4 RATING
Each insurance carrier providing insurance required under this
Section must have, independently of its parent's or any reinsurer's
rating, a General Policyholder Rating of A, and a Financial Rating
of X or better, as reported in the most current issue of Best's
Insurance Guide, or as reported by Best on its internet web site.
7.5 DEDUCTIBLE
The maximum deductible on each required coverage or policy is One
Hundred Thousand Dollars ($100,000).
7.6 NOTICES, CHANGES AND RENEWALS
All policies must require the insurance carrier to give the Lender a
minimum of ten (10) days' notice in the event of modification,
cancellation or termination for non payment of premium and a minimum
of thirty (30) days' notice of non renewal. The Borrower shall
report to the Lender immediately any material facts known to the
Borrower that may adversely affect the appropriateness or
enforceability of any insurance contract, including, without
limitation, changes in the ownership or occupancy of the Real
Property, any hazard to the Real Property and any matters that may
give rise to any claim. Prior to expiration of any policy required
under this Section, the Borrower shall provide either (a) an
original or certified copy of the renewed policy, or (b) a "binder,"
an Acord 28 (real property), Acord 27 (personal property) or Acord
25 (liability) certificate, or another document satisfactory to the
Lender conferring on the Lender the rights and privileges of
mortgagee. If the Borrower meets the foregoing requirement under
clause (b), the Borrower shall use its best efforts to supply an
original or certified copy of the original policy within ninety (90)
days, and shall be obligated to do so within two hundred forty (240)
days. All binders, certificates, documents, and original or
certified copies of policies must name the Borrower as a named
insured or as an additional insured, must include the complete and
accurate property address and must bear the original signature of
the issuing insurance agent.
7.7 UNEARNED PREMIUMS
If this Deed of Trust is foreclosed, the Lender may at its
discretion cancel any of the insurance policies required under this
Section and apply any unearned premiums to the Indebtedness.
7.8 FORCED PLACEMENT OF INSURANCE
If the Borrower fails to comply with the requirements of this
Section, the Lender may, at its discretion, procure any required
insurance. Any premiums paid for such insurance, or the allocable
portion of any premium paid by the Lender under a blanket policy for
such insurance, shall be a demand obligation under this Deed of
Trust, and any unearned premiums under such insurance shall comprise
Insurance Proceeds and therefore a portion of the Property.
8. INSURANCE AND CONDEMNATION PROCEEDS
8.1 ADJUSTMENT AND COMPROMISE OF CLAIMS AND AWARDS
The Borrower may settle any insurance claim or condemnation
proceeding if the effect of the casualty or the condemnation may be
remedied for Fifty Thousand Dollars ($50,000) or less. If a greater
sum is required, the Borrower may not settle any such claim or
proceeding without the advance written consent of the Lender. If a
Default exists, the Borrower may not settle any insurance claim or
condemnation proceeding without the advance written consent of the
Lender.
8.2 DIRECT PAYMENT TO THE LENDER OF PROCEEDS
If the Insurance Proceeds received in connection with a casualty or
the Condemnation Proceeds received in respect of a condemnation
exceed Fifty Thousand Dollars ($50,000), or if there is a Default,
then such proceeds shall be paid directly to the Lender. The Lender
shall have the right to endorse instruments which evidence proceeds
that it is entitled to receive directly.
8.3 AVAILABILITY TO THE BORROWER OF PROCEEDS
The Borrower shall have the right to use the Insurance Proceeds or
the Condemnation Proceeds to carry out the Restoration of the Real
Property, if the amount received is less than Six Hundred Thousand
Dollars ($600,000), subject to the conditions set forth in
Subsections 8.4, 8.5, and 8.6 of this Section.
If the amount received in respect of a casualty or condemnation
equals or exceeds Six Hundred Thousand Dollars ($600,000), and if
the Loan-to-Value ratio of the Property on completion will be
sixty-five percent (65%) or less, as determined by the Lender in its
discretion based on its estimate of the market value of the Real
Property, the Lender shall receive such Insurance Proceeds or
Condemnation Proceeds directly and hold them in a fund for
Restoration subject to the conditions set forth in Subsections 8.4,
8.5, and 8.6 of this Section. If the Lender's estimate of the market
value of the Real Property implies a Loan-to-Value ratio of over
sixty-five percent (65%), and the Borrower disagrees with the
Lender's estimate, the Borrower may require that the Lender engage
an independent appraiser (the "Fee Appraiser") to prepare and submit
to AEGON a full narrative appraisal report estimating the market
value of the Real Property. The Fee Appraiser shall be certified in
Utah and shall be a member of a national appraisal organization that
has adopted the Uniform Standards of Professional Appraisal Practice
(USPAP) established by the Appraisal Standards Board of the
Appraisal Foundation. The Fee Appraiser will be required to use
assumptions and limiting conditions established by the Lender and to
prepare the appraisal in conformity with the Lender's Appraisal
Guidelines. For purposes of this Section, the independent
appraiser's value conclusion shall be binding on both the Lender and
the Borrower. The Borrower shall have the right to make a prepayment
of the Loan, without premium, sufficient to achieve this
Loan-to-Value ratio. The independent fee appraisal shall be at the
Borrower's expense, and the Borrower shall pay to the Lender an
administrative fee of Two Thousand Five Hundred Dollars ($2,500) in
connection with its review. The Lender may require that the Borrower
deposit Ten Thousand Dollars ($10,000) with the Lender as security
for these expenses or may pay the fee appraiser's and administrative
fees from the proceeds at its sole discretion.
Unless the Borrower has the right to use the Insurance Proceeds or
the Condemnation Proceeds under the foregoing subsections, the
Lender may, in its sole and absolute discretion, either apply them
to the Loan balance or disburse them for the purposes of repair and
reconstruction, or to remedy the effects of the condemnation. No
prepayment premium will be charged on amounts applied to reduce the
principal balance of the Loan.
8.4 CONDITIONS TO AVAILABILITY OF PROCEEDS
The Lender shall have no obligation to release Insurance Proceeds or
Condemnation Proceeds to the Borrower, and may hold such amounts as
additional security for the Loan, if (a) a Default exists, (b) the
Lender has delivered to the Borrower Notice of any act, omission or
circumstance that will, if uncured, become a Default, and the
required cure has not been effected, or (c) if the Insurance
Proceeds or Condemnation Proceeds received by the Lender and any
other funds deposited by the Borrower with the Lender are
insufficient, as determined by the Lender in its reasonable
discretion, to complete the Restoration. If a Default exists, the
Lender may at its sole and absolute discretion apply such Insurance
Proceeds and Condemnation Proceeds to the full or partial cure of
the Default.
8.5 PERMITTED MEZZANINE FINANCING FOR REBUILDING OR REMEDIATION OF THE EFFECT
OF TAKING BY EMINENT DOMAIN
If the Lender reasonably determines that the Insurance Proceeds or
Condemnation Proceeds received in respect of a casualty or
condemnation, as the case may be, would be insufficient to permit
the Borrower to restore the Improvements to their condition before
the casualty, or to remedy the effect on the Real Property of the
condemnation, then the Borrower shall use reasonable efforts to
secure such additional funds as are necessary to effect the
Restoration. The Borrower's obligation shall be limited to securing
such funds on a non- recourse basis. Interests in the Borrower may
be pledged as security to the extent necessary in connection with
any such financing.
8.6 DRAW REQUIREMENTS
The Borrower's right to receive Insurance Proceeds and Condemnation
Proceeds held by the Lender under this Section shall be conditioned
on the Lender's reasonable approval of plans and specifications for
the Restoration. Each draw shall be in the minimum amount of Fifty
Thousand Dollars ($50,000). Draw requests shall be accompanied by
customary evidence of construction completion, and by endorsements
to the Lender's mortgagee title insurance coverage insuring the
absence of construction, mechanics' or materialmen's liens. Draws
based on partial completion of the Restoration shall be subject to a
ten percent (10%) holdback. All transactional expenses shall be paid
by the Borrower.
9. ESCROW FUND
The Borrower shall pay the Monthly Escrow Payment on the first (1st) day
of every month, commencing with the month in which the first regular
payment of principal and interest is due. The Lender shall hold Monthly
Escrow Payments in a non-interestbearing fund from which the Lender will
pay on a timely basis those Escrow Expenses that the Lender has
anticipated will become payable on a regular basis during the Loan's term,
and on which the Lender has based its determination of the Monthly
Imposition Requirement, the Monthly Insurance Premium Requirement and the
Monthly Reserve Requirement. The Escrow Fund will be maintained as an
accounting entry in the Lender's general account, where it may be
commingled with the Lender's other funds. The Lender may reanalyze the
projected Escrow Expenses from time to time and shall advise the Borrower
of any change in the amount of the Monthly Escrow Payment. Upon the
foreclosure of this Deed of Trust, the delivery of a deed in lieu of
foreclosure, or the payoff of the Loan, the Lender shall apply amounts in
the Escrow Fund, net of accrued Escrow Expenses, to the Indebtedness. The
Lender shall remit any amounts in excess of the Indebtedness to the
Borrower.
10. DEFAULT
10.1 PAYMENT DEFAULTS
A "Default" shall exist without Notice upon the occurrence of any of
the following events:
(a) Scheduled Payments
The Borrower's failure to pay, or to cause to be paid, (i) any
regular monthly payment of principal and interest under the
Note, together with any required Monthly Escrow Payment, on or
before the tenth (10th) day of the month in which it is due,
and (ii) any other scheduled payment under the Note, this Deed
of Trust or any other Loan Document.
(b) Payment at Maturity
The Borrower's failure to pay, or to cause to be paid, the
Indebtedness when the Loan matures by acceleration under
Section 16, because of a transfer or encumbrance under Section
13, or by lapse of time.
(c) Demand Obligations
The Borrower's failure to pay, or to cause to be paid, within
five (5) Business Days of the Lender's demand, any other
amount required under the Note, this Deed of Trust or any of
the other Loan Documents.
10.2 INCURABLE NONMONETARY DEFAULT
A Default shall exist upon any of the following:
(a) Material Untruth or Misrepresentation
The Lender's discovery that any representation made by the
Borrower in any Loan Document was materially untrue or
misleading when made, if the misrepresentation either was
intentional or is not capable of being cured as described in
Subsection 10.3(a) below.
(b) Due on Sale or Encumbrance
The occurrence of any sale, conveyance, transfer or vesting
that would result in the Loan becoming immediately due and
payable at the Lender's option under Section 13.
(c) Voluntary Bankruptcy Filing
The filing by the Borrower of a petition in bankruptcy or for
relief from creditors under any present or future law that
affords general protection from creditors.
(d) Insolvency
The failure of the Borrower generally to pay its debts as they
become due, its admission in writing to an inability so to pay
its debts, the making by the Borrower of a general assignment
for the benefit of creditors, or a judicial determination that
the Borrower is insolvent.
(e) Receivership
The appointment of a receiver or trustee to take possession of
any of the assets of the Borrower.
(f) Levy or Attachment
The taking or seizure of any material portion of the Property
under levy of execution or attachment.
(g) Lien
The filing against the Real Property of any lien or claim of
lien for the performance of work or the supply of materials,
or the filing of any federal, state or local tax lien against
the Borrower, or against the Real Property, unless the
Borrower promptly complies with Section 12 of this Deed of
Trust.
(h) Defaults under other Loan Documents
The existence of any default under any other Loan Document, provided any
required Notice of such default has been given and any applicable cure period
has expired.
( i) Dissolution or Liquidation
The Borrower shall initiate or suffer the commencement of a proceeding for its
dissolution or liquidation, and such proceeding shall not be dismissed within
thirty (30) days, or the Borrower shall cease to exist as a legal entity (unless
resulting in a Permitted Transfer).
10.3 CURABLE NON-MONETARY DEFAULT
A Default shall exist, following the cure periods specified below,
under the following circumstances:
(a) Unintentional Misrepresentations that are Capable of Being Cured
A "Default" shall exist, with Notice, if the Lender discovers that the
Borrower has unintentionally made any material misrepresentation that is
capable of being cured, unless the Borrower promptly commences and
diligently pursues a cure of the misrepresentation approved by the Lender,
and completes the cure within thirty (30) days. Any such cure shall place
the Lender in the risk position that would have existed had the false
representation been true when made.
(b) Involuntary Bankruptcy or Similar Filing
The Borrower becomes the subject of any petition or action seeking to
adjudicate it bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief, or that may result in a composition of its debts,
provide for the marshaling of the Borrower's assets for the satisfaction of
its debts, or result in the judicially ordered sale of the Borrower's
assets for the purpose of satisfying its obligations to creditors, unless a
motion for the dismissal of the petition or other action is filed within
ten (10) days and results in its dismissal within sixty (60) days of the
filing of the petition or other action.
(c) Entry of a Material Judgment
Any judgment is entered against the Borrower or any other Obligor, and the
judgment may materially and adversely affect the value, use or operation of
the Real Property, unless the judgment is satisfied within fifteen (15)
business days.
(d) Other Defaults
The Borrower fails to observe any promise or covenant made in this Deed of
Trust, unless the failure results in a Default described elsewhere in this
Section 10, provided the Lender delivers written Notice to the Borrower of
the existence of such an act, omission or circumstance, and that such an
act, omission or circumstance shall constitute a Default under the Loan
Documents unless the Borrower promptly initiates an effort to cure the
potential Default, pursues the cure diligently and continuously, and
succeeds in effecting the cure within one hundred twenty (120) days of its
receipt of Notice. The Lender shall afford the Borrower an additional
period of one hundred twenty (120) days in cases where construction or
repair is needed to cure the potential Default, and the cure cannot be
completed within the first one hundred twenty (120) day cure period. During
the cure period, the Borrower has the obligation to provide on demand
satisfactory documentation of its effort to cure, and, upon completion,
evidence that the cure has been achieved. All notice and cure periods
provided in this Deed of Trust shall run concurrently with any notice or
cure periods provided by law.
11. RIGHT TO CURE
The Lender shall have the right to cure any Default. The expenses of doing
so shall be part of the Indebtedness, and the Borrower shall pay them to
the Lender on demand.
12. CONTEST RIGHTS
The Borrower may secure the right to contest Impositions and construction,
mechanics' or materialmen's liens, through appropriate proceedings
conducted in good faith, by either (A) depositing with the Lender an
amount equal to one hundred twenty-five percent (125%) of the amount of
the Imposition or the lien, or (B) obtaining and maintaining in effect a
bond issued by a surety acceptable to the Lender, in an amount equal to
the amount required by Utah law or by the court in order to obtain a court
order staying the foreclosure of the lien pending resolution of the
dispute, and releasing the lien of record. The proceeds of such a bond
must be payable directly to the Lender. The surety issuing such a bond
must be acceptable to the Lender in its reasonable discretion. After such
a deposit is made or bond issued, the Borrower shall promptly commence the
contest of the lien and continuously pursue that contest in good faith and
with reasonable diligence. If the contest of the related Imposition or
lien is unsuccessful, any deposits or bond proceeds shall be used to pay
the Imposition or to satisfy the obligation from which the lien has
arisen. Any surplus shall be refunded to the Borrower.
13. DUE ON TRANSFER OR ENCUMBRANCE
Upon the sale or transfer of any portion of the Real Property or any other
conveyance, transfer or vesting of any direct or indirect interest in the
Borrower or the Property, including (i) the direct or indirect transfer
of, or the granting of a security interest in, the ownership of the
Borrower, (ii) any encumbrance (other than a Permitted Encumbrance) of the
Real Property (unless the Borrower contests the encumbrance in compliance
with Section 12), and (iii) the lease, license or granting of any security
interest in the Personal Property, the Indebtedness shall, at the Lender's
option, become immediately due and payable upon Notice to the Borrower,
unless the sale, conveyance, transfer or vesting is a Permitted Transfer.
14. DUE ON SALE EXCEPTIONS
The Permitted Transfers are those stated in Subsections 14.1 through 14.3. -
14.1 PUBLICLY TRADED SHARES OF THE REIT
The public trading of the shares of the REIT on the New York Stock
Exchange.
14.2 LIMITED PARTNERSHIP TRANSFERS OF THE CARVEOUT OBLIGOR
The transfer of limited partnership interests of the Carveout
Obligor, provided the REIT maintains direct or indirect ownership of
more than seventy-five percent (75%) of the Carveout Obligor's
limited partnership interests and the REIT continues to have Legal
Control of the Borrower.
14.3 PERMITTED TRANSFERS OF CERTAIN PASSIVE INTERESTS
A "Qualified Passive Interest Transfer," which is defined as any
transfer of a direct or indirect interest in the Borrower, if,
following the transfer (i) the Real Property remains under the Legal
Control of the REIT, (ii) the transfer does not change the identity
of any entity through which the Carveout Obligor exercises Legal
Control of the Real Property, and (iii) the Carveout Obligor meets
the Net Worth Requirement.
14.4 TRANSACTION COSTS
The Borrower shall pay all out-of-pocket expenses incurred by the
Lender in the review and processing of a Permitted Transfer
regardless of whether the Permitted Transfer is carried out.
15. NOTICE OF ABSOLUTE ASSIGNMENT OF LEASES AND RENTS
Under the Absolute Assignment of Leases and Rents, the Borrower has
assigned to the Lender, and to its successors and assigns, all of the
Borrower's right and title to, and interest in, the Leases, including all
rights under the Leases and all benefits to be derived from them. The
rights assigned include all authority of the Borrower to modify or
terminate Leases, or to exercise any remedies, and the benefits assigned
include all Rents. This assignment is present and absolute, but under the
terms of the Absolute Assignment of Leases and Rents, the Lender has
granted the Borrower a conditional license to collect and use the Rents,
and to exercise the rights assigned, in a manner consistent with the
Obligations, all as more particularly set forth in the Absolute Assignment
of Leases and Rents. The Lender may, however, terminate the license by
written Notice to the Borrower on certain conditions set forth in the
Absolute Assignment of Leases and Rents.
16. ACCELERATION
If a Default exists, the Lender may, at its option, declare the unpaid
principal balance of the Note to be immediately due and payable, together
with all accrued interest on the indebtedness, all costs of collection
(including reasonable attorneys' fees and expenses) and all other charges
due and payable by the Borrower under the Note or any other Loan Document.
If the subject Default has arisen from a failure by the Borrower to make a
regular monthly payment of principal and interest, the Lender shall not
accelerate the indebtedness unless the Lender shall have given the
Borrower at least three (3) Business Days advance notice of its intent to
do so.
If the subject Default is curable and nonmonetary in nature, the Lender
shall exercise its option to accelerate only by delivering notice of
acceleration to the Borrower. The Lender shall not deliver any such notice
of acceleration until (a) the Borrower has received any required notice of
the prospective Default, and (b) any applicable cure period has expired.
Except as expressly described in this Section, no notice of acceleration
shall be required in order for the Lender to exercise its option to
accelerate the indebtedness in the event of Default.
17. RIGHTS OF ENTRY AND TO OPERATE
17.1 ENTRY ON REAL PROPERTY
If a Default exists, the Lender may, to the extent permitted by law,
enter upon the Real Property and take exclusive possession of the
Real Property and of all books, records and accounts, all without
Notice and without being guilty of trespass, but subject to the
rights of tenants in possession under the Leases. If the Borrower
remains in possession of all or any part of the Property after
Default and without the Lender's prior written consent, the Lender
may, without Notice to the Borrower, invoke any and all legal
remedies to dispossess the Borrower.
17.2 OPERATION OF REAL PROPERTY
Following Default, the Lender may hold, lease, manage, operate or
otherwise use or permit the use of the Real Property, either itself
or by other persons, firms or entities, in such manner, for such
time and upon such other terms as the Lender may deem to be prudent
under the circumstances (making such repairs, alterations, additions
and improvements thereto and taking any and all other action with
reference thereto, from time to time, as the Lender deems prudent),
and apply all Rents and other amounts collected by the Lender in
accordance with the provisions of the Absolute Assignment of Leases
and Rents.
18. RECEIVERSHIP
Following Default, the Lender may apply to a court of competent
jurisdiction for the appointment of a receiver of the Property, ex parte
without Notice to the Borrower, whether or not the value of the Property
exceeds the Indebtedness, whether or not waste or deterioration of the
Real Property has occurred, and whether or not other arguments based on
equity would justify the appointment. The Borrower irrevocably, with
knowledge and for valuable consideration, consents to such an appointment.
Any such receiver shall have all the rights and powers customarily given
to receivers in Utah, including the rights and powers granted to the
Lender by this Deed of Trust, the power to maintain, lease and operate the
Real Property on terms approved by the court, and the power to collect the
Rents and apply them to the Indebtedness or otherwise as the court may
direct. Once appointed, a receiver may at the Lender's option remain in
place until the Indebtedness has been paid in full.
19. FORECLOSURE; POWER OF SALE
Upon Default, the Lender may immediately proceed to foreclose the lien of
this Deed of Trust, against all or part of the Property, or to sell the
Property by judicial or nonjudicial foreclosure in accordance with the
laws of Utah and may pursue any other remedy available to commercial
mortgage lenders under the laws of Utah.
20. WAIVERS
To the maximum extent permitted by law, the Borrower irrevocably and
unconditionally WAIVES and RELEASES any present or future rights (a) of
reinstatement or redemption, (b) that may exempt the Property from any
civil process, (c) to appraisal or valuation of the Property, (d) to
extension of time for payment, (e) that may subj ect the Lender's exercise
of its remedies to the administration of any decedent's estate or to any
partition or liquidation action, (f) to any homestead and exemption rights
provided by the Constitution and laws of the United States and of Utah,
(g) to notice of acceleration or notice of intent to accelerate (other
than as expressly stated herein), and (h) that in any way would delay or
defeat the right of the Lender to cause the sale of the Real Property for
the purpose of satisfying the Indebtedness. The Borrower agrees that the
price paid at a lawful foreclosure sale, whether by the Lender or by a
third party, and whether paid through cancellation of all or a portion of
the Indebtedness or in cash, shall conclusively establish the value of the
Real Property.
The foregoing waivers shall apply to and bind any party assuming the
Obligations of the Borrower under this Deed of Trust.
21. EXCULPATION CLAUSE AND CARVEOUT OBLIGATIONS
The Lender agrees that it shall not seek to enforce any monetary judgment
with respect to the Indebtedness evidenced by the Note against the
Borrower except through recourse to the Property, unless the Obligation
from which the judgment arises is a Carveout Obligation. The Carveout
Obligations include (a) the obligation to repay any portion of the
Indebtedness that arises because the Lender has advanced funds or incurred
expenses as a result of any of the "Carveouts" (as defined below), (b) the
obligation to repay the entire Indebtedness, if the Lender's exculpation
of the Borrower from personal liability under this Section has become void
as set forth below, (c) the obligation to indemnify the Lender in respect
of its actual damages suffered in connection with a Carveout, and (d) the
obligation to defend and hold the Lender harmless from and against any
claims, judgments, causes of action or proceedings arising from a
Carveout. The Carveouts are:
(i) fraud or material written misrepresentation;
(ii) waste of the Property (which shall include damage, destruction
or disrepair of the Real Property caused by a willful act or
grossly negligent omission of the Borrower, but shall exclude
ordinary wear and tear in the absence of gross negligence);
(iii) misappropriation of tenant security deposits (including
proceeds of tenant letters of credit), Insurance Proceeds or
Condemnation Proceeds;
(iv) failure to pay property taxes, assessments or other lienable
Impositions;
(v) failure to pay to the Lender all Rents, income and profits
(including any rent collected more than one month in advance,
or any rent for the last month of the lease term, under any
Lease in force at the time of Default), net of reasonable and
customary operating expenses, received in respect of a period
when the Loan is in Default;
(vi) removal from the Real Property of Fixtures or Personal
Property, unless replaced in a commercially reasonable manner;
(vii) the out-of-pocket expenses of enforcing the Loan Documents
following Default, not including expenses incurred after the
Borrower has agreed in writing to transfer the Real Property
to the Lender by the Lender's choice of either an uncontested
foreclosure or delivery of a deed in lieu of foreclosure;
(viii) terminating or amending a Lease in violation of the Loan
Documents; and
(ix) any liability of the Borrower under the Environmental
Indemnity Agreement.
The Lender's exculpation of the Borrower from personal liability for the
repayment of the Indebtedness evidenced by the Note shall be void without
Notice if the Borrower (A) voluntarily transfers or creates any voluntary
lien on the Property in violation of the Loan Documents, or (B) files a
voluntary petition for reorganization under Title 11 of the United States
Code (or under any other present or future law, domestic or foreign,
relating to bankruptcy, insolvency, reorganization proceedings or
otherwise similarly affecting the rights of creditors), and has not
offered, prior to the filing, to enter into the Lender's choice of either
an agreement to permit an uncontested foreclosure, or an agreement to
deliver a deed in lieu of foreclosure within sixty (60) days of the
Lender's acceptance of the offer. After the Lender accepts such an offer,
default by the Borrower in fulfilling the terms of the accepted offer
shall trigger personal liability for the entire Indebtedness. No such
offer shall be conditioned on any payment by the Lender, on the release of
any Obligor from any Obligation, or on any other concession.
22. SECURITY AGREEMENT AND FIXTURE FILING
22.1 DEFINITIONS
"Account" shall have the definition assigned in the UCC.
"Account Collateral" means all Accounts that arise from the
operation, use or enjoyment of the Property, from the commencement
of the Loan term through the satisfaction of all of the Obligations.
"Bank" shall have the definition assigned in the UCC.
"Chattel Paper" shall have the definition assigned in the UCC.
"Chattel Paper Collateral" means all Chattel Paper arising from the
sale or other disposition of all or part of the Property.
"Deposit Account" shall have the definition assigned in the UCC.
"Deposit Account Collateral" means all the Deposit Accounts into
which Rents or Proceeds are deposited at any time from the
commencement of the Loan term through the satisfaction of all of the
Obligations.
"Document" shall have the definition assigned in the UCC.
"Document Collateral" means all Documents that evidence title to all
or any part of the Goods Collateral.
"Equipment" shall have the definition assigned in the UCC.
"Equipment Collateral" means all Equipment that relates to the Real
Property and is used in the operation of the Real Property as
commercial real estate.
"Financing Statements" shall have the definition assigned in the
UCC.
"General Intangibles" shall have the definition assigned in the
UCC.
"General Intangible Collateral" means all General Intangibles that
have arisen or that arise in the future in connection with the
Borrower's ownership, operation or leasing of the Real Property, at
any time from the commencement of the Loan term through the
satisfaction of all of the Obligations.
"Goods" shall have the definition assigned in the UCC. "Goods"
include all detached Fixtures, items of Personal Property that may
become Fixtures, property management files, accounting books and
records, reports of consultants relating to the Real Property, site
plans, test borings, environmental or geotechnical surveys, samples
and test results, blueprints, construction and shop drawings, and
plans and specifications.
"Goods Collateral" means all Goods that relate to the Real Property
and are used in the operation of the Real Property as commercial
real estate.
"Instrument" shall have the definition assigned in the UCC.
"Instrument Collateral" means all Instruments received as Rents or
Proceeds or purchased by the Borrower with Rents or Proceeds.
"Investment Property" shall have the definition assigned in the UCC.
"Investment Property Collateral" means all the Investment Property
purchased using Rents or Proceeds, or received in respect of Account
Collateral.
"Letter of Credit" shall have the definition assigned in the UCC.
"Letter of Credit Collateral" means all Letters of Credit that
relate to the use, operation or enjoyment of the Property, including
those that secure the payment of any Accounts comprising Account
Collateral or arising from the sale or other disposition of all or
part of the Property.
"Letter of Credit Rights" shall have the definition assigned in the
UCC. -
"Letter of Credit Rights Collateral" means all Letter of Credit
Rights that relate to the use, operation or enjoyment of the
Property, including rights to Letters of Credit that secure the
payment of any Accounts comprising Account Collateral or arising
from the sale or other disposition of all or part of the Property.
"Money Collateral" means all money received in respect of Rents.
"Personal Property" means Account Collateral, Chattel Paper
Collateral, Commercial Tort Claim Collateral, Deposit Account
Collateral, Document Collateral, Equipment Collateral, General
Intangibles, Goods Collateral, Instrument Collateral, Investment
Property Collateral, Letter of Credit Rights Collateral, Letters of
Credit Collateral, and Money Collateral.
"Proceeds" shall have the definition assigned in the UCC.
"UCC" means the Uniform Commercial Code as adopted in Utah.
22.2 CREATION OF SECURITY INTEREST
This Deed of Trust shall be self-operative and shall constitute a
Security Agreement pursuant to the provisions of the UCC with
respect to the Personal Property. The Borrower, as debtor, hereby
grants the Lender, as secured party, for the purpose of securing the
Indebtedness, a security interest in the Account Collateral, Chattel
Paper Collateral, Commercial Tort Claim Collateral, Deposit Account
Collateral, Document Collateral, General Intangible Collateral,
Goods Collateral, Instrument Collateral, Investment Property
Collateral, Letter of Credit Rights Collateral, Letter of Credit
Collateral, and Money Collateral, in the accessions, additions,
replacements, substitutions and Proceeds of any of the foregoing
items of collateral. Upon Default, the Lender shall have the rights
and remedies of a secured party under the UCC as well as all other
rights and remedies available at law or in equity, and, at the
Lender's option, the Lender may also invoke the remedies provided
elsewhere in this Deed of Trust as to such Property. The Borrower
and the Lender agree that the rights granted to the Lender as
secured party under this Section 22 are in addition to rather than a
limitation on any of the Lender's other rights under this Deed of
Trust with respect to the Property.
22.3 FILING AUTHORIZATION
The Borrower irrevocably authorizes the Lender to file, in the
appropriate locations for filings of UCC financing statements in any
jurisdictions as the Lender in good faith deems appropriate, such
financing statements and amendments as the Lender may require in
order to perfect or continue this security interest, or in order to
prevent any filed financing statement from becoming misleading or
from losing its perfected status.
22.4 ADDITIONAL SEARCHES AND DOCUMENTATION
Borrower shall provide to Lender upon request, certified copies of
any searches of UCC records deemed necessary or appropriate by
Lender to confirm the first priority status of its security interest
in the Personal Property, together with copies of all documents or
records evidencing security interests disclosed by such searches.
22.5 COSTS
The Borrower shall pay all filing fees and costs and all reasonable
costs and expenses of any record searches (or their continuations)
as the Lender may require.
22.6 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER
(a) Ownership of the Personal Property
All of the Personal Property is, and shall during the term of
the Loan continue to be, owned by the Borrower, and is not the
subject matter of any lease, control agreement or other
instrument, agreement or transaction whereby any ownership,
security or beneficial interest in the Personal Property is
held by any person or entity other than the Borrower, subject
only to (1) the Lender's security interest, (2) the rights of
tenants occupying the Property pursuant to Leases approved by
the Lender, and (3) the Permitted Encumbrances.
(b) No Other Identity
The Borrower represents and warrants that the Borrower has not
used or operated under any other name or identity for at least
five (5) years. The Borrower covenants and agrees that
Borrower will furnish Lender with notice of any change in its
name, form of organization, or state of organization within
thirty (30) days prior to the effective date of any such
change.
(c) Location of Equipment All Equipment Collateral is located upon the Land.
(d) Removal of Goods
The Borrower will not remove or permit to be removed any item
included in the Goods Collateral from the Land, unless the
same is replaced immediately with unencumbered Goods
Collateral (1) of a quality and value equal or superior to
that which it replaces, and (2) which is located on the Land.
All such replacements, renewals, and additions shall become
and be immediately subject to the security interest of this
Deed of Trust.
(e) Proceeds
The Borrower may, without the Lender's prior written consent,
dispose of Goods Collateral in the ordinary course of
business, provided that, following the disposition, the
perfection of the Lender's security interest in the Proceeds
of the disposition will continue under ss. 9-315 (d) of the
UCC. The Borrower shall not, without the Lender's prior
written consent, dispose of any Personal Property in any other
manner, except in compliance with Subsection 22.6(d) above.
22.7 FIXTURE FILING
This Deed of Trust constitutes a financing statement filed as a
fixture filing in the Official Records of the County Recorder of
Salt Lake County, Utah with respect to any and all fixtures
comprising Property. The "debtor" is Foothill Chimney Associates
Limited Partnership, a limited partnership organized under Georgia
law, the "secured party" is Transamerica Financial Life Insurance
Company, a New York corporation, the collateral is as described in
Subsection 22.1 above and the granting clause of this Deed of Trust,
and the addresses of the debtor and secured party are the addresses
stated in Subsection 26.13 of this Deed of Trust for Notices to such
parties. The organizational identification number of the debtor is
K114285. The owner of record of the Real Property is Foothill
Chimney Associates Limited Partnership.
23. ENVIRONMENTAL MATTERS
23.1 REPRESENTATIONS
The Borrower represents as follows:
(a) No Hazardous Substances
To the best of the Borrower's knowledge and except as
disclosed in the ESA, no release of any Hazardous Substance
has occurred on or about the Real Property in a quantity or at
a concentration level that (i) violates any Environmental Law,
or (ii) requires reporting to any regulatory authority or may
result in any obligation to remediate under any Environmental
Law.
(b) Compliance with Environmental Laws
To the best of Borrower's knowledge, the Real Property and its
current use and presently anticipated uses comply with all
Environmental Laws, including those requiring permits,
licenses, authorizations, and other consents and approvals.
(c) No Actions or Proceedings
To the best of Borrower's knowledge, no governmental authority
or agency has commenced any action, proceeding or
investigation based on any suspected or actual violation of
any Environmental Law on or about the Real Property. To the
best of the Borrower's knowledge as a duly diligent property
owner, no such authority or agency has threatened to commence
any such action, proceeding, or investigation.
23.2 ENVIRONMENTAL COVENANTS
The Borrower covenants as follows:
(a) Compliance with Environmental Laws
The Borrower shall, and the Borrower shall cause all
employees, agents, contractors, and tenants of the Borrower
and any other persons present on or occupying the Real
Property to, keep and maintain the Real Property in compliance
with all Environmental Laws.
(b) Notices, Actions and Claims
The Borrower shall immediately advise the Lender in writing of
(i) any notices from any governmental or quasi-governmental
agency or authority of violation or potential violation of any
Environmental Law received by the Borrower, (ii) any and all
enforcement, cleanup, removal or other governmental or
regulatory actions instituted, completed or threatened
pursuant to any Environmental Law, (iii) all claims made or
threatened by any third party against the Borrower or the Real
Property relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous
Substances, and (iv) discovery by the Borrower of any
occurrence or condition on any real property adjoining or in
the vicinity of the Real Property that creates a foreseeable
risk of contamination of the Real Property by or with
Hazardous Substances.
23.3 THE LENDER'S RIGHT TO CONTROL CLAIMS
The Lender shall have the right (but not the obligation) to join and
participate in, as a party if it so elects, any legal proceedings or
actions initiated in connection with any Hazardous Substances and to
have its related and reasonable attorneys' and consultants' fees
paid by the Borrower upon demand.
23.4 INDEMNIFICATION
The Borrower shall be solely responsible for, and shall indemnify,
defend, and hold harmless the Lender, the Trustee, and their
respective directors, officers, employees, agents, successors and
assigns, from and against, any claim, judgment, loss, damage,
demand, cost, expense or liability of whatever kind or nature, known
or unknown, contingent or otherwise, directly or indirectly arising
out of or attributable to the use, generation, storage, release,
threatened release, discharge, disposal, or presence (whether prior
to or after the date of this Deed of Trust) of Hazardous Substances
on, in, under or about the Real Property (whether by the Borrower, a
predecessor in title, any tenant, or any employees, agents,
contractor or subcontractors of any of the foregoing or any third
persons at any time occupying or present on the Real Property),
including: (i) personal injury; (ii) death; (iii) damage to
property; (iv) all consequential damages; (v) the cost of any
required or necessary repair, cleanup or detoxification of the Real
Property, including the soil and ground water thereof, and the
preparation and implementation of any closure, remedial or other
required plans; (vi) damage to any natural resources; and (vii) all
reasonable costs and expenses incurred by the Lender or the Trustee
in connection with clauses (i) through (vi), including reasonable
attorneys' and consultants' fees; provided, however, that nothing
contained in this Section shall be deemed to preclude the Borrower
from seeking indemnification from, or otherwise proceeding against,
any third party including any tenant or predecessor in title to the
Real Property, and further provided that this indemnification will
not extend to matters caused by the Lender's gross negligence or
willful misconduct, or arising from a release of Hazardous
Substances which occurs after the Lender has taken possession of the
Real Property, so long as the Borrower has not caused the release
through any act or omission. The covenants, agreements, and
indemnities set forth in this Section shall be binding upon the
Borrower and its heirs, personal representatives, successors and
assigns, and shall survive repayment of the Indebtedness,
foreclosure of the Real Property, and the Borrower's granting of a
deed to the Real Property in lieu of foreclosure. Payment shall not
be a condition precedent to this indemnity. Any costs or expenses
incurred by the Lender or the Trustee for which the Borrower is
responsible or for which the Borrower has indemnified the Lender
shall be paid to the Lender on demand, with interest at the rate
provided for in the Note from the date incurred by the Lender until
paid in full, and shall be secured by this Deed of Trust. Without
the prior written consent of the Lender, the Borrower shall not
enter into any settlement agreement, consent decree, or other
compromise in respect to any claims relating to Hazardous
Substances. The Lender agrees that it shall not unreasonably delay
its consideration of any written request for its consent to any such
settlement agreement, consent decree, or other compromise once all
information, reports, studies, audits, and other documentation have
been submitted to the Lender.
23.5 ENVIRONMENTAL AUDITS
If a Default exists, or at any time the Lender has reason to believe
that a release of Hazardous Substances may have occurred or may be
likely to occur, the Lender may require that the Borrower retain, or
the Lender may retain directly, at the sole cost and expense of the
Borrower, a licensed geologist, industrial hygienist or an
environmental consultant acceptable to the Lender to conduct an
environmental assessment or audit of the Real Property. In the event
that the Lender makes a reasonable determination of the need for an
environmental assessment or audit, the Lender shall inform the
Borrower in writing that such a determination has been made and, if
requested to do so by the Borrower, give the Borrower a written
explanation of that determination before the assessment or audit is
conducted. The Borrower shall afford any person conducting an
environmental assessment or audit access to the Real Property and
all materials reasonably requested, subject to the rights of tenants
in possession. The Borrower shall pay on demand the cost and
expenses of any environmental consultant engaged by the Lender under
this Subsection. The Borrower shall, at the Lender's request and at
the Borrower's sole cost and expense, take such investigative and
remedial measures determined by the geologist, hygienist or
consultant to be necessary to address any condition discovered by
the assessment or audit so that (i) the Real Property shall be in
compliance with all Environmental Laws, (ii) the condition of the
Real Property shall not constitute any identifiable risk to human
health or to the environment, and (iii) the value of the Real
Property shall not be affected by the presence of Hazardous
Substances.
24. CONCERNING THE TRUSTEE
24.1 NO LIABILITY
If the Trustee or anyone acting by virtue of the Trustee's powers
enters the Real Property, the Trustee will not be personally liable
for debts contracted or for liability or damages incurred in the
management or operation of the Real Property. The Trustee will have
the right to rely on any instrument, document or signature
authorizing or supporting any action taken or proposed to be taken
by the Trustee or believed by the Trustee in good faith to be
genuine. The Trustee will be entitled to reimbursement for expenses
actually incurred by the Trustee in the performance of the Trustee's
duties and to reasonable compensation for services rendered. The
Borrower shall, from time to time, pay compensation due the Trustee
under this Deed of Trust and reimburse the Trustee for and save and
hold the Trustee harmless from and against any and all loss, cost,
liability, damage and expense whatsoever incurred by the Trustee in
the performance of the Trustee's duties.
24.2 RETENTION OF MONEY
All money received by the Trustee must, until used or applied, be
held in trust for the purposes for which it was received, but need
not be segregated in any manner from any other money (except to the
extent required by law) and the Trustee will have no liability for
interest on any money received.
24.3 SUCCESSOR TRUSTEES
The Trustee may resign by giving notice of such resignation in
writing to the Lender. If the Trustee's legal existence shall cease
or if the Trustee resigns or becomes disqualified from acting in the
execution of this Trust or fails or refuses to exercise the same
when requested by the Lender so to do or if for any reason and
without cause the Lender prefers to appoint a substitute trustee to
act instead of the original Trustee, or any prior successor or
substitute trustee, the Lender will have full power to appoint a
substitute trustee and, if preferred, several substitute trustees in
succession who shall succeed to all the estates, rights, powers and
duties of the Trustee.
24.4 SUCCESSION INSTRUMENTS
Any new Trustee appointed will, without any further act, deed or
conveyance, become vested with all the estates, properties, rights,
powers and trusts of the Trustee's predecessor. Upon the written
request of the Lender or of any successor trustee, the former
Trustee shall execute and deliver an instrument transferring to such
successor Trustee all the estates, properties, rights, powers and
trusts of the former Trustee, and shall duly assign, transfer and
deliver any of the property and money held by the former Trustee to
the successor Trustee so appointed in the former Trustee's place.
24.5 PERFORMANCE OF DUTIES BY AGENTS
The Trustee may authorize one or more parties to act on the
Trustee's behalf to perform the Trustee's ministerial functions,
including, without limitation, the transmittal and posting of any
notices.
25. SECONDARY MARKET
25.1 DISSEMINATION OF INFORMATION
In connection with any transfer of the Loan, the Lender may forward
all documents and information that the Lender deems necessary or
desirable concerning the Loan, including the financial statements of
any Obligor, and such other information as may be reasonably related
to the Obligors, the Property or the Leases to any:
(a) transferee or prospective transferee of the Loan;
(b) Rating Agency rating the Loan, a Participation, or Securities; or
(c) purchaser, transferee, assignee, servicer, participant,
investor in any Securitization and each prospective investor
and the advisor of each of the foregoing, all documents and
information which Lender now has or may hereafter acquire
relating to the Loan, to any Obligor and to the Real
Property, as Lender determines necessary or desirable.
The Borrower irrevocably waives any and all rights it may have under
applicable Legal Requirements to prohibit such disclosure, including
any right of privacy.
25.2 COOPERATION
The Borrower, any guarantor and any Carveout Obligor agree to
reasonably cooperate at no cost to Borrower or Carveout Obligor with
the Lender in connection with any transfer of the Loan or any
Participation or Securities. The Borrower agrees to provide to the
Lender or to any persons to whom the Lender may disseminate such
information, at the Lender's request, financial statements of
Obligors, an estoppel certificate and such other documents as may be
reasonably related to the Obligors, the Property, or the Leases.
25.3 ADDITIONAL FINANCIAL INFORMATION
If a decision is made to include the Loan in a Securitization and
the amount of the Loan would exceed twenty percent (20%) of the
amount estimated in good faith to be raised in the offering, the
Borrower agrees to provide, to the extent required by SEC Regulation
S-X Rule 3-14, and to the extent not previously supplied to Lender,
financial statements for the Real Property in respect of the three
(3) years prior to the Securitization. If the amount of the Loan
would exceed ten percent (10%) (but not twenty percent (20%)) of the
amount estimated in good faith to be raised by the offering, the
Borrower agrees to provide such additional property-related
financial information as the Lender may request in order to meet
then-applicable SEC rules in connection with the contemplated manner
of the offering.
25.4 RESERVES/ ESCROWS
If Participations are granted or Securities issued in connection
with the Loan, all funds held by the Lender in escrow or as reserves
in accordance with the Loan Documents may, at the Lender's
discretion, be deposited in "eligible accounts" at "eligible
institutions" and invested in "permitted investments" as then
defined and required by the Rating Agencies.
26. MISCELLANEOUS
26.1 SUCCESSORS AND ASSIGNS
All of the terms of the Loan Documents shall apply to, be binding
upon and inure to the benefit of the heirs, personal
representatives, successors and assigns of the Obligors, or to the
holder of the Note, as the case may be.
26.2 SURVIVAL OF OBLIGATIONS
Each and all of the Obligations shall continue in full force and
effect until the latest of (a) the date the Indebtedness has been
paid in full and the Obligations have been performed and satisfied
in full, (b) the last date permitted by law for bringing any claim
or action with respect to which the Lender may seek payment or
indemnification in connection with the Loan Documents, and (c) the
date on which any claim or action for which the Lender seeks payment
or indemnification is fully and finally resolved and, if applicable,
any compromise thereof of judgment or award thereon is paid in full.
26.3 FURTHER ASSURANCES
The Borrower, upon the request of the Lender or the Trustee, shall
complete, execute, acknowledge, deliver and record or file such
further instruments and do such further acts as may be reasonably
necessary to carry out more effectively the purposes of this Deed of
Trust, to subject any property intended to be covered by this Deed
of Trust to the liens and security interests it creates, to place
third parties on notice of those liens and security interests, or to
correct any defects which may be found in any Loan Document.
26.4 RIGHT OF INSPECTION
The Lender shall have the right from time to time, upon reasonable
advance notice to the Borrower and subject to the rights of tenants
in possession, to enter onto the Real Property for the purpose of
inspecting and reporting on its physical condition, tenancy and
operations.
26.5 EXPENSE INDEMNIFICATION
The Borrower shall pay all filing and recording fees, documentary
stamps, intangible taxes, and all expenses incident to the execution
and acknowledgment of this Deed of Trust, the Note or any of the
other Loan Documents, any supplements, amendments, renewals or
extensions of any of them, or any instrument entered into under
Subsection 26.3. The Borrower shall pay or reimburse the Lender,
upon demand, for all costs and expenses, including appraisal and
reappraisal costs of the Property and reasonable attorneys' and
legal assistants' fees, which the Lender may incur in connection
with enforcement proceedings under the Note, this Deed of Trust, or
any of the other Loan Documents (including all fees and costs
incurred in enforcing or protecting the Note, this Deed of Trust, or
any of the other Loan Documents in any bankruptcy proceeding), and
attorneys' and legal assistants' fees incurred by the Lender in any
other suit, action, legal proceeding or dispute of any kind in which
the Lender is made a party or appears as party plaintiff or
defendant, affecting the Indebtedness, the Note, this Deed of Trust,
any of the other Loan Documents, or the Property, or required to
protect or sustain the lien of this Deed of Trust. The Borrower
shall be obligated to pay (or to reimburse the Lender) for such
fees, costs and expenses and shall indemnify and hold the Lender and
the Trustee harmless from and against any and all loss, cost,
expense, liability, damage and claims and causes of action,
including attorneys' fees, incurred or accruing by reason of the
Borrower's failure to promptly repay any such fees, costs and
expenses. If any suit or action is brought to enforce or interpret
any of the terms of this Deed of Trust (including any effort to
modify or vacate any automatic stay or injunction, any trial, any
appeal, any petition for review or any bankruptcy proceeding), the
Lender shall be entitled to recover all expenses reasonably incurred
in preparation for or during the suit or action or in connection
with any appeal of the related decision, whether or not taxable as
costs. Such expenses include reasonable attorneys' fees, witness
fees (expert or otherwise), deposition costs, copying charges and
other expenses. Whether or not any court action is involved, all
reasonable expenses, including the costs of searching records,
obtaining title reports, appraisals, environmental assessments,
surveying costs, title insurance premiums, trustee fees, and other
reasonable attorneys' fees, incurred by the Lender that are
necessary at any time in the Lender's opinion for the protection of
its interest or enforcement of its rights shall become a part of the
Indebtedness payable on demand and shall bear interest from the date
of expenditure until repaid at the interest rate as provided in the
Note.
26.6 GENERAL INDEMNIFICATION
The Borrower shall indemnify, defend and hold the Lender harmless
against: (i) any and all claims for brokerage, leasing, finder's or
similar fees which may be made relating to the Real Property or the
Indebtedness, and (ii) any and all liability, obligations, losses,
damages, penalties, claims, actions, suits costs and expenses
(including the Lender's reasonable attorneys' fees, together with
reasonable appellate counsel fees, if any) of whatever kind or
nature which may be asserted against, imposed on or incurred by the
Lender in connection with the Indebtedness, this Deed of Trust, the
Real Property or any part thereof, or the operation, maintenance
and/or use thereof, or the exercise by the Lender of any rights or
remedies granted to it under this Deed of Trust or pursuant to
applicable law; provided, however, that nothing herein shall be
construed to obligate the Borrower to indemnify, defend and hold
harmless the Lender from and against any of the foregoing which is
imposed on or incurred by the Lender by reason of the Lender's
willful misconduct or gross negligence.
26.7 RECORDING AND FILING
The Borrower shall cause this Deed of Trust and all amendments,
supplements, and substitutions to be recorded, filed, re-recorded
and re-filed in such manner and in such places as the Lender may
reasonably request. The Borrower will pay all recording filing,
re-recording and re-filing taxes, fees and other charges.
26.8 NO WAIVER
No deliberate or unintentional failure by the Lender to require
strict performance by the Borrower of any Obligation shall be deemed
a waiver, and the Lender shall have the right at any time to require
strict performance by the Borrower of any Obligation.
26.9 COVENANTS RUNNING WITH THE LAND
All Obligations are intended by the parties to be and shall be
construed as covenants running with the Land.
26.10 SEVERABILITY
The Loan Documents are intended to be performed in accordance with,
and only to the extent permitted by, all applicable Legal
Requirements. Any provision of the Loan Documents that is prohibited
or unenforceable in any jurisdiction shall nevertheless be construed
and given effect to the extent possible. The invalidity or
unenforceability of any provision in a particular jurisdiction shall
neither invalidate nor render unenforceable any other provision of
the Loan Documents in that jurisdiction, and shall not affect the
validity or enforceability of that provision in any other
jurisdiction. If a provision is held to be invalid or unenforceable
as to a particular person or under a particular circumstance, it
shall nevertheless be presumed valid and enforceable as to others,
or under other circumstances.
26.11 USURY
The parties intend that no provision of the Note or the Loan
Documents be interpreted, construed, applied, or enforced so as to
permit or require the payment or collection of interest in excess of
the Maximum Permitted Rate. In this regard, the Borrower and the
Lender each stipulate and agree that it is their common and
overriding intent to contract in strict compliance with applicable
usury laws. Accordingly, none of the terms of this Deed of Trust,
the Note or any of the other Loan Documents shall ever be construed
to create a contract to pay, as consideration for the use,
forbearance or detention of money, interest at a rate in excess of
the Maximum Permitted Rate, and the Borrower shall never be liable
for interest in excess of the Maximum Permitted Rate. Therefore, (a)
in the event that the Indebtedness and Obligations are prepaid or
the maturity of the Indebtedness and Obligations is accelerated by
reason of an election by the Lender, unearned interest shall be
canceled and, if theretofore paid, shall either be refunded to the
Borrower or credited on the Indebtedness, as the Lender may elect;
(b) the aggregate of all interest and other charges constituting
interest under applicable laws and contracted for, chargeable or
receivable under the Note and the other Loan Documents or otherwise
in connection with the transaction contemplated thereby shall never
exceed the maximum amount of interest, nor produce a rate in excess
of the Maximum Permitted Rate; and (c) if any excess interest is
provided for or received, it shall be deemed a mistake, and the same
shall, at the option of the Lender, either be refunded to the
Borrower or credited on the unpaid principal amount (if any), and
the Indebtedness shall be automatically reformed so as to permit
only the collection of the interest at the Maximum Permitted Rate.
Furthermore, if any provision of the Note or any of the other Loan
Documents is interpreted, construed, applied, or enforced, in such a
manner as to provide for interest in excess of the Maximum Permitted
Rate, then the parties intend that such provision automatically
shall be deemed reformed retroactively so as to require payment only
of interest at the Maximum Permitted Rate. If, for any reason
whatsoever, interest paid or received during the full term of the
applicable Indebtedness produces a rate which exceeds the Maximum
Permitted Rate, then the amount of such excess shall be deemed
credited retroactively in reduction of the then outstanding
principal amount of the Indebtedness, together with interest at such
Maximum Permitted Rate. The Lender shall credit against the
principal of such Indebtedness (or, if such Indebtedness shall have
been paid in full, shall refund to the payor of such interest) such
portion of said interest as shall be necessary to cause the interest
paid to produce a rate equal to the Maximum Permitted Rate. All sums
paid or agreed to be paid to the Lender for the use, forbearance or
detention of money shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread in equal parts
throughout the full term of the applicable Indebtedness, so that the
interest rate is uniform throughout the full term of such
Indebtedness. In connection with all calculations to determine the
Maximum Permitted Rate, the parties intend that all charges be
excluded to the extent they are properly excludable under applicable
usury laws, as they from time to time are determined to apply to
this transaction. The provisions of this Section shall control all
agreements, whether now or hereafter existing and whether written or
oral, between the Borrower and the Lender.
26.12 ENTIRE AGREEMENT
The Loan Documents contain the entire agreements between the parties
relating to the financing of the Real Property, and all prior
agreements which are not contained in the Loan Documents, other than
the Environmental Indemnity Agreement, are terminated. The Loan
Documents represent the final agreement between the parties and may
not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements of the parties. There are no unwritten
oral agreements between the parties. The Loan Documents may be
amended, revised, waived, discharged, released or terminated only by
a written instrument or instruments executed by the party against
whom enforcement of the amendment, revision, waiver, discharge,
release or termination is asserted. Any alleged amendment, revision,
waiver, discharge, release or termination that is not so documented
shall be null and void.
26.13 NOTICES
In order for any demand, consent, approval or other communication to
be effective under the terms of this Deed of Trust, "Notice" must be
provided under the terms of this Subsection. All Notices must be in
writing. Notices may be (a) delivered by hand, (b) transmitted by
facsimile (with a duplicate copy sent by first class mail, postage
prepaid), (c) sent by certified or registered mail, postage prepaid,
return receipt requested, or (d) sent by reputable overnight courier
service, delivery charges prepaid. Notices shall be addressed as set
forth below:
If to the Lender:
Transamerica Financial Life Insurance Company c/o AEGON
USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-5443
Attn: Mortgage Loan Department
Reference: Loan #89539
Fax Number: (319) 369-2277
If to the Borrower:
Foothill Chimney Associates Limited Partnership 4582
South Ulster St. Parkway
Denver, Colorado 80237
Attn: Dodge McCord
Fax Number: (303) 759-8116
If to the Trustee:
Bonneville Title Company
1518 N. Woodland
Park Drive Layton, Utah 84041
Fax Number: (801) 774-5595
Notices delivered by hand or by overnight courier shall be deemed
given when actually received or when refused by their intended
recipient. Notices sent by facsimile will be deemed delivered when a
legible copy has been received (provided receipt has been verified
by telephone confirmation or one of the other permitted means of
giving Notices under this Subsection). Mailed Notices shall be
deemed given on the date of the first attempted delivery (whether or
not actually received). Either the Lender or the Borrower may change
its address for Notice by giving at least fifteen (15) Business
Days' prior Notice of such change to the other party.
26.14 COUNTERPARTS
This Deed of Trust may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall
constitute but one instrument.
26.15 CHOICE OF LAW
This Deed of Trust shall be interpreted, construed, applied, and
enforced according to, and will be governed by, the laws of Utah,
without regard to any choice of law principle which, but for this
provision, would require the application of the law of another
jurisdiction and regardless of where executed or delivered, where
payable or paid, where any cause of action accrues in connection
with this transaction, where any action or other proceeding
involving the Loan is instituted, or whether the laws of Utah
otherwise would apply the laws of another jurisdiction.
26.16 FORUM SELECTION
The Borrower agrees that the sole and exclusive forum for the
determination of any action relating to the validity and
enforceability of the Note, this Deed of Trust and the other Loan
Documents, and any other instruments securing the Note shall be
either in an appropriate court of the State of Utah or the
applicable United States District Court.
26.17 SOLE BENEFIT
This Deed of Trust and the other Loan Documents have been executed
for the sole benefit of the Borrower and the Lender and the
successors and assigns of the Lender. No other party shall have
rights thereunder or be entitled to assume that the parties thereto
will insist upon strict performance of their mutual obligations
hereunder, any of which may be waived from time to time. The
Borrower shall have no right to assign any of its rights under the
Loan Documents to any party whatsoever.
26.1 8 RELEASE OF CLAIMS
The Borrower hereby RELEASES, DISCHARGES and ACQUITS forever the
Lender and the Trustee and their officers, directors, trustees,
agents, employees and counsel (in each case, past, present or
future) from any and all Claims existing as of the date hereof (or
the date of actual execution hereof by the Borrower, if later). As
used herein, the term "Claim" shall mean any and all liabilities,
claims, defenses, demands, actions, causes of action, judgments,
deficiencies, interest, liens, costs or expenses (including court
costs, penalties, attorneys' fees and disbursements, and amounts
paid in settlement) of any kind and character whatsoever, including
claims for usury, breach of contract, breach of commitment,
negligent misrepresentation or failure to act in good faith, in each
case whether now known or unknown, suspected or unsuspected,
asserted or unasserted or primary or contingent, and whether arising
out of written documents, unwritten undertakings, course of conduct,
tort, violations of laws or regulations or otherwise.
26.19 NO PARTNERSHIP
Nothing contained in the Loan Documents is intended to create any
partnership, joint venture or association between the Borrower and
the Lender, or in any way make the Lender a co-principal with the
Borrower with reference to the Property.
26.20 PAYOFF PROCEDURES
If the Borrower pays or causes to be paid to the Lender all of the
Indebtedness, then the Trustee's interest in the Real Property shall
cease, and upon receipt by the Lender of such payment, the Lender
shall either (a) release this Deed of Trust, or (b) assign the Loan
Documents and endorse the Note (in either case without recourse or
warranty of any kind) to a takeout lender, upon payment (in the
latter case) of an administrative fee of Seven Hundred Fifty Dollars
($750).
26.21 SURVIVAL OF COMMITMENT TERMS
The Commitment shall survive the execution of this Deed of Trust and
the other Loan Documents. Any term of the Commitment that has been
inadvertently omitted from the Loan Documents is hereby incorporated
in this Deed of Trust by reference. If any term of the Commitment
conflicts with a provision of this Deed of Trust that addresses the
same subject, the terms of this Deed of Trust shall prevail. Any
provision of the Commitment which specifically states that it shall
survive the closing of the Loan shall so survive, and is hereby
incorporated in this Deed of Trust by reference.
26.22 FUTURE ADVANCES
Under this Deed of Trust, "Indebtedness" is defined to include
certain advances made by the Lender in the future. Such advances
include any additional disbursements to the Borrower (unless in
connection with another, independent mortgage financing) and any
obligations under agreements which specifically provide that such
obligations are secured by this Deed of Trust. In addition,
Indebtedness is defined to include any amounts advanced to pay
Impositions, to cure Defaults, or to pay the costs of collection and
receivership. Accordingly, all such advances and obligations shall
be equally secured with, and shall have the same priority as, the
Indebtedness, and shall be subject to all of the terms and
provisions of this Deed of Trust. The Borrower shall pay any taxes
that may be due in connection with any such future advance.
26.23 INTERPRETATION
(a) Headings and General Application
The section, subsection, paragraph and subparagraph headings
of this Deed of Trust are provided for convenience of
reference only and shall in no way affect, modify or define,
or be used in construing, the text of the sections,
subsections, paragraphs or subparagraphs. If the text
requires, words used in the singular shall be read as
including the plural, and pronouns of any gender shall include
all genders.
(b) Sole Discretion
The Lender may take any action or decide any matter under the
terms of this Deed of Trust or of any other Loan Document
(including any consent, approval, acceptance, option, election
or authorization) in its sole and absolute discretion, for any
reason or for no reason, unless the related Loan Document
contains specific language to the contrary. Any approval or
consent that the Lender might withhold may be conditioned in
any way.
(c) Result of Negotiations
This Deed of Trust results from negotiations between the
Borrower and the Lender and from their mutual efforts.
Therefore, it shall be so construed, and not as though it had
been prepared solely by the Lender.
(d) Reference to Particulars
The scope of a general statement made in this Deed of Trust or
in any other Loan Document shall not be construed as having
been reduced through the inclusion of references to particular
items that would be included within the statement's scope.
Therefore, unless the relevant provision of a Loan Document
contains specific language to the contrary, the term "include"
shall mean "include, but shall not be limited to" and the term
"including" shall mean "including, without limitation."
26.24 INDEBTEDNESS MAY EXCEED NOTE'S FACE AMOUNT
The Borrower's successors or assigns are hereby placed on Notice
that the Note contains late charge, prepayment and other provisions
which may result in the outstanding principal balance exceeding the
face amount of the Note.
26.25 JOINT AND SEVERAL LIABILITY
If there is more than one individual or entity executing this Deed
of Trust as the Borrower, liability of such individuals and entities
under this Deed of Trust shall be joint and several.
26.26 TIME OF ESSENCE
Time is of the essence of each and every covenant, condition and
provision of this Deed of Trust to be performed by the Borrower.
26.27 JURY WAIVER
THE BORROWER AND BY ITS ACCEPTANCE HEREOF, THE LENDER, HEREBY WAIVE
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE
OR DEFEND ANY RIGHTS (I) UNDER THIS DEED OF TRUST OR ANY OTHER LOAN
DOCUMENT, OR (II) ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS DEED OF TRUST OR ANY OTHER LOAN DOCUMENT, AND
THE BORROWER AND BY ITS ACCEPTANCE HEREOF, THE LENDER, AGREE THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT
BEFORE A JURY.
26.28 RENEWAL, EXTENSION, MODIFICATION AND WAIVER
The Lender, at its option, may at any time renew or extend this Deed
of Trust, the Note or any other Loan Document with Borrower's
consent. The Lender may enter into a modification of any Loan
Document or of the Environmental Indemnity Agreement without the
consent of any person not a party to the document being modified.
The Lender may waive any covenant or condition of any Loan Document
or of the Environmental Indemnity Agreement, in whole or in part, at
the request of any person then having an interest in the Property or
in any way liable for any part of the Indebtedness. The Lender may
take, release, or resort to any security for the Note and the
Obligations and may release any party primarily or secondarily
liable on any Loan Document or on the Environmental Indemnity
Agreement, all without affecting any liability not expressly
released in writing by the Lender.
26.29 CUMULATIVE REMEDIES
Every right and remedy provided in this Deed of Trust shall be
cumulative of every other right or remedy of the Lender, whether
conferred by law or by grant or contract, and may be enforced
concurrently with any such right or remedy. The acceptance of the
performance of any obligation to cure any Default shall not be
construed as a waiver of any rights with respect to any other past,
present or future Default. No waiver in a particular instance of the
requirement that any Obligation be performed shall be construed as a
waiver with respect to any other Obligation or instance.
26.30 NO OBLIGATION TO MARSHAL ASSETS
No holder of any deed of trust, security interest or other
encumbrance affecting all or any portion of the Real Property, which
encumbrance is inferior to the lien and security title of this Deed
of Trust, shall have any right to require the Lender to marshal
assets.
26.31 TRANSFER OF OWNERSHIP
The Lender may, without notice to the Borrower, deal with any person
in whom ownership of any part of the Real Property has vested,
without in any way vitiating or discharging the Borrower from
liability for any of the Obligations.
IN WITNESS WHEREOF, the Borrower has caused this Deed of Trust to be duly
executed as of the date first above written.
BORROWER:
FOOTHILL CHIMNEY ASSOCIATES LIMITED PARTNERSHIP,
a Georgia limited partnership
By: ConCap Equities, Inc., a Delaware
corporation Its General Partner
By: /s/Patti K. Fielding
Patti K. Fielding, Executive Vice President
and Treasurer
Exhibit 10.114
Loan No. 89539
$17,700,000 August 30, 2005
Secured Promissory Note
FOR VALUE RECEIVED, the undersigned, FOOTHILL CHIMNEY ASSOCIATES LIMITED
PARTNERSHIP, a Georgia limited partnership, whose address is 4582 South Ulster
St. Parkway, Denver, Colorado 80237 (the "Borrower"), promises to pay Seventeen
Million Seven Hundred Thousand Dollars ($17,700,000), together with interest
according to the terms of this Secured Promissory Note (this "Note"), to the
order of TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY, a New York corporation
(together with any future holder, the "Lender"), having an administrative office
c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E., Cedar Rapids,
Iowa 52499-5443, and a home office in Purchase, New York. Capitalized terms used
but not defined in this Note shall have the meanings assigned to them in the
Deed of Trust, as defined in Section 13 below.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at the rate of four
and seventy-two one hundredths percent (4.72%) per annum (the "Note
Rate"). Interest shall be calculated in arrears based on a 360-day year
having twelve thirty-day months. During any partial month, interest shall
accrue based on the number of actual days which elapse during the related
accrual period.
2. SCHEDULED PAYMENTS
2. 1 PREPAYMENT OF INTEREST FOR THE MONTH OF FUNDING
Unless the funding of the loan evidenced by this Note (together with
all additional charges, advances and accruals, the "Loan") occurs on
the first day of a calendar month, the Borrower shall prepay, on the
date of the funding, interest due from the date of the funding
through and including the last day of the calendar month in which
the funding occurs.
2.2 MONTHLY PRINCIPAL AND INTEREST PAYMENTS
On the first day of October, 2005, and on the first day of each
subsequent calendar month through August, 2008, the Borrower shall
pay an installment in the amount of Ninety-two Thousand Eleven and
97/100 Dollars ($92,011.79). Monthly installments of principal and
interest shall be made when due, regardless of the prior acceptance
by the Lender of unscheduled payments.
2.3 FINAL PAYMENT
The Loan shall mature on the first day of September, 2008 (the
"Maturity Date"), when the Borrower shall pay its entire principal
balance, together with all accrued interest and any other amounts
owed by the Borrower under this Note or under any of the other
documents entered into now or in the future in connection with the
Loan (the "Loan Documents").
3. LOAN TERM EXTENSION AND INTEREST RATE
3. 1 EXTENSION OPTIONS
So long as no Default exists, the Borrower may extend the term of
the Loan beyond the original Maturity Date (an "Extension") for two
(2) successive oneyear periods (each, an "Extension Period") by
exercising one of two options (each an "Extension Option"), on the
terms and subject to the conditions set forth herein.
3.2 REQUEST FOR EXTENSION AND INTEREST RATE
Prior and as a condition to exercising an Extension Option, the
Borrower must make a written request of the Lender for the Extension
and a quote for an Extension variable rate of interest (the "Quote")
no later than thirty (30) days before the original Maturity Date or,
as applicable, the expiration of the first Extension Period (if the
first Extension Option has been exercised) (the "Extension
Request"). Borrower's request shall identify the term of any LIBOR
rate to which it is requesting the interest rate during the
Extension Period ("the "Extended Note Rate") be indexed (the
"Index").
The Lender shall be obligated to issue a Quote under this Section
unless (i) the Real Property (as defined in Section 13) has suffered
a material adverse change since the closing of the Loan, (ii) the
Lender is no longer making mortgage loans similar to the Loan in
size and transaction structure, or secured by properties similar in
type and asset quality to the Real Property, or (iii) any Default
then exists, or any act, omission or circumstance exists which, with
the giving of notice or the passage of time, would result in
Default. Any Quote issued by Lender shall be at a spread above each
Index during the Extension Period and be consistent with the
Lender's then-current underwriting standards and practices for loans
that are similar to the Loan in size and transaction structure, and
that are secured by properties similar in type and asset quality to
the Real Property. The Quote shall be conclusively presumed to meet
the foregoing standard if it is consistent with then-current
institutional lending rates for similar loans and real properties.
3.3 INTEREST RATE FOR EXTENSION PERIODS
During each Extension Period, the principal balance of this Note
shall bear interest the Extended Note Rate. Interest shall be
calculated in arrears on actual days elapsed, based on a 360-day
year. During any partial month, interest shall accrue based on the
number of actual days which elapse during the related accrual
period.
3.4 PRINCIPAL AND INTEREST PAYMENT
Concurrently with each date the interest rate is adjusted pursuant
to Sections 3.2 and 3.3, the monthly principal and interest payments
shall be adjusted to reflect the adjusted Extended Note Rate and the
amortization of the outstanding balance of the Loan as of that date
based on the remainder of a twenty-five (25) year amortization
schedule that commences on the first day of the first Extension
Period and as calculated with all payments first applied against
accrued interest.
3. 5 PREPAYMENTS DURING EXTENSION PERIODS
During the Extension Period the Loan may be voluntarily prepaid in
its entirety without the assessment of a prepayment premium. Partial
prepayments during the Extension Period shall be subject to a
prepayment premium equal to the Prepayment Premium Amount defined in
Section 8 below.
3.6 COSTS
The Borrower shall pay the Lender's reasonable out-of-pocket
expenses, including, without limitation, reasonable attorneys' fees
and title insurance charges, in connection with each exercised
Extension Option, regardless of whether the Extension is effected.
Concurrently with the delivery of the Extension Request, the
Borrower shall pay to the Lender a fee of twenty-five one-hundredths
percent (.25%) of the Loan's then outstanding balance, which fee
shall be in addition to all other sums evidenced by this Note.
3.7 EXTENSION OF MATURITY DATE
For each Extension of the Loan, the Maturity Date shall be extended
by one (1) year.
4. BALLOON PAYMENT ACKNOWLEDGMENT
The Borrower acknowledges that the scheduled monthly payments referred to
in Section 2 will not amortize fully the principal sum of this Note over
its term, resulting in a "balloon" payment at maturity. Any future
agreement to extend this Note or refinance the indebtedness it evidences
may be made only by means of a writing executed by a duly authorized
officer of the Lender.
5. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When the Lender receives a monthly principal and interest payment, the
Lender shall apply it first to interest in arrears for the previous month
and then to the amortization of the principal amount of this Note, unless
other amounts are then due under this Note or the other Loan Documents. If
other amounts are due when a regular monthly payment is received, the
Lender shall apply the payment first to accrued interest and then, at its
discretion, either to those other amounts or to principal.
6. DEFAULT INTEREST
If a Default exists (as defined in Section 10 below) the outstanding
principal balance of this Note shall, at the option of the Lender, bear
interest at a rate (the "Default Rate") equal to the lesser of (i)
eighteen percent (18%) per annum, and (ii) the maximum rate allowed by
law. If interest has accrued at the Default Rate during any period, the
difference between such accrued interest and interest which would have
accrued at the Note Rate during such period shall be payable on demand. If
a court of competent jurisdiction determines that any interest charged has
exceeded the maximum rate allowed by law, the excess of the amount
collected over the legal rate of interest will be applied to the
indebtedness as a principal prepayment without premium, retroactively, as
of the date of receipt, or returned to the Borrower if the Indebtedness,
as such term is defined in the Deed of Trust, has been fully paid.
7. LATE CHARGE
If the Lender does not receive any scheduled monthly principal and
interest payment on or before the tenth (10th) day of the calendar month
in which it is due, the Lender will send the Borrower written notice that
a late charge equal to five percent (5%) of the late payment has accrued.
The Borrower shall pay any such late charge on or before the tenth (10th)
day of the calendar month following the month during which the late
payment was scheduled to have been received. Interest on unpaid late
charges shall, at the Lender's discretion, accrue at the Note Rate
beginning on the first (1st) day of the calendar month following their
accrual.
8. PREPAYMENT
This Note may be prepaid, in whole only, upon not less than sixty (60)
days' prior written notice to the Lender. At the time of any prepayment,
the Borrower shall pay all accrued interest on the principal balance of
this Note and all other sums due to the Lender under the Loan Documents.
In addition, unless the prepayment is a "Permitted Par Prepayment" (as
defined in Section 9 below), the Borrower shall remit together with any
prepayment a premium (the "Prepayment Premium Amount") equal to the
greater of (A) one percent (1%) of the prepayment, or (B) the amount (the
"Yield Protection Amount") calculated in accordance with the next
succeeding paragraph of this Note.
The Yield Protection Amount shall be calculated as follows:
First, the Lender shall determine the annual percentage yield on U.S.
Treasury securities maturing at the end of the term of the Loan (the
"Annual Treasury Instrument Yield"). The Annual Treasury Instrument Yield
shall be determined as of ten (10) Business Days (as defined in the Deed of
Trust) before the effective date of the prepayment. The Lender shall base
its determination of the Annual Treasury Instrument Yield on the yield on
U.S. Treasury instruments, as published in The Wall Street Journal (or, if
The Wall Street Journal is not then being published or if no such reports
are then being published in The Wall Street Journal, as reported in another
public source of information nationally recognized for accuracy in the
reporting of the trading of governmental securities). If no such
instruments mature on the exact maturity date of this Note, the Lender
shall interpolate the Annual Treasury Instrument Yield on a straight-line
basis using the yield on the instrument whose maturity date most closely
precedes that of this Note, and the yield on the instrument whose maturity
date most closely succeeds that of this Note.
Second, the Lender shall determine the monthly payment (the "Monthly
Reinvestment Payment"), based on a 360-day year and 30-day months, which
would be payable on a hypothetical interest-only promissory note having a
principal balance equal to the prepaid amount and bearing interest at the
rate (the "Reinvestment Rate") which, when compounded monthly, would
produce a yield equal to the Annual Treasury Instrument Yield plus 50
basis points.
Third, the Lender shall determine the hypothetical monthly interest-only
payment (based on a 360-day year and 30-day months) which would be payable
on a promissory note having a principal balance equal to the prepaid amount
and bearing interest at this Note Rate (the "Monthly Coupon Rate Payment").
Fourth, the Lender shall determine the present value of a series of
monthly payments, each equal in amount to the amount by which the Monthly
Coupon Rate Payment exceeds the Monthly Reinvestment Payment, received on
the first day of each calendar month from and including the first day of
the first full calendar month immediately following the effective date of
prepayment to and including the Maturity Date, using the Reinvestment Rate
as the discount rate.
Voluntary partial prepayments shall be prohibited.
The Prepayment Premium Amount constitutes liquidated damages to compensate
the Lender for reinvestment costs, lost opportunity costs, and the loss by
the Lender of its bargained-for investment in the Loan. The Borrower
agrees that such liquidated damages are not a penalty but are a reasonable
estimate in good faith of the actual damages sustained by the Lender as a
result of such prepayment, which actual damages are impossible to
ascertain with precision.
9. PERMITTED PAR PREPAYMENTS
The Lender shall not charge a prepayment premium on certain prepayments
(the "Permitted Par Prepayments"). Permitted Par Prepayments include:
(a) any prepayment in full of the Loan made no more than twelve
(12) months before the Maturity Date;
(b) any prepayment made as the result of the Lender's election to
apply insurance or condemnation proceeds to the principal
balance of this Note; and
(c) any voluntary prepayment of the entire Loan made during
either Extension Period.
10. DEFAULT
A default on this Note ("Default") shall exist if (a) the Lender fails to
receive any required installment of principal and interest on or before
the tenth (10th) day of the calendar month in which it is due, (b) the
Borrower fails to pay the matured balance of this Note on the Maturity
Date, or (c) a "Default" exists as defined in any other Loan Document. If
a Default exists and the Lender engages counsel to collect any amount due
under this Note or if the Lender is required to protect or enforce this
Note in any probate, bankruptcy or other proceeding, then any expenses
incurred by the Lender in respect of the engagement, including the
reasonable fees and reimbursable expenses of counsel and including such
costs and fees which relate to issues that are particular to any given
proceeding, shall constitute indebtedness evidenced by this Note, shall be
payable on demand, and shall bear interest at the Default Rate. Such fees
and expenses include those incurred in connection with any action against
the Borrower for a deficiency judgment after a trustee's sale of the Real
Property under the Deed of Trust (defined below), including all of the
Lender's reasonable attorneys' fees, property appraisal costs and witness
fees. Such fees and costs, if incurred after a trustee's sale, shall not
be secured by the Deed of Trust.
11. ACCELERATION
If a Default exists, the Lender may, at its option, declare the unpaid
principal balance of this Note to be immediately due and payable, together
with all accrued interest on the indebtedness, all costs of collection
(including reasonable attorneys' fees and expenses) and all other charges
due and payable by the Borrower under this Note or any other Loan
Document. If the subject Default has arisen from a failure by the Borrower
to make a regular monthly payment of principal and interest, the Lender
shall not accelerate the indebtedness unless the Lender shall have given
the Borrower at least three (3) Business Days' advance notice of its
intent to do so. If the subject Default is a "Curable Nonmonetary Default"
as defined in the Deed of Trust, the Lender shall exercise its option to
accelerate only by delivering notice of acceleration to the Borrower. The
Lender shall not deliver any such notice of acceleration until (a) the
Borrower has received any required notice of the prospective Default, and
(b) any applicable cure period has expired.
Except as expressly described in this Section, no notice of acceleration
shall be required in order for the Lender to exercise its option to
accelerate the indebtedness in the event of Default.
12. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the indebtedness evidenced by
this Note shall be presumed to be an attempt to avoid the provisions of
Section 8 of this Note, which prohibit prepayment or condition the
Lender's obligation to accept prepayment on the payment of a prepayment
premium. Accordingly, if the indebtedness is accelerated, any amounts
tendered to repay the accelerated indebtedness, or realized by the Lender
through its remedies following acceleration, shall be subject to the
prepayment premium that would have been applicable under Section 8
(calculated from the date of acceleration through the Maturity Date).
13. SECURITY
This Note is secured by a Deed of Trust, Security Agreement and Fixture
Filing (the "Deed of Trust") granted by the Borrower to Bonneville Title
Company, the Trustee, for the benefit of the Lender, conveying certain
real property (the "Real Property") located in Salt Lake City, Salt Lake
County, Utah, and granting a security interest in certain fixtures and
personal property, and by an Absolute Assignment of Leases and Rents made
by the Borrower to the Lender, assigning the landlord's interest in all
present and future leases (the "Leases") of all or any portion of the Real
Property encumbered by the Deed of Trust. Reference is made to the Loan
Documents for a description of the security and rights of the Lender. This
reference shall not affect the absolute and unconditional obligation of
the Borrower to repay the Loan in accordance with its terms.
14. RECOURSE TO BORROWER
The Lender agrees that it shall not seek to enforce any monetary judgment
with respect to the indebtedness evidenced by this Note against the
Borrower except through recourse to the Property (as defined in the Deed
of Trust), unless the obligation from which the judgment arises is one of
the "Carveout Obligations" defined in Section 15.
15. CARVEOUT OBLIGATIONS
The "Carveout Obligations" are (a) the obligation to repay any portion of
the indebtedness evidenced by this Note that arises from any of the
"Carveouts" (as defined below), (b) the obligation to repay the entire
indebtedness evidenced by this Note, if the Lender's exculpation of the
Borrower from personal liability under this Section has become void as set
forth below, (c) the obligation to indemnify the Lender in respect of its
actual damages suffered in connection with any of the Carveouts, and (d)
the obligation to defend and hold the Lender harmless from and against any
claims, judgments, causes of action or proceedings arising from any of the
Carveouts. The "Carveouts" are:
(i) fraud or material written misrepresentation;
(ii) waste of the Property (which shall include damage, destruction
or disrepair of the Real Property caused by a willful act or
grossly negligent omission of the Borrower, but shall exclude
ordinary wear and tear in the absence of gross negligence);
(iii) misappropriation of tenant security deposits (including
proceeds of tenant letters of credit), Insurance Proceeds or
Condemnation Proceeds;
(iv) failure to pay property taxes, assessments or other lienable
Impositions;
(v) failure to pay to the Lender all Rents, income and profits
(including any rent collected more than one (1) month in
advance, or any rent for the last month of the lease term,
under any Lease in force at the time of Default), net of
reasonable and customary operating expenses, received in
respect of a period when the Loan is in Default;
(vi) removal from the Real Property of Fixtures or Personal
Property, unless replaced in a commercially reasonable manner;
(vii) the out-of-pocket expenses of enforcing the Loan Documents
following Default, not including expenses incurred after the
Borrower has agreed in writing to transfer the Real Property
to the Lender by the Lender's choice of either an uncontested
foreclosure or delivery of a deed in lieu of foreclosure;
(viii) terminating or amending a Lease in violation of the Loan
Documents; and
(ix) any liability of the Borrower under the Environmental
Indemnity Agreement (as defined in the Deed of Trust).
The Lender's exculpation of the Borrower from personal liability for the
repayment of the Indebtedness evidenced by this Note shall be void without
Notice if the Borrower (A) voluntarily transfers or creates any voluntary
lien on the Property in violation of the Loan Documents, or (B) files a
voluntary petition for reorganization under Title 11 of the United States
Code (or under any other present or future law, domestic or foreign,
relating to bankruptcy, insolvency, reorganization proceedings or
otherwise similarly affecting the rights of creditors), and has not
offered, prior to the filing, to enter into the Lender's choice of either
an agreement to permit an uncontested foreclosure, or an agreement to
deliver a deed in lieu of foreclosure within sixty (60) days of the
Lender's acceptance of the offer. After the Lender accepts such an offer,
default by the Borrower in fulfilling the terms of the accepted offer
shall trigger personal liability for the entire Indebtedness. No such
offer shall be conditioned on any payment by the Lender, on the release of
any Obligor from any Obligation, or on any other concession.
16. SEVERABILITY
If any provision of this Note is held to be invalid, illegal or
unenforceable in any respect, or operates, or would if enforced operate to
invalidate this Note, then that provision shall be deemed null and void.
Nevertheless, its nullity shall not affect the remaining provisions of
this Note, which shall in no way be affected, prejudiced or disturbed.
17. WAIVER
Except to the extent that such rights are expressly provided in this Note,
the Borrower waives demand, presentment for payment, notice of intent to
accelerate, notice of acceleration, protest, notice of protest, dishonor
and of nonpayment and any and all lack of diligence or delays in
collection or enforcement of this Note. Without affecting the liability of
the Borrower under this Note, the Lender may release any of the Property,
grant any indulgence, forbearance or extension of time for payment, or
release any other person now or in the future liable for the payment or
performance of any obligation under this Note or any of the Loan
Documents.
The Borrower further (a) waives any homestead or similar
exemption; (b) waives any statute of limitation; (c) agrees that the
Lender may, without impairing any future right to insist on strict and
timely compliance with the terms of this Note, grant any number of
extensions of time for the scheduled payments of any amounts due, and may
make any other accommodation with respect to the indebtedness evidenced by
this Note; (d) waives any right to require a marshaling of assets; and (e)
to the extent not prohibited by applicable law, waives the benefit of any
law or rule of law intended for its advantage or protection as a debtor or
providing for its release or discharge from liability under this Note,
excepting only the defense of full and complete payment of all amounts due
under this Note and the Loan Documents.
18. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the number and
gender in which they are used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine,
feminine, or neuter, as the context or sense of this Note or any paragraph
or clause herein may require, the same as if such word had been fully and
properly written in the correct number and gender.
19. WAIVER OF JURY TRIAL
THE BORROWER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (A) UNDER THIS NOTE OR ANY
OTHER LOAN DOCUMENT, OR (B) ARISING FROM ANY LENDING RELATIONSHIP EXISTING
IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND THE BORROWER
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE
AND NOT BEFORE A JURY.
20. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against the money,
securities, or other property of the Borrower given to the Lender by law,
the Lender shall have a lien upon and a right of setoff against all money,
securities, and other property of the Borrower, now or hereafter in
possession of or on deposit with the Lender, whether held in a general or
special account or deposit, or safe-keeping or otherwise, and, following a
Default, every such lien and right of setoff may be exercised without
demand upon, or notice to the Borrower. No lien or right of setoff shall
be deemed to have been waived by any act or conduct on the part of the
Lender, or by any neglect to exercise such right of setoff or to enforce
such lien, or by any delay in so doing, and every right of setoff and lien
shall continue in full force and effect until such right of setoff or lien
is specifically waived or released by an instrument in writing executed by
the Lender.
21. COMMERCIAL LOAN
The Borrower hereby represents and warrants to the Lender that the Loan
was made for commercial or business purposes, and that the funds evidenced
by this Note will be used solely in connection with such purposes.
22. REPLACEMENT OR BIFURCATION OF NOTE
If this Note is lost or destroyed, the Borrower shall, at the Lender's
request, execute and return to the Lender a replacement promissory note
identical to this Note, provided the Lender delivers to the Borrower an
affidavit to the foregoing effect. Upon delivery of the executed
replacement Note, the Lender shall indemnify the Borrower from and against
its actual damages suffered as a result of the existence of two Notes
evidencing the same obligation. No replacement of this Note under this
Section shall result in a novation of the Borrower's obligations under
this Note. In addition, the Lender may at its sole and absolute discretion
require, at no cost to Borrower, that the Borrower execute and deliver two
separate promissory notes, which shall replace this Note as evidence of
the Borrower's obligations. The two replacement notes shall, taken
together, evidence the exact obligations set forth in this Note. The
replacement notes shall be independently transferable. If this Note is so
replaced, the Lender shall return this Note to the Borrower marked to
evidence its cancellation.
23. GOVERNING LAW
This Note shall be construed and enforced according to, and governed by,
the laws of Utah without reference to conflicts of laws provisions which,
but for this provision, would require the application of the law of any
other jurisdiction.
24. TIME OF ESSENCE
In the performance of the Borrower's obligations under this Note, time is
of the essence.
25. NO ORAL AGREEMENTS
THIS NOTE AND ALL THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE
AGREEMENT OF THE BORROWER AND THE LENDER
AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS
AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE LOAN AND MAY
NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE BORROWER AND THE LENDER.
THERE ARE NO ORAL AGREEMENTS BETWEEN THE BORROWER AND THE LENDER. THE
PROVISIONS OF THIS NOTE AND THE OTHER LOAN DOCUMENTS MAY BE AMENDED OR
REVISED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE BORROWER AND THE
LENDER.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed as of
the date first above written.
BORROWER:
FOOTHILL CHIMNEY ASSOCIATES LIMITED
PARTNERSHIP, a Georgia limited partnership
By: ConCap Equities, Inc., a
Delaware corporation Its
General Partner
By: /s/Patti K. Fielding
Patti K. Fielding, Executive Vice
President and Treasurer