altman
development
corporation
VIA FACSIMILE-& FEDERAL EXPRESS
December 14, 1995
Krupp Insured Plus - III Limited Partnership
c/o Krupp Mortgage Corporation
Harbor Plaza
470 Atlantic Avenue
Boston, Mass. 02210
Attention: Ms. Peggy DeMuth
Re: Royal Palm Place, Ltd.
Dear Peggy:
Attached is a signed executed copy of the Amended and Restated
Subordinated
Promissory Note with Exhibits A and B for Royal Palm Place dated
December 1, 1995.
If you have any questions, please call me at your earliest convenience.
Sincerely,
ROYAL PALM PLACE, LTD.
By: ALTMAN DEVELOPMENT CORPORATION
General Partner
By:
Joel L. Altman, President
cc to Jeffrey Deutch
cc to George L. Dave
Attachments
2201 corporate blvd., n.w., suite 200, boca raton, florida 33431 (407)
997-8661
AMENDED AND RESTATED
SUBORDINATED PROMISSORY NOTE
FOR VALUE RECEIVED, ROYAL PALM PLACE, LTD., a Florida limited
partnership, having an address at c/o Altman Development Corporation,
2201 Corporate Blvd., Suite 200, Boca Raton, Florida 33431 (hereinafter
referred to as the "Maker" or the "Mortgagor") has made and executed
this Amended and Restated Subordinated Promissory Note (the "Amended and
Restated Subordinated Note") payable to KRUPP INSURED PLUS - III LIMITED
PARTNERSHIP, or order, with offices c/o Berkshire Mortgage Finance
Corporation, Harbor Plaza, 470 Atlantic Avenue, Boston, Massachusetts
02110 (hereinafter, together with its and their successors and assigns,
referred to as the "Holder").
RECITALS
A. The Maker previously executed a Subordinated Promissory
Note dated March 20, 1991, made payable to Holder which Subordinated
Promissory Note was modified by a Modification Agreement dated March 20,
1991 (hereinafter, collectively referred to as the "Original Subordinate
Note".) This Amended and Restated Subordinate Note amends and restates
the Original Subordinate Note. All accrued but unpaid interest under the
Original Subordinate Note shall be payable as provided herein.
B. The Maker has obtained from First Interstate Commercial
Mortgage Company, a Delaware corporation (hereinafter, together with its
successors and assigns, referred to as the "First Mortgagee") a loan in
the original principal amount of Twenty-Two Million and No/100 Dollars
($22,000,000) (the "First Mortgage Loan") which First Mortgage Loan was
assigned to the Federal National Mortgage Association with respect to
Royal Palm Place Apartments, a 377-unit housing project (the "Project")
located in the City of Kendall, Florida, upon certain real property more
particularly described in Exhibit "A" to the Subordinated Mortgage
(hereinafter defined) securing this Amended and Restated Subordinated
Note.
C. The First Mortgage Loan is evidenced by a certain
Multifamily Note (the "First Mortgage Note") from the Maker to the First
Mortgagee, which First Mortgage Note was modified on December 1, 1995,
and is secured by a certain mortgage (the "First Mortgage").
D. The First Mortgage Loan was funded through the sale to the
Holder of a mortgage backed security (the "Project MBS"). The interest
rate on the First Mortgage Loan and the Project MBS were below
prevailing interest rates for comparable loans and securities and the
lower interest rates inured to the benefit of the Maker. The Holder was
unwilling to acquire the Project MBS unless the Maker agreed to enter
into the Original Subordinated Note.
E. The Holder has entered into a Participation Agreement with
Krupp Insured Plus - I Limited Partnership whereby the Holder
transferred, assigned and conveyed a 27.3693546% interest in the Project
MBS and the Original Subordinated Note.
NOW, THEREFORE, in consideration of the foregoing and one
dollar and other good and valuable consideration in hand paid, the
receipt and sufficiency of which-is hereby acknowledged, subject to the
requirements specified in Paragraph 3 hereof, the Maker promises to pay
to Holder or order on April 1, 2006 (the "Maturity Date"), if not sooner
paid, as provided below, all those sums as more particularly described
herein.
1. Payment of Additional Interest. The Maker covenants and agrees to pay
the Holder from the date hereof "Additional Interest" which shall mean
and include the greater of "Minimum Additional Interest" or "Shared
Income Interest" as defined below in subparagraphs A and B, and in
addition, "Shared Appreciation Interest" as defined in Subparagraph C.
A. Minimum Additional Interest. "Minimum Additional Interest"
shall mean and include interest from April 1, 1993, at the rate of
one-half percent (.5%) per annum calculated on the unpaid principal
balance of the First Mortgage Note. Minimum Additional Interest shall be
deemed earned beginning April 1, 1993 and on the first day of each month
thereafter, and shall accrue and be payable in cash annually commencing
on the first day of January 1996, and on the first day of each
succeeding January of each calendar year thereafter ("Annual Payment
Date") until the entire balance of the First Mortgage Note has been paid
subject to the provisions of Paragraph 3.A. and the limitations
described below in this Paragraph 1. Any owed but unpaid amounts shall
be accrued and paid upon any future annual installment or pursuant to
Paragraph 1.F.
B. Shared Income Interest. "Shared Income Interest" shall mean
and include thirty percent (30%) of "Gross Rental Income", as defined
below, actually received by the Maker during the annual period of
calculation in excess of $3,275,004 (the "Annual Base Income") during
the first calendar year and each-succeeding calendar year thereafter.
For purposes of this Amended and Restated Subordinated Note, "Gross
Rental Income" shall include all cash, notes or other things of value
and any and all other consideration, direct or indirect, laundry income,
parking income, and all other income from whatever source received in
connection with the ownership and operation of the Project, except for:
(a) proceeds of refinancing; (b) casualty insurance, flood insurance,
condemnation proceeds; and (c) capital contributions to the Maker. Such
Shared Income Interest shall be deemed earned beginning on the first day
of the first calendar month-following the execution of this Amended and
Restated Subordinated Note and on the first day of each month
thereafter, and shall accrue and be payable in arrears in cash annually
on each Annual Payment Date thereafter so long as this Amended and
Restated Subordinated Note is outstanding, subject to the provisions of
Paragraph 3.A. and the limitations described below in this Paragraph 1.
Any owed but unpaid amounts shall be accrued and paid upon any future
annual installment or pursuant to Paragraph 1.F.
Notwithstanding the foregoing obligation of the Maker to pay
the greater of Minimum Additional Interest or Shared Income Interest,
with respect to the any Annual period, the Maker shall not pay more than
the lesser of:
(i) Thirty percent (30%) of Gross Rental Income actually received by The
Maker with respect to such annual period, less the Annual Base Income
in-such annual period; or
(ii) Fifty percent (50%) of the Project's net income ("Net Income").
"Net Income" shall mean Gross Rental Income for the applicable period
less payments for ordinary and necessary operating expenses, taxes,
deposits to a reserve for replacement escrow and debt service applicable
to the modified First Mortgage Note as described below. Debt service for
the purpose of calculating Net Income shall consist of the following:
interest-only payments paid in accordance with the modified
First Mortgage Note for such applicable period; and
in any applicable period in which a paydown of principal of the
First Mortgage Loan occurs in accordance with the terms of the modified
First Mortgage Note, an amount equal to the principal amortization for
such period that would have been paid under the original terms of the
First Mortgage Note had it not been modified. An amortization schedule
following the original terms of the First Mortgage Note is attached as
Exhibit B.
Furthermore, Gross Rental Income shall not be reduced by any payments
for expenses, replacement or capital items which are reimbursed through
a reserve for replacement escrow held by the First Mortgagee.
Any owed but unpaid amounts shall be accrued and paid upon any future
annual installment or pursuant to Paragraph 1.F.
C. Shared Appreciation Interest. "Shared Appreciation
Interest" shall mean and include thirty percent (30%) of the excess of
the "Value", as defined below, over the "Base Value", as defined below,
of the Project until the first to occur of (i) a "Sale of the Project",
as defined below, to an unrelated third party or parties; (ii) the
Maturity Date determined in accordance with the terms of this Amended
and Restated Subordinated Note; or (iii) prepayment of this Amended and
Restated Subordinated Note in accordance with its term.
The "Value" of the Project shall equal all consideration paid
in connection with the Sale of the Project, including the stated
purchase price, cash, notes, any indebtedness assumed and/or to which
the Project is then subject, interest on any deferred portion of the
purchase price and the value of any and all other consideration, direct
or indirect, and whether paid to the Maker or to any other period or
party, but excluding to the extent paid by Maker, the following: (i)
prorations and reasonable selling expenses, including reasonable
independent
third party broker's commissions, (ii) title searches, (iii) survey
costs, and (iv) recording costs, escrowed charges and transfer taxes.
The term "Base Value" shall mean $23,200,000 less all eminent
domain or
condemnation awards, or damages and casualty insurance proceeds received
by the Maker prior to the Maturity Date which are not applied to the
restoration of the Project. Base Value may not be less than the original
principal balance of the First Mortgage.
The term "Sale of the Project" shall mean any sale, transfer,
conveyance,
assignment, exchange, liquidation or other disposition to an unrelated
third party for value of substantially all of the Project or
substantially all of the interests in the Mortgagor entity. Unless the
Holder hereof gives written approval, any sale to a "Related Party" or
"Affiliate" shall not be Sale of the Project. A "Related Party"
includes, without limitation, any spouse, brother, sister, parent, child
or grandchild of the Maker or principal of the Maker. An "Affiliate"
means, as to the Maker, any individual or entity (i) that directly or
indirectly controls or is controlled by or is under common control with
the Maker, (ii) that is an officer of, partner in or trustee, or with
respect to which the Maker serves in a similar capacity, or (iii) that
is the beneficial owner, directly or indirectly, of 10% or more of any
class of equity securities of the Maker or of which the Maker is an
officer, partner or trustee, or with respect to which the Maker serves
in a similar capacity, or (iii) that is the beneficial owner, directly
or indirectly, of 10% or more of any class of equity securities of the
Maker or of which the Maker is directly or indirectly the owner of 10%
or more of any class of equity securities.
If there has been no Sale of the Project, the Value of the
Project shall be
determined by an appraisal of the Project, prepared within sixty (60)
days prior to the Maturity Date or the date of voluntary prepayment of
this Amended and Restated Subordinated Note by the Maker. The appraisal
shall be prepared by a qualified M.A.I. appraiser selected by Holder.
The determination of appraised value shall be based, in part,
upon the assumption that the rental income from or with respect to the
Project is based on the then prevailing market rates for comparable
rental space in the same vicinity as the Project even if the actual rent
then being paid by lessees thereon is less. The appraisal shall specify
the Value of the Project assuming that the said First Mortgage Loan may
not be assumed;
The purpose of appraisal of the Project shall be to estimate
the market value of the fee simple interest, as- unencumbered of the
Project at current occupancy as of the date of the appraisal. The
definition of market value is the highest price in terms of money which
a property will bring in a competitive and open market under all
conditions requisite to a fair sale, the buyer and seller, each acting
prudently, knowledgeably and assuming the price is not affected by undue
stimulus. The determination of market value shall be based, in part,
upon the assumption that the rental income from or with respect to the
Project is based on the then prevailing market rates, for comparable
rental space in the same vicinity as the Project, even if the actual
rent then being paid by lessees thereon is less. The determination of
market value shall be based, in part, upon a determination by the
appraiser of the Project's highest and best use, which may include the
value of the Project assuming conversion to condominium or cooperative
ownership, provided, however, that it can be proven that there exists a
viable market for condominium or cooperative conversions in the area
where the Project is located and taking into account an allowance for
reasonable costs incurred in connection with such conversion.
In the event the Maker does not agree with the appraisal, the
Maker must notify the Holder within three business days after receipt
thereof, and it may arrange for another appraisal of the project by a
qualified MAI appraiser, which appraisal must be completed within sixty
(60) days of receipt of the first appraisal.
In the event the Holder does not agree with the appraisal
which is obtained by the Maker, and the Holder and the Maker is unable
to agree upon the Value, the Holder must notify the Maker within three
(3) business days after the receipt thereof, and the Holder may arrange
for another appraisal of the Project by a qualified MAI appraiser to be
selected jointly by the two appraisers who made the prior appraisals,
which appraisal must be completed within thirty (30) days. The Value
established pursuant to this third appraisal shall be binding upon the
Maker and the Holder
The cost of the first appraisal shall be borne by the Maker. The
cost of all
subsequent appraisals shall be shared equally by Holder and the Maker.
D. Shared Appreciation Interest under subparagraph C shall be
deemed earned and shall be payable (i) on the date of Sale of the
Project; (ii) on the Maturity Date; or (iii) upon a prepayment of this
Amended and Restated Subordinated Note, whichever first occurs, and
further, such Shared Appreciation Interest is payable only to the extent
that it exceeds any prepayment premium paid under Paragraph 4.
E. Notwithstanding the foregoing, in the event of default by
Maker under this Amended and Restated Subordinated Note or the
Subordinated Mortgage securing this Amended and Restated Subordinated
Note, and upon Holder's election, in its sole discretion, to accelerate
all amounts due hereunder-and under the Subordinated-Mortgage, Holder
shall obtain-the appraisal, described in Subparagraph C, within one
hundred twenty (120) days after Holder's election so to accelerate, and
the Shared Appreciation Interest, if any, due Holder as a result of such
appraisal shall be due and payable within ten (10) days after a copy of
the completed appraisal is delivered to Maker
F. Notwithstanding the provisions contained in Paragraph l(c)
above providing for the payments of Additional Interest, upon the
earliest to occur of (i) the date of Sale of the Project; (ii) the
prepayment of this Amended and Restated Subordinated Note; or (iii) the
Maturity Date, Maker expressly understands and agrees to pay to the
Holder the aggregate amount of all accrued and unpaid Additional
Interest payable hereunder, provided that the aggregate amount of
Additional Interest shall not exceed fifty percent (50%) of any
difference between the Value and the Base Value of the Project (the
Value and the Base Value of the
Project to be calculated for purposes of this Paragraph 1.F. in the same
manner as provided in Paragraph 1 .C.).
2. Payment of First Mortgage Loan.
The Maker covenants and agrees to pay all sums due or required
to be paid under the terms of the First Mortgage Note and the First
Mortgage prior to making any payments due hereunder.
3. Additional Requirements.
A. So long as the First Mortgage Note is held in trust in
connection with the Project MBS, the Maker shall have no right or
obligation to make any payments or prepayments hereunder from the income
from the Project unless at the time of such payment or prepayment, the
income generated by the Project is sufficient to pay in a timely manner
the Project's necessary and reasonable expenses, reserves for
replacement and all other amounts due and payable under the First
Mortgage Note and the First Mortgage. Nothing contained herein is
intended to relieve or modify the obligations of Maker to pay any and
all sums due on or under the terms of the First Mortgage Note and the
First Mortgage. Any Additional Interest or other sums not paid in any
year because of the restrictions imposed by this subparagraph A shall
continue to accrue without interest thereon and shall be paid in
subsequent years as provided above. All such unpaid sums shall be added
to the amount of accrued Additional Interest payable under Paragraph 1.
B. Nothing in this Amended and Restated Subordinated Note is
intended to alter or conflict with the terms, conditions, and provisions
of the First Mortgage Note or the First Mortgage. In the event of any
conflict or inconsistency between the terms of this Amended and Restated
Subordinated Note-or the Subordinated Mortgage-and the terms of the
First Mortgage Note or the First Mortgage, the provisions of the First
Mortgage Note or the First Mortgage shall control, and the terms of this
Amended and Restated Subordinated Note or the Subordinated Mortgage
shall be deemed amended so as not to conflict with or alter such First
Mortgage Note or First Mortgage, so long as the First Mortgage has not
been released.
C. In the event of a monetary default or pending default under
any of the terms of the First Mortgage Note and/or the First Mortgage,
as reasonably determined by the First Mortgagee, no payments will be
made or accepted under this Amended and Restated Subordinated Note or
under the Subordinated Mortgage without the First Mortgagee's prior
written consent
D. This Amended and Restated Subordinated Note shall not be
modified or amended without the First Mortgagee's prior written consent.
E. In the event that the Holder receives any payment or other
distribution of any kind from the Maker or from any other source
whatsoever with respect to the subordinated debt evidenced hereby, other
than as permitted under this Amended and Restated Subordinated Note or
under the Subordinated Mortgage, such payment or other distribution
shall be received in trust for the First Mortgagee and promptly turned
over to the First Mortgagee.
F. Any default or breach hereunder also shall constitute a
breach and default under the First Mortgage Note and the First Mortgage,
and upon the occurrence thereof, the First Mortgagee shall have the
right to exercise any of the remedies to which it is entitled under the
First Mortgage Note and the First Mortgage.
G. This Amended and Restated Subordinated Note shall not be
negotiated, assigned or otherwise transferred without the prior written
approval of the First Mortgagee.
H. The Holder shall not, without the prior written approval
of the First Mortgagee, commence or join with any other creditor in
commencing any bankruptcy, reorganization or insolvency proceedings with
respect to the Maker.
I. In the event of a condemnation which results in a payment
by the condemning body for any portion of the Project, or in the event
any proceeds are received from any casualty loss covered by insurance,
such condemnation proceeds or casualty loss proceeds shall be paid only
to the First Mortgagee, and only upon the full satisfaction of the First
Mortgage Note and the First Mortgage, shall the Holder receive payment
from the remainder-of such proceeds.
J. In the event of a default hereunder, the Holder agrees
that it shall not, without the prior written consent of the First
Mortgagee, commence foreclosure proceedings or any other proceedings to
enforce collection or-enforce its lien evidenced by the
Subordinated-Mortgage.
4. Prepayment. This Amended and Restated Subordinated Note may not be
prepaid, in whole or in part, for a term of one (1) year from the date
hereof. After one (1) year, the Maker shall have the right to prepay
this Amended and Restated Subordinated Note in whole, provided that the
First Mortgage Note is also prepaid in whole, as follows: if the Maker
prepays this Amended and Restated Subordinated Note during the second
through the ninth year, the Maker shall pay to Holder a prepayment
penalty equal to nine percent (9%) of the unpaid principal amount of the
First Mortgage Note as of the day immediately preceding the prepayment
date of the First Mortgage Note; and if the Maker prepays during the
tenth year, the Maker shall pay a prepayment penalty equal to one
percent (1 %) of the unpaid principal amount of the First Mortgage Note
as of the day immediately preceding the prepayment date of the First
Mortgage Note. On the date of a prepayment in whole, the Maker shall pay
to the Holder all Additional Interest to be paid hereon. Any prepayment
shall be made only after not less than ninety (90) days nor more than
one hundred eighty (180) days prior written notice from the Maker to the
Holder and to the First Mortgagee of Maker's intention to prepay.
Notwithstanding anything contained herein to the contrary, in the event
that the Maker prepays the First Mortgage Note, the Maker shall be
required to also prepay this Amended and Restated Subordinated Note,
together with the prepayment penalties set forth herein.
Notwithstanding-anything herein contained to the contrary,
there shall be no prepayment premium due as a result of the application
of (i) insurance proceeds; (ii) condemnation proceeds; (iii) the funds
held with regard to the Achievement Escrow, as defined in the First
Mortgage loan documents, or any paydowns of the outstanding principal
balance of the First Mortgage Loan scheduled under the modified First
Mortgage Note.
Notwithstanding anything to the contrary regarding the
payment of Additional Interest and the 9% penalty upon prepayment of the
Amended and Restated Subordinated Note as provided above (the "KIP"
Penalty"), the Maker shall pay to Holder as follows:
a. For purposes of this Paragraph 4, fifty percent (50%) of
the difference between the Value and the Base Value of the Project upon
the earliest to occur of (i) the date of Sale of the Project; (ii) the
prepayment of the Amended and Restated Subordinated Note; or (iii) the
Maturity Date, shall be referred to as the Maximum Additional Interest
Payment.
b. In the event that the KIP Penalty is equal to or exceeds
the Maximum Additional Interest Payment, no accrued and unpaid
Additional Interest will be owed to Holder.
c. In the event the KIP Penalty is less than the Maximum
Additional Interest Payment, the aggregate amount of any accrued and
unpaid Additional Interest is payable only to the extent that the sum of
such accrued and unpaid Additional Interest and the KIP Penalty does not
exceed the Maximum Additional Interest Payment.
d. Upon the earliest to occur of (i) the date of Sale of the
Project; (ii) the
prepayment of the Amended and Restated Subordinated Note; or
(iii) the Maturity Date, if prepayment penalty is due from Maker to
First Mortgagee Holder under the First Mortgage Loan (the "First
Mortgage Penalty"), Holder agrees to pay to First Mortgagee, on behalf
of Maker, (i) fifty percent (50%) of the First Mortgage Penalty, and
(ii) if any, the amount of which the KIP Penalty received rom Maker by
Holder exceeds the Maximum Additional Interest Amount, but not in
excess of the First Mortgage Penalty. An example is attached as Exhibit
"A".
5. Late Payment. If the Maker fails to make any payment of any amounts
payable
under this Amended and Restated Subordinated Note or the Subordinated
Mortgage on or before the fifteenth (15th) day of the month during which
such payment is due, the Holder may, at its option, impose a late charge
upon the Maker not to exceed four cents ($0.04) on each dollar so
delinquent.
6. General Provisions.
A. It is the intention and agreement of the parties that the
Additional Interest payable hereunder be an additional charge for the
principal sum advanced by the Holder with respect to the First Mortgage
Note. Such Additional Interest shall not constitute an additional
principal sum due under this Amended and Restated Subordinated Note or
the First Mortgage Note.
B. Amounts payable under this Amended and Restated
Subordinated Note shall be payable at the offices of Holder, or at such
other place as the Holder may designate in writing.
C. This Amended and Restated Subordinated Note and the
indebtedness evidenced hereby is secured by a Subordinated Mortgage or
Deed of Trust of even date herewith (the "Subordinated Mortgage")
executed by the Maker in favor of the Holder hereof, which covers that
certain real property and improvements thereon being more particularly
described in the Subordinated Mortgage. The Subordinated Mortgage is
subordinate and subject to the First Mortgage.
D. It is not intended hereby to charge interest at a rate in
excess of the maximum lawful rate of interest permitted to be charged
the Maker under the laws of the State in which the Project is located or
the laws of any other jurisdiction which may be deemed to govern the
terms of this Amended and Restated Subordinated Note. The First
Mortgagee has agreed to receive interest with respect to the First
Mortgage Loan at a rate which is lower than the prevailing market rate
of interest at-the time of such loan. The Holder's agreement to charge
and receive such interest with respect to the First Mortgage Loan is in
consideration of the Maker's agreement to pay Additional Interest as
provided hereinabove. Accordingly, the Additional Interest received
hereunder should be deemed to be spread and applied to the outstanding
balance of this Amended and Restated Subordinated Note plus the
outstanding balance of the First Mortgage Note, from time to time, over
the entire term that both notes, or either of them, are outstanding. If,
nevertheless, interest in excess of such maximum lawful rate shall be
paid hereunder, then the rate imposed hereunder shall be reduced to such
maximum lawful rate, and if from the circumstance, the Holder hereof
shall ever receive as interest an amount which would exceed the highest
lawful rate, such amount as would be deemed excessive interest shall be
refunded to the Borrower.
E. All financial statements and calculations with respect to
the Property as required in this Amended and Restated Subordinated Note
and Subordinated Mortgage shall be prepared according to the accrual
method of accounting in accordance with generally accepted accounting
procedures applied on a consistent basis from year to year. Holder must
approve any accruals which are not normal and customary in the rental
apartment business. Examples of normal and customary accruals include
items such as taxes, insurance, replacement reserves or normal trade
payables which relate to a particular period but are not paid in that
period.
F. It is expressly agreed that if the Maker is in default under
this Amended and Restated Subordinated Note in the payment of any sums
when due, or if the Maker is in default in the performance of any
covenant or condition of the Subordinated Mortgage, or any other
agreement evidencing or securing the repayment of the indebtedness,
which default is not cured within the applicable grace period, if any,
permitted in the Subordinated Mortgage, or such other agreement, then,
and in any of such events, the Holder may declare all sums due and
payable under this Amended and Restated Subordinated Note, subject to
the restrictions of Paragraph 3.J. above.
The failure of the Holder to exercise its option for
acceleration of maturity,
foreclosure, or either, following any default as aforesaid or to
exercise any other option granted to it hereunder or under the
Subordinated Mortgage or the acceptance by the Holder of partial
payments or partial performance, shall not constitute a waiver of any
such default or option but such rights of the Holder shall remain
continuously in force. Acceleration of maturity or other rights granted
to the Holder hereunder, once claimed hereunder by the Holder, may at
its option be rescinded or extended by written notice to that effect.
The tender and acceptance of partial payment or partial performance
alone shall not in any way affect or rescind an acceleration of maturity
by the Holder.
If any sum payable under this Amended and Restated
Subordinated Note is not paid within ten (10) days of the date when due,
whether by maturity or acceleration, the Maker agrees to pay all costs
of collection, including but not limited to, court costs and reasonable
attorney's fees, whether or not suit is filed thereon.
G. The Maker, and any endorsers hereof, jointly and
severally: (i) waive
presentment, protest and demand, notice of protest, notice of dishonor
and nonpayment of this Amended and Restated Subordinated Note, and every
other notice of any kind respecting this Amended and Restated
Subordinated Note except as set forth in this Amended and Restated
Subordinated Note and the Subordinated Mortgage; and (ii) to the extent
not prohibited by law, waive the benefit of any law or rule of law
intended for its advantage or protection which would enable its release
or discharge from liability hereon, in whole or in part, for any reason
other than full and complete payment of all amounts due hereunder.
H. The Maker hereby represents and warrants that: (i) it is a
business or commercial organization; (ii) the loan evidenced hereby was
made and transacted solely for the purpose of carrying on an investment
in real estate; and (iii) the proceeds of the loan are not to be used in
whole or in part for personal, family or household purposes.
I. In the event that any one or more of the provisions
contained herein are, for any reason, held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Amended
and Restated Subordinated Note and this Amended and Restated
Subordinated Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein
J. This Amended and Restated Subordinated Note may not be
changed orally, but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or
discharge is sought and subject to the provisions of Paragraph 3.D.
above.
K. All notices given pursuant to this Amended and Restated
Subordinated Note shall be in writing and shall be hand delivered or
mailed, registered U.S. Mail, return receipt requested to the parties at
the addresses specified below or to such other addresses as may be
specified by a party upon notice in compliance with this paragraph.
Maker: Royal Palm Place, Ltd.
c/o Altman Development Corporation
2201 Corporate Blvd.
Suite 200
Boca Raton, FL 33431
Holder: Krupp Insured Plus - III-Limited-Partnership
c/o Krupp Mortgage Corporation
Harbor Plaza
470 Atlantic Avenue
Boston, Massachusetts 02210
First Federal National Mortgage Association
Mortgagee: 950 East Paces Ferry Road
Suite 1900
Atlanta, GA 30326-1161
Attn: Vice President
Multifamily Activities
Servicer: GMAC Mortgage Corporation
101 S. Hanley Road, Suite 1300
St. Louis. MO 63105
L. This Amended and Restated Subordinated Note shall be given
effect and construed by application of the laws of the State in which
the Project is located.
M. It is expressly understood and agreed that neither the
Maker nor any partner, officer, director or stockholder of Maker, as the
case may be, shall have any personal liability for payment of any sums
due hereunder, and the Holder agrees to seek recourse solely against the
real estate and other security granted to the Holder under the
Subordinated Mortgage and any instrument further securing this Amended
and Restated Subordinated Note, including, without limitation, the
rents, issues and profits of the Project received by the Maker after
default herein or the Subordinated Mortgage or any instrument further
securing this Amended and Restated Subordinated Note (subject to the
provisions of Paragraph 3 of this Amended and Restated Subordinated
Note).
N. Notwithstanding the foregoing, the Maker, any partner,
officer, director or stockholder of Maker shall be subject to personal
liability to the extent of receipt by them of proceeds of insurance on
the Project, proceeds on account of condemnation thereof, or rents and
issues and profits of the Project (including, without limitation, the
proceeds of any sale of the Project) which Maker has not applied to
payment of this Amended and Restated Subordinated Note as and when
required by the terms of the Amended and Restated Subordinated Note.
WITNESS the signature and seal of the Maker hereof this 1st day of
December, 1995.
WITNESS: MAKER:
ROYAL PALM PLACE, LTD., a
Florida Limited Partnership
By: Altman Development
Corporation,
a Florida corporation
This Amended and Restated Subordinated Note is secured by a
Subordinated Mortgage dated March 20, 1991 on the property located in
the City of Kendall, County of Dade described therein from the Maker to
the Holder.
EXHIBIT "A"
EXHIBIT FOR PURPOSES OF PARAGRAPH 4d TO THE
AMENDED AND RESTATED SUBORDINATED PROMISSORY NOTE
Value of Project $27,000,000
Base Value of Project $23,200,000
difference $3,800,000
Maximum Additional Interest Payment = 50% of
or, $1,900,000 $3,800,000
Outstanding First Mortgage Loan balance $21,400,000
First Mortgage Penalty $415,588
(@ 1.942% in the 7th year
of the First Mortgage Loan)
KIP Penalty $1,926,000
( @ 9% in the 7th year of the
First Mortgage Loan)
So:
KIP Penalty $1,926,000
Less Maximum Additional Interest Payment $1,900,000
Excess $26,000
Plus KIP's 50% of First Mortgage Penalty $207,794
Amount paid by KIP to First Mortgage Lender $233,794
Amount paid by Royal Palm Place, Ltd. to $181,794
First Mortgage Lender
1. All capitalized terms used above are as defined in the
Amended and Restated Subordinated Promissory Note.
2. Both the Value and the Outstanding First Mortgage
Loan balance are assumed.
3. A Sale or prepayment date of May 1, 1997 is assumed.
FEDERAL NATIONAL MORTGAGE ASSOCIATION
MORTGAGE-BACKED SECURITIES PROGRAM
SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 1, 1994
$ 21,329,259.000
ISSUE DATE DECEMBER 1, 1995
SECURITY DESCRIPTION FNAR 06.2500 MB109057
6.2500 PERCENT PASS-THROUGH RATE
FANNIE MAE POOL NUMBER MB-109057
CUSIP 313637B25
PRINCIPAL AND INTEREST PAYABLE ON THE 25TH OF
EACH MONTH
BEGINNING JANUARY 25, l996
POOL STATISTICS (AS OF ISSUE DATE)
NUMBER OF MORTGAGE LOANS 1
AVERAGE OUTSTANDING BALANCE 21,329,259.07
MATURITY DATE 04/01/2006
WEIGHTED AVG REMAINING TERM 124
HIGHEST ANNUAL INTEREST RATE 6.5000
LOWEST ANNUAL INTEREST RATE 6.5000
WEIGHTED AVG ANNUAL INT RATE 6.5000
%UPB W/ INTRST ONLY FIRST DISTRIB 0.00
GEOGRAPHIC DISTRIBUTION OF SECURITY PROPERTIES
FLORIDA 1 21,329,259.07
THE DATE OF THIS SUPPLEMENT IS DECEMBER l, 1995
SUPPLEMENT TO PROSPECTUS REFERRED TO IN POOL
STATISTICS ATTACHED HERETO
FEDERAL NATIONAL MORTGAGE ASSOCIATION
GUARANTEED MORTGAGE PASS-THROUGH CERTIFICATES
(ADJUSTABLE-RATE MULTIFAMILY BALLOON MORTGAGE LOAN)
PRINCIPAL AND INTEREST
PAYABLE ON THE 25TH DAY OF EACH MONTH
BEGINNING IN THE MONTH FOLLOWING THE ISSUE DATE
THE CERTIFICATES, TOGETHER WITH INTEREST THEREON, ARE NOT
GUARANTEED BY THE UNITED STATES. THE OBLIGATIONS OF THE FEDERAL NATIONAL
MORTGAGE ASSOCIATION UNDER ITS GUARANTY OF THE CERTIFICATES ARE
OBLIGATIONS SOLELY OF THE CORPORATION AND DO NOT CONSTITUTE AN
OBLIGATION OF THE UNITED STATES OR ANY AGENCY OR INSTRUMENTALITY THEREOF
OTHER THAN THE CORPORATION. THE CERTIFICATES ARE EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND ARE
"EXEMPTED SECURITIES" WITHIN THE MEANING OF THE SECURITIES EXCHANGE ACT
OF 1934.
Each Certificate offered hereby, and by the Prospectus {the
"Prospectus"1 to which this is a supplement (which Prospectus is
referred to in the Pool Statistics attached hereto), evidences a
fractional undivided interest in a pool (the "Pool"1 containing a
conventional, adjustable-rate balloon mortgage loan (the "Mortgage
Loan"1 formed and held in trust by the Federal National Mortgage
Association (the "Corporation"1, a corporation organized and existing
under the laws of the United States. The Mortgage Loan was purchased by
the Corporation for resale to Certificate holders by issuance of the
Certificates, and they and the underlying Mortgage Loan are more
particularly described herein.
The Certificates are issued pursuant to the terms of the Trust Indenture
dated as of July 1, 1984, as amended, executed by the Corporation acting
in its corporate capacity and in its capacity as Trustee, as
supplemented by an Issue Supplement dated as of the Issue Date set forth
in the Pool Statistics attached hereto. The Corporation has certain
contractual servicing responsibilities with respect to the Pool. In
addition, the Corporation is obligated to distribute scheduled monthly
installments of principal and interest (adjusted to the Accrual Rate) as
further described herein, to the Certificate holders, whether or not
received. The Corporation is also obligated to distribute to Certificate
holders the full principal balance of the Mortgage Loan upon
foreclosure, whether or not such principal balance is actually
recovered.
The Pool Statistics attached hereto contain statistical information
respecting the Pool, including a prefix to the Pool Number that
identifies the specific type of Mortgage Loan in the Pool. The Schedule
of Mortgage Loan Information attached hereto contains additional
Mortgage Loan information, including the maturity date, amortization
term and prepayment characteristics of the Mortgage Loan in the Pool.
The Corporation currently intends, but has not committed, to publish
certain updated information about the Mortgage Loan periodically with
Bloomberg L.P., or another similar information service. Such information
is in addition to any information provided in the Bond Buyer.
The Schedule of Loan Information sets forth the Debt Service Coverage
Ratio as of the Issue Date for the Mortgage Loan. The "Debt Service
Coverage Ratio" for the Mortgage Loan is the ratio of (a) the Net
Operating Income estimated by the Corporation to be generated by the
related Mortgaged Property for the 12-month period following the Issue
Date to (b) the product of the amount of the Monthly Payment in effect
at the Issue Date, multiplied by 12. "Net Operating Income" is the
estimated revenue derived from the use and operation of a Mortgaged
Property (consisting primarily of estimated market rental rates and
laundry facilities, if any) less the estimated operating expenses (such
as utilities, general administrative expenses, management fees,
advertising, repairs and maintenance) and less the estimated fixed
expenses (such as insurance and real estate taxes), all calculated in
accordance with the Corporation's Multifamily Delegated Underwriting and
Servicing Guide (the "DUS Guide"). The Schedule of Loan Information also
sets forth the Debt Service Coverage Ratio at the maximum interest rate
of 9.40% of the Mortgage Loan, which was equal to the ratio of (a) the
current Net Operating Income to (b) the Monthly Payment at the projected
unpaid principal balance of the Mortgage Loan when the maximum interest
rate goes into effect, multiplied by 12.
CHARACTERISTICS OF THE MORTGAGE LOAN
The Mortgage Loan has been originated by a mortgage lender (the
"Lender"). The promissory note that evidences the Mortgage Loan (the
"Mortgage Note") is secured by a security instrument (the "Mortgage") on
a multifamily residential property consisting of five or more dwelling
units (the "Mortgaged Property").
Interest Rate and Payments
The Mortgage Loan provides for a monthly payment in an amount sufficient
to pay all interest accruing on such Mortgage Loan. The Mortgage Loan
also provides that, on December 1, 1996, December 1, 1997, December 1,
1998 and December 1, 1999, the borrower shall make a principal payment
of $250,000 in addition to any accrued interest due and payable. Such
principal payment shall be distributed to Certificate holders on the
next Distribution Date. The interest rate that accrues on the Mortgage
Loan prior to December 1, 1996 is 6.50%. Since the Corporation's
servicing and guaranty fee prior to December 1, 1996 will be .250%, the
Accrual Rate for the Mortgage Loan will be 6.25% for each distribution
through December 1996. Thereafter, the rate at which interest will
accrue on the Mortgage Loan will not vary in response to a specified
index (notwithstanding the terms of the Prospectus), but shall change in
accordance with the schedule set forth below. The Corporation's
servicing and guaranty fee and the Accrual Rate for the Mortgage Loan
will also change as described below.
Mortgage Interest Servicing and
Rate Change Date Mortgage Interest Rate Guaranty Fee Accrual Rate
12-1-96 7.00% .500% 6.500%
12-1-97 7.50 .500 7.000
12-1-98 8.00 .625 7.375
12-1-99 8.50 .625 7.875
12-1-00 9.00 .625 8.375
12-1-01 9.40 .625 8.775
12-1-04 9.40 .875 8.525
The Mortgage Loan will mature on the maturity date indicated on the Pool
Statistics information attached to this Supplement. All unpaid principal
will be payable as a balloon payment due on the stated maturity date of
the Mortgage Note together with accrued interest.
Prepayment
The borrower may prepay the Mortgage Loan in whole, but not in part, at
any time without penalty. Furthermore, early recovery of Mortgage Loan
principal, in whole or in part, could occur- on account of receipt
of-casualty insurance proceeds or a condemnation award affecting the
Mortgaged Property. Any casualty proceeds will be applied to restoration
or repair of the Mortgaged Property and not to reduce Mortgage Loan
principal, if there is then no Mortgage Loan default and the Corporation
determines that: (i) there are sufficient funds to achieve restoration
of the Mortgaged Property to a satisfactory condition, (ii} rental
income after
restoration will be sufficient to meet all project obligations, and
(iii} restoration will be completed prior to the earlier of the maturity
date of such Mortgage Loan, or within one year of the event of casualty.
Prepayment or early recovery of principal of the Mortgage Loan may
affect a Certificate holder's yield on its investment in Certificates.
In addition, a partial early recovery of principal may affect the
monthly payment amount distributable to Certificate holders. Fannie Mae
guarantees the payment of principal and interest when due, but makes no
representation or guaranty as to the occurrence or non-occurrence or an
early prepayment of principal of a Mortgage Loan Mortgage Loan
Documents; Subordinate Financing
The Mortgage Note and Mortgage are executed on FNMA/FHLMC Uniform
Instruments for multifamily loans made in the state in which the
Mortgaged Property is located (as amended by an Addendum and a Rider}.
Because the borrower's covenants (breach of which could result in
Mortgage Loan default and early distribution of principal to Certificate
holders} are the covenants provided for by such standard forms, they are
typical of those contained in loans secured by multifamily rental
properties.
The loan documents also provide that any breach of the terms of any
subordinate financing, which remains uncured after any applicable cure
period, is a default on the Mortgage Loan pursuant to which the
Corporation would have the right, but not the obligation, to declare the
entire principal balance of the Mortgage Loan immediately due and
payable. The borrower has entered into subordinate financing with Krupp
Insured Plus III Limited Partnership, which is secured by a junior lien
on the Mortgaged Property. The subordinate note provides that, so long
as the Mortgage Loan is in the Pool, the borrower may not make payments
on the subordinate note (or prepay the subordinate note) unless income
from the Mortgaged Property is then sufficient to pay all amounts due
under the Mortgage Loan, to pay the Mortgaged Property's necessary and
reasonable expenses, and to fund reserves required by the Mortgage Loan.
Certificate holders have no right to any payments due on the subordinate
note. The subordinate note has no stated principal amount and its
payments are characterized as (i} "Additional Interest" equal to the
greater of "Minimum Additional Interest" and "Shared Income Interest,"
and (iii)} "Shared Appreciation Interest." "Minimum Additional Interest"
is interest at the annual rate of .5% (50 basis points) of the
outstanding balance of the Mortgage Loan accruing during each calendar
year. "Shared Income Interest" per month is 30% of the Mortgaged
Property's "Gross Rental Income" for such month(as defined in the
subordinate note). Additional Interest is due on January 1 of each year,
but the amount payable on each payment date may not exceed the lesser of
30% of the Gross Rental Income actually received in the prior year and
50% of the Mortgaged Properties "Net Income" (as defined in the
subordinate note) for such annual period. Any amount due but not payable
currently is deferred for payment on a later annual date. If not earlier
paid, all deferred Additional Interest is due and payable, together with
"Shared Appreciation Interest," when the Mortgaged Property is sold,
when the subordinate loan is prepaid, or on the maturity date of the
subordinate loan (which is the same as the maturity date of the Mortgage
Loan}; provided that the amount then due shall not exceed 50% of the
amount by which the value of the Mortgaged Property at the time of such
event, determined by sale or appraisal, exceeds such value when the
Mortgage Loan was made (as set forth in the subordinate note), with
adjustment to such original value for the amount of any insurance
proceeds or condemnation award insofar as not applied to restoration of
the Mortgaged Property. "Shared Appreciation Interest" is 30% of such
excess. The subordinate note may not be prepaid unless the Mortgage Loan
is prepaid at the-same time, and the subordinate-note-must-be-prepaid U
the Mortgage Loan is prepaid.
The subordinate note provides that in the event of any conflicts or
inconsistency between the terms of the subordinate financing and the
terms of the Mortgage Loan, the terms of the latter shall control.
Without consent of the Corporation as holder of the Mortgage Note, li)
the subordinate note may not be modified or amended, and may not be
negotiated, assigned, or otherwise transferred; (ii} if the Mortgage
Loan is in default, no payments may be made on the subordinate note; and
(iii) the holder of the subordinate note may not enforce its lien on the
Mortgaged Property, commence proceedings to collect sums owed, or
commence (or join in commencing} any bankruptcy, reorganization or
insolvency proceedings with respect to the borrower.
Assumption and Further Encumbrance
The Mortgage Loan is assumable by a new mortgagor in the case of certain
transfers of the related Mortgaged Property. As to such transfers, and
certain sales or transfers of interests in the mortgagor, the
Corporation's general policy described in the Prospectus requiring
acceleration in the event of certain transfers of the Mortgaged Property
is inapplicable. Among the permitted transfers are any for which a 156
transfer fee is paid and for which the transferee executes an assumption
agreement, if the transferee meets those standards as to
creditworthiness and management ability customarily applied by the
Corporation for approval of borrowers for loans secured by similar
properties. No portion of any such transfer fee will be distributed to
Certificate holders.
FEDERAL TAX ASPECTS
Certain federal income tax consequences of the ownership of Certificates
are described in the Prospectus. The rulings described in the Prospectus
under "Certain Federal Income Tax Consequences" and identified as
Paragraphs 1, 2 and 3 do not apply to a mortgage loan to the extent that
its principal amount exceeds the value of the real property securing it.
The definition of "real property" is based on state law for purposes of
the rulings described in Paragraphs 1 and 2, and on federal income tax
law for purposes of the ruling described in Paragraph 3. Relying on the
Lender's representations of its compliance with requirements of the OUS
Guide concerning property appraisals and loan-to-value ratios, the
Corporation believes that the fair market value of the real property
securing the Mortgage Loan exceeds the Issue Date principal balance of
such Mortgage Loan. The principal security for the Mortgage Loan is a
first lien on real property consisting of a multifamily rental property.
However, the Mortgage Loan is also secured by a security interest in
related tangible personal property (e 9., equipment and furniture}
and-in related intangible personal property such as rents and revenues,
insurance proceeds, condemnation awards or settlements, contract rights,
deposits, permits, accounts, licenses, and so forth.
This Prospectus Supplement does not contain complete information
regarding this offering and should be read only in conjunction with the
Prospectus that it supplements.
The date of this Prospectus Supplement is the Issue
Date.