LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement (the "Agreement") is made and entered into as
of the 21st day of December, 2000 by and among Krupp Insured Mortgage Limited
Partnership, a Massachusetts limited partnership ("KIM"); Berkshire Mortgage
Finance Corporation, a Massachusetts corporation as successor to Krupp Mortgage
Corporation (the "First Mortgagee"); Legacy Wildflower Limited Partnership, a
Nevada limited partnership formally known as Lincoln Wildflower Limited
Partnership (the "Partnership" or the "Borrower"); Legacy Partners 326 Limited
Partnership, a Nevada limited partnership formally known as Lincoln Property
Company #326 Limited, the General Partner of the Partnership (the "General
Partner"); and Legacy Partners Residential, Inc., a Delaware corporation (the
"Property Management Agent") ( collectively; the "Parties").
W I T N E S S E T H:
WHEREAS, the First Mortgagee made a mortgage loan to the Partnership in
the original principal sum of Seventeen Million Six Hundred Thousand and
No/Dollars ($17,600,000) which loan, was coinsured by the U.S. Department of
Housing and Urban Development (HUD) (the "Coinsured Loan") under the provisions
of the National Housing Act;
WHEREAS. the Coinsured Loan was made to finance the Wildflower
Apartments located in Clark County, Nevada and identified as HUD Project
125-10523 (the "Project"):
WHEREAS, the Coinsured Loan is evidenced by a certain Deed of Trust
Note (the "Coinsured Note") dated December 12, 1989 from the Partnership to the
First Mortgagee in the original principal sum of $17,600,000.00;
WHEREAS, the repayment of the indebtedness evidenced by the Coinsured
Note is secured by, among other things, a Deed of Trust dated December 12, 1989
and recorded in the Official Records of Clark County, Nevada on December 13,
1989 in Book 891213 as document 0723 (the "Coinsured Mortgage");
WHEREAS, the operation of the Project is subject to the constraints of
a Regulatory Agreement For Multifamily Housing Projects Coinsured by HUD dated
December 12, 1989 and recorded in, the Official Records of Clark County, Nevada
on December 13, 1989 in Book _____________ as document No.0724 (the "Regulatory
Agreement"); (the Coinsured Note, Coinsured Mortgage and Regulatory Agreement
are collectively referred to as the "First Mortgage Loan Documents");
WHEREAS, the First Mortgagee obtained funding for the Coinsured Loan
through the issuance of a GNMA MBS purchased by KIM.
WHEREAS, the interest rate on the Coinsured Loan and the GNMA MBS was
below the then-prevailing interest rates for comparable loans and securities,
and KIM was unwilling to so participate in the financing of the Coinsured Loan
unless the Partnership agreed to pay additional interest to KIM;
WHEREAS, the Partnership agreed to pay additional interest to KIM as
evidenced in the Subordinated Promissory Note (the "Subordinated Note") made by
the Partnership in favor of KIM which is secured by a Subordinated Multifamily
Deed of Trust Assignment of Rents and Security Agreement (the "Subordinated
Mortgage") dated December 12, 1989 and recorded in the Official Records of Clark
County, Nevada at Book 891213 as document 00726 (the Subordinated Note and
Subordinated Mortgage are collectively referred to as the "Participating Loan
Documents");
WHEREAS, the Project has experienced financial difficulties and the
Borrower has requested assistance from KIM in regards to the obligations under
certain terms of the Coinsured Loan Documents and the Participating Loan
Documents;
WHEREAS, the Property Management Agent is an entity affiliated with
both the Borrower and the General Partner, and the continued successful
operation of the project will inure to its benefit. In order to assure that
successful operation, and in exchange for the benefits it expects to derive
therefrom, the Property Management Agent has agreed to be a party to this
Agreement;
WHEREAS, the Partnership, the Property Management Agent, the First
Mortgagee and KIM have agreed to certain terms in an effort to provide
assistance to the Borrower to assure the continued and successful operation of
the project, which terms are set forth herein.
NOW THEREFORE, in consideration of the foregoing, the sum of Ten and
No/100 Dollars ($10.00) in hand paid, and other good and valuable consideration,
the receipt and sufficiency, of which are hereby acknowledged, and intending to
be legally bound, the Partnership, the Property Management Agent, the First
Mortgagee and KIM each hereby agree as follows:
1.Recitals Incorporated. The foregoing Recitals are hereby incorporated herein
as if fully set forth.
2. Establishment of an Escrow. A Supplemental Repair and Operations Escrow (the
"Escrow") shall be established by the Parties and administered by the First
Mortgagee. The Escrow shall be administered by the First Mortgagee in accordance
with the same terms conditions and requirements established by HUD for the
administration of the Reserve for Replacements called for in the Regulatory
Agreement as part of the Coinsured Loan at Section B Paragraph 1 thereof.
Requests for disbursements from the Escrow shall be made to the First Mortgagee
by the Borrower using the same format and documentation as required of the
Borrower to effect a withdrawal from the Reserve for Replacements established
for the Coinsured Loan. Notwithstanding the above, the funds contributed to the
Escrow by any of the Parties shall be available for use for the expenses set
forth on Exhibit A hereto, even if one or more of those expense items would not
normally be payable from the Reserve for Replacements as constrained by HUD's
rules.
3. Duration of the Agreement. The initial contributions called for in this
Agreement shall be made upon the execution of this Agreement and in accordance
with the terms set forth below and further contributions shall continue through
and including December 31, 2002 unless this Agreement is sooner terminated or
amended by the mutual written agreement of the Parties.
4. Funding the Escrow
(a) The Property Management Agent. During the course of the term of
this Agreement, the Property Management Agent will continue to earn its
currently approved management fee. However the Property Management Agent agrees
to initially contribute to the Escrow a sum equivalent to thirty percent (30%)
of the management fees it has received for the period January 1, 2000 through
and including September 30, 2000 (the "Property Manager's Initial
Contribution").
Thereafter, on a monthly basis, the Property Management Agent
agrees to make further contributions to the Escrow in an amount equal to thirty
percent (30%) of the management fees it receives as it receives them for each
month in the period of October 2000 to and including December 2002 (the
"Property Manager's Additional Contributions"):
(b) KIM. Upon notification from the First Mortgagee that it has
received the Property Managers Initial Contribution to the Escrow, KlM shall
deposit into the Escrow a sum equivalent to $105,000.00 plus such additional
amount as is the equivalent of the sum actually deposited to the Escrow for the
Property Manager's Initial Contribution, which additional sum shall not to
exceed 30% of the fees actually received by the Property Management Agent for
the period January 1, 2000 to September 30, 2000. ("KIM's Initial
Contribution").
Thereafter for the duration of this Agreement, KIM shall make further
deposits to the Escrow in those amounts and at those times as the Property
Management Agent makes the Property Managers Additional Contributions, provided
that such further deposits by KIM shall not exceed thirty percent (30%) of the
management fees actually received by the Property Management Agent for the
duration of the term of this Agreement ("KIM's Additional Contributions") and
provided further that: the Borrower is not in default of the terms of the First
Mortgage Loan Documents and the Participating Loan Documents; and the General
Partner is not in default of the terms of this Agreement.
It is contemplated and agreed to by the Parties that KlM's
contributions to the Escrow are to be considered as rebates from or reductions
to the sums actually paid to it as Interest pursuant to and as that term is
defined in the Subordinated Note, and shall not be construed as an independent
contribution of capital to the Borrower or a modification of the terms of the
Subordinated Note. Further KIM's contribution to the Escrow shall not under any
circumstances be construed as rebates from or reductions of the sums due from
the Borrower under the terms of the Coinsured Note. Accordingly, under no
circumstances shall KIM's contribution to the Escrow exceed the amount of
interest it has actually received under the terms of the Subordinated Note for
the periods in question.
(c) Any and all contributions to the Escrow made by either KIM or the
Property Management Agent shall be evidenced by notes payable by the Borrower,
which notes shall be interest free. To the extent those notes are payable from
project cash flow they shall be payable by the Borrower from Surplus Cash only,
as Surplus Cash is defined and constrained by the Regulatory Agreement. To the
extent there are undisbursed funds in the Escrow those funds shall be disbursed
in the manner described in Paragraph 6(a) below.
(d) The General Partner. The General Partner shall participate in this
Agreement by converting short term loans it has already made to the Borrower, in
the amount of $105,000.00, to long term loans to the Borrower evidenced by a
note or notes (the "Converted Loans"), the terms of which shall provide that the
loan shall be non-interest bearing and the principal of which shall be paid only
by Surplus Cash, as that term is defined and constrained by the Regulatory
Agreement, when and if Surplus Cash is available, and in accordance with the
provisions set forth below.
The General Partner's obligation to convert the loan described above
shall be a pre-condition to KIM's Initial Contribution and KIM's Additional
Contributions.
5. The Existing Request for Reimbursement. Upon receipt by the First Mortgagee
of the full amount of the Property Manager's Initial Contribution and KIM's
Initial Contribution, coupled with the General Partner's conversion of short
term debt to long term debt as recited in Section 4(d) above, the First
Mortgagee shall process the Borrower's existing June 5, 2000 request for
reimbursement from the existing Reserve for Replacement, in the amount of
$84,995.04; provided that any sums approved by the First Mortgagee are approved
in accordance with HUD requirements and are used by the Borrower both in
accordance with HUD requirements and for those items listed on Exhibit A which
are properly payable from the HUD required Reserve for Replacement in
conformance with those guidelines.
6. Requirement of Sums Contributed Under this Agreement
(a) All sums contributed to the Escrow, as well as those converted to
long term debt by the General Partner in accordance with the
terms of this Agreement, shall be repaid to the respective
parties solely from distributable Surplus Cash, as that term is
defined and distributions are constrained in the Regulatory
Agreement. To the extent any such distributable Surplus Cash
exists, it together with all funds contributed to the escrow that
are not disbursed, upon the mutual agreement of the parties shall
be disbursed to KIM, the Property Management Agent and the
General Partner, prorated respectively to the cumulative balances
contributed to the Escrow by each contributor and the cumulative
balance of the Converted Loans. If the parties do not mutually
agree upon a distribution, such funds shall be placed in the
reserve for replacement and thereafter disbursement in accordance
with HUD requirements.
(b) In the event either a Sale or a Refinancing of the Project occurs
before the sums contributed to the Escrow and the Converted Loans
are repaid, the net proceeds from the Sale or Refinancing as that
term is defined in the First Mortgage Loan Documents and the
Participating Loan Documents, shall be distributed to KIM, the
Property Management Agent and the General Partner in the same
manner as described in Section 6(a) above.
7. Certain Definitions. All capitalized terms unless defined herein shall have
the same meaning as those terms are defined in the First Mortgage Loan Documents
or the Participating Loan Documents.
8. Notice Requirements
(a) All notices and other communications required or permitted under
this Agreement shall be in writing and, if mailed by prepaid United States
first-class, certified mail, return receipt requested, at any time other than a
general discontinuance of postal service due to strike, lockout or otherwise,
shall be deemed to be received on the earlier of the date shown on the return
receipt or five (5) business days after the postmarked day thereof. In addition,
notices hereunder may be delivered by hand or by overnight courier, in which
event the notice shall be deemed effective when delivered. All notices and other
communications under this Agreement shall be given to the Parties hereto at the
following addresses:
If to the Partnership, General Partners, and/or
Property Management Agent:
Fore Property Company
31416 Agoura Road,
Suite 160
Westlake Village, CA 91361
Attn.: Ellen Richwine
If to the First Mortgagee and/ or KIM:
Berkshire Mortgage Finance Corporation
One Beacon Street
Boston, Massachusetts 02108
Attn: Head of Portfolio Management
Any party hereto may change the address to which notices shall
be directed under this Paragraph 8 by giving ten (10) days
written notice of such change to the other Parties.
9. Loan Documents Not Impaired. Except as expressly set forth herein, the
agreements set forth herein are not intended to affect or alter the obligations
of the Partnership and the General Partner under the First Mortgage Loan
Documents or the Participating Loan Documents, and this Agreement shall not be
construed as a novation, renegotiation or release under any of these documents.
10. Representations of Borrower, the General Partner and
the Property Management Agent.
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The Partnership, General Partner and the Property Management Agent hereby
acknowledge and confirm with the First Mortgagee and KIM that:
(i) They have no offset, counterclaim or defense with respect
to the obligations under the First Mortgage Loan Documents, or Participating
Loan Documents or the Management Contract and to the extent that they had any
offset, counterclaim or defense with respect to the obligations thereunder, they
hereby waive and release such offset, counterclaim and defense.
(ii) The Partnership and General Partner ratify and
affirm all obligations under the First Mortgage Loan
Documents and the Participating Loan Documents.
(iii) There are no current or contemplated claims against the First Mortgagee
and/or KIM.
11. Representation of the First Mortgagee and KIM. The First Mortgagee and KIM
hereby acknowledge that all payment obligations identified in this Agreement,
the First Mortgage Loan Documents and the Participating Loan Documents are and
remain nonrecourse to the extent set forth therein.
12. Execution in Counterparts. This Agreement may be signed in counterparts by
the Parties and shall be effective upon the signature of the last party to sign
the Agreement.
13. Binding Effect. The terms and provisions of this Agreement shall be binding
upon the Parties hereto and their heirs, successors and assigns.
14. Time is of the Essence. Time is of the essence in this Agreement.
15. Governing Law. This Agreement shall be construed under the laws of the State
of Nevada and if any provisions of this Agreement are held by a court of
competent jurisdiction to be illegal, invalid or unenforceable, then such
illegality, invalidity or unenforceability shall not affect the legality,
validity or enforceability of the other remaining provisions of this Agreement.
16. No Other Agreements. This Agreement embodies the entire Agreement of the
Parties related to the subject covered herein and no oral agreements exist among
the Parties with respect to that subject matter. This Agreement may be amended
only by an agreement in writing executed by each party.
IN WITNESS WHEREOF, the undersigned Parties have caused this instrument to be
executed as of the day, month and year first written above.
Wildflower Agreement - Schedule A - Sources and Uses
revised 12/12/00
Sources 2000 2001 2002
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Repair Escrow
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KIM Interest rebate, estimated 152,000 50,000 55,000
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Legacy Fee rebate, estimated 47,000 50,000 55,000
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Replacement Reserve, estimated 200,000 190,000
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399,000 100,000 300,000
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USES 2000-2001 2001-2002 2002-2003 Comments
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Pay down A/P 83,000 3/00 operating statement
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Critical Repairs 30,940 Half of Gene Thomas's estimate
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Upgrade Unit Turns 50,000 Discussion with manager 5/10
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Put down units on-line 16,617 Borrower Exhibit B
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Playground 9,740 Borrower Exhibit B
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Landscape 6,350 Borrower Exhibit B
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Laundry room repairs 3,610 Borrower Exhibit B
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Pool Decks 14,010 Borrower Exhibit B
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Sports Court 7,100 Borrower Exhibit B
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Paint 177,633 97,367 Borrower Bid
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Roofs 270,750 per Gene Thomas's estimate of 8/99
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Total 399,000 97,367 270,750
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Funds Available 399,000 100,000 300,000
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Surplus/(Deficit) 2,633 29,250
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