SCHEDULE 14A
(Rule 14a-101)
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BASS REAL ESTATE FUND-II, A NORTH CAROLINA LIMITED PARTNERSHIP
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
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(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
$1,970
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Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
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Bass Real Estate Fund II
4000 Park Road, Charlotte, NC 28209
Investor Relations: (704) 523-9407 or toll-free 800-366-2277
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IMPORTANT INFORMATION CONCERNING THE SALE OF THE PARTNERSHIP'S PROPERTY
YOUR CONSENT MUST BE RECEIVED BY FRIDAY, DECEMBER 5.
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November 25, 1997
To the investors of Bass Real Estate Fund II:
In March of this year, we solicited your preference for HOLDING or SELLING the
Partnership's property, and a majority of you stated that you are in favor of
selling. Since conducting this survey, we have worked diligently to secure a
buyer for the property and we have recently entered into a firm Contract of Sale
pending Limited Partner approval. Information concerning this proposed sale
follows below and in the enclosed Information Statement. Having provided this,
we request your consent to SELL the property and terminate the Partnership. A
Consent Form and envelope are provided in this package. Votes must be received
in our office by 5:00 P.M. on Friday, December 5, 1997.
OFFER
We have communicated with a wide range of potential buyers. Only a handful of
these exchanges have evolved to a level of detailed discussions, and even fewer
have evolved to a level of serious negotiations. None of the potential buyers
are affiliated with your General Partner or any Marion Bass company. Within the
last 90 days, the prospective purchasers were tentatively narrowed to
Glenborough Realty Trust, Inc., a publicly traded real estate investment trust
(REIT), and Insignia Financial Group, Inc., a private entity that is reportedly
the largest owner and manager of rental apartments in the United States. Both
buyers are seeking the acquisition of a large property portfolio.
The offers we have received for Bass Real Estate Fund II's property also
includes the purchase of the entire portfolio under our management. We believe
this is attributable to the concentration of the portfolio in a large market;
the softening of demand for newer, higher-end apartments; and the portfolio's
favorable occupancy rate. Moreover, our discussions with potential buyers
indicate that the collective value of the portfolio represents a higher value
for each property over what could be obtained if each property were sold
separately.
We currently manage 1,385 apartment units in 14 properties owned by 10 public
and private partnerships. Eight of the ten Partnerships have already received
information concerning the proposed sale and have consented to it. Your consent
and that of one other public Partnership remains.
Glenborough and Insignia have both offered an aggregate purchase price of $55.3
million for the 14 properties, of which, approximately $9,846,221 is allocated
to the purchase of Sabal Point. After payment
Letter to Limited Partners for Consent to Sale of Property
November 25, 1997
page 2
of the Partnership's liabilities and closing costs, net proceeds of
approximately $4,297,381 will be available to Limited Partners in the amount of
$432 per investment unit.
Regretfully, the negotiated sale price does not allow for the return of 100% of
your original investment capital. However, you must also take into consideration
the capital that may have been returned during the Partnership's early years
when tax advantages were allocated to each Limited Partner. While each Limited
Partner's situation is different, our estimates indicate that a portion of
capital was returned to the average investor as a result of allocated tax
write-offs.
Given the difficult market and our discussions with potential buyers, we believe
the negotiated purchase price represents the best offer we are likely to obtain
presently or in the immediate future. We believe any potential for a higher sale
price would be contingent upon an extended holding period of up to five or more
years. We expand on this point in the following information.
PROPOSAL
We have entered into a firm Contract of Sale, pending Limited Partner approval,
for the property held by Bass Real Estate Fund II and 13 properties held by nine
other Partnerships under our management. We ask your consent and approval to
proceed with a sale.
When selling a property, the buyer's due diligence process includes exhaustive
inspections. It is not unusual for the buyer to uncover items of deferred
maintenance or other defects that might result in renegotiations or lowering of
the purchase price in order to take into account such factors. You may have
experienced something similar when purchasing or selling a home. Accordingly, we
seek your approval to sell the property at a purchase price of not less than
$9,353,910 (the "minimum sale price"). The minimum sale price equals 95% of the
estimated fair market value. We have secured a FAIRNESS OPINION from an
independent appraisal firm that supports this value. We ask that you approve the
sale of the property for the minimum sale price so as to avoid the necessity of
having to solicit your consent again should some minor adjustment in the
negotiated sale price of $9,846,221 be required. With your consent, we intend to
negotiate a contract for the sale of the property at a price no less than
$9,353,910.
Because a majority of the Limited Partners expressed a desire to sell the
Partnership's property, we recommend that you consent to the sale of the
property and the termination of the Partnership. THE TIMING OF THIS IS CRITICAL
TO A SUCCESSFUL SALE.
ESSENCE OF OPPORTUNITY
The ESSENCE of this opportunity is threefold: (1) an improved market, (2) the
presence of well-capitalized buyers and (3) stepped-up demand for our type of
property. These factors are in contrast to conditions we observed during the
first half of this decade. At the outset, the national recession left Charlotte
with job losses and meager economic growth. The vacancy rate for apartments
jumped to a record 12% and property values plummeted. Property values were
driven even lower by the savings & loan debacle. The Resolution Trust
Corporation, charged with overseeing the liquidation of many of the
institutions, saturated the market with properties selling at deep discounts. By
late 1994, however, the market began to rebound, driving rents and occupancy
levels up and attracting new investors interested in acquiring apartments.
Property values, however, remain low.
REITs, institutional buyers (e.g., pension funds) and other well-capitalized
investment entities have emerged as the dominant owners of rental properties.
REITs have been especially popular with investors. During the first seven months
of 1997, investors poured $21.27 billion into these publicly traded investments,
according to the National Association of Real Estate Investment Trusts. This
tremendous influx of capital creates pressure on the REITs to make acquisitions
and maximize performance. This has had a dramatic effect on the market.
Initially, these institutional investors acquired large (200+ rental units),
newer Class A apartments. The older and smaller Class B apartments like ours
attracted very little interest.1 More recently, the institutional investors'
high rate of acquisitions depleted the supply of Class A
Letter to Limited Partners for Consent to Sale of Property
November 25, 1997
page 3
properties and increased demand for Class B and C properties; thus, herein lies
our opportunity. There are signs, however, that this opportunity may be limited.
Charlotte's strong job growth and low vacancy rate have given birth to the
highest wave of development in seven years. In Charlotte and the surrounding
area, 2,240 apartment units were completed between February and August of this
year. There are currently 3,906 units under construction, and another 2,194
units are proposed. This suggests that new development could exceed Charlotte's
historical absorption rate of 2,000 units annually, yielding a surplus of units
within the next 12 months. The WALL STREET JOURNAL recently reported,
"Charlotte, one of the Southeast's highest-octane real estate markets, is being
warned to apply its brakes." If construction continues unabated, the market will
again become over-built, vacancies will rise, rents will be forced lower, and
property values will decline. Already, the vacancy level is expected to increase
to 7% or 8% over the next six months from its current level of 5.3%.
Given the current demand for Class B properties and the expected downturn in the
market, we believe that the best time to sell the Partnership's property is NOW.
We recommend that you approve the sale of the property for the minimum sale
price of $9,353,910. Your consent must be received by 5:00 P.M. on Friday,
December 5, 1997. We ask that you mail your Consent Form promptly so that we can
allow the buyers to immediately begin their due diligence period. Subject to
receipt of Limited Partner approval, we anticipate that we can close the sale on
or before December 31, 1997, but no later than January 31, 1998. The
Partnership's dissolution will begin immediately after the closing and the final
distribution will follow within 30-60 days from the closing.
Sincerely,
MARION BASS REAL ESTATE GROUP, INC.
General Partner for Bass Real Estate Fund II
/s/ Marion F. Bass
/s/ Marion F. Bass
Marion F. Bass
President
ENCLOSURE
1 It is Sabal Point's age, location, rent structure and size that classifies it
and the other properties in the Marion Bass portfolio as a "Class B" project.
BASS REAL ESTATE FUND-II, A NORTH CAROLINA LIMITED PARTNERSHIP
4000 PARK ROAD
CHARLOTTE, NORTH CAROLINA 28209
INFORMATION STATEMENT
RELATING TO A PROPOSED SALE OF THE PARTNERSHIP'S
APARTMENT COMPLEX AND THE SUBSEQUENT
LIQUIDATION OF THE PARTNERSHIP
This Information Statement is being furnished to the holders (the
"Unitholders") of units of limited partnership ("Units") of Bass Real Estate
Fund-II, a North Carolina Limited Partnership ("BREF-II") in connection with the
solicitation by the General Partners of BREF-II of the consent of the limited
partners of BREF-II (the "Limited Partners") to the sale of the Partnership's
apartment complex (which constitutes substantially all of the assets of BREF-II)
at a minimum price and, if the sale of the apartment complex is consummated, the
subsequent liquidation of the partnership. A meeting of the partners of BREF-II
will not be held in connection with the solicitation of the consent of the
Limited Partners. All expenses of this solicitation of consents from the Limited
Partners will be borne by BREF-II. In addition to the solicitation by mail,
directors, officers and employees of the Managing General Partner of BREF-II may
solicit consents by telephone, other customary means of communication, or
personal interviews. Said persons will receive no additional compensation for
such services. Brokerage houses, nominees, fiduciaries and other custodians will
be requested to forward these solicitation materials to the beneficial owners of
Units held of record by them and will be reimbursed for their reasonable
expenses. This Information Statement and the enclosed consent form are first
being mailed to Unitholders of BREF-II on or about November 25, 1997.
The Limited Partners of BREF-II are being asked to consider and consent
to the sale of the apartment complex owned by BREF-II, which constitutes
substantially all of the assets of BREF-II (the "Sale of Assets"), to
Glenborough Realty Trust Incorporated and/or Glenborough Properties, L.P.
(collectively "Glenborough" or "Buyer") at a purchase price of $9,846,221 (the
"Contract Sale Price") but in no event less than $9,353,910 (the "Minimum Sale
Price"). Under the terms of the Amended and Restated Limited Partnership
Agreement governing BREF-II (the "Partnership Agreement"), BREF-II will be
dissolved upon the sale of substantially all of its assets. Therefore, approval
of the Sale of Assets will also constitute approval of the dissolution of
BREF-II as soon as practicable following the closing of the Sale of Assets.
THE DATE OF THIS INFORMATION STATEMENT IS NOVEMBER 25, 1997.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by BREF-II with the Securities
and Exchange Commission (the "Commission") under the Securities Exchange Act of
1934 (the "Exchange Act") are incorporated herein by reference:
(a) BREF-II's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) BREF-II's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1997;
(c) BREF-II's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997; and
(d) BREF-II's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1997.
In accordance with the rules and regulations of the Commission, copies
of such Form 10-K and the Corporation's Form 10-Q for the fiscal quarter ended
September 30, 1997 previously filed by BREF-II with the Commission accompany
this Information Statement.
All documents filed by BREF-II pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Information Statement and prior
to the date consents are required to be returned shall be deemed to be
incorporated by reference into this Information Statement and to be a part
hereof from the date of the filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
subsequently filed document that is or is deemed to be incorporated by reference
herein) modifies or supersedes such previous statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except as
so modified or superseded.
TABLE OF CONTENTS
SUMMARY OF THE INFORMATION STATEMENT..............................................................................1
General..................................................................................................1
The Sale of Assets.......................................................................................1
The Purchase Agreement...................................................................................3
MARKET PRICE OF UNITS.............................................................................................5
Selected Financial Data..................................................................................5
INFORMATION STATEMENT.............................................................................................1
Introduction.............................................................................................1
Principal Unitholders and Holdings of Management.........................................................2
The Partnership..........................................................................................2
Business of the Partnership..............................................................................2
THE SALE OF ASSETS................................................................................................3
Proposed Minimum Sale Price..............................................................................6
INTEREST OF AFFILIATES IN THE SALE OF ASSETS......................................................................6
THE PURCHASE AGREEMENT............................................................................................7
Terms of the Purchase Agreement..........................................................................7
Certificate of Limited Partnership.......................................................................8
Indemnification by the Partnerships......................................................................9
Indemnification by the Buyer.............................................................................9
Conditions to Closing....................................................................................9
Dissenters' Rights......................................................................................10
Approval of Holders.....................................................................................10
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP...................................................................10
Projected Distributions to Limited Partners on Sale of the Project......................................11
Accounting and Income Tax Consequences of the Sale of Assets and Liquidation............................12
INDEPENDENT PUBLIC ACCOUNTANTS...................................................................................14
Purchase Agreement......................................................................................Appendix A
SUMMARY OF THE INFORMATION STATEMENT
THE FOLLOWING SUMMARY IS INTENDED ONLY TO HIGHLIGHT CERTAIN INFORMATION
CONTAINED ELSEWHERE IN THIS INFORMATION STATEMENT. THIS SUMMARY IS NOT INTENDED
TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
CONTAINED ELSEWHERE IN THIS INFORMATION STATEMENT, AND THE DOCUMENTS OTHERWISE
REFERRED TO HEREIN. UNITHOLDERS ARE URGED TO REVIEW THIS ENTIRE INFORMATION
STATEMENT CAREFULLY, INCLUDING THE PURCHASE AGREEMENT ATTACHED AS APPENDIX A
HERETO.
GENERAL
The holders of the Units of BREF-II are being asked by the General
Partners of BREF-II, Marion Bass Real Estate Group, Inc. and Marion F. Bass,
individually (collectively, the "General Partners"), to consider and consent to
a proposal unanimously recommended by the General Partners to approve the Sale
of Assets to Glenborough at a price no less than the Minimum Sale Price as
described in more detail in this Information Statement. See "The Sale of
Assets." In accordance with the terms of the Amended and Restated Limited
Partnership Agreement governing BREF-II (the "Partnership Agreement"), the
Partnership will be dissolved upon the sale of substantially all of the assets
of the Partnership. Therefore, approval of the Sale of Assets will also
constitute approval of the dissolution of the Partnership as soon as practicable
following any closing of a Sale of Assets. Holders of Units at the close of
business on November 1, 1997 (the "Record Date") have the right to vote on the
Sale of Assets. Each Unit is entitled to one vote on each matter that is
properly presented to the Holders for a vote. Under the Partnership Agreement,
the affirmative vote of a majority of the votes entitled to be cast by holders
of Units is required to approve the Sale of Assets. For information with respect
to the treatment of Units that are not properly voted, units held of record by a
broker, as nominee ("Broker Units") that are not voted, and properly executed
but unmarked consents, see "Voting Rights; Votes Required for Approval" and
"--Consents." BREF-II has no directors or executive officers. The directors and
executive officers of the Managing General Partner, which include Marion F.
Bass, the other General Partner of BREF-II, do not beneficially own any Units.
See "Security Ownership of Certain Beneficial Owners and Management."
THE SALE OF ASSETS
BREF-II. BREF-II is a North Carolina limited partnership whose
principal asset is a multi-family residential apartment complex Sabal Point
("Sabal Point"), consisting of 202 units, which is located in the Charlotte,
North Carolina (such apartment complex being referred to as the "Project").
BREF-II is engaged principally in the business of ownership, management and
rental of residential apartment units.
GLENBOROUGH. Glenborough Realty Trust Incorporated is a publicly traded
(NYSE:GLB) diversified real estate investment trust. Glenborough is a
self-administered and self-managed REIT with a diversified portfolio of 111
properties including industrial, office, multi-family , retail and hotel
properties. In addition, two associated companies, including Glenborough
Properties, L.P., control similarly diversified portfolios comprising 53
properties.
BACKGROUND OF THE SALE OF ASSETS
See "Background and Reasons for the Sale" for a summary of BREF-II's
discussions with potential acquirors that preceded execution of the Purchase
Agreement and BREF-II's decision to solicit the consent of the Limited Partners
to the Sale of Assets at a price no less than the Minimum Sale Price. The
General Partners have received a number of offers to purchase the Project
(together with other apartment complexes owned by the Bass Group Partnerships).
The General Partners have entered into a contract to sell the Project at a price
of $9,846,221 (the "Contract Sale Price"). The Contract Sale Price could be
adjusted during the due diligence period; however, the General Partners will not
close the sale for less than $9,353,910 (the "Minimum Sale Price").
CONDITIONS OF SALE OF ASSETS
In addition to BREF-II, the Managing General Partner serves as a
general partner of the following investment limited partnerships: Bass Real
Estate Fund III Limited Partnership, Eagle Series II Sharonridge, a North
Carolina Limited Partnership, Sharonridge II/Associates, a North Carolina
Limited Partnership, EquitySource `83/Wendover Glen Limited Partnership,
Equitysource `84/The Oaks Limited Partnership, Equitysource `85/Farmhurst
Landing, a North Carolina Limited Partnership, Bass Income Plus Fund Limited
Partnership, Equitysource `86/The Courtyard, a North Carolina Limited
Partnership, and Bass Real Estate Fund-84, a North Carolina Limited Partnership
(said investment limited partnerships together with the Partnership being
collectively referred to herein as the "Bass Group Partnerships"). Subject to
each Bass Group Partnership securing the consent of their limited partners,
Glenborough will purchase the apartment complexes owned by each of the Bass
Group Partnerships. The limited partners of all of the Bass Group Partnerships
have consented to a proposed sale of their apartment complexes other than Bass
Income Plus Fund Limited Partnership and this Partnership. The General Partners
of Bass Income Plus Fund Limited Partnership will seek to secure the consent of
its limited partners to a sale of its apartment complexes to Glenborough.
RECOMMENDATION AND REASONS FOR THE SALE OF ASSETS
The General Partners believe that the Sale of Assets at no less than
the Minimum Sale Price and subsequent dissolution of the Partnership are in the
best interest of BREF-II and the Unitholders. The General Partners have
unanimously approved the Sale of Assets at no less than the Minimum Sale Price
and recommend that the Unitholders of BREF-II vote FOR approval of the Sale of
Assets at no less than the Minimum Sale Price.
The recommendation of the General Partners is based on several factors,
including the General Partners' evaluation of issues relating to the desires of
the Limited Partners, future costs associated with ownership of the apartment
complexes, the lack of an established market for the Units and the uncertainty
of future exit scenarios available to the Partnership. See "The Sale of
Assets--Recommendation of the General Partners and Reasons for the Sale."
OPINION OF FORTENBERRY & ASSOCIATES, LLC
The Managing Partners of the Partnership secured an opinion from
Fortenberry & Associates, LLC (the "Appraiser") as to the fair value of the
Partnership's apartment complexes. The Appraiser issued its fairness opinion on
September 25, 1997 and concluded that as of September 4, 1997 Sabal Point had a
value between $9,766,000 - $10,030,000 (the "Value Range Estimate"). The Value
Range Estimate is consistent with the General Partners' estimate of the value of
the Project and the value being place on the Project by Glenborough. See "The
Sale of Assets -- Fairness Opinion of Fortenberry & Associates, LLC."
2
ACCOUNTING TREATMENT AND CERTAIN TAX CONSEQUENCES
If the sale of the Project is completed, the General Partners
anticipate that BREF-II will report a gain from the sale, which will be
allocated to the partners in accordance with the Partnership Agreement. The sale
of the Project and the subsequent distribution by the Partnership of the net
proceeds of the sale and the liquidation of the Partnership will constitute a
complete disposition by a Limited Partner of his interest in the Partnership
(unless he has elected to aggregate his limited partnership interest with other
similar interests). See "Accounting and Income Tax Consequences of the Sale of
the Project."
INTEREST OF AFFILIATES IN THE SALE OF ASSETS
All of the executive officers and directors of the Managing General
Partner serve in the same capacities with Marion Bass Securities Corporation,
Marion Bass Construction Company, Marion Bass Properties, Inc., Bass Capital
Management Corporation and Marion Bass Investment Group, Inc. (collectively, the
"Marion Bass Group"). Marion F. Bass is the sole shareholder of Marion Bass
Investment Group, Inc., which is the sole shareholder of the other corporations
in the Marion Bass Group. The corporations in the Marion Bass Group provide
services to BREF-II for which they receive fees and expenses; some or all of
such service agreements may be continued by the purchaser of the Project
following the closing of the Sale of Assets.
In addition, Glenborough will acquire all of the issued and outstanding
stock of a property management company, Marion Bass Properties, Inc., a North
Carolina corporation, at a purchase price between $2,615,000 and $3,700,000.
Marion F. Bass is the sole shareholder of Marion Bass Investment Group, Inc.,
which is the sole shareholder of Marion Bass Properties, Inc. BREF-II is not
aware of any other benefits to affiliates or conflicts of interest associated
with the Sale of Assets or the Liquidation. See "The Sale of Assets--Interest of
Affiliates in the Sale of Assets" and "Related Transactions."
THE PURCHASE AGREEMENT
TERMS OF THE SALE
The General Partners have entered into a definitive contract with
Glenborough, a copy of which (without schedules) is attached as Appendix A (the
"Purchase Agreement"). This Information Statement contains a description of the
terms contained in the Purchase Agreement. The Purchase Agreement provides that
upon the satisfaction or waiver of certain conditions, Glenborough will acquire
all of the assets of each of the Bass Group Partnerships for an aggregate
purchase price of $55,300,000. On the Closing Date, the purchaser will assume
certain loans relating to the assets being purchased pursuant to the Purchase
Agreement, and pay off all other loans applicable to such assets, and the total
amount of the Purchase Price will be reduced by an amount equal to the principal
balance of such loans, together with all accrued and unpaid interest thereon as
of the Closing Date, and all late charges, penalties or other charges owing
under such loans. The Purchase Agreement allocates the Purchase Price among each
of the Bass Group Partnerships based on the value of the property being sold by
such partnership as determined by Glenborough, less an amount equal to the
outstanding principal amount and accrued interest of any loan related to such
asset and certain other incidental and customary closing adjustments. The
Purchase Agreement allocates $9,846,221 of the Purchase Price to the Project.
CLOSING DATE
3
It is presently expected that the closing date of a Sale of Assets will
occur as soon as practicable following approval of the Sale of Assets at no less
than the Minimum Sale Price by the holders of the Units provided that all other
conditions to the Sale of Assets set forth in the Purchase Agreement have been
satisfied or waived by the parties. See "The Purchase Agreement--Conditions to
Closing."
PAYMENTS TO HOLDERS
No amounts will be paid to the Unitholders at the closing of a Sale of
Assets. However, as soon as practicable following the completion of a Sale of
Assets, BREF-II will be liquidated and dissolved. The General Partners of
BREF-II currently estimate that proceeds to the Holders upon the liquidation of
BREF-II will be approximately $432 per Unit, assuming a sale of the Project at
the Contract Sale Price. Such amount is merely an estimate and is subject to
adjustment based on the actual sale price for the Project, amounts required to
be paid by BREF-II in connection with any liabilities not assumed by
Glenborough, and certain indemnification obligations of BREF-II which can be
estimated by management but cannot be determined with certainty at this time.
Amounts actually received by Holders of Units could be higher or lower than $432
per Unit. The General Partners currently anticipate that BREF-II will be
liquidated and a liquidating distribution will be made to the Unitholders as
soon as practicable following the closing of the Sale of Assets. See
"Dissolution and Liquidation of the Partnership."
HOLDERS RIGHT TO DISSENT
Neither the Partnership Agreement nor the North Carolina Revised
Uniform Limited Partnership Act grants to the Limited Partners any right to
dissent from the Sale of Assets and to obtain the "fair value" of their Units.
See "The Purchase Agreement -- Dissenters' Rights."
REPRESENTATIONS AND WARRANTIES
The Purchase Agreement contains certain representations and warranties
of each of BREF-II and Glenborough which are typical in a transaction of this
type. See "The Purchase Agreement--Representations and Warranties."
INDEMNIFICATION
In the Purchase Agreement, each of the Bass Group Partnerships is
required to indemnify Glenborough from any and all losses suffered by
Glenborough as a result of a material breach or inaccuracy of any of the
representations or warranties of such Partnership in the Purchase Agreement
relating to the operation and condition of its property prior to the Closing
Date other than those resulting from acts or omissions of Glenborough.
Additionally, Glenborough has agreed to indemnify the Bass Group Partnerships
from any and all losses suffered by the Bass Group Partnerships as a result of
any personal injuries or property damage at the Projects following the Closing
Date, other than those resulting from acts or omissions of the Bass Group
Partnerships. Glenborough has also agreed to indemnify the Bass Group
Partnerships with respect to any loan assumed by Glenborough for the failure by
Glenborough to perform any obligations under the loan documents required to be
performed by the borrower after the Closing Date. See "The Purchase Agreement --
Indemnification."
4
OTHER COVENANTS AND AGREEMENTS
The Purchase Agreement subjects BREF-II, Glenborough and the other Bass
Group Partnerships to customary negative and affirmative covenants and
agreements. See "The Purchase Agreement--Other Covenants and Agreements."
TERMINATION OF THE PURCHASE AGREEMENT
The Purchase Agreement may be terminated by Glenborough at any time and
for any reason for a period of 30 days following execution of the Purchase
Agreement (such 30-day due diligence period expires December 13, 1997). The
Purchase Agreement may be terminated by Glenborough after such period only in
certain limited circumstances. See "The Purchase Agreement--Termination of the
Purchase Agreement."
MARKET PRICE OF UNITS
Transfer of limited partnership interests in BREF-II is subject to
certain restrictions set forth in the Partnership Agreement. BREF-II is not
aware of any sales of Units in the last five years.
As of September 30, 1997, 9,938 Growth Units were outstanding, held of
record by 552 persons.
The Partnership Agreement requires that operating revenue less
operating expenses ("Cash Flow") be distributed each year. Cash Flow is to be
distributed pro rata among the Unitholders in accordance with their percentage
interest, 99% to the Limited Partners, 1% to the General Partners. BREF-II made
the following distributions to Unitholders who held Units on the record date for
such distribution:
No. of Growth Average Amount
Payment Units Total Amount Distributed per
Record Date Date Outstanding Distributed Growth Unit
------------- ----- ------------ ------------ -------------------
12/31/88 02/10/89 9,938 50,000 $ 4.98
06/30/89 08/04/89 9,938 50,000 $ 4.98
12/31/89 02/07/90 9,938 75,000 $ 7.47
06/30/90 07/23/90 9,938 50,000 $ 4.98
12/31/90 02/06/91 9,938 50,000 $ 4.98
12/31/93 02/24/94 9,938 50,000 $ 4.98
12/31/94 01/15/95 9,938 100,000 $ 9.96
12/31/95 04/01/96 9,938 100,000 $ 9.96
12/31/96 05/15/97 9,938 100,000 $ 9.96
Future distributions may include amounts held as reserves, which
amounted to approximately $447,499 as of September 30, 1997. However, once those
reserves are distributed to limited partners, future distributions will be made
only out of net cash flow.
SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from the
audited financial statements of BREF-II for each of the five years ended
December 31, 1996. The balance sheets for the years ended December 31, 1996 and
1995 and related statements of income, changes in earnings and cash flows for
each of the three years in the
5
period ending December 31, 1996 are delivered herewith and included in the
BREF-II Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
The unaudited balance sheet data as of September 30, 1997 and the unaudited
statements of income data for the nine months ended September 30, 1997 and
September 30, 1996 have been derived from unaudited financial statements of
BREF-II, and have been prepared on the same basis as the audited financial
statements. In the opinion of management, such unaudited financial statements
include all adjustments, consisting only of normal recurring items, necessary to
present fairly the information presented. The operating results for the nine
months ended September 30, 1997 are not necessarily indicative of the operating
results for the full year.
6
Nine Months Ended Year Ended December 31,
September 30 ------------------------------------------------------------
----------------------
Statement of Income Data 1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
Revenues:
Rental Income......... $1,076,641 $1,091,240 $1,456,491 $1,364,926 $1,263,615 $1,177,316 $1,097,495
Interest Income....... 13,894 7,949 11,844 3,210 2,471 4,019 5,940
Other Income.......... 34,584 42,534 54,839 52,088 64,223 44,765 46,908
Total revenues..... 1,125,119 1,141,723 1,523,174 1,420,224 1,330,309 1,226,100 1,150,343
Operating expenses....... 615,295 637,732 848,494 885,394 911,877 864,497 890,207
Mortgage Interest expense 454,082 458,375 610,473 615,714 620,453 624,737 628,611
Net income (loss)........ (15,518) 6,302 34,995 (103,659) (228,393) (293,290) (396,575)
Balance Sheet Data:
Total assets............. 7,418,856 7,570,143 7,535,102 7,667,475 7,912,388 8,299,902 8,633,646
Liabilities:
Mortgage Loan payable. 5,954,539 6,013,484 5,999,300 6,053,951 6,103,361 6,151,556 6,191,604
Security deposits..... 18,280 22,194 19,405 33,610 23,277 23,308 22,866
Accrued liabilities... 62,366 63,969 17,208 15,720 17,897 78,792 79,640
Partners equity ......... 1,383,671 1,470,496 1,499,189 1,564,194 1,767,853 2,046,246 2,339,536
Limited Partners......... 1,369,702 1,455,659 1,484,065 1,548,420 1,750,042 2,025,651 2,316,008
General Partners......... 13,969 14,837 15,124 15,774 17,811 20,595 23,528
Per Unit Data:
Net income (loss)........ (1.55) 0.63 3.49 (10.33) (22.75) (29.22) (39.51)
Average units outstanding 9,938 9,938 9,938 9,938 9,938 9,938 9,938
Distributions to 9.96 9.96 9.96 9.96 4.98 0.00 0.00
Unitholders..............
BASS REAL ESTATE FUND-II, A NORTH CAROLINA LIMITED PARTNERSHIP
4000 PARK ROAD
CHARLOTTE, NORTH CAROLINA 28209
INFORMATION STATEMENT
INTRODUCTION
This Information Statement is being furnished to the holders
("Unitholders") of units of limited partnership ("Units") of Bass Real Estate
Fund-II, a North Carolina Limited Partnership ("BREF-II"), in connection with
the solicitation by the General Partners of BREF-II of the consent of the
Limited Partners of BREF-II (the "Limited Partners") to a sale of substantially
all of the assets of BREF-II to Glenborough in accordance with the Purchase
Agreement at the Contract Sale Price of $9,846,221 but in no event less than
$9,353,910 (the "Minimum Sale Price"). No meeting of the Unitholders will be
held. In accordance with the Partnership Agreement, the Partnership will be
dissolved upon the sale of substantially all of its assets, and therefore
approval of the Sale of Assets by the Unitholders will also constitute approval
of the dissolution of the Partnership.
The Sale of Assets and the resulting dissolution of the Partnership
have been unanimously approved and recommended by the Board of Directors of
Marion Bass Real Estate Group, Inc., the Managing General Partner of BREF-II,
and by Marion F. Bass, the other General Partner of BREF-II. No other
partnership action on the part of BREF-II or the other Bass Group Partnerships
is necessary to authorize the Sale of Assets or the resulting dissolution of
BREF-II. If the consent of the Limited Partners to the Sale of Assets at no less
than the Minimum Sale Price is obtained, it is anticipated that the closing of
the Sale of Assets will occur on or before December 31, 1997, but no later than
January 31, 1998.
Solicitation of consents other than by mail may be made personally and
by telephone by regularly employed officers and employees of the Managing
General Partner who will not be additionally compensated therefor. The total
cost of soliciting consents will be borne by BREF-II.
Each Unitholder is entitled to one vote on each matter presented to the
Limited Partners for their approval for each Unit held of record at the close of
business on November 1, 1997, which is the Record Date for determining the
holders of Units entitled to consent to the Sale of Assets. The number of units
issued and outstanding as of September 30, 1997 was 9,938. The Partnership
Agreement provides that a sale of substantially all of the assets of the
Partnership must be approved by the holders of a majority of the outstanding
Units.
Unitholders entitled to give consent on the matters submitted for their
approval shall be those Unitholders as of the Record Date. Any consent delivered
in the accompanying form may be revoked by the person executing the consent at
any time prior to December 5, 1997 by filing an instrument revoking it or a duly
executed consent bearing a later date. Consents must be delivered to BREF-II,
Investor Relations, 4000 Park Road, Charlotte, North Carolina 28209 no later
than December 5, 1997.
This Information Statement contains certain information as to the Sale
of Assets, the terms of the Purchase Agreement, the liquidation of the
Partnership following a Sale of Assets and BREF-II, and is accompanied by
certain financial information relating to BREF-II, all of which should be
reviewed carefully. The description of the Purchase Agreement and the terms
thereof set forth in this Information Statement is a summary only; however, a
copy of the Purchase Agreement (without schedules) is attached as Appendix A.
PRINCIPAL UNITHOLDERS AND HOLDINGS OF MANAGEMENT
1
At September 30, 1997, BREF-II had 552 Limited Partners, none of which
owned more than 5% of the outstanding Units.
BREF-II has no directors or executive officers. The directors and
executive officers of the Managing General Partner, including Marion F. Bass,
the President and a Director of the Managing General Partner and, in his
individual capacity, the other General Partner of BREF-II, do not beneficially
own any Units.
THE PARTNERSHIP
BREF-II was organized as of November 13, 1985 as a North Carolina
limited partnership for the purpose of acquiring unimproved real estate and
constructing thereon and subsequently operating, holding for investment,
leasing, and ultimately disposing of rental apartment complexes. In 1986,
BREF-II acquired approximately 23.132 acres of undeveloped land located in
Charlotte, North Carolina and in 1987 constructed thereon an 202 unit apartment
complex known as Sabal Point ("Sabal Point" or the "Project"). Limited Partners
subscribed for and contributed an aggregate of $4,969,000 as capital to BREF-II
which is represented by a total of 9,938 investment units (referred to as
"Units") of $500 each.
There is no established trading market for the Units and an investment
in BREF-II is illiquid. BREF-II currently has only one class of Limited Partners
and no Limited Partner has a right of priority over any other Limited Partner.
The managing General Partner of BREF-II is Marion Bass Real Estate
Group, Inc. (the "Managing General Partner"). Marion F. Bass, individually, is
the other General Partner of BREF-II (with the Managing General Partner, the
"General Partners"). The General Partners have the sole right to manage the
business of BREF-II and make any and all decisions with respect thereto. The
Limited Partners are allowed to vote or consent to certain proposed actions in
limited circumstances as specifically set forth in the Partnership Agreement.
The Limited Partners have no right to participate in the management of BREF-II.
The principal executive offices of BREF-II and the Managing General
Partner are located at 4000 Park Road, Charlotte, North Carolina 28209, and
their telephone number is (704) 523-9421.
BUSINESS OF THE PARTNERSHIP
BREF-II was organized for the purpose of acquiring and operating
developed or undeveloped real property. Since its organization, BREF-II has
constructed one rental apartment complex and currently owns, operates and
manages the same. Sabal Point is located at 12624 Sabal Point in Charlotte,
North Carolina. Sabal Point is the first phase of a three phase apartment
complex; the other two phases are owned by other Bass Group Partnerships. Sabal
Point was built in 1987 and consists of 202 apartment units in three-story, wood
frame and vinyl siding buildings on approximately 23.132 acres of land. Sabal
Point includes 300 parking spaces and a one-story office/clubhouse facility, an
additional clubhouse, two laundry facilities, playground areas, tennis court and
two swimming pools, which are shared with the other two phases of the complex.
The apartment mix is as follows:
2
Number of Current
Apartment Units Type Square Feet Rental Rate
--------------- ---- ----------- -----------
66 1 BR/ 1 BA 760 $585-605
111 2 BR/ 2 BA 1,010 $695-715
25 3 BR/ 2 BA 1,203 $810
The combined average occupancy rate for the Project for each of the
three years ended December 31, 1996 and through August 31, 1997 was 96%, 96%,
96% and 92%, respectively, and the combined average effective annual rentals per
apartment unit (reflecting combined 1, 2 and 3 BR rentals) for each such period
were $555, $590, $625 and $650, respectively.
The Project is currently encumbered by permanent financing placed on
the property on March 7, 1989 in the original principal amount of $6,250,000,
which provides for monthly payments of principal and interest of $ 55,427 (the
"Loan"). The Loan matures on April 1, 1999. The outstanding principal balance of
the Loan as of June 30, 1997 was $5,969,837.
Through August 31, 1997, the Partnership had made cash distributions to
the Limited Partners in the aggregate amount of $659,098 or $66 per Unit.
Limited Partners have been allocated "losses" for federal income tax purposes
through December 31, 1996 aggregating approximately $259 per Unit.
THE SALE OF ASSETS
BACKGROUND AND REASONS FOR THE SALE OF ASSETS.
Due to what are perceived to be improved market conditions, the General
Partners are recommending that the Partnership sell the Project and liquidate.
In March of this year, the General Partners inquired of the Limited
Partners regarding their preference for HOLDING OR SELLING the Project and a
majority of the Limited Partners stated that they were in favor of selling.
Since conducting this survey the General Partners began working diligently to
secure a buyer for the Project. The General Partners received a number of offers
to purchase the Project (together with similar apartment complexes owned by
other investment limited partnerships of which Marion Bass Real Estate Group,
Inc. serves as a general partner). Effective November 13, 1997 the General
Partners entered into a contract to sell the Project to Glenborough at a price
of $9,846,221 (the "Contract Sale Price"). Because Glenborough has 30 days to
conduct its due diligence under the Purchase Agreement and it is not unusual for
certain adjustments to be made in the selling price during a due diligence
period, the General Partners are seeking the approval of the Limited Partners to
sell the Project at a purchase price of not less than $9,353,910 (the "Minimum
Sale Price") which is 95% of the Contract Sale Price. The General Partners have
secured a fairness opinion from a qualified real estate appraiser as to the
value of the Project. Fortenberry & Associates, LLC has issued its fairness
opinion with an indicated value range for Sabal Point at $9,766,000 to
$10,030,000. The Contract Sale Price equals 101% of the aggregate of the lowest
range of the estimated fair value of the Project as determined by such appraiser
and the Minimum Sale Price
4
equals 96% of such range.
IN ORDER FOR THE PARTNERSHIP TO SELL THE PROJECT, LIMITED PARTNERS
OWNING MORE THAN 50% OF THE UNITS MUST APPROVE THE SALE. LIMITED PARTNERS ARE
BEING REQUESTED TO EXECUTE THE ENCLOSED CONSENT AUTHORIZING A SALE OF THE
PROJECT AT NO LESS THAN THE MINIMUM SALE PRICE.
This Information Statement is being furnished to the Limited Partners
of the Partnership in connection with the solicitation of the Limited Partners'
consent to sell the Project to Glenborough at a purchase price not less than the
Minimum Sale Price. Glenborough is a publicly traded real estate investment
trust and is not an affiliate of the General Partners.
In recent years, the ownership and operation of apartment complexes has
undergone dramatic changes, with the emergence of public and private real estate
investment trusts ("REITs"), institutional investors (such as pension funds),
and other large, well-capitalized investment entities becoming the dominant
owners of rental properties. Historically, the REITs and other institutional
investors have targeted the larger (more than 200 rental units) and newer Class
A apartments for acquisition. The older and smaller Class B apartment complexes
have attracted very little interest from REITs and institutional investors.
Older apartment complexes are generally viewed as having significantly higher
maintenance costs. Additionally, apartment complexes under 200 units are viewed
as inefficient from a management standpoint. The primary market for the sale of
the Class B apartment complex has been local entrepreneurial investor groups.
The Partnership's apartment complexes, due to their age, location, rent
structure and size, would generally be classified as a "Class B" apartment
complexes.
Within the past 12 months the General Partners began receiving serious
inquiries as to the availability of the apartment complexes owned by the Bass
Group Partnerships. The Bass Group Partnerships own an aggregate of 1,385
apartment units concentrated within the Charlotte-Metropolitan area. All of the
inquiries received by the General Partners have been conditioned upon the
purchase of the entire apartment portfolio owned by the Bass Group Partnerships.
It is believed that this interest can be attributable to a number of factors,
including: the size of the total portfolio; the concentration of the apartments
in Charlotte, North Carolina, an area viewed as extremely desirable by the real
estate community; the favorable occupancy rates experienced by apartments in the
Bass Group Partnerships; and the perceived softening of demand and occupancy in
the newer Class A apartment complexes.
The General Partners received a number of inquiries from qualified
potential buyers, including Summit Properties, a publicly traded REIT,
Glenborough and Insignia Financial Group, Inc., a private entity that is
reportedly the largest owner and manager of rental apartments in the U.S.
Effective November 13, 1997, the Purchase Agreement was entered into
between the Bass Group Partnerships and Glenborough pursuant to which
Glenborough agreed to buy all of the apartment complexes owned by the Bass Group
Partnerships at an aggregate purchase price of $55.3 million of which
4
$9,846,221 was allocated to the Project owned by BREF-II.
Glenborough Realty Trust Incorporated is a publicly traded (NYSE:GLB),
diversified real estate investment trust. Glenborough is a self-administered and
self-managed REIT with a diversified portfolio of 111 properties including
industrial, office, multifamily, retail and hotel properties. In addition, two
associated companies control similarly diversified portfolios comprising 53
properties. Combined, the portfolios encompass over 16 million square feet and
are spread among 24 states throughout the United States. During 1997 Glenborough
acquired 73 new properties located in 16 states composed of approximately 7
million square feet in 17 office complexes, 35 office flex complexes, 15
industrial properties and four retail properties, 224 multifamily rental units
and 163 hotel rooms. The total cost of such acquisitions in 1997 was $514
million.
RECOMMENDATION OF THE GENERAL PARTNERS AND REASONS FOR THE SALE OF ASSETS
The General Partners considered the following material factors that
weigh in favor of the sale of the Project: (1) the potential for increased
operating and maintenance expenses required in future years as the Partnership's
Project continues to age; (2) certain risks applicable to the ownership of
apartment complexes, including competition from other rental apartments and
adverse market conditions due to changes in the economy; (3) the increased cost
necessary in order to manage and operate small apartment complexes like the
Project; (4) the lack of an established trading market for the Units and
resulting lack of liquidity in the investment; (5) the favorable capital gains
tax rates now available as a result of recent changes in the tax laws; and (6)
the uncertainty as to the future exit scenarios available to the Partnership in
light of the traditional bias of institutional investors to larger and newer
apartment complexes.
The General Partners considered the following material factors that
weigh against a sale of the Project: (1) the possibility that future rental
income could more than offset future increases in operating and maintenance
costs and as a result cash flow distributions to the limited partners could be
increased; and (2) the possibility of eventually obtaining a higher purchase
price for the Project.
The General Partners concluded that, given the Limited Partners'
indication that they favored selling the Project, on balance the sale of the
Project is in the best interests of the Limited Partners and the
5
Partnership and therefore recommends that the Limited Partners consent to the
sale of the Project at no less than the Minimum Sale Price.
FAIRNESS OPINION OF FORTENBERRY & ASSOCIATES, LLC
The Managing Partner of each of the Bass Group Partnerships has secured
an opinion from Fortenberry & Associates, LLC (the "Appraiser") as to the fair
value of the Partnership's Project as well as each of the apartment complexes
owned by the respective Bass Group Partnerships. The principal of the Appraiser
is Carol Fortenberry, a 1981 graduate of the University of North Carolina at
Chapel Hill. Ms. Fortenberry also holds a Masters in Business Administration and
carries the MAI designation. She has been an active appraiser within the
Charlotte-Metropolitan area and elsewhere in North Carolina for over nine years.
The Appraiser issued its fairness opinion on September 25, 1997 and concluded
that as of September 4, 1997 Sabal Point had a value between $9,766,000 and
$10,030,000 (the "Value Range Estimate"). The Value Range Estimate as concluded
by the Appraiser is consistent with the General Partner's estimate of value and
the value being placed upon the Project by Glenborough in the Purchase
Agreement.
Appraisers typically use up to three approaches in valuing real
property: the cost approach, the income approach, and the sale comparison
approach. The Appraiser utilized the income approach in reaching the Value Range
Estimate of the Project.
The income method is believed to be the most reliable since each
apartment complex owned by the Bass Group Partnerships is an income producing
investment and most buyers view income production as the most important criteria
in investing in this type of property. The income approach estimates a
property's capacity to produce income through an analysis of the rental market,
operating expenses and net income. The value of the current net income (and in
some cases estimates as to future income) is then determined through either or a
combination of the direct capitalization or discounted cash flow approach.
In rendering the fairness opinion the Appraiser performed site
inspections on each property owned by a Bass Group Partnership. During such site
visits the Appraiser inspected the physical facilities, obtained current rent
and occupancy information, gathered information on competing properties, and
interviewed each local property manager or assistant manager concerning
performance of the subject property, conditions, area trends, and other factors.
Neither the General Partners nor BREF-II imposed any limitations on the
Appraiser as to the scope of review and methodology used in connection with
rendering. A copy of the fairness opinion will be provided to any Limited
Partner upon request.
Fortenberry & Associates, LLC will be paid a fee of $1,750, plus
expenses, by BREF-II for preparation of the fairness opinion regarding the
project. This fee was negotiated between the General Partners and the Appraiser
and payment thereof is not dependent upon approval of a sale of the Project or
the Appraiser's determination as to the fair value of the Project.
PROPOSED MINIMUM SALE PRICE
The Purchase Agreement executed by the General Partners on behalf of
BREF-II and the other Bass Group Partnerships provides for a purchase price for
BREF-II's project of $9,846,221. When selling properties such as the Project it
is typical for the prospective buyer to undertake certain due diligence,
including securing exhaustive inspections of the
6
properties by a qualified engineer. The Purchase Agreement provides for a due
diligence period ending December 13, 1997. Glenborough has the option of
terminating the Purchase Agreement for any reason during the due diligence
period. It is not unusual during the due diligence period for the prospective
buyer to uncover items of deferred maintenance or other defects in the property
involved that result in a re-negotiation or lowering of the purchase price in
order to take into account such factors. While the General Partners are not
aware of any items of deferred maintenance or defects in the Project which would
materially and adversely affect the value of the same, the Limited Partners
should recognize that adjustments to the purchase price may be required.
Accordingly, the Limited Partners are being asked to approve the sale of the
Project for the Minimum Sale Price so as to avoid the necessity of re-soliciting
the consent of the Limited Partners should some minor adjustment in the sale
price be required.
The General Partners will not sell the Project unless the final gross
sale price is at least $9,353,910.
INTEREST OF AFFILIATES IN THE SALE OF ASSETS
All of the executive officers and directors of the Managing General
Partner serve in the same capacity with Marion Bass Securities Corporation,
Marion Bass Construction Company, Marion Bass Properties, Inc., Bass Capital
Management Corporation, and Marion Bass Investment Group, Inc. (collectively,
the "Marion Bass Group"). Marion F. Bass is the sole shareholder of Marion Bass
Investment Group, Inc. which is the sole shareholder of the other corporations
in the Marion Bass Group. The General Partners are the general partner of each
of the Bass Group Partnerships. Marion Bass Real Estate Group, Inc. owns 20
units in Bass Real Estate Fund III. Marion Bass Real Estate Group, Inc. and
Marion F. Bass, individually, own 30 Units and 4 Units, respectively, of Bass
Real Estate Fund `84. Additionally, Marion F. Bass, individually, owns one Unit
in EquitySource `84/The Oaks. Marion F. Bass, individually, is also a general
partner of Bass Real Estate Fund I, Bass Income Plus Fund and Bass Real Estate
Fund `84.
The various corporations in the Marion Bass Group provide services to
the Partnership and other Bass Group Partnerships for which they receive fees
and expenses; some or all of such service agreements may be continued by the
buyer following the closing of the sale of the Project. The following table sets
forth fees and expenses paid to the Marion Bass Group by BREF-II for each of the
last three fiscal years and for the nine months ended September 30, 1997:
7
Through
Sept. 30,
1994 1995 1996 1997
---- ---- ---- ------
Management fee of 5% of gross revenues $ 65,640 $ 70,287 $ 75,303 $ 54,733
Reimbursed maintenance salaries $ 50,606 $ 53,702 $ 43,110 $ 35,737
Reimbursed property manager salaries $ 47,543 $ 44,727 $ 39,650 $ 37,984
Other miscellaneous reimbursements $ 6,020 $ 6,420 $ 15,657 $ 13,046
===== ===== ====== ======
TOTAL $ 169,809 $ 175,136 $ 173,720 $ 141,500
RELATED TRANSACTIONS
Each of the apartment complexes owned by a Bass Group Partnership,
including the Project owned by BREF-II, has retained Marion Bass Properties,
Inc., a North Carolina corporation, as property manager for which Marion Bass
Properties, Inc. receives various property management fees. Glenborough will
also purchase all of the issued and outstanding stock in Marion Bass Properties,
Inc. at a purchase price for such stock of $2,615,000 if BREF-II and Bass Income
Plus Fund Limited Partnership do not sell their apartment complexes or
$3,700,000 if all of the Bass Group Partnerships sell their properties to
Glenborough. The Limited Partners will not receive any of the purchase price for
the stock in Marion Bass Properties, Inc.
THE PURCHASE AGREEMENT
The General Partners have entered into a definitive contract with
Glenborough, a copy of which (without schedules) is attached as Appendix A (the
"Purchase Agreement"). The following is a description of the principal terms
contained in the Purchase Agreement.
8
TERMS OF THE PURCHASE AGREEMENT
The Purchase Agreement provides that upon the satisfaction or waiver of
certain customary conditions precedent to closing, Glenborough will acquire all
of the apartment complexes of the Bass Group Partnerships for an aggregate
purchase price of $55.3 million, subject to certain adjustments and prorations.
The purchase price allocable to the Project is $9,846,221. Glenborough has made
an earnest money deposit or binder (the "Earnest Money") of $1,500,000. If the
transaction is consummated, the Earnest Money will be credited to Glenborough's
obligation to pay the purchase price and will be delivered to the various Bass
Group Partnerships at closing as a portion of the Purchase Price. If the sale of
the various apartment complexes is not consummated by reason of a default of
Glenborough, the Earnest Money will be delivered to the various Bass Group
Partnerships as liquidated damages. If the sale of the apartment complexes is
not consummated for any other reason the Earnest Money will be returned to
Glenborough.
The aggregate purchase price will be reduced by an amount equal to the
principal balance together with all accrued and unpaid interest thereon as of
the closing date of all of the outstanding loans on the various apartment
complexes owned by the Bass Group Partnerships and the consideration to be paid
to each of the Bass Group Partnerships for their respective apartment complexes
will be reduced by their respective loan amount. The Buyer will assume all HUD
insured loans and the other outstanding loans will be paid in full at the
closing. BREF-II's Project is encumbered by conventional financing that is not
HUD insured and will be paid in full by the Buyer at the closing.
The Purchase Agreement provides that certain items are to be
apportioned or prorated between Glenborough and the Bass Group Partnerships as
sellers, including: current collected rents and prepaid rents; real estate taxes
and assessments; utility charges; amounts due on service contracts; and interest
on the permanent financing applicable to each apartment complex. Additionally,
BREF-II, and each Bass Group Partnership, will be required to pay certain
closing costs, including: North Carolina excise tax applicable to the sale
(computed at the rate of $2.00 per $1,000 of gross consideration); legal and
accounting fees; and similar costs and expenses. All brokerage or real estate
commissions owing with respect to the proposed sale will be paid by the
Glenborough. Additionally, Glenborough will pay all assumption fees, transfer
fees and similar related costs for any HUD loans assumed up to a maximum of
$235,000 and will pay all prepayment penalties, yield maintenance payments or
similar charges for loans that are not assumed up to a maximum amount of
$386,000. All loan assumption fees or prepayment penalties in excess of such
amounts will be borne by the various Bass Group Partnerships. Such costs and
expenses are not expected to exceed the maximum of Glenborough's obligation.
It is estimated that the closing costs and expenses allocable to the
sale of BREF-II's Project will be approximately $30,000 to $40,000.
Additionally, BREF-II will pay out of the proceeds of sale of the Project any
accrued but unpaid operating expenses as of the closing date.
9
The Bass Group Partnerships have entered into various service
agreements with members of the Marion Bass Group and unrelated entities.
Glenborough has the right to terminate all property management, leasing,
brokerage agreements and service contracts affecting the various apartment
complexes to be acquired.
The Purchase Agreement contains representations and warranties with
respect to BREF-II's Project. The representations and warranties are of the type
customary in transactions of this nature, including: the valid existence of
BREF-II as a limited partnership in the State of North Carolina; its authority
to sell its Project; the absence of conflicts with laws or other agreements as a
result of the sale of the Project; title to the Project; the physical condition
of the Project and other assets to be sold; the absence of material adverse
changes in its financial position; the insurance on the Project; pending or
threatened litigation; guaranties to which BREF-II is a party; violations of
environmental laws; and the validity of the contracts to which BREF-II is a
party. Additionally, the Purchase Agreement contains certain affirmative
covenants customary in transactions of this type, such as an obligation of
BREF-II following execution of the Purchase Agreement to continue to conduct its
business in the ordinary course.
CERTIFICATE OF LIMITED PARTNERSHIP
The Certificate of Limited Partnership and the Partnership Agreement of
BREF-II in effect immediately prior to the Closing Date will continue to be the
Certificate of Limited Partnership and Partnership Agreement of BREF-II
following the Closing, until thereafter duly amended in accordance with
applicable law.
Other than the applicable rules and regulations of the Securities and
Exchange Commission, the Managing General Partner knows of no other federal or
state regulatory requirements with which BREF-II or any of the Bass Group
Partnerships or the Buyer must comply in order to complete the Sale of Assets.
However, BREF-II will be required to comply with certain filing requirements
under North Carolina law in order to effect the dissolution and liquidation of
BREF-II subsequent to the Sale of Assets.
INDEMNIFICATION BY THE PARTNERSHIPS
The Purchase Agreement provides that each of the Bass Group
Partnerships will indemnify, defend and hold harmless Glenborough against all
claims, losses, demands, costs, expenses, penalties and damages asserted
against, incurred or suffered by it resulting from or arising out of (i) any
personal injury or property damage first occurring in, on or under any property
sold by such Partnership during such Partnership's ownership thereof, from any
cause whatsoever other than as a consequence of the acts or omissions of
Glenborough, or its agents, employees or contractors and (ii) the failure of
such Partnership to perform its obligations under any of the loans relating to
the assets of the Partnership which are to be performed prior to the Closing
Date.
INDEMNIFICATION BY THE BUYER
The Purchase Agreement contains an obligation of Glenborough to
indemnify, defend and hold harmless each Bass Group Partnership and its partners
against all claims, losses, demands, costs, expenses, penalties and damages
asserted against, incurred or suffered by any of the Bass Group Partnerships
resulting from or arising out of (i) any personal injury or property damage
first occurring in, on or under the properties sold by such partnerships during
the Buyer's ownership thereof, from any cause whatsoever other than as
10
a consequence of the acts or omissions of the partnerships or their agents,
employees or contractors and (ii) with respect to any loans relating to the
properties being sold which are assumed by Glenborough, the failure of
Glenborough to perform all obligations of the borrower after the Closing Date.
CONDITIONS TO CLOSING
It is customary in a sales contract involving income property to allow
the buyer the unqualified right to terminate the contract and obtain a refund of
any deposit if, by a specified date, the prospective buyer was unsatisfied with
any aspect regarding the sale transaction. The purpose of such clause is to give
the prospective buyer the right to conduct certain due diligence and if, as a
result thereof, it feels that an acquisition of the property is inappropriate,
terminate the contractual arrangement and receive a full refund of its deposit.
The Purchase Agreement entered into by BREF-II and the other Bass Group
Partnerships provides for a due diligence inspection period of 30 days (ending
December 13, 1997) with the right to terminate the Purchase Agreement without
any legal obligation or forfeiture of the Earnest Money if Glenborough decides
during such period that termination is advisable for any reason.
The Purchase Agreement provides that certain conditions must be
satisfied before the closing will occur as follows: (i) approval by Glenborough
of any exception to title respecting the Project and availability of
satisfactory title insurance; (ii) all leases at the Project are in full force
and effect as of the closing date; (iii) each of the representations and
warranties of the Partnership is true and correct (as, for example, condition of
the Project, etc.); (iv) the physical condition of the Project being the same as
the physical condition of the Project on the date of execution of the Purchase
Agreement, ordinary wear and tear excepted; (v) termination of all property
management, leasing, brokerage agreements and service contracts affecting the
Project; and (vi) receipt of approval from HUD of the sale of the apartment
complexes owned by some of the other Bass Group Partnerships and encumbered by
HUD-insured financing and permission for the Buyer to assume the HUD-insured
loans outstanding with respect to the projects. If any one or more of the
conditions precedent to closing is not satisfied prior to the date set for the
closing, Glenborough has the option of either waiving such item as a condition
to closing and proceeding to closing the transaction or terminating the Purchase
Agreement and receiving a refund of the Earnest Money.
If BREF-II fails to satisfy a condition precedent prior to the relevant
date, Glenborough may terminate the Purchase Agreement and receive a refund of
the Earnest Money. If, on the other hand, BREF-II complies with all of the terms
of the Purchase Agreement, and all conditions precedent to closing are met and
Glenborough nevertheless fails to close on the purchase of the Project, the sole
remedy available to the Bass Group Partnerships will be retention of the Earnest
Money as liquidated damages.
11
DISSENTERS' RIGHTS
Neither the Partnership Agreement nor the North Carolina Revised
Uniform Limited Partnership Act provides limited partners who vote against the
Sale of Assets or the Plan of Liquidation with dissenters' rights. Dissenters'
Rights generally allow a partner who votes against a proposed transaction, which
is otherwise approved and consummated, to be paid the "fair value" of his
interest as determined by an independent third party or a court of law.
APPROVAL OF HOLDERS
The Partnership Agreement of BREF-II provides that the affirmative vote
of a majority of the outstanding Units of BREF-II is required in order to
approve the Sale of Assets. All of the Bass Group Partnerships have approved a
sale of their apartment complexes pursuant to the Purchase Agreement except for
BREF-II and Bass Income Plus Fund Limited Partnership. Bass Income Plus Fund
limited partnership, like BREF-II, is currently seeking the approval of its
limited partners to the sale if its apartment complex. The failure of BREF-II
and/or Bass Income Plus Fund Limited Partnership to approve a sale will not
adversely affect the other Bass Group Partnerships and Glenborough has agreed to
close under the Purchase Agreement and acquire title to all of the apartment
complexes owned by those Bass Group Partnerships that approve such sale.
The Managing General Partner recommends that the Limited Partners
consent to the Sale of Assets at a price no less than the Minimum Sale Price.
The Managing General Partner of BREF-II reserves the right in its discretion at
any time prior to the Closing Date to abandon the Sale of Assets if the Managing
General Partner determines that such action would be in the best interest of
BREF-II.
DISSOLUTION AND LIQUIDATION
OF THE PARTNERSHIP
The Partnership Agreement provides that BREF-II will be dissolved upon
the sale of substantially all of the assets of BREF-II. Upon dissolution of
BREF-II, the General Partners shall proceed with the liquidation of BREF-II and
Partnership Assets will be applied and distributed as follows:
1. First, the assets of Partnership shall be applied to the payment of
the liabilities of BREF-II (other than any loans or advances that may
have been made by any Partners to BREF-II), and the expenses of
liquidation of the assets of BREF-II and the discharge of liabilities
to creditors so as to enable the General Partners to minimize any
losses resulting from liquidation.
2. The remaining assets shall next be applied to any loans made by any
Partner to BREF-II, with the most recent loans being repaid first.
3. The remaining assets shall next be distributed to the Partners,
after allocation of gain in accordance with the Partnership Agreement,
in accordance with their capital account balances.
Notwithstanding provisions 1 through 3 set forth above, the General
Partners may retain such amounts as they reasonably deemed necessary as a
reserve for any liabilities or obligations of BREF-II, which reserves, shall, at
the time the General Partner deems appropriate, be distributed later in
accordance with Partnership Agreement. Each of the Limited Partners will be
furnished with a statement prepared by Arthur Andersen, LLP, which will set
forth the assets and liabilities of BREF-II as of the date of the complete
liquidation. Upon the compliance by the General Partners with the distribution
plan set forth in the Partnership Agreement, the Limited Partners shall cease to
be such and the General Partners shal
12
execute and cause to be filed a Certificate of Cancellation of BREF-II and in
all other documents necessary with respect to such termination.
PROJECTED DISTRIBUTIONS TO LIMITED PARTNERS ON SALE OF THE PROJECT
If the sale of the Project is completed BREF-II will terminate and
dissolve. The General Partners will distribute the net proceeds of sale (i.e.,
the contract selling price for the Project less the Loans and any other
liabilities of BREF-II not assumed by the Buyer and all costs and expenses
associated with sale) and BREF-II's existing cash balance and reserves in
accordance with the terms of the Partnership Agreement as above described.
Set forth below is a schedule that summarizes the calculation of the
estimated distribution per Unit in connection with the proposed sale of the
Project. Such estimate is based upon financial information for the Partnerships
as of July 31, 1997 and an assumed closing date of no later than December 31,
1997.
13
ACTUAL RESULTS WILL LIKELY DIFFER FROM THESE ESTIMATES.
Estimated Source of Funds:
Cash and Cash Investments $ 447,499
Security Deposits 25,217
Accounts Receivable 6,492
Reserves 90,545
Gross Purchase Price
(assuming the Contract Sale Price) $9,846,221
Less Closing Costs (40,000)
=======
Net Sales Price 9,806,221
Estimated Use of Funds:
Accounts Payable 5,850
Escrow Security Deposits 18,280
Fees Payable 5,795
Tenant Prepaid Rents 798
Taxes 49,923
Note Payable-Affiliate 0
Mortgage Balance $ 5,954,539
=========
Total Cash Available for Distribution 4,340,789
General Partners Allocation 43,408
Total Limited Partner Allocation $ 4,297,381
=========
Estimated Distribution Per Unit $ 432
===========
In the event the Project is sold for less than the Contract Sale Price the
distribution per Unit would be reduced. For example, if the Project is sold for
the Minimum Sale Price the estimated distribution per Unit would be $383.
ACCOUNTING AND INCOME TAX CONSEQUENCES OF THE SALE OF ASSETS AND LIQUIDATION
If the sale of the Project is completed the General Partners anticipate
that it will report a gain from the sale for accounting and tax purposes which
would be allocated in accordance with the Partnership Agreements. Since the
Project is real property used in a trade or business, the character of the tax
gain on the sale is determined under Section 1231 of the Internal Revenue Code
of 1986, as amended (the "Code"). Section 1231 gain in excess of depreciation
recapture is treated as a capital gain subject to a maximum rate of 20%
(assuming no other Section 1231 losses). Alternative minimum tax adjustments and
taxation are not addressed for purposes of this document.
The sale by BREF-II of the Project and the subsequent distribution by
BREF-II of the net proceeds of the sale and the liquidation of BREF-II will
constitute a complete disposition by a Limited Partner of his interest in
BREF-II (unless he has elected to aggregate his limited partnership interest
with other similar interests).
14
If a cash distribution from a liquidation and dissolution exceeds a
Limited Partner's adjusted tax basis in his Units, such excess will be treated
as a gain realized by the Limited Partner as if there had been a sale of his
Unit. Similarly, the excess of a Limited Partner's adjusted tax basis in his
Unit over the amount distributed to the Limited Partner will be treated as a
loss realized by the Limited Partner on the sale of his Unit. Such gains or
losses will be treated as long-term capital gains or losses in the case of Units
held for more than 18 months; provided that the limited partner is not
considered to be a "dealer" with respect to the Units. A "dealer" is one who
owns property, primarily for sale to customers in the ordinary course of
business. Gains or losses on the liquidation of BREF-II in respect of a Unit
must be reported separately by each limited partner and will depend upon each
Limited Partner's basis in his own Units.
The gain on the sale of the project will be subject to tax in North
Carolina. The Managing General Partner is responsible for reporting the
distributable share of income of non-resident partners and is required to
compute and pay the tax due for each non-resident partner at the time of filing
the partnership tax return. This tax will be withheld from subsequent
distributions to the nonresident partners. All North Carolina resident partners
will report the sale as part of their federal taxable income.
In addition to the tax consequences from the sale, the General Partners
anticipate that BREF-II will report income from operations in the year of the
sale. This income will be allocated in accordance with the partnership agreement
and will be treated as passive activity income subject to the provisions of
Section 469 of the Code.
Based on the complexities of the income tax laws and because the tax
consequences may vary depending upon a holder's individual circumstances or tax
consequences, it is recommended that each Limited Partner consult his tax
adviser concerning the federal tax consequences (and any applicable state, local
or other tax consequences) of the liquidation and dissolution of the Partnership
pursuant to a sale of the Project.
15
The following is a schedule of activity since inception through
September 30, 1997 for a one unit investment in BREF-II, assuming a sale of the
Project at the Contract Sale Price. Suspended losses are not addressed in this
example.
Original Capital Contribution $ 500
Distributions Through 9/30/97 (66)
Losses Through 12/31/96 (259)
Estimated Income/(Loss) Before Depreciation Expense, 20
1/1/97 - 9/30/97 (includes Deferred Cost Write-Off) Gain on Sale of Project
Subject to 20% Tax 297
-----
Tax Basis on Liquidation 492
Estimated Distribution per Unit 432
Gain/(Loss) on Liquidation per Unit (60)
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of BREF-II included in BREF-II's Annual Report
on Form 10-K for the year ended December 31, 1996, are incorporated by reference
in this Information Statement and have been audited by Arthur Andersen LLP,
independent public accountants, as stated in their reports appearing therein.
APPENDIX A
PURCHASE AGREEMENT
BETWEEN
THE LIMITED PARTNERSHIPS LISTED
IN ADDENDUM I AND SCHEDULE 1,
NORTH CAROLINA LIMITED PARTNERSHIPS
(COLLECTIVELY "TRANSFEROR")
AND
GLENBOROUGH REALTY TRUST INCORPORATED
A MARYLAND CORPORATION
AND
GLENBOROUGH PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
(COLLECTIVELY, "TRANSFEREE")
RELATING TO THE PROPERTY
COMMONLY KNOWN AS
THE MARION BASS APARTMENT PORTFOLIO
(AS MORE SPECIFICALLY DESCRIBED IN SCHEDULE 1)
LOCATED IN
NORTH CAROLINA
PURCHASE AGREEMENT
MARION BASS APARTMENT PORTFOLIO
TABLE OF CONTENTS
PAGE
List of Addenda............................................................ ii
List of Exhibits........................................................... iii
List of Schedules.......................................................... iv
1. Definitions........................................................ 1
2. Agreement to Purchase and Sell..................................... 1
3. Consideration...................................................... 1
4. Transferee's Due Diligence......................................... 2
5. Conditions to Closing.............................................. 3
6. Closing and Escrow................................................. 8
7. Closing Adjustments and Prorations................................. 10
8. Transferor's Representations and Warranties........................ 13
9. Transferee's Representations and Warranties........................ 13
10. Indemnification.................................................... 14
11. Risk of Loss....................................................... 15
12. Transferor's Continued Operation of the Property................... 16
13. Cooperation........................................................ 16
14. Non-Consummation of the Transaction................................ 17
15. Miscellaneous...................................................... 18
Addenda
Exhibits
Schedules
LIST OF ADDENDA
I Definitions
II Transferor's Representations and Warranties
III Due Diligence Materials to be Delivered by Transferor to Transferee
IV Delivery of Certain Documents by Transferor After Closing
LIST OF EXHIBITS
A Deed
B Assignment and Assumption of Leases
C Warranty Bill of Sale
D Assignment and Assumption of Service Contracts,
Warranties and Guaranties, and Other Intangible Property
E Certificate of Transferor Other Than an Individual (FIRPTA Affidavit)
F [intentionally omitted]
G Notice to Tenants
H Closing Certificate
I Proration Statement
LIST OF SCHEDULES
SCHEDULES REFERENCED IN ADDENDUM I (DEFINITIONS)
1. Description of Land
2. Permitted Exceptions
3. Required Endorsements
4. Personal Property
5. Contracts
6. Other Interests
7. Environmental Reports
8. Rent Roll
9. Delinquency Report
10. Allocation of Consideration
11. Loan
12. Related Transactions
SCHEDULES REFERENCED IN ADDENDUM II (TRANSFEROR'S REPRESENTATIONS AND
WARRANTIES)
II.C.1. Defects
II.C.2. Violations
II.C.3. Proceedings
II.D.3. Lease Exceptions
II.D.7. Brokerage Fees
II.E.2. Litigation
II.E.3. Tenant Improvements Costs and Leasing Commissions-Transferor's
Responsibility
PURCHASE AGREEMENT
MARION BASS APARTMENT PORTFOLIO
THIS PURCHASEAGREEMENT ("Agreement") is dated as of the Effective Date
(as defined in Addendum I hereto) by and among the limited partnerships listed
in Addendum I and Schedule 1, each a North Carolina limited partnership
(collectively "Transferor") and Glenborough Realty Trust Incorporated, a
Maryland corporation ("GLB"), and Glenborough Properties, L.P., a California
limited partnership ("GPLP") (collectively, "Transferee").
RECITALS
A. Transferee desires to acquire the Property (as defined in Addendum
I) from Transferor and Transferor desires to sell the Property to Transferee,
upon the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties, covenants and agreements hereinafter contained, and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged and intending to be legally bound, the parties hereby agree
as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement shall have the meanings
set forth in Addendum I attached hereto.
2. AGREEMENT TO PURCHASE AND SELL. Subject to and upon the terms and conditions
herein set forth and the representations and warranties contained herein,
Transferor agrees to sell the Property to Transferee, and Transferee agrees to
purchase the Property from Transferor.
3. CONSIDERATION. Transferor and Transferee agree that the total Consideration
for the Property shall be Fifty Five Million Three Hundred Thousand Dollars
($55,300,000).
(a) The Consideration shall comprise the following components and shall
be paid by Transferee as follows:
(i) EARNEST MONEY DEPOSIT. Within two (2) business days of the
Effective Date, Transferee shall deposit the Earnest Money in
escrow with the Title Company. The Earnest Money shall be held
in a federally insured interest-bearing account and interest
accruing thereon shall be for the account of Transferee unless
Transferee shall default hereunder. The Earnest Money shall be
in the form of cash or other immediately available funds. In
the event the transaction contemplated hereby is consummated,
the Earnest Money plus interest accrued thereon shall be
credited against Transferee's payment obligations hereunder.
(ii) THE LOANS. At Closing, Transferee shall assume the Loans
listed as to be assumed on Schedule 11 (the "Assumed Loans").
At the Closing, there shall be credited against the
Consideration an amount equal to the unpaid principal balance
of the Assumed Loans, together with all accrued and unpaid
interest thereon as of the Closing Date, and all late charges,
penalties or other charges owing under the Assumed Loans. The
cost of any assumption fee, transfer fee or similar or related
costs for any of the Assumed Loans shall be the obligation of
Transferee, up to a maximum amount of $235,000, and Transferor
shall pay all such fees in excess of $235,000. Any prepayment
penalty, yield maintenance payment or similar charge for the
Loans that are not to be assumed by Transferee as shown on
Schedule 11 (the "Non-Assumed Loans") shall be the obligation
of Transferee up to a maximum amount of $386,000, and
Transferor shall pay all such fees in excess of $386,000.
(iii) CASH. Immediately available funds, in an amount equal to
the Consideration, less (i) the Earnest Money Deposit and
interest earned thereon, and (ii) the unpaid balance of the
Assumed Loans as of the Closing Date, as more fully described
above.
(b) WITHHOLD IF TRANSFEROR A FOREIGN PERSON. Transferor acknowledges
and agrees that, if Transferor is a foreign person, Transferee may be
required to withhold a portion of the Consideration pursuant to Section
1445 of the Internal Revenue Code or Sections 18805 and 26131 of the
California Revenue and Taxation Code or similar laws or regulations of
other states. Any amount properly so withheld by Transferee shall be
deemed to have been paid by Transferee as part of the Consideration,
and Transferor's obligation to consummate the transactions contemplated
herein shall not be excused, reduced, terminated or otherwise affected
thereby. Transferee shall not withhold any portion of the Consideration
if Transferor executes the FIRPTA Certificate and any equivalent
certificates and/or affidavits required under applicable state law.
(c) ALLOCATION OF CONSIDERATION. The Consideration shall be allocated
in the manner set forth in Schedule 10.
4. TRANSFEREE'S DUE DILIGENCE. As more fully provided below, Transferor agrees
to reasonably assist and cooperate with Transferee in obtaining access to the
Property and certain documents relating thereto for purposes of inspection and
due diligence.
(a) PHYSICAL INSPECTION OF THE PROPERTY. At any time(s) reasonably
requested by Transferee following the Effective Date and prior to
Closing, Transferor shall afford authorized representatives of
Transferee reasonable access to the Property for purposes of satisfying
Transferee with respect to the representations, warranties and
covenants of Transferor contained herein and with respect to the
satisfaction of any Conditions Precedent to the Closing, including
without limitation the taking of soil borings by a reputable consultant
providing insurance which is reasonably acceptable to Transferor;
2
provided, however, that Transferee shall not to unreasonably disturb or
interfere with the rights of Tenants and their occupancy of their
apartments. Transferee hereby agrees to indemnify and hold Transferor
harmless from any damage or injury to persons or property caused by
Transferee or its authorized representatives during their entry and
investigations prior to the Closing. In the event this Agreement is
terminated, Transferee shall restore the Property to substantially the
condition in which it was found. This indemnity shall survive the
termination of this Agreement or the Closing, as applicable.
(b) CONTACTS WITH PROPERTY MANAGERS. At any time(s) reasonably
requested by Transferee following the Effective Date and prior to
Closing, Transferee may contact and interview the Property Managers for
the Property, provided that such contacts or interviews shall occur
only after reasonable oral or written notice to Transferor and
Transferor may be present during any interview.
(c) DELIVERY OF DOCUMENTS AND RECORDS. Transferor shall make available
to Transferee at Transferor's office in Charlotte, North Carolina for
review and copying the Due Diligence Materials within five (5) business
days after the Effective Date.
(d) REJECTION OF SERVICE CONTRACTS. Transferee shall be deemed to have
rejected all Service Contracts unless, on or before the Approval Date,
Transferee has notified Transferor in writing that Transferee wishes to
assume any such Service Contracts to the extent assumable and
identifying which of such Service Contracts are to be assumed.
(e) NO ASSUMPTION OF RENEWAL OR OPTION COMMISSIONS. Transferee
specifically disclaims any liability for brokerage commissions that may
be payable upon the renewal or extension of the term of any Lease,
whether pursuant to the exercise of an option or otherwise.
(f) TRANSFEREE'S RIGHT TO TERMINATE. At any time up to the Approval
Date, Transferee has the unqualified right to terminate this Agreement
and obtain a refund of any and all amounts paid hereunder to Title
Company or to Transferor, subject to Transferee's obligations to return
Due Diligence Materials to Transferor as provided in the Section
entitled "Conditions to Closing." From and after the Approval Date,
Transferee shall have no right to terminate this Agreement and receive
a refund of the Earnest Money except to the limited extent provided (i)
in Paragraph 5(a) hereof due to a failure of Transferee's Conditions
Precedent, (ii) in the event of a default by Transferor hereunder
beyond any applicable cure periods, if any and (iii) in the event of a
Major Loss pursuant to Section 11(c) hereof.
3
5. CONDITIONS TO CLOSING.
(a) TRANSFEREE'S CONDITIONS PRECEDENT. Transferee's Conditions
Precedent as set forth below are precedent to Transferee's obligation
to purchase the Property. The Transferee's Conditions Precedent are
intended solely for the benefit of Transferee. If any of the
Transferee's Conditions Precedent is not satisfied or waived by
Transferee, Transferee shall have the right in its sole discretion
either to waive the Transferee's Condition Precedent and proceed with
the acquisition or terminate this Agreement by written notice to
Transferor and the Title Company. Provided, however, in the event
Transferee elects to terminate this Agreement by reason of the failure
of a Condition Precedent, and such failure is curable by Transferor,
Transferor shall have a period of fifteen (15) days to cure such
failure of a Condition Precedent and provided that such Condition
Precedent is so cured within such cure period, Transferee shall be
obligated to close the purchase of the Property as herein provided.
(i) APPROVAL OF TITLE. Prior to the Approval Date, Transferee
shall advise Transferor as to any objections to title.
Transferor shall have five (5) business days after receipt of
Transferee's objections to give to Transferee: (A) written
notice that Transferor will remove such objectionable
exceptions on or before the Closing Date; or (B) written
notice that Transferor elects not to cause such exceptions to
be removed. Transferor's failure to give notice to Transferee
within the five (5) business day period shall be deemed to be
Transferor's election not to cause such exceptions to be
removed. If Transferor gives Transferee notice or is otherwise
deemed to have elected to proceed under clause (B), Transferee
shall have five (5) business days within which to elect to
proceed with the transaction or terminate this Agreement. If
Transferee fails to give Transferor notice of its election
within such five (5) business day period, and the Closing does
not otherwise occur, Transferee shall be deemed to have
elected to terminate this Agreement. If Transferor gives
notice pursuant to clause (A) and fails to remove any such
objectionable exceptions from title prior to the Closing Date,
and Transferee is unwilling to take title subject thereto,
Transferor shall be in default and Transferee shall have the
rights and remedies set forth in the Section entitled
"Non-Consummation of the Transaction." All objections to title
to the Property not made in writing to Transferor prior to the
Approval Date shall be deemed waived by Transferee unless such
title objection first occurs (or is first discovered by the
Title Company) after the Approval Date. If Transferor gives
notice pursuant to clause (A) the removal of an objectionable
exception may be by means of securing at Transferor's cost and
expense an endorsement to the Title Policy issued by the Title
Company providing affirmative insurance over such
objectionable exception.
(ii) LEASES. Except as disclosed in the Delinquency Report and
as may be approved by Transferee, all of the Leases shall be
in full force and effect,
4
without default thereunder by either tenant or landlord, and
no tenant shall be the subject of a proceeding under any
Creditors Rights Laws; provided, however, Transferee shall
have no right to terminate this Agreement so long as no more
than five percent (5%) percent of the Tenants are delinquent
respecting their rent or no more than five percent (5%) of the
Tenants are subject to a proceeding under any Creditors Rights
Laws.
(iii) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Transferor contained herein shall be true and
correct as of the Closing Date as though made at and as of the
Closing Date, and Transferor's covenants under this Agreement
shall be satisfied as of the Closing Date (to the extent such
covenants are to be satisfied as of the Closing Date), and
Transferee shall have received at the Closing a Certificate in
the form of Exhibit H hereto, dated as of the Closing Date and
executed on behalf of Transferor by executive officers of
Transferor or of the respective general partners of
Transferor, as applicable, certifying as to the fulfillment of
the conditions set forth in this Subsection.
(iv) CONVEYANCES BY TRANSFEROR. At the Closing, Transferor
shall convey to Transferee all of its right, title and
interest to the Property by executing and delivering all
documents required to be delivered by Transferor pursuant to
the Section entitled "Closing and Escrow."
(v) TITLE POLICY. Title Company shall be committed to issue
the Title Policy with the Required Endorsements at Closing,
showing title to the Real Property vested in Transferee,
subject only to the Permitted Exceptions. On or before the
Closing, Transferor shall cause the Title Company to deliver
to Transferee a certification that, in issuing the Title
Policy, the Title Company has not relied on any
representations or indemnities of Transferor or any of its
affiliates (except as disclosed in such certification).
(vi) NO FINANCING STATEMENTS. Transferee shall be satisfied
that, as of the Closing, there is no outstanding financing
statement showing Transferor as debtor filed in accordance
with the Uniform Commercial Code of any applicable
jurisdiction with respect to the Property except for any
financing statements approved by Transferee prior to the
Approval Date or relating to the Loan.
(vii) PROPERTY CONDITION. The physical condition of the Real
Property shall be substantially the same on the Closing Date
as on the Effective Date, reasonable wear and tear and loss by
casualty excepted.
(viii) TERMINATION OF AGREEMENTS. Immediately following the
Approval Date, Transferor shall give written notice of
termination of all property management, leasing brokerage
agreements and Service Contracts (except those
5
specifically assumed by Transferee in writing) affecting the
Property, and such termination shall be without cost or
expense to Transferee.
(ix) LOAN BENEFICIARY STATEMENT. Transferee shall have
received a beneficiary statement at least five (5) business
days prior to the Closing Date for all the Assumed Loans, duly
executed by the current holder of each Assumed Loan within
twenty (20) days of the Closing Date, consenting to the
conveyance of the Property by Transferor to Transferee without
exercising any right of acceleration, imposing any fee, charge
or penalty except as otherwise required by the Loan Documents
on Transferor or Transferee except as agreed upon by Lender
and the party to be so charged, or otherwise modifying the
terms or provisions of the Loan, and further stating: (i) that
the holder is the true and lawful holder of the Loan; (ii) the
outstanding principal balance of the Loan and the date through
which interest has been paid; (iii) the interest rate,
amortization schedule and any balloon payments; (iv) the
present balance in any impound accounts; (v) that there are no
overdue installments of interest or principal under the Loan;
(vi) that the Loan Documents are in full force and effect; and
(vii) that there exists no default under the Loan nor any
facts which have come to the attention of the Lender and which
may result in a default thereunder. Transferee shall be deemed
to have approved in advance all fees, charges and penalties
whose cumulative total is within the dollar limitations set
forth in Section 3(a)(ii) above.
(x) LIMITED PARTNER CONSENT. Transferor shall have received
the Limited Partner Consent on or before December 15, 1997,
provided, however, that if such Limited Partner Consent has
not be received by Transferor by such date despite the good
faith efforts of Transferor to the contrary, Transferor shall
have a on time right to extend such period to January 15,
1998, by written notice to Transferee prior to December 15,
1997. In the event that the Transferor receives the Limited
Partner Consent as to some, but not all, of the Properties by
such deadline, this Agreement shall terminate as to the
non-approved properties, the consideration shall be reduced by
the allocated consideration amount for such non-approved
properties, and Transferor and Transferee shall close on the
balance of the Properties as to which the Limited Partner
consent has been obtained, under the terms and conditions set
forth herein.
(b) DEEMED APPROVAL OF CONDITIONS. In the event that any party having
the right of cancellation hereunder based on failure of a Condition(s)
Precedent set forth herein does not inform the other party and Title
Company in writing of its disapproval of any Condition(s) Precedent
prior to the Closing, such Condition(s) Precedent shall be deemed to
have been satisfied, approved or waived, effective as of the Closing;
provided that a party shall not be deemed to have waived any claim for
breach of any
6
representation or warranty by the other party unless such party has
Actual Knowledge of such breach prior to Closing.
(c) CLOSING OF RELATED TRANSACTIONS. The simultaneous closing of all of
the Related Transactions with the Closing of this transaction is a
condition precedent to both Transferor's and Transferee's obligations
under this Agreement. This condition precedent is for the benefit of
both Transferor and Transferee, and if it is not satisfied, then either
party may terminate this Agreement by written notice to the other party
and the Title Company, and the transaction shall not be consummated
unless both parties in their sole discretion waive this condition
precedent and elect to proceed with the transaction.
(d) MUTUAL CONDITIONS PRECEDENT RE HUD APPROVAL. This Agreement is
expressly conditioned upon preliminary approval by HUD of the
transaction as set forth in HUD Form 92266, Application for Transfer of
Physical Assets and supporting documents submitted to HUD. No transfer
of any interest in the Property under this Agreement shall be effective
prior to HUD approval. Buyer will not take possession of the Property
nor assume benefits of the Property ownership prior to such approval by
HUD. The Transferee, its heirs, executors, administrators or assigns,
shall have no right upon any breach by Transferor hereunder to seek
damages directly or indirectly, from the FHA Projects which are the
partial subject to this Agreement, including any assets, rents, issues,
or profits thereof, and Transferee shall have no right to effect a lien
upon those Projects or the assets, rents, issues or profits thereof.
Transferee agrees to use diligent efforts to secure HUD approval, and
Transferor agrees provide full cooperation in such efforts.
(e) TRANSFEROR'S CONDITIONS PRECEDENT. Transferor's Conditions
Precedent as set forth below are precedent to Transferor's obligations
to transfer the Property, and are intended solely for the benefit of
Transferor. If any of the Transferor's Conditions Precedent is not
satisfied, or if HUD approval as required by Section 5(d) hereof is not
secured within the time provided herein, Transferor shall have the
right in its sole discretion either to waive the Transferor's Condition
Precedent and proceed with the transfer or terminate this Agreement by
written notice to Transferee and the Title Company (and in the case of
such termination by Transferor, Transferor shall have no further
liability hereunder):
(i) RECEIPT OF EARNEST MONEY DEPOSIT. The Transferee shall
have deposited the Earnest Money in escrow with the Title
Company as herein provided.
(ii) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Transferee contained herein shall be true and
correct as of the Closing Date as though made at and as of the
Closing Date, and Transferee's covenants under
7
this Agreement shall be satisfied as of the Closing Date (to
the extent such covenants are to be satisfied as of the
Closing Date)
(iii) LIMITED PARTNER CONSENT. Transferor shall have received
the Limited Partner Consent to this transaction on or before
December 15, 1997, subject to extension as provided above. In
the event that the Transferor receives the Limited Partner
Consent as to some, but not all, of the Properties by such
deadline, this Agreement shall terminate as to the
non-approved properties, the consideration shall be reduced by
the allocated consideration amount for such non-approved
properties, and Transferor and Transferee shall close on the
balance of the Properties as to which the Limited Partner
consent has been obtained, under the terms and conditions set
forth herein.
(iv) HUD APPROVAL. HUD shall have given the approval required
by Section 5(d) hereof on or before December 31, 1997,
although Transferee shall have the right to extend this date
to January 21, 1998, provided that Transferee is diligently
proceeding with efforts to obtain such approval.
(f) RETURN OF MATERIALS. Upon termination of this Agreement and the
escrow for failure of a condition precedent, Transferee shall return to
Transferor all materials provided by Transferor to Transferee pursuant
to the Section entitled "Transferee's Due Diligence."
6. CLOSING AND ESCROW.
(a) CLOSING DATE. The Closing shall be conducted through, and all items
to be delivered shall be delivered to, the Title Company, on or before
the Closing Date, which may be extended by mutual agreement of the
parties hereto.
(b) DEPOSIT OF AGREEMENT AND ESCROW INSTRUCTIONS. The parties shall
promptly deposit a fully executed copy of this Agreement with Title
Company and this Agreement shall serve as escrow instructions to Title
Company for consummation of the transactions contemplated hereby. The
parties agree to execute such additional escrow instructions as may be
appropriate to enable Title Company to comply with the terms of this
Agreement; provided, however, that in the event of any conflict between
the provisions of this Agreement and any supplementary escrow
instructions, the terms of this Agreement shall control unless a
contrary intent is expressly indicated in such supplementary
instructions. Transferor and Transferee hereby designate Title Company
as the Reporting Person for the transaction pursuant to Section 6045(e)
of the Internal Revenue Code and the regulations promulgated
thereunder.
(c) TRANSFEROR'S DELIVERIES TO ESCROW. At or before the Closing, Transferor
shall deliver to Transferee the following, to the extent they have not
already been delivered:
(i) the duly executed and acknowledged Deed for each Property;
8
(ii) a duly executed Assignment of Leases for each Property;
(iii) a duly executed Bill of Sale for each Property;
(iv) a duly executed Assignment of Contracts for each
Property;
(v) an assignment in form and content reasonably acceptable to
Transferor, Transferee and the Department of Housing and Urban
Development of all reserves of Transferor held by or for the
benefit of HUD in connection with the Loans;
(vi) a FIRPTA affidavit (in the form attached as Exhibit E)
pursuant to Section 1445(b)(2) of the Internal Revenue Code of
1986, and on which Transferee is entitled to rely, that
Transferor is not a foreign person within the meaning of
Section 1445(f)(3) of the Internal Revenue Code; and
(vii) a California Form 590 (or equivalent form for North
Carolina) from Transferor certifying that Transferor has a
permanent place of business in North Carolina and is qualified
to do business in North Carolina; and
(viii) any other instruments, records or correspondence called
for hereunder which have not previously been delivered.
(d) TRANSFEROR'S DELIVERIES TO TRANSFEREE.
(i) DELIVERIES AT CLOSING. At or before the Closing, Transferor shall
deliver to Transferee the following, to the extent they have not
already been delivered:
a) a Closing Certificate in the form attached hereto as
Exhibit H;
b) operating statements for that portion of the current year
ending at the end of the calendar month preceding the month in
which the Closing Date occurs, certified in the manner
specified in Addendum III;
c) a Rent Roll and Delinquency Report both dated as of the
first day of the month in which the Closing Date occurs;
d) such original (or certified true copies of) resolutions,
authorizations, bylaws or other corporate and/or partnership
documents or agreements relating to Transferor as shall be
reasonably required by Transferee and/or the Title Company;
e) an original signed notice in the form of Exhibit G attached
hereto for each of the Tenants; and
f) all keys to the Property, which shall be personally
delivered at the Property by a representative of Transferor to
a representative of Transferee.
(ii) DELIVERIES AFTER CLOSING. On the first business day following the
Closing, Transferor shall deliver to Transferee the following, to the
extent they have not already been delivered, and such delivery shall be
made in the manner set forth in Addendum IV:
a) originals (to the extent available to Transferor, otherwise
copies certified as true and correct) of the Contracts not
previously delivered to Transferee;
9
b) originals (to the extent available to Transferor, otherwise
copies certified as true and correct) of the Leases;
c) originals (to the extent available to Transferor, otherwise
copies certified as true and correct) of any and all building
permits and certificates of occupancy for the Real Property
that are in the possession or control of Transferor and/or an
affiliate of Transferor;
d) originals (to the extent available to Transferor, otherwise
copies certified as true and correct) of all other matters
described in Addendum III; and
e) any other instruments, records or correspondence called for
hereunder which have not previously been delivered.
(e) TRANSFEREE'S DELIVERIES TO TRANSFEROR. At or before the Closing,
Transferee shall deliver or cause to be delivered to escrow the
following:
(i) a duly executed Assignment of Leases for each Property;
(ii) a duly executed Assignment of Contracts for each
Property;
(iii) any loan assumption documentation reasonably requested
by a lender under the Assumed Loans, in form and content
acceptable to Transferee and such Lender; and
(iv) the Cash.
(f) DEPOSIT OF OTHER INSTRUMENTS. Transferor and Transferee shall each
deposit such other instruments as are reasonably required by Title
Company or otherwise required to close the escrow and consummate the
transactions described herein in accordance with the terms hereof.
7. CLOSING ADJUSTMENTS AND PRORATIONS. With respect to each Property, the
following adjustments shall be made, and the following procedures shall be
followed:
(a) BASIS OF PRORATIONS. All prorations shall be calculated as of 12:01
a.m. on the Closing Date, on the basis of a 365-day year.
(b) ITEMS NOT TO BE PRORATED. There shall be no prorations or
adjustments of any kind with respect to:
(i) INSURANCE PREMIUMS;
(ii) DELINQUENT RENTS FOR FULL MONTHS PRIOR TO THE MONTH IN
WHICH THE CLOSING OCCURRED. Delinquent Rents for full months
prior to the month in which the Closing occurred shall remain
the property of Transferor, and Transferee shall have no claim
thereto and no responsibility of any kind with respect
thereto. Transferor may take all appropriate collection
measures (including litigation if deemed by Transferor to be
necessary or desirable), except that Transferor may not seek
any remedy which would interfere with the
10
Tenant's continued occupancy and full use of its premises
under such Tenant's Lease, or Transferee's rights to receive
Rent with respect to any period beginning on the Closing Date.
(iii) ADDITIONAL RENTS RELATING TO FULL OR PARTIAL MONTHS
PRIOR TO THE CLOSING DATE. If Additional Rents relating to
full or partial months prior to the Closing Date are not
finally adjusted between Transferor and any Tenant until after
the Closing Date, then any refund to which any Tenant may be
entitled shall be the obligation of Transferor, and any
additional amounts due from the Tenant for such period shall
be the property of Transferor. Transferee shall have no
obligation with respect to any such refund due to any Tenant
and no claim to any such amounts due from any Tenant. In
seeking to collect any such amount due from any Tenant,
Transferor may take all appropriate collection measures
(including litigation if deemed by Transferor to be necessary
or desirable), except that, in seeking to collect any such
additional amounts due from any Tenant, Transferor may not
seek any remedy which would interfere with the Tenant's
continued occupancy and full use of its premises under such
Tenant's Lease, or Transferee's rights to receive Rent with
respect to any period beginning on the Closing Date. If
Transferor receives any refund of expenses paid prior to the
Closing and relating to a period prior to the Closing, and
such expenses were reimbursed in whole or in part by any
Tenant, Transferor shall refund to each Tenant its share of
any such refund.
(c) CLOSING ADJUSTMENTS. Prior to Closing, Transferor shall prepare for
review, comment and agreement by Transferee a proration statement for
each Property, substantially in the form attached hereto as Exhibit I,
and each party shall be credited or charged at the Closing, in
accordance with the following:
(i) RENTS. Transferor shall account to Transferee for any
Rents actually collected by Transferor for the month in which
the Closing occurs, and Transferee shall be credited for its
prorata share based on the number of days remaining in the
month following the Closing.
(ii) EXPENSES.
a) PREPAID EXPENSES. To the extent Expenses have been
paid prior to the Closing Date for the period in
which the Closing occurs, Transferor shall account to
Transferee for such prepaid Expenses, and Transferor
shall be credited for its pro rata share thereof for
the period after the Closing Date.
b) UNPAID EXPENSES. To the extent Expenses relating
to the period in which the Closing occurs are unpaid
as of the Closing Date but are ascertainable (e.g.,
interest on the Loan), Transferee shall be credited
11
for Transferor's pro rata share of such Expenses for
the period prior to the Closing date. The amount to
be credited to Transferee hereunder shall include the
amount of any future payments due to any Tenant under
such Tenant's Lease as reimbursement for tenant
improvements or otherwise.
(c) PROPERTY TAXES. For purposes of this Subsection
entitled "Expenses," the Title Company shall pro-rate
property taxes based on the most recent available tax
bills, or if the tax bills are not available, the
most recent tax valuations and current tax rate.
(iii) SECURITY DEPOSITS. Transferor shall deliver to
Transferee all prepaid rents, security deposits,
non-refundable cleaning and other fees and deposits, letters
of credit and other collateral given to Transferor or any of
its affiliates or successors-in-interest under any of the
Leases. Transferee shall assume all of Transferor's
obligations with respect to the Security Deposits, shall agree
to hold and administer the same in accordance with the terms
of applicable North Carolina law, and shall indemnify and hold
harmless Transferor from any and all liability respecting the
same arising from and after the Closing Date. This undertaking
and indemnity shall survive the Closing.
(iv) LEASES. Transferor shall also deliver to Transferee the
amount of any prepaid income under any cable television or
laundry lease or the like allocable to the period from and
after the Closing Date. Transferee shall deliver to Transferor
the amount of any income under any cable television, laundry
lease or similar agreement attributable to the period prior to
the Closing Date.
(d) POST-CLOSING ADJUSTMENTS. After the Closing Date, Transferor and
Transferee shall meet from time to time to discuss adjustments in
accordance with the following, provided, however, that all post closing
adjustments shall be completed on or before ninety days after the
Closing Date (except for ad valorem taxes, which shall be finally
adjusted promptly after receipt of the actual tax bills for the period
in question;
(i) NON-DELINQUENT RENTS. If Transferee collects any
non-delinquent Rents applicable to the month in which the
Closing occurred, Transferor's pro rata share of such Rents
shall be credited to Transferor.
(ii DELINQUENT RENTS FOR MONTH IN WHICH THE CLOSING OCCURRED.
If Transferee collects from any Tenant Rents that were
delinquent as of the Closing Date and that relate to the
period in which the Closing occurred, then such Rents shall be
applied in the following order of priority: First, to
reimburse Transferee for all out-of-pocket third-party
collection costs actually incurred by Transferee in collecting
such Rents (including the portion thereof relating to the
period after the Closing Date); second, to satisfy such
Tenant's
12
Rent obligations relating to the period after the Closing
Date; and third, to satisfy such delinquent Rent obligations
relating to the period before the Closing Date. Transferor
shall have no right to pursue the collection of the balance of
such delinquent Rents.
(iii) EXPENSES. With respect to any invoice received by
Transferee after the Closing Date for Expenses that relate to
the period in which the Closing occurred, Transferee will
either, at Transferee's option, (A) pay the entire amount of
the invoice and either bill Transferor for Transferor's share,
or offset Transferor's share against any prorated Rents due to
Transferor under subsection(i) or (ii) above, or (B) compute
Transferee's pro rata share, write a check for that amount in
favor of the vendor, and then send the invoice and check to
Transferor, in which case Transferor agrees that it will pay
for its share (assuming the same is not reasonably disputed by
Transferor) and forward the invoice and the two payments to
the vendor. If the ad valorem property taxes respecting the
Property for the calendar year in which the Closing occurs are
prorated at Closing based upon the latest tax rate and
assessment available at the Closing, and should such proration
be inaccurate based on the actual ad valorem bill when
received, either Transferor or Transferee, as applicable,
shall be entitled to receive a payment from the other
correcting such malapportionment.
(iv) SURVIVAL OF OBLIGATIONS. The obligations of Transferor
and Transferee under the Subsection entitled "Post-Closing
Adjustments" shall survive the Closing up to December 31,
1998.
(e) ALLOCATION OF CLOSING COSTS. Closing costs shall be allocated as
set forth below:
(i) Escrow charges: 100% to Transferee.
(ii) Recording fees: 100% to Transferee.
(iii) Title insurance premium: the premium for the Title
Policy and any costs related to any endorsements requested by
Transferee shall be paid by Transferee.
(iv) Transfer taxes: 100% to Transferor.
(v) Survey fees: 100% to Transferee.
(vi) Loan transfer fees, loan assumption fees and similar
costs and fees relating to the Assumed Loans, as provided for
in Section 3(a)(ii) above.
(vii) Prepayment penalties, yield maintenance and similar
charges respecting the Non-Assumed Loans, as provided for in
Section 3(a)(iii) above.
8. TRANSFEROR'S REPRESENTATIONS AND WARRANTIES. Transferor hereby represents and
warrants to Transferee the matters set forth on Addendum II, which is
incorporated herein by this reference as though fully set forth herein.
Transferee is entitled to rely on Transferor's
13
representations and warranties notwithstanding Transferee's inspection and
investigation of the Property.
9. TRANSFEREE'S REPRESENTATIONS AND WARRANTIES. Transferee hereby represents and
warrants to Transferor as follows:
(a) GPLP is a duly organized and validly existing limited partnership
in good standing under the laws of the State of California, and GLB is
a duly organized and validly existing corporation under the laws of the
State of Maryland. This Agreement and all documents executed by
Transferee which are to be delivered to Transferor at the Closing are
or at the time of Closing will be duly authorized, executed and
delivered by Transferee, and are or at the Closing will be legal, valid
and binding obligations of Transferee, and do not and at the time of
Closing will not violate any provisions of any agreement or judicial
order to which Transferee is subject.
(b) Transferee has made (or will make prior to the Closing Date) an
independent investigation with regard to the Property and Transferee's
intended use thereof, including without limitation, review and/or
approval of matters disclosed by Transferor pursuant to this Agreement.
(c) There is no litigation pending or, to Transferee's knowledge,
threatened, against Transferee or any basis therefor that might
materially and detrimentally affect the ability of Transferee to
perform its obligations under this Agreement. Transferee shall notify
Transferor promptly of any such litigation of which Transferee becomes
aware.
(d) All representations and warranties set forth herein shall be true
as of the Effective Date and the Closing Date.
10. INDEMNIFICATION.
(a) MUTUAL INDEMNIFICATION. Each party hereby agrees to indemnify the
other party and defend and hold it harmless from and against any and
all claims, demands, liabilities, costs, expenses, penalties, damages
and losses, including, without limitation, reasonable attorneys fees,
resulting from any misrepresentation or breach of warranty or breach of
covenant made by such party in this Agreement or in any document,
certificate, or Exhibit or Schedule given or delivered to the other
pursuant to or in connection with this Agreement.
(b) INDEMNIFICATION BY TRANSFEROR. Transferor agrees to indemnify
Transferee and its partners and successors and assigns and defend and
hold Transferee and its partners harmless from and against any and all
claims, demands, liabilities, costs, expenses, penalties, damages and
losses, including, without limitation, reasonable attorneys' fees,
asserted against, incurred or suffered by Transferee resulting from or
arising out of (i) any personal injury or property damage occurring in,
on or under the
14
Property during Transferor's ownership thereof, from any cause
whatsoever other than as a consequence of the acts or omissions of
Transferee, its agents, partners employees or contractors; and (ii) the
failure of Transferor to perform any obligation under the Loan
Documents to be performed by the borrower prior to the Closing Date
(other than with respect to the Assumed Loans the obligation to obtain
the Lender's Consent, if required, for the transfer of the Property
contemplated herein).
(c) INDEMNIFICATION BY TRANSFEREE. Transferee agrees to indemnify
Transferor and its partners and successors and assigns and defend and
hold Transferor and its partners harmless from any claims, losses,
demands, liabilities, costs, expenses, penalties, damages and losses,
including, without limitation, reasonable attorneys fees, asserted
against, incurred or suffered by Transferor resulting from or arising
out of (i) any personal injury or property damage first occurring in,
on or under the Property during Transferee's ownership thereof, from
any cause whatsoever other than as a consequence of the acts or
omissions of Transferor, or its partners, agents, employees or
contractors, and (ii) with regard to the Assumed Loans, the failure of
Transferor to perform any obligation under the Loan Documents to be
performed by the borrower after the Closing Date.
(d) SURVIVAL OF INDEMNIFICATIONS. The indemnification provisions of
this Section shall survive beyond the Closing, or, if the Closing does
not occur pursuant to this Agreement, beyond any termination of this
Agreement.
11. RISK OF LOSS.
(a) NOTICE OF LOSS. If, prior to the Closing Date, any portion of the
of the Property suffers a Minor or Major Loss, Transferor shall
immediately notify Transferee of that fact, which notice shall include
sufficient detail to apprise Transferee of the current status of the
Property following such loss.
(b) MINOR LOSS. Transferee's obligations hereunder shall not be
affected by the occurrence of a Minor Loss, provided that: (i) upon the
Closing, there shall be a credit against the Consideration equal to the
amount of any insurance proceeds or condemnation awards collected by
Transferor as a result of such Minor Loss, plus the amount of any
insurance deductible, provided however, in the event any damage
occasioned by a casualty shall have been repaired by the Transferor on
or prior to the Closing, Transferor shall be entitled to retain all
insurance proceeds payable in connection therewith; or (ii) insurance
or condemnation proceeds available to Transferor are sufficient to
cover the cost of restoration, the insurance carrier has admitted
liability for the payment of such costs; and the applicable Loan is not
accelerated or defaulted by reason of such casualty or condemnation. If
the proceeds or awards have not been collected as of the Closing, then
and provided that Transferor shall not have caused the damage
occasioned by a casualty to have been repaired on or
15
prior to the Closing, Transferor's right, title and interest to such
proceeds or awards shall be assigned to Transferee.
(c) MAJOR LOSS. In the event of a Major Loss, Transferee may, at its
option to be exercised by written notice to Transferor within twenty
(20) days of Transferor's notice to Transferee of the occurrence
thereof, elect to either (i) terminate this Agreement as to the damaged
or condemned Property (in which event the Consideration payable
hereunder shall be reduced by the value of the damaged or condemned
Property as shown on Schedule 10), or (ii) consummate the acquisition
of the Property for the full Consideration, subject to the following.
If Transferee elects to proceed with the acquisition of the Property,
then the Closing shall be postponed to the later of the Closing Date or
the date which is five (5) days after Transferee makes such election
and, upon the Closing, Transferee shall be given a credit against the
Consideration equal to the amount of any insurance proceeds or
condemnation awards collected by Transferor as a result of such Major
Loss, plus the amount of any insurance deductible. If the proceeds or
awards have not been collected as of the Closing, then Transferor's
right, title and interest to such proceeds or awards shall be assigned
to Transferee, Transferee shall receive a credit against the
Consideration due at Closing in the amount of any insurance deductible,
and Transferor will cooperate with Transferee as reasonably requested
by Transferee in the collection of such proceeds or award. If
Transferee fails to give Transferor notice within such 20-day period,
then Transferee will be deemed to have elected to terminate this
Agreement as to the damaged or condemned Property.
12. TRANSFEROR'S CONTINUED OPERATION OF THE PROPERTY
(a) GENERAL. Except as otherwise contemplated or permitted by this
Agreement or approved by Transferee in writing, from the Effective Date
to the Closing Date, Transferor will operate, maintain, repair and
lease the Property in a prudent manner, in the ordinary course of
business, on an arm's-length basis, at current market rents (with such
rent concessions as are customary in the market for similar
properties), and consistent with its past practices (and without
limiting the foregoing, Transferor shall, in the ordinary course,
negotiate with prospective tenants and enter into leases of the
Property, enforce leases in all material respects (except as is
customary in the ordinary course of business) including eviction
proceedings against all Tenants with delinquencies in excess of 60
days, pay all costs and expenses of the Property, including, without
limitation, debt service, real estate taxes and assessments, maintain
insurance and pay and perform obligations under the Loan Documents) and
will not dispose of or encumber any of the Property, except for
dispositions of personal property in the ordinary course of business.
Between the Effective Date and the Closing, Transferor shall continue
to undertake capital improvements with respect to the Property in the
ordinary course of business.
16
(b) ACTIONS REQUIRING TRANSFEREE'S CONSENT. Notwithstanding the above
terms of this Section, Transferor shall not, without the prior written
approval of Transferee, take any of the following actions:
(i) LEASES. Execute, renew or terminate any Lease except as is
consistent with Transferor's past practices, or modify or
waive any material term of any Lease, except as is consistent
with Transferor's past practices;
(ii) CONTRACTS. Except as otherwise required under this
Agreement, enter into, execute or terminate any operating
agreement, reciprocal easement agreement, management agreement
or any lease, contract, agreement or other commitment of any
sort (including any contract for capital items or
expenditures), with respect to the Property requiring payments
to or by Transferor in excess of $5,000 per year, or the
performance of services by Transferor the value of which
exceeds $5,000 per year; or
(iii) LOAN DOCUMENTS. Waive or modify any material term under
any Loan Document.
13. COOPERATION
(a) BEFORE CLOSING. Transferor and Transferee shall cooperate and do
all acts as may be reasonably required or requested by the other with
regard to the fulfillment of any Condition Precedent or the
consummation of the transactions contemplated hereby including
execution of any documents, applications or permits. Transferor hereby
irrevocably authorizes Transferee and its agents to make all inquiries
of any third party, including any governmental authority, as Transferee
may reasonably require to complete its due diligence.
(b) AFTER CLOSING. Prior to the liquidation of the various partnerships
comprising Transferor, Transferor will give Transferee timely and
complete access to the historical financial and property records of
Transferor relating to its acquisition, ownership and operation of the
Property, and Transferor agrees that it will not destroy any of the
records during any such period of time without the prior written
consent of Transferee. During the first year after the Closing,
Transferor will provide to Transferee on a timely and complete basis
such historical financial information with respect to the acquisition,
ownership and operation of the Property as Transferee may reasonably
request in connection with any reports which GLB is required to file
with the Securities & Exchange Commission or the New York Stock
Exchange.
14. NON-CONSUMMATION OF THE TRANSACTION. If the transaction is not consummated
on or before the Closing Date, the following provisions shall apply:
17
(a) NO DEFAULT. If the transaction is not consummated for a reason
other than a default by one of the parties, then Title Company and each
party shall return to the depositor thereof the Earnest Money and all
other funds and items which were deposited hereunder. Any return of
funds or other items by the Title Company or any party as provided
herein shall not relieve either party of any liability it may have for
its wrongful failure to close. This provisions shall apply to
terminations for the following reasons, without intending to limit its
application to such reasons: (I) failure to obtain HUD approval within
the time frames set forth herein, (ii) failure of Transferor to obtain
the Limited Partner Consent, and (iii) termination of this Agreement by
Transferee prior to the Approval Date.
(b) DEFAULT BY TRANSFEROR. If the transaction is not consummated as a
result of a default by Transferor, then Transferee may either (i)
terminate this Agreement by delivery of notice of termination to
Transferor, whereupon (A) the Earnest Money plus interest accrued
thereon shall be immediately returned to Transferee, and (B) Transferor
shall pay to Transferee any out of pocket title, escrow, legal and
inspection fees actually and reasonably incurred by Transferee in
connection with the performance of its review under the Section
entitled "Transferee's Due Diligence" (including, environmental and
engineering consultants' fees and expenses), in which case neither
party shall have any further rights or obligations hereunder, and
provided further that Transferor's duty to reimburse legal fees shall
be capped at $50,000; or (ii) continue this Agreement pending
Transferee's action for specific performance.
(c) DEFAULT BY TRANSFEREE. If the Closing does not occur as a result of
a default by Transferee, then (i) Transferee shall pay all escrow
cancellation charges, (ii) Title Company shall deliver the Earnest
Money and all interest accrued thereonto Transferor as its full and
complete liquidated damages and its sole and exclusive remedy for
Transferee's default. If the transaction is not consummated because of
a default by Transferee, the Earnest Money together with the interest
accrued thereon shall be paid to and retained by Transferor as
liquidated damages. THE PARTIES HAVE AGREED THAT TRANSFEROR'S ACTUAL
DAMAGES, IN THE EVENT OF A DEFAULT BY TRANSFEREE, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR
INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY AND ALL
ACCRUED INTEREST THEREON HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS
THE PARTIES' REASONABLE ESTIMATE OF TRANSFEROR'S DAMAGES AND AS
TRANSFEROR'S EXCLUSIVE REMEDY AGAINST TRANSFEREE, AT LAW OR IN EQUITY,
IN THE EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF
TRANSFEREE.
INITIALS: Transferor [???] Transferee [???]
18
15. MISCELLANEOUS
(a) DISCLOSURE OF TRANSACTION. Neither party shall publicly announce or
discuss the execution of this Agreement or the transaction contemplated
hereby except in accordance with the following. Transferor shall not
publicly announce or discuss the execution of this Agreement or the
transaction contemplated hereby unless: (i) the information
disseminated by Transferor is required in connection with disclosure to
its investor limited partners by the Securities and Exchange
Commission, any state securities laws or is reasonably necessary in the
opinion of counsel to the Transferor in order to permit limited partner
investors to make an informed decision whether or not to approve the
sale contemplated hereby; or (ii) Transferor has obtained the prior
written consent of Transferee, which shall not be unreasonably
withheld. Transferee shall not publicly announce or discuss the
execution of this Agreement or the transaction contemplated hereby
unless: (i) the information disseminated by Transferee is limited to
the name of the Transferor; a general description of the Property
including size, type and location; the amount and nature of the
Consideration; and Transferee's anticipated yield from the acquisition
of the Property; or (ii) Transferee has obtained the prior written
consent of Transferor, which shall not be unreasonably withheld.
(b) POSSESSION. Possession of the Property shall be delivered to
Transferee upon he Closing.
(c) NOTICES. Any notice, consent or approval required or permitted to
be given under this Agreement shall be in writing and shall be deemed
to have been given upon (i) hand delivery, (ii) one (1) day after being
deposited with Federal Express, DHL Worldwide Express or another
reliable courier service guaranteeing overnight delivery, (iii) on the
day transmitted if transmitted by facsimile telecopy provided there is
electronic confirmation of any facsimile telecopy transmission and such
transmission is followed by another permitted method or (iii) five (5)
days after being deposited in the United States mail, registered or
certified mail, postage prepaid, return receipt required, and addressed
as indicated below, or such other address as either party may from time
to time specify in writing to the other.
IF TO TRANSFEREE: IF TO TRANSFEROR:
Glenborough Realty Trust Incorporated Marion Bass Companies
400 South El Camino Real, 11th Floor 4000 Park Road
San Mateo, CA 94402-1708 Charlotte, NC 28209
Attention: Mr. Stephen Saul Attention: Mr. Marion Bass
WITH A COPY TO: WITH A COPY TO:
Glenborough Realty Trust Incorporated Kennedy Covington et.al.
400 South El Camino Real, 11th Floor 100 North Tryon Street, Suite 4200
San Mateo, CA 94402-1708 Charlotte, North Carolina 28202 Attention:
Mr. G. Lee Burns, Jr. Attention: Glen B. Hardymon
19
(d) BROKERS AND FINDERS. Transferee has agreed to pay to Koll and
Company a brokerage fee pursuant to a separate agreement. Except as set
forth in the preceding sentence, neither party has had any contact or
dealings regarding the Property, or any communication in connection
with the subject matter of this transaction through any real estate
broker or other person who can claim a right to a commission or
finder's fee in connection with the transfer contemplated herein. In
the event that any broker or finder perfects a claim for a commission
or finder's fee based upon any such contact, dealings or communication,
the party through whom the broker or finder makes its claim shall be
responsible for said commission or fee and shall indemnify and hold
harmless the other party from and against all liabilities, losses,
costs and expenses (including reasonable attorneys' fees) arising in
connection with such claim for a commission or finder's fee. The
provisions of this Subsection shall survive the Closing.
(e) LIABILITY OF TRANSFEROR. Transferee acknowledges that the various
entities comprising Transferor hold interests in the Properties as
shown on Schedule 1. Each entity comprising Transferor is executing
this Agreement solely as owner of its interest in the Property as shown
on Schedule 1. Transferee agrees that no partnership comprising
Transferor shall be liable for any representations, warranties or
covenants relating to any Property that it does not have an interest
in, and that no partnership shall be jointly and severally liable with
another for any liability or obligation created herein except as to
jointly owned Property.
(f) SUCCESSORS AND ASSIGNS. Subject to the following, this Agreement
shall be binding upon, and inure to the benefit of, the parties and
their respective successors, heirs, administrators and assigns.
Transferee shall have the right, with notice to Transferor (but without
the necessity of Transferor's consent), to assign all or a portion of
its right, title and interest in and to this Agreement to one or more
assignees at any time before the Closing Date; provided, however that
such assignee(s) shall assume all obligations of Transferee, and such
assignment and assumption shall not release Transferee from any
obligation hereunder. Transferor shall not have the right to assign its
interest in this Agreement.
In the event Transferee assigns its rights to acquire one or more (but
not all) of the Property, the assignee shall succeed and be entitled to
rely on the representations, warranties and indemnities of the
Transferor contained herein as relate to the properties that are to be
acquired by the assignee. Transferor shall cooperate with Transferee
and the assignee to permit the assignee to perform its own due
diligence inspections (relating solely to the properties that it will
acquire) during the Due Diligence Period, in the same fashion as is
permitted of Transferee hereunder. Notwithstanding any assignment of
Transferee's rights to acquire less than all of the Property,
Transferee shall not be relieved of any of its liabilities and
obligations hereunder including, without limitation, Transferee's
responsibility for payment of any assumption fees
20
and/or prepayment penalties pursuant to Sections 3(a)(ii) and 7(e)(vi)
and (vii). Transferor acknowledges and agrees that any assignee will
have to obtain HUD approval with regard to its acquisition of any
property encumbered by a HUD loan that is to be assumed hereunder. If
all other conditions to Closing are satisfied except HUD approval for
the assignee as to the property that it will acquire, Transferor and
Transferee shall close escrow on all of the Property to be acquired by
Transferor, and the Closing Date for the property to be acquired by the
assignee shall be extended to the date that is ten (10) days after
receipt of HUD approval by assignee, provided however, that if such
Closing relating to the properties to be acquired by the assignee does
not take place by January 31, 1998 despite the good faith efforts of
the assignee to obtain such approvals, or in the event such assignee
fails to close the purchase of such properties in accordance with the
terms of this Agreement for any reason other than a default by
Transferor, then in such event Transferee shall acquire such properties
pursuant to the terms of this Contract not later than January 31, 1998.
(g) AMENDMENTS. Except as otherwise provided herein, this Agreement may
be amended or modified only by a written instrument executed by
Transferor and Transferee.
(h) GOVERNING LAW. This Agreement has been negotiated and executed in
North Carolina and the substantive laws of the State of North Carolina,
without reference to its conflict of laws provisions, will govern the
validity, construction, and enforcement of this Agreement.
(i) MERGER OF PRIOR AGREEMENTS. This Agreement and the Addenda,
Exhibits and Schedules hereto constitute the entire agreement between
the parties and supersede all prior agreements and understandings
between the parties relating to the subject matter hereof.
(j) ARBITRATION OF DISPUTES. Any controversy, claim , counterclaim, or
disputes between or among the parties hereto arising out of or relating
to the interpretation, application, breach or enforcement of this
Agreement or any related agreements or instruments ("Subject
Documents") ("Dispute"), shall, at the option of any party, and at that
party's expense, be submitted to mediation, using either the American
Arbitration Association (AAA) or Judicial Arbitration and Mediation
Services, Inc. (JAMS). If mediation is not used, or if it is used and
it fails to resolve the Dispute within 30 days from the date AAA or
JAMS is engaged, then the Dispute shall be determined by binding
arbitration in accordance with the Commercial Arbitration Rules of AAA
and Title 9 of the U.S. Code (except as specifically set forth herein),
notwithstanding any other choice of law provision(s) herein or in the
Subject Documents. Any controversy concerning whether a Dispute is
arbitrable shall be determined by the arbitrator(s). The parties agree
that related arbitration proceedings may be consolidated. The
arbitrator shall prepare written reasons for the award. The parties
hereto agree that the arbitrator shall be empowered to grant equitable,
as well as
21
legal, relief, including, without limitation, the power to compel
specific performance of this Agreement. The parties further consent
that the initiation of mediation and/or arbitration pursuant to these
provisions shall constitute an action or the equivalent for purposes of
determining a party's right to file a lis pendens in the official
records of the jurisdiction where the Property is/are located. The
parties consent that judgment on the award rendered may be entered in
any state court sitting in North Carolina.
All mediation and/or arbitration proceedings conducted
pursuant to this Section shall be administered by the Office of the
American Arbitration Association in Charlotte, North Carolina (or if
such office ceases to exist as of the time arbitration is demanded, the
AAA offices geographically closest to Charlotte, North Carolina) and
all hearings shall be held in Charlotte, North Carolina. Arbitration
proceedings shall be conducted in accordance with the Commercial
Arbitration Rules of the AAA in force as of the date demand for
arbitration is made with the following exceptions if in conflict:
If within fifteen (15) days after demand for arbitration is
made, the parties thereto are able to agree upon the appointment of a
single person as arbitrator, the person so agreed upon shall be
appointed as the sole arbitrator and notice of such appointment shall
be given to the AAA by the parties thereto;
In the event the parties are unable to agree upon the
appointment of a single arbitrator the, within fifteen (15) days of the
date demand for arbitration is made, each party shall appoint one (1)
member of an arbitration panel (each such member being referred to
herein as a "Party Appointed Arbitrator") and within thirty (30) days
of the date for demand of arbitration is made such Party Appointed
Arbitrators shall appoint a third arbitrator who shall serve as the
Chair of the Arbitration Panel. In the event that there are more than
one Transferor that is a party to such arbitration, all of the
Transferors shall agree upon a single Party Appointed Arbitrator. In
the event that a party fails or neglects to appoint such party's Party
Appointed Arbitrator within the time period set forth in this
subsection, such party shall be deemed to have consented to the
election of the other party's Party Appointed Arbitrator as the sole
arbitrator for the arbitration proceeding;
If there is a single arbitrator the decisions and awards of
such arbitrator shall be binding on the parties. In the even a panel of
arbitrators is constituted, the decision and awards of a majority of
the arbitrators on the panel shall be binding. As herein used the term
"arbitrator" refers to either a single arbitrator or an arbitration
panel as the case may be.
During the pendency of any arbitration proceedings the costs
and fees of the proceeding (other than attorneys' fees incurred by each
of the parties in connection with the proceeding which shall be the
independent responsibility of such party) shall be shared equally by
the parties, unless otherwise allocated by the arbitrator. However, as
part of the final award or any interim award agreed to by the parties
or
22
found by the arbitrator to be final for confirmation and enforcement
purposes, the prevailing party shall be entitled to recover costs and
fees of the arbitration proceeding, including reasonable attorneys'
fees and costs.
The discovery provisions of the North Carolina Rules of Civil
Procedure in effect as of the date demand for arbitration is made shall
govern the conduct for discovery in any arbitration proceeding
commenced hereunder.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AND YOU ARE GIVING
UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A
COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP
YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE
SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF
YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION,
YOU MAY BE COMPELLED TO ARBITRATE UNDER AUTHORITY OF NORTH CAROLINA
LAW. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. WE HAVE
READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
TO NEUTRAL ARBITRATION.
???? ????
------------ ------------
Transferor Transferee
(k) ENFORCEMENT. If either party fails to perform any of its
obligations under this Agreement or if a dispute arises between the
parties concerning the meaning or interpretation of any provision of
this Agreement, then the defaulting party or the party not prevailing
in such dispute shall pay any and all costs and expenses incurred by
the other party on account of such default and/or in enforcing or
establishing its rights hereunder, including, without limitation,
arbitration or court costs and reasonable attorneys' fees and
disbursements. Any such attorneys' fees and other expenses incurred by
either party in enforcing a judgment in its favor under this Agreement
shall be recoverable separately from and in addition to any other
amount included in such judgment, and such attorneys' fees obligation
is intended to be severable from the other provisions of this Agreement
and to survive and not be merged into any such judgment.
(l) TIME OF THE ESSENCE. Time is of the essence of this Agreement.
(m) SEVERABILITY. If any provision of this Agreement. or the
application thereof to any person, place, or circumstance, shall be
held by a court of competent jurisdiction to be invalid, unenforceable
or void, the remainder of this Agreement and such
23
provisions as applied to other persons, places and circumstances shall
remain in full force and effect.
(n) MARKETING. Transferor agrees not to market or show the Property to
any other prospective purchasers during the term of this Agreement.
(o) CONFIDENTIALITY. Transferee and Transferor shall each maintain as
confidential any and all material or information about the other or, in
the case of Transferee and its agents, employees, consultants and
contractors, about the Property, and shall not disclose such
information to any third party, except, in the case of information
about the Property and Transferor, to Transferee's investment bankers,
lender or prospective lenders, insurance and reinsurance firms,
attorneys, environmental assessment and remediation service firms and
consultants, as may be reasonably required for the consummation of the
transaction contemplated hereunder and/or as required by law.
(p) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
(q) ADDENDA, EXHIBITS AND SCHEDULES. All addenda, exhibits and
schedules referred to herein are, unless otherwise indicated,
incorporate herein by this reference as though set forth herein in
full.
(r) CONSTRUCTION. Headings at the beginning of each section and
subsection are solely for the convenience of the parties and are not a
part of the Agreement. Whenever required by the context of this
Agreement, the singular shall include the plural and the masculine
shall include the feminine and vice versa. This Agreement shall not be
construed as if it had been prepared by one of the parties, but rather
as if both parties had prepared the same. In the event the date on
which Transferor or Transferee is required to take any action under the
terms of this Agreement is not a business day, the action shall be
taken on the next succeeding business day.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
SIGNATURES BEGIN ON NEXT PAGE
24
TRANSFEROR
Eagleseries II/ Sharonridge, Sharonridge II Associates,
a North Carolina limited partnership a North Carolina limited partnership
By: Marion Bass Real Estate Group, Inc., By: Marion Bass Real Estate Group, Inc.
a North Carolina corporation, a North Carolina corporation
its General Partner its General Partner
By /s/ Marion F. Bass By: /s/ Marion F. Bass
-------------------- --------------------
its President its: President
------------------- --------------------
Date: 11-10, 1997 Date: 11-10, 1997
----------- -----------
Equitysource 83/Wendover Glen, Equitysource 84/The Oaks,
a North Carolina limited partnership a North Carolina limited partnership
By: Marion Bass Real Estate Group, Inc., By: Marion Bass Real Estate Group, Inc.
a North Carolina corporation, a North Carolina corporation
its General Partner its General Partner
By /s/ Marion F. Bass By: /s/ Marion F. Bass
-------------------- --------------------
its President its: President
------------------- --------------------
Date: 11-10, 1997 Date: 11-10, 1997
----------- -----------
Equitysource 85/Farmhurst Landing , Equitysource 86/Courtyard,
a North Carolina limited partnership a North Carolina limited partnership
By: Marion Bass Real Estate Group, Inc., By: Marion Bass Real Estate Group, Inc.
a North Carolina corporation, a North Carolina corporation
its General Partner its General Partner
By /s/ Marion F. Bass By: /s/ Marion F. Bass
-------------------- --------------------
its President its: President
------------------- --------------------
Date: 11-10, 1997 Date: 11-10, 1997
----------- -----------
25
Bass Real Estate Fund II, Bass Real Estate Fund 84,
a North Carolina limited partnership a North Carolina limited partnership
By: Marion Bass Real Estate Group, Inc., By: Marion Bass Real Estate Group, Inc.
a North Carolina corporation, a North Carolina corporation
its General Partner its General Partner
By /s/ Marion F. Bass By: /s/ Marion F. Bass
-------------------- --------------------
its President its: President
------------------- --------------------
Date: 11-10, 1997 Date: 11-10, 1997
----------- -----------
Bass Income Plus Fund, Bass Real Estate Fund III
a North Carolina limited partnership a North Carolina limited partnership
By: Marion Bass Real Estate Group, Inc., By: Marion Bass Real Estate Group, Inc.
a North Carolina corporation, a North Carolina corporation
its General Partner its General Partner
By /s/ Marion F. Bass By: /s/ Marion F. Bass
-------------------- --------------------
its President its: President
------------------- --------------------
Date: 11-10, 1997 Date: 11-10, 1997
----------- -----------
TRANSFEREE
Glenborough Realty Trust Incorporated
a Maryland corporation
By /s/ Illegible Signature
------------------------
Glenborough Properties, L.P.
a California limited partnership
By Glenborough Realty Trust Incorporated
a Maryland corporation
its General Partner
By /s/ Illegible Signature
------------------------
Date: 11-13, 1997
-----------
26
Agreement of Title Company
The undersigned executes this Agreement for the purposes of
acknowledging its agreement to serve as escrow agent in accordance with the
terms of this Agreement and to acknowledge receipt of the Earnest Money from the
Transferee.
First American Title Insurance Company
By: _________________________
Its: _________________________
Date: _________________________
27
ADDENDUM I
DEFINITIONS
Terms used in this Agreement shall have the meanings set forth below:
1. ACTUAL KNOWLEDGE OF TRANSFEREE (OR TRANSFEREE'S ACTUAL KNOWLEDGE). The
knowledge of any Responsible Individual of Transferee, after reasonable
inquiry.
2. ACTUAL KNOWLEDGE OF TRANSFEROR (OR TRANSFEROR'S ACTUAL KNOWLEDGE). The
knowledge of any Responsible Individual of Transferor, after reasonable
inquiry.
3. ADDITIONAL RENTS. All amounts, other than Fixed Rents, due from any
Tenant under any Lease, including without limitation percentage rents,
escalation charges for real estate taxes, parking charges, marketing
fund charges, reimbursement of operating expenses or common area
expenses, maintenance escalation rents or charges, cost-of-living
increases or other charges of a similar nature, if any, and any
additional charges and expenses payable under any Lease.
4. AGREEMENT. This Agreement between Transferor and Transferee, including
all Addenda, Schedules and Exhibits attached hereto and incorporated
herein by reference.
5. APPROVAL DATE. The end of the Due Diligence Period.
6. ASSIGNMENT OF CONTRACTS. An Assignment and Assumption of Service
Contracts, Guaranties and Warranties and Other Intangible Property in
the form of Exhibit D attached hereto.
7. ASSIGNMENT OF LEASES. An Assignment and Assumption of Leases in the
form of Exhibit B attached hereto.
8. BILL OF SALE. A Warranty Bill of Sale in the form of Exhibit C attached
hereto.
9. CASH. Immediately available funds to be paid by Transferee at the
Closing, as provided in the Section entitled "Consideration".
10. CLOSING. The delivery of the Deed and the other documents required to
be delivered hereunder and the payment of the Consideration.
11. CLOSING DATE. The later of (i) November 30, 1997 or (ii) the first
Tuesday that is five days after receipt of the Limited Partner Consent,
or (iii) within ten (10) days of receipt of approval from HUD to
transfer the Property encumbered by the Assumed Loans to the
Transferee, provided, however, that if the Limited Partner Consent and
the HUD
ADDENDUM I - 1
Loan Assumption approvals have not been obtained by January 31, 1998
despite the good faith cooperation of Transferee in such efforts,
Transferee shall have the right to terminate this Agreement and obtain
the return of the Earnest Money Deposit, and all accrued interest.
12. CONDITIONS PRECEDENT. Collectively, the Transferor's Conditions
Precedent and the Transferee's Conditions Precedent.
13. CONSIDERATION. The total consideration to be paid by Transferee to
Transferee as described in the Section entitled "Consideration," which
is allocated in the manner indicated on Schedule 10.
14. CONTRACTS. The service contracts, construction contracts for work in
progress, any warranties thereunder, management contracts, unrecorded
reciprocal easement agreements, operating agreements, maintenance
agreements, franchise agreements and other similar agreements relating
to the Property as listed on Schedule 5 attached hereto.
15. CREDITORS' RIGHTS LAWS. All bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally,
as well as general equitable principles whether or not the enforcement
thereof is considered to be a proceeding at law or in equity.
16. DEED. A special warranty deed in the form attached hereto as Exhibit A.
17. DELINQUENCY REPORT. A report substantially in the form attached hereto
as Schedule 9 setting forth the name of each Tenant as to which a
delinquency exists as to the payment of Rent, and specifying the amount
of each such delinquency, the period of time during which each such
delinquency has been outstanding, and whether collection of such
delinquency has been referred to a collection agency or legal counsel.
18. DELIVERY DATE. The date of any writing signed by the parties indicating
that Transferor has delivered all of the Due Diligence Materials as
required by the Section entitled "Transferee's Due Diligence."
19. DUE DILIGENCE MATERIALS. The materials described in Addendum III.
20. DUE DILIGENCE PERIOD. A period of time commencing upon the Effective
Date, and expiring thirty (30) days from the Effective Date.
21. EARNEST MONEY. An earnest money deposit paid by Transferee pursuant to
the Section entitled "Consideration", in the amount of $1,500,000.
22. EFFECTIVE DATE. The date this Agreement is signed by Transferor or
Transferee, whichever signs last.
ADDENDUM I - 2
23. ENVIRONMENTAL LAWS. All federal, state, local or administrative agency
ordinances, laws, rules, regulations, orders or requirements relating
to Hazardous Materials.
24. ENVIRONMENTAL REPORTS. All environmental reports and investigations
relating to the Property which are readily available to Transferor,
which are listed on Schedule 7 attached hereto.
25. EXPENSES. All operating expenses normal to the operation and
maintenance of the Property, including without limitation real property
taxes and assessments; current installments of any improvement bonds or
assessments which are a lien on the Property or which are pending and
may become a lien on the Property; water, sewer and utility charges;
amounts payable under any Contract for any period in which the Closing
occurs; permits, licenses and inspection fees; and interest on the
Loan.
26. FIXED RENTS. The fixed periodic rental payments under any Lease.
27. GENERAL INTANGIBLES. All general intangibles relating to design,
development, operation, management and use of the Real Property; all
certificates of occupancy, zoning variances, building, use or other
permits, approvals, authorizations, licenses and consents obtained from
any governmental authority or other person in connection with the
development, use, operation or management of the Real Property (to the
extent the same are assignable; all soil tests, engineering reports,
appraisals, architectural drawings, plans and specifications relating
to all or any portion of the Real Property (to the extent the same are
assignable), and all payment and performance bonds or warranties or
guarantees relating to the Real Property; and all of Transferor's
right, title and interest in and to any and all of the following to the
extent assignable: trademarks, service marks, logos or other source and
business identifiers, trademark registration and applications for
registration used at or relating to the Real Property and any written
agreement granting to Transferor any right to use any trademark or
trademark registration at or in connection with the Real Property.
28. GLB. Glenborough Realty Trust Incorporated, a Maryland corporation.
29. GPLP. Glenborough Properties, L.P., a California limited partnership.
30. HAZARDOUS MATERIALS. Hazardous or toxic materials, substances or
wastes, or other materials injurious to human health or the
environment.
31. IMPROVEMENTS. All buildings, parking lots, signs, walks and walkways,
fixtures and equipment and all other improvements located at or on or
affixed to the Land to the full extent that such items are owned by
Transferor and constitute realty under the laws of the state in which
the Land is located.
ADDENDUM I - 3
32. LAND. The land described in Schedule 1 attached hereto, together with
all appurtenances thereto, including without limitation easements and
mineral and water rights.
33. LAWS. All restrictive covenants, building codes, environmental, zoning
and land use laws, and other local, state and federal laws and
regulations applicable to the Property.
34. LEASES. The leases listed in the Rent Roll, together with any leases
approved or deemed approved by Transferee pursuant to the Section
entitled "Transferor's Continued Operation of the Property."
35. LEASE RIGHTS. All of Transferor's right, title and interest in and to
the Leases and any and all guarantees of the Leases.
36. LIMITED PARTNER CONSENT. The approval of this Transaction by the
limited partners of the partnerships comprising Transferor to the
extent required by law and/or pursuant to the organizational documents
of such partnerships.
37. LOAN. The mortgage loan or loans described on Schedule 11 attached
hereto.
38. LOAN DOCUMENTS. All notes or other evidence of indebtedness, loan
agreements, mortgages, guaranty agreements, and any and all other
documents entered into by Transferor and all amendments. modifications
and supplements thereto relating to the Loan.
39. MAJOR LOSS is defined as any damage or destruction to, or condemnation
of, any Real Property as to which the cost to repair, or the value of
the portion taken, as the case may be, exceeds 1% of the Consideration.
40. MATERIAL DAMAGE. Damage in excess of $50,000 suffered by Transferee as
a result of any inaccuracy in or breach of any representation or
warranty or covenants (on a cumulative basis and not per occurrence) by
Transferor hereunder.
41. MINOR LOSS is defined as any such damage, destruction or condemnation
that is not a Major Loss.
42. OTHER INTERESTS. To the extent assignable, any and all assets, rights,
claims, interests or other things of value which are to be conveyed by
Transferor to Transferee hereunder (other than the Real Property, the
Contracts, the General Intangibles, the Lease Rights and the Personal
Property), as set forth on Schedule 6.
43. PERMITTED EXCEPTIONS. The Leases and the exceptions to title set forth
on Schedule 2 hereto.
ADDENDUM I - 4
44. PERSONAL PROPERTY. All of Transferor's right, title and interest in and
to the personal property and any interest therein owned by Transferor
or held directly for the benefit of Transferor, if any, located on the
Real Property and used in the operation or maintenance of the Real
Property, as set forth on Schedule 4. All descriptions of equipment
listed in Schedule 4 shall include serial number (if any) and make.
Schedule 4 shall also list all licensed software and any personal
computer based security system.
45. PROPERTY. The Real Property, together with the Leases, the Personal
Property, the General Intangibles, the Contracts, and the Other
Interests.
46. REAL PROPERTY. The Land and Improvements.
47. RELATED TRANSACTIONS. The transactions contemplated by the agreements
described on Schedule 12 attached hereto.
48. RENT ROLL. The list of each of the Leases as of the date of this
Agreement, attached hereto as Schedule 8 setting forth for each Lease:
the name of the Tenant, the number of unit occupied by the tenant,
commencement and expiration dates, the amount of the monthly Fixed
Rental payment, a description of any Additional Rent provisions, any
extension or renewal options and the amount of rent applicable thereto,
the amount of any security deposit or prepaid rent, the amount and due
date of any payments due to such Tenant in the future as reimbursement
for costs of tenant improvements or for any other purpose, and any
early termination or cancellation rights.
49. RENTS. Fixed Rents and Additional Rents.
50. REQUIRED ENDORSEMENTS. The title insurance endorsements listed on
Schedule 3, together with such other endorsements as Transferee has
reasonably requested prior to the Approval Date.
51. RESPONSIBLE INDIVIDUALS. (i) with respect to Transferee: Andrew
Batinovich and Steve Saul, and (ii) with respect to Transferor: Mr.
Marion Bass.
52. SERVICE CONTRACTS. All Contracts involving ongoing services and
periodic payment therefor, as distinguished from franchise agreements,
easements, guarantees, warranties and the like.
53. TENANT(S). Each and all tenants as listed on the Rent Roll.
54. TITLE COMPANY. First American Title Insurance Company, whose address
is:345 California Street, 24th Floor, San Francisco, California 94104.
55. TITLE POLICY. A policy of extended coverage American Land Title
Association Policy of Owner's Title Insurance (Form B, rev. 10/17/70),
including the Required Endorsements,
ADDENDUM I - 5
issued by Title Company in the amount of the Consideration, showing
title vested in Transferee subject only to the Permitted Exceptions.
56. TRANSFEREE (collectively if more than one). GLB and GPLP.
57. TRANSFEREE'S CONDITIONS PRECEDENT. Conditions precedent to Transferee's
obligation to consummate this transaction, as set forth in the Section
entitled "Conditions to Closing."
58. TRANSFEROR. Eagleseries II/Sharonridge, Sharonridge II Associates,
Equitysource 83/Wendover Glen, Equitysource 84/The Oaks, Equitysource
85/Farmhurst Landing, Equitysource 86/Courtyard, Bass Real Estate Fund
II, Bass Real Estate Fund 84, Bass Income Plus Fund and Bass Real
Estate Fund III, all North Carolina limited partnerships.
59. TRANSFEROR'S CONDITIONS PRECEDENT. Conditions precedent to Transferor's
obligations to consummate this Transaction, as set forth in the Section
entitled "Conditions to Closing."
ADDENDUM I - 6
ADDENDUM II
TRANSFEROR'S REPRESENTATIONS AND WARRANTIES
MARION BASS PORTFOLIO
Transferor hereby represents and warrants to Transferee as follows:
A. ORGANIZATION AND AUTHORIZATION.
1. Transferor is composed of the limited partnerships listed in Addendum
I, each duly organized, validly existing and in good standing under the
laws of the State of North Carolina, and is qualified to do business in
the State of North Carolina.
2. Subject to Limited Partner Consent, Transferor has full partnership
power and authority to execute and deliver this Agreement and to
perform all of the terms and conditions hereof to be performed by
Transferor and to consummate the transactions contemplated hereby. This
Agreement and all documents executed by Transferor which are to be
delivered to Transferee at Closing have been duly executed and
delivered by Transferor and are or at the time of Closing will be the
legal, valid and binding obligation of Transferor and is enforceable
against Transferor in accordance with its terms, except as the
enforcement thereof may be limited by applicable Creditors' Rights
Laws. Transferor is not presently subject to any bankruptcy,
insolvency, reorganization, moratorium, or similar proceeding.
3. Subject to receipt of the Limited Partner Consent, the individuals
executing this Agreement and the instruments referenced herein on
behalf of Transferor and its constituent entities, if any, have the
legal power, right and actual authority to bind Transferor to the terms
and conditions hereof and thereof.
4. Subject to receipt of the Limited Partner Consent, neither the
execution and delivery of this Agreement, the consummation of the
transactions contemplated by this Agreement, nor the compliance with
the terms and conditions hereof will (a) violate or conflict, in any
material respect, with any provision of Transferor's organizational
documents or any statute, regulation or rule, or, to Transferor's
Actual Knowledge, any injunction, judgment. order, decree, ruling,
charge or other restrictions of any government, governmental agency or
court to which Transferor is subject, and which violation or conflict
would have a material adverse effect on the ownership and operation of
the Property, or (b) result in any material breach or the termination
of any lease, agreement or other instrument or obligation to which
Transferor is a party or by which any of the Property may be subject,
or cause a lien or other encumbrance to attach to any of the Property,
other than any due-on-sale provisions under the Loan. Transferor is not
a party to any contract or subject to any other legal restriction that
would prevent fulfillment by Transferor or all of the terms and
conditions of this
ADDENDUM II - 1
Agreement or compliance with any of the obligations under it, other
than any due-on-sale provisions in the Loan Documents.
5. To Transferee's Actual Knowledge, all material consents required
from any governmental authority or third party in connection with the
execution and delivery of this Agreement by Transferor or the
consummation by Transferor of the transactions contemplated hereby have
been made or obtained or shall have been made or obtained by the
Closing Date. Complete and correct copies of all such consents shall be
delivered to Transferee.
B. TITLE MATTERS
1. Transferor has fee simple title to the Real Property, subject only
to the Permitted Exceptions.
2. There are no adverse or other parties in possession of the Property,
or any part thereof, except Transferor and Tenants. Except as set forth
on Schedule II.B.2, no party has been granted any license, lease, or
other right relating to the use or possession of the Property or any
part thereof, except Tenants.
3. Other than the rights of Tenants, as tenants only, under the Leases,
Transferor has not entered into any purchase contracts, options or
other agreements of any kind, written or oral, recorded or unrecorded,
whereby any person or entity other than Transferee will have acquired
or will have any basis to assert any right, title or interest in, or
right to possession, use, enjoyment or proceeds of, all or any portion
of the Property. None of the Leases contains any rights to purchase,
rights of first offer to purchase, or first refusal to purchase the
Property.
C. PROPERTY CONDITION, USE AND COMPLIANCE
1. NO MATERIAL DEFECTS. Except as set forth on Schedule II.C.1., to
Transferor's Actual Knowledge, there are no material defects with
respect to the Property, including, without limitation, no material
defects in the structural and load-bearing components of the
Improvements, the roof(s), the parking lot(s), the plumbing, heating,
air conditioning and electrical and life safety systems, and all such
items are in good operating condition and repair.
2. COMPLIANCE WITH LAWS. Except as set forth on Schedule II.C.2., to
Transferor's Actual Knowledge, the use and operation of the Property is
in compliance in all material respects with all applicable Laws, and
Transferor has received no notice that the use or operation of the
Property is in violation of any applicable Laws.
3. NO REGULATORY PROCEEDINGS. Except as set forth on Schedule II.C.3.,
to Transferor's Actual Knowledge, there are no condemnation,
environmental, zoning or
ADDENDUM II - 2
other land-use regulation proceedings that have been instituted, and
Transferor has not received any notice of any such proceeding that is
planned to be instituted, which would detrimentally and materially
affect the use, operation or value of any of the Property, nor has
Transferor received notice of any special assessment proceedings
affecting any of the Property. Transferor shall notify Transferee
promptly of any such proceedings of which Transferor becomes aware.
4. UTILITIES. To Transferee's Actual Knowledge, all water, sewer, gas,
electric, telephone, and drainage facilities and all other utilities
required, to Transferor's Actual Knowledge, by any Laws or by the
normal use and operation of the Property are installed to the property
lines of the Property, and are connected pursuant to valid permits, and
are adequate to service the Property as presently operated and, to
Transferor's Actual Knowledge, to permit compliance with all Laws. To
Transferor's Actual Knowledge, no fact or condition exists which would
result in the termination or impairment in the furnishing of utility
services to the Property.
5. LICENSES, PERMITS, ACCESS, ETC. To Transferee's Actual Knowledge,
Transferor has obtained all licenses, permits (specifically including
construction permits for the installation of tenant improvements by
whomever installed), variances, approvals, authorizations, easements
and rights of way, including proof of dedication, required from all
governmental authorities having jurisdiction over the Property or from
private parties for the construction, development, present use,
operation and occupancy of the Property and to insure vehicular and
pedestrian ingress to and egress from the Property to and from the
public streets and roads.
6. ENVIRONMENTAL MATTERS. Transferor has delivered all Environmental
Reports to Transferee. Except as set forth in the Environmental
Reports: (i) to Transferor's Actual Knowledge, the Property is not, and
Transferor has not received any written notice that any real estate in
the vicinity of the Property is, in violation of any Environmental
Laws; (ii) neither Transferor nor, to Transferor's Actual Knowledge,
any third party, has used, manufactured, generated, treated, stored,
disposed of, or released any Hazardous Material on or under the
Property or transported any Hazardous Material over the Property (other
than materials use in the ordinary course of operation of the Property;
(iii) to Transferor's Actual Knowledge, neither Transferor nor any
third party, has installed, used or removed any storage tank on or from
the Property except in full compliance with all Environmental Laws;
(iv) to Transferor's Actual Knowledge there are no storage tanks or
wells (whether existing or abandoned) located on or under the Property;
(v) to Transferor's Actual Knowledge no storage tank has been installed
on, used on or removed from the Property in violation of any
Environmental Laws; (vi) to Transferor's Actual Knowledge, the Property
does not consist of any building materials that contain Hazardous
Materials; and (vii) no claim, action, suit or proceeding relating to
Hazardous Materials is pending or, to Transferor's Actual Knowledge,
threatened against Transferor, before any court or other governmental
authority or arbitration tribunal, and there is no outstanding
ADDENDUM II - 3
judgment, order, writ, injunction, decree or award against Transferor
or otherwise having a material adverse effect on the Property with
respect to the same.
7. USE AND OPERATION. Transferor knows of no facts nor has Transferor,
to Transferee's Actual Knowledge, failed to disclose any fact which
would prevent Transferee from using and operating the Property after
Closing in the manner in which the Property is currently operated.
D. THE LEASES
1. RENT ROLL AND DELINQUENCY REPORT. The Rent Roll and Delinquency
Report are complete and accurate in all material respects as of their
date. Except as disclosed on the Rent Roll, there are no other Tenants
at the Property, and no Rental under any Lease has been collected in
advance of the current month. The Rent Roll and Delinquency Report
shall be updated at the Closing to reflect any changes which occur
after the Effective Date. Transferor is the owner of the entire
lessor's interest in and to each of the Leases and none of the Leases
or the rentals or other sums payable thereunder has been assigned or
otherwise encumbered except in connection with the Loan.
2. ENFORCEABILITY OF LEASES. To Transferor's Actual Knowledge, each of
the Leases, including without limitation any guaranties thereof, is an
enforceable Lease and is in full force and effect according to the
terms set forth therein, except as the enforcement thereof may be
limited by applicable Creditors' Rights Laws.
3. NO TENANT DELINQUENCIES OR DEFAULTS. Except as specifically provided
on Schedule II.D.3. attached hereto or on the Delinquency Report: (i)
no Tenant is greater than fifteen (15) days delinquent in the payment
of its rental and other sums due, (ii) no Tenant has abandoned or
otherwise vacated the Property in violation of any Lease, to
Transferor's actual knowledge (iii) to Transferor's Actual Knowledge,
no Tenant or guarantor has filed a voluntary petition in bankruptcy,
insolvency or similar proceedings, has been the subject of an
involuntary bankruptcy petition, or otherwise been adjudged bankrupt or
insolvent in any proceedings filed against such tenant or guarantor;
(iv) to Transferor's Actual Knowledge, no trustee or receiver has been
appointed for any Tenant; (v) to Transferee's Actual Knowledge, no
written notice has been provided to any tenant notifying the Tenant
that it is in default under the Lease which default has not been
remedied by such Tenant; and (vi) no Tenant, to Transferor's Actual
Knowledge, is otherwise in default under any of the Leases. Except as
otherwise provided in the Lease, to Transferor's Actual Knowledge, each
Tenant is legally required to pay all sums and perform all other
material obligations set forth in its respective Lease, without
concessions, abatements, offsets or other basis for relief or
adjustment, subject to applicable Creditors' Rights Laws.
ADDENDUM II - 4
4. NO LEASE DEFAULTS BY TRANSFEROR. To Transferor's Actual Knowledge,
no material event of default on behalf of Transferor, as lessor, exists
under any Lease and no event or condition exists that, upon the giving
of notice or lapse of time, or both, would constitute a default by
Transferor under any Lease. Transferor has not received any notice from
any Tenant of any offsets, defenses or claims available against rent or
other charges payable by such Tenant or other performance or
obligations otherwise due from it under any Lease, except as
specifically set forth in the Rent Roll and/or the Tenant Estoppel
Certificates.
5. NO RELEASE OF GUARANTOR. No guarantor of any Lease has been
voluntarily released or discharged from any obligation under or in
connection with any Lease or any transaction related thereto.
6. SECURITY DEPOSITS. The Rent Roll sets forth all security deposits
held by Transferor. Transferor has not received from any Tenant or any
other party written notice of any claim (other than for customary
refund at the expiration of a Lease) to all or any part of any security
deposit, except as set forth on the Rent Roll and/or the Tenant
Estoppel Certificates.
7. PAYMENT OF LEASE COSTS. Except as shown on the Rent Roll, Transferor
has paid in full any of landlord's leasing costs or obligations,
including without limitation any costs incurred by Transferor in
connection with any tenant improvements. Except as shown on Schedule
II.D.7., (i) no brokerage or similar fee is due or unpaid by Transferor
with respect to the Leases, and (ii) no brokerage or similar fee shall
be due or payable by Transferor after the Closing in connection with
the Leases.
E. OTHER MATTERS
1. PERSONAL PROPERTY. To Transferor's Actual Knowledge, (i) Schedule 3
lists all of the Personal Property, and (ii) except as shown on
Schedule 3, Transferor owns good and marketable title to the Personal
Property, free and clear of any liens or encumbrances, and (iii) the
Personal Property is in good order and repair.
2. NO LITIGATION. Except as set forth on Schedule II.E.2., there is no
litigation pending or, to Transferor's Actual Knowledge, threatened:
(i) against Transferor that arises out of the ownership of the Property
or that might materially and detrimentally affect the value or the use
or operation of any of the Property for its intended purpose or the
ability of Transferor to perform its obligations under this Agreement;
or (ii) by Transferor or any agent of Transferor against any Tenant.
Transferor shall notify Transferee promptly of any such litigation of
which Transferor becomes aware.
3. NO CONTRACTS FOR IMPROVEMENTS. Except as set forth on Schedule
II.E.3., at the time of Closing (i) there will be no outstanding
written or oral contracts made by Transferor for any improvements to
the Property which have not been fully paid for
ADDENDUM II - 5
and Transferor shall cause to be discharged all mechanics and
materialmen's liens arising from any labor or materials furnished to
the Property prior to the time of Closing, and (ii) Transferor shall
have completed all punch-list items with respect to any tenant
improvements constructed by Transferor as landlord under the Leases.
4. CONTRACTS. With the exception of any Contract rejected by Transferee
as provided herein, each of the Contracts (i) is legal, valid, binding,
and, to Transferor's Actual Knowledge, enforceable in accordance with
its terms and in full force and effect, except as may be limited by
applicable Creditors' Rights Laws, and has not been amended, modified
or supplemented except as disclosed to Transferee, (ii) to Transferor's
Actual Knowledge, except for a Contract that is terminable upon thirty
(30) day written notice, will not be adversely affected by the
occurrence of the Closing and will be legal, valid, binding,
enforceable in accordance with its terms and in full force and effect
on identical terms following the Closing, (iii) Transferor is not, and,
to Transferor's Actual Knowledge, no other party to the Contract is, in
breach or default under any obligation thereunder or any provisions
thereof which would have material adverse affect upon Transferor, and
no event has occurred which, with notice or lapse of time, would
constitute a breach or default, or permit any termination under the
Contract which would have a material adverse effect upon Transferor,
and (iv) no event has occurred under the Contract which would permit
the creation of any lien upon, or the restriction of the right to the
use of the Property.
5. EXHIBITS AND SCHEDULES. The Schedules attached hereto, as provided
by or on behalf of Transferor, completely and correctly present in all
material respects the information required by this Agreement to be set
forth therein. Transferor has made available to Transferee for review
and copying true and correct copies of all of the due diligence
materials pertaining to the Property which are in the possession or
control of Transferor. No representation or warranty by Transferor
herein and no information disclosed in the Schedules hereto supplied by
or on behalf of Transferor contains any untrue statement of a material
fact or omits to state a fact necessary to make the statements
contained herein or therein not materially misleading. Transferor has
no Actual Knowledge of any events, transactions or other facts which,
either individually or in the aggregate might reasonably give rise to
circumstances or conditions which might have a material adverse effect
on the Property.
6. TRANSFEROR NOT A FOREIGN PERSON. Transferor is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Internal
Revenue Code.
7. STATUS OF LOAN. To the best of Transferor's Actual Knowledge, there
is no current default or breach under the terms and provisions of any
of the Loan Documents; the Loan Documents have not been, and will not
be, amended or modified except as consented to by Transferee; and no
acceleration events have occurred relative to the Loan Documents. The
Loan Documents made available to Transferee by
ADDENDUM II - 6
Transferor are true, correct and complete copies of every instrument or
document executed in connection with the Loan.
F. MISCELLANEOUS
1. NOTICE OF CHANGE. Transferor shall inform Transferee in writing of
any significant adverse change in the condition, financial or
otherwise, of the Property, or the operation thereof, which occurs at
any time prior to the Closing Date. The Transferor shall also promptly
inform Transferee in writing of (i) any fact which would indicate that
any Tenant occupying all or a portion of the Property is insolvent or
is not able to pay rent or perform any other obligations under the
relevant Lease when due or (ii) the execution, termination or
modification of any Lease or Contract, which notice shall also include
a copy of any and all documentation relating to such event.
2. RESPONSIBLE INDIVIDUALS. Transferor has provided a copy of the
representations and warranties set forth in this Addendum to the
Responsible Individuals, and each of the Responsible Individuals has
reviewed such copy of the representations and warranties and concurred
in the same.
3. TIMELINESS OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties set forth herein shall be deemed to be given as of the
Effective Date and the Closing Date unless Transferor otherwise
notifies Transferee in writing prior to the Closing.
4. MATERIALITY LIMITATION. Transferee shall not be entitled to any
right or remedy for any inaccuracy in or breach of any representation,
warranty or covenant under this Agreement or any conveyance document
unless the amount of damages proximately caused thereby exceeds the
amount of Material Damage.
5. CONTINUATION AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.
All representations and warranties by the respective parties contained
herein or made in writing pursuant to this Agreement are intended to
and shall remain true and correct as of the time of Closing, shall be
deemed to be material, and, together with all conditions, covenants and
indemnities made by the respective parties contained herein or made in
writing pursuant to this Agreement (except as otherwise expressly
limited or expanded by the terms of this Agreement), shall survive the
execution and delivery of this Agreement and shall survive the Closing
for a period of ninety (90) days, or, to the extent the context
requires, beyond any termination of this Agreement for a period of
ninety (90) days from the termination date.
ADDENDUM II - 7
ADDENDUM III
DUE DILIGENCE MATERIALS TO BE MADE AVAILABLE
BY TRANSFEROR TO TRANSFEREE
1. LEASES, LOANS AND CONTRACTS: Copies of (i) all existing Leases, lease
abstracts, Rent Rolls, Delinquency Reports, rental agreements,
amendments, Tenant correspondence, side agreements and letters of
understanding; (ii) all existing Loan Documents and any service,
management or leasing contracts and agreements; (iii) any financial
information relating to the Tenants, together with any information
about purchase options, rights of first refusal, or lease extensions or
termination options and other rights of Tenants; and (iv) Tenant
payment ledgers for the last 12 months and Tenant delinquency reports.
2. INSPECTION OF TITLE, SURVEY, USE AND ZONING MATTERS: To the extent
reasonably available to Transferor without additional cost, copies of
occupancy permits/certificates, if any, preliminary title reports, all
underlying title documents, ALTA surveys, a current ADA compliance
survey prepared by a licensed architect, if any, easements and other
encumbrances, CC&Rs and any governmental correspondence or other
documentation and notices related to use, zoning, building code or any
other regulatory matters. Transferee shall be responsible for updating
preliminary title reports and existing ALTA surveys. In each instance
in which there is no existing ALTA survey suitable for updating,
Transferee shall provide such ALTA survey. Transferor shall have no
obligation to provide the documentation set forth in this subparagraph
2 to the extent that the same has not previously been secured by
Transferor and continues to be available without additional cost (other
than duplication costs.)
3. HISTORICAL INCOME, EXPENSES AND CAPITAL EXPENDITURE DATA: Current
operating budgets and historical operating information related to the
Property, specifically including: (i) three years of records (calendar
1994, 1995, 1996 and 1997 year to date), confirming collected income,
operating expenses, capital expenditures, commissions and fees, all of
which shall be certified in writing by the chief financial officer of
Transferor or of Transferor's general partner (as the case may be) as
being true and accurate in all material respects, and as having been
prepared in accordance with Transferor's customary accounting practices
in the ordinary course of business; together with (ii) related
correspondence, notices, existing audits, tax filings, contracts and
associated books and records.
4. COLLATERAL MATERIAL: To the extent in the possession or control of
Transferor, copies of property tax bills, utility bills, service
contracts, building inspection reports, seismic compliance reports (if
applicable), aerial photos, assessment district information, appraisals
and any other information that Transferee reasonably believes may be
useful to Transferee in evaluation of the Property.
5. HAZARDOUS MATERIAL AND ENVIRONMENTAL MATTERS: Copies of existing Phase
I and Phase II environmental inspection reports, and any asbestos
surveys.
6. OTHER: To the extent within the possession or control of Transferor,
construction plans and specifications, site plans, copies of licenses,
permits and approvals, soils reports, fire sprinkler
ADDENDUM III - 1
ratings, electrical ratings, seismic compliance report with Aggregate
Probable Maximum Loss estimate, list of capital improvements made in
the past three years; list of planned/needed building repairs and all
associated drawings, modifications, add-ons, etc. for the Property.
ADDENDUM III - 2
ADDENDUM IV
DELIVERY OF CERTAIN DOCUMENTS BY TRANSFEROR AFTER CLOSING
MARION BASS PORTFOLIO
With respect to certain documents to be delivered by Transferor to
Transferee after Closing, as provided in the Section entitled "Closing and
Escrow," such delivery shall be effectuated at Transferor's headquarters in
Charlotte, North Carolina, except as may be modified by Transferee.
ADDENDUM III - 1
EXHIBIT A
SPECIAL WARRANTY DEED
(SEE ATTACHED)
????????????????????????
????????????????????????
[TO BE ATTACHED TO DEED OR INCORPORATED IN DEED, AS MAY BE REQUIRED BY STATE
LAW]
_____________________, 1997
xxxx County Recorder
- ---------------------------
- ---------------------------
- ---------------------------
Re: Request That Statement of Documentary
Transfer Tax Not be Recorded
Dear Sir or Madam:
Request is hereby that this statement of tax due not be recorded with
the attached deed but be affixed to the deed after recordation and before return
as directed on the deed.
The attached deed names ______________, a North Carolina limited
partnership, as grantor, and Glenborough Properties, L.P., a California limited
partnership, as grantee.
The property being transferred and described in the attached deed is
located in the City of __________, County of ___________, State of California.
The amount of Documentary Transfer Tax due on the attached deed is
$_____________ computed on the full value of the property conveyed.
--------------,
a North Carolina limited partnership
By Marion Bass Real Estate Group, Inc.,
a North Carolina corporation
By ___________________________
its __________________
EXHIBIT A
TO GRANT DEED
REAL PROPERTY DESCRIPTION
EXHIBIT B
ASSIGNMENT AND ASSUMPTION OF LEASES
THIS ASSIGNMENT AND ASSUMPTION OF LEASES ("Assignment") dated as of
__________, 1997, is entered into by and between ______________, a North
Carolina limited partnership ("Assignor"), and Glenborough Properties, L.P., a
California limited partnership ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor is the lessor under certain leases executed with
respect to that certain real property commonly known as ______________ (the
"Property") as more fully described in Exhibit A attached hereto, which leases
are described in the Rent Roll attached hereto as Schedule 1 (the "Leases"); and
WHEREAS, Assignor has entered into that certain Purchase Agreement (the
"Agreement") by which title to the Property is being transferred to Assignee;
and
WHEREAS, Assignor desires to assign its interest as lessor in the
Leases to Assignee, and Assignee desires to accept the assignment thereof;
NOW, THEREFORE. in consideration of the promises and conditions
contained herein, [and the consent of the Secretary of Housing and Urban
Development to the conveyance of the Property,]the parties hereby agree as
follows:
1. Effective as of the Closing Date (as defined in the Agreement),
Assignor hereby assigns to Assignee all of its right, title and interest in and
to the Leases, and any guarantees related thereto.
2. Assignor warrants and represents that as of the Closing Date
Schedule 1 includes all of the Leases and occupancy agreements affecting the
Property, and that there are no oral agreements with anyone, including tenants
under the Leases, with respect to occupancy of the Property or any part thereof.
As of the date hereof, there are no assignments of or agreements to assign the
Leases to any other party other than in connection with the Loan.
3. Except as otherwise set forth in the Agreement, Assignor hereby
agrees to indemnify Assignee against and hold Assignee harmless from any and all
cost, liability, loss, damage or expense, including without limitation
reasonable attorneys' fees, arising out of facts or circumstances occurring
prior to the Closing Date and arising out of the lessor's obligations under the
Leases.
4. Except as otherwise set forth in the Agreement and in the last
sentence of this Section, effective as of the Closing Date, Assignee hereby
assumes all of the lessor's obligations arising after the Closing Date under the
Leases and agrees to indemnify Assignor
against and hold Assignor harmless from any and all cost, liability, loss,
damage or expense, including without limitation, reasonable attorneys' fees,
arising out of facts or circumstances occurring subsequent to the Closing Date
and arising out of the lessor's obligations under the Leases. Notwithstanding
the foregoing, Assignee assumes no obligation with respect to any amounts that
may be owed to a tenant under any of the Leases for any overpayment by such
tenant of estimated common area maintenance charges, other expense reimbursement
payments or similar charges.
5. Any rental and other payments under the Leases shall be prorated
between the parties as provided in the Agreement.
6. If either party hereto fails to perform any of its obligations under
this Assignment or if a dispute arises between the parties hereto concerning the
meaning or interpretation of any provision of this Assignment, then the
defaulting party or the party not prevailing in such dispute shall pay any and
all costs and expenses incurred by the other party on account of such default
and/or in enforcing or establishing its rights hereunder including, without
limitation, court costs and reasonable attorneys' fees and disbursements. Any
such attorneys' fees and other expenses incurred by either party in enforcing a
judgment in its favor under this Assignment shall be recoverable separately from
and in addition to any other amount included in such judgment and such
attorneys' fees obligation is intended to be severable from the other provisions
of this Assignment and to survive and not be merged into any such judgment.
7. This Assignment shall be binding on and inure to the benefit of the
parties hereto, their heirs, executors, administrators, successors in interest
and assigns.
8. This Assignment shall be governed by and construed in accordance
with the laws of the State of North Carolina.
9. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which taken together shall constitute one and
the same instrument.
IN WITNESS WHEREOF Assignor and Assignee have executed this Assignment
the day and year first above written.
ASSIGNEE ASSIGNOR
Glenborough Properties, L.P. ______________
a California limited partnership a North Carolina limited partnership
By Glenborough Realty Trust Incorporated By Marion Bass Real Estate Group, Inc.,
a Maryland corporation a North Carolina corporation
its General Partner its General Partner
By _________________________ By ________________________
its ______________________ its _____________________
EXHIBIT A
TO ASSIGNMENT AND ASSUMPTION OF LEASES
REAL PROPERTY DESCRIPTION
SCHEDULE 1
TO ASSIGNMENT AND ASSUMPTION OF LEASES
RENT ROLL
EXHIBIT C
WARRANTY BILL OF SALE
For good and valuable consideration the receipt of which is hereby
acknowledged, [including, without limitation, the consent of the Secretary of
Housing and Urban Develoment to the conveyance of the Property (as defined
below)]______________, a North Carolina limited partnership ("Transferor"), does
hereby sell, transfer, and convey to Glenborough Properties, L.P., a California
limited partnership ("Transferee") all personal property owned by Transferor and
located on or in or used in connection with the Real Property (as defined in
that certain Purchase Agreement relating to the real property commonly known as
_________________, between Transferor and Transferee), including, without
limitation, those items described in Schedule 1 attached hereto
Transferor represents and warrants to Transferee that Transferor is the
lawful owner of such personal property, that such personal property is free and
clear of all encumbrances, and that Transferor has good right to sell the same
as aforesaid and will warrant and defend the title thereto unto Transferee, its
successors and assigns, against the claims and demands of all persons
whomsoever. Except for the representations and warranties specifically set forth
herein or in the Purchase Agreement, Transferor makes no representations or
warranties of any kind, including, without limitation, any warranties as to
condition or suitability of the personal property.
Dated: ____________________, 1997
TRANSFEROR
- --------------
a North Carolina limited partnership
By Marion Bass Real Estate Group, Inc.,
a North Carolina corporation,
its General Partner
By ___________________________________
its ________________________________
SCHEDULE 1
TO WARRANTY BILL OF SALE
PERSONAL PROPERTY
EXHIBIT D
ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS,
WARRANTIES AND GUARANTIES, AND OTHER GENERAL INTANGIBLES
This Assignment of Service Contracts, Warranties and Guaranties and
Other Intangible Property ("Assignment") is made and entered into as of
________, 1997, by ______________, a North Carolina limited partnership
("Assignor"), to Glenborough Properties, L.P., a California limited partnership
("Assignee"), pursuant to that certain Purchase Agreement (the "Agreement")
between Assignor and Assignee relating to the Real Property commonly known as
__________________________.
For good and valuable consideration, the receipt of which is hereby
acknowledged, [including, without limitation, the consent of the Secretary of
Housing and Urban Development to the conveyance of the Property] effective as of
the Closing Date (as defined in the Agreement), Assignor hereby assigns and
transfers unto Assignee all of its right, title, claim and interest in and
under:
(a) all assignable warranties and guaranties made by or received from
any third party with respect to any building, building component, structure,
fixture. machinery, equipment, or material situated on, contained in any
building or other improvement situated on, or comprising a part of any building
or other improvement situated on, any part of that certain real property
described in Exhibit A attached hereto including, without limitation, those
warranties and guaranties listed in Schedule 1 attached hereto (collectively,
"Warranties");
(b) all of the Service Contracts listed in Schedule 2 attached hereto;
and
(c) any General Intangibles (as defined in the Agreement) to the extent
assignable.
Assignor and Assignee further hereby agree and covenant as follows:
1. Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all cost, liability, loss, damage or expense,
including, without limitation, reasonable attorneys' fees, originating prior to
the Closing Date and arising out of the owner's obligations under the Service
Contracts.
2. Effective as of the Closing Date, Assignee hereby assumes all of
Assignor's obligations under the Service Contracts and agrees to indemnify
Assignor against and hold Assignor harmless from any and all cost, liability,
loss, damage or expense, including, without limitation, reasonable attorneys'
fees, originating on or subsequent to the Closing Date and arising out of the
owner's obligations under the Service Contracts.
3. If either party hereto fails to perform any of its obligations under
this Assignment or if a dispute arises between the parties hereto concerning the
meaning or
interpretation of any provision of this Assignment, then the defaulting party or
the party not prevailing in such dispute shall pay any and all costs and
expenses incurred by the other party on account of such default and/or in
enforcing or establishing its rights hereunder, including, without limitation,
court costs and attorneys' fees and disbursements. Any such attorneys' fees and
other expenses incurred by either party in enforcing a judgment in its favor
under this Assignment shall be recoverable separately from and in addition to
any other amount included in such judgment, and such attorneys, fees obligation
is intended to be severable from the other provisions of this Assignment and to
survive and not be merged into any such judgment.
4. Assignor hereby covenants that Assignor will, at any time and from
time to time, upon written request therefor, execute and deliver to Assignee any
new or confirmatory instruments which Assignee may reasonably request in order
to fully assign, transfer to and vest in Assignee, and to protect Assignee's
right, title and interest in and to, any of the items assigned herein or to
otherwise realize upon or enjoy such rights in and to those items.
5. This Assignment shall be binding on and inure to the benefit of the
parties hereto, their heirs, executors, administrators, successors in interest
and assigns
6. This Assignment shall be governed by and construed and in accordance
with laws of the State of North Carolina.
7. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which taken together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment
the day and year first above written.
ASSIGNEE ASSIGNOR
Glenborough Properties, L.P. ______________
a California limited partnership a North Carolina limited partnership
By Glenborough Realty Trust Incorporated By Marion Bass Real Estate Group, Inc.,
a Maryland corporation a North Carolina corporation
its General Partner its General Partner
By _________________________ By ________________________
its ______________________ its _____________________
EXHIBIT A
TO
ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS,
WARRANTIES AND GUARANTIES, AND OTHER GENERAL INTANGIBLES
REAL PROPERTY DESCRIPTION
SCHEDULE 1
TO
ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS,
WARRANTIES AND GUARANTIES, AND OTHER INTANGIBLE PROPERTY
WARRANTIES AND GUARANTIES
SCHEDULE 2
TO
ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS,
WARRANTIES AND GUARANTIES, AND OTHER INTANGIBLE PROPERTY
SERVICE CONTRACTS
EXHIBIT E
CERTIFICATE OF TRANSFEROR
OTHER THAN AN INDIVIDUAL
(FIRPTA AFFIDAVIT)
Section 1445 of the Internal Revenue Code provides that a transferee of
a U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform Glenborough Properties, L.P., a California limited
partnership, the transferee of certain real property located at
__________________ that withholding of tax is not required upon the disposition
of such U.S. real property interest by ______________, a North Carolina limited
partnership ("Transferor"), the undersigned hereby certifies the following on
behalf of Transferor:
1. Transferor is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations);
2. Transferor's U.S. employer identification number is
________________; and
3. Transferor's office address is c/o Marion Bass Companies, 4000 Park
Road Charlotte, NC 28209
Transferor understands that this certification may be disclosed to the
Internal Revenue Service by Transferee and that any false statement contained
herein could be punished by fine, imprisonment, or both.
Under penalty of perjury, I declare that I have examined this
certificate and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have authority to sign this document on
behalf of Transferor.
Dated: ______________________, 1997
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--------------------------------
on behalf of:
--------------
a North Carolina limited partnership
EXHIBIT F
[INTENTIONALLY OMITTED]
EXHIBIT G
NOTICE TO TENANTS
(Date)
(Name )
(Street Address)
(City, State, Zip Code)
Re: _____________________
Dear (Tenant, or address individually to each Tenant):
Please be advised that as of today, ___________________, 1997, ______________,
the owner of __________________________, has sold the property to Glenborough
Properties, L.P. ("Glenborough"). Glenborough has assumed the obligations of the
landlord under your lease from this day forward.
Please direct all your future payments to Glenborough, at _____________________.
This will also confirm that your security deposit in the amount of $_______
(which represents your original security deposit of $______ less the amount of
$_______ applied on account of __________) has been transferred to and assumed
by Glenborough.
Very truly yours.
- -----------------------------------------
By:
its:
EXHIBIT H
CLOSING CERTIFICATE
The individuals ("Individuals") signing this certificate on behalf of
______________, a North Carolina limited partnership ("Transferor") hereby
certify that they are the duly appointed and acting _________________ of
Transferor, and that they are duly authorized to execute and deliver this
Closing Certificate on behalf of Transferor. The Individuals and Transferor
hereby certify that this certificate is executed for the purpose of complying
with the Section entitled "Conditions to Closing" of that certain Purchase
Agreement (the "Agreement") between Transferor and Glenborough Realty Trust
Incorporated, a Maryland corporation, and Glenborough Properties, L.P., a
California limited partnership, relating to the real property commonly known as
Marion Bass Portfolio. Transferor hereby certifies that: (i) the representations
and warranties of Transferor contained in the Agreement are true and correct as
of the date hereof as though made at and as of the date hereof (or as of the
date originally made, to the extent such representations and warranties may
refer to matters as of a specific date that is referenced in the Agreement), and
(ii) Transferor's covenants under the Agreement have been satisifed as of the
date hereof, to the extent such covenants are to be satisifed as of the date
hereof in accordance with the provisions of the Agreement, except as follows:
Dated: ___________________, 1997
TRANSFEROR
--------------,
a North Carolina limited partnership
By Marion Bass Real Estate Group, Inc.,
a North Carolina corporation
its General Partner
By ___________________________
its _______________________
INDIVIDUALS
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EXHIBIT I
PRORATION STATEMENT
--------------
SUMMARY PRORATIONS SCHEDULE - GLENBOROUGH TRANSACTION
AS OF ____________________, 1997
DUE TO TRANSFEROR DUE TO GLENBOROUGH
------------------------------ ------------------------------------------------
Current
CAM/Taxes/ Month Prepaid Security
Property Name Insurance Proration Charges Rents Deposits
- ----------------------------- ------------------------------ -------------- ------------ --------------
------------------------------ -------------- ------------ --------------
Grand Totals
============================== ============== ============ ==============
Attach detail schedule for each property.
PRORATION SCHEDULE
PROPERTY DETAIL
AS OF ____________________, 1997
PROPERTY NAME: MARION BASS PORTFOLIO
Proration of Current
Month Collections (No. of Due to Glenborough
days)
----------------------------- ----------------------
Current
Other Total Month Due Due Prepaid Security
Apt. No. Tenant Name Rent Charges Charges Collections Transferor Glenborough Rents Deposits
- ----------- -------------- --------- ---------- ----------- ----------- ------------- ------------- ---------- ---------
========= ========== =========== =========== ============= ============= ========== =========
Totals
========= ========== =========== =========== ============= ============= ========== =========
* For tenants not paying estimates.
SCHEDULE 1
DESCRIPTION OF LAND
[BY PARTNERSHIP AND PROPERTY COMMON NAME: LEGAL DESCRIPTIONS ATTACHED]
1. EAGLESERIES II/SHARONRIDGE: SHARONRIDGE - PHASE 1
2. SHARONRIDGE II ASSOCIATES: SHARONRIDGE - PHASE 2
3. EQUITYSOURCE 83/WENDOVER GLEN: WENDOVER GLEN
4. EQUITYSOURCE 84/THE OAKS: THE OAKS
5. EQUITYSOURCE 85/FARMHURST LANDING: THE LANDING ON FARMHURST
6. EQUITYSOURCE 86/COURTYARD: THE COURTYARD
7. BASS REAL ESTATE FUND II: SABAL POINT - PHASE I
8. BASS REAL ESTATE FUND 84: THE CHASE ON COMMONWEALTH AND WILLOW GLEN
9. BASS INCOME PLUS FUND: ARROWOOD CROSSING - PHASE 1, THE CHASE - MONROE
AND SABAL POINT - PHASE 2
10. BASS REAL ESTATE FUND III: ARROWOOD CROSSING - PHASE 2 AND SABAL POINT
- PHASE 3
BASS REAL ESTATE FUND-II,
A NORTH CAROLINA LIMITED PARTNERSHIP
CONSENT OF LIMITED PARTNER TO SALE OF ALL
OF THE PARTNERSHIPS' PROPERTY
The undersigned Limited Partner acknowledges receipt of the Information
Statement dated November 25, 1997 respecting the proposed sale of the
Partnership's apartment complex and the subsequent liquidation of the
Partnership. The undersigned Limited Partner understands that the General
Partner is seeking the consent of the Limited Partners to a sale of the
Partnership's apartment complex at a Minimum Sale Price of $9,353,910 to
Glenborough Realty Trust incorporated and/or Glenborough Properties, L.P.
(unaffiliated with the General Partner).
The General Partner recommends a vote for a sale of the Partnership's
apartment complex.
THIS PROPOSED SALE OF THE PARTNERSHIP'S APARTMENT COMPLEX REQUIRES THE
APPROVAL BY THE HOLDERS OF MORE THAN 50% OF THE OUTSTANDING UNITS OF THE
PARTNERSHIP.
PLEASE CHECK THE APPROPRIATE BLANK BOX BELOW IN BLUE OR BLACK INK TO
INDICATE YOUR VOTE ON THIS MATTER.
Consent to the Sale of the Partnership's Apartment Complex: proposal to
authorize the General Partner to sell the Partnership's apartment
complex at a gross purchase price of not less than $9,353,910 to
Glenborough Realty Trust incorporated and/or Glenborough Properties,
L.P. with such sale to be completed on or prior to January 31, 1998.
Approval of a sale of the Partnership's apartment complex will also be
deemed a consent to the termination and dissolution of the Partnership
(upon the completion of a sale).
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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Signature of Unit Holder
Date: _________________, 1997
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Print Name
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Signature of Unit Holder, if held jointly
Date: ________________, 1997
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Print Name
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE CERTIFICATES REPRESENTING YOUR
LIMITED PARTNERSHIP INTEREST. WHEN SUCH INTEREST(S) ARE HELD BY JOINT TENANTS,
BOTH SHOULD SIGN. WHEN SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN PLEASE GIVE FULL TITLE OF SUCH. IF A CORPORATION, PLEASE HAVE SIGNED
IN FULL CORPORATE NAME BY THE PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE HAVE SIGNED IN THE PARTNERSHIP'S NAME BY AN AUTHORIZED
PERSON.