-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qu+0bSF3fS3Pd1M0ZHjYPei91kaPxD2pColM95DezOigLGO+gp5OhF8gWdZ4tu+L Cwm2aclmqAZ8ZDBDRi1u8w== 0000950123-01-500550.txt : 20010410 0000950123-01-500550.hdr.sgml : 20010410 ACCESSION NUMBER: 0000950123-01-500550 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010405 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010405 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNION REAL ESTATE EQUITY & MORTGAGE INVESTMENTS CENTRAL INDEX KEY: 0000037008 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 346513657 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-06249 FILM NUMBER: 1595768 BUSINESS ADDRESS: STREET 1: 551 FIFTH AVE STREET 2: STE 1416 CITY: NEW YORK STATE: NY ZIP: 10176 BUSINESS PHONE: 2129051104 MAIL ADDRESS: STREET 1: 551 FIFTH AVE STREET 2: SUITE 1416 CITY: NEW YORK STATE: NY ZIP: 10176 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION REALTY DATE OF NAME CHANGE: 19691012 8-K/A 1 y47595e8-ka.txt AMENDMENT TO FORM 8-K 1 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------- FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------------------- Date of Report April 5, 2001 First Union Real Estate Equity and Mortgage Investments - ------------------------------------------------------------------------------- (Exact name of Registrant as Specified in Its Charter) Ohio 1-6249 34-6513657 - -------------------------------------- ----------------------------------- -------------------------- (State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Incorporation) Identification No.)
125 Park Avenue, 14th Floor New York, NY 10017 - ---------------------------------------------- ---------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (212) 949-1373 ---------------------- - ------------------------------------------------------------------------------- Former Name or Former Address, if Changed Since Last Report. Total number of pages in report: 4 2 ITEM TWO TO FORM 8-K IS HEREBY AMENDED AND SUPPLEMENTED AS FOLLOWS: ITEM 2. DISPOSITION OF ASSETS On March 7, 2001, the Registrant and certain of its subsidiaries completed the sale of two shopping center properties, four office properties, five parking garages, one parking lot, a $1.5 million note receivable secured by a mortgage on a non-owned apartment property and certain assets used in the operation of the properties being sold (the "Asset Sale") under sales agreements with Radiant Investors LLC ("Purchaser"). Daniel P. Friedman, Anne N. Zahner and David Schonberger (the "Executives") are principals of Purchaser and were executive officers of the Registrant. Other than Mr. Friedman, who was a trustee of the Registrant from November 1998 through September 2000, no member of the Board of Trustees of the Registrant was affiliated with, or had an interest in, or a relationship with, Purchaser or any of its affiliates. Purchaser assigned its interest in the transaction to Radiant Ventures I, LLC. The principal equity investors in Radiant Ventures I, LLC are Purchaser, which is the managing member, and Landmark Equity Trust VII, which is the principal non-managing member (owning 89% of the total ownership interests in Radiant Ventures I, LLC). As a part of the Asset Sale, Purchaser received a purchase price adjustment for the net operating income from the properties sold from June 1, 2000 less (a) debt service on the properties, (b) capital expenditures committed subsequent to May 9, 2000 and paid prior to closing and (c) 66.6% of the asset management fees paid from June 1, 2000 until the closing of the transaction to the management firm controlled by the Executives that managed the assets of the Registrant. The Asset Sale was submitted to shareholders for approval and was approved by the shareholders at a meeting held on March 6, 2001. The Asset Sale is described in the previously filed definitive proxy materials relating to the March 6, 2001 shareholders meeting. The aggregate purchase price for the Asset Sale was $205 million, which was reduced at closing by $20.6 million, the net sales price realized by the Registrant from the sale of the Huntington Garage, which was sold in December 2000 to another party. As part of the Asset Sale, Purchaser assumed $121.4 million of existing mortgage debt on the purchased properties and the Registrant granted to Purchaser a six-month bridge loan of $7 million secured by two of the properties sold. The balance of the purchase price for the Asset Sale was paid in cash. The book value as of December 31, 2000 of the properties sold to Purchaser was approximately $143 million. The acquisition price for the Asset Sale was determined as a result of negotiations between the Registrant and Purchaser and was determined based on a number of factors, primarily the highest price the Registrant could obtain for the properties. The representatives of the Registrant in these negotiations were the Chairman of the Registrant, William Ackman, and the Vice-Chairman of the Registrant, William Scully, both of whom have extensive experience in the real estate industry and neither of whom are affiliated with, or have an interest in, or a relationship with, Purchaser or any of its affiliates. ITEM SEVEN TO FORM 8-K IS HEREBY AMENDED AND SUPPLEMENTED AS FOLLOWS: ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS a. Financial Statements of Businesses Acquired Not applicable. b. Pro Forma Financial Information 3 Pro Forma Combined Balance Sheet as of December 31, 2000. Pro Forma Combined Statement of Operations for the Year Ended December 31, 2000. Pro Forma Combined Statement of Operations for the Year Ended December 31, 1999. Notes to Pro Forma Combined Financial Statements. The Pro Forma Combined Balance Sheet of the Registrant as of December 31, 2000, reflects two adjustment columns: the Asset Sale to Purchaser and the North Valley financing. The Pro Forma Combined Statement of Operations for the year ended December 31, 2000, reflects five adjustment columns: the spinoff of Imperial Parking Corporation ("Imperial") in March 2000, the sale of the Crossroads Center property to General Growth Properties, Inc. in April 2000, the sale of Temple Mall in August 2000, the Asset Sale to Purchaser and the sale of the Huntington Garage property to Northeastern Security Development Corporation in December 2000. The Pro Forma Combined Statement of Operations for the year ended December 31, 1999, reflects six adjustment columns: the properties sold by the Registrant prior to December 31, 1999, the sale of the Crossroads Center property to General Growth Properties, Inc. in April 2000, the spinoff of Imperial in March 2000, the sale of Temple Mall in August 2000, the Asset Sale to Purchaser and the sale of the Huntington Garage property to Northeastern Security Development Corporation in December 2000. The Pro Forma Combined Balance Sheet of the Registrant assumes that the Asset Sale to Radiant occurred on December 31, 2000, and the Pro Forma Combined Statements of Operations assume that all transactions occurred at the beginning of the periods presented. The Pro Forma Combined Statement of Operations for the year ended December 31, 1999 and for the year ended December 31, 2000 are not necessarily indicative of the actual results that would have occurred had the pro forma transactions been consummated on the first day of the respective periods or of future operations of the Registrant. The Pro Forma financial statements do not take into consideration the increase in the Registrant's liquidity or possible uses of those funds. The Pro Forma Combined Balance Sheet and Pro Forma Combined Statements of Operations should be read in conjunction with the Notes to Pro Forma Combined Financial Statements. c. Exhibits 99.1 Press release dated March 8, 2001, regarding the sale of certain real estate properties to Radiant Investors, LLC. * 99.2 Pro Forma Combined Balance Sheet as of December 31, 2000. 99.3 Pro Forma Combined Statement of Operations for the Year Ended December 31, 2000. 99.4 Pro Forma Combined Statement of Operations for the Year Ended December 31, 1999. 99.5 Notes to Pro Forma Combined Financial Statements. 99.6 Promissory Note ----------------- * Previously Filed 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. First Union Real Estate Equity and Mortgage Investments -------------------------------- (Registrant) Date: April 5, 2001 By:/S/ Neil H. Koenig ------------------ Neil H. Koenig Interim Chief Financial Officer EX-99.2 2 y47595ex99-2.txt PRO FORMA COMBINED BALANCE SHEET 1 EXHIBIT 99.2 FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS PRO FORMA COMBINED BALANCE SHEET DECEMBER 31, 2000 (IN THOUSANDS)
Pro Forma Adjustments --------------------------------- Sale of North Valley Properties Historical Financing (4) to Radiant (1) Pro Forma ------------ --------------- ---------------- --------------- ASSETS Investments in real estate Land $ 45,692 $ (39,607) $ 6,085 Buildings and improvements 227,691 (163,866) 63,825 ----------- ------------- ------------ ----------- 273,383 (203,473) 69,910 Less - Accumulated depreciation (68,507) 60,313 (8,194) ----------- ------------- ------------ ----------- Total investments in real estate 204,876 (143,160) 61,716 (2) Mortgage loans and notes receivable 1,468 5,532 7,000 Other assets Cash and cash equivalents - unrestricted 19,477 $ 5,439 44,993 69,909 - restricted 4,412 789 (3,242) 1,959 (3) Accounts receivable and prepayments, net of allowances 5,386 5,386 Investments 220,648 220,648 Inventory 3,097 3,097 Unamortized debt issue costs 1,439 272 (1,286) 425 Other 1,795 (1,575) 220 ----------- ------------- ------------ ----------- Total assets $ 462,598 $ 6,500 $ (98,738) $ 370,360 =========== ============= ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Mortgage loans $ 158,772 $ 6,500 $(122,922) $ 42,350 Notes payable 150,110 150,110 Senior notes 12,538 12,538 Accounts payable and accrued liabilities 18,040 (1,757) 16,283 Deferred items 2,755 (2,653) 102 ----------- ------------- ------------ ----------- Total liabilities $ 342,215 $ 6,500 $(127,332) $ 221,383 ----------- ------------- ------------ ----------- Shareholders' equity Preferred shares of beneficial interest 23,171 23,171 Shares of beneficial interest 39,697 39,697 Additional paid in capital 214,336 214,336 Undistributed loss from operations (156,821) 28,594 (128,227) ----------- ------------- ------------ ----------- Total shareholders' equity 120,383 28,594 148,977 ----------- ------------- ------------ ----------- Total liabilities and shareholders' equity $ 462,598 $ 6,500 $ (98,738) $ 370,360 =========== ============= ============ ===========
(1) Received approximately $45 million in cash from the sale, after assumption and repayment of debt of approximately $123 million and expenses and adjustments related to the sale. In addition, First Union provided $7 million in short term financing to the purchaser. (2) The balance consists primarily of investments in real estate at Circle Tower of approximately $2.4 million and Park Plaza of approximately $59.3 million. (3) The balance of restricted cash consists of a severance escrow of approximately $1.2 million and Park Plaza escrow balances of approximately $.7 million. (4) In February 2001, in accordance with the Radiant sales agreement, First Union amended the mortgage loan on the North Valley Tech Center property to provide for an additional $6.5 million of financing. EX-99.3 3 y47595ex99-3.txt PRO FORMA COMBINED STATEMENT OF OPERATIONS 1 EXHIBIT 99.3 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS PRO FORMA COMBINED STATEMENT OF OPERATIONS For the Year Ended December 31, 2000 (In thousands, except per share data)
Pro Forma Adjustments --------------------------------------------------------- Sale of Sale of Sale of Spinoff of Sale of Temple Huntington Properties Imperial Crossroads Mall Garage to Radiant Historical (1) (2) (3) (4) (5) Pro Forma ----------- ---------- ---------- ------ ---------- ----------- --------- Revenues Rents $ 49,603 $(3,170) $(2,297) $(31,059) $13,077 Sales 5,556 5,556 Interest - Mortgage loans 229 $(42) (150) 37 - Short-term investments 11,091 $ (490) (4) (251) 10,346 Dividends 788 788 Equity in loss from joint venture (182) 182 - Other income 180 (6) 174 --------- ------- -------- ----- -------- --------- -------- 67,265 (490) (3,180) 140 (2,297) (31,460) 29,978 --------- ------- -------- ----- -------- --------- -------- Expenses Property operating 14,448 (655) (36) (9,291) 4,466 Cost of goods sold 8,156 8,156 Real estate taxes 5,348 (707) (333) (3,456) 852 Depreciation and amortization 12,580 (730) (268) (9,394) 2,188 Interest - Mortgage loans 17,137 (2,571) (644) (11,323) 2,599 - Notes payable 7,754 (47) (176) 7,531 - Senior notes 1,113 1,113 General and administrative 11,361 11,361 Unrealized loss on carrying value of assets identified for disposition and impaired assets 19,150 (19,150) - --------- ------- -------- ----- -------- --------- -------- 97,047 - (4,663) - (1,328) (52,790) 38,266 --------- ------- -------- ----- -------- --------- -------- Loss before capital gains, extraordinary loss and preferred dividend $(29,782) $ (490) $ 1,483 $140 $ (969) $ 21,330 $(8,288) ========= ======= ======== ===== ======== ========= ======== Per share data Basic weighted average shares 41,758 41,758 ========= ======== Diluted weighed average shares 47,499 47,499 ========= ======== Loss before capital gains, extraordinary loss and preferred dividend, basic and diluted $ (0.71) $ (0.20) ========= ========
(1) Spinoff of Imperial was in March 2000. (2) Crossroads was sold in April 2000. (3) Temple Mall was sold in August 2000. (4) Huntington Garage was sold in December 2000. (5) The sale of properties to Radiant was in March 2001. EX-99.4 4 y47595ex99-4.txt PRO FORMA COMBINED STATEMENT OF OPERATIONS 1 EXHIBIT 99.4 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS PRO FORMA COMBINED STATEMENT OF OPERATIONS For the Year Ended December 31, 1999 (In thousands, except per share data)
Pro Forma Adjustments -------------------------------------------------------------------- Properties sold Temple Proposed Sale of prior to Sale of Spinoff of Mall Huntington Properties December Crossroads Imperial Sale Sale to Radiant Historical 31, 1999 (1) (2) (3) (4) (5) Pro Forma ---------- ----------- ---------- --------- ------ ---------- ----------- --------- Revenues Rents $ 109,839 $ (53,647) $ (11,378) $ (2,231) $ (29,812) $ 12,771 Sales 6,643 6,643 Interest - Mortgage loans 463 (170) 293 - Short-term invstments 2,649 (567) (7) $ (1,950) (87) 38 Equity in income from joint venture 64 $ (64) -- Management fees 332 332 Other income 784 784 ---------- ---------- ---------- --------- ------ ---------- ---------- --------- 120,774 (54,214) (11,385) (1,950) (64) (2,231) (30,069) 20,861 ---------- ---------- ---------- --------- ------ ---------- ---------- --------- Expenses Property operating 36,224 (21,342) (1,844) (78) (8,574) 4,386 Cost of goods sold 8,670 8,670 Real estate taxes 9,937 (3,709) (1,987) (356) (3,068) 817 Depreciation and amortization 25,331 (11,283) (1,691) (242) (7,742) 4,373 Interest - Mortgage loans 28,264 (11,221) (4,327) (690) (9,074) 2,952 - Notes payable 4,232 (4,193) 39 - Senior notes 1,113 1,113 - Bank loans and other 4,833 (3,253) 1,580 General and administrative 14,664 14,664 Unrealized loss on carrying value of assets identified for disposition and -- impaired assets 9,800 9,800 ---------- ---------- ---------- --------- ------ ---------- ---------- --------- 143,068 (55,001) (9,849) -- -- (1,366) (28,458) 48,394 ---------- ---------- ---------- --------- ------ ---------- ---------- --------- Loss before capital gain, extraordinary loss, discontinued operations and preferred dividend $ (22,294) $ 787 $ (1,536) $ (1,950) $ (64) $ (865) $ (1,611) $(27,533) ========== ========== ========== ========= ====== ========== ========== ========= Per share data Basic weighted average shares 38,827 38,827 ========== ========= Diluted weighted average shares 38,836 38,836 ========== ========= Loss before capital gain, extraordinary loss, discontinued operations and preferred dividend, basic and diluted $ (0.57) $ (0.71) ========== =========
(1) Crossroads was sold in April 2000. (2) Spinoff of Imperial was in March 2000. (3) Temple Mall was sold in August 2000. (4) Huntington Garage was sold in December 2000. (5) The sale of properties to Radiant was in March 2001. EX-99.5 5 y47595ex99-5.txt NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS 1 EXHIBIT 99.5 Notes to Pro Forma Combined Financial Statements Distribution of Imperial In March 2000, the Registrant distributed all common stock of Imperial to its shareholders. One share of Imperial common stock was distributed for every 20 of the Registrant's common shares of beneficial interest held on March 20, 2000. Approximately 2.1 million shares of Imperial common stock were distributed. As part of the spin-off, the Registrant repaid Imperial Parking Limited's bank credit facility of approximately $24.2 million, contributed approximately $7.5 million of cash, contributed its 14 Canadian parking properties and $6.7 million for a parking development located in San Francisco, California. Sale of Crossroads Shopping Center In April 2000, the Registrant sold Crossroads Shopping Center for $80.1 million, of which approximately $78.1 million was applied against a loan payable to the purchaser, the assumption of the first mortgage debt on the property and other liabilities. The Registrant recognized a gain on the sale of approximately $58.7 million, less an extraordinary loss on extinguishment of debt of approximately $2.4 million. Sale of Temple Mall In August 2000, the Registrant received approximately $2.4 million representing its 50% non-controlling ownership interest in the net proceeds from the sale of Temple Mall. The Registrant accounted for its interest in Temple Mall as an investment in a joint venture using the equity method of accounting. The Registrant recognized a gain from the investment in the joint venture of approximately $1.2 million. Temple Mall was sold for approximately $25.7 million, of which approximately $19.5 million was applied against the first mortgage debt on the mall. In addition, the joint venture repaid its $1.2 million note payable to the Registrant from cash reserves. Sale of the Huntington Garage In December 2000, the Registrant sold the Huntington Garage for $21.3 million, of which approximately $7.6 million was applied against the first mortgage debt on the garage. The Registrant recognized a gain on the sale of approximately $16.1 million, less an extraordinary loss on early extinguishment on debt of approximately $.6 million. Sale of Properties In March 2001, the Registrant sold a significant portion of its remaining real estate assets (the "Purchased Assets") to the Purchaser for an aggregate sale price, before costs and adjustments, of $205 million. At the closing of this transaction, the sale price of $205 million was reduced by $20.6 million, which was the net sales price realized by the Registrant from the sale of the Huntington Garage which was sold in December 2000 to another party and which was part of the aggregate sales price of $205 million. The Huntington Garage property was among those that Purchaser agreed to acquire from the Registrant. The Purchaser and the Registrant had agreed that the Registrant was permitted to sell the Huntington Garage property to a third party and that Purchaser would receive a credit towards the $205 million purchase price equal to the net sales price realized by the Registrant from the sale of the Huntington Garage. 2 The assets purchased by Purchaser consisted of the following: - 55 Public Square and CEI Office Buildings - Cleveland, Ohio - 55 Public Square Garage - Cleveland, Ohio - West Third Street Parking Lot - Cleveland, Ohio - North Valley Tech Center - Thornton, Colorado - Two Rivers Business Center - Clarksville, Tennessee - Westgate Shopping Center - Abilene, Texas - Pecanland Mall - Monroe, Louisiana - Long Street Garage - Columbus, Ohio - Madison and Wells Garage - Chicago, Illinois - Printers Alley Garage - Nashville, Tennessee - 5th and Marshall Garage - Richmond, Virginia - Club Associates' note receivable, face amount of approximately $1.5 million. - Ancillary assets including furniture, fixtures and equipment, and reserve and escrow accounts related to the Purchased Assets - Net operating income from all of the Purchased Assets from June 1, 2000 less (a) debt service on the purchased assets, (b) capital expenditures committed subsequent to May 9, 2000 and (c) 66.6% of asset management fees paid to Radiant Partners, LLC from June 1, 2000 until the closing of the transaction The Registrant retained ownership of the following assets: - Unrestricted cash and Treasury bills - Convertible preferred investment in HQ Global Workplaces - Severance and prior trustees escrow account - Park Plaza Mall - Little Rock, Arkansas - Circle Tower - Indianapolis, Indiana - Peachtree Mall legal claim In addition, the Registrant retained ownership of Ventek. The Registrant remains liable for the following obligations: - 8.4% convertible preferred shares; $24,620,000 approximate face amount - 8.875% Publicly-traded senior notes; $12,500,000 approximate face amount - Dallas management office lease (the Registrant has sub-leased this space) - Certain liabilities relating to the Purchased Assets arising prior to June 1, 2000, except for certain potential liabilities of the Westgate Shopping Center - Corporate expenses and liabilities not related to the Purchased Assets (including the Ventek guarantee) - Property level mortgage debt on retained assets - Other ordinary course liabilities Radiant Partners, LLC will continue to manage the Registrant's remaining assets for $250,000 per year for two years. 3 In connection with the sale, the Registrant granted to the Purchaser a four-month bridge loan, which may be extended for an additional two months. The loan in the amount of $7.0 million bears interest at 11% per annum secured by cross-collateralized first mortgages on two properties. Payments of interest only are payable in monthly installments commencing April 1, 2001 through and including July 1, 2001. The loan may be extended by the purchaser through September 1, 2001 at an interest rate of 15% per annum, at which time all principal and accrued interest shall be payable. Prepayment of the loan is permitted without penalty only by payment of the entire principal balance and accrued interest at time of prepayment or based upon specified release terms, as defined. The Pro Forma financial statements do not include an adjustment related to the loan due to its short-term nature. EX-99.6 6 y47595ex99-6.txt PROMISSORY NOTE 1 EXHIBIT 99.6 PROMISSORY NOTE $7,000,000 March 6, 2001 FOR VALUE RECEIVED Marshall Fifth Venture LLC ("Marshall"), a Delaware limited liability company and West Third Venture LLC ("West Third"), a Delaware limited liability company, collectively as maker, having their principal place of business c/o Radiant Realty LLC, 1212 Avenue of the Americas, 18th Floor, New York, New York 10036 (collectively, Marshall and West Third are hereinafter referred to as the "Borrower"), hereby jointly, severally and unconditionally promise to pay to the order of First Union Real Estate Equity and Mortgage Investments, an Ohio business trust, having an address c/o Imowitz, Koenig & Co., LLP, 125 Park Avenue, New York, New York 10017, Attention: Neil Koenig ("Lender"), or at such other place as the holder hereof may from time to time designate in writing, the principal sum of SEVEN MILLION ($7,000,000) DOLLARS, in lawful money of the United States of America with interest thereon to be computed from the date of this Note at either the (i) the Initial Interest Rate (defined below) or (ii) Extension Interest Rate (defined below), and to be paid as provided herein. 1. CERTAIN DEFINED TERMS As used herein the following terms shall have the meanings set forth below: (a) "Initial Interest Rate" shall mean an interest rate equal to 11% per annum. (b) "Extension Interest Rate" shall mean an interest rate equal to 15% per annum. (c) "Loan" shall mean the loan evidenced by this Note. (d) "Loan Documents" shall mean this Note, the Security Instruments, and any other documents or instruments which now or shall hereafter wholly or partially secure or guarantee payment of this Note or which have otherwise been executed by Borrower and/or any other person in connection with the Loan. (e) "Maturity Date" shall mean either (i) July 6, 2001 or (ii) if Borrower extends the repayment of this Note pursuant to the terms described below, September 6, 2001 (sometimes hereinafter September 6, 2001 is referred to as the "Extended Maturity Date"). (f) "Security Instruments" shall mean (i) that certain Deed of Trust, Assignment and Security Agreement dated the date hereof in the principal sum of $7,000,000 given by Marshall to (or for the benefit of) Lender covering the fee estate of Marshall in certain premises located in the City of Richmond, State of Virginia, and other property, as more particularly described therein (the "Marshall Property") and (ii) that certain Open-End Mortgage and Security Agreement and Assignment of Leases and Rents dated the date hereof in the principal sum of $7,000,000 given by West Third to (or for the benefit of) Lender covering the fee estate of West Third in certain premises located in the City of Cleveland, State of Ohio and other property, as more particularly described therein ("West Third Street Property") (collectively, the Marshall Property and the West Third Street Property, are hereinafter referred to as the "Property"). Notwithstanding anything contained herein to the contrary, the Security Instruments collectively secure this Note. 2. PAYMENT TERMS (a) Borrower shall make payments of interest only payable in monthly installments commencing on April 1, 2001 through and including July 1, 2001 (or September 1, 2001 if Borrower elects to extend the Maturity Date of this Loan to the Extended Maturity Date pursuant to the terms described below. The principal sum and the balance of all interest that shall have accrued thereon shall be due and payable on the Maturity Date. (b) Interest on the principal sum of this Note shall be calculated by multiplying the actual number of days elapsed in the period for which interest is being calculated by (i) the Initial Interest Rate through July 6, 2001 and (ii) if applicable, the Extension Interest Rate from an after July 6, 2001 through and including the Extended Maturity Date, based on a 360 day year. 2 (c) Notwithstanding anything herein to the contrary, Borrower shall have the option (the "Option"), by an authorized representative of Borrower providing to Lender at or before 10 A.M. on any weekday prior to June 29, 2001 telephonic instruction specifying its desire, to extend the Maturity Date of this Note to September 6, 2001. If Borrower exercises the Option, the interest rate payable on this Note shall be payable at the Extension Interest Rate from and after July 6, 2001 through and including the Extended Maturity Date. (d) Unless payments are made in the required amount in immediately available funds at the place where this Note is payable, remittances in payment of all or any part of the Debt (defined below) shall not, regardless of any receipt or credit issued therefore, constitute payment until the required amount is actually received by Lender in funds immediately available at the place where this Note is payable (or any other place as Lender, in Lender's sole discretion, may have established by delivery of written notice thereof to Borrower) and shall be made and accepted subject to the condition that any check or draft may be handled for collection in accordance with the practice of the collecting bank or banks. 3. DEFAULT AND ACCELERATION (a) The whole of the principal sum of this Note, (b) interest, default interest, late charges and other sums, as provided in this Note, the Security Instruments or the other Loan Documents, (c) all other monies agreed or provided to be paid by Borrower in this Note, the Security Instruments or the other Loan Documents, (d) all sums advanced pursuant to the Security Instruments to protect and preserve the Property and the lien and the security interest created thereby, and (e) all sums advanced and costs and expenses incurred by Lender in connection with the Debt (defined below) or any part thereof, any renewal, extension, or change of or substitution for the Debt or any part thereof, or the acquisition or perfection of the security therefore, whether made or incurred at the request of Borrower or Lender (all the sums referred to in (a) through (e) above shall collectively be referred to as the "Debt") shall without notice become immediately due and payable at the option of Lender if any payment required in this Note prior to the Maturity Date is not paid within ten (10) days of the date when due or on the happening of any other default, after the expiration of any applicable notice and grace periods, herein or under the terms of the Security Instruments or any of the other Loan Documents (collectively, an "Event of Default"). 4. DEFAULT INTEREST Borrower does hereby agree that upon the occurrence of an Event of Default, Lender shall be entitled to receive and Borrower shall pay interest on the entire unpaid principal sum at a rate (the "Default Rate") equal to the lesser of (i) the Initial Interest Rate or Extension Interest Rate, if the Option has been exercised by Borrower, plus five percent (5%) or (ii) the maximum interest rate that Borrower may by law pay. The Default Rate shall be computed from the occurrence of the Event of Default until the earlier of the date upon which the Event of Default is cured or the date upon which the Debt is paid in full. Interest calculated at the Default Rate shall be added to the Debt, and shall be deemed secured by the Security Instruments. This clause, however, shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default. 5. PREPAYMENT The principal balance of this Note may be prepaid, in whole or in part (in accordance with the terms of Section 18 hereof), upon: (i) not less than five (5) days prior written notice (the "Prepayment Notice") to Lender specifying the scheduled payment date on which prepayment is to be made (the "Prepayment Date"); (ii) payment of all accrued and unpaid interest on the outstanding principal balance of this Note to and including the Prepayment Date; and (iii) payment of all other sums then due under this Note, the Security Instruments and the other Loan Documents. Lender shall not be obligated to accept any prepayment of the principal balance of this Note unless it is accompanied by all sums due in connection therewith. 6. SECURITY This Note is secured by the Security Instruments and the other Loan Documents. Each Security Instrument is intended to be duly recorded in the public records of the county where the respective Property is located. All of the terms, covenants and conditions contained in the Security Instruments and the other Loan Documents are hereby made part of this Note to the same extent and with the same force as if they were fully set forth herein. 7. SAVINGS CLAUSE This Note is subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Lender to 3 either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by applicable law to contract or agree to pay. If by the terms of this Note, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of such maximum rate, the Initial Interest Rate, the Extension Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the Debt, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of this Note until payment in full so that the rate or amount of interest on account of the Debt does not exceed the maximum lawful rate of interest from time to time in effect and applicable to the Debt for so long as the Debt is outstanding. 8. LATE CHARGE If any monthly installment payable under this Note (other than principal at maturity) is not paid on or prior to the fifth (5th) day after the date on which it is due, regardless of whether such failure shall constitute an Event of Default, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of the unpaid sum or the maximum amount permitted by applicable law to defray the expenses incurred by Lender in handling and processing the delinquent payment and to compensate Lender for the loss of the use of the delinquent payment and the amount shall be secured by the Security Instruments and the other Loan Documents. 9. NO ORAL CHANGE This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 10. JOINT AND SEVERAL LIABILITY If Borrower consists of more than one person or party, the obligations and liabilities of each person or party shall be joint and several. 11. WAIVERS, ETC. All payments required hereunder shall be made irrespective of, and without any deduction for, any setoff, defense or counterclaim. Borrower and all others who may become liable for the payment of all or any part of the Debt do hereby severally waive presentment and demand for payment, notice of dishonor, protest and notice of protest and non-payment and all other notices of any kind, other than notices specifically required by the terms of this Note, the Security Instruments and the other Loan Documents. No release of any security for the Debt or extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of this Note, the Security Instruments or the other Loan Documents made by agreement between Lender or any other person or party shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Borrower, and any other person or entity who may become liable for the payment of all or any part of the Debt, under this Note, the Security Instruments or the other Loan Documents. No notice to or demand on Borrower shall be deemed to be a waiver of the obligation of Borrower or of the right of Lender to take further action without further notice or demand as provided for in this Note, the Security Instruments or the other Loan Documents. In addition, acceptance by Lender of any payment in an amount less than the amount then due shall be deemed an acceptance on account only, and the failure to pay the entire amount then due shall be and continue to be an Event of Default. If Borrower is a partnership, the agreements herein contained shall remain in force and applicable, notwithstanding any changes in the individuals comprising the partnership, and the term "Borrower," as used herein, shall include any alternate or successor partnership, but any predecessor partnership and their partners shall not thereby be released from any liability. If Borrower is a corporation or limited liability company, the agreements contained herein shall remain in full force and applicable notwithstanding any changes in the shareholders or members comprising, or the officers and directors or managers relating to, the corporation or limited liability company, and the term "Borrower" as used herein, shall include any alternative or successor corporation or limited liability company, but any predecessor corporation or limited liability company shall not be relieved of liability hereunder. (Nothing in the foregoing sentence shall be construed as a consent to, or a waiver of, any prohibition or restriction on transfers of interests in a partnership, corporation or limited liability company which may be set forth in the Security Instruments or any other Loan Document.) 4 12. TRANSFER Upon the transfer of this Note, Borrower hereby waiving notice of any such transfer, Lender may deliver all the collateral mortgaged, granted, pledged or assigned pursuant to the Security Instruments and the other Loan Documents to the transferee who shall thereupon become vested with all the rights herein or under applicable law given to Lender with respect thereto, and Lender shall thereafter forever be relieved and fully discharged from any liability or responsibility in the matter; but Lender shall retain all rights hereby given to it with respect to any liabilities and the collateral not so transferred. 13. WAIVER OF TRIAL BY JURY BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE APPLICATION FOR THE LOAN, THIS NOTE, THE SECURITY INSTRUMENTS OR THE OTHER LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH. 14. AUTHORITY Each of Marshall and West Third (and the undersigned representative of each, if any) represents that Marshall and West Third each has full power, authority and legal right to execute and deliver this Note, their respective Security Instrument and the other Loan Documents and that this Note, the Security Instruments and the other Loan Documents constitute valid and binding obligations of each such respective entity. 15. APPLICABLE LAW This Note shall be governed, construed, applied and enforced in accordance with the laws of the state of New York and the applicable laws of the United States of America. 16. COUNSEL FEES In the event that it should become necessary to employ counsel to collect the Debt or to protect or foreclose the security therefore, Borrower also agrees to pay all reasonable fees and expenses of Lender, including, without limitation, reasonable attorney's fees for the services of such counsel whether or not suit be brought. 17. NOTICES All notices or other written communications hereunder shall be deemed to have been properly given (i) upon delivery, if delivered in person, (ii) one (1) Business Day (defined below) after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the U.S. Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: If to Borrower: Marshall Fifth Venture LLC c/o Radiant Realty LLC 1212 Avenue of the Americas, 18th Floor New York, New York 10036 Attention: Daniel P. Friedman West Third Venture LLC c/o Radiant Realty LLC 1212 Avenue of the Americas, 18th Floor New York, New York 10036 Attention: Daniel P. Friedman 5 With a copy to: Goldberg Weprin & Ustin LLP 1501 Broadway, 22nd Floor New York, New York 10036 Attention: Andrew Albstein, Esq. If to Lender: First Union Real Estate Equity and Mortgage Investments c/o Imowitz, Koenig & Co., LLP 125 Park Avenue New York, New York 10017 Attention: Neil Koenig With a copy to: Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, New York 10038 Attention: Peter A. Miller, Esq. or addressed as such party may from time to time designate by written notice to the other parties. Either party by notice to the other may designate additional or different addresses for subsequent notices or communications. "Business Day" shall mean a day upon which commercial banks are not authorized or required by law to close in New York, New York. 18. RIGHT TO RELEASE Notwithstanding anything contained herein to the contrary, prior to the Maturity Date, Borrower shall have the right to prepay upon two (2) days prior written notice to Lender as follows: a. Release of the mortgage encumbering the Marshall Property by payment of the sum of $5,500,000.00 as a reduction to the principal amount due under this Promissory Note (or such lesser principal sum if the outstanding principal sum is less than such amount at the time of such prepayment), plus all accrued and unpaid interest, and such other sums due and owing at the time of such prepayment; b. Release of the mortgage encumbering the West Third Street Property by payment of the sum of $2,200,000.00 as a reduction to the principal amount due under this Promissory Note, plus all accrued and unpaid interest, and such other sums due and owing at the time of such prepayment; or by payment of the sum of $2,000,000.00 as a reduction to the principal amount due under this Promissory Note (or such lesser principal sum if the outstanding principal sum is less than such amount at the time of such prepayment), plus all accrued and unpaid interest, and such other sums due and owing at the time of such prepayment, provided: I. the holder of the First Lien on the Marshall Property (as defined in the Deed of Trust securing this Promissory Note (the "Deed of Trust") subordinates its lien to the lien of the Deed of Trust; or II. Borrower obtains certificates of completion from both Marriot (as defined in the Expansion Agreements as defined in the Deed of Trust) and the City of Richmond as required by the First Lien; or III. Borrower delivers to Lender an appraisal for the Marshall Property evidencing a value of not less than $11,500,000. 19. MISCELLANEOUS (a) Wherever pursuant to this Note (i) Lender exercises any right given to it to approve or disapprove, (ii) any arrangement or term is to be satisfactory to Lender, or (iii) any other decision or determination is to be made by Lender, the decision of Lender to approve or disapprove, all decisions that 6 arrangements or terms are satisfactory or not satisfactory and all other decisions and determinations made by Lender, shall be in the sole and absolute discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. (b) Whenever used, the singular shall include the plural, the plural shall include the singular, and the words "Lender" and "Borrower" shall include their respective successors, assigns, heirs, executors and administrators. [Remainder of Page Intentionally Left Blank] 7 IN WITNESS WHEREOF, Borrower has duly executed this Note as of the day and year first above written. MARSHALL FIFTH VENTURE LLC, a Delaware limited liability company By: RADIANT REALTY LLC, a Delaware limited liability company as manager By: RADIANT VENTURES I, L.L.C., a Delaware limited liability company as sole member By: RADIANT INVESTORS LLC, a Delaware limited liability company as managing member By: /s/ Daniel P. Friedman Daniel P. Friedman Member WEST THIRD VENTURE LLC, a Delaware limited liability company By: RADIANT REALTY LLC, a Delaware limited liability company as manager By: RADIANT VENTURES I, L.L.C., a Delaware limited liability company as sole member By: RADIANT INVESTORS LLC, a Delaware limited liability company as managing member By: /s/ Daniel P. Friedman Daniel P. Friedman Member 8 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 6th day of March in the year 2001, before me, the undersigned, personally appeared Daniel P. Friedman, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. /s/ Linda J. Trachter Notary Public -----END PRIVACY-ENHANCED MESSAGE-----