-----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, LbvReyYwDl5EvTTu8Pyx68M3ZSr6lgkB8W2FkXUF10EC8Hcf9xEj+eL+myLAv3Jp aoYqEEjqbpNRD+oOf+kfog== 0000276779-96-000004.txt : 19961108 0000276779-96-000004.hdr.sgml : 19961108 ACCESSION NUMBER: 0000276779-96-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961107 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED CAPITAL PROPERTIES V CENTRAL INDEX KEY: 0000725614 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 942918560 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13083 FILM NUMBER: 96655892 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: POST OFFICE BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT (As last amended by 34-32231, eff. 6/3/93.) U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period.........to......... Commission file number 0-13083 CONSOLIDATED CAPITAL PROPERTIES V (Exact name of small business issuer as specified in its charter) California 94-2918560 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Issuer's telephone number (864) 239-1000 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CONSOLIDATED CAPITAL PROPERTIES V CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 1996 Assets Cash and cash equivalents: Unrestricted $ 686 Restricted - tenant security deposits 99 Investments 108 Accounts receivable 29 Escrows for taxes and insurance 185 Restricted escrows 290 Other assets 348 Investment properties: Land $ 1,969 Buildings and related personal property 18,253 20,222 Less accumulated depreciation (12,782) 7,440 $ 9,185 Liabilities and Partners' Deficit Liabilities Accounts payable $ 12 Tenant security deposits 101 Accrued taxes 304 Other liabilities 206 Mortgage notes payable 10,604 Partners' Deficit General partner $ (19) Special limited partners (55) Limited partners (179,617 units issued and outstanding) (1,968) (2,042) $ 9,185 See Accompanying Notes to Consolidated Financial Statements b) CONSOLIDATED CAPITAL PROPERTIES V CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 Revenues: Rental income $1,008 $1,227 $2,992 $ 3,550 Other income 27 31 124 217 Total revenues 1,035 1,258 3,116 3,767 Expenses: Operating 343 490 1,099 1,591 General and administrative 60 67 196 270 Maintenance 139 241 379 610 Depreciation 286 345 853 988 Interest 233 335 726 1,009 Property taxes 96 145 272 448 Total expenses 1,157 1,623 3,525 4,916 Loss before extraordinary item (122) (365) (409) (1,149) Extraordinary loss on refinancing (22) - (22) -- Net loss (144) (365) (431) (1,149) Net loss allocated to general partners (.2%) $ -- $ (1) $ (1) $ (2) Net loss allocated to limited partners (99.8%) (144) (364) (430) (1,147) $ (144) $ (365) $ (431) $(1,149) Net loss per limited partnership unit: Loss before extraordinary item $ (.68) $(2.03) $(2.27) $ (6.39) Extraordinary loss on refinancing (.12) -- (.12) -- Net loss per limited partnership unit $ (.80) $(2.03) $(2.39) $ (6.39) See Accompanying Notes to Consolidated Financial Statements
c) CONSOLIDATED CAPITAL PROPERTIES V CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) For the Nine Months Ended September 30, 1996 (in thousands, except unit data)
Limited Special Partnership General Limited Limited Units Partner Partners Partners Total Original capital contributions 180,037 $ 1 $ -- $45,009 $45,010 Partners' deficit at December 31, 1995 179,617 $ (18) $ (56) $(1,537) $(1,611) Amortization of timing difference (Note D) -- -- 1 (1) -- Net loss for the nine months ended September 30, 1996 -- (1) -- (430) (431) Partners' deficit at September 30, 1996 179,617 $ (19) $ (55) $(1,968) $(2,042) See Accompanying Notes to Consolidated Financial Statements
d) CONSOLIDATED CAPITAL PROPERTIES V CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 1996 1995 Cash flows from operating activities: Net loss $ (431) $(1,149) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 853 988 Amortization of lease commissions, discounts, and loan costs 117 127 Casualty gain -- (32) Extraordinary loss on refinancing 22 -- Change in accounts: Restricted cash 9 (57) Accounts receivable (7) (51) Escrows for taxes and insurance 9 74 Other assets 18 9 Accounts payable (216) 171 Tenant security deposit liabilities (16) (9) Accrued taxes (26) (71) Other liabilities (41) 169 Net cash provided by operating activities 291 169 Cash flows from investing activities: Property improvements and replacements (155) (403) Deposits to restricted escrows (213) (42) Receipts from restricted escrows -- 26 Proceeds from sale of investments 100 398 Net insurance proceeds on casualty item -- 32 Net cash (used in) provided by investing activities (268) 11 Cash flows from financing activities: Payments on mortgage notes payable (166) (76) Repayment of mortgage note payable (2,925) -- Proceeds from long-term borrowings 2,800 -- Loan costs paid (102) -- Prepayment penalty (22) -- Net cash used in financing activities (415) (76) Net (decrease) increase in cash and cash equivalents (392) 104 Cash and cash equivalents at beginning of period 1,078 240 Cash and cash equivalents at end of period $ 686 $ 344 Supplemental disclosure of cash flow information: Cash paid for interest $ 681 $ 812 See Accompanying Notes to Consolidated Financial Statements
e) CONSOLIDATED CAPITAL PROPERTIES V NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited financial statements of Consolidated Capital Properties V ("the Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of ConCap Equities, Inc. (the "General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1996, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1996. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the fiscal year ended December 31, 1995. Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. Investments Investments consisting primarily of U.S. Treasury Notes with original maturities of more than 90 days, are considered to be held-to-maturity securities. NOTE B - TRANSACTIONS WITH RELATED PARTIES The Partnership has paid property management fees based upon collected gross rental revenues for property management services in each of the nine month periods ended September 30, 1996 and 1995. In December 1994, affiliates of the General Partner assumed day-to-day property management responsibilities for all of the Partnership's properties with the exception of the Fourth and Race Tower, which was managed by a third party until it was sold in December 1995. Property management fees of approximately $152,000 and $160,000 were paid to affiliates of the General Partner for each of the nine months ended September 30, 1996 and 1995, respectively. These fees are included in operating expenses. The Partnership Agreement also provides for reimbursement to the General Partner and its affiliates for costs incurred in connection with the administration of Partnership activities. Reimbursements for services of affiliates of approximately $127,000 and $144,000 were paid to the General Partner and its affiliates during each of the nine months ended September 30, 1996 and 1995, respectively. During the nine months ended September 30, 1996, the Partnership paid an affiliate of the General Partner approximately $12,000 for loan costs which were capitalized and included in other assets in the accompanying Consolidated Balance Sheet. These loan costs related primarily to the refinancing of the Sutton Place Apartments (See "Note F"). NOTE B - TRANSACTIONS WITH RELATED PARTIES (CONTINUED) In July 1995, the Partnership began insuring its properties under a master policy through an agency and insurer unaffiliated with the General Partner. An affiliate of the General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The current agent assumed the financial obligations to the affiliate of the General Partner who receives payment on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations is not significant. NOTE C - COMMITMENT The Partnership is required to maintain working capital reserves for normal repairs, replacements, working capital and contingencies of not less than 5% of Net Invested Capital as defined in the Partnership Agreement. In the event expenditures are made from these reserves, operating revenue shall be allocated to such reserves to the extent necessary to maintain the foregoing level. Cash and cash equivalents, tenant security deposits and investments totalling approximately $893,000, are less than the reserve requirement of approximately $1,761,000 at September 30, 1996. The Partnership intends to replenish the working capital reserve from cash flow from operations after consideration of any capital improvement needs of the properties. The Partnership's recent cash flows from operations, however, have not been sufficient to replenish the reserve and there is no assurance that future levels of cash flow from operations will be adequate to accomplish this objective. The working capital requirement must be met prior to any consideration for distributions to the partners. NOTE D - CHANGE IN STATUS OF NON-CORPORATE GENERAL PARTNER In the year ended December 31, 1991, the Partnership Agreement was amended to convert the General Partner interests held by the non-corporate General Partner, Consolidated Capital Group ("CCG"), to that of special limited partners ("Special Limited Partners"). The Special Limited Partners do not have a vote and do not have any of the other rights of a Limited Partner except the right to inspect the Partnership's books and records; however, the Special Limited Partners will retain the economic interest in the Partnership which they previously owned as a general partner. ConCap Equities, Inc. ("CEI") became the sole general partner of the Partnership effective December 31, 1991. In connection with CCG's conversion, a special allocation of gross income was made to the Special Limited Partners in order to eliminate their tax basis negative capital account. After the conversion, the various owners of interests in the Special Limited Partners transferred portions of their interests to CEI so that CEI now holds a .2% interest in all allocable items of income, loss and distribution. The difference between the Special Limited Partners' capital accounts for financial statement and tax reporting purposes is being amortized as the components of the timing differences which created the balance reverse. NOTE E - DEBT RESTRUCTURING The Partnership restructured the debt on the 51 North High Building and made a principal prepayment (without penalty) of $700,000 in January 1996. In addition to this payment, the lender reduced the note's face amount by an additional $700,000 and the stated interest rate of the note was reduced from 13.5% to 9%. The maturity date of June 1, 2004, was unchanged. The debt restructuring was accounted for as a modification of terms. The total future cash payments under the restructured loan exceed the carrying value of the loan as of the date of restructure. Consequently, the carrying amount of the loan was reduced only by the $700,000 principal prepayment actually paid with no gain being recognized on the restructuring. Interest on the restructured debt accrues at an imputed rate of 4%, the rate required to equate the present value of the total future cash payments under the new terms to the carrying amount of the loan at the date of restructure. To facilitate the debt restructuring of the 51 North High Building in 1996, the property was placed into a lower-tier partnership known as 51 North High Street, L.P. in which the Partnership is the 99.99% limited partner. The Partnership retained substantially all economic benefits from the property. NOTE F - NOTE REFINANCING In July 1996, to facilitate the refinancing of the first mortgage indebtedness secured by the Sutton Place Apartments, the property was transferred to a lower-tier partnership known as Sutton Place CCPV, L.P., in which the Partnership is the 99.99% limited partner. The Partnership retained substantially all economic benefits from the property. Under the terms of the refinancing agreement which was completed September 6, 1996, the new $2.8 million mortgage note which bears interest at 9.125% and matures in October 2003, replaced the previous mortgage note of approximately $2.2 million. As a result of the refinancing, the Partnership incurred a $22,000 prepayment penalty which resulted in an extraordinary loss on refinancing. In conjunction with the refinancing, a capital improvement reserve of approximately $164,000 was established and approximately $102,000 in loan costs were incurred. These loan costs will be amortized over the life of the loan. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's investment properties consist of two apartment complexes and one commercial property. The following table sets forth the average occupancy of the properties for the nine months ended September 30, 1996 and 1995: Average Occupancy 1996 1995 Aspen Ridge Apartments Chicago, Illinois 94% 91% Sutton Place Apartments Corpus Christi, Texas 93% 90% 51 North High Street Building Columbus, Ohio 89% 85% The occupancy increase at Aspen Ridge Apartments is due to an improved tenant base from stricter qualification procedures which have resulted in more stable occupancy levels. The occupancy increase at Sutton Place Apartments resulted from additional military troops being relocated to Corpus Christi. The increase in occupancy at the 51 North High Street Building is due to existing tenants leasing additional space. The Partnership realized a loss before extraordinary item of $122,000 and $409,000 for the three and nine months ended September 30, 1996, respectively, compared to a loss of $365,000 and $1,149,000 for the three and nine months ended September 30, 1995, respectively. The decreased loss before extraordinary item primarily resulted from the sale of the Fourth and Race Tower office building in December 1995. The sale of Fourth and Race Tower resulted in decreases in rental and other income. Other income also decreased due to lower lease cancellation fees, cleaning and damage fees and fewer late charges at the Sutton Place Apartments due to a stronger tenant base. Additionally, the Partnership received no dividends on its investment in Southmark Preferred Stock during 1996 which further reduced other income. The Partnership received approximately $21,000 in dividends during the nine months ended September 30, 1995. These decreases in other income were partially offset by a property tax refund received during the nine months ended September 30, 1996, resulting from an appeal of the 1994 taxes for the 51 North High Street Building. Property operations, maintenance, depreciation and property taxes also decreased due to the Fourth and Race Tower sale. General and administrative expenses decreased due to reduced expense reimbursements as well as reduced legal costs. Expense reimbursements were higher in 1995 as a result of the costs associated with the Dallas partnership administration staff. Legal costs were higher in 1995 related to the marketing for sale of the Fourth and Race Tower. The decrease in interest expense is due to a debt restructure which lowered the imputed interest rate substantially and a principal payment of $700,000 at 51 North High in January 1996. (See "Note E" in the Notes to Consolidated Financial Statements in "Item 1"). The decrease in tax expense is a result of the reduction in the assessed value of the 51 North High Street Building in 1996 and the sale of the Fourth and Race Tower in December of 1995. The $22,000 extraordinary loss on refinancing realized during the three months ended September 30, 1996, related to the refinancing of Sutton Place Apartments. Through this refinancing, a new $2,800,000 mortgage note, which bears interest at 9.125% and matures in October 2003, was obtained. As a result of the refinancing, the Partnership realized a $22,000 prepayment penalty resulting in the extraordinary loss. During the nine months ended September 30, 1995, the Partnership realized a casualty gain as a result of a fire at the Fourth and Race Tower on June 5, 1995. The total insurance proceeds received exceeded the total estimated costs of replacing the equipment destroyed resulting in a casualty gain of $32,000 which is included in other income. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. At September 30, 1996, the Partnership held cash and cash equivalents of $686,000 compared to $344,000 at September 30, 1995. Net cash provided by operating activities increased primarily due to the elimination of the negative cash flows of the Fourth and Race Tower subsequent to the building sale in late 1995, as well as paying $131,000 less in interest for 1996 compared to 1995, partially offset by increased payments of certain repair and maintenance items related to painting and other unit interior and exterior maintenance incurred in December of 1995. Net cash used in investing activities increased primarily due to increased deposits to restricted escrows resulting from the Sutton Place refinancing as well as a reduction in long-term investments maturing in 1996, partially offset by reduced property improvements and replacements. Net cash used in financing activities increased due primarily to the payment on the 51 North High Street Building debt in January 1996, and the refinancing of the Sutton Place Apartments mortgage as noted above. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of $10,604,000, net of discount, matures at various times with balloon payments due at maturity, at which time the properties will either be refinanced or sold. Future cash distributions will depend on the levels of net cash generated from operations, reserve requirements, capital expenditure requirements, property sales and the availability of cash reserves. During each of the nine months ended September 30, 1996 and 1995, no distributions were declared or paid. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. Exhibit 10.21, Promissory Note dated September 6, 1996, between Sutton Place CCPV, L.P., a South Carolina limited partnership and First Union National Bank of North Carolina, a national banking association. (b) Reports on Form 8-K. None. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED CAPITAL PROPERTIES V By: CONCAP EQUITIES, INC. General Partner By: /s/Carroll D. Vinson Carroll D. Vinson President By: /s/Robert D. Long, Jr. Robert D. Long, Jr. Vice President/CAO Date: November 7, 1996 EX-27 2
5 This schedule contains summary financial information extracted from Consolidated Capital Properties V 1996 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000725614 CONSOLIDATED CAPITAL PROPERTIES V 1,000 9-MOS DEC-31-1996 SEP-30-1996 686 108 29 0 0 0 20,222 12,782 9,185 0 10,604 0 0 0 (2,042) 9,185 0 3,116 0 0 3,525 0 726 0 0 0 0 (22) 0 (431) (2.39) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
EX-10.21 3 PROMISSORY NOTE $2,800,000.00 September 6, 1996 FOR VALUE RECEIVED, the undersigned, Sutton Place CCPV, L.P., a South Carolina limited partnership ("Borrower"), whose address is One Insignia Financial Plaza, Greenville, South Carolina 29601, promises to pay to the order of First Union National Bank of North Carolina, a national banking association ("Lender"), at the office of Lender at One First Union Center, DC6, 301 South College Street, Charlotte, North Carolina 28288-0166, or at such other place as Lender may designate to Borrower in writing from time to time, the principal sum of TWO MILLION EIGHT HUNDRED THOUSAND AND 00/100 DOLLARS ($2,800,000.00) together with interest on so much thereof as is from time to time outstanding and unpaid, from the date of the advance of the principal evidenced hereby, at the rate of Nine and One Hundred Twenty-Five Thousandths (9.125%) percent per annum (the "Note Rate"), in lawful money of the United States of America, which shall at the time of payment be legal tender in payment of all debts and dues, public and private. ARTICLE I - TERMS AND CONDITIONS 1.01 Payment of Principal and Interest. Said interest shall be computed hereunder based on a 360-day year and based on twelve (12) 30-day months for each full calendar month and on the actual number of days elapsed for any partial month in which interest is being calculated. In computing the number of days during which interest accrues, the day on which funds are initially advanced shall be included regardless of the time of day such advance is made, and the day on which funds are repaid shall be included unless repayment is credited prior to close of business. Payments in federal funds immediately available in the place designated for payment received by Lender prior to 2:00 p.m. local time at said place of payment shall be credited prior to close of business, while other payments may, at the option of Lender, not be credited until immediately available to Lender in federal funds in the place designated for payment prior to 2:00 p.m. local time at said place of payment on a day on which Lender is open for business. Such principal and interest shall be payable in equal consecutive monthly installments of $23,195.93 each, beginning on the first day of the second full calendar month following the date of this Note (or on the first day of the first full calendar month following the date hereof, in the event the advance of the principal amount evidenced by this Note is the first day of a calendar month), and continuing on the first day of each and every month thereafter through and including September 1, 2003, and on October 1, 2003 (the "Maturity Date"), at which time the entire outstanding principal balance hereof, together with all accrued but unpaid interest thereon, shall be due and payable in full. Each such monthly installment shall be applied first to the payment of accrued interest and then to reduction of principal. If the advance of the principal amount evidenced by this Note is made on a date other than the first day of a calendar month, then Borrower shall pay to Lender contemporaneously with the execution hereof interest at the Note Rate for a period from the date hereof through and including the first day of the next succeeding calendar month. 1.02 Prepayment. (a) This Note may be prepaid in whole but not in part (except as otherwise specifically provided herein) at any time after the second (2nd) anniversary of this Note provided (i) written notice of such prepayment is received by Lender not more than sixty (60) days and not less than thirty (30) days prior to the date of such prepayment, (ii) such prepayment is accompanied by all interest accrued hereunder and all other sums due hereunder and under the other Loan Documents (as hereinafter defined), and (iii) if such prepayment occurs prior to the date that is six (6) months prior to the Maturity Date, Lender is paid a prepayment fee in an amount equal to the greater of (A) one (1%) percent of the principal amount being prepaid or (B) the positive excess of (1) the present value ("PV") of all future installments of principal and interest due under this Note including the principal amount due at maturity (collectively, "All Future Payments"), discounted at an interest rate per annum equal to the sum of (a) the Treasury Constant Maturity Yield Index published during the second full week preceding the date on which such premium is payable for instruments having a maturity coterminous with the remaining term of this Note, and (b) fifty (50) basis points over (2) the principal amount of this Note outstanding immediately before such prepayment [(PV of All Future Payments) - (principal balance at time of prepayment) = prepayment fee]. "Treasury Constant Maturity Yield Index" shall mean the average yield for "This Week" as reported by the Federal Reserve Board in Federal Reserve Statistical Release H.15(519). If there is no Treasury Constant Maturity Yield Index for instruments having a maturity coterminous with the remaining term of this Note, then the index shall be equal to the weighted average yield to maturity of the Treasury Constant Maturity Yield Indices with maturities next longer and shorter than such remaining average life to maturity, calculated by averaging (and rounding upward to the nearest whole multiple of 1 /100 of 1% per annum, if the average is not such a multiple) the yields of the relevant Treasury Constant Maturity Yield Indices (rounded, if necessary, to the nearest 1/100 of 1% with any figure of 1/200 of 1% or above rounded upward). In the event that any prepayment fee is due hereunder, Lender shall deliver to Borrower a statement setting forth the amount and determination of the prepayment fee, and, provided that Lender shall have in good faith applied the formula described above, Borrower shall not have the right to challenge the calculation or the method of calculation set forth in any such statement in the absence of manifest error, which calculation may be made by Lender on any day during the thirty (30) day period preceding the date of such prepayment. Lender shall not be obligated or required to have actually reinvested the prepaid principal balance at the Treasury Constant Maturity Yield or otherwise as a condition to receiving the prepayment fee. No prepayment fee or premium shall be due or payable in connection with any prepayment of the indebtedness, in whole, evidenced by this Note made on or after the date that is six (6) months prior to the Maturity Date. In addition to the aforesaid prepayment fee if, upon any such prepayment (whether prior to or after the date that is six (6) months prior to the Maturity Date), the aforesaid prior written notice has not been timely received by Lender, the prepayment fee shall be increased by an amount equal to the lesser of (i) thirty (30) days' unearned interest computed on the outstanding principal balance of this Note so prepaid and (ii) unearned interest computed on the outstanding principal balance of this Note so prepaid for the period from, and including, the date of prepayment through the otherwise stated maturity date of this Note. (b) Partial prepayments of this Note shall not be permitted, except partial prepayments resulting from Lender applying insurance or condemnation proceeds to reduce the outstanding principal balance of this Note as provided in the Security Instrument (as hereinafter defined), in which event no prepayment fee or premium shall be due. No notice of prepayment shall be required under the circumstance specified in the preceding sentence. No principal amount repaid may be reborrowed. Partial payments of principal shall be applied to the unpaid principal balance evidenced hereby but such application shall not reduce the amount of the fixed monthly installments required to be paid pursuant to Section 1.01 above. (c) Except as otherwise expressly provided in Section 1.02(b) above, the prepayment fees provided above shall be due, to the extent permitted by applicable law, under any and all circumstances where all or any portion of this Note is paid prior to the Maturity Date, whether such prepayment is voluntary or involuntary (including, without limitation, any prepayment made prior to the second anniversary of the date hereof), even if such prepayment results from Lender's exercise of its rights upon Borrower's default and acceleration of the maturity date of this Note (irrespective of whether foreclosure proceedings have been commenced), and shall be in addition to any other sums due hereunder or under any of the other Loan Documents. No tender of a prepayment of this Note with respect to which a prepayment fee is due shall be effective unless such prepayment is accompanied by the prepayment fee. Any tender of payment of such indebtedness made prior to the second anniversary date hereof, whether voluntary or involuntary, must include a prepayment fee computed as provided in Section 1.02(a) above plus an additional prepayment fee of one percent (1%) of the principal balance of this Note. 1.03 Security. The indebtedness evidenced by this Note and the obligations created hereby are secured by that certain Deed of Trust and Security Agreement (the "Security Instrument") from Borrower to Lender, dated as of the date hereof, concerning property located in Corpus Christie, Texas. The Security Instrument together with this Note and all other documents to or of which Lender is a party or beneficiary now or hereafter evidencing, securing, guarantying, modifying or otherwise relating to the indebtedness evidenced hereby, are herein referred to collectively as the "Loan Documents". All of the terms and provisions of the Loan Documents are incorporated herein by reference. Some of the Loan Documents are to be filed for record on or about the date hereof in the appropriate public records. 1.04 Default. It is hereby expressly agreed that should any default occur in the payment of principal or interest as stipulated above and such payment is not made within fifteen (15) days of the date such payment is due (provided that no grace period is provided for the payment of principal and interest due on the Maturity Date), or should any other default occur under any of the Loan Documents which is not cured within any applicable grace or cure period, then a default shall exist hereunder, and in such event the indebtedness evidenced hereby, including all sums advanced or accrued hereunder or under any other Loan Document, and all unpaid interest accrued thereon, shall, at the option of Lender and without notice to Borrower, at once become due and payable and may be collected forthwith, whether or not there has been a prior demand for payment and regardless of the stipulated date of maturity. In the event that any payment (other than the payment of principal due on the Maturity Date) due under the Note is not received by Lender on the date when due (subject to the applicable grace period), then in addition to any default interest payments due hereunder, Borrower shall also pay to Lender a late charge in an amount equal to five percent (5.0%) of the amount of such overdue payment. So long as any default exists hereunder beyond any applicable grace or cure period, regardless of whether or not there has been an acceleration of the indebtedness evidenced hereby, and at all times after maturity of the indebtedness evidenced hereby (whether by acceleration or otherwise), interest shall accrue on the outstanding principal balance of this Note at a rate per annum equal to four percent (4.0%) plus the interest rate which would be in effect hereunder absent such default or maturity, or if such increased rate of interest may not be charged or collected under applicable law, then at the maximum rate of interest, if any, which may be charged or collected from Borrower under applicable law (the "Default Interest Rate"), and such default interest shall be immediately due and payable. Borrower acknowledges that it would be extremely difficult or impracticable to determine Lender's actual damages resulting from any late payment or default, and such late charges and default interest are reasonable estimates of those damages and do not constitute a penalty. The remedies of Lender in this Note or in the Loan Documents, or at law or in equity, shall be cumulative and concurrent, and may be pursued singly, successively or together in Lender's discretion. Time is of the essence of this Note. In the event this Note, or any part hereof, is collected by or through an attorney-at-law, Borrower agrees to pay all costs of collection including, but not limited to, reasonable attorneys' fees. 1.05 Exculpation. Notwithstanding anything in the Loan Documents to the contrary, but subject to the qualifications hereinbelow set forth, Lender agrees that (i) Borrower shall be liable upon the indebtedness evidenced hereby and for the other obligations arising under the Loan Documents to the full extent (but only to the extent) of the security therefor, the same being all properties (whether real or personal), rights, estates and interests now or at any time hereafter securing the payment of this Note and/or the other obligations of Borrower under the Loan Documents (collectively, the "Security Property"), (ii) if default occurs in the timely and proper payment of all or any part of such indebtedness evidenced hereby or in the timely and proper performance of the other obligations of Borrower under the Loan Documents, any judicial or other proceedings brought by Lender against Borrower shall be limited to the preservation, enforcement and foreclosure, or any thereof, of the liens, security titles, estates, assignments, rights and security interests now or at any time hereafter securing the payment of this Note and/or the other obligations of Borrower under the Loan Documents, and no attachment, execution or other writ of process shall be sought, issued or levied upon any assets, properties or funds of Borrower other than the Security Property except with respect to the liability described below in this section, and (iii) in the event of a foreclosure of such liens, security titles, estates, assignments, rights or security interests securing the payment of this Note and/or the other obligations of Borrower under the Loan Documents, no judgment for any deficiency upon the indebtedness evidenced hereby shall be sought or obtained by Lender against Borrower, except with respect to the liability described below in this section; provided, however, that, notwithstanding the foregoing provisions of this section, Borrower shall be fully and personally liable and subject to legal action (a) for proceeds paid under any insurance policies (or paid as a result of any other claim or cause of action against any person or entity) by reason of damage, loss or destruction to all or any portion of the Security Property, to the full extent of such proceeds not previously delivered to Lender, but which, under the terms of the Loan Documents, should have been delivered to Lender, (b) for proceeds or awards resulting from the condemnation or other taking in lieu of condemnation of all or any portion of the Security Property, or any of them, to the full extent of such proceeds or awards not previously delivered to Lender, but which, under the terms of the Loan Documents, should have been delivered to Lender, (c) for all tenant security deposits or other refundable deposits paid to or held by Borrower or any other person or entity in connection with leases of all or any portion of the Security Property which are not applied in accordance with the terms of the applicable lease or other agreement, (d) for rent and other payments received from tenants under leases of all or any portion of the Security Property paid more than one month in advance, (e) for rents, issues, profits and revenues of all or any portion of the Security Property received or applicable to a period after any notice of default from Lender hereunder or under the Loan Documents in the event of any default by Borrower hereunder or thereunder which are not either applied to the ordinary and necessary expenses of owning and operating the Security Property or paid to Lender, (f) for waste committed on the Security Property, damage to the Security Property as a result of the intentional misconduct or gross negligence of Borrower or any of its principals, officers or general partners, or any agent or employee of any such persons, or any removal of the Security Property in violation of the terms of the Loan Documents, to the full extent of the losses or damages incurred by Lender on account of such failure, (g) for failure to pay any valid taxes, assessments, mechanic's liens, materialmen's liens or other liens which could create liens on any portion of the Security Property which would be superior to the lien or security title of the Security Instrument or the other Loan Documents, to the full extent of the amount claimed by any such lien claimant, (h) for all obligations and indemnities of Borrower under the Loan Documents relating to hazardous or toxic substances or compliance with environmental laws and regulations to the full extent of any losses or damages (including, but not limited to, those resulting from diminution in value of any Security Property) incurred by Lender as a result of the existence of such hazardous or toxic substances or failure to comply with environmental laws or regulations, and (i) for fraud or material misrepresentation by Borrower or any of its principals, officers, or general partners, any guarantor, any indemnitor or any agent, employee or other person authorized or apparently authorized to make statements or representations on behalf of Borrower, any principal, officer or partner of Borrower, any guarantor or any indemnitor, to the full extent of any losses, damages and expenses of Lender on account thereof. References herein to particular sections of the Loan Documents shall be deemed references to such sections as affected by other provisions of the Loan Documents relating thereto. Nothing contained in this section shall (1) be deemed to be a release or impairment of the indebtedness evidenced by this Note or the other obligations of Borrower under the Loan Documents or the lien of the Loan Documents upon the Security Property, or (2) preclude Lender from foreclosing the Loan Documents in case of any default or from enforcing any of the other rights of Lender except as stated in this section, or (3) limit or impair in any way whatsoever the Indemnity and Guaranty Agreement and the Hazardous Substances Indemnity Agreement each of even date executed and delivered in connection with the indebtedness evidenced by this Note or release, relieve, reduce, waive or impair in any way whatsoever, any obligation of any party to such Indemnity and Guaranty Agreement and Hazardous Substances Indemnity Agreement. ARTICLE II - GENERAL CONDITIONS 2.01 No Waiver: Amendment. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a partial or past due payment, or indulgences granted from time to time shall be construed (i) as a novation of this Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or of the right of Lender thereafter to insist upon strict compliance with the terms of this Note, or (ii) to prevent the exercise of such right of acceleration or any other right granted hereunder or by any applicable laws; and Borrower hereby expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing. No extension of the time for the payment of this Note or any installment due hereunder, made by agreement with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part unless Lender agrees otherwise in writing. This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. 2.02 Waivers. Presentment for payment, demand, protest and notice of demand, intent to accelerate, acceleration, protest and nonpayment and all other notices are hereby waived by Borrower. Borrower hereby further waives and renounces, to the fullest extent permitted by law, all rights to the benefits of any moratorium, reinstatement, marshalling, forbearance, valuation, stay, extension, redemption, appraisement, exemption and homestead now or hereafter provided by the Constitution and laws of the United States of America and of each state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement and collection of the obligations evidenced by this Note or the other Loan Documents. 2.03 Limit of Validity. The provisions of this Note and of all agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of demand or acceleration of the maturity of this Note or otherwise, shall the amount paid, or agreed to be paid ("Interest"), to Lender for the use, forbearance or retention of the money loaned under this Note exceed the maximum amount permissible under applicable law. To the extent of the applicability of Article 5069-1,04 of the Texas Revised Civil Statutes, as amended, the maximum rate shall be based upon the "indicated rate ceiling", but Lender reserves the right to implement, withdraw or reinstate any other ceiling as an alternative to the indicated rate ceiling, including the right to reinstate the indicated rate ceiling. If, from any circumstance whatsoever, performance or fulfillment of any provision hereof or of any agreement between Borrower and Lender shall, at the time performance or fulfillment of such provision shall be due, exceed the limit for Interest prescribed by law or otherwise transcend the limit of validity prescribed by applicable law, then ipso facto the obligation to be performed or fulfilled shall be reduced to such limit and if, from any circumstance whatsoever, Lender shall ever receive anything of value deemed Interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive Interest shall be applied to the reduction of the principal balance owing under this Note in the inverse order of its maturity (whether or not then due) or at the option of Lender be paid over to Borrower, and not to the payment of Interest. All Interest (including, but not limited to, any amounts or payments deemed to be Interest) paid or agreed to be paid to Lender shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal balance of this Note so that the Interest thereof for such full period will not exceed the maximum amount permitted by applicable law. This Section 2.03 will control all agreements between Borrower and Lender. 2.04 Use of Funds. Borrower hereby warrants, represents and covenants that no funds disbursed hereunder shall be used for personal, family or household purposes. 2.05 Unconditional Payment. Borrower is and shall be obligated to pay principal, interest and any and all other amounts which become payable hereunder or under the other Loan Documents absolutely and unconditionally and without any abatement, postponement, diminution or deduction and without any reduction for counterclaim or setoff. In the event that at any time any payment received by Lender hereunder shall be deemed by a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under any bankruptcy, insolvency or other debtor relief law, then the obligation to make such payment shall survive any cancellation or satisfaction of this Note or return thereof to Borrower and shall not be discharged or satisfied with any prior payment thereof or cancellation of this Note, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof, and such payment shall be immediately due and payable upon demand. 2.06 Miscellaneous. This Note shall be interpreted, construed and enforced according to the laws of the State of Texas. The terms and provisions hereof shall be binding upon and inure to the benefit of Borrower and Lender and their respective heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of the parties or by operation of law. As used herein, the terms "Borrower" and "Lender" shall be deemed to include their respective heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of the parties or by operation of law. If Borrower consists of more than one person or entity, each shall be jointly and severally liable to perform the obligations of Borrower under this Note. All personal pronouns used herein, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and vice versa. Titles of articles and sections are for convenience only and in no way define, limit, amplify or describe the scope or intent of any provisions hereof. Time is of the essence with respect to all provisions of this Note. This Note and the other Loan Documents contain the entire agreements between the parties hereto relating to the subject matter hereof and thereof and all prior agreements relative hereto and thereto which are not contained herein or therein are terminated. Borrower's Tax Identification No.: 57-1053095 IN WITNESS WHEREOF, Borrower has executed this Note under seal as of the date first above written. SUTTON PLACE CCPV, L.P., a South Carolina limited partnership By: Sutton Place GP Limited Partnership, d/b/a Sutton CCPV, L.P., a South Carolina limited partnership, its general partner By: GP Services X, Inc., a South Carolina corporation, its general partner By: /s/ Robert D. Long, Jr. Name: Robert D. Long, Jr. Title: Vice President STATE OF SOUTH CAROLINA) ) ss. COUNTY OF GREENVILLE ) This instrument was acknowledged before me this September 6, 1996, by Robert D. Long, Jr., Vice President of GP Services X, Inc., a South Carolina corporation, on behalf of and as general partner of Sutton Place GP Limited Partnership, a South Carolina limited partnership, on behalf of and as general partner of SUTTON PLACE CCPV, L.P., a South Carolina limited partnership. /s/ Nancy A. Dixon Notary Public My Commission Expires: 6/9/98 -----END PRIVACY-ENHANCED MESSAGE-----