-----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, PWyxO//d6CxSwg+xHcNkP82yRqBvYtdMlvkbfeHzelX4uaKYH6FAM+Db6PZhq3Bu EHpp5Oh8nQH4wqIoKZNr5g== 0000950168-99-001591.txt : 19990518 0000950168-99-001591.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950168-99-001591 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGHWOODS PROPERTIES INC CENTRAL INDEX KEY: 0000921082 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 561871668 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13100 FILM NUMBER: 99628732 BUSINESS ADDRESS: STREET 1: 3100 SMOKETREE CT STREET 2: STE 600 CITY: RALEIGH STATE: NC ZIP: 27604 BUSINESS PHONE: 9198724924 MAIL ADDRESS: STREET 1: 3100 SMOKETREE COURT STREET 2: STE 600 CITY: RALEIGH STATE: NC ZIP: 27604 10-Q 1 HIGHWOODS PROPERTIES 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 Commission file number: 001-13100 HIGHWOODS PROPERTIES, INC. (Exact name of registrant as specified in its charter)
MARYLAND 56-1871668 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number)
3100 SMOKETREE COURT, SUITE 600, RALEIGH, N.C. (Address of principal executive office) 27604 (Zip Code) Registrant's telephone number, including area code: (919) 872-4924 ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ---------------- The Company has only one class of common stock, par value $.01 per share, with 61,661,891 shares outstanding as of May 14, 1999. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HIGHWOODS PROPERTIES, INC. QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 1999 TABLE OF CONTENTS
PAGE ----- PART I. FINANCIAL INFORMATION Item 1. Financial Statements 3 Consolidated balance sheets of Highwoods Properties, Inc. as of March 31, 1999 and December 31, 1998 4 Consolidated statements of income of Highwoods Properties, Inc. for the three month periods ended March 31, 1999 and 1998 5 Consolidated statements of cash flows of Highwoods Properties, Inc. for the three month periods ended March 31, 1999 and 1998 6 Notes to consolidated financial statements of Highwoods Properties, Inc. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Results of Operations 10 Liquidity and Capital Resources 11 Year 2000 13 Funds From Operations and Cash Available for Distributions 16 Disclosure Regarding Forward-Looking Statements 17 Property Information 19 Inflation 28 Item 3. Quantitative and Qualitative Disclosures About Market Risk 29 PART II. OTHER INFORMATION Item 1. Legal Proceedings 31 Item 2. Changes in Securities and Use of Proceeds 31 Item 3. Defaults Upon Senior Securities 31 Item 4. Submission of Matters to a Vote of Security Holders 31 Item 5. Other Information 31 Item 6. Exhibits and Reports on Form 8-K 31
2 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS We refer to (1) Highwoods Properties, Inc. as the "Company," (2) Highwoods Realty Limited Partnership as the "Operating Partnership," (3) the Company's common stock as "Common Stock" and (4) the Operating Partnership's common partnership interests as "Common Units." The information furnished in the accompanying balance sheets, statements of income and statements of cash flows reflect all adjustments that are, in our opinion, necessary for a fair presentation of the aforementioned financial statements for the interim period. The aforementioned financial statements should be read in conjunction with the notes to consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations and our 1998 Annual Report on Form 10-K. 3 HIGHWOODS PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
MARCH 31, 1999 DECEMBER 31, 1998 -------------- ------------------ (UNAUDITED) ASSETS Real estate assets, at cost: Land and improvements ................................................ $ 506,078 $ 559,100 Buildings and tenant improvements .................................... 2,950,479 3,186,584 Development in process ............................................... 223,545 189,465 Land held for development ............................................ 154,020 150,622 Furniture, fixtures and equipment .................................... 7,891 7,693 ---------- ---------- 3,842,013 4,093,464 Less -- accumulated depreciation ..................................... (202,246) (169,272) ---------- ---------- Net real estate assets ............................................... 3,639,767 3,924,192 Property held for sale ................................................ 396,160 131,262 Cash and cash equivalents ............................................. 38,325 31,445 Restricted cash ....................................................... 11,668 24,263 Accounts receivable ................................................... 23,039 27,948 Advances to related parties ........................................... 3,166 10,420 Notes receivable ...................................................... 47,054 40,225 Accrued straight line rents receivable ................................ 30,016 27,194 Investment in unconsolidated affiliates ............................... 36,746 21,088 Other assets: Deferred leasing costs ............................................... 51,419 45,785 Deferred financing costs ............................................. 43,409 38,750 Prepaid expenses and other ........................................... 15,331 15,237 ---------- ---------- 110,159 99,772 Less -- accumulated amortization ..................................... (27,006) (23,476) ---------- ---------- 83,153 76,296 ---------- ---------- $4,309,094 $4,314,333 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Mortgages and notes payable ........................................... $2,030,849 $2,008,716 Accounts payable, accrued expenses and other liabilities .............. 111,252 130,575 ---------- ---------- Total liabilities .................................................... 2,142,101 2,139,291 Minority interest ..................................................... 241,105 279,043 Stockholders' equity: Preferred stock, $.01 par value, 50,000,000 authorized shares; 8 5/8% Series A Cumulative Redeemable Preferred Shares (liquidation preference $1,000 per share), 125,000 shares issued and outstanding at March 31, 1999 and December 31, 1998 ............ 125,000 125,000 8% Series B Cumulative Redeemable Preferred Shares (liquidation preference $25 per share), 6,900,000 shares issued and outstanding at March 31, 1999 and December 31, 1998 ................ 172,500 172,500 8% Series D Cumulative Redeemable Preferred Shares (liquidation preference $250 per share), 400,000 shares issued and outstanding at March 31, 1999 and December 31, 1998 ................ 100,000 100,000 Common stock, $.01 par value, authorized 200,000,000 shares; 61,628,377 shares issued and outstanding at March 31, 1999 and 59,865,259 shares issued and outstanding at December 31, 1998 .......................... 616 599 Additional paid-in capital ............................................ 1,581,853 1,546,592 Distributions in excess of net income ................................. (54,081) (48,692) ---------- ---------- Total stockholders' equity ........................................... 1,925,888 1,895,999 ---------- ---------- $4,309,094 $4,314,333 ========== ==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 4 HIGHWOODS PROPERTIES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED AND IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, ------------------------- 1999 1998 ----------- ----------- REVENUE: Rental property .................................................... $146,721 $100,331 Equity in earnings of unconsolidated affiliates .................... 197 -- Gain on disposition of assets ...................................... 569 -- Interest and other income .......................................... 5,287 2,157 -------- -------- 152,774 102,488 OPERATING EXPENSES: Rental property .................................................... 45,345 29,728 Depreciation and amortization ...................................... 28,156 17,161 Interest expense: Contractual ...................................................... 31,842 17,162 Amortization of deferred financing costs ......................... 778 616 -------- -------- 32,620 17,778 General and administrative ......................................... 5,793 3,784 -------- -------- Income before minority interest and extraordinary item .............................................. 40,860 34,037 MINORITY INTEREST ................................................... (5,826) (5,608) -------- -------- Income before extraordinary item ................................... 35,034 28,429 EXTRAORDINARY ITEM -- LOSS ON EARLY EXTINGUISHMENT OF DEBT ............................................. -- (46) -------- -------- Net income ......................................................... 35,034 28,383 Dividends on preferred stock ........................................ (8,145) (6,145) -------- -------- Net income available for common stockholders ....................... $ 26,889 $ 22,238 ======== ======== NET INCOME PER COMMON SHARE -- BASIC: Income before extraordinary item ................................... $ 0.45 $ 0.45 Extraordinary item -- loss on early extinguishment of debt ......... -- -- -------- -------- Net income ......................................................... $ 0.45 $ 0.45 ======== ======== Weighted average shares outstanding -- basic ....................... 60,272 49,051 ======== ======== NET INCOME PER COMMON SHARE -- DILUTED: Income before extraordinary item ................................... $ 0.45 $ 0.45 Extraordinary item loss on early extinguishment of debt ............ -- -- -------- -------- Net income ......................................................... $ 0.45 $ 0.45 ======== ======== Weighted average shares outstanding -- diluted ..................... 60,409 49,688 ======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 5 HIGHWOODS PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED AND IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, ---------------------------- 1999 1998 ------------ ------------- OPERATING ACTIVITIES: Net income ..................................................... $ 35,034 $ 28,383 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ................................ 28,156 17,161 Minority interest ............................................ 5,826 5,608 Loss on early extinguishment of debt ......................... -- 46 Gain on disposition of assets ................................ (569) -- Changes in operating assets and liabilities .................. (18,056) 773 ---------- ---------- Net cash provided by operating activities ................... 50,391 51,971 ---------- ---------- INVESTING ACTIVITIES: Additions to real estate assets ................................ (122,860) (311,362) Cash paid in exchange for partnership net assets ............... (1,008) (12,383) Proceeds from disposition ...................................... 124,463 -- Repayment of advances from subsidiaries ........................ 7,254 -- Other .......................................................... (30,467) (2,099) ---------- ---------- Net cash used in investing activities ....................... (22,618) (325,844) ---------- ---------- FINANCING ACTIVITIES: Distributions paid on common stock and common units ............ (38,072) (30,097) Dividends paid on preferred stock .............................. (8,145) (6,145) Payments of prepayment penalties ............................... -- (46) Borrowings on mortgages and notes payable ...................... 4,385 287,188 Repayment of mortgages and notes payable ....................... (3,252) (102,450) Borrowings on revolving loans .................................. 95,000 247,000 Payments on revolving loans .................................... (74,000) (240,500) Net proceeds from the sale of common stock ..................... 7,850 139,167 Net (payment) receipt of deferred financing costs .............. (4,659) 1,860 ---------- ---------- Net cash (used in) provided by financing activities ......... (20,893) 295,977 ---------- ---------- Net increase in cash and cash equivalents ...................... 6,880 22,104 Cash and cash equivalents at beginning of the period ........... 31,445 10,146 ---------- ---------- Cash and cash equivalents at end of the period ................. $ 38,325 $ 32,250 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest ......................................... $ 30,207 $ 12,324 ========== ==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 6 HIGHWOODS PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED AND IN THOUSANDS) SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES The following summarizes the net assets contributed by holders of Common Units in the Operating Partnership or acquired subject to mortgage notes payable:
THREE MONTHS ENDED MARCH 31, ---------------------- 1999 1998 --------- ---------- ASSETS: Rental property and equipment, net .......... $2,241 $76,125 LIABILITIES: Mortgages and notes payable assumed ......... $ -- $61,303 ------ ------- Net assets ............................... $2,241 $14,822 ====== =======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 7 HIGHWOODS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1999 (UNAUDITED) 1. BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and the Operating Partnership and its majority controlled affiliates. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. The extraordinary loss represents the write-off of loan origination fees and prepayment penalties paid on the early extinguishment of debt, net of the minority interest. The Company has elected and expects to continue to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. In June 1998, the Financial Accounting Standards Board issued Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which is required to be adopted in fiscal years beginning after June 15, 1999. The Statement will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The fair market value of the Company's derivatives is March 31, 1999 are discussed in Item 2. The "Year 2000" issue is a general term used to describe the various problems that may result from the improper processing of dates and calculations involving years by many computers throughout the world as the Year 2000 is approached and reached. We have reviewed the impact of Year 2000 issues and do not expect Year 2000 issues to be material to our business, operations or financial condition. The Year 2000 issue is discussed more fully in "Management's Discussion and Analysis of Financial Condition and Results of Operations." Minority interest in the Company represents Common Units owned by various individuals and entities and not the Company in the Operating Partnership, the entity that owns substantially all of the Company's properties and through which the Company, as the sole general partner, conducts substantially all of its operations. Per share information is calculated using the weighted average number of shares outstanding (including common share equivalents). In addition, minority interest includes equity of consolidated real estate partnerships which are owned by various individuals and entities and not the Company. The Company acquired greater than 50% of the interest in real estate partnerships as part of its acquisition of J.C. Nichols Company. The accompanying financial information has not been audited, but in the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of our financial position, results of operations and cash flows have been made. For further information, refer to the financial statements and notes thereto included in our 1998 Annual Report on Form 10-K. 2. SEGMENT INFORMATION The sole business of the Company is the acquisition, development and operation of rental real estate properties. The Company operates office, industrial and retail properties and apartment units. There are no material inter-segment transactions. The Company's chief operating decision maker ("CDM") assesses and measures operating results based upon property level net operating income. The operating results for the individual assets within each property type have been aggregated since the CDM evaluates operating results and allocates resources on a property-by-property basis within the various property types. 8 The accounting policies of the segments are the same as those described in note 1. Further, all operations are within the United States and no tenant comprises more than 10% of consolidated revenues. The following table summarizes the rental income, net operating income and assets for each reportable segment for the quarter ended March 31, 1999 and 1998.
THREE MONTHS ENDED MARCH 31, ------------------------------- 1999 1998 -------------- -------------- (IN THOUSANDS) RENTAL INCOME: Office segment .......................................................... $ 121,208 $ 91,412 Industrial segment ...................................................... 13,054 8,919 Retail segment .......................................................... 7,568 -- Apartment segment ....................................................... 4,891 -- ---------- ---------- $ 146,721 $ 100,331 ========== ========== NET OPERATING INCOME: Office segment net operating income ..................................... $ 82,709 $ 63,225 Industrial segment net operating income ................................. 10,943 7,378 Retail segment net operating income ..................................... 5,069 -- Apartment segment net operating income .................................. 2,655 -- ---------- ---------- $ 101,376 $ 70,603 Reconciliation to income before minority interest and extraordinary item: Equity in income of unconsolidated affiliates ........................... 197 -- Gain on disposition of assets ........................................... 569 -- Interest and other income ............................................... 5,287 2,157 Interest expense ........................................................ (32,620) (17,778) General and administrative expenses ..................................... (5,793) (3,784) Depreciation and amortization ........................................... (28,156) (17,161) ---------- ---------- Income before minority interest and extraordinary item .................. $ 40,860 $ 34,037 ========== ========== TOTAL ASSETS: Office segment .......................................................... $3,229,735 $2,739,906 Industrial segment ...................................................... 490,452 304,175 Retail segment .......................................................... 256,869 -- Apartment segment ....................................................... 136,339 -- Corporate and other ..................................................... 195,699 87,651 ---------- ---------- Total Assets ............................................................ $4,309,094 $3,131,732 ========== ==========
3. JOINT VENTURE ACTIVITY On March 15, 1999, the Company closed a transaction with Schweiz-Deutschland-USA Dreilander Beteiligung Objekt-DLF 98/29-Walker Fink-KG ("DLF"), pursuant to which the Company sold or contributed certain office properties valued at approximately $142 million to a newly created limited partnership (the "Joint Venture"). DLF contributed approximately $55 million for a 77.19% interest in the Joint Venture, and the Joint Venture borrowed approximately $71 million from third-party lenders. The Company retained the remaining 22.81% interest in the Joint Venture, received net cash proceeds of approximately $124 million and are the sole and exclusive manager and leasing agent of the Joint Venture's properties, for which the Company receives customary management fees and leasing commissions. The Company used the cash proceeds received in the transaction to fund existing development activity either through direct payments or repayment of borrowings under the Revolving Loan. 4. CONTINGENCIES LITIGATION. On October 2, 1998, John Flake, a former stockholder of J.C. Nichols Company, filed a putative class action lawsuit on behalf of himself and the other former stockholders of J.C. Nichols in the United States District Court for the District of Kansas against J.C. Nichols, certain of its former officers and directors 9 and the Company. The complaint alleges, among other things, that in connection with the merger of J.C. Nichols and the Company (1) J.C. Nichols and the named directors and officers of J.C. Nichols breached their fiduciary duties to J.C. Nichols' stockholders, (2) J.C. Nichols and the named directors and officers of J.C. Nichols breached their fiduciary duties to members of the J.C. Nichols Company Employee Stock Ownership Trust, (3) all defendants participated in the dissemination of a proxy statement containing materially false and misleading statements and omissions of material facts in violation of Section 14(a) of the Securities and Exchange Act of 1934 and (4) the Company filed a registration statement with the Securities and Exchange Commission containing materially false and misleading statements and omissions of material facts in violation of Sections 11 and 12(2) of the Securities Act of 1933. The plaintiffs seek equitable relief and monetary damages. The Company believes that the defendants have meritorious defenses to the plaintiffs' allegations. The Company intends to vigorously defend this litigation and has filed a motion to dismiss all claims asserted against the defendants. Due to the inherent uncertainties of the litigation process and the judicial system, the Company is not able to predict the outcome of this litigation. If this litigation is not resolved in our favor, it could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, the Company is a party to a variety of legal proceedings arising in the ordinary course of our business. The Company believes that it is adequately covered by insurance and indemnification agreements. Accordingly, none of such proceedings are expected to have a material adverse affect on the Company's business, financial condition and results of operations. 5. SUBSEQUENT EVENTS PENDING DISPOSITION ACTIVITY. The Company recently entered into agreements to sell approximately 3.3 million rentable square feet of non-core office and industrial properties and 49 acres of development land in the South Florida area for gross proceeds of approximately $323.2 million. The South Florida transaction is expected to close by June 1, 1999. The Company recently also entered into agreements to sell approximately 737,000 rentable square feet of non-core office and industrial properties and 10.5 acres of development land in the Baltimore area for gross proceeds of approximately $82.2 million. The Baltimore transaction is expected to close by June 30, 1999. Non-core office and industrial properties generally include single buildings or business parks that do not fit our long-term strategy. The Company can provide no assurance that all or parts of the transactions will be consummated. Both transactions are subject to customary closing conditions, and the Baltimore transaction is also subject to the completion of due diligence. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with all of the financial statements appearing elsewhere in the report. The following discussion is based primarily on the consolidated financial statements of the Company. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1999. Revenues from rental operations increased $46.4 million, or 46%, from $100.3 million for the three months ended March 31, 1998 to $146.7 million for the comparable period in 1999. The increase is primarily a result of our acquisition of 9.6 million square feet of majority owned office, industrial and retail properties and 2,325 apartment units, and the completion of 4.2 million square feet of development activity during the last nine months of 1998 and the first three months of 1999. Our in-service portfolio increased from 33.9 million square feet at March 31, 1998 to 43.6 million square feet at March 31, 1999. Same property revenues, which are the revenues of the 471 in-service properties owned on January 1, 1998, increased 4% for the three months ended March 31, 1999, compared to the same three months of 1998. During the three months ended March 31, 1999, 373 leases representing 2.3 million square feet of office, industrial and retail space commenced at an average rate per square foot which was 5% higher than the average rate per square foot on the expired leases. 10 Interest and other income increased $3.1 million, or 141%, from $2.2 million for the three months ended March 31, 1998 to $5.3 million for the comparable period in 1999. The increase was a result of higher cash balances in 1999, and additional income generated from management fees, development fees and leasing commissions. The Company generated $313,000 in auxiliary income (vending and parking) as a result of acquiring multifamily communities in the merger with J.C. Nichols. Rental operating expenses increased $15.6 million, or 53%, from $29.7 million for the three months ended March 31, 1998 to $45.3 million for the comparable period in 1999. The increase is a result of our addition of 13.8 million square feet of office, industrial and retail space and 2,325 apartment units through a combination of acquisitions and developments during the last nine months of 1998 and the first three months of 1999. Rental operating expenses as a percentage of related revenues increased from 30% for the three months ended March 31, 1998 to 31% for the comparable period in 1999. Depreciation and amortization for the three months ended March 31, 1999 and 1998 was $28.2 million and $13.8 million, respectively. The increase of $11.0 million, or 64%, is due to an increase in depreciable assets over the prior year. Interest expense increased $14.8 million, or 83%, from $17.8 million for the three months ended March 31, 1998 to $32.6 million for the comparable period in 1999. The increase is attributable to the increase in the outstanding debt for the entire quarter. Interest expense for the three months ended March 31, 1999 and 1998 included $778,000 and $616,000, respectively, of amortization of non-cash deferred financing costs and the costs related to the Company's interest rate hedge contracts. General and administrative expenses increased from 3.8% of rental revenue for the three months ended March 31, 1998 to 3.9% for the comparable period in 1999. Net income before minority interest and extraordinary item equaled $40.9 million and $34.0 million for the three months ended March 31, 1999 and 1998, respectively. The Company's net income allocated to minority interest totaled $5.8 million and $5.6 million for the three months ended March 31, 1999 and 1998, respectively. The Company recorded $8.1 million and $6.1 million in preferred stock dividends for the three months ended March 31, 1999 and 1998, respectively. LIQUIDITY AND CAPITAL RESOURCES STATEMENT OF CASH FLOWS. For the three months ended March 31, 1999, cash provided by operating activities decreased by $1.6 million, or 3%, to $50.4 million, as compared to $52.0 million for the same period in 1998. The decrease is primarily due to the payment of real estate taxes due in the first quarter of 1999 offset by the increase in net income resulting from our property acquisitions in 1998 and 1999. Cash used for investing activities decreased by $303.2 million, to $22.6 million, for the first three months of 1999, as compared to $325.8 million for the same period in 1998. The decrease is due to a decline in acquisition activity during the first three months of 1999 as compared to the same period in 1998 and the sale or contribution of certain office properties to a newly created joint venture as described under " -- Recent Developments," partially offset by an increase in development activity. Cash provided by financing activities decreased by $316.9 million to $(20.9) million for the first three months of 1999, as compared to $296.0 million for the same period in 1998. Payments of distributions increased by $8.0 million to $38.1 million for the first three months of 1999, as compared with $30.1 million for the same period in 1998. The increase is due to the greater number of shares outstanding and a 6% increase in the distribution rate. Preferred stock dividend payments were $8.1 million for the first three months of 1999, as compared to $6.1 million for the same period in 1998. The increase is due to the issuance of Preferred Series D Shares in the first quarter of 1998. CAPITALIZATION. The Company's total indebtedness at March 31, 1999 totaled $2.0 billion and was comprised of $641.9 million of secured indebtedness with a weighted average interest rate of 7.7% and $1.4 billion of unsecured indebtedness with a weighted average interest rate of 7.0%. Except as stated below, all of the mortgage and notes payable outstanding at March 31, 1999 were either fixed rate obligations or variable rate obligations covered by interest rate hedge contracts. A portion of our $600 million unsecured revolving loan (the "Revolving Loan") and approximately $73 million of floating rate notes payable assumed upon consummation of the merger with J.C. Nichols were not covered by interest rate hedge contracts on March 31, 1999. 11 Based on the Company's total market capitalization of $4.1 billion at March 31, 1999, (at the March 31, 1999 stock price of $23.56 and assuming the redemption for shares of Common Stock of the 8,877,978 Common Units of minority interest in the Operating Partnership), the Company's debt represented approximately 50% of its total market capitalization. To meet in part our long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Borrowings under our Revolving Loan bear interest at variable rates. Our long-term debt, which consists of long-term financings and the issuance of debt securities, typically bears interest at fixed rates. In addition, we have assumed fixed rate and variable rate debt in connection with acquiring properties. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time we enter into interest rate hedge contracts such as collars, swaps, caps and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We do not hold or issue these derivative contracts for trading or speculative purposes. The following table sets forth information regarding our interest rate hedge contracts as of March 31, 1999:
NOTIONAL MATURITY FIXED FAIR MARKET TYPE OF HEDGE AMOUNT DATE REFERENCE RATE RATE VALUE - ---------------- ---------- ---------- ----------------------- ------------- ------------ (DOLLARS IN THOUSANDS) Treasury Lock $100,000 10/1/99 10-Year Treasury 5.725% $ (3,331) Treasury Lock 50,000 6/10/99 10-Year Treasury 5.276 114 Treasury Lock 100,000 7/1/99 10-Year Treasury 5.674 (3,166) Swap 100,000 10/1/99 3-Month LIBOR 4.970 22 Swap 20,970 6/10/02 1-Month LIBOR + 0.75% 7.700 (1,333) Collar 80,000 10/15/01 1-Month LIBOR 5.40 - 6.25 (482)
We enter into swaps, collars and caps to limit our exposure to an increase in variable interest rates, particularly with respect to amounts outstanding under our Revolving Loan. The interest rate on all of our variable rate debt is adjusted at one- and three-month intervals, subject to settlements under these contracts. We also enter into treasury lock agreements from time to time in order to limit our exposure to an increase in interest rates with respect to future debt offerings. In addition, we are exposed to certain losses in the event of nonperformance by the counterparties under the interest rate hedge contracts. We expect the counterparties, which are major financial institutions, to perform fully under these contracts. However, if the counterparties were to default on their obligations under the interest rate hedge contracts, we could be required to pay the full rates on our debt, even if such rates were in excess of the rates in the contracts. CURRENT AND FUTURE CASH NEEDS. Historically, rental revenue has been the principal source of funds to pay operating expenses, debt service, stockholder distributions and capital expenditures, excluding nonrecurring capital expenditures. In addition, construction management, maintenance, leasing and management fees have provided sources of cash flow. We presently have no plans for major capital improvements to the existing in-service properties, other than normal recurring building improvements, tenant improvements and lease commissions. We expect to meet our short-term liquidity requirements generally through working capital and net cash provided by operating activities along with the Revolving Loan. Our short-term (within the next 12 months) liquidity needs also include, among other things, the funding of approximately $310 million of our existing development activity. We expect to fund our short-term liquidity needs through a combination of: o additional borrowings under our Revolving Loan (approximately $144 million was available as of March 31, 1999); o the issuance of secured debt; o the selective disposition of non-core assets; and 12 o the sale or contribution of some of our wholly owned properties to strategic joint ventures to be formed with selected partners interested in investing with us, which will have the net effect of generating additional capital through such sale or contributions. Because of certain financial covenants set forth in the Revolving Loan, we intend to finance a significant portion of our short-term development expenses through asset sales and joint ventures. Although we believe that we will be able to fund our short-term development commitments, an inability to sell a sufficient number of non-core assets or to enter into significant joint venture arrangements of the type described above could adversely affect our liquidity. See " -- Recent Developments." Our long-term liquidity needs generally include the funding of existing and future development activity, selective asset acquisitions and the retirement of mortgage debt, amounts outstanding under the Revolving Loan and long-term unsecured debt. We remain committed to maintaining a flexible and conservative capital structure. Accordingly, we expect to meet our long-term liquidity needs through a combination of (1) the issuance by the Operating Partnership of additional unsecured debt securities, (2) the issuance of additional equity securities by the Company and the Operating Partnership as well as (3) the sources described above with respect to our short-term liquidity. We expect to use such sources to meet our long-term liquidity requirements either through direct payments or repayment of borrowings under the Revolving Loan. We do not intend to reserve funds to retire existing secured or unsecured indebtedness upon maturity. Instead, we will seek to refinance such debt at maturity or retire such debt through the issuance of equity or debt securities. We anticipate that our available cash and cash equivalents and cash flows from operating activities, together with cash available from borrowings and other sources, will be adequate to meet our capital and liquidity needs in both the short and long term. However, if these sources of funds are insufficient or unavailable, the Company's ability to make the expected distributions to stockholders discussed below and satisfy other cash requirements may be adversely affected. DISTRIBUTIONS TO STOCKHOLDERS. In order to qualify as a REIT for Federal income tax purposes, the Company is required to make distributions to its stockholders of at least 95% of REIT taxable income. The Company expects to use its cash flow from operating activities for distributions to stockholders and for payment of recurring, non-incremental revenue-generating expenditures. The following factors will affect cash flows from operating activities and, accordingly, influence the decisions of the Board of Directors regarding distributions: (1) debt service requirements after taking into account the repayment and restructuring of certain indebtedness; (2) scheduled increases in base rents of existing leases; (3) changes in rents attributable to the renewal of existing leases or replacement leases; (4) changes in occupancy rates at existing properties and procurement of leases for newly acquired or developed properties; and (5) operating expenses and capital replacement needs. RECENT DEVELOPMENTS JOINT VENTURE ACTIVITY. On March 15, 1999, we closed a transaction with Schweiz-Deutschland-USA Dreilander Beteiligung Objekt-DLF 98/29-Walker Fink-KG ("DLF"), pursuant to which we sold or contributed certain office properties valued at approximately $142 million to a newly created limited partnership (the "Joint Venture"). DLF contributed approximately $55 million for a 77.19% interest in the Joint Venture, and the Joint Venture borrowed approximately $71 million from third-party lenders. We retained the remaining 22.81% interest in the Joint Venture, received net cash proceeds of approximately $124 million and are the sole and exclusive manager and leasing agent of the Joint Venture's properties, for which we receive customary management fees and leasing commissions. We used the cash proceeds received in the transaction to fund existing development activity either through direct payments or repayment of borrowings under the Revolving Loan. PENDING DISPOSITION ACTIVITY. We recently entered into agreements to sell approximately 3.3 million rentable square feet of non-core office and industrial properties and 49 acres of development land in the South Florida area for gross proceeds of approximately $323.2 million. The South Florida transaction is expected to close by June 1, 1999. We recently also entered into agreements to sell approximately 737,000 rentable square feet of non-core office and industrial properties and 10.5 acres of development land in the Baltimore area for gross proceeds of approximately $82.2 million. The Baltimore transaction is expected to close by June 30, 1999. Non-core office and industrial properties generally include single buildings or business parks that do not fit our long-term strategy. We can provide no assurance that all or parts of the transactions will be consummated. Both 13 transactions are subject to customary closing conditions, and the Baltimore transaction is also subject to the completion of due diligence. YEAR 2000 BACKGROUND. The Year 2000 compliance issue refers to the inability of computer systems and computer software to correctly process any date after 1999. The date change to the new millennium may be a problem because some computer hardware and software was designed to use only two digits to represent a year. As a result, some systems may interpret 1/1/00 to be the year 1900. In addition, some systems may not recognize that the Year 2000 is a leap year. Both problems could result in system failure or miscalculations, which may cause disruptions of operations. The Year 2000 issue, if not corrected, could result in the failure of the information technology ("IT") systems that we use in our business operations, such as computer programs related to property management, leasing, financial reporting, employee benefits, asset management and energy management. In addition, computerized systems and microprocessors are embedded in a variety of products used in our operations and properties, such as HVAC controls, lights, power generators, elevators, life safety systems, phones and security systems. APPROACH AND STATUS. Our Year 2000 compliance efforts are divided into two areas -- "operations level" and "property level." Operations level includes those information technology systems used in our corporate and division offices to perform real estate, accounting and human resources functions. Property level includes the non-information technology systems at our individual properties. Our Y2K remediation plan at both the operations and property levels has three phases: o assessment (inventory and testing of computer systems), o renovation (repairing or replacing non-compliant systems) and o validation (testing of repaired or replaced systems). Our Information Technology Department is overseeing our operations level compliance program. With respect to our operations level IT software, we have completed all three phases of our Year 2000 remediation plan. As part of a standardization of our technology infrastructure in 1998, computer software that was not Year 2000 compliant was upgraded or replaced. These software upgrades were off-the-shelf Year 2000 compliant packages. Additionally, we successfully upgraded and tested a Year 2000 compliant version of our corporate accounting and property management software in December 1998. With respect to our operations level IT hardware, we have completed the assessment phase of our remediation plan and are 90% complete (in terms of labor) with the renovation and validation phases of the plan. We expect to complete the renovation and validation phases with respect to our operations level hardware by the third quarter of 1999. Our Chief Operating Officer is overseeing our property level compliance program. We have completed our inventory of all of our properties' non-information technology systems. As part of the inventory process, we requested appropriate vendors and manufacturers to certify that their products are Year 2000 compliant. We are approximately 75% complete (in terms of labor) with the renovation and validation phases of our remediation plan at the property level. We expect to complete both phases in the third quarter. With respect to Year 2000 issues relating to our customer base, we have not sought representations from our tenants with respect to their Year 2000 readiness because no one tenant represents more than 3% of our annualized rental revenue. With respect to suppliers and vendors, our material purchases are generally from those in competitive fields where others will be able to meet any of our needs unmet by suppliers or vendors with Year 2000 difficulties. (Although we have no reason to expect a significant interruption of utility services for our properties, we have not received (nor sought) written assurances from utility providers that Y2K issues will not cause an interruption in service.) COSTS. To date, the costs directly associated with our Year 2000 efforts have not been material, and we estimate our future costs to be immaterial as well. RISKS ASSOCIATED WITH THE YEAR 2000 ISSUE. We do not expect Year 2000 failures to have a material adverse effect on our results of operations or liquidity because: o we do not rely on a small number of tenants for a significant portion of our rental revenue; 14 o we stand ready to switch vendors or suppliers whose Year 2000 failures adversely affect their products or services; and o our remediation plan is expected to be complete prior to the Year 2000. As a result, we do not expect to develop a contingency plan for Year 2000 failures. Our assessment of the likely impact of Year 2000 issues on us, which is a forward-looking statement, depends on numerous factors, such as the continued provision of utility services, and we remain exposed to the risk of Year 2000 failures. See " -- Disclosure Regarding Forward-Looking Statements." Our disclosures and announcements concerning our Year 2000 programs are intended to constitute "Year 2000 Readiness Disclosures" as defined in the recently-enacted Year 2000 Information and Readiness Disclosure Act. The Act provides added protection from liability for certain public and private statements concerning an entity's Year 2000 readiness and the Year 2000 readiness of its products and services. The Act also potentially provides added protection from liability for certain types of Year 2000 disclosures made after January 1, 1996, and before the date of enactment of the Act. POSSIBLE ENVIRONMENTAL LIABILITIES In connection with owning or operating our properties, we may be liable for certain costs due to possible environmental liabilities. Under various laws, ordinances and regulations, such as the Comprehensive Environmental Response Compensation and Liability Act, and common law, an owner or operator of real estate is liable for the costs to remove or remediate certain hazardous or toxic chemicals or substances on or in the property. Owners or operators are also liable for certain other costs, including governmental fines and injuries to persons and property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of the hazardous or toxic chemicals or substances. The presence of such substances, or the failure to remediate such substances properly, may adversely affect the owner's or operator's ability to sell or rent such property or to borrow using such property as collateral. Persons who arrange for the disposal, treatment or transportation of hazardous or toxic chemicals or substances may also be liable for the same types of costs at a disposal, treatment or storage facility, whether or not that person owns or operates that facility. Certain environmental laws also impose liability for releasing asbestos-containing materials. Third parties may seek recovery from owners or operators of real property for personal injuries associated with asbestos- containing materials. A number of our properties have asbestos-containing materials or material that we presume to be asbestos-containing materials. In connection with owning and operating our properties, we may be liable for such costs. In addition, it is not unusual for property owners to encounter on-site contamination caused by off-site sources. The presence of hazardous or toxic chemicals or substances at a site close to a property could require the property owner to participate in remediation activities or could adversely affect the value of the property. Contamination from adjacent properties has migrated onto at least three of our properties; however, based on current information, we do not believe that any significant remedial action is necessary at these affected sites. As of the date hereof, we have obtained Phase I environmental assessments (and, in certain instances, Phase II environmental assessments) on substantially all of our in-service properties. These assessments have not revealed, nor are we aware of, any environmental liability at our properties that we believe would materially adversely affect our financial position, operations or liquidity taken as a whole. This projection, however, could be incorrect depending on certain factors. For example, material environmental liabilities may have arisen after the assessments were performed or our assessments may not have revealed all environmental liabilities or may have underestimated the scope and severity of environmental conditions observed. There may also be unknown environmental liabilities at properties for which we have not obtained a Phase I environmental assessment or have not yet obtained a Phase II environmental assessment. In addition, we base our assumptions regarding environmental conditions, including groundwater flow and the existence and source of contamination, on readily available sampling data. We cannot guarantee that such data is reliable in all cases. Moreover, we cannot provide any assurances (1) that future laws, ordinances or regulations will not impose a material environmental liability or (2) that tenants, the condition of land or operations in the vicinity of our properties or unrelated third parties will not affect the current environmental condition of our properties. 15 Some tenants use or generate hazardous substances in the ordinary course of their respective businesses. In their leases, we require these tenants to comply with all applicable laws and to be responsible to us for any damages resulting from their use of the property. We are not aware of any material environmental problems resulting from tenants' use or generation of hazardous or toxic chemicals or substances. We cannot provide any assurances, however, that all tenants will comply with the terms of their leases or remain solvent. If tenants do not comply or do not remain solvent, we may at some point be responsible for contamination caused by such tenants. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which is required to be adopted in fiscal years beginning after June 15, 1999. The Statement will require us to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT Under the Americans with Disabilities Act (the "ADA"), all public accommodations and commercial facilities are required to meet certain federal requirements related to access and use by disabled persons. These requirements became effective in 1992. Compliance with the ADA requirements could require removal of access barriers, and noncompliance could result in imposition of fines by the U.S. government or an award of damages to private litigants. Although we believe that our properties are substantially in compliance with these requirements, we may incur additional costs to comply with the ADA. Although we believe that such costs will not have a material adverse effect on us, if required changes involve a greater expenditure than we currently anticipate, our results of operations, liquidity and capital resources could be materially adversely affected. FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTIONS We consider funds from operations ("FFO") to be a useful financial performance measure of the operating performance of an equity REIT because, together with net income and cash flows, FFO provides investors with an additional basis to evaluate the ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures. FFO does not represent net income or cash flows from operating, investing or financing activities as defined by Generally Accepted Accounting Principles ("GAAP"). It should not be considered as an alternative to net income as an indicator of our operating performance or to cash flows as a measure of liquidity. FFO does not measure whether cash flow is sufficient to fund all cash needs, including principal amortization, capital improvements and distributions to stockholders. Further, FFO as disclosed by other REITs may not be comparable to our calculation of FFO, as described below. FFO and cash available for distributions should not be considered as alternatives to net income as an indication of our performance or to cash flows as a measure of liquidity. FFO means net income (computed in accordance with generally accepted accounting principles) excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In March 1995, the National Association of Real Estate Investment Trusts ("NAREIT") issued a clarification of the definition of FFO. The clarification provides that amortization of deferred financing costs and depreciation of non-real estate assets are no longer to be added back to net income in arriving at FFO. Cash available for distribution is defined as funds from operations reduced by non-revenue enhancing capital expenditures for building improvements and tenant improvements and lease commissions related to second generation space. 16 FFO and cash available for distribution for the three month periods ended March 31, 1999 and 1998 are summarized in the following table (in thousands):
THREE MONTHS ENDED MARCH 31, ------------------------ 1999 1998 ----------- ---------- FUNDS FROM OPERATIONS: Income before minority interest and extraordinary item ..................... $ 40,860 $ 34,037 Add (deduct): Dividends to preferred shareholders ....................................... (8,145) (6,145) Gain on disposition of assets ............................................. (569) -- Depreciation and amortization ............................................. 28,156 17,161 Depreciation on unconsolidated affiliates ................................. 477 -- -------- -------- FUNDS FROM OPERATIONS BEFORE MINORITY INTEREST .......................... 60,779 45,053 CASH AVAILABLE FOR DISTRIBUTION: Add (deduct): Rental income from straight-line rents .................................... (3,985) (3,116) Amortization of deferred financing costs .................................. 778 616 Non-incremental revenue generating capital expenditures (1): Building improvements paid .............................................. (1,518) (1,019) Second generation tenant improvements paid .............................. (6,009) (2,436) Second generation lease commissions paid ................................ (3,531) (1,726) -------- -------- CASH AVAILABLE FOR DISTRIBUTION ........................................ $ 46,514 $ 37,372 ======== ======== Weighted average common shares/common units outstanding -- basic (2) ....... 70,114 59,598 ======== ======== Weighted average common shares/common units outstanding -- diluted (2) ..... 70,251 60,235 ======== ======== DIVIDEND PAYOUT RATIO -- DILUTED: Funds from operations ..................................................... 62.4% 68.2% ======== ======== Cash available for distribution ........................................... 81.6% 82.2% ======== ========
- ---------- (1) Amounts represent cash expenditures. (2) Assumes redemption of Common Units for shares of Common Stock. Minority interest Common Unit holders and the stockholders of the Company share equally on a per share and per Common Unit basis; therefore, the resultant per share information is unaffected by the conversion. On April 27, 1999, the Company's Board of Directors declared a dividend of $.54 per share ($2.16 on an annualized basis) payable on May 19, 1999 to stockholders of record on May 7, 1999. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS Some of the information in this Quarterly Report on Form 10-Q may contain forward-looking statements. Such statements include, in particular, statements about our plans, strategies and prospects under "Management's Discussion and Analysis of Financial Condition and Results of Operations." You can identify forward-looking statements by our use of forward-looking terminology such as "may," "will," "expect," "anticipate," "estimate," "continue" or other similar words. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that our plans, intentions or expectations will be achieved. When considering such forward-looking statements, you should keep in mind the following important factors that could cause our actual results to differ materially from those contained in any forward-looking statement: o our markets could suffer unexpected increases in development of office, industrial and retail properties; o the financial condition of our tenants could deteriorate; o the costs of our development projects could exceed our original estimates; 17 o we may not be able to complete development, acquisition, disposition or joint venture projects as quickly or on as favorable terms as anticipated; o we may not be able to lease or release space quickly or on as favorable terms as old leases; o we may have incorrectly assessed the environmental condition of our properties; o an unexpected increase in interest rates would increase our debt service costs; o we may not be able to continue to meet our long-term liquidity requirements on favorable terms; o we could lose key executive officers; and o our southeastern markets may suffer an unexpected decline in economic growth or increase in unemployment rates. Given these uncertainties, we caution you not to place undue reliance on forward-looking statements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances or to reflect the occurrence of unanticipated events. 18 PROPERTY INFORMATION The following table sets forth certain information with respect to our majority owned in-service and development properties (excluding apartment units) as of March 31, 1999 and 1998:
RENTABLE NUMBER OF PERCENT LEASED/ MARCH 31, 1999 SQUARE FEET PROPERTIES PRE-LEASED - ---------------------------- ------------- ------------ ---------------- IN-SERVICE: Office .................... 30,032,000 443 94% Industrial ................ 11,883,000 184 91% Retail .................... 1,661,000 18 91% ---------- --- -- Total .................... 43,576,000 645 93% ========== === == REDEVELOPMENT: Office .................... 207,000 4 49% Industrial ................ 194,000 4 1% ---------- --- -- Total .................... 401,000 8 26% ========== === == DEVELOPMENT: COMPLETED -- NOT STABILIZED Office .................... 1,564,000 15 79% Industrial ................ 777,000 6 87% Retail .................... -- -- -- ---------- --- -- Total .................... 2,341,000 21 82% ========== === == IN PROCESS Office .................... 3,764,000 30 64% Industrial ................ 131,000 1 50% Retail .................... 200,000 2 65% ---------- --- -- Total .................... 4,095,000 33 63% ========== === == TOTAL: Office .................... 35,567,000 492 Industrial ................ 12,985,000 195 Retail .................... 1,861,000 20 ---------- --- Total .................... 50,413,000 707 ========== === MARCH 31, 1998 - ----------------------------- IN-SERVICE: Office .................... 26,501,000 382 94% Industrial ................ 7,429,000 148 90% Retail .................... -- -- -- ---------- --- -- Total .................... 33,930,000 530 93% ========== === == REDEVELOPMENT Office .................... N/A N/A N/A Industrial ................ N/A N/A N/A ---------- --- ---- Total .................... N/A N/A N/A ========== === ==== DEVELOPMENT: COMPLETED -- NOT STABILIZED Office .................... N/A N/A N/A Industrial ................ N/A N/A N/A Retail .................... N/A N/A N/A ---------- --- ---- Total .................... N/A N/A N/A ========== === ==== IN PROCESS Office .................... 3,182,000 27 53% Industrial ................ 396,000 5 25% Retail .................... -- -- -- ---------- --- ---- Total .................... 3,578,000 32 50% ========== === ==== TOTAL: Office .................... 29,683,000 409 Industrial ................ 7,825,000 153 Retail .................... -- -- ---------- --- Total .................... 37,508,000 562 ========== ===
19 The following table sets forth certain information with respect to our properties under development as of March 31, 1999 (dollars in thousands):
RENTABLE SQUARE ESTIMATED NAME LOCATION FEET COSTS - ------------------------------- ------------------- ------------ ----------- IN-PROCESS OFFICE: Highwoods Center II @ Tradeport Atlanta 53,000 $ 4,825 Peachtree Corner Atlanta 109,000 9,238 Highwoods I Baltimore 125,000 15,300 Mallard Creek V Charlotte 118,000 12,262 Parkway Plaza 14 Charlotte 90,000 7,690 Lakefront Plaza I Hampton Roads 77,000 7,477 Belfort Park C1 Jacksonville 54,000 4,830 Belfort Park C2 Jacksonville 31,000 2,730 Valencia Place Kansas City 241,000 34,020 Southwind Building D Memphis 64,000 6,800 Caterpillar Financial Center Nashville 313,000 54,000 Lakeview Ridge III Nashville 131,000 13,100 Westwood South Nashville 125,000 13,530 C N A Maitland III Orlando 78,000 9,885 Capital Plaza Orlando 303,000 53,000 Concourse Center One Piedmont Triad 86,000 8,400 3737 Glenwood Ave. Research Triangle 107,000 16,700 4101 Research Commons Research Triangle 73,000 9,311 Capital One Bldg 1 Richmond 126,000 14,795 Capital One Bldg 2 Richmond 44,000 5,125 Capital One Bldg 3 Richmond 126,000 14,380 Highwoods Common Richmond 49,000 4,840 Stony Point II Richmond 136,000 13,881 Sportsline USA South Florida 80,000 10,000 Intermedia Building 1 Tampa 200,000 27,040 Intermedia Building 2 Tampa 30,000 4,056 Intermedia Building 3 Tampa 170,000 22,984 Intermedia Building 4 Tampa 200,000 29,219 Intermedia Building 5 Tampa 200,000 29,219 Lakepoint II Tampa 225,000 34,106 ------- -------- In-Process Office Total or Weighted Average 3,764,000 $492,743 ========= ======== INDUSTRIAL: Newpoint II Atlanta 131,000 5,167 --------- -------- In-Process Industrial Total or Weighted Average 131,000 $ 5,167 ========= ======== RETAIL: Seville Square Kansas City 119,000 32,100 Valencia Place Kansas City 81,000 14,362 --------- -------- In-Process Retail Total or Weighted Average 200,000 $ 46,462 ========= ======== Total or Weighted Average of all In-Process Development Projects 4,095,000 $544,372 ========= ======== COST AT PRE-LEASING ESTIMATED ESTIMATED NAME 3/31/99 PERCENTAGE(1) COMPLETION STABILIZATION(2) - ------------------------------- ----------- --------------- ------------ ----------------- IN-PROCESS OFFICE: Highwoods Center II @ Tradeport $ 994 57% 3Q 99 4Q 99 Peachtree Corner 3,042 -- 3Q 99 3Q 00 Highwoods I 8,048 -- 2Q 99 4Q 99 Mallard Creek V 5,948 -- 4Q 99 4Q 00 Parkway Plaza 14 3,236 58 2Q 99 1Q 00 Lakefront Plaza I 5,122 31 2Q 99 1Q 00 Belfort Park C1 1,579 -- 3Q 99 2Q 00 Belfort Park C2 1,130 -- 3Q 99 2Q 00 Valencia Place 16,879 41 1Q 00 4Q 00 Southwind Building D 3,869 56 2Q 99 4Q 99 Caterpillar Financial Center 16,743 79 1Q 00 2Q 00 Lakeview Ridge III 8,523 88 2Q 99 2Q 99 Westwood South 8,068 79 3Q 99 1Q 00 C N A Maitland III 5,648 100 3Q 99 3Q 99 Capital Plaza 15,721 30 1Q 00 4Q 01 Concourse Center One 4,817 32 2Q 99 1Q 00 3737 Glenwood Ave. 8,903 56 3Q 99 1Q 00 4101 Research Commons 3,919 35 3Q 99 2Q 00 Capital One Bldg 1 8,647 100 2Q 99 2Q 99 Capital One Bldg 2 3,064 100 3Q 99 3Q 99 Capital One Bldg 3 4,401 100 4Q 99 4Q 99 Highwoods Common 3,902 100 2Q 99 2Q 99 Stony Point II 9,148 52 2Q 99 4Q 99 Sportsline USA 3,153 100 3Q 99 3Q 99 Intermedia Building 1 1,298 100 1Q 00 1Q 00 Intermedia Building 2 123 100 1Q 00 1Q 00 Intermedia Building 3 1,674 100 1Q 00 1Q 00 Intermedia Building 4 -- 100 2Q 00 2Q 00 Intermedia Building 5 -- 100 3Q 01 3Q 01 Lakepoint II 8,334 52 4Q 99 4Q 99 -------- --- In-Process Office Total or Weighted Average $165,933 64% ======== === INDUSTRIAL: Newpoint II 2,964 50% 2Q 99 2Q 00 -------- --- In-Process Industrial Total or Weighted Average $ 2,964 50% ======== === RETAIL: Seville Square 26,913 75% 2Q 99 4Q 99 Valencia Place 3,876 50 1Q 00 4Q 00 -------- --- In-Process Retail Total or Weighted Average $ 30,789 65% ======== === Total or Weighted Average of all In-Process Development Projects $199,686 63% ======== ===
- ---------- (1) Includes the effect of letters of intent. (2) We generally consider a development project to be stabilized upon the earlier of the first date such project is at least 95% occupied or one year from the date of completion. 20
RENTABLE SQUARE ESTIMATED NAME LOCATION FEET COSTS - ------------------------------- ------------------- ------------ ----------- COMPLETED -- NOT STABILIZED OFFICE: Ridgefield III Asheville 57,000 $ 5,500 10 Glenlakes Atlanta 254,000 35,100 Highwoods Center I @ Tradeport Atlanta 45,000 3,717 Parkway Plaza 11 Charlotte 32,000 2,600 Parkway Plaza 12 Charlotte 22,000 1,800 Patewood VI Greenville 107,000 11,400 Highwoods Centre Hampton Roads 103,000 9,925 Cool Springs I Nashville 153,000 16,800 Highwoods Centre Research Triangle 76,000 8,300 Overlook Research Triangle 97,000 10,500 Red Oak Research Triangle 65,000 6,000 Situs II Research Triangle 59,000 6,300 Eastshore II Richmond 76,000 7,842 Highwoods Square South Florida 93,000 12,500 Interstate Corporate Center Tampa 325,000 19,100 ------- -------- Completed -- Not Stabilized Office Total or Weighted Average 1,564,000 $157,384 ========= ======== INDUSTRIAL: Bluegrass Lakes I Atlanta 112,000 4,700 Tradeport 1 Atlanta 87,000 3,100 Tradeport 2 Atlanta 87,000 3,100 Air Park South Warehouse II Piedmont Triad 136,000 4,200 Air Park South Warehouse VI Piedmont Triad 189,000 8,000 HIW Distribution Center Richmond 166,000 5,764 --------- -------- Completed -- Not Stabilized Industrial Total or Weighted Average 777,000 $ 28,864 --------- -------- Total or Weighted Average of all Completed -- Not Stabilized Development Projects 2,341,000 $186,248 ========= ======== Total or Weighted Average of all Development Projects 6,436,000 $730,620 ========= ======== COST AT PRE-LEASING ESTIMATED ESTIMATED NAME 3/31/99 PERCENTAGE(1) COMPLETION STABILIZATION(2) - ------------------------------- ----------- --------------- ------------ ----------------- COMPLETED -- NOT STABILIZED OFFICE: Ridgefield III $ 5,046 44% 3Q 98 4Q 99 10 Glenlakes 27,469 77 1Q 99 4Q 99 Highwoods Center I @ Tradeport 2,776 100 1Q 99 2Q 99 Parkway Plaza 11 2,212 66 1Q 99 3Q 99 Parkway Plaza 12 1,401 61 1Q 99 4Q 99 Patewood VI 11,882 92 3Q 98 2Q 99 Highwoods Centre 8,103 60 4Q 98 4Q 99 Cool Springs I 15,076 66 3Q 98 3Q 99 Highwoods Centre 8,313 100 4Q 98 3Q 99 Overlook 9,509 91 4Q 98 2Q 99 Red Oak 4,767 80 4Q 98 2Q 99 Situs II 5,986 83 3Q 98 2Q 99 Eastshore II 6,275 100 1Q 99 2Q 99 Highwoods Square 8,842 47 1Q 99 4Q 99 Interstate Corporate Center 16,527 90 1Q 99 2Q 99 -------- --- Completed -- Not Stabilized Office Total or Weighted Average $134,184 79% ======== === INDUSTRIAL: Bluegrass Lakes I 3,856 100% 1Q 99 2Q 99 Tradeport 1 2,605 87 3Q 98 2Q 99 Tradeport 2 2,587 96 3Q 98 2Q 99 Air Park South Warehouse II 3,216 100 4Q 98 3Q 99 Air Park South Warehouse VI 6,784 100 1Q 99 2Q 99 HIW Distribution Center 5,831 46 1Q 99 4Q 99 -------- --- Completed -- Not Stabilized Industrial Total or Weighted Average $ 24,879 87% -------- --- Total or Weighted Average of all Completed -- Not Stabilized Development Projects $159,063 82% ======== === Total or Weighted Average of all Development Projects $358,749 70% ======== ===
- ---------- (1) Includes the effect of letters of intent. (2) We generally consider a development project to be stabilized upon the earlier of the first date such project is at least 95% occupied or one year from the date of completion. 21
RENTABLE SQUARE ESTIMATED PRE-LEASING FEET COSTS PERCENTAGE(1) DEVELOPMENT ANALYSIS ------------- ----------------------- ---------------- (DOLLARS IN THOUSANDS) ----------------------- SUMMARY BY ESTIMATED STABILIZATION DATE: Second Quarter 1999 .................. 1,555,000 $116,494 93% Third Quarter 1999 ................... 599,000 56,910 89 Fourth Quarter 1999 .................. 1,543,000 191,981 57 First Quarter 2000 ................... 885,000 107,877 75 Second Quarter 2000 .................. 802,000 105,257 67 Third Quarter 2000 ................... 109,000 9,238 -- Fourth Quarter 2000 .................. 440,000 60,644 32 Third Quarter 2001 ................... 200,000 29,219 100 Fourth Quarter 2001 .................. 303,000 53,000 30 --------- -------- --- Total or Weighted Average ........... 6,436,000 $730,620 70% ========= ======== === SUMMARY BY MARKET: Asheville ............................ 57,000 5,500 44% Atlanta .............................. 878,000 68,947 69 Baltimore ............................ 125,000 15,300 0 Charlotte ............................ 262,000 24,352 33 Greenville ........................... 107,000 11,400 92 Hampton Roads ........................ 180,000 17,402 48 Jacksonville ......................... 85,000 7,560 0 Kansas City .......................... 441,000 80,482 52 Memphis .............................. 64,000 6,800 56 Nashville ............................ 722,000 97,430 78 Orlando .............................. 381,000 62,885 44 Piedmont Triad ....................... 411,000 20,600 86 Research Triangle .................... 477,000 57,111 74 Richmond ............................. 723,000 66,627 79 South Florida ........................ 173,000 22,500 72 Tampa ................................ 1,350,000 165,724 90 --------- -------- --- Total or Weighted Average ........... 6,436,000 $730,620 70% ========= ======== === Build-to-Suit ....................... 1,254,000 $166,703 100% Multi-tenant ........................ 5,182,000 563,917 63 --------- -------- --- Total or Weighted Average ........... 6,436,000 $730,620 70% ========= ======== === RENTABLE SQUARE FEET ESTIMATED COSTS PRE-LEASING(1) ------------- ----------------------- ------------- PER PROPERTY TYPE: Office Weighted Average............... 118,400 $ 14,447 68% Industrial Weighted Average .......... 129,714 4,862 81 Retail Weighted Average .............. 100,000 23,231 65 --------- -------- ------------- Total Weighted Average ............... 119,400 $ 13,378 70% ========= ======== =============
- ---------- (1) Includes the effect of letters of intent. 22 The following table sets forth certain information with respect to our properties under redevelopment as of March 31, 1999 (dollars in thousands):
RENTABLE ESTIMATED SQUARE ESTIMATED COST AT PRE-LEASING ESTIMATED STABILIZATION NAME LOCATION FEET COST 3/31/99 (1) COMPLETION (2) - --------------------------- --------------- ---------- ----------- --------- ------------- ------------ -------------- OFFICE: Highwoods Park B South Florida 27,000 $ 2,296 $ 1,834 99% 1Q 00 3Q 00 Highwoods Park C South Florida 77,000 6,667 5,347 47 1Q 00 3Q 00 Highwoods Park E South Florida 78,000 6,782 5,248 50 1Q 00 3Q 00 Highwoods Park F South Florida 25,000 2,394 1,730 -- 1Q 00 3Q 00 ------ ------- ------- -- Total or Weighted Average 207,000 18,139 14,159 49 ======= ======= ======= == INDUSTRIAL: Highwoods Park G South Florida 66,000 4,241 2,578 1% 1Q 00 3Q 00 Highwoods Park H1 South Florida 20,000 1,426 771 -- 1Q 00 3Q 00 Highwoods Park H2 South Florida 36,000 3,022 2,385 -- 1Q 00 3Q 00 Highwoods Park J South Florida 72,000 4,501 2,725 -- 1Q 00 3Q 00 ------- ------- ------- -- Total or Weighted Average 194,000 13,190 8,459 -- ======= ======= ======= == Grand Total 401,000 31,329 22,618 26% ======= ======= ======= ==
- ---------- (1) Includes the effect of letters of intent. (2) We generally consider a development project to be stabilized upon the earlier of the first date such project is at least 95% occupied or one year from the date of completion. 23 The following tables set forth certain information about our leasing activities at our majority-owned in service properties (excluding apartment units) for the three months ended March 31, 1999 and December 31, September 30 and June 30, 1998.
OFFICE LEASING STATISTICS THREE MONTHS ENDED ----------------------------------------------------------------------------------- 3/31/99 12/31/98 9/30/98 6/30/98 AVERAGE -------------- -------------- --------------- -------------- -------------- NET EFFECTIVE RENTS RELATED TO RE-LEASED SPACE: Number of lease transactions (signed leases) 276 308 326 285 299 Rentable square footage leased 1,406,170 1,291,297 1,645,913 1,099,805 1,360,796 Average per rentable square foot over the lease term: Base rent $ 14.84 $ 16.54 $ 16.18 $ 15.53 $ 15.77 Tenant improvements (0.84) ( 0.85) ( 0.71) ( 1.00) ( 0.85) Leasing commissions (0.42) ( 0.38) ( 0.42) ( 0.27) ( 0.37) Rent concessions 0.00 0.00 0.00 ( 0.03) ( 0.01) ---------- ---------- ----------- ---------- ---------- Effective rent 13.58 15.31 15.05 14.23 14.54 Expense stop(1) ( 3.55) ( 3.96) ( 4.45) ( 4.22) ( 4.05) ---------- ---------- ----------- ---------- ---------- Equivalent effective net rent $ 10.03 $ 11.35 $ 10.60 $ 10.01 $ 10.49 ========== ========== =========== ========== ========== Average term in years 5 4 5 5 5 ========== ========== =========== ========== ========== CAPITAL EXPENDITURES RELATED TO RE-LEASED SPACE: Tenant Improvements: Total dollars committed under signed leases $6,848,279 $4,886,517 $ 6,754,100 $5,849,409 $6,084,576 Rentable square feet 1,406,170 1,291,297 1,645,913 1,099,805 1,360,796 ---------- ---------- ----------- ---------- ---------- Per rentable square foot $ 4.87 $ 3.78 $ 4.10 $ 5.32 $ 4.47 ========== ========== =========== ========== ========== Leasing Commissions: Total dollars committed under signed leases $3,047,978 $2,005,094 $ 3,694,473 $1,356,002 $2,525,887 Rentable square feet 1,406,170 1,291,297 1,645,913 1,099,805 1,360,796 ---------- ---------- ----------- ---------- ---------- Per rentable square foot $ 2.17 $ 1.55 $ 2.24 $ 1.23 $ 1.86 ========== ========== =========== ========== ========== Total: Total dollars committed under signed leases $9,896,257 $6,891,611 $10,448,573 $7,205,411 $8,610,463 Rentable square feet 1,406,170 1,291,297 1,645,913 1,099,805 1,360,796 ---------- ---------- ----------- ---------- ---------- Per rentable square foot $ 7.04 $ 5.34 $ 6.35 $ 6.55 $ 6.33 ========== ========== =========== ========== ========== RENTAL RATE TRENDS: Average final rate with expense pass throughs $ 14.28 $ 13.57 $ 14.51 $ 13.91 $ 14.07 Average first year cash rental rate $ 15.01 $ 14.47 $ 15.43 $ 14.87 $ 14.95 ---------- ---------- ----------- ---------- ---------- Percentage increase 5.11% 6.63% 6.34% 6.90% 6.24% ========== ========== =========== ========== ==========
- ---------- (1) "Expense stop" represents operating expenses (generally including taxes, utilities, routine building expense and common area maintainance) for which we will not be reimbursed by our tenants. 24
INDUSTRIAL LEASING STATISTICS THREE MONTHS ENDED -------------------------------------------------------------------------- 3/31/99 12/31/98 9/30/98 6/30/98 AVERAGE -------------- ------------ ------------ ------------ ------------ NET EFFECTIVE RENTS RELATED TO RE-LEASED SPACE: Number of lease transactions (signed leases) 72 44 56 41 53 Rentable square footage leased 837,616 582,758 314,549 194,014 482,234 Average per rentable square foot over the lease term: Base rent $ 5.12 $ 4.71 $ 6.59 $ 6.99 $ 5.85 Tenant improvements (0.22) (0.20) (0.23) (0.29) (0.24) Leasing commissions (0.10) (0.09) (0.09) (0.19) (0.12) Rent concessions 0.00 0.00 0.00 0.00 0.00 ---------- -------- -------- -------- -------- Effective rent 4.80 4.42 6.27 6.51 5.50 Expense stop(1) (0.28) (0.25) (0.44) (0.52) (0.37) ---------- -------- -------- -------- -------- Equivalent effective net rent $ 4.52 $ 4.17 $ 5.83 $ 5.99 $ 5.13 ========== ======== ======== ======== ======== Average term in years 4 3 4 3 3 ========== ======== ======== ======== ======== CAPITAL EXPENDITURES RELATED TO RE-LEASED SPACE: TENANT IMPROVEMENTS: Total dollars committed under signed leases $ 821,654 $712,108 $248,359 $239,348 $505,367 Rentable square feet 837,616 582,758 314,549 194,014 482,234 ---------- -------- -------- -------- -------- Per rentable square foot $ 0.98 $ 1.22 $ 0.79 $ 1.23 $ 1.05 ========== ======== ======== ======== ======== LEASING COMMISSIONS: Total dollars committed under signed leases $ 315,101 $173,017 $ 99,574 $130,243 $179,484 Rentable square feet 837,616 582,758 314,549 194,014 482,234 ---------- -------- -------- -------- -------- Per rentable square foot $ 0.38 $ 0.30 $ 0.32 $ 0.67 $ 0.37 ========== ======== ======== ======== ======== Total: Total dollars committed under signed leases $1,136,755 $885,125 $347,933 $369,591 $684,851 Rentable square feet 837,616 582,758 314,549 194,014 482,234 ---------- -------- -------- -------- -------- Per rentable square foot $ 1.36 $ 1.52 $ 1.11 $ 1.90 $ 1.42 ========== ======== ======== ======== ======== RENTAL RATE TRENDS: Average final rate with expense pass throughs $ 4.91 $ 4.62 $ 5.40 $ 6.09 $ 5.26 Average first year cash rental rate $ 4.91 $ 4.72 $ 5.54 $ 6.50 $ 5.42 ---------- -------- -------- -------- -------- Percentage increase 0.00% 2.16% 2.59% 6.73% 3.04% ========== ======== ======== ======== ========
- ---------- (1) "Expense stop" represents operating expenses (generally including taxes, utilities, routine building expense and common area maintainance) for which we will not be reimbursed by our tenants. 25
RETAIL LEASING STATISTICS THREE MONTHS ENDED -------------------------------------------------------- 3/31/99 12/31/98 9/30/98 AVERAGE ------------ ------------ ------------ ----------- NET EFFECTIVE RENTS RELATED TO RE-LEASED SPACE: Number of lease transactions (signed leases) 25 15 11 17 Rentable square footage leased 62,638 29,706 37,258 43,201 Average per rentable square foot over the lease term: Base rent $ 15.37 $ 16.34 $ 13.59 $ 15.10 Tenant improvements ( 0.45) ( 1.66) ( 0.14) ( 0.75) Leasing commissions ( 0.39) ( 0.76) ( 0.44) ( 0.53) Rent concessions 0.00 0.00 0.00 0.00 -------- -------- -------- -------- Effective rent 14.53 13.92 13.01 13.82 Expense stop ( 0.27) ( 1.79) ( 0.09) ( 0.72) -------- -------- -------- -------- Equivalent effective net rent $ 14.26 $ 12.13 $ 12.92 $ 13.10 -------- -------- -------- -------- Average term in years 6 5 6 6 ======== ======== ======== ======== CAPITAL EXPENDITURES RELATED TO RE-LEASED SPACE: TENANT IMPROVEMENTS: Total dollars committed under signed leases $248,531 $319,620 $ 21,000 $196,384 Rentable square feet 62,638 29,706 37,258 43,201 -------- -------- -------- -------- Per rentable square foot $ 3.97 $ 10.76 $ 0.56 $ 4.55 ======== ======== ======== ======== LEASING COMMISSIONS: Total dollars committed under signed leases $153,872 $123,047 $ 99,268 $125,396 Rentable square feet 62,638 29,706 37,258 43,201 -------- -------- -------- -------- Per rentable square foot $ 2.46 $ 4.14 $ 2.66 $ 2.90 ======== ======== ======== ======== TOTAL: Total dollars committed under signed leases $402,403 $442,667 $120,268 $321,779 Rentable square feet 62,638 29,706 37,258 43,201 -------- -------- -------- -------- Per rentable square foot $ 6.42 $ 14.90 $ 3.23 $ 7.45 ======== ======== ======== ======== RENTAL RATE TRENDS: Average final rate with expense pass throughs $ 10.92 $ 15.91 $ 8.55 $ 11.79 Average first year cash rental rate $ 16.22 $ 18.16 $ 10.53 $ 14.97 -------- -------- -------- -------- Percentage increase 48.53% 14.14% 23.16% 26.94% ======== ======== ======== ========
- ---------- (1) "Expense stop" represents operating expenses (generally including taxes, utilities, routine building expense and common area maintainance) for which we will not be reimbursed by our tenants. (2) Note: The company did not own any retail property during the quarter ended 6/30/98. 26 The following tables set forth scheduled lease expirations for executed leases at our majority-owned in-service properties (excluding apartment units) as of March 31, 1999 assuming no tenant exercises renewal options. OFFICE PROPERTIES:
AVERAGE ANNUAL RENTS ANNUAL PERCENTAGE OF TOTAL PERCENTAGE OF UNDER RENTAL RATE LEASED RENTS YEAR OF RENTABLE LEASED SQUARE FOOTAGE EXPIRING PER SQUARE REPRESENTED LEASE NUMBER OF SQUARE FEET REPRESENTED BY LEASES (1) FOOT FOR BY EXPIRING EXPIRATION LEASES EXPIRING EXPIRING LEASES (IN THOUSANDS) EXPIRATIONS (1) LEASES - -------------------- ----------- ------------- ----------------------- ---------------- ----------------- -------------- Remainder of 1999 955 3,288,450 11.6% $ 51,652 $ 15.71 11.4% 2000 897 4,098,481 14.4 65,965 16.09 14.6 2001 850 4,463,076 15.7 71,864 16.10 15.8 2002 671 4,159,527 14.6 67,013 16.11 14.8 2003 587 3,978,439 14.0 64,482 16.21 14.3 2004 209 2,145,807 7.5 33,410 15.57 7.4 2005 92 1,349,324 4.7 20,673 15.32 4.6 2006 49 1,267,839 4.5 19,872 15.67 4.4 2007 31 870,058 3.1 14,321 16.46 3.2 2008 54 1,707,657 6.0 24,240 14.19 5.4 Thereafter 55 1,103,252 3.9 18,311 16.60 4.1 --- --------- ----- -------- -------- ----- Total of average 4,450 28,431,910 100.0% $451,803 $ 15.89 100.0% ===== ========== ===== ======== ======== =====
INDUSTRIAL PROPERTIES:
AVERAGE ANNUAL PERCENTAGE OF TOTAL PERCENTAGE OF ANNUAL RENTS RENTAL RATE LEASED RENTS RENTABLE LEASED SQUARE FOOTAGE UNDER EXPIRING PER SQUARE REPRESENTED YEAR OF LEASE NUMBER OF SQUARE FEET REPRESENTED BY LEASES (1) FOOT FOR BY EXPIRING EXPIRATION LEASES EXPIRING EXPIRING LEASES (IN THOUSANDS) EXPIRATIONS (1) LEASES - ------------------- ----------- ------------- ----------------------- ---------------- ----------------- -------------- Remainder of 1999 203 1,820,161 17.0% $ 9,150 $ 5.03 17.7% 2000 172 2,157,591 20.1 10,681 4.95 20.6 2001 159 1,998,739 18.6 8,986 4.50 17.4 2002 83 1,267,253 11.8 5,929 4.68 11.5 2003 57 772,642 7.2 4,124 5.34 8.0 2004 23 1,369,816 12.8 5,275 3.85 10.2 2005 11 187,833 1.8 1,210 6.44 2.3 2006 5 224,099 2.1 1,110 4.95 2.1 2007 4 489,125 4.6 1,726 3.53 3.3 2008 8 376,536 3.5 3,245 8.62 6.3 Thereafter 3 58,876 0.5 335 5.69 0.6 --- --------- ----- ------- ------- ----- Total or average 728 10,722,671 100.0% $51,771 $ 4.83 100.0% === ========== ===== ======= ======= =====
- ---------- (1) Includes operating expense pass throughs and excludes the effect of future contractual rent increases. 27 RETAIL PROPERTIES:
AVERAGE ANNUAL RENTS ANNUAL PERCENTAGE OF TOTAL PERCENTAGE OF UNDER RENTAL RATE LEASED RENTS YEAR OF RENTABLE LEASED SQUARE FOOTAGE EXPIRING PER SQUARE REPRESENTED LEASE NUMBER OF SQUARE FEET REPRESENTED BY LEASES (1) FOOT FOR BY EXPIRING EXPIRATION LEASES EXPIRING EXPIRING LEASES (IN THOUSANDS) EXPIRATIONS (1) LEASES - -------------------- ----------- ------------- ----------------------- ---------------- ----------------- -------------- Remainder of 1999 87 320,973 15.7% $ 3,060 $ 9.53 12.0% 2000 72 238,381 11.7 2,940 12.33 11.5 2001 61 235,825 11.5 3,209 13.61 12.5 2002 41 162,767 8.0 2,161 13.28 8.4 2003 47 210,935 10.3 3,214 15.24 12.6 2004 19 168,129 8.2 1,260 7.49 4.9 2005 13 64,999 3.2 1,294 19.91 5.1 2006 12 109,066 5.3 1,172 10.75 4.6 2007 8 63,125 3.1 946 14.99 3.7 2008 14 105,765 5.2 2,223 21.02 8.7 Thereafter 23 366,156 17.8 4,118 11.25 16.0 -- ------- ----- ------- ------- ----- Total or average 397 2,046,121 100.0% $25,597 $ 12.51 100.0% === ========= ===== ======= ======= =====
TOTAL:
PERCENTAGE OF TOTAL PERCENTAGE OF ANNUAL RENTS LEASED RENTS RENTABLE LEASED SQUARE FOOTAGE UNDER EXPIRING REPRESENTED YEAR OF LEASE NUMBER OF SQUARE FEET REPRESENTED BY LEASES (1) BY EXPIRING EXPIRATION LEASES EXPIRING EXPIRING LEASES (IN THOUSANDS) LEASES - --------------------- ----------- ------------- ----------------------- ---------------- -------------- Remainder of 1999 1,245 5,429,584 13.2% $ 63,862 12.1% 2000 1,141 6,494,453 15.8 79,586 15.0 2001 1,070 6,697,640 16.2 84,059 15.9 2002 795 5,589,547 13.6 75,103 14.2 2003 691 4,962,016 12.0 71,820 13.6 2004 251 3,683,752 8.9 39,945 7.5 2005 116 1,602,156 3.9 23,177 4.4 2006 66 1,601,004 3.9 22,154 4.2 2007 43 1,422,308 3.5 16,993 3.2 2008 76 2,189,958 5.3 29,708 5.6 Thereafter 81 1,528,284 3.7 22,764 4.3 ----- --------- ----- -------- ----- Total or average 5,575 41,200,702 100.0% $529,171 100.0% ===== ========== ===== ======== =====
- ---------- (1) Includes operating expense pass throughs and excludes the effect of future contractual rent increases. INFLATION Historically inflation has not had a significant impact on our operations because of the relatively low inflation rate in our geographic areas of operation. Most of the leases require the tenants to pay their pro rata share of increased incremental operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in operating expenses resulting from inflation. In addition, many of the leases are for terms of less than seven years, which may enable us to replace existing leases with new leases at a higher base rent if rents on the existing leases are below the market rate. 28 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK THE EFFECTS OF POTENTIAL CHANGES IN INTEREST RATES AND EQUITY PRICES ARE DISCUSSED BELOW. OUR MARKET RISK DISCUSSION INCLUDES "FORWARD-LOOKING STATEMENTS" AND REPRESENTS AN ESTIMATE OF POSSIBLE CHANGES IN FAIR VALUE OR FUTURE EARNINGS THAT WOULD OCCUR ASSUMING HYPOTHETICAL FUTURE MOVEMENTS IN INTEREST RATES OR EQUITY MARKETS. THESE DISCLOSURES ARE NOT PRECISE INDICATORS OF EXPECTED FUTURE LOSSES, BUT ONLY INDICATORS OF REASONABLY POSSIBLE LOSSES. AS A RESULT, ACTUAL FUTURE RESULTS MAY DIFFER MATERIALLY FROM THOSE PRESENTED. SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS -- LIQUIDITY AND CAPITAL RESOURCES" FOR A DESCRIPTION OF OUR ACCOUNTING POLICIES AND OTHER INFORMATION RELATED TO THESE FINANCIAL INSTRUMENTS. INTEREST RATE RISK To meet in part our long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Borrowings under the Revolving Loan bear interest at variable rates. Our long-term debt, which consists of long-term financings and the issuance of debt securities, typically bears interest at fixed rates. In addition, we have assumed fixed rate and variable rate debt in connection with acquiring properties. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time we enter into interest rate hedge contracts such as collars, swaps, caps and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We do not hold or issue these derivative contracts for trading or speculative purposes. CERTAIN VARIABLE RATE DEBT. As of March 31, 1999, the Company had approximately $325.8 million of variable rate debt outstanding that was not protected by interest rate hedge contracts. If the weighted average interest rate on this variable rate debt is 100 basis points higher or lower during the 12 months ended March 31, 2000, our interest expense would be increased or decreased approximately $3.3 million. In addition, as of March 31, 1999, we had $80 million of additional variable rate debt outstanding that was protected by an interest rate collar that effectively keeps the interest rate within a range of 85 basis points. We do not believe that a 100 basis point increase or decrease in interest rates would materially affect our interest expense with respect to this $80 million of debt. INTEREST RATE HEDGE CONTRACTS. For a discussion of our interest rate hedge contracts in effect at March 31, 1999, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources -- CAPITALIZATION." If interest rates increase by 100 basis points, the aggregate fair market value of these interest rate hedge contracts as of March 31, 1999 would increase by approximately $21.1 million. If interest rates decrease by 100 basis points, the aggregate fair market value of these interest rate hedge contracts as of March 31, 1999 would decrease by approximately $23.1 million. In addition, we are exposed to certain losses in the event of nonperformance by the counterparties under the hedge contracts. We expect the counterparties, which are major financial institutions, to perform fully under these contracts. However, if the counterparties were to default on their obligations under the interest rate hedge contracts, we could be required to pay the full rates on our debt, even if such rates were in excess of the rates in the contracts. EQUITY PRICE RISK On August 28, 1997, we entered into a purchase agreement with UBS AG, London Branch ("UB-LB") involving the sale of 1.8 million shares of Common Stock and a related forward contract providing for certain purchase price adjustments. The forward contract (as amended) generally provides that if the market price (defined as the weighted average closing price of the Common Stock for the period beginning March 31, 1999 and ending when UB-LB has sold all of the shares issued under the forward contract) is less than a certain amount, which we refer to as the "Forward Price," we must pay UB-LB the difference times 1.8 million. (Similarly, if the Market Price of a share of Common Stock is above the Forward Price, UB-LB must pay us the difference in shares of Common Stock.) 29 On February 28, 1999, the Company and UB-LB amended the forward contract. Pursuant to the amendment: o UB-LB applied $12.8 million in Company collateral to "buy down" the Forward Price by approximately $7.10 (at March 31, 1999, the forward price was approximately $25.12); o We issued 161,924 shares of Common Stock to UB-LB as an interim settlement payment; and o UB-LB agreed not to sell any of the shares that we had issued to it until not later than March 31, 1999. If the weighted average closing price of one share of Common Stock during the period during which UB-LB sells the shares is 10% lower or higher than on March 31, 1999, our cost of settling the forward contract would increase or decrease by approximately $5 million, payable in cash or shares of Common Stock. The Company has retained the option of repurchasing any of UB-LB's remaining shares for cash prior to their distribution by UB-LB. 30 PART II -- OTHER INFORMATION Item 1. Legal Proceedings On October 2, 1998, John Flake, a former stockholder of J.C. Nichols, filed a putative class action lawsuit on behalf of himself and the other former stockholders of J.C. Nichols in the United States District Court for the District of Kansas against J.C. Nichols, certain of its former officers and directors and the Company. The complaint alleges, among other things, that in connection with the merger of J.C. Nichols and the Company, (1) J.C. Nichols and the named directors and officers of J.C. Nichols breached their fiduciary duties to J.C. Nichols' stockholders, (2) J.C. Nichols and the named directors and officers of J.C. Nichols breached their fiduciary duties to members of the J.C. Nichols Company Employee Stock Ownership Trust, (3) all defendants participated in the dissemination of a proxy statement containing materially false and misleading statements and omissions of material facts in violation of Section 14(a) of the Exchange Act of 1934 and (4) the Company filed a registration statement with the SEC containing materially false and misleading statements and omissions of material facts in violation of Sections 11 and 12(2) of the Securities Act of 1933. The plaintiffs seek equitable relief and monetary damages. We believe that the defendants have meritorious defenses to the plaintiffs' allegations. We intend to vigorously defend this litigation and have filed a motion to dismiss all claims asserted against the defendants. Due to the inherent uncertainties of the litigation process and the judicial system, we are not able to predict the outcome of this litigation. If this litigation is not resolved in our favor, it could have a material adverse effect on our business, financial condition and results of operations. Item 2. Changes in Securities and Use of Proceeds (c) During the three months ended March 31, 1999, the Company issued an aggregate of 1,179,103 shares of Common Stock to holders of Common Units in the Operating Partnership upon the redemption of such Common Units in private offerings exempt from the registration requirements pursuant to Section 4(2) or Rule 505 of Regulation D of the Securities Act. Each of the holders of Common Units were accredited investors under Rule 501 of the Securities Act, except for several holders who received their Common Stock pursuant to a single offering made under Rule 505 of Regulation D, and none of the offerings involved a general solicitation by the Company. The Company has registered the resale of such shares under the Securities Act. Item 3. Defaults Upon Senior Securities -- NA Item 4. Submission of Matters to a Vote of Security Holders -- NA Item 5. Other Information -- NA Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
EXHIBIT NO. DESCRIPTION - ------------- ------------------------------------------------------------------------------------- 10.1 Purchase and Sale Agreement dated March 22, 1999, by and among Highwoods/Florida Holdings, L.P. and America's Capital Partners, LLC, as amended by First Amendment to Purchase and Sale Agreement dated April 21, 1999. 10.2 Purchase and Sale Agreement dated March 22, 1999, by and among Highwoods/Florida Holdings, L.P. and America's Capital Partners, LLC, as amended by First Amendment to Purchase and Sale Agreement dated April 21, 1999. 27 Financial Data Schedule
(b) Reports on Form 8-K -- None 31 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 thereunto duly authorized. HIGHWOODS PROPERTIES, INC. /S/ RONALD P. GIBSON ---------------------------------------- RONALD P. GIBSON PRESIDENT AND CHIEF EXECUTIVE OFFICER /s/ CARMAN J. LIUZZO ---------------------------------------- CARMAN J. LIUZZO CHIEF FINANCIAL OFFICER (PRINCIPAL ACCOUNTING OFFICER) Date: May 17, 1999 32 EX-10 2 EXHIBIT 10.1 FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT is made and entered into the 21st day of April, 1999, by and between HIGHWOODS/FLORIDA HOLDINGS, L.P., a Delaware limited partnership ("Seller"), and AMERICA'S CAPITAL PARTNERS, LLC, a Florida limited liability company ("Purchaser"). Seller and Purchaser have previously entered into that certain Purchase and Sale Agreement dated as of March 22, 1999 (the "Agreement"). All terms used but not defined herein shall have the meanings given for such terms in the Agreement. Seller and Purchaser wish to amend certain of the provisions of the Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the mutual covenants and agreements herein and in the Agreement set forth and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Seller and Purchaser hereby agree as follows: 1. RECITALS. The foregoing recitals are true and correct. 2. THE PROPERTY. Section 1.1 and Exhibit "1.1" are hereby amended to delete therefrom the properties described as "Highwoods Development Parcels" in Exhibit "1.1," I.E. Cypress Creek Land consisting of approximately 11 acres and Highwoods Sawgrass consisting of approximately 38 acres, and to delete the "Sunrise Office Building." The Agreement is further amended to delete therefrom all references in the Agreement, including all exhibits thereto, to said "Highwoods Development Parcels" and "Sunrise Office Building." 3. DEFINITION OF CONTRACT. Section 1.5 is hereby amended to add the words "set forth in Exhibit "12.1"" after the word "agreements" in the first line of Section 1.5. 4. PURCHASE PRICE. Section 5 is hereby amended to reduce the Purchase Price by the amount of Seventeen Million Two Hundred Eighty Four Thousand Dollars ($17,284,000.00), to a total of Two Hundred Thirty-One Million Seven Hundred Fifty Thousand Dollars ($231,750,000.00) plus an amount equal to the book value of the Development Assets as described in Section 5.1 of the Agreement. 5. PAYMENT OF PURCHASE PRICE. Section 5.2 is hereby amended to change the approximate balance of the Purchase Price due in cash at Closing, subject to prorations and adjustments as provided in the Agreement, to $226,750,000.00. 6. TITLE OBJECTIONS. Section 9.1 is hereby amended to provide that April 28, 1999 is the last day on which Purchaser may notify Seller of any title and survey objections. 7. INVESTIGATION PERIOD. Sections 11.1 and 11.2 are hereby amended to provide that the Investigation Period shall expire on April 30, 1999 at 5:00 p.m. Eastern Daylight Time. 8. APPROVAL OF AMENDMENT BY SELLER'S BOARD OF DIRECTORS. Seller and Purchaser hereby acknowledge that this First Amendment must be approved by Seller's Board of Directors. Seller agrees to present the terms of this First Amendment to Seller's Board of Directors for its approval not later than April 27, 1999. Section 12.8 of the Agreement is hereby amended accordingly. -2- 9. BROKERS. Section 20 is amended to provide that the brokerage commission to be paid to Redwood Real Estate Services Corp. shall be One Million Dollars ($1,000,000.00). 10. HIGHWOODS PARK CONTRACTS. There are two (2) existing contracts for HVAC repairs, each between Seller and Airstron, dated March 1, 1999 and March 17, 1999, respectively, and one (1) existing contract for roof repairs, between Seller and Murton Roofing, dated March 1, 1999, in each case for work that is currently being done on the Improvements in the Highwoods Park property. At Closing, Seller shall credit to Purchaser an amount equal to the then-remaining balance due to said contractors for work completed and then unpaid and for the balance of the work contemplated by said contracts in order to achieve completion thereunder, and Seller shall provide to Purchaser proof (a) that the three (3) construction contracts are in good standing and full force and effect, (b) of the amounts that the contractors have been paid to the date of Closing, (c) that neither contractor has the right to file a lien against the Highwoods Park property, and (d) that the respective contractors have consented to the assignment of said contracts to Purchaser without change in the terms thereof. Section 19 of the Agreement is hereby amended to provide that Seller shall deliver, at Closing, appropriate assignments to Purchaser of said construction contracts. 11. SELLER FINANCING. At Closing, Seller shall provide purchase money financing in the amount of Thirty Million Dollars ($30,000,000.00) to Purchaser, for the purpose of closing the subject transaction. Said financing shall be for a term of three (3) years, shall be repaid in three (3) Ten Million Dollar ($10,000,000.00) increments on each anniversary date of the Closing, shall accrue interest at the rate of eleven percent (11%) per annum, which interest shall be payable quarterly in arrears, and shall be prepayable at any -3- time, in whole or in part, without penalty. The loan shall be secured in a manner acceptable to Seller, in its sole and absolute discretion, pursuant to loan and security documents reasonably acceptable to Purchaser and Seller, the forms of which shall be agreed upon by Purchaser and Seller by the end of the Inspection Period. 12. TRUE, CORRECT AND COMPLETE AGREEMENT. Seller and Purchaser hereby acknowledge that several pages in the Agreement have been substituted to clarify certain issues and, pursuant to the terms of the Agreement, certain exhibits were annexed thereto after the Effective Date. Seller and Purchaser acknowledge and agree that the copy of the Agreement attached hereto is a true, correct and complete copy of the Agreement as it existed prior to the date of this First Amendment. 13. NO FURTHER MODIFICATION. Except as set forth in this First Amendment, the Agreement remains unmodified and in full force and effect. IN WITNESS WHEREOF, the Seller and Purchaser have executed this First Amendment the day and year first written above. -4- WITNESSES: SELLER: HIGHWOODS/FLORIDA HOLDINGS, L.P., a Delaware limited partnership - ------------------------------- By: Highwoods/Florida G.P. Corp., a Delaware corporation, as general partner - ------------------------------- (As to Seller) By: Mack D. Pridgen III ---------------------------------- Title: Vice President ------------------------------- Dated: April 21, 1999 PURCHASER: AMERICA'S CAPITAL PARTNERS LLC, a Florida limited liability company. _______________________________ By: Alen C. de Olazarra ---------------------------------- Title: Managing Member ---------------------------------- _______________________________ Dated: April 21, 1999 (As to Purchaser) -5- PURCHASE AND SALE AGREEMENT THIS AGREEMENT is made and entered into as of the 22nd day of March, 1999, by and between HIGHWOODS/FLORIDA HOLDINGS, L.P., a Delaware limited partnership ("Seller"), and AMERICA'S CAPITAL PARTNERS, LLC, a Florida limited liability company and/or its permitted assigns hereunder ("Purchaser"). In consideration of the mutual covenants and promises set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties to this Agreement, the parties agree to the following terms and conditions: 1. PURCHASE AND SALE. Subject to the terms of this Agreement, Seller agrees to sell to Purchaser and Purchaser agrees to purchase from Seller the following property (collectively, the "Property" or "Properties"): 1.1 Those fee and leasehold parcels of property located in Dade, Lee and Broward Counties, Florida consisting of approximately 2,813,123 rentable square feet and 49 acres of land as more particularly described in Exhibit "1.1" as the "Existing Properties" (collectively, the "Realty"), together with the projects presently under construction and Seller's rights with respect to the "Allied Signal Option Parcel" as more particularly described in Exhibit "1.1" as the "Development Assets" (collectively, the "Development Assets"); 1.2 The land and all buildings, structures and other improvements situated on the Realty (the "Improvements"); 1.3 All fixtures, equipment, furnishings and other items of property whatsoever used or useful in the operation, repair and maintenance of the Realty, situated on the Realty, and owned by Seller (the "Personalty"); 1.4 All of the landlord's interest in and to tenant leases for space in the Improvements or on the Realty; 1.5 All transferable contracts and agreements (each a "Contract", and collectively, the "Contracts"), deposits, licenses, permits, and contract rights pertaining to ownership, development and/or operation of the Realty, the Improvements, the Personalty and the Development Assets; 1.6 All of Seller's rights in and to the name and all logos, trademarks and other rights in connection with the name, and general intangible rights pertaining to the ownership and/or operation of the Realty other than the name "Highwoods" and any logos, trademarks, tradenames or other intangible rights relating to the name "Highwoods"; and 1.7 All strips, gores, easements, privileges, rights-of-way, riparian and other water rights, rights to lands underlying any adjacent streets or roads, and other tenements, hereditaments and appurtenances, if any, pertaining to or accruing to the benefit of the Realty, the Improvements and the Development Assets. 2. EFFECTIVE DATE. If this Agreement is not executed and delivered by each party to it to all parties on or before March 25, 1999, at 5:00 p.m., Eastern time, then this Agreement shall be null and void and of no force or effect. Execution and delivery shall be defined as the receipt of the fully executed Agreement by the parties by means of the U.S. mails, delivery by a nationally recognized overnight delivery service, hand delivery or facsimile transmission. In the event delivery is by facsimile, the party delivering this Agreement shall deliver to all other parties an original copy of the fully executed Agreement within two (2) business days; failure to do so shall not affect the validity of the execution and delivery of this Agreement. The date of this Agreement, 2 for purposes of performance, shall be the date when the last one of Seller or Purchaser has signed this Agreement, as stated on the signature page (the "Effective Date"). 3. CLOSING DATE. Subject to other provisions of this Agreement for extension or termination, the closing of the transactions contemplated by this Agreement (the "Closing") shall be held at the offices of the attorneys for Purchaser, Holland & Knight LLP, 701 Brickell Avenue, Miami, Florida 33131 on or before May 19, 1999 (the "Closing Date"); provided, however, that, as to the properties identified as "Gulf Atlantic Center" and "The 1800 Eller Drive Building" on Exhibit "1.1" only, either Seller or Purchaser may, by written notice to the other party, extend the Closing Date on said two (2) properties for up to three (3) successive periods of thirty (30) days each, solely for the purpose of satisfying the condition precedent in Section 13.2.2, but any such extension shall not affect Purchaser's obligation to close in a timely manner with respect to the other properties comprising the Property. 4. DEPOSIT. 4.1 To secure the performance by Purchaser of Purchaser's obligations under this Agreement, Purchaser will deliver, within two (2) business days of the Effective Date, to the law firm of Holland & Knight LLP, as escrow agent ("Escrow Agent"), the sum of One Million Dollars ($1,000,000.00) by wire transfer to a depository designated by Escrow Agent, the proceeds of which shall be held in trust as an earnest money deposit (the "Initial Deposit") by Escrow Agent, and disbursed only in accordance with the terms of this Agreement. If Purchaser elects not to cancel this Agreement during the Investigation Period, as more particularly described in Section 11.2 of this Agreement, then, within two (2) business days following the expiration of said Investigation Period, Purchaser shall deliver to Escrow Agent a check or wire transfer in the sum of Four Million Dollars 3 ($4,000,000.00) (the "Additional Deposit") to be held together with, and upon the same terms and conditions as, the Initial Deposit. Once the Additional Deposit is paid to Escrow Agent, the term "Deposit" shall mean the Initial Deposit plus the Additional Deposit; prior to such payment, whenever used in this Agreement, the term "Deposit" shall mean only the Initial Deposit. In addition, on the Closing Date, in the event that the extension respecting the Gulf Atlantic Center and/or The 1800 Eller Drive Building properties is exercised by either party, the aggregate $5,000,000.00 Deposit shall be applied to the Purchase Price as provided in Section 5.2, and Purchaser shall be obligated to make a new deposit in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00) for each such property for which the Closing Date is extended, up to a maximum aggregate amount of $500,000.00, by wire transfer to Escrow Agent on the Closing Date, which amount shall thereafter become the "Deposit" for all purposes hereunder, and shall be applied to the portion of the Purchase Price to be paid upon the closing of the Gulf Atlantic Center and/or The 1800 Eller Drive Building properties or otherwise returned to Purchaser or paid to Seller as provided herein. 4.2 Escrow Agent shall use its reasonable efforts to invest the Deposit in an interest bearing account or certificate of deposit maintained with or issued by a commercial bank reasonably acceptable to Purchaser and Seller. All interest accrued or earned on the Deposit shall be paid or credited to Purchaser, except in the event of a default by Purchaser, without any default of Seller, in which event the interest shall be disbursed to Seller, together with the Deposit, as liquidated damages in accordance with Section 15. 4.3 Purchaser and Seller acknowledge that, if the Deposit is at any time in excess of $100,000.00, then the amount over $100,000.00 shall not be insured, and both parties hold 4 Escrow Agent harmless from all losses and costs and liabilities which may accrue or be incurred related to such lack of insurance. 5. PURCHASE PRICE. 5.1 The total purchase price (the "Purchase Price") to be paid by Purchaser to Seller for the Property is Two Hundred Forty-Nine Million Thirty-Four Thousand Dollars ($249,034,000.00), plus an amount equal to the book value of the Development Assets as described in Exhibit "1.1". For purposes of this Agreement, "book value" is defined as $650,000.00 for the "Allied Signal Option Parcel" and Seller's current cost basis as of the Closing Date, determined using generally accepted accounting principles, as to the other Development Assets. The Purchase Price shall be allocated among the Properties within two (2) business days prior to the end of the Inspection Period, which allocation, once completed, shall be attached to each copy of this Agreement as Exhibit "5.1." 5.2 The Purchase Price shall be paid to Seller as follows: $5,000,000.00, the Deposit described in Section 4 of this Agreement, which shall be paid to Seller at Closing; $244,034,000.00, approximately, in cash at Closing, subject to prorations and adjustments as provided in this Agreement, to be paid by cashier's check or by wire transfer; and an amount equal to the book value of the Development Assets as described in Section 5.1. In the event that the extension respecting the Gulf Atlantic Center and/or The Eller Drive Building properties is exercised by either party, the Purchase Price payable hereunder shall be reduced by Seller's aggregate net book value of the Gulf Atlantic and/or Eller Drive properties, and such amount shall thereafter become the "Purchase Price" hereunder for the Gulf 5 Atlantic Center and/or The 1800 Eller Drive Building properties. 6. CONFIDENTIAL NATURE OF AGREEMENT. Except for information obtained by Purchaser from third parties or which is otherwise available to the public, Purchaser shall keep all information obtained by Purchaser relative to the Property (including, without limitation, the Due Diligence Documents), as it relates to this transaction, confidential. Purchaser shall have the right to disclose such information notwithstanding such limitation to Purchaser's professionals, consultants, lenders, officers, employees, stockholders, purchasers and affiliates for the sole purpose of evaluating the Property to determine its value and suitability for Purchaser's needs and financing and as may be required by applicable law. Seller shall have the right, in its sole discretion, to terminate this Agreement in the event of a material breach by Purchaser of this Section 6, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination. 7. TITLE EVIDENCE. Within fifteen (15) days following the Effective Date, Purchaser shall, at Purchaser's expense, obtain an ALTA marketability title insurance commitment (the "Commitment"), with fee and leasehold owner's title policy premium to be paid by Purchaser at Closing, issued by Holland & Knight LLP, as agent for one or more national title insurers acceptable to Purchaser (collectively, the "Title Insurer"), with hard copies of all exceptions. The Commitment shall show Seller to be vested with good and marketable and insurable fee simple or leasehold title to the Realty and the Development Assets other than the Allied Signal Option Parcel, insurable in an amount equal to the Purchase Price in accordance with the standards adopted from 6 time to time by The Florida Bar, at standard rates, and Seller believes that the Commitment will show the Realty and the Development Assets other than the Allied Signal Option Parcel to be free and clear of all liens, encumbrances, leases, tenancies, covenants, conditions, restrictions, rights-of-way, easements and other matters affecting title, except the following (which, if not objected to by Purchaser pursuant to the terms of Article 9 below, shall be deemed the "Permitted Exceptions"): 7.1 Ad valorem real estate taxes for 1999 and subsequent years; 7.2 All applicable zoning ordinances and regulations; 7.3 Matters of record which are common to the subdivision; 7.4 Matters described in Seller's existing title policies with respect to the Properties, including, with respect to the Gulf Atlantic Center and The 1800 Eller Drive Building properties, the ground leases (collectively, the "Ground Leases") pursuant to which Seller obtained its leasehold interest in the subject Realty; and 7.5 Tenants in possession. 8. SURVEY. 8.1 Within the time period for providing the Commitment, Purchaser shall obtain and deliver to Seller ALTA surveys (the "Surveys") of the Realty and the Improvements. The Surveys shall: 8.1.1 meet the minimum technical standards of the Florida Board of Land Surveyors; 8.1.2 be certified to Purchaser, to Purchaser's attorney, to the Title Insurer and to Purchaser's mortgage lender; 7 8.1.3 be certified (or recertified) as of a date subsequent to the Effective Date; 8.1.4 set forth the total number of square feet and acres in the Realty; 8.1.5 show the location of all improvements, parcels (if any) in the legal descriptions of the Realty, number of square feet and parking spaces in the Improvements, utility, setback and other lines; easements, either visible or recorded, and recording references of them; and 8.1.6 include elevation and flood zone information. 8.2 If the Survey shall reflect any encroachments, overlaps, unrecorded easements or similar rights in third parties, or any other adverse matters not specifically provided for in this Agreement, then the same shall be deemed "title defects" as set forth in Section 9. 9. TITLE DEFECTS. 9.1 Purchaser shall have until April 21, 1999 in which to examine the Commitment and the Surveys. If Purchaser finds title to be defective, Purchaser shall, no later than 5:00 p.m. Eastern time on April 21, 1999, notify Seller in writing, specifying the title defect(s). If Purchaser fails to give Seller written notice of any title defect(s) before 5:00 p.m. Eastern time on April 21, 1999, the defects shown in the Commitment or the Surveys shall be deemed to be waived as title objections to closing this transaction. 9.2 If Purchaser has given Seller timely written notice of defect(s) and the defect(s) render the title other than as represented in this Agreement or if any new defects appear from the date of the Commitment through the Closing Date, Seller shall use commercially reasonable efforts to cause only those defects recorded after October 7, 1997 to be cured by the Closing Date. Seller agrees to remove, by payment, bonding or otherwise, any such lien (other than 8 environmental liens) against the Property capable of removal by the payment of money or bonding. Seller shall not be obligated to (but may, in its sole and absolute discretion) cure any other defect or to buyout or settle any other claim or lien against the Property. At Seller's option, the Closing Date may be extended for a period not to exceed sixty (60) days for purposes of eliminating such title defects. If such additional time is reasonably required by Seller to cure such title defects, Seller's failure to extend the Closing Date shall be commercially unreasonable. 9.3 If Seller does not eliminate such defects as of the Closing Date, as the same may be extended under the preceding sentence, or if any new "title defects" appear between the date of the Commitment through the Closing Date which Seller does not eliminate as of the Closing Date, Purchaser shall have the option to: 9.3.1 Close and accept the title "as is," without reduction in the Purchase Price and without claim against Seller for such title defects (except for any lien that Seller is required to cure pursuant to Section 9.2 that can be removed by the payment of money or bonding, for which credit shall be given Purchaser at the Closing unless Seller pays the same at the Closing) (and in such event, the Closing shall take place on the Closing Date); or 9.3.2 Cancel this Agreement, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination, unless such title defects were caused by Seller's willful act or willful omission, in which event Seller shall remain liable to Purchaser for damages caused by such title defects. 10. EXISTING LEASES. Seller represents and warrants to Purchaser that attached to 9 this Agreement as Exhibit "10" is a rent roll of all leases, tenancies, and other occupancies, whether written or oral, affecting all or any portion of the Property (the "Leases"), setting forth, for each tenant (each a "Tenant", and collectively, the "Tenants"), the name of the tenant, the space(s) affected, the rents, the lease term, the security deposit as required by the subject Lease, if any, prepaid rent and any rent arrearages. Upon execution of this Agreement by Seller, Seller shall deliver to Purchaser true, correct and complete copies of all of the Leases. Seller further represents and warrants to Purchaser that: 10.1 No other parties have any rights of occupancy or possession (including, without limitation, renewal options, rights of first refusal, options to purchase, free rent, tenant improvement allowances or other special concessions) of all or any portion of the Property except as set forth in the rent roll which is a part of Exhibit "10" or as set forth in the lease files provided by Seller to Purchaser pursuant to Section 11.1; 10.2 All of the Leases are, as of the date of this Agreement, in good standing, without default on the part of Seller, and shall remain without default on the part of Seller through the date of the Closing; 10.3 Seller shall use its diligent, good-faith, commercially reasonable efforts to deliver to Purchaser, at least ten (10) days prior to the Closing, appropriate estoppel letters from all Tenants occupying more than 10,000 square feet ("Major Tenants") and from a sufficient number of Tenants occupying the remaining occupied square feet in the Property, and not occupied by Major Tenants, necessary to provide estoppel coverage on eighty percent (80%) of the occupied square footage in the Property, such estoppel letters to confirm in all material respects the information contained in Exhibit "10" and provided to Purchaser by Seller pursuant to Sections 11.1.5 and 10 11.1.6 and to be in the form attached hereto as Exhibit "10.3". If the estoppel letters required by the preceding sentence are not timely obtained after diligent effort by Seller, then Seller shall execute an affidavit as to each such Lease for which it has not obtained an estoppel letter, setting forth the information which would have been contained in the estoppel letter, which shall substitute for such missing estoppel letters until such time as estoppel letters are received from the subject Tenants; provided, however, that Seller shall not be obligated to give, and Purchaser shall not be obligated to accept, substitute affidavits for more than 100,000 occupied square feet in the aggregate with respect to missing estoppel letters from Major Tenants. If Seller is unable to comply with the provisions of this Section 10.3 by the Closing Date, Purchaser shall have the options set forth in Sections 14.1 and 14.2; 10.4 There are no modifications, understandings or agreements with respect to the Leases except as reflected in the Leases or as set forth in the lease files provided by Seller to Purchaser may be disclosed to Purchaser pursuant to Section 11.1; 10.5 Seller has not received any prepaid rent under any of the Leases except as may be disclosed to Purchaser in the rent roll which is part of Exhibit "10"; and 10.6 Seller shall not accept payment of any rent under any Lease for more than one (1) month in advance. Seller shall have the right, prior to the end of the Inspection Period, to modify any existing Lease or Contract and enter into any new lease or agreement affecting all or any portion of the Property, provided that Seller shall give Purchaser prompt notice of any such modification or new lease or agreement, and provided further that Seller shall not exercise its option, or enter into any lease respecting, the Allied Signal Option Parcel without Purchaser's prior written consent, which shall not be unreasonably withheld or delayed. After the end of the 11 Investigation Period, Seller shall modify any existing Lease or Contract or enter into any new lease or agreement affecting all or any portion of the Property only with the prior written consent of Purchaser, which shall not be unreasonably withheld. Seller shall immediately provide to Purchaser a copy of any such proposed modification, lease or agreement, and Purchaser shall have two (2) business days from the delivery thereof in which to withhold its consent to the terms thereof in writing, if it so chooses, or else the same shall be deemed consented to by Purchaser. If Purchaser timely withholds its consent, Purchaser shall have the right to terminate this Agreement, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination. If Purchaser elects not to terminate this Agreement at the end of the Investigation Period, all new leases and agreements entered into by Seller prior to the end of the Investigation Period shall become "Leases" and "Contracts," respectively, hereunder. In addition, all new leases and agreements entered into by Seller after the end of the Investigation Period with Purchaser's consent or deemed consent shall become "Leases" and "Contracts," respectively, hereunder. 11. INVESTIGATION PERIOD. 11.1 During the period from the Effective Date until April 23, 1999 (the "Investigation Period"), Purchaser shall have the right to conduct, at Purchaser's expense, whatever reasonable investigations, analyses and studies of the Property that Purchaser may deem appropriate to satisfy Purchaser with regard to: 11.1.1 the physical condition of the building(s) and other improvements included in the Property, including their structure, roofs, air conditioning, heating, electrical, 12 plumbing and other mechanical systems; 11.1.2 the physical condition of all fixtures, equipment, furnishings and other items of property referred to in Subsection 1.3 above, an inventory of which shall be furnished by Seller at Seller's expense within fifteen (15) days after the Effective Date; 11.1.3 the permitted uses of and improvements to the Property under applicable building and zoning ordinances and the present compliance or non-compliance with the same; 11.1.4 evidence of any hazardous waste or similar materials, and of Radon, in, on, under or about the Property; 11.1.5 all existing Contracts, Leases, lease files, lease abstracts, historical MRI reports (not including prospective information, such as budget projections, which are proprietary to Seller) and tenancies affecting the Property; and 11.1.6 Seller's historical operating statements for calendar year 1998 and year-to-date 1999 (as and when available). 11.2 Purchaser and its agents and employees shall have the right to enter upon the Property for the purpose of making inspections, at Purchaser's sole risk, cost and expense, and subject to the rights of tenants. No destructive testing shall be permitted. All of such entries upon the Property shall be at reasonable times during normal business hours and after at least one (1) business day's prior notice to Seller or Seller's agent, and Seller or Seller's agent shall have the right to accompany Purchaser during any activities performed by Purchaser on the Property. Seller shall make available to Purchaser at all times during business hours during the Investigation Period, and after the Investigation Period until the Closing Date, upon one (1) business day's prior notice, all 13 documents relating to the matters described in Section 11.1 above which are in Seller's possession for review and copying by Purchaser (the "Due Diligence Documents"). In addition, within five (5) business days after the Effective Date, Seller shall provide Exhibits "12.1" and "12.6" to Purchaser. Purchaser shall promptly provide to Seller copies of all environmental and engineering reports which Purchaser may obtain from third parties relating to the Property. If Purchaser is dissatisfied, for any reason and in Purchaser's exclusive judgment, with the result of Purchaser's investigations, then Purchaser may cancel this Agreement by notifying Seller of such cancellation on or before 5:00 p.m. on April 23, 1999, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination. 11.3 If Purchaser or Seller cancels this Agreement pursuant to the terms hereof, Purchaser shall deliver to Seller all of the Due Diligence Documents. Upon receipt of said documents by Seller, Escrow Agent shall disburse the Deposit, together with all interest earned thereon, to Purchaser. 11.4 Upon Purchaser's waiver of or failure to duly exercise its right to terminate described in this Section 11, Purchaser shall have accepted the Property "as is", with no representations or warranties regarding the Property other than any which may be specifically stated in this Agreement. 11.5 Notwithstanding any provisions in this Agreement to the contrary, Purchaser does and shall indemnify and hold harmless Seller and its agents, employees, successors and assigns, to the extent of the Deposit, against all losses, claims, damages, liability, attorneys' and 14 accountants' fees and costs of litigation and all other expenses related to, growing out of, or arising from the investigation of or entry upon the Property, or other acts undertaken by Purchaser or its agents, employees or assigns, under this Agreement, including, without limitation, mechanic's or materialmen's liens. If Purchaser does not close on the purchase of the Property under this Agreement, it shall return the Property to the condition in which it existed prior to any investigations undertaken by Purchaser or its agents, employees and assigns pursuant to this Agreement. 11.6 Except as otherwise expressly provided herein, Seller makes no representations or warranties as to the accuracy or completeness of the Due Diligence Documents. 11.7 The inspections under this Section 11 may include a Phase I environmental inspection of the Property, but no Phase II environmental inspection shall be performed without the prior written consent of Seller, which may be withheld in its sole and absolute discretion, and if consented to by Seller, the proposed scope of work and the party who will perform the work shall be subject to Seller's review and approval. Upon Seller's request, Purchaser shall deliver to Seller copies of any Phase II or other environmental report to which Seller consents as provided above. Purchaser, for itself and any entity affiliated with Purchaser, waives and releases Seller and its employees, agents, officers, trustees, directors, beneficiaries and partners from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses of whatever kind or nature, known or unknown, existing and future, contingent or otherwise (including any action or proceeding, brought or threatened, or ordered by any appropriate governmental entity) made, incurred, or suffered by Purchaser or any entity affiliated with Purchaser relating to the presence, misuse, use, disposal, release or threatened release of any hazardous or toxic materials, chemicals or wastes as the Property and any liability or claim related to the Property arising under 15 the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, and the Toxic Substance Control Act, all as amended, or any other cause of action based on any other state, local, or federal environmental law, rule or regulation; provided, however, the foregoing release shall not operate or release any claim by Purchaser against any person or entity other than described above in this Section 11.7. The provisions of this Section 11.7 shall survive indefinitely the Closing or any termination of this Agreement and shall not be merged into the closing documents. 11.8 To the maximum and extent permitted by applicable law, and except for Seller's representations and warranties (collectively, "Seller's Warranties") in this Agreement and the documents of conveyance and assignment to be delivered at the Closing, this sale is made and will be made without representation, covenant, or warranty of any kind (whether express, implied, or, to the maximum extent permitted by applicable law, statutory) by Seller. As a material part of the consideration of this Agreement, Purchaser agrees to accept the Property on an "AS IS" and "WHERE IS" basis, with all faults and any and all latent and patent defects, and without any representation or warranty, all of which Seller hereby disclaims, except for Seller's Warranties. Except for Seller's Warranties, no warranty or representation is made by Seller as to (a) fitness for any particular purpose, (b) merchantability, (c) design, (d) quality, (e) condition, (f) operation or income, (g) compliance with drawings or specifications, (h) absence of defects, (i) absence of hazardous or toxic substances, (j) absence of faults, (k) flooding, or (1) compliance with laws and regulations including, without limitation, those relating to health, safety, and the environment. Purchaser acknowledges that Purchaser has entered into this Agreement with the intention of 16 making and relying upon its own investigation of the physical, environmental, economic use, compliance and legal condition of the Property and that, except as otherwise provided in this Agreement, Purchaser is not now relying, and will not later rely, upon any representations and warranties made by Seller or anyone acting or claiming to act, by, through or under or on Seller's behalf concerning the Property. The provisions of this paragraph shall survive indefinitely the Closing or any termination of this Agreement and shall not be merged into the closing documents. 12. REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller represents and warrants to Purchaser, to Seller's knowledge, and covenants and agrees with Purchaser as follows: 12.1 Seller has not entered into any contracts, subcontracts, arrangements, licenses, concessions, easements or other agreements, either recorded or unrecorded, written or oral, affecting all or any portion of the Property, or the use of it, other than the Leases set forth in Exhibit "10" and those agreements set forth in Exhibit "12.1"; 12.2 There are no (i) existing or pending improvement liens affecting the Property; (ii) violations of building codes and/or zoning ordinances or other governmental or regulatory laws, ordinances, regulations, orders or requirements affecting the Property; (iii) existing, pending or threatened lawsuits or appeals of prior lawsuits affecting the Property; (iv) existing, pending or threatened condemnation proceedings affecting the Property; or (v) existing, pending or threatened zoning, building or other moratoria, downzoning petitions, proceedings, restrictive allocations or similar matters that could affect Purchaser's use of the Property; 12.3 Seller is vested with good and marketable title to all fixtures, equipment, furnishings and other items of property referred to in Section 1 and owned by Seller, free of all 17 financing and other liens or encumbrances; 12.4 Seller shall maintain the Property in the same manner as it has been maintained prior to the Effective Date until the Closing Date and shall comply prior to the Closing in all material respects with all laws, rules, regulations, and ordinances of all governmental authorities having jurisdiction over the Property; 12.5 There is no radon in the Improvements which are above government approved levels; Seller has not done nor allowed anything which could cause toxic or hazardous materials or waste to be present in, on or about the Property, and has no knowledge of any such materials or waste being or ever having been in, on, or about the Property or adjacent properties, in each case, except as described in Exhibit "12.6" attached hereto, which, for purposes hereof, constitutes all of Seller's knowledge; 12.6 Seller shall provide, and keep in force through the Closing, policies of fire, flood, windstorm, hazard and other casualty insurance on the improvements portion of the Realty and all items of other property referred to in Section 1 above; 12.7 There are no agreements currently in effect which restrict the sale of the Property; 12.8 Subject to approval of Seller's Board of Directors as provided in this Section 12.8, Seller has the right, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby nor the fulfillment of nor the compliance with the terms, conditions and provisions of this Agreement will conflict with or result in a violation or breach of Seller's partnership agreement, or any other instrument or 18 agreement of any nature to which Seller is a party or by which it is bound or may be affected, or constitute (with or without the giving of notice or the passage of time) a default under such an instrument or agreement; no consent, approval, authorization or order of any person is required with respect to the consummation of the transactions contemplated by this Agreement. Seller agrees to present the terms of this Agreement to its Board of Directors (the "Board") for its approval not later than March 23, 1999. Seller further agrees to notify Purchaser of the decision of such Board no later than the end of business on such date. A Board decision to approve this transaction shall be final except that in the event of a material change in a term as embodied in this Agreement, the parties acknowledge that such change in terms may be subject to reconsideration by the Board, at its election. 12.9 No commitments or agreements have been or will be made by or on behalf of Seller to any governmental authority, utility company, school board, church or other religious body, any homeowners or homeowners' association, or any other organization, group or individual, relating to the Property which would impose an obligation upon Purchaser to make any contributions or dedications of money or land to construct, install or maintain any improvements of a public or private nature on or off the Realty or the Development Assets, or otherwise impose liability on Purchaser. 12.10 The Ground Leases are, as of the date of this Agreement, in good standing, without default on the part of Seller, and have not been modified, changed, altered or amended in any respect since Seller acquired its leasehold interest in the Ground Leases, and the lessors under the Ground Leases are not in default, nor has there occurred any event which, by lapse of time or otherwise, will result in any default under the Ground Leases. 19 12.11 At all times during the term of this Agreement and as of the Closing, all of Seller's representations, warranties and covenants in this Agreement shall be true and correct; no representation or warranty by Seller contained in this Agreement and no statement delivered or information supplied to Purchaser pursuant to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements or information contained in them or in this Agreement not misleading. For purposes of this Section 12, "to Seller's knowledge" shall mean the actual knowledge of Troy Cox, James Heistand, Dale Johannes and Richard Nash, without independent inquiry. Purchaser warrants and represents to Seller that Purchaser has the right, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by it, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by it nor the fulfillment of nor the compliance with the terms, conditions and provisions of this Agreement will conflict with or result in a violation or breach of Purchaser's organizational documents, or any other instrument or agreement of any nature to which Purchaser is a party or by which it is bound or may be affected, or constitute (with or without the giving of notice or the passage of time) a default under such an instrument or agreement; no consent, approval, authorization or order of any person is required with respect to the consummation of the transactions contemplated by this Agreement. At all times during the term of this Agreement and as of the Closing, all of Purchaser's representations, warranties and covenants in this Agreement shall be true and correct. 13. CONDITIONS PRECEDENT. 20 13.1 An express condition precedent to Purchaser's obligation to close this transaction is the truth and correctness of all of Seller's representations and warranties and the fulfillment of all of Seller's covenants at all times during the term of this Agreement and as of the Closing, and no inquiry, analysis or examination made by Purchaser (or the results of them) shall reduce, limit or otherwise affect said representations, warranties and covenants. 13.2 The following items are additional conditions precedent to Purchaser's obligation to close the transactions contemplated by this Agreement: 13.2.1 The Property shall remain zoned at the time of the Closing so as to permit each and every use now being made of the Property; there shall be no additional limiting conditions or restrictions under any zoning resolution, ordinance, covenant, agreement, or the like that could prohibit or frustrate any use of the Property now being made or otherwise permissible under said zoning classification in the absence of such conditions or restrictions. 13.2.2 As to the Gulf Atlantic Center and The 1800 Eller Drive Building properties only, Purchaser shall have received consents to the assignment of the lessee's interests under the Ground Leases by Seller and the assumption thereof by Purchaser, and Purchaser shall also have received estoppel certificates from the ground lessors under the Ground Leases in form and substance reasonably satisfactory to Purchaser; provided, however, that if one or both of such consents are not received by the Closing Date and Seller or Purchaser extends the Closing Date as to the Gulf Atlantic Center and/or The 1800 Eller Drive Building properties, the foregoing shall be a condition to closing of the Gulf Atlantic Center and/or The 1800 Eller Drive Building properties only. 14. DEFAULT BY SELLER. Prior to the Closing Date, in the event that Purchaser 21 becomes aware of facts or circumstances indicating that a representation or warranty of Seller contained herein is inaccurate, untrue or breached, as the case may be, Purchaser shall promptly so notify Seller in writing, and Seller shall have the right to cure the same on or before the Closing Date, failing which Purchaser shall have the right, by written notice to Seller given on the Closing Date, to terminate this Agreement, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations hereunder, except for those which expressly survive such termination. If any of Seller's representations and warranties are not true and correct in all material respects as of the Closing Date or Seller's covenants are not fulfilled in all material respects or all other conditions precedent are not met in all material respects as of the Closing (or earlier specified date, if any), or if Seller fails to perform any of the terms and conditions of this Agreement in all material respects or is otherwise in default under this Agreement, then Purchaser, at Purchaser's sole option, may elect to: 14.1 Waive the default or failure and close "as is"; or 14.2 Cancel this Agreement by written notice to Seller given on or before the Closing Date, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination, unless the default was caused by the willful act or willful omission of Seller, in which event Seller shall continue to be liable for damages and attorneys' fees caused by such default); or 14.3 Seek specific performance of Seller's obligations under this Agreement. In the event that any representation or warranty made by Seller herein is found to be 22 inaccurate, untrue or breached, as the case may be, after the Closing Date, Purchaser shall have the right, for a period of one (1) year after the Closing Date, to seek actual (but not consequential or punitive) damages from Seller; provided, however, that Purchaser must commence a legal action or proceeding seeking such damages within said one (1)-year period, or its claims shall thereafter be barred. 15. DEFAULT BY PURCHASER. In the event of the failure or refusal of Purchaser to close this transaction, Escrow Agent shall pay to Seller the Deposit, together with all interest earned thereon, as agreed and liquidated damages for said breach, and as Seller's sole and exclusive remedy for default of Purchaser, whereupon this Agreement shall terminate and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination. 16. PRORATIONS. 16.1 Real estate and personal property taxes and ground rents under the Ground Leases shall be prorated as of midnight of the day before the Closing Date. In the event that the taxes for the year of the Closing are unknown, the tax proration will be based upon such taxes for the prior year and, at the request of either party, such taxes for the year of the Closing shall be reprorated and adjusted when the tax bill for the year of the Closing is received and the actual amount of taxes is known. 16.2 Utility bills or charges, where applicable, shall be prorated as of midnight of the day before the Closing Date. The parties shall, to the extent reasonably possible, have utility meters read the day preceding the Closing Date and Seller shall be responsible for paying all utility bills or charges which accrued against the Property prior to midnight of the day before the Closing 23 Date and Purchaser shall be required to pay all utility bills or charges accruing against the Property on or subsequent to midnight of the day before the Closing Date, with any charge for which a reading could not be made as of the day preceding the Closing Date being prorated as of midnight of the day before the Closing Date using an estimate based on the most recent reading for such utility. Purchaser shall, as of the day prior to the Closing Date, post with each utility company such deposit as each such utility company shall require, to the end that Seller's utility deposits shall be refunded to Seller following the Closing, after appropriate charge for Seller's utility bills. Purchaser shall secure its own insurance on the Property as of the Closing Date, and Seller shall cancel all existing insurance policies as of the Closing Date. Purchaser and Seller shall, before and after the Closing, reasonably cooperate with each other in connection with this Section 16.2. 16.3 The parties agree that, except as otherwise specifically stated elsewhere in this Agreement, all income and expenses of the Property are intended to be prorated as of midnight of the day before the Closing Date. Purchaser shall be deemed the owner of the Property, for the purpose of such calculation, for the entire Closing Date. Income shall include all revenue of Seller derived from the operation of the Property. Expenses shall include all expenses from the operation of the Property. Income actually received by Seller prior to the Closing in payment for a period subsequent to the Closing shall appear on the closing statement as a credit to Purchaser. Expenses actually paid by Seller prior to the Closing in payment for a period subsequent to the Closing shall appear on the closing statement as a credit to Seller. 16.4 Notwithstanding anything to the contrary in Section 16.3 above, rents under the Leases, including, without limitation, fixed rent and additional rent, including operating expense and real estate tax pass-throughs (collectively, "Rents"), shall be addressed in the manner set forth in 24 this Section 16.4. All collected Rents for the month in which the Closing occurs shall be prorated as of midnight the day before the Closing Date. All uncollected Rents for the months prior to the month in which the Closing occurs and all uncollected Rents for the month of the Closing (the "Delinquent Rents"), shall remain Seller's property, and Seller shall receive no proration credit therefor at the Closing. Purchaser, however, shall receive a proration credit for its prorated portion of all Rents for the month of the Closing whether such Rents have been collected or remain uncollected. All prepaid Rents (for the months following the Closing) paid to or in possession of Seller shall be credited to Purchaser at the Closing. Purchaser agrees to use good faith and commercially reasonable efforts, for a period of six (6) calendar months after the Closing, to collect Delinquent Rents from each tenant ("Tenant or Tenants") remaining in possession of its space under a Lease. If any Tenant identifies in writing at the time of payment what its payment is for or how such payment should be applied, such payment shall be used or applied in such manner. Any and all other amounts received by Purchaser from any party owing the Delinquent Rents which are received by Purchaser after the Closing Date shall first be applied to the Rent due for the then current month, then to Purchaser's reasonable collection costs (including reasonable attorneys' fees and costs), then to accrued obligations of such Tenant due prior to the Closing (in the order of accrual), and then to accrued obligations due after the Closing. Purchaser shall promptly deliver to Seller any funds to be applied to Delinquent Rents in accordance with the preceding sentence. No portion of Delinquent Rents attributable to a particular Tenant shall be applied against the Rents or Delinquent Rents attributable to another Tenant, or the expenses incurred by Purchaser in collecting such Rents or Delinquent Rents from other Tenants. Purchaser shall not be obligated to file suit to collect the Delinquent Rents. After the Closing, Seller shall be entitled to commence and/or 25 continue any collection efforts against any Tenants owing Delinquent Rents, including, but not limited to, commencing and/or continuing prosecuting lawsuits against such Tenants, so long as such lawsuits are for money damages only and do not seek the remedy of eviction. 16.5 All security deposits or prepaid Rent held by or under the control of Seller, as required by the Leases, reflected on the tenant estoppel letter with respect to the Leases and as set forth on Exhibit "10" (less any offsets indicated thereon as hereinafter defined, if applicable), shall be paid or credited to Purchaser as of the Closing Date, and Purchaser shall, with respect to all matters arising or accruing after the Closing, assume all liability therefor. Seller shall not, after the Effective Date and prior to the Closing, further offset all or any portion of such security deposits or prepaid Rent without the prior written consent of Purchaser. 16.6 Except as otherwise provided in this Agreement, any lease commissions or tenant improvement costs which are (i) incurred by Seller in connection with any existing Leases or new leases entered into prior to the end of the Investigation Period or entered into after the end of the Investigation Period and approved by Purchaser in writing; or (ii) associated with currently existing renewal, expansion or refusal rights of Tenants under the Leases exercised after the Effective Date but prior to the Closing shall be prorated between the parties in proportion to the percentage of the Lease term in the case of (i) above, or the renewal or expansion term or term applicable to the expansion or refusal rights in the case of (ii) above, which falls before midnight of the day before the Closing Date (which shall be Seller's portion) and the percentage of same which falls after midnight of the day before the Closing Date (which shall be Purchaser's portion). Any other lease commissions or tenant improvement costs incurred by Seller in connection with the Leases shall be the responsibility of Seller; provided, however, that Purchaser shall bear the cost of 26 any lease commissions or tenant improvement costs associated with currently existing renewal, extension, expansion or refusal rights of Tenants under the Leases exercised after the Closing. 16.7 Seller agrees to pay to the appropriate taxing authority sales tax collected by Seller in connection with Rent received by Seller under the Leases for the month in which the Closing occurs promptly after the Closing. Not later than one hundred twenty (120) days after the Closing Date, Seller shall deliver to Purchaser the receipt or certificate from the Florida Department of Revenue provided for in Section 212.10(1), Florida Statutes (such as a "letter of good standing"), evidencing that the sales taxes for such month and for previous months have been paid in full and that no interest or penalties are due in connection with same. 16.8 Notwithstanding anything to the contrary which may be contained herein: 16.8.1 Seller and Purchaser acknowledge and agree that to the extent the annual reconciliation of pass-throughs for the 1998 calendar year are not completed prior to the Closing, Seller, rather than Purchaser, shall have the right and obligation to complete such reconciliations and to collect and retain reimbursements from Tenants or pay reimbursements to Tenants, as applicable. 16.8.2 Upon the annual reconciliation of such pass-throughs with the Tenants of the Property for the 1999 calendar year, (i) if such reconciliation results in there being refunds due and payable to the Tenants, Seller shall promptly pay to Purchaser, upon Purchaser's request (accompanied by appropriate documentation), Seller's share of such refund amounts prorated for the portion of the year during which Seller owned the Property, and (ii) if such reconciliation results in Tenants owing funds, Purchaser shall have the right to collect such funds from the Tenants and Purchaser shall promptly pay to Seller a portion of the funds so collected, 27 prorated for the portion of the year during which Seller owned the Property. 16.9 The provisions of this Section 16 shall survive the Closing under this Agreement. 17. IMPROVEMENT LIENS. All installments due and owing under certified, confirmed or ratified liens for governmental improvements or special assessments as of the Closing Date, if any, shall be paid in full by Seller, and pending liens and installments thereof not yet due and owing for governmental improvements or special assessments as of the Closing Date shall be assumed by Purchaser, provided that where the improvement has been substantially completed as of the Closing Date, such pending lien shall be considered certified. 18. CLOSING COSTS. At the Closing, Seller shall pay the documentary stamps and surtax, if any, due on the deed of conveyance. Purchaser shall pay the owner's title insurance premium. Seller and Purchaser shall equally bear the cost of the Surveys. Each party shall pay its own attorneys' fees and bear the recording costs of any instruments received by that party, except that Seller shall pay the recording costs on documents necessary to clear title. 19. CLOSING. 19.1 Seller shall convey title to the Property owned in fee by Special Warranty Deed, subject only to the Permitted Exceptions (which, if Purchaser requests, shall not be specifically enumerated) and its leasehold interests in the Gulf Atlantic Center and The 1800 Eller Drive Building properties by assignment of the Ground Leases and assumption thereof by Purchaser, which assignment and assumption shall contain reciprocal indemnities for matters arising before and after the Closing Date and shall address such other matters as the ground lessors under the Ground Leases may require. Seller shall also deliver to Purchaser at the Closing: 28 19.1.1 a mechanic's lien affidavit, to the title insurer and Purchaser, in form acceptable to the Title Insurer to delete the standard exception relating to such liens in Purchaser's owner's title insurance policy; 19.1.2 an affidavit, to the Title Insurer and Purchaser, that there are no unrecorded easements and that Seller has exclusive possession of the Property, except for the rights of tenants shown on Exhibit "10" or hereafter approved in writing by Purchaser and that Seller has done nothing to change the state of facts shown on the Surveys, in form acceptable to the Title Insurer to delete the standard exceptions relating to such matters in Purchaser's owner's title insurance policy; 19.1.3 a gap affidavit and indemnification agreement acceptable to the Title Insurer for purposes of deleting the "gap" from Purchaser's title commitment and policy; 19.1.4 instruments necessary to clear title, if any, including those required to remove standard exceptions from the title policy; 19.1.5 an appropriate bill of sale with warranty of title for the Personalty; 19.1.6 appropriate assignments of the Leases and all other assignable leases, deposits, licenses, easements, rights-of-way, contract rights, intangible rights and other property and rights included in this transaction, containing reciprocal indemnities for matters arising before and after the Closing which instruments shall contain assumptions by Purchaser of the Leases and Contracts; 19.1.7 appropriate restatements of Seller's covenants, representations and warranties which are to survive the Closing; 19.1.8 appropriate evidence of Seller's partnership existence and authority 29 to sell and convey the Property; 19.1.9 any and all guarantees and warranties on all property conveyed pursuant to this Agreement, with assignment of all assignable rights under the guaranties and warranties; 19.1.10 a non-foreign certificate and other documentation as may be appropriate and satisfactory to Purchaser to meet the non-withholding requirements under FIRPTA and any other federal statute or regulations (or, in the alternative, Seller shall cooperate with Purchaser in the withholding of funds pursuant to FIRPTA regulations); 19.1.11 an appropriate reporting form to be submitted with the deed at time of recordation; 19.1.12 Tenant notice letter regarding payment of rent; and 19.1.13 A consent and certification from Andreyev Engineering, authorizing Seller, Purchaser and its lenders to rely upon its reports. 19.2 Purchaser shall pay the balance of the Purchase Price in excess of the Deposit, and shall provide Seller with analogous proof of entity existence and authority and an appropriate restatement of Purchaser's covenants, representations and warranties which are to survive the Closing. Seller and Purchaser shall each execute such other documents as are reasonably necessary to consummate this transaction. 20. BROKERS. The parties each represent and warrant to the other that the only real estate broker, salesman or finder involved in this transaction is Redwood Real Estate Services Corp., to whom Seller shall pay a real estate brokerage commission in the amount of the lesser of one (1%) percent of the Purchase Price (excluding the amount paid for the Development Assets) or 30 Two Million Four Hundred Fifty Thousand ($2,450,000.00) Dollars, and Seller shall indemnify, defend and hold Purchaser harmless from claims for such payments. If a claim for brokerage or similar fees in connection with this transaction is made by any broker, salesman or finder other than the above-named broker claiming to have dealt through or on behalf of one of the parties to this Agreement, then that party shall indemnify, defend and hold the other party under this Agreement harmless from all liabilities, damages, claims, costs, fees and expenses whatsoever (including reasonable attorneys' fees and court costs, including those for appellate matters and post judgment proceedings) with respect to said claim for brokerage. The provisions of this section shall survive the Closing or the earlier termination of this Agreement. 21. ASSIGNABILITY. Purchaser shall be entitled to assign Purchaser's rights and obligations under this Agreement to any entities owned or controlled by Allen C. de Olazarra and Rodolfo Prio Touzet. 22. INSPECTIONS. Purchaser, and Purchaser's agents and contractors, shall have the right during the term of this Agreement, upon one (1) business day's advance notice, to enter upon the Property at all reasonable times for purposes of inspection and making tests and studies. Purchaser hereby agrees to and does indemnify, defend and hold Seller harmless, to the extent of the Deposit, from all liabilities, damages, claims, costs, or expenses whatsoever (including reasonable attorneys' fees and court costs) for bodily injury, death, or property damage resulting from any such inspection, test or study. The provisions of this Section 22 shall survive the Closing or the termination or cancellation of this Agreement. 23. ESCROW AGENT. 23.1 Escrow Agent undertakes to perform only such duties as are expressly set 31 forth in this Agreement. Escrow Agent shall not be deemed to have any implied duties or obligations under or related to this Agreement. Escrow Agent is the law firm representing Purchaser. In the event of a dispute between the parties, the parties consent to Escrow Agent continuing to represent Purchaser, notwithstanding that Escrow Agent shall continue to have the duties provided for in this Agreement. 23.2 Escrow Agent may (a) act in reliance upon any writing or instrument or signature which it, in good faith, believes to be genuine; (b) assume the validity and accuracy of any statement or assertion contained in such a writing or instrument; and (c) assume that any person purporting to give any writing, notice, advice or instructions in connection with the provisions of this Agreement has been duly authorized to do so. Escrow Agent shall not be liable in any manner for the sufficiency or correctness as to form, manner of execution, or validity of any instrument deposited in escrow, nor as to the identity, authority, or right of any person executing any instrument; Escrow Agent's duties under this Agreement are and shall be limited to those duties specifically provided in this Agreement. 23.3 The parties to this Agreement do and shall indemnify Escrow Agent and hold it harmless from any and all claims, liabilities, losses, actions, suits or proceedings at law or in equity, or other expenses, fees, or charges of any character or nature, including attorneys' fees and costs, which it may incur or with which it may be threatened by reason of its action as Escrow Agent under this Agreement, except for such matters which are the result of Escrow Agent's gross negligence or willful malfeasance. 23.4 If the parties (including Escrow Agent) shall be in disagreement about the interpretation of this Agreement, or about their respective rights and obligations, or about the 32 propriety of any action contemplated by Escrow Agent, Escrow Agent may, but shall not be required to, file an action in interpleader to resolve the disagreement; upon filing such action, Escrow Agent shall be released from all obligations under this Agreement. Escrow Agent shall be indemnified for all costs and reasonable attorneys' fees, including those for appellate and post judgment matters and for paralegals and similar persons, incurred in its capacity as escrow agent in connection with any such interpleader action; Escrow Agent may represent itself in any such interpleader action and charge its usual and customary legal fees for such representation, and the court shall award such attorneys' fees, including those for appellate and post judgment matters and for paralegals and similar persons, to Escrow Agent from the losing party. Escrow Agent shall be fully protected in suspending all or part of its activities under this Agreement until a final judgment in the interpleader action is received. 23.5 Escrow Agent may consult with counsel of its own choice, including counsel within its own firm, and shall have full and complete authorization and protection in accordance with the opinion of such counsel. Escrow Agent shall otherwise not be liable for any mistakes of fact or errors of judgment, or for any acts or omissions of any kind unless caused by its gross negligence or willful misconduct. 23.6 Escrow Agent may resign upon five (5) days' written notice to Seller and Purchaser. If a successor escrow agent is not appointed jointly by seller and Purchaser within the five (5) day period, Escrow Agent may petition a court of competent jurisdiction to name a successor. 24. NOTICES. Any notices required or permitted to be given under this Agreement shall be delivered by hand, by facsimile providing a transmission receipt or delivered by a nationally 33 recognized overnight delivery service, and addressed as described below; notices shall be deemed effective only upon receipt or refusal of delivery or, if by facsimile sent after 5:00 p.m., Eastern Time, on the next business day after transmission. 34 Notices to Seller: Highwoods/Florida Holdings, L.P. 3100 Smoketree Court Suite 600 Raleigh, NC 26704-1051 Attn: Mack D. Pridgen, III, Esq. Fax: 919-876-6929 With a copy to: Alston & Bird 3605 Glenwood Avenue Suite 310 Raleigh, NC 27622-1107 Attn: William R. Klapp, Jr. Esq. Fax: 919-420-2260 Notices to Purchaser: America's Capital Partners, LLC 444 Brickell Avenue Suite 1001 Miami, Florida 33131 Attn: Allen C. de Olazarra, CEO Fax: 305-995-9993 With a copy to: Holland & Knight LLP 701 Brickell Avenue Suite 3000 Miami, Florida 33131 Attn: Stuart K. Hoffman, Esq. Fax: 305-789-7732 35 Notices to Escrow Agent: Holland & Knight LLP 701 Brickell Avenue Suite 3000 Miami, Florida 33131 Attn: Stuart K. Hoffman, Esq. Fax: 305-789-7732 25. RISK OF LOSS. 25.1 The Property shall be conveyed to Purchaser in the same condition as on the date of this Agreement, ordinary wear and tear excepted, free of all tenancies or occupancies except those set forth in Exhibit "10", or hereafter approved by Purchaser in writing). Seller shall not remove anything from the Property between the date of this Agreement and the Closing. 25.2 Upon receipt of an offer or any notice or communication from any governmental or quasi-governmental body seeking to take under its power of eminent domain all or any portion of the Property, Seller shall promptly notify Purchaser of the receipt of same and shall send such communication, or a copy of it, to Purchaser. Upon receipt of such notice, Purchaser shall have the right to rescind this Agreement by delivery of written notice to Seller within fifteen (15) days of Purchaser's receipt of the communication from Seller. In the event Purchaser elects to rescind, Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination. In the event that Purchaser elects not to rescind, then Purchaser shall be entitled to all condemnation awards and settlements. Seller and Purchaser agree to cooperate with each other to obtain the highest and best price for the condemned property. 36 25.3 In the event that any of the Property is damaged or destroyed by fire or other casualty prior to Closing, Seller shall repair and restore the Property to the same condition as before the fire or casualty, and the closing shall be deferred for up to one hundred twenty (120) days to permit such repair and restoration. If Seller is unable to repair and restore within such one hundred twenty (120)-day period, then Purchaser shall have the option of (a) terminating this Agreement by written notice to Seller, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except those which expressly survive such termination, or (b) proceeding with the Closing, in which case Purchaser shall be entitled to all insurance proceeds (subject to the rights of the holder(s) of any existing mortgages), and to credits equal to the insurance deductibles and to the replacement cost not covered by insurance proceeds and deductibles. 26. INDEMNITY. Seller shall and does indemnify and hold Purchaser harmless from any and all liability, including costs and attorneys' fees, including those for appellate proceedings: 26.1 to the State of Florida for sales tax due on any rentals or sales prior to Closing, under Florida Statutes Section 212.10; 26.2 for services rendered prior to the Closing under any contracts for services to the Property existing now or at any time prior to the Closing; 26.3 for any security deposits of tenants received by Seller prior to the Closing and not credited to Purchaser at the Closing; 26.4 for any personal property taxes remaining unpaid for calendar years prior to the year of the Closing. 37 27. RADON GAS NOTICE. Pursuant to Florida Statutes Section 404.056(8), Seller hereby makes, and Purchaser hereby acknowledges, the following notification: RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit. 28. MISCELLANEOUS. 28.1 This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without application of choice of law or conflicts of laws principles. 28.2 In the event any term or provision of this Agreement is determined by appropriate judicial authority to be illegal or otherwise invalid, such provision shall be given its nearest legal meaning or be construed as deleted as such authority determines, and the remainder of this Agreement shall be construed to be in full force and effect. 28.3 In the event of any litigation between the parties under this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees. Wherever provision is made in this Agreement for "attorneys' fees," such term shall be deemed to include accountants' and attorneys' fees and court costs, whether or not litigation is commenced, including those for appellate and post judgment proceedings and for paralegals and similar persons. 28.4 Each party has participated fully in the negotiation and preparation of this Agreement with full benefit of counsel. Accordingly, this Agreement shall not be more strictly construed against either party. 28.5 Whenever used in this Agreement, the singular shall include the plural, the 38 plural shall include the singular, any gender shall include every other and all genders, and captions and paragraph headings shall be disregarded. 28.6 The captions in this Agreement are for the convenience of reference only and shall not be deemed to alter any provision of this Agreement. 28.7 Any reference in this Agreement to time periods less than six (6) days shall, in the computation thereof, exclude Saturdays, Sundays, and legal holidays; any time period provided for in this Agreement which shall end on a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of the next full business day. Time is of the essence. 28.8 This Agreement constitutes the entire agreement between the parties and may not be changed, altered or modified except by an instrument in writing signed by the party against whom enforcement of such change would be sought. 28.9 All references in this Agreement to exhibits, schedules, paragraphs, subparagraphs and sections refer to the respective subdivisions of this Agreement, unless the reference expressly identifies another document. 28.10 All of the terms of this Agreement, including but not limited to the representations, warranties and covenants of Seller, shall be binding upon and shall inure to the benefit of the parties to this Agreement and their respective successors and assigns. 28.11 Typewritten or handwritten provisions which are inserted in or attached to this Agreement as addenda or riders shall control all printed or pretyped provisions of this Agreement with which they may be in conflict. 28.12 All covenants and agreements which expressly survive the Closing and all representations and warranties of Seller in this Agreement, all remedies related to them, and the 39 provisions of this Section 28.12 shall survive the Closing for a period of one (1) year. 29. SECTION 1031 EXCHANGE. Purchaser hereby acknowledges it is the intention of the Seller to effect a Section 1031 tax deferred exchange at no additional expense to Purchaser. The Seller's rights and obligations under this Agreement may be assigned to a qualified intermediary for the purpose of completing such an exchange. Purchaser agrees to cooperate with Seller and said qualified intermediary to complete the exchange. 30. OTHER AGREEMENT. Seller and Purchaser acknowledge that they have entered into one (1) other Purchase and Sale Agreement (the "Other Agreement") contemporaneously herewith, and that, if this Agreement is terminated in accordance with its terms, then the Other Agreement shall also terminate. 40 EXECUTED as of the date first written above in several counterparts, each of which shall be deemed an original, but all of which constitute only one agreement. Signed, sealed and delivered in the presence of: SELLER: _________________________ HIGHWOODS/FLORIDA HOLDINGS, L.P., a Delaware limited partnership _________________________ (As to Seller) By: Highwoods/Florida GP Corp., a Delaware corporation, its general partner By: /s/ Edward Fritsch ---------------------------------- Title: Executive Vice President ---------------------------------- PURCHASER: AMERICA'S CAPITAL PARTNERS _________________________ By: /s/ Allen C. de Olazarra _________________________ Its: Managing Member (As to Purchaser) ----------------------------------- Dated: March 25, 1999 ---------------------------------- 41 EX-10 3 EXHIBIT 10.2 FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT is made and entered into the 21st day of April, 1999, by and between HIGHWOODS/FLORIDA HOLDINGS, L.P., a Delaware limited partnership ("Seller"), and AMERICA'S CAPITAL PARTNERS, LLC, a Florida limited liability company ("Purchaser"). Seller and Purchaser have previously entered into that certain Purchase and Sale Agreement dated as of March 22, 1999 (the "Agreement"). Seller and Purchaser wish to amend certain of the provisions of the Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the mutual covenants and agreements herein and in the Agreement set forth and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Seller and Purchaser hereby agree as follows: 1. RECITALS. The foregoing recitals are true and correct. 2. THE PROPERTY. Section 1.1 and Exhibit "1.1" are hereby amended to add the properties described as (a) "Highwoods Development Parcels" I.E., Cypress Creek Land consisting of approximately 11 acres and Highwoods Sawgrass consisting of approximately 38 acres and (b) the "Sunrise Office Building," consisting of approximately 51,831 rentable square feet. 3. DEFINITION OF CONTRACT. Section 1.5 is hereby amended to add the words "set forth in Exhibit "12.1"" after the word "agreements" in the first line of Section 1.5. 4. CLOSING DATE. Section 3 is amended to provide that the Closing Date shall be on December 1, 1999. 5. ADDITIONAL DEPOSIT. The amount of the Additional Deposit in Section 4.1 is hereby changed to Three Million Dollars ($3,000,000.00). 6. PURCHASE PRICE. Section 5.1 is hereby amended to increase the Purchase Price by the amount of Fifteen Million One Hundred Thirty Four Thousand Dollars ($15,134,000.00), to a total of Eighty-Five Million One Hundred Thirty Four Thousand Dollars ($85,134,000.00). 7. PAYMENT OF PURCHASE PRICE. Section 5.2 is hereby amended to change the amount of the Deposit to $3,005,000.00 and the approximate balance of the Purchase Price due in cash at Closing, subject to prorations and adjustments as provided in the Agreement, to $82,129,000.00. 8. TITLE OBJECTIONS. Section 9.1 is hereby amended to provide that April 28, 1999 is the last day on which Purchaser may notify Seller of any title and survey objections. 9. INVESTIGATION PERIOD. Sections 11.1 and 11.2 are hereby amended to provide that the Investigation Period shall expire on April 30, 1999 at 5:00 p.m. Eastern Daylight Time. 10. APPROVAL OF AMENDMENT BY SELLER'S BOARD OF DIRECTORS. Seller and Purchaser hereby acknowledge that this First Amendment must be approved by Seller's Board of Directors. Seller agrees to present the terms of this First Amendment to Seller's Board of Directors for its approval not later than April 27, 1999. Section 12.8 of the Agreement is hereby amended accordingly. -2- 11. BROKERS. Section 20 is amended to delete the brokerage commission to be paid to Redwood Real Estate Services Corp. 12. TRUE, CORRECT AND COMPLETE AGREEMENT. Seller and Purchaser hereby acknowledge that several pages in the Agreement have been substituted to clarify certain issues and, pursuant to the terms of the Agreement, certain exhibits were annexed thereto after the Effective Date. Seller and Purchaser acknowledge and agree that the copy of the Agreement attached hereto is a true, correct and complete copy of the Agreement as it existed prior to the date of this First Amendment. 13. NO FURTHER MODIFICATION. Except as set forth in this First Amendment, the Agreement remains unmodified and in full force and effect. IN WITNESS WHEREOF, the Seller and Purchaser have executed this First Amendment the day and year first written above. -3- WITNESSES: SELLER: HIGHWOODS/FLORIDA HOLDINGS, L.P., a Delaware limited partnership _______________________________ By: Highwoods/Florida G.P. Corp., a Delaware corporation, as general partner _______________________________ (As to Seller) By: Mark D. Pridgan III ------------------------------- Title: Vice President ---------------------------- Dated: April ____, 1999 PURCHASER: AMERICA'S CAPITAL PARTNERS LLC, a Florida limited liability company. _______________________________ By: Allen C. de Olazarra ------------------------------- Title: Managing Member ---------------------------- _______________________________ Dated: April ___, 1999 (As to Purchaser) -4- EX-10 4 EXHIBIT 10.2 Exhibit 10.2 PURCHASE AND SALE AGREEMENT THIS AGREEMENT is made and entered into as of the 22nd day of March, 1999, by and between HIGHWOODS/FLORIDA HOLDINGS, L.P., a Delaware limited partnership ("Seller"), and AMERICA'S CAPITAL PARTNERS, LLC, a Florida limited liability company and/or its permitted assigns hereunder ("Purchaser"). In consideration of the mutual covenants and promises set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties to this Agreement, the parties agree to the following terms and conditions: 1. PURCHASE AND SALE. Subject to the terms of this Agreement, Seller agrees to sell to Purchaser and Purchaser agrees to purchase from Seller the following property (collectively, the "Property" or "Properties"): 1.1 Those fee parcels of property located in Palm Beach County, Florida consisting of approximately 506,735 rentable square feet as more particularly described in Exhibit "1.1" (collectively, the "Realty"); 1.2 The land and all buildings, structures and other improvements situated on the Realty (the "Improvements"); 1.3 All fixtures, equipment, furnishings and other items of property whatsoever used or useful in the operation, repair and maintenance of the Realty, situated on the Realty, and owned by Seller (the "Personalty"); 1.4 All of the landlord's interest in and to tenant leases for space in the Improvements or on the Realty; 1.5 All transferable contracts and agreements (each a "Contract", and collectively, the "Contracts"), deposits, licenses, permits, and contract rights pertaining to ownership, development and/or operation of the Realty, the Improvements and the Personalty; 1.6 All of Seller's rights in and to the name and all logos, trademarks and other rights in connection with the name, and general intangible rights pertaining to the ownership and/or operation of the Realty other than the name "Highwoods" and any logos, trademarks, tradenames or other intangible rights relating to the name "Highwoods"; and 1.7 All strips, gores, easements, privileges, rights-of-way, riparian and other water rights, rights to lands underlying any adjacent streets or roads, and other tenements, hereditaments and appurtenances, if any, pertaining to or accruing to the benefit of the Realty and the Improvements. 2. EFFECTIVE DATE. If this Agreement is not executed and delivered by each party to it to all parties on or before March 25, 1999, at 5:00 p.m., Eastern time, then this Agreement shall be null and void and of no force or effect. Execution and delivery shall be defined as the receipt of the fully executed Agreement by the parties by means of the U.S. mails, delivery by a nationally recognized overnight delivery service, hand delivery or facsimile transmission. In the event delivery is by facsimile, the party delivering this Agreement shall deliver to all other parties an original copy of the fully executed Agreement within two (2) business days; failure to do so shall not affect the validity of the execution and delivery of this Agreement. The date of this Agreement, for purposes of performance, shall be the date when the last one of Seller or Purchaser has signed this Agreement, as stated on the signature page (the "Effective Date"). 3. CLOSING DATE. Subject to other provisions of this Agreement for extension or 2 termination, the closing of the transactions contemplated by this Agreement (the "Closing") shall be held at the offices of the attorneys for Purchaser, Holland & Knight LLP, 701 Brickell Avenue, Miami, Florida 33131 on or before November 30, 1999, on a date designated by Seller upon not less than sixty (60) days' prior written notice to Purchaser (the "Closing Date"). 4. DEPOSIT. 4.1 To secure the performance by Purchaser of Purchaser's obligations under this Agreement, Purchaser will deliver, within two (2) business days of the Effective Date, to the law firm of Holland & Knight LLP, as escrow agent ("Escrow Agent"), the sum of Five Thousand Dollars ($5,000.00) by wire transfer to a depository designated by Escrow Agent, the proceeds of which shall be held in trust as an earnest money deposit (the "Initial Deposit") by Escrow Agent, and disbursed only in accordance with the terms of this Agreement. If Purchaser elects not to cancel this Agreement during the Investigation Period, as more particularly described in Section 11.2 of this Agreement, then, on the "Closing Date" under the Other Agreement (as hereinafter defined), Purchaser shall deliver to Escrow Agent a check or wire transfer in the sum of Two Million Dollars ($2,000,000.00) (the "Additional Deposit") to be held together with, and upon the same terms and conditions as, the Initial Deposit. Once the Additional Deposit is paid to Escrow Agent, the term "Deposit" shall mean the Initial Deposit plus the Additional Deposit; prior to such payment, whenever used in this Agreement, the term "Deposit" shall mean only the Initial Deposit. 4.2 Escrow Agent shall use its reasonable efforts to invest the Deposit in an interest bearing account or certificate of deposit maintained with or issued by a commercial bank reasonably acceptable to Purchaser and Seller. All interest accrued or earned on the Deposit shall 3 be paid or credited to Purchaser, except in the event of a default by Purchaser, without any default of Seller, in which event the interest shall be disbursed to Seller, together with the Deposit, as liquidated damages in accordance with Section 15. 4.3 Purchaser and Seller acknowledge that, if the Deposit is at any time in excess of $100,000.00, then the amount over $100,000.00 shall not be insured, and both parties hold Escrow Agent harmless from all losses and costs and liabilities which may accrue or be incurred related to such lack of insurance. 5. PURCHASE PRICE. 5.1 The total purchase price (the "Purchase Price") to be paid by Purchaser to Seller for the Property is Seventy Million Dollars ($70,000,000.00). The Purchase Price shall be allocated among the Properties within two (2) business days prior to the end of the Inspection Period, which allocation, once completed, shall be attached to each copy of this Agreement as Exhibit "5.1." 5.2 The Purchase Price shall be paid to Seller as follows: $2,005,000.00, the Deposit described in Section 4 of this Agreement, which shall be paid to Seller at Closing; and $67,995,000.00, approximately, in cash at Closing, subject to prorations and adjustments as provided in this Agreement, to be paid by cashier's check or by wire transfer. 6. CONFIDENTIAL NATURE OF AGREEMENT. Except for information obtained by Purchaser from third parties or which is otherwise available to the public, Purchaser shall keep all information obtained by Purchaser relative to the Property (including, without limitation, the Due 4 Diligence Documents), as it relates to this transaction, confidential. Purchaser shall have the right to disclose such information notwithstanding such limitation to Purchaser's professionals, consultants, lenders, officers, employees, stockholders, purchasers and affiliates for the sole purpose of evaluating the Property to determine its value and suitability for Purchaser's needs and financing and as may be required by applicable law. Seller shall have the right, in its sole discretion, to terminate this Agreement in the event of a material breach by Purchaser of this Section 6, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination. 7. TITLE EVIDENCE. Within fifteen (15) days following the Effective Date, Purchaser shall, at Purchaser's expense, obtain an ALTA marketability title insurance commitment (the "Commitment"), with fee owner's title policy premium to be paid by Purchaser at Closing, issued by Holland & Knight LLP, as agent for one or more national title insurers acceptable to Purchaser (collectively, the "Title Insurer"), with hard copies of all exceptions. The Commitment shall show Seller to be vested with good and marketable and insurable fee simple title to the Realty, insurable in an amount equal to the Purchase Price in accordance with the standards adopted from time to time by The Florida Bar, at standard rates, and Seller believes that the Commitment will show the Realty to be free and clear of all liens, encumbrances, leases, tenancies, covenants, conditions, restrictions, rights-of-way, easements and other matters affecting title, except the following (which, if not objected to by Purchaser pursuant to the terms of Article 9 below, shall be 5 deemed the "Permitted Exceptions"): 7.1 Ad valorem real estate taxes for 1999 and subsequent years; 7.2 All applicable zoning ordinances and regulations; 7.3 Matters of record which are common to the subdivision; 7.4 Matters described in Seller's existing title policies with respect to the Properties; and 7.5 Tenants in possession. 8. SURVEY. 8.1 Within the time period for providing the Commitment, Purchaser shall obtain and deliver to Seller ALTA surveys (the "Surveys") of the Realty and the Improvements. The Surveys shall: 8.1.1 meet the minimum technical standards of the Florida Board of Land Surveyors; 8.1.2 be certified to Purchaser, to Purchaser's attorney, to the Title Insurer and to Purchaser's mortgage lender; 8.1.3 be certified (or recertified) as of a date subsequent to the Effective Date; 8.1.4 set forth the total number of square feet and acres in the Realty; 8.1.5 show the location of all improvements, parcels (if any) in the legal descriptions of the Realty, number of square feet and parking spaces in the Improvements, utility, setback and other lines; easements, either visible or recorded, and recording references of them; and 6 8.1.6 include elevation and flood zone information. 8.2 If the Survey shall reflect any encroachments, overlaps, unrecorded easements or similar rights in third parties, or any other adverse matters not specifically provided for in this Agreement, then the same shall be deemed "title defects" as set forth in Section 9. 9. TITLE DEFECTS. 9.1 Purchaser shall have until April 21, 1999 in which to examine the Commitment and the Surveys. If Purchaser finds title to be defective, Purchaser shall, no later than 5:00 p.m. Eastern time on April 21, 1999, notify Seller in writing, specifying the title defect(s). If Purchaser fails to give Seller written notice of any title defect(s) before 5:00 p.m. Eastern time on April 21, 1999, the defects shown in the Commitment or the Surveys shall be deemed to be waived as title objections to closing this transaction. 9.2 If Purchaser has given Seller timely written notice of defect(s) and the defect(s) render the title other than as represented in this Agreement or if any new defects appear from the date of the Commitment through the Closing Date, Seller shall use commercially reasonable efforts to cause only those defects recorded after October 7, 1997 to be cured by the Closing Date. Seller agrees to remove, by payment, bonding or otherwise, any such lien (other than environmental liens) against the Property capable of removal by the payment of money or bonding. Seller shall not be obligated to (but may, in its sole and absolute discretion) cure any other defect or to buyout or settle any other claim or lien against the Property. At Seller's option, the Closing Date may be extended for a period not to exceed sixty (60) days for purposes of eliminating such title defects. If such additional time is reasonably required by Seller to cure such title defects, Seller's 7 failure to extend the Closing Date shall be commercially unreasonable. 9.3 If Seller does not eliminate such defects as of the Closing Date, as the same may be extended under the preceding sentence, or if any new "title defects" appear between the date of the Commitment through the Closing Date which Seller does not eliminate as of the Closing Date, Purchaser shall have the option to: 9.3.1 Close and accept the title "as is," without reduction in the Purchase Price and without claim against Seller for such title defects (except for any lien that Seller is required to cure pursuant to Section 9.2 that can be removed by the payment of money or bonding, for which credit shall be given Purchaser at the Closing unless Seller pays the same at the Closing) (and in such event, the Closing shall take place on the Closing Date); or 9.3.2 Cancel this Agreement, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination, unless such title defects were caused by Seller's willful act or willful omission, in which event Seller shall remain liable to Purchaser for damages caused by such title defects. 10. EXISTING LEASES. Seller represents and warrants to Purchaser that attached to this Agreement as Exhibit "10" is a rent roll of all leases, tenancies, and other occupancies, whether written or oral, affecting all or any portion of the Property (the "Leases"), setting forth, for each tenant (each a "Tenant", and collectively, the "Tenants"), the name of the tenant, the space(s) affected, the rents, the lease term, the security deposit as required by the subject Lease, if any, 8 prepaid rent and any rent arrearages. Upon execution of this Agreement by Seller, Seller shall deliver to Purchaser true, correct and complete copies of all of the Leases. Seller further represents and warrants to Purchaser that: 10.1 No other parties have any rights of occupancy or possession (including, without limitation, renewal options, rights of first refusal, options to purchase, free rent, tenant improvement allowances or other special concessions) of all or any portion of the Property except as set forth in the rent roll which is a part of Exhibit "10" or as set forth in the lease files provided by Seller to Purchaser pursuant to Section 11.1; 10.2 All of the Leases are, as of the date of this Agreement, in good standing, without default on the part of Seller, and shall remain without default on the part of Seller through the date of the Closing; 10.3 Seller shall use its diligent, good faith, commercially reasonable efforts to deliver to Purchaser, at least ten (10) days prior to the Closing, appropriate estoppel letters from all Tenants occupying more than 10,000 square feet ("Major Tenants") and from a sufficient number of Tenants occupying the remaining occupied square feet in the Property, and not occupied by Major Tenants, necessary to provide estoppel coverage on eighty percent (80%) of the occupied square footage in the Property, such estoppel letters to confirm in all material respects the information contained in Exhibit "10" and provided to Purchaser by Seller pursuant to Sections 11.1.5 and 11.1.6 and to be in the form attached hereto as Exhibit "10.3". If the estoppel letters required by the preceding sentence are not timely obtained after diligent effort by Seller, then Seller shall execute an affidavit as to each such Lease for which it has not obtained an estoppel letter, setting forth the 9 information which would have been contained in the estoppel letter, which shall substitute for such missing estoppel letters until such time as estoppel letters are received from the subject Tenants; provided, however, that Seller shall not be obligated to give, and Purchaser shall not be obligated to accept, substitute affidavits for more than 100,000 occupied square feet in the aggregate with respect to missing estoppel letters from Major Tenants. If Seller is unable to comply with the provisions of this Section 10.3 by the Closing Date, Purchaser shall have the options set forth in Sections 14.1 and 14.2; 10.4 There are no modifications, understandings or agreements with respect to the Leases except as reflected in the Leases or as set forth in the lease files provided by Seller to Purchaser may be disclosed to Purchaser pursuant to Section 11.1; 10.5 Seller has not received any prepaid rent under any of the Leases except as may be disclosed to Purchaser in the rent roll which is part of Exhibit "10"; and 10.6 Seller shall not accept payment of any rent under any Lease for more than one (1) month in advance. Seller shall have the right, prior to the end of the Inspection Period, to modify any existing Lease or Contract and enter into any new lease or agreement affecting all or any portion of the Property, provided that Seller shall give Purchaser prompt notice of any such modification or new lease or agreement. After the end of the Investigation Period, Seller shall modify any existing Lease or Contract or enter into any new lease or agreement affecting all or any portion of the Property only with the prior written consent of Purchaser, which shall not be unreasonably withheld. Seller shall immediately provide to Purchaser a copy of any such proposed modification, lease or agreement, and Purchaser shall have two (2) business days from the delivery 10 thereof in which to withhold its consent to the terms thereof in writing, if it so chooses, or else the same shall be deemed consented to by Purchaser. If Purchaser timely withholds its consent, Purchaser shall have the right to terminate this Agreement, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination. If Purchaser elects not to terminate this Agreement at the end of the Investigation Period, all new leases and agreements entered into by Seller prior to the end of the Investigation Period shall become "Leases" and "Contracts," respectively, hereunder. In addition, all new leases and agreements entered into by Seller after the end of the Investigation Period with Purchaser's consent or deemed consent shall become "Leases" and "Contracts," respectively, hereunder. 11. INVESTIGATION PERIOD. 11.1 During the period from the Effective Date until April 23, 1999 (the "Investigation Period"), Purchaser shall have the right to conduct, at Purchaser's expense, whatever reasonable investigations, analyses and studies of the Property that Purchaser may deem appropriate to satisfy Purchaser with regard to: 11.1.1 the physical condition of the building(s) and other improvements included in the Property, including their structure, roofs, air conditioning, heating, electrical, plumbing and other mechanical systems; 11.1.2 the physical condition of all fixtures, equipment, furnishings and other items of property referred to in Subsection 1.3 above, an inventory of which shall be furnished 11 by Seller at Seller's expense within fifteen (15) days after the Effective Date; 11.1.3 the permitted uses of and improvements to the Property under applicable building and zoning ordinances and the present compliance or non-compliance with the same; 11.1.4 evidence of any hazardous waste or similar materials, and of Radon, in, on, under or about the Property; 11.1.5 all existing Contracts, Leases, lease files, lease abstracts, historical MRI reports (not including prospective information, such as budget projections, which are proprietary to Seller) and tenancies affecting the Property; and 11.1.6 Seller's historical operating statements for calendar year 1998 and year-to-date 1999 (as and when available). 11.2 Purchaser and its agents and employees shall have the right to enter upon the Property for the purpose of making inspections, at Purchaser's sole risk, cost and expense, and subject to the rights of tenants. No destructive testing shall be permitted. All of such entries upon the Property shall be at reasonable times during normal business hours and after at least one (1) business day's prior notice to Seller or Seller's agent, and Seller or Seller's agent shall have the right to accompany Purchaser during any activities performed by Purchaser on the Property. Seller shall make available to Purchaser at all times during business hours during the Investigation Period, and after the Investigation Period until the Closing Date, upon one (1) business day's prior notice, all documents relating to the matters described in Section 11.1 above which are in Seller's possession for review and copying by Purchaser (the "Due Diligence Documents"). In addition, within five (5) 12 business days after the Effective Date, Seller shall provide Exhibits "12.1" and "12.6" to Purchaser. Purchaser shall promptly provide to Seller copies of all environmental and engineering reports which Purchaser may obtain from third parties relating to the Property. If Purchaser is dissatisfied, for any reason and in Purchaser's exclusive judgment, with the result of Purchaser's investigations, then Purchaser may cancel this Agreement by notifying Seller of such cancellation on or before 5:00 p.m. on April 23, 1999, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination. 11.3 If Purchaser or Seller cancels this Agreement pursuant to the terms hereof, Purchaser shall deliver to Seller all of the Due Diligence Documents. Upon receipt of said documents by Seller, Escrow Agent shall disburse the Deposit, together with all interest earned thereon, to Purchaser. 11.4 Upon Purchaser's waiver of or failure to duly exercise its right to terminate described in this Section 11, Purchaser shall have accepted the Property "as is", with no representations or warranties regarding the Property other than any which may be specifically stated in this Agreement. 11.5 Notwithstanding any provisions in this Agreement to the contrary, Purchaser does and shall indemnify and hold harmless Seller and its agents, employees, successors and assigns, to the extent of the Deposit, against all losses, claims, damages, liability, attorneys' and accountants' fees and costs of litigation and all other expenses related to, growing out of, or arising 13 from the investigation of or entry upon the Property, or other acts undertaken by Purchaser or its agents, employees or assigns, under this Agreement, including, without limitation, mechanic's or materialmen's liens. If Purchaser does not close on the purchase of the Property under this Agreement, it shall return the Property to the condition in which it existed prior to any investigations undertaken by Purchaser or its agents, employees and assigns pursuant to this Agreement. 11.6 Except as otherwise expressly provided herein, Seller makes no representations or warranties as to the accuracy or completeness of the Due Diligence Documents. 11.7 The inspections under this Section 11 may include a Phase I environmental inspection of the Property, but no Phase II environmental inspection shall be performed without the prior written consent of Seller, which may be withheld in its sole and absolute discretion, and if consented to by Seller, the proposed scope of work and the party who will perform the work shall be subject to Seller's review and approval. Upon Seller's request, Purchaser shall deliver to Seller copies of any Phase II or other environmental report to which Seller consents as provided above. Purchaser, for itself and any entity affiliated with Purchaser, waives and releases Seller and its employees, agents, officers, trustees, directors, beneficiaries and partners from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses of whatever kind or nature, known or unknown, existing and future, contingent or otherwise (including any action or proceeding, brought or threatened, or ordered by any appropriate governmental entity) made, incurred, or suffered by Purchaser or any entity affiliated with Purchaser relating to the presence, misuse, use, disposal, release or threatened release of any hazardous or toxic materials, chemicals or wastes as the Property and any liability or claim related to the Property arising under 14 the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, and the Toxic Substance Control Act, all as amended, or any other cause of action based on any other state, local, or federal environmental law, rule or regulation; provided, however, the foregoing release shall not operate or release any claim by Purchaser against any person or entity other than described above in this Section 11.7. The provisions of this Section 11.7 shall survive indefinitely the Closing or any termination of this Agreement and shall not be merged into the closing documents. 11.8 To the maximum and extent permitted by applicable law, and except for Seller's representations and warranties (collectively, "Seller's Warranties") in this Agreement and the documents of conveyance and assignment to be delivered at the Closing, this sale is made and will be made without representation, covenant, or warranty of any kind (whether express, implied, or, to the maximum extent permitted by applicable law, statutory) by Seller. As a material part of the consideration of this Agreement, Purchaser agrees to accept the Property on an "AS IS" and "WHERE IS" basis, with all faults and any and all latent and patent defects, and without any representation or warranty, all of which Seller hereby disclaims, except for Seller's Warranties. Except for Seller's Warranties, no warranty or representation is made by Seller as to (a) fitness for any particular purpose, (b) merchantability, (c) design, (d) quality, (e) condition, (f) operation or income, (g) compliance with drawings or specifications, (h) absence of defects, (i) absence of hazardous or toxic substances, (j) absence of faults, (k) flooding, or (1) compliance with laws and regulations including, without limitation, those relating to health, safety, and the environment. 15 Purchaser acknowledges that Purchaser has entered into this Agreement with the intention of making and relying upon its own investigation of the physical, environmental, economic use, compliance and legal condition of the Property and that, except as otherwise provided in this Agreement, Purchaser is not now relying, and will not later rely, upon any representations and warranties made by Seller or anyone acting or claiming to act, by, through or under or on Seller's behalf concerning the Property. The provisions of this paragraph shall survive indefinitely the Closing or any termination of this Agreement and shall not be merged into the closing documents. 12. REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller represents and warrants to Purchaser, to Seller's knowledge, and covenants and agrees with Purchaser as follows: 12.1 Seller has not entered into any contracts, subcontracts, arrangements, licenses, concessions, easements or other agreements, either recorded or unrecorded, written or oral, affecting all or any portion of the Property, or the use of it, other than the Leases set forth in Exhibit "10" and those agreements set forth in Exhibit "12.1"; 12.2 There are no (i) existing or pending improvement liens affecting the Property; (ii) violations of building codes and/or zoning ordinances or other governmental or regulatory laws, ordinances, regulations, orders or requirements affecting the Property; (iii) existing, pending or threatened lawsuits or appeals of prior lawsuits affecting the Property; (iv) existing, pending or threatened condemnation proceedings affecting the Property; or (v) existing, pending or threatened zoning, building or other moratoria, downzoning petitions, proceedings, restrictive allocations or similar matters that could affect Purchaser's use of the Property; 16 12.3 Seller is vested with good and marketable title to all fixtures, equipment, furnishings and other items of property referred to in Section 1 and owned by Seller, free of all financing and other liens or encumbrances; 12.4 Seller shall maintain the Property in the same manner as it has been maintained prior to the Effective Date until the Closing Date and shall comply prior to the Closing in all material respects with all laws, rules, regulations, and ordinances of all governmental authorities having jurisdiction over the Property; 12.5 There is no radon in the Improvements which are above government approved levels; Seller has not done nor allowed anything which could cause toxic or hazardous materials or waste to be present in, on or about the Property, and has no knowledge of any such materials or waste being or ever having been in, on, or about the Property or adjacent properties, in each case, except as described in Exhibit "12.6" attached hereto, which, for purposes hereof, constitutes all of Seller's knowledge; 12.6 Seller shall provide, and keep in force through the Closing, policies of fire, flood, windstorm, hazard and other casualty insurance on the improvements portion of the Realty and all items of other property referred to in Section 1 above; 12.7 There are no agreements currently in effect which restrict the sale of the Property; 12.8 Subject to approval of Seller's Board of Directors as provided in this Section 12.8, Seller has the right, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; neither the execution and delivery of this 17 Agreement nor the consummation of the transactions contemplated hereby nor the fulfillment of nor the compliance with the terms, conditions and provisions of this Agreement will conflict with or result in a violation or breach of Seller's partnership agreement, or any other instrument or agreement of any nature to which Seller is a party or by which it is bound or may be affected, or constitute (with or without the giving of notice or the passage of time) a default under such an instrument or agreement; no consent, approval, authorization or order of any person is required with respect to the consummation of the transactions contemplated by this Agreement. Seller agrees to present the terms of this Agreement to its Board of Directors (the "Board") for its approval not later than March 23, 1999. Seller further agrees to notify Purchaser of the decision of such Board no later than the end of business on such date. A Board decision to approve this transaction shall be final except that in the event of a material change in a term as embodied in this Agreement, the parties acknowledge that such change in terms may be subject to reconsideration by the Board, at its election. 12.9 No commitments or agreements have been or will be made by or on behalf of Seller to any governmental authority, utility company, school board, church or other religious body, any homeowners or homeowners' association, or any other organization, group or individual, relating to the Property which would impose an obligation upon Purchaser to make any contributions or dedications of money or land to construct, install or maintain any improvements of a public or private nature on or off the Realty or the Development Assets, or otherwise impose liability on Purchaser; and 12.10 At all times during the term of this Agreement and as of the Closing, 18 all of Seller's representations, warranties and covenants in this Agreement shall be true and correct; no representation or warranty by Seller contained in this Agreement and no statement delivered or information supplied to Purchaser pursuant to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements or information contained in them or in this Agreement not misleading. For purposes of this Section 12, "to Seller's knowledge" shall mean the actual knowledge of Troy Cox, James Heistand, Dale Johannes and Richard Nash, without independent inquiry. Purchaser warrants and represents to Seller that Purchaser has the right, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by it, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by it nor the fulfillment of nor the compliance with the terms, conditions and provisions of this Agreement will conflict with or result in a violation or breach of Purchaser's organizational documents, or any other instrument or agreement of any nature to which Purchaser is a party or by which it is bound or may be affected, or constitute (with or without the giving of notice or the passage of time) a default under such an instrument or agreement; no consent, approval, authorization or order of any person is required with respect to the consummation of the transactions contemplated by this Agreement. At all times during the term of this Agreement and as of the Closing, all of Purchaser's representations, warranties and covenants in this Agreement shall be true and correct. 13. CONDITIONS PRECEDENT. 19 13.1 An express condition precedent to Purchaser's obligation to close this transaction is the truth and correctness of all of Seller's representations and warranties and the fulfillment of all of Seller's covenants at all times during the term of this Agreement and as of the Closing, and no inquiry, analysis or examination made by Purchaser (or the results of them) shall reduce, limit or otherwise affect said representations, warranties and covenants. 13.2 The following items are additional conditions precedent to Purchaser's obligation to close the transactions contemplated by this Agreement: 13.2.1 The Property shall remain zoned at the time of the Closing so as to permit each and every use now being made of the Property; there shall be no additional limiting conditions or restrictions under any zoning resolution, ordinance, covenant, agreement, or the like that could prohibit or frustrate any use of the Property now being made or otherwise permissible under said zoning classification in the absence of such conditions or restrictions. 14. DEFAULT BY SELLER. Prior to the Closing Date, in the event that Purchaser becomes aware of facts or circumstances indicating that a representation or warranty of Seller contained herein is inaccurate, untrue or breached, as the case may be, Purchaser shall promptly so notify Seller in writing, and Seller shall have the right to cure the same on or before the Closing Date, failing which Purchaser shall have the right, by written notice to Seller given on the Closing Date, to terminate this Agreement, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations hereunder, except for those which expressly survive such termination. If any of Seller's representations and warranties are not true and correct in 20 all material respects as of the Closing Date or Seller's covenants are not fulfilled in all material respects or all other conditions precedent are not met in all material respects as of the Closing (or earlier specified date, if any), or if Seller fails to perform any of the terms and conditions of this Agreement in all material respects or is otherwise in default under this Agreement, then Purchaser, at Purchaser's sole option, may elect to: 14.1 Waive the default or failure and close "as is"; or 14.2 Cancel this Agreement by written notice to Seller given on or before the Closing Date, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination, unless the default was caused by the willful act or willful omission of Seller, in which event Seller shall continue to be liable for damages and attorneys' fees caused by such default); or 14.3 Seek specific performance of Seller's obligations under this Agreement. In the event that any representation or warranty made by Seller herein is found to be inaccurate, untrue or breached, as the case may be, after the Closing Date, Purchaser shall have the right, for a period of one (1) year after the Closing Date, to seek actual (but not consequential or punitive) damages from Seller; provided, however, that Purchaser must commence a legal action or proceeding seeking such damages within said one (1)-year period, or its claims shall thereafter be barred. 15. DEFAULT BY PURCHASER. In the event of the failure or refusal of Purchaser to close this transaction, Escrow Agent shall pay to Seller the Deposit, together with all interest earned 21 thereon, as agreed and liquidated damages for said breach, and as Seller's sole and exclusive remedy for default of Purchaser, whereupon this Agreement shall terminate and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination. 22 16. PRORATIONS. 16.1 Real estate and personal property taxes shall be prorated as of midnight of the day before the Closing Date. In the event that the taxes for the year of the Closing are unknown, the tax proration will be based upon such taxes for the prior year and, at the request of either party, such taxes for the year of the Closing shall be reprorated and adjusted when the tax bill for the year of the Closing is received and the actual amount of taxes is known. 16.2 Utility bills or charges, where applicable, shall be prorated as of midnight of the day before the Closing Date. The parties shall, to the extent reasonably possible, have utility meters read the day preceding the Closing Date and Seller shall be responsible for paying all utility bills or charges which accrued against the Property prior to midnight of the day before the Closing Date and Purchaser shall be required to pay all utility bills or charges accruing against the Property on or subsequent to midnight of the day before the Closing Date, with any charge for which a reading could not be made as of the day preceding the Closing Date being prorated as of midnight of the day before the Closing Date using an estimate based on the most recent reading for such utility. Purchaser shall, as of the day prior to the Closing Date, post with each utility company such deposit as each such utility company shall require, to the end that Seller's utility deposits shall be refunded to Seller following the Closing, after appropriate charge for Seller's utility bills. Purchaser shall secure its own insurance on the Property as of the Closing Date, and Seller shall cancel all existing insurance policies as of the Closing Date. Purchaser and Seller shall, before and after the Closing, reasonably cooperate with each other in connection with this Section 16.2. 16.3 The parties agree that, except as otherwise specifically stated elsewhere in 23 this Agreement, all income and expenses of the Property are intended to be prorated as of midnight of the day before the Closing Date. Purchaser shall be deemed the owner of the Property, for the purpose of such calculation, for the entire Closing Date. Income shall include all revenue of Seller derived from the operation of the Property. Expenses shall include all expenses from the operation of the Property. Income actually received by Seller prior to the Closing in payment for a period subsequent to the Closing shall appear on the closing statement as a credit to Purchaser. Expenses actually paid by Seller prior to the Closing in payment for a period subsequent to the Closing shall appear on the closing statement as a credit to Seller. 16.4 Notwithstanding anything to the contrary in Section 16.3 above, rents under the Leases, including, without limitation, fixed rent and additional rent, including operating expense and real estate tax pass-throughs (collectively, "Rents"), shall be addressed in the manner set forth in this Section 16.4. All collected Rents for the month in which the Closing occurs shall be prorated as of midnight the day before the Closing Date. All uncollected Rents for the months prior to the month in which the Closing occurs and all uncollected Rents for the month of the Closing (the "Delinquent Rents"), shall remain Seller's property, and Seller shall receive no proration credit therefor at the Closing. Purchaser, however, shall receive a proration credit for its prorated portion of all Rents for the month of the Closing whether such Rents have been collected or remain uncollected. All prepaid Rents (for the months following the Closing) paid to or in possession of Seller shall be credited to Purchaser at the Closing. Purchaser agrees to use good faith and commercially reasonable efforts, for a period of six (6) calendar months after the Closing, to collect Delinquent Rents from each tenant ("Tenant or Tenants") remaining in possession of its space under 24 a Lease. If any Tenant identifies in writing at the time of payment what its payment is for or how such payment should be applied, such payment shall be used or applied in such manner. Any and all other amounts received by Purchaser from any party owing the Delinquent Rents which are received by Purchaser after the Closing Date shall first be applied to the Rent due for the then current month, then to Purchaser's reasonable collection costs (including reasonable attorneys' fees and costs), then to accrued obligations of such Tenant due prior to the Closing (in the order of accrual), and then to accrued obligations due after the Closing. Purchaser shall promptly deliver to Seller any funds to be applied to Delinquent Rents in accordance with the preceding sentence. No portion of Delinquent Rents attributable to a particular Tenant shall be applied against the Rents or Delinquent Rents attributable to another Tenant, or the expenses incurred by Purchaser in collecting such Rents or Delinquent Rents from other Tenants. Purchaser shall not be obligated to file suit to collect the Delinquent Rents. After the Closing, Seller shall be entitled to commence and/or continue any collection efforts against any Tenants owing Delinquent Rents, including, but not limited to, commencing and/or continuing prosecuting lawsuits against such Tenants, so long as such lawsuits are for money damages only and do not seek the remedy of eviction. 16.5 All security deposits or prepaid Rent held by or under the control of Seller, as required by the Leases, reflected on the tenant estoppel letter with respect to the Leases and as set forth on Exhibit "10" (less any offsets indicated thereon as hereinafter defined, if applicable), shall be paid or credited to Purchaser as of the Closing Date, and Purchaser shall, with respect to all matters arising or accruing after the Closing, assume all liability therefor. Seller shall not, after the Effective Date and prior to the Closing, further offset all or any portion of such security deposits or 25 prepaid Rent without the prior written consent of Purchaser. 16.6 Except as otherwise provided in this Agreement, any lease commissions or tenant improvement costs which are (i) incurred by Seller in connection with any existing Leases or new leases entered into prior to the end of the Investigation Period or entered into after the end of the Investigation Period and approved by Purchaser in writing; or (ii) associated with currently existing renewal, expansion or refusal rights of Tenants under the Leases exercised after the Effective Date but prior to the Closing shall be prorated between the parties in proportion to the percentage of the Lease term in the case of (i) above, or the renewal or expansion term or term applicable to the expansion or refusal rights in the case of (ii) above, which falls before midnight of the day before the Closing Date (which shall be Seller's portion) and the percentage of same which falls after midnight of the day before the Closing Date (which shall be Purchaser's portion). Any other lease commissions or tenant improvement costs incurred by Seller in connection with the Leases shall be the responsibility of Seller; provided, however, that Purchaser shall bear the cost of any lease commissions or tenant improvement costs associated with currently existing renewal, extension, expansion or refusal rights of Tenants under the Leases exercised after the Closing. 16.7 Seller agrees to pay to the appropriate taxing authority sales tax collected by Seller in connection with Rent received by Seller under the Leases for the month in which the Closing occurs promptly after the Closing. Not later than one hundred twenty (120) days after the Closing Date, Seller shall deliver to Purchaser the receipt or certificate from the Florida Department of Revenue provided for in Section 212.10(1), Florida Statutes (such as a "letter of good standing"), evidencing that the sales taxes for such month and for previous months have been paid in full and 26 that no interest or penalties are due in connection with same. 16.8 Notwithstanding anything to the contrary which may be contained herein: 16.8.1 Seller and Purchaser acknowledge and agree that to the extent the annual reconciliation of pass-throughs for the 1998 calendar year are not completed prior to the Closing, Seller, rather than Purchaser, shall have the right and obligation to complete such reconciliations and to collect and retain reimbursements from Tenants or pay reimbursements to Tenants, as applicable. 16.8.2 Upon the annual reconciliation of such pass-throughs with the Tenants of the Property for the 1999 calendar year, (i) if such reconciliation results in there being refunds due and payable to the Tenants, Seller shall promptly pay to Purchaser, upon Purchaser's request (accompanied by appropriate documentation), Seller's share of such refund amounts prorated for the portion of the year during which Seller owned the Property, and (ii) if such reconciliation results in Tenants owing funds, Purchaser shall have the right to collect such funds from the Tenants and Purchaser shall promptly pay to Seller a portion of the funds so collected, prorated for the portion of the year during which Seller owned the Property. 16.9 The provisions of this Section 16 shall survive the Closing under this Agreement. 17. IMPROVEMENT LIENS. All installments due and owing under certified, confirmed or ratified liens for governmental improvements or special assessments as of the Closing Date, if any, shall be paid in full by Seller, and pending liens and installments thereof not yet due and owing for governmental improvements or special assessments as of the Closing Date shall be 27 assumed by Purchaser, provided that where the improvement has been substantially completed as of the Closing Date, such pending lien shall be considered certified. 18. CLOSING COSTS. At the Closing, Seller shall pay the documentary stamps and surtax, if any, due on the deed of conveyance. Purchaser shall pay the owner's title insurance premium. Seller and Purchaser shall equally bear the cost of the Surveys. Each party shall pay its own attorneys' fees and bear the recording costs of any instruments received by that party, except that Seller shall pay the recording costs on documents necessary to clear title. 19. CLOSING. 19.1 Seller shall convey title to the Property by Special Warranty Deed, subject only to the Permitted Exceptions (which, if Purchaser requests, shall not be specifically enumerated). Seller shall also deliver to Purchaser at the Closing: 19.1.1 a mechanic's lien affidavit, to the title insurer and Purchaser, in form acceptable to the Title Insurer to delete the standard exception relating to such liens in Purchaser's owner's title insurance policy; 19.1.2 an affidavit, to the Title Insurer and Purchaser, that there are no unrecorded easements and that Seller has exclusive possession of the Property, except for the rights of tenants shown on Exhibit "10" or hereafter approved in writing by Purchaser and that Seller has done nothing to change the state of facts shown on the Surveys, in form acceptable to the Title Insurer to delete the standard exceptions relating to such matters in Purchaser's owner's title insurance policy; 19.1.3 a gap affidavit and indemnification agreement acceptable to the Title 28 Insurer for purposes of deleting the "gap" from Purchaser's title commitment and policy; 19.1.4 instruments necessary to clear title, if any, including those required to remove standard exceptions from the title policy; 19.1.5 an appropriate bill of sale with warranty of title for the Personalty; 19.1.6 appropriate assignments of the Leases and all other assignable leases, deposits, licenses, easements, rights-of-way, contract rights, intangible rights and other property and rights included in this transaction, containing reciprocal indemnities for matters arising before and after the Closing which instruments shall contain assumptions by Purchaser of the Leases and Contracts; 19.1.7 appropriate restatements of Seller's covenants, representations and warranties which are to survive the Closing; 19.1.8 appropriate evidence of Seller's partnership existence and authority to sell and convey the Property; 19.1.9 any and all guarantees and warranties on all property conveyed pursuant to this Agreement, with assignment of all assignable rights under the guaranties and warranties; 19.1.10 a non-foreign certificate and other documentation as may be appropriate and satisfactory to Purchaser to meet the non-withholding requirements under FIRPTA and any other federal statute or regulations (or, in the alternative, Seller shall cooperate with Purchaser in the withholding of funds pursuant to FIRPTA regulations); 19.1.11 an appropriate reporting form to be submitted with the deed at time 29 of recordation; 19.1.12 Tenant notice letter regarding payment of rent; and 19.1.13 A consent and certification from Andreyev Engineering, authorizing Seller, Purchaser and its lenders to rely upon its reports. 19.2 Purchaser shall pay the balance of the Purchase Price in excess of the Deposit, and shall provide Seller with analogous proof of entity existence and authority and an appropriate restatement of Purchaser's covenants, representations and warranties which are to survive the Closing. Seller and Purchaser shall each execute such other documents as are reasonably necessary to consummate this transaction. 20. BROKERS. The parties each represent and warrant to the other that the only real estate broker, salesman or finder involved in this transaction is Redwood Real Estate Services Corp., to whom Seller shall pay a real estate brokerage commission in the amount of the lesser of one (1%) percent of the Purchase Price or Seven Hundred Thousand ($700,000.00) Dollars, and Seller shall indemnify, defend and hold Purchaser harmless from claims for such payments. If a claim for brokerage or similar fees in connection with this transaction is made by any broker, salesman or finder other than the above-named broker claiming to have dealt through or on behalf of one of the parties to this Agreement, then that party shall indemnify, defend and hold the other party under this Agreement harmless from all liabilities, damages, claims, costs, fees and expenses whatsoever (including reasonable attorneys' fees and court costs, including those for appellate matters and post judgment proceedings) with respect to said claim for brokerage. The provisions of this section shall survive the Closing or the earlier termination of this Agreement. 30 21. ASSIGNABILITY. Purchaser shall be entitled to assign Purchaser's rights and obligations under this Agreement to any entities owned or controlled by Allen C. de Olazarra and Rodolfo Prio Touzet. 22. INSPECTIONS. Purchaser, and Purchaser's agents and contractors, shall have the right during the term of this Agreement, upon one (1) business day's advance notice, to enter upon the Property at all reasonable times for purposes of inspection and making tests and studies. Purchaser hereby agrees to and does indemnify, defend and hold Seller harmless, to the extent of the Deposit, from all liabilities, damages, claims, costs, or expenses whatsoever (including reasonable attorneys' fees and court costs) for bodily injury, death, or property damage resulting from any such inspection, test or study. The provisions of this Section 22 shall survive the Closing or the termination or cancellation of this Agreement. 23. ESCROW AGENT. 23.1 Escrow Agent undertakes to perform only such duties as are expressly set forth in this Agreement. Escrow Agent shall not be deemed to have any implied duties or obligations under or related to this Agreement. Escrow Agent is the law firm representing Purchaser. In the event of a dispute between the parties, the parties consent to Escrow Agent continuing to represent Purchaser, notwithstanding that Escrow Agent shall continue to have the duties provided for in this Agreement. 23.2 Escrow Agent may (a) act in reliance upon any writing or instrument or signature which it, in good faith, believes to be genuine; (b) assume the validity and accuracy of any statement or assertion contained in such a writing or instrument; and (c) assume that any person 31 purporting to give any writing, notice, advice or instructions in connection with the provisions of this Agreement has been duly authorized to do so. Escrow Agent shall not be liable in any manner for the sufficiency or correctness as to form, manner of execution, or validity of any instrument deposited in escrow, nor as to the identity, authority, or right of any person executing any instrument; Escrow Agent's duties under this Agreement are and shall be limited to those duties specifically provided in this Agreement. 23.3 The parties to this Agreement do and shall indemnify Escrow Agent and hold it harmless from any and all claims, liabilities, losses, actions, suits or proceedings at law or in equity, or other expenses, fees, or charges of any character or nature, including attorneys' fees and costs, which it may incur or with which it may be threatened by reason of its action as Escrow Agent under this Agreement, except for such matters which are the result of Escrow Agent's gross negligence or willful malfeasance. 23.4 If the parties (including Escrow Agent) shall be in disagreement about the interpretation of this Agreement, or about their respective rights and obligations, or about the propriety of any action contemplated by Escrow Agent, Escrow Agent may, but shall not be required to, file an action in interpleader to resolve the disagreement; upon filing such action, Escrow Agent shall be released from all obligations under this Agreement. Escrow Agent shall be indemnified for all costs and reasonable attorneys' fees, including those for appellate and post judgment matters and for paralegals and similar persons, incurred in its capacity as escrow agent in connection with any such interpleader action; Escrow Agent may represent itself in any such interpleader action and charge its usual and customary legal fees for such representation, and the 32 court shall award such attorneys' fees, including those for appellate and post judgment matters and for paralegals and similar persons, to Escrow Agent from the losing party. Escrow Agent shall be fully protected in suspending all or part of its activities under this Agreement until a final judgment in the interpleader action is received. 23.5 Escrow Agent may consult with counsel of its own choice, including counsel within its own firm, and shall have full and complete authorization and protection in accordance with the opinion of such counsel. Escrow Agent shall otherwise not be liable for any mistakes of fact or errors of judgment, or for any acts or omissions of any kind unless caused by its gross negligence or willful misconduct. 23.6 Escrow Agent may resign upon five (5) days' written notice to Seller and Purchaser. If a successor escrow agent is not appointed jointly by seller and Purchaser within the five (5) day period, Escrow Agent may petition a court of competent jurisdiction to name a successor. 24. NOTICES. Any notices required or permitted to be given under this Agreement shall be delivered by hand, by facsimile providing a transmission receipt or delivered by a nationally recognized overnight delivery service, and addressed as described below; notices shall be deemed effective only upon receipt or refusal of delivery or, if by facsimile sent after 5:00 p.m., Eastern Time, on the next business day after transmission. 33 Notices to Seller: Highwoods/Florida Holdings, L.P. 3100 Smoketree Court Suite 600 Raleigh, NC 26704-1051 Attn: Mack D. Pridgen, III, Esq. Fax: 919-876-6929 With a copy to: Alston & Bird 3605 Glenwood Avenue Suite 310 Raleigh, NC 27622-1107 Attn: William R. Klapp, Jr. Esq. Fax: 919-420-2260 Notices to Purchaser: America's Capital Partners, LLC 444 Brickell Avenue Suite 1001 Miami, Florida 33131 Attn: Allen C. de Olazarra, CEO Fax: 305-995-9993 With a copy to: Holland & Knight LLP 701 Brickell Avenue Suite 3000 Miami, Florida 33131 Attn: Stuart K. Hoffman, Esq. Fax: 305-789-7732 34 Notices to Escrow Agent: Holland & Knight LLP 701 Brickell Avenue Suite 3000 Miami, Florida 33131 Attn: Stuart K. Hoffman, Esq. Fax: 305-789-7732 25. RISK OF LOSS. 25.1 The Property shall be conveyed to Purchaser in the same condition as on the date of this Agreement, ordinary wear and tear excepted, free of all tenancies or occupancies except those set forth in Exhibit "10", or hereafter approved by Purchaser in writing). Seller shall not remove anything from the Property between the date of this Agreement and the Closing. 25.2 Upon receipt of an offer or any notice or communication from any governmental or quasi-governmental body seeking to take under its power of eminent domain all or any portion of the Property, Seller shall promptly notify Purchaser of the receipt of same and shall send such communication, or a copy of it, to Purchaser. Upon receipt of such notice, Purchaser shall have the right to rescind this Agreement by delivery of written notice to Seller within fifteen (15) days of Purchaser's receipt of the communication from Seller. In the event Purchaser elects to rescind, Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except for those which expressly survive such termination. In the event that Purchaser elects not to rescind, then Purchaser shall be entitled to all condemnation awards and settlements. Seller and Purchaser agree to cooperate with each other to obtain the 35 highest and best price for the condemned property. 25.3 In the event that any of the Property is damaged or destroyed by fire or other casualty prior to Closing, Seller shall repair and restore the Property to the same condition as before the fire or casualty, and the closing shall be deferred for up to one hundred twenty (120) days to permit such repair and restoration. If Seller is unable to repair and restore within such one hundred twenty (120)-day period, then Purchaser shall have the option of (a) terminating this Agreement by written notice to Seller, whereupon Escrow Agent, subject to the provisions of Section 11.3, shall return the Deposit, together with all interest earned thereon, to Purchaser, and both parties shall be released from all further obligations under this Agreement, except those which expressly survive such termination, or (b) proceeding with the Closing, in which case Purchaser shall be entitled to all insurance proceeds (subject to the rights of the holder(s) of any existing mortgages), and to credits equal to the insurance deductibles and to the replacement cost not covered by insurance proceeds and deductibles. 26. INDEMNITY. Seller shall and does indemnify and hold Purchaser harmless from any and all liability, including costs and attorneys' fees, including those for appellate proceedings: 26.1 to the State of Florida for sales tax due on any rentals or sales prior to Closing, under Florida Statutes Section 212.10; 26.2 for services rendered prior to the Closing under any contracts for services to the Property existing now or at any time prior to the Closing; 26.3 for any security deposits of tenants received by Seller prior to the Closing and not credited to Purchaser at the Closing; 36 26.4 for any personal property taxes remaining unpaid for calendar years prior to the year of the Closing. 27. RADON GAS NOTICE. Pursuant to Florida Statutes Section 404.056(8), Seller hereby makes, and Purchaser hereby acknowledges, the following notification: RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit. 28. MISCELLANEOUS. 28.1 This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without application of choice of law or conflicts of laws principles. 28.2 In the event any term or provision of this Agreement is determined by appropriate judicial authority to be illegal or otherwise invalid, such provision shall be given its nearest legal meaning or be construed as deleted as such authority determines, and the remainder of this Agreement shall be construed to be in full force and effect. 28.3 In the event of any litigation between the parties under this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees. Wherever provision is made in this Agreement for "attorneys' fees," such term shall be deemed to include accountants' and attorneys' fees and court costs, whether or not litigation is commenced, including those for appellate and post judgment proceedings and for paralegals and similar persons. 28.4 Each party has participated fully in the negotiation and preparation of this 37 Agreement with full benefit of counsel. Accordingly, this Agreement shall not be more strictly construed against either party. 28.5 Whenever used in this Agreement, the singular shall include the plural, the plural shall include the singular, any gender shall include every other and all genders, and captions and paragraph headings shall be disregarded. 28.6 The captions in this Agreement are for the convenience of reference only and shall not be deemed to alter any provision of this Agreement. 28.7 Any reference in this Agreement to time periods less than six (6) days shall, in the computation thereof, exclude Saturdays, Sundays, and legal holidays; any time period provided for in this Agreement which shall end on a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of the next full business day. Time is of the essence. 28.8 This Agreement constitutes the entire agreement between the parties and may not be changed, altered or modified except by an instrument in writing signed by the party against whom enforcement of such change would be sought. 28.9 All references in this Agreement to exhibits, schedules, paragraphs, subparagraphs and sections refer to the respective subdivisions of this Agreement, unless the reference expressly identifies another document. 28.10 All of the terms of this Agreement, including but not limited to the representations, warranties and covenants of Seller, shall be binding upon and shall inure to the benefit of the parties to this Agreement and their respective successors and assigns. 28.11 Typewritten or handwritten provisions which are inserted in or attached to 38 this Agreement as addenda or riders shall control all printed or pretyped provisions of this Agreement with which they may be in conflict. 28.12 All covenants and agreements which expressly survive the Closing and all representations and warranties of Seller in this Agreement, all remedies related to them, and the provisions of this Section 28.12 shall survive the Closing for a period of one (1) year. 29. SECTION 1031 EXCHANGE. Purchaser hereby acknowledges it is the intention of the Seller to effect a Section 1031 tax deferred exchange at no additional expense to Purchaser. The Seller's rights and obligations under this Agreement may be assigned to a qualified intermediary for the purpose of completing such an exchange. Purchaser agrees to cooperate with Seller and said qualified intermediary to complete the exchange. 30. OTHER AGREEMENT. Seller and Purchaser acknowledge that they have entered into one (1) other Purchase and Sale Agreement (the "Other Agreement") contemporaneously herewith, and that, if the Other Agreement is terminated in accordance with its terms, then this Agreement shall also terminate. In the event that "Closing" (as defined in the Other Agreement) occurs under the Other Agreement on or before May 19, 1999 (or on such later date as may be permitted by the Other Agreement), Seller and Purchaser shall enter into a management agreement and a leasing agreement in the forms attached hereto as Exhibit "30(a)" and Exhibit "30(b)". Purchaser shall manage and lease the Property pursuant to such agreements from the date of such "Closing" until the Closing Date hereunder or earlier termination of, or default by Purchaser under, this Agreement. 39 EXECUTED as of the date first written above in several counterparts, each of which shall be deemed an original, but all of which constitute only one agreement. Signed, sealed and delivered in the presence of: SELLER: _________________________ HIGHWOODS/FLORIDA HOLDINGS, L.P., a Delaware limited partnership _________________________ (As to Seller) By: Highwoods/Florida GP Corp., a Delaware corporation, its general partner By: Edward Fritson ---------------------------------- Title: Executive Vice President ------------------------------- PURCHASER: AMERICA'S CAPITAL PARTNERS __________________________ By: Allen C. de Olazarra _______________________________ Its: Managing Member (As to Purchaser) ---------------------------------- Dated: March 25, 1999 -------------------------------- 40 EX-27 5 FDS -- HIGHWOODS PROPERTIES, INC.
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 49,993 0 75,152 1,893 0 91,529 3,842,013 202,246 4,309,094 111,252 2,030,849 0 397,500 616 1,768,877 4,309,094 146,721 152,774 45,345 73,501 5,793 0 32,620 35,034 0 35,034 0 0 0 26,889 0.45 0.45
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