Item 1.01. Entry into a Material Definitive Agreement.
Item
1.01. Entry into a Material Definitive Agreement.
On
Xxxxxx
0, 0000, XXX Realty L.P. (the “Partnership”), the operating partnership
wholly-owned subsidiary of Winthrop Realty Trust (the “Trust”), and The
Lexington Master Limited Partnership (“LMLP”), an operating partnership
subsidiary of Lexington Realty Trust (“Lexington”) formed a jointly owned
subsidiary, Lex-Win Concord LLC (“Lex-Win”), and the Partnership and LMLP each
contributed to Lex-Win all of their right, title and interest in Concord Debt
Holdings LLC (“Concord”) and WRP Management LLC (“WRP Management”), the entity
that provides collateral management and asset management services to Concord
and
its existing CDO.
Second
Amended and Restated Limited Liability Company Agreement of
Concord
Immediately
following the contribution described above, Lex-Win, as managing member, and
Inland American (Concord) Sub LLC (“Inland”), a wholly-owned subsidiary of
Inland American Real Estate Trust, Inc., as a preferred member, entered into
the
Second Amended and Restated Limited Liability Company Agreement (the “Amended
Concord Agreement”) of Concord.
Capital
Contributions
The
Amended Concord Agreement provides for a $100.0 million capital commitment
by
Inland to Concord during the period ending on the earlier of (i) 12 months
if
$65.0 million of capital contributions is not called from Inland during the
first 12 month period (ii) 18 months or (iii) at Inland’s election, the date on
which neither Xxxxxxx X. Xxxxxx nor Xxxxx Xxxxxxxxx, respectively, the Chief
Executive Officer and President and of the Trust, is a member of Concord’s
advisory committee (see “Governance”
below).
Inland’s capital contributions may be used by Concord, without Inland’s consent,
for the acquisition of loan assets meeting certain criteria and, with Inland’s
consent, to meet margin calls or for senior loans and sidecar investments.
Lex-Win is obligated to make additional capital contributions to Concord of
up
to $75.0 million (“Lex-Win Preferred Capital”) only if such capital
contributions are necessary to (i) meet a margin call if Inland elects not
to
make a capital contribution with respect to such margin call, (ii) retire short
term debt (non-match funded debt with a maturity of less than one year or 18
months with extensions and 15% of match funded debt with a maturity of less
than
one year with extensions) so that short term debt does not exceed the greater
of
(x) $750.0 million or 120% of total equity contributed and committed (the “Short
Term Debt Limit”), or (iii) retire debt so that Concord’s total debt to total
assets is not greater than 75% (the “Total Debt Limit”).
Distributions
As
described in more detail below, Inland receives a 10% priority return on
unreturned capital contributions from operating cash flow and capital proceeds
(subject to certain increases in the Inland priority return in the event of
certain default events by Lex-Win), and Lex-Win receives a priority return
from
capital proceeds until its unreturned capital contributions are reduced to
$200
million (currently $325 million) or, if Inland is no longer obligated to make
preferred capital contributions, the greater of (i) $100 million and (ii) 200%
of Inland’s unreturned preferred capital contribution.
Operating
cash flow is distributed (i) first, to Lex-Win until it receives its unreturned
Lex-Win Preferred Capital plus the applicable return on its Lex-Win Preferred
Capital, generally equal to the rate on the debt related to the margin call
being satisfied or the debt being retired by such Lex-Win Preferred Capital;
provided, that if such additional capital contribution is not returned within
12
months, such rate is reduced by 00 xxxxx xxxxxx,
(xx)
second, to Inland until it receives a 10% preferred return on its unreturned
capital contributions (subject to certain increases in the Inland priority
return in the event of certain default events by Lex-Win), (iii) third, to
Lex-Win until it receives a 10% return on its unreturned capital contributions,
and (iv) thereafter, pari
passu between Lex-Win and Inland in accordance with unreturned capital
contributions, except that Lex-Win will receive, as a promoted interest, 30%
of
the amount that Inland would otherwise be entitled to receive,
or if
all unreturned capital contributions have been reduced to zero, distributions
will be made 76 2/3% to Lex-Win and 23 1/3% to Inland.
Capital
proceeds are distributed (i) first, to Lex-Win until it receives the applicable
return on its Lex-Win Preferred Capital plus a return of its Lex-Win Preferred
Capital, (ii) second, to the extent not paid from cash flow, to Inland until
it
receives a 10% preferred return on its unreturned capital contributions, (iii)
third, to Lex-Win until its existing unreturned capital contribution is reduced
to $200 million (currently $325 million) or, if Inland is no longer obligated
to
make capital contributions, the greater of (i) $100 million and (ii) 200% of
Inland’s unreturned capital contribution, (iv) fourth, to Inland until it
receive a return of its unreturned capital contributions, (v) fifth, to the
extent not paid from cash flow, to Lex-Win until it receives a 10% preferred
return on its unreturned capital contributions, (vi) sixth, to Lex-Win until
it
receive a return of its unreturned capital, and (vii) thereafter, 76 2/3% to
Lex-Win and 23 1/3% to Inland.
Governance
Lex-Win
generally has discretion to make investments in loan assets meeting certain
criteria, except that Inland’s consent and the approval of an advisory committee
is required for certain actions. The advisory committee will consist of two
members appointed by Inland and two members appointed by Lex-Win (one from
each
of the Partnership and LMLP); provided that either Xxxxxxx X. Xxxxxx or Xxxxx
Xxxxxxxxx need to be a member of the Advisory Committee at all times, and,
if
not, then Inland will not be required to make any further capital contributions
and Concord is not permitted to make any investments in loan assets or sidecar
entities without Inland’s consent. If this were to occur, Lex-Win, the Trust and
Lexington would, however, be entitled to invest in loan assets or sidecar
entities directly six months thereafter.
Management
Fees
Lex-Win
or its designee will be entitled to (i) an annual base management fee equal
to
100 basis points of the total unreturned capital contributions made by Lex-Win
and Inland to Concord, which fee will be paid quarterly and reduced by any
payments made by Concord’s existing CDO to WRP Management, (ii) origination fees
equal to 27.5 basis points of the gross purchase price of any loan asset
acquired by Concord, and (iii) securitization fees equal to 7.5 basis points
of
the gross value of a securitized entity established by Concord, but not to
exceed $300,000.
Exclusivity
Lex-Win
and its affiliates (including the Trust and the Partnership) will have the
obligation to offer all loan assets meeting the investment criteria to Concord,
subject to certain exceptions, including if such loan assets are related to
existing assets owned by Lex-Win or its affiliates, or if the Trust acquires,
directly or indirectly, a company currently in the business of originating
and/or acquiring loan assets.
Redemptions
Inland
will have the right at any time after the earlier of a default event by Lex-Win
or the fifth anniversary of the date of the Amended Concord Agreement to have
its interest in Concord redeemed for a redemption price approximating the fair
market value of Inland’s interests in Concord at the time. In addition, Lex-Win
will have the right to redeem Inland’s interest in Concord after such fifth
anniversary, provided that Inland can elect to retain its interest in Concord,
in which case (i) the redemption will be null and void and (ii) Inland will
no
longer have the right to request a redemption.
Removal
of Manager
Following
a default event by Lex-Win, Inland will have the right to remove Lex-Win as
the
managing member and appoint a new managing member, in which event Lex-Win would
no longer be permitted to receive its promoted interest or to receive any of
the
fees described above. In addition, following a default event by Lex-Win, Inland
will have the right to sell assets of Concord or liquidate Concord without
Lex-Win’s consent.
Transfers
Transfers
of interests are generally prohibited except certain transfers, including
transfers (i) to affiliates of members, (ii) transfers between the members
of
Lex-Win, (iii) transfers of interests in Lex-Win so long as either the
Partnership or WRT continues to control Lex-Win, and (iv) transfers of interests
in Inland so long as the Inland Real Estate Group of Companies continues to
control Inland. Following a default event, Inland will have the right to remove
Lex-Win as the managing member in which event Lex-Win would no longer be
permitted to receive its promoted interest or to receive any of the fees
described above. In addition, following a default event, Inland will have the
right to sell assets or liquidate without Lex-Win’s consent.
The
foregoing description is qualified in its entirety by reference to the Amended
Concord Agreement, which is attached as Exhibit 10.1 to this Current Report
on
Form 8-K.
Limited
Liability Company Agreement of Lex-Win and Administration and Advisory
Agreement
As
disclosed above, on August 2, 2008, the Partnership and LMLP have contributed
all of their right, title and interest in Concord to Lex-Win pursuant to the
Limited Liability Company Agreement of Lex-Win (the “Lex-Win
Agreement”).
Capital
Contributions
Capital
contributions will only be required to the extent required by Lex-Win under
the
Concord Agreement and will be made equally by the Partnership and LMLP.
Distributions
Distributions
of cash flow and capital proceeds will be distributed equally to the Partnership
and LMLP, unless a default event has occurred which was caused by the
Partnership or LMLP. In such case, the non-defaulting member will receive from
Lex-Win and the defaulting member the same returns it would have received under
the Amended Concord Agreement and the Lex-Win Agreement had there not been
a
default and any shortfall will accrue at a default rate which will be payable
by
the defaulting member.
Governance
Lex-Win
will be managed by the Partnership and LMLP and certain accounting and auditing
matters will be subject to the approval of an audit committee which will consist
of two independent trustees (one appointed by each of the Partnership and LMLP)
and the CFO of each of the Trust and Lexington. WRP Sub-Management LLC (“WRP
Sub”), an affiliate of FUR Advisors LLC (“FUR Advisors”), the Trust’s external
advisor and entity controlled and partially owned by the Trust’s senior
management, will act as the administrative manager of Lex-Win. WRP Sub will
be
entitled to reimbursement of certain dedicated expenses. On August 2, 2008,
WRP
Sub also entered into an Administration and Advisory Agreement with Lex-Win
and
WRP Management.
The
Trust
will have sole discretion over certain actions by Lex-Win if Lexington, directly
or indirectly (other than through Concord) pursues certain loan assets as
permitted by the terms of the Amended Concord Agreement.
Management
Fees
Pursuant
to the Administration and Advisory Agreement, Lex-Win and WRP Management are
obligated to pay to WRP Sub (i) reimbursement of indirect expenses in an amount
equal to 5 basis points of the total unreturned capital of Concord (the
“Indirect Reimbursement”), (ii) origination fees, approved in connection with
the annual budget each year, and currently equal to 50 basis points of the
gross
value of any loan asset acquired by Concord and (iii) a reimbursement of all
direct expenses of employees (other than loan originators) dedicated solely
to
the business of Concord. Due to the affiliation of WRP Sub and FUR Advisors,
the
Trust will continue to be entitled to reduce the fee payable by it to FUR
Advisors by one-half of the Indirect Reimbursement paid to WRP Sub to ensure
equal treatment to the Trust and LMLP with respect to the fees paid by Lex-Win
to WRP Sub.
Buy/Sell
The
Lex-Win Agreement contains a buy/sell that may be exercised by any member at
any
time following the redemption of Inland’s preferred interest in Concord or
expiration of Inland’s right to cause a redemption of its preferred interest in
Concord.
Transfers
Transfers
of interests are generally prohibited except transfers (x) to affiliates or
other members, (y) of interests up to 30% of such member’s interest so long as
the Trust or Lexington, as the case may be, retains control of such member,
(z)
to a transferee that has provided evidence sufficient to the other member that
such transferee has the financial capability to make capital contributions
to
Lex-Win equal to not less than 12.5% of Lex-Win’s total net asset
value.
The
foregoing description is qualified in its entirety by reference to the Lex-Win
Agreement, which is attached as Exhibit 10.2 to this Current Report on Form
8-K,
and the Administration and Advisory Agreement, which is attached as Exhibit
10.3
to this Current Report on Form 8-K.
