Xxxxx 0, 0000
Xxxxx Realty, Inc.
Arden Realty Limited Partnership
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxx, XX 00000
Closing Agreement
Ladies and Gentleman:
We refer to that certain Agreement for Purchase and
Sale of AEW/LBA Portfolio (the "Agreement") dated as of December
15, 1997 executed by and among you as the "Buyer" and the set of
"Sellers" defined in and signatory to the Agreement. All
capitalized terms not otherwise defined in this Closing Agreement
shall have the meanings provided in the Agreement. We write to
confirm certain matters relating to such Agreement, specifically,
that the parties agree as follows:
1. Consistent with Section 6.3(c)(i) of the Agreement in which
the parties agreed that (a) Sellers would transfer Sellers'
entire interest in any letters of credit or certificates of
deposit held by Sellers as lease deposits, and that (b) Sellers
would diligently cooperate with Buyer in obtaining any reissuance
or confirmation of the effect of the transfer of such documents,
Sellers and Buyer hereby agree that, following Closing, for any
letter of credit or other collateral held as a lease deposit in
lieu of cash (i) Sellers will cooperate to the extent necessary
to transfer such collateral to Buyer, and (ii) until such time as
the transfer or reissuance of such collateral is effective, Buyer
may request, at Buyer's expense, for Sellers to effect a draw on
a letter of credit or a foreclosure on collateral, with delivery
to Buyer of proceeds from such draw or foreclosure. Sellers
specifically acknowledge that Sellers have not afforded Buyer a
credit and have not transferred to Buyer as of the Closing Date
funds in the approximate amount of $1.25 million representing a
security deposit from PSB Lending at the Carlsbad Corporate
Center Property. Sellers shall transfer such funds upon Buyer's
request following Buyer's establishment of the necessary
segregated account for such purposes.
2. Buyer and AEW/LBA II agree that the option deposit held by
AEW/LBA II from 1st Capital Bancorp with respect to the leasing
of space at Xxx Xxxxxx Corporate Center shall be prorated between
the parties as part of the post-closing reconciliations based
upon the portion of the option period falling before and after
the Closing Date.
3. Notwithstanding the fact that in the Agreement, the legal
description for the Cymer Technology Center includes Xxx 00 xx
Xxxxxxxx Xxxxxxxxxx Xxxx Xxxx Xx. 00 according to Map thereof No.
10480 filed in the Office of County Recorder of San Diego County,
California, on September 23, 1982 (the "Cymer Parking Lot"), the
parties hereby acknowledge that the Cymer Parking Lot will be
retained by Sellers as part of the Cymer Build-to-Suit and that
an easement agreement affording rights of parking over the Cymer
Parking Lot will be executed for recordation on the Closing Date,
and that there will be no corresponding credit or debit to Buyer
or reduction or increase in Purchase Price due to the fact that
the Cymer Parking Lot is not being transferred as part of the
Agreement or that the parking easement shall be executed. Buyer
and Sellers further agree to cooperate and exercise diligent
efforts to secure the prompt execution by Cymer of the lease
amendments proposed to the Cymer Technology lease and the Cymer
Build-To-Suit lease substantially in the forms approved by Buyer
and Sellers as of this date to reflect the retention of and
easement over the Cymer Parking Lot. The parties further
acknowledge that such lease amendments shall divide the rental
assessed Cymer for the Cymer Parking Lot between the two leases
in proportion to the number of parking spaces allocated to the
respective properties in the Cymer Parking Lot.
4. Buyer shall have the option to purchase from AEW/LBA II the
Cymer Build-To-Suit Property (the "Cymer BTS"), subject to the
following terms and conditions: (a) Buyer shall have until 5
p.m. Los Angeles time on May 2, 1998, to determine, in Buyer's
sole discretion and to be expressed by written notice to AEW/LBA
II, whether Buyer elects to purchase the Cymer BTS; (b) if Buyer
so elects to purchase, Buyer shall deposit with the Title Company
a deposit on account of the BTS Properties in an amount equal to
3% of the aggregate projected purchase price for the Cymer BTS
(as determined in good faith by the parties prior to execution of
the agreement contemplated in the last sentence of this Section);
(c) if Buyer so elects to purchase, Buyer shall be obligated to
purchase the Cymer BTS following AEW/LBA II's substantial
completion of all landlord improvements at the Cymer BTS and the
commencement of the term of the lease currently in place with
respect to the Cymer BTS; (d) the purchase price for the Cymer
BTS shall be the annualized stabilized net operating income for
the Cymer BTS divided by a capitalization rate of eight and one-
half percent (8.5%); (e) the calculation of the purchase price
shall exclude from the rental income any amortization of tenant
improvement costs expended by AEW/LBA II in excess of the
allowance defined in the lease, provided that Buyer shall
reimburse AEW/LBA II at the closing for the amount of such costs;
and (f) AEW/LBA II shall assign to Buyer all warranties,
guaranties and contract rights relating to the general contractor
or otherwise relating to the construction of the improvements.
Buyer and AEW/LBA II shall negotiate in good faith and execute a
separate agreement consistent with the foregoing and otherwise
satisfactory to each party to document their respective rights
and obligations as to the option to purchase the Cymer BTS.
5. Buyer acknowledges the existence of that certain mechanic's
lien filed against the Westridge property by C.S.I. Inc. ("CSI")
relating to a contract for services between CSI and a tenant of
the property, Depositech, Inc. which by its express terms only
applies to the leasehold premises of Depositech. Sellers
currently hold certificates of deposit, cash or deposits, in an
amount in excess of the mechanic's lien claim, from Depositech,
and such certificates, cash or deposits are specifically
designated to secure all costs incurred by the tenant in
connection with tenant improvements to the tenant's leasehold
premises. The parties acknowledge that at closing, Sellers will
transfer (consistent with the terms of Paragraph 1 above) such
deposit to Buyer, and that thereafter Sellers will bear no
liability to address the removal of such mechanic's lien from the
property;
6. Buyer acknowledges that Section 2.1 of the Agreement, which
contemplates distributions of some assets from AEW/LBA I and/or
AEW/LBA II to Spectrum entities before the final transfer of
those assets to Buyer, shall apply instead to similar
distributions of assets, prior to their final distribution to
Buyer, from AEW/LBA IV and CAL VI to Spectrum I and to Spectrum
III, respectively;
7. Buyer acknowledges that on the signature page to the
Agreement (a) one of the Seller entities, Spectrum Huntington
Center, LLC, was mis-identified as Spectrum Huntington Avenue,
LLC, and (b) the general partner of Spectrum Investments, L.P.
and Spectrum Investments II, L.P., LBA Fund I, Inc., was mis-
identified as LBA, Inc. Buyer hereby acknowledges that
consistent with the correction of such mis-identifications,
Spectrum Huntington Center, LLC (and not Spectrum Huntington
Avenue, LLC) and LBA Fund I Inc. (and not LBA Inc.) will be the
signatories on various Closing Documents, where appropriate.
8. Pursuant to Section 6.3(c)(iii) of the Agreement, Sellers
are responsible for the costs and expenses relating to the
completion of each of the items of capital improvement set forth
on Exhibit M to the Agreement on or prior to the Closing Date.
For any such items which have not been completed on or prior to
the Closing Date, the Agreement further states that Buyer will
receive a credit against the Purchase Price based upon that
portion of the amount set forth with respect to such item on
Exhibit M as the parties in good faith determine is necessary to
complete the item. Buyer shall thereafter assume the
responsibility for all such costs. Consistent with the
foregoing:
(a) Buyer hereby acknowledges that, for any
Exhibit M item for which no credit has been given to
Buyer (other than the item described in subsection (b)
below with reference to Carlsbad Corporate Center),
Buyer shall have a period of 15 business days following
the Closing Date in which to confirm the completion of
items on Exhibit M or to identify in writing to Sellers
any Exhibit M items not completed. If Buyer so
identifies any incomplete items in timely fashion and
in fact such items are not complete, Sellers shall
refund to Buyer that portion of the amount set forth
with respect to such item on Exhibit M as the parties
shall in good faith determine is necessary to complete
the item and Buyer shall assume the responsibility for
all such costs.
(b) Buyer and Sellers confirm that Sellers have
commenced but not completed the project described on
Exhibit M with reference to Carlsbad Corporate Center -
- the construction of a parking lot and related
improvements (the "Carlsbad Project"). Buyer,
therefore, shall receive a credit on the Closing Date
in the amount of the $444,737 representing the current
estimated cost to complete the Carlsbad Project (the
"Estimated Cost"). To date, the scope and plans for
the project have been defined and are under review for
the issuance of requisite governmental approvals.
Promptly following receipt of such approvals, Buyer and
Sellers shall cooperate to secure bids from three
qualified parking lot construction contractors for the
construction of the Carlsbad Project. The character of
the process of securing bids and the selection of the
bidding contractors shall be subject to the approval of
both Buyer and Sellers. Buyer shall have full control
and decision authority with respect to the award of the
bid, construction contract terms and the execution of
the Carlsbad Project. If the amount of the low bid
secured through the approved bidding process is less
than the Estimated Cost, Buyer shall refund to Sellers
the amount of the difference within 30 days following
the execution of the contracts; if the amount of the
low bid is in excess of the Estimated Cost, Sellers
shall pay the amount of the difference to Buyer within
30 days following execution of the contracts.
9. Buyer and Sellers agree that the amounts of any credits
afforded Sellers on the Closing Date on account of amounts paid
by Sellers on construction and related contracts on tenant
improvement or other capital projects the costs of which are
borne by Buyer pursuant to the Agreement shall be subject to the
reconciliation provisions of the Agreement,.
10. Buyer and AEW/LBA II acknowledge that the parties shall
cooperate following the Closing Date to transfer to Buyer any
rights and obligations of AEW/LBA as the declarant or manager
under property owner associations affecting the Properties,
including those affecting Airport Commerce Center and 0000 Xxxxxx
Xxxxxxx Business Park. To that end, AEW/LBA shall transfer to
Buyer any and all association books, records, accounts or funds
held by AEW/LBA -- all in accordance with any procedures
prescribed under the associations' governing documents.
11. Notwithstanding Buyer's failure to proceed with the purchase
of the BTS Properties and the proviso at the close of Section 2.3
of the Agreement, Buyer shall be entitled to the full amount of
the credits set forth in subsection 2.3(e) of the Agreement.
12. Buyer and CAL VI acknowledge that CAL VI has disclosed to
Buyer, without representation or warranty, the expression of
tenant concerns as to air quality within the Camarillo Business
Park building and reports prepared by third party consultants
with respect to such matters. Consistent with the Agreement,
Buyer has assumed fully the risk of such adverse conditions.
Notwithstanding the foregoing and without implying any
representation, warranty, indemnity or other undertaking not
expressly set forth in the Agreement, CAL VI agrees that the
release set forth in Section 2.5(d) of the Agreement shall not
operate to waive rights, if any, Buyer may possess with respect
to claims relating to injuries arising out of adverse air quality
conditions during CAL VI's ownership of Camarillo Business Park.
Nor shall the limitations of Section 4.4 operate to limit any
such extra-contract rights, if any, that Buyer may possess with
respect to the Camarillo Business Park air quality matter.
13. Sellers represent that Exhibit A to this letter sets forth
under the heading "Deposit per LBA" a materially accurate list of
the amounts collected by the Seller in ownership of the
identified Property as the security deposit from the identified
tenant. Sellers make no representation as to Buyer's ability to
collect any additional amount as a security deposit from such
tenant.
14. Buyer acknowledges that AEW/LBA II has disclosed to Buyer a
complaint and related lis pendens filed as Case No. 718225 in the
Superior Court of San Diego County relating to the assertions of
Fairfield Properties Inc. ("Fairfield") of a breach by AEW/LBA II
of certain rights of second refusal afforded in Fairfield's lease
at Sorrento Valley Science Park (the "Fairfield Matter"). Buyer
and AEW/LBA II, in a collaborative effort to permit AEW/LBA II to
address the Fairfield Matter in an efficient and effective manner
and to achieve certain beneficial leasing at the Sorrento Valley
Property have agreed as follows:
(a) AEW/LBA shall cause the Title Company to
remove the lis pendens filed as part of the Fairfield
Matter affecting the first and second floors of 0000
Xxxxxxxxx Xxxxx at the Sorrento Valley Property as an
exception to the vestee's title set forth in the Title
Policy issued by the Title Company for the Sorrento
Valley Property.
(b) AEW/LBA II acknowledges that AEW/LBA and not
Buyer shall be responsible for any loss or damage
suffered by Fairfield based upon the alleged breach of
the Fairfield lease described as the Fairfield Matter.
Provided that Arden performs consistent with the
undertakings set forth in subsections (c) and (d)
below, AEW/LBA II shall indemnify, defend and hold
harmless Buyer from and against any claim for such
damages asserted by Fairfield against Buyer arising out
of the Fairfield Matter, including, without limitation,
all reasonable costs and expenses and attorneys' fees
suffered or incurred by Buyer in connection with such a
claim (provided that AEW/LBA II shall control in good
faith any settlement with respect to such damage
claims).
(c) AEW/LBA II is in the process of finalizing
the terms of an agreement with Xxxxx Environmental &
Energy ("Xxxxx") with respect to the termination of
certain premises occupied by Xxxxx on the first floor
of 0000 Xxxxxxxxx Xxxxx and the execution of a new
lease at 0000 Xxxxxxxxx Xxxxx. The parties acknowledge
that the termination of Xxxxx'x existing lease would
permit AEW/LBA II to mitigate any claim by Fairfield by
offering Xxxxx'x space to Fairfield for lease at market
terms. Based on consideration afforded Buyer in this
letter and the closing process and based on Buyer's
review and approval of the current proposed term sheet
governing the proposed Xxxxx transaction set forth as
Exhibit B to this letter, Buyer agrees following the
Closing Date to pursue with due diligence (and with the
cooperation and involvement of AEW/LBA II) the
negotiation and finalization of the terms of the Xxxxx
lease transaction. If so finalized, Buyer shall
execute and assume the landlord's rights and
obligations under a lease with Xxxxx consistent in all
material respects with that described on Exhibit B.
(d) Consistent with the foregoing and based on
other consideration afforded Buyer as part of the
closing process, Buyer further agrees following the
Closing Date to pursue with due diligence (and with the
cooperation and involvement of AEW/LBA II) the offer,
negotiation and finalization of the terms of a lease
with Fairfield for the space vacated by Xxxxx in 0000
Xxxxxxxxx Xxxxx consistent in all material respects
with that described on Exhibit C to this letter and to
execute and assume the landlord's rights and
obligations under such lease.
(e) Arden shall bear the costs, including legal
fees, tenant improvements and leasing commissions,
incurred in connection with the preparation, execution
and performance of the leases/amendments evidencing the
Exhibit B and Exhibit C leasing transactions.
(f) AEW/LBA II shall bear any incremental costs
incurred which relate to the defense or settlement of
the Fairfield Matter.
15. As contemplated by Section 4.2(c) of the Agreement, Sellers
confirm that Sellers have terminated all property management
agreements affecting the Properties on or prior to the Closing
Date and have terminated or provided written notice of
termination under agreements for the performance of leasing
brokerage services. Sellers further confirm that all such
agreements terminate upon sale, upon written notice or within 30
days following written notice.
16. Buyer and Sellers agree that leasing commissions in the
approximate amount of $104,000 otherwise payable or reimbursable
to Sellers by Buyer in accordance with the provisions of Section
6.3(c)(ii) of the Agreement shall not be so paid or reimbursed to
the extent that such fees would be payable to LBA, Inc.
17. AEW/LBA I confirms that it has paid the sum of approximately
$10,000 representing the sole amount assessed to date on account
of a Public Facilities Fee in connection with the development of
the movie theater project at the Tower Plaza Property designated
by the City of Temecula as Project PA95-0114 pursuant the
Agreement for Payment of Public Facilities Fee entered into with
the City dated March 25, 1997. AEW/LBA I acknowledges and agrees
that it shall be fully responsible for the timely payment of any
additional assessment of a Public Facilities Fee under the City
agreement relating to the development of the project by AEW/LBA
I. Buyer shall provide AEW/LBA I with notice and copies of any
such assessment provided to Buyer by the City.
18. Buyer and Brea Tech Associates, LLC, an entity with
beneficial ownership consistent with that of AEW/LBA I, shall
negotiate in good faith and finalize within 15 business days
following the Closing Date a definitive agreement affording the
following rights with respect to the Tower Plaza Retail Property
and the portion of the Tower Plaza retail area consisting of the
proposed "Michael's" development pad, the contiguous development
pad and related common area retained by AEW/LBA I and transferred
to Brea Tech Associates following the closing (the "Pads"):
(a) If, at any time within 12 months following
the Closing Date, Arden or any affiliate (but no
successor-in-ownership to Arden) desires to sell the
Tower Plaza Retail Property and the Pads in a unified
sale to a third party, Arden shall have the right to
"drag" Brea Tech along to participate in such sale.
The allocation of the aggregate purchase price between
the parties in such a unified sale shall be subject to
agreement or, in the absence of agreement, to
determination pursuant to a methodology to be set forth
in the definitive agreement. Arden and Brea shall
cooperate in any such unified sale to provide any and
all information to one another necessary to market and
conclude such sale in an efficient fashion.
(b) If, at any time within 24 months following
the Closing Date, Brea Tech desires to sell the Pads,
Arden or any affiliate (but no successor-in-ownership
to Arden) shall have a right of first offer (subject to
a prompt response period) to purchase the Pads at a
price proposed by Brea Tech. The precise terms of the
right of first offer shall be set forth in the
definitive agreement. Both this right of first offer
and the foregoing drag-along right shall terminate if
Brea Tech sells to any unaffiliated third party
successor following Arden's declination of the right of
first offer.
[Balance of Page Intentionally Blank]
* * * * *
If you agree that the foregoing represents an accurate
expression of our agreement, please execute a copy of this letter
agreement in the space provided below and return a signed copy to
the undersigned.
Very truly yours,
AEW/LBA Acquisition Co., LLC
AEW/LBA Acquisition Co. II, LLC
AEW/LBA Acquisition Co. IV, LLC
Cal Portfolio VI, L.L.C.
Spectrum Huntington Center, LLC
Spectrum Chicago Avenue , LLC
Spectrum Xxxxxx Street, LLC
Spectrum Xxxxxxx Plaza, LLC
By:/s/ Xxxx Xxxxxxx
Xxxx Xxxxxxx
By:/s/ Xxxx X. Xxxx
Xxxx X. Xxxx
Authorized Sellers's Signatories
AGREED TO BY BUYER:
Arden Realty, Inc. Arden Realty Limited
Partnership, a Maryland limited partnership
By:
Name: Xxxxxx Xxxxxxx By: Arden Realty, Inc.
Its: President
By:/s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx Xxxxxxx
Its: President
AGREED TO SOLELY FOR THE PURPOSES
OF SECTION 18:
BREA TECH ASSOCIATES, LLC
By: /s/ Xxxx X. Xxxx
Xxxx X. Xxxx
Its: Authorized Signatory
