-----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, D1rsrSVo2kaidohsKBqqxztQGvm56xaT85FnAwD/e/lIlxeK2cG8kvTpoBwOgDbu IRd8OPTmHHmIAgvT2RVrxw== 0000841127-02-000001.txt : 20020415 0000841127-02-000001.hdr.sgml : 20020415 ACCESSION NUMBER: 0000841127-02-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REALTY PARKING PROPERTIES LP CENTRAL INDEX KEY: 0000841127 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 521591575 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17616 FILM NUMBER: 02590636 BUSINESS ADDRESS: STREET 1: 225 E REDWOOD ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4107274083 MAIL ADDRESS: STREET 2: 225 E REDWOOD ST CITY: BALTIMORE STATE: MD ZIP: 21202 10-K 1 rp10kworking.txt REALTY PARKING PROPERTIES 10-K 12/31/02 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) { X } ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 OR { } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-17616 Realty Parking Properties L.P. (Exact Name of Registrant as Specified in its Charter) Delaware 52-1591575 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 225 East Redwood Street, Baltimore, Maryland 21202 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (410) 727-4083 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None Securities registered pursuant to section 12(g) of the Act: Assignee Units of Limited Partnership Interests (Title of class) 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 As of December 31, 2001, there were 1,909,127 Units of Assignee and Limited Partnership Interests held by non-affiliates of the Registrant. Because there is not an established public trading market for the Units, the aggregate market value of the Units held by non-affiliates of the Registrant cannot be calculated. Documents Incorporated by Reference The Annual Report for 2001 is incorporated by reference. REALTY PARKING PROPERTIES L.P. INDEX
Part I Page(s) Item 1. Business 3-4 Item 2. Properties 4-5 Item 3. Legal Proceedings 5 Item 4. Submission of Matters to a Vote of Security Holders 5 Part II. Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 6 Item 6. Selected Financial Data 6 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 Item 7a. Quantitative and Qualitative Disclosures About Market Risk 9 Item 8. Financial Statements and Supplementary Data 9 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 9 Part III. Item 10. Directors and Executive Officers of the Registrant 10 Item 11. Executive Compensation 11 Item 12. Security Ownership of Certain Beneficial Owners and Management 11 Item 13. Certain Relationships and Related Transactions 11 Part IV. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 11-15 Signatures 16
REALTY PARKING PROPERTIES L.P. PART I Item 1. Business Realty Parking Properties L. P. (the "Partnership") is a Delaware limited partnership formed on October 4, 1988. The Partnership's intent was to acquire surface lots and parking garage buildings (the "Properties") to be held for appreciation and used for parking operations to produce current income. The Properties were acquired with an emphasis on surface commercial parking lots believed to have significant future potential for eventual sale as development sites. The Partnership acquired the Properties on an all-cash basis without debt financing. The acquisition program is complete and only minor rehabilitation expenditures and repairs to existing Properties are expected in the future. The General Partner of the Partnership is Realty Parking Company, Inc., a Maryland corporation. A minimum of 80,000 units of assignee limited partnership interests (the "Units") and an increased maximum of 2,400,000 Units were registered under the Securities and Exchange Act of 1933, as amended. Throughout 1988 and 1989, investors holding 1,909,087 Units, or $47,727,175 of gross offering proceeds, were recognized on the books of the Partnership and the selling effort was completed in November 1989. The offering proceeds, net of issuance-related fees, were used to acquire the Properties and make necessary improvements on an all-cash basis. The Partnership has an Investment Advisory Agreement with Central Parking System, Inc. (the "Advisor"). The Advisor identified properties for purchase by the Partnership and leased such properties from the Partnership following acquisition. Pursuant to the Investment Advisory Agreement, the Advisor will earn a fee upon disposition of a property equal to 2% of the contract price for the sale of the property. Such fee is earned for services rendered to advise the General Partner on the timing and pricing of property sales. The Partnership acquired fifteen Properties during 1989 and 1999. During 2001, the Partnership sold four of its Properties. Additionally, the Partnership sold one Property in each of the years 1993, 1999 and 2000. The Partnership's investment in the remaining eight Properties, net of impairment losses and accumulated depreciation, was $16,856,095 at December 31, 2001. The Partnership initially leased its parking properties to the Advisor for periods of 10 years, expiring between April 1999 and November 2000, with options to extend the leases for two additional terms of five years. The Advisor exercised extension options for seven properties held at December 31, 2001. Under the terms of the leases, the Advisor is responsible for all operating costs, including ad valorem real estate taxes and general and garage liability insurance coverage. One of the leases differs slightly from the terms above in order to accommodate specific circumstances of the related property. Under the terms of the leases, the Advisor is obligated to pay the Partnership the greater of minimum rent plus reimbursement of real estate taxes or 60% of gross parking revenues ("percentage rent"). Percentage rents earned during 2001, 2000 and 1999 totaled $109,023, $197,902 and $326,976, respectively. The minimum rents are 7.0% of certain acquisition costs. Parking lot revenues of $1,056,109 in 2001, $1,431,204 in 2000, and $2,308,135 in 1999, represented minimum rents under the lease agreements. Each of the seven leases with the Advisor is cancelable by the Partnership upon the sale of the property and payment to the Advisor of a termination fee. The termination fee generally equals 15% of the amount, if any, by which the property's sale proceeds exceed the original acquisition cost of the property plus a 12% compounded annual return on the original acquisition cost minus all rental income received by the Partnership from the property. 3 REALTY PARKING PROPERTIES L.P. Item 1. Business (continued) The Advisor did not extend leases on four Properties at the lease's renewal dates. Three of these Properties have been operated under month-to-month management contracts with parking operators, two of which were sold in 2001. Parking operations at the fourth Property ceased in November 2000 and the Partnership sold this Property in 2001. Under the terms of the management contracts, the parking operators receive a fixed fee for managing the Properties. The Partnership records as parking lot revenue the gross parking revenues net of the operating expenses of these Properties. The Partnership is responsible for real estate taxes. Parking lot revenues of $333,068 and $211,869 in 2001 and 2000, respectively, represented income from Properties operated under the management contracts. The success of the Partnership will, to a large extent, depend on the quality of management of the Partnership and the timing, terms and conditions of any sale. Future development of the Properties may be delayed or rendered legally or economically unfeasible as a result, for example, of future building moratoriums, zoning changes, and changes in growth and development patterns, any of which may impair the value of the Partnership's investment in its properties. The interim use of the Properties for parking operations to produce current income is dependent, in part, upon the Advisor's ability to pay rents under the terms of the lease agreements. Rents may vary due to percentage rental payments (discussed above) which are influenced by a variety of factors, including competition, traffic levels, parking demand and the location, design and condition of the parking lot (see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations). Item 2. Properties The Partnership owns eight properties in total, seven of which are wholly owned by the Partnership. The undivided tenants-in-common ownership of one of the properties is noted below. The properties were acquired on an all-cash basis and, therefore, are not subject to a mortgage or other lien or encumbrance. As of December 31, 2001, the Partnership owns the following properties:
Approximate (1) Investment (3) 2001 Parking Location Size (Sq. Ft.) Type in Real Estate Lot Revenue Lease Date Birmingham, Alabama 28,000 276-car garage $ 902,750 $ 156,698 5/90 - 4/05 Corner of Fourth Ave. North and 19th St. Little Rock, Arkansas 35,000 surface lot 1,002,360 69,100 5/89 - 4/04 East side of Broadway between Third and Fourth Streets Los Angeles, California 41,800 surface lot 3,489,920 301,608 Monthly 800 Block S. Main St. Miami, Florida 90,000 surface lot 4,900,458 340,627 8/89 - 7/04 Block bounded by S. Miami Ave., S.E. 2nd St., N.E. 1st Ave. (2)
4 REALTY PARKING PROPERTIES L.P. Item 2. Properties (continued)
Approximate (1) Investment (3) 2001 Parking Location Location Size (Sq. Ft.) Type in Real Estate Lot Revenue Lease Date Kansas City, Missouri 35,650 400-car garage 1,745,903 110,000 10/90 - 9/03 Fronting on Grand Ave., 8th St. and Walnut St. Nashville, Tennessee 33,360 surface lot 1,558,046 103,945 10/90 - 9/05 Commerce St. and Seventh Ave. Houston, Texas 81,000 surface lot 1,407,423 144,388 8/90 - 7/05 Commerce St. at its intersection with Austin St. Milwaukee, Wisconsin 36,350 451-car garage 1,849,235 155,610 10/90 - 9/05 East side of N. 7th St. and N. 6th St. at West Wells St. ----------- ----------- $16,856,095 $ 1,381,976 =========== ===========
(1) Investment in real estate is recorded net of an impairment loss of $4,409,624 and accumulated depreciation totaling $1,220,553 (see Note 4. "Gain (Loss) on Properties" in Item 8. Financial Statements, herein). (2) The Partnership owns a three-quarter undivided interest in this property with the remaining 25% owned by the Advisor. (3) 2001 parking lot revenue does not include rental income from the properties sold during 2001. Item 3. Legal Proceedings The Partnership is not subject to any material pending legal proceedings. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to the security holders for a vote during the last quarter of the fiscal year covered by this report. 5 REALTY PARKING PROPERTIES L.P. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters An established public trading market for the Units does not exist and the Partnership does not anticipate that a public market will develop. Transfer of Units by an investor and purchase of Units by the Partnership may be accommodated under certain terms and conditions. The Partnership Agreement imposes certain limitations on the transfer of Units and may restrict, delay or prohibit a transfer primarily if: o the transfer of Units would cause a technical termination of the Partnership within meaning of Section 708(b)(1)(A) of the Internal Revenue Code; o such a transfer would be a violation of any federal or state securities laws that may cause the Partnership to be classified other than as a partnership for federal income tax purposes; and, o such transfers would cause the Partnership to be treated as a "publicly traded partnership" under Sections 7704 and 469(k) of the Internal Revenue Code. As of December 31, 2001, there were 2,924 holders of assignee and limited partnership interests of the registrant, owning an aggregate of 1,909,127 units. The Partnership made four quarterly cash distributions totaling $1,415,420 in 2001, and $2,032,913 in 2000, and $2,473,212 in 1999. These distributions were derived from funds provided by operating activities and a return of capital of $135,558 in 2001 and $70,387 in 2000. Additionally in 2001 and 2000, the Partnership distributed sales proceeds totaling $4,537,000 and $9,581,634, respectively. Item 6. Selected Financial Data The following selected financial data should be read in conjunction with the financial statements and accompanying notes incorporated by reference in this report.
2001 2000 1999 1998 1997 Parking lot revenue $1,498,200 $1,840,975 $2,635,111 $2,702,673 $2,508,271 Interest income 41,514 99,133 64,155 47,354 53,389 Gain (loss) on properties, net 1,805,024 767,622 (4,158,255) - - Net earnings (loss) 2,929,580 2,345,661 (1,752,340) 2,436,246 2,251,096 Net earnings (loss) per Unit 1.52 1.21 (.97) 1.25 1.16 Total assets 17,861,515 20,824,038 30,267,124 34,354,969 34,399,045 Partners' capital 17,493,260 20,516,100 29,784,986 34,010,538 34,047,504 Cash distributions paid per Unit: Operations .66 1.01 1.27 1.27 1.21 Return of capital .07 .03 - - .06 Sales proceeds 2.38 5.02 - - -
6 REALTY PARKING PROPERTIES L.P. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The Partnership was fully invested in parking properties as it entered 2001 and currently has no plans to use working capital to perform major repairs or improvements to any of its properties. At December 31, 2001, the Partnership had a working capital position that included cash and cash equivalents of $834,800, accounts receivable (net of real estate taxes payable) of $1,620 and accounts payable of $199,255. Cash and cash equivalents increased $913 during 2001. This increase represents the net effect of $1,416,339 in cash provided by operating activities, $1,415,420 in quarterly cash distributions to investors, $4,536,994 in proceeds from sales of properties, and distributions of sales proceeds totaling $4,537,000. It is anticipated that remaining cash and cash equivalents will be sufficient to satisfy the Partnership's liquidity requirements. On February 13, 2002, the Partnership made a quarterly cash distribution totaling $287,194, of which 98% was allocated to assignee and limited partners. The distribution was comprised of funds provided by operating activities during 2001. Results of Operations Sales During 2001, the Partnership sold four properties for $4,850,000. The Partnership's investment in the properties was $2,731,970, net of accumulated depreciation of $50,308 and impairment losses totaling $2,050,679. The gain from the sales totaled $1,805,024, net of expenses of $313,006. During 2000, the Partnership sold one property for $1,335,586. The Partnership's investment in the property was $372,558, net of accumulated depreciation of $1,189. The gain from the sale totaled $767,622, net of expenses of $195,406. During 1999, the Partnership sold one property for $8,625,000. The Partnership's investment in the property was $6,137,882, net of accumulated depreciation of $13,440. The gain from the sale totaled $2,302,048, net of expenses of $185,070. In the fourth quarter of 1999, the Advisor gave notice that it would not renew four leases that were expiring at various dates in 2000. As a result, the Partnership made an evaluation as to the recoverability of the carrying amounts of the related properties from future cash flows expected to result from the use and eventual disposition of the properties over their expected holding periods. Based upon this evaluation, the Partnership determined that the carrying amounts of those properties were not recoverable, and an impairment loss of $6,460,303 was recognized at December 31, 1999. See Note 4, "Gain (Loss) on Properties, Net," in Item 8. Financial Statements, herein. Operations Parking lot revenue includes base and percentage rents earned pursuant to the lease agreements with the Advisor, and the net operating revenues of the properties operated under management contracts. The Partnership leases seven of its properties to the Advisor under terms that include a minimum rent calculated as a percentage of certain acquisition costs. In addition, the Advisor is obligated to pay percentage rent, calculated as a percentage of gross parking revenues in excess of a base amount. The eighth remaining property is managed by a parking operator in accordance with a separate management contract. Under the terms of the management contract, the operator forwards the property's net operating revenues to the Partnership. The Partnership is responsible for the payment of real estate taxes for that property. 7 REALTY PARKING PROPERTIES L.P. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Operations (continued) Parking lot revenue for 2001, 2000 and 1999 totaled $1,498,200, $1,840,975 and $2,635,111, respectively. Parking lot revenue declined during 2001 by $342,775 from 2000. This decline resulted from: (1) reduced rental income of $200,362 related to the four properties that were sold during 2001, (2) reduced rental income of $26,504 related to a lease renewal at a rate lower than the original lease, (3) reduced rental income of $59,556 related to a property that is operated pursuant to a management agreement, and (4) lower percentage rental income of $56,353 earned at other properties. Parking lot revenue declined during 2000 by $794,136 from 1999. This decline resulted from: (1) reduced rental income of $476,335 related to the two properties that were sold during late 1999 and early 2000, (2) reduced rental income of $247,869, primarily from the three properties that are operated pursuant to management agreements, and (3) lower percentage rental income of $69,932 earned at other properties. Expenses in 2001, net of depreciation, totaled $296,509, reflecting an increase of $55,464 over 2000. The increase was primarily the result of real estate tax expense relating to the properties being operated under management contracts, professional expenses incurred in examining sale possibilities, and franchise and excise taxes imposed by the State of Tennessee on the Partnership's property in Nashville. The increases were offset by the lower administrative expenses incurred. Administrative expenses were incurred during 2000 that did not recur during 2001, as noted below. Expenses in 2000, net of depreciation, totaled $241,045, reflecting an increase of $71,546 over 1999. The increase was primarily the result of real estate tax expense relating to the properties being operated under management contracts. In addition, administrative expenses increased due primarily to the additional costs and expenses incurred as a result of lease extension and management contract negotiations. Outlook The Partnership is currently negotiating with separate buyers for the Kansas City, Nashville, Houston and Milwaukee properties. Although these negotiations are serious and ongoing, there can be no assurances that these properties will be sold. There has been significant interest from various buyers throughout the country in the Partnership's remaining properties. While the Fund's original investment strategy had anticipated that the highest returns might be obtained by selling properties at a price reflective of their development potential, strong returns can also be earned from selling properties based on their parking economics. We will pursue all viable strategies in evaluating the sale of the Partnership's remaining assets. Critical Accounting Policies Critical accounting policies are those that are both important to the presentation of financial condition and results of operations and require management's most difficult, complex or subjective judgments. The Partnership's critical accounting policy relates to the evaluation of impairment of long-lived assets. If events or changes in circumstances indicate that the carrying value of a property to be held and used may be impaired, a recoverability analysis is performed based on estimated undiscounted cash flows to be generated from the property in the future. If the analysis indicates that the carrying value is not recoverable from future cash flows, the property is written down to its estimated fair value and an impairment loss is recognized. If the Partnership decides to sell a property, it evaluates the recoverability of the carrying amount of the assets. If the evaluation indicates that the carrying value is not recoverable from estimated net sales proceeds, the property is written down to estimated fair value less costs to sell and an impairment loss is recognized. The estimates of cash flows and fair values of the properties are based on current market conditions and consider matters such as each of the parking properties' parking rates, operating expenses and/or the terms of a net lease with a parking operator, recent sales data for comparable properties and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers. These estimates are subject to revision as market conditions, and the Partnership's assessment of them, change. 8 REALTY PARKING PROPERTIES L.P. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) New Accounting Pronouncement In October 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144 does not change the fundamental provisions of SFAS No. 121; however, it resolves various implementation issues of SFAS No. 121 and establishes a single accounting model for long-lived assets to be disposed of by sale. It retains the requirement of APB Opinion No. 30 to report separately discontinued operations but extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in distribution to owners) or is classified as held for sale. We do not believe that adoption of SFAS No. 144 in 2002 will have a material effect on the Partnership's financial statements. Item 7a. Quantitative and Qualitative Disclosures About Market Risk None. Item 8. Financial Statements and Supplementary Data Index to Financial Statements: Pages(s) Herein Annual Report Independent Auditors' Report 12 3 Balance Sheets 4 Statements of Operations 5 Statements of Partners' Capital 6 Statements of Cash Flows 7 Notes to Financial Statements 8-15 Financial Statement Schedule Schedule III - Real Estate and Accumulated Depreciation 13-15 All other schedules are omitted because they are not applicable, not required, or because the required information is included in the financial statements or notes thereto. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 9 REALTY PARKING PROPERTIES L.P. PART III Item 10. Directors and Executive Officers of the Registrant The General Partner of the Partnership is Realty Parking Company, Inc. The Partnership's principal executive office is located at 225 East Redwood Street, Baltimore, Maryland 21202, telephone (410) 727-4083. The General Partner had primary responsibility for the selection and negotiation of terms concerning the acquisition of the properties' sites, selecting a manager for the interim investments, and the structure of the offering and the Partnership. The General Partner is responsible for overseeing the performance of those who contract with the Partnership, as well as making decisions with respect to the financing, sale and liquidation of the Partnership's assets. It also provides all reports to, and communications with, investors and others, all distributions and allocations to investors, the administration of the Partnership's business and all filings with the Securities and Exchange Commission and other federal or state regulatory authorities. The Partnership Agreement provides for the removal of the General Partner and the election of a successor or additional general partner by investors holding a majority of the Units. The directors and principal officers of the General Partner are as follows: John M. Prugh, age 53, has been a Director and President of the General Partner since 1988, and of Alex. Brown Realty, Inc. and Armata Financial Corp. since 1984. Mr. Prugh graduated from Gettysburg College in 1970, and was designated a Certified Property Manager by the Institute of Real Estate Management in 1979. He has worked in property management for H. G. Smithy Co., in Washington, D.C., and Dreyfus Bros., Inc. in Bethesda, Maryland. Since 1977, Mr. Prugh has been involved in managing, administering, developing and selling real estate investment projects sponsored by Alex. Brown Realty, Inc. and its subsidiaries. Peter E. Bancroft, age 49, has been a Director and Vice President of the General Partner since 1988 and a Senior Vice President of Alex. Brown Realty, Inc. and Armata Financial Corp. since 1983. Mr. Bancroft graduated from Amherst College in 1974, attended the University of Edinburgh, and received a J.D. degree from the University of Virginia School of Law in 1979. Prior to joining Alex. Brown Realty, Inc. in 1983, Mr. Bancroft held legal positions with Venable, Baetjer and Howard and T. Rowe Price Associates, Inc. Terry F. Hall, age 55, has been the Secretary of the General Partner and a Vice President and Secretary of, and Legal Counsel for, Alex. Brown Realty, Inc. since 1989. Mr. Hall graduated from the University of Nebraska-Lincoln in 1968, and received a J.D. degree from the University of Pennsylvania Law School in 1973. Prior to joining Alex. Brown Realty, Inc. in 1986, Mr. Hall was a Partner at the law firm of Venable, Baetjer and Howard from 1981 to 1986 and an associate at the same firm from 1973 to 1981. Timothy M. Gisriel, age 45, has been the Treasurer of the General Partner and of Alex. Brown Realty, Inc. and Armata Financial Corp. since 1990. He was the Controller of Alex. Brown Realty, Inc. and Armata Financial Corp. from 1984 through 1989. Mr. Gisriel graduated from Loyola College in 1978 and received his Masters of Business Administration degree from the Robert G. Merrick School of Business, University of Baltimore, in 1993. Prior to joining Alex. Brown Realty, Inc. in 1984, Mr. Gisriel was an audit supervisor in the Baltimore office of Coopers & Lybrand. He is a Maryland Certified Public Accountant. There is no family relationship among the officers and directors of the General Partner. 10 REALTY PARKING PROPERTIES L.P Item 11. Executive Compensation The officers and directors of the General Partner received no compensation from the Partnership. The General Partner is entitled to receive a share of cash distributions and a share of profits and losses as described in the Agreement of Limited Partnership (see Note 8. "Partners' Capital" in Item 8. Financial Statements, herein). For a discussion of compensation and fees to which the General Partner is entitled, see Item 13, Certain Relationships and Related Transactions, herein. Item 12. Security Ownership of Certain Beneficial Owners and Management No person is known to the Partnership to own beneficially more than 5% of the outstanding assignee units of limited partnership interest of the Partnership. The Assignor Limited Partner, Parking Properties Holding Co., Inc., an affiliate of the General Partner, holds 40 Units representing a beneficial interest in limited partnership interests in the Partnership. The Units held by the Assignor Limited Partner have all rights attributable to such Units under the Limited Partnership Agreement except that these Units are nonvoting. The General Partner has a 2% interest in the Partnership as the General Partner, but holds no Units. For the three years ending December 31, 2001, the Advisor held 43,011 assignee limited partnership interests (an approximate 2% investment in the Partnership). There are no arrangements known to the Partnership, the operation of which may, at a subsequent date, result in a change of control of the registrant. Item 13. Certain Relationships and Related Transactions The General Partner and its affiliates have and are permitted to engage in transactions with the Partnership. For a summarization of fees paid during 2001, 2000 and 1999, and to be paid to the General Partner and its affiliates at December 31, 2001, see Note 6, "Related Party Transactions," in Item 8, Financial Statements, herein. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. Financial Statements: See Index to Financial Statements in Item 8 on page 9, herein. 2. Financial Statement Schedule: See Index to Financial Statements and Financial Statement Schedule in Item 8 on page 9. 3. Exhibits: (3, 4) Limited Partnership Agreement on pages 1 through 38 of Exhibit A to the Partnership's Registration Statement on Form S-11 (File No. 33-24961) incorporated herein by reference. (13) Annual Report for 2001. (b) Reports on Form 8-K: None. 11 INDEPENDENT AUDITORS' REPORT The Partners Realty Parking Properties L.P.: Under date of January 25, 2002, we reported on the balance sheets of Realty Parking Properties L.P. as of December 31, 2001 and 2000 and the related statements of operations, partners' capital and cash flows for each of the years in the three-year period ended December 31, 2001, which are included in the Annual Report on Form 10-K for 2001. In connection with our audits of the aforementioned financial statements, we also audited the related financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Partnership's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP Baltimore, Maryland January 25, 2002 12 REALTY PARKING PROPERTIES L.P. page 1 of 3 SCHEDULE III. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------ COLUMN A COLUMN C COLUMN D COLUMN E COST CAPITALIZED GROSS AMOUNT SUBSEQUENT AT WHICH CARRIED INITIAL COST TO THE TO ACQUISITION AT CLOSE OF PERIOD PARTNERSHIP LAND BUILDING LAND & BUILDING & DESCRIPTION LAND BUILDING IMPROVEMENTS IMPROVEMENTS IMPROVEMENTS IMPROVEMENTS TOTAL - ------------------------------------------------------------------------------------------------------------------------------------ LITTLE ROCK, ARKANSAS approximately 35,000 square-foot surface parking lot $1,002,360 1,002,360 1,002,360 MIAMI, FLORIDA approximately 90,000 square-foot surface parking lot 4,900,458 4,900,458 4,900,458 BIRMINGHAM, ALABAMA 276-car garage on appoximately 28,000 square-foot lot 307,791 672,075 209,737 307,791 881,812 1,189,603 LOS ANGELES, CALIFORNIA approximately 41,800 square-foot surface parking lot 3,454,621 75,619 3,530,240 3,530,240 HOUSTON, TEXAS approximately 81,000 square-foot surface parking lot 1,407,423 1,407,423 1,407,423 NASHVILLE, TENNESSEE approximately 33,360 square-foot surface parking lot 1,558,046 1,558,046 1,558,046 KANSAS CITY, MISSOURI 400-car garage on approximately 35,650 square-foot lot 1,151,154 625,447 34,485 274,294 1,185,639 899,741 2,085,380 MILWAUKEE, WISCONSIN 451-car garage on approximately 36,350 square-foot lot 738,914 929,946 734,278 738,914 1,664,224 2,403,138 ----------- --------- ------- --------- ---------- --------- ---------- $14,520,767 2,227,468 110,104 1,218,309 14,630,871 3,445,777 18,076,648 =========== ========= ======= ========= ========== ========= ==========
13 REALTY PARKING PROPERTIES L.P. SCHEDULE III. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2001
- --------------------------------------------------------------------------------------- COLUMN A COLUMN F COLUMN H COLUMN I LIFE ON WHICH ACCUMULATED DEPRECIATION DEPRECIATION DATE IN LATEST I/S DESCRIPTION ("A/D") ACQUIRED IS COMPUTED - --------------------------------------------------------------------------------------- LITTLE ROCK, ARKANSAS approximately 35,000 square-foot surface parking lot N/A 1989 N/A MIAMI, FLORIDA approximately 90,000 square-foot surface parking lot N/A 1989 N/A BIRMINGHAM, ALABAMA 276-car garage on appoximately 28,000 square-foot lot 286,853 1990 SEE NOTE 5 LOS ANGELES, CALIFORNIA approximately 41,800 square-foot surface parking lot 40,320 1990 SEE NOTE 5 HOUSTON, TEXAS approximately 81,000 square-foot surface parking lot N/A 1990 N/A NASHVILLE, TENNESSEE approximately 33,360 square-foot surface parking lot N/A 1990 N/A KANSAS CITY, MISSOURI 400-car garage on approximately 35,650 square-foot lot 339,477 1990 SEE NOTE 5 MILWAUKEE, WISCONSIN 451-car garage on approximately 36,350 square-foot lot 553,903 1990 SEE NOTE 5 ------------ 1,220,553 ============
14 REALTY PARKING PROPERTIES L.P. SCHEDULE III. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2001
- ---------------------------------------------------------------------------------------------------------------------------- (1) 2001 2000 1999 REAL ESTATE A/D REAL ESTATE A/D REAL ESTATE A/D ---------------------------------------------------------------------------------------------- BALANCE AT BEGIN. OF PERIOD $ 20,858,926 1,152,212 21,232,673 1,032,377 33,844,298 921,965 ADDITIONS - 118,649 - 121,024 - 123,852 REAL ESTATE SOLD (4,832,957) (50,308) (373,747) (1,189) (6,151,322) (13,440) IMPAIRMENT LOSSES 2,050,679 - - - (6,460,303) - --------------------------------------------------------------------------------------------- BALANCE AT CLOSE OF PERIOD $ 18,076,648 1,220,553 20,858,926 1,152,212 21,232,673 1,032,377 ============================================================================================================================
(2) AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $22,486,272 AT DECEMBER 31, 2001 (3) SEE NOTES 3 AND 4 OF THE NOTES TO FINANCIAL STATEMENTS FOR INFORMATION REGARDING THE PARTNERSHIP'S INVESTMENT IN REAL ESTATE AND THE IMPAIRMENT LOSSES RECORDED IN 1999. IMPAIRMENT LOSSES HAVE BEEN APPLIED TO REDUCE THE INITIAL COST OF LAND, WHERE APPLICABLE. (4) THERE ARE NO ENCUMBRANCES ON THE REAL ESTATE SET FORTH ABOVE. (5) LAND IMPROVEMENTS ARE DEPRECIATED OVER 15 YEARS STRAIGHT LINE BUILDING AND IMPROVEMENTS IN SERVICE PRIOR TO JANUARY 1, 1994 ARE DEPRECIATED OVER 31.5 YEARS STRAIGHT LINE BUILDING AND IMPROVEMENTS IN SERVICE AFTER JANUARY 1, 1994 ARE DEPRECIATED OVER 39 YEARS STRAIGHT LINE 15 REALTY PARKING PROPERTIES L.P. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REALTY PARKING PROPERTIES L. P. DATE: 3/15/02 BY: /s/ John M. Prugh John M. Prugh President and Director Realty Parking Company, Inc. General Partner Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following in the capacities and on the dates indicated. DATE: 3/15/02 BY: /s/ John M. Prugh John M. Prugh President and Director Realty Parking Company, Inc. General Partner DATE: 3/20/02 BY: /s/ Peter E. Bancroft Peter E. Bancroft Vice President and Director Realty Parking Company, Inc. General Partner DATE: 3/20/02 BY: /s/ Terry F. Hall Terry F. Hall Secretary Realty Parking Company, Inc. General Partner DATE: 3/15/02 BY: /s/ Timothy M. Gisriel Timothy M. Gisriel Treasurer Realty Parking Company, Inc. General Partner -16- EX-13 3 rp10kex-13annual.txt REALTY PARKING ANNUAL REPORT 12/31/02 REALTY PARKING PROPERTIES L.P. 2001 ANNUAL REPORT April 12, 2002 Dear Investor: OPERATIONS Operating highlights during 2001 for Realty Parking Properties L.P. (the "Partnership") featured the sales of four properties for $4,850,000. The Dayton, Ohio lot sold in March for $500,000, the Rochester, New York lot sold in June for $550,000, the Reno, Nevada lot sold in September for $950,000, and the St. Paul-Jackson, Minnesota lot sold in October for $2,850,000. The Partnership's investment in the properties was $2,731,970, net of accumulated depreciation of $50,308 and impairment losses totaling $2,050,679. The gain from the sales totaled $1,805,024, net of expenses of $313,006. Parking lot rental income includes base rents and percentage rents earned pursuant to lease agreements in effect during each period and net operating revenues earned pursuant to management contracts. Parking lot revenue declined during 2001 by $342,775 from 2000. This decline resulted from: (1) reduced rental income of $200,362 related to the four properties that were sold in 2001, (2) reduced rental income of $26,504 related to a lease renewal at a rate lower than the original lease at the Kansas City property, (3) reduced rental income of $59,556 related to the Los Angeles property that is now operated pursuant to a management agreement, and (4) lower percentage rental income of $56,353 earned at other properties. Expenses, net of depreciation, totaled $296,509, an increase of $55,464 over 2000. The increase was primarily the result of real estate tax expense related to the properties being operated under management contracts, professional expenses incurred in examining sale possibilities, and franchise and excise taxes imposed by the State of Tennessee on the Partnership's property in Nashville. CASH DISTRIBUTIONS The Partnership made four quarterly distributions from operations totaling $1,415,420 in 2001, of which $135,558 was provided by reserves. The Partnership will make future operating distributions from the net parking lot rental income of its eight remaining properties. Distributions from operations are expected to decrease as sales of the remaining properties occur. On February 13, 2002, the Partnership made a cash distribution to partners totaling $287,194. Each partner received his or her share of this distribution in the amount of $0.15 per Unit. 1 REALTY PARKING PROPERTIES L.P. CASH DISTRIBUTIONS, continued Distributions from net sales proceeds during 2001 were $4,537,000 or $2.38 per Unit. Future distributions of sale proceeds are completely dependent of the Partnership's ability to successfully identify buyers for its remaining properties. OUTLOOK The Partnership is currently negotiating with separate buyers for the Kansas City, Nashville, Houston and Milwaukee properties. Although these negotiations are serious and ongoing, there can be no assurances that these properties will be sold. There has been significant interest from various buyers throughout the country in the Partnership's remaining properties. While the Fund's original investment strategy had anticipated that the highest returns might be obtained by selling properties at a price reflective of their development potential, strong returns can also be earned from selling properties based on their parking economics. We will pursue all viable strategies in evaluating the sale of the Partnership's remaining assets. SUMMARY Total distributions in 2001 exceeded $5.95 million, or $3.10 per Unit. Total distributions since inception have now increased to $29.41 per original $25 Unit. The Partnership's remaining properties are expected to continue to deliver strong operational cash flow while we consider additional disposition opportunities. Very truly yours, /s/ John M. Prugh John M. Prugh, President Realty Parking Company, Inc. General Partner 2 INDEPENDENT AUDITORS' REPORT The Partners Realty Parking Properties L.P.: We have audited the accompanying balance sheets of Realty Parking Properties L.P. (the "Partnership") as of December 31, 2001 and 2000 and the related statements of operations, partners' capital and cash flows for each of the years in the three-year period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Realty Parking Properties L.P. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLC Baltimore, Maryland January 25, 2002, except as to note 10, which is as of February 13, 2002 3 REALTY PARKING PROPERTIES L.P. Balance Sheets
December 31, --------------------------------------- 2001 2000 ----------------- ---------------- Assets Investment in real estate (Notes 3 and 4) $ 16,856,095 $ 19,706,714 Cash and cash equivalents 834,800 833,887 Accounts receivable (Note 6) 170,620 261,958 Other assets - 21,479 ----------------- ---------------- $ 17,861,515 $ 20,824,038 ================= ================ Liabilities and Partners' Capital Accounts payable and accrued expenses $ 160,898 $ 34,608 Due to affiliate (Note 6) 38,357 37,830 Real estate taxes payable (Note 6) 169,000 235,500 ----------------- ---------------- 368,255 307,938 ----------------- ---------------- Partners' Capital (Notes 7 and 8) General Partner - - Assignee and Limited Partnership Interests - $25 stated value per unit, 1,909,127 units outstanding 17,493,160 20,516,000 Subordinated Limited Partner 100 100 ----------------- ---------------- 17,493,260 20,516,100 ----------------- ---------------- $ 17,861,515 $ 20,824,038 ================= ================
See the accompanying notes to financial statements. 4 REALTY PARKING PROPERTIES L.P. Statements of Operations For the years ended December 31,
2001 2000 1999 ---------------------------------------------------- Revenues Parking lots (Note 5) $ 1,498,200 $ 1,840,975 $ 2,635,111 Interest income 41,514 99,133 64,155 ---------------- ---------------- ---------------- 1,539,714 1,940,108 2,699,266 ---------------- ---------------- ---------------- Expenses Administrative, including amounts to related party (Note 6) 98,970 130,342 106,094 Professional fees 37,167 24,800 23,712 Management fees to related party (Note 6) 28,000 30,000 39,693 Real estate taxes 111,556 55,903 - Franchise and excise taxes 20,816 - - Depreciation 118,649 121,024 123,852 ---------------- ---------------- ---------------- 415,158 362,069 293,351 ---------------- ---------------- ---------------- Earnings from operations 1,124,556 1,578,039 2,405,915 Gain (loss) on properties, net (Note 4) 1,805,024 767,622 (4,158,255) ---------------- ---------------- ---------------- Net earnings (loss) $ 2,929,580 $ 2,345,661 $ (1,752,340) ================ ================ ================ Net earnings (loss) per unit of assignee and limited partnership interests-basic (Note 8) $ 1.52 $ 1.21 $ (0.97) ================ ================ ================
See the accompanying notes to financial statements. 5 REALTY PARKING PROPERTIES L.P. Statements of Partners' Capital For the years ended December 31, 2001, 2000 and 1999
Assignee and Limited Subordinated Partnership Limited General Interests Partner Partner Total ------------------------------------------------------------------------- Balance at December 31, 1998 $ 34,066,407 $ 100 $ (55,969) $ 34,010,538 Net earnings (loss) (1,857,773) - 105,433 (1,752,340) Distributions to partners (2,423,748) - (49,464) (2,473,212) ---------------- ----------------- ----------------- ----------------- Balance at December 31, 1999 29,784,886 100 - 29,784,986 Net earnings 2,305,003 - 40,658 2,345,661 Distributions to partners Operations (1,992,255) - (40,658) (2,032,913) Sales proceeds, net (9,581,634) - - (9,581,634) ---------------- ----------------- ----------------- ----------------- Balance at December 31, 2000 20,516,000 100 - 20,516,100 Net earnings 2,901,272 - 28,308 2,929,580 Distributions to partners Operations (1,387,112) - (28,308) (1,415,420) Sales proceeds, net (4,537,000) - - (4,537,000) ---------------- ----------------- ----------------- ----------------- Balance at December 31, 2001 $ 17,493,160 $ 100 $ - $ 17,493,260 ================ ================= ================= =================
See the accompanying notes to financial statements. 6 REALTY PARKING PROPERTIES L.P. Statements of Cash Flows For the years ended December 31,
2001 2000 1999 ------------------------------------------------------ Cash flows from operating activities Net earnings (loss) $ 2,929,580 $ 2,345,661 $ (1,752,340) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities (Gain) loss on properties, net (1,805,024) (767,622) 4,158,255 Depreciation 118,649 121,024 123,852 Changes in assets and liabilities Decrease in accounts receivable and real estate taxes payable, net 24,838 3,227 332,575 (Increase) decrease in other assets 21,479 (21,479) - Increase in accounts payable and accrued expenses 126,290 1,831 1,536 Increase (decrease) in due to affiliates 527 (178,031) 183,171 ----------------- ----------------- ---------------- ----------------- --------------- -------------- Net cash provided by operating activities 1,416,339 1,504,611 3,047,049 ----------------- ----------------- ---------------- Cash flows from investing activities - proceeds from sales of properties, net 4,536,994 1,140,180 8,439,930 ----------------- ----------------- ---------------- Cash flows from financing activities - distributions to partners (5,952,420) (11,614,547) (2,473,212) ----------------- ----------------- ---------------- Net increase (decrease) in cash and cash equivalents 913 (8,969,756) 9,013,767 Cash and cash equivalents Beginning of year 833,887 9,803,643 789,876 ----------------- ----------------- ---------------- End of year $ 834,800 $ 833,887 $ 9,803,643 ================= ================= ================
See the accompanying notes to financial statements. 7 REALTY PARKING PROPERTIES L.P. Notes to Financial Statements December 31, 2001, 2000 and 1999 (1) Organization Realty Parking Properties L.P. (the "Partnership") is a Delaware limited partnership formed on October 4, 1988 to acquire surface lots and parking garage buildings to be held for appreciation and used for parking operations to produce current income. The General Partner is Realty Parking Company, Inc. and the Subordinated Limited Partner is Realty Associates Limited Partnership, an affiliate of the General Partner. The Partnership shall continue until December 31, 2038, unless dissolved prior to that date, in accordance with the provisions of the Partnership Agreement. The Partnership owns eight properties in total, seven of which are wholly owned by the Partnership. The undivided tenants-in-common ownership of one of the properties is noted below. The properties were acquired on an all-cash basis and, therefore, are not subject to a mortgage or other lien or encumbrance. As of December 31, 2001, the Partnership owned the following properties: Approximate Location Size (Sq. Ft.) Type Birmingham, Alabama 28,000 276-car garage Little Rock, Arkansas 35,000 surface lot Los Angeles, California 41,800 surface lot Miami, Florida 90,000 surface lot Kansas City, Missouri 35,650 400-car garage Nashville, Tennessee 33,360 surface lot Houston, Texas 81,000 surface lot Milwaukee, Wisconsin 36,350 451-car garage The Partnership owns a 75% undivided interest in the Miami, Florida property with the remaining 25% owned by Central Parking System (the "Advisor"). The Partnership has an Investment Advisory Agreement with the Advisor. The Advisor purchased and holds 43,011 Assignee Limited Partnership Interests representing its maximum allowable purchase of $1,000,000. 8 REALTY PARKING PROPERTIES L.P. Notes to Financial Statements (continued) (2) Summary of Significant Accounting Policies The accompanying financial statements have been prepared on the accrual basis of accounting. The Partnership reports its operating results for income tax purposes on the accrual basis. No provision for income tax is made because any liability for income taxes is that of the individual partners and not that of the Partnership. Lease revenues are recorded as earned under the terms of lease agreements. Costs associated with the marketing of Assignee Limited Partnership Interests to the public were offset against the related partners' capital. The Partnership considers all short-term investments with maturities of three months or less at dates of purchase as cash equivalents. Cash and cash equivalents consist of cash and money market accounts and are stated at cost, which approximated market value at December 31, 2001 and 2000. Investment in real estate is stated at cost, net of accumulated depreciation, reduced for impairment losses where appropriate, and includes all related acquisition costs of the properties. Depreciation of the parking garage buildings is computed using the straight-line method over 31.5 years for property placed in service prior to January 1, 1994 and 39 years for property placed in service after January 1, 1994. Land improvements are depreciated using the straight-line method over 15 years. The Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the individual assets might be impaired, and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. Assets considered to be impaired are written down to estimated fair value. If the Partnership decides to sell a property, it evaluates the recoverability of the carrying amount of the assets. If the evaluation indicates that the carrying value is not recoverable from estimated net sale proceeds, the property is written down to estimated fair value, less costs to sell, and an impairment loss is recognized. During 2001 and 2000, no events or circumstances indicated that the assets of the Partnership were impaired. In October 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards(SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144 does 9 REALTY PARKING PROPERTIES L.P. Notes to Financial Statements (continued) (2) Summary of Significant Accounting Policies (continued) not change the fundamental provisions of SFAS No. 121; however, it resolves various implementation issues of SFAS No. 121 and establishes a single accounting model for long-lived assets to be disposed of by sale. It retains the requirement of APB Opinion No. 30 to report separately discontinued operations but extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in distribution to owners) or is classified as held for sale. We do not believe that adoption of SFAS No. 144 in 2002 will have a material effect on the Partnership's financial statements. Management of the Partnership has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. The fair values of all financial instruments approximated their recorded values at December 31, 2001 and 2000. (3) Investment in Real Estate Investment in real estate is summarized as follows at December 31: 2001 2000 ---------------- ----------------- Land $ 14,520,767 $ 17,224,496 Buildings 3,445,777 3,445,777 Land improvements 110,104 188,653 ---------------- ----------------- 18,076,648 20,858,926 Accumulated depreciation (1,220,553) (1,152,212) ---------------- ----------------- $ 16,856,095 $ 19,706,714 ================ ================= 10 REALTY PARKING PROPERTIES L.P. Notes to Financial Statements (continued) (4) Gain (Loss) on Properties, Net The gain (loss) on properties, net, for 2001, 2000 and 1999 consists of the following:
2001 2000 1999 ---------------- ----------------- ---------------- Gain on sale of operating properties $ 1,805,024 $ 767,622 $ 2,302,048 Impairment loss - - (6,460,303) ---------------- ----------------- ---------------- $ 1,805,024 $ 767,622 $ (4,158,255) ================ ================= ================
During 2001, the Partnership sold four properties for $4,850,000. The Partnership's investment in the properties was $2,731,970, net of accumulated depreciation of $50,308 and impairment losses totaling $2,050,679. The gain from the sales totaled $1,805,024, net of expenses of $313,006. During 2000, the Partnership sold one property for $1,335,586. The Partnership's investment in the property was $372,558, net of accumulated depreciation of $1,189. The gain from the sale totaled $767,622, net of expenses of $195,406. During 1999, the Partnership sold one property for $8,625,000. The Partnership's investment in the property was $6,137,882, net of accumulated depreciation of $13,440. The gain from the sale totaled $2,302,048, net of expenses of $185,070. In the fourth quarter of 1999, the Advisor gave notice that it would not renew four leases that were expiring at various dates in 2000. As a result, the Partnership made an evaluation as to the recoverability of the carrying amounts of the related properties from future cash flows expected to result from the use and eventual disposition of the properties over their expected holding periods. Based upon this evaluation, the Partnership determined that the carrying amounts of those properties were not recoverable, and an impairment loss was recognized at December 31, 1999. (5) Leases and Management Contracts The Partnership initially leased its parking properties to the Advisor for periods of 10 years, expiring between April 1999 and November 2000, with options to extend the leases for two additional terms of five years. The Advisor exercised extension options for seven of the properties held at December 31, 2001. Under the terms of the leases, the Advisor is responsible for all operating costs, including ad valorem real estate taxes and general and garage liability insurance coverage. One of the leases differs slightly from the terms above in order to accommodate specific circumstances of the related property. 11 REALTY PARKING PROPERTIES L.P. Notes to Financial Statements (continued) (5) Leases and Management Contracts (continued) Under the terms of the leases, the Advisor is obligated to pay the Partnership the greater of minimum rent plus reimbursement of real estate taxes or 60% of gross parking revenues ("percentage rent"). Percentage rents earned during 2001, 2000 and 1999 totaled $109,023, $197,902 and $326,976, respectively. The minimum rents are 7.0% of certain acquisition costs. Parking lot revenues of $1,056,109 in 2001, $1,431,204 in 2000, and $2,308,135 in 1999, represented minimum rents under the lease agreements. Each of the seven leases with the Advisor is cancelable by the Partnership upon the sale of the property and payment to the Advisor of a termination fee. The termination fee generally equals 15% of the amount, if any, by which the property's sale proceeds exceed the original acquisition cost of the property plus a 12% compounded annual return on the original acquisition cost minus all rental income received by the Partnership from the property. The Advisor did not extend leases on four Properties at the lease's renewal dates. Three of these Properties have been operated under month-to-month management contracts with parking operators, two of which were sold in 2001. Parking operations at the fourth Property ceased in November 2000 and the Partnership sold this Property in 2001. Under the terms of the management contracts, the parking operators receive a fixed fee for managing the Properties. The Partnership records as parking lot revenue the gross parking revenues net of the operating expenses of these Properties. The Partnership is responsible for real estate taxes. Parking lot revenues of $333,068 and $211,869 in 2001 and 2000, respectively, represented income from Properties operated under the management contracts. The minimum rents to be received in accordance with the terms of the leases in effect at December 31, 2001 are summarized as follows: 2002 $ 971,345 2003 943,845 2004 673,350 2005 287,720 ----------- Total $ 2,876,260 =========== 12 REALTY PARKING PROPERTIES L.P. Notes to Financial Statements (continued) (6) Related Party Transactions Pursuant to an Investment Advisory Agreement, the Advisor will earn a fee upon disposition of a property equal to 2% of the contract price for the sale of the property. Such fee is earned for services rendered to advise the General Partner on the timing and pricing of property sales. The Advisor earned advisory fees totaling $97,000, $26,712 and $172,500 during 2001, 2000 and 1999, respectively. In 2000, the Advisor earned a lease termination fee of $87,604 in connection with the sale of a property. The General Partner earned property management fees of $28,000, $30,000 and $39,693 (1% of the gross revenues of the properties and other sources of income) and was reimbursed $124,116, $131,570 and $98,007 for certain costs incurred relating to administrative costs and services related to sales of properties for the Partnership in 2001, 2000 and 1999, respectively. Under the terms of the extended lease agreements with the Advisor, real estate taxes paid by the Partnership will generally be reimbursed and are not reflected in the statements of operations. The Partnership recorded $169,000 and $235,500 of real estate taxes in both accounts receivable and real estate taxes payable at December 31, 2001 and 2000, respectively. (7) Earnings for Federal Income Tax Purposes In 2001 and 1999, the Partnership's income for income tax purposes differs from the net earnings (loss) for financial reporting purposes as a result of an impairment loss recorded for financial reporting purposes during 1999, a portion which was recognized for income tax purposes in 2001. Impairment losses are not deductible for income tax purposes until they are realized. There was no difference between the Partnership's net earnings for income tax purposes and the net earnings for financial reporting purposes in 2000. (8) Partners' Capital The Partnership Agreement provides, among other provisions, for the following: (a) The Partnership consists of the General Partner, the Assignee and Limited Partners and Subordinated Limited Partner. 13 REALTY PARKING PROPERTIES L.P. Notes to Financial Statements (continued) (8) Partners' Capital (continued) (b) Distributions to the partners relating to operations of the properties are based on net cash flow, as defined in the Partnership Agreement. Assignee and Limited Partners receive 98% of net cash flow and the General Partner receives 2%. Net earnings per Unit of Assignee and Limited Partnership Interests, as disclosed in the statements of operations, is based upon 1,909,127 Units. (c) Net proceeds of a sale or financing of the properties are distributed as follows: o To Assignee and Limited Partners until each such partner has recovered its original capital contribution in full and received a cumulative, noncompounded annual return of 12% of its adjusted capital balance to the extent that such return has not been provided from prior distributions of net cash flow. o To the General Partner until the General Partner has received an amount equal to the sum of its original capital contribution and a deferred net cash flow amount. The deferred net cash flow amount is the cumulative excess of the amounts of net cash flow that the General Partner would have received if net cash flow from operations had been distributed 95% to the Assignee and Limited Partners and 5% to the General Partner over the amounts of net cash flow actually received by the General Partner. o Any remainder will be distributed 90% to the Assignee and Limited Partners, 1% to the General Partner and 9% to the Subordinated Limited Partner. (d) Net earnings from operations and gains on sales of properties are allocated consistent with the above distribution provisions, except that gains on sales are allocable first to any partner with a negative capital account balance. Losses on sales of properties are allocated in accordance with the Partners' respective partnership interests. (e) Assignee Limited Partners may elect to become Substitute Limited Partners, as defined in the Partnership Agreement. Assignee Limited Partners who elect to become Substitute Limited Partners will receive one limited partnership interest for each Assignee Limited Partnership Interest they convert and will not be able to re-exchange their limited partnership interests for Assignee Limited Partnership Interests. (f) Restrictions exist regarding transferability or disposition of partnership interests. 14 REALTY PARKING PROPERTIES L.P. Notes to Financial Statements (continued) (9) Distributions to Investors Distributions of sales proceeds to investors during 2001 and 2000 totaled $4,537,000 and $9,581,634, respectively, of which 100% was allocated to Assignee and Limited Partners. Distributions of cash flow to investors totaled $1,415,420, $2,032,913, and $2,473,212 in 2001, 2000 and 1999, respectively, of which 98% was allocated to Assignee and Limited Partners. These distributions were derived from funds provided by operating activities and a return of capital of $135,558 in 2001 and $70,387 in 2000. (10) Subsequent Event On February 13, 2002, the Partnership made a cash distribution totaling $287,194, of which 98% was allocated to Assignee and Limited Partners. This distribution was derived from funds provided by operating activities during 2001. Assignee and Limited Partners received a cash distribution of $.15 per original $25 Unit. 15 REALTY PARKING PROPERTIES L.P. Partnership Information Directors and Executive Officers Realty Parking Company, Inc. General Partner: John M. Prugh President and Director Peter E. Bancroft Vice President and Director Terry F. Hall Vice President and Secretary Timothy M. Gisriel Treasurer Form 10-K A copy of the Partnership's Annual Report on Form 10-K for 2001 as filed with the Securities and Exchange Commission is available to partners without charge on request by writing to: Investor Services Realty Parking Properties L.P. 225 East Redwood Street Baltimore, Maryland 21202 Auditors KPMG LLP 111 South Calvert Street Baltimore, Maryland 21202 Legal Counsel Wilmer, Cutler & Pickering 100 Light Street Baltimore, Maryland 21202 Further Information Please submit changes in name, address, investment representative and distribution instructions to Investor Services at the above address. For further information or questions regarding your investment, please call Yolanda Harris, Investor Services Coordinator, at 410-547-3016. 16 EX-4 4 rp10kex-4pa.txt PARTNERSHIP AGREEMENT EXHIBIT A LIMITED PARTNERSHIP AGREEMENT REALTY PARKING PROPERTIES L.P. TABLE OF CONTENTS
Page Preliminary Statement .......................................................................................... A-3 Article I - Defined Terms .................................................................................... A-3 Article II - Name; Purpose; Term and Certificate ................................................... A-9 Section 2.1 Name; Formation .............................................................................. A-9 Section 2.2 Place of Registered Office .................................................................. A-9 Section 2.3 Purpose .......................................................................................... A-9 Section 2.4 Term .............................................................................................. A-9 Section 2.5 Recording of Certificate ..................................................................... A-9 Article III - Partners; Capital .............................................................................. A-10 Section 3.1 General Partners; Assignor Limited Partner; Subordinated Limited Partners ........................................................................................... A-10 Section 3.2 Investors ........................................................................................ A-10 Section 3.3 Partnership Capital .......................................................................... A-10 Section 3.4 Liability of Partners and Investors ..................................................... A-11 Article IV - Allocations, Distributions and Applicable Rules ................................... A-12 Section 4.1 Allocation of Profit or Loss from a Sale ............................................. A-12 Section 4.2 Distribution of Net Proceeds of Sale or Financing ............................... A-12 Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and Loss from Operations .................................................................................... A-13 Section 4.4 Liquidation or Dissolution ............................................................... A-13 Section 4.5 General and Special Rules ............................................................... A- 14 Article V - Rights, Powers and Duties of Partners ................................................. A-16 Section 5.1 Management and Control of the Partnership; Tax Matters Partner ............. A-16 Section 5.2 Authority of General Partners .......................................................... A-16 Section 5.3 Authority of Investors ..................................................................... A-19 Section 5.4 Restrictions on Authority ................................................................. A-19 Section 5.5 Authority of Partners and Affiliated Persons to Deal with Partnership ............. A-21 Section 5.6 Duties and Obligations of the General Partner ................................... A-22 Section 5.7 Compensation of General Partner ..................................................... A-23 Section 5.8 Other Businesses of Partner .............................................................. A-23 Section 5.9 Liability of General Partner and Affiliates to Limited Partner or Investors . ..... A-23 Section 5.10 Indemnification ............................................................................. A-23 Article VI - Transferability of a General Partner's Interest ..................................... A-24 Section 6.1 Removal, Voluntary Retirement or Withdrawal of a General Partner; Transfer of Interests ...................................................................................... A-24 Section 6.2 Election and Admission of Successor or Additional General Partners ....... A-24 Section 6.3 Events of Withdrawal of a General Partner ........................................ A-24 Section 6.4 Liability of a Withdrawn General Partner .......................................... A-25 Section 6.5 Valuation of Partnership Interest of General Partner ........................... A-25 Article VII - Assignment of Assignee Units to Investors; Transferability of Limited Partner Interests and Units ..............................................................................A-26 Section 7.1 Assignments of the Assignee Units to Investors .................................. A-26 Section 7.2 Transferability of Units .................................................................... A-27 Section 7.3 Death, Bankruptcy or Adjudication of Incompetence of an Investor or a Limited Partner ........................................................................................... A-28
A-1
Section 7.4 Effective Date ............................................................................ A-28 Section 7.5 Substitute Limited Partners .......................................................... A-28 Section 7.6 Retirement or Withdrawal of a Limited Partner ............................. A-28 Article VIII - Dissolution, Liquidation and Termination of the Fund ................... A-29 Section 8.1 Events Causing Dissolution ......................................................... A-29 Section 8.2 Liquidation ................................................................................ A-29 Section 8.3 Capital Contribution Upon Dissolution ......................................... A-30 Article IX - Certain Payments to the General Partners and Affiliates ................... A-30 Section 9.1 Reimbursement of Certain Costs and Expenses of the General Partner and Its Affiliates ............................................................................................ A-30 Section 9.2 Fees and Other Payments ............................................................ A-31 Article X - Books and Records; Bank Accounts; Reports ................................... A-31 Section 10.1 Books and Records .................................................................... A-31 Section 10.2 Bank Accounts ......................................................................... A-32 Section 10.3 Reports .................................................................................... A-32 Section 10.4 Federal Tax Elections ................................................................ A-33 Article XI - Meetings of Investors ................................................................... A-34 Section 11.1 Calling Meetings ......................................................................... A-34 Section 11.2 Notice; Procedure ..................................................................... A-34 Section 11.3 Right to Vote ........................................................................... A-34 Section 11.4 Proxies; Rules .......................................................................... A-34 Article XII - General Provisions ..................................................................... A-35 Section 12.1 Appointment of General Partner as Attorney-in-Fact ......................... A-35 Section 12.2 Waiver of Partition ................................................................... A-35 Section 12.3 Notification .............................................................................. A-35 Section 12.4 Word Meanings ........................................................................ A-35 Section 12.5 Binding Provisions ................................................................... A-35 Section 12.6 Applicable Law ........................................................................ A-35 Section 12.7 Counterparts ............................................................................ A-35 Section 12.8 Separability of Provisions .......................................................... A-36 Section 12.9 Paragraph Titles ........................................................................ A-36 Section 12.10 Entire Agreement ...................................................................... A-36 Section 12.11 Amendments .......................................................................... A-36 Signatures ..................................................................................................... A-37 Schedule A .................................................................................................... A-38
REALTY PARKING PROPERTIES L.P. THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of October 4,1988, is by and among Realty Parking Company, Inc., a Maryland corporation, as the General Partner, Parking Properties Holding Co., Inc., a Maryland corporation, as the Assignor Limited Partner, and Realty Associates 1988 Limited Partnership, a Maryland limited partnership, as the Subordinated Limited Partner. Preliminary Statement The General Partner, the Subordinated Limited Partner and the Assignor Limited Partner desire to form Realty Parking Properties L.P. (the "Partnership"), pursuant to the Delaware Revised Uniform Limited Partnership Act, for the purpose of acquiring parking lot properties located in the United States. NOW, THEREFORE, in consideration of the mutual promises made herein, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I DEFINED TERMS The defined terms used in this Agreement shall, unless the context otherwise expressly requires, have the meanings specified in this Article I. "Accountants" means such firm of independent certified public accountants as shall be engaged from time to time by the General Partner on behalf of the Partnership. "Acquisition Expenses" means expenses, including, but not limited to, legal fees and expenses, travel and communications expenses, costs of appraisals, non-refundable option payments on property not acquired, accounting fees and expenses, title insurance, and miscellaneous expenses related to selection and acquisition of Properties, whether or not acquired. "Acquisition Fees" means the total of all fees and commissions paid by any party on behalf of the Partnership in connection with the selection, purchase or development of, or investment in, any Property by the Partnership, including, without limitation, the Property Acquisition Fee payable to the General Partner, any real estate commission, selection fee, non-recurring management fee, development fee, or any fee of a similar nature, however designated. "Act"means the Delaware Revised Uniform Limited Partnership Act (6 DEL.C. ss.17-101 et. seq.) as amended or modified from time to time. "Additional General Partner" means any Person who is admitted as an Additional General Partner of the Partnership, under the provisions of Article VI, after the date of this Agreement. "Adjusted Capital Balance" of a Partner or an Investor means the Capital Contribution of the Partner or the Assignor Limited Partner made on behalf of an Investor, less any Net Proceeds of Sale or Financing actually distributed to the Partner or Investor (other than that portion, if any, which is payment of an unpaid Preferred Return), as provided in Article IV herein, at the time of reference thereto. "Affiliate" means (i) any Person directly or indirectly controlling, controlled by or under common control with another Person, (ii) any Person owning or controlling 10% or more of the outstanding voting securities of such other Person, (iii) any officer, director or partner of such Person, and (iv) if such other Person is an officer, director or partner, any company for which such Person acts in any such capacity. "Agreement" means this Agreement of Limited Partnership as originally executed and as amended from time to time, as the context requires. Words such as "herein", "hereinafter, " "hereof," "hereto," "hereby" and "hereunder," when used with reference to this Agreement, refer to this Agreement as a whole unless the context otherwise requires. A-3 "Assigned Limited Partnership Interest" means a Partnership Interest which is credited to the Assignor Limited Partner on the books and records of the Partnership in respect of a purchase of one Unit by an Investor. Each Assigned Limited Partnership Interest represents a contribution to the capital of the Partnership equal to $25, regardless of any reduction in Selling Commissions. "Assignee Units" means the ownership interests of an Investor in the Partnership at any particular time, including the right of such Investor to any and all benefits to which an Investor may be entitled as provided in this Agreement. The ownership interests of the Investors in the Partnership are sometimes referred to herein as "Units". "Assignor Limited Partner" means Parking Properties Holding Co., Inc. which will (i) own any Assigned Limited Partnership Interests issued pursuant to Sections 3.2 and 7.1 hereof, and (ii) transfer and assign to those Persons who acquire Units all of its rights and interest in Assigned Limited Partnership Interests in accordance with Sections 3.2 and 7.1 hereof. "Capital Account" means (i) the separate account maintained and adjusted on the books and records of the Partnership for each Partner and (ii) the separate subaccount of the Capital Account of the Assignor Limited Partner maintained and adjusted for each Investor. Each Partner's and Inves- tor's Capital Account is credited with his Capital Contributions and his distributive share of Profit (or item thereof). Each Partner's or Investor's Capital Account is debited with the cash and the fair market value of any property distributed to him (net of liabilities assumed by such Partner or Investor and liabilities to which such distributed property is subject), and his distributive share of Loss (and deduction (or item thereof)). Each Partner's and Investor's Capital Account shall also be adjusted pursuant to Section 4.5 hereof and as required by the Income Tax Regulations promulgated under Section 704 of the Code. Any questions concerning a Partner's or Investor's Capital Account shall be resolved by the General Partner in its reasonably exercised discretion, applying principles consistent with this Agreement and the regulations promulgated under Section 704 of the Code in order to assure that all allocations herein will have substantial economic effect or will otherwise be respected for income tax purposes. For purposes of this Agreement, a Partner or Investor who has more than one Partnership Interest or Unit, as the case may be, shall have a single Capital Account that reflects all of his Partnership Interests and Units, regardless of the class of Interests owned (e.g., general or limited) and regardless of the time or manner in which the Partnership Interests and Units were acquired. "Capital Contribution" means the total amount of cash and the fair market value of any other assets contributed to the Partnership by a Partner (net of liabilities assumed by the Partnership and liabilities to which any such contributed assets are subject) and, with respect to an Investor, the Capital Contribution of the Assignor Limited Partner made on behalf of such Investor (without regard to any reduction of Selling Commissions). Any reference in this Agreement to the Capital Contribution of a then-Partner or Investor shall include a Capital Contribution previously made by any prior Partner or Investor with respect to the Interest or Unit of such then-Partner or then- Investor, except to the extent that all or a portion of the Interest or Unit of any prior Partner or Investor shall have been terminated and the portion so terminated not transferred to a successor Partner or Investor. "Certificate" means the Certificate of Limited Partnership establishing the Partnership, as filed with the office of the Secretary of State of the State of Delaware on or about the date of this Agreement, as it may be amended from time to time in accordance with the terms of this Agreement and the Act. "Code" means the Internal Revenue Code of 1986, as amended (or any corresponding provision of succeeding law). "Controlling Person"of the General Partner or Affiliate thereof means any person who (a) performs functions for the General Partner or Affiliate similar to those of (i) a Chairman or member of the Board of Directors, (ii) executive management, such as a President, or a Vice-President, Secretary or Treasurer, or (iii) senior management; or (b) holds a 5% or more equity interest in the A-4 General Partner or Affiliate, or has the power to direct or cause the direction of the General Partner, or Affiliate, whether through the ownership of voting securities, by contract or otherwise. "Deferred Net Cash Flow Amount" means the cumulative excess of the amounts of Net Cash Flow that the General Partner would have received if Net Cash Flow had been distributed 95% to the Investors and 5% to the General Partner over the amounts of Net Cash Flow actually received by the General Partner pursuant to Section 4.3A hereof. "Due Diligence Expense Reimbursement Fee" means the fee equal to 2% of the Gross Proceeds of the Offering allowed to the Selling Agent, which may be re-allowed to Soliciting Dealers, for advisory services, due diligence activities and the reimbursement of expenses. "Entity" means any general partnership, limited partnership, corporation, joint venture, trust, estate, business trust, cooperative, association or other legal form of organization. "Escrow Agent" means Mercantile-Safe Deposit & Trust Company, or such other escrow agent chosen by the General Partner to hold funds from Persons who have subscribed to become Investors pending the assignment of Assignee Units to them. "Financing" means all indebtedness encumbering the Properties or incurred by the Partnership, the principal amount of which is scheduled to be paid over a period of not less than 48 months, and not more than 50% of the principal amount of which is scheduled to be paid during the first 24 months. "Front-End Fees" means fees and expenses paid by any Person for any services rendered during the organization or acquisition phase of the Partnership, including the Offering and Organizational Expense Fee, the Due Diligence Expense Reimbursement Fee, the Selling Commissions, the Acquisition Expenses, the Acquisition Fees and any other similar fees. "General Partner" means Realty Parking Company, Inc. and any other Person designated as a General Partner in the Schedule and any Person who becomes a Successor or Additional General Partner as provided herein, in each such Person's capacity as a General Partner of the Partnership. "Gross Proceeds of the Offering" means the aggregate of the proceeds from the sale of Units in the Offering, which amount is equal to the total of all Capital Contributions of the Investors. "Increased Maximum Offering Amount" means the total amount of $60,000,000 in Gross Proceeds of the Offering. "Interest" or "Partnership Interest" means the entire ownership interest (which may be segmented into and/or expressed as a percentage of various rights and/or liabilities) of a Partner in the Partnership at any particular time, including the right of such Partner to any and all benefits to which a Partner may be entitled as provided in the Agreement and in the Act, together with the obligations of such Partner to comply with all the terms and provisions of this Agreement and of the Act. "Interim Investments" means the short-term investments made with the Net Proceeds of the Offering until such Net Proceeds of the Offering are disbursed for acquisition of Properties. "Investor" means (i) any Person who holds an Assignee Unit and is reflected as an Investor on the books and records of the Partnership, and (ii) any Investor who has been admitted to the Partnership as a Substitute Limited Partner pursuant to Section 7.5 hereof. "Investment in Properties" means the amount of Capital Contributions actually paid or allocated to the purchase and development of the Properties (including the purchase of properties, working capital reserves allocable thereto (except that working capital reserves in excess of 5% shall not be included), and other cash payments such as interest and taxes but excluding Front-End Fees). "Investment Advisory Agreement" means the agreement referred to in the Prospectus by and between the Partnership and Allright Auto Parks, Inc. A-5 "Leases" means those certain agreements to be entered into by the Partnership and the Parking Lot Operator pursuant to which the Parking Lot Operator shall lease, operate or manage each of the Properties. "Limited Partner" means any Person who is designated as a Limited Partner on the books and records of the Partnership at the time of reference thereto, in each such Person's capacity as a Limited Partner of the Partnership. "Limited Partnership Interest" means the ownership interest of the Assignor Limited Partner and all other Limited Partners in the Partnership. "Limited Partnership Interest Percentage" in respect of any Investor means the percentage obtained by converting to a percentage the fraction having the number of Assignee Units owned by such Investor as its numerator and having the number of Assignee Units owned by all Investors at the time of reference thereto as its denominator. "Majority Vote of the Investors" shall mean the affirmative vote of Investors owning more than 50% of the outstanding Units or the consent of Investors owning more than 50% of the outstanding Units, as the case may be. "Maximum Offering Amount" means the total amount of $25,000,000 in Gross Proceeds of the Offering. "Minimum Gain" means with respect to each non-recourse liability of the Partnership and subject to certain adjustments pursuant to Income Tax Reg. ss.1.704-1 (b)(4)(iv)(c), the amount of gain (of whatever character), if any, that would be realized by the Partnership, if the Partnership disposed of (in a taxable transaction) any of the assets subject to such liability in full satisfaction of the liability. For this purpose, only the portion of the assets' adjusted basis allocated to non-recourse liabilities of the Partnership shall be taken into account. "Minimum Offering Amount" means the amount of $2,000,000 in Gross Proceeds of the Offering. "Net Cash Flow" means, with respect to any fiscal period, the excess, if any, of (i) all cash funds derived from the operations of the Partnership during such period, including the yield from the Interim Investments and excess cash reserves deemed distributable by the General Partner pursuant to Section 3.3E hereof, over (ii) all cash disbursed in the operations of the Partnership during such period, including cash used to pay, or establish reasonable reserves for, operating expenses, fees, commissions, debt service and loan repayments, improvements, repairs, replacements, contingencies and anticipated obligations, except to the extent any such payment is made out of reserves set aside for such purpose. Net Cash Flow shall not include amounts distributed or to be distributed under Section 4.2 hereof. "Net Proceeds from a Financing" means the gross proceeds to the Partnership of any Financing, less any amounts deemed necessary by the General Partner to be allocated to the establishment of reserves, the payment of any debts and liabilities of the Partnership to creditors, and the payment of any reasonable expenses or costs associated with the Financing, including but not limited to, fees, points, or commissions paid to any unaffiliated Persons. "Net Proceeds from a Sale" means the gross proceeds to the Partnership of any Sale, less any amounts deemed necessary by the General Partner to be allocated to the establishment of reserves, the payment of any debts and liabilities of the Partnership to creditors, and the payment of any reasonable expenses or costs associated with the Sale, including but not limited to, fees or real estate brokerage commissions paid to any unaffiliated Persons and, subject to Sections 5.2.A(viii) and 9.2.A(vi), fees or real estate brokerage commissions paid to the General Partner or Affiliates. "Net Proceeds of the Offering" means the Gross Proceeds of the Offering less the Selling Commissions, the Due Diligence Expense Reimbursement Fee, and the Offering and Organizational Expense Fee. A-6 "Net Proceeds from a Sale or Financing" means the Net Proceeds from a Sale or Net Proceeds from a Financing, as the case may be. "Notification" means a writing, containing the information required by this Agreement to be communicated to any Person, sent or delivered to such Person in accordance with the provisions of Section 12.3 of this Agreement. "Offering"means the offering and sale of Units for a minimum of $2,000,000 and a maximum of $60,000,000, as more fully described in the Prospectus. "Offering and Organizational Expense Fee" means the non-accountable fee paid to the General Partner equal to 4.5% of the Gross Proceeds of the Offering, payable at such times as the Investors are recognized as such on the books of the Partnership, for services rendered and costs incurred in connection with the organization of the Partnership and the offering of Units. "Parking Lot Operator" means (i) Allright Auto Parks, Inc. or an Affiliate, or (ii) such other person selected by the Partnership to operate the Properties. "Partner" means any General Partner or Limited Partner. "Partnership" means the limited partnership formed in accordance with this Agreement by the parties hereto, as said limited partnership may from time to time be constituted. "Partnership Property" means all or any portion of the assets owned or to be owned by the Partnership, including the Properties and all incidental personal property. "Person" means any individual or Entity. "Preferred Return" means the cumulative, non-compounded annual return equal to 12% of the Adjusted Capital Balance of each Investor commencing on the earlier of (i) the final closing for the sale of Units or (ii) December 31, 1988, less any Net Cash Flow distributed to each Investor pursuant to Section 4.3 and any Net Proceeds from a Sale or Financing distributed to each Investor in respect of the Preferred Return pursuant to Section 4.2A(i). "Profit" or "Loss" means, for each fiscal year or other period, an amount equal to the Partner- ship's taxable income or loss for such year or period, with the following adjustments: (i) any income of the Partnership that is exempt from federal income tax shall be added to such taxable income or loss; (ii) any expenditures of the Partnership described in Section 705(a)(2)(B) of the Code, or treated as Section 705(a)(2)(B) of the Code expenditures pursuant to Income Tax Reg. ss.1.704-1(b)(2)(iv)(i), shall be subtracted from such taxable income or loss; and (iii) Pursuant to Income Tax Reg. ss.1.704- l(b)(iv)(g)(3), an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year or other period for federal income tax purposes shall be taken into account, except that if the fair market value on the date that the asset is contributed to the Partnership (or if the basis of such asset for book purposes is adjusted under the Income Tax Regulations, such adjusted book basis) differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, the depreciation, amortization and other cost recovery deductions taken into account shall be equal to an amount which bears the same ratio to such beginning fair market value (or adjusted book basis) as the federal income tax depreciation, amortization, or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis. Except as otherwise provided herein, each item of income, gain, loss, deduction, preference or recapture entering into the computation of Profit or Loss hereunder shall be allocated to each Partner in the same proportion as Profit and Loss are allocated. "Profit or Loss from Operations" means Profit or Loss of the Partnership from any source other than a Sale. "Properties" means the parking lot properties acquired by the Partnership, including, without limitation, surface commercial parking lots, parking garages, suburban parking properties, parking properties requiring the prior demolition of obsolete structures, or offsite airport parking lots. A-7 "Property Acquisition Fee" means the fee paid to the General Partner or its Affiliates for identifying, evaluating and selecting the Properties, as described in the Prospectus. "Prospectus" means the Partnership's Prospectus contained in the Registration Statement filed on Form S-11 with the Securities and Exchange Commission for the registration of the Units under the Securities Act of 1933, in the final form in which it is filed with the Securities and Exchange Commission and as thereafter supplemented pursuant to Rule 424 under the Securities Act of 1933. Any reference herein to "date of the Prospectus" shall be deemed to refer to the date of the Prospectus in the form filed pursuant to Rule 424(b) of the Securities Act of 1933. "Sale" means any transaction entered into by the Partnership resulting in the receipt of cash or other consideration (other than the receipt of Capital Contributions) not in the ordinary course of its business, including, without limitation, sales or exchanges or other dispositions of Properties and real or personal property of the Partnership, condemnations, recoveries of damage awards and insurance proceeds (other than business or rental interruption insurance proceeds), but excepting any Financing. "Schedule" means Schedule A annexed hereto as amended from time to time and as so amended at the time of reference thereto. "Selling Agent" means Alex. Brown Realty Securities, Inc., an Affiliate of the General Partner, which will offer the Units on a best efforts basis pursuant to the Selling Agent Agreement. "Selling Agent Agreement" means that certain agreement to be entered into by the Partnership, Alex. Brown Realty Securities. Inc., and the General Partner, pursuant to which Alex. Brown Realty Securities, Inc. will offer and sell the Units on a best efforts basis. "Selling Commissions" means the maximum total (or any portion thereof) of 7% of the Gross Proceeds of the Offering paid to the Selling Agent or Soliciting Dealers for their efforts in offering the Units. The 7% maximum Selling Commissions will be reduced for volume purchases and purchases by certain Affiliates as specified in the Prospectus. "Sponsor" means any Person directly or indirectly instrumental in organizing, wholly or in part, the Partnership or who will manage or participate in the management of the Partnership, and any Affiliate of such Person, but does not include (a) any Person whose only relationship with the Partnership or the General Partner is that of an independent property manager if such person's only compensation from the Partnership is in the form of fees for the performance of property management services, or (b) wholly-independent third parties such as attorneys, accountants and broker-dealers whose only compensation from the Partnership is for professional services rendered in connection with the Offering or the operations of the Partnership. "Subordinated Limited Partner" means Realty Associates 1988 Limited Partnership and such other Persons who are designated as Subordinated Limited Partners on the books and records of the Partnership. "Substitute Limited Partner" means any Investor who has elected to convert from an Investor to a Limited Partner pursuant to Section 7.5 of this Agreement. "Successor General Partner" means any Person who is admitted as a Successor General Partner to the Partnership under the provisions of Article VI after the date of this Agreement. "Tax Matters Partner" means the General Partner designated in Section 5.1C as the tax matters partner, as defined in Section 6231(a)(7) of the Code. "Termination Date of the Offering" means the date upon which the Offering will terminate, which, if not sooner terminated by the General Partner, will be one (1) year from the date of the Prospectus. "Unit" means (i) an Assignee Unit representing the assignment by the Assignor Limited Partner of one Assigned Limited Partnership Interest, and (ii) the Partnership Interest attributable to one Unit of any Investor who has become a Substitute Limited Partner pursuant to Section 7.5 hereof. A-8 "U.S. Person" means a Person who is (i) an individual who is either a United States citizen or a resident of the United States for federal income tax purposes, (ii) a corporation, partnership, or other legal entity created or organized in or under the laws of the United States or any political subdivision thereof, (iii) a corporation that is not created or organized in or under the laws of the United States or any political subdivision thereof but which has made an election under Section 897(i) of the Code to be treated as a domestic corporation for certain purposes of federal income taxation, or (iv) an estate or trust whose income from sources without the United States is includable in its gross income for federal income tax purposes regardless of its connection with a trade or business carried on in the United States. "Working Capital Reserves" means, initially, the portion of the Net Proceeds of the Offering set aside as working capital reserves pursuant to Section 3.3E, as increased or decreased from time to time at the discretion of the General Partner. ARTICLE II NAME; PURPOSE; TERM AND CERTIFICATE Section 2.1 Name; Formation The Partners hereby form the limited partnership to be known as "Realty Parking Properties L.P.," and such name shall be used at all times in connection with the Partnership's business and affairs; provided, however, that the Partnership may use trade names in its business operations. The Partnership shall be governed by the Act. Section 2.2 Place of Registered Office The address of the registered office in the State of Delaware of the Partnership is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801; the name of the registered agent for service of process on the Partnership in the State of Delaware at that address is The Corporation Trust Company. The Partnership's principal place of business is 225 East Redwood Street, 4th Floor, Baltimore, Maryland 21202 or such other place(s) as the General Partner may hereafter determine. Notification of any change in the location of the principal office shall be given to the Partners and Investors on or before the date of any such change. Section 2.3 Purpose The purpose of the Partnership is to acquire, own, develop, maintain, finance, encumber, operate as a business, lease, sell, dispose of and otherwise deal with the Properties, and to do all things necessary, convenient or incidental to the achievement of the foregoing. Section 2.4 Term The Partnership shall continue until December 31, 2038, unless the Partnership is sooner dissolved in accordance with the provisions of this Agreement. Section 2.5 Recording of Certificate The General Partner shall take all necessary action to maintain the Partnership in good standing as a limited partnership under the Act, including, without limitation, the filing of the Certificate and such amendments and further certificates as may be necessary under the Act and necessary to qualify the Partnership to do business in such states as the Partnership owns property. The General Partner shall not be required to send a copy of the Partnership's filed Certificate to each Partner and Investor. A-9 ARTICLE III PARTNERS; CAPITAL Section 3.1 General Partner; Assignor Limited Partner; Subordinated Limited Partner The name, address and Capital Contribution of the General Partner, the Assignor Limited Partner and the Subordinated Limited Partner are set forth on the Schedule. Upon the dissolution and termination of the Partnership (i) the General Partner, on or before the later of the last day of the fiscal year in which the dissolution of the Partnership occurs or ninety (90) days after the date of dissolution of the Partnership, shall make a Capital Contribution to the Partnership in an amount equal to the lesser of (A) the deficit balance, if any, in its Capital Account or (B) the excess of 2.02% of the Capital Contributions of the Investors and Limited Partners (excluding capital contributions of the Assignor Limited Partner on behalf of Investors) over the Capital Contributions previously contributed by the General Partner, and (ii) the Subordinated Limited Partner, on or before the later of the last day of the fiscal year in which the dissolution of the Partnership occurs or ninety (90) days after the date of dissolution of the Partnership, shall make a Capital Contribution to the Partnership in an amount equal to the lesser of (x) the deficit balance in its Capital Account or (y) the amount which it agrees to contribute to the capital of the Partnership pursuant to an amendment hereto. Section 3.2 Investors A. The General Partner is authorized to accept orders for Units pursuant to the Offering. All orders for Units shall be held in trust and deposited in an escrow account with the Escrow Agent. Orders for Units shall be accepted or rejected by the General Partner within thirty (30) days after their receipt by the Escrow Agent. B. Upon the receipt by the Escrow Agent of orders for an amount equal to the Minimum Offering Amount, the Escrow Agent shall release the funds in the escrow account to the Assignor Limited Partner which shall immediately transmit such funds to the Partnership. Subsequent orders for Units that are accepted by the General Partner shall be released from the escrow account and transmitted to the Partnership or returned to subscribers in accordance with the Prospectus. Upon release of an Investor's funds from the escrow account to the Partnership, an Assigned Limited Partnership Interest shall be credited to the Assignor Limited Partner on the books and records of the Partnership in respect of such Unit and the Assignor Limited Partner shall assign all of its rights with respect to such Assigned Limited Partnership Interest to the Investor to the extent permitted by, and in accordance with, the Agreement and applicable law. The Assignor Limited Partner hereby agrees to exercise any and all rights with respect to such Assigned Limited Partnership Interest as directed by the Investor. C. Any interest earned on moneys paid by Investors during the period such moneys are held in escrow by the Escrow Agent shall be paid to the Partnership following the release of orders and shall be distributed in accordance with Section 4.5A hereof. Persons whose orders for Units are rejected by the General Partner shall be returned their moneys (and interest earned thereon) within ten (10) days after such rejection. D. No order for Units sold as part of the Offering shall be accepted after the Termination Date of the Offering. If the General Partner does not accept orders totalling an amount equal to the Minimum Offering Amount on or before the Termination Date of the Offering, the Escrow Agent shall promptly return all moneys deposited by subscribers together with any interest earned on such moneys. E. For purposes of this Agreement, an Investor who acquires Units in the Offering shall be recognized as an Investor with respect to such Units on the date that such Investor's funds are released from the escrow account to the Partnership. Section 3.3 Partnership Capital A. Each Partner's and Investor's Capital Contribution shall be paid in cash on or prior to the date of such Partner's admission to the Partnership or the date of the recognition of the Investor on the books and records of the Partnership. A-10 B. Except to the extent of any interest income earned on an Investor's Capital Contribution while it is held in escrow, and later distributed to such Investor pursuant to Section 4.5A, no Partner or Investor shall be paid interest on any Capital Contribution. C. Except as otherwise provided in this Agreement, no Partner or Investor shall have the right to withdraw, or receive any return of, his Capital Contribution prior to December 31, 2038. D. Under circumstances requiring a return of any Capital Contribution, no Partner shall have the right to demand or receive property other than cash. E. The Partnership shall initially set aside Working Capital Reserves for contingencies related to ownership of the Properties in an amount equal to at least 3% of the Gross Proceeds of the Offering. If in any fiscal quarter, the General Partner determines that the Working Capital Reserves of the Partnership are in excess of the amount deemed sufficient in connection with the ownership of the Properties and that such Working Capital Reserves may be reduced, the amount of such reduction may be distributed to the Partners and Investors as a portion of the Partnership's Net Cash Flow. Upon the Sale or disposition of a Property, any Working Capital Reserves maintained for such Property may be distributed, in the General Partner's discretion, to Partners and Investors or applied as Working Capital Reserves for other Properties. Section 3.4 Liability of Partners and Investors A. Except as provided in Section 17-607 of the Act, or in Section 3.1 with respect to the Subordinated Limited Partner, the Limited Partners and Investors shall be liable only to pay their Capital Contributions and no Limited Partner or Investor will be personally liable for the debts, liabilities, contracts, or other obligations of the Partnership. B. Except as set forth in 3.4A, no Limited Partner or Investor shall be required to lend any funds to the Partnership or, after his Capital Contribution has been fully paid, to make any further capital contribution to the Partnership, nor shall any Limited Partner or Investor be liable for or have any obligation to restore any negative balance in his Capital Account. C. Subject to the provisions of Sections 3.1 and 5.9 of this Agreement, the General Partner shall not have any personal liability for the repayment of the Capital Contribution or the Preferred Return of any Limited Partner or Investor or be required to repay to the Partnership all or any portion of any negative balance of the Capital Accounts of the Limited Partners or the Investors. A-11 ARTICLE IV ALLOCATIONS, DISTRIBUTIONS AND APPLICABLE RULES Section 4.1 Allocation of Profit or Loss from a Sale A. Profit from any Sale (and Profit from any deemed Sale pursuant to Section 4.5) shall be allocated in the following order of priority: (i) First, if one or more Investors or Partner has a negative balance in his Capital Account, to such Partners and Investors, in proportion to their negative Capital Accounts, until all such Capital Accounts have zero balances. (ii) Second, to each of the Investors until the Capital Account of each Investor is equal to the sum of his Adjusted Capital Balance plus his unpaid Preferred Return, if any. (iii) Third, to the General Partner until the Capital Account of the General Partner is equal to the sum of its Adjusted Capital Balance and the Deferred Net Cash Flow Amount. (iv) Fourth, to the Subordinated Limited Partner, an amount of Profit equal to the amount of Net Proceeds from such Sale to which the Subordinated Limited Partner is entitled to receive pursuant to Section 4.2A (iii) or would have been entitled to receive if the Sale Proceeds were distributed pursuant to Section 4.2A rather than Section 4.2B. (v) Fifth, any remaining Profit shall be allocated 98% to the Investors and 2% to the General Partner. B. Loss from any Sale (and Loss from any deemed Sale pursuant to Section 4.5) shall be allocated 98% to the Investors and 2% to the General Partner. C. All Profit or Loss allocated pursuant to Section 4.1 hereof with respect to any Unit which is transferred during a taxable year of the Partnership shall be allocated to the Persons recognized (in accordance with Section 7.4 hereof) as Investors as of the first business day of the month that includes the date on which the Sale occurs; provided, however, that all such Profit or Loss which is attributable to an installment or other deferred Sale shall be allocated to the Persons recognized (in accordance with Section 7.4 hereof) as Investors as of the first business day of the month that includes the date on which the deferred Net Proceeds from such Sale are received by the Partnership, and the allocable cash basis items with respect thereto shall be allocated as required under Section 706(d) of the Code and the Income Tax Regulations thereunder. Section 4.2 Distribution of Net Proceeds of Sale or Financing A. Upon a Financing and upon a Sale that does not constitute a Sale of all or substantially all of the Properties, Net Proceeds from the Financing or Sale shall be distributed, credited and applied in the following order of priority: (i) First, to the Investors until each Investor has received an amount equal to his unpaid Preferred Return, if any, and then his Adjusted Capital Balance. (ii) Second, to the General Partner, an amount equal to the sum of its Adjusted Capital Balance and the deferred Net Cash Flow Amount. (iii) Third, except as provided in Section 4.2D below, any remaining Net Proceeds of Sale or Financing shall be distributed 90% to the Investors, 9% to Realty Associates 1988 Limited Partnership, and 1% to the General Partner. B. Upon the Sale of all or substantially all of the Properties, Net Proceeds from the Sale shall be allocated to the Partners and Investors, in proportion to their positive Capital Accounts, after the allocation of Profit and Loss pursuant to Sections 4.1A and 4.1B, until all such Capital Accounts have been reduced to zero. C. All Net Proceeds of Sale or Financing distributable with respect to any Unit which is transferred during a taxable year of the Partnership shall be distributed to the Persons recognized (in A-12 accordance with Section 7.4 hereof) as Investors as of the first business day of the month that includes the date on which the Sale or Financing occurs; provided, however, that all Net Proceeds from a Sale received by the Partnership as a result of an installment or other deferred Sale shall be distributed to the Persons recognized (in accordance with Section 7.4 hereof) as Investors as of the first business day of the month that includes the date on which the deferred Net Proceeds from a Sale are received by the Partnership. D. Notwithstanding any other provision of this Article IV, the Subordinated Limited Partner shall not be entitled to receive any Net Proceeds from a Sale except (i) to the extent that it has been or will be allocated Profit from such Sale in an amount equal to the Net Proceeds from such Sale which will be allocated to it pursuant to Section 4.1A, and (ii) if the amount of Net Proceeds from such Sale which it would be otherwise entitled to receive exceeds the amount of Profit from such Sale to be allocated to it pursuant to Section 4.1A, then, in addition to the amount to which the Subordinated Limited Partner is entitled to receive under subparagraph (i), an amount equal to the excess of the amount that the Subordinated Limited Partner has agreed to contribute pursuant to Section 3.1 over the amount of Profit from such Sale which is allocated to it (reduced by prior distributions pursuant to this subparagraph (ii)). Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and Loss from Operations A. Net Cash Flow shall be distributed 98% to the Investors and 2% to the General Partner. The General Partner will endeavor to distribute Net Cash Flow on a quarterly basis, within approximately sixty (60) days after the close of each calendar quarter. B. Profit and Loss from Operations for each fiscal year shall be allocated 98% to the Investors and 2% to the General Partner. C. For each fiscal year, all Profit and Loss allocated pursuant to Section 4.3B to the Investors shall be allocated among the Persons that are recognized as Investors during such year by determining the Profit and Loss attributable to each month during such year and by allocating the amount of such Profit and Loss among Persons who are recognized as Investors on the books of the Partnership on the first business day of such month. The Profit or Loss attributable to each month of the fiscal year shall be determined by dividing the Profit or Loss for such year by the number of days in such year, and then multiplying such per diem amount by the number of days in each month. D. All Net Cash Flow distributable to the Investors attributable to each month of a fiscal quarter, if any, pursuant to Section 4.3A, shall be distributed among the Persons recognized as Investors on the books of the Partnership on the first business day of such month during the fiscal quarter. The Net Cash Flow attributable to each month of the fiscal quarter shall be determined by dividing the amount of Net Cash Flow for such quarter by the number of days in the quarter, and then multiplying such per diem amount by the number of days in each month. E. Notwithstanding Sections 4.3C and 4.3D, the Partnership shall adopt the "interim closing of the books" method of allocating Profit and Loss, in accordance with a "semi-monthly convention," among persons who become Investors pursuant to a closing of the sale of the Units on or before the Termination Date. Accordingly, if there is more than one closing of the sale of the Units, Investors who are recognized on the books of the Partnership (i) prior to the sixteenth day of a calendar month, shall be treated as an Investor on the books of the Partnership on the first business day of the month of recognition, and (ii) on or after the sixteenth day of a calendar month shall be treated as an Investor on the books of the Partnership on the sixteenth day of the month of recognition. Section 4.4 Liquidation or Dissolution A. If the Partnership is liquidated or dissolved, the net proceeds from such liquidation, as provided in Article VIII, shall be distributed first to creditors, including Partners who are creditors, to the extent otherwise permitted by law (whether by payment or by establishment of reserves), other than liabilities for distributions to Partners and Investors, and any remaining net proceeds shall be A-13 distributed in proportion to the Capital Accounts of the Partners and Investors, determined after the allocations in Sections 4.1A and 4.1B. B. All distributions under this Section 4.4 shall be made by the end of the taxable year of liquidation of the Partnership or, within ninety (90) days of the date of liquidation, whichever is later. Section 4.5 General and Special Rules A. Except as otherwise provided herein, the timing and amount of all distributions shall be determined by the General Partner. Notwithstanding any other provision of this Agreement, the General Partner shall have authority to make the following distributions to certain of the Investors: First, if the Partnership has realized a savings on Selling Commissions payable by the Partnership with respect to the purchase of Units (as more fully set forth in the Prospectus), the General Partner shall make a distribution to such Investor equal to the amount of such savings realized by the Partnership. Second, if any interest is earned on an Investor's Capital Contribution while it is held in escrow pending recognition as an Investor under Article VII, such interest shall be paid by the Partnership to such Investor and Profit attributable to such interest shall be allocated in the same manner. B. Subject to all of the special rules of this Section 4.5, if any property or assets of the Partnership are distributed to the Partners in kind, such property or assets first shall be valued on the basis of the fair market value thereof to determine the Profit or Loss that would have resulted if such property or assets had been sold, and then such Profit or Loss shall be allocated as provided in Section 4.1A and Section 4.1B, and shall be properly credited or charged to the Capital Accounts in accordance with Income Tax Reg. ss.1.704-1(b)(2)(iv)(e) or any successor provision thereto. Any Partner entitled to any interest in such property or assets shall receive such interest as a tenant-in-common with all other Partners so entitled. The fair market value of such property or assets shall be determined by an independent appraiser who shall be selected by the General Partner. This Section 4.5B governs income tax consequences only and shall not be read or construed as authorizing the distribution in kind of property or assets of the Partnership. C. Notwithstanding Sections 4.1 and 4.3 hereof, if an allocation of Loss (or item thereof) to an Investor or Partner, other than the General Partner, would cause or increase a deficit balance in his or its Capital Account in excess of his proportionate share of Minimum Gain (such excess being referred to hereafter as the "Excess Deficit Balance"), plus, in the case of the Subordinated Limited Partner, any amount which it agrees to contribute to the capital of the Partnership pursuant to Section 3.1, then the allocation shall not be made to such Investor or Partner. Instead, such Loss (or item thereof) shall be allocated first to the Partners and Investors having positive Capital Accounts, in proportion to such positive Capital Accounts, until all such positive Capital Accounts have been reduced to zero, and any additional Loss (or item thereof) shall be allocated to the General Partner. For purposes of making the determination set forth above, each Investor's and each Partner's Capital Account balance shall be reduced by reasonably expected allocations or adjustments of loss (or item thereof) including Loss from a Sale under Income Tax Regulation ss.ss.1.704-1(b)(2)(ii)(d)(4) and (5), and by reasonably expected distributions to the extent not offset by reasonably expected Capital Account increases ("Account Reduction Items"). For purposes of calculating reasonably expected Capital Account increases, the value of the Partnership's assets shall be presumed to be equal to their adjusted basis for federal income tax purposes. D. Notwithstanding Sections 4.1 and 4.3 hereof, in accordance with Income Tax Regulation ss.ss.1.704-1(b)(2)(ii)(d) and 1.704-1(b)(4)(iv)(e), (i) if, in any fiscal year of the Partnership, an Account Reduction Item unexpectedly causes or increases an Investor's or Partner's Excess Deficit Balance, or (ii) if there is a net decrease in Minimum Gain during a taxable year, then all Investors or Partners with an Excess Deficit Balance at the end of such year shall be specially allocated Profit and, to the extent necessary, gross income (as defined in Section 61 of the Code) to the extent of such Excess Deficit Balances, in proportion to the Excess Deficit Balance of each Investor or Partner. Any remaining Profit or Loss, after adjustment has been made for allocation of income or gain pursuant to this Section 4.5D, shall be allocated in accordance with Sections 4.1 and 4.3 hereof. The General Partner shall be authorized to interpret and apply this Section 4.5D so as to satisfy the requirements A-14 of Income Tax Regulation ss.ss.1.704-1(b)(2)(11)(d)and 1.704-1(b)(4)(iv)(e) and any successor provisions. E. Any special allocations of Profit, Loss or gross income under Section 4.5D shall be taken into account in computing subsequent allocations of Profit or Loss, so that to the extent possible, the aggregate amounts of Profit or Loss allocated to each Partner or Investor will be equal to the aggregate amounts that would have been allocated to them in the absence of the unexpected Account Reduction Items. F. In the event that any Investor fails to furnish to the General Partner evidence, in form and substance satisfactory to the General Partner, establishing that the General Partner has no obligation under Section 1445 of the Code with respect to such Investor to withhold and pay over an amount to the Internal Revenue Service, the General Partner may, in its sole discretion, withhold with respect to such Investor the amount it would be required to withhold pursuant to Section 1445 of the Code if such Investor were not a U.S. Person, and any amount so withheld shall be treated as a distribution under Sections 4.2 or 4.3 of this Agreement, as the case may be, and shall reduce the amount otherwise distributable to such Investor thereunder. Alternatively, the General Partner may at its option loan the Investor an amount equal to the tax to be withheld (at an interest rate equal to the Escrow Agent's announced "prime rate" plus two percentage points), such loan to be repaid by retaining such Investor's distributions. In addition, the General Partner is authorized to withhold from any distribution made to an Investor the amount of tax paid or to be paid by the Partnership under Section 1446 of the Code with respect to such Investor. G. Notwithstanding anything to the contrary that may be expressed or implied in this Agreement, if at any time the allocation provisions of this Article IV do not result in the allocation to the General Partner of at least 1% of the Profit or Loss being allocated, the General Partner shall be allocated 1% thereof. H. It is the intent of the General Partner that each Investor's and Partner's distributive share of Profit and Loss shall be determined and allocated in accordance with this Article IV to the fullest extent permitted by Sections 704(b) and 706 of the Code. Therefore, if the Partnership is advised by the Accountants or the Partnership's legal counsel, that the allocations provided in Article IV of this Agreement are unlikely to be respected for federal income tax purposes, the General Partner has been granted the power in Section 12.1l.B hereof to amend the allocation provisions of this Agreement, on advice of the Accountants or the Partnership's legal counsel, to the minimum extent necessary to conform to Sections 704(b) and 706 of the Code the plan of allocations and distributions of Profit and Loss, Net Cash Flow and Net Proceeds of Sale or Financing provided in this Agreement. I. Notwithstanding any other provision of this Agreement, the General Partner may, after giving ninety (90) days' prior Notification to the Investors, (i) adopt any other method for determining, in the event of transfers of Units, the Investors entitled to distributions of Net Cash Flow or Net Proceeds from a Sale or Financing that the General Partner, subject to the review and approval of the Accountants, determines is reasonable, and (ii) allocate Profit or Loss among the Investors during the taxable year in any other manner that the General Partner, determines satisfies the requirements of Section 706 of the Code, but only to the extent such allocation of Profit and Loss incorporates the minimum changes required to comply with such section and is supported by an opinion of counsel to the Partnership. J. Allocations and distributions to Investors as a class shall be made to each Investor entitled to such allocation or distribution based upon the ratio of the number of Units owned by each such Investor to the number of Units owned by all Investors entitled to such allocation or distribution. K. In accordance with Section 704(c) of the Code and the Income Tax Regulations thereunder, income, gain, loss, and deduction (including depreciation) with respect to any property contributed to the capital of the Partnership shall be allocated among the Investors and Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its fair market value on the date of contribution. In the event the value at A-15 which Partnership assets are carried on its balance sheet maintained under the terms of this Agreement are adjusted pursuant to Income Tax Reg. ss.1.704-1(b)(2)(iv)(f), subsequent allocations of income, gain, loss and deduction with respect to such assets shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and the value carried on such balance sheet in the same manner as under Section 704(c) of the Code and the Income Tax Regulations thereunder. Any elections or other decisions relating to such allocations shall be made by the General Partner in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Investor's or Partner's Capital Account or share of Profit, Loss, Net Cash Flow, Net Proceeds from a Sale, Net Proceeds from a Financing, or other distributions pursuant to any provision of this Agreement. ARTICLE V RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER Section 5.1 Management and Control of the Partnership; Tax Matters Partner A. Subject to the Majority Vote of the Investors when required by this Agreement, the General Partner shall have the exclusive right to manage and control the business of the Partnership. B. No Limited Partner or Investor (except one who may also be a General Partner, and then only in his capacity as General Partner) shall have the right to participate in the control of the business of the Partnership, or have any authority or right to act for or bind the Partnership. C. The General Partner is hereby designated to serve as the Partnership's Tax Matters Partner and shall have all of the powers and responsibilities of such position as provided in Sections 6221 et seq. of the Code. All third party costs and expenses incurred by the General Partner in performing its duties as Tax Matters Partner shall be borne by the Partnership, as shall all expenses incurred by the Partnership and/or the Tax Matters Partner in connection with any tax audit or tax-related administrative or judicial proceeding. Each Partner and Investor shall be responsible for all costs incurred by such Partner or Investor with respect to any tax audit or tax related administrative or judicial proceeding in connection with such Partner's or Investor's tax returns and all costs incurred by any such Partner or Investor who participates in any tax audit or tax-related administrative or judicial proceeding of or against the Partnership or any Partner. Each Partner and Investor hereby (i) expressly authorizes the Tax Matters Partner to enter into any settlement with the Internal Revenue Service with respect to any tax matter, tax item, tax issue, tax audit, or judicial proceeding, which settlement shall be binding on all Partners and Investors; (ii) waives the right to participate in any administrative or judicial proceeding in which the tax treatment of any Partnership item is to be determined; and (iii) agrees to execute such consents, waivers or other documents as the Tax Matters Partner may determine are necessary to accomplish the provisions of this Section 5.1C. The Tax Matters Partner shall have no liability to any Partner or Investor or the Partnership, and shall be indemnified by the Partnership to the full extent provided by law, for any act or omission performed or omitted by it within the scope of the authority conferred on it by this Agreement, except for acts of negligence or for damages arising from any misrepresentation or breach of any other agreement with the Partnership. The liability and indemnification of the Tax Matters Partner shall be determined in the same manner as is provided in Sections 5.9 and 5.10 hereof. Section 5.2 Authority of General Partner A. Except to the extent otherwise provided herein, including, without limitation, Sections 5.3A, 5.4 and 5.5, the General Partner for, and in the name of, and on behalf of, the Partnership is hereby authorized: (i) to enter into any kind of activity and to perform and carry out contracts of any kind necessary to, or in connection with, or incidental to the accomplishment of the purposes of the Partnership, so long as said activities and contracts may be lawfully carried on or performed by a limited partnership under applicable laws and regulations; A-16 (ii) to engage Persons, including the Sponsors as provided in Article IX, to provide services or goods to the Partnership, upon such terms as the General Partner deems fair and reasonable and in the best interest of the Partnership, provided, however, that, as to services or goods provided by a Sponsor (except for those services specifically authorized under the NASAA Guidelines to be performed by a Sponsor), (a) the compensation for such services or goods must be the lesser of the cost of such services or goods to the Sponsor or ninety percent (90%) of the competitive price that would be charged by non-affiliated persons or entities rendering similar types and quality of services in the same or comparable geographic locations; (b) the compensation and other terms of such contracts shall be fully disclosed to the Investors in the reports of the Partnership; (c) the Sponsor must have been previously engaged in the business of providing such services or goods, independent of the Partnership and as an ongoing business; (d) all such transactions shall be embodied in a written contract that describes the services or goods to be provided and the compensation to be paid, which contract may only be modified by the Majority Vote of the Investors, and ,which contract shall permit termination without penalty on sixty (60) days notice; and (e) except for those services to be provided under agreements referred to in this Agreement or the Prospectus, any services provided by a Sponsor will be provided only under extraordinary circumstances where services are not available elsewhere; (iii) to acquire by lease or purchase, improve, develop, own, construct, finance, maintain, mortgage, lease or exchange incident to a tax-free swap any real estate and any personal property necessary, convenient or incidental to the accomplishment of the purposes of the Partnership, including without limitation, any Property; (iv) to grant options with respect to, sell, convey, or assign any Property or any other real estate or personal property necessary, convenient or incidental to the accomplishment of the purposes of the Partnership; (v) to execute any and all agreements, contracts, documents, certifications and instruments necessary or convenient in connection with the acquisition, development, construction, management, maintenance and operation of any Property, including without limitation, the Investment Advisory Agreement and the Leases; (vi) to borrow money and issue evidences of indebtedness in furtherance of any or all of the purposes of the Partnership, and to secure the same by deed of trust, mortgage, security interest, pledge or other lien or encumbrance on any Property or any other assets of the Partnership and to borrow money on the general credit of the Partnership for use in the business of the Partnership and to take any action and enter into any agreement necessary or advisable in connection with such borrowing; (vii) to repay in whole or in part, negotiate, refinance, recast, increase, renew, modify or extend any secured, or other indebtedness affecting any Partnership Property and in connection therewith to execute any extensions, renewals or modifications of any evidences of indebtedness secured by deeds of trust, mortgages, security interests, pledges or other encumbrances covering any Partnership Property or assets, provided, however, that it is the Partnership's objective to acquire the Properties on an all-cash basis and the General Partner does not anticipate that it will be necessary to borrow money to acquire the Properties or to maintain the Partnership's investment in the Properties; (viii) to engage a real estate agent (including a Sponsor) to sell any Partnership Property or assets or portions thereof upon such terms and conditions as are deemed fair and reasonable by the General Partner and to be in the best interest of the Partnership, and to pay reasonable compensation for such services; provided, however, that any real estate commission paid shall not exceed the lesser of the competitive real estate commission for like properties located in the same geographic area or six percent (6%) of the contract price for the Sale of any Partnership Property or assets, and, in addition, if a Sponsor provides substantial services in such regard, to pay the Sponsor up to one-half of such real estate commission, provided, however, that the payment of such real estate commission to the Sponsor shall be subordinated to the payment to A-17 Investors of their Adjusted Capital Balance plus the unpaid portion, if any, of their Preferred Return; (ix) to recognize transferees of Units as Investors and to admit substitute Limited Partners in accordance with the terms described in the Prospectus and Article VII of this Agreement; (x) to invest Working Capital Reserves and, pending the investment of the Partnership's assets in the Properties, to invest the Partnership's assets (excluding Working Capital Reserves), in interest-bearing accounts and short-term investments, including obligations of federal, state and local governments and their agencies, regulated investment companies, commercial paper and certificates of deposit of federally-insured commercial banks, savings banks or savings and loan associations; provided, however, that such investments are short-term, highly-liquid and provide appropriate safety of principal; (xi) to purchase and cancel or otherwise retire or dispose of the Partnership Interests or Units of any Partner or Investor according to the provisions of this Agreement; (xii) to execute and deliver all documents necessary or appropriate (a) for the sale of Units, including the Prospectus and filings under the Securities Act of 1933 and any other federal and state laws relating to the sale of securities and (b) to file state and local tax returns at the Partnership level on behalf of the Investors and Partners; (xiii) to require Investors to become Limited Partners (in which case the General Partner shall have the power to amend this Agreement without the Majority Vote of the Investors) and to take such other action with respect to the manner in which Units are being or may be transferred or traded as may be necessary or appropriate to preserve the tax status of the Partnership as a partnership for federal income tax purposes and the tax treatment of the Investors as Partners (but such action shall be taken only to the minimum extent required by an opinion of Counsel and only with the Majority Vote of Investors if the changes would adversely affect the Investors); (xiv) to take such steps (including amendment of this Agreement) as the General Partner determines are advisable or necessary and will not result in any material adverse effect on the economic position of a majority in interest of the Investors with respect to the Partnership in order to preserve the tax status of the Partnership as a partnership for federal income tax purposes and the tax treatment of the Investors as Partners, including, without limitation, removing the Units from public trading markets and imposing restrictions on transfers of Units or Interests (provided such restrictions on transfers do not cause the Partnership's assets to be deemed "plan assets" within the meaning of ERISA) (but such action shall be taken only to the minimum extent required by an opinion of Counsel and only with the Majority Vote of Investors if the changes would adversely affect the Investors); (xv) to establish and maintain the Working Capital Reserves described in Section 3.3E; (xvi) to pay or reimburse any reasonable out-of-pocket expenses incurred by any Affiliate of the General Partner in connection with any report pursuant to Section 10.3, provided that no fee shall be paid to any Affiliate in connection with any such report; (xvii) upon the Majority Vote of the Investors to the matters set forth in Sections 5.4A(xv), 5.4A(xvi) or 5.4A(xvii), to take any actions which they deem appropriate to the extent authorized by the Investors to facilitate the purposes described in such sections, including, without limitation, amendments to this Agreement to change the dates upon which transfers of Units will be recognized, and the General Partner shall give prior written notice to the Investors of any such amendment; and (xviii) to take such steps as the General Partner determines are advisable or necessary and will not result in any material adverse effect on the economic position of a majority in interest of the Investors with respect to the Partnership to restructure the Partnership and its activities to obtain a prohibited transaction exemption from the Department of Labor or to comply with any exemption in final plan asset regulations adopted by the Department of Labor, including, but not limited to, establishing a fixed percentage of Units permitted to be held by qualified plans or A-18 other tax-exempt investors or discontinuing sales to such entities after a given date, in the event that either the assets of the Partnership constitute "plan assets" for purposes of ERISA or the transactions contemplated hereunder constitute prohibited transactions under ERISA or the Code. B. Any person dealing with the Partnership or the General Partner may rely upon a certificate signed by the General Partner, as to: (i) the identity of any General Partner or any Limited Partner; (ii) the existence or non-existence of any fact or facts that constitute conditions precedent to acts by the General Partner or in any other manner are germane to the affairs of the Partnership; (iii) the Persons who are authorized to execute and deliver any instrument or document of the Partnership; or (iv) any act or failure to act by the Partnership or as to any other matter whatsoever involving the Partnership or any Partner. Section 5.3 Authority of Investors A. By the Majority Vote of the Investors, the Investors, without the consent of the General Partner, may: (i) amend this Agreement; provided that such amendment (a) shall not in any manner allow the Investors to take part in the control of the Partnership's business in a manner which would subject them to liability as general partners under the Act or any other applicable law, and (b) shall not, without the consent of the General Partner affected, alter the rights, powers, or duties of the General Partner or its interest in Profit and Loss, Net Cash Flow, Net Proceeds of Sale or Financing, or alter any of the provisions of Section 8.2 hereof; (ii) dissolve or terminate the Partnership prior to the expiration of its term; (iii) remove the General Partner and, pursuant to Section 6.2, elect a new General Partner, or (iv) approve or disapprove of the Sale of all or substantially all of the Partnership Property. B. Any action taken pursuant to Section 5.3A hereof shall be void ab initio, if prior to or within fifteen (15) days after such vote either (i) the Partnership shall have received an opinion of counsel, which counsel is approved by the Majority Vote of the Investors, that such action may not be effected without subjecting the Investors to liability as general partners under the Act or under the laws of such other jurisdiction in which the Partnership owns properties or is doing business, or (ii) a court of competent jurisdiction shall have entered a final judgment to the foregoing effect. For purposes of this paragraph, counsel will be deemed approved by the Majority Vote of the Investors if proposed by the General Partner and affirmatively approved in writing within forty-five (45) days; provided, that if the holders of 10% or more of the outstanding Units proposed counsel for this purpose, such proposed counsel, and not counsel proposed by the General Partner shall be submitted for such approval by the Investors. The existence of such an opinion of counsel or court judgment with respect to a particular contemplated Partnership action shall not affect the rights of the Investors to vote on other future actions or the existence of such rights. If the opinion of counsel or court judgment referred to above has not been obtained the vote shall proceed as scheduled and it shall not be delayed or postponed for any reason except as otherwise permitted by the Act. Section 5.4 Restrictions on Authority A. The General Partner and its Affiliates shall have no authority to perform any act in violation of any applicable laws or regulations thereunder, nor shall the General Partner as such have any authority: A-19 (i) to purchase or acquire property other than as described in the Prospectus or to invest more than 25% of the Gross Proceeds of the Offering in unimproved, non-income producing property; (ii) except as permitted in this Agreement, to do any act required to be approved by the Investors under the Act; (iii) to reinvest any Net Cash Flow or Net Proceeds of Sale or Financing, except in short-term securities pursuant to Section 10.2B; (iv) except with respect to the Interim Investments, to invest in or underwrite securities of any type or kind for any purpose, or make investments other than in the Properties and the operations related and incidental thereto; (v) to do any act in contravention of this Agreement; (vi) to do any act that would make it impossible to carry on the ordinary business of the Partnership; (vii) to confess a judgment against the Partnership; (viii) to offer Interests or Units in exchange for property; (ix) to possess any property, or assign the Partnership's rights in same, for other than the exclusive use of the Partnership; (x) to operate in such a manner as to be classified as an "investment company" under the meaning of the Investment Company Act of 1940; (xi) to purchase or lease any property from or sell or lease property to the General Partner, its Affiliates or any program or partnership in which the General Partner or its Affiliates have any interest (provided however that the General Partner or an Affiliate may temporarily hold title to a Property to facilitate an acquisition by the Partnership so long as no profit is received by the General Partner or Affiliate); (xii) to admit a Person as a General Partner, except as provided in this Agreement; (xiii) to admit a Person as an Investor or Limited Partner, except as provided in this Agreement; (xiv) to create or suffer to exist a total indebtedness incurred by the Partnership in excess of 60% of the fair market value of all of the assets of the Partnership, as determined, by an independent appraisal; provided, however, that the General Partner shall have the authority to incur indebtedness with respect to any single Property up to but not in excess of 75% of the then fair market value of such Property, as determined by an independent appraiser; provided, further, that the foregoing term "indebtedness" shall include the principal of any loan together with any interest that may be deferred pursuant to the terms of the loan agreement which exceeds 5% per annum of the principal balance of such indebtedness excluding contingent participations in income or appreciation in the value of the property); (xv) without the Majority Vote of the Investors, to cause or facilitate the merger or consolidation of the Partnership with other partnerships, including, but not limited to, mergers or consolidations in which the Investors receive in exchange for their Units interests in the surviving entity, with the objective of listing the interests of the surviving entity on a national or regional securities exchange or NASDAQ; (xvi) subject to Section 7.2.A, without the Majority Vote of the Investors, to list the Units on a securities exchange or enable the Units to be traded in the over-the-counter market, or otherwise facilitate the establishment of a market for the trading of Units, or (except as set forth in Section 5.2A(xiv)) to withdraw the Units from such listing; or (xvii) without the Majority Vote of the Investors, to restructure the Partnership as a real estate investment trust ("REIT") for federal income tax purposes; or A-20 (xviii) to obtain mortgage financing which is not fully amortized over not more than 30 years or which requires balloon payments due sooner than seven years from the date the Partnership acquires the Property securing such financing; provided, however, that the foregoing do not apply to financing representing 25% or less of the purchase price of the Properties acquired or to interim financing. B. The General Partner shall not take any action which, for federal tax purposes, shall cause the Partnership to terminate or to be treated as an association taxable as a corporation. Section 5.5 Authority of Partners and Affiliated Persons to Deal with Partnership A. The General Partner may, for, in the name of, and on behalf of, the Partnership, acquire property from, borrow money from, enter into agreements, contracts or the like (in addition to those set forth herein) with, or reimburse for reasonable out-of-pocket expenses incurred in connection with the preparation of reports by, any Sponsor in an independent capacity, as distinguished from such capacity (if any) as a Sponsor, as if such Sponsor were an independent contractor; provided, however, that any such agreement shall be subject to the conditions set forth in Section 5.2A(ii) herein. B. Neither the General Partner nor any Affiliate thereof shall have the authority: (i) to cause the Partnership to invest in any program, partnership or other venture; (ii) to receive any compensation, fee or expense not otherwise permitted to be paid to it under the terms of this Agreement or the Prospectus; (iii) to cause the Partnership to acquire a Property without first having obtained an appraisal with respect to the value of the Property, rendered by a competent, independent appraiser, in which the appraised value equals or exceeds the purchase price to be paid by the Partnership; (iv) to commingle the Partnership's funds with those of any other Person, or to invest any of the Net Proceeds of the Offering in junior mortgages, junior deeds of trust or other similar obligations, except that funds of the Partnership may be temporarily retained by agents of the Partnership pursuant to contracts for the rendering of services to the Partnership by such agents or held in accounts established and maintained for the purpose of making the Interim Investments and/or computerized disbursements; (v) to cause the Partnership to lend money or other assets to the General Partner or any Affiliate thereof, (vi) to grant to the General Partner or any Affiliate thereof an exclusive listing for the Sale of any assets of the Partnership; (vii) to receive any rebate or give-up, or to participate in any reciprocal business arrangement with the General Partner or an Affiliate thereof, (viii) to cause the Partnership to acquire a Property that is under construction without completion bonds, fixed price guarantees or other satisfactory arrangements; (ix) to cause the Partnership to pay directly or indirectly, a commission or fee (except as provided under Section 5.2.A.(viii)) to a Sponsor in connection with the reinvestment or distribution of the proceeds of the resale, exchange or refinancing of the Properties; or (x) to cause the Partnership to engage a Sponsor to construct or develop the Properties or render any services in connection with the construction or development of the Properties. C. If a loan is made to the Partnership by the General Partner, the General Partner may not receive interest or similar charges or fees in excess of the amount which would be charged by unrelated lending institutions on comparable loans for the same purpose, in the same locality of the property if the loan is made in connection with a particular property. No prepayment charge or penalty shall be required by the General Partner on a loan to the Partnership secured by either a first or a junior or all-inclusive trust deed, mortgage or encumbrance on the property, except to the extent A-21 that such prepayment charge or penalty is attributable to the underlying encumbrance. Notwithstanding the foregoing, the General Partner shall not provide Financing to the Partnership. Section 5.6 Duties and Obligations of the General Partner A. The General Partner shall take all action that may be necessary or appropriate (i) for the continuation of the Partnership's existence as a limited partnership under the Act (and under the laws of each other jurisdiction in which such existence is necessary to protect the limited liability of the Investors and the Limited Partners or to enable the Partnership to conduct the business in which it is engaged), and (ii) for the acquisition, maintenance, preservation and operation of the Properties in accordance with the Prospectus, the provisions of this Agreement and applicable laws and regulations. The General Partner shall devote to the Partnership such time as may be necessary for the proper performance of its duties hereunder, but neither the General Partner nor any of its Affiliates shall be expected to devote its full time to the performance of such duties. The General Partner or its Affiliates may act as general or managing partners for other partnerships engaged in businesses similar to that conducted by the Partnership. Nothing herein shall limit the General Partner or its Affiliates from engaging in any such business activities, or any other activities which may be competitive with the Partnership. B. The General Partner shall at all times conduct its affairs, the affairs of all its Affiliates and the affairs of the Partnership in such a manner that no Limited Partner or Investor (except a Limited Partner or Investor who is also a General Partner) will have any personal liability for Partnership debts except as otherwise set forth herein and in the Prospectus. C. The General Partner shall prepare or cause to be prepared, and shall file, on or before the due date (or any extension thereof), any federal, state or local tax returns required to be filed by the Partnership. The General Partner shall cause the Partnership to pay any taxes payable by the Partnership to the extent same are not payable by any other party. D. The General Partner shall obtain and keep in force, or cause to be obtained and kept in force during the term hereof, fire and extended coverage, workmen's compensation, and public liability insurance in favor of the Partnership with such insurers and in such amounts as the General Partner deems advisable, but in amounts not less (and with deductible amounts not greater) than those customarily maintained with respect to parking lots or garages comparable to the Properties. E. The General Partner shall be under a fiduciary duty to conduct the affairs of the Partnership in the best interests of the Partnership, including the safekeeping and use of all Partnership funds and assets, whether or not in the General Partner's possession or control, and the use thereof for the benefit of the Partnership. The General Partner shall not enter into any contract or agreement relieving it of its common law fiduciary duty. The General Partner shall at all times act in good faith and exercise due diligence in all activities relating to the conduct of the business of the Partnership. The General Partner shall treat the Investors as a group and shall not favor the interests of any particular Investor. F. The General Partner shall cause the Partnership to commit a percentage of the Gross Proceeds of the Offering to Investment in Properties which is equal to the greater of. (i) 80% of the Gross Proceeds of the Offering reduced by.1625% for each 1% of financing of the Partnership; or (ii) 67% of the Gross Proceeds of the Offering. The proceeds of the Offering will be invested in Properties within two years of the date of the Prospectus. I. Except for payment of the Selling Commissions and the re-allowance of the Due Diligence Expense Reimbursement Fee, the General Partner shall not directly or indirectly pay or award any commission or other compensation to any Person engaged by a potential Investor for investment advice as an inducement to such advisor to advise the purchase of Units. A-22 Section 5.7 Compensation of General Partner Except as expressly provided in Articles IV and IX herein, the General Partner shall receive no fees, salaries, profits, distributions, reimbursement or other compensation for serving as General Partner. Section 5.8 Other Businesses of Partners Neither the Partnership nor any Partner or Investor shall have any rights or obligations, by virtue of this Agreement, in or to any independent ventures of any nature or description, or the income or profits derived therefrom, in which a Partner or Investor may engage, including, without limitation, the ownership, operation, management, syndication and development of other real estate projects. Section 5.9 Liability of General Partner and Affiliates to Limited Partners or Investors The General Partner and its Affiliates performing certain services on behalf of the Partnership shall not be liable, responsible, or accountable, in liabilities, damages or otherwise, to any Investor, Limited Partner or the Partnership for any loss, judgment, liability, expense or amount paid in settlement of any claims sustained which arise out of any act or omission performed or omitted by them within the scope of the authority conferred on them by this Agreement, provided that the General Partner determines, in good faith, that such act or omission was in the best interests of the Partnership, except for acts of negligence or misconduct or for damages arising from any misrepresentation or breach of an agreement with the Partnership. The Partnership shall not incur the cost of that portion of any liability insurance which insures the General Partner or its Affiliates performing certain services on behalf of the Partnership against any liability as to which the General Partner or its Affiliate may not be indemnified under Section 5.10 herein. In the event the General Partner is held liable to Investors and the General Partner's assets are insufficient to satisfy such liability, the Subordinated Limited Partner agrees to permit Investors to recover from it to the extent of the Subordinated Limited Partner's interest in the Partnership. Section 5.10 Indemnification A. The General Partner and its Affiliates performing certain services on behalf of the Partnership shall be indemnified to the full extent provided by law for any loss, judgment, liability, expense or amount paid in settlement of any claims sustained by them which arise out of any act or omission performed or omitted by any or all of them within the scope of the authority conferred on them by this Agreement, if the General Partner determines, in good faith, that such act or omission was in the best interests of the Partnership and that such act or omission did not constitute negligence or misconduct or breach of any other agreement with the Partnership, provided that any indemnity under this Section shall be provided out of and to the extent of Partnership assets only, and no Investor or Limited Partner shall have any personal liability on account thereof. B. Notwithstanding Section 5.10A, the General Partner and its Affiliates performing certain services on behalf of the Partnership and any Person acting as a Broker-Dealer shall not be indemnified by the Partnership for any liability, loss or damage incurred by any or all of them in connection with (i) any claim or settlement arising under federal or state securities laws unless (a) there has been a successful adjudication on the merits of each count involving such securities laws violations as to the particular indemnities and the court approves indemnification of the litigation costs, (b) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnities and the court approves indemnification of the litigation costs, or(c) a court of competent jurisdiction approves a settlement of the claims and finds that indemnification of the settlement and related costs should be made, after being advised as to the current position of the Securities and Exchange Commission, the Massachusetts Securities Division, the California Commissioner of Corporations, the Pennsylvania Securities Commission, the Tennessee Securities Commission, the Missouri Securities Division (and such other state securities administrators as shall be required by such court), regarding indemnification for violations of securities law; or (ii) any liability imposed by law, including liability for negligence or misconduct. A-23 ARTICLE VI TRANSFERABILITY OF THE GENERAL PARTNER'S INTEREST Section 6.1 Removal, Voluntary Retirement or Withdrawal of the General Partner; Transfer of Interests A. The General Partner may be removed in the manner specified in Section 5.3A herein. B. The General Partner may not voluntarily withdraw or retire from its position as a General Partner of the Partnership unless another General Partner (including any Additional or Successor General Partner admitted pursuant to Section 6.2) remains, and unless (i) counsel for the Partnership is of the opinion that such voluntary retirement or withdrawal from the Partnership will not cause the Partnership: (a) to be dissolved under the Act; (b) to be classified other than as a partnership for federal income tax purposes; or (c) to terminate for federal income tax purposes; and (ii) the approval of the remaining General Partners, if any, and the Majority Vote of the Investors to such voluntary retirement or withdrawal is obtained. C. If the General Partner voluntarily retires or withdraws from the Partnership in violation of this Section 6.1, it shall be and remain liable to the Partnership and the Partners for damages resulting from the General Partner's breach of this Agreement, and, without limitation of remedies, the Partnership may offset such damages against the amounts otherwise distributable to the General Partner. D. The General Partner shall not have the right to sell, exchange, or otherwise dispose of all or any portion of its Interest unless the proposed assignee or transferee of all or a portion of the Interest of the General Partner is admitted as a Successor or Additional General Partner to the Partnership pursuant to the provisions of Section 6.2 prior to any such sale, exchange or other disposition. E. The voluntary retirement or withdrawal of the General Partner shall become effective only upon (i) receipt by the Partnership of the opinions of counsel referred to in Section 6.1(B)(i); (ii) receipt by the Partnership of the approval and consent referred to in Section 6.1B(ii); and (iii) the amendment of the Partnership's Certificate to reflect such withdrawal or retirement and its filing for recordation. Section 6.2 Election and Admission of Successor or Additional General Partners A. The General Partner may at any time designate additional persons to be Successor or Addi- tional General Partners, provided that the conditions of Section 6.2B are satisfied. B. Except as otherwise expressly provided herein, no Person shall be admitted as a Successor or Additional General Partner unless (i) counsel for the Partnership is of the opinion that the admission of such Successor or Additional General Partner will not cause the Partnership to be classified other than as a partnership for federal income tax purposes or cause the Partnership to terminate for federal income tax purposes; (ii) the consent of the then remaining General Partners, if any, is obtained; and (iii) the Majority Vote of the Investors to such admission has been obtained. C. The admission of such Successor or Additional General Partner shall become effective upon (i) receipt by the Partnership of the opinion referred to in Section 6.2B(i); (ii) receipt by the Partnership of the consents referred to in Section 6.2B(ii) and (iii), if applicable; and (iii) the amendment of the Certificate to reflect the admission of the Successor or Additional General Partner and its filing for recordation. Section 6.3 Events of Withdrawal of a General Partner A. In addition to a voluntary withdrawal of the General Partner pursuant to Section 6.lE, the General Partner shall be deemed to withdraw (i) if the General Partner assigns all of its Interest in the Partnership, (ii) if the General Partner is removed pursuant to Section 5.3A; and (iii) the filing of a certificate of dissolution, or its equivalent, for the General Partner or the revocation of its charter. To the maximum extent permitted by the Act, no other act or event shall be deemed an event of withdrawal of the General Partner or serve to convert a General Partner to a Limited Partner. A-24 B. In the event of the withdrawal of the General Partner and if a Successor or Additional General Partner has been admitted to the Partnership in accordance with Section 6.2, the remaining General Partner or General Partners, including such Successor or Additional General Partner may elect to continue the Partnership, and if such election is made, shall promptly give Notification of such event and shall make and file such amendments to the Certificate as are required by the Act to reflect the fact that the withdrawn General Partner has ceased to be a General Partner of the Partnership. C. In the event of the withdrawal of the General Partner and no Successor or Additional General Partner has been admitted to the Partnership, or such Successor or Additional General Partner does not elect to continue the Partnership, the withdrawn General Partner, or its successors, representatives, heirs or assigns shall promptly give Notification of such withdrawal to all remaining Partners and Investors. In such event, the Partnership shall be dissolved unless, within ninety (90) days after the withdrawal of the General Partner, the Investors, by the Majority Vote of the Investors (or such higher percentage vote as may be required by the Act), agree in writing to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal of the sole General Partner, of one or more Additional General Partners. If the Investors elect to reconstitute the Partnership and agree to admit an Additional General Partner, the relationship of the Investors and of substitute General Partner in the Partnership shall be governed by this Agreement. Section 6.4 Liability of a Withdrawn General Partner A. Any General Partner who withdraws from the Partnership shall be, and remain, liable for all obligations and liabilities incurred by it as General Partner prior to the time such withdrawal becomes effective. In addition, a General Partner who voluntarily withdraws in violation of this Agreement shall be subject to the liability described in Section 6.1C. B. Upon the withdrawal of a General Partner, such General Partner shall immediately cease to be a General Partner, and, unless a Successor General Partner has acquired the Interest of the withdrawing General Partner pursuant to Section 6.5, the withdrawn General Partner's Interest shall be converted to a limited partner Interest of a new class. Such conversion shall not affect any rights or liabilities of the withdrawn General Partner, except that such General Partner shall no longer participate in the management of the Partnership. For purposes of this Section 6.4.B and Section 6.5, the Interest of the withdrawing General Partner shall include the interest in the Partnership as a Subordinated Limited Partner (if any) owned by an Affiliate of such withdrawing General Partner. C. The personal representatives, heirs, successors or assigns of any General Partner who withdraws from the Partnership shall be, and remain, liable for all obligations and liabilities incurred by the General Partner prior to, or in connection with, its withdrawal. Section 6.5 Valuation of Partnership Interest of General Partner Upon the voluntary or involuntary withdrawal of a General Partner, the Partnership or a Successor General Partner may purchase the Partnership Interest of the withdrawn General Partner at any time subsequent to withdrawal. The price of the withdrawn General Partner's Interest shall be determined by two (2) independent appraisers, one selected by the withdrawn General Partner and one selected by the remaining General Partner, or if none is remaining, by the Investors. If the two appraisers are unable to agree on the value of the General Partner's Interest, they shall jointly appoint a third independent appraiser whose determination shall be final and binding. The Partnership shall then pay the withdrawn General Partner the price of its Interest as a General Partner as so determined. The expense of the appraisals shall be borne equally by the terminated General Partner and the Partnership. If the withdrawal is involuntary, payment shall be made by delivery of a promissory note bearing interest payable semiannually at a floating rate of interest equal to the lowest rate permitted under the Code to avoid the imputation of interest income to the withdrawn General Partner, payable in five equal annual installments, the first installment to be paid as soon as practicable after the appraisal, and prepayable at any time. If the withdrawal is voluntary, payment shall be made by delivery of a promissory note bearing no interest, with principal payable only from distributions which the withdrawn General Partner would have received under this Agreement had the A-25 General Partner not withdrawn. Immediately upon receiving the note, the withdrawn General Partner shall cease to be a Partner of the Partnership for all purposes, except that the withdrawn General Partner shall continue to be subject to Section 6.4 hereunder. All amounts received pursuant to this Section 6.5 shall constitute complete and full discharge for all amounts owing to the withdrawn General Partner on account of its Interest in the Partnership. Any disputes regarding valuation or payment pursuant to this Section which are not resolved in a binding manner by the provisions of this Section shall be resolved by arbitration in accordance with the then current rules of the American Arbitration Association. The expense of arbitration shall be borne equally by the terminated General Partner and the Partnership. ARTICLE VII ASSIGNMENT OF ASSIGNEE UNITS TO INVESTORS; TRANSFERABILITY OF LIMITED PARTNER INTERESTS AND UNITS Section 7.1 Assignment of the Assignee Units to Investors A. Pursuant to Sections 3.2 and 7.lC hereof, the Assignor Limited Partner shall assign to each Investor Assignee Units equal to the number of Units purchased by each Investor in the Offering. B. Except as provided in Section 7.1.A above, the Assignor Limited Partner may not transfer a Limited Partnership Interest without the prior written consent of the General Partner. The Assignor Limited Partner shall have no right to vote or consent with respect to Units owned by the Assignor Limited Partner for its own account and such Units shall not be considered outstanding Units for purposes of determining whether the Majority Vote of the Investors or the Consent of the Investors has occurred. The Assignor Limited Partner, by the execution of this Agreement, acknowledges and agrees that the Assignor Limited Partner's management will have fiduciary responsibility for the safekeeping and use of all funds and assets of the Investors, whether or not in the Assignor Limited Partner's management's possession or control, and that the management of the Assignor Limited Partner will not employ, or permit another to employ such funds or assets in any manner except for the exclusive benefit of the Investor. The Assignor Limited Partner agrees not to contract away the fiduciary duty owed to the Investors by the Assignor Limited Partner's management under the common law of agency. C. Except as set forth in Section 7.1G, the Assignor Limited Partner, by the execution of this Agreement, irrevocably transfers and assigns to the Investors all of the Assignor Limited Partner's rights and interest in and to the Assigned Limited Partnership Interests, as of the time that payment for such Assigned Limited Partnership Interests is received by the Partnership and such Assigned Limited Partnership Interests are credited to the Assignor Limited Partner on the books and records of the Partnership. The rights and interest so transferred and assigned shall include, without limitation, the following: (i) all rights to receive distributions of uninvested Capital Contributions pursuant to Sec- tions 3.2 and 3.3; (ii) all rights to receive cash distributions pursuant to ArticleIV; (iii) all rights in respect to allocations of Profit and Loss pursuant to Article IV; (iv) all other rights in respect of determinations of allocations and distributions pursuant to Article IV, (v) all rights to consent to the admission of Successor or Additional General Partners pursuant to Sections 6.1 and 6.2; (vi) all rights to receive any proceeds of liquidation of the Partnership pursuant to Section 8.2; (vii) all rights to inspect books and records and to receive reports pursuant to Article X; (viii)all voting rights, rights to attend or call meetings and other such rights; and A-26 (ix) all rights which the Limited Partners have, or may have in the future, under the Act. D. The General Partner, by the execution of this Agreement, irrevocably consents to and acknowledges that (i) the foregoing transfer and assignment pursuant to Section 7.1 by the Assignor Limited Partner to the Investors of the Assignor Limited Partner's rights and interest in the Assigned Limited Partnership Interests is effective, and (ii) the Investors are intended to be and shall be third party beneficiaries of all rights and privileges of the Assignor Limited Partner in respect of the Assigned Limited Partnership Interests. The General Partner covenants and agrees that, in accordance with the foregoing transfer and assignment, all the Assignor Limited Partner's rights and privileges in respect of Assigned Limited Partnership Interests may be exercised by the Investors including, without limitation, those cited in Section 7.1. E. In accordance with the transfer and assignment described in Section 7.1, Investors shall have the same rights that the Limited Partners have under this Agreement and under the Act. F. Notwithstanding the assignment of the Assigned Limited Partnership Interests referred to in this Section 7.1, the Assignor Limited Partner shall retain legal title to and be and remain a Limited Partner of the Partnership. Section 7.2 Transferability of Units A. Units are generally transferable, provided, however, that a transfer of Units shall be prohibited if one of the following restrictions applies: (i) No sale or exchange of any Units shall be made if the Units sought to be sold or exchanged, when added to the total of all other Units sold or exchanged within a period of twelve (12) consecutive months prior thereto, would, in the opinion of counsel for the Partnership, result in the Partnership being considered to have terminated within the meaning of Section 708(b)(1)(A) of the Code. The General Partner shall give Notification to all Investors in the event that sales or exchanges should be suspended for this reason. All deferred sales or exchanges shall be made (in chronological order to the extent practicable) as of the first day of the fiscal year beginning after the end of any such 12-month period, subject to the provisions of this Article VII. (ii) No transfer or assignment of any Unit shall be made if a counsel for the Partnership is of the opinion that the particular transfer or assignment would be in violation of any federal or state securities laws (including any investment suitability standards) applicable to the Partnership or would cause the Partnership to be classified other than as a partnership for federal income tax purposes. (iii) No transfer or assignment of any Unit shall be made if in the opinion of Counsel to the Partnership such transfer would cause the Partnership to be treated as a "publicly traded partnership" under Sections 7704 and 469(k) of the Code. Each Investor agrees not to transfer, and agrees that the Partnership shall not recognize for any purpose any transfer on or through a listing on a securities exchange, over-the-counter market or secondary market or any transfer to or from a dealer in securities or partnership interests or other market maker, or any transfer arranged thrugh or facilitated by means of an interdealer quotation system, information system or other facility that may create the equivalent of a secondary market in partnership interests, unless counsel to the Partnership is of the opinion that such transfers will not result in the partnership becoming taxable as a corporation or a publicly traded partnership. (iv) No transfer or assignment of Units shall be made after which any transferor or transferee would hold (a) a number of Units not evenly divisible by four, or (b) less than 200 Units, except for Individual Retirement Accounts, or (c) less than 80 Units in the case of Individual Retirement Accounts, provided, however, that any such transferor or transferee may hold zero Units. (v) No transfer or assignment of any Unit shall be made if it would result in the assets of the Partnership being treated as "plan assets" or the transactions contemplated hereunder to be prohibited transactions under ERISA or the Code. A-27 (vi) No transfer or assignment of a Unit shall be made to a foreign person under the Code or a minor or incompetent (unless such transfer or assignment shall be made to a legal guardian on such person's behalf). B. In order to record a trade on its books and records, the Partnership may require such evidence of transfer or assignment and authority of the transferor or assignor (including signature guarantees), evidence of the transferee's suitability under state securities laws, and the written acceptance and adoption by the transferee of the provisions of this Agreement, as the General Partner may determine. The General Partner may charge a transfer fee sufficient to cover an reasonable expenses connected with such transfer (with no profit to any party in the transaction). C. In no event shall an Investor be permitted to transfer a fraction of a Unit. Section 7.3 Death, Bankruptcy or Adjudication of Incompetence of an Investor or a Limited Partner Upon the death of an Investor or a Limited Partner, his executor, administrator, or trustee, or, if he is adjudicated incompetent or insane, his committee, guardian, or conservator, or, if he becomes bankrupt, the trustee or receiver of his estate, shall have all the rights of an Investor or a Limited Partner for the purpose of settling or managing his estate and shall have whatever power the deceased or incompetent Investor or Limited Partner possessed to assign all or any part of his Units or Interest. The death, dissolution, adjudication of incompetence, or bankruptcy of an Investor or a Limited Partner shall not dissolve the Partnership. Section 7.4 Effective Date The Partnership shall recognize the transferee of Units as an Investor on the Partnership's books and records on the first business day of the next calendar month after the month in which the Partnership receives all necessary documentation and consents required to effect the transfer of Units. Section 7.5 Substitute Limited Partners Any Investor may elect to become a Substitute Limited Partner upon (i) signing a counterpart of this Agreement and any other instrument or instruments deemed necessary by the General Partner, including a Power of Attorney in favor of the General Partner as described in Section 12.1.A hereof, and (ii) paying a fee equal to the actual costs and expenses incurred by the General Partner for legal and administrative costs and recording fees. Investors who elect to become Substitute Limited Partners will receive one Limited Partnership Interest for each Unit they convert and will not be able to re-exchange their Limited Partnership Interests for Units. The Capital Account of the former Investor attributable to transferred Units shall be credited to the Capital Account of the Substitute Limited Partner. The Partnership's Certificate will be amended no less often than quarterly, if required by applicable law, to reflect the substitution of Limited Partners. Section 7.6 Retirement or Withdrawal of an Investor A. No Investor shall have the right to voluntarily retire or withdraw from the Partnership unless the General Partner shall have consented to such voluntary retirement or withdrawal by an Investor. Upon the retirement or withdrawal of an Investor: (i) the Interest of such retiring or withdrawing Investor shall thereafter belong to the Partnership; (ii) such retiring or withdrawing Investor shall not be entitled to receive distributions with respect to any periods after the time of such retirement of withdrawal; and (iii) such retiring or withdrawing Investor shall not be entitled to receive any amount for the fair value of his Units as of the date of his retirement or withdrawal, other than as agreed to by the General Partner and the withdrawing Investor. The General Partner shall not consent to the voluntary retirement or withdrawal of an Investor if the General Partner receives an opinion of counsel to the Partnership that such retirement or withdrawal would cause the Partnership to be classified other than as a partnership for federal income tax purposes, or cause the Partnership to terminate for federal income tax purposes. A-28 B. At any time after the Termination Date of the Offering, the Partnership may, in its sole discretion, in response to the request of an Investor, repurchase any or all of the Units of such Investor upon mutually agreeable terms, provided that such repurchase does not materially impair the capital or operation of the Partnership. The determination to repurchase Units will be made in the sole discretion of the General Partner. The determination of the value of the repurchased Units will be based upon, among other factors, the current fair market value of the Properties and the assets of the Partnership, less all Partnership debts and obligations. The Partnership will not repurchase Units prior to the Termination Date of the Offering and is not obligated to repurchase Units at any time. Units acquired by the General Partner and its Affiliates or by the Assignor Limited Partner will not be eligible for repurchase by the Partnership. Units purchased by the Partnership during any month shall be deemed cancelled effective as of the first day of the month following the effective date of such purchase. ARTICLE VIII DISSOLUTION, LIQUIDATION AND TERMINATION OF THE FUND Section 8.1 Events Causing Dissolution A. The Partnership shall dissolve and its affairs shall be wound up upon the first to occur of the following events: (i) the expiration of its term; (ii) the withdrawal of the General Partner, unless the Partnership is continued pursuant to Sections 6.3B or 6.3C; (iii) the Sale of all of the Properties (excepting (a) a disposition thereof which, in the opinion of counsel to the Partnership, qualifies, in whole or in part, under Section 1031 or Section 1033 of the Code or (b) a Sale in which the purchase price is paid in one or more installments, in which case the Partnership shall dissolve upon receipt of the final payment thereunder); (iv) the election by the General Partner, with the Majority Vote of the Investors, to dissolve the Partnership; (v) by the Majority Vote of the Investors pursuant to Section 5.3A to dissolve the Partner- ship; or (vi) the happening of any other event causing the dissolution of the Partnership under applicable law. B. Dissolution of the Partnership shall be effective on the day on which the event occurs giving rise to the dissolution. A certificate of cancellation shall be filed under the Act upon the dissolution and the commencement of winding up of the Partnership; provided, however, that the Partnership shall not terminate until the assets of the Partnership has been distributed as provided in Section 8.2. Notwithstanding the dissolution of the Partnership, prior to the termination of the Partnership, the business of the Partnership and the affairs of the Partners, as such, shall continue to be governed by this Agreement. Section 8.2 Liquidation A. As soon as practical after the dissolution of the Partnership, the General Partner, or if there is no General Partner, any Limited Partner or the liquidating trustee under the Act, as the case may be, shall give Notification to all the Limited Partner and Investors of such fact and shall prepare a plan as to whether and in what manner the assets of the Partnership shall be liquidated. By the Majority Vote of the Investors, the assets of the Partnership, subject to its liabilities (and the establishment of reserves, if necessary, for such liabilities), may be transferred to a successor Entity, upon such terms and conditions as are then agreed upon. B. Unless the Investors agree to transfer the assets of the Partnership, subject to its liabilities, to a successor Entity pursuant to Section 8.2A, upon dissolution of the Partnership, the General Partner, A-29 any Limited Partner or the liquidating trustee under the Act, as the case may be, shall liquidate the assets of the Partnership, and apply and distribute the proceeds thereof in accordance with Section 4.4. C. Notwithstanding the provisions of Section 8.2B, in the event the General Partner or any liquidating agent under the Act, as the case may be, shall determine that an immediate sale of all or a portion of the assets of the Partnership would cause undue loss to the Partners and Investors, the General Partner or liquidating agent under the Act, as the case may be, in order to avoid such loss, may, after having given Notification to all the Investors and Limited Partners, either defer liquidation of, and withhold from distribution for a reasonable time, any assets of the Partnership, or distribute the assets in kind to a liquidating trust to be held for the benefit of the Investors and Partners. Section 8.3 Capital Contribution Upon Dissolution Subject to the provisions of Section 5.9 of this Agreement, each Investor and Partner shall look solely to the assets of the Partnership for all distributions with respect to the Partnership and his Capital Contribution and shall have no recourse (upon dissolution or otherwise) against any Partner or Investor; provided, however, that upon the dissolution and termination of the Partnership, the General Partner will make the Capital Contributions referred to in Section 3.1. All amounts so contributed by the General Partner shall be distributed first to the Partnership's creditors entitled thereto, and the balance to the Investors and Partners in proportion to the positive balances in their Capital Accounts at the time of dissolution and termination of the Partnership. ARTICLE IX CERTAIN PAYMENTS TO THE GENERAL PARTNER AND AFFILIATES Section 9.1 Reimbursement of Certain Costs and Expenses of the General Partner and its Affiliates A. Subject to the provisions of Article V hereof, the Partnership shall be permitted to reimburse the General Partner for the actual cost to the General Partner or any of its Affiliates of the Partner- ship's operating expenses. In determining the actual cost to the General Partner or an Affiliate of the General Partner of goods and materials and administrative services, actual cost means the actual cost to the General Partner or an Affiliate of the General Partner of goods and materials used for or by the Partnership and obtained from entities not affiliated with the General Partner, and actual cost of administrative services means the pro rata cost of personnel as if such persons were employees of the Partnership. The cost for administrative services to be reimbursed to the General Partner or an Affiliate shall be at the lower of the General Partner's or Affiliate's actual cost or ninety percent (90%) of the amount the Partnership would be required to pay to independent parties for comparable administrative services in the same geographic location. The General Partner shall use its best efforts to cause all of the Partnership's expenses to be billed directly to and paid by the Partnership to the extent practicable. B. Subject to the foregoing, the Partnership shall pay all expenses (which expenses shall be billed directly to the Partnership) of the Partnership which may include but are not limited to: (a) an costs of personnel (excluding rent or depreciation, utilities, capital equipment, and other administrative items) employed full- or part-time by the Partnership and involved in the business of the Partnership and allocated pro rata to their administrative services performed on behalf of the Partnership, including Persons who may also be officers or employees of the General Partner or its Affiliates (other than Controlling Persons); (b) all costs of borrowed money, taxes and assessments on Properties and other taxes applicable to the Partnership; (c) legal, audit, accounting, brokerage and other fees; (d) printing, engraving and other expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and recording of documents evidencing ownership of an Interest or Unit or in connection with the business of the Partnership; (e) fees and expenses paid to independent contractors, mortgage bankers, brokers and servicers, leasing agents, consultants, on-site property managers and other property management personnel (other than Controlling Persons and other officers of the General Partner or its Affiliates), real estate brokers, insurance brokers and other A-30 agents; (f) expenses in connection with the disposition, replacement, alteration, repair, remodeling, refurbishment, leasing, refinancing and operating of the Properties (including the costs and expenses of foreclosures, insurance premiums, real estate brokerage and leasing commissions and of maintenance of such Properties); (g) expenses of organizing, revising, amending, converting, modifying or terminating the Partnership; and (h) the cost of preparation and dissemination of the informational material and documentation relating to potential sale, or other disposition of Properties or in connection with any meetings or votes if the Investors. C. Notwithstanding any other provision of this Agreement, no reimbursement shall be permitted for services for which the General Partner is entitled to compensation by way of a separate fee. Section 9.2 Fees and Other Payments A. The Partnership shall cause the following payments and fees to be paid to the General Partner and its Affiliates: (i) to the Selling Agent, the Selling Commissions and the Due Diligence Expense Reimburse- ment Fee. (ii) to the General Partner or its Affiliates, the Offering and Organizational Expense Fee. (iii) to the General Partner or its Affiliates, the Acquisition Expenses previously paid by the General Partner or its Affiliates. (iv) to the General Partner or its Affiliates, the Property Acquisition Fee. (v) to the General Partner, an annual property management fee equal to 1% of the gross revenues of the Properties. (vi) to the General Partner, real estate brokerage commissions, payable upon the Sale of any Property, provided that the General Partner actually renders real estate brokerage services in connection with such Sale. Any commissions paid to the General Partner will be limited to one-half of the competitive real estate commission for like properties located in the same geographic area not to exceed 1% of the contract price for the Sale of the Property, and will be subordinated to the payment to Investors of their Adjusted Capital Balance plus the unpaid portion, if any, of their Preferred Return. B. The total of the fees owed to the General Partner and its Affiliates and described in. (i), (ii), (iii) and (iv) above shall in no event exceed 16.5% of the Gross Proceeds of the Offering. ARTICLE X BOOKS AND RECORDS; BANK ACCOUNTS; REPORTS Section 10.1 Books and Records A. The books and records of the Partnership shall be maintained by the General Partner at the Partnership's principal place of business. In all cases, said books and records shall be available for examination and copying by any Limited Partner, Investor or his duly authorized representatives, for any purpose related to the Limited Partner's or Investor's interest as a Limited Partner or Investor, at the expense of such Limited Partner or Investor, at any and all reasonable times. The Partnership shall keep at its principal place of business, without limitation, the following records: true and full information regarding the status of the business and financial condition of the Partnership; promptly after becoming available, a copy of the Partnership's federal, state and local income tax returns for each year; a current list of the names and last known business, residence or mailing addresses of and the numbers of Units held by each Partner and Investor; a copy of this Agreement and the Certificate and all amendments thereto; and other information regarding the affairs of the Partnership as is just and reasonable. The current list of the names and last known business, residence or mailing addresses of each Partner and Investor shall be mailed to any Investor upon payment of a reasonable charge for copy work. A-31 B. The Partnership shall keep its books and records in accordance with the accounting methods determined by the General Partner. The Partnership's taxable year shall be a calendar year. Section 10.2 Bank Accounts A. The General Partner shall have fiduciary responsibility for the safekeeping and use of all funds and assets of the Partnership, whether or not in their immediate possession or control. The General Partner shall not employ, or permit any other Person to employ, such funds in any manner except for the benefit of the Partnership. B. The bank accounts of the Partnership shall be maintained in such banking institutions as the General Partner shall determine, and withdrawals shall be made only in the regular course of Partnership business on the signature of the General Partner or such other signature or signatures as the General Partner may determine. All deposits and other funds may be deposited in interest bearing or non-interest bearing accounts guaranteed by federal authorities, invested in short-term United States Government or municipal obligations, or deposited with a banking institution selected by the General Partner. Section 10.3 Reports A. No later than seventy-five (75) days after the end of each calendar year, the General Partner will furnish each Person who was an Investor or Limited Partner at any time during the fiscal year with all tax information relating to the Partnership's performance for the preceding calendar year that is required to be set forth in the Investor's and Limited Partner's federal and state income tax return. B. Within sixty (60) days after the end of each of the first three fiscal quarters of each fiscal year of the Partnership, the General Partner will furnish to each Person who was an Investor or Limited Partner at any time during the fiscal quarter then ended, a report setting forth information with respect to the progress of the Partnership's business, which report shall include: (i) an unaudited balance sheet of the Partnership; (ii) an unaudited statement of income for the quarter; (iii) an unaudited cash flow statement for the quarter; (iv) an unaudited statement setting forth the services rendered to, and fees received from, the Partnership by any Sponsor; and (v) other pertinent information concerning the Partnership and its activities during the quarter. The various reports required pursuant to this Section 10.3.B may be sent earlier than or separately from any of the other reports required pursuant to this Section 10.3.B, and the information required to be contained in any of the reports required pursuant to this Section 10.3.B may be contained in more than one report. C. Within one hundred twenty (120) days after the end of each fiscal year, the General Partner shall furnish an annual report to each Person who was a Limited Partner or an Investor as of the last business day of the fiscal year then ended. Such annual report will include: (i) a balance sheet as of the end of the Partnership's fiscal year, statements of income, Partners' equity and cash flow, which shall be prepared in accordance with generally accepted accounting principles and accompanied by (a) an auditor's report containing an opinion of an independent certified public accountant and (b) a reconciliation to information furnished to Investors for income tax purposes; (ii) the breakdown of any Partnership costs reimbursed to a Sponsor and a statement setting forth in detail the services rendered to, and fees received from, the Partnership by any Sponsor as verified by a review of the time records of, and the specific nature of the work performed by, individual employees, the cost of whose services were reimbursed (and within the scope of the A-32 annual audit by the Accountants shall be the obligation to verify the allocations of the costs reimbursed to the General Partner or Affiliate thereof); (iii) a cash flow statement; and (iv) a report of the activities of the Partnership during the fiscal year. The annual report shall also set forth distributions to the Investors for the period covered thereby and shall separately identify distributions from (a) Net Cash Flow during the period, (b) Net Cash Flow during a prior period which had been held as reserves, (c) Net Proceeds of Sale or Financing, and (d) Working Capital Reserves. D. Within forty-five (45) days after the end of each fiscal quarter in which a Sale or Financing occurs, the General Partner shall send to each Person who was an Investor as of the close of business on the first business day of the month that includes the date of occurrence of the Sale or Financing, a report as to the nature of the Sale or Financing and as to the Profit or Loss arising from the Sale or Financing. E. The General Partner shall prepare and timely file with appropriate federal and state regulatory authorities all reports required to be filed with such entities under then-applicable laws, rules and regulations. Such reports shall be prepared on the accounting or reporting basis required by such regulatory authorities. Upon request, copies of such reports will be furnished to any Investor or Limited Partner for any purpose reasonably related to the Investor's or Limited Partner's interest as an Investor or a Limited Partner. In the event that any regulatory authority promulgates rules or amendments thereto that would permit a reduction in any of the reporting requirements to which the Partnership is subject under this Agreement at the time of the execution hereof, the Partnership may cease to prepare and file any such reports in accordance with such rules or amendments. F. The General Partner shall maintain, (I) for a period of at least six (6) years, a record of the information obtained to indicate that an Investor has met the suitability standards set forth in the Prospectus; and (ii) for a period of at least five (5) years, records of the appraisals made of the Properties, which appraisal records shall be available for inspection and copying by any Investor or Limited Partner for any purpose reasonably related to the Investor's or Limited Partner's interest as an Investor or a Limited Partner. Section 10.4 Federal Tax Elections The Partnership, in the sole discretion of the General Partner, may make elections for federal tax purposes as follows: (i) In case of a transfer of a Unit, the Partnership, in the sole discretion of the General Partner, may timely elect pursuant to Section 754 of the Code (or corresponding provisions of future law) and pursuant to similar provisions of applicable state or local income tax laws, to adjust the basis of the assets of the Partnership. (ii) The General Partner may elect accelerated depreciation methods under the Code, or may elect straight-line depreciation over a period as long as forty (40) years if, in its sole discretion, the determination of the percentage of tax-exempt Investors becomes too cumbersome. (iii) All other elections required or permitted to be made by the Partnership under the Code shall be made by the General Partner in such manner as will, in its sole opinion, be most advantageous to a Majority of the Investors. The Partnership shall, to the extent permitted by applicable law and regulations, elect to treat as an expense for federal income tax purposes all amounts incurred by it for real estate taxes, interest and other charges which may, in accordance with applicable law and regulations, be considered as expenses. A-33 ARTICLE XI MEETINGS OF INVESTORS Section 11.1 Calling Meetings Meetings of the Investors for any purpose may be called by the General Partner and shall be called by the General Partner upon receipt of a request in writing signed by Investors having in the aggregate more than 10% of the outstanding Units. Upon receipt of a written request stating the purpose(s) of the meeting, the General Partner shall provide all Investors within 10 days after receipt of such request with notice as described in Section 11.2. The meeting shall be held at a time and place convenient to the Investors. Section 11.2 Notice, Procedure If a meeting is called at the request of the Investors, the General Partner shall provide all Investors with notice of such meeting given either personally or by certified mail, which notice shall state the purpose thereof, such meeting to be held on a date not less than fifteen (15) nor more than sixty (60) days after the receipt by the General Partner of the request for the meeting. Notice of any other meeting shall be given either personally or by certified mail, not less than fifteen (15) days nor more than sixty (60) days before the date of the meeting, to each Investor at his record mailing address. The notice shall be in writing, and shall state the place, date, hour, and purpose of the meeting, and shall indicate that it is being issued at or by the direction of the Partners or Investors calling the meeting. If a meeting is adjourned to another time or place, and if any announcement of the adjournment of time or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting. The presence in person or by proxy of the holders of more than 50% of the outstanding Units shall constitute a quorum at all meetings of the Investors; provided, however, that if there is no quorum present, holders of a majority in interest of the Investors present or represented may adjourn the meeting from time to time without further notice until a quorum is obtained. No notice of the time, place or purpose of any meeting of Investors need be given to any Investor who attends in person or is present by proxy (except when an Investor attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business on the ground that the meeting is not lawfully called or convened), or to any Investor entitled to notice who, in a writing executed and filed with the records of the meeting, either before or after the time of the meeting, waives the notice requirement. Section 11.3 Right to Vote For the purpose of determining the Investors entitled to vote at any meeting of the Partnership, the General Partner or the Investors requesting the meeting may fix a date, in advance, as the record date for the determination of Investors entitled to vote. This date shall be not more than fifty (50) days nor less than ten (10) days before any meeting. Section 11.4 Proxies; Rules Each Investor may authorize any person or persons to act for him by proxy in all matters in which an Investor is entitled to participate, whether by waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Investor or his attorney-in-fact. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be recoverable at the pleasure of the Investor executing it. At each meeting of Investors, the General Partner shall appoint officers and adopt rules as they deem appropriate for the conduct of the meeting. A-34 ARTICLE XII GENERAL PROVISIONS Section 12.1 Appointment of General Partner as Attorney-in-Fact A. Each Limited Partner and Investor hereunder hereby irrevocably appoints and empowers the General Partner his attorney-in-fact to consent to or ratify any act listed in Subsections 5.4A(i) through (xviii) and Section 6.3C of this Agreement after the Majority Vote of the Investors thereto has been obtained, and to execute, acknowledge, swear to and deliver all agreements and instruments and file all documents requisite to carrying out the intentions and purposes contemplated in this Agreement, including, without limitation, the execution and delivery of this Agreement and all amendments hereto, the filing of all business certificates and necessary certificates of limited partnership and amendments thereto from time to time in accordance with all applicable laws and any certificates of cancellation. B. The appointment by all Limited Partners and Investors of the General Partner as attorney-in-fact shall be deemed to be a power coupled with an interest, shall not be affected by the subsequent disability or incapacity of the principal and shall survive the assignment by any Limited Partners or Investors of the whole or any part of his Interests or Units in the Partnership. C. The power of attorney granted by this Section 12.1 shall be governed by the laws of the State of Delaware. Section 12.2 Waiver of Partition Each Partner and Investor, on behalf of himself, his successors, representatives, heirs and assigns hereby waives any right of partition or any right to take any other action which otherwise might be available to him for the purpose of severing his relationship with the Partnership or his interest in the assets held by the Partnership from the interest of the other Partners or Investors. Section 12.3 Notification Any Notification, in order to be effective, shall be sent by registered or certified mail, postage prepaid, if to a Partner or Investor, to the address of the Partner or Investor set forth in the books and records of the Partnership, and if to the Partnership, to the principal place of business of the Partnership set forth in Section 2.2 (unless Notification of a change of the principal office is given), the date of registry thereof or the date of the certification thereof being deemed the date of receipt of Notification; provided, however, that any written communication sent to a Partner or Investor or to the Partnership and actually received by such Person shall constitute Notification for all purposes of this Agreement. Section 12.4 Word Meanings In this Agreement, the singular shall include the plural and the masculine gender shall include the feminine and neuter and vice versa, unless the context otherwise requires. Section 12.5 Binding Provisions The covenants and agreements contained herein shall be binding upon, and inure to the benefit of, the heirs, personal representatives, successors and assigns of the respective parties hereto. Section 12.6 Applicable Law This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware, without regard to principles of conflict of laws. Section 12.7 Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together A-35 constitute one and the same instrument. This Agreement shall become binding upon the date hereof. Each Additional or Successor General Partner shall become a signatory hereof by signing such number of counterparts of this Agreement and such other instrument or instruments, and in such manner as the General Partner shall determine, and by so signing, shall be deemed to have adopted and to have agreed to be bound by all the provisions of this Agreement. Section 12.8 Separability of Provisions Each provision of this Agreement shall be considered separable, and if for any reason any provision or provisions hereof are determined to be invalid or contrary to any existing or future law, such invalidly shall not impair the operation of or affect those portions of this Agreement which are valid. Section 12.9 Paragraph Titles Paragraph titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text. Section 12.10 Entire Agreement This Agreement and the exhibits and documents referred to herein constitute the entire understanding and agreement among the parties hereto with respect to the subject matter hereof, and supersede all prior and contemporaneous agreements and understanding, inducements or conditions, express or implied, oral or written, except as herein contained. This Agreement may not be modified or amended other than by an agreement in writing. Section 12.11 Amendments A. In addition to the amendments otherwise authorized herein, amendments may be made to this Agreement from time to time by the General Partner with the Majority Vote of the Investors; provided, however, that without the consent of the Partners or Investors to be adversely affected by the amendment, except as provided in Section 12.11B, this Agreement may not be amended so as to (i) convert an Investor's interest into a General Partner's interest; (ii) modify the limited liability of an Investor; (iii) alter the interest of a Partner or Investor in Net Cash Flow, Profit or Loss, or Net Proceeds of Sale or Financing; (iv) increase the amount of the Capital Contributions required to be paid by the Investors; or (v) extend the Termination Date. B. In addition to the amendments otherwise authorized herein, amendments may be made to this Agreement from time to time by the General Partner, without the consent of any of the Investors, (i) to add to the duties or obligations of the General Partner or surrender any right or power granted to the General Partner herein, for the benefit of the Investors; (ii) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Agreement which will not be inconsistent with the provisions of this Agreement; (iii) to delete or add any provision of this Agreement required to be deleted or added by the Staff of the Securities and Exchange Commission or other federal agency or by a state securities commissioner or similar official and deemed by the commission, agency, commissioner, or official to be for the benefit or protection of the Investors; (iv) to take any actions necessary to cause the assets of the Partnership to come within the exclusion from the definition of "plan assets" contained in Section 2550.40lb-1 of Title 29 of the Code of Federal Regulations; and (v) to give effect to any action permitted pursuant to Section 5.2; provided, however, that no amendment shall be adopted pursuant to this Section 12.2.B unless its adoption (1) is not adverse to the interests of the Investors; (2) is consistent with Section 5.2; (3) does not affect the distribution of Net Cash Flow or Net Proceeds of Sale or Financing or the allocation of Profit or Loss among the Investors as a class and the General Partner, except as provided below; and (4) does not affect the limited liability of the Investors or the status of the Partnership as a partnership for federal income tax purposes. In addition to the amendments otherwise authorized herein, amendments may be made to this Agreement to amend provisions of Article IV of this Agreement relating to the allocations of Profit or Loss and to distributions of Net Cash Flow or Net Proceeds of Sale or A-36 Financing among the Partners and Investors if the Partnership is advised at any time by the Partner- ship's Accountants and counsel that the allocations provided in Article IV of this Agreement are unlikely to be respected for federal income tax purposes. The General Partner is empowered to amend the distribution and allocation provisions of Article IV pursuant to Section 12.11B to the minimum extent necessary in accordance with the advice of the Partnership's Accountants and counsel to effect the plan of distribution of Net Cash Flow and Net Proceeds of Sale or Financing, and, consistent therewith, the allocations of Profit and Loss provided in this Agreement. New allocations made by the General Partner in reliance upon the advice of the Partnership's Accountants and counsel shall be deemed to be made pursuant to the fiduciary obligation of the General Partner to the Partnership and the Investors. This Section 12.11 shall be subject to the provisions of Section 5.9 of this Agreement. C. If this Agreement is amended as a result of adding or substituting a Limited Partner or increasing the investment of a Limited Partner, the amendment shall be signed by the General Partner and by the Person to be substituted or added, or the Limited Partner increasing his investment in the Partnership, and, if a Limited Partner is to be substituted, by the assigning Limited Partner. If this Agreement is amended to reflect the designation of an Additional General Partner, the amendment shall be signed by the other General Partner or General Partners and by the Additional General Partner. If this Agreement is amended to reflect the withdrawal of a General Partner when the business of the Partnership is being continued, the amendment shall be signed by the withdrawing General Partner and by the remaining or successor General Partner or General Partners. D. In making any amendments, there shall be prepared and filed for recordation by the General Partner all documents and certificates required to be prepared and filed under the Act and under the laws of the other jurisdictions under the laws of which the Partnership is then formed or qualified. IN WITNESS WHEREOF, parties hereto have executed this Agreement as of the date first above written. GENERALPARTNER ATTEST: REALTY PARKING COMPANY, INC. By: (SEAL) Name: Name: Title: Title: SUBORDINATED LIMITED PARTNER WITNESS: REALTY ASSOCIATES 1988 LIMITED PARTNERSHIP By: RESIDUAL INVESTMENT ASSOCIATES, A MARYLAND LIMITED PARTNERSHIP, General Partner By: A.B. RESIDUAL, INC., General Partner By: (SEAL) Name: Title: ASSIGNOR LIMITED PARTNER ATTEST: PARKING PROPERTIES HOLDING CO., INC. By: Name: Name: Title: Title: A-37 -----END PRIVACY-ENHANCED MESSAGE-----