EXHIBIT 10.4
REAL ESTATE MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of October, 2002, between PARK PLAZA MALL, LLC, having an office at c/o First Union Real Estate Equity and Mortgage Investments, 125 Park Avenue 14th Floor, New York, New York 10017, ("OWNER"), and GENERAL GROWTH MANAGEMENT, INC., having a principal address 110 North Wacker Drive, Chicago,
Illinois 60606 ("AGENT").
W I T N E S S E T H
In consideration of the Covenants herein contained, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT AND AUTHORITY OF AGENT
1.1 Owner owns a shopping center (referred to as the "PREMISES"), identified on EXHIBIT A attached hereto and made a part hereof. Owner hereby appoints Agent as the sole and exclusive managing and leasing agent for the Premises, and hereby authorizes Agent to exercise such powers with respect to the Premises as may be necessary for the performance of Agent's obligations under Article II, and Agent accepts such appointment on the terms and conditions hereinafter set forth for a term as provided in Article V and agrees to manage, operate and maintain the Property in a faithful and diligent manner, subject to the terms and conditions in this Agreement. Agent shall have no right or authority, express or implied, to commit or otherwise obligate Owner in any manner whatsoever except to the extent specifically provided herein.
ARTICLE II
AGENT'S AGREEMENT
2.1 Agent, on behalf of Owner, shall implement, or cause to be implemented, the decisions of Owner and shall conduct the ordinary and usual business affairs of Owner as provided in this Agreement. Agent shall at all times use reasonable efforts to conform to the policies and programs established by Owner and identified to Agent, and the scope of Agent's authority shall be limited to said policies. All undertakings incurred by Agent on behalf of Owner under this Agreement shall be at the cost and expense of Owner unless otherwise provided for herein. Agent agrees to use its best efforts in the management and operation of the Premises, and to comply with Owner's instructions. If Owner has or creates a Managing Agent's Manual ("the Manual") which summarizes the instructions, then the "MANUAL" furnished by Owner to Agent shall be made a part hereof. In the event of any inconsistency or conflict between the terms and provisions of this Agreement and the Manual or the policies and programs established by Owner, the terms and provisions of this Agreement shall govern and be binding. Agent shall perform the following duties in connection with the management and operation of the Premises:
(a) Contract, for periods limited to Owner's possession of the Premises,
but not in excess of one (1) year, in the name of Owner, for gas,
electricity, water and such other services as are being currently furnished
to the Premises. Service contracts shall be written to include a thirty (30)
day notice of cancellation by Owner wherever possible. All service contracts
in effect at the date hereof in respect of the Premises, including the terms
thereof (with cancellation right, if any), the services provided thereunder
and the charges called for thereby, should be detailed in the Annual Budget.
No such contract, other than a contract for an item specified in the Annual
Budget or for water or utilities, which involves an expenditure in excess of
the amount set forth in paragraph 3 of EXHIBIT A attached hereto shall
hereinafter be entered into by Agent without the prior approval of Owner.
1
(b) Select, employ, pay, supervise, train, direct and discharge all
employees necessary for the operation and maintenance of the Premises,
including the payment of all related expenses, compensation, salary,
bonuses, fringe and fringe-related costs in accordance with industry
practices and, where applicable, the Annual Budget, carry Worker's
Compensation Insurance (and, when required by law, compulsory
Non-Occupational Disability Insurance) covering such employees, and use
reasonable care in the selection and supervision of such employees. Owner
agrees to reimburse Agent for any reasonable relocation costs associated
with the relocation of exempt level employees to the Premises. Agent will
keep bi-weekly time sheets which shall be available for inspection by Owner.
Agent shall prepare or cause to be prepared and timely filed and paid, all
necessary returns, forms and payments in connection with unemployment
insurance, medical and life insurance policies, pensions, withholding and
social security taxes and all other taxes relating to said employees which
are imposed by any federal, state or municipal authority. Agent shall also
provide usual management services in connection with labor relations and
shall prepare, maintain and file all necessary reports with respect to the
Fair Labor Standards Act and all other required statements and reports
pertaining to labor employed at the Premises. Agent shall use its best
efforts to comply with all laws and regulations and collective bargaining
agreements, if any, affecting such employment. Agent will be and will
continue throughout the term of this Agreement to be an Equal Opportunity
Employer. All persons employed in connection with the operation and
maintenance of the Premises shall be employees of Agent.
Owner warrants and represents that as of the date of this Agreement, the
employees of the current manager of the Premises that the Agent has been
asked to retain have never been employed by Owner nor participated in any
retirement plan offered by Owner, are not presently or in the past been
represented by a labor union in their employment at the Premises and that
the Agent will not incur any unfunded vested retirement plan liability
arising out of these employees' employment by any previous manager at the
Premises.
(c) Keep the Premises, or cause the Premises to be kept in a safe, clean
and sightly condition and make and contract for all repairs, alterations,
replacements, and installations, do or cause to be done all decorating and
landscaping, and purchase all supplies necessary for the proper operation
and maintenance of the Premises as a first-class regional shopping mall and
the fulfillment of Owner's obligations under any lease, operating agreement
or other agreement or compliance with all governmental and insurance
requirements, provided that, except as provided in Section 2.4 hereof, Agent
shall not make any purchase or do any work, the cost of which shall exceed
the approved budget or the amount set forth in paragraph 3 of EXHIBIT A
attached hereto, without obtaining in each instance, the prior approval of
Owner, except in circumstances which Agent shall deem to constitute an
emergency requiring immediate action for the protection of the Premises or
of tenants or other persons or to avoid the suspension of necessary services
or in order to cure any violation or other condition which would subject
Owner or Agent to any criminal penalty or civil fine. Agent shall promptly
notify Owner immediately of the necessity for, the nature of, and the cost
of, any such emergency repairs or any action to cure any such violation or
other condition. Agent shall arrange for and supervise, on behalf of Owner,
the performance of all alterations and other work to prepare or alter space
in the Premises for occupancy by tenants thereof. Agent shall submit a list
of contracts and subcontractors performing tenant work, repairs, alterations
or services at the Premises, under Agent's direction for Owner's approval
before such subcontractors commence any work at the Premises.
It is understood that Agent shall not be required to undertake the making
or supervision of extensive reconstruction of the Premises or any part
thereof except after written agreement by the parties hereto as to any
additional fee to be paid for such services.
Owner shall receive the benefit of all discounts and rebates obtainable
by Agent in its operation of the Premises. Owner is entitled to discounts
from various contractors and suppliers under National Agreements; Agent, if
informed by Owner of such National Agreements, agrees to take advantage of
such National Agreements wherever feasible. Agent agrees to obtain a minimum
of three (3) competitive bids for the performance of any work at the
Premises exceeding $15,000.00, to furnish copies of such bids to Owner and
to accept such bid as Owner may direct.
2
If Agent desires to contract for repair, construction or other service
described in this paragraph (c) (other than work done at the request of a
tenant and at the tenant's sole cost and expense, hereinafter referred to as
"Tenant's Work") with a party with respect to which any partner or
shareholder of Agent holds a beneficial interest, or with any subsidiary,
affiliate or related corporation in which Agent shall have a financial
interest, such interest shall be disclosed to, and approved by Owner in
writing before such services are procured. The cost of any such services
shall likewise be at competitive rates, notwithstanding that tenants of the
Premises may be required to pay such costs. Agent, or the general contractor
working under the supervision of Agent, is authorized to make and install
Tenant Work, and Agent may collect from such tenant or such general
contractor, for its sole account, its charge for supervisory overhead on all
such Tenant Work; provided in each instance Owner is notified, in advance,
in writing of the scope of such work and the identities of the tenant and
contractors involved in such work. Agent shall hold Owner harmless from any
claims which may be advanced by any such tenant in connection with Tenant
Work performed by Agent or under Agent's supervision. Agent, however, shall
not require any tenant to use Agent, its subsidiary, affiliate or related
corporation or its general contractor to perform such Tenant Work.
(d) Handle promptly complaints and requests from tenants and parties to
reciprocal easement agreements, notify Owner of any major complaint made by
any such tenant or party and notify owner promptly (together with copies of
supporting documentation), of: the receipt of any notice of violation of any
governmental requirements; and known orders or requirements of insurers,
insurance rating organizations, Board of Fire Underwriters or similar
bodies; any known defect in the Premises; any known fire or other damage to
the Premises, and complete customary loss reports in connection with fire or
other damage to the Premises.
(e) Notify Owner's General Liability Insurance carrier and Owner promptly
of any personal injury or property damage known to Agent occurring to or
claimed by any tenant or third party on or with respect to the Premises and
promptly forward to the carrier, with copies to the Owner, any summons,
subpoena, or other like legal document served upon Agent relating to actual
or alleged potential liability of Owner, Agent, or the Premises, with copies
to Owner of all such documents.
(f) Advise Owner of those exceptions in leases, operating agreements and
other agreements in which the tenants or parties to such agreements do not
agree to hold Owner harmless with respect to liability from any accidents
and/or to replace broken glass.
(g) Subject to Agent entering into cash management agreements in form and
content acceptable to Owner's mortgage and mezzanine lenders, receive and
collect rent and all other monies payable to Owner by all tenants and
licensees in the Premises and by all other parties including department
stores under ground leases and reciprocal easement agreements and tenants
under leases of free-standing stores. In this connection, Agent shall
calculate all amounts due to Owner from such tenants, licensees and other
parties, including annual or periodic adjustments where applicable, and
shall, when appropriate, submit statements or invoices to such tenants,
licensees and parties. Agent shall deposit the same promptly in the bank
named on EXHIBIT A attached hereto (the "Bank") in an account with a title
including a distinctive portion of Agent's name and " " or such
other designation as Owner may direct (the "BANK ACCOUNT"), which account
shall be used exclusively for such funds. Owner's representative will be a
signatory on all bank accounts maintained by Agent. Agent shall pay the
operating expenses of the Premises and any other payments relative to the
Premises as required by the terms of this Agreement out of the Bank Account.
All amounts received by Agent for or on behalf of Owner shall be and remain
the property of Owner. Checks may be drawn on the above-mentioned Bank
Account only for purposes authorized under this Agreement. Copies of the
monthly statements for each such Bank Account shall be sent to Owner. No
funds of Agent or others shall be commingled with funds in any such Bank
Account. Owner has the right to control the types of cash management
accounts and dictate the specifics of said accounts with respect to
disbursement and management of funds.
(h) Serve notices of default upon tenants of space in the Premises and
other parties which are in default in performing obligations under their
leases, reciprocal easement agreements or other agreements, with
3
copies sent simultaneously to Owner, and attempt to cause such defaults to
be cured. Agent shall, subject to Owner's consent with respect to any tenant
who occupies more than 2,000 square feet, utilizing counsel theretofore
approved by Owner, institute all necessary legal action or proceedings for
the collection of rent or other income from the Premises, or the ousting or
dispossessing of tenants or other persons therefrom, and all other matters
requiring legal attention. Agent agrees to use its best efforts to collect
rent and other charges from tenants in a timely manner and to pursue Owner's
legal remedies for non-payment of same. Owner reserves the right to
designate or approve counsel and to control litigation of any character
affecting or arising out of the operation of the Premises and the settlement
of such litigation.
(i) Bond Agent and/or all of Agent's employees who may handle or be
responsible for monies or property of Owner with a "comprehensive 3-D" or
"Commercial Blanket" bond, in an amount of $100,000.
(j) Notify Owner immediately of any known fire, accident or other
casualty, condemnation proceedings, rezoning or other governmental order,
lawsuit or threat thereof involving the Premises; and the receipt of any
notice of violations relative to the leasing, use, repair and maintenance of
the Premises under governmental laws, rules, regulations, ordinances or like
provisions.
(k) If Owner so directs, make timely payment of real estate and personal
property taxes and assessments levied or assessed against the Premises or
personal property used in connection therewith. Agent shall promptly furnish
Owner with copies of all assessment notices and receipted tax bills.
(1) Cooperate with Owner's national energy conservation policies, and
submit energy consumption reports for the Premises as required in accordance
with Owner's program for property energy audits and review reports.
(m) Cooperate with Owner in attaining certain corporate objectives, i.e.,
purchase and reporting of goods and services furnished or supplied by
minority groups.
(n) Promptly comply in all material respects with all present and future
laws, ordinances, orders, rules, regulations and requirements of all
Federal, state and local governments, courts, departments, commissions,
boards and offices, any national or local Board of Fire Underwriters or
Insurance Services offices having jurisdiction, or any other body exercising
functions similar to those of any of the foregoing which may be applicable
to the Premises or any part thereof or to the leasing, use, repair,
operation and management thereof, but only to the extent that such
compliance is reasonably capable of being carried out and complied with by
Agent and Agent has available the necessary funds therefor from collections
or advances by Owner. Agent shall give prompt notice to Owner of any known
violation or the receipt of notice of alleged violation of such laws. As and
when directed by Owner, Agent shall institute in its name, or in the name of
Owner, using counsel selected by Owner, appropriate actions or proceedings
to contest any such law, ordinance, rule, regulation, order, determination
or requirement.
(o) Promote the Premises and participate as Owner's representative in any
Merchant's Associations or Promotional Organizations (collectively, the
"PROMOTIONAL ORGANIZATIONS") established to promote the Premises, and in
connection therewith, employ (via a property level reimbursement or tenant
reimbursement) and direct the activities of a marketing director for the
Premises.
(p) Consent to and approve tenant alteration work and installations which
are performed by tenants of space in the Premises and are provided for in
the leases of such tenants. Agent is authorized to approve tenant alteration
work and installations not provided for in leases if (i) such alteration
work and installations are made solely at the expense of the tenant, and
(ii) such alteration work and installations do not affect the structural
integrity of any building and (iii) such alteration work and installations
are consistent with the overall leasing plan for the Premises and do not
interfere with any other tenant's use of the Premises.
(q) Provide, upon Owner's request and in accordance with the provisions
of section 7 and section 9 of Exhibit A, general contracting and
construction management services ("DEVELOPMENT SERVICES") and consultation
to Owner for the Premises which shall include, without limitation, the
management, supervision and administration of, and provisions for services
for the improvement, expansion (and in the
4
event of damage or condemnation, the reconstruction thereof) of the
Premises, including advice, expertise and support of Agent provided and/or
retained and/or coordinated by home office and on-site personnel including,
without limitation, executive personnel, design and engineering personnel,
clerical personnel, legal and accounting personnel. Such personnel will
perform consultation and various functions involved with Development
Services including, without limitation, the following: design, planning,
architectural, engineering, acquisition and negotiation, negotiations with
department stores for site acquisition and operation in the Premises;
permits and licenses; pre-opening advertising and publicity; market
research; site work; negotiations with public authorities, public hearings;
project management and all other activities necessary to accomplish the
improvement, expansion or reconstruction of the Premises.
(r) If Owner so directs, pay when due (i) all debt service and other
amounts due under any mortgages which encumber the Premises or any part
thereof, and give Owner notice of the making of each payment, and (ii) all
rent and other charges payable under any ground lease of land included in
the Premises under which Owner is the tenant.
(s) Cause the requirements on the part of Owner under all such mortgages
and ground leases, all leases of space in the Premises, all ground leases
and reciprocal easement agreements with department stores and all other
agreements affecting or relating to the Premises which are known or made
known to Agent, including, without limitation, the furnishing of all
services and utilities called for therein, to be carried out and complied
with in all material respects, but only to the extent that such requirements
are at the time reasonably capable of being carried out by Agent and
complied with and Agent has available the necessary funds therefor from
collections or advances by Owner. Agent shall notify Owner promptly of any
default under any such mortgage, lease, ground lease, reciprocal easement or
other agreement on the part of Owner, the tenant or other party thereto, of
which Agent becomes aware.
(t) Use its reasonable efforts to require compliance with the
requirements of leases of space in the Premises, ground leases, reciprocal
easement agreements and all other agreements affecting or relating to the
Premises which are known or made known to Agent on the part of tenants,
department stores and other parties thereto and enforce compliance with the
rules and regulations, sign criteria and like standards for the Premises
adopted by Owner from time to time.
(u) Cause Owner to be furnished with an executed copy of each lease,
lease renewal, lease amendment, service contract and other agreement entered
into on or after the date of this Agreement in connection with the
operation, management and leasing of the Premises, and use reasonable
efforts to secure from tenants and parties to reciprocal easement
agreements, and furnish to Owner, any certificates of insurance, and
renewals thereof, required to be furnished by the terms of their leases or
agreements.
(v) Inspect the Premises periodically and submit reports of findings and
recommendations to Owner which shall include, without limitation,
recommendations as to required repairs, replacements or maintenance.
(w) Erect barriers or chains for the purpose of blocking access to the
common areas of and buildings included in the Premises as local law may
require, or, directed in writing by Owner, in order to avoid the dedication
of the same for public use and furnish appropriate evidence of same to
Owner. Agent shall give any advance notice of the erection of such barriers
or chains which may be required under reciprocal easement agreements or
ground leases with department stores.
(x) Use its reasonable efforts to obtain from tenants of the Premises and
department stores which are parties to reciprocal easement agreements or
ground leases waivers of their insurers' rights of subrogation in respect to
policies of fire and extended coverage and other property damage insurance
carried by them in favor of Owner, Agent and any department store or tenant
for which Owner is obligated to attempt to obtain such waivers under a
ground lease, reciprocal easement agreement or space lease.
(y) Provide and prepare standard quarterly statements and other required
reports to be submitted by Owner to its lenders.
5
(z) Perform its duties in the renting, management, operation and
maintenance of the Premises applying prudent and reasonable business
practices, using reasonable care and diligence in carrying out its
responsibilities under this Agreement. Agent shall maintain those portions
of the common areas of the Premises which are Owner's obligation to maintain
in a clean and attractive first-class condition, use reasonable efforts to
enforce the provisions of applicable leases, ground leases and reciprocal
easement agreements so as to cause tenants and department stores to maintain
their premises and common areas, if any, in similar condition, arrange for
necessary security for the Premises and their common areas and arrange for
cleaning and snow removal for the parking areas and roadways of the
Premises. Agent shall recommend to Owner from time to time such procedures
with respect to the Premises as Agent may deem advisable for the more
efficient and economic management and operation thereof.
Owner recognizes and understands that Environmental Services (as
hereinafter defined) are not actions or services that Agent is required
to perform under this Agreement and Owner further recognizes and
understands that Agent is not a consultant or a contractor that performs
Environmental Services. Upon Owners request, Agent agrees to obtain and
coordinate for and on behalf of Owner, such Environmental Services that
Owner may request or require. Owner shall reimburse Agent for its
administrative costs in connection with the coordination of such
Environmental Services. In addition, Owner shall reimburse Agent for the
costs of outside professionals retained to perform Environmental
Services. Environmental Services is defined to be those acts or actions
involving the presence, use, exposure, removal, restoration, or
introduction of Hazardous Materials (as hereinafter defined) and the
investigation of and compliance with any and all applicable rules, laws,
or regulations of local state or federal authorities which apply or
regulate Hazardous Materials. Hazardous Materials means any hazardous,
radioactive or toxic substance, material or waste listed in the United
States Department of Transportation Hazardous Materials Table; or by the
Environmental Protective Agency as hazardous substances; or such
substances, material and waste which are or become regulated under
applicable local, state or federal law including materials which are
petroleum products, asbestos, polychlorinated biphenyls, or designated
as hazardous substances under the Clean Water Act; or defined as
hazardous waste under the Resource Conservation and Recovery Act; or
defined as hazardous substances under the Comprehensive Environmental
Response, Compensation and Liability Act.
(aa) Agent agrees that, unless specifically agreed to in writing by the
Owner, all contracts executed by 3rd party vendors, suppliers, contractors,
etc. will have a provision whereby said vendor, supplier or contractor
indemnifies Owner for the vendor's, supplier's, or contractor's negligence.
2.2 Agent agrees to render monthly, quarterly and annual reports relating to the management and operation of the Premises for the preceding calendar month, quarter and year, as the case may be, on or before the fifteenth (15th) day of the month following the end of the month, quarter or year, as the case may be, in form satisfactory to Owner in accordance with Exhibit B. At Owner's request, Agent shall update Owner's Argus reports up to twice per year. Agent shall have the option to provide any and all such reports electronically. Agent agrees that Owner shall have the right to require the transfer to Owner at any time of any funds in the Bank Account considered by Owner to be in excess ...