KBS Real Estate Investment Trust, Inc. - FORM 10-Q - EX-10.6 - OMNUBUS EXTENSION OF LOAN AGREEMENTS

Attached files

file	filename
10-Q - FORM 10-Q - KBS Real Estate Investment Trust, Inc.	d10q.htm
EX-10.5 - AMENDMENT NO. 1 TO EXTENSION AGREEMENT - KBS Real Estate Investment Trust, Inc.	dex105.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. 1350 - KBS Real Estate Investment Trust, Inc.	dex321.htm
EX-10.4 - AMENDMENT NO. 1 TO EXTENSION AGREEMENT - KBS Real Estate Investment Trust, Inc.	dex104.htm
EX-32.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. 1350 - KBS Real Estate Investment Trust, Inc.	dex322.htm
EX-10.2 - EXTENSION OF MASTER REPURCHASE AGREEMENT - KBS Real Estate Investment Trust, Inc.	dex102.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 - KBS Real Estate Investment Trust, Inc.	dex312.htm
EX-10.1 - EXTENSION OF MASTER REPURCHASE AGREEMENT - KBS Real Estate Investment Trust, Inc.	dex101.htm
EX-10.3 - OMNIBUS EXTENSION OF LOAN AGREEMENTS - KBS Real Estate Investment Trust, Inc.	dex103.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 - KBS Real Estate Investment Trust, Inc.	dex311.htm

Exhibit 10.6

EXECUTION COPY

March 13, 2011

VIA E-MAIL AND FEDERAL EXPRESS

To the Persons listed on Schedule I hereto, Schedule II hereto

and GKK Stars Junior Mezz 2 LLC

c/o Gramercy Capital Corp.

420 Lexington Avenue, 19th Floor

New York, New York 10170


Attention:		Robert R. Foley, Chief Operating Officer and
		Timothy J. O’Connor, President

Re: Omnibus Extension of Loan Agreements

Ladies and Gentlemen:

Reference is hereby made to (i) that certain Loan Agreement, dated as of April 1, 2008 (as amended by that certain Amendment to Loan Agreement, dated as of August 22, 2008, and as further amended by that certain Second Amendment to Loan Agreement (the “Second Amendment”), dated as of March 9, 2010, the “Mortgage Loan Agreement”), by and among the parties identified as “Mortgage Borrower” on Schedule I hereto (collectively, the “Mortgage Borrower”) and Goldman Sachs Commercial Mortgage Capital, L.P. (as predecessor-in-interest to Goldman Sachs, “Goldman”), Citicorp North America, Inc. (“Citi”), and SL Green Realty Corp. (“SL Green,” and collectively with Goldman and Citi, the “Mortgage Lender”), and (ii) that certain Amended and Restated Senior Mezzanine Loan Agreement, effective as of August 22, 2008, as amended by that certain Amendment to Amended and Restated Loan Agreement (the “Senior Mezz Amendment”), dated as of March 9, 2010 (the “Senior Mezzanine Loan Agreement”), by and between KBS Debt Holdings, LLC (“Senior Mezzanine Lender”), as successor-in-interest to Goldman and Citi, and the parties identified as “Senior Mezzanine Borrower” on Schedule II hereto (collectively, the “Senior Mezzanine Borrower”), a 56.25% participation in which was acquired by KBS GKK Participation Holdings I, LLC (“KBS Participation Holdings I”) and then sold to Goldman pursuant to that certain Master Repurchase Agreement, dated as of August 22, 2008, between KBS Participation Holdings I and Goldman and a 43.75% participation in which was acquired by KBS GKK Participation Holdings II, LLC (“KBS Participation Holdings II”, and collectively with KBS Participation Holdings I, “KBS”) and then sold to Citi pursuant to that certain Master Repurchase Agreement, dated as of August 22, 2008, between KBS Participation Holdings II and Citi and (iii) that certain Junior Mezzanine Loan Agreement, dated as of August 22, 2008, as amended by that certain Amendment to Junior Mezzanine Loan Agreement (the “Junior Mezz Amendment”), dated as of March 9, 2010 (the “Junior Mezzanine Loan Agreement”), by and between Goldman, Citi and SL Green (collectively, the “Junior Mezzanine Lender” and collectively with Mortgage Lender and Senior Mezzanine Lender, the “Lender”) and GKK Stars Junior Mezz 2 LLC (the “Junior Mezzanine Borrower”, and collectively with the Mortgage Borrower and Senior Mezzanine Borrower, the “Borrower”). Capitalized terms not defined herein shall have the meanings set forth in the Mortgage Loan Agreement. References in this Extension Agreement to the “Loans,” the “Loan Agreements,” or the “Loan Documents” shall be

deemed to collectively refer to the Loan, the Mezzanine Loan and the Junior Mezzanine Loan; the Loan Documents, the Mezzanine Loan Documents and the Junior Mezzanine Loan Documents; and the Mortgage Loan Agreement, the Senior Mezzanine Loan Agreement and the Junior Mezzanine Loan Agreement, as applicable.

Pursuant to Paragraph 1 of that certain Extension Agreement, dated as of March 11, 2011, by and between Borrower, Guarantor, Whole Loan Guarantor, Lender, and KBS, the scheduled maturity date of the Loans (the “Maturity Date”) will occur on March 13, 2011. Borrower has requested that Lenders enter into this agreement to extend the Maturity Date (“Extension Agreement”) until 11:59 PM on April 15, 2011 (eastern standard time) (the period from March 13, 2011 until 11:59 PM on April 15, 2011 (eastern standard time) referred to herein as the “Extension Period”). Lenders have agreed to the same, under terms and conditions set forth in this Extension Agreement.

As a condition precedent to the effectiveness of this Extension Agreement:

No later than 5:00 PM (eastern standard time) on March 14, 2011, Gramercy Capital Corp. (“Guarantor”) shall pay to an account designated by Citi and Goldman the sum of $3,500,000 (“Extension Fee”). No later than 5:00 PM (eastern standard time) on March 14, 2011, Guarantor shall send a Fed Reference Number evidencing such payment via E-Mail to michael.m.schadt@citi.com, anthony.preisano@gs.com, and samuel.zylberberg@weil.com. The Extension Fee will be non-refundable, and shall be applied first towards amounts, if any, that may be due and payable now or in the future by Guarantor to Lender (it being understood that Guarantor is not conceding that such an obligation exists) and the balance of the Extension Fee shall be applied to costs and expenses which Borrower is otherwise responsible for and which are required to be paid by Borrower or Guarantor to, or at the direction of, the Lender. For the avoidance of doubt, this Extension Agreement shall become effective as of 12:00 AM (eastern standard time) on March 14, 2011; provided, however, that Guarantor’s failure to pay the Extension Fee and provide evidence of the same as described above prior to 5:00 PM (eastern standard time) on March 14, 2011 shall result in the immediate termination of this Extension Agreement.

No later than 5:00 PM (eastern standard time) on March 17, 2011, Borrower shall provide Lender with a list of all parties (“Existing CA Parties”) with whom it has executed the confidentiality agreements described under the heading “Potential Transaction Detail” in Exhibit A hereto. Thereafter, upon reasonable request from Lender, Borrower shall provide Lender with a list of all parties with whom it has executed confidentiality agreements regarding Borrower and/or any property held by Borrower in the previous 18 months.

The purpose of this Extension Agreement is to (a) consider proposals towards a long-term extension of the Loan, and (b) explore an orderly transition of Borrower’s assets to the Lender; provided that no party shall have any obligation to transact in the manners described above or approve or enter into any agreement described in clause (a) or (b)

above unless it approves such transaction and/or documentation in its sole and absolute discretion.

The first sentence of Section 1.3(a) of each of the Mortgage Loan Agreement, the Senior Mezzanine Loan Agreement and the Junior Mezzanine Loan Agreement shall be deleted in their entirety and replaced with the following:

“On each Payment Date, Borrower shall pay interest on the Principal Indebtedness for the Interest Accrual Period in which such Payment Date falls at a rate per annum equal to the greater of:

(i)

the sum of LIBOR, determined as of the Interest Determination Date immediately preceding such Interest Accrual Period, plus the Spread; or

(ii)

1% per annum in excess of the Prime Rate from time to time.

As of March 12, 2011 and for all times thereafter, the Spread under the Mortgage Loan shall mean 5.99%, the Spread under the Senior Mezzanine Loan shall mean 9.2%, and the Spread under the Junior Mezzanine Loan shall mean 10%.

The definition of “Default Rate” shall be deleted in its entirety.

During the Extension Period, Borrower shall cooperate with Lender’s effort to conduct asset-level due diligence with respect to Borrower and its subsidiaries. Borrower’s cooperation shall include, but not be limited to, delivery of the items set forth on Exhibit A hereto to Lender. The list set forth on Exhibit A shall be representative, but not exhaustive, of the asset-level diligence and Borrower shall provide such other asset-level diligence items, to the extent the same exist, during the Extension Period as may be reasonably requested by Lender.

(a) Borrower acknowledges that pursuant to the Mortgage Loan Agreement, the Senior Mezzanine Loan Agreement or the Junior Mezzanine Loan Agreement, Lender may share any information it receives regarding the Borrower, its Affiliates and/or any property held by Borrower and/or its Affiliates with any third party.

(b) Notwithstanding the foregoing clause (a), Lender shall only provide information it receives pursuant to Paragraph 6 that is not otherwise delivered to Lender pursuant to the regular reporting requirements under the Loan Agreements to third parties subject to (i) such third parties (collectively, “Lender CA Parties”) entering into confidentiality agreements with Lender or its agents that contain the same or substantially similar key provisions as contained on the form attached as Exhibit B hereto, (ii) Lender or its agents informing Borrower and Guarantor of the existence of, and the parties to, the confidentiality agreements within three (3) business days following execution of the same, and (iii) Lender maintaining compliance with all applicable securities laws (and related regulations), consistent with the provisions of the confidentiality agreement form attached as Exhibit B hereto. Any restrictions contained in electronic data rooms which pertain to the

sharing of information shall be superseded by the confidentiality agreements entered into pursuant to this Paragraph 7, and shall not be applicable to Lender or any Lender CA Party that signs a confidentiality agreement pursuant to this Paragraph 7. Borrower and Guarantor shall be third party beneficiaries of any confidentiality agreement entered into in connection with this Paragraph 7. The requirement to enter into confidentiality agreements pursuant to this Paragraph 7 shall terminate upon the earlier to occur of (A) the first anniversary of the end of the Extension Period, and (B) Lender’s completion of foreclosure proceedings against the assets that such confidential information pertains to. For the avoidance of doubt, Lender’s affiliates and counsel shall not be deemed to be third parties.

Borrower and Guarantor may share information regarding the Borrower, its Affiliates and/or any property held by Borrower and/or its Affiliates with any third party, subject to (i) such third parties (collectively, “Company CA Parties”) entering into confidentiality agreements with Borrower and Guarantor or their agents that contain the same or substantially similar key provisions as contained on the form attached as Exhibit B hereto, (ii) Borrower and Guarantor or its agents informing Lender of the existence of, and the parties to, the confidentiality agreements within three (3) business days following execution of the same, and (iii) Borrower and Guarantor maintaining compliance with all applicable securities laws (and related regulations), consistent with the provisions of the confidentiality agreement form attached as Exhibit B hereto. Any restrictions contained in electronic data rooms which pertain to the sharing of information shall be superseded by the confidentiality agreements entered into pursuant to this Paragraph 8, and shall not be applicable to any Company CA Party that signs a confidentiality agreement pursuant to this Paragraph 8. Lender shall be a third party beneficiary of any confidentiality agreement entered into in connection with this Paragraph 8. Borrower shall have the right, but not the obligation, to amend any confidentiality agreement with an Existing CA Party in a manner which is substantially consistent with the provisions and restrictions of any confidentiality agreement entered into pursuant to Paragraph 7.

Lender shall provide Borrower with prior notice that it intends to engage in discussions with Existing CA Parties before engaging in any such discussions. Any provision in confidentiality agreements with Existing CA Parties that restricts such parties from engaging in discussions with Lender shall be rendered null and void. In addition, Borrower and Guarantor may engage in discussions with any Lender CA Party and Lender may engage in discussions with any Company CA Party, in each case subject to providing prior notice to Borrower and Guarantor or Lender, as applicable, before engaging in any such discussions. Borrower, Guarantor and Lender agree that any discussions with third parties regarding the Loans will be of a commercial nature and will not be entered into with intent to disparage any party to this Extension Agreement.

10.

During the Extension Period, Borrower shall be permitted to make Permitted Distributions only in accordance with Section 3.7 of the Mortgage Loan Agreement, Section 3.5 of the Senior Mezzanine Loan Agreement and Section 3.6

of the Junior Mezzanine Loan Agreement, provided that any Permitted Distributions made in accordance with this Paragraph 10 shall be prorated to account for any partial fiscal quarters.

11.

During the Extension Period Guarantor and Borrower shall continue to operate their properties and assets in the ordinary course. Borrower shall pay all invoices related to its properties and assets as they come due. If Borrower fails to pay any invoice related to its properties and assets as it comes due, Borrower and Guarantor shall promptly inform Lender of the same (“Invoice Notice”). Upon (a) receipt of the Invoice Notice, or (b) Borrower’s failure to pay invoices and provide evidence of the same to Lender within two (2) business days after Lender’s notice to Borrower that such invoices have not been paid, Lender shall, upon the occurrence of either (a) or (b), have the right, but not the obligation, to, upon notice to the Borrower (i) deem the Maturity Date to be the date of the giving of such notice, and/or (ii) terminate the Extension Period effective as of the date of the giving of such notice.

12.

Each of Borrower and Guarantor represents and warrants, with respect to itself, as follows:

Each of Borrower and Guarantor has all necessary corporate and/or limited liability company power, authority and legal right to execute, deliver and perform its obligations under this Extension Agreement; the execution, delivery and performance by each of Borrower and Guarantor of this Extension Agreement and the transactions contemplated hereunder have been duly authorized by all necessary corporate or other action on its part; and this Extension Agreement has been duly and validly executed and delivered by Borrower and Guarantor and constitutes a legal, valid and binding obligation of Borrower and Guarantor, enforceable against each of them in accordance with its terms;

No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority or any securities exchange are necessary for the execution, delivery or performance by Borrower or Guarantor of this Extension Agreement or for the legality, validity or enforceability hereof; and

From and after March 9, 2010, Guarantor, Borrower and their Affiliates have at all times been in compliance with Section 3.7 of the Mortgage Loan Agreement, Section 3.5 of the Senior Mezzanine Loan Agreement and Section 3.6 of the Junior Mezzanine Loan Agreement.

13.

Each Lender represents and warrants, with respect to itself, as follows:

Each of Lender has all necessary corporate and/or limited liability company power, authority and legal right to execute, deliver and perform its obligations under this Extension Agreement; the execution, delivery

and performance by each Lender of this Extension Agreement and the transactions contemplated hereunder have been duly authorized by all necessary corporate or other action on its part; and this Extension Agreement has been duly and validly executed and delivered by Lender and constitutes a legal, valid and binding obligation of Lender, enforceable against each of them in accordance with its terms;

No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority or any securities exchange are necessary for the execution, delivery or performance by Lender of this Extension Agreement or for the legality, validity or enforceability hereof; and

Goldman represents and warrants that it, or its affiliate, currently owns 48.2% of the Mortgage Loan, 56.25% of the Senior Mezzanine Loan (subject to the KBS Master Repurchase Agreement), and 48.2% of the Junior Mezzanine Loan. Citi represents and warrants that it, or its affiliate, currently owns 37.5% of the Mortgage Loan, 43.75% of the Senior Mezzanine Loan (subject to the KBS Master Repurchase Agreement), and 37.5% of the Junior Mezzanine Loan. SL Green represents and warrants that it currently owns 14.3% of the Mortgage Loan and 14.3% of the Junior Mezzanine Loan. Each Lender represents and warrants that it has not sold, transferred or otherwise conveyed its interests in the loans.

14.

The Maturity Date of the Mortgage Loan, the Senior Mezzanine Loan and the Junior Mezzanine Loan shall be April 15, 2011.

15.

This Extension Agreement and all communications concerning this Extension Agreement are subject in their entirety to that certain Pre-Negotiation Agreement, dated as of October 25, 2010, entered into between Lender (other than KBS and Senior Mezzanine Lender) and Borrower, Guarantor and Whole Loan Guarantor (the “PNA”). KBS and Senior Mezzanine Lender shall be deemed to be parties to the PNA as if they entered into the PNA as a lender party with the other Lenders on October 25, 2010, such that KBS and Senior Mezzanine Lender shall be subject to all obligations imposed, and entitled to all protections afforded, thereunder as of October 25, 2010.

16.

This Extension Agreement may be executed in any number of separate counterparts and by the different parties hereto on separate counterparts, each of which shall be deemed an original and all of which, taken together, shall be deemed to constitute one and the same instrument. In proving this Extension Agreement in any judicial proceedings, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom such enforcement is sought. Any signature delivered by a party by facsimile transmission or electronic mail shall be deemed an original signature hereto.

17.

This Extension Agreement shall not be a binding obligation of any party hereto until such time as all of the signatories hereto have executed and delivered this Extension Agreement. Notwithstanding the foregoing, the inclusion of any individual Lender party as a signatory hereto shall not be interpreted to mean that the consent of such individual Lender party is required pursuant to any existing agreement among the Lender parties.

18.

Each of the parties hereto expressly reserves any and all rights and remedies available under the Loan Documents, at law and in equity. No delay, waiver or failure to exercise by Lender in exercising any right, remedy, power or privilege hereunder or under the Loan Documents shall preclude any other or further exercise thereof, or the exercise of any other right, remedy power or privilege. Except as modified hereby, the Loan Documents are and shall remain in full force and effect. Except as expressly set forth herein, nothing contained herein shall be construed or interpreted as a modification or amendment of the Loan Documents in any way.

19.

This Extension Agreement shall be governed by, and construed in accordance with the laws of the State of New York without regard to principles of conflicts of law. The parties hereto hereby agree that any suit for the enforcement of this Extension Agreement may be brought in the courts of the State of New York sitting in New York County or any Federal Court sitting in New York County and consent to the exclusive jurisdiction of such Court.

[SIGNATURE PAGES FOLLOW]

EXECUTION COPY

IN WITNESS WHEREOF, for good and valuable consideration, the sufficiency of which is hereby acknowledged and agreed, the parties hereto have executed and delivered this Extension Agreement as of the date first hereinabove set forth. This letter agreement shall be of no force and effect unless signed by each of the parties set forth below.


MORTGAGE BORROWER:

The entities listed on Schedule I to this signature page

By:		/s/ Robert R. Foley
		Name: Robert R. Foley
		Title: Chief Operating Officer

SENIOR MEZZANINE BORROWER:

The entities listed on Schedule II to this signature page

By:		/s/ Robert R. Foley
		Name: Robert R. Foley
		Title: Chief Operating Officer

JUNIOR MEZZANINE BORROWER:

GKK STARS JUNIOR MEZZ 2 LLC, a Delaware limited liability company

By:		/s/ Robert R. Foley
		Name: Robert R. Foley
		Title: Chief Operating Officer