10-K/A 1 a10-k.txt AMENDED FORM 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission File No. 1-8815 EQK REALTY INVESTORS I ---------------------- (Exact name of Registrant as specified in its Charter) MASSACHUSETTS 23-2320360 ---------------------------------------- ------------------------------------- (State or other jurisdiction (I.R.S.Employer Identification No.) of incorporation or organization) 2810 Spring Road, Suite 106, Atlanta, GA 30339 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (770) 433-9400 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------------------------ ----------------------------------------- Shares of Beneficial Interest OTC Bulletin Board System Securities registered pursuant to Section 12(g) of the Act: None Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. / / Indicate by checkmark 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 / / The aggregate market value of Shares of Beneficial Interest held by non-affiliates of the Registrant, based on the closing price of the Shares on May 19, 2000 on the OTC Bulletin Board System of $.04 per share, is $385,057. As of May 19, 2000, 9,632,212 Shares of Beneficial Interest were outstanding. Officers and Trustees of the Trust (and certain of their family members) are treated as affiliates for the purposes of this computation, with no admission being made that such people or entities are actually affiliates. DOCUMENTS INCORPORATED BY REFERENCE. EXPLANATORY NOTE This Amendment No. 1 is filed solely to (a) amend Item 8 (including corresponding changes to the financial statements and Note 1 thereto) to label all the financial statements as unaudited since no accountants' report is included and (b) amend Item 9 of this report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Registrant's financial statements and supplementary data listed in Item 14(a) appear immediately following the signatures page. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. In March, 2000, the Trust filed an application in the Bankruptcy Court with jurisdiction over its pending bankruptcy proceedings for authority to employ Deloitte & Touche LLP ("Deloitte") as auditors, accountants, and tax consultants. Certain parties in interest filed objections in the Bankruptcy Court to such employment and Deloitte subsequently requested that the Trust withdraw its application to retain Deloitte. On May 18, 2000, the Trust filed a praecipe to withdraw the Deloitte employment application. Accordingly, Deloitte ceased acting as the Trust's independent public accountants as of such date. The Trust has not replaced Deloitte. Deloitte's reports on the Trust's financial statements for the fiscal years ended December 31, 1998 and December 31, 1997 do not contain an adverse opinion or a disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principles, except that Deloitte's report on the Trust's financial statements for the fiscal year ended December 31, 1998 includes an explanatory paragraph indicating that there is substantial doubt about the Trust's ability to continue as a going concern. Deloitte did not audit the Trust's financial statements for the fiscal year ended December 31, 1999. During the Trust's last two fiscal years ended December 31, 1998 and the subsequent intervening period to the date hereof, there were no disagreements between the Trust and Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Deloitte, would have caused it to make a reference to the subject matter of the disagreements in connection with its reports. The Trust requested and Deloitte furnished a letter addressed to the Securities and Exchange Commission stating it agrees with the above statements. A copy of this letter, dated July 7, 2000, is filed as Exhibit 99 to the Trust's Form 8/K filed on July 7, 2000. None of the "reportable events" described in Item 304 (a)(1)(v) of Regulation S-K occurred with respect to the Trust within the two fiscal years ended December 31, 1998 and the subsequent intervening period to the date hereof. 1 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to a report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 14th day of July, 2000. EQK Realty Investors I By: /s/LLOYD T. WHITAKER -------------------------------- LLOYD T. WHITAKER PRESIDENT (PRINCIPAL EXECUTIVE OFFICER) 2 EQK REALTY INVESTORS I BALANCE SHEETS (UNAUDITED) (In thousands, except share data)

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 3 EQK REALTY INVESTORS I STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 4 EQK REALTY INVESTORS I STATEMENTS OF SHAREHOLDERS' DEFICIT (UNAUDITED)

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 5 EQK REALTY INVESTORS I STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 6 EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 1: DESCRIPTION OF BUSINESS EQK Realty Investors I, a Massachusetts business trust (the "Trust"), was formed pursuant to an Amended and Restated Declaration of Trust dated February 27, 1985, as amended on March 5, 1986, to acquire certain income-producing real estate investments. Commencing with the period beginning April 1, 1985, the Trust qualified for and elected real estate investment trust ("REIT") status under the applicable provisions of the Internal Revenue Code. On December 14, 1999, the Trust filed a voluntary petition in the United States Bankruptcy Court for the Middle District of Pennsylvania (the "Bankruptcy Court") because the Trust was unable to repay certain mortgage indebtedness upon the December 15, 1999 expiration date of forbearance and extension agreements with its lenders. The Trust is now operating as a "debtor-in-possession" pursuant to Chapter 11 of the U.S. Bankruptcy Code. On April 10, 2000, the Trust and the Mortgage Note Lender (as hereinafter defined) filed a Joint Plan of Reorganization in the Bankruptcy Court. At December 31, 1999 and 1998, the Trust's remaining real estate investment is Harrisburg East Mall (the "Mall"), a regional shopping center in Harrisburg, Pennsylvania, which is currently being actively marketed and held for sale. The Declaration of Trust provides for the Trust's existence and a maximum holding period for its real estate investments of 14 years. The Declaration of Trust further provides that this 14-year term may be extended by up to two years upon the recommendation of the Trustees and the affirmative vote of a majority of its shareholders. At a Special Meeting of Shareholders on February 23, 1999, the shareholders approved a two-year extension of the Trust's life from its initial maturity date of March 5, 1999 to March 5, 2001. Effective December 23, 1997, the Trust entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which an affiliate of American Realty Trust, Inc. ("ART") agreed to merge with and into the Trust (the "Merger"), with the Trust being the surviving entity. The Merger contemplated, among other things, a 20-year extension of the life of the Trust. The Merger Agreement was amended on August 25, 1998 and further amended on April 22, 1999 and June 4, 1999, (the "Revised Merger Agreement") to provide for, among other matters, the right of the Trust to sell the Mall and distribute proceeds of such sale to the Trust's shareholders prior to completing the Merger and a corresponding reduction in the Merger consideration to be paid to the Trust's shareholders. The Revised Merger Agreement provided for Merger consideration to be comprised entirely of ART Series F Cumulative Convertible Preferred Stock with a par value of $2.00 per share and a liquidation value of $10.00 per share (the "ART Preferred Shares"). The Revised Merger Agreement provided for the Merger to be effected by (i) ART's acquisition of 4,376,056 Shares held by four EQK shareholders (the "Selling Shareholders") and (ii) ART's receipt of 673,976 shares newly issued by the Trust (which, together with Shares currently outstanding, constitutes 7 EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS (UNAUDITED) "EQK Shares"), the combined effect of which would give ART an approximate 49% interest in EQK. The Selling Shareholders would receive for each EQK Share sold 0.030 of an ART Preferred Share with a corresponding liquidation value of $0.30 per EQK Share sold. The remaining shareholders would be entitled to retain their Shares at the time of the Merger, but would be compensated for the dilution in their percentage ownership interest through the receipt of 0.014 of an ART Preferred Share with a corresponding liquidation value of $0.14 per EQK Share held. In addition, ART intended (but was not legally obligated) to acquire the remaining EQK Shares from such other shareholders at some time after the third anniversary of the consummation of the Merger for not less than 0.0486 of an ART Preferred Share with a liquidation value of $0.486 for each EQK Share tendered. According to the terms of the Revised Merger Agreement, upon completion of the sale of the Mall and receipt of shareholder approval, the Merger would be completed. Because the Merger was not completed by December 15, 1998, the Revised Merger Agreement became terminable by either ART or the Trust. In view of the Trust's bankruptcy filing, the Trust will not be able to consummate the Merger in accordance with the terms of the Revised Merger Agreement nor to make any distributions to its shareholders without Bankruptcy Court approval. Although management has had continuing discussions with representatives of ART on terms and conditions of a transaction with ART and/or its affiliates, no assurances can be provided that a new agreement will be reached, or if reached, would be approved by the Bankruptcy Court. See "Note 7-Commitments and Contingencies." Trading in the Trust's Shares on the New York Stock Exchange ("NYSE") terminated on May 4, 1998, as the Trust did not meet the NYSE's continued listing criteria. The Trust's Shares are currently traded on the OTC Bulletin Board System. In March 2000, the Trust filed an application in the Bankruptcy Court for authority to employ Deloitte & Touche LLP ("Deloitte") as its independent accountants, including serving as auditors of its 1999 financial statements. Certain parties in interest filed objections in the Bankruptcy Court to such employment, and Deloitte subsequently requested that the Trust withdraw its application to retain Deloitte. On May 18, 2000, the Trust filed a praecipe to withdraw the Deloitte employment application. Accordingly, as of such date, Deloitte ceased acting as the Trust's independent public accountants, and the 1999 financial statements are unaudited. Furthermore, because the Trust has not received a currently dated auditors' report with respect to the financial statements for 1998 and 1997, such statements have also been labled unaudited. 8 EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CAPITALIZATION, DEPRECIATION AND AMORTIZATION Property additions are recorded at cost. Costs directly associated with major renovations and improvements, including interest on funds borrowed to finance construction, are capitalized to the point of substantial completion. Costs incurred in connection with the execution of a new lease including leasing commissions and costs associated with the acquisition or buyout of existing leases and related legal fees are deferred and amortized over the term of the new lease. Until April 1, 1998, depreciation of real estate investments was provided on a straight-line basis over the estimated useful lives of the related assets, ranging generally from 5 to 40 years. Tenant improvements were amortized over their estimated useful lives, which did not exceed the terms of the respective tenant leases. Intangible assets were amortized on a straight-line basis over their estimated useful lives. The Trust discontinued recording depreciation and amortization expense on its investment in real estate when the investment was classified as "real estate held for sale" on April 1, 1998. Deferred financing costs are included in accounts receivable and other assets on the Balance Sheets. Deferred financing costs are amortized over the life of the related debt and such amortization is included in interest expense on the Statements of Operations. VALUATION OF REAL ESTATE At December 31, 1999 and 1998, the investment in real estate was recorded at cost less accumulated depreciation through April 1, 1998. In accordance with Statement of Financial Accounting Standards No.121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF," the Trust considers, on a quarterly basis, whether events or changes in circumstances indicate that the carrying amount of its real estate investment may not be recoverable based on estimates of future undiscounted cash flows without interest expense. In the event such projected undiscounted future cash flows should be less than the depreciated cost of the property, the investment in real estate would be written down to its estimated fair market value. REVENUE RECOGNITION Minimum rents are recognized on a straight-line basis over the term of the related leases. Percentage rents, which are earned based on specified percentages of tenants' sales, are recognized on an accrual basis. NET INCOME (LOSS) PER SHARE The net income (loss) per Share calculation is based on the weighted average number of Shares outstanding during the year, which was 9,632,212 for 1999, 9,505,222 for 1998 and 9,264,344 9 EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS (UNAUDITED) for 1997. On March 19, 1998, The Prudential Insurance Company of America (the "Mortgage Note Lender") exercised warrants issued in 1992 for 367,868 Shares of the Trust at $.0001 per Share. (See Note 3.) Such Shares were issued to the Mortgage Note Lender on May 7, 1998, increasing the total number of issued and outstanding Shares of the Trust to 9,632,212. As such, these Shares were included in the net income per share calculation for 1999 and 1998. In 1997, the warrants, which were considered common share equivalents, were not included in the net loss per Share calculation since the effect on such calculation was anti-dilutive. INCOME TAXES The Trust has complied with all applicable provisions established by the Internal Revenue Code for maintaining its REIT status. Accordingly, no income tax provision or benefit has been recognized in the accompanying financial statements. CASH EQUIVALENTS Cash equivalents include short-term investments with a maturity of three months or less. FAIR VALUES OF FINANCIAL INSTRUMENTS The Trust values its financial instruments as required by Statement of Financial Accounting Standards No. 107, "DISCLOSURE ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS". Based on rates currently available to the Trust for comparable financial instruments, the Trust believes the carrying amounts of cash and cash equivalents, the Mortgage Note and the Term Loan approximate fair value. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the current year presentation. MANAGEMENT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 3: MORTGAGE DEBT AND RESTRUCTURING ACTIVITIES The Trust has a "Mortgage Note" obligation with the Mortgage Note Lender, which had an original maturity date of December 15, 1995. The principal balance of the Mortgage Note as of December 31, 1999 and 1998 was $43,794,000. The stated terms of the Mortgage Note provide 10 EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS (UNAUDITED) for monthly payments of interest only accruing at the rate of 8.88% per annum ($324,000 per month). As part of a 1992 debt restructuring, the Trust entered into a Cash Management Agreement with the Mortgage Note Lender and assigned all lease and rental receipts to the Mortgage Note Lender as additional collateral. Pursuant to this agreement, a third-party escrow agent was appointed to receive all rental payments from tenants, to deposit such funds in a cash collateral account, and to fund monthly operating expenses in accordance with a budget approved by the Mortgage Note Lender. The Cash Management Agreement also provides for the establishment of a capital reserve account, which is maintained by the escrow agent. Disbursements from this account, which is funded each month from any excess operating cash flow, are limited to capital expenditures approved by the Mortgage Note Lender. As of December 31, 1999, the third-party escrow agent held, in trust, cash balances of $2,322,000 in the cash collateral account and $1,037,000 in the capital reserve account. Under the terms of the 1992 debt restructuring transactions, the Mortgage Note Lender received warrants to purchase 367,868 Shares of the Trust at $.0001 per share. The Mortgage Note Lender exercised the warrants in 1998 and owns 367,868 of the Trust's Shares at December 31, 1999 and 1998. (See Note 2.) The Trust also has a "Term Loan" obligation with PNC Bank N.A. ("Term Loan Lender") in place since December 15, 1992, which had an original principal balance of $2,859,000. The Term Loan is collateralized by a subordinate lien on the Mall. The principal balance of the Term Loan was $1,570,000 and $1,580,000, respectively, as of December 31, 1999 and 1998. The stated terms of the Term Loan provide for an annual pay rate of 8.88%, but an annual accrual interest at a rate that re-sets periodically. The accrual interest rate is computed at the Trust's discretion at either 2 5/8% above the Euro-Rate (as defined) or 1 1/8% above the Prime Rate (as defined). The accrual rate in effect as of March 15, 2000 was 8.90%. The excess of the interest accrued over the interest paid is included in the principal balance of the Term Loan in the accompanying Balance Sheets. EXTENSIONS OF DEBT The Trust's Mortgage Note Lender and Term Loan Lender agreed to extensions of the maturity dates of the loans through June 15, 1998. Following the June 15, 1998 scheduled maturity date, the Mortgage Note Lender granted three six-month forbearance arrangements (through December 15, 1998, then through June 15, 1999, and then through December 15, 1999) wherein it agreed not to exercise remedies for non-payment of the outstanding principal balance. The Term Loan Lender also granted three six-month extensions of its maturity dates so as to coincide with such forbearance periods. The forbearance and extension arrangements were conditioned upon, among other things, the Trust continuing to make timely debt service payments in monthly amounts equal to those amounts stipulated in prior debt extension agreements, as set forth below. In consideration for the extension of the maturity date of the Mortgage Note through June 15, 1998, the Trust paid an up-front application fee of $165,000 and agreed to pay a back-end fee 11 EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS (UNAUDITED) of $272,900, plus interest thereon at the contract rate of 8.88% at maturity. On June 15, 1998, the Trust paid the back-end fee plus interest in the aggregate amount of $309,200 to the Mortgage Note Lender. In consideration for the extension of the maturity date of the Term Loan the Trust agreed to pay an extension fee of $23,800 in 1997 and paid additional loan fees of $88,100 to the Term Loan Lender on June 15, 1998. In consideration for the extension of the forbearance agreement relating to the Mortgage Note through June 15, 1999 and December 15, 1999, the Trust paid extension fees of $25,000 for each extension. In consideration for the extension of the maturity date of the Term Loan through June 15, 1999 and December 15, 1999, the Trust paid extension fees of $8,000 and $15,700, respectively. The Trust's expiration date of its final forbearance and extension arrangements was December 15, 1999. Inasmuch as the Trust was unable to obtain from its lenders additional forbearance and extension arrangements on economically acceptable terms, the Trust filed a voluntary bankruptcy petition on December 14, 1999. The Mortgage Note Lender has asserted that it is entitled to be paid interest at the default rate (which is 5.04% in excess of the stated 8.88% stated rate) for all periods following June 15, 1998, due to the Trust's failure to pay the Mortgage Note on the December 15, 1999, expiration date of the forbearance agreement. The Term Loan Lender may assert that it is likewise entitled to default rate interest at 5.00% in excess of the stated Term Loan Rate from the December 15, 1999, extended maturity date of the Term Loan. Accordingly, the Trust has recorded accrued and unpaid interest in the Balance Sheet as of December 31, 1999, at amounts which include $3,467,000 for the accrual of default rate interest for such periods. The Trust has been advised that it may have defenses to the Mortgage Note Lender's claim for default rate interest for all periods prior to December 15, 1999. There can, however, be no assurance that any such defenses would be successful. NOTE 4: LEASING ARRANGEMENTS The Trust leases shopping center space in the Mall generally under non-cancelable operating leases, some of which contain renewal options. The shopping center leases generally provide for minimum rentals, plus percentage rentals based upon specified percentages of the tenant retail store sales. Percentage rentals amounted to $245,000, $272,000, and $122,000 for the years ended December 31, 1999, 1998, and 1997, respectively. In addition, the tenants pay certain utility charges to the Trust. In most leases, tenants reimburse their proportionate share of real estate taxes and common area expenses. Recoveries of common area and real estate tax expenses amounted to $2,591,000, $2,418,000, and $2,299,000 for the years ended December 31, 1999, 1998, and 1997, respectively. 12 EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Future minimum rentals under existing, non-cancelable leases at December 31, 1999, are as follows:

The Limited Inc. operates seven stores at the Mall. Revenues from these tenants represented approximately 13.7%, 14.2% and 13.0% of the Mall's total revenues in 1999, 1998 and 1997, respectively. No other individual tenant, or group of affiliated tenants, contributed more than 10% to the Mall's total revenues in any of the three years in the period ended December 31, 1999. Prior to 1998, due to the temporary closure of two of the anchor stores operating at the Mall, certain tenants exercised the right, as provided for under co-tenancy provisions set forth in their respective leases, to pay percentage rent in lieu of fixed minimum rents which amounted to $228,000 for the years ended December 31, 1997. The rental payment obligations of substantially all of these tenants reverted back to fixed minimum rent upon the March 10, 1997 opening of a Lord & Taylor department store at the Mall. NOTE 5: ADVISORY AND MANAGEMENT AGREEMENTS ADVISORY AGREEMENTS Lend Lease Portfolio Management, Inc. ("Lend Lease" and formerly ERE Yarmouth Portfolio Management, Inc.), a wholly owned subsidiary of Lend Lease Real Estate Investments, (formerly ERE Yarmouth, Inc.) served as advisor to the Trust from the Trust's inception until the termination of its advisory agreement on December 13, 1999. The advisor makes recommendations to the Trust concerning investments, administration and day-to-day operations. As of December 31, 1989, the payment of portfolio management fees of $5,440,000 payable to Lend Lease had been deferred in accordance with subordination provisions contained in the original advisory agreement. Pursuant to the amended advisory agreement, Lend Lease forgave one-half, or $2,720,000, of the deferred balance. The remaining deferred fees of $2,720,000 were intended to be paid upon the disposition of the Trust's remaining property, the Mall. Under the terms of the advisory agreement with Lend Lease, as amended in December 1989, 13 EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Lend Lease was entitled to a management fee based on the average daily per share price of the Trust's shares plus the average daily balance of outstanding mortgage indebtedness. Such fee was calculated using an annual factor of 42.5 basis points (0.425%) and generally was payable monthly. Inasmuch as the Shares of the Trust ceased to be traded on a market with readily available market values on May 4, 1998, the Trustees agreed on stipulated per Share values to be used for purposes of calculating the portfolio management fee. These stipulated per share values were $0.75 per share for the period of May 4, 1998 through December 31, 1998, $0.37 per share for the period January 1, 1999 through June 30, 1999, and $0.15 per share for the period July 1, 1999 through the December 13, 1999 termination date of the Lend Lease advisory agreement with the Trust. Commencing with a December, 1995 extension of mortgage debt, the Mortgage Note Lender requested, and the Advisor agreed to, a partial deferral of payment of its fee. Although the fee continued to be accrued and computed in accordance with the formula described above, cash payments to Lend Lease were limited to $37,500 per quarter. These additional deferred fees were intended to be paid to Lend Lease upon the repayment of the Mortgage Note. In addition to the foregoing, Lend Lease earned a refinancing fee of $50,000 in connection with a December, 1996 extension of debt, which fee does not become payable until the retirement of the Trust's mortgage debt. For the years ended December 31, 1999, 1998 and 1997, accrued portfolio management fee expense to Lend Lease amounted to $186,195, $232,000, and $242,000, respectively. The aggregate amount of all refinancing and advisory fees due to Lend Lease at December 31, 1999, including all deferred amounts, was $3,142,741. The liability for these fees is included in "accounts payable and other liabilities" on the Balance Sheets, and the Trust has treated this amount as a general unsecured claim in the Trust's bankruptcy proceeding. On December 13, 1999, the Trust entered into an Advisory Agreement with Gregory Greenfield & Associates, Ltd. ("Greenfield"). Certain parties in interest raised objections to Greenfield's appointment as advisor in connection with the Trust's bankruptcy proceedings due to prior relationships between the Trust and principals of Greenfield who had previously been officers of the Trust and Lend Lease. As a consequence, Greenfield resigned as the Trust's advisor effective January 18, 2000. Greenfield was paid cash compensation of $25,000 for its advisory services. Effective January 18, 2000, Newleaf Corporation was appointed as the Trust's Advisor pursuant to an Advisory Agreement dated January 18, 2000 and an order of the Bankruptcy Court entered January 25, 2000. The Newleaf Advisory Agreement provides for the Advisor to receive monthly cash compensation based on the hourly billing rates of its principals, but not to exceed a cumulative amount calculated at the rate of $35,000 per month for the first three months of services, $25,000 per month for the next six months of services, and $20,000 per month for each month thereafter. The Advisor is also entitled to earn incentive fees of not more than $70,000 14 EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS (UNAUDITED) in connection with the sale of the Mall and $25,000 upon the consummation of a merger or similar transaction involving the Trust and ART or other entities. PROPERTY MANAGEMENT AGREEMENTS The Trust has a property management agreement with Jones Lang LaSalle Americas, Inc. (the "Manager" and formerly ERE Yarmouth Retail, Inc., formerly Compass Retail, Inc. and formerly a wholly-owned subsidiary of Lend Lease Real Estate Investments, Inc.), for the on-site management of the Mall. On September 30, 1998, Lend Lease Real Estate Investments, Inc. sold the Manager to LaSalle Partners, Incorporated ("LaSalle"), which is not affiliated with the Trust or Lend Lease. Management fees paid to the Manager are generally based upon a percentage of rents and certain other charges. The Manager earned management fees of $302,000, $316,000, and $307,000 for the respective years ended December 31, 1999, 1998 and 1997. NOTE 6: SHARE OWNERSHIP In connection with a debt restructuring in December 1992, the Trust issued 1,675,000 previously repurchased Shares to Lend Lease for $6,700,000, or $4.00 per Share. In total at December 31, 1999 and 1998, Lend Lease owned 1,685,556 Shares, or 17.5% of the total Shares outstanding. The Trust has available for re-issuance an additional 423,343 shares previously repurchased. Any issuance of shares in excess of the shares previously repurchased would require Bankruptcy Court approval and possibly shareholder approval. NOTE 7: COMMITMENTS AND CONTINGENCIES On February 3, 1998, the Trust, its trustees, and its Advisor were named as defendants in a purported class action complaint filed by a shareholder in Massachusetts State court. The complaint sought to enjoin the Merger and also sought other relief including unspecified damages. This complaint was dismissed without prejudice in 1999. Counsel for ART has indicated that ART has claims against the Trust arising from the purported termination of the Revised Merger Agreement, and in connection therewith, ART has filed a proof of claim in the Trust's bankruptcy proceedings in the amount of $2,162,000. NOTE 8: JOINT PLAN OF REORGANIZATION On April 10, 2000, the Trust and the Mortgage Note Lender filed a Joint Plan of Reorganization (the "Plan") in the Bankruptcy Court. The Plan provides for the allowance of a secured claim of the Mortgage Note Lender in the amount of approximately $47,478,000 plus legal fees, which amount includes accrued and unpaid interest of approximately $3,360,000 calculated at the default rate from June 15, 1998 to the December 14, 1999 bankruptcy petition date. The Plan further provides that the Mortgage Note Lender will waive its entitlement to default rate interest if, by certain specified dates in July, 2000: (a) a Plan confirmation order is entered by the 15 EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Bankruptcy Court or the Mall is sold pursuant to order of the Bankruptcy Court; (b) the general unsecured creditors (including Lend Lease) and the Term Loan Lender vote to accept the Plan; and (c) the closing of a sale of the Mall takes place or the Mortgage Note Lender is conveyed title to the Mall. Upon the closing of the sale or conveyance of the Mall, the Plan provides that the Mortgage Note Lender will receive payment of its secured claim first from the restricted cash accounts held in trust by the escrow agent pursuant to the Cash Management Agreement and secondly from the sales proceeds of the Mall. The Trust will deliver to an escrow agent a deed in lieu of foreclosure in favor of the Mortgage Note Lender which shall be released only in the event of a default by the Trust under the terms of the Plan or the Trust's failure to meet certain July, 2000, payment deadlines (unless extended). If the proceeds from the proposed sale of the Mall are sufficient to pay all of the Trust's claims in full, the Plan provides that the Mortgage Note Lender will be entitled to a $200,000 administrative and forbearance fee. Under the Plan, the Term Loan Lender will be paid its secured claim from the proceeds remaining from the sale of the Mall, after payment of the Mortgage Note. To the extent that the Term Loan is not paid in full from such proceeds, then the deficiency will be treated as a general unsecured claim. General unsecured claims will share pro rata in the Trust's remaining funds after payment of administrative expenses, certain priority tax claims, and secured claims; provided, however, the Mortgage Note Lender has agreed to fund up to $750,000 for the payment of general unsecured claims under certain conditions. The Shareholders of the Trust would retain their shares in accordance with the Declaration of Trust and in accordance with any treatment which might be set forth in any plan of merger which might be negotiated with ART or other entities. 16 NOTE 9: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of selected quarterly financial data for the years ended December 31, 1999 and 1998:

(1) The 1999 and 1998 results reflect the cessation of depreciation and amortization of the Mall's assets as a result of the Trust's real estate being classified as "held for sale" as of April 1, 1998. (2) The quarter ended December 31, 1999, reflects the recording of default rate interest on the Mortgage Note from June 15, 1998, and the Term Loan from December 15, 1999, in the total amount of $3,467,000. 17 FINANCIAL STATEMENT SCHEDULE DECEMBER 31, 1999 (IN THOUSANDS) SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION (5)--(UNAUDITED)

(1) Encumbrances are composed of the principal amounts of a mortgage note payable constituting a first lien on the Mall and a term loan payable to a bank constituting a subordinated lien on the Mall, together with the related amounts of accrued interest thereon as of December 31, 1999. (2) Initial cost is net of imputed interest of $5,280 at date of acquisition. (3) The aggregate tax basis of the Trust's land and building is $54 million as of December 31, 1998. (4) Renovation of the Mall was completed in 1993. (5) As discussed in the Notes to Financial Statements, the Trust intends to sell the Mall and as such, its investment in real estate is presented on the balance sheets as held for sale at December 31, 1999 and 1998. This asset includes deferred leasing costs, and is carried at the lower of cost or fair value less cost to sell. Depreciation and amortization of the Mall's assets ceased beginning April 1, 1998. (6) Included in deferred leasing costs is a 1990 payment of $5,500,000 made to an anchor tenant at the Mall in exchange for the tenant relinquishing space that was subsequently converted into leasable are for mall shops.

EQK REALTY INVESTORS I 10-K/A