I land . 321,083 The parties agree that those adjusted bases are correct, except to the extent, if any, that the cost of the Atrium assets, see supra sec. U.A.7., is allocable to the bases of the properties sold in the 2UBC transaction.
9. The 3UBC Transaction
a. The Various Agreements
By purchase and sale agreement dated December 31, 1987, LBC sold 3UBC, but not the land underlying 3UBC (the 3UBC land), to Holme, Roberts & Owen (hro), a partnership that was engaged in the practice of law and that served as the Bank's legal counsel during the years in issue (the 3UBC sale agreement). The purchase price of $15,957,648 was paid by a note that was nonrecourse to the partners of HRO; however, the note was secured by a deed of trust to 3UBC and an irrevocable letter of credit in the amount of $2.4 million.
By an agreement dated December 31, 1987, LBC leased the 3UBC land to HRO for a term commencing on December 31, 1987, and running for 34 years and 9 months (the 3UBC ground lease). For the period through September 30, 2012, the annual rent was $25,000 plus 30 percent of any net rental income generated by 3UBC in excess of $2.5 million. After September 30, 2012, the rent was to be at fair market value. Pursuant to the 3UBC ground lease, LBC and HRO granted to each other certain reciprocal easements pertaining to the ingress and egress of pedestrians through common areas, including the Atrium. Also, LBC agreed to operate the Atrium in an attractive and orderly manner and to refrain from substantially modifying the exterior design of the Atrium. In the event that the Atrium was materially damaged, destroyed by fire or other casualty, or taken by condemnation, LBC had the option to rebuild, replace, repair, or raze the Atrium. If LBC elected to raze the Atrium, LBC was required to cover the area with an attractive surface until rebuilding (if any) and to grant HRO a 40-foot setback easement on the south side of the 3UBC land.
By an agreement dated December 31, 1987, UBD leased back the entirety of 3UBC from HRO (the 3UBC space lease). The 3UBC space lease had an initial term of 9 years and 6 months and automatically renewed for a second term running until September 30, 2012, unless UBD elected otherwise. The rent was $2,070,000 a year during the initial term and $2,333,452 a year during the second term. The 3UBC space lease required that UBD pay all expenses and taxes, maintain and repair the building, insure the building, and replace the building if destroyed.
On December 31, 1987, LBC assumed HRO's lease of approximately 122,000 square feet of space in 2UBC and subleased to HRO approximately 130,000 square feet of space in 1UBC.
The 3UBC sale agreement, the 3UBC ground lease, the 3UBC space lease, the agreements relating to HRO's lease in 2UBC and sublease in 1UBC, and related agreements shall be referred to