SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report: February 21, 1997
APPLE RESIDENTIAL INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 333-10635 54-1816010
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
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APPLE RESIDENTIAL INCOME TRUST, INC.
FORM 8-K
Index
Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report
(Mill Crossing Apartments)*
Historical Statement of Income and
Direct Operating Expenses*
(Mill Crossing Apartments)
Note to Historical Statement of
Income and Direct Operating
Expenses (Mill Crossing Apartments)*
b. Pro Forma Balance Sheet as of
December 31, 1996 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1996
(unaudited)*
c. Exhibits
10.1 Purchase Contract for Mill Crossing Apartments
10.2 Modification to Purchase Contract for Mill
Crossing Apartments
10.3 Property Management Agreement for Mill Crossing
Apartments
23.1 Consent of Independent Auditors*
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* To be filed by amendment.
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Item 2. Acquisition or Disposition of Assets
MILL CROSSING APARTMENTS
Arlington, Texas
On February 21, 1997, effective January 1, 1997, the Company purchased
the Mill Crossing Apartments a 184-unit apartment complex having an address of
2713 North Collins, Arlington, Texas (the "Property").
The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $4,544,121, which was paid entirely in cash
using proceeds from the sale of Shares. Title to the Property was conveyed to
the Company by limited warranty deed.
Location. The Property is located in the city of Arlington, which is
located between Dallas and Fort Worth. Arlington is approximately 13 miles east
of the Fort Worth Central Business District and approximately 20 miles west of
the Dallas Central Business District.
The Dallas/Fort Worth Consolidated Metropolitan Statistical area is
know locally as "the Metroplex." The Dallas/Fort Worth Metroplex is in the
north-central part of Texas and is composed of nine counties. The 1996
population of the Metroplex was approximately 4,400,000. Dallas is the second
largest city in the state, behind Houston.
The economy of the Dallas/Forth Worth area is complex and diversified.
Key economic factors include a large manufacturing base (including as products
military hardware, electronics, automobiles, industrial equipment, oil-field
parts, food products and chemicals), banking, insurance services,
communications, oil and gas production and air transportation. Major employers
in the area include Texas Instruments, Southwestern Bell, General Motors, J. C.
Penney, NationsBank and Vought Aircraft Company.
The Metroplex is also an established transportation center for the
nation. The Dallas/Fort Worth International Airport occupies approximately
17,800 acres of land between the two cities. It is the largest commercial
airport in the United States in terms of land area, and is the fourth busiest
airport in the world, with 1,700 daily arrivals and departures.
The area also has a well-established system of interstate highways and
supporting secondary routes. The Metroplex is located at the hub of Interstates
35, 45, 20 and 30. Two outer
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loops, Interstate 635 in Dallas and Interstate 820 in Forth Worth, surround the
respective cities.
The many institutions of higher learning in the area include Southern
Methodist University, the University of Texas at Dallas, the University of Texas
at Arlington, the University of North Texas, and Texas Christian University.
Owing in large part to its location between Dallas and Fort Worth,
Arlington has become a focus of business development in the area. Major
employers include General Motors, National Semiconductor, Johnson & Johnson,
Doskocil Manufacturing Company and Arlington Memorial Hospital. The area is also
the site of several large warehousing and distribution companies whose primary
market is the Metroplex.
The University of Texas at Arlington has an enrollment of approximately
23,000 students. Arlington also serves as a major medical center for its own
population and for residents of outlying communities as well. Arlington Memorial
Hospital has a staff of approximately 1,680 and HCA South Arlington Medical
Center has approximately 640 employees, making both of them among the largest
employers in the city.
The immediate area surrounding the Property consists of other
multifamily housing, residential, commercial and retail development. The
Property is conveniently located near restaurants, businesses, schools and
churches, and is readily accessible from Interstate 20 and Interstate 30.
Description of the Property. The Property consists of 184 garden-style
apartment units in 14 two-story buildings on approximately 8 acres of land. The
Property was built in 1979.
The Company believes that the Property has generally been well
maintained and is generally in good condition. However, the Company has budgeted
approximately $184,000 for repairs and improvements, including painting,
clubhouse renovations and parking lot repair.
The Property offers several different unit types. The unit mix and
rents currently being charged new tenants as of January, 1997 are as follows:
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Approximate
Interior
Square Monthly
Quantity Type Footage Rental
-------- ---- ------- ------
24 Efficiency 452 $349
24 One bedroom/one bath 553 384
downstairs
24 One bedroom/one bath 553 394
upstairs
24 One bedroom/one bath 652 410
downstairs
24 One bedroom/one bath 652 425
upstairs
24 Two bedrooms/two baths 860 545
downstairs
24 Two bedrooms/two baths 860 555
upstairs
8 Two bedrooms/two baths 1,075 625
downstairs
8 Two bedrooms/two baths 1,075 635
upstairs
The apartments provide a combined total of approximately 127,000 square
feet of net rentable area.
Leases at the Property are generally for terms of one year or less.
Average rental rates of the past five years have generally increased. As an
example, a one bedroom, one bath apartment rented for $351 in 1992, $360 in
1993, $380 in 1994, $385 in 1995, and $395 in 1996. The average effective annual
rental per square foot at the Property for 1992, 1993, 1994, 1995 and 1996 was
$6.77, $6.95, $7.33, $7.43 and $7.62, respectively.
The buildings are wood frame construction with a combination of brick
veneer and masonite hardboard exteriors on reinforced concrete slab foundations.
Roofs are sloped fiberglass shingles over plywood.
The Property has an outdoor swimming pool, clubhouse with leasing
office, and two laundry facilities. There is ample paved parking for the
tenants.
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Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up, miniblinds and an individually controlled heating and air conditioning
unit. Each kitchen is equipped with a refrigerator/freezer, electric range and
oven, dishwasher, microwave and garbage disposal. Certain units also feature a
woodburning fireplace, bookshelves or vaulted ceilings, and all two-bedroom
units have washer/dryer connections for full-sized appliances. The owner of the
Property pays for cold water, natural gas for hot water, sewer service and trash
removal. Tenants pay for their electricity usage, which includes cooking,
lighting, heating and air conditioning.
There are at least six apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are higher
when compared with those at the Property. Based on a recent telephone survey,
the Advisor estimates that occupancy in nearby competing properties now averages
approximately 96%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 92% in 1992, 93% in 1993, 94% in 1994, 93%
in 1995 and 94% in 1996. On February 28, 1997, the Property was 95% occupied.
The tenants are a mix of white-collar and blue-collar workers.
The following table sets forth the 1996 real estate tax information on
the Property:
Jurisdiction Assessed Value Tax Rate Tax
- ------------ -------------- -------- ---
County of Tarrant $3,600,000 $1.90619 $68,623
City of Arlington 3,600,000 0.64000 23,040
Total $91,663
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $2,990,160) will be depreciated over a
27.5 years on a straight-line basis. The basis of the personal property portion
will be depreciated in accordance with the modified accelerated cost recovery
system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.
The Advisor and the Company believe that the Property is and will
continue to be adequately covered by property and liability insurance.
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Material Factors Considered in Assessing the Property. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. The Dallas/Fort Worth area generally and the specific area in which the
Property is located were perceived as being characterized by a diverse,
stable and steadily growing economy. Accordingly, it was believed that
such economy and its anticipated growth and development would support
stable occupancy rates and reasonable increases in rents at the
Property.
2. Based upon an engineering report and its own inspections, the Advisor
believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs
and improvements to be made will allow an increase in rents at the
Property.
3. The Property is strategically located between Dallas and
Fort Worth. In addition, the City of Arlington has become a
popular location for new business development, owning in
part to its location between the two larger cities and its
close proximity to Dallas/Forth Worth International Airport.
The Advisor and the Company believe that this location for
the Property will continue to appeal to workers in the area,
which will support stable occupancy rates.
Acquisition and Management Services and Fees. In consideration of
services rendered to the Company in connection with the selection and
acquisition of the Property, the Company paid Apple Realty Group, Inc. a
property acquisition fee equal to 2% of the purchase price of the Property, or
$90,882. Apple Residential Management Group, Inc. will serve as property manager
for the Property and for its service will be paid by the Company a monthly
management fee equal to 5% of the gross revenues of the Property plus
reimbursement of certain expenses.
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ITEM 7.a.*
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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ITEM 7.b.*
* To be filed by amendment. It is impracticable to include herein the required
pro forma financial information. The required pro forma financial information
will be filed as an amendment to this report as soon as possible, but in no
event more than 60 days after the date of filing of this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Apple Residential Income Trust, Inc.
Date: March 10, 1997 By: /s/ GLADE M. KNIGHT
-------------------------------------
Glade M. Knight
President
of Apple Residential
Income Trust, Inc.
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EXHIBIT INDEX
Apple Residential Income Trust, Inc.
Form 8-K dated February 21, 1997
Exhibit Number Exhibit Page Number
10.1 Purchase Contract for
Mill Crossing Apartments
10.2 Modification to Purchase Contract for Mill
Crossing Apartments
10.3 Property Management Agreement
for Mill Crossing Apartments
23.1 Consent of Independent Auditors*
* To be filed by amendment.
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EXHIBIT 10.1
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 12th day of December 1996 (the
Effective Date"), between CORNERSTONE REALTY GROUP, INC. or its nominee,
(hereinafter called "Purchaser") and MILL CROSSING GREENERY LLP, a Texas
Limited Liability Partnership, (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 Sale of Property. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as MILLCROSS APARTMENTS located
in ARLINGTON, TX, with all buildings and improvements located thereon, as more
particularly described in the attached legal description in EXHIBIT A including,
but not limited to 184 individually heated and air conditioned apartment units,
with all appurtenances, together with all appliances, drapes, carpeting,
shrubbery and all other personal property used in connection with the premises,
including, the inventory of personal property to be supplied by Seller and
attached hereto as EXHIBIT B (all such real and personal property hereinafter
collectively referred to as the "Property" unless the context clearly indicates
otherwise).
ARTICLE III
PAYMENT OF PURCHASE PRICE
2.1 Purchase Price. The total purchase price shall be FOUR MILLION
FOUR HUNDRED FIFTY THOUSAND ($4,450,000) DOLLARS as evidenced by cash or cash
equivalent at closing.
2.2 Deposit. TWENTY FIVE THOUSAND ($25,000) DOLLARS to be placed in
escrow upon full execution of this contract. Said deposit shall be placed in
escrow with Commonwealth Land Title Insurance Corporation or its authorized
agent (the "Title Company") as an earnest money deposit which may be credited
against the purchase price or applied as per Article XI below.
2.3 Independent Contract Consideration. Purchaser shall, concurrently
with its execution hereof, deliver to Seller a check in the amount of FIFTY
($50) DOLLARS (the "Independent Contract Consideration"), which amount Seller
and Purchaser agree has been bargained for as consideration for Seller's
execution and delivery of this Contract and Purchaser's right to inspect the
Property. The Independent Contract Consideration is in addition to and
independent of any other consideration or payment provided for
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in this Contract and is non-refundable in all events.
ARTICLE III
TITLE MATTERS
3.1 Title. Seller, shall convey good and indefeasible title by Special
Warranty Deed, subject only to general taxes for the current year not yet due
and payable and utility easements which do not interfere with the present use of
the Property, and the "Permitted Exceptions". "Permitted Exceptions" are those
title exceptions listed in the title commitment, which are not objected to
pursuant to section 3.2 below.
(A) Title shall be free from any and all liens or mortgages and
Seller shall be responsible for any prepayment penalties necessary to
deliver such free title.
3.2 Title Defects; Election to Cure. Seller shall furnish to Purchaser
at Seller's expense a commitment for Title Insurance from the Title Company,
(the "Commitment or the "Title Report") within ten (10) days after the Effective
Date, covering the Property binding the Title Company to issue a Texas Owner
Policy of Title Insurance (the "Title Policy") on the standard form prescribed
by the Texas State Board of Insurance at the Closing, in the full amount of the
Purchase Price, insuring Purchaser's fee simple title to the Property to be good
and indefeasible, together with true and correct copies of all instruments
listed on Schedule B to the Commitment (as well as any other documents or
instruments listed therein which will not be released at closing). If the title
commitment shows such exceptions, which are not acceptable to Purchaser in
Purchaser's sole discretion, Purchaser shall give written notice of such defects
in title to Seller's counsel during the Inspection Period. Seller may, at its
option, elect whether to cure said defects or by written notice to Purchaser
indicate its intention not to cure.
3.3 Election Not to Cure Defects. Should Seller elect not to cure
title defects, this Agreement, at Purchaser's option (exercised within (5) days
of the notice by Seller that it will not cure the objections), shall be void;
each party shall thereupon be released from all obligations hereunder; and all
deposits shall be immediately returned to Purchaser.
3.4 Survey. As soon as reasonably possible, and in any event within
ten (10) days after the Effective Date, Seller shall, at Seller's expense,
deliver or cause to be delivered to the Seller, the Title Company, and to
Purchaser a current or updated on-the-ground perimeter survey (the "Survey") of
the Property prepared by a Registered Professional Land Surveyor reasonably
acceptable to the Purchaser. The Survey shall show the location and size of all
of the following on or on adjacent to the Property, if
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any:
buildings, buildings lines, improvements, streets, pavements,
easements, rights-of-way, protrusions, encroachments, fences,
100-year flood plain, apparent public utilities, and recording
information of easements.
The Survey shall show the gross land area and the Net Land Area. The
Survey shall be in a form and of a date acceptable to Purchaser and to the Title
Company, and in acceptable form in order to allow the Title Company to delete
the survey exception from the Title Policy. The term "Net Land Area" means the
gross land area of the Property less the land area included in utility
easements, drainage easements, ingress/egress easements, rights-of-way, 100-year
flood plain and encroachments on or across the Property. The area within the
100-year flood plain shall be as defined by the Federal Emergency Management
Agency or other applicable governmental authority.
3.5 The Survey shall show no encroachments onto the Land from any
adjacent property and no violation of or encroachments upon any recorded
building lines, restrictions or easements affecting the Property. If the Survey
discloses any such encroachment or violation, Seller shall have thirty (30) days
from the date of delivery of the Survey (with a commensurate extension of the
closing date) to have the Title Insurer issue its endorsement insuring against
damage caused by such encroachment or violation and to provide evidence thereof
to Purchaser, and if Seller fails to or is unable to have the same insured
against within such thirty (30) day period, Purchaser may elect, or on before
the expiration of the Inspection Period, to (i) terminate this Agreement (in
which case the Earnest Money shall be returned to Purchaser) and neither party
shall have any further liability or obligation to the other hereunder, or (ii)
accept the property subject to any such encroachment or violation, as "Permitted
Exceptions".
3.6 Purchaser agrees to deliver to Seller, within the Inspection
Period, notice as to which items on the title report or the Survey are
objectionable.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following shall be prorated,
on a calendar-month basis, to the 1st day of the month of the closing: rents
and other income from the Property; operating expenses (on such service
contracts and other obligations as Purchaser may agree to assume); and general
and real property 3
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taxes and personal and business property taxes for the year of closing (based
on the most recent assessment and the most recent levy).
4.2 Closing Costs. Purchaser and Seller shall pay their customary
share of all taxes, recording fees, if any, imposed on the Deed, or any other
documents executed in connection with the transfer of the Property. Seller
agrees to pay cost of title insurance. Seller shall pay any prepayment penalty
charged by the holders of any existing notes.
4.3 Allocation of Rents. Rents collected by Seller prior to Closing
shall be prorated as agreed in 4.1 above. Purchaser shall apply rents received
after Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 Prior Lease Concessions. Seller shall pay to Purchaser, in a lump
sum at closing, all future monetary concessions which Seller has given to
tenants under leases existing at the time of closing.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 Possession. Possession of the Property shall be delivered to
Purchaser at closing, subject to the rights of the tenants under existing leases
and rental agreements.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions Precedent. Purchaser's obligation to purchase shall be
subject and contingent upon the satisfaction of the following conditions
precedent:
(A) Receipt by Purchaser of an engineering report of building
and site conditions, satisfactory to Purchaser in its sole discretion,
said report to include in part, a description of any hazardous waste
sites, hazardous wastes and/or hazardous materials affecting the
property. Purchaser shall have fifteen (15) days in which to review the
reports set forth herein and exercise its right to reject the Property
based thereon or the right hereunder shall be deemed waived.
(B) The receipt by Purchaser of Seller documents
described in 7.2 below.
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(C) On the condition that Sellers representations and
warranties described in Article VIII below remain true and correct.
(D) On the condition that there have been no material or
adverse changes to the property or leases.
(E) Seller acknowledges that Purchaser is a public entity and
that it is required to furnish financial statements to the Securities
and Exchange Commission in connection with this acquisition. Seller
agrees to make the information available for Purchaser to audit the last
12 months of operation of the Property so that a report can be generated
that is in compliance with accounting Regulation S-X of the Securities
and Exchange Commission.
(F) Purchaser determining during the Inspection Period that all
water, sewer, gas, electric, telephone, and drainage facilities and all
other utilities required by law or by the normal use and operation of
the Property are and at the time of closing will be installed to the
property line, are and at the time of closing will be connected pursuant
to valid permits, and are and at the time of closing will be adequate to
service the Property and to permit full compliance with all requirements
of law and normal usage of the Property by the tenants thereof and their
licensees and invitees.
6.2 Inspection. This Agreement shall be further subject to and
contingent upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 Preparation for Inspection. At the execution of this Agreement,
Seller shall deliver to Purchaser copies of the following: The current rent
roll for the Property; detailed statements of income and expenses with respect
to the Property for the past two years; the most recent tax bills for the
Property; utility bills for the Property for the twelve (12) months previous to
the date hereof; all contract, mortgages, and other documents creating liens of
security interest on the Property, or any part thereof and all promissory notes
secured thereby; all insurance policies applicable to the property to include
loss runs for the last five (5) years; Plans and Specifications for the
Property, service contracts, Certificates of Occupancy, to the extent reasonably
available; a copy of title policy (together with true and correct copies of the
instruments listed thereon which evidence exceptions to title, except those
which will be released at and as a condition of
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closing) and most recent survey for the Property. A copy of any environmental
or engineering reports on the property. All these items shall be certified by
Seller to be accurate and complete to the best of its knowledge and belief.
6.2.2 Inspection of Books and Records; Access. Purchaser, its
employees, agents and contractors shall have thirty (30) days (the "Inspection
Period"), to enter upon the Property (subject to the rights of the tenants)
during normal business hours for the purpose of making physical inspections
thereof, including but not limited to roofs, heating, cooling, electrical and
plumbing systems, swimming pools, appliances, and structural elements of the
buildings. Upon the conclusion of the Inspection Period this contract shall be
deemed to be a firm agreement of purchase and sale binding the parties hereto,
except as it may be terminated prior to the end of the Inspection Period and
subject to the other provisions and conditions contained herein, including but
not limited to the condition imposed by Paragraph 6.1(A) above. The Inspection
Period shall be extended by one (1) day for each day beyond ten (10) days from
the Effective Date delivery of the Survey and title commitment are delayed.
6.2.3 Right of Termination During Inspection Period. Purchaser shall
also be permitted to review all original leases, expense records, tenant cards
and occupancy data available. If Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller before the end of
the Inspection Period, and not party hereto shall have any further liability to
any other party hereto, and all deposits shall be returned to Purchaser.
6.2.4 "Rent Ready". During the Inspection Period, both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree that
said apartment shall be representative of a "rent ready" unit by which all other
units shall be judged for "rent ready" condition at closing. All vacant
apartment units, are to be in a "rent ready" condition (as defined above), at
the time of closing, containing, but not limited to the following amenities,
i.e., carpet, refrigerator, range, garbage disposal, heating, plumbing and
electrical systems.
6.2.5 Condition of Personal Property at Closing. All personal property
included in the sale and all mechanical, electrical heating, air conditioning,
sewer, water and plumbing systems will be in the same working order at the time
of closing and in the same condition as at the time of the initial inspection by
Purchaser. If Seller fails to make reasonable efforts to
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conserve the property, Purchaser shall have the option of waiving such
requirement, in writing, and proceeding to closing, or Purchaser may
void this Agreement and obtain a prompt return of its deposit.
<PAGE>
ARTICLE VII
CLOSING
7.1 Closing. Closing will be held on or about seven (7) days after the
completion of the Inspection Period, at such place and at such time as the
parties may agree.
7.2 Seller's Deliveries. At closing, Seller shall execute and deliver
to Purchaser the General Warranty Deed referred to in Paragraph 3 hereof and
shall also execute, where necessary, and deliver to Purchaser, the following in
a form reasonably acceptable to Purchaser:
(A) A Bill of Sale, with special warranty of title transferring
the personal property (as shown in Schedule B) to Purchaser free of all
liens, charges and encumbrances.
(B) The Title Policy issued by the underwriter for the Title
Company pursuant to the Title Commitment, subject only to the Permitted
Exceptions, in the full amount of the Purchase Price, dated as of the
date of Closing.
(C) Originals or copies of all signed leases and rental
agreements in effect with tenants of the Property not for more than one
(1) year.
(D) All security and cleaning deposits made by such tenants.
Seller will give the tenants the required notice of such transfer in
compliance with the laws of TEXAS.
(E) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating
to unrecorded mechanic's and materialmen's liens.
(F) A rent roll certified by Seller to be true and correct as
of the date of closing showing the name of, and the amount of monthly
rental payable, by each tenant of the Property, the apartment occupied
by the tenant, the date to which rent has been paid, any advance payment
of rent, and the amount of any escrow, or security deposit of tenant.
(G) An affidavit of Seller that to the best of its information
and belief there are, on the date of closing, no unsatisfied judgments,
creditor's claims other than in the course of business, tax liens, or
pending bankruptcies involving Seller.
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(H) Seller shall provide, a certificate from a licensed
extermination contractor, who is regularly engaged in the business of
pest control, that all buildings are free from any termite or other
wood-boring insect infestation. Said certificate shall be dated within
90 days of closing, bearing the Contractor's name, contractors license
number, the signature of the party authorized to sign for the
Contractors and the date of the inspection. Should damage exist, Seller
may, but shall not be obligated to proceed to have any corrective work
completed prior to closing. If Seller does not make the repairs prior
to closing, Purchaser, at its option, may either proceed to settlement
and have such sums required for repairs deducted from Seller's proceeds,
or may in its sole discretion terminate this Agreement. Seller shall
promptly return Purchaser's deposit upon such termination.
(I) Assignments of all Seller's interest in the following: (a)
all assignable licenses, and permits relating to the operation of the
Property, (2) the leases and rental agreements with tenants of the
Property, (3) the existing Property telephone number and (4) the
business and trade name as set forth in Par. 1.1.
(J) Assignments without recourse of all warranties and
guarantees to the extent such are still in effect and provide Purchaser
with copies of all such warranties and guarantees without limitation for
all appliances, dishwashers, disposals, refrigerators, heating and air
conditioning units, washers and dryers.
(K) Consent of the Seller's authorized officer to the sale of
the Property and any other approvals required under Seller's articles,
by-laws or other organizational documents, which may affect Seller's
ability to convey marketable title.
(L) Provide documents for the transfer of the telephone,
electric, water and sewer, and gas utilities, as may be required by the
utility, for execution at closing.
(M) Satisfactory evidence of the power and authority of Seller
to enter into and consummate this agreement, including but not limited
to:
(i) An opinion of Seller's counsel, in a form
reasonably satisfactory to Purchaser, stating that:
(a) The individual(s) executing the deed and related
documents are duly authorized to do all such acts as are
necessary to consummate this sale, without further consent
of any other party.
(b) That the partner or officer can bind the
Partnership or Corporation.
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(N) Affidavit that Seller has received no notice of the
presence of asbestos and/or any other hazardous material at the
Property.
(O) Seller shall provide a satisfactory and valid written
termination of the management agreement executed by the existing
management and rental agent for the Property, without cost to the
Purchaser.
(P) A notice letter to all the residents of the apartment
complex as to change of ownership in the form prepared by the Purchaser.
(Q) All such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Purchaser or its counsel.
(R) A representation letter as normally required by auditors
for a public company in the form attached hereto as EXHIBIT C. This
clause shall survive closing for one year.
(S) Closing Memorandum and Indemnification Agreement in the
form attached hereto as EXHIBIT D.
7.3 Purchaser's Deliveries. At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price,
adjusted for the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under leases, securities,
any contracts which may be accepted by the Purchaser and any other obligations
specifically set forth herein.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and delivered by the
Purchaser and is a valid and binding agreement of Purchaser, and
(ii) Purchaser has complete unrestricted power to buy the Property from the
Seller and to execute any documents required to effectuate the transfer.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations of the Parties. Seller warrants
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(which warranties shall not survive settlement unless designated to the
contrary) that as of the date hereof and as of closing hereof:
(A) That Seller, is the owner in fee simple of the Property and
has the power to convey same.
(B) That Seller is not subject to any other agreements or
arrangements, with the exception of those contained in an existing
mortgage documents which would prevent Seller from selling the Property
to Purchaser. This warranty shall survive for one year following
closing.
(C) All necessary action has been taken by Seller to authorize
the execution of this Agreement and the performance of the obligations
contemplated hereunder, which are not excluded elsewhere in existing
mortgage documents. This warranty shall survive for one year following
closing.
(D) Seller has not actual knowledge and has not been advised in
writing that it is in default under any lease, rental agreement service
or equipment contract, or mortgage or other encumbrances relating to the
Property. This warranty shall survive for one year following closing.
(E) Seller has no actual knowledge of any patent or latent
defect in the Property or any part thereof. This warranty shall survive
for one year following closing.
(F) Seller has no actual knowledge of any existing or
threatened litigation which relates to or which would affect the
Property. This warranty shall survive for one year following closing.
(G) The Property abuts on and has direct vehicular access to a
public road.
(H) All building and other improvements at the Property are
located entirely within the boundary lines of the Property.
(I) Seller has no actual knowledge that any part of the
Property or the operation of the Property, is in violation or may
violate any governmental statute, regulation, ordinance or building code
or of any private restriction, that any governmental requires any work
to be done on or affecting the Property, or that any governmental
authority has expressed an intent to condemn or to make special
improvements for the benefit of the Property or any part thereof. This
warranty shall survive for one year following closing.
(J) That to the best knowledge of the Seller, the drainage
within the project is satisfactory and complies in all
10
<PAGE>
respects with all government regulation. This warranty shall survive for
one year following closing.
(K) That Seller is not a "foreign person" within the meaning of
the Internal Revenue Code of 1954, as amended (the "Code"), and that
Seller will furnish to Purchaser prior to closing an affidavit in form
satisfactory to Purchaser confirming the same.
(L) That to the best of Seller's knowledge, the Property was
never utilized as a disposal site for hazardous waste products and will
furnish to Purchaser an affidavit confirming same.
(M) Seller covenants and agrees that, between this date and the
date of closing, Seller shall continue to maintain, operate and manage
the Property in a manner consistent with its prior practices, making
every reasonable effort to do nothing which might damage the reputation
of the Property or the relationships with the tenants. Seller shall not
permit the modification, extension or cancellation of any tenant lease
(except in accordance with the terms of such lease) or any dealing
with any tenant other than the ordinary course of managing the Property,
without the prior written consent of Purchaser. If the leases of any
tenants expire before thirty (30) days after the date of closing, Seller
shall, up to the date of closing and without cost to the Purchaser,
continue its normal course of operation with respect to causing tenants
to be obtained for apartments which are unrented.
8.2 Continuation of Representations, Warranties and Covenants to the
Date of Closing. If each of the warranties set forth in this section does not
remain true up to and including the time of closing as to any material matters,
this Agreement, at Purchaser's election, shall be terminated, Seller shall
return all payments made by Purchaser, or Purchaser may elect to close the sale
and waive failure of the warranties.
8.3 Breach of Representations, Warranties and Covenants.
Notwithstanding the provisions of 8.2 above, Seller shall indemnify Purchaser
for all reasonable costs incurred as a result of the failure of any of Seller's
representations, warranties or covenants contained herein to remain true as of
the date of closing.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 Property Damage. If, prior to closing, any part of the Property is
damaged by fire or other casualty, Seller shall repair such damage before the
date provided herein for closing. If such damage cannot be repaired by such
time, this Agreement may be canceled at the option of the Purchaser. In the
event of cancellation as aforesaid, this Agreement shall become null and
11
<PAGE>
void and the parties shall be released and all payments made shall be returned.
Should Purchaser elect to carry out this Agreement despite such damage Seller
shall assign to Purchaser all insurance proceeds and any deductible arising
from such damage and will compensate Purchaser for lost rent collections to the
extent of insurance proceeds received. Seller shall promptly notify Purchaser
in writing upon the occurrence of any such damage.
9.2 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any actual
or proposed sale in lieu thereof, the Seller shall give written notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property (any part of the building or more than
5% of the parking area), Purchaser may elect to either (a) terminate this
Agreement, in which event the Deposit shall be immediately returned to Purchaser
and all other rights and obligations of the parties hereunder shall terminate
immediately, or (b) to waive its right to terminate this Agreement and proceed
to closing, in which event all proceeds, awards and other payments arising out
of such condemnation or sale (actual or threatened) shall be paid to the
Purchaser at closing, if such payment has been received or Seller shall assign
to Purchaser the rights to such payments.
9.3 Risk of Loss. Prior to closing, all risks of loss or damage by every
casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 Commission. Seller agrees to pay a brokerage fee, if any,
pursuant to a separate agreement. Said brokerage fee shall be deemed earned if,
and only if, settlement occurs hereunder, and shall not be deemed earned even if
Purchaser and/or Seller wrongfully fail(s) to consummate the purchase and sale
herein contemplated. Seller and Purchaser represent and warrant to each other
that no other brokerage fees are or shall be owing in connection with this
transaction or in any way with the Apartments and Seller and Purchaser hereby
indemnify and hold the other harmless from any and all claims of any other
person so claiming.
ARTICLE XI
DEFAULT
11.1 Default Defined. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event or default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
12
<PAGE>
11.2 Seller's Default. Upon Seller's default, the Purchaser, at it's
election, may either (1) require specific performance of Seller, or pursue its
other remedies at law or equity, (2) cancel this Agreement and obtain a prompt
return of the deposit, in which case this Agreement shall be terminated and the
parties released from all obligations hereunder, or (3) the Purchaser may waive
such defaults and proceed to settlement. Seller shall indemnify Purchaser for
any reasonable costs incurred by Purchaser if Purchaser elects to pursue its
option (1) noted above, to include reasonable attorney fees.
11.3 Purchaser's Default. Upon Purchaser's default, this Agreement
shall be terminated and both parties released from all obligations hereunder,
and the deposit shall be retained by the Seller as liquidated damages. Seller
shall have no other remedy against Purchaser in the event of Purchaser's
default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement sets forth the entire
understanding between the parties; it supersedes all previous agreements and
representations which are deemed merged herein and may not be modified except in
writing.
12.2 Assignment. Purchaser may assign this Agreement without the
consent of Seller.
12.3 Severability. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 Binding Effect. The parties to the Agreement mutually agree that
it shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 Controlling Law. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State set forth in Par. 1.1.
12.6 Counterparts. To facilitate execution, this Agreement maybe
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear in each counterpart
hereof, and it shall be sufficient that the signature on behalf of both parties
hereto appear on one or more such counterparts. All counterparts
13
<PAGE>
shall collectively constitute a single contract.
12.7 Incorporation by Reference. All of the Exhibits referred to
herein and/or attached hereto shall be deemed to constitute a part of the
Agreement.
12.8 Headings. The headings of the Articles and sections hereof are
inserted for convenience only and shall not be deemed to constitute a part of
the Agreement.
12.9 Construction of Contract. Each party hereto have reviewed and
revised (or requested revisions of) this Agreement, and therefore the normal
rule of construction that any ambiguities are to be resolved against a
particular party shall not be applicable in the construction and interpretation
of this Contract or any amendments or exhibits hereto.
ARTICLE XIII
NOTICE
13.1 Notice. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: Mill Crossing Greenway LLP
With a copy to
Seller's Attorneys:
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
With a copy to
Purchaser's Attorneys: Harry S. Taubenfield, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
14
<PAGE>
-and
Robert E. Morrison, Esq.
Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, TX 75201
Fax: (214) 999-6170
13.2 Delivery of Notice. Notices sent either by Registered or
Certified Mail, Return Receipt Requested, or by overnight express mail shall be
deemed given when deposited in the United States Mail, postage prepaid, or
delivered to a reliable overnight courier or by fax. Notices sent in any other
manner shall be deemed given only when actually delivered at the specified
address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
MILL CROSSING GREENWAY LLP
By: TEXAS GREENWAY INC.
General Partner
By: /s/ Robert S. Green
--------------------------
Robert S. Green
Its: President
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S.J. Olander
----------------------------
Its: SENIOR VICE PRESIDENT
----------------------------
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
MILL CROSSING
FIELD NOTE DESCRIPTION
BEING 7.93 acres of land located in the L. W. Holt Survey, Abstract No. 811, and
the John Langley Survey, Abstract No. 978, Tarrant County, Texas and being a
portion of the 286.32 acre tract of land conveyed to Henry S. Miller Company,
Trustee, by deed recorded in Volume 5499, Page 360 of the Deed Records of
Tarrant County, Texas, and is now known as Lot 2, Block A, River Bend, an
addition to the City of Arlington, Tarrant County, Texas, according to the plat
recorded in Volume 388-121, Page 69, Plat Records, Tarrant County, Texas, said
7.93 acres of land being more particularly described as follows:
BEGINNING at an iron rod found at the Northwest corner of said Lot 2, Block A,
said iron rod also being on the East line of a 10 foot right-of-way dedication
(F.M. Highway 157) as per plat thereof;
THENCE, South 77 degrees 30 minutes East along the platted Northerly line of
said Lot 2, 305.0 feet to a cut cross found at an angle point;
THENCE, North 32 degrees 45 minutes East along a Northwesterly line of said Lot
2, 320.0 feet to an iron rod found for a corner;
THENCE, North 88 degrees 56 minutes 27 seconds East, along the Northerly line
of said Lot 2 448.0 feet an iron rod found on the platted west right-of-way of
Furrs Street (60' width);
THENCE, along the platted west right-of-way of said Furrs Street the following
three calls:
1. South 32 degrees 45 minutes West, 346.11 feet to an iron rod found at
the point of curvature of a curve to the left, having a central angle of
20 degrees 15 minutes, a radius of 1030.0 feet and being subtended by
chord bearing South 22 degrees 37 minutes 30 seconds West, 362.14 feet;
2. THENCE, along said curve to the left an arc distance of 364.03 feet to a
cut cross found at the point of tangency of said curve;
3. South 12 degrees 30 minutes West, 23.80 feet to an iron rod set for a
corner;
THENCE, North 77 degrees 30 minutes West, along the South line of said Lot 2,
680.0 feet, to an iron rod found on the East line of said 10 foot wide right-of-
way dedication (F.M. Highway 157);
THENCE, North 14 degrees 49 minutes 40 seconds East, along said east line of
said 10 foot wide right-of-way dedication (F.M. Highway No. 157) 300.0 feet to
the POINT OF BEGINNING, CONTAINING 7.93 Acres of Land, more or less.
Updated November 26, 1991.
21
<PAGE>
EXHIBIT "C"
L.P. Martin & Company, P.C.
4132 Innslake Drive
Glen Allen, VA 23060
In connection with our audit of the statement of income and direct operating
expenses of Apartments for the twelve month period ended
for the purpose of expressing an opinion as to whether the financial statement
presents fairly, in all material respects, the results of operations of
Apartments, in conformity with generally accepted accounting principles, we
confirm, to the best of our knowledge and belief, the following representations
made to your during your audit.
1. We are responsible for the fair presentation of the statement of
operations in conformity with generally accepted accounting
principles.
2. We have made available to you all financial records and related data
and to our knowledge these records are the only accounting records
in existence for the above noted apartments.
3. There have been no:
a. Irregularities involving management or employees who have
significant roles in the internal control structure.
b. Irregularities involving other employees that could have a
material effect on the financial statements.
c. Communications from regulatory agencies concerning
noncompliance with, or deficiencies in financial reporting practices
that could have a material effect on the financial statements.
4. The following, if applicable, have been properly recorded in the
accounting records and/or disclosed to you.
a. Related party transactions and related accounts receivable
or payable, including sales, purchases, loans, transfers, leasing
arrangements, and guarantees.
b. Arrangements with financial institutions involving
compensating balances or other arrangements
<PAGE>
L.P. Martin & Company, P.C.
Page 2
involving restrictions on cash balances and line-of-credit or similar
arrangements.
5. There are no:
a. Violations or potential violations of laws or regulations
whose effect should be considered for disclosure in the financial
statements or as a basis for recording a loss contingency.
b. Other material liabilities or gain or loss contingencies
that are required to be accrued or disclosed by Statement of Financial
Accounting Standards No. 5.
6. We are not aware of any pending or threatened litigation, claims, or
assessments or unasserted claims or assessments that are required to
be accrued or disclosed in the financial statements in accordance
with Statement of Financial Accounting Standards No. 5, and we have
not consulted a lawyer concerning litigation, claims or assessments.
7. There are no material transactions that have not been properly
recorded in accounting records underlying the financial statements.
8. We have compiled with all aspects of contractual agreements that
would have a material effect on the financial statements in the
event of noncompliance.
9. We have identified all accounting estimates that could be material
to the financial statements, including the key factors and
significant assumptions underlying those estimates, and we believe
the estimates are reasonable in the circumstances.
10. No events have occurred subsequent to that would
require adjustment to, or disclosure in, the financial statements.
__________________________________ __________________________________
Signature Signature
__________________________________ __________________________________
Title Title
__________________________________ __________________________________
<PAGE>
EXHIBIT D
CLOSING MEMORANDUM AND INDEMNIFICATION AGREEMENT
THE STATE OF TEXAS ss
ss KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DALLAS ss
THIS CLOSING MEMORANDUM AND INDEMNIFICATION AGREEMENT (the "Agreement")
is entered into effective as of ____________________, 1996 (the "Closing
Date") by and between , a ("Seller") and____________
____________________, a __________________________("Purchaser").
In connection with and in consideration of the closing ("Closing") of
the trans- action contemplated under that certain Earnest Money Contract (the
"Contract") dated _________________ ___, 1996, by and between Seller and
Purchaser, covering that certain property more particularly described in the
Contract (the "Property"), Seller and Purchaser hereby agree as follows:
1. Proration Date. All prorations have been made as of the Closing
Date.
2. Operating Expenses. Except as otherwise provided in the Contract or
herein, any and all costs and expenses relating to the operation, management,
leasing or ownership of the Property for the period prior to the Closing Date,
including but not limited to, accounts and payments under service contracts,
utility charges and other costs required to be paid by the landlord under,
and/or with respect to, any leases for all or any portion of the Property and
commission agreements relating thereto are the responsibility of Seller and will
be paid by Seller promptly upon receipt of billing therefor, and Seller hereby
agrees to reimburse Purchaser for any loss, cost or expense relating to same.
Any and all costs and expenses relating to the operation, management, leasing or
ownership of the Property for the period from and after the Closing Date,
including, but not limited to, accounts and payments under service contracts,
utility charges and other costs required to be paid by the landlord under,
and/or with respect to, any leases for all or any portion of the Property are
the responsibility of Purchaser and will be paid by Purchaser promptly upon
receipt of billing therefor, and Purchaser agrees to reimburse Seller for, any
loss, cost or expense relating to same. To the extent not reflected in the
closing statements (the "Closing Statements") evidencing the transaction
contemplated under the Contract, Purchaser and Seller agree to adjust between
themselves outside of Closing any amounts which are the responsibility of the
other pursuant to this paragraph.
EXHIBIT D - Page 1 of 3
3. Earnest Money. Seller and Purchaser acknowledge the application of
the Earnest Money Deposit (as defined in the Contract) previously deposited with
the Title Company (as defined in the Contract) against the purchase price of the
Property as reflected in the Closing Statements.
4. Real Estate Taxes. All ad valorem and similar taxes and assessments
(the "taxes") relating to the Property for the current year were prorated
between Seller and Purchaser as reflected in the Closing Statements based upon
the best available estimates of the amount of taxes that will be due and payable
on the Property during the current year. At such time as the actual amount of
taxes against the Property for the current year is known, Seller and Purchaser
shall, if required, readjust the amount of taxes to be paid by each party
pursuant to this paragraph so that Seller shall pay for those taxes attributable
to the period of time occurring from and after the Closing Date.
5. Rents. All rents have been prorated as of the Closing Date to the
extent same have actually been collected by Seller. Seller shall pay to
Purchaser, Purchaser's pro rata share of any delinquent or unpaid rents
attributable to the Property which are paid to Seller after Closing and which
relate to the period after the Closing Date, and Purchaser shall pay to Seller,
Seller's pro rata share of said delinquent or unpaid rents attributable to the
Property relating to the period up to the Closing Date, which are paid by
tenants after Closing when received by Purchaser, once Purchaser has received
and been credited with all rents owed or owing to Purchaser. Seller and
Purchaser agree that all rent attributable to the Property received after
Closing shall be applied first to current rentals and then to delinquent rentals
(in inverse order of maturity).
6. Brokerage Commissions. Except as set forth in Section of the
Contract, Seller and Purchaser each hereby agree to reimburse the other for any
and all loss, cost or expense (including, without limitation, reasonable
attorneys' fees and costs) resulting from any claim for any fee, commission or
similar payment by any broker, agent, finder or realtor as a result of any
action of Seller or Purchaser, respec- tively, related to the origination,
negotiation, or consummation of the transactions contemplated by the Contract.
7. Errors or Omissions. Seller and Purchaser agree to adjust between
themselves after Closing any errors or omissions in the prorations or
adjustments set forth in the Closing Statements.
EXHIBIT D - Page 2 or 3
<PAGE>
8. Survival. This Agreement and the agreements and the provisions
contained herein shall survive Closing and the execution and delivery of any
documents in connection therewith subject, however, to the limitations set forth
in Article VII of the Contract, all of which are hereby incorporated into this
Agreement by this reference as if restated in their entirety. This instrument
may be executed in multiple counterparts, each of which shall be deemed an
original but together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed by Seller and
Purchaser as of (but not necessarily on) the day and year first above written.
SELLER:
By:
By:____________________________________
Name:__________________________________
Title:_________________________________
PURCHASER:
_______________________________________________
By:____________________________________
Name:
Title:
EXHIBIT D - Page 3 of 3
EXHIBIT 10.2
MODIFICATION TO PURCHASE CONTRACT
This Modification to Purchase Contract ("Modification") is made and
entered into this 6th day of February 1997 between Cornerstone Realty Group
Incorporated (Purchaser") and Mill Crossing, Limited ("Seller").
WHEREAS, Purchaser and Seller entered into an Agreement of Sale dated
the 12th day of December 1996 ("Agreement"); and
WHEREAS, Purchaser and Seller now desire to modify and amend the
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:
1. All terms not specifically defined herein shall have the same
meaning as ascribed to them in the Agreement.
2. Par. 2.2, Deposit, is hereby further amended (First Amendment dated
the 12th day of December 1996) to add to the existing paragraph the following:
"One Hundred Thousand ($100,000) Dollars upon the execution of
this modification to be placed in escrow with Commonwealth Land Title
Insurance Corporation or its authorized agent as an additional earnest
money deposit which shall be credited against the purchase price."
3. It is understood that the Purchaser has completed its due diligence.
4. Par. 7.1, Closing, is hereby amended to read:
"Closing shall take place on February 21, 1997"
5. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
6. In the event there is any conflict in the terms of this Modification
and terms of the Agreement, the terms of this Modification shall govern.
7. This Modification may be executed in separate counterparts, each of
which shall be deemed an original and all of which taken together will
constitute one agreement between the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the date first above written.
CORNERSTONE REALTY GROUP INCORPORATED,
a Virginia Corporation
By:____________________________________
Name:__________________________________
Its:___________________________________
MILL CROSSING, LIMITED
By: TEXAS GREENERY INC.
General Partner
By: /s/ Robert S. Green
---------------------------------------
Name: Robert S. Green
---------------------------------------
Its: President
---------------------------------------
EXHIBIT 10.3
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of January,
1997, by and between Apple Residential Income Trust, Inc., a Virginia
corporation (hereinafter referred to as "Owner"), and Apple Residential
Management Group, Inc., a Virginia corporation (hereinafter referred to as
"Manager").
WITNESSETH:
WHEREAS, Owner is the owner of Mill Crossing Apartments (hereinafter
referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate on the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the
Property, provided that nothing herein contained shall constitute a guarantee by
Manager of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment,
tools, appliances, materials, supplies and uniforms necessary for the
maintenance or operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas,
electricity and other services necessary for the operation and maintenance of
the Property;
d. The advertising for the rental of space in the Property, the
cost of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property
rented by procuring tenants for the Property and negotiating and executing on
behalf of Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returned and other
documents (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) required under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act, or any
similar federal or state legislation. Manager shall also file returns and
reports, and pay from Owner's funds, all sums as may from time to time be
required by the state or locality in which the Property is located;
h. The maintenance of full books of account with correct
entries of all receipts and expenditures, which books of account shall be the
property of Owner and shall at all times be open to the inspection of Owner or
any of its employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by canceled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h
2
<PAGE>
and i shall be paid for by Owner pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall
contain a composite financial report of the monthly statements provided in
accordance with paragraph i, plus a statement by Manager as to the operations
of the Property during the previous year and recommendations, if any, as to
necessary policy changes or improvements which should be implemented in the
forthcoming year, which recommendations shall be accompanied by an estimated
budget for such items;
k. The furnishing from time to time, at least semi-annually,
of a tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review
of lease negotiations; (3) annual analysis of leases; and (4) schedule of
capital improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary
to operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits
on keys and other income from the Property, shall be deposited from time to
time as collected by Manager to the credit of Owner in such bank or banks as
may from time to time be designated by Owner. Such funds shall be disbursed
only in accordance with the terms of each individual lease and in accordance
with any applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compen-
sation insurance. In the event, Manager is authorized by Owner to place
insurance policies, the companies, the general agents, the amounts of coverage
and the risks insured shall be subject to the approval of Owner.
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6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any kind incurred by or
asserted against Manager by reason or or in connection with the employment of
Manager hereunder, the performance by Manager of the services described herein
or the occurrence or existence of any event or circumstance which results or is
alleged to have resulted in death or injury to any person or destruction of or
damage to any property and any suit, action or proceeding (whether threatened,
initiated or completed) by reason of the foregoing; provided, however, that no
such indemnification of Manager shall be made, and Manager shall indemnify and
hold Owner harmless against, and to the extent of, any loss that a court of
competent jurisdiction shall, by final adjudication, determine to have results
from willful misconduct, gross negligence or fraud by or on the part of Manager.
7. Compensation of Manager for Managing the Property.
Owner shall pay to Manager a "Property Management Fee" for management of the
Property pursuant to this Agreement in an amount equal to five percent (5%)
of the monthly gross revenues from the Property. The Property Management Fee
shall be paid to Manager on or before the 10th day of each month and shall be
based upon the income received by Owner (for such month) which has been
obtained by such date. If additional gross revenues are received by Owner
after the day Manager is paid, the sum due to Manager on account of such
additional income shall be paid to Manager when Manager is paid its fees for
the next succeeding month.
8. Reimbursement for Expenses. Owner shall reimburse Manager for
Manager's expenses, including salaries and related overhead expenses, associated
with bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget
prepared by Manager, pursuant to paragraph 3(k), will contain a category labeled
"Reserve for Capital Items." Owner agrees to place rents and other income in
a bank account, or to permit Manager to transfer Owner's funds to such account,
in sufficient amounts to meet the needs reflected in such budget. Such funds
shall be placed in the account on a monthly basis as reflected in the budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month
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covered by the budget, to place sufficient funds in a bank account, or to
permit Manager to transfer Owner's funds to such account, to make up the
budgeted operating deficit. These funds must be placed in such account at
least forty-five days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by canceling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire
understanding between parties hereto with regard to the transactions described
herein and may only be amended by a written instrument signed by the party
against whom enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance
with and be governed by the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
OWNER:
APPLE RESIDENTIAL INCOME TRUST, INC.,
a Virginia corporation
By: /s/ Glade M. Knight
-------------------------------------------
Title: President
----------------------------------------
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MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ Glade M. Knight
-------------------------------------------
Title: President
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