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: November 24, 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
(Copper Crossing Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Copper Crossing Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Copper Crossing Apartments)*
b. Pro Forma Statement of Operations for the Nine Months ended
September 30, 1997 (unaudited)*
Pro Forma Balance Sheet as of
September 30, 1997 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1996
(unaudited)*
c. Exhibits
10.1 Purchase Contract for Copper Crossing Apartments
10.2 Property Management Agreement for Copper 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
On November 24, 1997, Apple Residential Income Trust, Inc. (the
"Company") purchased the Copper Crossing Apartments located at 5644 Riverwalk
Drive in Fort Worth, Texas (The "Property").
The Property comprises 200 apartment units. The purchase price for the
Property was $4,750,000. The seller was Copper Crossing Investors, Ltd., a Texas
limited partnership which is not affiliated with the Company, Apple Residential
Advisors, Inc. or their Affiliates. The entire purchase price was paid 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 off of Bryant-Irvin in Fort Worth,
Texas, in Tarrant County, which is part of the greater Dallas/Fort Worth
Consolidated Metropolitan Statistical Area, or as it is called locally, "The
Metroplex." The following information is based in part upon information provided
by the Dallas Chamber of Commerce.
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/Fort 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 loops, Interstate 635 in Dallas and Interstate 820
in Fort 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.
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The immediate area surrounding the Property consists of other
multi-family, single-family, commercial and retail development. The Property is
located near restaurants, businesses, schools, and churches, and is readily
accessible from Interstate 20, Highway 183 and Interstate 820, which are the
major highways in the area.
The Property is close to Hulen Mall, a major regional mall. This
regional mall has spurred significant construction and corresponding retail
growth in the Hulen Mall/Benbrook area. The Property is an approximately
30-minute drive from the Dallas/Fort Worth International Airport, an
approximately 15-minutes drive from the Fort Worth central business district and
an approximately 30-minute drive from the Dallas central business district.
Description of the Property. The Property consists of 200 garden-style
apartment units in 13 two-story buildings on approximately 6.9 acres of land.
The Property was constructed in 1981.
The Property offers four different unit types. The unit mix and rents
currently being charged new tenants as of November, 1997 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
56 One bedroom/one bathroom 563 $385
40 One bedroom/one bathroom 663 410
32 One bedroom/one bathroom 745 450
72 Two bedrooms/two bathrooms 915 540
The apartments provide a total of approximately 148,000 square feet of
net rental area.
The Company believes that the Property has generally been well
maintained and is in good condition. According to the seller, in the past two
years the seller spent over $400,000 in capital improvements to the exterior of
the Property, including new roofs, exterior rehabilitation, and repair and
replacement of awnings.
The Company has budgeted approximately $100,000 for additional capital
improvements to the Property. These improvements will include clubhouse
renovations and upgrading the landscaping at the Property. In addition, at the
time that the Company acquired the Property there were 12 apartment units which
had been damaged by fire. These damaged apartment units are currently being
repaired and are all expected to be available for occupancy by April 1998. All
costs of the repair are being funded with the proceeds of Property casualty
insurance.
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Leases at the Property are generally for terms of one year or less.
Average rental rates for the past five years have both increased and decreased.
As an example, a one-bedroom, one- bathroom apartment unit (563 square feet)
rented for $289 in 1992, $300 in 1993, $299 in 1994, $315 in 1995, and $345 in
1996. The average effective annual rental per square foot at the Property for
1992, 1993, 1994, 1995, 1996, was $5.53, $5.74, $5.72, $6.03, and $6.60,
respectively.
The buildings are wood-frame construction with a combination of brick
veneer masonite hardboard on reinforced concrete slab foundations. Roofs are
sloped fiberglass shingled on plywood.
The Property has an outdoor swimming pool with a large deck, a fitness
center, a laundry facility, a sand volleyball court and picnic areas. There is
also a clubhouse which includes an entertainment area and a leasing office.
There is ample paved parking for the tenants.
All apartment units have 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 and an individually controlled heating and air conditioning unit. Each
kitchen is equipped with a refrigerator/freezer, electric range and oven,
dishwasher and garbage disposal. Each apartment unit has a woodburning
fireplace, a screened porch or balcony, ceiling fans, mini blinds and vertical
blinds. The largest one-bedroom units and the two-bedroom units include
full-sized washer/dryer connections. The owner of the Property pays for cold
water, gas usage for hot water, sewer service and trash removal. Tenants pay for
their own electricity service, which includes cooking, lighting, heating and air
conditioning.
There are at least five apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy in the nearby competing properties now averages
approximately 94%.
According to information provided by the Seller, physical occupancy at
the Property averaged approximately 85% in 1992, 87% in 1993, 96% in 1994, 95%
in 1995, 94% in 1996, and 93% during the first six months of 1997. As of
November 24, 1997, the Property was 91 % occupied, counting as vacant the 12
units recently damaged by fire. Of the 188 units available for rental, 182, or
96% of 188, were rented as of November 24, 1997. The tenants are a mix of
white-collar workers, blue-collar workers, students and retired persons.
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The following table sets forth the 1996 real estate tax information of
the Property:
Assessed
Jurisdiction Value Rate Tax
- ------------ ----- ---- ---
County of Tarrant $3,300,000 $2.01160 $66,382.67
City of Benbrook 3,300,000 0.78500 25,905.00
Total $92,287.67
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $2,698,000) will be depreciated over 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.
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 will allow an increase in rents at the Property.
3. The Property is strategically located in the "Hulen Mall/Benbrook
area," which is one of the most commercially active areas in the Metroplex.
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 will pay Cornerstone Realty Income
Trust, Inc., a property acquisition fee equal to 2% of the purchase price of the
Property, or $95,000. Cornerstone Realty Income Trust, Inc. will serve as
property manager for the Property and for its services 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.*
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* 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.*
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* 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: December 8, 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 November 24, 1997
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
10.1 Purchase Contract for Copper Crossing
Apartments
10.2 Property Management Agreement
for Copper Crossing Apartments
23.1 Consent of Independent Auditors*
* To be filed by amendment.
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PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 31st day of October 1997 (the
"Effective Date"), between CORNERSTONE REALTY GROUP, INC. or its nominee,
(hereinafter called "Purchaser") and COPPER CROSSING INVESTORS, LTD., a Texas
Limited 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 COPPER CROSSING APARTMENTS
located in FORT WORTH, 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 200 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 II
PAYMENT OF PURCHASE PRICE
2.1 PURCHASE PRICE. The total purchase price shall be FOUR MILLION SEVEN
HUNDRED FIFTY THOUSAND ($4,750,000) DOLLARS as evidenced by cash or cash
equivalent at closing.
2.2 DEPOSIT. ONE HUNDRED THOUSAND ($100,000) DOLLARS to be placed in escrow
at the end of the "Inspection Period" described in Article VI below. Said
deposit shall be placed in escrow with commonwealth Land Title Insurance
Corporation or its authorized agent (the "Title Company") , Attention: Ms.
Beverly Griese, 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
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and independent of any other consideration or payment provided for 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 in the form attached hereto as EXHIBIT C, subject only to a lien
for 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 any 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 five (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
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acceptable to the Purchaser. The Survey shall show the location and size of all
of the following on or adjacent to the Property, if 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. Anything to the contrary
notwithstanding, it shall be sufficient that the survey shows the gross area.
3.5 The Survey shall show no encroachments onto the Land from any adjacent
property, no non-insurable encroachments by or from the Land onto adjacent
property and no non-insurable 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, on or 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". If closing does not take place, the Purchaser agrees to pay
one-half (1/2) of the cost of the Survey ($1,500) so long as closing is not
aborted as a result of a title or Survey defect.
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.
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ARTICLE IV
PRORATIONS
4.1 INCOME AND EXPENSE ALLOCATIONS. The following shall be prorated, on a
calendar-month basis, to the day 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 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. If Seller has committed to give any future
monetary concessions to tenants under existing leases to which Purchaser would
become liable, then Seller shall pay to Purchaser said amount in a lump sum at
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 to and contingent upon the satisfaction of the following conditions
precedent:
(A) Receipt by Purchaser of an engineering report
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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 af fecting 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.
(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 Inspection
Period shall be extended as a result of any delays by Seller in producing the
items requested herein unless the Seller does not have them and notifies
Purchaser with an extension of time to reflect delays of notification.) 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;
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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 three (3) 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 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. Upon receipt by Purchaser of
all documents requested in the paragraph above, Purchaser, its employees, agents
and contractors shall have twenty-one (21) days (the "Inspection Period", as the
same may be extended) 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 pool, 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 no 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 which have been vacant for a period of more than seven (7) days,
are to be in a "rent ready" condition (as defined
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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 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.
ARTICLE VII
CLOSING
7.1 CLOSING. Closing will be held on or about (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 Special 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
shall give Purchaser a notice as required of such transfer in compliance with
the laws of Texas and Purchaser, pursuant thereto, shall notify each tenant.
(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
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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.
(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 Contractor 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, shall have the option of closing or at its sole
discretion cancel this Agreement. Seller shall promptly return Purchaser's
deposit upon such termination.
(I) Assignments of all Seller's interest in the following in the form
attached hereto as EXHIBIT D: (1) 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 (see
Exhibit D) 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 sewers and gas utilities, as may be required by the utility, for
execution at closing.
(M) Evidence satisfactory to the title company of the power and
authority of Seller to enter into and consummate this Agreement.
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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 E. This clause shall
survive closing for one year.
(S) Closing Memorandum and Indemnification Agreement in the form
attached hereto as EXHIBIT F.
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.
(D) Execute all such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Seller or its counsel.
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ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 REPRESENTATIONS OF THE PARTIES. seller warrants (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 any 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 no 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) 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 authority 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.
(I) That to the best knowledge of the Seller, the drainage within the
project is satisfactory and complies in all
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respects with all government regulation. This warranty shall survive for one
year following closing.
(J) 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.
(K) 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.
(L) 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.
(M) Seller warrants that it has complied with the keyless, dead-bolt
lock requirement.
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 (A) 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
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event of cancellation as aforesaid, this Agreement shall become null and void
and the parties shall be released and all payments made shall be returned.
Should Purchaser elect to carry out this Agrdemefit despite such damage Seller
shall assign to Purchaser all insurance proceeds and any deductible arising from
such damage and wil'l 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.
(B) CURRENT DAMAGE. The parties agree that nothing herein to the
contrary, that there are ten (10) units in the premises that have been fire
damaged and the Purchaser agrees to close under one of the following conditions:
(i) That all repairs have been made.
(ii) Repairs have not been completed, however, the Seller, with the
concurrence of the Purchaser, has settled its claim against the insurance
company and agrees to assign all insurance proceeds as well as paying an amount
equal to the deductible and assign any loss of rent for the post closing period.
(iii) Assign the claim to Purchaser as well as payment for the
deductible and an assignment of the loss of rent insurance.
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 to NATIONAL INCOME
PROPERTIES, pursuant to a separate agreement. Said brokerage fee shall be deemed
earned if, and only
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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 of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 SELLER'S DEFAULT. Upon Seller's default, the Purchaser, as its
exclusive remedy, may either (1) require specific performance of Seller and
commence any legal proceedings to enforce said right within ninety (90) days
after the scheduled closing date or any adjournment thereafter, (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 to APPLE RESIDENTIAL INCOME TRUST, INC.
12.3 SEVERABILITY. If any provision, sentence, phrase or word Of this
Agreement or the application thereof to any person
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or circumstance shall be held invalid, the remainder of this Agreement or the
application of such provision, sentence, phrasei 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 of Texas.
12.6 COUNTERPARTS. To facilitate execution, this Agreement may be 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 shall collectively
constitute a single contract. Counterparts may be faxed with an additional hard
copy by mail.
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.
12.10 CONFIDENTIALITY. The parties shall keep conf idential the existence
of this Agreement, the transactions described herein, and all information
obtained from the other party both during and subsequent to the transaction.
However, the covenants contained in this paragraph shall not apply in respect to
any information which (a) was already known to either party when such
information was received from the other, (b) was readily available to the
general public at the time of such receipt, (c) subsequently becomes known to
the general public through no fault or omission by the other party, (d) is
subsequently disclosed by a third party which has the bona fide right to make
such disclosure, or (e) is required to be disclosed by law or a governmental
agency.
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This clause shall survive closing.
12.11 HOLIDAYS. If any of the deadlines in this Contract ends on,, or it
any event is to occur on, a Saturday, Sunday, or, legal holiday, the deadline or
the date for performance shall automatically be extended to the next day which
is not a Saturday, Sunday, or legal holiday.
12.12 LEAD WARNING STATEMENT. Every purchaser of any interest in
residential real property on which a residential dwelling was built prior to
1978 is notified that such property may present exposure to lead from lead-based
paint that may place young children at risk of developing lead poisoning. Lead
poisoning in young children may produce permanent neurological damage, including
learning disabilities, reduced intelligence quotient, behavioral problems, and
impaired memory. Lead poisoning also poses a particular risk to pregnant women.
The seller of any interest in residential real property is required to provide
the buyer with any information on lead-based paint hazards from risk assessments
or inspections in the seller's possession and notify the buyer of any known
lead-based paint hazards. A risk assessment or inspection for possible
lead-based paint hazards is recommended prior to purchase.
12.12.1. Seller has no knowledge of lead-based paint and/or lead-based
paint hazard in the housing.
12.12.2. Seller has no reports or records pertaining to lead-based paint
and/or lead-based paint hazards in the housing.
12.12.3. Purchaser is hereby granted a lo-day opportunity (or the length of
the Inspection Period, whichever is longer) to conduct a risk assessment or
inspection for the presence of lead-based paint and/or lead-based paint hazards.
12.13 EXHIBITS. The following exhibits are attached to this Agreement and
are incorporated into this Agreement by this reference and made a part hereof
for all purposes:
(a) EXHIBIT A, the legal description of the Land.
(b) EXHIBIT B, list of personal property
(c) EXHIBIT C, the form of Deed.
(d) EXHIBIT D, the form of the Assignment and Assumption of Personal
Property, Service Contracts, Warranties and Leases.
(e) EXHIBIT E, the form of the Representation Letter.
(f) EXHIBIT F, Closing Memorandum and Indemnification Agreement
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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: Mr. Jack Scholz
1010 Sandstone Drive
Libertyville, IL 60048
Fax: (847) 362-7404
With a copy to
Seller's Attorneys: John S. Broude, Esq.
Broude, Smith & Jennings
309 W. Seventh Street, Suite 1100
Fort Worth, TX 76102
Fax: (817) 335-1603
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. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-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.
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13.3 TAX-DEFERRED EXCHANGE. The Seller desires to complete an exchange of
the Property in conjunction with the transfer and exchange of another tract of
property (the "Exchange Property") which exchange will qualify for
nonrecognition of gain pursuant to ss.1031, Internal Revenue Code of 1986, as
amended (the "Code"). In order to effect such exchange, Purchaser agrees to
cooperate with Seller and to execute any and all documents required in order to
consummate the transaction involving the Exchange Property. It is expressly
agreed that the Purchaser shall incur no liability or additional expenses
connected with such proposed property exchange, it being understood that the
Purchaser is agreeing merely to cooperate with Seller as an accommodation party.
If the exchange transaction does not occur as contemplated, then Purchaser and
Seller shall be obligated to perform and close this transaction in accordance
with and pursuant to the rest of the terms and provisions of this Agreement. If
the Exchange Property has not been identified or is not being acquired
contemporaneously with the conveyance of the Property to Purchaser, Purchaser
agrees to deposit the funds into an escrow account as requested by Seller in
order to afford Seller the opportunity to consummate a deferred exchange which
satisfies the requirements of the code and Regulations promulgated pursuant to
the Code. Notwithstanding the foregoing, Seller agrees that any such tax
deferred exchange will not adversely impact the Closing or postpone the Closing
Date. Seller will execute a hold harmless to Purchaser as to the content of this
paragraph
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed this day and date first written above.
SELLER:
COPPER CROSSING INVESTORS, LTD.
By: REBEL INC., a Kentucky Corporation
BY: /s/ Jack Scholz
--------------------
Its:
-------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
BY: /s/ S J Olander
--------------------
Its: S.V.P
-------------------
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EXHIBIT 10.2
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 25th day of November,
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")
W I T N E S S E T H :
WHEREAS, Owner is the owner of Copper 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 upon 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 returns 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's 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
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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;
1. 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' compensation
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 and every kind incurred
by or asserted against Manager by reason of 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 resulted 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 of 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 (45) 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 the 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 above written.
OWNER:
APPLE RESIDENTIAL INCOME TRUST, INC.,
a Virginia corporation
By: /s/ S.J. Olander
------------------------------------------------
Title: Secretary
---------------------------------------------
5
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MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ S.J. Olander
------------------------------------------------
Title: Secretary
---------------------------------------------
6
