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: April 25, 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
(The Arbors on Forest Ridge Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(The Arbors on Forest Ridge Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (The Arbors on Forest Ridge Apartments)*
b. Pro Forma Statement of Operations for the Three Months
ended March 31, 1997 (unaudited)*
Pro Forma Balance Sheet as of
March 31, 1997 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1996
(unaudited)*
c. Exhibits
10.1 Purchase Contract for The Arbors on Forest Ridge
Apartments
10.2 Property Management Agreement for The Arbors on
Forest Ridge 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
THE ARBORS ON FOREST RIDGE APARTMENTS
Bedford, Texas
On April 25, 1997, Apple Residential Income Trust, Inc. (The "Company")
purchased The Arbors on Forest Ridge Apartments, a 210-unit apartment complex
having an address of 2200 Forest Ridge Drive, Bedford, Texas (the "Property").
The seller was unaffiliated with the Company, the Company's advisor
(the "Advisor") and their affiliates. The purchase price was $7,748,906.70. The
Company borrowed the entire purchase price under the Company's unsecured line of
credit with First Union National Bank of Virginia. The Company plans to repay
this borrowed amount using proceeds from the future sale of its Shares. Title to
the Property was conveyed to the Company by limited warranty deed.
Location. The Property is located in Bedford within Tarrant County,
which is part of "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
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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.
Bedford is located between Dallas and Fort Worth, being approximately
15 miles east of the Fort Worth central business district and approximately 20
miles west of the Dallas central business district. The immediate area
surrounding the Property consists of other multi-family and single-family
housing and commercial and retail development. The Property is located near
restaurants, businesses, schools and churches, and is readily accessible from
Interstates 121 and 183. The Property is an approximately 10-minute drive from
the Dallas/Fort Worth International Airport.
Description of the Property. The Property consists of 210 garden-style
apartment units located in 19 two-story buildings on approximately 8.9 acres of
land. The Property was completed in 1986.
The Company believes that the Property has generally been well
maintained and is generally in good condition. However the Company had budgeted
$210,000 for repairs and improvements, including painting, siding repairs, pool
renovations and clubhouse renovations.
The Property offers a variety of unit types. The unit mix and rents
currently being charged new tenants as of April 1997 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
- -------- ---- -------------- --------------
8 Contemporary One 581 $456
Bedroom/One Bath
Basic
10 Contemporary One 581 466
Bedroom/One Bath
w/Fireplace
2 Contemporary One 604 461
Bedroom/One Bath
large
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Approximate
Interior
Quantity Type Square Footage Monthly Rental
- -------- ---- -------------- --------------
8 Contemporary One 615 471
Bedroom/One Bath
large w/Fireplace
9 Luxury One 684 536
Bedroom/One Bath
Down
9 Luxury One 684 541
Bedroom/One Bath Up
14 Luxury One 684 541
Bedroom/One Bath
Down w/Fireplace
14 Luxury One 684 546
Bedroom/One Bath Up
w/Fireplace
8 Luxury One 684 552
Bedroom/One Bath
w/View
12 Luxury One 684 557
Bedroom/One Bath
w/View w/Fireplace
8 Conventional One 716 536
Bedroom/One Bath
Lofted Study
11 Conventional One 716 541
Bedroom/One Bath
Lofted Study
w/Fireplace
9 Conventional One 750 550
Bedroom/One Bath
Lofted Study Large
w/Fireplace
12 Executive One 775 572
Bedroom/One Bath
Down
12 Executive One 775 582
Bedroom/One Bath Up
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Approximate
Interior
Quantity Type Square Footage Monthly Rental
- -------- ---- -------------- --------------
12 Executive One 775 582
Bedroom/One Bath
Down w/Fireplace
12 Executive One 775 593
Bedroom/One Bath Up
w/Fireplace
10 Executive One 871 640
Bedroom/One Bath
Study Down
10 Executive One 893 651
Bedroom/One Bath
Study Up
4 Executive One 871 651
Bedroom/One Bath
Study Down
w/Fireplace
4 Executive One 893 661
Bedroom/One Bath
Study Up w/Fireplace
6 Executive One 871 661
Bedroom/One Bath
Study Down w/View
6 Executive One 893 666
Bedroom/One Bath
Study Up w/View
The apartments provide a combined total of approximately 169,000 square
feet of net rentable area.
Leases at the Property are generally for terms of one year or less.
Average rental rates for the past five years have generally increased. As an
example, a one-bedroom, one-bath apartment (executive-down) rented for $455 in
1992, $460 in 1993, $500 in 1994, $545 in 1995 and $560 in 1996. The average
effective annual rental per square foot at the Property for 1992, 1993, 1994,
1995 and 1996 was $6.58, $6.65, $7.52, $7.88 and $8.10, respectively.
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The buildings are wood frame construction with a combination of brick
veneer and wood siding on concrete slab foundations.
Roofs are pitched composition shingles.
The Property includes a swimming pool and deck, hot tub/whirlpool,
weight room, sand volleyball court, basketball court, gas grills, picnic area,
laundry room, curb-side trash pick-up and access gates. The Property also has a
clubhouse. There is ample paved parking for tenants, each of whom is assigned
one covered parking space and one uncovered parking space.
Each apartment unit has wall-to-wall carpeting in the living area 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
apartment has ceiling fans and a private balcony or patio. Each kitchen has a
refrigerator/freezer with ice maker, electric range and oven, dishwasher,
microwave and garbage disposal. Some units also feature decorator bookcases,
pass through bar, vaulted ceilings and washer/dryer connections. Currently, the
owner of the Property pays for cold water, sewer service and trash removal. The
tenants pay for their electricity service, which includes cooking, lighting,
heating, hot water and air conditioning. The apartment units have recently been
separately metered for water and sewer charges, and it is expected that tenants
will bear these charges as leases are renewed or new leases are entered into.
There are at least five apartment properties which 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 nearby competing properties now averages
approximately 91%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 93% in 1992, 94% in 1993, 96% in 1994, 95%
in 1995 and 96% in 1996. On April 23, 1997, the Property was 96% occupied. The
residents are a mix of white-collar and blue-collar workers and retired persons.
The following table sets forth the 1996 real estate tax information on
the Property:
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Jurisdiction Assessed Value Rate Tax
- ----------------- -------------- -------- -----------
County of Tarrant $5,600,000 $2.54706 $142,635.58
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $5,114,687.00) 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 Internal Revenue Code of 1986, as amended ("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. Dallas 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
very 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 conveniently proximate to many retail centers,
businesses, restaurants and entertainment-related facilities.
Accordingly, the Advisor believes that the Company is and can continue
to be perceived as a desirable location for residents.
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
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Property, or $154,978. 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.*
* 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: May 9, 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 May 9, 1997
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
10.1 Purchase Contract for The
Arbors on Forest Ridge
Apartments
10.2 Property Management Agreement
for The Arbors on Forest Ridge
Apartments
23.1 Consent of Independent Auditors*
* To be filed by amendment.
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Exhibit 10.1
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
(Arbors on Forest Ridge)
This Purchase and Sale Agreement ("Agreement") and Escrow
Instructions ("Escrow Instructions") are made and entered into by and between
Western Rim Investors 1992-5, L.P., a California Limited Partnership, dba Arbors
on Forest Ridge ("Seller") and Cornerstone Realty Group, Inc., a Virginia
corporation ("Buyer").
BACKGROUND
A. Seller owns certain real property, with improvements thereon and
personal property used in connection therewith, located in Tarrant County, Texas
and commonly known as the Arbors on Forest Ridge Apartments (containing 210
apartment units) and more particularly defined as the "Property" below.
B. Seller's affiliate, Western Rim Investors 1991-4, L.P., a California
Limited Partnership, dba Wildwood Apartments ("Wildwood Seller") owns and
operates certain real property located in Tarrant County, Texas, with
improvements thereon and personal property used in connection therewith,
commonly known as the Wildwood Apartments (containing 120 apartment units)
("Wildwood Property").
C. Seller's affliate, Western Rim Investors 1993-2, L.P., a California
Limited Partnership, dba Toscana Apartments ("Toscana Seller") owns and operates
certain real property located in Denton County, Texas, with improvements thereon
and personal property used in connection therewith, known as the Toscana
Apartments (containing 192 apartment units) ("Toscana Property").
D. Buyer desires to purchase the Property together with all improvements
and all related rights and appurtenances, including without limitation, Seller's
interest in adjacent streets, alleys, rights-of-way, strips, gores and access
easements, and any improvements on the Property.
E. Seller desires to sell the Property to Buyer on the condition that
Buyer also purchase the Wildwood Property and the Toscana Property
simultaneously therewith as a "package" purchase and sale.
1. AGREEMENT.
This agreement of Purchase and Sale and Escrow Instructions dated
January 21, 1997, Escrow No. TC96-81550, is between Seller and Buyer with Safeco
Land Title of Tarrant, a Texas corporation, as escrow agent ("Escrow Agent").
This Agreement and Escrow Instructions shall constitute the agreement on the
part of the Seller to sell and on the part of the Buyer to purchase the Property
described and defined hereinbelow. In the event of any conflict or any
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inconsistency between the terms and provisions of any other Escrow Instructions
and the terms and provisions of this Agreement, the terms and provisions of this
Agreement shall control.
2. PROPERTY.
The property which is the subject of this Agreement is defined to mean
the following: (i) the real property located in Tarrant County, Texas as more
particularly described by legal description on Exhibit A attached hereto and
made a part thereof, together with (ii) all improvements and fixtures located
thereon ("Improvements"), (iii) the personal property owned by Seller and used
in connection therewith as described on Exhibit B attached hereto ("Personal
Property"), (iv) all rights of Seller in and to any and all leases for space in
and to the Property ("Leases") by tenants ("Tenants") thereunder, (v) all
existing warranties, including manufacturer's warranties ("Warranties") relating
to the Improvements or Personal Property, but only to the extent assignable,
(vi) all right, title and interest of Seller, if any, in and to the use of the
name by which the Property is commonly known, "Arbors on Forest Ridge
Apartments," ("Tradename"), (vii) the existing phone numbers ("Phone Numbers")
used in connection with the operation of the Property, but only to the extent
assignable and (viii) all rights, privileges, easements and appurtenances
thereto, if any (collectively, the "Property").
3. OPENING OF ESCROW; CLOSING; PACKAGE SALE; INDEPENDENT CONSIDERATION.
a. For purposes of this Agreement, the Opening, of Escrow (the
"Opening of Escrow") shall be deemed to be the date set forth below on which the
Earnest Money Deposit (as hereinafter defined) and three (3) fully executed
copies of this Agreement and the Other Agreements (as hereinafter defined) are
delivered to and accepted by Escrow Agent. The consummation of the transaction
contemplated by this Agreement (the "Closing") shall occur at 10:00 a.m., Texas
time, on the date which is seven days after the expiration of the Feasibility
Termination Date (as hereinafter defined) (the "Closing Date"); provided,
however, if Buyer in good faith needs additional time to prepare for the Closing
of the transaction and the funding of the Purchase Price, then Buyer may extend
the Closing Date by up to seven (7) days by sending written notice of such
extension to Seller on or before the originally scheduled Closing Date; and
provided further that any such extension shall constitute an extension for the
same period of time of the Closing Date under the Other Agreements so that in
any case the closing of the sale and conveyance of the Property, the Wildwood
Property and the Toscana Property shall occur simultaneously. The Closing shall
occur at the off'ces of Escrow Agent or at such other place as Seller and Buyer
may agree in writing. Closing shall be deemed to have occurred when (i) all
Closing documents contemplated by this Agreement have been delivered to,
received by, and executed by the appropriate parties; (ii) all conditions to
such Closing contemplated by this Agreement have been satisfied or waived in
writing (including, without limitation the simultaneous closing of the sale and
purchase from Seller to Buyer of the Wildwood Property and the Toscana Property
as hereinafter discussed); (iii) the deed required pursuant to paragraph 8 has
been recorded; and (iv) the funds required to be paid under this Agreement have
been properly delivered to Escrow Agent and are available for distribution by
Escrow Agent.
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b. The parties acknowledge and agree that (i) the sale of the
Property is a part of a "package sale" of the Property, the Wildwood Property
and the Toscana Property, (ii) as of even date herewith, Buyer is entering into
separate Purchase and Sale Agreements ("Other Agreements") with Wildwood Seller
and Toscana Seller to purchase the Wildwood Property and Toscana Property,
respectively, (iii) Buyer shall have no right to close the purchase the Property
unless Buyer simultaneously closes the purchase of both the Wildwood Property
and Toscana Property in accordance with the terms of the Other Agreements, (iv)
Seller's obligations hereunder shall be conditioned on Buyer's performing all of
its obligations under the Other Agreements and, simultaneously with the Closing
hereunder, closing the purchase of the Wildwood Property and Toscana Property in
accordance with the terms of the Other Agreements, (v) any termination by Buyer
of either of the Other Agreements pursuant to an express right to terminate
thereunder shall be deemed to also constitute a termination of this Agreement by
Buyer pursuant to the corresponding provision hereof and (vi) any default by
Buyer under either of the Other Agreements shall be deemed to also constitute a
default by Buyer under this Agreement. The provisions of this subsection shall
control in the event of any conflicting provisions contained herein or in the
Other Agreements.
c. Contemporaneously with the execution of this Agreement, Buyer
shall deliver to Seller a check in the amount of Fifty and No/100 Dollars
($50.00) ("Independent Consideration"), which amount the parties bargained for
and agreed to as consideration for Seller's execution, delivery and performance
of this Agreement. This Independent Consideration is in addition to and
independent of any other consideration or payment provided for in this
Agreement, is nonrefundable, and shall be retained by Seller notwithstanding any
other provision of this Agreement.
4. INFORMATION SUPPLIED BY SELLER/PRE-CLOSING MATTERS.
As soon as reasonably possible after the Opening of Escrow, Seller shall
either deliver or make available to Buyer the following:
a. Current rent roll schedules ("Rent Rolls") certified as being
true and correct by Seller (as of the last day of the month immediately
preceding the month in which such schedule is furnished to Buyer) and showing
for each apartment unit within the Property (i) its vacancy or occupancy, (ii)
the monthly rental amount therefore; (iii) if the space is occupied, the
commencement and termination date of the Lease covering that space and the
name(s) of the Tenant(s) thereunder; and (iv) the amount of any rent or other
charges, if any, in arrears or prepaid thereunder.
b. Letter in form substantially the same as that attached hereto as
Exhibit C addressed to Buyer's accountants, L.P. Martin & Company, P.C.,
concerning certain financial certifications as provided therein, executed by
Seller.
c. A current Termite Inspection Report or Reports for the Property
indicating that there is no evidence of termites on the Property or, if there is
evidence that termites are present, that termites have been killed or treated.
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d. Sufficient books and records for the operation of the Property
for at least 12 months of operation so that Buyer can generate a report in
compliance with accounting regulation S-X of the Securities and Exchange
Commission.
5. REVIEW, APPROVAL AND FINANCING CONTINGENCIES.
Buyer and Seller acknowledge that, until the Feasibility Termination
Date (as hereinafter defined), Buyer's obligations hereunder shall be
conditioned on Buyer's satisfaction with all aspects of the Property and the
transaction hereunder and its review of the same, including but not limited to,
(i) Buyer's investigation of the economic feasibility of purchasing the
Property; (ii) Buyer's inspection of the Property, and its review of any
engineering reports, architectural reports, soils and environmental analyses,
research of relevant codes, ordinances, or regulations; (iii) Buyer's approval
of the forms of various documents to be executed at Closing; (iv) Buyer's
obtaining financing; (v) Buyer's review of the Title Commitment and Survey (as
hereinafter defined) and any other title matters which may affect the Property;
(vi) Buyer's review of the books and records kept in connection with the
operation of the Property; (vii) Buyer's review of the Leases; and (vi) Buyer's
review of any other matter which Buyer may deem to affect the desirability of
the Property. Accordingly, notwithstanding anything to the contrary contained in
this Agreement, at any time on or before 5:00 p.m. on the date which is
twenty-one (21) days after the Opening of Escrow (the "Feasibility Termination
Date"), Buyer shall have the right, at its sole discretion, to terminate this
Agreement for any reason whatsoever by delivering written notice of termination
to Escrow Agent and Seller on or before the Feasibility Termination Date. Upon
such termination, this Agreement and Escrow Instructions shall be immediately
canceled, Escrow Agent shall return to Buyer the Earnest Money Deposit and (if
theretofore deposited) the Additional Earnest Money Deposit and interest accrued
thereon, Buyer shall deliver to Seller copies of any nonproprietary studies,
reports or tests pertaining to the Property, and Buyer and Seller shall have no
further obligation or liability to the other in connection with the purchase and
sale of the Property, except such specific indemnification provision as are
provided for in this Agreement. Failure by Buyer to terminate this Agreement on
or before the Feasibility Termination Date shall be deemed to be a waiver of its
right to terminate under this paragraph, whereupon the Earnest Money Deposit (as
defined in paragraph 6), subject to Seller's performance hereunder and except as
otherwise specifically provided herein, shall be deemed to be nonrefundable.
6. PURCHASE PRICE.
a. The parties acknowledge that the sale of the Property is part of
a "package sale" of the Property, the Wildwood Property and the Toscana Property
as discussed above. The aggregate purchase price ("Purchase Price") for the
Property, Wildwood Property and Toscana Property shall be seventeen million four
hundred twenty-five thousand dollars ($17,425,000). Payment of the Purchase
Price and the Earnest Money Deposit and Additional Earnest Money Deposit as
provided below shall constitute payment for all three properties without
allocation among such properties.
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i. Upon Opening of escrow, Buyer shall deposit with Escrow
Agent one-hundred fifty thousand dollars ($150,000) (the "Earnest Money
Deposit"). The Earnest Money Deposit is to be disbursed to Seller or Buyer in
accordance with the terms hereof prior to Closing.
ii. Upon the Feasibility Termination Date (if Buyer does not
terminate this Agreement pursuant to paragraph 5 above) and as a condition to
Buyer's continued rights hereunder and under the Other Agreements, Buyer shall
deposit with Escrow Agent an additional sum of one-hundred fifty thousand
dollars ($150,000) (the "Additional Earnest Money Deposit"). The Additional
Earnest Money Deposit is to be disbursed to Seller or Buyer in accordance with
the terms hereof prior to Closing.
iii. Upon the Feasibility Termination Date and in the event
Buyer has not terminated this Agreement and the Other Agreements, the entire
Earnest Money Deposit including the Additional Earnest Money Deposit shall be
deemed non-refundable.
iv. On or before the Closing Date, Buyer shall deposit with
Escrow Agent for the account of Seller, Wildwood Seller and Toscana Seller in
cash or funds immediately available in Ft. Worth, Texas, the balance of the
Purchase Price increased or reduced by such funds as are required to take into
account the prorations and other adjustments required by this Agreement and the
Other Agreements.
b. All funds deposited in escrow on account of the Purchase Price
or otherwise shall be deposited by Escrow Agent in an interest bearing account
in a federally insured commercial bank reasonably approved by Buyer. Any
interest earned on such funds shall be remitted to Buyer if Buyer is entitled to
the return of the funds pursuant to this Agreement; otherwise, the interest
shall be credited to the Purchase Price in the event Closing shall occur.
7. TITLE REVIEW; SURVEY.
a. Seller will deliver with this agreement a commitment for title
insurance with copies of all recorded Schedule B items set forth therein ("Title
Report") pertaining to the Property. Seller will deliver with this Agreement to
Buyer the existing surveys of the Property, if any (the "Surveys").
b. Buyer shall be entitled to object to any makers disclosed by the
Title Report or Surveys by delivering written notice of such objection to Seller
and Escrow Agent on or before the date which is ten (10) days after the Opening
of Escrow. Said notices of objection shall specify in reasonable detail any
maker to which Buyer objects. If Escrow Agent subsequently issues any amended
commitment for title insurance disclosing any additional Schedule B matters or
if Buyer subsequently receives an amended survey reflecting additional Schedule
B matters, Buyer shall be entitled to reasonably object to any matters not
previously disclosed in the initial Title Report or the initial Surveys by
delivering written notice of such objection to Seller and Escrow Agent on or
before ten (10) days after Escrow Agent has delivered to Buyer the amended title
commitment or ten (10) days after Buyer's receipt of the amended survey, said
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notice to specify in reasonable detail any maker to which Buyer objects. Buyer
shall be deemed to have approved the Title Report and Surveys and any amendments
if it fails to notify Seller and Escrow Agent in writing of its objections
within the respective periods provided herein.
c. After receipt of Buyer's objections, if any, Seller shall at its
option, either (i) terminate this Agreement by sending written notice to Buyer
and Escrow Agent (subject to Buyer's right to cancel said termination provided
for below) if it cannot or is unwilling to cure the objections or (ii) attempt
to eliminate the matters to which Buyer has objected within fifteen (15) days
after receipt of Buyer's objections. Notwithstanding the foregoing, Seller shall
not be required to satisfy any pecuniary encumbrances until Closing. If Seller
elects to terminate this Agreement as provided above by sending written notice
to Buyer, this Agreement and the Escrow shall automatically terminate on the
date ten (10) days after Buyer and Escrow Agent receive written notice of such
termination, unless Buyer elects to cancel such termination and waive its
objections to said makers by written notice to Seller and Escrow Agent delivered
within the ten (10) day period. Seller agrees to use reasonable efforts to give
notice to Buyer as to its election of the above options in favor of Seller;
provided, however, if, within fifteen (15) days after receipt by Seller of
Buyer's objections, Seller has not either (i) sent written notice terminating as
provided above or (ii) sent written notice agreeing to cure said objections or
caused the makers to which Buyer has objected to be eliminated, then in such
event Seller shall be deemed to have sent notice to Buyer terminating this
Agreement, with such deemed notice to be deemed to have been sent and received
upon the expiration of said fifteen (15) day period, and in such event this
Agreement and Escrow shall terminate unless Buyer waives its objections by
written notice delivered to Seller and Escrow Agent on or before two (2) days
after the expiration of said fifteen (15) day period. In the event of any
termination pursuant to this paragraph, the Earnest Money Deposit delivered to
Escrow Agent shall be promptly refunded or returned to Buyer, Buyer shall
deliver copies of any nonproprietary studies, reports or tests pertaining to the
Property, and Seller and Buyer shall have no further obligation or liability to
one another regarding the sale or purchase of the Property, except as to the
specific indemnification provisions otherwise provided for in this Agreement.
8. CLOSING DOCUMENTS AND CLOSING ITEMS.
a. At the Closing, Seller shall deliver to Escrow Agent the
following:
(i) a special warranty deed ("Deed") duly executed,
acknowledged and in a form acceptable for recording,
substantially in the form of Exhibit D attached hereto
and made a part hereof, subject to the Permitted
Exceptions (as hereinafter defined) and Seller shall
deliver the Property free and clear of all liens;
(ii) Assignment and Assumption of Leases ("Assigntnent and
Assumption of Leases"), in form and substance
substantially the same as that attached hereto as
Exhibit E, and by this reference made a part hereof,
fully executed and acknowledged by Seller, conveying to
Buyer the Leases.
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(iii) Bill of Sale and Assignment ("Bill of Sale and
Assignment"), in form and substance substantially the
same as that attached hereto as Exhibit F., and by this
reference made a part hereof, fully executed and
acknowledged by Seller, conveying to Buyer the Personal
Property, Warranties, and Trade Name affecting the
Property.
(iv) Affidavit ("Affidavit") that as of the Closing Date
there are no judgements against the Seller or Property
or other unrecorded matters affecting the Property in
such form as Escrow Agent may require to issue the Title
Policy discussed below.
(v) A Termination Agreement ("Termination Agreement")
executed by the existing property manager for the
Property and terminating, effective as of the Closing,
the existing management agreement for the Property.
(vi) The Non-Foreign Status Certification (as hereinafter
defined) executed by Seller.
b. Ad valorem and similar taxes and assessments relating to the
Property for the year in which the Closing occurs ("Taxes") shall be prorated
between Seller and Buyer as of the Closing Date, based on the latest rate
applied to the latest assessed valuation for the Property, with Seller to bear
the economic burden of all such Taxes for the period prior to and including the
Closing Date and with Buyer to bear the economic burden of all such Taxes for
all periods after the Closing Date. As soon as the actual amount of Taxes on the
Property for such year is final and known (and after any appeal with respect
thereto is final and the amount of such Taxes is final), Seller and Buyer
shall, to the extent the amount of actual Taxes differs from the amount
estimated at Closing and upon the request of either party, recalculate the
proration of such Taxes between Seller and Buyer in the same manner specified
above but based on such actual final amount of Taxes for such year. Upon such
recalculation, Buyer shall pay to Seller, or Seller shall pay to Buyer, as the
case may be, a sufficient amount of money so that when added to or subtracted
from the preliminary pro-rated amounts for each party determined at Closing,
Seller shall have paid for those Taxes applicable to the Property prior to and
including the Closing Date and Buyer shall have paid for those Taxes applicable
to the Property after the Closing Date. Subject to the pro-ration obligations
under this Section, Buyer shall assume and pay for all Taxes relating to the
Property for the year 1997 and subsequent years, and shall indemnify and hold
Seller harmless from and against the same. The provisions of this subparagraph
shall survive the Closing.
c. All prepaid rentals, if any, actually received by Seller for the
month in which the Closing occurs shall be prorated as of the Closing Date, with
Seller to obtain the economic benefit of all such rentals for all periods prior
to and including the Closing Date and with Buyer to obtain the economic benefit
of all such rentals for all periods after the Closing Date. To the extent
actually received by Seller prior to the Closing, Seller shall deliver to Buyer
at the Closing all advance payments or rentals, other than for the month in
which the Closing occurs. Claims for any delinquent rent and other sums which
are owing to Seller by Tenants of the
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Property for periods prior to the Closing Date ("Delinquent Rents") shall be
owned and retained by Seller and Seller shall be entitled to collect all of
same. Furthermore, Buyer agrees to pay Delinquent Rents (or Seller's pro rata
share thereof to the extent such Delinquent Rents are applicable to the month
during which the Closing occurred) to Seller if, and when, amounts are collected
from the delinquent Tenant that are required to be applied to Delinquent Rents
as provided in the immediately succeeding sentence. To the extent rentals are
collected by Buyer after Closing from Tenants owing Delinquent Rents, such
collections shall be applied in the following order of priority (i) such
collections shall first be applied to Delinquent Rents which were delinquent 30
days or less as of the Closing Date, (ii) any balance shall then be applied to
rents currently due at the time of the collection of such amounts and (iii) the
balance shall then be applied to Delinquent Rents which were delinquent for more
than 30 days as of the Closing Date. Buyer agrees to use reasonable efforts to
collect Delinquent Rents, but nothing contained herein shall operate to require
Buyer to institute a lawsuit to recover any such Delinquent Rents or to
terminate any Lease.
d. Seller shall deliver into escrow at Closing individual tenant
security deposits under the Leases held by Seller in trust, or provide Buyer
with a credit therefor. At Closing, Escrow Officer shall disburse the security
deposits to Buyer or provide a credit in favor of Buyer on the settlement
statement. At the Closing, Seller and Buyer shall execute and deliver Tenant
Notice Letters ("Tenant Notice Letters") to be sent to each Tenant under the
Leases (i) notifying such Tenants of the change in ownership with respect to the
Property, (ii) instructing such Tenants to perform all future obligations under
the Leases to Buyer and (iii) advising the Tenants of the transfer to Buyer of
applicable prepaid rent, security or cleaning deposits, and acknowledging
Buyer's future responsibility for the same, and otherwise in form complying with
Section 92.105 of the Texas Property Code. Promptly after Closing, Buyer shall
mail, by first class mail, the Tenant Notice Letters (or at Seller's option,
Seller may so deliver the same) to each Tenant under the Leases. Buyer shall
provide Seller with copies of all such Tenant Notice Letters and a certificate
of mailing within (10) calendar days following Closing.
e. Charges for utilities, if any, serving the Property shall be
determined as of the Closing Date, and Buyer shall be responsible for all
utility charges for the period after the Closing Date. The parties shall
mutually cooperate and execute and deliver such additional documents as may be
reasonably necessary or desirable to insure that all such utilities are switched
over into the name of Buyer as of the Closing Date, or as soon as possible
thereafter.
f. Prepaid cable television contract payments shall be prorated as
of the Closing Date and Buyer shall receive a credit against the Purchase Price
for its pro-rata share.
g. In general, any and all other items of current revenue and
expenses relating to the Property on the Closing Date shall be prorated as of
the Closing Date.
h. At Closing, Seller shall deliver vacated apartment units in the
Property in the following condition: (i) for units which have been vacated for
10 or more days as of the Closing Date, such units shall be delivered in "rent
ready" condition and (ii) for units which have been
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vacated for less than 10 days as of the Closing Date, such units shall be
delivered in the condition they were in upon move-out by the tenant therein.
i. At the Closing, Seller and Buyer shall execute and deliver
multiple counterparts of a Closing Memorandum and Indemnification Agreement
("Closing Memorandum") in form substantially the same as that attached hereto as
Exhibit G with respect to the prorations and other adjustments made at Closing.
j. Seller shall pay the premium for the Title Policy as provided
and subject to the limitations contained in paragraph 9 below. All other costs
incurred in the transfer of the Property from Seller to Buyer shall be paid in
accordance with the customs of real estate transactions presently in effect in
Tarrant County, Texas, as solely determined by Escrow Agent.
9. TITLE INSURANCE POLICY.
At the Closing, Seller shall furnish to Buyer a Texas Standard Owner
Policy of Title Insurance (on the form promulgated by the Texas State Board of
Insurance) issued by Chicago Title Insurance Company ("Title Policy"), in the
amount of the Purchase Price, insuring that title to the Property is held by
Buyer subject only to the printed exceptions normally contained in such policy,
the exceptions contained in the Title Report and any amendments to the Title
Report which are deemed to be approved pursuant to paragraph 7 above, and such
other matters as are provided for in this Agreement ("Permitted Exceptions"). If
Seller so requests, the Title Policy shall be issued as a single Title Policy
that covers all of the Property, the Wildwood Property and the Toscana Property,
and Buyer shall not have the right to a separate Title Policy for each such
properties. Buyer may elect to obtain from Escrow Agent a modification to the
Title Policy so that the standard printed exception for boundaries and other
survey type matters shall be limited to "shortages in area"; however, Buyer
shall be responsible for (i) obtaining at its sole cost and expense any
additional surveys needed to obtain such modification and (ii) paying any excess
premium required in order to obtain such modification or other additional
coverage.
10. RIGHT OF ENTRY.
Buyer and its engineers and agents shall have access to the Property at
reasonable times after Opening of Escrow for the purpose of conducting
geological, soil, drainage, engineering, building inspection and environmental
tests and other studies and surveys which Buyer, in its reasonable discretion,
deems necessary. Buyer shall immediately thereafter restore the Property to the
condition which existed prior to performing such tests and studies, and Buyer
shall indemnify, protect, hold harmless and defend Seller for, from and against
any loss, expense, including reasonable attorney's fees, claims, actions, suits
and liability resulting from activities by Buyer or its engineers or agents upon
the Property, and shall keep the Property free from Liens arising out of such
activities. Notwithstanding anything contained in this Agreement to the
contrary, this indemnity and obligation to restore and keep the Property free
from liens shall survive any termination of this Agreement.
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11. SALE PROPERTY CONDITION.
To best of Seller's knowledge, Seller represents and warrants to Buyer,
as of the date hereof and, except as otherwise set forth herein, as of the
Closing Date, as follows:
a. Seller is (i) a natural person or, if not a natural person, is
duly organized, validly existing and in good standing under the laws of the
state in which Seller was organized, whether as a corporation, partnership,
limited partnership, trust or other legal entity, (ii) has full power, authority
and legal right to carry on its business as now being conducted and to own the
property and assets it now owns, and (iii) is duly qualified or licensed to do
business and is in good standing in the jurisdiction where the property is
located unless Seller has been advised by legal counsel that such qualification
is not required by applicable state law;
b. Seller has full power, authority and legal right to execute,
deliver and perform this Agreement and all other documents and certificates
contemplated hereby, and the execution, delivery and performance thereof have
been duly authorized by Seller;
c. No other action is or was required to be taken by Seller to
permit the execution delivery and performance of its Agreement and all other
documents and certificates contemplated hereby, and the transactions
contemplated hereby and no consent or approval of any third party or
governmental authority is or was required or appropriate in connection with the
execution of this Agreement or to consummate the transactions contemplated
hereby;
d. This Agreement constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms;
e. Neither the execution or delivery of this Agreement nor the
consummation by Seller of the transactions contemplated hereby is or was in
violation of or in conflict with (i) any provision of any agreement (including,
without limitation, the organization documents under which Seller is organized),
instrument or other restriction of any kind to which Seller is a party, or by
which Seller or the Property is bound or (ii) in any material or adverse way,
statute, law, decree, regulation or order of any governmental authority, or
resulted or will result in a default under any agreement, or caused or will
cause the acceleration of any obligation or loan to which Seller is a party or
by which Seller or the Property is bound;
f. There are no actions, suits, proceedings, orders or
investigations pending or, to the best of Seller's actual knowledge, threatened
against or affecting Seller or the Property at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which might
materially adversely affect Sellers performance under this Agreement or the
consummation of the transactions contemplated hereby or the use or operation of
the Property; provided, however, Seller discloses that Seller and/or Wildwood
Seller and/or Toscana Seller has filed and is prosecuting a lawsuit against
certain former cable television service providers serving the Property and/or
the Wildwood Property and/or the Toscana Property, and Buyer agrees that
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Seller may continue to prosecute such lawsuit after the Closing and that Buyer
shall have no claim to any portion of any recovery in connection therewith; and
g. Seller is not in default under any agreement, deed of trust,
mortgage, security agreement published ordinance, resolution, or decree, bond,
note, indenture, order or judgment to which it is a party or by which the
Property or assets owned by it or used in the conduct of its business thereon is
affected.
h. To the best of Seller's actual knowledge, all leases, rent rolls
or income statements furnished by Seller are materially accurate.
i. There are no outstanding rent concessions of any kind with
respect to the Leases, and if any such concessions are found to exist Seller
shall reimburse Buyer therefor.
j. The mechanical components of the Property shall be in working
order at the time of Closing, normal wear and tear excepted (and taking into
consideration the age of such items).
k. Seller has no knowledge of any default under any of the Leases
except as specified in the Rent Roll or otherwise disclosed to Buyer in writing
prior to the Feasibility Termination Date.
l. Seller has not received any notice of any violation of any
ordinance, regulation, law or statute of any governmental agency pertaining to
the Property or any portion thereof.
m. At all times from the date hereof until Closing, Seller shall
materially maintain, operate and lease the Property in a manner and standard
consistent with Seller's historical operation of the Property.
These representations and warranties shall survive close of escrow for a
period of twelve (12) months. SELLER MAKES NO OTHER REPRESENTATIONS OR
WARRANTIES WHATSOEVER.
EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, BUYER
ACKNOWLEDGES, REPRESENTS, WARRANTS AND AGREES THAT: (I) BUYER IS PURCHASING THE
PROPERTY, ANY IMPROVEMENTS NOW OR HEREAFTER MADE THERETO AT CLOSING IN "AS IS"
AND "WHERE IS" CONDITION, WITH ALL FAULTS WITHOUT ANY WARRANTY EXPRESSED OR
IMPLIED WHATSOEVER; (II) BUYER HAS MADE OR SHALL MAKE PRIOR TO CLOSING ITS OWN
EXAMINATION, INSPECTION AND INVESTIGATION OF THE PROPERTY, ALL IMPROVEMENTS, IF
ANY, LOCATED THEREON, THE SUBSURFACE OF THE PROPERTY AND ALL SOIL, ENGINEERING,
ENVIRONMENTAL OTHER CONDITIONS AND REQUIREMENTS FOR THE PROPERTY AND ANY
PERSONAL PROPERTY; (III) BUYER HAS OR SHALL INVESTIGATE ALL ZONING, BUILDING AND
GOVERNMENTAL REGULATORY MATTERS PERTAINING TO THE PROPERTY PRIOR TO CLOSING;
(IV) BUYER IS ENTERING INTO THIS AGREEMENT AND IS PURCHASING THE PROPERTY AND,
BASED UPON SUCH INSPECTIONS AND INVESTIGATIONS AND NOT IN RELIANCE ON ANY
STATEMENTS, REPRESENTATIONS, INDUCEMENTS OR AGREEMENTS OF SELLER AND/OR BROKER
IN CONNECTION WITH THE PROPERTY, ITS ZONING, ITS FITNESS OR MERCHANTABILITY FOR
ANY PARTICULAR USE OR PURPOSE, AVAILABILITY OF WATER
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OR UTILITIES, SOIL OR ENVIRONMENTAL CONDITIONS, ENCROACHMENTS WHICH WOULD BE
DISCLOSED BY EITHER AN INSPECTION OF THE PROPERTY OR A SURVEY, FLOODING AND SUCH
OTHER MATTERS AS MIGHT BE DISCLOSED OR DETERMINED BY AN EXAMINATION OF THE
PROPERTY AND INDEPENDENT INQUIRY WITH RESPECT THERETO; (V) ANY ENGINEERING DATA,
ENVIRONMENTAL AUDIT, SOILS REPORTS, SURVEYS OR OTHER INFORMATION THAT SELLER OR
ANY OTHER PARTY MAY HAVE DELIVERED TO BUYER PERTAINING TO THE PROPERTY IS
FURNISHED WITHOUT ANY REPRESENTATION OR WARRANTY WHATSOEVER; AND (VI) SELLER
AND/OR BROKER SHALL HAVE NO RESPONSIBILITY, LIABILITY OR OBLIGATION RESPECTING
THE PROPERTY SUBSEQUENT TO CLOSING. BUYER SHALL MAKE ITS OWN INVESTIGATION
REGARDING THE PRESENCE OF ANY TOXIC WASTE OR HAZARDOUS MATERIALS ON THE
PROPERTY.
12. BROKERAGE.
a. Seller shall pay to Western Rim Property Services, Inc.
("Broker"), an affiliate of Seller, a real estate broker's commission for the
sale of the Property by Seller to Buyer equal to five percent (5%) of the
Purchase Price, in cash at Closing, provided that such commission shall be
payable only if, as and when Closing shall occur hereunder. If Closing does not
occur for any reason whatsoever, Broker shall not be entitled to any commission
whatsoever or any portion of the Earnest Money Deposit forfeited to Seller.
Buyer and Seller each represent to the other that it has not dealt with any real
estate broker or any other party entitled to a commission, broker's fee or other
compensation in connection with the sale of the Property by Seller to Buyer
except Broker. Buyer and Seller each agree to indemnity, protect, defend and
hold the other harmless for, from and against any expense, including without
limitation, attorneys' and accountants' fees, claims, actions, suits or demands
for payment of any commission, finder's fee or other sum initiated by any
broker, commission agent or other person which such party or its representatives
has engaged or retained or with which it has had discussions concerning the
transaction contemplated by this Agreement except Broker. Notwithstanding
anything in this Agreement to the contrary, the representation and indemnity set
forth in this paragraph shall survive any termination of this Agreement.
Furthermore, notwithstanding anything to the contrary in this Agreement, Western
Rim Property Services, Inc., represents Seller only and does not represent Buyer
in any manner whatsoever.
b. Buyer acknowledges that it has retained or may retain Pinnacle
Realty or an affiliate thereof ("Pinnacle") in connection with Buyer's due
diligence review of the transaction. Buyer represents and warrants that Pinnacle
is not acting in a broker capacity in this regard and in any case any and all
amounts owed to Pinnacle or claimed to be owed by Pinnacle shall be the sole
responsibility of Buyer, and Seller shall have no responsibility therefor.
13. CHANGES IN THE PROPERTY.
Prior to Closing, risk of loss with regard to the Property shall be
borne by Seller. If, prior to Closing, the Property or any portion thereof is
destroyed or damaged, or becomes subject to a taking by virtue of eminent
domain, to any extent whatsoever, Buyer may, in Buyer's sole discretion, either
(i) terminate this Agreement and receive back Buyer's Earnest Money Deposit and
Additional Earnest Money Deposit, and neither party hereto shall have any
further rights or obligations hereunder, or (ii) proceed with the Closing of the
transaction, in
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which event Seller shall assign to Buyer all insurance or condemnation proceeds
available as a result of such destruction or taking (including proceeds from
loss of rents coverage), and in which event Buyer shall also receive a credit
against the Purchase Price for any deductible amounts from such insurance
proceeds.
14. POSSESSION.
Possession of the Property shall be delivered to Buyer upon Closing,
subject to the matters set forth in the Deed.
15. NOTICES.
Unless otherwise required by law, all notices required to be given
hereunder shall be in writing and shall be conveyed by (i) personal delivery
(including by any messenger service, courier service, overnight delivery or
facsimile with confirmation of receipt) to the address listed below for such
party or (ii) the United States Postal Service by certified or registered mail,
postage prepaid, with return receipt requested, to the address listed below for
such party or (iii) telecopied by facsimile transmission to such party at the
telecopy number listed below, provided that such transmission is confirmed by
telephone on the date of such transmission. The addresses and telecopy numbers
for the parties are as follows:
if to Seller:
(Overnight) Western Rim Investment Advisors, Inc.
2400 North Highway 121
Euless, TX 76039
Attn: Marcus D. Hiles, President
Facsimile: (817) 355-2505
Phone: (817) 355-2500
(U.S. Mail) P. O. Box 426
Colleyville, TX 76034
with a copy of any Kelly, Hart and Hallman
notice to Seller to: 201 Main Street, Suite 2500
Fort Worth, TX 76102
Attn: David Mellina, Esq.
Facsimile: (817) 878-9280
Phone: (817) 878-3538
if to Escrow Agent: Safeco Land Title of Tarrant
777 Main Street
Concourse, #10
Fort Worth, Texas 76102
Attn: Jeff Davis, President
Facsimile: (214) 445-5047
Phone: (817) 877-1481
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if to Buyer: Cornerstone Realty Income Trust, Inc.
306 E. Main Street
Richmond, Virginia 23219
Attn: Gus Remppies
Facsimile: (804) 782-9302
Phone: (804) 643-1761
with copies of any Zuckerbrod & Taubenfeld
notice to Buyer to: 575 Chestnut Street
P.O. Box 488
Cedarhurst, New York 11516
Attn: Harry S. Taubenfeld
Facsimile: (516) 374-3490
Phone: (516) 374-3133
and to:
Brown McCarrol & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, Texas 75201-6929
Attn: Robert Morrison
Facsimile: (214) 999-6170
Phone: (214) 999-6103
Notice given by personal delivery shall be deemed to have been given
upon delivery to the appropriate address against receipt therefor (or upon
refusal of acceptance), and notice given by U.S. mail shall be deemed to have
been given two days after deposit in the U.S. mail, and notice by facsimile
transmission shall be deemed to have been given on the date of such transmission
provided that such transmission is confirmed by telephone on the date of such
transmission. Each party may designate from time to time, another address in
place of the address hereinabove set forth by notifying the other parties in the
same manner as provided in this paragraph.
16. DEFAULT BY BUYER.
Except as provided below in this paragraph, if on or prior to Closing,
Buyer shall default in performing or fulfilling any of the covenants or
obligations to be performed by it under this Agreement or the Other Agreements,
including without limitation, Buyer's failure to complete the purchase of the
Property, Wildwood Property and Toscana Property, Seller shall, as its sole
remedy, obtain the Earnest Money Deposit (including all additions thereto) and
any other sums theretofore deposited in Escrow or paid to Seller to such time,
as liquidated damages to Seller for such breach by Buyer, Buyer and Seller
agreeing that the amount of damages for such breach by Buyer is difficult to
determine at this time and that the aforesaid sum is a reasonable estimation of
the amount of liquidated damages of such breach under the circumstances existing
at the time this Agreement is entered into. Upon giving notice by Seller to
Buyer and Escrow
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Agent of such default, if such default is not cured within five (5) business
days after such notice, Escrow Agent shall deliver to Seller the Earnest Money
Deposit (including all interest earned thereon); whereupon, this Agreement and
the Other Agreements shall be deemed terminated, and Buyer and Seller shall have
no further obligation or liability to the other regarding the purchase and sale
of the Property, except such specific indemnification provisions as are provided
for in this Agreement. Notwithstanding the foregoing, Seller may pursue all
rights and remedies available at law or in equity against Buyer in the event of
a Breach or default by Buyer under the specific indemnification provisions
provided for in this Agreement as an additional remedy and not in lieu of the
foregoing liquidated damages remedy.
17. DEFAULT BY SELLER.
In the event that Seller defaults under this Agreement, Buyer shall have
as its sole remedies the right (i) to require specific performance by Seller
hereunder or (ii) to terminate this Agreement and to be repaid the Earnest Money
Deposit and Additional Earnest Money Deposit, together with any interest which
may have been earned thereon, plus a reimbursement of all reasonable actual
out-of-pocket expenses incurred by Buyer in connection with its inspection of
the Property, including engineering fees, legal fees and accounting fees. Buyer
hereby specifically waives any and all other rights and remedies in equity or at
law, subject, however, to its rights to recoup its attorneys fees as provided in
paragraph 19 below. Buyer acknowledges that Seller's inability or unwillingness
to deliver title to the Property in a condition required by Buyer shall not be
deemed to be a default by Seller hereunder and Buyer's sole remedy in such event
shall be to terminate the Agreement and to be repaid the Earnest Money Deposit
together with any interest earned thereon.
18. REPRESENTATIONS AND WARRANTIES AT CLOSING.
All of Buyer's representations and warranties contained in this
Agreement shall be true and correct at Closing as though made at and as of
Closing. All of Seller's representations and warranties contained in this
Agreement shall be true and correct at Closing as though made at and as of
Closing.
19. ATTORNEYS' FEES.
If either party to this Agreement shall breach its representations or
warranties hereunder or shall fail to fulfill or perform any of its covenants or
obligations in this Agreement, that party shall pay all costs, including,
without limitation, reasonable attorneys' fees and expert witness fees that may
be incurred to enforce the terms, covenants, conditions and provisions of this
Agreement or that may be incurred as a result of the default under or breach of
this Agreement in the event legal action is commenced.
20. ENTIRE AGREEMENT; AMENDMENT.
All exhibits attached to this Agreement are incorporated into this
Agreement by reference and made a part hereof. This Agreement, including all
exhibits hereto, is the entire Agreement
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between parties pertaining to all matters agreed upon or understood in
connection with the sale and purchase of the Property. There are no oral
promises, conditions, representations, understandings, interpretations or terms
of any kind as conditions or inducements to the execution hereof or in effect
between the parties. No change or addition may be made to this Agreement except
by a written agreement executed by the parties.
21. TIME OF ESSENCE.
Time is of the essence with respect to the performance of all terms,
covenants, conditions and provisions of this Agreement. No provision of the
Escrow Instructions shall extend the Closing Date by more than five (5) business
days or provide either party hereto with any grace period not provided in this
Agreement.
22. FURTHER ASSURANCES.
The parties hereto shall execute, acknowledge and deliver such other
instruments and documents as may be necessary or appropriate to carry out the
full intent and purpose of this Agreement.
23. APPLICABLE LAW.
This Agreement and the rights of the parties hereto shall be
interpreted, governed and construed in accordance with the laws of the State of
Texas.
24. SECTION HEADINGS.
The section headings in this Agreement are inserted only for convenience
and reference and the parties intend that they shall be disregarded in
interpreting the terms, covenants, conditions and provisions of this Agreement.
25. SEVERABILITY.
Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be valid under applicable law, but if any provision shall
be invalid or prohibited hereunder, such provision shall be ineffective to the
extent of such prohibition or invalidation but shall not invalidate the
remainder of such provision or the remaining provisions.
26. WAIVER.
Either of the parties shall have the right to excuse or waive
performance by the other party of any obligation under this Agreement by a
writing signed by the party so excusing or waiving. No delay in exercising any
right or remedy shall constitute a waiver thereof, and no waiver by Seller or
Buyer of the breach of any covenant of this Agreement shall be construed as a
waiver of any preceding or succeeding breach of the same or any other covenant
or condition of this Agreement.
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27. ASSIGNMENT; BINDING EFFECT.
Buyer may only assign this Agreement and all of its rights, privileges
and benefits hereunder, or designate a nominee to take title for Buyer, without
Seller's prior written consent so long as its to a wholly owned subsidiary or
affiliate of Buyer. Seller hereby acknowledges and consents that Buyer may
assign its rights hereunder to Apple Residential Income Trust, Inc., a Virginia
corporation ("Apple"); provided, however, Buyer hereby represents and warrants
to Seller that Apple shall be a wholly owned subsidiary or affiliate of Buyer.
Any assignee consented to hereunder shall be required to assume and agree in
writing to perform all Buyer's obligations hereunder, and Buyer shall provide
Seller with a copy of the assignment and assumption agreement between Buyer and
such assignee. Upon any assignment hereunder, Buyer hereunder shall not be
released from any of its obligations or liabilities under this Agreement, nor
shall the Earnest Money Deposit be released to Buyer upon any assumption. Seller
may not assign and transfer any right, title and interest hereunder. Except as
otherwise provided herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. Seller shall not unreasonably withhold
its consent to any assignment of this Agreement by Buyer to an entity which
Buyer owns at least a 50% interest.
28. CONSTRUCTION.
As used in this Agreement, the masculine, feminine or neuter gender and
the singular or plural numbers shall each be deemed to include the other
whenever the context so requires. This Agreement shall be construed as a whole
and in accordance with its fair meaning and without regard to any presumption or
other rule requiring construction against the party causing this Agreement or
any part of this Agreement to be drafted. The parties acknowledge that each
party has reviewed this Agreement and has had the opportunity to have it
reviewed by legal counsel. If any words or phrases in this Agreement are
stricken or otherwise eliminated whether or not other words or phrases have been
added, this Agreement shall be construed as if the words or phrases stricken or
otherwise eliminated were never included in this Agreement, and no implication
or inference will be drawn from the fact that the words or phrases were stricken
or otherwise eliminated.
29. DEFAULT INTEREST.
If any monies become payable by one party to the other person pursuant
to this Agreement and are not paid when due, then all sums unpaid shall bear
interest at the rate of twelve percent (12%) per annum, from the date when due
until paid; provided, however, the provisions of this paragraph shall not apply
with respect to the Additional Earnest Money Deposit.
30. NO PARTNERSHIP, THIRD PERSON.
It is not intended by this Agreement to, and nothing contained in this
Agreement shall, create any partnership, joint venture or other arrangement
between Seller and Buyer except as
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specifically provided herein. No term or provision of this Agreement is intended
to benefit of any person, partnership, corporation or other entity not a party
hereto (including without limitation, any broker), and no such other person,
partnership, corporation or entity shall have any right or cause of action
hereunder.
31. TIME OF PERFORMANCE.
If the date for performance of any obligation hereunder or the last day
of any time period provided for herein shall fall on a Saturday, Sunday or legal
holiday, then said date for performance or time period shall expire on the first
day thereafter which is not a Saturday, Sunday or legal holiday. Except as may
otherwise be set forth herein, any performance provided for herein shall be
timely made and completed if made and completed no later than 5:00 P.M. (Texas
time) on the day for performance.
32. SURVIVAL.
Except as otherwise provided herein, all covenants, agreements,
representations and warranties set forth in this Agreement or in any certificate
or instrument executed or delivered pursuant to this Agreement shall survive the
Closing and shall not merge into any deed, assignment or other instrument
executed or delivered pursuant hereto.
33. RECORDING.
This Agreement shall not be filed or recorded in any public office in
the State of Texas.
34. CLOSING FUNDS.
The funds which will be required from Buyer and all other acts required
of Buyer in order to consummate the transaction contemplated by this Agreement
shall be deposited with Escrow Agent and performed no later than 10:00 A.M.
(Texas time) on the Closing Date. The Closing funds shall be available for
immediate distribution to Seller at Closing after payment of all liens including
mortgages, mechanic liens, etc. The net proceeds of sale that are to be
distributed to Seller at Closing shall be remitted by Escrow Agent in accordance
with Seller's instructions given at or prior to Closing.
35. IRS REAL ESTATE SALES REPORTING.
Buyer and Seller hereby appoint Escrow Agent as, and Escrow Agent agrees
to act as, "the person responsible for Closing" the transaction which is the
subject of this Agreement pursuant to Internal Revenue Code of 1986 Section
6045(e). Escrow Agent shall prepare and file the information return (IRS Form
1099-B) required by and otherwise comply with the terms of IRC SS6045(e). Escrow
Agent further agrees to indemnify and hold Buyer, Seller and there respective
attorneys harmless from and against all claims, costs, liabilities, penalties or
expenses resulting from Escrow Agent's failure to file the appropriate reports
and otherwise comply with the terms of the Internal Revenue Code pursuant to
this paragraph.
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36. NON-FOREIGN ENTITY.
Seller shall execute and deliver to Buyer at Closing an affidavit as
required by Internal Revenue Code Section 1445(b)(2) setting forth Seller's
taxpayer identification number, Seller's address and stating that it is not a
foreign person for purposes of that Section ("Non-Foreign Status
Certification").
37. COUNTERPART EXECUTION.
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original and all of which together shall be deemed one and the
same Agreement.
38. ACCEPTANCE.
This offer to purchase the Property by the party first executing and the
terms set forth herein shall automatically terminate at 5:00 P.M. (Texas time),
on February 15, 1997, unless accepted by the other party by delivering to the
first executing party at its address referenced above a fully executed
counterpart of this Agreement no later than said date.
39. OTHER OFFERS.
Seller may accept and negotiate back-up offers and contracts should
Buyer default under this Agreement. No other offer or Contract would be in force
or effect if or until Buyer defaults.
40. CONFIDENTIALITY.
Buyer agrees to hold this Agreement and its contemplated acquisition
strictly confidential and only disclose the contemplated acquisition to its
attorneys, accountants, professional consultants and advisors, lenders and title
company. In no event, under any circumstances whatsoever, shall this sale prior
to closing be disclosed to any on-site employee of Western Rim Property
Services, Inc. or its vendors, suppliers, contractors, or any resident at any of
the Sellers properties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first set forth above.
BUYER:
Cornerstone Realty Group, Inc., a Virginia
corporation
By: /s/ S. J. Olander
----------------
Name: S. J. Olander
Title: S. VP
SELLER:
Western Rim Investors 1992-5, L.P., a California
Limited Partnership, dba Arbors on Forest Ridge
By: Western Rim Investment Advisors, Inc.,
its General Partner
By: /s/ Marcus D. Hiles
------------------
Marcus D. Hiles, President
ESCROW AGENT:
Escrow Agent hereby agrees to be bound by the provisions hereof
applicable to Escrow Agent and to perform its obligations as set forth herein
and hereby declares that Opening of Escrow has occurred this 7th day of February
1997.
Safeco Land Title of Tarrant
By: /s/Barbara Hutson
-----------------
Name: Barbara Hutson
Title: Commercial Operations Manager
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Exhibit 10.2
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of April,
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 The Arbors on Forest Ridge 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' 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;
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'
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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<PAGE>
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/ Glade M. Knight
-------------------
Title:
5
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MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ Glade M. Knight
-------------------
Title:
6
