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: June 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
(Pace's Cove Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Pace's Cove Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Pace's Cove Apartments)*
b. Pro Forma Statement of Operations for the Six Months
ended June 30, 1997 (unaudited)*
Pro Forma Balance Sheet as of
June 30, 1997 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1996
(unaudited)*
c. Exhibits
10.1 Purchase Contract for Pace's Cove Apartments
10.2 Property Management Agreement for Pace's Cove
Apartments
23.1 Consent of Independent Auditors*
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___________________________
* To be filed by amendment.
<PAGE>
Item 2. Acquisition or Disposition of Assets
PACE'S COVE APARTMENTS
Dallas, Texas
On June 24, 1997, the Company purchased the Pace's Cove Apartments, a
328-unit apartment complex at 13100 Pandora Drive in Dallas, Texas (the
"Property"). The seller was unaffiliated with the Company, the Advisor, and
their Affiliates. The purchase price was $9,277,355. The Company borrowed the
entire purchase price under its unsecured line of credit and will seek to repay
this borrowed amount using proceeds from the future sale of Shares. Title to the
Property was conveyed to the Company by limited warranty deed.
LOCATION. The Property is located in the northern portion of Dallas
within "The Metroplex." For information on The Metroplex see "Brookfield
Apartments" herein.
The neighborhood surrounding the Property consists of other
multi-family and single-family housing and commercial and retail development.
The Property is an approximately 20-minute drive from Dallas/Fort Worth
International Airport and an approximately 15-minute drive from downtown Dallas.
DESCRIPTION OF THE PROPERTY. The Property consists of 328 garden-style
apartment units located in 19 two- and three-story buildings on approximately 13
acres of land. The Property was constructed in 1982.
The Company believes that the Property has generally been well
maintained and is generally in good condition. However, the Company has budgeted
approximately $75,000 for certain repairs and improvements, including clubhouse
renovations.
The Property offers a variety of unit types. The unit mix and rents
currently being charged new tenants as of the date of this Supplement are as
follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
- -------- ---- -------------- --------------
42 One 504 $420
bedroom/one
bath
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Approximate
Interior
Quantity Type Square Footage Monthly Rental
- -------- ---- -------------- --------------
42 One 504 430
bedroom/one
bath upstairs
40 One 572 440
bedroom/one
bath
40 One 572 450
bedroom/one
bath upstairs
42 One 690 520
bedroom/one
bath
w/fireplace
42 One 690 530
bedroom/one
bath
w/fireplace
upstairs
20 One 757 605
bedroom/one
bath/den
w/fireplace
30 Two 925 645
bedrooms/two
baths
w/fireplace
30 Two 1,026 680
bedrooms/two
baths
w/fireplace
The apartments provide a combined total of approximately 220,000 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 downstairs one-bedroom, one-bath apartment (504 square feet) rented
for $330 in 1992, $330 in 1993, $370 in 1994, $390 in 1995, and $420 in 1996.
The
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average effective annual rental per square foot at the Property for 1992, 1993,
1994, 1995, and 1996 was $7.14, $7.14, $8.01, $8.44, and $9.09, respectively.
The buildings are wood-frame construction with a combination of brick
veneer and stucco with painted trim on concrete slab foundations. Roofs are
pitched and covered with asphalt shingles on plywood sheathing.
The Property has two outdoor swimming pools, a hot tub and jacuzzi,
volleyball area, fitness center, laundry facility and covered parking for
approximately 328 vehicles. The Property also includes a clubhouse with a
leasing office. There is also ample uncovered paved parking for residents.
Each apartment unit has wall-to-wall carpeting in the living area and
vinyl floors in the kitchen and bath. Each apartment units has a cable
television hook-up, miniblinds, and an individual heating and air-conditioning
unit. Each kitchen has a refrigerator/freezer, electric range and oven,
dishwasher and garbage disposal. Each unit has full-sized washer/dryer
connections and a security alarm. The owner of the Property pays for cold water,
sewer charges and trash removal. The tenants pay for electricity service, which
includes cooking, lighting, heating, hot water and air-conditioning.
There are at least seven apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are lower
when compared with those of the Property. Based on a recent telephone survey,
the Advisor estimates that occupancy at nearby competing properties now averages
approximately 95%.
According to information provided by the Seller, physical occupancy at
the Property averaged approximately 92% in 1992, 91% in 1993, 93% in 1994, 94%
in 1995, and 93% in 1996. As of June 4, 1997, the Property was 90% occupied. The
residents are a mix of white-collar and blue-collar workers.
The following table sets forth the 1996 real estate tax information on
the Property:
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Jurisdiction Assessed Value Rate Tax
- ------------ -------------- ---- ---
City of Dallas $7,895,980 $0.46255 $36,522.86
County of 7,895,980 2.13063 168,234.12
Dallas
Total $204,756.98
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $6,204,450) 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 will 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.
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ACQUISITION AND MANAGEMENT SERVICES AND FEES. The Company will pay
Cornerstone Realty Income Trust, Inc. a property acquisition fee equal to 2% of
the purchase price of the Property, or $185,547. Cornerstone Realty Income
Trust, Inc. will also 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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<PAGE>
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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<PAGE>
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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<PAGE>
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: July 2, 1997 By: /s/ Glade M. Knight
-------------------
Glade M. Knight
President
of Apple Residential
Income Trust, Inc.
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<PAGE>
EXHIBIT INDEX
Apple Residential Income Trust, Inc.
Form 8-K dated June 24, 1997
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
10.1 Purchase Contract for Paces's
Cove Apartments
10.2 Property Management Agreement
for Pace's Cove Apartments
23.1 Consent of Independent Auditors*
* To be filed by amendment.
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Exhibit 10.1
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 21 day of February 1997
(the "Effective Date"), between CORNERSTONE REALTY GROUP, INC. or its
nominee, (hereinafter called "Purchaser") and INTERCAPITAL PORTFOLIO 944
I LIMITED PARTNERSHIP, an Illinois 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 PACES COVE APARTMENTS
located in DALLAS, 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 328 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).
1.2 "As Is". The Property is being sold "as is", except for the
warranties set forth otherwise herein.
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 Purchase Price. The total purchase price shall be NINE MILLION TWO
HUNDRED THOUSAND ($9,200,000) 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 Texas State Title Insurance
Corporation or its authorized agent (the "Title Company") as an earnest money
deposit which may be credited against the purchase price or applied as per
Article XI below.
2.3 Independent Contract Consideration. Purchaser shall, concurrently
with its execution hereof, deliver to Seller a check in the amount of FIFTY
($50) DOLLARS (the "Independent Contract Consideration"), which amount Seller
and Purchaser agree has been bargained for as consideration for Seller's
execution and delivery of this Contract and Purchaser's right to inspect the
<PAGE>
Property. The Independent Contract Consideration is in addition to 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, subject only to general taxes for the current year not yet due
and payable and utility easements which do not interfere with the present use
of the Property, and the "Permitted Exceptions". "Permitted Exceptions" are
those title exceptions listed in the title commitment, which are not objected
to pursuant to section 3.2, or as provided in sections 3.3 and 3.5 below and
acts of Purchaser.
(A) Title shall be free from any and all liens on 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 fifteen (15) 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). Seller will not pay for any endorsements deleting or
amending the Survey exceptions. 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 by Purchaser
notifying Seller 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. The intent being that if Purchaser does not
waive title defects within five (5) days, this Agreement shall automatically
be null and void.
3.4 Survey. Upon the Effective Date, the Seller shall
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<PAGE>
deliver to the Purchaser an existing Survey and as soon as reasonably possible,
and in any event within three (3) days after the expiration of the Inspection
Period, 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 "Updated Survey") of the Property prepared
by a Registered Professional Land Surveyor reasonably acceptable to the
Purchaser. The Survey shall show the location and size of all of the
following on or 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 Updated Survey sometimes hereinafter referred to as the "Survey" shall
show the gross land area. The Updated 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 area within the 100-year flood plain shall be as defined
by the Federal Emergency Management Agency or other applicable governmental
authority.
3.5 Subject to the following sentences, the Survey shall show no
encroachments onto the Land from any adjacent property, no encroachments
by or from the Land onto adjacent property and no violation of or encroachments
upon any recorded building lines, restrictions or easements affecting the
Property. If the Survey discloses any such encroachment or violation, Seller
shall have ten (10) days from the date of delivery of the Updated Survey and
receipt of Purchaser's notice (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 ten (10) 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".
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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3.7 The Inspection Period shall be extended for a period of ten (10)
days for a review of the Updated Survey delivered pursuant to Paragraph 3.4.
However, in the event that the Updated Survey is delivered after the end of the
original unextended Inspection Period, the Purchaser may only raise such
objections as are brought about as a result of said Survey. Seller shall have
five (5) days from receipt of Purchaser's notice to have the title company issue
its endorsement insuring over the encroachments.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following shall be prorated, on
a calendar-month basis, to the date of delivery of the deed: rents and other
income from the Property; operating expenses (on such service contracts and
other obligations as Purchaser takes subject to); 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). Purchaser shall get the
benefit of the prorations on the date of closing if the Purchase Price is wired
to the title company and closing occurs by 2:00 CST. If the money is sent later
than 2:00, Seller shall get the prorations on the date of closing.
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
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 and
rents received by Purchaser for the month of closing shall be prorated as agreed
in 4.1 above. Purchaser shall apply rents received after the month of Closing
first to payment of the current rent due to Purchaser, then to delinquent rents
due to Purchaser, and last to rents due to Seller as of the Closing but
uncollected prior to settlement. Purchaser agrees to use its best efforts in
good faith to collect the amount of any rental arrears from tenants and
Purchaser agrees to remit promptly to Seller any such arrears actually paid by
such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 Prior Lease Concessions. Seller shall pay to Purchaser, in a lump
sum at closing, all future monetary concessions which Seller has given to
tenants under leases existing at the time of closing.
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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 and any service agreements assumed by Purchaser.
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 at Purchaser's expense of an engineering report
of building and site conditions, satisfactory to Purchaser in its sole
discretion, said report to include in part, a description of any hazardous waste
sites, hazardous wastes and/or hazardous materials affecting the property.
Purchaser shall have fifteen (15) days in which to review the reports set forth
herein and exercise its right to reject the Property based thereon or the
right hereunder shall be deemed waived.
(B) The receipt by Purchaser of Seller documents described in 7.2 below.
(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 subject to Par. 9 or leases. All leasing shall be pursuant to
past good business practices.
(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 during business hours, upon at least two (2)
business days notice 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. Purchaser acknowledges that the
books and records are kept in the Houston office of the Seller.
(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
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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.
(G) All of the conditions precedent under 6.1(A), (B) and (F) shall be
deemed satisfied if Purchaser does not terminate this Agreement prior to the
expiration of the Inspection Period.
6.2 Inspection. This Agreement shall be further subject to and
contingent upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 Preparation for Inspection. At the execution of this Agreement,
Seller shall deliver to Purchaser copies of the following: The current rent
roll for the Property; detailed statements of income and expenses with respect
to the Property for the past two years; the most recent tax bills for the
Property; utility bills for the Property for the twelve (12) months previous to
the date hereof; all contract, and other documents creating liens of security
interest on the Property (if not to be released at closing), or any part thereof
and all promissory notes secured thereby; synopsis of all insurance policies
applicable to the Property to include loss runs for the last two (2) years;
Plans and Specifications for the Property if in Seller's possession, service
contracts, Certificates of Occupancy if in Seller's possession, to the extent
reasonably available, if any; 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. Seller does not
warrant the truth or accuracy to the information on the environmental or
engineering reports, or the Plans and Specifications other than to state that
they were received in the ordinary course of business.
6.2.2 Inspection of Books and Records; Access. Upon the signing of this
Agreement by both parties, Purchaser, its employees, agents and contractors
shall have twenty-one (21) days after the Effective Date of this Contract (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
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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. There shall be no intrusive testing without
Seller's consent.
6.2.3 Indemnification. Purchaser agrees to indemnify and hold Seller
harmless from any damages, liability, loss, cost, expense, causes of action and
liens arising from Purchaser's inspection of the Property. Purchaser shall
restore any damages caused by any tests, studies or inspections performed by or
on behalf of Purchaser. This indemnification and agreement shall survive
termination of this Agreement and closing for one (1) year (unless an action is
brought within said one (1) year in which event it will survive until final
adjudication) and shall not be subject to any liquidated damages provision.
6.2.4 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. If
Purchaser does not terminate, the condition under Par. 6.2 shall be deemed
satisfied.
6.2.5 "Rent Ready". During the Inspection Period, both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree that
said apartment shall be representative of a "rent ready" unit by which all other
units shall be judged for "rent ready" condition at closing. All vacant
apartment units, are to be in a "rent ready" condition (as defined above), at
the time of closing, containing, but not limited to the following amenities,
i.e., carpet, refrigerator, range, garbage disposal, if any, heating, plumbing
and electrical systems. Upon failure to agree, then it shall be understood that
"rent ready" shall be deemed clean and painted (if necessary) in accordance with
Seller's normal practice to rent to new occupants and all amenities included
above shall be in good working order, normal wear and tear expected.
6.2.6 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, except for normal wear and tear. If Seller fails to make reasonable
efforts to conserve the property, Purchaser shall have the option of waiving
such requirement, in writing, and
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proceeding to closing, or Purchaser may void this Agreement and obtain a prompt
return of its deposit, pursuant to Article XI.
ARTICLE VII
CLOSING
7.1 Closing. Closing will be held on March 24, 1997, at such place and
at such time as the parties may agree. However, either party shall be entitled
to one (1) extension of seven (7) days upon request.
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 (with respect to residential leases) not
for more than one (1) year.
(D) All security and cleaning deposits made by such tenants. Seller
will give the tenants the required notice of such transfer in compliance with
the laws of TEXAS.
(E) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(F) A rent roll certified by Seller to be true and correct as of the
date of closing showing the name of, and the amount of monthly rental payable,
by each tenant of the Property, the apartment occupied by the tenant, the date
to which rent has been paid, any advance payment of rent, and the amount of any
escrow, or security deposit of tenant.
(G) An affidavit of Seller sufficient to satisfy the title company
that to the best of its information and belief there are, on the date of
closing, no unsatisfied judgments, creditor's claims other than in the course of
business, tax liens, or pending bankruptcies involving Seller.
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(H) Assignments of all Seller's interest in the following: (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.
(I) Assignments without recourse of all warranties and guarantees,
if any, 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.
(J) 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.
(K) Provide documents for the transfer of the telephone, electric,
water and sewer, and gas utilities, as may be required by the utility, for
execution at closing, provided Purchaser will post new bonds or security
deposits if required by the utility company.
(L) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement.
(M) Affidavit that Seller has received no actual notice of the
presence of asbestos and/or any other hazardous material at the Property (except
as may be disclosed in the environmental report delivered to Purchaser).
(N) 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.
(O) A notice letter to all the residents of the apartment complex as
to change of ownership in the form prepared by the Purchaser, a copy of which is
annexed hereto as EXHIBIT C.
(P) 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.
(Q) A representation letter as normally required by auditors for a
public company in the form attached hereto as EXHIBIT D. This clause shall
survive closing for one year.
(R) Closing Memorandum and Indemnification Agreement in the form
attached hereto as EXHIBIT E.
9
<PAGE>
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 Purchaser shall take subject to and any other
obligations specifically set forth herein, a copy of which is annexed hereto as
EXHIBIT F.
(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.
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,
10
<PAGE>
rental agreement service or equipment contract, or mortgage or other
encumbrances relating to the Property. This warranty shall survive for one year
the following closing.
(E) 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.
(F) Seller has not received any notice, written or oral, nor has
actual knowledge of any code violation without duty to investigate. Seller has
not received any notice of condemnation proceedings with respect to the
Property. This warranty shall survive for one year following closing. Knowledge
shall be referred to as knowledge of the Property manager of Paul Austin, Vice
President of Seller.
(G) 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.
(H) 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 modify, extend or cancel any
tenant lease (except in accordance with the terms of such lease or in accordance
with good business practice) or any dealing with any tenant other than in 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 before closing and without
cost to the Purchaser, continue its normal course of operation with respect to
causing tenants to be obtained for apartments which are unrented.
8.2 Continuation of Representations, Warranties and Covenants to the
Date of Closing. If upon ten (10) days' notice to Seller calling for the curing
of a breach of warranties prior to closing (during which period Seller may cure
the breach of warranties), 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 Willful Breach of Representations, Warranties and Covenants.
Notwithstanding the provisions of 8.2 above, Seller shall indemnify Purchaser
for all reasonable costs incurred as a
11
<PAGE>
result of the willful failure of any of Seller's representations, warranties or
covenants contained in this Par. 8 to remain true as of the date of closing,
however, Seller's liability shall not exceed $50,000.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 Property Damage. If, prior to closing, any part of the Property is
damaged by fire or other casualty in an amount of more than One Hundred Thousand
($100,000) Dollars, Seller shall advise Purchaser if Seller will 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 delivered to Seller within ten (10) days of Seller's notice. In the
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 not elect to cancel this Agreement despite such damage or if
the loss shall be less than One Hundred Thousand ($100,000) Dollars, the parties
shall close without a reduction of Purchase Price and Seller shall assign to
Purchaser all insurance proceeds and any deductible arising from such damage and
will compensate Purchaser for lost rent collections to the extent of insurance
proceeds received by Seller. Seller shall promptly notify Purchaser in writing
upon the occurrence of any such damage.
9.2 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any actual
or proposed sale in lieu thereof, the Seller shall give written notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof. Upon
a taking of a material part of the Property (any part of the building or more
than 5% of the parking area), Purchaser may elect within ten (10) days of
receipt of notice 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 without a diminution of the Purchase Price.
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 KET INC. and
Purchaser agrees to pay a brokerage fee to EVANS, RIVERS & COMPANY, pursuant to
separate agreements. Said
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<PAGE>
brokerage fees shall be deemed earned if, and only if, settlement occurs
hereunder, and shall not be deemed earned even if Purchaser and/or Seller
wrongfully fail(s) to consummate the purchase and sale herein contemplated.
Seller and Purchaser represent and warrant to each other that no other brokerage
fees are or shall be owing in connection with this transaction or in any way
with the Apartments and Seller and Purchaser hereby indemnify and hold the other
harmless from any and all claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 Default Defined. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event 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, at
it's election, may either as its sole and exclusive remedies (1) require
specific performance of Seller, (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. In the event that the Purchaser shall
commence an action for specific performance and the Court shall hold
against it, then Seller shall be entitled to reimbursement of reasonable
costs 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. This section does not apply to Purchaser's
obligation under Par. 6.2.3. 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 or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 Binding Effect. The parties to the Agreement mutually agree that it
shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 Controlling Law. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State 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.
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. All information acquired by or supplied to
Purchaser in connection with the Property of any other operations of Seller
shall be confidential and shall be disseminated only upon Seller's written
approval.
12.11 Holidays. If any of the deadlines in this Contract ends on, or if
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 actual knowledge of lead-based paint and/or
lead-based paint hazard in the housing.
12.12.2. Seller has no written reports or records pertaining to
lead-based paint and/or lead-based paint hazards in the housing, except, if any,
in the environmental report delivered to Purchaser.
12.12.3. Purchaser is hereby granted a 10-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.
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: Intercapital Portfolio 944 I Limited
Partnership
7670 Woodway At San Felipe - Suite 380
Houston, TX 77063
Attention: Paul Austin
Fax: (713) 953-7123
With a copy to
Seller's Attorneys: Michael E. Ross, Esq.
Schain, Firsel & Burney, Ltd.
Suite 1910
222 North La Salle Street
Chicago, IL 60601-1102
Fax: (312) 332-4514
15
<PAGE>
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.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
INTERCAPITAL PORTFOLIO 944 I, LIMITED PARTNERSHIP
By: INTERCAPITAL PORTFOLIO, INC.
General Partner
By: /s/ Paul E. Austin
--------------------
Its: Vice President
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. Olander
-----------------------
Its: Senior Vice President
16
<PAGE>
MODIFICATION TO PURCHASE CONTRACT
---------------------------------
This MODIFICATION TO PURCHASE CONTRACT ("Modification") is made and entered
into this day of March, 1997, between CORNERSTONE REALTY GROUP, INC.
("Purchaser") and INTERCAPITAL PORTFOLIO 944 I LIMITED PARTNERSHIP ("Seller").
WHEREAS, Purchaser and Seller entered into an Agreement of Sale dated the
21st day of February 1997 ("Agreement"); and
WHEREAS, Purchaser and Seller now desire to modify and amend the Agreement
as set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:
1. All terms not specifically defined herein shall have the same meaning as
ascribed to them in the Agreement unless previously modified.
2. ARTICLE II, Paragraph 2.2 Deposit, is hereby amended to read:
"ONE HUNDRED FIFTY THOUSAND ($150,000) 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 Texas State Title Insurance
Corporation or its authorized agent (the "Title Company") as an
earnest money deposit which may be credited against the purchase price
or applied as per Article XI below."
3. ARTICLE VII, Paragraph 7.1 Closing, is hereby modified to read as
follows:
"Closing will be held on April 15, 1997, at such place and at such time
as the parties may agree. However, either party shall be entitled to
one (1) extension of seven (7) days upon request."
4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
5. In the event there is any conflict in the terms of this Modification
and the terms of the Agreement, the terms of this Modification shall govern.
<PAGE>
6. This Modification may be executed in separate counterparts, each of
which shall be deemed an original and all of which taken together will
constitute one agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this agreement on the
date first above written.
CORNERSTONE REALTY GROUP, INC.,
a Virginia Corporation
By: /s/ S. J. Olander
---------------------------
Name: S. J. Olander
--------------------------
Its: Secretary
---------------------------
INTERCAPITAL PORTFOLIO 944 I
LIMITED PARTNERSHIP
By: INTERCAPITAL PORTFOLIO, INC.
Its: General Partner
By: /s/ Paul E. Austin
------------------------------
Name: Paul E. Austin
----------------------------
Its: Vice President
----------------------------
2
<PAGE>
SECOND MODIFICATION TO PURCHASE CONTRACT
----------------------------------------
This Second Modification to Purchase Contract ("Second Modification") is
made and entered into this 29th day of April, 1997 between Cornerstone Realty
Group, Inc. ("Purchaser") and Intercapital Portfolio 944 I Limited Partnership
("Seller").
WHEREAS, Purchaser and Seller entered into an Agreement of Sale dated the
21st day of February 1997 ("Agreement"); and
WHEREAS, Purchaser and Seller entered into a First Modification to Purchase
Contract on the day of March 1997; and
WHEREAS, Purchaser and Seller now desire to further modify and amend the
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:
1. All terms not specifically defined herein shall have the same meaning as
ascribed to them in the Agreement unless previously modified.
2. Par. 2.2, Deposit, is hereby further amended (First Amendment dated the
day of March 1997) to add to the existing paragraph the following:
"ONE HUNDRED THOUSAND ($100,000) DOLLARS upon the execution of
this Second Modification (making a total deposit of TWO
HUNDRED FIFTY THOUSAND ($250,000) DOLLARS) to be placed in escrow
with Texas State Title Company ("Title Company") or its
authorized agent as an additional earnest money deposit which
shall be credited against the purchase price.
The Title Company is authorized to release to Seller the sum
of Fifty Thousand ($50,000) Dollars upon its receipt of a fully
executed copy of this Second Modification and the additional one
Hundred Thousand (100,000) Dollars set forth herein."
3. ARTICLE VII, Paragraph 7.1 Closing, is hereby modified to read as
follows:
"Closing will be held on May 23, 1997,..."
4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
5. In the event there is any conflict in the terms of this Second
Modification and the terms of this Agreement, the terms of this Second
Modification shall govern.
<PAGE>
6. This Second Modification may be executed, in separate counterparts, each
of which shall be deemed an original and all of which taken together will
constitute one agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Modification on the date first above written.
CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By: /s/ S. J. Olander
---------------------------
Name: S. J. Olander
--------------------------
Its: Secretary
---------------------------
INTERCAPITAL PORTFOLIO 944 I
LIMITED PARTNERSHIP
By: INTERCAPITAL PORTFOLIO, INC.
General Partner
By: /s/ Paul E. Austin
------------------------------
Name: Paul E. Austin
----------------------------
Its: Vice President
----------------------------
<PAGE>
THIRD MODIFICATION TO PURCHASE CONTRACT
---------------------------------------
This Third Modification to Purchase Contract ("Third Modification") is
made and entered into this day of May 1997 between Cornerstone Realty
Group, Inc. ("Purchaser") and Intercapital Portfolio 944 I Limited Partnership
("Seller").
WHEREAS, Purchaser and Seller entered into an Agreement of Sale dated the
21st day of February 1997 ("Agreement"); and
WHEREAS, Purchaser and Seller entered into a First Modification to
Purchase Contract on the day of March 1997; and
WHEREAS, Purchaser and Seller entered into a Second Modification to
Purchase Contract on the 29th day of April 1997; and
WHEREAS, Purchaser and Seller now desire to further modify and amend the
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the promises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:
1. All terms not specifically defined herein shall have the same meaning
as ascribed to them in the Agreement unless previously modified.
2. ARTICLE II, Paragraph 2.1 Purchase Price, is hereby amended to read:
"The total purchase price shall be NINE MILLION TWO HUNDRED
FIFTEEN THOUSAND ($9,215,000) DOLLARS as evidenced by cash or cash
equivalent at closing.
However, in the event that the closing takes place on or before
May 30, 1997, Paragraph 2.1 shall not be amended and the purchase
price shall remain as set forth in the Agreement, to wit: NINE
MILLION TWO HUNDRED THOUSAND ($9,200,000) DOLLARS.*
3. ARTICLE VII, Paragraph 7.1 Closing, is hereby modified to read as
follows:
"Closing will be held on or about June 24, 1997,..."
4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
*Purchaser shall give Seller written notice on or before May 27, 1997 of
Purchaser's intention to close on May 30, 1997.
<PAGE>
5. In the event there is any conflict in the terms of this Third
Modification and the terms of the Agreement, the terms of this third
Modification shall govern.
6. This Third Modification may be executed in separate counterparts, each
of which shall be deemed an original and all of which taken together will
constitute one agreement between the parties hereto.
7.** (See Paragraph 7, hereinbelow, fully incorporated herein)
IN WITNESS WHEREOF, the parties hereto have executed this Third
Modification on the date first above written.
CORNERSTONE REALTY GROUP, INC.
a Virginia Corporation
By: /s/ S.J. Olander
Name: S.J. Olander
Its: Senior Vice President
INTERCAPITAL PORTFOLIO 944 I LIMITED
PARTNERSHIP
By: INTERCAPITAL PORTFOLIO 944, Inc.
General Partner
By: /s/ Paul E. Austin
Name: Paul E. Austin
Its: Vice President
**7. The Agreement and all modifications thereto, though executed by the duly
authorized officers of Intercapital Portfolio 944, Inc., the general partner of
the Seller, were executed by such general partner under the name "Intercapital
Portfolio, Inc.", due to a scrivener's error. The Seller and Purchaser hereby
acknowledge and agree that all references to the name "Intercapital Portfolio,
Inc." in the Agreement and all amendments and modifications thereto, including
but not limited to any such reference made in the preambles and signature lines,
were, are and shall be references to the name "Intercapital Portfolio 944,
Inc.".
Exhibit 10.2
PROPERTY MANAGEMENT AGREEMENT
-----------------------------
THIS AGREEMENT is made and entered into as of the 1st day of June, 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 Pace's Cove 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
2
<PAGE>
and i shall be paid for by Owner pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall
contain a composite financial report of the monthly statements provided
in accordance with paragraph i, plus a statement by Manager as to the
operations of the Property during the previous year and recommendations,
if any, as to necessary policy changes or improvements which should be
implemented in the forthcoming year, which recommendations shall be
accompanied by an estimated budget for such items;
k. The furnishing from time to time, at least semiannually,
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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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 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
--------------------------
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MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ S. J. Olander
----------------------------
Title: Secretary
----------------------------
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