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: August 6, 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
(Chaparosa Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Chaparosa Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Chaparosa Apartments)*
b. Independent Auditors' Report
(Riverhill Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Riverhill Apartments)*
Note to Historical Statement of Income
and Direct Operating Expenses
(Riverhill Apartments)*
c. Pro Forma Statement of Operations for the
Six Months ended June 30, 1997 (unaudited)*
Pro Forma Balance Sheet as of
June 30, 1997 (unaudited)*
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* To be filed by amendment.
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Pro Forma Statement of Operations
for the Year ended December 31, 1996
(unaudited)*
d. Exhibits
10.1 Purchase Contract for Chaparosa Apartments
10.2 Purchase Contract for Riverhill Apartments
10.3 Property Management Agreement for Remington Hills
at Las Colinas (formerly Chaparosa and Riverhill)
23.1 Consent of Independent Auditors*
23.2 Consent of Independent Auditors*
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* To be filed by amendment.
<PAGE>
Item 2. Acquisition or Disposition of Assets
On August 6, 1997, the Company purchased the Chaparosa and Riverhill
Apartments ("Chaparosa" and "Riverhill," respectively, and, collectively, the
"Property") located at 1201 Meadow Creek Drive and 1101 Meadow Creek Drive,
respectively, in Irving, Texas. Chaparosa and Riverhill are adjacent to each
other and the Company plans to operate them as a combined community under the
new name "Remington Hills at Los Colinas." The Property comprises 362 apartment
units. The purchase price for the Property was $13,100,000 (allocated $5,825,000
to Chaparosa and $7,275,000 to Riverhill), and the sellers are unaffiliated with
the Company, the Advisor and their Affiliates. The Company borrowed the entire
purchase price under its unsecured line of credit. Title to the Property was
conveyed to the Company by limited warranty deed.
Location. The Property is located off of MacArthur Boulevard in
Irving, Texas. The following information is based in part upon information
provided by the Dallas Chamber of Commerce.
Irving, Texas is part of the Dallas/Fort Worth Consolidated
Metropolitan Statistical area, or as it is called locally, "The Metroplex." The
Dallas/Fort Worth Metroplex is in the north-central part of Texas and is
composed of nine counties. The 1996 population of The Metroplex was
approximately 4,400,000. Dallas is the second largest city in the state, behind
Houston.
The economy of the Dallas/Fort Worth area is complex and diversified.
Key economic factors include a large manufacturing base (including as products
military hardware, electronics, automobiles, industrial equipment, oil-field
parts, food products and chemicals), banking, insurance services,
communications, oil and gas production and air transportation. Major employers
in the area include Texas Instruments, Southwestern Bell, General Motors, J.C.
Penney, NationsBank and Vought Aircraft Company.
The Metroplex is also an established transportation center for the
nation. The Dallas/Fort Worth International Airport occupies approximately
17,800 acres of land between the two cities. It is the largest commercial
airport in the United States in terms of land area, and is the fourth busiest
airport in the world, with 1,700 daily arrivals and departures.
The area also has a well-established system of interstate highways and
supporting secondary routes. The Metroplex is located at the hub of Interstates
35, 45, 20 and 30. Two outer loops, Interstate 635 in Dallas and Interstate 820
in Fort Worth, surround the respective cities.
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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.
Irving is approximately eight miles west of the Dallas central business
district and approximately 25 miles east of downtown Fort Worth. Irving is a
relatively young city with a majority of its development occurring during the
latter half of this century. The location of Irving between Dallas and Fort
Worth, and near Dallas/Fort Worth International Airport, has enabled it to
garner a large portion of the area's recent commercial and industrial
development.
Irving is the site of Las Colinas, one of the nation's largest
master-planned real estate developments. The development occupies approximately
12,500 acres and includes residential developments, office space, research,
distribution and light industrial facilities, four golf courses, the Las Colinas
Sports Club and an equestrian center.
Las Colinas is targeted to large employers and is the home of numerous
regional and national businesses. The Irving employment sector is primarily
white-collar. Significant employers in Las Colinas include Exxon, GTE, Aetna,
Abbott Laboratories, Boeing, US Sprint, Computer Associates, Allstate Insurance,
Zale Jewelers and the Federal Home Loan Bank Board. In addition, Columbia/HCA
Health Care Corporation recently signed an agreement to buy approximately 28
acres in the development. The plans for the land include a community hospital
with medical office complex and a full-service acute-care facility.
Irving has a well-defined highway system. The city is connected to
Dallas by state highway 114 on the northeast, state highway 183 in its central
portion and Interstate 30 on the south.
The Property is located in the area of Las Colinas. The immediate area
surrounding the Property consists of other multi-family and single-family
housing, and commercial and retail development. The Property is an approximately
15-minute drive from downtown Dallas.
Description of the Property. The Property consists of 362 garden- and
townhouse- style apartment units in 38 two- and three-story buildings on
approximately 16.8 acres of land. Chaparosa was built in 1984 and Riverhill was
built in 1985.
Chaparosa offers five different unit types. The unit mix and rents
currently being charged new tenants as of July, 1997 are as follows:
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Approximate
Interior
Quantity Type Square Footage Monthly Rental
42 One bedroom/one bath 713 $575
32 One bedroom/one bath 830 630
42 Two bedrooms/two baths 1077 790
34 Two bedrooms/two baths 1148 825
20 Two bedrooms/two baths TH 1222 840
Riverhill offers six different unit types. The unit mix and rents
currently being charged new tenants as of July, 1997 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
32 One bedroom/one bath 665 $585
36 One bedroom/one bath 773 610
16 One bedroom/1.5 baths TH 928 740
w/den
24 Two bedrooms/two baths 974 760
48 Two bedrooms/two baths 1062 785
36 Two bedrooms/2.5 baths TH 1176 825
The apartments collectively provide a total of approximately 346,000
square feet of net rentable area.
The Company believes that Chaparosa and Riverhill have generally been
well maintained and are in good condition. However, the Company has budgeted
approximately $1,000,000 for repairs and improvements to Chaparosa, including
foundation repairs, painting, wood replacement, clubhouse renovation and
appliance and carpet replacement, and has budgeted approximately $1,000,000 for
similar repairs and improvements to Riverhill.
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<PAGE>
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 two-bedroom, two-bath apartment (1,222 square feet) at Chaparosa
rented for $595 in 1992, $615 in 1993, $715 in 1994, $725 in 1995, and $750 in
1996.
A one-bedroom, one-bath apartment (665 square feet) at Riverhill rented
for $455 in 1992, $465 in 1993, $485 in 1994, $505 in 1995, and $525 in 1996.
The average effective annual rental per square foot at Chaparosa for 1992, 1993,
1994, 1995 and 1996 was $6.32, $6.53, $7.59, $7.70 and $7.96, respectively. The
average effective annual rental per square foot at Riverhill for 1992, 1993,
1994, 1995 and 1996 was $7.14, $7.29, $7.61, $7.92 and $8.24, respectively.
Buildings are wood-frame construction with crawl spaces. Roofs are
pitched and covered with red tiles. Exteriors are stucco and brick veneer.
Chaparosa features an outdoor swimming pool and hot tub, a lighted
tennis court, a central laundry facility, and a clubhouse with a rental office
and lounge. Chaparosa also has access to Canal Park, which is located across
from Chaparosa. There is ample paved parking for tenants. Riverhill features an
outdoor swimming pool and enclosed whirlpool spa, a lighted tennis court, and a
clubhouse with a kitchen, lounge, game room and rental office. Riverhill also
has access to Canal Park and ample paved parking for tenants.
All apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and baths, as well as cable television hook-ups and
individually controlled heating and air-conditioning units. Each apartment unit
has washer/dryer connections, a woodburning fireplace and outside storage. Each
kitchen is equipped with a refrigerator/freezer with icemaker, electric range
and oven, microwave, dishwasher and garbage disposal. The owner of the property
pays for cold water, sewer service, cable television, alarm service and trash
removal. The tenants pay for their electricity service, which includes heat, hot
water, air-conditioning, cooking and lights.
There are at least five apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are higher
when compared to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy in nearby competing properties now averages
approximately 96%.
According to information provided by the Seller, physical occupancy at
Chaparosa averaged approximately 94% in 1992, 94% in 1993, 95% in 1994, 97% in
1995 and 97% in 1996. According to information provided by the Seller, physical
occupancy at Riverhill averaged approximately 94% in 1992, 96% in 1993, 95% in
1994, 96% in 1995 and 96% in 1996.
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As of July 29, 1997, occupancy at Chaparosa was 98% and at Riverhill
was 99%. Tenants at both Chaparosa and Riverhill are principally white-collar
workers.
The following tables set forth the 1996 real estate tax information on
the Property:
Chaparosa
Assessed
Jurisdiction Value Rate Tax
------------ -------- ---- ---
County of Dallas $6,053,350 $0.46255 $27,999.77
City of Irving 6,053,350 0.50860 30,787.34
Irving School District 6,053,350 1.46190 88,493.92
Total $147,281.03
Riverhill
Jurisdiction Assessed
------------ Value Rate Tax
-------- ---- ---
County of Dallas $7,631,540 $0.46255 $35,299.69
City of Irving 7,631,540 0.50860 38,814.01
Irving School District 7,631,540 1.46190 111,565.48
Total $185,679.18
Grand Total $332,960.21
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $4,586,530 for Chaparosa and $5,803,050
for Riverhill) will be depreciated over 27.5 years on a straight-line basis. The
basis of the personal property portion will be depreciated in accordance with
the modified accelerated cost recovery system of the Code. Amounts to be spent
by the Company on repairs and improvements will be treated for tax purposes as
permitted by the Code based on the nature of the expenditures.
The Advisor and the Company believe that the Property is and will
continue to be adequately covered by property and liability insurance.
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<PAGE>
Material Factors Considered in Assessing the Property. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. The Dallas/Fort Worth area generally and the specific area in which
the Property is located were perceived as being characterized by a diverse,
stable and steadily growing economy. Accordingly, it was believed that such
economy and its anticipated growth and development would support stable
occupancy rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs and
improvements will allow an increase in rents at the Property.
3. The Advisor and the Company believe that operation of Chaparosa and
Riverhill as a combined development will offer competitive advantages.
4. The Property is strategically located between Dallas and Fort Worth
and is not far from the Dallas/Fort Worth International Airport. The Advisor and
the Company believe that this location for the Property appeals and will
continue to appeal to workers in the area.
Acquisition and Management Services and Fees. In consideration of
services rendered to the Company in connection with the selection and
acquisition of the Property, the Company will pay Cornerstone Realty Income
Trust, Inc., a property acquisition fee equal to 2% of the purchase price of the
Property, or $116,500 for Chaparosa and $145,500 for Riverhill. 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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<PAGE>
ITEM 7.a.*
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* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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<PAGE>
ITEM 7.b.*
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* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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<PAGE>
ITEM 7.c.*
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* To be filed by amendment. It is impracticable to include herein the required
pro forma financial information. The required pro forma financial information
will be filed as an amendment to this report as soon as possible, but in no
event more than 60 days after the date of filing of this report.
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<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: August 20, 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 August 6, 1997
Exhibit Number Exhibit Page Number
10.1 Purchase Contract for Chaparosa Apartments
10.2 Purchase Contract for Riverhill Apartments
10.3 Property Management Agreement for Remington
Hills at Las Colinas
(formerly Chaparosa and Riverhill)
23.1 Consent of Independent Auditors*
23.2 Consent of Independent Auditors*
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* To be filed by amendment.
FIRST MODIFICATION TO AGREEMENT FOR PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
This First Modification to Agreement for Purchase and Sale and Joint
Escrow Instructions ("Modification") is made and entered into this 24th day of
June 1997 between HUTTON/CON AM REALTY PENSION INVESTORS ("Seller") and
CORNERSTONE REALTY GROUP, INC. ("Purchaser").
WHEREAS, Purchaser and Seller entered into an Agreement for Purchase and
Sale and Joint Escrow Instructions dated the 17th day of June 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.
2. Paragraph 5.2. Due Diligence Investigation is hereby amended to
remove June 23, 1997 and insert June 30, 1997.
3. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
4. 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.
5. 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 Modification
on the date first above written.
HUTTON/COM AM REALTY PENSION INVESTORS,
a New York limited partnership,
general partner
By: RPI REAL ESTATE SERVICES, INC.
a Delaware corporation,
general partner
By: /s/ Donald E. Petrow
------------------------------
Name: Donald E. Petrow
Title: vp
<PAGE>
By: COM AM PROPERTY SERVICES III, LTD.
a California limited partnership,
general partner
By: CONTINENTAL AMERICAN
DEVELOPMENT, INC.
a California corporation,
general partner
By: /s/ E. Scott Dupree
------------------------------
Name: E. Scott Dupree
Title: Vice President
CORNERSTONE REALTY GROUP, INC.
a Virginia Corporation
By: /s/ S.J. Olander
----------------------------------
Name: S.J. Olander
Title: SVP
<PAGE>
SECOND MODIFICATION TO AGREEMENT FOR PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
This Second Modification to Agreement for Purchase ad Sale and Joint
Escrow Instructions ("Second Modification") is made and entered into as of June
30, 1997 between HUTTON/CON AM REALTY PENSION INVESTORS ("Seller") and
CORNERSTONE REALTY GROUP, INC. ("Purchaser").
WHEREAS, Purchaser and Seller entered into an Agreement for Purchase and
Sale and Joint Escrow Instructions dated the 17th day of June, 1997 (as amended
and modified, the "Agreement"); and
WHEREAS, the Agreement was modified by that certain First Modification
to Agreement for Purchase and Sale and Joint Escrow Instructions dated as of the
24th day of June, 1997; ("First Modification") and
WHEREAS, the Due Diligence Period has expired pursuant to Section 5.2 of
the Agreement, as modified by the First Modification; and
WHEREAS, the Title Review Period has expired pursuant to Section 5.3(a)
of the Agreement, as modified by the First Modification; and
WHEREAS, Purchaser has completed (i) its investigation and research in
connection with the Due Diligence Period pursuant to Section 5.2 of the
Agreement and (ii) its review in connection with the Title Review Period
pursuant to Section 5.3(c) of the Agreement, and as a result thereof has
requested a reduction in the Purchase Price from Seller in consideration of
Purchaser waiving its rights to terminate the Agreement pursuant to Section
5.5(a) and Section 5.5(b) of the 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:
<PAGE>
1. All terms not specifically defined herein shall have the meanings
ascribed to them in the Agreement.
2. Section 4 of the Agreement is hereby amended to read as follows:
"4. Purchase Price. The purchase price payable by Buyer for
the Property (the "Purchase Price") is FIVE MILLION EIGHT HUNDRED
TWENTY FIVE THOUSAND DOLLARS ($5,825,000.00), payable in cash on the
Closing Date."
3. Purchaser hereby confirms that the Due Diligence Period has expired
pursuant to Section 5.2 of the Agreement, as modified by the First Modification,
and Purchaser hereby waives any right to terminate the Agreement pursuant to
Section 5.5(a) of the Agreement.
4. Purchaser hereby confirms that the Title Review Period has expired
pursuant to Section 5.3(c) of the Agreement, as modified by the First
Modification, and Purchaser hereby waives any right to terminate the Agreement
pursuant to Section 5.5(b) of the Agreement.
5. Section 7 of the Agreement is hereby amended to insert the following
text to follow immediately after Section 7.12:
"7.13. Estoppel Certificate. An estoppel certificate from The
Las Colinas Association for the benefit of Buyer affirming, among
other things, that based on a review of the Association's records,
the Property is currently in compliance with Articles IV, V and VI of
The Las Colinas Declaration recorded in Volume 73166, Page 1001 of
the Dallas County Deed Records (the "Records") on August 22, 1973, as
corrected by that certain Correction to Declaration dated August 8,
1977 recorded in Volume 77154, Page 1096 of the Records, that certain
Second Correction to Declaration dated June 19, 1979 recorded in
Volume 79122, Page 0749 of the Records, that certain Third Correction
to Declaration dated March 1, 1982 recorded in Volume 82071, Page
3244 of the Records, and that certain Supplementary Declaration No.
51 recorded in Volume 83110, Page 2738 of the Records (as corrected,
amended, and modified, the "Declaration"). The estoppel certificate
contemplated by this Section 7.13 shall, to
2
<PAGE>
the Buyer's reasonable satisfaction determined in good faith, address
those matters contained in the sample estoppel certificate attached
hereto as Exhibit A."
6. Section 7.13 of the Agreement is hereby amended to be designated
"Section 7.14".
7. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
8. In the event there is any conflict in the terms of this Second
Modification and the terms of the Agreement, the terms of this Second
Modification shall govern.
9. 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.
HUTTON/CON AM REALTY PENSION
INVESTORS, a New York limited
partnership
By: RPI REAL ESTATE SERVICES
INC., a Delaware corpora-
tion, general partner
By: /s/ Donald E. Petrow
-----------------------
Name: Donald E. Petrow
Title: VP
3
<PAGE>
By: CON AM PROPERTY SERVICES
III, LTD., a California
limited partnership, gener-
al partner
By: CONTINENTAL AMERICAN
DEVELOPMENT, INC., a
California corpora-
tion, limited partner
By: /s/ E. Scott Dupree
-----------------------
Name: E. Scott Dupree
Title: Vice President
CORNERSTONE REALTY GROUP, INC.,
a Virginia corporation
By: /s/ S.J. Olander
-----------------------------
Name: S.J. Olander
Title: SVP
4
<PAGE>
EXHIBIT A
THE LAS COLINAS ASSOCIATION
4950 N. O'Connor Blvd. Suite 100 Irving, Texas 75062-2266
(214) 541-2345 Fax (214) 650-0229
November 13, 1996
Safeco Land Title
1201 Elm, Suite 5220
Dallas, Texas 75270
WDN Properties Ltd.
5400 LBJ Freeway, Suite 400
Dallas, Texas 75240
RE: GF# SP96-190596
1201 Meadow Creek Drive
Lot 1A, 7.483 Acres
Chaparosa Apartments
Las Colinas Area LI
Acct. # 051.001
ESTOPPEL CERTIFICATE
Ladies/Gentlemen:
We understand that WDN Properties Ltd., (the "Purchaser"), contemplates
purchasing the above referenced property, (the "Property"), together with any
improvements constructed thereon, from Hutton/Conam Realty Pension Investors,
(the "Seller"). As a condition of the sale of said Property, you have requested
that The Las Colinas Association, (the "Association"), certify to certain
matters.
The Association hereby certifies that as of November 13, 1996:
(1) The Association is a Texas non-profit corporation principally organized
to enforce the covenants, conditions and restrictions contained in The Las
Colinas Declaration recorded in Volume 73166, Page 1001 of the Dallas County
Deed Records on August 22, 1973, as corrected by that certain Correction to
Declaration dated August 8, 1977 recorded in Volume 77154, Page 1096 of the
Dallas County Deed Records, that certain Second Correction to Declaration dated
June 19, 1979 recorded in Volume 79122, Page 0749 of the Dallas County Deed
Records and that certain Third Correction to Declaration dated March 1, 1982
recorded in Volume 82071, Page 3244 of the Dallas County Deed Records. (The Las
Colinas Declaration, all amendments and corrections, and any applicable
supplementary declarations thereto referred to herein as the "Declaration".)
(2) The Property is part of Las Colinas Area LI. The specific protective
covenants applicable to the Property are contained in Supplementary Declaration
No. 51, recorded in Volume 83110, Page 2738, of the Real Property Records of
Dallas County, Texas ("SD#51").
<PAGE>
ESTOPPEL CERTIFICATE
November 13, 1996
PAGE TWO
(3) Based upon a review of the Association's records on the Property, the
Property is currently in compliance with Article IV, V and VI of the Declaration
except as noted in Exhibit A to this certificate.
(4) The property met The Las Colinas Association Technical Specifications
and Federal Communications Commission (FCC) signal leakage requirements except
as noted in Exhibit B. This does not guarantee or imply compliance beyond the
date of testing. FCC signal leakage testing is regularly done on a quarterly
basis to meet the FCC requirements.
(5) All approvals and reviews by the Association and the Architectural
Control Committee are limited to matters of an aesthetic nature and do not
include structural, engineering, architectural or foundation review. Approval
of the plans for construction on the Property by the Association and/or the
Architectural Control Committee does not guarantee or imply that the plans, if
followed, will result in properly designed improvements or that any improvements
built in accordance therewith will be built in a good and workmanlike manner.
Approval of the plans for construction on the Property is not to be construed as
approval by the City of Irving, Texas, as the approval processes are mutually
exclusive. You may wish to conduct or have conducted an appropriate inspection
on these matters.
(6) The owner of the Property has delinquent obligations with respect to
the payment of assessments and other fees to the Association. A current status
of any obligations is noted in Exhibit C.
(7) The assessment lien shall be superior to all other liens and charges
against the property, except only for tax liens and all sums unpaid on a first
mortgage lien or first deed of trust lien of record, securing in either instance
sums borrowed for the improvement of the property in question pursuant to
Article III, Section 10 of the Declaration. The annual assessment covers the
period January 1st, thru December 31st. The annual assessment is billed in
April or May, and is due by July 1st, and becomes delinquent after July 31st,
accruing interest at the rate of 10% per year or .83% per month. The annual
assessment for the current year, 1996, is $9,989.02 and has been paid.
Very truly yours,
THE LAS COLINAS ASSOCIATION
/s/ Worth B. Brown
------------------
By: Worth B. Brown
Its: Vice President / General Manager
enclosures
CC: Realty Pension Investors
Hutton/Conam Realty Pension Investors
1764 San Diego Avenue
San Diego, California 92110
<PAGE>
EXHIBIT A
November 12, 1996
Chaparosa Apartments
1201 Meadow Creek Drive
Las Colinas Area 51
TLCA Property ID #051.001
A review of the referenced property has been completed to determine compliance
with Articles IV, V and VI of the Declaration. To the best of the Association's
knowledge the property is in compliance except as noted below.
Compliance issues with Articles IV, V and approved plans:
[ ] A number of large trees are missing throughout the complex.
[ ] Shrubbery missing at foundation and a/c equipment.
[ ] A number of exterior light fixtures are different styles than those which
were previously approved.
Compliance issues with the Maintenance provisions of Article VI:
[ ] Loose and missing roof tiles were observed at several areas.
[ ] Exterior stucco is stained and discolored in areas. Needs to be painted.
[ ] Railroad ties used for retaining walls are loose and damaged. They are in
need of immediate repair/replacement.
[ ] Flashing above storage areas/mechanical rooms, located at the ends of the
building, need to be painted to match roof tiles or stucco color.
[ ] Surface damage to parking area.
[ ] Flashing needs to be secured at exterior walls in areas where the brick and
siding meet.
[ ] Small building located at front entrance is in need of paint and roof
repairs.
THE ASSOCIATION RESERVES THE RIGHT TO REVIEW ANY NOTED
DEFICIENCIES UPON THEIR RESOLUTION.
<PAGE>
EXHIBIT B
November 13, 1996
1201 Meadow Creek Drive
Lot 1A, 7.483 Acres
Chaparosa Apartments
Las Colinas Area LI
Acct. # 051.001
1. The following buildings have significant amounts of signal leakage based upon
the Cumulative Leakage Index (CLI):
a. Building #1207
These signal leakages must be corrected in order to meet FCC requirements and
The Las Colinas Association Technical Specifications.
THE CABLE AND THE INSTALLATION METHOD MUST MEET THE LAS COLINAS ASSOCIATION
TECHNICAL SPECIFICATIONS. THE ASSOCIATION RESERVES THE RIGHT TO DISCONNECT OR
REFUSE TO CONNECT THE PROPERTY TO THE LAS COLINAS ASSOCIATION COMMUNICATIONS
SYSTEM UNTIL THESE SPECIFICATIONS ARE MET.
<PAGE>
EXHIBIT C
THE LAS COLINAS ASSOCIATION
4950 N. OCONNOR BLVD. SUITE 100
IRVING, TX 75062-2266
972-541-2345
Statement as of 11/08/96
TO: MAKE CHECKS PAYABLE TO:
CHAPAROSA APARTMENTS THE LAS COLINAS ASSOCIATION
ATTN: MANAGER 4950 N. OCONNOR BLVD. SUITE 100
1201 N MEADOWCREEK CIRCLE IRVING, TX 75062-2266
IRVING, TX 75038
Account : 051.001 Acres: 7.4830
Address : 1201 MEADOW CREEK DR Lot: 1A Block:
Loc.Name: CHAPAROSA APARTMENTS
Legal : MEADOW CREEK CIRCLE NORTH
DCAD : 322585800001A0000
- --------------------------------------------------------------------------------
INVOICE # INVOICE DATE INVOICE AMOUNT PAYMENT/CREDIT AMOUNT DUE
- ---------- ------------ -------------- -------------- -------------
4207.9509998504 12/09/95 23.20 23.20 .00
4302.9509998549 12/18/95 1,502.41 1,502.41 .00
4302.9609998668 01/03/96 1,502.41 1,502.41 .00
4302.9609998777 02/01/96 1,502.41 1,502.41 .00
4207.9609998861 02/06/96 23.60 23.60 .00
4302.9609998963 03/05/96 1,502.41 1,502.41 .00
4207.9609998999 03/08/96 22.60 .00 22.60
4302.9609999067 04/01/96 1,502.41 1,502.41 .00
4207.9609999143 04/04/96 25.40 25.40 .00
4302.9609999211 05/01/96 1,502.41 1,502.41 .00
4207.9609999275 05/02/96 24.00 24.00 .00
4002.9609999806 05/15/96 9,989.02 9,989.02 .00
4302.9610002537 06/03/96 1,502.41 1,502.41 .00
LATE FEE 05/31/96 .19 .00 .19
4207.9610002616 06/12/96 25.60 25.60 .00
4302.9610004511 07/03/96 1,444.95 1,444.95 .00
4207.9610004541 07/05/96 26.80 26.80 .00
4302.9610004563 07/05/96 1,502.41 1,502.41 .00
LATE FEE 06/28/96 .19 .00 .19
LATE FEE 07/31/96 .19 .00 .19
4302.9610005140 08/02/96 1,502.41 1,502.41 .00
4207.9610005171 08/02/96 23.20 23.20 .00
4302.9610005244 09/03/96 1,502.41 1,502.41 .00
LATE FEE 08/30/96 .19 .00 .19
4207.9610005511 09/06/96 21.80 21.80 .00
4302.9610005558 10/02/96 1,471.99 1,471.99 .00
LATE FEE 09/30/96 .19 .00 .19
4302.9610005764 10/04/96 1,509.17 1,509.17 .00
4207.9610005794 10/07/96 24.00 24.00 .00
LATE FEE 10/31/96 .19 .00 .19
4214.9610005960 11/01/96 75.00 .00 75.00
4207.9610005976 11/04/96 25.80 .00 25.80
4302.9610005998 11/07/96 1,509.17 .00 1,509.17
<PAGE>
EXHIBIT C
THE LAS COLINAS ASSOCIATION
4950 N. OCONNOR BLVD. SUITE 100
IRVING, TX 75062-2266
972-541-2345
Statement as of 11/08/96
TO: MAKE CHECKS PAYABLE TO:
CHAPAROSA APARTMENTS THE LAS COLINAS ASSOCIATION
ATTN: MANAGER 4950 N. OCONNOR BLVD. SUITE 100
1201 N MEADOWCREEK CIRCLE IRVING, TX 75062-2266
IRVING, TX 75038
Account : 051.001 Acres: 7.4830
Address : 1201 MEADOW CREEK DR Lot: 1A Block:
Loc.Name: CHAPAROSA APARTMENTS
Legal : MEADOW CREEK CIRCLE NORTH
DCAD : 322585800001A0000
- --------------------------------------------------------------------------------
INVOICE # INVOICE DATE INVOICE AMOUNT PAYMENT/CREDIT AMOUNT DUE
- ---------- ------------ -------------- -------------- -------------
TOTAL DUE: 1,633.71
- --------------------------------------------------------------------------------
CURRENT OVER 30 OVER 60 OVER 90 OVER 120
------- ------- ------- ------- --------
1,610.16 .19 .19 .19 22.98
PLEASE PROVIDE THE ASSOCIATION WITH A COPY OF THE WARRANTY DEED OR SETTLEMENT
STATEMENT WITH THE PURCHASERS CORRECT MAILING ADDRESS.
<PAGE>
THIRD MODIFICATION TO AGREEMENT FOR PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
This Third Modification to Agreement for Purchase and Sale and Joint
Escrow Instructions ("Third Modification") is made and entered into as of August
__, 1997 between HUTTON/CON AM REALTY PENSION INVESTORS ("Seller") and
CORNERSTONE REALTY GROUP, INC. ("Purchaser").
WHEREAS, Purchaser and Seller entered into an Agreement for Purchase and
Sale and Joint Escrow Instructions dated June 17, 1997, which Agreement was
modified by that certain First Modification to Agreement for Purchase and Sale
and Joint Escrow Instructions dated as of June 24, 1997, and further modified by
that certain Second Modification to Agreement for Purchase and Sale and Joint
Escrow Instructions dated as of June 30, 1997 (as amended and modified, the
"Agreement"); and
WHEREAS, Seller has notified Purchaser that Seller has initiated an
action to contest the 1997 assessed value of the Property, which action,
including all appeals, may extend beyond the Close of Escrow; and
WHEREAS, Seller and Purchaser desire to allow for an adjustment of those
proration items set forth in Section 10 of the Agreement which are based upon
the assessed value of the Property in the event the contest referred to herein,
including any appeal, is successful and as a result any such proration items are
accordingly reduced; 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 meanings
ascribed to them in the Agreement.
2. Section 10 of the Agreement is hereby amended to include the
following provision:
<PAGE>
"In the event that the assessed value of the Property for real estate
tax purposes for the tax year 1997 is, for any reason, decreased after the Close
of Escrow (the "Reassessment Date"), then Seller and Purchaser agree to
re-prorate the real estate taxes for which an adjustment will have been made at
the Close of Escrow. If, as a result of such re-proration, Purchaser has
collected from Seller at the Close of Escrow an amount in excess of the amount
Purchaser would have collected at the Close of Escrow if the assessed value of
the Property had been the same at the time of the Close of Escrow as it is at
the Reassessment Date, then Purchaser shall refund the difference between such
amounts to Seller within five (5) business days of receiving notice from Seller
of such event."
3. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
4. 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.
5. 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.
IN WITNESS WHEREOF, the parties hereto have executed this Third
Modification on the date first above written.
HUTTON/CON AM REALTY PENSION
INVESTORS, a New York limited
partnership
By: RPI REAL ESTATE SERVICES,
INC., a Delaware corpora-
tion, general partner
By: /s/ Donald E. Petrow
--------------------
Name: Donald E. Petrow
Title: VP
2
<PAGE>
By: CON AM PROPERTY SERVICES
III, LTD., a California
limited partnership, gener-
al partner
By: CONTINENTAL AMERICAN
DEVELOPMENT, INC., a
California corpora-
tion, limited partner
By: /s/ E. Scott Dupree
-------------------------
Name: E. Scott Dupree
Title: Vice President
CORNERSTONE REALTY GROUP, INC.,
a Virginia corporation
By: /s/ Glade M. Knight
-------------------------------
Name: Glade M. Knight
Title: President
3
<PAGE>
AGREEMENT FOR PURCHASE AND SALE AND JOINT ESCROW
INSTRUCTIONS
This Agreement for Purchase and Sale and Joint Escrow Instructions
(the "Agreement") is entered into as of June 17, 1997, by and between HUTTON/
CON AM REALTY PENSION INVESTORS, a New York limited partnership ("Seller"),
and CORNERSTONE REALTY GROUP, INC., a Virginia corporation ("Buyer"), who
agree and, to the extent applicable, instruct COMMONWEALTH LAND TITLE
INSURANCE COMPANY ("Escrow Holder"), as escrow holder, as follows:
1. This Agreement is made with reference to the following facts:
1.1. Seller owns the real property located at 1201 North
Meadow Creek Drive, Irving (Las Colinas), Texas, commonly known as Chaparosa
Apartments, and more fully described on the attached Exhibit A (the "Real
Property"). Along with the Real Property, Buyer intends to purchase and Seller
intends to sell, in accordance with this Agreement, all improvements constructed
in, on or under the Real Property (the "Improvements") and all of Seller's
personal property located on and used in connection with the Real Property or
the Improvements (the "Personal Property").
1.2. By this Agreement, Buyer and Seller intend to provide
for the sale of the Real Property, the Personal Property, and the Improvements
(collectively, the "Property") by Seller to Buyer.
1.3. Concurrently with the execution of this Agreement, Buyer
shall deliver to Seller the sum of Fifty Dollars ($50) (the "Independent
Consideration"), which amount Buyer and Seller agree has been bargained for as
consideration for Seller's execution and delivery of this Agreement and Buyer's
right to inspect the Property in accordance with the provisions hereof. The
Independent Consideration is in addition to and independent of any other
consideration or payment provided for in this Agreement, and is non-refundable
in all events.
2. Purchase and Sale. Subject to the provisions of this Agreement,
Seller agrees to sell the Property to Buyer, and Buyer agrees to purchase the
Property from Seller, in its "as-is" condition except as may otherwise be set
forth in this Agreement.
3. Escrow.
3.1. Opening of Escrow. Buyer shall cause an escrow account
(the "Escrow") to be opened with Escrow Holder at 1700 Pacific Avenue, Suite
4740, Dallas, Texas 75201 (Attention: Beverly Grisse) for the purpose of
facilitating the consummation of this Agreement, by delivering the Deposit
(as defined in Section 4.1 below) to Escrow Holder along with a copy of the
fully executed original (or executed counterparts) of this Agreement within
two business days after executing this Agreement. This Agreement constitutes
instructions to Escrow Holder. Buyer and Seller shall execute such
additional mutual instructions as Escrow Holder may require, consistent with
this Agreement. Any inconsistency between any such further mutual
instructions and this Agreement must be resolved in a manner consistent with
this Agreement and the provisions of this Agreement prevail unless Buyer and
Seller waive such inconsistent provision in writing by specifically referring
to the fact of such inconsistency and their intent to waive it.
3.2. Closing Date. Escrow Holder shall close escrow in
accordance with Article 8 below (the "Close of Escrow") within thirty (30) days
after the expiration of the Due Diligence Period (as defined in Section 5.2
hereof) and after the waiver or satisfaction of Buyer's condition set forth in
Section 5.2 below, but in no event after July 22, 1997 (as the same may be
amended pursuant to this Section 3.2, the "Closing Date"). Notwithstanding the
foregoing, prior to July 15, 1997 Buyer may elect to extend the Closing Date
(the "Extension Option") for up to an additional sixty (60) days, but in no
event after September 21, 1997, upon (x) the delivery to Seller of immediately
available funds in the amount of One Hundred Thousand Dollars ($100,000.00) (the
"Additional
<PAGE>
Deposit"), the Additional Deposit shall be applied towards the Purchase Price on
the Closing Date but shall be non-refundable to Buyer in all events except as
otherwise provided herein, and (y) the delivery of a notice to Seller and Escrow
Holder of Buyer's election to exercise the Extension Option, which notice states
that Buyer waives any rights that it may have to the Deposit from and after the
date of such notice except as may be stated below, and includes instructions to
Escrow Holder to deliver the Deposit to Seller at the Close of Escrow or upon
any termination of this Agreement.
If the Close of Escrow does not occur on or before the Closing Date,
then Buyer (unless Buyer exercises the Extension Option) or Seller, if not
then in default under this Agreement, may at any time thereafter give
written notice to Escrow Holder to cancel the Escrow whereupon the Escrow and
the subject transaction shall be terminated and Escrow Holder shall
distribute all monies and documents in Escrow Holder's possession in accordance
with Section 11 herein and Seller shall have its remedies in accordance with
Section 12 herein, and all additional mutual instructions as the parties may
provide. Such cancellation of Escrow shall not prejudice or limit any legal
or equitable rights of Buyer or Seller, except as may be limited by Section 12
herein with respect to Sellers rights.
4. Purchase Price. The purchase price payable by Buyer for the
Property (the "Purchase Price") is SIX MILLION DOLLARS ($6,000,000.00),
payable in cash on the Closing Date.
4.1. Deposit. Concurrently with Buyer's delivery of an
executed copy of this Agreement to Escrow Holder, Buyer shall deliver to
Escrow Holder immediately available funds in the amount of One Hundred Fifty
Thousand Dollars ($150,000.00) (including any interest accrued thereon, the
"Deposit"). Escrow Holder shall notify Seller in writing on the date that it
receives the Deposit from Buyer (the "Escrow Notice"). Unless Buyer and Seller
agree to instruct Escrow Holder in writing to the contrary, during the term of
this Agreement, Escrow Holder shall invest the Deposit in a short-term interest
bearing account at a nationally recognized financial institution. Except
as provided in Sections 3.2, 5.5, 11, 12, 17 and 18 below, the Deposit and
the Additional Deposit, if any, shall be applied towards the Purchase Price
on the Closing Date.
4.2. Balance. On or before the Closing Date, Buyer shall
deposit with Escrow Holder cash or other immediately available funds in the
amount of the balance of the Purchase Price, plus the other sums required
of Buyer under this Agreement to pay costs and prorations.
5. Conditions Precedent. Buyer's obligations under this
Agreement are subject to the satisfaction, approval or waiver by Buyer, on or
before the expiration of the applicable contingency period provided for below
(collectively, the "Contingency Periods"), of the following conditions
precedent (collectively, "Buyer's Conditions"):
5.1. Due Diligence Deliveries By Seller. Seller must have
provided Buyer copies of the following items no later than ten (10) days after
the date of Seller's receipt of the Escrow Notice from Escrow Agent
(collectively, "Seller's Due Diligence Deliveries"): (a) a Commitment for Title
Insurance for the Property dated no earlier than May 20, 1997, and issued by
Escrow Holder as agent for Commonwealth Land Title Company (the "Title
Company"), together with legible copies of all documents referenced therein (the
"Title Commitment"), (b) any survey of the Property currently in Seller's
possession or control, (c) current annual real estate and personal property tax
bills, (d) copies of all plats, plans, specifications, architectural drawings
and engineer's drawings related to the original construction or structural
repairs, if any, of the Property currently in Seller's possession or control,
(e) year-ending 1995 and 1996 operating statements and, to the extent
available, monthly operating statements for 1997 (collectively, the "Operating
Statements"), (f) the most recent rent roll identifying the rental income,
security deposit, term of the lease, expiration date and status of the tenant
(the "Rent Roll"), (g) all licenses and permits relating to the use or occupancy
of the Property, (h) any service or maintenance contracts, including, without
limitation, laundry, cable television, yellow pages, landscaping, security and
refuse removal contracts relating to the Property (collectively, the "Service
Contracts"), (i) all soils reports and environmental studies of the Property
currently in Seller's possession or control, and (j) a copy of the standard form
of resident lease. During the Due Diligence Period, Seller will make available
at the Property to Buyer copies of any and all leases
2
<PAGE>
affecting the Property. Seller's Due Diligence Deliveries shall be accompanied
by a list describing the same and Buyer shall sign said list attesting to its
receipt of all of Seller's Due Diligence Deliveries. Seller acknowledges that
Buyer is a public entity and therefore Buyer may be required to furnish
financial statements to the Securities and Exchange Commission in connection
with this acquisition. Seller agrees to make available to Buyer, upon Buyer's
reasonable request therefor, operating statements and other financial
information with respect to the last twelve (12) months of operations of the
Property so that Buyer may prepare, at Buyer's sole cost and expense, a report
that is in compliance with accounting regulation S-X of the Securities and
Exchange Commission. In addition, in connection with the preparation of any such
report, Seller agrees to make its auditors available to Buyer in the event that
Buyer shall request a representation letter of Seller's auditors, and Buyer
agrees that the cost of Seller's auditor's services in connection with the
foregoing shall be borne solely by Buyer.
5.2. Due Diligence Investigation. From May 16, 1997 until June 23,
1997 (the "Due Diligence Period"), Buyer may review Seller's Due Diligence
Deliveries and may investigate and research and approve or disapprove of the
physical, developmental, and economic status and feasibility of the Property.
The matters subject to Buyer's approval under this Section include marketing
studies, land use and legal due diligence, engineering studies, soils tests,
physical inspections, structural reports, and environmental surveys with respect
to the Property. In order to facilitate Buyer's investigation and analysis under
this Section, subject to the provisions of Section 21 hereof, Seller grants
Buyer the right to enter the Property at any time during normal business hours
during the Due Diligence Period after forty-eight (48) hours prior written
notice to Seller's regional property manager, to conduct reasonable inspections,
reviews, examinations, and tests on the Property to investigate the physical
condition of the Property. Buyer agrees to use its best efforts to give Seller
as much advance written notice as possible prior to conducting such inspections,
reviews, examinations and tests on the Property. Notwithstanding the foregoing,
Buyer shall not conduct any Phase II environmental assessments and shall not
otherwise disturb the integrity of the Property without the Seller's prior
written consent.
5.3. Evidence of Title.
(a) Title Commitment. Within five (5) days after the date of
Seller's receipt of the Escrow Notice from Escrow Holder, Seller, at Seller's
sole expense, shall order and upon receipt deliver to Buyer and Buyer's
attorney, the Title Commitment from the Title Company committing to insure the
Property in the amount of the Purchase Price. The Title Commitment shall be
effective no earlier than the "Effective Date" as indicated on such Title
Commitment and shall include good, legible copies of all documents referenced
therein. The Title Commitment shall reflect good and indefeasible fee simple
title vested in the Seller. Buyer shall accept title subject to any covenants,
conditions, rights of easements, restrictions and other matters affecting title
which do not materially impair the use, value or operation of the Property (the
"Permitted Exceptions").
(b) Survey. Within five (5) days after the date that Buyer delivers
the Deposit to Escrow Holder, Buyer shall employ at Buyer's sole cost and
expense a Texas Registered Public Land Surveyor to survey the Property and
prepare and deliver to Buyer, Seller and Escrow Holder a Category 1A survey of
the Real Property and the Improvements according to the current Manual of
Practice for Land Surveying in Texas published by the Texas Society of
Professional Surveyors (the "Survey"). The Survey shall be sufficient to permit
the Title Company to modify the standard printed exception in the Title
Commitment pertaining to discrepancies, conflicts, boundary lines,
encroachments, overlapping of improvements or similar matters. Buyer shall
notify Seller in writing on the date that it receives the Survey (the "Survey
Notice").
(c) Review. Buyer shall have ten (10) days following later of (i)
the date of its receipt of the Title Commitment and the documents referenced
therein, and (ii) the date of its receipt of the Survey, but in no event later
than the expiration of the Due Diligence Period (the "Title Review Period"), in
which to review the Title Commitment and the Survey. Buyer shall accept title
subject to the Permitted Exceptions and to any items to which Buyer does not
object to prior to the expiration of the Title Review Period. If, prior to the
expiration of the Title Review Period, Buyer discovers an exception to title
which is not a Permitted Exception and is not acceptable to Buyer (a
"Disapproved Title Exception") Buyer shall evidence its disapproval by giving
written notice
3
<PAGE>
of its disapproval to Escrow Holder and Seller prior to the expiration of the
Title Review Period. Seller shall have ten (10) days from Seller's receipt of
such notice to agree to remove such Disapproved Title Exception, and if after
such ten-day period Seller has not agreed to remove such Disapproved Title
Exception, this Agreement shall terminate on the written request of either Buyer
or Seller. Notwithstanding the foregoing, Disapproved Title Exceptions shall
only include any of the exclusions from coverage listed in the Title Commitment
and shall not include (a) matters which are in all circumstances required
exclusions from applicable title insurance coverage, (b) any exception to or
condition of unavailability of any endorsement or amendment requested by Buyer
to the TLTA owner's policy of title insurance to be issued pursuant to the Title
Commitment (the "Title Policy"), and (c) any lien or requirement to the issuance
of the Title Policy set forth in the Schedule B requirements to the Title
Policy. Buyer agrees that Seller shall not suffer any liability in connection
with its failure to remove any title exception. If Seller fails to cause the
elimination of a Disapproved Title Exception within the time frame set forth in
this Section 5.3(c), Buyer may (x) elect to terminate this Agreement in
accordance with Section 5.5(b) below, or (y) waive Seller's failure to remove
such Disapproved Title Exception and proceed to closing in accordance with this
Agreement.
5.4. Owner's Policy. As a condition to Buyer's obligations to
purchase the Property, on or before the Close of Escrow, Title Company must
be prepared to issue to Buyer the Title Policy effective as of the Close of
Escrow, insuring Buyer in the amount of the Purchase Price that upon recordation
of the Deed (as defined in Section 7.1 hereof) title to the Property shall
be vested in Buyer, subject only to the Permitted Exceptions and the standard
printed exceptions other than any Disapproved Title Exception not waived
by Buyer.
5.5. Termination. Any one or more of the foregoing Buyer's Conditions
may be waived by Buyer at or before the Close of Escrow.
In the event that (a) prior to the expiration of the Due Diligence
Period Buyer determines that it does not desire to purchase the Property for any
reason whatsoever, or (b) a Disapproved Title Exception exists which Seller is
unable or unwilling to remove within the time frame set forth in Section 5.3(c)
hereof, Buyer shall notify Seller and Escrow Holder in writing of its election
to terminate this Agreement. If Buyer so elects to terminate this Agreement,
this Agreement will be of no further force and effect and Buyer, upon the
delivery of a written notice of termination of this Agreement to Seller and
Escrow Holder, shall be entitled to the return of the Deposit.
5.6. Rent Ready. Seller agrees that all apartment units vacated by
tenants five (5) or more business days prior to the Close of Escrow (each such
unit, an "Applicable Unit") shall be in Rent Ready condition. For purposes
herein, "Rent Ready" shall mean that condition in which vacant apartment units
are immediately prior to being rented under Seller's ordinary course of
managing the Property. If Seller shall fail to deliver an Applicable Unit in
Rent Ready condition at the Close of Escrow, Buyer's sole remedy hereunder shall
be an adjustment of the Purchase Price in the amount of the actual amount that
it will cost to make such Applicable Unit Rent Ready, provided however, that in
no event shall such amount exceed Seven Hundred Fifty Dollars ($750.00) per
Applicable Unit or Seven Thousand Five Hundred Dollars ($7,500.00) in the
aggregate. The obligations of Buyer and Seller pursuant to this Section 5.6
shall survive the closing for a period of ten (10) days after the Closing Date,
during which period Buyer and Seller shall agree on a reconciliation of the
adjustments described herein, if any.
5.7. River Hill Apartments. The closing of this transaction is
contingent upon both Buyer's and Seller's satisfactory completion of their
respective obligations under that certain Agreement for Purchase and
Sale and Joint Escrow Instructions of even date herewith with respect
to the property located at 1101 North Meadow Creek Drive, Irving (Las Colinas),
Texas, commonly known as River Hill Apartments ("River Hill Apartments").
6. Buyer's Deliveries. Buyer shall deliver to Escrow Holder, on or before
the Closing Date, for disbursement, delivery and recordation, as provided in
this Agreement, the following funds, instruments, and documents, the delivery
of which is material to the Close of Escrow:
4
<PAGE>
6.1. Funds. Immediately available funds in the amount required
of Buyer under this Agreement including sufficient funds to meet Buyer's
obligations under Sections 4.2, 5.7, and Articles 9 and 10.
6.2. Evidence of Authorization. Evidence in form and substance
reasonably satisfactory to Seller and its legal counsel that Buyer is authorized
to enter into and consummate the transactions contemplated by this Agreement.
6.3. Bring Down Certificate. A certificate signed by Buyer confirming
that Buyer's representations and warranties as provided in Section 15 hereof are
true and correct as of the Closing Date.
6.4. Other Documents. Any documents reasonably required of Buyer
by Escrow Holder in order to consummate the subject transaction inclusive
of a Buyer's closing statement (the "Buyer's Closing Statement").
7. Seller's Deliveries. Seller shall deliver to Escrow Holder on or
before the Close of Escrow, for disbursement, delivery and recordation,
as provided in this Agreement, the following instruments and documents,
the delivery of which is material to the Close of Escrow:
7.1. Deed and Bill of Sale. A special warranty deed duly executed
and acknowledged by Seller conveying all of Seller's interest in the Real
Property to Buyer (the "Deed") and a bill of sale executed by Seller
conveying all of Seller's interest in the Personal Property to Buyer
on an "as is-where is" basis (the "Bill of Sale").
7.2. FIRPTA Affidavit. A FIRPTA affidavit duly executed and
acknowledged by Seller certifying under penalty of perjury (a) Seller's
United States taxpayer identification number and (b) that Seller
is not a foreign person, in accordance with Section 1445 of the Internal
Revenue Code of 1986, as amended (the Foreign Investment in Real Property
Tax Act).
7.3. Lease Assignment. An assignment of Seller's interest, as
lessor, in any leases of space at the Property and security deposits for each
such lease under which Seller retains responsibility for pre-closing
matters and Buyer assumes all post-closing responsibilities. Delivery
of leaser hereunder shall include all original leases in Seller's possession.
7.4. Service Contracts Assignment. An assignment, to the extent
assignable, of Seller's rights under the Service Contracts relating to the
Property which are acceptable by Buyer. Seller shall retain responsibility
for pre-closing matters and Buyer shall assume all post-closing
responsibilities.
7.5. Licenses, Permits, Warranties and Guarantees Assignment.
A non-recourse assignment, to the extent assignable, of any licenses, permits
and unexpired warranties and guarantees, if any, pertaining to the Property.
7.6. Updated Rent Roll. An update of the Rent Roll certified by
Seller to be true and accurate as of a date within three days of the Closing
Date.
7.7. Asbestos Affidavit. As affidavit of Seller certifying whether
Seller has received any written notice from any governmental agency of the
presence of asbestos and/or any other hazardous material at the Property.
7.8. Termination of Management Agreement. A valid written termination
of the management agreement executed by all necessary parties, without cost to
Buyer.
7.9. Notice Letter. A signed copy of a notice letter (in a form
prepared by Buyer and approved by Seller, such approval not to be unreasonably
withheld)
5
<PAGE>
addressed to all residents at the Property notifying such residents as to
the change in ownership. Delivery of such notice letter shall be at Buyer's
sole cost and expense.
7.10. Bring Down Certificate. A certificate signed by Seller
confirming that Seller's representations and warranties as provided in Section
14 hereof are true and correct as of the Closing Date.
7.11. Representation Letter. A representation letter as normally
required by auditors for a public company, substantially in the form attached
hereto as Exhibit B.
7.12. Closing Memorandum. A closing memorandum and indemnification
substantially in the form attached hereto as Exhibit C.
7.13. Other Documents. All other documents reasonably required
of Seller by Escrow Holder or as customarily required in similar transactions
by Title Company in order to consummate the subject transaction inclusive of a
Seller's closing statement (the "Seller's Closing Statement").
8. Closing Escrow. On the Closing Date, provided Escrow Holder has received
all the documents, instruments and funds required to be delivered by Buyer
and Seller in accordance with Articles 6 and 7 above, and provided Title
Company is prepared to cause Escrow Holder to issue the Title Policy upon
the Close of Escrow and that all other conditions to the Close of Escrow
have been satisfied (or waived by the party to this Agreement who benefits
from such condition), Escrow Holder shall promptly perform all of the
following:
8.1. Recording. Cause the Deed to be recorded with the real property
records of the county in which the Property is located.
8.2. Deliveries. Deliver to Seller all of the deliveries of Buyer
made pursuant to Article 6 above, and deliver to Buyer the Bill of Sale and all
of the other deliveries of Seller made pursuant to Article 7 above.
8.3. Costs and Prorations. Pay the costs and apply the prorations in
accordance with Articles 9 and 10 below.
8.4. Issuance of Owner's Policy. Cause the Title Policy to be issued
at Seller's sole cost and expense, by the Title Company pursuant to the Title
Commitment, subject only to the Permitted Exceptions, in the full amount
of the Purchase Price, dated the Closing Date, and delivered to Buyer.
8.5. Disbursement of Purchase Price. Disburse to Seller, or in
accordance with Seller's instructions (after making appropriate adjustments for
costs and prorations as provided in this Agreement), all funds deposited with
Escrow Holder by Buyer in payment of the Purchase Price.
9. Costs. Seller shall pay (a) one-half of Escrow Holder's fee, (b) Escrow
Holder's customary charges to a seller for document drafting, recording and
miscellaneous charges, (c) the cost of the Title Policy, and (d) one-half the
documentary transfer and stamp taxes payable in connection with the recordation
of the Deed.
Buyer shall pay (a) one-half of Escrow Holder's fee, (b) Escrow Holder's
customary charges to a buyer for document drafting, recording and miscellaneous
charges, (c) the cost of any amendments or endorsements to the Title Policy
requested by Buyer or its lender, (d) one-half the documentary transfer and
stamp taxes payable in connection with the recordation of the Deed, and (e) all
costs associated with Buyer's financing of the Purchase Price, including any
fees for any loans, appraisals, title policies, etc.
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10. Proration Items. The following shall be apportioned and adjusted
between the parties as of 5:00 pm, New York City time of the day preceding the
Closing Date ("the Adjustment Date"):
(a) Real estate and other taxes, assessments and charges, and
other municipal and state charges, license and permit fees, water and sewer
rents and charges, if any, on the basis of the fiscal period for which assessed
or charged;
(b) Water, electric, gas and other utility charges for service
furnished to the Property;
(c) Base rents and any other payments (the "Rents"), actually
paid under the terms of any Lease for the month of closing;
(d) Any amounts paid to Seller or by Seller under Service
Contracts which are accepted by Buyer and are being assigned to Buyer;
(e) All costs associated with telephone directory listings and
any other prepaid advertising which are accepted by Buyer with respect to the
Property;
(f) Any other customary adjustments made in connection with the
sale of similar properties; and
(g) Refundable security deposits from current tenants as of the
Closing Date.
Seller will not assign to buyer any of the hazard insurance
policies affecting the Property then in force. There will therefore be no
proration of insurance costs at Closing. Except as may be otherwise provided
herein, all other expenses which are attributable to the period prior to the
Closing Date shall be the obligation of Seller and those which are attributable
to the period from and after the Closing Date shall be the obligation of Buyer.
For purposes of the foregoing apportionments and adjustments, the
following procedures shall govern:
(i) If the Closing Date shall occur before the real estate
tax rate is fixed, the apportionment of such taxes shall be made upon the basis
of the tax rate for the immediately preceding year, applied to the latest
assessed valuation;
(ii) If there are water meters on the Property, Seller shall
furnish meter readings to a date not more than twenty (20) days prior to the
Adjustment Date; and the unfixed meter charges for the intervening time to the
Adjustment Date shall be apportioned on the basis of such meter readings, and
any such meter charges for the period subsequent to the Adjustment Date shall be
paid by Buyer;
(iii) The apportionment of utility charges shall be made
upon the basis of charges shown on the latest available bills for such
utilities. The charges shown on such available bills for periods prior to the
Adjustment Date shall be paid by Seller, and for the period from the date of
each such last available utility bill to the Adjustment Date an apportionment
shall be made based on the amount charged for the period covered by such last
available bill;
(iv) All taxes, water and sewer charges and current
installments for assessments for public improvements which are liens upon the
Property as of the Closing Date, will be allowed to Buyer as a credit against
the Purchase Price, subject to apportionment as herein provided, and the
existence of any such lien shall not constitute an objection to title;
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(v) If any tenants pay Rents collected by Buyer after the
Closing Date which are attributable in whole or in part to any period prior to
the Closing Date, Buyer shall promptly pay to Seller, Seller's proportionate
share thereof;
(vi) If any tenants pay Rents collected by Seller which are
attributable in whole or in part to any period after the Closing Date, Seller
shall promptly pay to Buyer, Buyer's proportionate share thereof;
(vii) If any tenant is in arrears in the payment of Rents on
the Closing Date, Rents received from such tenant after the Closing Date shall
be applied in the following order of priority: (a) first to pay any rents then
due and owing for any period subsequent to the Closing Date and (b) then to pay
any rent owning for any period prior to the Closing Date. If Rents or any
portion thereof are received by Seller or Buyer after the Closing Date and are
payable to the other party by reason of this allocation, the appropriate sum
shall be promptly paid to the other party. The obligations of Buyer and Seller
pursuant to this Section 10(vii) and the two immediately preceding Sections
shall survive the Closing for a period of one hundred eighty (180) days after
the Closing Date, during which period Buyer and Seller shall agree on a
reconciliation of the prorations described herein.
Except as expressly provided, the provisions of this Section 10 shall
survive the Closing.
11. Remedies for Default. If Escrow fails to close by reason of any default
by Seller under this Agreement, Buyer shall be entitled to the return of the
Deposit and any Additional Deposit upon delivery of written notice by Buyer to
Seller and Escrow Holder, in which event Buyer may pursue all of the rights and
remedies that Buyer may have at law or in equity, including the right to seek
specific performance of this Agreement and recover all reasonable expenses
incurred including attorneys fees incurred in remedying such default. If Escrow
fails to close by reason of any default by Buyer under this Agreement, Seller
shall be entitled to receive the liquidated damages set forth in Section 12
below upon delivery of written notice by Seller to Buyer and Escrow Holder, in
which event Seller may pursue all of the rights and remedies that Seller may
have at law or in equity, including recovering all reasonable expenses incurred
including attorneys fees incurred in remedying such default. If Escrow Holder
intends to release the Deposit to either party pursuant to this Section 11 or
Section 12 hereof, Escrow Holder shall give Buyer and Seller not less than ten
(10) days prior written notice of such fact and, if Escrow Agent actually
receives notice from either Buyer or Seller within such ten (10) day period that
such party objects to the release, then Escrow Holder shall not release the
Deposit until directed by both Buyer and Seller or pursuant to an order of any
court of competent jurisdiction. If this Agreement or Escrow is terminated,
Buyer shall return to Seller, within two business days after the termination of
Escrow, all documents and materials provided by Seller or its agents to Buyer or
its agents in connection with this Agreement or the Property and all copies
thereof.
12. LIQUIDATED DAMAGES. IF BUYER FAILS TO CLOSE UNDER THIS AGREEMENT, THEN
SELLER MAY RECEIVE THE DEPOSIT AND ANY ADDITIONAL DEPOSIT AS LIQUIDATED DAMAGES.
THE PARTIES HAVE DISCUSSED AND NEGOTIATED IN GOOD FAITH UPON THE QUESTION OF THE
DAMAGES THAT WOULD BE SUFFERED BY SELLER IN THE EVENT BUYER FAILS TO CLOSE UNDER
THIS AGREEMENT AND HAVE ENDEAVORED TO REASONABLY ESTIMATE SUCH DAMAGES AND THEY
AGREE THAT (I) SUCH DAMAGES ARE AND WILL BE IMPRACTICABLE OR EXTREMELY DIFFICULT
TO FIX, (II) LIQUIDATED DAMAGES IN THE AMOUNT OF THE DEPOSIT AND ANY ADDITIONAL
DEPOSIT ARE AND WILL BE REASONABLE, (III) IN THE EVENT OF SUCH BREACH, SELLER IS
ENTITLED TO THE DEPOSIT AND ANY ADDITIONAL DEPOSIT AS SUCH LIQUIDATED DAMAGES,
AND (IV) IN CONSIDERATION OF THE PAYMENT OF SUCH LIQUIDATED DAMAGES, SELLER
SHALL BE DEEMED TO HAVE WAIVED ALL OTHER CLAIMS FOR DAMAGES OR RELIEF AT LAW OR
IN EQUITY, EXCEPT FOR: (A) CLAIMS FOR THE RETURN OF DOCUMENTS IN CONNECTION WITH
THIS AGREEMENT; (B) ACTIONS TO EXPUNGE A LIS PENDENS OR OTHER CLOUDS ON TITLE
CAUSED BY BUYER; (C) CLAIMS ON ACCOUNT OF ANY OF BUYER'S INDEMNITY
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OBLIGATIONS UNDER THIS AGREEMENT; AND (D) REASONABLE ATTORNEY'S FEES AND COSTS
INCURRED BY SELLER INCIDENT TO CLAUSES (A), (B), OR (C) HEREOF.
SELLER'S INITIALS BUYER'S INITIALS
_________ _________
13. Possession. Seller shall deliver possession of the Property to Buyer on
the Close of Escrow, subject to the rights of tenants.
14. Seller's Representations and Warranties. The accuracy and completeness
of the following constitute a condition to the Close of Escrow and Seller
represents and warrants that the following are complete and accurate as of the
date of this Agreement, and will be complete and accurate as of the Close of
Escrow.
14.1. Legal Power, Right, Authority and Enforceability. Seller is duly
organized, validly existing, and qualified to conduct its business and has the
legal power, right and authority to enter into this Agreement and to consummate
the transactions contemplated by this Agreement and will have taken all
requisite action in connection with entering into this Agreement and the
consummation of the transactions contemplated by this Agreement and the
individuals executing this Agreement on behalf of Seller will have the legal
power, right, and actual authority to bind Seller to the terms and conditions of
this Agreement.
14.2. FIRPTA. Seller is not a foreign person within the meaning of
Section 1445 of the Internal Revenue Code of 1986, as amended (the Foreign
Investment in Real Property Tax Act).
14.3. Rent Roll. Except as described in the Rent Roll, there are no
leases affecting the Real Property (each such lease, a "Lease", and
collectively, the "Leases") and no person, other than tenants under such Leases
which, subject to any title exceptions relating thereto, has any right of
possession of the Real Property. Except as otherwise specifically and expressly
set forth in the Rent Roll or otherwise specifically disclosed in writing to
Buyer, to the best of Seller's knowledge: (i) no presently effective or future
rent concessions have been given to any tenants; (ii) no rent has been paid in
advance by any tenants respecting a period subsequent to the Close of Escrow
(except for the month in which the Close of Escrow occurs); (iii) no current
tenants have any claim against Seller for any security deposit or other
deposits, other than pursuant to the terms of its Lease with respect to sums
specified as security deposits in the Rent Roll; (iv) no tenants have any option
or right of first refusal to extend or renew their Lease or rent additional
space; (v) other than with respect to certain leases with certain service
providers, including without limitation laundry service providers, no lease
provides for occupancy of more than one (1) year; and (vi) there are no leasing
or other commissions due, nor will any become due, in connection with any Lease,
or any renewal or extension of any Lease, subsequent to the Closing Date.
Furthermore, to the best of Seller's knowledge, no tenants have asserted any
defenses or offsets as of the date of this Agreement, nor are there any defenses
or offsets to rent accruing after the Closing Date. Except as specifically set
forth in the Rent Roll or otherwise specifically disclosed in writing to Buyer,
to the best of Seller's knowledge no default or breach exists on the part of
any tenant nor has Seller received any notice of any default or breach on the
part of the landlord under any Lease, nor does there exist any such default or
breach on the part of the landlord.
14.4. Operating Statements. The Operating Statements show all items of
income and expense (operating and capital) incurred in connection with Seller's
ownership and management of the Property for the periods indicated and are true,
correct and complete in all material respects.
14.5. Service Contracts. There are no management or service agreements
affecting the Property other than the Service Contracts. The list of Service
Contracts is true, correct and complete in all material respects.
14.6. Notice of Violations. Seller has received no written notice that
either the Property or the use thereof violates any laws, rules and regulations
of any federal, state, city or county government or any agency, body or
subdivision thereof having any jurisdiction over the Property that have not been
resolved to the satisfaction of the issuer of the notice.
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14.7. Condition of Personal Property. Other than due to the occurrence
of a casualty or condemnation of all or a portion of the Property, all Personal
Property included in the sale and all mechanical, electrical, heating, air
conditioning, sewer, water and plumbing systems at the Property shall be in
substantially the same working order at the time of closing hereunder as at the
time of the initial inspection by Buyer in accordance with its due diligence
examination of the Property pursuant to Section 5.2 hereof, reasonable wear and
tear excepted.
14.8. Real Estate Taxes and Assessments. All ad valorem taxes for 1996
and all prior years have been paid and no taxes for 1997 are delinquent. All
assessments, fees or other charges for utilities or roads have been paid in
full.
14.9. Litigation. Seller has no actual knowledge of any existing or
pending litigation which would adversely affect the Property.
14.10. Continued Operation. Seller covenants and agrees that between
the date hereof and Closing Date, Seller shall continue to maintain, operate and
manage the Property in a manner consistent with its prior practices. Seller
shall not permit the modification, extension, or cancellation of any tenant
lease other than in the ordinary course of managing the Property. If the leases
of any tenants expire before thirty (30) days after the Closing Date, Seller
shall, up to the Closing Date, continue its normal course of operation with
respect to leasing apartments which are unrented or will be vacated during the
applicable period described above.
14.11. Dead-Bolt Compliance. Seller warrants that it has complied with
the keyless, dead-bolt lock requirement.
15. Buyer's Representations and Warranties. The accuracy and completeness
of the following constitute a condition to the Close of Escrow and Buyer
represents and warrants that the following is complete and accurate as of the
date of this Agreement and shall be complete and accurate as of the Close of
Escrow, and survive the Close of Escrow in perpetuity: (i) Buyer is duly
organized, validly existing, and qualified to conduct its business and has the
legal power, right and authority to enter into this Agreement and to consummate
the transactions contemplated by this Agreement; (ii) all requisite action
(corporate, partnership, trust or otherwise) has been taken by Buyer in
connection with entering into this Agreement and the consummation of the
transactions contemplated by this Agreement; (iii) the individual executing this
Agreement on behalf of Buyer has the legal power, right, and actual authority to
bind Buyer to the terms and conditions of this Agreement; and (iv) this
Agreement and all documents required by this Agreement to be executed by Buyer
are and will be valid, legally binding obligations of and enforceable against
Buyer in accordance with their terms.
16. Waivers of Deceptive Trade Practices Act. Buyer acknowledges and
agrees, on its own behalf and on behalf of its assigns and successors, that the
Texas Deceptive Trade Practices--Consumer Protection Act, Subchapter E of
Chapter 17 of the Texas Business and Commerce Code (the "DTPA"), is not
applicable to the transactions contemplated by this Agreement. Accordingly,
Buyer's rights and remedies with respect to these transactions, and with respect
to all other acts or practices, past, present or future, in connection with
these transactions, shall be governed by legal principles other than the DTPA.
In furtherance thereof, Buyer agrees as follows:
(a) Buyer represents that it is a business consumer and that it seeks
to acquire by purchase or lease the goods or services that are the subject
of this Agreement for commercial or business use. Buyer further represents
that it has knowledge and experience in financial and business matters that
enables it to evaluate the merits and risks of the business transactions
that are the subject of this Agreement. Buyer also represents that it is
not in a significantly disparate bargaining position in relation to Seller.
(b) Buyer represents that Buyer has assets of Five Million Dollars
($5,000,000.00) or more.
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(c) Buyer represents that it has been represented by legal counsel in
seeking or acquiring the goods or services that are the subject of this
Agreement and that the transactions contemplated by this Agreement do not
involve the purchase or lease of a family residence occupied or to be
occupied as the residence of Buyer. Buyer shall cause its legal counsel to
sign this Agreement for the purpose of complying with Section 17.42(a)(3)
of the DTPA.
(d) Buyer agrees, on its own behalf and on behalf of its assigns and
successors, that all of its rights and remedies under the DTPA are waived
and released, including specifically, without limitation, all rights and
remedies resulting from or arising out of any and all acts or practices of
Seller in connection with the transactions contemplated by this Agreement,
whether such acts or practices occur before or after the execution of this
Agreement; provided, however, notwithstanding anything to the contrary
herein, in accordance with Section 17.42 of the DTPA, Buyer does not waive
Section 17.555 of the DTPA.
17. Condemnation. If before the Close of Escrow, any portion of the
Property is taken by eminent domain (or is the subject of a pending or
contemplated taking which has not been consummated) Buyer and Seller shall
proceed to the Close of Escrow in accordance with this Agreement, without
modification of the terms of this Agreement, except that (i) the Property will
not include the property so taken, (ii) the Purchase Price will be reduced by
the amount of any awards for such taking paid to Seller as of the Closing Date,
and (iii) Seller shall assign and turn over to Buyer, and Buyer shall be
entitled to receive and retain, all awards for such taking not yet awarded as of
the Close of Escrow. Notwithstanding the foregoing, if a portion of the Property
is taken by eminent domain (or is the subject of a pending or contemplated
taking which has not been consummated) and such portion either (a) contains more
than five percent (5%) of the number of parking spaces located at the Property,
or (b) is worth in excess of $250,000.00, Buyer may either (x) terminate this
Agreement and receive the return of the Deposit and any Additional Deposit, in
which case neither party will have any additional rights or obligations under
this Agreement, or (y) elect to proceed to the Close of Escrow in accordance
with this Agreement, without modification of the terms of this Agreement.
18. Destruction. Except as otherwise provided in this Agreement, prior to
the Closing Date, all risks of loss or damage by every casualty shall be borne
by the Seller. Notwithstanding the foregoing, if the Property is damaged by fire
or other casualty on or before the Closing Date, Seller immediately shall notify
Buyer of such damage. If the damage is less than Two Hundred Fifty Thousand
Dollars ($250,000.00) and does not eliminate access to the Property, Buyer and
Seller shall proceed to the Close of Escrow in accordance with the terms of this
Agreement, without modification of the terms of this Agreement, in which event
Buyer shall be entitled to an assignment of the proceeds of all insurance
relating to such fire or other casualty, including the proceeds of rent loss
insurance, and Seller shall be responsible for the payment of any deductibles
under its insurance policies. If the damage exceeds Two Hundred Fifty Thousand
Dollars ($250,000.00), Buyer may either (a) terminate this Agreement and receive
the return of the Deposit and any Additional Deposit, in which case neither
party will have any additional rights or obligations under this Agreement, or
(b) elect to proceed to the Close of Escrow in accordance with this Agreement,
without modification of the terms of this Agreement, in which event Buyer is
entitled to an assignment of the proceeds of all insurance relating to such fire
or other casualty, including the proceeds of rent loss insurance, and Seller
shall be responsible for the payment of any deductibles under its insurance
policies.
19. Brokers. Seller represents that it has engaged Jerry T. Lamm of Lamm
Real Estate, Ltd. ("Lamm"), as a real estate broker in connection with its sale
of the Property. Buyer represents that is has engaged Tom Flood of Pinnacle
Realty Management Company ("Pinnacle") as real estate broker in connection with
its purchase of the Property. Lamm and Pinnacle shall be collectively referred
to herein as "Broker." On the Close of Escrow Broker is entitled to receive a
commission in the amount of One and Three-Quarter Percent (1.75%) of the
Purchase Price from the proceeds of the Purchase Price, payable by Seller
one-half to Lamm and one-half to Pinnacle. Each party to this Agreement
represents that no real estate or business broker, agent, finder, or other
person other than Broker is responsible for bringing about or negotiating this
Agreement and that such party has not dealt with any real estate broker, agent,
finder, or other person other than Broker relating to this Agreement
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in any manner. Each party to this Agreement shall defend, indemnify, and hold
harmless the other party to this Agreement against all liabilities, damages,
losses, costs, expenses, attorneys' fees and claims arising from (a) any breach
of such representation by such indemnifying party set forth in the preceding
sentence, and (b) any claims that may be made against such indemnified party by
any real estate broker, agent, finder, or other person alleging to have acted on
behalf of, or to have dealt with, such indemnifying party. It is the intent of
the parties that Broker is not a third party beneficiary of this Agreement.
20. As-Is Purchase. Buyer acknowledges that it is purchasing the Property
in reliance solely on: (i) Buyer's inspection of the Real Property, the Personal
Property and the Improvements; (ii) Buyer's independent verification of the
truth of any documents made available to Buyer; and (iii) the opinions and
advice concerning the Property of consultants and attorneys engaged by Buyer.
Buyer acknowledges that before the expiration of the Due Diligence Period, Buyer
will have performed all of its due diligence investigations of and with respect
to the Property as Buyer deems appropriate, including engineering studies, soils
tests, environmental surveys and testing, physical inspections, TLTA or other
surveys, and market analyses as well as Buyer's evaluation of the condition and
status of the Personal Property and Improvements and the operation and future
prospects of the Property. On the Close of Escrow, Buyer accepts the Property
and all matters relating to the Property in their "as is" condition or status as
of the Closing Date, including such matters as: soils and geological condition,
topography, area and configuration of the Real Property; the age and condition
of the Improvements and Personal Property; the existence of any hazardous or
toxic substances or materials, construction defects or other matters which would
or could necessitate abatement or remediation action by the Property's owner;
any physical or mechanical defects in the Improvements or Personal Property; any
easement, license or encroachment which is not a matter of public record,
whether or not visible upon inspection of the Property; the zoning and other
land use regulations applicable to the Property; and any other matter relating
to the Property including, but not limited to, value, title, income,
feasibility, cost, marketing and investment return. Buyer acknowledges and
agrees that Seller is not making any express or implied warranties or
representations of any kind or character with respect to the Property. Buyer
warrants and represents that it has not relied upon and will not rely upon,
either directly or indirectly, any warranty or representation of Seller not
explicitly set forth in this Agreement.
21. Indemnification.
21.1. Indemnification of Buyer. Seller hereby agrees to indemnify,
defend and hold harmless Buyer and any other holder of record title to the
Property pursuant to this Agreement, their officers, directors, general
partners, agents and employees and their respective heirs, executors,
administrators, successors and assigns, from and against any and all
indebtedness or other liability arising out of ownership or operation of the
Property prior to Close of Escrow, including, but not limited to, any and all
claims, liabilities, damages, penalties and losses, costs or expenses (including
court costs and reasonable attorney's fees) incurred, resulting from or in any
way arising out of any act or omission of Seller, its agents and employees, in
respect of the operation of the Property prior to Close of Escrow, and any
injury to persons or damage to property happening or occurring in, or on about
the Property. Seller further agrees, upon notice and request from Buyer, to
contest any such demand, claim, suit or action against which Seller has
hereinabove agreed to indemnify and hold Buyer harmless, and to defend any
action that may be brought in connection with any such demand, claim, suit or
action or with respect to which Seller has hereinabove agreed to indemnify and
hold Buyer harmless and to bear all costs and expenses of such contest and
defense, provided, however, that Seller shall have no obligation hereunder to
indemnify or hold Buyer harmless from and against any claim, liability, damage,
penalty or loss, cost or expense incurred by Buyer incident to, resulting from
or in any way arising out of any act or omission of Buyer, its agent or
employees, it being understood and agreed, however, that the employees engaged
in the operation of the Property prior to Close of Escrow are and shall be
construed to be, for purposes of this provision, the employees of Seller and the
acts and omissions of said employees shall in no way be attributable to Buyer
for the purposes of this provision.
21.2. Indemnification of Seller. Buyer hereby agrees to indemnify,
defend and hold harmless Seller and any other holder of record title to the
Property pursuant to this Agreement, their officers, directors, general
partners, agents and employees and their respective heirs, executors,
administrators, successors and assigns,
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from and against any and all indebtedness or other liability arising out of
ownership or operation of the Property from and after Close of Escrow,
including, but not limited to, any and all claims, liabilities, damages,
penalties and losses, costs or expenses (including court costs and reasonable
attorney's fees) incurred, resulting from or in any way arising out of any act
or omission of Buyer, its agents and employees, in respect of the operation of
the Property from and after Close of Escrow, and any injury to persons or damage
to property happening or occurring in, on or about the Property. Buyer further
agrees, upon notice and request from Seller, to contest any such demand, claim,
suit or action against which Buyer has hereinabove agreed to indemnify and hold
Seller harmless, and to defend any action that may be brought in connection with
any such demand, claim, suit or action or with respect to which Buyer has
hereinabove agreed to indemnify and hold Seller harmless and to bear all costs
and expenses of such contest and defense, provided, however, that Buyer shall
have no obligation hereunder to indemnify or hold Seller harmless from and
against any claim, liability, damage, penalty or loss, cost or expense incurred
by Seller incident to, resulting from or in any way arising out of any act or
omission of Seller, its agent or employees, it being understood and agreed,
however, that the employees engaged in the operation of the Property from and
after Close of Escrow are and shall be construed to be, for purposes of this
provision, the employees of Buyer and the acts and omissions of said employees
shall in no way be attributable to Seller for the purposes of this provision.
21.3. Indemnification Procedure. To the extent of any claims against
Seller or Buyer predicated upon facts which could reasonably be interpreted as
giving rise to potential liability of Seller or Buyer under this Section 21, the
party against whom such claim is asserted shall promptly give notice thereof to
the other party hereto. Thereupon, such other party shall have the option of
retaining counsel of its choice to defend both it and the remaining party in
respect of such claim and to control, in a manner reasonable in light of
applicable circumstances, the course and ultimate disposition of such claim. In
the event that a party to this Agreement shall elect to exercise the option
provided in the preceding sentence, the party electing such option, by reason
thereof, shall be deemed to have agreed to pay all reasonable costs and expenses
of defending against such claim and any liability of the party against whom such
claim was asserted on account thereof. Without regard to whether any party
hereto shall exercise such option, Seller and Buyer and their counsel shall
consult with one another concerning such claim and with due regard to both the
mutual and the independent interest of Seller and Buyer therein.
21.4. Indemnity Regarding Inspection. In consideration of Seller's
permission to Buyer and its agents to perform investigations and testing on and
about the Property, Buyer shall defend, indemnify and hold harmless Seller,
Seller's officers, employees, agents, contractors, successors, assigns, and
affiliates (collectively, the "Indemnitees"), and the Property from all claims,
costs, liens, actions and judgments (including Seller's attorneys' fees and
defense costs) resulting from Buyer's investigation or otherwise caused by Buyer
or any of its employees, agents or independent contractors. Unless and until the
Close of Escrow occurs, Buyer shall maintain all the information it obtains in
connection with the Property in strict confidence subject to the terms of the
Indemnification Agreement dated May 16, 1997 by and between Seller and Buyer
(the "Indemnification Agreement"). Buyer shall, at Buyer's sole cost, promptly
repair any damage resulting from its activities on the Property and restore the
Property to its condition before Buyer or any of its agents first entered the
Property. If the Close of Escrow does not occur on or before the Closing Date
for any reason other than a breach of this Agreement by Seller, Buyer shall
provide Seller, at no cost to Seller, copies of all reports and materials
derived from Buyer's investigation of the Property.
22. Governing Law, Venue and Jurisdiction. This Agreement is governed by
and construed in accordance with the laws of the State of Texas. All actions and
proceedings arising in connection with this Agreement must be tried and
litigated exclusively in the State and Federal courts located in the County of
Dallas, State of Texas, which courts have personal jurisdiction and venue over
each of the parties to this Agreement for the purpose of adjudicating all
matters arising out of or related to this Agreement. Each party authorizes and
accepts service of process sufficient for personal jurisdiction in any action
against it as contemplated by this paragraph by registered or certified mail,
return receipt requested, postage prepaid, to its address for the giving of
notices set forth in this Agreement.
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23. Further Assurances. Each party to this Agreement shall execute and
deliver all instruments and documents and take all actions as may be reasonably
required or appropriate to carry out the purposes of this Agreement.
24. Counterparts and Exhibits. This Agreement may be executed in
counterparts, each of which is deemed an original and all of which together
constitute one document. All exhibits attached to and referenced in this
Agreement are incorporated into this Agreement.
25. Time of Essence. Time and strict and punctual performance are of the
essence with respect to each provision of this Agreement.
26. Attorney's Fees. The prevailing party in any litigation, arbitration,
mediation, bankruptcy, insolvency or other proceeding ("Proceeding") relating to
the enforcement or interpretation of this Agreement may recover from the
unsuccessful party all costs, expenses, and reasonable attorney's fees
(including expert witness and other consultants' fees and costs) relating to or
arising out of (a) the Proceeding (whether or not the Proceeding proceeds to
judgment), and (b) any post-judgment or post-award proceeding including, without
limitation, one to enforce or collect any judgment or award resulting from the
Proceeding. All such judgments and awards shall contain a specific provision for
the recovery of all such subsequently incurred costs, expenses, and actual
attorney's fees.
27. Modification. This Agreement may be modified only by a contract in
writing executed by the party to this Agreement against whom enforcement of the
modification is sought.
28. Headings. The paragraph headings in this Agreement (a) are included
only for convenience, (b) do not in any manner modify or limit any of the
provisions of this Agreement, and (c) may not be used in the interpretation of
this Agreement.
29. Prior Understandings. This Agreement and all documents specifically
referred to and executed in connection with this Agreement: (a) contain the
entire and final agreement of the parties to this Agreement with respect to the
subject matter of this Agreement, and (b) supersede all negotiations,
stipulations, understandings, agreements, representations and warranties, if
any, with respect to such subject matter, which precede or accompany the
execution of this Agreement.
30. Interpretation. Whenever the context so requires in this Agreement, all
words used in the singular may include the plural (and vice versa) and the word
"person" includes a natural person, a corporation, a firm, a partnership, a
joint venture, a trust, an estate or any other entity. The terms "includes" and
"including" do not imply any limitation. No remedy or election under this
Agreement is exclusive, but rather, to the extent permitted by applicable law,
each such remedy and election is cumulative with all other remedies at law or in
equity.
31. Partial Invalidity. Each provision of this Agreement is valid and
enforceable to the fullest extent permitted by law. If any provision of this
Agreement (or the application of such provision to any person or circumstance)
is or becomes invalid or unenforceable, the remainder of this Agreement, and the
application of such provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, are not affected by such invalidity
or unenforceability.
32. Successors-in-Interest and Assigns. Buyer may not assign its rights
under this Agreement to any person or entity, other than Apple Residential
Trust, Inc., without the prior written consent of Seller, which consent may not
be unreasonably withheld. No assignment by Buyer of any of its rights or
obligations under this Agreement shall relieve Buyer of any of its obligations
under this Agreement unless Seller expressly agrees to such release in writing.
Subject to the foregoing, this Agreement is binding on and inures to the benefit
of the successors-in-interest and assigns of each party to this Agreement.
14
<PAGE>
33. Municipal Utility District Notices. Buyer agrees that if the Property
or any portion thereof is located in a municipal utility district, Buyer will,
within five days after request by Seller, execute any and all notices which, in
the opinion of counsel for Seller, are required by law to be given to Buyer with
respect to the Property.
34. Notices. Each notice and other communication required or permitted to
be given under this Agreement ("Notice") must be in writing. Notice is duly
given to another party upon: (a) hand delivery to the other party, (b) receipt
by the other party when sent by facsimile to the address and number for such
party set forth below (provided, however, that the notice is not effective
unless a duplicate copy of the facsimile Notice is promptly given by one of the
other methods permitted under this paragraph), (c) three business days after the
Notice has been deposited with the United States postal service as first class
certified mail, return receipt requested, postage prepaid, and addressed to the
party as set forth below, or (d) the next business day after the Notice has been
deposited with a reputable overnight delivery service, postage prepaid,
addressed to the party as set forth below with next-business-day delivery
guaranteed, provided that the sending party receives a confirmation of delivery
from the delivery-service-provider.
If to Seller, to: Hutton/Con Am Realty Investors 4
1764 San Diego Avenue
San Diego, California 92110
Attn: E. Scott Dupree, Esq.
Phone: 614-297-6771
Fax: 619-294-2451
with a copy to: RI 3-4 Real Estate Services, Inc.
c/o Lehman Brothers, Inc.
Diversified Asset Group
3 World Financial Center, 29th Floor
or
200 Vesey Street, 29th Floor
New York, New York 10285
Attn: Donald E. Petrow
Phone: 212-526-3140
Fax: 212-528-9697
If to Buyer, to: Cornerstone Realty Group, Inc.
306 East Main Street
Richmond, Virginia 23219
Attn: Gustav G. Remppies
Phone: (804) 643-1761
Fax: (804) 782-9302
with a copy to: Zuckerbrod & Taubenfeld
575 Chestnut Street
P.O. Box 488
Cedarhurst, New York 11516
Attn: Harry S. Taubenfeld, Esq.
Phone: (516) 374-3133
Fax: (516) 374-3490
and a copy to: Brown McCarroll & Oaks Hartline
300 Crescent Court--Suite 1400
Dallas, Texas 75201-6929
Attn: Leigh Moore, Esq.
15
<PAGE>
Phone: (214) 999-6173
Fax: (214) 999-6170
Each party shall make a reasonable, good faith effort to ensure that it will
accept or receive any Notice to it that is given in accordance with this
paragraph. A party may change its address for purposes of this paragraph by
giving the other party(ies) written notice of a new address in the manner set
forth above.
35. Waiver. Any waiver of a default or provision under this Agreement must
be in writing. No such waiver constitutes a waiver of any other default or
provision concerning the same or any other provision of this Agreement. No delay
or omission by a party in the exercise of any of its rights or remedies
constitutes a waiver of (or otherwise impairs) such right or remedy. A consent
to or approval of an act does not waive or render unnecessary the consent to or
approval of any other or subsequent act.
36. Drafting Ambiguities. Each party to this Agreement and its legal
counsel have reviewed and revised this Agreement. The rule of construction that
ambiguities are to be resolved against the drafting party or in favor of the
party receiving a particular benefit under an agreement may not be employed in
the interpretation of this Agreement or any amendment to this Agreement.
37. Third Party Beneficiaries. Nothing in this Agreement is intended to
confer any rights or remedies on any person or entity other than the parties to
this Agreement and their respective successors-in-interest and permitted
assignees.
38. Confidentiality. Except as required by law, as provided in Section 21.4
or as set forth in the Indemnification Agreement, Seller and Buyer hereby agree
from and after the date hereof, not to disclose the terms of the transactions
contemplated by this Agreement or any information in connection therewith to
anyone other than (i) the consultants and professionals retained by each party
in connection with evaluating, reviewing, negotiating and closing the
transactions contemplated by this Agreement, (ii) the partners, management and
officers of each party, and (iii) other employees of each party involved in
evaluating, reviewing, negotiating and closing the transactions contemplated by
this Agreement (collectively, the "Involved Parties"). Any document or
information provided to the Involved Parties is for their internal use only and
shall not be published, quoted, copied, distributed, divulged, disseminated or
discussed without the express prior written consent of the other party, except
as otherwise required by law. Seller and Buyer hereby agree to keep, and agree
to direct the Involved Parties to keep, any information and documents received
from the other party, or from any third party regarding the other, confidential,
and no publicity or press release regarding the transactions contemplated by
this Agreement or the consummation of the sale of the Property shall be made
without the prior written consent of both Seller and Buyer. The provisions of
this Section shall apply prior to the Closing Date and, if the Closing does not
occur, shall survive the termination of this Agreement.
16
<PAGE>
SELLER: HUTTON/CON AM REALTY PENSION INVESTORS,
a New York limited partnership
By: RPI REAL ESTATE SERVICES, INC.
a Delaware corporation general partner
/s/ Donald E. Petrow
By: __________________________________
Name: Donald E. Petrow
Title: Vice President
By: CON AM PROPERTY SERVICES III, LTD.,
a California limited partnership,
general partner
By: CONTINENTAL AMERICAN
DEVELOPMENT, INC.,
a California corporation,
general partner
/s/ Scott Dupree
By: __________________________________
Name: Scott Dupree
Title: Vice President
<PAGE>
BUYER: CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
/s/ S. J. Olander
By: __________________________________
Name: S. J. Olander
Title: Senior Vice President
FIRST MODIFICATION TO AGREEMENT FOR PURCHASE AND SALE
-----------------------------------------------------
AND JOINT ESCROW INSTRUCTIONS
-----------------------------
This First Modification to Agreement for Purchase and Sale and Joint Escrow
Instructions ("Modification") is made and entered into this 24th day of June
1997 between RIVER HILL APARTMENTS, LTD., ("Seller") and CORNERSTONE REALTY
GROUP, INC. ("Purchaser").
WHEREAS, Purchaser and Seller entered into an Agreement for Purchase and
Sale and Joint Escrow Instructions dated the 17th day of June 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.
2. Paragraph 5.2. Due Diligence Investigation is hereby amended to remove
June 23, 1997 and insert June 30, 1997.
3. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
4. 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.
5. 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 Modification on
the date first above written.
RIVER HILL APARTMENTS, LTD.,
a Texas limited partnership
By: HUTTON/COM AM REALTY INVESTORS 4,
a California limited partnership,
general partner
By: RI 3-4 REAL ESTATE SERVICES, INC.
a Delaware corporation
general partner
/s/ Donald E. Petrow
By: ______________________________
Name: Donald E. Petrow
Title: Vice President
<PAGE>
By: COM AM PROPERTY SERVICES IV, LTD.
a California limited partnership,
general partner
By: CONTINENTAL AMERICAN
DEVELOPMENT, INC.,
a California corporation,
general partner
/s/ Scott Dupree
By: _________________________________
Name: E. Scott Dupree
Title: Vice President
CORNERSTONE REALTY GROUP, INC.
a Virginia Corporation
/s/ S. J. Olander
By: _______________________________________
Name: S. J. Olander
Title: Senior Vice President
<PAGE>
SECOND MODIFICATION TO AGREEMENT FOR PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
This Second Modification to Agreement for Purchase and Sale and Joint
Escrow Instructions ("Second Modification") is made and entered into as of June
30, 1997 between RIVER HILL APARTMENTS, LTD., ("Seller") and CORNERSTONE REALTY
GROUP, INC. ("Purchaser").
WHEREAS, Purchaser and Seller entered into an Agreement for Purchase and
Sale and Joint Escrow Instructions dated the 17th day of June, 1997 (as amended
and modified, the "Agreement"); and
WHEREAS, the Agreement was modified by that certain First Modification to
Agreement for Purchase and Sale and Joint Escrow Instructions dated as of the
24th day of June, 1997; ("First Modification") and
WHEREAS, the Due Diligence Period has expired pursuant to Section 5.2 of
the Agreement, as modified by the First Modification; and
WHEREAS, the Title Review Period has expired pursuant to Section 5.3(a) of
the Agreement, as modified by the First Modification;
WHEREAS, Purchaser has completed (i) its investigation and research in
connection with the Due Diligence Period pursuant to Section 5.2 of the
Agreement and (ii) its review in connection with the Title Review Period
pursuant to Section 5.3(c) of the Agreement, and as a result thereof has
requested a reduction in the Purchase Price from Seller in consideration of
Purchaser waiving its rights to terminate the Agreement pursuant to Section
5.5(a) and Section 5.5(b) of the 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:
<PAGE>
1. All terms not specifically defined herein shall have the meanings
ascribed to them in the Agreement.
2. Section 4 of the Agreement is hereby amended to read as follows:
"4. Purchase Price. The purchase price payable by Buyer for the Property
(the "Purchase Price") is SEVEN MILLION TWO HUNDRED SEVENTY FIVE THOUSAND
DOLLARS ($7,275,000.00), payable in cash on the Closing Date."
3. Purchaser hereby confirms that the Due Diligence Period has expired
pursuant to Section 5.2 of the Agreement, as modified by the First Modification,
and Purchaser hereby waives any right to terminate the Agreement pursuant to
Section 5.5(a) of the Agreement.
4. Purchaser hereby confirms that the Title Review Period has expired
pursuant to Section 5.3(c) of the Agreement, as modified by the First
Modification, and Purchaser hereby waives any right to terminate the Agreement
pursuant to Section 5.5(b) of the Agreement.
5. Section 7 of the Agreement is hereby amended to insert the following
text to follow immediately after Section 7.12:
"7.13. Estoppel Certificate. An estoppel certificate from the Las Colinas
Association for the benefit of Buyer affirming, among other things, that based
on a review of the Association's records, the Property is currently in
compliance with Articles IV, V and VI of The Las Colinas Declaration recorded in
Volume 73166, Page 1001 of the Dallas County Deed Records (the "Records") on
August 22, 1973, as corrected by that certain Correction to Declaration dated
August 8, 1977 recorded in Volume 77154, Page 1096 of the Records, that certain
Second Correction to Declaration dated June 19, 1979 recorded in Volume 79122,
Page 0749 of the Records, that certain Third Correction to Declaration dated
March 1, 1982 recorded in Volume 82071, Page 3244 of the Records, and that
certain Supplementary Declaration No. 51 recorded in Volume 83110, Page 2738 of
the Records (as corrected, amended, and modified, the "Declaration"). The
estoppel certificate contemplated by this Section 7.13 shall, to
2
<PAGE>
the Buyer's reasonable satisfaction determined in good faith, address those
matters contained in the sample estoppel certificate attached hereto as Exhibit
A."
6. Section 7.13 of the Agreement is hereby amended to be designated
"Section 7.14".
7. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
8. In the event there is any conflict in the terms of this Second
Modification and the terms of the Agreement, the terms of this Second
Modification shall govern.
9. 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.
RIVER HILL APARTMENTS, LTD., a
Texas limited partnership
By: HUTTON/CON AM REALTY INVES-
TORS 4, a California limit-
ed partnership, general
partner
By: RI 3-4 REAL ESTATE
SERVICES, INC., a
Delaware corporation
general partner
By: /s/ Donald E. Petrow
-----------------------
Name: Donald E. Petrow
Title: Vice President
3
<PAGE>
By: CON AM PROPERTY SERVICES
IV, LTD., a California
limited partnership, gener-
al partner
By: CONTINENTAL AMERICAN
DEVELOPMENT, INC., a
California corpora-
tion, limited partner
By: /s/ Scott Dupree
----------------------
Name: E. Scott Dupree
Title: Vice President
CORNERSTONE REALTY GROUP, INC.,
a Virginia corporation
By: /s/ S. J. Olander
--------------------
Name: S. J. Olander
Title: Senior Vice President
4
EXHIBIT A
THE LAS COLINAS ASSOCIATION
4950 N. O'Connor Blvd. Suite 100 Irving, Texas 75062-2266
(214) 541-2345 Fax (214) 650-0229
November 12, 1996
Safeco Land Title
1201 Elm, Suite 5220
Dallas, Texas 75270
WDN Properties
5400 LBJ Freeway, Suite 400
Dallas, Texas 75240
RE: GF# SP96-190595
1101 Meadow Creek Drive
Lot 1B, 9.3281 Acres
River Hill Apartments
Las Colinas Area LI
Acct. # 051.004
ESTOPPEL CERTIFICATE
Ladies/Gentlemen:
We understand that WDN Properties, Ltd., (the "Purchaser"), contemplates
purchasing the above referenced property, (the "Property"), together with any
improvements constructed thereon, from River Hill Apartments Ltd., (the
"Seller"). As a condition of the sale of said Property, you have requested that
The Las Colinas Association, (the "Association"), certify to certain matters.
The Association hereby certifies that as of November 12, 1996:
(1) The Association is a Texas non-profit corporation principally
organized to enforce the covenants, conditions and restrictions contained in The
Las Colinas Declaration recorded in Volume 73166, Page 1001 of the Dallas County
Deed Records on August 22, 1973, as corrected by that certain Correction to
Declaration dated August 8, 1977 recorded in Volume 77154, Page 1096 of the
Dallas County Deed Records, that certain Second Correction to Declaration dated
June 19, 1979 recorded in Volume 79122, Page 0749 of the Dallas County Deed
Records and that certain Third Correction to Declaration dated March 1, 1982
recorded in Volume 82071, Page 3244 of the Dallas County Deed Records. (The Las
Colinas Declaration, all amendments and corrections, and any applicable
supplementary declarations thereto referred to herein as the "Declaration".)
(2) The Property is part of Las Colinas Area LI. The specific protective
covenants applicable to the Property are contained in Supplementary Declaration
No. 51, recorded in Volume 83110, Page 2738, of the Real Property Records of
Dallas County, Texas ("SD#51").
<PAGE>
ESTOPPEL CERTIFICATE
November 12, 1996
PAGE TWO
(3) Based upon a review of the Association's records on the Property,
the Property is currently in compliance with Articles IV, V and VI of the
Declaration except as noted in Exhibit A to this certificate.
(4) The property met The Las Colinas Association Technical
Specifications and Federal Communications Commission (FCC) signal leakage
requirements except as noted in Exhibit B. This does not guarantee or imply
compliance beyond the date of testing. FCC signal leakage testing is regularly
done on a quarterly basis to meet the FCC requirements.
(5) All approvals and reviews by the Association and the Architectural
Control Committee are limited to matters of an aesthetic nature and do not
include structural, engineering, architectural or foundation review. Approval of
the plans for construction on the Property by the Association and/or the
Architectural Control Committee does not guarantee or imply that the plans, if
followed, will result in properly designed improvements or that any improvements
built in accordance therewith will be built in a good and workman-like manner.
Approval of the plans for construction on the Property is not to be construed as
approval by the City of Irving, Texas, as the approval processes are mutually
exclusive. You may wish to conduct or have conducted an appropriate inspection
on these matters.
(6) The owner of the Property has delinquent obligations with respect to
the payment of assessments and other fees to the Association. A current status
of any obligations is noted in Exhibit C.
(7) The assessment lien shall be superior to all other liens and charges
against the property, except only for tax liens and all sums unpaid on a first
mortgage lien or first deed of trust lien of record, securing in either instance
sums borrowed for the improvement of the property in question pursuant to
Article III, Section 10 of the Declaration. The annual assessment covers the
period January 1st, thru December 31st. The annual assessment is billed in April
or May, and is due by July 1st, and becomes delinquent after July 31st, accruing
interest at the rate of 10% per year or .83% per month. The annual assessment
for the current year, 1996, is $13,049.06 and has been paid.
Very truly yours,
THE LAS COLINAS ASSOCIATION
/s/ Worth B. Brown
--------------------------
By: Worth B. Brown
Its: Vice President / General Manager
enclosures
CC: River Hill Apartments
C/O Manager
1101 Meadow Creek Circle N.
Irving, Texas 75038
<PAGE>
EXHIBIT A
November 12, 1996
Riverhill Apartments, Ph. I
1101 Meadow Creek Drive
Las Colinas Area 51
TLCA Property ID #051.004
A review of the referenced property has been completed to determine compliance
with Articles IV, V and VI of the Declaration. To the best of the Association's
knowledge the property is in compliance except as noted below.
Compliance issues with Article IV, V and approved plans:
[ ] A number of large trees are missing throughout the complex.
[ ] Shrubbery missing at foundation and a/c equipment.
[ ] Overnight parking and storage of trailers, boats, and recreational
vehicles are required to be stored under covered area or in an interior
designated area of the complex.
[ ] A number of exterior light fixtures are different styles than those which
were previously approved.
[ ] All PVC condensate drains located on the exterior walls are unapproved.
Compliance issues with the Maintenance provisions of Article VI:
[ ] Loose and missing roof tiles.
[ ] Exterior stucco is stained and discolored. Needs to be painted.
[ ] Railroad ties used for retaining walls are loose and damaged. They are in
need of immediate repair/replacement.
[ ] Monument sign is damaged and in need of repair.
[ ] Flashing above storage areas/mechanical rooms, located at the ends of the
building, need to be painted to match roof tiles or stucco color.
[ ] Surface damage to parking area.
THE ASSOCIATION RESERVES THE RIGHT TO REVIEW ANY NOTED
DEFICIENCIES UPON THEIR RESOLUTION.
<PAGE>
EXHIBIT B
November 12, 1996
1101 Meadow Creek Drive
Lot 1B, 9.3281 Acres
River Hill Apartments
Las Colinas Area LI
Acct. # 051.004
1. The following buildings have significant amounts of signal leakage
based upon the Cumulative Leakage Index (CLI):
a. Building #1123
b. Building #1107
c. Building #1103
These signal leakages must be corrected in order to meet FCC requirements and
The Las Colinas Association Technical Specifications.
THE CABLE AND THE INSTALLATION METHOD MUST MEET THE LAS COLINAS ASSOCIATION
TECHNICAL SPECIFICATIONS. THE ASSOCIATION RESERVES THE RIGHT TO DISCONNECT OR
REFUSE TO CONNECT THE PROPERTY TO THE LAS COLINAS ASSOCIATION COMMUNICATIONS
SYSTEM UNTIL THESE SPECIFICATIONS ARE MET.
<PAGE>
Page 1 of 2
EXHIBIT C
THE LAS COLINAS ASSOCIATION
4950 N. OCONNOR BLVD. SUITE 100
IRVING, TX 75062-2266
972-541-2345
Statement as of 11/12/96
TO: MAKE CHECKS PAYABLE TO:
RIVER HILL APARTMENTS THE LAS COLINAS ASSOCIATION
C/O MANAGER 4950 N. OCONNOR BLVD. SUITE 100
1101 MEADOW CREEK CIRCLE N. IRVING, TX 75062-2266
IRVING, TX 75038
Account : 051.004 Acres: 9.3281
Address : 1101 MEADOW CREEK DR Lot: 1B Block:
Loc.Name: RIVER HILL APARTMENTS PHASE I
Legal : MEADOW CREEK CIRCLE NORTH
DCAD : 322585800001B0000
- ---------------------------------------------------------------------------
INVOICE # INVOICE DATE INVOICE AMOUNT PAYMENT/CREDIT AMOUNT DUE
- ----------- ------------ -------------- -------------- -----------
4207.9509997618 08/03/95 27.00 .00 27.00
LATE FEE 10/31/95 .23 .00 .23
LATE FEE 11/30/95 .23 .00 .23
4207.9509998520 12/09/95 28.40 28.40 .00
4302.9509998554 12/18/95 1,697.99 1,697.99 .00
LATE FEE 12/31/95 .23 .00 .23
4302.9609998673 01/03/96 1,697.99 1,697.99 .00
4207.9609998715 01/04/96 30.20 30.20 .00
4302.9609998782 02/01/96 1,697.99 1,697.99 .00
LATE FEE 01/31/96 .23 .00 .23
4207.9609998877 02/06/96 27.40 27.40 .00
LATE FEE 02/29/96 .23 .00 .23
4302.9609998968 03/05/96 1,697.99 1,697.99 .00
4207.9609999015 03/08/96 25.40 25.40 .00
4302.9609999072 04/01/96 1,697.99 1,697.99 .00
LATE FEE 03/31/96 .23 .00 .23
4207.9609999159 04/04/96 25.20 25.20 .00
LATE FEE 04/30/96 .23 .00 .23
4302.9609999250 05/02/96 1,697.99 1,697.99 .00
4207.9609999291 05/02/96 24.20 24.20 .00
4002.9609999805 05/15/96 13,049.06 13,049.06 .00
4302.9610002542 06/03/96 1,697.99 1,697.99 .00
LATE FEE 05/31/96 .23 .00 .23
4207.9610002632 06/12/96 24.60 24.60 .00
4302.9610004516 07/05/96 1,633.05 1,633.05 .00
4207.9610004557 07/05/96 25.40 25.40 .00
4302.9610004568 07/05/96 1,697.99 1,697.99 .00
LATE FEE 06/28/96 .23 .00 .23
LATE FEE 07/31/96 .23 .00 .23
4302.9610005145 08/02/96 1,697.99 1,697.99 .00
4207.9610005187 08/02/96 24.60 24.60 .00
4302.9610005249 09/03/96 1,697.99 1,697.99 .00
LATE FEE 08/30/96 .23 .00 .23
4207.9610005527 09/06/96 25.40 25.40 .00
4302.9610005563 10/02/96 1,663.61 1,663.61 .00
LATE FEE 09/30/96 .23 .00 .23
<PAGE>
Page 2 of 2
EXHIBIT C
THE LAS COLINAS ASSOCIATION
4950 N. OCONNOR BLVD. SUITE 100
IRVING, TX 75062-2266
972-541-2345
Statement as of 11/12/96
TO: MAKE CHECKS PAYABLE TO:
RIVER HILL APARTMENTS THE LAS COLINAS ASSOCIATION
C/O MANAGER 4950 N. OCONNOR BLVD. SUITE 100
1101 MEADOW CREEK CIRCLE N. IRVING, TX 75062-2266
IRVING, TX 75038
Account : 051.004 Acres: 9.3281
Address : 1101 MEADOW CREEK DR Lot: 1B Block:
Loc.Name: RIVER HILL APARTMENTS PHASE I
Legal : MEADOW CREEK CIRCLE NORTH
DCAD : 322585800001B0000
- ---------------------------------------------------------------------------
INVOICE # INVOICE DATE INVOICE AMOUNT PAYMENT/CREDIT AMOUNT DUE
- ----------- ------------ -------------- -------------- -----------
4302.9610005769 10/04/96 1,705.63 1,705.63 .00
4207.9610005810 10/07/96 24.20 24.20 .00
LATE FEE 10/31/96 .23 .00 .23
4214.9610005961 11/01/96 75.00 .00 75.00
4207.9610005992 11/04/96 27.80 .00 27.80
4302.9610006003 11/07/96 1,705.63 .00 1,705.63
TOTAL DUE: 1,838.42
- ---------------------------------------------------------------------------
CURRENT OVER 30 OVER 60 OVER 90 OVER 120
------- ------- ------- ------- --------
1,808.66 .23 .23 .23 29.07
PLEASE PROVIDE THE ASSOCIATION WITH A COPY OF THE WARRANTY DEED OR SETTLE-
MENT STATEMENT WITH THE PURCHASERS CORRECT MAILING ADDRESS.
<PAGE>
THIRD MODIFICATION TO AGREEMENT FOR PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
This Third Modification to Agreement for Purchase and Sale and Joint
Escrow Instructions ("Third Modification") is made and entered into as of August
__, 1997 between RIVER HILL APARTMENTS, LTD. ("Seller") and CORNERSTONE REALTY
GROUP, INC. ("Purchaser").
WHEREAS, Purchaser and Seller entered into an Agreement for Purchase and
Sale and Joint Escrow Instructions dated June 17, 1997, which Agreement was
modified by that certain First Modification to Agreement for Purchase and Sale
and Joint Escrow Instructions dated as of June 24, 1997, and further modified by
that certain Second Modification to Agreement for Purchase and Sale and Joint
Escrow Instructions dated as of June 30, 1997 (as amended and modified, the
"Agreement"); and
WHEREAS, Seller has notified Purchaser that Seller has initiated an
action to contest the 1997 assessed value of the Property, which action,
including all appeals, may extend beyond the Close of Escrow; and
WHEREAS, Seller and Purchaser desire to allow for an adjustment of those
proration items set forth in Section 10 of the Agreement which are based upon
the assessed value of the Property in the event the contest referred to herein,
including any appeal, is successful and as a result any such proration items are
accordingly reduced; 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 meanings
ascribed to them in the Agreement.
2. Section 10 of the Agreement is hereby amended to include the
following provision:
<PAGE>
"In the event that the assessed value of the Property for real estate
tax purposes for the tax year 1997 is, for any reason, decreased after the Close
of Escrow (the "Reassessment Date"), then Seller and Purchaser agree to
re-prorate the real estate taxes for which an adjustment will have been made at
the Close of Escrow. If, as a result of such re-proration, Purchaser has
collected from Seller at the Close of Escrow an amount in excess of the amount
Purchaser would have collected at the Close of Escrow if the assessed value of
the Property had been the same at the time of the Close of Escrow as it is at
the Reassessment Date, then Purchaser shall refund the difference between such
amounts to Seller within five (5) business days of receiving notice from Seller
of such event."
3. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
4. 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.
5. 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.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third
Modification on the date first above written.
RIVER HILL APARTMENTS, LTD., a
Texas limited partnership
By: HUTTON/CON AM REALTY INVES-
TORS 4, a California limit-
ed partnership, general
partner
By: RI 3-4 REAL ESTATE
SERVICES, INC., a
Delaware corporation,
general partner
By: /s/ Donald E. Petrow
_____________________
Name: Donald E. Petrow
Title: Vice President
By: CON AM PROPERTY SERVICES
IV, LTD., a California
limited partnership, gener-
al partner
By: CONTINENTAL AMERICAN
DEVELOPMENT, INC., a
California corpora-
tion, limited partner
By: /s/ E. Scott Dupree
_____________________
Name: E. Scott Dupree
Title: Vice President
CORNERSTONE REALTY GROUP, INC.,
a Virginia corporation
By: /s/ Glade M. Knight
----------------------
Name: Glade M. Knight
Title: President
3
<PAGE>
AGREEMENT FOR PURCHASE AND SALE AND JOINT ESCROW
------------------------------------------------
INSTRUCTIONS
------------
This Agreement for Purchase and Sale and Joint Escrow Instructions (the
"Agreement") is entered into as of June 17, 1997, by and between RIVER HILL
APARTMENTS, LTD., a Texas limited partnership ("Seller"), and CORNERSTONE REALTY
GROUP, INC., a Virginia corporation ("Buyer"), who agree and, to the extent
applicable, instruct COMMONWEALTH LAND TITLE INSURANCE COMPANY ("Escrow
Holder"), as escrow holder, as follows:
1. This Agreement is made with reference to the following facts:
1.1. Seller owns the real property located at 1101 North Meadow Creek
Drive, Irving (Las Colinas), Texas, commonly known as RIVER HILL APARTMENTS, and
more fully described on the attached EXHIBIT A (the "Real Property"). Along with
the Real Property, Buyer intends to purchase and Seller intends to sell, in
accordance with this Agreement, all improvements constructed in, on or under the
Real Property (the "Improvements") and all of Seller's personal property located
on and used in connection with the Real Property or the Improvements (the
"Personal Property").
1.2. By this Agreement, Buyer and Seller intend to provide for the
sale of the Real Property, the Personal Property, and the Improvements
(collectively, the "Property") by Seller to Buyer.
1.3. Concurrently with the execution of this Agreement, Buyer shall
deliver to Seller the sum of Fifty Dollars ($50) (the "Independent
Consideration"), which amount Buyer and Seller agree has been bargained for as
consideration for Seller's execution and delivery of this Agreement and Buyer's
right to inspect the Property in accordance with the provisions hereof. The
Independent Consideration is in addition to and independent of any other
consideration or payment provided for in this Agreement, and is non-refundable
in all events.
2. Purchase and Sale. Subject to the provisions of this Agreement,
Seller agrees to sell the Property to Buyer, and Buyer agrees to purchase the
Property from Seller, in its "as-is" condition except as may otherwise be set
forth in this Agreement.
3. Escrow.
3.1. Opening of Escrow. Buyer shall cause an escrow account (the
"Escrow") to be opened with Escrow Holder at 1700 Pacific Avenue, Suite 4740,
Dallas, Texas 75201 (Attention: Beverly Grisse) for the purpose of facilitating
the consummation of this Agreement, by delivering the Deposit (as defined in
Section 4.1 below) to Escrow Holder along with a copy of the fully executed
original (or executed counterparts) of this Agreement within two business days
after executing this Agreement. This Agreement constitutes instructions to
Escrow Holder. Buyer and Seller shall execute such additional mutual
instructions as Escrow Holder may require, consistent with this Agreement. Any
inconsistency between any such further mutual instructions and this Agreement
must be resolved in a manner consistent with this Agreement and the provisions
of this Agreement prevail unless Buyer and Seller waive such inconsistent
provision in writing by specifically referring to the fact of such inconsistency
and their intent to waive it.
3.2. Closing Date. Escrow Holder shall close escrow in accordance
with Article 8 below (the "Close of Escrow") within thirty (30) days after the
expiration of the Due Diligence Period (as defined in Section 5.2 hereof) and
after the waiver or satisfaction of Buyer's condition set forth in Section 5.2
below, but in no event after July 22, 1997 (as the same may be amended pursuant
to this Section 3.2, the "Closing Date"). Notwithstanding the foregoing, prior
to July 15, 1997 Buyer may elect to extend the Closing Date (the "Extension
Option") for up to an additional sixty (60) days, but in no event after
September 21, 1997, upon (x) the delivery to Seller of immediately available
funds in the amount of One Hundred Thousand Dollars ($100,000.00) (the
"Additional
<PAGE>
Deposit"), the Additional Deposit shall be applied towards the Purchase Price on
the Closing Date but shall be non-refundable to Buyer in all events except as
otherwise provided herein, and (y) the delivery of a notice to Seller and Escrow
Holder of Buyer's election to exercise the Extension Option, which notice states
that Buyer waives any rights that it may have to the Deposit from and after the
date of such notice except as may be stated below, and includes instructions to
Escrow Holder to deliver the Deposit to Seller at the Close of Escrow or upon
any termination of this Agreement.
If the Close of Escrow does not occur on or before the Closing Date,
then Buyer (unless Buyer exercises the Extension Option) or Seller, if not then
in default under this Agreement, may at any time thereafter give written notice
to Escrow Holder to cancel the Escrow whereupon the Escrow and the subject
transaction shall be terminated and Escrow Holder shall distribute all monies
and documents in Escrow Holder's possession in accordance with Section 11 herein
and Seller shall have its remedies in accordance with Section 12 herein, and all
additional mutual instructions as the parties may provide. Such cancellation of
Escrow shall not prejudice or limit any legal or equitable rights of Buyer or
Seller, except as may be limited by Section 12 herein with respect to Sellers
rights.
4. Purchase Price. The purchase price payable by Buyer for the Property
(the "Purchase Price") is SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($7,500,000.00), payable in cash on the Closing Date.
4.1. Deposit. Concurrently with Buyer's delivery of an executed copy
of this Agreement to Escrow Holder, Buyer shall deliver to Escrow Holder
immediately available funds in the amount of One Hundred Fifty Thousand Dollars
($150,000.00) (including any interest accrued thereon, the "Deposit"). Escrow
Holder shall notify Seller in writing on the date that it receives the Deposit
from Buyer (the "Escrow Notice"). Unless Buyer and Seller agree to instruct
Escrow Holder in writing to the contrary, during the term of this Agreement,
Escrow Holder shall invest the Deposit in a short-term interest bearing account
at a nationally recognized financial institution. Except as provided in Sections
3.2, 5.5, 11, 12, 17 and 18 below, the Deposit and the Additional Deposit, if
any, shall be applied towards the Purchase Price on the Closing Date.
4.2. Balance. On or before the Closing Date, Buyer shall deposit with
Escrow Holder cash or other immediately available funds in the amount of the
balance of the Purchase Price, plus the other sums required of Buyer under this
Agreement to pay costs and prorations.
5. Conditions Precedent. Buyer's obligations under this Agreement are
subject to the satisfaction, approval or waiver by Buyer, on or before the
expiration of the applicable contingency period provided for below
(collectively, the "Contingency Periods"), of the following conditions precedent
(collectively, "Buyer's Conditions"):
5.1. Due Diligence Deliveries By Seller. Seller must have provided
Buyer copies of the following items no later than ten (10) days after the date
of Seller's receipt of the Escrow Notice from Escrow Agent (collectively,
"Seller's Due Diligence Deliveries"): (a) a Commitment for Title Insurance for
the Property dated no earlier than May 20, 1997, and issued by Escrow Holder as
agent for Commonwealth Land Title Company (the "Title Company"), together with
legible copies of all documents referenced therein (the "Title Commitment"), (b)
any survey of the Property currently in Seller's possession or control, (c)
current annual real estate and personal property tax bills, (d) copies of all
plats, plans, specifications, architectural drawings and engineer's drawings
related to the original construction or structural repairs, if any, of the
Property currently in Seller's possession or control, (e) year-ending 1995 and
1996 operating statements and, to the extent available, monthly operating
statements for 1997 (collectively, the "Operating Statements"), (f) the most
recent rent roll identifying the rental income, security deposit, term of the
lease, expiration date and status of the tenant (the "Rent Roll"), (g) all
licenses and permits relating to the use or occupancy of the Property, (h) any
service or maintenance contracts, including, without limitation, laundry, cable
television, yellow pages, landscaping, security and refuse removal contracts
relating to the Property (collectively, the "Service Contracts"), (i) all soils
reports and environmental studies of the Property currently in Seller's
possession or control, and (j) a copy of the standard form of resident lease.
2
<PAGE>
During the Due Diligence Period, Seller will make available at the Property to
Buyer copies of any and all leases affecting the Property. Seller's Due
Diligence Deliveries shall be accompanied by a list describing the same and
Buyer shall sign said list attesting to its receipt of all of Seller's Due
Diligence Deliveries. Seller acknowledges that Buyer is a public entity and
therefore Buyer may be required to furnish financial statements to the
Securities and Exchange Commission in connection with this acquisition. Seller
agrees to make available to Buyer, upon Buyer's reasonable request therefor,
operating statements and other financial information with respect to the last
twelve (12) months of operations of the Property so that Buyer may prepare, at
Buyer's sole cost and expense, a report that is in compliance with accounting
regulation S-X of the Securities and Exchange Commission. In addition, in
connection with the preparation of any such report, Seller agrees to make its
auditors available to Buyer in the event that Buyer shall request a
representation letter of Seller's auditors, and Buyer agrees that the cost of
Seller's auditor's services in connection with the foregoing shall be borne
solely by Buyer.
5.2. Due Diligence Investigation. From May 16, 1997 until June 23,
1997 (the "Due Diligence Period"), Buyer may review Seller's Due Diligence
Deliveries and may investigate and research and approve or disapprove of the
physical, developmental, and economic status and feasibility of the Property.
The matters subject to Buyer's approval under this Section include marketing
studies, land use and legal due diligence, engineering studies, soils tests,
physical inspections, structural reports, and environmental surveys with respect
to the Property. In order to facilitate Buyer's investigation and analysis under
this Section, subject to the provisions of Section 21 hereof, Seller grants
Buyer the right to enter the Property at any time during normal business hours
during the Due Diligence Period after forty-eight (48) hours prior written
notice to Seller's regional property manager, to conduct reasonable inspections,
reviews, examinations, and tests on the Property to investigate the physical
condition of the Property. Buyer agrees to use its best efforts to give Seller
as much advance written notice as possible prior to conducting such inspections,
reviews, examinations and tests on the Property. Notwithstanding the foregoing,
Buyer shall not conduct any Phase II environmental assessments and shall not
otherwise disturb the integrity of the Property without the Seller's prior
written consent.
5.3. Evidence of Title.
(a) Title Commitment. Within five (5) days after the date of
Seller's receipt of the Escrow Notice from Escrow Holder, Seller, at Seller's
sole expense, shall order and upon receipt deliver to Buyer and Buyer's
attorney, the Title Commitment from the Title Company committing to insure the
Property in the amount of the Purchase Price. The Title Commitment shall be
effective no earlier than the "Effective Date" as indicated on such Title
Commitment and shall include good, legible copies of all documents referenced
therein. The Title Commitment shall reflect good and indefeasible fee simple
title vested in the Seller. Buyer shall accept title subject to any covenants,
conditions, rights of easements, restrictions and other matters affecting title
which do not materially impair the use, value or operation of the Property (the
"Permitted Exceptions").
(b) Survey. Within five (5) days after the date that Buyer delivers
the Deposit to Escrow Holder, Buyer shall employ at Buyer's sole cost and
expense a Texas Registered Public Land Surveyor to survey the Property and
prepare and deliver to Buyer, Seller and Escrow Holder a Category 1A survey of
the Real Property and the Improvements according to the current Manual of
Practice for Land Surveying in Texas published by the Texas Society of
Professional Surveyors (the "Survey"). The Survey shall be sufficient to permit
the Title Company to modify the standard printed exception in the Title
Commitment pertaining to discrepancies, conflicts, boundary lines,
encroachments, overlapping of improvements or similar matters. Buyer shall
notify Seller in writing on the date that it receives the Survey (the "Survey
Notice").
(c) Review. Buyer shall have ten (10) days following later of (i)
the date of its receipt of the Title Commitment and the documents referenced
therein, and (ii) the date of its receipt of the Survey, but in no event later
than the expiration of the Due Diligence Period (the "Title Review Period"), in
which to review the Title Commitment and the Survey. Buyer shall accept title
subject to the Permitted Exceptions and to any items to which Buyer does not
object to prior to the expiration of the Title Review Period. If, prior to the
expiration of the Title Review Period, Buyer discovers an exception to title
which is not a Permitted Exception and is not
3
<PAGE>
acceptable to Buyer (a "Disapproved Title Exception") Buyer shall evidence its
disapproval by giving written notice of its disapproval to Escrow Holder and
Seller prior to the expiration of the Title Review Period. Seller shall have ten
(10) days from Seller's receipt of such notice to agree to remove such
Disapproved Title Exception, and if after such ten-day period Seller has not
agreed to remove such Disapproved Title Exception, this Agreement shall
terminate on the written request of either Buyer or Seller. Notwithstanding the
foregoing, Disapproved Title Exceptions shall only include any of the exclusions
from coverage listed in the Title Commitment and shall not include (a) matters
which are in all circumstances required exclusions from applicable title
insurance coverage, (b) any exception to or condition of unavailability of any
endorsement or amendment requested by Buyer to the TLTA owner's policy of title
insurance to be issued pursuant to the Title Commitment (the "Title Policy"),
and (c) any lien or requirement to the issuance of the Title Policy set forth in
the Schedule B requirements to the Title Policy. Buyer agrees that Seller shall
not suffer any liability in connection with its failure to remove any title
exception. If Seller fails to cause the elimination of a Disapproved Title
Exception within the time frame set forth in this Section 5.3(c), Buyer may (x)
elect to terminate this Agreement in accordance with Section 5.5(b) below, or
(y) waive Seller's failure to remove such Disapproved Title Exception and
proceed to closing in accordance with this Agreement.
5.4. Owner's Policy. As a condition to Buyer's obligations to
purchase the Property, on or before the Close of Escrow, Title Company must be
prepared to issue to Buyer the Title Policy effective as of the Close of Escrow,
insuring Buyer in the amount of the Purchase Price that upon recordation of the
Deed (as defined in Section 7.1 hereof) title to the Property shall be vested in
Buyer, subject only to the Permitted Exceptions and the standard printed
exceptions other than any Disapproved Title Exception not waived by Buyer.
5.5. Termination. Any one or more of the foregoing Buyer's Conditions
may be waived by Buyer at or before the Close of Escrow.
In the event that (a) prior to the expiration of the Due Diligence
Period Buyer determines that it does not desire to purchase the Property for any
reason whatsoever, or (b) a Disapproved Title Exception exists which Seller is
unable or unwilling to remove within the time frame set forth in Section 5.3(c)
hereof, Buyer shall notify Seller and Escrow Holder in writing of its election
to terminate this Agreement. If Buyer so elects to terminate this Agreement,
this Agreement will be of no further force and effect and Buyer, upon the
delivery of a written notice of termination of this Agreement to Seller and
Escrow Holder, shall be entitled to the return of the Deposit.
5.6. Rent Ready. Seller agrees that all apartment units vacated by
tenants five (5) or more business days prior to the Close of Escrow (each such
unit, an "Applicable Unit") shall be in Rent Ready condition. For purposes
herein, "Rent Ready" shall mean that condition in which vacant apartment units
are immediately prior to being rented under Seller's ordinary course of managing
the Property. If Seller shall fail to deliver an Applicable Unit in Rent Ready
condition at the Close of Escrow, Buyer's sole remedy hereunder shall be an
adjustment of the Purchase Price in the amount of the actual amount that it will
cost to make such Applicable Unit Rent Ready, provided however, that in no event
shall such amount exceed Seven Hundred Fifty Dollars ($750.00) per Applicable
Unit or Seven Thousand Five Hundred Dollars ($7,500.00) in the aggregate. The
obligations of Buyer and Seller pursuant to this Section 5.6 shall survive the
closing for a period of ten (10) days after the Closing Date, during which
period Buyer and Seller shall agree on a reconciliation of the adjustments
described herein, if any.
5.7. Chaparosa Apartments. The closing of this transaction is
contingent upon both Buyer's and Seller's satisfactory completion of their
respective obligations under that certain Agreement for Purchase and Sale and
Joint Escrow Instructions of even date herewith with respect to the property
located at 1201 North Meadow Creek Drive, Irving (Las Colinas), Texas, commonly
known as Chaparosa Apartments ("Chaparosa Apartments").
6. Buyer's Deliveries. Buyer shall deliver to Escrow Holder, on or
before the Closing Date, for disbursement, delivery and recordation, as provided
in this Agreement, the following funds, instruments, and documents, the delivery
of which is material to the Close of Escrow:
4
<PAGE>
6.1. Funds. Immediately available funds in the amount required of
Buyer under this Agreement including sufficient funds to meet Buyer's
obligations under Sections 4.2, 5.7, and Articles 9 and 10.
6.2. Evidence of Authorization. Evidence in form and substance
reasonably satisfactory to Seller and its legal counsel that Buyer is authorized
to enter into and consummate the transactions contemplated by this Agreement.
6.3. Bring Down Certificate. A certificate signed by Buyer
confirming that Buyer's representations and warranties as provided in Section 15
hereof are true and correct as of the Closing Date.
6.4. Other Documents. Any documents reasonably required of Buyer by
Escrow Holder in order to consummate the subject transaction inclusive of a
Buyer's closing statement (the "Buyer's Closing Statement").
7. Seller's Deliveries. Seller shall deliver to Escrow Holder on or
before the Close of Escrow, for disbursement, delivery and recordation, as
provided in this Agreement, the following instruments and documents, the
delivery of which is material to the Close of Escrow:
7.1. Deed and Bill of Sale. A special warranty deed duly executed
and acknowledged by Seller conveying all of Seller's interest in the Real
Property to Buyer (the "Deed") and a bill of sale executed by Seller conveying
all of Seller's interest in the Personal Property to Buyer on an "as is-where
is" basis (the "Bill of Sale").
7.2. FIRPTA Affidavit. A FIRPTA affidavit duly executed and
acknowledged by Seller certifying under penalty of perjury (a) Seller's United
States taxpayer identification number and (b) that Seller is not a foreign
person, in accordance with Section 1445 of the Internal Revenue Code of 1986, as
amended (the Foreign Investment in Real Property Tax Act).
7.3. Lease Assignment. An assignment of Seller's interest, as
lessor, in any leases of space at the Property and security deposits for each
such lease under which Seller retains responsibility for pre-closing matters and
Buyer assumes all post-closing responsibilities. Delivery of leases hereunder
shall include all original leases in Seller's possession.
7.4. Service Contract Assignment. An assignment, to the extent
assignable, of Seller's rights under the Service Contracts relating to the
Property which are accepted by Buyer. Seller shall retain responsibility for
pre-closing matters and Buyer shall assume all post-closing responsibilities.
7.5. Licenses, Permits, Warranties and Guarantees Assignment. A
non-recourse assignment, to the extent assignable, of any licenses, permits and
unexpired warranties and guarantees, if any, pertaining to the Property.
7.6. Updated Rent Roll. An update of the Rent Roll certified by
Seller to be true and accurate as of a date within three days of the Closing
Date.
7.7. Asbestos Affidavit. As affidavit of Seller certifying whether
Seller has received any written notice from any governmental agency of the
presence of asbestos and/or any other hazardous material at the Property.
7.8. Termination of Management Agreement. A valid written
termination of the management agreement executed by all necessary parties,
without cost to Buyer.
5
<PAGE>
7.9. Notice Letter. A signed copy of a notice letter (in a form
prepared by Buyer and approved by Seller, such approval not to be unreasonably
withheld) addressed to all residents at the Property notifying such residents as
to the change in ownership. Delivery of such notice letter shall be at Buyer's
sole cost and expense.
7.10. Bring Down Certificate. A certificate signed by Seller
confirming that Seller's representations and warranties as provided in Section
14 hereof are true and correct as of the Closing Date.
7.11. Representation Letter. A representation letter as normally
required by auditors for a public company, substantially in the form attached
hereto as EXHIBIT B.
7.12. Closing Memorandum. A closing memorandum and indemnification
substantially in the form attached hereto as EXHIBIT C.
7.13. Other Documents. All other documents reasonably required of
Seller by Escrow Holder or as customarily required in similar transactions by
Title Company in order to consummate the subject transaction inclusive of a
Seller's closing statement (the "Seller's Closing Statement").
8. Closing Escrow. On the Closing Date, provided Escrow Holder has
received all the documents, instruments and funds required to be delivered by
Buyer and Seller in accordance with Articles 6 and 7 above, and provided Title
Company is prepared to cause Escrow Holder to issue the Title Policy upon the
Close of Escrow and that all other conditions to the Close of Escrow have been
satisfied (or waived by the party to this Agreement who benefits from such
condition), Escrow Holder shall promptly perform all of the following:
8.1. Recording. Cause the Deed to be recorded with the real property
records of the county in which the Property is located.
8.2. Deliveries. Deliver to Seller all of the deliveries of Buyer
made pursuant to Article 6 above, and deliver to Buyer the Bill of Sale and all
of the other deliveries of Seller made pursuant to Article 7 above.
8.3. Costs and Prorations. Pay the costs and apply the prorations in
accordance with Articles 9 and 10 below.
8.4. Issuance of Owner's Policy. Cause the Title Policy to be issued
at Seller's sole cost and expense, by the Title Company pursuant to the Title
Commitment, subject only to the Permitted Exceptions, in the full amount of the
Purchase Price, dated the Closing Date, and delivered to Buyer.
8.5. Disbursement of Purchase Price. Disburse to Seller, or in
accordance with Seller's instructions (after making appropriate adjustments for
costs and prorations as provided in this Agreement), all funds deposited with
Escrow Holder by Buyer in payment of the Purchase Price.
9. Costs. Seller shall pay (a) one-half of Escrow Holder's fee, (b)
Escrow Holder's customary charges to a seller for document drafting, recording
and miscellaneous charges, (c) the cost of the Title Policy, and (d) one-half
the documentary transfer and stamp taxes payable in connection with the
recordation of the Deed.
Buyer shall pay (a) one-half of Escrow Holder's fee, (b) Escrow
Holder's customary charges to a buyer for document drafting, recording and
miscellaneous charges, (c) the cost of any amendments or endorsements to the
Title Policy requested by Buyer or its lender, (d) one-half the documentary
transfer and stamp taxes payable in connection with the recordation of the Deed,
and (e) all costs associated with Buyer's financing of the Purchase Price,
including any fees for any loans, appraisals, title policies, etc.
6
<PAGE>
10. Proration Items. The following shall be apportioned and adjusted
between the parties as of 5:00 pm, New York City time of the day preceding the
Closing Date ("the Adjustment Date"):
(a) Real estate and other taxes, assessments and
charges, and other municipal and state charges, license and permit fees, water
and sewer rents and charges, if any, on the basis of the fiscal period for which
assessed or charged;
(b) Water, electric, gas and other utility charges for
service furnished to the Property;
(c) Base rents and any other payments (the "Rents"),
actually paid under the terms of any Lease for the month of closing;
(d) Any amounts paid to Seller or by Seller under
Service Contracts which are accepted by Buyer and are being assigned to Buyer;
(e) All costs associated with telephone directory
listings and any other prepaid advertising which are accepted by Buyer with
respect to the Property;
(f) Any other customary adjustments made in connection
with the sale of similar properties; and
(g) Refundable security deposits from current tenants as
of the Closing Date.
Seller will not assign to Buyer any of the hazard
insurance policies affecting the Property then in force. There will therefore be
no proration of insurance costs at Closing. Except as may be otherwise provided
herein, all other expenses which are attributable to the period prior to the
Closing Date shall be the obligation of Seller and those which are attributable
to the period from and after the Closing Date shall be the obligation of Buyer.
For purposes of the foregoing apportionments and
adjustments, the following procedures shall govern:
(i) If the Closing Date shall occur
before the real estate tax rate is fixed, the apportionment of such taxes shall
be made upon the basis of the tax rate for the immediately preceding year,
applied to the latest assessed valuation;
(ii) If there are water meters on the
Property, Seller shall furnish meter readings to a date not more than twenty
(20) days prior to the Adjustment Date; and the unfixed meter charges for the
intervening time to the Adjustment Date shall be apportioned on the basis of
such meter readings, and any such meter charges for the period subsequent to the
Adjustment Date shall be paid by Buyer;
(iii) The apportionment of utility
charges shall be made upon the basis of charges shown on the latest available
bills for such utilities. The charges shown on such available bills for periods
prior to the Adjustment Date shall be paid by Seller, and for the period from
the date of each such last available utility bill to the Adjustment Date an
apportionment shall be made based on the amount charged for the period covered
by such last available bill;
(iv) All taxes, water and sewer charges
and current installments for assessments for public improvements which are liens
upon the Property as of the Closing Date, will be allowed to Buyer as a credit
against the Purchase Price, subject to apportionment as herein provided, and the
existence of any such lien shall not constitute an objection to title;
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<PAGE>
(v) If any tenants pay Rents collected
by Buyer after the Closing Date which are attributable in whole or in part to
any period prior to the Closing Date, Buyer shall promptly pay to Seller,
Seller's proportionate share thereof;
(vi) If any tenants pay Rents collected
by Seller which are attributable in whole or in part to any period after the
Closing Date, Seller shall promptly pay to Buyer, Buyer's proportionate share
thereof;
(vii) If any tenant is in arrears in the
payment of Rents on the Closing Date, Rents received from such tenant after the
Closing Date shall be applied in the following order of priority: (a) first to
pay any rents then due and owing for any period subsequent to the Closing Date
and (b) then to pay any rent owning for any period prior to the Closing Date. If
Rents or any portion thereof are received by Seller or Buyer after the Closing
Date and are payable to the other party by reason of this allocation, the
appropriate sum shall be promptly paid to the other party. The obligations of
Buyer and Seller pursuant to this Section 10(vii) and the two immediately
preceding Sections shall survive the Closing for a period of one hundred eighty
(180) days after the Closing Date, during which period Buyer and Seller shall
agree on a reconciliation of the prorations described herein.
Except as expressly provided, the provisions of this Section 10
shall survive the Closing.
11. Remedies for Default. If Escrow fails to close by reason of any
default by Seller under this Agreement, Buyer shall be entitled to the return of
the Deposit and any Additional Deposit upon delivery of written notice by Buyer
to Seller and Escrow Holder, in which event Buyer may pursue all of the rights
and remedies that Buyer may have at law or in equity, including the right to
seek specific performance of this Agreement and recover all reasonable expenses
incurred including attorneys fees incurred in remedying such default. If Escrow
fails to close by reason of any default by Buyer under this Agreement, Seller
shall be entitled to receive the liquidated damages set forth in Section 12
below upon delivery of written notice by Seller to Buyer and Escrow Holder, in
which event Seller may pursue all of the rights and remedies that Seller may
have at law or in equity, including recovering all reasonable expenses incurred
including attorneys fees incurred in remedying such default. If Escrow Holder
intends to release the Deposit to either party pursuant to this Section 11 or
Section 12 hereof, Escrow Holder shall give Buyer and Seller not less than ten
(10) days prior written notice of such fact and, if Escrow Agent actually
receives notice from either Buyer or Seller within such ten (10) day period that
such party objects to the release, then Escrow Holder shall not release the
Deposit until directed by both Buyer and Seller or pursuant to an order of any
court of competent jurisdiction. If this Agreement or Escrow is terminated,
Buyer shall return to Seller, within two business days after the termination of
Escrow, all documents and materials provided by Seller or its agents to Buyer or
its agents in connection with this Agreement or the Property and all copies
thereof.
12. LIQUIDATED DAMAGES. IF BUYER FAILS TO CLOSE UNDER THIS AGREEMENT,
THEN SELLER MAY RECEIVE THE DEPOSIT AND ANY ADDITIONAL DEPOSIT AS LIQUIDATED
DAMAGES. THE PARTIES HAVE DISCUSSED AND NEGOTIATED IN GOOD FAITH UPON THE
QUESTION OF THE DAMAGES THAT WOULD BE SUFFERED BY SELLER IN THE EVENT BUYER
FAILS TO CLOSE UNDER THIS AGREEMENT AND HAVE ENDEAVORED TO REASONABLY ESTIMATE
SUCH DAMAGES AND THEY AGREE THAT (I) SUCH DAMAGES ARE AND WILL BE IMPRACTICABLE
OR EXTREMELY DIFFICULT TO FIX, (II) LIQUIDATED DAMAGES IN THE AMOUNT OF THE
DEPOSIT AND ANY ADDITIONAL DEPOSIT ARE AND WILL BE REASONABLE, (III) IN THE
EVENT OF SUCH BREACH, SELLER IS ENTITLED TO THE DEPOSIT AND ANY ADDITIONAL
DEPOSIT AS SUCH LIQUIDATED DAMAGES, AND (IV) IN CONSIDERATION OF THE PAYMENT OF
SUCH LIQUIDATED DAMAGES, SELLER SHALL BE DEEMED TO HAVE WAIVED ALL OTHER CLAIMS
FOR DAMAGES OR RELIEF AT LAW OR IN EQUITY, EXCEPT FOR: (A) CLAIMS FOR THE RETURN
OF DOCUMENTS IN CONNECTION WITH THIS AGREEMENT; (B) ACTIONS TO EXPUNGE A LIS
PENDENS OR OTHER CLOUDS ON TITLE CAUSED BY BUYER; (C) CLAIMS ON ACCOUNT OF ANY
OF BUYER'S INDEMNITY
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OBLIGATIONS UNDER THIS AGREEMENT; AND (D) REASONABLE ATTORNEYS' FEES AND COSTS
INCURRED BY SELLER INCIDENT TO CLAUSES (A), (B), OR (C) HEREOF.
SELLER'S INITIALS BUYER'S INITIALS
----------- -----------
13. Possession. Seller shall deliver possession of the Property to Buyer
on the Close of Escrow, subject to the rights of tenants.
14. Seller's Representations and Warranties. The accuracy and
completeness of the following constitute a condition to the Close of Escrow and
Seller represents and warrants that the following are complete and accurate as
of the date of this Agreement, and will be complete and accurate as of the Close
of Escrow.
14.1. Legal Power, Right, Authority and Enforceability. Seller is
duly organized, validly existing, and qualified to conduct its business and has
the legal power, right and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement and will have taken
all requisite action in connection with entering into this Agreement and the
consummation of the transactions contemplated by this Agreement and the
individuals executing this Agreement on behalf of Seller will have the legal
power, right, and actual authority to bind Seller to the terms and conditions of
this Agreement.
14.2. FIRPTA. Seller is not a foreign person within the meaning of
Section 1445 of the Internal Revenue Code of 1986, as amended (the Foreign
Investment in Real Property Tax Act).
14.3. Rent Roll. Except as described in the Rent Roll, there are no
leases affecting the Real Property (each such lease, a "Lease", and
collectively, the "Leases") and no person, other than tenants under such Leases
which, subject to any title exceptions relating thereto, has any right of
possession of the Real Property. Except as otherwise specifically and expressly
set forth in the Rent Roll or otherwise specifically disclosed in writing to
Buyer, to the best of Seller's knowledge: (i) no presently effective or future
rent concessions have been given to any tenants; (ii) no rent has been paid in
advance by any tenants respecting a period subsequent to the Close of Escrow
(except for the month in which the Close of Escrow occurs); (iii) no current
tenants have any claim against Seller for any security deposit or other
deposits, other than pursuant to the terms of its Lease with respect to sums
specified as security deposits in the Rent Roll; (iv) no tenants have any option
or right of first refusal to extend or renew their Lease or rent additional
space; (v) other than with respect to certain leases with certain service
providers, including without limitation laundry service providers, no lease
provides for occupancy of more than one (1) year; and (vi) there are no leasing
or other commissions due, nor will any become due, in connection with any Lease,
or any renewal or extension of any Lease, subsequent to the Closing Date.
Furthermore, to the best of Seller's knowledge, no tenants have asserted any
defenses or offsets as of the date of this Agreement, nor are there any defenses
or offsets to rent accruing after the Closing Date. Except as specifically set
forth in the Rent Roll or otherwise specifically disclosed in writing to Buyer,
to the best of Seller's knowledge no default or breach exists on the part of any
tenant nor has Seller received any notice of any default or breach on the part
of the landlord under any Lease, nor does there exist any such default or breach
on the part of the landlord.
14.4. Operating Statements. The Operating Statements show all items
of income and expense (operating and capital) incurred in connection with
Seller's ownership and management of the Property for the periods indicated and
are true, correct and complete in all material respects.
14.5. Service Contracts. There are no management or service
agreements affecting the Property other than the Service Contracts. The list of
Service Contracts is true, correct and complete in all material respects.
14.6. Notice of Violations. Seller has received no written notice
that either the Property or the use thereof violates any laws, rules and
regulations of any federal, state, city or county government or any agency, body
or subdivision thereof having any jurisdiction over the Property that have not
been resolved to the satisfaction of the issuer of the notice.
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14.7. Condition of Personal Property. Other than due to the
occurrence of a casualty or condemnation of all or a portion of the Property,
all Personal Property included in the sale and all mechanical, electrical,
heating, air conditioning, sewer, water and plumbing systems at the Property
shall be in substantially the same working order at the time of closing
hereunder as at the time of the initial inspection by Buyer in accordance with
its due diligence examination of the Property pursuant to Section 5.2 hereof,
reasonable wear and tear excepted.
14.8. Real Estate Taxes and Assessments. All ad valorem taxes for
1996 and all prior years have been paid and no taxes for 1997 are delinquent.
All assessments, fees or other charges for utilities or roads have been paid in
full.
14.9. Litigation. Seller has no actual knowledge of any existing or
pending litigations which would adversely affect the Property.
14.10. Continued Operation. Seller covenants and agrees that between
the date hereof and Closing Date, Seller shall continue to maintain, operate and
manage the Property in a manner consistent with its prior practices. Seller
shall not permit the modification, extension, or cancellation of any tenant
lease other than in the ordinary course of managing the Property. If the leases
of any tenants expire before thirty (30) days after the Closing Date, Seller
shall, up to the Closing Date, continue its normal course of operation with
respect to leasing apartments which are unrented or will be vacated during the
applicable period described above.
14.11. Dead-Bolt Compliance. Seller warrants that it has complied
with the keyless, dead-bolt lock requirement.
15. Buyer's Representation and Warranties. The accuracy and completeness
of the following constitute a condition to the Close of Escrow and Buyer
represents and warrants that the following is complete and accurate as of the
date of this Agreement and shall be complete and accurate as of the Close of
Escrow, and survive the Close of Escrow in perpetuity: (i) Buyer is duly
organized, validly existing, and qualified to conduct its business and has the
legal power, right and authority to enter into this Agreement and to consummate
the transactions contemplated by this Agreement; (ii) all requisite action
(corporate, partnership, trust or otherwise) has been taken by Buyer in
connection with entering into this Agreement and the consummation of the
transactions contemplated by this Agreement; (iii) the individual executing this
Agreement on behalf of Buyer has the legal power, right, and actual authority to
bind Buyer to the terms and conditions of this Agreement; and (iv) this
Agreement and all documents required by this Agreement to be executed by Buyer
are and will be valid, legally binding obligations of and enforceable against
Buyer in accordance with their terms.
16. Waivers of Deceptive Trade Practices Act. Buyer acknowledges and
agrees, on its own behalf and on behalf of its assigns and successors, that the
Texas Deceptive Trade Practices -- Consumer Protection Act, Subchapter E of
Chapter 17 of the Texas Business and Commerce Code (the "DTPA"), is not
applicable to the transactions contemplated by this Agreement. Accordingly,
Buyer's rights and remedies with respect to these transactions, and with respect
to all other acts or practices, past, present or future, in connection with
these transactions, shall be governed by legal principles other than the DTPA.
In furtherance thereof, Buyer agrees as follows:
(a) Buyer represents that it is a business consumer and that it
seeks to acquire by purchase or lease the goods or services that are the
subject of this Agreement for commercial or business use. Buyer further
represents that it has knowledge and experience in financial and
business matters that enables it to evaluate the merits and risks of the
business transactions that are the subject of this Agreement. Buyer also
represents that it is not in a significantly disparate bargaining
position in relation to Seller.
(b) Buyer represents that Buyer has assets of Five Million Dollars
($5,000,000.00) or more.
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(c) Buyer represents that it has been represented by legal counsel
in seeking or acquiring the goods or services that are the subject of
this Agreement and that the transactions contemplated by this Agreement
do not involve the purchase or lease of a family residence occupied or
to be occupied as the residence of Buyer. Buyer shall cause its legal
counsel to sign this Agreement for the purpose of complying with Section
17.42(a)(3) of the DTPA.
(d) Buyer agrees, on its own behalf and on behalf of its assigns and
successors, that all of its rights and remedies under the DTPA are
waived and released, including specifically, without limitation, all
rights and remedies resulting from or arising out of any and all acts or
practices of Seller in connection with the transactions contemplated by
this Agreement, whether such acts or practices occur before or after the
execution of this Agreement; provided, however, notwithstanding anything
to the contrary herein, in accordance with Section 17.42 of the DTPA,
Buyer does not waive Section 17.555 of the DTPA.
17. Condemnation. If before the Close of Escrow, any portion of the
Property is taken by eminent domain (or is the subject of a pending or
contemplated taking which has not been consummated) Buyer and Seller shall
proceed to the Close of Escrow in accordance with this Agreement, without
modification of the terms of this Agreement, except that (i) the Property will
not include the property so taken, (ii) the Purchase Price will be reduced by
the amount of any awards for such taking paid to Seller as of the Closing Date,
and (iii) Seller shall assign and turn over to Buyer, and Buyer shall be
entitled to receive and retain, all awards for such taking not yet awarded as of
the Close of Escrow. Notwithstanding the foregoing, if a portion of the Property
is taken by eminent domain (or is the subject of a pending or contemplated
taking which has not been consummated) and such portion either (a) contains more
than five percent (5%) of the number of parking spaces located at the Property,
or (b) is worth in excess of $250,000.00, Buyer may either (x) terminate this
Agreement and receive the return of the Deposit and any Additional Deposit, in
which case neither party will have any additional rights or obligations under
this Agreement, or (y) elect to proceed to the Close of Escrow in accordance
with this Agreement, without modification of the terms of this Agreement.
18. Destruction. Except as otherwise provided in this Agreement, prior
to the Closing Date, all risks of loss or damage by every casualty shall be
borne by the Seller. Notwithstanding the foregoing, if the Property is damaged
by fire or other casualty on or before the Closing Date, Seller immediately
shall notify Buyer of such damage. If the damage is less than Two Hundred Fifty
Thousand Dollars ($250,000.00) and does not eliminate access to the Property,
Buyer and Seller shall proceed to the Close of Escrow in accordance with the
terms of this Agreement, without modification of the terms of this Agreement, in
which event Buyer shall be entitled to an assignment of the proceeds of all
insurance relating to such fire or other casualty, including the proceeds of
rent loss insurance, and Seller shall be responsible for the payment of any
deductibles under its insurance policies. If the damage exceeds Two Hundred
Fifty Thousand Dollars ($250,000.00), Buyer may either (a) terminate this
Agreement and receive the return of the Deposit and any Additional Deposit, in
which case neither party will have any additional rights or obligations under
this Agreement, or (b) elect to proceed to the Close of Escrow in accordance
with this Agreement, without modification of the terms of this Agreement, in
which event Buyer is entitled to an assignment of the proceeds of all insurance
relating to such fire or other casualty, including the proceeds of rent loss
insurance, and Seller shall be responsible for the payment of any deductibles
under its insurance policies.
19. Brokers. Seller represents that it has engaged Jerry T. Lamm of Lamm
Real Estate, Ltd. ("Lamm"), as a real estate broker in connection with its sale
of the Property. Buyer represents that it has engaged Tom Flood of Pinnacle
Realty Management Company ("Pinnacle") as real estate broker in connection with
its purchase of the Property. Lamm and Pinnacle shall be collectively referred
to herein as "Broker." On the Close of Escrow Broker is entitled to receive a
commission in the amount of One and Three-Quarter Percent (1.75%) of the
Purchase Price from the proceeds of the Purchase Price, payable by Seller
one-half to Lamm and one-half to Pinnacle. Each party to this Agreement
represents that no real estate or business broker, agent, finder, or other
person other than Broker is responsible for bringing about or negotiating this
Agreement and that such party has not dealt with any real estate broker, agent,
finder, or other person other than Broker relating to this Agreement
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in any manner. Each party to this Agreement shall defend, indemnify, and hold
harmless the other party to this Agreement against all liabilities, damages,
losses, costs, expenses, attorneys' fees and claims arising from (a) any breach
of such representation by such indemnifying party set forth in the preceding
sentence, and (b) any claims that may be made against such indemnified party by
any real estate broker, agent, finder, or other person alleging to have acted on
behalf of, or to have dealt with, such indemnifying party. It is the intent of
the parties that Broker is not a third party beneficiary of this Agreement.
20. As-Is Purchase. Buyer acknowledges that it is purchasing the
Property in reliance solely on: (i) Buyer's inspection of the Real Property, the
Personal Property and the Improvements; (ii) Buyer's independent verification of
the truth of any documents made available to Buyer; and (iii) the opinions and
advice concerning the Property of consultants and attorneys engaged by Buyer.
Buyer acknowledges that before the expiration of the Due Diligence Period, Buyer
will have performed all of its due diligence investigations of and with respect
to the Property as Buyer deems appropriate, including engineering studies, soils
tests, environmental surveys and testing, physical inspections, TLTA or other
surveys, and market analyses as well as Buyer's evaluation of the condition and
status of the Personal Property and Improvements and the operation and future
prospects of the Property. On the Close of Escrow, Buyer accepts the Property
and all matters relating to the Property in their "as is" condition or status as
of the Closing Date, including such matters as: soils and geological condition,
topography, area and configuration of the Real Property; the age and condition
of the Improvements and Personal Property; the existence of any hazardous or
toxic substances or materials, construction defects or other matters which would
or could necessitate abatement or remediation action by the Property's owner;
any physical or mechanical defects in the Improvements or Personal Property; any
easement, license or encroachment which is not a matter of public record,
whether or not visible upon inspection of the Property; the zoning and other
land use regulations applicable to the Property; and any other matter relating
to the Property including, but not limited to, value, title, income,
feasibility, cost, marketing and investment return. Buyer acknowledges and
agrees that Seller is not making any express or implied warranties or
representations of any kind or character with respect to the Property. Buyer
warrants and represents that it has not relied upon and will not rely upon,
either directly or indirectly, any warranty or representation of Seller not
explicitly set forth in this Agreement.
21. Indemnification.
21.1. Indemnification of Buyer. Seller hereby agrees to indemnify,
defend and hold harmless Buyer and any other holder of record title to the
Property pursuant to this Agreement, their officers, directors, general
partners, agents and employees and their respective heirs, executors,
administrators, successors and assigns, from and against any and all
indebtedness or other liability arising out of ownership or operation of the
Property prior to Close of Escrow, including, but not limited to, any and all
claims, liabilities, damages, penalties and losses, costs or expenses (including
court costs and reasonable attorney's fees) incurred, resulting from or in any
way arising out of any act or omission of Seller, its agents and employees, in
respect of the operation of the Property prior to Close of Escrow, and any
injury to persons or damage to property happening or occurring in, on or about
the Property. Seller further agrees, upon notice and request from Buyer, to
contest any such demand, claim, suit or action against which Seller has
hereinabove agreed to indemnify and hold Buyer harmless, and to defend any
action that may be brought in connection with any such demand, claim, suit or
action or with respect to which Seller has hereinabove agreed to indemnify and
hold Buyer harmless and to bear all costs and expenses of such contest and
defense, provided, however, that Seller shall have no obligation hereunder to
indemnify or hold Buyer harmless from and against any claim, liability, damage,
penalty or loss, cost or expense incurred by Buyer incident to, resulting from
or in any way arising out of any act or omission of Buyer, its agent or
employees, it being understood and agreed, however, that the employees engaged
in the operation of the Property prior to Close of Escrow are and shall be
construed to be, for purposes of this provision, the employees of Seller and the
acts and omissions of said employees shall in no way be attributable to Buyer
for the purposes of this provision.
21.2. Indemnification of Seller. Buyer hereby agrees to indemnify,
defend and hold harmless Seller and any other holder of record title to the
Property pursuant to this Agreement, their officers, directors, general
partners, agents and employees and their respective heirs, executors,
administrators, successors and assigns,
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from and against any and all indebtedness or other liability arising out of
ownership or operation of the Property from and after Close of Escrow,
including, but not limited to, any and all claims, liabilities, damages,
penalties and losses, costs or expenses (including court costs and reasonable
attorney's fees) incurred, resulting from or in any way arising out of any act
or omission of Buyer, its agents and employees, in respect of the operation of
the Property from and after Close of Escrow, and any injury to persons or damage
to property happening or occurring in, on or about the Property. Buyer further
agrees, upon notice and request from Seller, to contest any such demand, claim,
suit or action against which Buyer has hereinabove agreed to indemnify and hold
Seller harmless, and to defend any action that may be brought in connection with
any such demand, claim, suit or action or with respect to which Buyer has
hereinabove agreed to indemnify and hold Seller harmless and to bear all costs
and expenses of such contest and defense, provided, however, that Buyer shall
have no obligation hereunder to indemnify or hold Seller harmless from and
against any claim, liability, damage, penalty or loss, cost or expense incurred
by Seller incident to, resulting from or in any way arising out of any act or
omission of Seller, its agent or employees, it being understood and agreed,
however, that the employees engaged in the operation of the Property from and
after Close of Escrow are and shall be construed to be, for purposes of this
provision, the employees of Buyer and the acts and omissions of said employees
shall in no way be attributable to Seller for the purposes of this provision.
21.3. Indemnification Procedure. To the extent of any claims against
Seller or Buyer predicated upon facts which could reasonably be interpreted as
giving rise to potential liability of Seller or Buyer under this Section 21, the
party against whom such claim is asserted shall promptly give notice thereof to
the other party hereto. Thereupon, such other party shall have the option of
retaining counsel of its choice to defend both it and the remaining party in
respect of such claim and to control, in a manner reasonable in light of
applicable circumstances, the course and ultimate disposition of such claim. In
the event that a party to this Agreement shall elect to exercise the option
provided in the preceding sentence, the party electing such option, by reason
thereof, shall be deemed to have agreed to pay all reasonable costs and expenses
of defending against such claim and any liability of the party against whom such
claim was asserted on account thereof. Without regard to whether any party
hereto shall exercise such option, Seller and Buyer and their counsel shall
consult with one another concerning such claim and with due regard to both the
mutual and the independent interest of Seller and Buyer therein.
21.4. Indemnity Regarding Inspection. In consideration of Seller's
permission to Buyer and its agents to perform investigations and testing on and
about the Property, Buyer shall defend, indemnify and hold harmless Seller,
Seller's officers, employees, agents, contractors, successors, assigns, and
affiliates (collectively, the "Indemnitees"), and the Property from all claims,
costs, liens, actions and judgments (including Seller's attorneys' fees and
defense costs) resulting from Buyer's investigation or otherwise caused by Buyer
or any of its employees, agents or independent contractors. Unless and until the
Close of Escrow occurs, Buyer shall maintain all the information it obtains in
connection with the Property in strict confidence subject to the terms of the
Indemnification Agreement dated May 16, 1997 by and between Seller and Buyer
(the "Indemnification Agreement"). Buyer shall, at Buyer's sole cost, promptly
repair any damage resulting from its activities on the Property and restore the
Property to its condition before Buyer or any of its agents first entered the
Property. If the Close of Escrow does not occur on or before the Closing Date
for any reason other than a breach of this Agreement by Seller, Buyer shall
provide Seller, at no cost to Seller, copies of all reports and materials
derived from Buyer's investigation of the Property.
22. Governing Law, Venue and Jurisdiction. This Agreement is governed by
and construed in accordance with the laws of the State of Texas. All actions and
proceedings arising in connection with this Agreement must be tried and
litigated exclusively in the State and Federal courts located in the County of
Dallas, State of Texas, which courts have personal jurisdiction and venue over
each of the parties to this Agreement for the purpose of adjudicating all
matters arising out of or related to this Agreement. Each party authorizes and
accepts service of process sufficient for personal jurisdiction in any action
against it as contemplated by this paragraph by registered or certified mail,
return receipt requested, postage prepaid, to its address for the giving of
notices set forth in this Agreement.
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23. Further Assurances. Each party to this Agreement shall execute and
deliver all instruments and documents and take all actions as may be reasonably
required or appropriate to carry out the purposes of this Agreement.
24. Counterparts and Exhibits. This Agreement may be executed in
counterparts, each of which is deemed an original and all of which together
constitute one document. All exhibits attached to and referenced in this
Agreement are incorporated into this Agreement.
25. Time of Essence. Time and strict and punctual performance are of the
essence with respect to each provision of this Agreement.
26. Attorney's Fees. The prevailing party in any litigation, arbitration,
mediation, bankruptcy, insolvency or other proceeding ("Proceeding") relating to
the enforcement or interpretation of this Agreement may recover from the
unsuccessful party all costs, expenses, and reasonable attorney's fees
(including expert witness and other consultants' fees and costs) relating to or
arising out of (a) the Proceeding (whether or not the Proceeding proceeds to
judgment), and (b) any post-judgment or post-award proceeding including, without
limitation, one to enforce or collect any judgment or award resulting from the
Proceeding. All such judgments and awards shall contain a specific provision
for the recovery of all such subsequently incurred costs, expenses, and actual
attorney's fees.
27. Modification. This Agreement may be modified only by a contract in
writing executed by the party to this Agreement against whom enforcement of the
modification is sought.
28. Headings. The paragraph headings in this Agreement (a) are included only
for convenience, (b) do not in any manner modify or limit any of the provisions
of this Agreement, and (c) may not be used in the interpretation of this
Agreement.
29. Prior Understandings. This Agreement and all documents specifically
referred to and executed in connection with this Agreement: (a) contain the
entire and final agreement of the parties to this Agreement with respect to the
subject matter of this Agreement, and (b) supersede all negotiations,
stipulations, understandings, agreements, representations and warranties, if
any, with respect to such subject matter, which precede or accompany the
execution of this Agreement.
30. Interpretation. Whenever the context so requires in this Agreement, all
words used in the singular may include the plural (and vice versa) and the word
"person" includes a natural person, a corporation, a firm, a partnership, a
joint venture, a trust, an estate or any other entity. The terms "includes" and
"including" do not imply any limitation. No remedy or election under this
Agreement is exclusive, but rather, to the extent permitted by applicable law,
each such remedy and election is cumulative with all other remedies at law or in
equity.
31. Partial Invalidity. Each provision of this Agreement is valid and
enforceable to the fullest extent permitted by law. If any provision of this
Agreement (or the application of such provision to any person or circumstance)
is or becomes invalid or unenforceable, the remainder of this Agreement, and the
application of such provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, are not affected by such invalidity
or unenforceability.
32. Successors-in-Interest and Assigns. Buyer may not assign its rights
under this Agreement to any person or entity, other than Apple Residential
Trust, Inc., without the prior written consent of Seller, which consent may not
be unreasonably withheld. No assignment by Buyer of any of its rights or
obligations under this Agreement shall relieve Buyer of any of its obligations
under this Agreement unless Seller expressly agrees to such release in writing.
Subject to the foregoing, this Agreement is binding on and inures to the
benefit of the successors-in-interest and assigns of each party to this
Agreement.
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33. Municipal Utility District Notices. Buyer agrees that if the Property or
any portion thereof is located in a municipal utility district, Buyer will,
within five days after request by Seller, execute any and all notices which, in
the opinion of counsel for Seller, are required by law to be given to Buyer with
respect to the Property.
34. Notices. Each notice and other communication required or permitted to be
given under this Agreement ("Notice") must be in writing. Notice is duly given
to another party upon: (a) hand delivery to the other party, (b) receipt by the
other party when sent by facsimile to the address and number for such party set
forth below (provided, however, that the notice is not effective unless a
duplicate copy of the facsimile Notice is promptly given by one of the other
methods permitted under this paragraph), (c) three business days after the
Notice has been deposited with the United States postal service as first class
certified mail, return receipt requested, postage prepaid, and addressed to the
party as set forth below, or (d) the next business day after the Notice has been
deposited with a reputable overnight delivery service, postage prepaid,
addressed to the party as set forth below with next-business-day delivery
guaranteed, provided that the sending party receives a confirmation of delivery
from the delivery-service-provider.
If to Seller, to: Hutton/Con Am Realty Investors 4
1764 San Diego Avenue
San Diego, California 92110
Attn: E. Scott Dupree, Esq.
Phone: 614-297-6771
Fax: 619-294-2451
with a copy to: RI 3-4 Real Estate Services, Inc.
c/o Lehman Brothers, Inc.
Diversified Asset Group
3 World Financial Center, 29th Floor
or
200 Vesey Street, 29th Floor
New York, New York 10285
Attn: Donald E. Petrow
Phone: 212-526-3140
Fax: 212-528-9697
If to Buyer, to: Cornerstone Realty Group, Inc.
306 East Main Street
Richmond, Virginia 23219
Attn: Gustav G. Remppies
Phone: (804) 643-1761
Fax: (804) 782-9302
with a copy to: Zuckerbrod & Taubenfeld
575 Chestnut Street
P.O. Box 488
Cedarhurst, New York 11516
Attn: Harry S. Taubenfeld, Esq.
Phone: (516) 374-3133
Fax: (516) 374-3490
and a copy to: Brown McCarroll & Oaks Hartline
300 Crescent Court - Suite 1400
Dallas, Texas 75201-6929
Attn: Leigh Moore, Esq.
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Phone: (214) 999-6173
Fax: (214) 999-6170
Each party shall make a reasonable, good faith effort to ensure that it will
accept or receive any Notice to it that is given in accordance with this
paragraph. A party may change its address for purposes of this paragraph by
giving the other party(ies) written notice of a new address in the manner set
forth above.
35. Waiver. Any waiver of a default or provision under this Agreement must
be in writing. No such waiver constitutes a waiver of any other default or
provision concerning the same or any other provision of this Agreement. No
delay or omission by a party in the exercise of any of its rights or remedies
constitutes a waiver of (or otherwise impairs) such right or remedy. A consent
to or approval of an act does not waive or render unnecessary the consent to or
approval of any other or subsequent act.
36. Drafting Ambiguities. Each party to this Agreement and its legal counsel
have reviewed and revised this Agreement. The rule of construction that
ambiguities are to be resolved against the drafting party or in favor of the
party receiving a particular benefit under an agreement may not be employed in
the interpretation of this Agreement or any amendment to this Agreement.
37. Third Party Beneficiaries. Nothing in this Agreement is intended to
confer any rights or remedies on any person or entity other than the parties to
this Agreement and their respective successors-in-interest and permitted
assignees.
38. Confidentiality. Except as required by law, as provided in Section 21.4
or as set forth in the Indemnification Agreement, Seller and Buyer hereby agree
from and after the date hereof, not to disclose the terms of the transactions
contemplated by this Agreement or any information in connection therewith to
anyone other than (i) the consultants and professionals retained by each party
in connection with evaluating, reviewing, negotiating and closing the
transactions contemplated by this Agreement, (ii) the partners, management and
officers of each party, and (iii) other employees of each party involved in
evaluating, reviewing, negotiating and closing the transactions contemplated by
this Agreement (collectively, the "Involved Parties"). Any document or
information provided to the Involved Parties is for their internal use only and
shall not be published, quoted, copied, distributed, divulged, disseminated or
discussed without the express prior written consent of the other party, except
as otherwise required by law. Seller and Buyer hereby agree to keep, and agree
to direct the Involved Parties to keep, any information and documents received
from the other party, or from any third party regarding the other, confidential,
and no publicity or press release regarding the transactions contemplated by
this Agreement or the consummation of the sale of the Property shall be made
without the prior written consent of both Seller and Buyer. The provisions of
this Section shall apply prior to the Closing Date, and if the Closing does not
occur, shall survive the termination of this Agreement.
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SELLER: RIVER HILL APARTMENTS, LTD.,
a Texas limited partnership
By: HUTTON/CON AM REALTY INVESTORS 4,
a California limited partnership,
general partner
By: RI 3-4 REAL ESTATE SERVICES, INC.,
a Delaware corporation,
general partner
By: /s/ Donald E. Petrow
--------------------
Name: DONALD E. PETROW
Title: vp
By: CON AM PROPERTY SERVICES IV, LTD.,
a California limited partnership,
general partner
By: CONTINENTAL AMERICAN
DEVELOPMENT, INC.,
a California corporation,
general partner
By: /s/ Scott Dupree
-----------------
Name: SCOTT DUPREE
Title: VICE PRESIDENT
<PAGE>
BUYER: CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By: /s/ S.J. Olander
----------------
Name: S.J. Olander
Title: Senior VP
Exhibit 10.3
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 6th day of August,
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 Remington Hills at Las Colinas 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, provide 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;
<PAGE>
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;
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
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<PAGE>
to date, and for the same month of the preceding year. The cost of performing
the accounting functions outlined in paragraphs h 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
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<PAGE>
coverage and the risks insured shall be subject to the approval of Owner.
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, 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.
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<PAGE>
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 covered by the budget, to place sufficient funds in a bank account,
or to permit Manager to transfer Owner's funds to such account, to make up the
budgeted operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by canceling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire understanding
between the parties hereto with regard to the transactions described herein and
may only be amended by a written instrument signed by the party against whom
enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OWNER:
APPLE RESIDENTIAL INCOME TRUST, INC.,
a Virginia corporation
By: /s/ S. J. Olander
----------------------------------
Title: Secretary
----------------------------------
5
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MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ S.J. Olander
----------------------------------
Title: Secretary
----------------------------------
6
