SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: June 2, 1998
APPLE RESIDENTIAL INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 0-23983 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
Page
Number
------
Item 2. Acquisition or Disposition of Assets 4
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report 9
(Summer Tree Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Summer Tree Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Summer Tree Apartments)*
b. Pro Forma Statement of Operations 10
for the Year ended December 31, 1997
(unaudited)*
Pro Forma Statement of Operations
for the Quarter ended March 31, 1998
(unaudited)*
Pro Forma Balance Sheet as of
March 31, 1998 (unaudited)*
c. Exhibits
10.1 Purchase Contract for Summer Tree Apartments,
as amended
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- -----------------------
* To be filed by amendment.
<PAGE>
10.2 Property Management Agreement for Summer Tree
Apartments
23.1 Consent of Independent Auditors*
-3-
- -----------------------
* To be filed by amendment.
<PAGE>
Item 2. Acquisition or Disposition of Assets
SUMMER TREE APARTMENTS
North Dallas, Texas
On June 2, 1998, Apple REIT Limited Partnership (together with its
parent companies, Apple Residential Income Trust, Inc., Apple General, Inc. and
Apple Limited, Inc., the "Company") purchased the Summer Tree Apartments located
at 13250 Emily Road in North Dallas, Texas (the "Property").
The Property comprises 232 apartment units. The purchase price for the
Property was $5,700,000. The seller was Sunrise Enterprises, Inc., a Texas
corporation which was not affiliated with the Company, Apple Residential
Advisors, Inc. (the "Advisor") or their affiliates. The purchase price was paid
entirely in cash using proceeds from the sale of Shares of the Company. Title to
the Property was conveyed to the Company by limited warranty deed.
Location. The Property is located on Emily Road on the north side of
Interstate 635 (L.B.J. Freeway), and just west of U.S. Highway 75 (Central
Expressway) in North Dallas, Texas. The Property is located within the greater
Dallas/Fort Worth metropolitan statistical area, or as it is called locally,
"The Metroplex."
The following information is based in part upon information provided by
the Dallas Chamber of Commerce. The Dallas/Fort Worth Metroplex is in the
north-central part of Texas and is composed of nine counties. The 1996
population of The Metroplex was approximately 4,400,000. The Dallas metropolitan
area is the second largest 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
17,600 acres of land between the two cities. It is the second largest commercial
airport in the United States in terms of land area, and is the second busiest
airport in the world, with more than 2,500 daily arrivals and departures.
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The area also has a well-established system of interstate highways and
supporting secondary routes. The Metroplex is located at the hub of Interstates
35, 45, 20 and 30. Two outer loops, Interstate 635 in Dallas and Interstate 820
in Fort Worth, surround the respective cities.
The many institutions of higher learning in the area include Southern
Methodist University, the University of Texas at Dallas, the University of Texas
at Arlington, the University of North Texas, and Texas Christian University.
The immediate neighborhood surrounding the Property consists of other
multi-family and single-family housing and commercial and retail development.
The Property is located approximately one-quarter mile from a
multi-billion-dollar Texas Instruments facility. The Property is proximate to
other businesses, restaurants, schools and churches and is readily accessible
from Interstate 635 and Highway 75. The Property is an approximately 20-minute
drive from Dallas/Fort Worth International Airport and an approximately
15-minute drive from downtown Dallas.
Description of the Property. The Property consists of 232 garden-style
apartment units in 11 two and three story buildings on approximately six acres
of land. The Property was constructed in 1980.
The Property offers four different unit types. The unit mix and rents
being charged new tenants as of June 1998 are as follows:
APPROXIMATE INTERIOR
QUANTITY TYPE SQUARE FOOTAGE MONTHLY RENTAL
-------- ---- -------------- --------------
96 One bedroom, one bathroom 481 $439
48 One bedroom, one bathroom 575 464
72 One bedroom, one bathroom 622 484
16 Two bedrooms, two bathrooms 933 659
The apartments provide a total of approximately 133,500 square feet of
net rentable area.
The Company believes that the Property has generally been well
maintained and is in good condition. However, the Company has budgeted
approximately $348,000 for repairs and improvements to the Property to include
clubhouse renovations, exterior painting, pool renovations, sign replacement and
interior upgrades.
-5-
<PAGE>
The following information is provided by the seller. Physical occupancy
at the Property averaged approximately 94% in 1993, 94% in 1994, 96% in 1995,
96% in 1996 and 97% in 1997. Leases at the Property are generally for terms of
one year or less. Average rental rates for the past five years have generally
increased. As an example, a one-bedroom, one-bathroom apartment (622 square
feet) rented for $390 in 1993, $424 in 1994, $444 in 1995, $454 in 1996 and $484
in 1997. The average effective annual rental per square foot at the Property for
1993, 1994, 1995, 1996 and 1997 was $7.97, $8.67, $9.07, $9.28, and $9.89,
respectively.
The Property has an outdoor swimming pool, a fitness center, a laundry
facility and card- accessed entrance gates. The Property also has a clubhouse
with a kitchen, entertainment area and leasing office. There is ample paved
parking for tenants.
The buildings are wood frame construction with a combination of brick
veneer, stucco and wood lap siding on concrete slab foundations. Roofs are
pitched and covered with asphalt shingles on plywood sheathing.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually controlled heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, dishwasher,
microwave oven and garbage disposal. All units have washer/dryer connections and
all units except the smallest one-bedroom units have a wood-burning fireplace.
The owner of the Property pays for cold water, sewer charges, gas (for hot
water) and trash removal. The tenants pay for their electricity service, which
includes cooking, lighting, heating and air-conditioning.
There are at least eight apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy at nearby competing properties averaged
approximately 97% on May 31, 1998.
As of May 31, 1998, the Property was approximately 98% occupied. The
tenants are primarily a mix of white-collar and blue-collar workers.
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<PAGE>
The following table sets forth the 1997 real estate tax information on
the Property:
JURISDICTION ASSESSED VALUE RATE TAX
------------ -------------- ---- ---
County of Dallas . . . . . . . $4,423,510 $0.44307 $19,599.25
City of Dallas . . . . . . . . 4,423,510 0.65160 28,823.59
Richardson I.S.D. . . . . . . . 4,423,510 1.60000 70,776.16
----------
Total . . . . . . . . . . $119,199.00
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $2,738,537) will be depreciated over 27.5
years on a straight-line basis. The basis of the personal property portion will
be depreciated in accordance with the modified accelerated cost recovery system
of the Code. Amounts to be spent by the Company on repairs and improvements will
be treated for tax purposes as permitted by the Code based on the nature of the
expenditures.
The Advisor and the Company believe that the property is and will
continue to be adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. The Dallas/Fort Worth area generally and the specific area in which
the Property is located were perceived as being characterized by a diverse,
stable and steadily growing economy. Accordingly, it was believed that such
economy and its anticipated growth and development would support stable
occupancy rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs and
improvements will allow an increase in rents at the Property.
3. The Property has an advantageous location - convenient to the
Dallas/Fort Worth International Airport and downtown Dallas - and is located in
a rapidly-growing area proximate to centers of employment and retail
development.
Acquisition and Management Services and Fees. In consideration of
services rendered to the Company in connection with the selection and
acquisition of the Property, the Company paid Cornerstone Realty Income Trust,
Inc. a property acquisition fee equal to 2% of the purchase price
-7-
<PAGE>
of the property, or $114,000. Cornerstone Realty Income Trust, Inc. will serve
as property manager for the Property and for its services will be paid by the
Company a monthly management fee equal to 5% of the gross revenues of the
Property plus reimbursement of certain expenses.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
-8-
<PAGE>
ITEM 7.a.*
- --------
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements
will be filed as an amendment to this report as soon as possible, but in no
event more than 60 days after the date of filing of this report.
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<PAGE>
ITEM 7.b.*
- -------
* To be filed by amendment. It is impracticable to include herein the required
pro forma financial information. The required pro forma financial
information will be filed as an amendment to this report as soon as
possible, but in no event more than 60 days after the date of filing of this
report.
-10-
<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: June 10, 1998 By: /s/ Glade M. Knight
-----------------------------------
Glade M. Knight
President of Apple Residential
Income Trust, Inc.
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<PAGE>
EXHIBIT INDEX
Apple Residential Income Trust, Inc.
Form 8-K dated June 2, 1998
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
10.1 Purchase Contract for Summer Tree
Apartments, as amended
10.2 Property Management Agreement
for Summer Tree Apartments
23.1 Consent of Independent Auditors*
- ----------
* To be filed by amendment.
-12-
EXHIBIT 10.1
REINSTATEMENT AGREEMENT made this 7th day of May 1998, by and between
SUNRISE ENTERPRISES, INC., a Texas corporation ("SELLER") and CORNERSTONE REALTY
GROUP, INC., a Virginia corporation ("PURCHASER").
WHEREAS, the above parties entered into an Agreement for the purchase
and sale of the property known as the Summertree Apartments on November 20, 1997
(the "AGREEMENT"), and
WHEREAS, the Agreement was amended on November 20, 1997, December 1,
1997, December 2, 1997 and December 8, 1997, and
WHEREAS, the Agreement was terminated pursuant to a letter dated
December 12, 1997, and
WHEREAS, the parties wish to reinstate the Agreement.
NOW, THEREFORE, in consideration of the mutual promises expressed
herein, it is hereby agreed as follows:
1. The parties agree that the Agreement is hereby reinstated with the
following modifications:
a. ARTICLE III, INSPECTION PERIOD, is hereby amended to extend
the Inspection Period to fourteen (14) days after the execution of this
Reinstatement Agreement.
b. ARTICLE IV, CLOSING, is hereby amended to change the
Closing to seven (7) days after the completion of the Inspection Period.
2. Except as modified herein, the Agreement remain in full force and
effect without modification.
3. Seller and Purchaser hereby ratify and confirm the Agreement, as
herein modified, for all purposes.
4. This Reinstatement Agreement may be executed in
<PAGE>
counterparts, each of which will be deemed to be an original, but all of which
will constitute one and the same document. A counterpart signed by a party and
transmitted by facsimile to the other party will have the same effect as the
delivery of an original.
IN WITNESS WHEREOF, this Reinstatement Agreement is executed effective
as of the date first set forth above.
SELLER: SUNRISE ENTERPRISES, INC. ,
a Texas corporation
By: /s/ Nathan Levine
---------------------------------
Nathan Levine, President
PURCHASER: CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By: /s/ Gus G. Remppies
---------------------------------
Vice President Acquisitions
<PAGE>
FOURTH AMENDMENT TO REAL ESTATE PURCHASE AND SALE AGREEMENT
This Fourth Amendment to Real Estate Purchase and Sale Agreement (the
"Amendment") is made by and between SUNRISE ENTERPRISES, INC., a Texas
corporation (the "Seller") and CORNERSTONE REALTY GROUP, INC., a Virginia
corporation ("Purchaser") to be effective as of the 8th day of December, 1997.
RECITALS
A. Effective on or about November 20, 1997, Seller and Purchaser
entered into a certain Real Estate Purchase and Sale Agreement (as amended, the
"Agreement") relating to a parcel of land and the improvements thereon located
in Dallas County, Texas. All terms used herein with their initial letter
capitalized shall, unless otherwise specified herein, have the meaning given to
such terms in the Agreement.
B. The parties desire to further amend the Agreement to extend the
Inspection Period stated in Section 3.1 of the Agreement and have entered into
this Amendment to reflect such agreements.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser and Seller hereby agree as follows:
1. The Inspection Period stated in Section 3.1, as amended by the Third
Amendment, shall be further amended to expire at 11:59 p.m. Dallas, Texas time
on Wednesday, December 17, 1997.
2. Except as modified herein, the Agreement remain in full force and
effect without modification.
3. Purchaser and Seller hereby ratify and confirm the Agreement, as
herein modified, for all purposes.
4. This Amendment may be executed in counterparts, each of which will
be deemed to be an original, but all of which will constitute one and the same
document. A counterpart signed by a party and transmitted by facsimile to the
other party will have the same effect as the delivery of an original.
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first set forth above.
SELLER: SUNRISE ENTERPRISES, INC.,
a Texas corporation
By: /s/ Nathan Levine
-----------------------------------
Nathan Levine, President
PURCHASER: CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By:
-------------------------------------
S.J. Olander, Senior Vice President
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first set forth above.
SELLER: SUNRISE ENTERPRISES, IC.
a Texas corporation
By:
------------------------------------
Nathan Levine, President
PURCHASER: CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By: /s/ S.J. Olander
------------------------------------
S. J. Olander, Senior Vice President
<PAGE>
THIRD AMENDMENT TO REAL ESTATE PURCHASE AND SALE AGREEMENT
This Third Amendment to Real Estate Purchase and Sale Agreement (the
"Amendment") is made by and between SUNRISE ENTERPRISES, INC. a Texas
corporation ("Seller") and CORNERSTONE REALTY GROUP, INC., a Virginia
corporation ("Purchaser"), to be effective as of the 2nd day of December, 1997.
RECITALS
A. Effective on or about November 20, 1997, Seller and Purchaser
entered into a certain Real Estate Purchase and Sale Agreement (as amended, the
"Agreement") relating to a parcel of land and the improvements thereon located
in Dallas County, Texas. All terms used herein with their initial letter
capitalized shall, unless otherwise specified herein, have the meaning given to
such terms in the Agreement.
B. The parties desire to amend the Agreement to extend the Inspection
Period stated in Section 3.1 of the Agreement and have entered into this
Amendment to reflect such agreements.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser and Seller hereby agree as follows:
1. The Inspection Period stated in Section 3.1 of the Agreement shall
expire at 11:59 p.m. Dallas, Texas time on Wednesday, December 10, 1998.
2. Except as modified herein, the Agreement in full force and effect
without modification.
3. Purchaser and Seller hereby ratify and confirm the Agreement, as
herein modified, for all purposes.
4. This Amendment may be executed in counterparts, each of which will
be deemed to be an original, but all of which will constitute one and the same
document. A counterpart signed by a party and transmitted by facsimile to the
other party will have the same effect as the delivery of an original.
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first set forth above.
SELLER: SUNRISE ENTERPRISES, INC.
a Texas corporation
By: /s/ Nathan A. Levine
-------------------------------------
Nathan A. Levine, President
PURCHASER: CORNERSTONE REALTY GROUP, INC.,
a Virginia corporation
By: /s/ S. J. Olander
--------------------------------------
Name: S. J. Olander
Title: Senior Vice President
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first set forth above.
SELLER: SUNRISE ENTERPRISES, INC.,
a Texas corporation
By:
--------------------------------------
Nathan A. Levine President
PURCHASER: CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By: /s/ S. J. Olander
--------------------------------------
Name: S. J. Olander
Title: Senior Vice President
<PAGE>
AMENDMENT NO. 2
TO
REAL ESTATE PURCHASE AND SALE AGREEMENT
STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS THAT:
COUNTY OF DALLAS )
This Agreement is made and entered into on this 1st day of December,
1997, by and between SUNRISE ENTERPRISES, INC., a Texas corporation (hereinafter
called "Seller"), and CORNERSTONE REALTY GROUP, INC., a Virginia corporation
(hereinafter called "Purchaser"):
RECITALS:
A. Heretofore, the undersigned parties executed a certain written Real
Estate Purchase and Sale Agreement and First Modification to Real Estate
Purchase and Sale Agreement each dated November 20, 1997 (hereinafter jointly
referred to as the "Agreement"), for the sale of property located in Dallas
County, Texas, described in detail in Exhibit "A" attached to the Agreement.
B. The parties desire to amend the Agreement as set forth hereinafter.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, each of the undersigned parties for itself, its
respective successors and assigns agrees as follows:
1. The first sentence of Section 4.1 of the Agreement is hereby amended
to read as follows:
"The closing of the transaction contemplated hereby
("Closing") will be held at the offices of the Title Company,
300 Crescent Court, Suite 100, Dallas, Texas 75201, at 10:00
a.m. on or before December 15, 1997."
2. Except as expressly modified by this Amendment, all of the other
terms, provisions, conditions, and covenants set forth in the Agreement shall
remain in full force and effect, and this Amendment shall not be construed as a
novation of the Agreement.
<PAGE>
EXECUTED as of the day and year first written above.
SELLER:
SUNRISE ENTERPRISES, INC.,
a Texas corporation
By: /s/ Nathan Levine
----------------------------
Nathan Levine, President
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By: /s/ S.J. Olander
------------------------------
Name: S.J. Olander
Title: S.V.P
<PAGE>
FIRST MODIFICATION TO REAL ESTATE PURCHASE AND SALE AGREEMENT
This First Modification to Real Estate Purchase and Sale Agreement
("Modification") is made and entered into this 20 day of November 1997 between
SUNRISE ENTERPRISES, INC., ("Seller") and CORNERSTONE REALTY GROUP, INC.
("Purchaser").
WHEREAS, Purchaser and Seller are simultaneously executing the Purchase
Contract ("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. ARTICLE III, INSPECTION PERIOD, is hereby amended to add the
following paragraph:
"3.6 CLOSING CONDITION. The Seller agrees to continue the maintenance
and normal operation of the premises until the date of closing. During the
Inspection Period, both Seller and Purchaser will inspect an apartment unit at
the Property and mutually agree that said apartment shall be representative of a
"rent ready" unit by which all other units shall be judged for "rent ready"
condition at closing. All vacant apartment units which have been vacant for a
period of more than ten (10) days, are to be in a "rent ready" condition (as
defined above), at the time of closing, containing, but not limited to the
following amenities, i.e., carpet, refrigerator, range, garbage disposal,
heating, plumbing and electrical systems."
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
<PAGE>
Modification on the date first above written.
SELLER:
SUNRISE ENTERPRISES, INC.,
a Texas corporation
By: /s/ Nathan Levine
---------------------------
Nathan Levine, President
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By: /s/ S.J. Olander
----------------------------
Its: Senior Vice President
<PAGE>
REAL ESTATE PURCHASE AND SALE AGREEMENT
THIS REAL ESTATE PURCHASE AND SALE AGREEMENT (this "Agreement") is made
and entered into to be effective as of the Effective Date (as hereinafter
defined) by and between SUNRISE ENTERPRISES, INC., a Texas corporation
("Seller"), whose address is 14001 North Dallas Parkway, Suite 1050, Dallas,
Texas 75240, and CORNERSTONE REALTY GROUP, INC., a Virginia corporation
("Purchaser"), whose address is 306 East Main Street, Richmond, Virginia 23219.
W I T N E S S E T H :
ARTICLE I
PURCHASE AND SALE
1.1 Agreement of Purchase and Sale. Subject to the terms and conditions
hereinafter set forth, Seller agrees to sell and convey and Purchaser agrees to
purchase the following:
(a) that certain tract or parcel of land situated in Dallas
County, Texas, more particularly described on Exhibit "A" attached
hereto and made a part hereof, together with all and singular the
rights, easements and appurtenances pertaining to such property,
including any right, title and interest of Seller in and to adjacent
streets, alleys or rights-of-way (the property described in clause (a)
of this Section 1.1 being herein referred to collectively as the
"Land");
(b) the buildings and other improvements on the Land,
including specifically, without limitation, all those certain apartment
buildings, clubhouse, swimming pools, laundry room, and leasing office
located thereon having a street address of 13250 Emily Road, Dallas,
Texas 75240, and being a 232 unit multi-family apartment complex (the
property described in clause (b) of this Section 1.1 being herein
referred to collectively as the "Improvements");
(c) the personal property owned by Seller upon the Land or
within the Improvements, including specifically, without limitation,
heating, ventilation and air conditioning systems and equipment, stoves
refrigerators, disposals, ovens and other appliances, furniture,
carpeting, draperies and curtains and other window coverings, tools and
supplies, and other items of personal property (excluding cash) used in
connection with the operation of the Land and the Improvements (the
Page 1
<PAGE>
property described in clause (c) of this Section 1.1 being herein
referred to collectively as the "Personal Property");
(d) all of Seller's right, title and interest in all oral or
written agreements pursuant to which any portion of the Land or
Improvements is used or occupied by anyone other than Seller (the
property described in clause (d) of this Section 1.1 being herein
referred to collectively as the "Leases"); and
(e) all of Seller's right, title and interest in and to (i)
all assignable contracts and agreements accepted by Purchaser pursuant
to Section 3.3 hereof relating to the upkeep, repair, maintenance or
operation of the Land, Improvements or Personal Property which will
extend beyond the date of Closing (as such term is defined in Section
4.1 hereof), (ii) all assignable warranties and guaranties (express or
implied) issued to Seller in connection with the Improvements or the
Personal Property and (iii) all of Seller's right, title and interest,
if any, in and to the name "Summertree Apartments" (the property
described in this Section 1.1(e) being sometimes herein referred to
collectively as the "Intangibles").
1.2 Property Defined. The Land, the Improvements, the Personal
Property, the Leases and the Intangibles are hereinafter sometimes referred to
collectively as the "Property."
1.3 Permitted Exceptions. The Property will be conveyed subject to the
matters which are deemed to be Permitted Exceptions pursuant to Section 2.3
hereof and subject to the matters described in Section 2.5 hereof (herein
referred to collectively as the "Permitted Exceptions").
1.4 Purchase Price. Seller is to sell and Purchaser is to purchase the
Property for a total of FIVE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($5,700,000)
(the "Purchase Price").
1.5 Payment of Purchase Price. The Purchase Price will be payable in
full at Closing (as hereinafter defined) in cash or immediately available wire
transferred funds.
1.6 Independent Contract Consideration. On the Effective Date,
Purchaser shall deliver to Seller a check in the amount of One Hundred Dollars
($100) ("Independent Contract Consideration"), which amount the parties hereby
acknowledge and agree has been bargained for and agreed to as consideration for
Seller's execution and delivery of this Agreement. The Independent Contract
Consideration is in addition to and independent of any other consideration or
payment provided in this Agreement, and is nonrefundable in all events.
Page 2
<PAGE>
1.7 Earnest Money. On or before two (2) days next succeeding the
Effective Date, Purchaser shall deposit with Republic Title of Texas, Inc. (the
"Title Company"), having its office at 300 Crescent Court, Suite 100 Dallas,
Texas 75201 Attention: Leslie B. Wheeler, Vice President, the sum of One Hundred
Thousand Dollars ($100,000) (the "Earnest Money"). The Title Company shall
deposit the Earnest Money in an interest-bearing account in a national bank in
Dallas, Texas. The party entitled to the Earnest Money shall be entitled to all
interest thereon. The Title Company shall hold and disburse the Earnest Money in
accordance with the provisions of this Agreement. In the event that Purchaser
fails to deliver the Earnest Money to the Title Company within the time period
provided in this Section 1.7, then Seller shall have the option to terminate
this Agreement by sending written notice to Purchaser.
ARTICLE II
TITLE AND SURVEY
2.1 Commitment for Title Insurance. Seller and Purchaser hereby
instruct the Title Company to prepare (at Seller's expense) and deliver to
Purchaser, Seller and the surveyor described in Section 2.2 below, within ten
(10) days after the Effective Date, (i) a title commitment (the "Title
Commitment") covering the Property, showing all matters affecting title to the
Property and binding the Title Company to issue at Closing an Owner Policy of
Title Insurance on the standard form of policy prescribed by the Texas State
Board of Insurance in the full amount of the Purchase Price pursuant to Section
2.4 hereof, and (ii) legible copies of all instruments referenced in Schedule B
of the Title Commitment.
2.2 Survey. Seller agrees, at Seller's expense, to retain John R,
Piburn, Jr., a Texas Registered Professional Land Surveyor, or such other
registered professional land surveyor acceptable to the Title Company, to survey
the Property and prepare and deliver to Purchaser, Seller, and the Title
Company, within ten (10) days after the Effective Date, a survey thereof (the
"Survey") reflecting the total area of the Property, the location of all
improvements, recorded easements and encroachments, if any, located thereon and
all building and set back lines and other matters of record with respect
thereto. Unless otherwise agreed by Seller and Purchaser, the metes and bounds
description contained in the Survey shall be the legal description employed in
the documents of conveyance of the Property.
2.3 Title Review Period. Purchaser shall have ten (10) days (the "Title
Review Period") after the receipt of the last of the Title Commitment, legible
copies of all instruments referred to in Schedule B thereof, and the Survey to
notify Seller, in writing, of any objections Purchaser may have to anything
contained in the Title Commitment or the Survey; provided, however, that
Purchaser
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shall not be entitled to object to any Permitted Exceptions described in Section
2.5 hereof. Any item contained in the Title Commitment or the Survey to which
Purchaser does not object during the Title Review Period will be deemed a
Permitted Exception. In the event Purchaser shall notify Seller of objections to
title or the Survey prior to the expiration of the Title Review Period, Seller
shall have ten (10) days after receipt of notification of such objections, or
such greater period of time as may be mutually acceptable to Purchaser and
Seller (the "Cure Period"), within which Seller may (but shall not be required
to) cure or remove such objections; provided, however, Seller shall be required
to obtain the release of any liens created by Seller. If Seller fails either to
cure or remove any objection to the reasonable satisfaction of the Title Company
and Purchaser prior to the expiration of the Cure Period, Purchaser may either
(a) terminate this Agreement by written notice to Seller and receive a return of
the Earnest Money, at which time this Agreement will become null and void or (b)
waive such objection and accept such title as Seller is able to convey without
any reduction in the Purchase Price. Failure of Purchaser to send written notice
of the election available to Purchaser pursuant to the preceding sentence within
five (5) calendar days after the expiration of the Cure Period will be deemed an
election by Purchaser to waive Purchaser's objection and accept such title as
Seller is able to convey without any reduction in the Purchase Price.
2.4 Owner Policy of Title Insurance. At Closing, Seller shall cause the
Title Company to issue to Purchaser, at Seller's expense, an Owner Policy of
Title Insurance (the "Title Policy") covering the Property, in the full amount
of the Purchase Price, in the form prescribed by the Texas State Board of
Insurance. Such Title Policy may only contain as exceptions the standard
exceptions and the Permitted Exceptions. If Purchaser requests that the survey
exception or any other standard exception be amended, such amendment will be at
the sole expense of Purchaser.
2.5 Title Conveyed Subject to Certain Matters. The Property will be
conveyed subject to the following matters, which will be deemed to be Permitted
Exceptions:
(a) building restrictions and zoning regulations heretofore or
hereafter adopted by any municipal or other public authority relating
to the Property not violated by the current Improvements, and rent or
other regulations or laws, if any, now or hereafter in effect with
respect to the Property;
(b) rights, if any, relating to the construction and
maintenance, in connection with any public utility, of wires, poles,
pipes, conduits and appurtenances thereto, on, under or across the
premises (Purchaser retains its right pursuant to
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Section 2.3 hereof to object to any utility easements not acceptable to
Purchaser);
(c) any and all assessments becoming liens subsequent to the
date hereof, and in addition if at the date hereof the Property or any
part thereof will be or will have been affected by any assessment or
assessments which are payable in installments or may be paid in
installments without penalty (other than interest), Purchaser shall pay
all such installments which shall become due and payable or which may
be paid without penalty (other than interest) after the date of
Closing, except that any installment relating to the current fiscal
year (with any interest thereon) will be apportioned between the
parties at Closing;
(d) all liens for real estate taxes on the Property for the
year 1998 and subsequent years which are not yet due and payable at the
time of Closing; and
(e) all Leases affecting the Property (except any Leases
executed by Seller in violation of Section 5.2(b) hereof.
ARTICLE III
INSPECTION PERIOD
3.1 Right of Inspection. During the period beginning on the Effective
Date and ending the fourteenth (14th) day following such Effective Date
(hereinafter referred to as the "Inspection Period"), Purchaser shall have the
right to make a physical inspection of the Property and to examine any books and
records maintained by Seller relating to the Property at such place or places as
said books and records may be located (excluding, however, internal memoranda,
financial projections, appraisals and budgets) and to examine zoning and other
laws affecting the use of the Property. Without limiting the foregoing, Seller
shall make available to Purchaser those documents described on Exhibit "G"
attached hereto and made a part hereof. Purchaser understands and agrees that
any on-site inspections of the Property will be conducted upon at least
twenty-four (24) hours prior notice to Seller and in the presence of Seller or
its representative. Purchaser agrees to indemnify and hold Seller harmless of
and from any claim for damages or injuries arising from Purchaser's inspection
of the Property, and notwithstanding anything to the contrary in this Agreement,
such obligation to indemnify will survive Closing or any termination of this
Agreement for a period of six (6) months. Seller will notify Purchaser in
writing promptly after Seller has knowledge of any such claim covered by said
indemnification. If the claim is asserted by a third party, Purchaser may defend
such claim at Purchaser's expense by counsel of Purchaser's choice. Purchaser's
obligation to indemnify Seller
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will not extend to any diminution in value or other consequences caused by
Purchaser's discovery of defects or other conditions on or with respect to the
Property, nor will Purchaser's obligation extend to the costs of remediation of
any such defect or other condition not caused by Purchaser. All inspections must
occur at reasonable times agreed upon by Seller and Purchaser and must be
conducted so as not to unreasonably interfere with use of the Property by Seller
or its tenants.
3.2 Right of Termination. Purchaser, in its sole and absolute
discretion, may deliver written notice of its intention to terminate this
Agreement to Seller and the Title Company at any time prior to the expiration of
the Inspection Period or any extensions of the Inspection Period. If Purchaser
delivers such notice, the Title Company shall immediately release the Earnest
Money to Purchaser without requiring the execution of any release or consent
from Seller and despite any notifications or protestations from Seller or any
other third party to the contrary. By its execution of this Agreement, the Title
Company agrees with Purchaser to comply with the foregoing provision. If
Purchaser fails to send Seller such notice prior to the expiration of the
Inspection Period, Purchaser shall be deemed to have determined that the
Property is suitable for Purchaser's purposes and to have waived Purchaser's
right to terminate this Agreement pursuant to this Section 3.2.
3.3 Operating Agreements. During the Inspection Period, Purchaser shall
have the right to review all contracts and agreements relating to the upkeep,
repair, maintenance or operation of the Land, Improvements or Personal Property
which will extend beyond the date of Closing. Prior to the expiration of the
Inspection Period, Purchaser shall notify Seller in writing of those contracts
and agreements which Seller must terminate. Seller shall send written notice of
termination to such contract parties within three (3) business days after the
date of Seller's receipt of such notification from Purchaser. At Closing, any
amounts due on any contracts which will continue in effect after Closing (the
"Operating Agreements"), whether because Purchaser has not requested their
termination or because the termination does not become effective until after
Closing, will be prorated.
3.4 Conditions Precedent. Purchaser's obligation to consummate the
purchase of the Property is subject to and contingent upon the satisfaction (or
waiver) of the following conditions precedent:
(a) Receipt by Purchaser of an engineering report, at
Purchaser's expense, of building and site conditions, satisfactory to
Purchaser in its sole discretion, said report to include in part, a
description of any hazardous waste sites, hazardous wastes and/or
hazardous materials affecting
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the Property. Purchaser shall have until the expiration of the
Inspection Period in which to review the report set forth in this
subsection and exercise its right to reject the Property based thereon
or the right hereunder shall be deemed waived.
(b) That there have been no material, adverse changes to the
Property or Leases.
(c) Seller acknowledges that Purchaser is a public entity and
that Purchaser is required to furnish financial statements to the
Securities and Exchange Commission in connection with this acquisition.
Seller agrees to make the information available for Purchaser to audit
the last 12 months of operation of the Property so that a report can be
generated that is in compliance with accounting Regulation S-X of the
Securities and Exchange commission.
3.5 Condition of Personal Property at Closing. The Personal Property
and all mechanical, electrical, heating, air conditioning, sewer, water and
plumbing systems will be in the same working order at the time of Closing and in
the same condition as at the time of the initial inspection by Purchaser. If
Seller fails to make reasonable efforts to conserve the Property, Purchaser
shall have the option of waiving such requirement, in writing, and proceeding to
Closing, or Purchaser may terminate this Agreement and obtain a prompt return of
the Earnest Money.
ARTICLE IV
CLOSING
4.1 Time and Place. Closing of the transaction contemplated hereby
("Closing") will be held at the offices of the Title Company, 300 Crescent
Court, Suite 100, Dallas, Texas 75201, at 10:00 a.m. on or before seven (7) days
next following the expiration of the Inspection Period, but in no event later
than December 1, 1997. At Closing, Seller and Purchaser shall perform the
obligations set forth in, respectively, Section 4.2 and Section 4.3, the
performance of which obligations will be concurrent conditions.
4.2 Seller's Obligations at Closing. At Closing, Seller shall:
(a) deliver to Purchaser a Special Warranty Deed (the "Deed')
in the form of Exhibit "B" attached hereto and made a part hereof,
executed and acknowledged by Seller and in recordable form, conveying
the Land and Improvements to Purchaser, subject only to the Permitted
Exceptions;
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(b) join with Purchaser in the execution of a Bill of Sale and
Assignment (the "Bill of Sale") in the form of Exhibit "C" attached
hereto and made a part hereof with respect to the Property;
(c) join with Purchaser in the execution of an Assignment and
Assumption of Contracts (the "Assignment of Contracts") in the form of
Exhibit "D" attached hereto and made a part hereof with respect to the
Property;
(d) deliver to Purchaser an estoppel certificate with respect
to the Leases addressed to Purchaser from Seller, which certificate
will be dated not earlier than twenty-one (21) days prior to Closing,
will be in substance satisfactory to Purchaser and will be
substantially in the form of Exhibit "E" attached hereto and made a
part hereof;
(e) join with Purchaser in the execution of a letter to each
tenant of the Property in the form of Exhibit "F" attached hereto and
made a part hereof;
(f) deliver to Purchaser such evidence as Purchaser's counsel
and/or the Title Company may reasonably require as to the authority of
the person or persons executing documents on behalf of Seller;
(g) deliver to Purchaser possession and occupancy of the
Property, subject to the Permitted Exceptions;
(h) deliver to Purchaser all available keys to the Property in
Seller's possession;
(i) deliver to Purchaser the Title Policy pursuant to Section
2.4 hereof;
(j) deliver to Purchaser a current rent roll certified to the
actual knowledge (as defined in Section 5.3) of Seller to be true and
correct as of the date of Closing setting forth with respect to each
Lease, the name of the tenant, the monthly rent payable, the apartment
number, the date through which rent has been paid, the amount of any
payment of rent in advance, and the amount of any security deposit;
(k) deliver to Purchaser a termite inspection report dated
after the Effective Date prepared by a licensed termite extermination
contractor who is regularly engaged in the business of pest control
certifying that all buildings are free from any termite or other wood-
boring insect infestation, except as noted in the said report. Said
report must contain the contractor's name, contractor's license number,
the signature of the party authorized to sign for the contractor,
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and the date of the inspection. Should damage exist, Seller may, but
shall not be obligated to, proceed to have any corrective work
completed prior to Closing. If Seller does not make the repairs prior
to Closing, Purchaser, at its option, may either proceed to Closing or
may in its sole discretion terminate this Agreement and the Title
Company shall promptly return the Earnest Money to Purchaser upon such
termination;
(l) deliver to Purchaser originals of Leases, Operating
Agreements, books and records, and related papers and documents;
(m) deliver to Purchaser a non-foreign person certificate duly
executed by Seller;
(n) deliver to Purchaser affidavits duly executed by Seller as
to debts and liens and similar documents customarily required by the
Title Company;
(o) deliver to Purchaser cash or other immediately available
funds by wire transfer an amount equal to all security, cleaning, and
other deposits held by Seller as landlord pursuant to the Leases;
(p) deliver to Purchaser an affidavit duly executed by Seller
that except as set forth in a certain Environmental Assessment dated
July 8, 1992, prepared by Maxim Engineers, Inc., Project Number
0492000819 with reference to the Property, a copy of which has been
furnished to Purchaser, Seller has received no notice of the presence
of asbestos or other hazardous materials;
(q) deliver to Purchaser a copy of the duly executed
termination of the current management agreement, effective as of the
Closing; and
(r) a representation letter in the form of Exhibit "H"
attached hereto.
4.3 Purchaser's Obligations at Closing. At Closing, Purchaser
shall:
(a) pay to Seller the full amount of the Purchase Price in
cash or immediately available wire transferred funds pursuant to
Section 1.5 above;
(b) join Seller in execution of the instruments described in
Sections 4.2(b), 4.2(c), and 4.2(e) above; and
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(c) deliver to Seller such evidence as Seller's counsel and/or
the Title Company may reasonably require as to the authority of the
person or persons executing documents on behalf of Purchaser.
4.4 Credits and Prorations.
(a) The following items will be prorated with respect to the
Property as of 12:01 a.m., Dallas, Texas, time, on the day of Closing,
as if Purchaser were vested with title to the Property during the
entire day upon which Closing occurs:
(i) rents, if any, as and when collected (the term
"rents" as used in this Agreement including payments due and
payable by tenants under the Leases and by licensees and
concessionaires, if any);
(ii) taxes (including personal property taxes on the
Personal Property);
(iii) any assessments to the extent specified in
Section 2.5(c) hereof;
(iv) payments under the Operating Agreements or other
agreements affecting the Property;
(v) gas, electricity and other utility charges for
which Seller is liable, if any, such charges to be apportioned
at Closing on the basis of the most recent meter reading
occurring prior to Closing; and
(vi) any other operating expenses of the Property
incurred during the month in which Closing occurs.
(b) Notwithstanding anything contained in the foregoing
provisions:
(i) At Closing, (A) the Earnest Money and interest
thereon will be delivered by the Title Company to Seller and
the amount of the Earnest Money together with the interest
thereon will be credited against the Purchase Price, (B)
Seller shall credit to the account of the Purchaser the amount
of all security deposits held by Seller pursuant to the Leases
(to the extent such security deposits have not been applied
against delinquent rents), and (C) Purchaser shall credit to
the account of Seller all refundable cash or other deposits
posted with utility companies serving the Property and
transferred or assigned at Closing by Seller to Purchaser.
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(ii) Any taxes for the year of closing paid at Closing will be
prorated based upon the amounts actually paid. Seller shall pay all
delinquent taxes, and if the amount of taxes for the year of Closing is
not known at the time of Closing, the proration will be based on the
prior year's tax rate, with a subsequent adjustment.
(iii) Charges referred to in Section 4.4(a) above (other than
those referred to in Section 4.4(a)(i)) which are payable by any tenant
to a third party will not be apportioned hereunder, and Purchaser shall
accept title subject to any of such charges unpaid and Purchaser shall
look solely to the tenant responsible therefor for the payment of the
same. If Seller shall have paid any of such charges on behalf of any
tenant, and shall not have been reimbursed therefor by the time of
Closing, Purchaser shall credit to Seller an amount equal to all such
charges so paid by Seller.
(iv) Seller shall receive the entire advantage of any
discounts for the prepayment by it of any taxes, water rates or sewer
rents which were paid by Seller on or before the Closing.
(v) As to gas, electricity and other utility charges referred
to in Section 4.4(a)(v) above, Seller may on notice to Purchaser elect
to pay one or more or all of said items accrued to the date herein
above fixed for apportionment directly to the person or entity entitled
thereto, and to the extent Seller so elects, such item will not be
apportioned hereunder, and will be directly paid by Seller at the
Closing.
(vi) The Personal Property is included in this sale, without
further charge, except that (A) Purchaser agrees to purchase from
Seller, at Seller's cost, and pay for at Closing, any supplies which
are in unopened containers on the Property at the time of Closing, the
amount of such supplies and the cost thereof to be determined as of the
day before the date of closing by a certificate of an agent or
representative of Seller, and (B) Purchaser shall pay to Seller the
amount of any and all sales or similar taxes payable in connection with
the Personal Property which is to be transferred to Purchaser under
this Agreement and Purchaser shall execute and deliver any tax returns
required of it in connection therewith, said obligations of Purchaser
to survive Closing.
(vii) Purchaser shall be responsible for the payment of (A)
all leasing commissions which become due and payable (whether before or
after Closing) (1) as a result
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of any renewals of existing Leases which occur between the Effective
Date and the date of Closing, and (2) under any new Leases entered into
between the Effective Date and the date of Closing which have been
approved (or deemed approved) by Purchaser; and (B) all leasing
commissions which become due and payable from and after the date of
Closing. If, as of the date of Closing, Seller shall have paid any
leasing commissions for which Purchaser is responsible pursuant to the
foregoing provisions, Purchaser shall reimburse Seller therefor at
closing.
(viii) If Seller has committed to give any future monetary
concessions to tenants under existing Leases to which Purchaser would
become liable, then Seller shall pay to Purchaser said amount in a lump
sum at Closing.
4.5 Closing Costs. Seller shall pay (a) the fees of any counsel
representing Seller in connection with this transaction; (b) the basic premium
for the Title Policy to be issued to Purchaser by the Title Company at Closing
(specifically excluding the additional premium chargeable for modification of
the survey exception, which deletion expense shall be borne by Purchaser); (c)
the cost of the Survey; (d) the fees for recording the deed conveying the
Property to Purchaser; and (e) one-half (1/2) of any escrow fee charged by the
Title Company. Purchaser shall pay (w) the fees of any counsel representing
Purchaser in connection with this transaction; (x) the additional premium
chargeable for modification of the survey exception, if such modification is
requested by Purchaser; (y) any transfer tax, documentary stamp tax or similar
tax which are customary in the area where the Property is located, which becomes
payable by reason of the transfer of the Property; and (z) one-half (1/2) of any
escrow fee charged by the Title Company. All other costs and expenses incident
to this transaction and the closing thereof shall be paid by the party incurring
same.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 Representations and Warranties of Seller. Seller hereby represents
and warrants to Purchaser as follows:
(a) Seller has no actual knowledge that the execution and
delivery of this Agreement by Seller and Seller's performance of and
compliance with its terms (i) violates any existing federal, state or
local law. Ordinance, rule, regulation or order, or (ii) breaches any
agreement or other obligation to which Seller is a party or by which it
is bound.
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(b) As of the date hereof, Seller has no actual knowledge of
any pending (and there are no existing) claims, litigation,
condemnation, administrative actions or other legal proceedings which
might affect the Property in a materially adverse manner.
(c) Seller has the full right, power and authority to sell the
Property as provided in this Agreement and to carry out Seller's
obligations hereunder, and all requisite action necessary to carry out
its obligations hereunder have, or by the Closing, will have been
taken.
(d) At the time of Closing there will be no outstanding
written or oral contracts made by Seller for any improvements to the
Property which have not ben fully paid for and Seller shall cause to be
discharged all mechanics' and materialmen's liens arising from any
labor or materials furnished to the Property prior to the Closing
pursuant to authorization by Seller.
(e) That Seller is the owner in fee simple of the Property and
has the power to convey same.
(f) All necessary action has been taken by Seller to authorize
execution of this Agreement and the performance by Seller of the
obligations contemplated hereunder, which are not excluded elsewhere in
existing mortgage documents.
(g) Seller has no actual knowledge and has not been advised in
writing that Seller is in default under any Lease, rental agreement,
service or equipment contract, or mortgage or other encumbrances
relating to the Property.
(h) Seller has no actual knowledge of any patent or latent
defect of a material nature in the Property or any part thereof.
(i) That Seller is not a "foreign person" within the meaning
of the Internal Revenue Code of 1986, as amended (the "Code").
(j) That to the best of Seller's actual knowledge, the
Property was never utilized as a disposal site for hazardous waste
products.
(k) To Seller's actual knowledge, Seller has complied with
applicable keyless, dead-bolt lock requirements of Texas law.
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(l) That the Leases are for residential tenancies only for
terms of one year or less.
5.2 Covenants of Seller. Seller hereby covenants with Purchaser as
follows:
(a) From the Effective Date until the Closing or earlier
termination of this Agreement, Seller shall use reasonable efforts to
operate and maintain the Property in the manner Seller has operated and
maintained the Property prior to the date hereof.
(b) A copy of each Lease and each lease proposal presented to
Seller between the Effective Date and the date of Closing for its
approval and execution will be submitted to Purchaser prior to
execution by Seller. Purchaser agrees to notify Seller in writing
within three (3) days after its receipt of each such Lease of either
its approval or disapproval thereof, including all leasing commissions
to be incurred in connection therewith. In the event Purchaser fails to
notify Seller in writing of its approval or disapproval of any such
Lease within the three(3) day time period for such purpose set forth
above, such failure will be deemed the approval by Purchaser of such
Lease. At Closing, Purchaser shall reimburse Seller for any leasing
commissions incurred by Seller pursuant to a new Lease approved (or
deemed approved) by Purchaser.
(c) From the Effective Date until the date of Closing, Seller
shall continue to maintain, operate, and manage the Property in a
manner consistent with its prior practices, making every reasonable
effort to do nothing which will damage the reputation of the Property
or the relationships with the tenants. Seller shall not permit the
modification, extension or cancellation of any Lease (except in
accordance with the terms of such Lease) or any dealing with any tenant
other than the ordinary course of managing the Property, without the
prior written consent of Purchaser. If any Leases expire within thirty
(30) days next succeeding the date of Closing, Seller shall, up to the
date of Closing and without cost to the Purchaser, continue its usual
course of marketing the Property and seeking new tenants for apartments
which are or will become vacant.
5.3 Actual Knowledge Defined. Reference in Section 5.1 above to the
"actual knowledge" of Seller shall refer only to the actual knowledge of the
Designated Employees (as hereinafter defined) of Sunrise Enterprises, Inc. and
shall not be construed to refer to the knowledge of any other officer, agent, or
employee of Seller or any affiliate thereof or to impose upon such Designated
Employees any duty to investigate the matter to which such actual knowledge,
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or the absence thereof, pertains. As used herein, the term "Designated
Employees" shall refer to the following persons: (a) Nathan A. Levine and (b)
Sue Gilbert.
5.4 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller:
Purchaser has the full right, power and authority to purchase
the Property as provided in this Agreement and to carry out Purchaser's
obligations hereunder, and all requisite action necessary to authorize
Purchaser to enter into this Agreement and to carry out its obligations
hereunder have been, or by the Closing will have been taken.
5.5 Covenants of Purchaser. Purchaser hereby covenants with Seller that
Purchaser shall, in connection with its investigation of the Property during the
Inspection Period, inspect the Property for the presence of abestos,
polychlorinated biphenyl emissions, urea formaldehyde foam insulation, radon
gas, or other hazardous substances, materials and wastes (as those terms may be
defined by applicable federal or state law, rule or regulation), and shall
furnish to Seller at Closing copies of any reports received by Purchaser in
connection with any such inspection. Purchaser hereby assumes full
responsibility for such inspections and irrevocably waives any claim against
Seller arising from the presence of such materials on the Property. Purchaser
shall also furnish to Seller at Closing copies of any other reports received by
Purchaser relating to any other inspections of the Property conducted on
Purchaser's behalf, if any (including, specifically, without limitation, any
reports analyzing compliance of the Property with the provisions of the
Americans with Disabilities Act ("ADA"), 42 U.S.C. Section 12101) et seq., if
applicable).
ARTICLE VI
DEFAULT
6.1 Default by Purchaser. If the Earnest Money is delivered to the
Title Company as herein provided and Purchaser fails to consummate this
Agreement for any reason, except Seller's default or the permitted termination
of this Agreement by either Seller or Purchaser as herein expressly provided,
Seller shall be entitled, as its sole and exclusive remedy, to terminate this
Agreement and receive the Earnest Money as liquidated damages for the breach of
this Agreement, it being agreed between the parties hereto that the actual
damages to Seller in the event of such breach are impractical to ascertain and
the amount of the Earnest Money is a reasonable estimate thereof.
Notwithstanding anything to the contrary contained in this Section 6.1, if
Purchaser or any affiliate of Purchaser asserts a claim to the Property which
clouds Seller's title thereto, and if such claim is found by a court of
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competent jurisdiction to be without merit, then Seller shall have all remedies
available at law or in equity against Purchaser; provided, however, in the event
that Purchaser's claim is found by a court of competent jurisdiction to be
valid, Seller shall reimburse Purchaser for all its costs.
6.2 Default by Seller. In the event that Seller fails to consummate
this Agreement for any reason, except Purchaser's default or the permitted
termination of this Agreement by either Seller or Purchaser as herein expressly
provided, Purchaser shall be entitled, as its sole and exclusive remedy, either
(a) to receive the return of the Earnest Money, which return shall operate to
terminate this Agreement and release Seller from any and all liability
hereunder, or (b) to enforce specific performance of Seller's obligation to
execute the documents required to convey the Property to Purchaser, it being
understood and agreed that the remedy of specific performance will not be
available to enforce any other obligation of Seller hereunder. If Purchaser is
the prevailing party in a suit for specific performance by a final judgment of a
court of competent jurisdiction, Purchaser is entitled to recover reasonable
attorney's fees actually incurred in such suit. Purchaser expressly waives its
rights to seek damages in the event of Seller's default hereunder. Purchaser
shall be deemed to have elected to terminate this Agreement and receive back the
Earnest Money if Purchaser fails to file suit for specific performance against
Seller in a court of competent jurisdiction in Dallas County, Texas, on or
before one hundred twenty (120) days following the date upon which Closing was
to have occurred or any extensions of the Closing.
ARTICLE VII
RISK OF LOSS
7.1 Minor Damage. In the event of loss or damage to the Property or any
portion thereof which is not "major" (as hereinafter defined), this Agreement
shall remain in full force and effect provided Purchaser performs any necessary
repairs or, at Purchaser's option, reduces the Purchase Price in an amount equal
to the cost of such repairs, and Seller assigns to Purchaser all of Seller's
right, title and interest to any claims and proceeds Seller may have with
respect to any casualty insurance policies or condemnation awards relating to
the Property. In the event that Purchaser elects to perform repairs upon the
Property, the date of Closing will not be extended.
7.2 Major Damage. In the event of a "major" loss or damage to the
Property, Purchaser may terminate this Agreement by written notice to the other
party, in which event the Earnest Money will be returned to Purchaser. If
Purchaser does not elect to terminate this Agreement within ten (10) days after
Seller sends Purchaser
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written notice of the occurrence of a major loss or damage, then Purchaser shall
be deemed to have elected to proceed with the Closing, in which event Seller
shall, at Seller's option, either (a) perform any necessary repairs, or (b)
assign to Purchaser all of Seller's right, title and interest to any claims and
proceeds Seller may have with respect to any casualty insurance policies or
condemnation awards relating to the Property. In the event that Seller elects to
perform repairs upon the Property, Seller shall use reasonable efforts to
complete such repairs promptly and the date of Closing will be extended a
reasonable time not to exceed ninety (90) days in order to allow for the
completion of such repairs. Upon Closing, full risk of loss with respect to the
Property will pass to Purchaser. For purposes of Sections 7.1 and 7.2, "major"
loss or damage means: (i) loss or damage to the Property or any portion thereof
such that the cost of repairing or restoring the Property in question to a
condition substantially identical to that of the Property in question prior to
the event of damage would be , in the certified opinion of a mutually acceptable
architect, equal to or greater than Two Hundred Fifty Thousand Dollars (
$250,000), or (ii) any loss due to a condemnation which permanently and
materially impairs the current use of the Property.
7.3 Risk of Loss. Prior to the closing Date, Seller will bear all risk
of loss or damage by casualty to the Property.
ARTICLE VIII
COMMISSIONS
8.1 Brokerage Commissions. Seller agrees to pay to Pinnacle Realty
Management Company (herein "Broker") a brokerage commission pursuant to the
terms of a separate brokerage agreement conditioned upon the consummation of the
transaction contemplated by this Agreement, but not otherwise. By its signature
hereto, Broker represents to Seller and Purchaser (a) that Broker is a duly
licensed real estate broker under the provisions of the Texas Real Estate
License Act, and (b) that Broker has not entered into any arrangement with any
other party whereby such other party is entitled to any commission or finder's
fee in connection with this transaction. Broker agrees that should any claim be
made for brokerage commissions or finder's fees by any other party by, through
or on account of any acts of Broker or its representatives, Broker shall
indemnify and hold Purchaser and Seller harmless from and against any and all
claims, loss, cost, damage and expense in connection therewith. In the event the
transaction envisioned hereby fails to close for any reason, including without
limitation Seller's default, Seller shall have no obligation for the payment of
any brokerage commission or similar type fee hereunder. Purchaser represents and
warrants to Seller that Purchaser has not engaged or dealt with any real estate
agent or broker other than Broker. Purchaser shall indemnify and hold Seller
harmless from
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and against any and all claims, losses, costs, damages, liabilities, claims or
expenses, including without limitation reasonable attorneys' fees arising out of
the claim to a commission by any party which claim is based on the actions of
Purchaser, as determined by final judgment of a court of competent jurisdiction.
Seller shall indemnify and hold Purchaser harmless from and against any and all
claims, losses, costs, damages, liabilities, claims or expenses, including
without limitation reasonable attorneys' fees arising out of the claim to a
commission by any party which claim is based on the actions of Seller, as
determined by final judgment of a court of competent jurisdiction. The
provisions of this paragraph will survive Closing for six (6) months. If any
claim for indemnity is asserted against a party to this Agreement, such party
shall give written notice to the other party and allow the other party the
opportunity to defend such claim.
ARTICLE IX
DISCLAIMERS AND WAIVERS
9.1 No Reliance on Documents. Except as expressly stated herein, Seller
makes no representation or warranty as to the truth, accuracy or completeness of
any materials, data or information delivered by Seller to Purchaser in
connection with the transaction contemplated hereby including, without
limitation, any materials provided to Purchaser by Broker. Purchaser
acknowledges and agrees that all materials, data and information delivered by
Seller to Purchaser in connection with the transaction contemplated hereby are
provided to Purchaser as a convenience only and that any reliance on or use of
such materials, data or information by Purchaser shall be at the sole risk of
Purchaser, except as otherwise expressly stated herein. Without limiting the
generality of the foregoing provisions, Purchaser acknowledges and agrees that
(a) any environmental or other report with respect to the Property which is
delivered by Seller to Purchaser will be for general informational purposes
only, (b) Purchaser shall not have any right to rely on any such report
delivered by Seller to Purchaser with respect thereto, and (c) neither Seller,
any affiliate of Seller nor the person or entity which prepared any such report
delivered by Seller to Purchaser shall have any liability to Purchaser for any
inaccuracy in or omission from any such report.
9.2 Disclaimers. SELLER AND PURCHASER ACKNOWLEDGE AND AGREE THAT EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, IT IS UNDERSTOOD AND AGREED THAT
SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY WARRANTIES OR
REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO
THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS
AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
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TITLE (OTHER THAN SELLER'S WARRANTY OF TITLE TO BE SET FORTH IN THE DEED),
ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL CONDITION, UTILITIES,
OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, THE
COMPLIANCE OF THE PROPERTY WITH GOVERNMENTAL LAWS, THE TRUTH, ACCURACY OR
COMPLETENESS OF THE PROPERTY DOCUMENTS OR ANY OTHER INFORMATION PROVIDED BY OR
ON BEHALF OF SELLER TO PURCHASER, OR ANY OTHER MATTER OR THING REGARDING THE
PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING SELLER SHALL SELL
AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY "AS IS, WHERE
IS, WITH ALL FAULTS", EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS
AGREEMENT. PURCHASER HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER IS NOT
LIABLE FOR OR BOUND BY, ANY EXPRESS OR IMPLIED WARRANTIES, GUARANTIES,
STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY OR
RELATING THERETO MADE OR FURNISHED BY SELLER, THE MANAGER OF THE PROPERTY, OR
ANY REAL ESTATE BROKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER,
TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, UNLESS
EXPRESSLY SET FORTH IN THIS AGREEMENT. PURCHASER REPRESENTS TO SELLER THAT
PURCHASER HAS CONDUCTED, OR WILL CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS
OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL
CONDITIONS THEREOF, AS PURCHASER DEEMS NECESSARY TO SATISFY ITSELF AS TO THE
CONDITION OF THE PROPERTY AND THE EXISTENCE OR NONEXISTENCE OR CURATIVE ACTON TO
BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON OR DISCHARGED FROM
THE PROPERTY, AND WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION
PROVIDED BY OR ON BEHALF OF SELLER OR ITS AGENTS OR EMPLOYEES WITH RESPECT
THERETO, OTHER THAN SUCH REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AS
ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. UPON CLOSING, PURCHASER SHALL ASSUME
THE RISK FOR ANY ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION
DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, WHICH MAY NOT HAVE
BEEN REVEALED BY PURCHASER'S INVESTIGATIONS. UPON CLOSING, PURCHASER SHALL BE
DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED SELLER FROM AND AGAINST ANY AND
ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT),
LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND
COURT COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH
PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER AT ANY TIME BY REASON OF
OR ARISING OUT OF ANY CONSTRUCTION DEFECTS, PHYSICAL CONDITIONS, VIOLATIONS OF
ANY APPLICABLE LAWS (INCLUDING ANY ENVIRONMENTAL LAWS) AND ANY AND ALL OTHER
ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY.
PURCHASER AGREES THAT SHOULD ANY CLEANUP, REMEDIATION OR REMOVAL OF HAZARDOUS
SUBSTANCES OR OTHER ENVIRONMENTAL CONDITIONS ON THE PROPERTY BE REQUIRED AFTER
THE DATE OF CLOSING, SUCH CLEAN-UP, REMOVAL OR REMEDIATION WILL BE THE
RESPONSIBILITY OF AND WILL BE PERFORMED AT THE SOLE COAST AND EXPENSE OF
PURCHASER.
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9.3 Waivers of Deceptive Trade Practices Act. Purchaser 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 this transaction. Accordingly, Purchaser's rights and remedies
with respect to this transaction, and with respect to all acts or practices of
the other, past, present or future, in connection with this transaction, will be
governed by legal principles other than the DTPA. In furtherance thereof,
Purchaser agrees as follows:
(a) Purchaser represents that Purchaser is a business consumer
and that Purchaser seeks to acquire by purchase or lease the goods or
services that are the subject of this Agreement for commercial or
business use. Purchaser further represents that Purchaser has knowledge
and experience in financial and business matters that enable Purchaser
to evaluate the merits and risks of the business transaction that is
the subject of this Agreement. Purchaser also represents that Purchaser
is not in a significantly disparate bargaining position in relation to
Seller.
(b) Purchaser represents that Purchaser has been represented
by legal counsel in seeking or acquiring the goods or services that are
the subject of this Agreement and that the transaction contemplated by
this Agreement does not involve the purchase or lease of a family
residence occupied or to be occupied as the residence of Purchaser.
Purchaser shall cause its legal counsel to sign this Agreement in the
space provided below for the purpose of evidencing compliance with
Section 17.42 of the DTPA.
(c) WAIVER OF CONSUMER RIGHTS. PURCHASER HEREBY WAIVES
PURCHASER'S RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES-CONSUMER
PROTECTION ACT, SECTION 17.41 ET SEQ., BUSINESS & COMMERCE CODE, A LAW
THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION
WITH AN ATTORNEY OF PURCHASER'S OWN SELECTION, PURCHASER VOLUNTARILY
CONSENTS TO THIS WAIVER.
9.4 Effect and Survival of Disclaimers. Seller has informed Purchaser
that the Purchase Price payable to Seller for the Property has been decreased to
take into account that the Property is being sold subject to the provisions of
this Article IX. Seller and Purchaser agree that the provisions of this Article
IX will survive Closing.
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ARTICLE X
MISCELLANEOUS
10.1 Confidentiality. Each of Seller and Purchaser and their respective
representatives shall hold in strictest confidence all data and information
obtained with respect to the Property, whether obtained before or after the
execution and delivery of this Agreement, and shall not disclose such data to
others; provided, however, that Purchaser may disclose such data and information
as required by law or to the employees, consultants, lenders, accountants and
attorneys of Purchaser. If this Agreement is terminated or Purchaser fails to
perform hereunder, Purchaser shall promptly return to Seller any statements,
documents, schedules, exhibits or other written information obtained from Seller
in connection with this Agreement or the transaction contemplated herein. In the
event of a breach or threatened breach by either party or its agent or
representatives of this Section 10.1, the other party shall be entitled to an
injunction restraining such party or its agents or representatives, from
disclosing, in whole or in part, such confidential information. Nothing herein
will be construed as prohibiting a party from pursuing any other available
remedy at law or in equity for such breach or threatened breach.
10.2 Public Disclosure. Prior to Closing, any release to the public of
information with respect to the matters set forth in this Agreement will be made
only in the form approved by Purchaser and Seller and their respective counsel.
10.3 Discharge of Obligations. The acceptance of the Deed by Purchaser
will be deemed to be a full performance and discharge of every representation
and warranty made by Seller herein and every agreement and obligation on the
part of Seller to be performed pursuant to the provisions of this Agreement,
except those, if any, which are herein expressly stated to survive the Closing.
10.4 Assignment. Other than an assignment to Apple Residential Income
Trust, Inc., a Virginia corporation, Purchaser may not assign its rights under
this Agreement to anyone other than a Permitted Assignee (as hereinafter
defined) without first obtaining Seller's written approval. Subject to the
conditions set forth in this Section 10.4, Purchaser may assign its rights under
this Agreement to a Permitted Assignee, without the prior written consent of
Seller. If Purchaser desires to assign its rights under this Agreement to a
Permitted Assignee, Purchaser shall send written notice to Seller, to the extent
practicable, as least five (5) business day prior to the effective date of such
assignment stating the name and, if applicable, the constituent persons or
entities of the Permitted Assignee. Such assignment will not become effective
until such Permitted Assignee execute an instrument reasonably satisfactory to
Seller in form and substance whereby the Permitted
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Assignee expressly assumes each of the obligations of Purchaser under this
Agreement, including specifically, without limitation, all obligations
concerning the Earnest Money. For purposes of this Section 10.4, the term
"Permitted Assignee" means any corporation, partnership, limited partnership,
REIT, limited liability company, venture or similar entity (i) in which
Purchaser owns an interest of more than thirty percent (30%) or which owns an
interest of more than thirty percent (30%) of Purchaser, and (ii) which at the
time of such assignment and at the time of Closing has assets in excess of Five
Million Seven Hundred Thousand Dollars ($5,700,000). In order to enable Seller
to make such determination, Purchaser shall cause to be delivered to Seller such
information as is reasonably requested by Seller with respect to a proposed
assignee and the constituent persons or entities of any proposed assignee.
10.5 Title Policy or Abstract. Purchaser hereby acknowledges that, at
the time of the execution of this Agreement, the Seller advised the Purchaser by
this writing that the Purchaser should have the abstract covering the real
estate which is the subject of this Agreement examined by an attorney of the
Purchaser's own selection or that the Purchaser should be furnished with or
obtain a policy of title insurance.
10.6 Notices. Any notice required or permitted by this Agreement must
be given in writing either by (a) personal delivery, or (b) expedited delivery
service with proof of delivery, or (c) United States Mail, postage prepaid,
registered or certified mail, return receipt requested, or (d) prepaid telegram,
telex or telecopy (provided that such telegram, telex or telecopy is confirmed
by expedited delivery service or by mail in the manner confirmed by expedited
delivery service or by mail in the manner previously described), sent to the
intended addressee at the address set forth below, or to such other address or
to the attention of such other person as the addressee shall have designated by
written notice sent in accordance herewith, and shall be deemed to have been
given either at the time of personal delivery, or, in the case of expedited
delivery service or mail, as of the date of first attempted delivery at the
address and in the manner provided herein, or, in the case of telegram, telex or
telecopy upon receipt. Unless changed in accordance with the preceding sentence,
the addresses for notice given pursuant to this Agreement will be as follows:
IF TO SELLER: Sunrise Enterprises, Inc.
Suite 1050
14001 North Dallas Parkway
Dallas, Texas 75240
Attn: Nathan A. Levine, President
Fax No.: (972) 385-9601
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WITH A COPY TO: Prager & Benson, P.C.
2626 Cole Avenue, Suite 900
Dallas, Texas 75204
Attn: Jerome L. Prager, Esq.
Fax No.: (214) 969-7635
IF TO PURCHASER: Cornerstone Realty Group, Inc.
305 East Main Street
Richmond, Virginia 23219
Attn: Gus G. Remppies, Vice President Acquisitions
Fax No.: (304) 782-9302
WITH A COPY TO: Zuckerbrod & Taubenfeld
575 Chestnut Street
Cedarhurst, New York 11516
Attn: Harry Taubenfeld, Esq.
Fax No.: (516) 374-3490
AND WITH A COPY TO: Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, Texas 75201-6929
Attn: Leigh Moore, Esq.
Fax No.: (214) 999-6170
10.7 Modifications. This Agreement cannot be changed orally, and no
executory agreement will be effective to waive, change, modify or discharge this
Agreement or any provision hereof, in whole or in part, unless such executory
agreement is in writing and is signed by the parties against whom enforcement of
any waiver, change, modification or discharge is sought.
10.8 Tax-Deferred Exchange. The Purchaser hereby acknowledges and
agrees that Seller desires to complete an exchange of the Property in
conjunction with the transfer and exchange of another tract of property (the
"Exchange Property") which exchange will qualify for nonrecognition of gain
pursuant to Section 1031, Internal Revenue Code of 1986, as amended (the
"Code"). In order to effect such exchange, Purchaser agrees to cooperate with
Seller and to execute any and all documents required in order to consummate the
transaction involving the Exchange Property. It is expressly agreed that the
Purchaser shall incur no liability or additional expenses connected with such
proposed property exchange, it being understood that the Purchaser is agreeing
merely to cooperate with and hold Purchaser harmless of and from any and all
claims asserted by a third party against Purchaser by reason of such proposed
property exchange. If the exchange transaction does not occur as contemplated,
then Purchaser and Seller shall be obligated to perform and close this
transaction in accordance with and pursuant to the rest of the terms and
provisions of this Agreement. If the
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Exchange Property has not been identified or is not being acquired
contemporaneously with the conveyance of the Property to Purchaser, Purchaser
agrees to deposit the funds into an escrow account administered by Texas Escrow
Company, Inc., a Texas corporation, serving as a qualified intermediary, in
order to afford Seller the opportunity to consummate a deferred exchange which
satisfies the requirements of the Code and Regulations promulgated pursuant to
the Code. Notwithstanding the foregoing, Seller agrees that any such tax
deferred exchange will not adversely impact the Closing or postpone the Closing
Date.
10.9 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described in this Agreement, the day of the act or
event after which the designated period of time begins to run is not to be
included and the last day of the period so computed is to be included, unless
such last day is a Saturday, Sunday or legal holiday under the laws of the State
of Texas, in which event the period will run until the end of the next day which
is neither a Saturday, Sunday or legal holiday. The term "business day" means a
day which is not a Saturday, Sunday or legal holiday under the laws of the State
of Texas. The final day of any such period shall be deemed to end at 5 p.m.,
Dallas, Texas, time.
10.10 Time of Essence. Seller and Purchaser agree that time is of the
essence of this Agreement. Seller and Purchaser shall be entitled to one
extension each. Any such extension will be for not more than ten (10) days. A
party who desires to exercise the right set forth in this paragraph must give
written notice to the other party timely and such notice must expressly refer to
this Section 10.10.
10.11 Successors and Assigns. The terms and provisions of this
Agreement are binding upon and inure to the benefit of the permitted successor
and assigns of the parties hereto.
10.12 Entire Agreement. This Agreement, including the exhibits,
contains the entire agreement between the parties pertaining to the subject
matter hereof and fully supersedes all prior agreements and understandings
between the parties pertaining to such subject matter.
10.13 Further Assurances. Each party agrees that it will without
further consideration execute and deliver such other documents and take such
other action, whether prior or subsequent to Closing, as may be reasonably
requested by the other party to consummate more effectively the purposes or
subject matter of this Agreement. Without limiting the generality of the
foregoing, Purchaser shall, if requested by Seller, executed acknowledgments of
receipt with respect to any materials delivered by Seller to Purchaser with
respect to the Property.
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10.14 Attorneys' Fees. In the event of any controversy, claim or
dispute between the parties affecting or relating to the subject matter or
performance of this Agreement, the prevailing party shall be entitled to recover
from the nonprevailing party all of its reasonable expenses, including
reasonable attorneys' and accountants' fees.
10.15 Counterparts. This Agreement may be executed in several
counterparts, and all such executed counterparts shall constitute the same
agreement. It shall be necessary to account for only one such counterpart in
proving this Agreement.
10.16 Severability. If any provision of this Agreement is determined by
a court of competent jurisdiction to be invalid or unenforceable, the remainder
of this Agreement shall nonetheless remain in full force and effect.
10.17 Applicable Law. THIS AGREEMENT IS PERFORMABLE IN DALLAS COUNTY,
TEXAS, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE SUBSTANTIVE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF THE
STATE OF TEXAS. SELLER AND PURCHASER HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN DALLAS COUNTY, TEXAS, IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND HEREBY
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING SHALL
BE AND DETERMINED IN A STATE OR FEDERAL COURT SITTING IN DALLAS COUNTY, TEXAS.
PURCHASER AND SELLER AGREE THAT THE PROVISIONS OF THIS SECTION 10.17 SHALL
SURVIVE THE CLOSING OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT.
10.18 Limited Liability. The obligations of Seller arising by virtue of
this Agreement will be limited to the value of Seller's interest in the Property
as of the Effective Date and resort must not be had to any other assets of
Seller.
10.19 No Third Party Beneficiary. Except as expressly set forth herein
to the contrary, the provisions of this Agreement and of the documents to be
executed and delivered at Closing are and will be for the benefit of Seller and
Purchaser only and are not for the benefit of any third party, and accordingly,
no third party shall have the right to enforce the provisions of this Agreement
or of the documents to be executed and delivered at Closing.
10.20 Exhibits and Schedules. The following schedules or exhibits
attached hereto will be deemed to be an integral part of this Agreement:
(a) Exhibit "A" - Legal description of the Land
(b) Exhibit "B" - Form of Special Warranty Deed
(c) Exhibit "C" - Form of Bill of Sale and Assignment
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(d) Exhibit "D" - Form of Assignment and Assumption of Contracts
(e) Exhibit "E" - Form of Tenant Estoppel Certificate
(f) Exhibit "F" - Form of Tenant Notification Letter
(g) Exhibit "G" - List of Inspection Documents
(h) Exhibit "H" - Form of Representation Letter
10.21 Captions. The section headings appearing in this Agreement are
for convenience of reference only and are not intended, to any extent and for
any purpose, to limit or define the text or any section or any subsection
hereof.
10.22 Construction. The parties acknowledge that the parties and their
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party will not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
10.23 Termination of Agreement. If either Purchaser or Seller
terminates this Agreement pursuant to a right of termination granted hereunder,
such termination will relieve Seller and Purchaser from all obligations under
this Agreement, except for such obligations as are expressly stated herein to
survive the termination of this Agreement (such as the indemnification
obligation of Purchaser set forth in Section 3.1).
10.24 Municipal Utility District Notices. Purchaser agrees that if the
Property or any portion thereof is located in a municipal utility district,
Purchaser will, within five (5) 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 Purchaser with respect to the Property.
10.25 Effective Date. If Purchaser fails to execute this Agreement and
deliver same to Seller on or before 5 p.m., Dallas, Texas, time, on November 24,
1997, all negotiations between Seller and Purchaser concerning the sale of the
Property will be deemed terminated. Upon execution of this Agreement by
Purchaser and delivery of same to Seller, this Agreement will constitute an
offer by Purchaser. The offer by Purchaser herein contained will automatically
be withdrawn and become of no force or effect unless this Agreement is executed
by Seller and delivered to the Title Company on or before 5 p.m., Dallas, Texas,
time, on November 24, 1997. The later date of execution of this Agreement by
Purchaser and Seller, as evidenced by the respective dates of execution set
forth below, will be deemed the effective date of this Agreement (the "Effective
Date").
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement to be effective as of the Effective Date.
SELLER:
Executed by Seller
This 20 day of SUNRISE ENTERPRISES, INC., a Texas
November, 1997 corporation
By: /s/ Nathan A. Levine
------------------------------
Nathan A. Levine, President
PURCHASER:
Executed by Purchaser CORNERSTONE REALTY GROUP, INC.,
this 14th day of a Virginia corporation
November, 1997
By: /s/ S. J. Olander
------------------------------
Name: S.J. Olander
Title: Senior Vice President.
Page 27
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of June, 1998 by
and between Apple REIT Limited Partnership, a Virginia limited partnership
(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 Summer Tree Apartments (hereinafter referred
to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and for
other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby engages
Manager as sole and exclusive manager to rent, manage and operate the Property,
upon the conditions and for the term and compensation herein set forth. All or a
portion of the services being performed by Manager may be contracted or
subcontracted to another property management company, provided that such company
agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an initial
term of two (2) years. In the event Owner sells its interest in the Property,
this Agreement will terminate upon the date of such sale. Unless either party by
written notice sent to the other party at least sixty (60) days before the end
of any two-year term hereof elects not to renew this Agreement, this Agreement
shall renew automatically for successive terms of two (2) years on the same
terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as the
manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the Property,
provided that nothing herein contained shall constitute a guarantee by Manager
of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment, tools,
appliances, materials, supplies and uniforms necessary for the maintenance or
operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas, electricity and
other services necessary for the operation and maintenance of the Property;
d. The advertising for the rental of space in the Property, the cost
of which shall be paid for 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 cancelled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h 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
<PAGE>
implemented in the forthcoming year, which recommendations shall be accompanied
by an estimated budget for such items;
k. The furnishing from time to time, at least semi-annually, of a
tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary to
operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents, tenant
security deposits or other deposits on space in the Property, deposits on keys
and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to the
Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.
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.
<PAGE>
7. Compensation of Manager for Managing the Property. Owner shall pay to
Manager a "Property Management Fee" for management of the Property pursuant to
this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for Manager's
expenses, including salaries and related overhead expenses, associated with
bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget prepared
by Manager, pursuant to paragraph 3(k), will contain a category labeled "Reserve
for Capital Items." Owner agrees to place rents and other income in a bank
account, or to permit Manager to transfer Owner's funds to such account, in
sufficient amounts to meet the needs reflected in such budget. Such funds shall
be placed in the account on a monthly basis as reflected in the budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month 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 cancelling 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OWNER:
APPLE REIT LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., general partner
By: /s/ S. J. Olander
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Title: Secretary
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<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ S. J. Olander
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Title: Secretary
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