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: July 1, 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
<PAGE>
APPLE RESIDENTIAL INCOME TRUST, INC.
FORM 8-K
Index
-----
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Item 2. Acquisition or Disposition of Assets 4
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a. Independent Auditors' Report 9
(Park Village Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Park Village Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Park Village 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 June 30, 1998
(unaudited)*
Pro Forma Balance Sheet as of
June 30, 1998 (unaudited)*
c. Exhibits
10.1 Purchase Contract for Park Village Apartments
</TABLE>
-2-
- -----------------------
* To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.2 Property Management Agreement for Park Village
Apartments
23.1 Consent of Independent Auditors*
</TABLE>
-3-
- -----------------------
* To be filed by amendment.
<PAGE>
Item 2. Acquisition or Disposition of Assets
PARK VILLAGE APARTMENTS
Bedford, Texas
On July 1, 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 Park Village Apartments
located at 2401 L. Don Dodson Drive, in Bedford, Texas (the "Property").
The Property comprises 238 apartment units. The purchase price for the
Property was $7,000,000. The seller was Park Village Investment Partnership, a
Texas limited partnership 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 L. Don Dodson Drive off of Central
Drive just north of Airport Freeway (Highway 183) in Bedford, 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.
-4-
<PAGE>
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 proximate to businesses, restaurants, schools and churches and
is readily accessible from Interstates 121, 360 and 183. The Property is an
approximately 10-minute drive from Dallas/Fort Worth International Airport and
an approximately 20-minute drive from either downtown Dallas or Fort Worth.
Description of the Property. The Property consists of 238 garden-style
apartment units in 23 two story buildings on approximately ten acres of land.
The Property was constructed in 1983.
The Property offers six different unit types. The unit mix and rents
being charged new tenants as of June 1998 are as follows:
<TABLE>
<CAPTION>
APPROXIMATE INTERIOR
QUANTITY TYPE SQUARE FOOTAGE MONTHLY RENTAL
-------- ---- -------------- --------------
<S> <C> <C> <C> <C>
48 One Bedroom/One Bath 456 $390
64 One Bedroom/One Bath 521 420
62 One Bedroom/One Bath 669 495
32 One Bedroom/One Bath/Den 841 580
16 Two Bedroom/Two Bath 920 625
16 Two Bedroom/Two Bath 983 670
</TABLE>
The apartments provide a total of approximately 154,070 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 $238,000 for repairs and
-5-
<PAGE>
improvements to the Property to include clubhouse renovations, exterior
painting, sign replacement and interior upgrades.
The following information is provided by the seller. Physical occupancy
at the Property averaged approximately 95% in 1993, 97% in 1994, 97% in 1995,
96% in 1996 and 96% 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 two-bedroom, two-bathroom apartment (983 square
feet) rented for $560 in 1993, $560 in 1994, $580 in 1995, $605 in 1996 and $630
in 1997. The average effective annual rental per square foot at the Property for
1993, 1994, 1995, 1996 and 1997 was $7.58, $7.58, $7.85, $8.14, and $8.53,
respectively.
The Property has an outdoor swimming pool, hot tub and two laundry
facilities. The Property also has a clubhouse with a leasing office. There is
ample paved parking for tenants.
The buildings are wood frame construction with a combination of brick
veneer, stucco and wood siding on concrete slab foundations. Roofs are pitched
composition.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has smoke detectors, a
cable television hook-up and individually controlled heating and
air-conditioning unit. Each kitchen has a refrigerator/freezer, electric range
and oven, dishwasher, and garbage disposal. All units except the smallest
one-bedroom units have washer/dryer connections and 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 seven 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 94% on July 1, 1998.
As of July 1, 1998, the Property was approximately 97% occupied. The
tenants are primarily a mix of white-collar and blue-collar workers and retired
persons.
-6-
<PAGE>
The following table sets forth the 1997 real estate tax information on
the Property:
<TABLE>
<CAPTION>
JURISDICTION ASSESSED VALUE RATE TAX
------------ -------------- ---- ---
<S> <C> <C> <C>
County of Tarrant ................................. $5,392,450 $ .264836 $14,281.15
City of Bedford ................................... 5,392,450 0.369000 19,898.14
T C Hospital ...................................... 5,392,450 0.234070 12,622.11
T C Jr. College ................................... 5,392,450 0.057690 3,110.90
H-E-B I.S.D. ..................................... 5,392,450 1.606257 86,616.61
----------
Total ........................................ $136,528.91
</TABLE>
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $6,165,062 will be depreciated over 27.5
years on a straight-line basis. The basis of the personal property portion will
be depreciated in accordance with the modified accelerated cost recovery system
of the Internal Revenue Code of 1986, as amended (the "Code"). Amounts to be
spent by the Company on repairs and improvements will be treated for tax
purposes as permitted by the Code based on the nature of the expenditures.
The Advisor and the Company believe that the property is and will
continue to be adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. 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 Fort Worth - and
is located in a rapidly-growing area proximate to centers of employment and
retail development.
-7-
<PAGE>
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 of the
property, or $140,000. 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.
-9-
<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: July 1, 1998 By: /s/ Glade M. Knight
--------------------------------
Glade M. Knight
President of Apple Residential
Income Trust, Inc.
-11-
<PAGE>
EXHIBIT INDEX
Apple Residential Income Trust, Inc.
Form 8-K dated July 1, 1998
Exhibit Number Exhibit
- -------------- -------
10.1 Purchase Contract for Park Village
Apartments, as amended
10.2 Property Management Agreement
for Park Village Apartments
23.1 Consent of Independent Auditors*
* To be filed by amendment.
-12-
AGREEMENT OF PURCHASE AND SALE
by and between
Park Village Investment Partnership
("Seller")
and
Cornerstone Realty Income Trust, Inc.
("Purchaser")
Park Village Apartments
2401 L. Don Dodson Drive
Bedford, Tarrant County, Texas
<PAGE>
AGREEMENT OF PURCHASE AND SALE
------------------------------
THIS AGREEMENT OF PURCHASE AND SALE (the "Agreement") is by and
between PARK VILLAGE INVESTMENT PARTNERSHIP, (hereinafter called the "Seller")
and CORNERSTONE REALTY INCOME TRUST, INC. (hereinafter called the ("Purchaser").
ARTICLE 1
Definitions
-----------
Section 1.1 As used in this Agreement, unless the content otherwise
requires or it is otherwise herein expressly provided, the following terms shall
have the following meanings:
CLOSING: The consummation of the transaction contemplated by this
Agreement.
CLOSING DATE: On or before June 30, 1998; provided, however, Purchaser
shall have the right to extend the Closing Date to July 6, 1998 if (i)
it provides Seller with written notice thereof prior to the originally
scheduled Closing Date, (ii) it is not in Default hereunder and (iii)
it deposits an additional $100,000.00 of Earnest Money with the Title
Company on or prior to the originally scheduled Closing Date.
IMPROVEMENTS: The 238-unit apartment complex located on the Real
Property, together with all buildings, structures, fixtures and other
improvements of every kind and nature situated on, in or under the
Real Property.
PERSONAL PROPERTY: All of Seller's right, title and interest in and to
all fixtures; furniture and equipment; building materials, and
property of every kind and character, to the extent the foregoing is
located on the Property and owned by the Seller and used in connection
with the operation of the Improvements, and including without
limitation, HVAC units, appliances, drapes, carpeting and other
personal property located in each apartment, as well as the trade name
Park Village (the "Trade Name") and any telephone numbers assigned to
the Trade Name.
REAL PROPERTY: The real property described on Exhibit "A" annexed
hereto.
TENANT LEASES: All of the Seller's right, title and interest in all
leases, licenses, contracts and other agreements for the use or
occupancy of space in the Real Property or Improvements.
TITLE COMPANY: Texas Title Company, 17370 Preston Road, Suite 510,
Dallas, Texas, 75252, (972) 931-8192, Attention: Eva Horton.
Section 1.2 For purposes of determining the time for performance of
various obligations under this Agreement, the effective date of this Agreement
(the "Effective Date") shall be the date of full execution and delivery of this
Agreement by Seller and Purchaser.
ARTICLE 2
Sale and Purchase
-----------------
Section 2.1 Subject to the terms and provisions hereof, the Seller
agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the
Seller, the following (collectively, the "Property"):
1
<PAGE>
(a) Fee simple title to the Real Property and Improvements, together
with all right, title and interest, if any, of Seller in and to all strips
and gores and any land lying in the bed of any street, road, or avenue,
opened or proposed, in front of or adjoining the Real Property; and all
easements, rights-of-way, privileges, licenses (written or oral), and all
appurtenances thereto.
(b) All of Seller's right, title and interest in and to:
(1) All plans and specifications, site plans, soil and substrata
studies, architectural drawings, floor plans, and landscape plans
relating to the Real Property and Improvements; and
(2) The Personal Property as described on Exhibit "B"; and
(3) The Tenant Leases.
Section 2.2 SELLER AND PURCHASER EXPRESSLY AGREE THAT THE PROPERTY IS
SOLD ON AN AS IS BASIS ONLY WITH ALL FAULTS OF ANY KIND, INCLUDING ENVIRONMENTAL
(WHETHER ABOVE, WITHIN OR UNDER THE PROPERTY). SELLER EXPRESSLY DISCLAIMS
WARRANTIES, EXPRESS OR IMPLIED, AS TO THE FITNESS, ENVIRONMENTAL COMPLIANCE,
AREA, CONDITION, QUALITY, QUANTITY, CHARACTER, SIZE, DESCRIPTION,
MERCHANTABILITY OR HABITABILITY OF THE PROPERTY OR OTHERWISE EXCEPT AS
SPECIFICALLY SET FORTH IN THIS AGREEMENT AND IN THE WARRANTY DEED TO BE
DELIVERED HEREUNDER. PURCHASER WAIVES ALL WARRANTIES AND REPRESENTATIONS,
EXPRESS OR IMPLIED, EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT AND IN
THE WARRANTY DEED TO BE DELIVERED HEREUNDER.
PURCHASER REPRESENTS THAT IT IS KNOWLEDGEABLE IN COMMERCIAL REAL
ESTATE MATTERS, SPECIFICALLY INCLUDING PROPERTY SIMILAR TO THE PROPERTY.
PURCHASER REPRESENTS AND COVENANTS IT EITHER HAS OR WILL CAREFULLY INSPECT THE
PROPERTY AND CONSULT WITH COMPETENT PROFESSIONALS BEFORE DETERMINING TO PROCEED
WITH THE PURCHASE. PURCHASER IS NOT RELYING (AND WILL NOT RELY IN THE FUTURE) ON
ANY STATEMENTS, FACTS OR REPRESENTATIONS MADE BY SELLER, ORAL OR WRITTEN, EXCEPT
FOR THOSE MATTERS SPECIFICALLY SET FORTH IN THE CONTRACT. IN THE EVENT THAT
PURCHASER ELECTS TO PROCEED WITH PURCHASE OF THE PROPERTY AFTER ANY INSPECTION
AND FEASIBILITY PERIOD PROVIDED IN THIS AGREEMENT, PURCHASER REPRESENTS TO
SELLER THAT IT HAS, OR WILL DURING THE INSPECTION PERIOD, EXTENSIVELY INSPECTED
THE PROPERTY AND IS FULLY FAMILIAR WITH ITS DEFECTS AND, CONSIDERING THE
FOREGOING, PURCHASER DESIRES TO PURCHASE THE PROPERTY WITH FULL KNOWLEDGE OF ITS
CONDITION AND DEFECTS.
PURCHASER EXPRESSLY ACKNOWLEDGES THAT THIS SECTION 2.2 IS A MATERIAL
FACTOR IN SELLER'S AGREEMENT TO SELL THE PROPERTY FOR THE PURCHASE PRICE.
ARTICLE 3
Consideration for Conveyance
----------------------------
Section 3.1 Subject to the terms, conditions and provisions herein
contained, Purchaser agrees to pay, and Seller agrees to accept, as
consideration for the conveyance of the Property, SEVEN MILLION AND NO/100
DOLLARS ($7,000,000.00)(the "Purchase Price"), which shall be due and payable in
cash at closing.
Section 3.2 As consideration for the conveyance of the Trade Name, the
Purchaser shall pay to the Seller, and Seller agrees to accept, the sum of TEN
AND NO/100 DOLLARS ($10.00) in cash at Closing. It is expressly agreed that such
sum represents that portion of the Purchase Price that is attributable to or
paid for the Trade Name.
2
<PAGE>
Section 3.3 Contemporaneously with the execution of this Agreement,
Purchaser hereby delivers to Seller and Seller hereby acknowledges the delivery
of, a check in the amount of TEN AND NO/100 DOLLARS ($10.00) ("Independent
Agreement Consideration"), which amount the parties bargained for and agreed to
as consideration for the Seller's grant to Purchaser of Purchaser's exclusive
right to purchase the Property pursuant to the terms hereof and for Seller's
execution, delivery and performance of this Agreement. This Independent
Agreement Consideration is in addition to and independent of any other
consideration or payment provided in this Agreement, nonrefundable under any
circumstances, and shall be retained by Seller notwithstanding any other
provisions of this Agreement.
ARTICLE 4
Earnest Money
-------------
Section 4.1 Within two business days of the Effective Date, the
Purchaser shall deliver cash or same-day wire transfer of funds in the amount of
ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) (hereinafter called the
"Earnest Money") to the Title Company. At Closing, the Earnest Money shall be
applied to the Purchase Price. In the event this Agreement is canceled for any
reason whatsoever during the Inspection Period, then the Title Company shall
disburse the Earnest Money in the manner provided for elsewhere herein. The
Title Company shall be authorized, at Purchaser's option, to invest the Earnest
Money in such federally-insured interest-bearing account at the best available
short term rate as Purchaser may direct.
Section 4.2. Termination Prior to End of the Inspection Period. If
Purchaser elects to terminate the Purchase Agreement prior to end of the
Inspection Period (or any extension thereof), Title Company shall pay the entire
Earnest Money to Purchaser one business day following receipt prior to such time
of the written notice to such effect from Purchaser (as long as the current
investment can be liquidated in one day) and this Agreement shall thereupon
terminate. No notice to Title Company from Seller shall be required for the
release of the Earnest Money to Purchaser by Title Company. The Earnest Money
shall be released and delivered to Purchaser from Title Company upon Title
Company's receipt of such notice, despite any objection or potential objection
by Seller. Seller agrees it shall have no right to bring any action against
Title Company which would have the effect of delaying, preventing, or in any way
interrupting, Title Company's delivery of the Earnest Money to Purchaser
pursuant to this paragraph, any remedy of Seller being against Purchaser, not
Title Company. After the expiration of the Inspection Period, the Earnest Money
shall be refundable to Purchaser only upon the occurrence of any of the
following events:
(a) Default of the Seller;
(b) An election to terminate pursuant to Section 5.1;
(c) An election to terminate pursuant to Section 7.1 or 7.2; or
(d) Failure of a condition precedent to Purchaser's obligations
hereunder, as set forth in Section 8. 1.
Section 4.3 The Title Company must sign this Agreement as evidence
that the Title Company agrees to be bound by the obligations contained herein
with respect to the Earnest Money. In the event the Title Company cannot comply
with the obligations imposed pursuant to this Article 4, the Purchaser and
Seller shall mutually and reasonably select another title company on or before
the expiration of five (5) days following written notice by either party to the
other that said selection is required.
3
<PAGE>
ARTICLE 5
Obligations, Representations and Warranties
-------------------------------------------
Section 5.1
(a) Within five (5) days after the Effective Date, Seller shall deliver
ITS most recent existing survey on the Property (such existing survey and as
updated by Purchaser to be known as the "Survey").
(b) Within five (5) days after the Effective Date hereof, the Seller,
at the Seller's sole cost and expense, shall provide to Purchaser a current
owner's title policy commitment (hereinafter called the "Title Commitment") for
the issuance of a standard form Owner's Policy of Title Insurance to the
Purchaser from the Title Company in the full amount of the Purchase and Sale
Price, together with good legible copies of all documents (including, but not
limited to, recorded instruments) constituting exceptions or restrictions to
Seller's title as reflected in the Title Commitment. To the extent Purchaser
requests or requires any upgrades or additional endorsements to the Title
Policy, such upgrades or additional endorsements shall be at Purchaser's sole
cost and expense.
(c) Purchaser shall have five (5) days from the date of receipt of the
Title Commitment in which to review them and to deliver to Seller in writing
("Purchaser's Objection Notice") such objections as Purchaser may have to
anything contained or set forth in the Title Commitment. Any items to which
Purchaser does not object within such five (5) day period shall be deemed to be
"Permitted Exceptions" (herein so called). If Purchaser fails to timely provide
Seller ITS Purchaser's Objection Notice, then all exceptions noted shall be
deemed to be Permitted Exceptions.
(d) Seller shall, within five (5) days of ITS receipt of Purchaser's
Objection Notice, advise Purchaser in writing ("Seller's Response") which
objections (if any) it shall cure or cause to be cured prior to the Closing.
Seller has no obligation to cure any title exceptions, except that Seller shall
in all events be obligated to cause to be released on or before Closing, (i) all
liens filed against the Property, (ii) all items Seller agrees to cure in the
Seller's Response, and (iii) any exceptions to title created by Seller and not
reflected on the Title Commitment prior to the expiration of the Inspection
Period. If, in Seller's Response, Seller declines to cure any item to which
Purchaser objected in Purchaser's Objection Notice, Purchaser shall be entitled
to terminate this Agreement; provided, however, Purchaser must exercise such
right no later than the expiration of the Inspection Period or five (5) days
following Seller's response, whichever is later.
Section 5.2
(a) Upon execution of this Agreement by Seller and Purchaser, Seller
shall either deliver to Purchaser or make available at ITS offices, and Seller
shall instruct ITS management company to cooperate in making available, the
following documents and materials to the extent in Seller's possession
(collectively, the "Property Information"):
(1) All contracts, agreements, permits, licenses, consents,
authorizations, government approvals, plans, specifications, as-built
architectural drawings and engineering, electrical and mechanical
plans;
(2) All operating information respecting the Property relating to
the period of Seller's fee ownership of the Property;
(3) All Real Property tax bills.
4
<PAGE>
Notwithstanding the foregoing, the following property information (to
the extent in Seller's possession) shall be delivered to Purchaser's offices
(1) Rent Roll and Apartment Mix List. A current rent roll and
delinquency report ("Rent Roll") for the Property and a list of
apartments sizes and rents (e.g., "1 bedroom, 1 bath: ______units @
$/mth);
(2) Financial Information. Operating statements of the Property
for the 36 months preceding this Agreement ("Operating Statements")
and financial statements (balance sheet, income, expenses and capital
improvements) for the Property for the two years preceding this
Agreement and year-to-date for the current year;
(3) Service Contracts. A list, together with copies, of all
management, service, supply, equipment rental, and other contracts
related to the operation of the Property ("Service Contracts");
(4) Environmental Reports. Any environmental reports in Seller's
possession related to the Property;
(b) Excluded-Materials. Notwithstanding the foregoing, Seller shall
have no obligation to deliver to Purchaser, and the Due Diligence Materials
shall not include, any of the following confidential and proprietary materials:
(i) Information contained in Seller's credit reports, credit
authorizations, credit for financial analyses or projections, steering committee
sheets, account summaries or other internal documents relating to the Property,
including any valuation documents and the book value of the Property;
(ii) material which is subject to attorney-client privilege or
which is attorney work product;
(iii) appraisal reports or letters;
(iv) financial statements of Seller or any affiliate of Seller;
or
(v) material which Seller is legally required not to disclose.
(c) For purposes of this Agreement, the phrase "Seller's possession"
includes the possession of Seller's property manager.
Section 5.3
(a) Seller warrants and represents to Purchaser as of the date
hereof, and as Closing Date, that:
(1) Seller has good and indefeasible title to the Property,
subject to any and all restrictions, covenants, conditions,
liens, encumbrances, reservations, easements and other exceptions
to title, if any, relating to the Property, shown of record in
Tarrant County, Texas, as of the date of execution hereof by
Seller, the Tenant Leases, and all zoning laws, regulations and
ordinances of municipal and/or other governmental authorities, if
any, affecting the Property, as of the date of execution hereof
by Seller.
5
<PAGE>
(2) The individual executing this Agreement on behalf of
Seller has the right, power and authority to execute this
Agreement on behalf of Seller, and Seller has the right, power
and authority to convey the Property in accordance with the terms
of this Agreement.
(3) Neither Seller nor ITS property manager has received
written notice of any violations of any applicable law or of any
covenant, condition, restriction, or easement encumbering the
Property.
(4) The Property is a legal lot separately assessed for real
estate tax purposes.
(5) To Seller's actual knowledge, there are no (a) proposed
public improvements adjacent to the Property which may involve a
charge being, levied or assessed against the Property or which
may result in the creation of a lien upon the Property, (b)
proposed changes in the zoning classification of the Property by
the City of Bedford, (c) suits, actions, claims, or legal,
administrative, arbitration or other proceedings or governmental
investigations that would (i) prevent Seller from conveying the
Property to Purchaser or (ii) result in a lien or other
encumbrance upon the Property that would be effective against
Purchaser, (d) proposed special assessments against the Property,
(e) penalties or interest due with respect to real estate taxes
assessed against the Property, or (f) proposed changes in any
road pattern or grade with respect to any road immediately
adjacent to and providing a means of ingress and egress to and
from the Property. In the event Seller receives notice of any of
the foregoing matters prior to Closing, Seller agrees to furnish
Purchaser with a copy of any such notice within two (2) days
after receipt thereof.
(6) The operating statements to be delivered to Purchaser
pursuant to this Agreement will be those created in the normal
course of business and will, to Seller's actual knowledge without
duty of inquiry, show all items of income and expense (operating
and capital) incurred in connection with Seller's ownership,
operation, and management of the Property for the periods
indicated and will, to Seller's actual knowledge without duty of
inquiry, be true, correct, and complete in all material respects.
(7) Seller has no actual knowledge of any violation of
Environmental Laws related to the Property or the presence or
release of Hazardous Materials on or from the Property except as
disclosed in the Property Information or otherwise. The term
"Environmental Laws" includes without limitation the Resource
Conservation and Recovery Act and the Comprehensive Environmental
Response Compensation and Liability Act and other federal laws
governing the environment as in effect on the date of this
Agreement together with their implementing regulations and
guidelines as of the date of this Agreement, and all state,
regional, county, municipal and other local laws, regulations and
ordinances that are equivalent or similar to the federal laws
recited above or that purport to regulate Hazardous Materials.
The term "Hazardous Materials" includes petroleum, including
crude oil or any fraction thereof, natural gas, natural gas
liquids, liquified natural gas, or synthetic gas usable for fuel
(or mixtures of natural gas or such synthetic gas), asbestos and
asbestos containing materials and any substance, material waste,
pollutant or contaminant listed or defined as hazardous or toxic
under any Environmental Law.
(b) The representations and warranties contained in Section
5.3(a) shall be true and correct in all material respects on the
Effective Date, at all times during the term of this Agreement, and on
the Closing Date, and shall survive for a period of six (6) months
following the Closing Date; and the obligation of the Purchaser to
close this transaction is expressly conditioned upon said
representations being true and correct on the Closing Date.
6
<PAGE>
Seller shall advise Purchaser in writing if any representation
contained in Section 5.3(a) shall become false or misleading prior to
the Closing Date. In the event Seller advises Purchaser as aforesaid
or Purchaser discovers, prior to Closing, a breach of a representation
by Seller under this Agreement, Purchaser's sole and exclusive remedy
shall be either (1) a termination of this Agreement and refund of his
Earnest Money or (ii) to waive such breach and proceed to Closing. In
the event Purchaser discovers, after Closing, a material breach of a
representation by Seller under this Agreement, Purchaser shall notify
Seller and provide Seller reasonable opportunity to cure such breach.
Section 5.4 From the Effective Date until the Closing Date or earlier
termination Agreement, Seller shall:
(a) Operate the Property diligently and in the ordinary course of
ITS business.
(b) Keep, maintain, and repair the Property in a good and
presentable condition and comply with all governmental regulations
affecting the Property.
(c) Keep, observe, and perform ITS obligations as landlord under
the Tenant Leases.
(d) Keep, observe, and perform in a timely manner all of ITS
obligations under any promissory notes and instruments securing same
which encumber the Property and which will be discharged in full prior
to Closing.
(e) Not sell, assign, or convey any right, title, or interest
whatsoever in or to the Property (other than entering into Tenant
Leases as otherwise permitted by this Agreement), or create or permit
to exist any lien, encumbrance, or charge thereon without promptly
discharging the same.
(f) Promptly advise Purchaser in writing of any notices
concerning the Property that Seller receives from any appraisal
districts, taxing authorities or any governmental agency having
jurisdiction over the Property,
(g) Maintain in full force and effect property insurance in an
amount not less the Purchase Price.
(h) Seller will not, without Purchaser's prior consent, such
consent not to be unreasonably withheld, enter into any contract
(other than leases, subleases, or modifications or amendments of
leases) that will be an obligation affecting the Property subsequent
to the Closing, except contracts entered into in the ordinary course
of business that are terminable without cause on 30-days' notice.
Section 5.5 Purchaser warrants and represents to Seller that as the
date hereof: (a) Purchaser is a duly authorized existing Virginia corporation;
(b) Purchaser is qualified to do business in the State of Texas; (c) Purchaser
has full right and authority to enter into this Agreement and to consummate the
transaction contemplated herein; (d) each of the individuals executing this
Agreement on behalf of Purchaser is authorized to do so; (e) this Agreement
constitutes a valid and legally binding obligation of Purchaser, enforceable in
accordance with ITS terms; and (f) there are no material legal or administrative
proceedings pending or to the best of Purchaser's knowledge threatened against
or affecting Purchaser which would affect Purchaser's ability to enter into or
close this Agreement.
7
<PAGE>
ARTICLE 6
Inspection and Audit
--------------------
Section 6.1 The Seller agrees that from the Effective Date until
Closing, the Purchaser, personally or through ITS authorized agents or
representatives, shall be entitled to enter upon the Real Property and the
Improvements to conduct such reasonable physical and environmental inspections,
independent appraisals, and other tests, examinations and studies of the
Property as Purchaser desires, including, but not limited to, lease audit,
asbestos testing, one unit-by-unit inspection of the Property (but only upon
twenty-four (24) hours prior notice for such unit-by-unit inspection), at
reasonable times so long as such activities do not interfere with rights of
tenants under the Tenant Leases or damage the Property. Purchaser shall
indemnify and hold Seller harmless from and against any and all claims, demands,
injuries, damages, costs, expenses (including reasonable attorney's fees) or
liability incurred by or asserted against Seller as a direct result of any of
those visits or inspections.
Section 6.2 The Purchaser shall have until June 30, 1998 (the
"Inspection Period") within which to make all audits, inspections or
investigations of the Property desired by the Purchaser. If, at any time prior
to the expiration of the Inspection Period, Purchaser is not satisfied with the
results of the inspection, in ITS sole and absolute discretion, then Purchaser
shall have the absolute right to terminate this Agreement by written notice to
Seller, and the Title Company, despite any instructions or communications of any
kind, from any party or ITS agent OF representative to the contrary, shall
refund the Earnest Money, together with all interest accrued thereon, to
Purchaser, and Seller and Purchaser shall have no further rights or duties to
each other under this Agreement, except as otherwise provided in the Agreement.
If Purchaser does not provide Seller with written notice of termination prior to
expiration of the Inspection Period, then Purchaser shall be deemed to have
accepted the Property, and the Earnest Money shall become non-refundable as
otherwise provided herein.
Section 6.4. Service Contracts. During the Inspection Period,
Purchaser shall have an opportunity to review and inspect the Service Contracts,
all of which are terminable upon thirty (30) days written notice to the contract
vendor, other than the laundry lease with Central Texas coin Meter (KWIK Wash
Laundries) (the "Laundry Lease"). Purchaser will assume the obligations arising
from and after the Closing Date under those Service Contracts that are not in
default as of the Closing Date; provided, however, if requested by Purchaser in
writing, Seller shall deliver a termination notice to the vendor of any of the
Service Contracts other than the Laundry Lease, which termination shall be
effective upon the expiration of thirty (30) days after Seller delivers such
notice. If requested by Purchaser, Seller shall terminate at Closing, and
Purchaser shall not assume, any property management agreement affecting the
Property, and Seller shall also simultaneously either (a) terminate any existing
lease (whether written, oral or otherwise) on the Property between Seller and
any employee of the existing property management firm under which rent is waived
or is discounted, or (b) use commercially reasonable efforts to modify any such
lease to provide for a then-current market rent.
ARTICLE 7
Damage or Destruction Prior to Closing: Condemnation
----------------------------------------------------
Section 7.1 In the event the Improvements or any of the items
constituting the Personal Property should be damaged by any casualty after the
Effective Date prior to Closing, and if the cost of repairing such damage, as
estimated by a contractor retained by the Purchaser, is:
(a) less than TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($250,000.00) and less than 90 days to repair, then the Purchaser
shall have no right to terminate this Agreement, but Seller shall
assign to Purchaser, at Closing, all insurance proceeds (including
rent insurance, if any) payable for such damage, and Purchaser shall
receive a credit against the Purchase Price in the amount of any
deductible required by
8
<PAGE>
Seller's insurance policies and the sale shall be closed without the
Seller's repairing such damage; provided however, Seller shall be
obligated to make such emergency repairs as are necessary to prevent
further damage to the Property or injury to any person thereon and
Seller may use insurance proceeds for this limited Purpose; or if said
cost is
(b) more than TWO HUNDRED FIFTY THOUSAND AND NO/ 100 DOLLARS
($250,000.00) and more than 90 days to repair, then the Purchaser may
elect to terminate this Agreement by delivering written notice within
ten (10) days following Purchaser's receipt of the contractor's
estimate (and, if necessary, the Closing Date shall be extended to
give Purchaser the full ten-day period to make such election); and if
the Purchaser does not elect to terminate this Agreement, the Seller
shall assign to Purchaser, at Closing, all insurance proceeds
(including rent insurance, if any) payable for such damage, and
Purchaser shall receive a credit against the Purchase Price in the
amount of any deductible required by Seller's insurance policies, and
the sale shall be closed without the Seller's repairing such damage;
provided however, Seller shall be obligated to make such emergency
repairs as are necessary to prevent further damage to the Property or
injury to any person thereon, and Seller may use insurance proceeds
for this limited purpose.
Section 7.2 In the event of a taking by condemnation or similar
proceedings or actions of all of the Property, or any material portion of the
Property, Purchaser shall have the option to terminate this Agreement upon
written notice to Seller within ten (10) business days after notice thereof
(and, if necessary, the Closing Date shall be extended to give Purchaser the
full ten-day period to make such election). If Purchaser does not exercise ITS
option under the immediately preceding sentence of this Section to terminate
this Agreement, then the Agreement shall remain in full force and effect and
Seller shall assign or pay to Purchaser at Closing, Seller's entire interest in
and to any and all condemnation awards or proceeds from any such proceedings or
actions in lieu thereof, and Purchaser shall have the sole right during the
pendency of this Agreement to negotiate and otherwise deal with the condemning
authority in respect of such matter. For purpose of this section, the definition
of "material" shall include taking of a number of parking spaces such that the
property is not in compliance with applicable parking requirements.
Section 7.3 The parties shall have the rights and duties set forth in
this Article VII rather than as prescribed by the Uniform Vendor and Purchaser
Risk Act, Texas Property Code Section 5.007.
ARTICLE 8
Condition Precedent to Obligations of Purchaser
-----------------------------------------------
Section 8.1 If on the Closing Date:
(a) Purchaser has made objections to the title or survey in
accordance with Section 5.1 which Seller has agreed to cure or is
obligated to cure, and such objections have not been cured;
(b) Any of the representations and warranties of Seller contained
in Section 5.3 are not true and correct in any material respect as of
the Closing Date;
(c) Seller has materially breached any of the covenants contained
herein; or
(d) the Title Company has advised that it is not able to issue
the Title Policy in accordance with Section 9.2(i);
then Purchaser may elect, in ITS sole discretion, and as ITS sole and exclusive
remedy, to (1) waive any such defect or requirement and close the transaction
contemplated herein, or (2) terminate this Agreement, whereupon the Earnest
Money, and all interest accrued thereon, shall be immediately returned to the
Purchaser by the Title Company.
9
<PAGE>
ARTICLE 9
Closing
-------
Section 9.1 The Closing hereunder shall take place at the offices of
the Title Company, on or before the Closing Date.
Sections 9.2 At the Closing, Seller shall deliver or cause to be
delivered to Purchaser, at Seller's sole cost and expense, except as provided
below, each of the following items:
(a) A special warranty deed, in the form of Exhibit "C" attached
hereto, duly executed and acknowledged by Seller, and in form for
recording, conveying good and indefeasible fee simple title in the
Real Property and Improvements to Purchaser, subject only to the
Permitted Exceptions.
(b) A bill of sale, in the form of Exhibit "D" attached hereto
duly executed acknowledged by Seller, conveying the Personal Property.
(c) Executed originals of all Tenant Leases, to the extent in
Seller's possession, together with an assignment, the form of Exhibit
"E" attached hereto, duly executed and acknowledged by Seller,
assigning the Tenant Leases to Purchaser.
(d) Letters addressed to each tenant under any Tenant Leases, in
the form of Exhibit "F" attached hereto, advising of the change of
ownership of the Property, and of the assumption by Purchaser of the
liability to return the security deposits, and informing such tenant
to make future rental payments to the Purchaser.
(e) An assignment, in the form of Exhibit "G" attached hereto,
duly executed and acknowledged by Seller, assigning (1) all ITS rights
under any Miscellaneous Agreements affecting the Property, (2) all
warranties, guaranties, and bonds applicable to the Property, or any
part thereof, and (3) all of Seller's right, title, and interest, if
any, in the Trade Name and (4) all of ITS assignable rights in any
licenses and permits affecting the Property.
(f) At Seller's sole cost and expense, an Owner's Policy of Title
Insurance issued by the Title Company on the standard form in use in
the State of Texas, insuring good and indefeasible title to the
Property in the Purchaser, subject only to the Permitted Exceptions
and the standard printed exceptions.
(g) Such evidence or documents as may be reasonably required by
the Title Company evidencing the status and capacity of Seller and the
authority of the person or persons who are executing the various
documents on behalf of the Seller in connection with the sale of the
Property.
(h) A certification in a from of Exhibit "H" attached hereto duly
executed by the Seller under penalties of perjury, containing the
following:
(1) The Seller's U.S. Taxpayer Identification Number;
(2) The home address of the Seller (or the business address
of the Seller if the Seller is not an individual); and
(3) A statement that the Seller is not a foreign person
within the meaning of Sections 1445 and 7701 of the Internal
Revenue Code of 1986, as it may be amended from time to time (the
"IRC") (i.e., the Seller is not a nonresident alien, foreing
corporation, foreign partnership, foreign trust or foreign
estate, as those terms are defined in the IRC and Income Tax
Regulations.
10
<PAGE>
(i) Seller shall make available at the Property: All keys to all locks
on the Property (and an accounting for keys in possession of others); originals
(or to the extent not available, copies) of all Service Contracts being assigned
to Purchaser; all books, records, advertising, materials, and correspondence
pertaining to the Property; and all documents in the possession of the Seller,
pertaining to tenants of the Property, including, but not limited to, all
applications, correspondence and credit reports relating, to each such tenant,
provided that (i) Seller may retain copies of such records as Seller deems
necessary and (ii) Purchaser shall provide Seller access to and copies, at
Seller's expense, of any material provided by Seller to Purchaser if Seller
reasonably requests after Closing.
(j) A rent roll certified by Seller to be true and correct as of the
date of Closing showing the name of, and the amount of monthly rental payable,
by each tenant of the Property, the apartment occupied by the tenant, the date
to which rent has been paid, any advance payment of rent, and the amount of any
escrow, or security deposit of tenant.
(k) A certificate from a licensed contractor, who is regularly engaged
in the business of pest control, that all buildings have been serviced for any
termite and other wood-boring insect infestation. Said certificate shall be
dated within 90 days of closing, bearing the contractor's name, contractors
license number, the signature of the party authorized to sign for the
Contractor's name, contractors license number, the signature of the party
authorized to sign for the Contractor and the date of the inspection. Should
material damage exist Seller may, but shall not be obligated to proceed to have
any corrective work ("Termite Work") recommended by such contractor completed
prior to Closing. If Seller does not complete the Termite Work, if any, prior to
Closing, Purchaser, at ITS option may either proceed to Closing and have an
amount equal to the cost of the unperformed Termite Work deducted from Seller's
proceeds, or may in ITS sole Discretion terminate this Agreement. The Title
company shall promptly return Purchaser's deposit upon such termination.
(1) A representation letter as normally required by auditor's for a
public company in the form attached hereto as Exhibit "I". This clause shall
survive closing for one year.
Section 9.3 At the Closing, Purchaser shall deliver to Seller the following:
(a) The Purchase Price, after application of the Earnest Money thereto
pursuant to Section 4.1 hereof.
(b) Such evidence or documents as may reasonably be required by the
Title Company evidencing the status and capacity of Purchaser and the authority
of the person or persons who are executing the various documents on behalf of
the Purchaser in connection with the purchase of the Property.
(c) An assignment, in the form of Exhibit "E" attached hereto, duly
accepted by Purchaser.
(d) Letters addressed to each Tenant under any Tenant Leases, in the
form of Exhibit "F" attached hereto, advising of the change of ownership of the
Property and the assumption by Purchaser of the liability for return of the
security deposits, and informing such tenant to make future rental payments to
the Purchaser.
(e) An assignment, in the form of Exhibit "G" attached hereto, duly
accepted by Purchaser.
11
<PAGE>
Section 9.4 At Closing, the following items shall be adjusted or
prorated between Seller and Purchaser:
(a) Seller shall credit against the Purchase Price tile amount of
any rents, fees or bonuses of any kind paid to the Seller pursuant to
any Tenant Leases for or attributable to the Closing Date and periods
subsequent to the Closing Date. No proration shall be made for rents
delinquent by more than 10 days as of the Closing, Date. Purchaser
agrees to make a good faith effort to collect such delinquent rents,
and shall promptly remit to Seller any delinquent rents collected.
(b) Taxes, ad valorem or otherwise, for the Property for the
current calendar year shall be prorated to date of Closing, and the
Seller shall credit against the Purchase Price the amount of Seller's
pro rata portion of such taxes. The Seller's pro rata portion of such
taxes shall be based upon taxes actually assessed for the current
calendar year. If, for any reason, taxes for the current calendar year
have not been assessed on the Property, such proration shall be
estimated based upon the most recently published tax rate and
valuation for the Property for calendar year in which the Closing Date
occurs, and adjusted within thirty (30) days following the date when
exact amounts are available, and such adjustment provision shall
expressly survive Closing.
(c) All other income and ordinary operating expenses for or
pertaining to the Property, public utility charges, maintenance,
service charges, and all other normal operating charges of the
Property shall be prorated at the Closing effective as of the Closing
Date. Seller shall cause all utility meters to be read on the Closing
Date and Seller shall credit against the Purchase Price (or furnish
evidence of prior payment of) an amount equal to all unpaid utility
charges incurred or accrued up to the reading of such utility meters.
No prorations or transfers will be made for Seller's utility deposits.
Seller shall be entitled to request and receive a refund for all such
utility deposits, and Purchaser shall cause all utilities to be placed
in ITS own name and be responsible for providing any necessary
security deposits as of the date of closing.
(d) Seller shall credit against the Purchase Price all security
deposits held by the Seller under the Tenant Leases and Seller shall
retain such security deposits, Purchaser shall thereafter be
responsible to the Tenants for the security deposits and shall notify
each tenant in writing pursuant to Section 9.3(d) hereof.
(e) Seller shall credit against the Purchase Price, a sum equal
to any future monetary concessions granted by Seller to Tenants under
existing Tenant Leases for which Purchaser will become liable after
Closing.
In the event any adjustments pursuant to this Section 9.4 are,
subsequent to Closing, found to be erroneous, then either party hereto who is
entitled to additional monies shall invoice the other party for such additional
amounts as may be owing, together with reasonably detailed information
supporting such amounts, and such amount shall be paid within ten (10) days from
receipt of the invoice. This covenant shall survive the Closing of the sale
contemplated hereby.
Section 9.5 This Agreement, and the rights and obligations hereunder,
may not be assigned by Purchaser without Seller's prior written consent;
provided, however, Purchaser shall have the right to assign this Agreement to
any party affiliated with Purchaser without Seller's consent. In the event of
any such assignment, the original party designated as the Purchaser shall not be
released from any duties or obligations hereunder upon the assumption of such
obligations by the assignee of Purchaser.
Section 9.6 Exclusive possession of the Property shall be delivered to
Purchaser by Seller at the Closing, subject only to such rights of others
pursuant to the Tenant Leases.
12
<PAGE>
Section 9.7 Except as otherwise provided herein, Purchaser shall pay
(i) 50% of all escrow fees relating to the sale of the Property, (ii) except as
provided in the next sentence, all costs and expenses of the issuance of the
Title Policy, including, but not limited to, the cost of any survey and all
endorsements required in connection with the same and (iii) the cost of any of
ITS examination and inspections and audits of the Property, including, but not
limited to, title cost of any environmental or financial audits. Seller shall
pay (i) all of the fees payable in connection with the recording of the Deed
including the Tax Certificate and delivery/courier charges, (ii) 50% of all
escrow fees relating to the sale of the Property, and (iii) the title insurance
premium that would be payable to Title Company if Purchaser has purchased a
standard form Owner's Policy of Title Insurance without any endorsements or
other modifications. Except as specifically provided in Section 12.5 hereof,
each party hereto shall pay ITS own attorneys' fees incurred in the preparation
and negotiation of this Agreement and the Closing of the transaction
contemplated hereby.
ARTICLE 10
Real Estate Commission
----------------------
Section 10.1 Seller does hereby represent and warrant that it, ITS
officers, employees and agents have contracted for no real estate commissions or
similar fees and, except for the fees contemplated herein, Seller has not acted
in a manner so as to give rise to a claim for such real estate commissions or
similar fee. Seller shall be solely responsible for tile payment of any and all
real estate commissions, claims to such commissions, and/or similar type fees
arising directly or indirectly out of this transaction and based upon the
actions of Seller. Seller does hereby agree to indemnify Purchaser against and
hold Purchaser harmless from any and all such real estate commissions, claims to
such commissions, or similar fees, including attorneys' fees incurred in any
lawsuit regarding such commissions or fees, to the extent such claims or
liabilities are based upon the actions of Seller. In connection herewith and
except as provided herein, Purchaser does hereby represent and warrant that it,
ITS officers, employees and agents have contracted for no real estate
commissions or similar fees. Purchaser has not acted in a manner so as to give
rise to a claim for other real estate commissions or similar fee. Purchaser
shall be solely responsible for the payment of any and all real estate
commissions, claims to such commissions, and/or similar type fees arising
directly or indirectly out of this transaction and based upon the actions of
Purchaser. Purchaser does hereby agree to indemnify Seller and hold Seller
harmless from and against any such real estate commissions or similar fees,
including costs and attorneys' fees incurred in any lawsuit regarding such
commissions and fees, to the extent that such claims and liabilities are based
upon actions of Purchaser.
The Apartment Group, Inc., a Texas corporation (Seller's Broker") has
acted as Seller's broker in this transaction. Seller has agreed to pay Seller's
Broker a commission if, as and when the sale of the Property to Purchaser closes
(but not otherwise) on the terms and conditions contained in a separate
agreement entered into by Seller and Seller's Broker. Seller shall not be
obligated to pay any other real estate commissions.
Section 10.2 PURCHASER ACKNOWLEDGES THAT, AT THE TIME OF EXECUTION OF
THIS AGREEMENT, THE SELLER ADVISED PURCHASER BY THIS WRITING THAT PURCHASER
SHOULD HAVE THE ABSTRACT COVERING THE PROPERTY EXAMINED BY AN ATTORNEY OF
PURCHASER'S OWN SELECTION OR THAT PURCHASER SHOULD BE FURNISHED WITH OR OBTAIN A
POLICY OF TITLE INSURANCE.
ARTICLE 11
Remedies of Default
-------------------
Section 11.1 Except to the extent provided otherwise elsewhere in this
Agreement, in the event of Seller's default at any time during the term hereof,
Purchaser may elect, at ITS option,
13
<PAGE>
as its sole and exclusive remedy, (a) to terminate this Agreement and the
Earnest Money and all earnings thereon shall be immediately returned to
Purchaser by the Title Company, or (b) to enforce specific performance hereunder
against Seller and receive all reasonable legal fees and expenses incurred by
Purchaser in connection with such suit; provided, however, if the remedy of
specific performance is not available to Purchaser, Purchaser shall be entitled
to recover its actual OUT-OF-POCKET expenses (but not punitive or consequential
damages) Incurred In connection with this transaction, such expenses not to
exceed $50,000.00.
Section 11.2 In the event that Seller is unable to consummate the sale
contemplated hereby due to a default by Purchaser, then, as Seller's sole and
exclusive remedy and relief, all the Earnest Money shall be paid to the Seller
by the Title Company as liquidated damages for the Purchaser's default;
provided, however, if Seller files such to enforce this agreement then, in
addition to the Earnest Money, Seller shall be entitled to the benefits of
Section 12.5 below. Such amount is agreed upon by and between the Seller and the
Purchaser as liquidated damages, due to the difficulty and inconvenience of
ascertaining and measuring actual damages, and the uncertainty thereof.
Section 11.3 Notwithstanding the provisions of Sections 11.1 and 11.2
above, in the event that after Closing a party (the "Defaulting Party") breaches
an obligation hereunder which is expressly stated herein to survive Closing, the
Defaulting Party shall be liable to the other party (the "Non-Defaulting Party")
for the damages incurred by the Non- Defaulting Party as a result of such
breach, except to the extent provided otherwise elsewhere in this Agreement.
ARTICLE 12
Miscellaneous
-------------
Section 12.1 All notices, demands, or other communications of any type
(herein collectively referred to as "Notices") given by the Seller to the
Purchaser or by the Purchaser to the Seller, whether required by this Agreement
or in any way related to the transaction contracted for herein, shall be void
and of no effect unless given in accordance with the provisions of this Article
12. All notices shall be in writing and delivered to the person to whom the
notice is directed, either in person, by facsimile, by nationally recognized
overnight courier, or by United States Mail, as a registered or certified item,
return receipt requested. Notices delivered by mail shall be effective when
deposited in a post office or other depository under the care or custody of the
United States Postal Service, enclosed in a wrapper with proper postage affixed,
addressed, if to the Purchaser, as follows:
Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Telephone No.:_________________
Facsimile No.: (804) 782-9302
With a copy to: Harry S. Taubenfield
Zuckerbrod & Taubenfield
575 Chestnut Street
P.O. Box 488
Cedarhurst, NY 11516
Telephone No.:_____________
Facsimile No.: (516) 374-3490
and
14
<PAGE>
Robert E. Morrison, Esq.
Brown McCarroll & Oaks
300 Crescent Court
Suite 1400
Dallas, TX 75201
Facsimile No.: (214) 999-6170
and addressed, if to the Seller, as follows:
Park Village Investment Partnership
5944 Luther Lane, Suite 501
Dallas, Texas 75225
Telephone: 214-369-6192
Facsimile: 214-369-7239
Attn: David R. Hudgins
With a copy to:
Kirk V. Helgeson
Octagon Overseas Investment Corporation
150 South Los Robles Avenue, Suite 610
Pasadena, CA 91101
Telephone: 626-795-5901
Facsimile: 626-795-5910
Notice given in person, by facsimile, or by overnight courier shall be
effective upon receipt. Either party hereto may change the address for notice
specified above by giving the other party ten (10) days advance written notice
of such change of address.
Section 12.2 This Agreement shall be construed and interpreted in
accordance with the laws of the State of Texas and the obligations of the
parties hereto are and shall be performable in the county wherein the Property
is located. Where required for proper interpretation, words in the singular
shall include the plural, the masculine gender shall include the neuter and the
feminine, and vice versa. The terms "heirs, executors, administrators and
assigns" shall include "successors, legal representatives and assigns".
Section 12.3 This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns. This Agreement may not be modified or amended,
except by an agreement in writing signed by the Seller and the Purchaser. The
parties may waive any of the conditions contained herein or any of the
obligations of the other party hereunder, but any such waiver shall be effective
only if in writing and signed by the party waiving such conditions or
obligations.
Section 12.4 Time is of the essence of this Agreement.
Section 12.5 In the event it becomes necessary for either party hereto
to file a suit to enforce this Agreement or any provisions contained herein, the
party prevailing in such action shall be entitled to recover, in addition to all
other remedies or damages, reasonable attorneys' fees and court costs, including
appellate costs, incurred in such suit, provided herein.
Section 12.6 The descriptive headings of the several Articles,
Sections and Paragraphs contained in this Agreement are inserted for convenience
only and shall not control or affect the meaning or construction of any of the
provisions hereof.
Section 12.7 This Agreement, including the Exhibits and Addenda hereto
and the items to be furnished in accordance with Articles 5 and 9 hereof,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings of the parties in connection therewith. No representation,
warranty, covenant, agreement or condition not expressed in this Agreement shall
15
<PAGE>
be binding upon the parties hereto or shall affect or be effective to interpret,
change or restrict the provisions of this Agreement.
Section 12.8 Multiple originals of this Agreement have been executed
by the parties hereto. Each such executed original shall have the full force and
effect of all original executed instrument. This Agreement may be executed in
multiple counterparts, all of which when taken together shall constitute one and
the same agreement. It shall not be necessary that the signature of all parties
appear on the same counterpart, so long as each party signs at least one
counterpart.
Section 12.9 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 shall run until the end of the next day which is neither a Saturday,
Sunday or legal holiday. The final day of any such period shall be deemed to end
at 5:00 o'clock p.m. (Central Time).
Section 12.10 If any term or provision of this Agreement which would
not deprive the parties of the benefit of the bargain shall be held to be
invalid, illegal, unenforceable or inoperative as a matter of law, the remaining
terms and provisions of this Agreement shall not be affected thereby, but each
such remaining term and provision shall be valid and shall remain in fall force
and effect.
Section 12.11 Each party hereto acknowledges that each of them has had
the benefit of legal counsel of ITS own choice and has been afforded an
opportunity to review this Agreement with ITS legal counsel and that this
Agreement has been jointly drafted and shall be construed as having been jointly
drafted by each party hereto. Accordingly, the rule of construction to the
affect that ambiguities are to be resolved against the drafting party shall not
be employed in the interpretation of this Agreement or any amendments or
exhibits hereto.
Section 12.12 Purchaser is acquiring only the Property and is not the
successor of Seller. Purchaser does not assume or agree to pay, or indemnify
Seller or any other person or entity against, any liability, obligation or
expense of Seller relating to the Property prior to the Closing Date, in any
way, except, and only to the extent, if any, expressly provided for herein or in
the documents executed at Closing. This provision shall survive Closing.
Section 12.13 In addition to the acts and deeds recited herein and
contemplated to be performed, executed and/or delivered by Seller and Purchaser,
both Seller and Purchaser, hereby agree to perform, execute and/or deliver or
cause to be performed, executed and/or delivered at the Closing or after the
Closing, such further acts, deeds and assurances as the other party hereto may
reasonably require to (a) evidence and vest in Purchaser the ownership of, and
title to, all of the Property in accordance with the terms hereof, and (b)
consummate the transactions contemplated hereunder.
Section 12.14 THIS AGREEMENT IS PERFORMABLE IN TARRANT 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. PURCHASER AND SELLER HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT SITTING IN TARRANT 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 HEARD AND
DETERMINED IN A STATE OR FEDERAL COURT SITTING IN TARRANT COUNTY, TEXAS.
16
<PAGE>
Section 12.15 Section 1031 Exchange. Purchaser may consummate the
purchase of the Property as part of a so-called like kind exchange (the
"Exchange") pursuant to 1031 of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that: (i) the Closing shall not be delayed or affected by
reason of the Exchange nor shall the consummation or accomplishment of the
Exchange be a condition precedent or condition subsequent to Purchaser's
obligations under this Agreement; (ii) Purchaser shall effect the Exchange
through an assignment of this Agreement, or ITS rights under this Agreement, to
a qualified intermediary; (iii) Seller shall not be required to take an
assignment of the purchase agreement for the relinquished property or be
required to incur any additional liability or acquire or hold title to any real
property for put-poses or consummating the Exchange; and (iv) Purchaser shall
pay any additional costs that would not otherwise have been incurred by
Purchaser or Seller had Purchaser not consummated ITS purchase through the
Exchange. Seller shall not by this agreement or acquiescence to the Exchange (1)
have ITS rights under this Agreement affected or diminished in any manner or (2)
be responsible for compliance with or be deemed to have warranted to Purchaser
that the Exchange in fact complies with 1031 of the Code.
Section 12.16 Confidentiality. All information required by either
party in connection with the sale and purchase of the Property or any other
operation of Seller and Purchaser shall be confidential and shall not be
disseminated without the written approval of the Purchaser and Seller.
Section 12.17 Public Entity. Seller acknowledges that Purchaser is a
public entity and that it is required to furnish financial statements to the
Securities and Exchange Commission in connection with this acquisition, Seller
agrees to make the information available for Purchaser during normal business
hours 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.
EXECUTED on this the 23rd day of June, 1998, by Purchaser.
CORNERSTONE REALTY INCOME TRUST, INC.
By: /s/ Gus G. Remppies
--------------------------------------------
Name: Gus G. Remppies
--------------------------------------------
Title: Vice President , Director of Acquisitions
--------------------------------------------
EXECUTED on this the 24th day of June, 1998, by Seller.
PARK VILLAGE INVESTMENT PARTNERSHIP
By: Park Village Investments, Inc.,
General Partner
By: /s/ R. Maurice Crowe
---------------------------------------------
R. Maurice Crowe, Jr., President
The Agreement, together with the Purchaser's Earnest Money deposit,
has been received by the Title Company this the 26th day of June 1998.
TEXAS TITLE COMPANY
By: /s/ Eva A. Horton
--------------------------------------------
Name: Eva A. Horton
--------------------------------------------
Title:Vice President
--------------------------------------------
17
PROPERTY MANAGEMENT AGREEMENT
-----------------------------
THIS AGREEMENT is made and entered into as of the 1st day of July, 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").
WITNESSETH:
WHEREAS, Owner is the owner of Park Village 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 Manner 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
shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property rented
by procuring tenants for the Property and negotiating and executing on behalf of
Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other documents
(other than promissory notes, mortgages, deeds of trust or other documents or
instruments which would encumber the Property) required under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act, or any similar
federal or state legislation, Manager shall also file returns and reports, and
pay from Owner's funds, all sums as may from time to time be required by the
state or locality in which the Property is located;
h. The maintenance of full books of account with correct entries
of all receipts, and expenditures, which books of account shall be the property
of Owner and shall at all times be open to the inspection of Owner or any of its
employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by 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;
1. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary to
operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income, All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits on
keys and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.
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
-------------------------------------
Title:
----------------------------------
1
<PAGE>
MANAGER: APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By:/s/ S.J. Olander
-----------------------------------------------
Title:
--------------------------------------------
