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: October 28, 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> <C>
Item 2. Acquisition or Disposition of Assets 4
Item 5. Other Events 11
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a. Independent Auditors' Report 13
(Burney Oaks Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Burney Oaks Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Burney Oaks Apartments)*
b. Independent Auditors' Report 14
(Brandywine Park Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Brandywine Park Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Brandywine Park Apartments)*
c. Pro Forma Statement of Operations 15
for the Year ended December 31, 1997
(unaudited)*
</TABLE>
- --------------------------
* To be filed by amendment.
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Pro Forma Statement of Operations
for the Nine Months ended September 30, 1998
(unaudited)*
Pro Forma Balance Sheet as of
September 30, 1998 (unaudited)*
d. Exhibits
10.1 Purchase Contract for Burney Oaks Apartments
10.2 Purchase Contract for Brandywine Park
Apartments
10.3 Property Management Agreement for
Burney Oaks Apartments
10.4 Property Management Agreement for
Brandywine Park Apartments
23.1 Consent of Independent Auditors*
23.2 Consent of Independent Auditors*
</TABLE>
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* To be filed by amendment.
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<PAGE>
Item 2. Acquisition or Disposition of Assets
BURNEY OAKS APARTMENTS
Arlington, Texas
On October 28, 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 Burney Oaks Apartments located
at 2502 Burney Oaks Lane in Arlington, Texas (the "Property").
The Property comprises 240 apartment units. The purchase price for the
Property was $9,300,000. The seller was JMB Institutional Apartment Limited
Partnership-II, an Illinois limited partnership, which is 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 Common Shares of the Company. Title to the Property was conveyed to the
Company by limited warranty deed.
Location. The Property is located on Burney Oaks Lane off of Highway 360 in
Arlington, 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.
Two significant recent developments in the area are Alliance Airport and
Texas Motor Speedway, located in North Tarrant County and Denton County,
respectively. Alliance Airport is a 418-acre non-passenger facility that serves
manufacturing companies in the export and transportation of their products.
Texas Motor Speedway occupies about 1,000 acres and seats about 160,000
spectators. The Speedway has created approximately 6,200 new temporary and
permanent jobs and is expected to generate more than $100 million annually in
tourism income.
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.
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<PAGE>
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.
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 Property is located in Tarrant County in the city of Arlington, which
is located between Dallas and Fort Worth. Arlington is approximately 13 miles
east of the Fort Worth Central Business District and approximately 20 miles west
of the Dallas Central Business District.
Owing in large part to its location between Dallas and Fort Worth,
Arlington has become a focus of business development in the area. Major
employers include General Motors, National Semiconductor, Johnson & Johnson,
Doskocil Manufacturing Company and Arlington Memorial Hospital. The area is also
the site of several large warehousing and distribution companies whose primary
market is The Metroplex.
The University of Texas at Arlington has an enrollment of approximately
23,000 students. Arlington also serves as a major medical center for its own
population and for residents of outlying communities as well. Arlington Memorial
Hospital has a staff of approximately 1,680 and HCA South Arlington Medical
Center has approximately 640 employees, making both of them among the largest
employers in the city.
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 Highways 360 and 183. The Property is an
approximately 20-minute drive from Dallas/Fort Worth International Airport, an
approximately 30-minute drive from the Dallas Central Business District, and an
approximately 15- minute drive from the Forth Worth Central Business District.
Description of the Property. The Property consists of 240 garden-style
apartment units in 12 two- and three-story buildings on approximately 9.6 acres
of land. The Property was constructed in 1985.
The Property offers 10 different unit types. The unit mix and rents being
charged new tenants as of October 1998 are as follows:
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<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE INTERIOR
QUANTITY TYPE SQUARE FOOTAGE MONTHLY RENTAL
-------- ---- -------------- --------------
<S> <C> <C> <C>
96 One bedroom, one bathroom 620 $ 515
8 One bedroom, one bathroom 710 575
w/desk
24 One bedroom, one bathroom 710 580
w/fireplace
32 One bedroom, one bathroom 800 620
w/sunroom
4 Two bedrooms, two bathrooms 965 705
w/desk
16 Two bedrooms, two bathrooms 965 710
w/fireplace
4 Two bedrooms, two bathrooms 1,000 725
w/desk
16 Two bedrooms, two bathrooms 1,000 730
w/fireplace
20 Two bedrooms, two bathrooms 1,050 740
w/sunroom
20 Two bedrooms, two bathrooms 1,120 750
w/sunroom
</TABLE>
The apartments provide a total of approximately 190,500 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
$180,000 for repairs and improvements to the Property, to include clubhouse
renovations, exterior painting and interior upgrades.
The following information is provided by the seller. Physical occupancy at
the Property averaged approximately 95% in 1993, 94% in 1994, 94% in 1995, 93%
in 1996, 95% in 1997 and 93% during the first nine months of 1998. 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 unit (800 square feet) rented for $450 in 1993, $475 in 1994,
$505 in 1995, $545 in 1996 and $545 in 1997. The average effective annual rental
per square foot at the Property for 1993, 1994, 1995, 1996 and 1997 was $6.67,
$7.04, $7.48, $8.07, and $8.07, respectively.
-6-
<PAGE>
The Property has an outdoor swimming pool, a fitness center, two saunas, a
heated Jacuzzi and controlled access. There is a clubhouse with a leasing office
and there is ample paved parking for tenants. There are also 228 covered parking
spaces.
The buildings are wood frame construction with exteriors of a combination
of brick veneer, painted wood and stucco 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 and
garbage disposal. Each unit has a washer and dryer, a pantry, a linen closet and
miniblinds. A total of 96 units have a fireplace and 24 units have a built-in
desk. The owner of the Property pays for cold water, sewer service, trash
removal and gas for hot water. The residents pay for their electricity usage,
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 95% on October 31, 1998.
As of October 28, 1998, the Property was approximately 94% occupied. The
tenants are a mix of white-collar and blue-collar workers, students and retired
persons.
The following table sets forth the 1998 real estate tax information on the
Property:
<TABLE>
<CAPTION>
JURISDICTION ASSESSED VALUE RATE TAX
------------ -------------- ---- ---
<S> <C> <C> <C>
County of Tarrant .......... $6,948,993 $2.10152 $146,034.20
City of Arlington .......... 6,948,993 0.63800 44,334.58
-----------
Total ................. $190,368.78
</TABLE>
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $8,283,095) 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.
-7-
<PAGE>
Material Factors Considered in Assessing the Property. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. The Dallas/Fort Worth area generally and the specific area in which the
Property is located were perceived as being characterized by a diverse, stable
and steadily growing economy. Accordingly, it was believed that such economy and
its anticipated growth and development would support stable occupancy rates and
reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the Advisor
believes that the Property has been well maintained and is in good condition,
although the Advisor believes that the planned repairs and improvements will
allow a further increase in rents at the Property.
3. The Property has an advantageous location - convenient to the
Dallas/Fort Worth International Airport and both downtown Dallas and downtown
Fort Worth - and is located in a rapidly-growing area proximate to centers of
employment and retail development in the city of Arlington.
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 Apple Residential Management Group, Inc. a property
acquisition fee equal to 2% of the purchase price of the property, or $186,000.
Apple Residential Management Group, 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>
BRANDYWINE PARK APARTMENTS
Richardson, Texas
On October 29, 1998, Apple REIT Limited Partnership purchased the
Brandywine Park Apartments located at 1111 Abrams Road in Richardson, Texas (the
"Property").
The Property comprises 196 apartment units. The purchase price for the
Property was $8,100,000. The seller was Abrams One Properties Limited
Partnership, a Texas limited partnership, which is not affiliated with the
Company, the Advisor or their affiliates. The purchase price was paid entirely
in cash using proceeds from the sale of Common Shares of the Company. Title to
the Property was conveyed to the Company by limited warranty deed.
Location. The Property is located on Abrams Road on the north side of
Interstate 635 (L.B.J. Freeway) and east of U. S. Highway 75 (Central
Expressway) in Richardson, outside of Dallas, Texas. The Property is located
within The Metroplex. See above under "Burney Oaks Apartments" for a description
of The Metroplex.
The immediate area surrounding the Property consists of other multi-family
and single-family housing, and commercial and retail development. The Property
is located less than a mile from a multi-billion-dollar Texas Instruments
facility. The Property is also located immediately adjacent to Richland
Community College, a two-year college. The Property is located near restaurants,
businesses, 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 196 garden-style
apartment units in 17 two-story buildings on approximately 11 acres of land. The
Property was constructed in 1978.
The Property offers three different unit types. The unit mix and rents
being charged new tenants as of October 1998 are as follows:
<TABLE>
<CAPTION>
APPROXIMATE INTERIOR
QUANTITY TYPE SQUARE FOOTAGE MONTHLY RENTAL
- -------- ---- -------------- --------------
<S> <C> <C> <C>
80 One bedroom, one bathroom 700 $530
60 Two bedrooms, two bathrooms 1,067 740
56 Three bedrooms, two 1,392 870
bathrooms
</TABLE>
The apartments provide a total of approximately 200,000 square feet of net
rentable area.
The Company believes the Property has generally been well maintained and is
in good condition for a property of its age. However, the Company has budgeted
approximately
-9-
<PAGE>
$1,078,000 for repairs and improvements to the Property, including clubhouse
renovations, siding replacement, exterior painting, pool renovations, foundation
corrections and interior upgrades.
The following information is provided by the seller. Physical occupancy at
the Property averaged approximately 96% in 1996 , 97% in 1997 and 97% during the
first nine months of 1998. Occupancy rates for earlier periods are not
available. 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 three-bedroom, two-bathroom apartment (1,392 square feet) rented for
$700 in 1993, $710 in 1994, $710 in 1995, $735 in 1996 and $750 in 1997. The
average effective annual rental per square foot at the Property for 1993, 1994,
1995, 1996 and 1997 was $6.50, $6.60, $6.60, $6.83, and $6.97, respectively.
The Property has an outdoor swimming pool, a playground and a picnic are.
There is also a clubhouse with a leasing office. There are also 196 covered
parking spaces and additional paved uncovered parking.
The buildings are wood frame construction with a combination of brick
veneer and painted wood siding exteriors 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 and
garbage disposal. All units have a washer and dryer, a wood-burning fireplace,
ten-foot ceilings, ceiling fans, mini and vertical blinds and assigned covered
parking. The owner of the Property pays for cold water, sewer service, trash
removal and gas for hot water. The tenants pay for their electricity service,
which includes cooking, lighting, heating and air-conditioning.
There are at least four 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 October 31, 1998.
As of October 26, 1998, the Property was approximately 98% occupied. The
tenants are a mix of white-collar and blue-collar workers and retired persons.
The following table sets forth the 1998 real estate tax information on the
Property:
<TABLE>
<CAPTION>
JURISDICTION ASSESSED VALUE RATE TAX
------------ -------------- ---- ---
<S> <C> <C> <C>
County of Dallas ............... $6,073,780 $0.4330 $ 26,303.96
City of Richardson ............. 6,073,780 0.4438 26,958.47
Richardson I.S.D ............... 6,073,780 1.6257 98,741.44
----------
Total ..................... $152,003.88
</TABLE>
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<PAGE>
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $6,161,411) 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 for a property of its age, although the Advisor believes that the
planned repairs and improvements will allow a further increase in rents at the
Property.
3. The Property has an advantageous location close to major employers,
including particularly a large Texas Instruments facility.
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 Apple Residential Management Group, Inc. a property
acquisition fee equal to 2% of the purchase price of the property, or $162,000.
Apple Residential Management Group, 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.
Item 5. Other Events
Cornerstone Realty Income Trust, Inc. ("Cornerstone") has been providing
property management, advisory and real estate brokerage services to the Company.
The property management and advisory services have been provided by Cornerstone
under subcontracts from Apple Residential Management Group, Inc. ("ARMG") and
Apple Residential Advisors, Inc. ("ARA"), the entities that originally
contracted with the Company for the providing of such services. As to the real
estate brokerage services, Cornerstone previously purchased the assets
-11-
<PAGE>
of Apple Realty Group, Inc. ("ARG") - consisting principally of the real estate
brokerage agreement - and thereby succeeded to ARG in providing such services to
the Company.
Effective at the close of business on September 30, 1998, the subcontract
agreements described above were terminated, and ARA assigned to ARMG its rights
and responsiblities under the advisory agreement. Thus, as of October 1, 1998,
the property management and advisory services to the Company are now performed
by ARMG using employees leased from Cornerstone. Effective October 1, 1998,
Cornerstone sold to ARMG its rights in the real estate brokerage agreement.
Beginning on such date ARMG will provide the services and be entitled to the
compensation under the real estate brokerage agreement. ARMG will lease
employees necessary to provide such services from Cornerstone.
It is not expected that the restructuring of the relationships under which
the Company receives property management, advisory and real estate brokerage
services will have any material effect on the Company since in substance
Cornerstone will continue to provide such services to the Company.
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<PAGE>
ITEM 7.a.*
- ---------------------
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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<PAGE>
ITEM 7.b.*
- ---------------------
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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<PAGE>
ITEM 7.c.*
- ---------------------
* To be filed by amendment. It is impracticable to include herein the required
pro forma financial information. The required pro forma financial information
will be filed as an amendment to this report as soon as possible, but in no
event more than 60 days after the date of filing of this report.
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<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Apple Residential Income Trust, Inc.
Date: November 11, 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 October 28, 1998
<TABLE>
<CAPTION>
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
<S> <C> <C>
10.1 Purchase Contract for Burney Oaks Apartments
10.2 Purchase Contract for Brandywine Park Apartments
10.3 Property Management Agreement for Burney Oaks
Apartments
10.4 Property Management Agreement for Brandywine
Park Apartments
23.1 Consent of Independent Auditors*
23.2 Consent of Independent Auditors*
</TABLE>
* To be filed by amendment.
-17-
EXHIBIT 10.1
AGREEMENT OF PURCHASE AND SALE
BURNEY OAKS APARTMENTS
ARLINGTON, TEXAS
By and Between
JMB INSTITUTIONAL APARTMENT LIMITED
PARTNERSHIP-II
an Illinois limited partnership,
Seller
and
CORNERSTONE REALTY GROUP, INC.,
a Virginia corporation
Purchaser
DATED: October __, 1998
<PAGE>
AGREEMENT OF PURCHASE AND SALE
BURNEY OAKS APARTMENTS, ARLINGTON, TEXAS
THIS AGREEMENT OF PURCHASE AND SALE is made and entered into this ___ day
of October, 1998 by and between JMB INSTITUTIONAL APARTMENT LIMITED
PARTNERSHIP-II, an Illinois limited partnership ("Seller"), having an address of
c/o Heitman Capital Management Corporation, 180 North LaSalle Street, Suite
3600, Chicago, Illinois 60601-6789, Attention: Howard J. Edelman; facsimile
number (312) 541-6738, and CORNERSTONE REALTY GROUP, INC., a Virginia
corporation ("Purchaser"), having an address of 306 E. Main Street, Richmond,
Virginia 23215 Attention: Gus G. Remppies, facsimile number (804) 782-9302.
RECITALS
Seller is the owner of a parcel of real estate in Arlington, Texas, legally
described on Exhibit A attached hereto and all buildings thereon (the "Real
Property", which together with any and all appurtenances thereto is collectively
referred to as the "Property"), commonly known as the Burney Oaks Apartments.
The Property consists of twelve (12) buildings containing two hundred forty
(240) residential apartment units
Subject to and on the terms and provisions of and for the considerations
set forth in this Agreement, Seller has agreed to sell, and Purchaser has agreed
to buy, the Property.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms have the
following meanings:
Closing. Shall have the meaning set forth in Section 4.1 hereof.
Closing Date . As agreed between Seller and Purchaser but no later than
October 28, 1998.
Due Diligence Period. The period commencing on September 28, 1998 and
ending on October 20, 1998.
Escrow Company. Near North National Title Corporation.
Title Company. Near North National Title Corporation, as agent for First
American Title Company.
-1-
<PAGE>
2. Sale: Purchase Price.
2.1 Subject to the terms and provisions hereof, Seller agrees to sell and
convey to Purchaser, and Purchaser agrees to purchase from Seller the Property.
2.2 The total purchase price (hereinafter called the "Purchase Price") to
be paid by Purchaser to Seller for the Property shall be Nine Million Three
Hundred Thousand and no/100 Dollars ($9,300,000.00). The Purchase Price shall be
payable in the following manner:
(a) EARNEST MONEY. Purchaser shall, within two (2) business days after
the delivery of this Agreement to Seller, deposit with the Escrow Company, as
escrow agent, the amount of Four Hundred Thousand and 00/100 Dollars
($400,000.00) (hereinafter called the "Initial Earnest Money") which Initial
Earnest Money shall be in the form of a wire transfer of immediately available
United States of America funds. In the event Purchaser desires an extension of
the Due Diligence Period, Purchaser shall provide Seller with written notice
thereof and deposit with the Escrow Company, as escrow agent, the amount of One
Hundred Thousand and 00/100 Dollars ($ 100,000.00 ) (hereinafter called the
"Additional Earnest Money") which Additional Earnest Money shall be in the form
of a wire transfer of immediately available United States of America funds. The
Initial Earnest Money and the Additional Earnest Money are collectively,
together with interest earned thereon, hereinafter called the "'Earnest Money".
The Initial Earnest Money shall become nonrefundable at the close of business on
October 29, 1998 unless this Agreement is terminated prior to the expiration of
the Due Diligence Period. The Additional Earnest Money shall become
nonrefundable upon the commencement of the Due Diligence Period extension by
Purchaser's deposit of the Additional Earnest Money with the Escrow Company. The
Earnest Money shall be held and disbursed by the Escrow Company acting as escrow
agent pursuant to the Earnest Money Escrow Agreement in the form of Exhibit B
attached hereto which the parties have executed simultaneously with this
Agreement. The Earnest Money shall be invested in a federally issued or insured
interest bearing instrument with any interest accruing thereon being deemed part
of the Earnest Money and shall be paid to the party to which the Earnest Money
is paid pursuant to the provisions hereof. If the sale hereunder is consummated
in accordance with the terms hereof, the Earnest Money and any interest thereon
shall be applied to the Purchase Price to be paid by Purchaser at the Closing.
In the event of a default hereunder by Purchaser or Seller, the Earnest Money
shall be applied as provided herein.
(b) CASH BALANCE. Purchaser shall. pay the balance of the Purchase
Price, subject to the prorations described in Section 5 below, in cash (the
"Cash Balance") by wire transfer of immediately available United States of
America funds to the Title
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<PAGE>
Company for payment to Seller, in accordance with the terms and conditions of
this Agreement, no later than 11:00 am (Chicago, Illinois) on the Closing Date.
3. Conditions Precedent. In the event any of the conditions set forth in
Sections 3.2(b) or 3.3 below shall not have been fulfilled, accepted or deemed
accepted or waived as provided herein on or before the applicable dates
specified herein, Purchaser shall have the right to terminate this Agreement by
giving written notice thereof to Seller on or before the respective dates
specified herein, and thereupon all Earnest Money shall be refunded to Purchaser
and neither party shall have any further rights or obligations hereunder, except
for the Surviving Obligations (as hereinafter defined).
3.1 Seller's Deliveries. Seller has delivered or made available to
Purchaser complete copies of the following items pertaining to the Property
which are in Seller's actual possession:
(a) all leases, occupancy agreements, and amendments thereto listed on
Schedule 1, and referenced in Section 6.6 (the "Leases");
(b) all service contracts, equipment leases and other agreements
listed on Schedule 2 (the "Service Contracts");
(c) copies of the real estate tax bills for the current year and two
prior years, if available;
(d) any existing environmental reports, including any Phase I
environmental report;
(e) the existing owner's title policy;
(f) the existing survey (the "Existing Survey");
(g) annual operating statements for the Property for the last two
calendar years and monthly operating statements for the months in the current
year; and
(h) plans and specifications.
Seller shall provide to Purchaser any documents described in this Section
3.1 and first coming into Seller's possession or produced by Seller after the
initial delivery and continue to provide the same during the pendency of this
Agreement.
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In the event this Agreement terminates for any reason, Purchaser shall
immediately return to Seller all information delivered by Seller or Seller's
agent(s) to Purchaser or Purchaser's agent(s). The foregoing provision shall
survive termination of this Agreement.
3.2 Due Diligence. Purchaser and its representatives shall be permitted to
enter upon the Property at any reasonable time and from time to time before the
Closing Date to examine, inspect and investigate the Property as well as all
records and other documentation provided by Seller or located at the Property
(collectively, "Due Diligence"). The Due Diligence shall be subject to the
terms, conditions and limitations set forth in this Section 3.2 and Purchaser's
conduct thereof shall be in strict compliance with its covenants and agreements
contained herein.
(a) Purchaser shall have a right to enter upon the Property for the
purpose of conducting its Due Diligence provided that in each such instance (i)
Purchaser notifies Seller of its intent to enter the Property to conduct its Due
Diligence not less than forty-eight (48) hours prior to such entry; (ii) the
date and approximate time period are scheduled with Seller, and (iii) Purchaser
is in full compliance with the insurance requirements set forth in Section
3.2(f) hereof. At Seller's election, a representative of Seller shall be present
during any entry by Purchaser or its representatives upon the Property for
conducting its Due Diligence. Purchaser shall take all necessary actions to
ensure that neither it nor any of its representatives interfere with the tenants
or ongoing operations occurring at the Property. Purchaser shall not cause or
permit any mechanic liens, materialmen's liens or other liens to be filed
against the Property as a result of its Due Diligence.
(b) Purchaser shall have, through the last day of the Due Diligence
Period in which to conduct its Due Diligence and, in Purchaser's sole
discretion, to determine whether the Property is acceptable to Purchaser.
Purchaser may, for any or no reason, terminate this Agreement by giving written
notice of termination to Seller on or before the last day of the Due Diligence
Period. On or before the expiration of the Due Diligence Period, Purchaser shall
deliver to Seller a written notice indicating whether it will proceed with the
transaction. If Purchaser does not timely give notice of termination as
aforesaid, Purchaser shall be deemed to have elected to purchase the Property in
accordance with the terms and conditions of this Agreement and this Agreement
shall continue in full force and effect. In the event of such termination, the
Earnest Money, including any interest thereon, shall be returned to Purchaser
and neither party shall have any further obligations to the other party
hereunder, except for the Surviving Obligations.
(c) Purchaser shall assume any or all of the Service Contracts on the
Closing Date. In the event Purchaser desires to cancel any of the Service
Contracts, Purchaser shall, prior to the Closing Date, notify Seller in writing
requesting termination of any or all of the Service Contracts, which are noted
on Schedule 2 as being terminable upon
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thirty (30) days notice, that Purchaser does not elect to assume. If Purchaser
does give notice requesting termination of a Service Contract prior to the
Closing Date, Purchaser shall be deemed to have accepted the assumption of such
Service Contract. Purchaser shall assume all other Service Contracts listed on
Schedule 2.
(d) Purchaser shall have the right to conduct, at its sole cost and
expense, any Inspections, studies or tests that Purchaser deems appropriate in
determining the condition of the Property, provided, however, Purchaser is not
permitted to perform any intrusive testing, including, without limitation, a
Phase II environmental assessment or boring, without (i) submitting to Seller
the scope and inspections for such testing; and (ii) obtaining the prior written
consent of Seller for such testing, which consent shall not be unreasonably
withheld, denied or delayed, except in connection with ground water testing, in
which case Seller may withhold its consent in its sole and absolute discretion.
(e) Purchaser agrees and covenants with Seller not to disclose to any
third party (other than its affiliates, investors, lenders, employees, agents,
attorneys and other professionals and consultants in connection with the
transaction contemplated herein) without Seller's prior written consent unless
Purchaser is obligated by law to make such disclosure, any of the reports or any
other documentation or information obtained by Purchaser which relates to the
Property or Seller in any way, all of which shall be used by Purchaser and its
agents solely in connection with the transaction contemplated hereby. In the
event that this Agreement is terminated, Purchaser agrees that all such
information will be held in strict confidence.
(f) Purchaser agrees to indemnify, protect, defend and hold Seller and
its partners, trustees, beneficiaries, shareholders, members, managers, advisors
and other agents and their respective partners, affiliates, trustees,
beneficiaries, employees, officers, directors and shareholders (collectively,
the "Indemnified Parties") harmless from and against any and all liabilities,
demands, actions, causes of action, suits, claims, losses, damages, costs and
expense (including without limitation actual reasonable attorneys fees and court
costs and litigation expenses) made, brought, sought, suffered or incurred by
any of the Indemnified Parties as a result of or in connection with any
activities of Purchaser (including activities of any of Purchaser's employees,
consultants, contractors or other agents) by reasons directly or indirectly
arising out of, caused by or relating to the inspection of the Property,
including, without limitation, mechanics' liens, damage to the Property, injury
to persons or property resulting from such activities in connection therewith
after notice. In the event that the Property is disturbed or altered in any way
as a result of such activities, Purchaser shall promptly restore the Property to
its condition existing prior to the commencement of such activities which
disturb or alter the Property. Furthermore, Purchaser agrees to maintain and
cause any of its representatives or agents conducting any Due Diligence to
maintain and have in effect commercial general liability insurance with (i)
limits of not less than One Million and 00/100 Dollars (S1,000,000.00) for
personal
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Diligence, to maintain and have in effect commercial general liability insurance
with (i) limits of not less than One Million and 00/100 Dollars ($ 1,000,000.00)
for personal injury, including bodily injury and death, and property damage,
(ii) such insurance shall name JMB Institutional Apartment Limited
Partnership-II, Heitman Capital Management Corporation ("HCMC") and
Kennedy-Wilson Properties, Ltd. as additional insureds and (iii) waiver of
subrogation, if available. Purchaser shall deliver to Seller a copy of the
certificate of insurance effectuating the insurance required hereunder prior to
the commencement of such activities which certificate shall provide that such
insurance shall not be terminated or modified without at least thirty (30) days'
prior written notice to Seller.
(g) Purchaser acknowledges and agrees that it shall have no right to
review or inspect any of the following: (i) internal memoranda, correspondence,
analyses, documents or reports prepared by or for Seller or an affiliate of
Seller in connection with this (A) Agreement (B) the transaction contemplated by
this Agreement, (C) the acquisition of the Property by Seller (other than
environmental reports, if any) or (D) any prior or current contemplated
reorganization of Seller and certain affiliated funds, (ii) communications
between Seller and HCMC, and (iii) appraisals, assessments or other valuations
of the Property in the possession of Seller or HCMC.
(h) Purchaser agrees and covenants with Seller not to conduct or cause
to be conducted any written or oral communications with any tenant regarding
renegotiating current lease terms or renewal lease terms.
(i) Sections 3.2(e) and 3.2(f) and such other provisions in this
Agreement designated as surviving shall survive Closing for a period of four (4)
months or any termination of this Agreement (collectively, the "Surviving
Obligations").
3.3 Title and Survey. Seller shall, at Seller's sole cost and expense,
obtain and deliver to Purchaser for Purchaser's review a commitment for a
standard owner's policy of title insurance along with a copy of each instrument
listed as an exception thereon (the "Title Commitment") on the Real Property
issued by the Title Company and the Updated Survey. During the Due Diligence
Period, Purchaser shall have the right to obtain, at its sole cost and expense,
any desired endorsements to the Title Commitment which are available. Purchaser
may elect to receive modifications to the Updated Survey (the "Modified Survey")
by notifying Seller of such election in writing within five (5) days after
Purchaser's receipt of the Updated Survey. If Purchaser so elects, Seller shall,
at Purchaser's sole cost and expense, obtain and deliver to Purchaser for
Purchaser's review the Modified Survey. Purchaser shall have until the date
which is fifteen days after receipt of the Title Commitment and Updated Survey
(such date being referred to as the "Title Review Date") far examination of
Title Commitment and Updated Survey and the making of any objections thereto,
said objections to be made in writing and delivered to Seller on or before the
Title Review Date. If
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exceptions and matters and any exceptions or matters caused by or through
Purchaser shall be included in the term "Permitted Exceptions" as used herein.
In the event Purchaser elects to receive the Modified Survey, then Purchaser
shall have until the expiration of the Due Diligence Period for examination of
the Modified Survey and the making of objections only to matters shown thereon
that were not shown on the Updated Survey, such objections to be made in writing
and delivered to Seller on or before the expiration of the Due Diligence Period.
If Purchaser shall fail to make any such objections to the Modified Survey on or
before the expiration of the Due Diligence Period, Purchaser shall be deemed to
have accepted the form and substance of the Modified Survey and all matters
shown thereon; all such exceptions and matters and any exceptions or matters
caused by or through Purchaser shall be included as Permitted Exceptions. If any
objections to (i) the Title Commitment or Updated Survey are made on or before
the Title Review Date, or (ii) the Modified Survey with respect to matters not
shown on the Updated Survey are made on or before the expiration of the Due
Diligence Period, then Seller shall have the right but not, the obligation, to
(w) cure (by removal, endorsement or otherwise) such objections on or before the
Closing Date or (x) terminate this Agreement by giving notice to Purchaser on or
before the date which is two (2) business days after the Due Diligence Period.
If no such notice from Seller concerning such election is received by Purchaser
by such date, then Seller shall be deemed to have elected not to cure any such
objections. If this Agreement is not so terminated by Seller, and any such
objections are not cured by Seller by the scheduled Closing Date, then Purchaser
may as its only option, elect to either: (y) waive such objection(s) and
consummate the transaction contemplated by this Agreement without adjustment to
the Purchase Price; or (z) terminate this Agreement in which event the Earnest
Money shall be returned to Purchaser and neither party shall have any further
obligations to the other party except for the Surviving Obligations.
4. Closing; Conditions; Deliveries.
4.1 Time, Place and Manner of Closing. The Closing shall be held on the
Closing Date in the offices of the Title Company or at any location mutually
acceptable to the parties.
4.2 Condition to Parties' Obligation to Close. In addition to all other
conditions set forth in this Agreement, the obligation of Seller, on the one
hand, and Purchaser, on the other hand, to consummate the transaction
contemplated hereunder shall be contingent upon the following:
(a) The other party's representations and warranties contained herein
shall be true and correct in all material respects as of the date of this
Agreement and the Closing Date;
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(b) As of the Closing Date, the other party shall have performed its
obligations hereunder in all material respects and all deliveries to be made at
Closing by such other party have been tendered;
(c) As of the Closing Date, there shall exist no pending action, suit
or proceeding with respect to the other party before or by any court or
administrative agency which seeks to restrain or prohibit, or to obtain damages
or a discovery order with respect to, this Agreement or the consummation of the
transactions contemplated hereby; and
(d) Simultaneously with execution of this Agreement, Purchaser shall
have delivered to Seller a fully executed original ERISA certificate in the form
of Exhibit F attached hereto.
(e) Seller acknowledges that Purchaser is a public entity and that
Purchaser is required to furnish statements to the Securities and Exchange
Commission in connection with the acquisition of the Property. Seller hereby
agrees to make any information required by the Securities and Exchange
Commission available to Purchaser so that Purchaser may audit the last twelve
(12) months of operation of the Property in order that a report may be generated
in compliance with accounting Regulation S-X of the Securities and Exchange
Commission.
4.3 Deliveries. At Closing each party shall execute and deliver to the
other and/or the Escrow Company the following documents:
(a) Seller shall deliver to Purchaser and/or the Escrow Company:
(i) a special warranty deed (the "Deed") to the Property in
recordable form, duly executed by Seller and acknowledged and in substantially
the same form as set forth in Exhibit G attached hereto, conveying to Purchaser
title to the Real Property, subject to the Permitted Exceptions;
(ii) a bill of sale duly executed by Seller and in substantially
the same form as set forth in Exhibit H attached hereto, conveying to Purchaser
title to all personal property owned by Seller and located at the Real Property,
if any;
(iii) an assignment to Purchaser of the Leases duly executed by
Seller and in substantially the same form as set forth in Exhibit I attached
hereto;
(iv) an assignment to Purchaser of the Service Contracts and
other third party contracts pursuant to Section 5.8 hereof being assumed
hereunder, licenses and permits affecting the Property (to the extent freely
assignable) duly executed by Seller and in substantially the same form as set
forth in Exhibit J attached hereto;
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(v) a non-foreign transferor certification pursuant to Section
1445 of the Internal Revenue Code and any similar provisions of applicable state
law, in substantially the same form as set forth on Exhibit K attached hereto
(the "Affidavit");
(vi) a certified resolution of Seller certifying that Seller has
the legal power, right and authority to consummate the sale of the Property;
(vii) originals of the leases and keys to the Property;
(viii) originals or copies of all signed leases and rental
agreements in effect with tenants of the Property not for more than one (1)
year, Purchaser hereby agrees that for purposes of this Section 4.3(a)(viii)
such leases and rental agreements shall be deemed delivered by Seller so long as
such leases and rental agreements are located on the Property;
(ix) an affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens;
(x) to the extent owned by Seller and assignable, an assignment
to Purchaser of all rights, title and interest of Seller in and to the business
and trade name, "Burney Oaks Apartments" and the business telephone number (the
"Intangible Property") in substantially the same form as set forth on Exhibit N;
(xi) a written termination of the management agreement in
substantially the same form attached hereto as Exhibit O;
(xii) a representation letter as normally required by auditors
for a public company in the form attached hereto as Exhibit P. The delivery of
such representation letter shall survive the Closing for a period of four (4)
months; and
(xiii) any such other documents as are required by the Title
Company.
(b) Purchaser shall deliver to Seller or the Escrow Company:
(i) the Cash Balance, by wire transfer, as provided in Section
2.2(b) hereof;
(ii) an assumption duly executed by the Purchaser of the
assignments described in Sections 4.3(a)(iii) and (iv); and
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(iii) a certified resolution of Purchaser certifying that
Purchaser has the legal power, right and authority to consummate the purchase of
the Property.
(c) Seller and Purchaser shall jointly deliver to the Escrow Company:
(i) A closing statement;
(ii) All transfer declarations or similar documentation required
by law;
(iii) Letters to the tenants of the Property in the form of
Exhibit L attached hereto; and
(iv) Notices in substantially the form of Exhibit M attached
hereto to the other party to each Service Contract assumed by Purchaser pursuant
to Section 3.2(c) of this Agreement.
(d) The Escrow Company shall deliver to Purchaser an initialed mark-up
of the Title Commitment, extending the effective date to the Closing Date,
insuring Purchaser as owner of the Real Property in the full amount of the
Purchase Price, and removing all exceptions other than Permitted Exceptions.
(e) Seller shall deliver all apartment units vacated at least seven
(7) days prior to the Closing Date in rent ready condition on the Closing Date.
4.4 Permitted Termination. So long as a party is not in default hereunder,
if any condition to such party's obligation to proceed with the Closing
hereunder has not been satisfied or waived as of the Closing Date or such
earlier date as provided herein, such party may, in its sole discretion,
terminate this Agreement by delivering written notice to the other party before
the Closing Date, or elect to close, notwithstanding the non-satisfaction of
such condition, except Seller's obligation to make apartment units rent-ready
and to deliver the Property in the condition set forth herein, in which event
such party shall be deemed to have waived any such condition.
5. Prorations. All items of income and expense shall be paid, prorated or
adjusted as of the close of business on the day prior to the Closing Date (the
"Proration Date") in the manner hereinafter set forth:
5.1 Purchaser shall be credited with the amount of all rents received by
Seller and attributable to any month commencing after the Closing Date, (ii) all
unapplied cash security deposits held by Seller and which were made by tenants
under all leases of the Real Property
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in effect as of the Closing Date, and (iii) all prepaid security deposits for
leases whose terms have not commenced as of the Closing Date.
5.2 Any amounts received from tenants after Closing shall be applied on a
tenant by tenant basis in the following order: (i) first on account of any
amount then due and payable to Purchaser from such tenant(s); (ii) next, on
account of any amount due Seller from such tenant(s) for the period up to and
including the Proration Date and (iii) finally, any balance then remaining to
Purchaser. Seller retains the right to pursue its remedies against tenants after
Closing for any delinquent payments or other amounts owed to Seller, except for
actions or proceedings affecting possession or landlord liens. However, Seller
will not exercise any such rights or remedies unless such delinquent rents have
not been collected by Purchaser and paid to Sell within three (3) months after
the Closing Date. Any money due to Seller shall be remitted to Seller within
five (5) business days after the end of each month in which Purchaser receives
such money.
5.3 Operating expenses, including, without limitation, transferable
permits, licenses, membership dues, and any other prepaid expenses, shall be
prorated between Purchaser and Seller based upon the actual days of their
respective ownership of the Property utilizing the actual expenses or reasonable
estimates.
5.4 Real estate taxes shall be prorated between Seller and Purchaser based
upon the actual days of ownership of the parties for the year in which Closing
occurs utilizing the most recent ascertainable tax bill(s). Seller and Purchaser
agree to reprorate said real estate taxes upon Purchaser's receipt of the actual
tax bill for the tax year in question, if any. Seller shall retain all rights
with respect to any refund of taxes applicable to any period prior to the
Closing Date.
5.5 Except for utilities billed directly to tenants, utilities shall be
prorated as of the Proration Date based upon estimates using the prior month's
actual invoices.
5.6 All insurance policies and property management agreements shall be
terminated as of the Closing Date and there shall be no proration with respect
to these items.
All other items which are customarily prorated in transactions similar to the
transaction contemplated hereby and which were not heretofore dealt with, will
be prorated as of the Proration Date. In the event any prorations or
computations made under this Section are based on estimates or prove to be
incorrect, then either party shall be entitled to an adjustment to correct the
same, provided that it makes written demand on the party from whom it is
entitled to such adjustment within one hundred and twenty days after the end of
the current calendar year.
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6. Seller's Representations, Warranties and Covenants. Seller hereby
represents, warrants and covenants as follows:
6.1 Power. Seller has the legal power, right and authority to enter into
this Agreement and the instruments referenced herein and to consummate the
transactions contemplated hereby.
6.2 Requisite Action. All requisite action (corporate, trust partnership or
otherwise) has been taken by Seller in connection with entering into this
Agreement and the instruments referenced herein and the consummation of the
transactions contemplated hereby. No consent of any partner, shareholder,
member, creditor, investor, judicial or administrative body, authority or other
party is required which has not been obtained to permit Seller to enter into
this Agreement and consummate the transaction contemplated hereby.
6.3 Authority. The individuals executing this Agreement and the instruments
referenced herein on behalf of Seller have the legal power, right and actual
authority to bind Seller to the terms and conditions hereof and thereof.
6.4 Validity. This Agreement and all documents required hereby to be
executed by Seller are and shall be valid, legally binding obligations of and
enforceable against Seller in accordance with their terms.
6.5 Conflicts. None of the execution and delivery of this Agreement and
documents referenced herein, the incurrence of the obligations set forth herein,
the consummation of the transactions herein contemplated or referenced herein
conflicts with or results in the material breach of any terms, conditions or
provisions of or constitutes a default under, any bond, note, or other evidence
of indebtedness or any contract, lease or other agreements or instruments to
which Seller is a party.
6.6 Leases. Attached hereto as Schedule 1 is a complete and accurate list
of the leases, occupancy agreements and amendments thereto (collectively "Lease
Documents") relating to the Property as of the date of this Agreement, which
shall be updated by Seller prior to Closing, if necessary including the addition
thereto of Lease Documents executed after the date of this Agreement through the
Closing Date.
6.7 Service Contracts. Attached hereto as Schedule 2 is a complete and
accurate list of the service contracts, equipment leases and other agreements
relating to the Property as of the date of this Agreement which shall be updated
by Seller prior to Closing, if necessary including the addition thereto of any
such agreements executed after the date of this Agreement through the Closing
Date.
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6.8 Notices. Seller has not received any written notice that the Property,
and all present uses and operations thereof, are in violation of any applicable
zoning, or land-use laws.
6.9 Litigation. Except as set forth on Schedule 3 and except for matters
covered by insurance no litigation has been served upon Seller, nor to the best
of the Seller's knowledge has been filed, or threatened in writing, affecting
the Seller's ability to consummate the transaction contemplated by this
Agreement. Schedule 3 shall be updated by Seller prior to Closing, if necessary.
6. 10 Environmental Condition. Seller has no knowledge of any violation of
Environmental Laws related to the Property or the presence or release (other
than as permitted by law) of Hazardous Materials on or from the Property except
as disclosed in the environmental reports, studies and other information
relating to the environmental condition of the Property delivered by Seller to
Purchaser or made available for Purchaser's review. The term "Environmental
Laws" means the Resource Conservation and Recovery Act and the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA") 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 in
effect as of the date of this Agreement. "Hazardous Materials" means any
substance which is (i) designated, defined, classified or regulated as a
hazardous substance, hazardous material, hazardous waste, pollutant or
contaminant under any Environmental Law, as currently in effect as of the date
of this Agreement, (ii) petroleum hydrocarbon, including crude oil or any
fraction thereof and all petroleum products, (iii) PCBs, (iv) lead, (v) friable
asbestos, (vi) flammable explosives, (vii) infectious materials, or (viii)
radioactive materials.
6.11 Indemnity. Seller shall indemnify and hold Purchaser harmless from and
against any and all claims, actions, judgments, liabilities, liens, damages,
penalties, fines, costs and reasonable attorneys' fees, foreseen or unforeseen,
asserted against, imposed on or suffered or incurred by Purchaser (or the
Property) directly or indirectly arising out of or in connection with any breach
of the warranties, representations and covenants set forth in this Section 6.
The warranties and representations set forth in this Section 6 shall be deemed
remade as of Closing and updated if necessary, and said warranties and
representations as so remade and updated, and the indemnity obligation set forth
in herein shall survive Closing, provided that any claim by Purchaser based upon
a misrepresentation or breach of any warranty or representation or indemnity
obligation under this Section 6 shall be deemed waived unless Purchaser has (i)
delivered to Seller written notice of such claim prior to the
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date which is four (4) months after the Closing Date, and (ii) filed suit within
two (2) months after delivery to Seller of any such notice of claim.
6.12 Dead-bolt Lock. Seller warrants that it has complied with the keyless,
dead-bolt lock requirement pursuant to Section 92 of the Texas Property Code.
As used in this Section 6, the term "to Seller's knowledge" "actual knowledge"
or "best of Sellers knowledge" or words of similar import (i) shall mean the
actual knowledge of Howard J. Edelman and Tom Rogers and not to any other
persons, (ii) shall mean the actual knowledge of such individuals, without any
investigation or inquiry of any kind, and (iii) shall not mean such individuals
are charged with knowledge of the acts, omissions and/or knowledge of Seller's
agents or employees.
Notwithstanding anything contained in this Agreement to the contrary,
Seller shall have no liability for breaches of any representations, warranties
and certifications (the "Representations") which are made by Seller herein or in
any of the documents or instruments required to be delivered by Seller hereunder
if Purchaser, its officers, employees, shareholders, members, partners, or
agents had knowledge of such breach by Seller (including, without limitation,
knowledge gained by Purchaser in the course of its Due Diligence as to a fact or
circumstance which, by its nature, indicates that a Representation was or has
become untrue or inaccurate) at Closing where Purchaser elects to proceed to
close the transaction contemplated by this Agreement, and Purchaser shall not
otherwise have the right to bring any lawsuit or other legal action against
Seller, nor pursue any other remedies against Seller, as a result of the breach
of such Representation caused thereby, but Purchaser's sole right shall be to
terminate this Agreement in which event, the Earnest Money shall be returned to
Purchaser.
7. Purchase As-Is. EXCEPT FOR THE REPRESENTATIONS OF SELLER EXPRESSLY SET
FORTH IN SECTION 6 OF THIS AGREEMENT, PURCHASER WARRANTS AND ACKNOWLEDGES TO AND
AGREES WITH SELLER THAT PURCHASER IS PURCHASING THE PROPERTY IN ITS "AS-IS,
WHERE IS" CONDITION "WITH ALL FAULTS" AS OF THE CLOSING DATE AND SPECIFICALLY
AND EXPRESSLY WITHOUT ANY WARRANTIES, REPRESENTATIONS OR GUARANTEES, EITHER
EXPRESS OR IMPLIED, AS TO ITS CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE,
MERCHANTABILITY, OR ANY OTHER WARRANTY OF ANY KIND, NATURE, OR TYPE WHATSOEVER
FROM OR ON BEHALF OF SELLER. EXCEPT FOR THE REPRESENTATIONS OF SELLER EXPRESSLY
SET FORTH IN SECTION 6 OF THIS AGREEMENT, SELLER SPECIFICALLY DISCLAIMS ANY
WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST OR PRESENT, EXPRESS
OR IMPLIED, CONCERNING (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE
PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER,
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STRUCTURAL INTEGRITY, SOIL AND GEOLOGY; (B) THE INCOME TO BE DERIVED FROM THE
PROPERTY; (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND
USES WHICH PURCHASER MAY CONDUCT THEREON, INCLUDING THE POSSIBILITIES FOR FUTURE
DEVELOPMENT OF THE PROPERTY; (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS
OPERATION WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE
GOVERNMENTAL AUTHORITY OR BODY; (E) THE HABITABILITY, MERCHANTABILITY,
MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE
PROPERTY; (F) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY,
INCORPORATED INTO THE PROPERTY; (G) THE MANNER, QUALITY, STATE OF REPAIR OR LACK
OF REPAIR OF THE PROPERTY; (H) THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS
AT, UNDER, OR ADJACENT TO THE PROPERTY OR ANY OTHER ENVIRONMENTAL MATTER OR
CONDITION OF THE PROPERTY; OR (I) ANY OTHER MATTER WITH RESPECT TO THE PROPERTY.
PURCHASER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES OF SELLER CONTAINED IN SECTION 6 OF THIS AGREEMENT, ANY INFORMATION
PROVIDED BY OR ON BEHALF OF SELLER WITH RESPECT TO THE PROPERTY WAS OBTAINED
FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT
INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS
AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. SELLER WARRANTS TO
PURCHASER THAT ALL OF THE DOCUMENTATION RELATING TO THE PROPERTY PROVIDED TO
PURCHASER BY SELLER HAS BEEN PREPARED IN THE ORDINARY COURSE OF BUSINESS. SELLER
IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY ORAL OR WRITTEN STATEMENTS,
REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION
THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER
PERSON EXCEPT FOR THE EXPRESS REPRESENTATIONS SET FORTH IN SECTION 6 OF THIS
AGREEMENT. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT PURCHASER IS A
SOPHISTICATED AND EXPERIENCED PURCHASER OF PROPERTIES SUCH AS THE PROPERTY AND
HAS BEEN DULY REPRESENTED BY COUNSEL IN CONNECTION WITH THE NEGOTIATION OF THIS
AGREEMENT. EXCEPT AS MAY OTHERWISE BE PROVIDED HEREIN, SELLER HAS MADE NO
AGREEMENT TO ALTER, REPAIR OR IMPROVE ANY OF THE PROPERTY.
8. Confidentiality. Seller agrees and covenants with Purchaser not to disclose
to any third party (other than its affiliates, investors, employees, agents,
attorneys and other professionals and consultants in connection with the
transaction contemplated herein) without Purchaser's prior written consent,
unless Seller is obligated by law to make such disclosure, any of the reports or
any other documentation or information obtained by Seller
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<PAGE>
which relates to the Property or Purchaser in any way, all of which shall be
used by Seller and its agents solely in connection with the transaction
contemplated hereby. In the event that this Agreement is terminated, Seller
agrees that all such information will be held in strict confidence.
9. Purchaser's Representations, Warranties and Covenants. Purchaser hereby
represents, warrants and covenants as follows:
9.1 Power, Purchaser has the legal power, right and authority to enter into
this Agreement and the instruments referenced herein and to consummate the
transactions contemplated hereby.
9.2 Requisite Action. All requisite action (corporate, trust, partnership
or otherwise) has been taken by Purchaser in connection with entering into this
Agreement and the instruments referenced herein and the consummation of the
transactions contemplated hereby. No consent of any partner, shareholder,
member, creditor, investor, judicial or administrative body, authority or other
party is required which has not been obtained or shall not be obtained prior to
the Closing Date to permit Purchaser to enter into this Agreement and consummate
the transaction contemplated hereby.
9.3 Authority. The individuals executing this Agreement and the instruments
referenced herein on behalf of Purchaser have the legal power, right and actual
authority to bind Purchaser to the terms and conditions hereof and thereof.
9.4 Validity. This Agreement and all documents required hereby to be
executed by Purchaser are and shall be valid, legally binding obligations of and
enforceable against Purchaser in accordance with their terms.
9.5 Conflicts. Neither the execution and delivery of this Agreement and
documents referenced herein, nor the incurrence of the obligations set forth
herein, nor the consummation of the transactions herein contemplated, nor
referenced herein conflict with or result in the material breach of any terms,
conditions or provisions of or constitute a default under, any bond, note, or
other evidence of indebtedness or any contract, lease or other agreements or
instruments to which Purchaser is a party.
9.6 Litigation. There is no action, suit or proceeding pending or
threatened against Purchaser in any court or by or before any other governmental
agency or instrumentality which would materially and adversely affect the
ability of Purchaser to carry out the transactions contemplated by this
Agreement.
9.7 Indemnity. Upon timely written notice to Purchaser by any indemnified
Party, Purchaser shall have the right to defend the Indemnified Parties against
any third party claims
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<PAGE>
or actions. Purchaser shall also indemnify, protect and hold the Indemnified
Parties harmless from and against any and all claims, actions, judgments,
liabilities, liens, damages, penalties, fines, costs and reasonable attorneys'
fees, foreseen or unforeseen, asserted against, imposed on or suffered or
incurred by Seller directly or indirectly arising out of or in connection with
any breach of the warranties, representations and covenants set forth in this
Section 8 or the inaccuracy of the ERISA Certificate. The warranties,
representations and indemnities set forth in this Section 8 shall be deemed
remade as of Closing and shall survive Closing, and said warranties and
representations as so remade, and the indemnity obligation set forth in herein
shall be deemed waived unless Seller has given Purchaser written notice of any
such claim prior to the date which is four (4) months from the Closing Date.
10. Closing Costs. Seller shall pay the following expenses: (i) the costs to
obtain a standard owner's title policy; (ii) the costs to obtain the Updated
Survey; (iii) one-half of all closing escrow fees, including "New York Style"
closing fees; and (iv) Seller's legal fees and expenses. Purchaser shall pay the
following expenses: (a) the costs for any endorsements to the title policy; (b)
the cost of any reinsurance of the title policy; (c) the costs to obtain
modifications to the Updated Survey; (d) one-half of all closing escrow fees,
including "New York Style" closing fees; (e) the fee for the recording of the
Deed; (f) all costs and expenses incurred in connection with the transfer of any
transferable permits, warranties or licenses in connection with the ownership or
operation of the Property; (g) all costs and expenses associated with
Purchaser's financing, if any; and (h) Purchaser's legal fees and expenses. The
provisions of this Section 9 shall survive Closing or any termination of this
Agreement.
11. Commissions. Seller shall be solely responsible for the payment of the
commission to O'Boyle Properties, Inc. Seller and Purchaser each warrant and
represent to the other that (other than O'Boyle Properties, Inc.) neither has
had any dealings with any broker, agent, or finder relating to the sale of the
Property or the transactions contemplated hereby, and each agrees to indemnify
and hold the other harmless against any claim for brokerage commissions,
compensation or fees by any broker, agent, or finder in connection the sale of
the Property or the transactions contemplated hereby resulting from the acts of
the indemnifying party. The provisions of this Section 10 shall survive Closing.
12. New York Style Closing. It is contemplated that the transaction shall be
closed by means of a so-called New York Style Closing, with the concurrent
delivery of the documents of title, transfer of interest, delivery of the title
policy or marked-up title commitment described in Section 4.3(d) and the payment
of the Purchase Price. Seller and Purchaser agree that disbursement of the
Purchase Price, as adjusted by the prorations, shall not be conditioned upon the
recording of the Deed, but rather, upon the agreement by the Title Company to
issue the title policy. Seller and Purchaser shall each provide any undertaking
to the Title Company necessary to accommodate the New York Style Closing.
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13. Attorneys' Fees and Costs. In the event suit or action is instituted to
interpret or enforce the terms of this Agreement, or in connection with any
arbitration or mediation of any dispute, the prevailing party shall be entitled
to recover from the other party such sum as the court, arbitrator or mediator
may adjudge reasonable as such party's costs and attorney's fees, including such
costs and fees as are incurred in any trial, on any appeal, in any bankruptcy
proceeding (including the adjudication of issues peculiar to bankruptcy law) and
in any petition for review. Each party shall also have the right to recover its
reasonable costs and attorney's fees incurred in collecting any sum or debt owed
to it by the other party, with or without litigation, if such sum or debt is not
paid within fifteen (15) days following written demand therefor.
14. Notice. All notices, demands, deliveries and communications (a "Notice")
under this Agreement shall be delivered or sent by: (i) first class, registered
or certified mail, postage prepaid, return receipt requested, (ii) nationally
recognized overnight carrier, or (iii) facsimile with original Notice sent via
overnight delivery addressed to the address of the party in question set forth
in the first paragraph of this Agreement and copies to the parties designated
below or to such other address as either party may designate by Notice pursuant
to this Section 13. Notices shall be deemed given (x) three business days after
being mailed as provided in clause (i) above, (y) one business day after
delivery to the overnight carrier as provided in clause (ii) above, or (z) on
the day of the transmission of the facsimile so long as it is received in its
entirety by 5:00 pm (New York City, New York Time) on such day and the original
of such Notice is received the next business day via overnight mail as provided
in clause (iii) above.
Notices to Seller copy to: Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60606
Attn.: Melvin K. Lippe
Facsimile No.: (312) 715-4800
Notices to Purchaser copy to: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut Street
Cedarhurst, NY 11516
Facsimile No.: (516) 374-3490
And Bob Morrison, Esq.
Brown McCarroll & Oak Hartline
300 Crescent Court
Suite 1400
Dallas, TX 75201
Facsimile No.: (214) 999-6170
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<PAGE>
15. Fire or Other Casuality; Condemnation.
15.1 If the Property or any part thereof is damaged by fire or other
casualty prior to the Closing Date which would cost in excess of $200,000.00 to
repair (as determined by an insurance adjuster selected by the insurance
carriers), Purchaser may terminate this Agreement by written notice to Seller
given on or before the earlier of (i) twenty (20) days following such casualty
or (ii) the Closing Date. In the event of such termination, this Agreement shall
be of no further force and effect and, except for the Surviving Obligations,
neither party shall thereafter have any further obligation under this Agreement,
and Seller shall direct the Escrow Company to promptly return all Earnest Money
to Purchaser. If Purchaser does not elect to terminate this Agreement or the
cost of repair is determined by said adjuster to be less than $200,000.00, then
the Closing shall take place as herein provided without abatement of the
Purchase Price, and Seller shall assign and transfer to Purchaser on the Closing
Date, without warranty or recourse, all of Seller's right, title and interest to
the balance of insurance proceeds paid or payable to Seller on account of such
fire or casualty remaining after reimbursement to Seller for the total amount of
all costs and expenses incurred by Seller in connection therewith including but
not limited to making emergency repairs, securing the Property and complying
with applicable governmental requirements. Seller shall reimburse Purchaser for
any rent loss suffered by Purchaser which occurs after the Closing Date. Seller
shall pay to Purchaser the amount of the deductible of any of Seller's
applicable insurance policies.
15.2 If any material portion of the Property is taken in eminent domain
proceedings prior to Closing or a notice of intent to take is provided to Seller
by any condemning authority, Purchaser may terminate this Agreement by notice to
Seller given on or before the earlier of (i) twenty (20) days after such taking
or (ii) the Closing Date, and, in the event of such termination, this Agreement
shall be of no further force and effect and, except for the Surviving
Obligations, neither party shall thereafter have any further obligation under
this Agreement, and Seller shall direct the Escrow Company to promptly return
all Earnest Money to Purchaser. If Purchaser does not so elect to terminate or
if the taking is not material, then the Closing shall take place as herein
provided without abatement of the Purchase Price, and Seller shall deliver or
assign to Purchaser on the Closing Date, without warranty or recourse, all of
Seller's right, title and interest in and to all condemnation awards paid or
payable to Seller. For purposes of this Section 15.2, the term "material" shall
be defined as any diminution of the parking area or any taking of the Property
which exceeds $200,000. Seller hereby agrees that in the event eminent domain
proceedings occur within four (4) months after the Closing Date, Seller shall
cooperate in any settlement or lawsuit between Purchaser and a condemning
authority by providing Purchaser with reasonable information, in Seller's sole
discretion, requested by Purchaser in assisting Purchaser with the valuation of
the Property.
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<PAGE>
16. Operations After Date of This Agreement. Seller covenants and agrees with
Purchaser that:
(a) after the date hereof through the Closing, Seller will (except as
specifically provided to the contrary herein):
(i) Refrain from transferring any of the Property or creating on the
Property any easements, liens, mortgages, encumbrances, or other interests
which will survive Closing or permitting any changes to the zoning
classification of the Land;
(ii) Refrain from entering into or amending any contracts, or other
agreements (excluding leases) regarding the Property (other than contracts
in the ordinary and usual course of business and which are cancelable by
the owner of the Property without penalty within thirty (30) days after
giving notice thereof);
(iii) Continue to operate, maintain, and repair the Property in a
manner consistent with Seller's current practices;
(iv) Comply with all of the material terms of the Leases; Refrain from
offering the Property for sale or marketing the same; and
(vi) Deliver to Purchaser copies of all Lease Documents entered into
after the date hereof; and
(vii) Enter into new leases only at market rates.
17. Assignment. Purchaser shall not assign this Agreement without Seller's
prior written consent which consent may be withheld for any reason or no reason.
Notwithstanding the foregoing, the parties hereby agree that Purchaser may
assign this Agreement to any entity whereby Purchaser is the controlling partner
without obtaining Seller's consent but with prior notice to Seller. Subject to
the previous sentence, this Agreement shall apply to, inure to the benefit of
and be binding upon and enforceable against the parties hereto and their
respective successors and assigns. Seller's consent to any such assignment shall
be conditioned upon Seller's receipt of the following not less than five (5)
business days prior to the Closing Date: (i) a duly executed express assumption
of all of the duties and obligations of Purchaser by the proposed assignee in a
form acceptable to Seller, and (ii) an ERISA certificate, in the form of Exhibit
F attached hereto and the content of which is satisfactory to Seller.
18. Remedies.
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<PAGE>
(a) (i) IN THE EVENT THAT SELLER SHALL FAIL TO CONSUMMATE THIS AGREEMENT
AND SUCH FAILURE IS NOT A RESULT OF PURCHASER'S DEFAULT OR A TERMINATION OF THIS
AGREEMENT BY PURCHASER OR SELLER PURSUANT TO A RIGHT TO DO SO UNDER THE
PROVISIONS HEREOF, PURCHASER, IN THE CASE WHERE SUCH FAILURE IS BASED UPON A
VOLUNTARY BREACH BY SELLER ("SELLER'S DEFAULT"), SHALL ONLY BE ENTITLED TO SEEK
AT ITS ELECTION, EITHER: (A) THE REMEDY OF SPECIFIC PERFORMANCE, OR (B) DAMAGES
IN AN AMOUNT NOT TO EXCEED $250,000.00 IN THE AGGREGATE FOR ALL RECOURSE OF
PURCHASER UNDER THE PURCHASE DOCUMENTS (AS DEFINED IN SECTION 19 HEREOF). IN THE
EVENT PURCHASER ELECTS THE REMEDY OF SPECIFIC PERFORMANCE, SELLER SHALL
INDEMNIFY PURCHASER FOR ANY REASONABLE COSTS INCURRED BY PURCHASER, INCLUDING
REASONABLE ATTORNEY'S FEES. IN NO EVENT SHALL SELLER BE LIABLE TO PURCHASER FOR
ANY PUNITIVE, SPECULATIVE OR CONSEQUENTIAL DAMAGES. IN THE CASE WHERE SUCH
FAILURE IS BASED UPON AN INVOLUNTARY BREACH BY SELLER, PURCHASER, AS ITS SOLE
AND EXCLUSIVE REMEDY, MAY TERMINATE THIS AGREEMENT AND RECEIVE A REFUND OF THE
EARNEST MONEY. IN NO EVENT SHALL PURCHASER BE ENTITLED TO RECORD A LIS PENDENS
OR NOTICE OF PENDENCY OF ACTION AGAINST THE PROPERTY FOR ANY REASON WHATSOEVER..
(ii) PURCHASER SHALL (A) NOTIFY SELLER OF ITS ELECTION TO SEEK THE
REMEDY OF SPECIFIC PERFORMANCE ON OR BEFORE THE DATE WHICH IS FORTY FIVE (45)
DAYS AFTER THE DATE OF A SELLER'S DEFAULT AND (B) INSTITUTE PROCEEDINGS SEEKING
SUCH REMEDY ON OR BEFORE THE DATE WHICH IS THIRTY (30) DAYS AFTER THE DATE OF
PURCHASER'S NOTICE.
(iii) PURCHASER SHALL BE DEEMED TO HAVE WAIVED ITS ELECTION TO SEEK
TEE REMEDY OF SPECIFIC PERFORMANCE IF PURCHASER DOES NOT (x) NOTIFY SELLER OF
SUCH ELECTION AS PROVIDED IN SECTION 17(a)(ii)(A) HEREINABOVE, OR (y) INSTITUTE
PROCEEDINGS, SEEKING SUCH REMEDY AS PROVIDED IN SECTION 17(a)(ii)(B)
HEREINABOVE.
(iv) NOTWITHSTANDING ANYTHING IN THIS SECTION 17(a) TO THE CONTRARY,
FAILURE OF A CONDITION PRECEDENT (AS SUCH TERM IS DEFINED IN SECTION 3) SHALL BE
CONSIDERED AN INVOLUNTARY BREACH UNDER THIS SECTION 17(a).
(b) IN THE EVENT THAT PURCHASER SHOULD FAIL TO CONSUMMATE THIS AGREEMENT
FOR ANY REASON, EXCEPT SELLER'S DEFAULT OR THE
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TERMINATION OF THIS AGREEMENT BY PURCHASER OR SELLER PURSUANT TO A RIGHT TO DO
SO UNDER THE TERMS AND PROVISIONS HEREOF, THEN SELLER, AS ITS SOLE AND EXCLUSIVE
REMEDY MAY TERMINATE THIS AGREEMENT BY NOTIFYING PURCHASER THEREOF AND RECEIVE
OR RETAIN THE EARNEST MONEY AS LIQUIDATED DAMAGES, PROVIDED THAT THIS PROVISION
SHALL NOT LIMIT SELLER'S RIGHTS TO RECEIVE REIMBURSEMENT FOR ATTORNEYS FEES AND
TO PURSUE AND RECOVER ON A CLAIM WITH RESPECT TO ANY SURVIVING OBLIGATIONS. THE
PARTIES AGREE THAT SELLER WILL SUFFER DAMAGES IN THE EVENT OF PURCHASER'S
DEFAULT ON ITS OBLIGATIONS. ALTHOUGH THE AMOUNT OF SUCH DAMAGES IS DIFFICULT OR
IMPOSSIBLE TO DETERMINE, THE PARTIES AGREE THAT THE AMOUNT OF THE EARNEST MONEY
IS A REASONABLE ESTIMATE OF SELLER'S LOSS IN THE EVENT OF PURCHASER'S DEFAULT.
THUS, SELLER SHALL ACCEPT AND RETAIN THE EARNEST MONEY AS LIQUIDATED DAMAGES BUT
NOT AS A PENALTY. EXCEPT AS OTHERWISE SET FORTH IN THIS SECTION 17(b), SUCH
LIQUIDATED DAMAGES SHALL CONSTITUTE SELLER'S SOLE AND EXCLUSIVE REMEDY. IN THE
EVENT SELLER IS ENTITLED TO THE EARNEST MONEY AS LIQUIDATED DAMAGES AND TO THE
EXTENT SELLER HAS NOT ALREADY RECEIVED THE EARNEST MONEY, THE EARNEST MONEY
SHALL BE IMMEDIATELY PAID TO SELLER BY THE ESCROW COMPANY UPON (I) THE ESCROW
COMPANY'S RECEIPT OF WRITTEN NOTICE FROM SELLER THAT PURCHASER HAS DEFAULTED
UNDER THIS AGREEMENT, AND PURCHASER AGREES TO TAKE ALL SUCH ACTIONS AND EXECUTE
AND DELIVER ALL SUCH DOCUMENTS NECESSARY OR APPROPRIATE TO EFFECT SUCH PAYMENT
AND (II) THE ESCROW COMPANY DELIVERING TO THE PURCHASER THREE (3) BUSINESS DAYS'
PRIOR WRITTEN NOTICE OF THE ESCROW COMPANY'S INTENT TO DELIVER THE EARNEST MONEY
TO SELLER.
SELLER AND PURCHASER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE
PROVISIONS OF THE FOREGOING LIQUIDATED DAMAGES
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<PAGE>
PROVISION AND BY THEIR SIGNATURES IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS
TERMS.
SELLER: PURCHASER:
JMB INSTITUTIONAL APARTMENT CORNERSTONE REALTY GROUP,
LIMITED PARTNERSHIP-II, INC., a Virginia corporation
an Illinois limited partnership
By: Heitman/JMB Institutional By:
Realty Advisors, Inc., an ----------------------------
Illinois corporation Name:
Its: Corporate General Partner --------------------------
Its:
---------------------------
By:
--------------------------------
Name: Howard J. Edelman
Its: Executive Vice President
19. Miscellaneous.
19.1 Entire Agreement. This Agreement, together with the exhibits attached
hereto, constitute the entire agreement of the parties hereto regarding the
purchase and sale of the Property, and all prior agreements, understandings,
representations and statements, oral or written, are hereby merged herein. In
the event of a conflict between the terms of this Agreement and any prior
written agreements, the terms of this Agreement shall prevail. This Agreement
may only be amended or modified by an instrument in writing, signed by the party
intended to be bound thereby.
19.2 Time. All parties hereto agree that time is of the essence in this
transaction. If the time for performance of any obligation hereunder shall fall
on a Saturday, Sunday or holiday (national, in the State of Illinois or the
state in which the Property is located) such that the obligation hereby can not
be performed, the time for performance shall be extended to the next such
succeeding day where performance is possible.
19.3 Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
19.4 Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF TEXAS AND FOR
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ALL PURPOSES SHALL, BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS.
19.5 Publicity. Seller and Purchaser hereby covenant and agree that, at all
times after the date of execution hereof and continuing after the Closing,
unless consented to in writing by the other party, no press release or other
public disclosure concerning this transaction shall be made, and each party
agrees to use best efforts to prevent disclosure of this transaction.
19.6 Recordation. Purchaser shall not record this Agreement or a memorandum
or other notice thereof in any public office without the express written consent
of Seller. A breach by Purchaser of this covenant shall constitute a material
default by Purchaser under this Agreement.
19.7 Benefit. This Agreement is for the benefit of Purchaser and Seller,
and except as provided in the indemnities granted by Purchaser in this Agreement
and in the Purchase Documents (as defined in Section 19) with respect to the
Indemnified Parties listed therein, no other person or entity will be entitled
to rely on this Agreement, receive any benefit from it or enforce any provisions
of it against Purchaser or Seller.
19.8 Section Headings. The Section headings contained in this Agreement are
for convenience only and shall in no way enlarge or limit the scope or meaning
of the various and several Sections hereof
19.9 Further Assurances. Purchaser and Seller agree to execute all
documents and instruments reasonably required in order to consummate the
purchase and sale herein contemplated.
19.10 Severability. If any portion of this Agreement is held to be
unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall remain in full force and effect.
19.11 Waiver of Trial by Jury. Seller and Purchaser, to the extent they may
legally do so, hereby expressly waive any right to trial by jury of any claim,
demand, action, cause of action, or proceeding arising under or with respect to
this Agreement, or in any way connected with, or related to, or incidental to,
the dealings of the parties hereto with respect to this Agreement or the
transaction related hereto or thereto, in each case whether now existing or
hereafter arising, and irrespective of whether sounding in contract, tort, or
otherwise. To the extent they may legally do so, Seller and Purchaser hereby
agree that any such claim, demand, action, cause of action, or proceeding shall
be decided by a court trial without a jury and that any party hereto may file an
original counterpart or a copy of this
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<PAGE>
Section with any court as written evidence of the consent of the other party or
parties hereto to waiver of its or their right to trial by jury.
19.12 Independent Counsel. Purchaser and Seller each acknowledge that: (a)
they have been represented by independent counsel in connection with this
Agreement; (b) they have executed this Agreement with the advice of such
counsel; and (c) this Agreement is the result of negotiations between the
parties hereto and the advice and assistance of their respective counsel. The
fact that this Agreement was prepared by Seller's counsel as a matter of
convenience shall have no import or significance. Any uncertainty or ambiguity
in this Agreement shall not be construed against Seller because Seller's counsel
prepared this Agreement in its final form.
19.13 Governmental Approvals. Nothing contained in this Agreement shall be
construed as authorizing Purchaser to apply for a zoning change, variance,
subdivision maps, lot line adjustment, or other discretionary governmental act,
approval or permit with respect to the Property prior to the Closing, and
Purchaser agrees not to do so. Purchaser agrees not to submit any reports,
studies or other documents, including, without limitation, plans and
specifications, impact statements for water, sewage, drainage or traffic,
environmental review forms, or energy conservation checklists to any
governmental agency, or any amendment or modification to any such instruments or
documents prior to the Closing. Purchaser's obligation to purchase the Property
shall not be subject to or conditioned upon Purchaser's obtaining any variances,
zoning amendments, subdivision maps, lot line adjustment or other discretionary
governmental act approval or permit.
19.14 No Waiver. No covenant term or condition of this Agreement other than
as expressly set forth herein shall be deemed to have been waived by Seller or
Purchaser unless such waiver is in writing and executed by Seller or Purchaser,
as the case may be.
19.15 Discharge and Survival, The delivery of the Deed by Seller, and the
acceptance thereof by Purchaser shall be deemed to be the full performance and
discharge of every covenant and obligation on the part of Seller to be performed
hereunder except the Surviving Obligations or warranties that survive the
Closing. No action shall be commenced after the Closing on any covenant or
obligation except the Surviving Obligations.
20. Exculpation of Seller and Related Parties. Notwithstanding anything to the
contrary contained in this Agreement or in any exhibits attached hereto or in
any documents executed or to be executed in connection herewith (collectively,
including this Agreement said exhibits and any such document, the "Purchase
Documents"), it is expressly understood and agreed by and between the parties
hereto that from and after the Closing: (i) the recourse of Purchaser or its
successors or assigns against Seller with respect to the alleged breach by or on
the part of Seller of any representation, warranty, covenant, undertaking,
indemnity or agreement contained in any of the Purchase Documents (collectively,
"Seller's
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Undertakings") shall be limited to an amount not to exceed $250,000.00 in the
aggregate of all recourse of purchaser under the Purchase Documents; and (ii) no
personal liability or undertakings an alleged personal responsibility of any
sort with respect to any of Seller's Undertakings or any breach thereof is
assumed by, or shall at any time be asserted or enforceable against, Seller or
HCMC, or against any of their respective shareholders, directors, officers,
employees, agents, constituent partners, members, beneficiaries, trustees or
representatives except as provided in (i) above with respect to Seller.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be as
of the day and year first above stated.
SELLER:
JMB INSTITUTIONAL APARTMENT
LIMITED PARTNERSHIP-II an Illinois limited
partnership
By: Heitman/JMB Institutional Realty
Advisors, Inc., an Illinois corporation
Its: Corporate General Partner
By:
------------------------------------
Name: Howard J. Edelman
Its: Executive Vice President
PURCHASER:
CORNERSTONE REALTY GROUP, INC., a
Virginia corporation
By:
----------------------------------------
Name:
--------------------------------------
Its:
---------------------------------------
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EXHIBIT 10.2
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this day of October 1998 (the
"Effective Date"), between CORNERSTONE REALTY GROUP, INC. or its nominee,
(hereinafter called "Purchaser"), AND ABRAMS ONE PROPERTIES LIMITED PARTNERSHIP
and CWG/OAKWOOD PROPERTIES LIMITED PARTNERSHIP (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 SALE OF PROPERTY. (A) Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as BRANDYWINE PARK APARTMENTS
located in RICHARDSON, TX, with all buildings and improvements located thereon,
as more particularly described in the attached legal description in EXHIBIT A-1
including, but not limited to 196 individually heated and air conditioned
apartment units, with all appurtenances, together with all appliances, drapes,
carpeting, shrubbery and all other personal property used in connection with the
premises, including, the inventory of personal property to be supplied by Seller
and attached hereto as EXHIBIT B-1 (all such real and personal property
hereinafter collectively referred to as the "Property" unless the context
clearly indicates otherwise).
(B) Seller agrees to sell and convey, and Purchaser agrees to purchase,
Seller's real property known as OAYWOOD CREEK APARTMENTS located in DALLAS, TX,
with all buildings and improvements located thereon, as more particularly
described in the attached legal description in EXHIBIT A-2 including, but not
limited to 86 individually heated and air conditioned apartment units, with all
appurtenances, together with all appliances, drapes, carpeting, shrubbery and
all other personal property used in connection with the premises, including, the
inventory of personal property to be supplied by Seller and attached hereto as
EXHIBIT B-2 (all such real and personal property hereinafter collectively
referred to as the "Property" unless the context clearly indicates otherwise).
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 PURCHASE PRICE. The total purchase price shall be
<PAGE>
ELEVEN MILLION TWO HUNDRED THOUSAND ($11,200,000) DOLLARS. The Purchase Price
shall be payable as follows:
(a) by Purchaser (or its Assignee hereunder) assuming the unpaid principal
balance of that certain indebtedness evidenced by a promissory note in the
original principal amount of $2,300,000 dated July 21, 1997 executed by
CWG/Oakwood Properties Limited Partnership and made payable to the First
National Bank and Trust Co. of McAlester "Lender" which is secured by first lien
on the Oakwood Creek Apartments Property; and
(b) by Purchaser paying the difference between the unpaid principal balance
(as of the Closing Date) of the indebtedness described in (a) above by cash or
cash equivalent at closing.
Notwithstanding any other provision of this Agreement to the contrary, (i)
interest on the debt described above shall be prorated as of the closing; (ii)
Purchaser (or its Assignee) shall pay all costs of the assumption of the
aforesaid debt not to exceed $46,000 and all reasonable costs required by
Lender, and (iii) Purchaser's obligation to consummate this transaction shall be
conditioned on Purchaser (or its Assignee) receiving the debt holder's approval
of such assumption and of the modification of the debt upon terms satisfactory
to Purchaser (or its Assignee, as applicable). Purchaser shall have the right to
terminate this Agreement and receive a full refund of the Earnest Money, if the
condition described in clause (iii) preceding is not satisfied by October 26,
1998. Unless Purchaser gives notice of termination to Seller on or before
October 26, 1998, such condition shall be deemed satisfied or waived.
2.2 ASSIGNMENT. Both properties must be purchased simultaneously. However,
the Purchaser shall have the right to assign (i) its right to receive Seller's
Deliveries, as described in Section 7.2, and (ii) its obligations under section
4.3 and Section 7.3(B) as to both or one of the properties set forth in
Paragraph 1.1, provided that there shall be only one sale by Seller for
$11,200,000. The Assignee shall have the same rights that the Purchaser herein
has as to matters hereinafter set forth.
2.3 DEPOSIT. Concurrently herewith, Purchaser will cause to be placed in
escrow with Lawyers Title Insurance Corporation, 4311 Oak Lawn, Suite 600,
Dallas, TX 75209, Attention: David Long, or its authorized agent (the Title
Company) the sum of THREE HUNDRED THOUSAND ($300,000) DOLLARS as an earnest
money deposit which may be credited against the purchase price or applied as per
Article XI below.
2.4 INDEPENDENT CONTRACT CONSIDERATION. Purchaser shall, concurrently with
its execution hereof, deliver to Seller a
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check in the amount of FIFTY ($50) DOLLARS (the "Independent. Contract
Consideration"), which amount Seller and Purchaser agree has been bargained for
as consideration for Seller's execution and delivery of this Contract and
Purchaser's right to inspect the Property. The Independent. Contract
Consideration is in addition to and independent of any other consideration or
payment provided for in this Contract and is non-refundable in all events.
ARTICLE III
TITLE MATTERS
3.1 TITLE. Seller, shall convey good and indefeasible title by Special
Warranty Deed in the form attached hereto as EXHIBIT C, subject only to general
taxes for the current year not yet due and payable and utility easements which
do not interfere with the present use of the Property, and the "Permitted
Exceptions". Permitted Exceptions are those title exceptions listed in the title
commitment.
(A) Title shall be tree from any and all liens or mortgages and Seller
shall be responsible for any prepayment penalties necessary to deliver such free
title, except as to the mortgage indebtedness on the Oakwood Creek Property to
be assumed by Purchaser (or its Assignee) pursuant to Section 2.1.
3.2 COMMITMENT. Purchaser has obtained a commitment for Title Insurance
from the Title Company, (the "Commitment" or the "Title Report") covering the
Property binding the Title Company to issue a Texas Owner Policy of Title
Insurance (the "Title Policy") on the standard form prescribed by the Texas
State Board of Insurance at the Closing, in the full amount of the Purchase
Price $11,200,000, insuring Purchaser's fee simple title to each Property to be
good and indefeasible, together with true and correct copies of all instruments
listed on Schedule B to the Commitment (as well as any other documents or
instruments listed therein which will not be released at closing). Purchaser
accepts Seller's title as reflected by the Commitment, except those matters
shown in Schedule C thereof (other than matters in connection with the debt to
be assumed).
3.3 SURVEY. Seller has previously delivered to Purchaser (i) a copy of a
survey plat of the Brandywine Park Apartments prepared by James Dewey R. P. L.
S., dated October 9, 1996; AND (ii) a copy of an existing survey plat of the
Oakwood Creek Apartments prepared by W. R. Lee, R.P.L.S., dated June 15, 1998
(the "Existing Surveys"). Purchaser may elect, to obtain NEW surveys or revise,
modify, or re-certify the Existing Surveys ("Survey") as reasonably necessary in
order for the Title Company to delete the survey exception from the Title Policy
or to otherwise satisfy Purchaser's objectives. Purchaser shall receive
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credit at Closing for actual costs incurred to obtain a new or updated survey,
provided such credit shall not exceed $3,00updated survey, provided such credit
shall not exceed $3,000 for the Brandywine Park Property and $2,500 for the
Oakwood Creek Property.
ARTICLE IV
PRORATIONS
4.1 INCOME AND EXPENSE ALLOCATIONS. The following shall be prorated, on a
calendar-month basis, as of the day of the closing: collected rents and other
income from the Property; operating expenses (on such service contracts and
other obligations as Purchaser may agree to assume or be required to assume);
and general and real property taxes and personal and business property taxes for
the year of closing (based on the most recent assessment and the most recent
levy). Seller shall receive a credit for any escrow funds assigned, pursuant to
the assumption of the mortgage.
4.2 CLOSING COSTS. Purchaser and Seller shall pay their customary share of
all taxes, recording fees, if any, imposed on the Deed, or any other documents
executed in connection with the transfer of the Property. Purchaser shall
receive a credit at closing in the sum of Sixty Six Thousand Seven Hundred Fifty
Two ($66,752) Dollars towards the cost of the basic premium for two (2) TLTA
Owner's Policies of Title insurance in the amount of $11,200,000 for both
parcels. Purchaser (or its Assignee, as applicable) shall pay the actual premium
for any title insurance required. Seller shall pay any prepayment penalty
charged by the holders of any existing notes on the Brandywine Park Property.
4.3 ALLOCATION OF RENTS. Rents collected by Seller prior to Closing shall
be prorated as agreed in 4.1 above. Purchaser shall apply rents received after
Closing first to payment of the rent for the month in which received, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 PRIOR LEASE CONCESSIONS. 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.
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ARTICLE V
POSSESSION OF THE PROPERTY
5.1 POSSESSION. Possession of the Property shall be delivered Lo Purchaser
at closing, subject to the rights of the tenants under existing leases and
rental agreements and the Permitted Exceptions.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT. Purchaser's obligation to purchase shall be
subject to and contingent upon the satisfaction of the following conditions
precedent:
(A) On the condition that Sellers representations AND warranties described
in Article VIII below remain true and correct in all material respects.
(B) on the condition that there have BEEN no material adverse changes to
the property or leases.
(C) 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 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.
6.2 ITEMS DELIVERED BY SELLER. Abrams One Properties Limited Partnership
(as to the Brandywine Park Apartments) and CWG/Oakwood Properties Limited
Partnership (as to the Oakwood Creek Apartments) have previously delivered to
Purchaser and Purchaser acknowledges receipt of copies of the following with
respect to each of said Properties:
(a) Rent Roll
(b) Statements of Income and Operating Statements for 1996, 1997 and 1998
year-to-date
(c) 1997 Tax Statements
(d) Utility Bills for the 12 months through August 1998
(e) Evidence of Insurance coverage and, to the extent reasonably obtainable
from its insurance carriers and agents "loss runs"
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(f) Copies of all service contracts in effect with respect to the Property
(g) Copy of existing reports of environmental assessments of the respective
Properties
Each Seller (with respect to its respective Property) warrants that the
Rent Roll and information as to income of the Property are true and correct in
all material respects; and that all other information is true and correct in all
material respects to the best of its knowledge and belief.
Concurrently with the execution of this Agreement, Purchaser has advised
Seller in writing of which service contracts it will assume and which service
contracts Purchaser requests that Seller deliver written notice of termination
at or prior to Closing, provided Seller shall have no obligation to terminate,
and Purchaser shall be obligated to assume, any service contracts which by their
terms cannot be terminated without penalty or payment of a fee. Seller shall
deliver at Closing notices of termination of all service contracts that are not
so assumed. Purchaser must assume the obligations arising from and after the
Closing Date under those service contracts (i) that Purchaser has agreed to
assume, or that Purchaser is obligated to assume pursuant to this subparagraph,
and (ii) for which a termination notice is delivered as of or prior to Closing
but for which termination is not effective until after Closing.
6.2.4 "RENT READY". Both Seller and Purchaser will inspect an apartment
unit at the Property, on the day of or the day prior to Closing, and mutually
agree that said apartment shall be representative of a "rent ready" unit by
which all other units shall be judged for "rent ready" condition at Closing. All
vacant apartment units, are to be in a "rent ready" condition (as defined
above), at the time of closing, containing, but not limited to the following
amenities, i.e., carpet, refrigerator, range, garbage disposal, heating,
plumbing and electrical systems, except for one apartment which is used for
storage (Unit 158 of Brandywine Park).
6.2.5 CONDITION OF PERSONAL PROPERTY AT CLOSING. All personal property
included in the sale and all mechanical, electrical, heating, air conditioning,
sewer, water and plumbing systems will be in the same working order at the time
of closing and in the same condition as at the time of the initial inspection by
Purchaser. 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 void this Agreement and obtain a prompt
return of its deposit.
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6.2.6 DISCLAIMER OF WARRANTIES. Except as specifically otherwise provided
in this Agreement, Seller makes no representations or warranties as to the
Property or any information delivered by Seller to Purchaser in connection with
the Property. Purchaser is purchasing the Property "AS IS", with all faults and
defects, known or unknown, latent or patent, WITHOUT ANY REPRESENTATION OR
WARRANTY, ORAL OR WRITTEN, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, HABITABILITY, MERCHANTABILITY,
SUITABILITY OR QUALITY, AND IN SOLE RELIANCE ON PURCHASER'S OWN INDEPENDENT
INSPECTION, INQUIRY AND/OR INVESTIGATION. SPECIFICALLY, SELLER TS NOT MAKING AND
SPECIFICALLY DISCLAIMS ANY WARRANTIES OR REPRESENTATIONS OR ANY KIND OR
CHARACTER, EXPRESS OR IMPLIED WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT
LIMITED TO, WARRANTIES OR REPRESENTATIONS AS TO MATTERS OF TITLE (OTHER THAN
SELLER'S WARRANTY OF TITLE SET FORTH IN THE CONVEYANCE DOCUMENTS TO BE DELIVERED
AT CLOSING), PHYSICAL OR ENVIRONMENTAL CONDITIONS, GOVERNMENTAL REGULATIONS OR
ANY OTHER MATTERS OR THINGS RELATING TO OR AFFECTING THE PROPERTY INCLUDING,
WITHOUT LIMITATION: (i) THE VALUE, CONDITION, MERCHANTABILITY, MARKETABILITY,
PROFITABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OF THE
PROPERTY, (ii) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS
INCORPORATED INTO ANY OF T14E PROPERTY AND (iii) THE MANNER, QUALITY, STATE OF
REPAIR OR LACK OF REPAIR OF THE PROPERTY. PURCHASER IS ACQUIRING THE PROPERTY ON
THE BASIS OF ITS OWN INDEPENDENT INSPECTIONS, INQUIRIES AND/OR INVESTIGATIONS
AND NOT AS A RESULT OF ANY WARRANTIES OR REPRESENTATIONS, COLLATERAL TO OR
AFFECTING THE PROPERTY BY SELLER, ANY AGENT OF SELLER OR ANY THIRD PARTY. SELLER
IS NOT LIABLE OR BOUND TN ANY MANNER BY VERBAL OR WRITTEN STATEMENTS,
REPRESENTATIONS, OR INFORMATION PERTAINING TO THE PROPERTY FURNISHED BY ANY REAL
ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. THE TERMS AND
CONDITIONS OF THIS PARAGRAPH SHALL SURVIVE THE CLOSING AND NOT MERGE THEREIN.
ARTICLE VII
CLOSING
7.1 CLOSING. Closing will be held on October 29,1998 at the Title Company
or at such place and at such time as the parties may agree.
7.2 SELLER'S DELIVERIES. At closing, each Seller with respect to the
Property owned by it shall execute and deliver to Purchaser (or its Assignee)
the Special warranty Deed referred to in Paragraph 3 hereof and shall also
execute, where necessary, and deliver to Purchaser (or its Assignee), the
following in a form reasonably acceptable to Purchaser or its Assignee:
(A) A Bill of Sale, with special warranty of
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title transferring the personal property (as shown in Schedule B) to Purchaser
(or its assignee) free of all liens, charges and encumbrances.
(B) Originals or copies of all signed leases and rental agreements in
effect with tenants of the Property not for more than one (1) year.
(C) All security and cleaning deposits made by such tenants and not
previously applied to satisfy tenant obligations. Seller will give the tenants
the required notice of such transfer in compliance with the laws of TEXAS.
(D) An affidavit of Seller in such form as will cause the Title company to
omit from the title insurance policy the exclusion relating to unrecorded
mechanic's and materialmen's liens and the exception relating to "rights of
parties in possession" other than tenants with unrecorded leases.
(E) A rent roll certified by Seller to be true and correct in all material
respects 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.
(F) An affidavit of Seller that to the best of its information and belief
there are, on the date of closing, no unsatisfied judgments, creditor's claims
other than in the course of business, tax liens, or pending Bankruptcies
involving Seller.
(G) Assignments of all Seller's interest in the following in the form
attached hereto as EXHIBIT D: (1) all assignable licenses, and permits relating
to the operation of the Property, (2) the leases and rental agreements with
tenants of the Property, (3) the existing Property telephone number and (4) the
business and trade name as set forth in Par. 1.1.
(H) Assignments without recourse of all warranties and guarantees (see
Exhibit D) to the extent such are still in effect and provide Purchaser with
copies of all such warranties and guarantees (to the extent within Seller's
possession) without limitation for all appliances, dishwashers, disposals,
refrigerators, heating and air conditioning units, washers and dryers, in
Seller's possession.
(I) Consent of the Seller's authorized officer to the sale of the Property
and any other approvals required under Seller's articles, by-laws or other
organizational
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documents, which may affect Seller's ability Lo convey marketable title.
(J) Provide documents for the transfer of the telephone, electric, water
and sewer, and gas utilities, as may be required by the utility, for execution
at closing.
(K) Evidence reasonably satisfactory evidence to the Title Company of the
power and authority of Seller to enter into and consummate this Agreement.
(L) Affidavit that Seller has received no notice of the presence of
asbestos and/or any other hazardous material at the Property, except for such
items as set forth in the environmental report given to Purchaser by Seller.
(M) Seller's shall provide a satisfactory and valid written termination of
the management agreement executed by the existing management and rental agent
for the Property, without cost to the Purchaser.
(N) A notice letter to all the residents of the apartment complex as to
change of ownership in the form prepared by the Purchaser (and reasonably
acceptable to counsel for Seller).
(0) All such other documents as are normally transferred at settlement in
the jurisdiction in which the property is located or are reasonably requested by
Purchaser or its counsel.
(P) A representation letter as normally required by auditors for a public
company in the form attached hereto as EXHIBIT E. Seller shall have the option
to execute this letter when the auditors and/or Purchaser have made their final
request for documents. This clause shall survive closing for six months.
(Q) Closing Memorandum and Indemnification Agreement in the form attached
hereto as EXHIBIT F.
7.3 PURCHASER'S DELIVERIES. At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price, adjusted for
the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of
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obligations under leases, securities, any contracts which may be accepted (or
deemed to be accepted) by the Purchaser and any other obligations specifically
set forth herein.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and delivered
by the Purchaser and is a valid and binding agreement of Purchaser, and
(ii) Purchaser has complete unrestricted power to buy the Property
from the Seller and to execute any documents required to effectuate the
transfer.
(D) Execute all such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Seller or its counsel.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 REPRESENTATIONS OF THE PARTIES. Each Seller warrants (which warranties
shall not survive settlement unless designated to the contrary) with respect to
the respective Property owned by it that as of the date hereof and as of closing
hereof:
(A) That Seller, is the owner in fee simple of the Property, subject to
the Permitted Exceptions, and has the power to convey same.
(B) That Seller is not subject to any other agreements or arrangements,
with the exception of those contained in any existing mortgage documents which
would prevent Seller from selling the Property to Purchaser. This warranty shall
survive for one year following closing.
(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents. This
warranty shall survive for one year following closing.
(D) Seller has no actual knowledge and has not been advised in writing
that it is in default under any lease, rental agreement service or equipment
contract, or mortgage or other encumbrances relating to the Property. This
warranty shall survive for one year following closing.
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(E) Seller has no actual knowledge of any existing or threatened
litigation which relates to or which would affect the Property, except a
possible action regarding the widening of Abrams Road, evidence of which has
been delivered Lo Purchaser. This warranty shall survive for six (6) months
following closing.
(F) The Property abuts oil and has direct vehicular access to a public
road.
(G) Except as provided in Paragraph 8.1(E), Seller has not received
from any governmental authority, insurance company, or any other supervisory
authority notice that any part of the Property or the operation of the Property,
is in violation or may violate any governmental statute, regulation, ordinance
or building code or of any private restriction, that any governmental authority
requires any work to be done on or affecting the Property, or that any
governmental authority has expressed an intent to condemn or to make special
improvements for the benefit of the Property or any part thereof. This warranty
shall survive for six (6) months following closing.
(H) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(I) That to the best of Seller's knowledge, the Property was never
utilized as a disposal site for hazardous waste products and will furnish to
Purchaser an affidavit confirming same.
(J) Seller covenants and agrees that, between this date and the date of
closing, Seller shall continue to maintain, operate and manage the Property in a
manner consistent with its prior practices, making every reasonable effort to do
nothing which might damage the reputation of the Property or the relationships
with the tenants. Seller shall not permit the modification, extension or
cancellation of any tenant 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 the leases of
any tenants expire before thirty (30) days after the date of closing, Seller
shall, up to the date of closing and without cost to the Purchaser, continue its
normal course of operation with respect to causing tenants to be obtained for
apartments which are unrented.
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(K) Seller warrants that it has complied with the keyless, dead-bolt
lock requirement.
The foregoing representations, warranties and covenants are made to
Purchaser's Assignee. seller agrees that purchaser's Assignee may rely thereon.
8.2 CONTINUATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS TO THE DATE
OF CLOSING. If each of the warranties set forth in this section does not remain
true up to and including the time of closing as to any material matters, this
Agreement, at Purchaser's's election, shall be terminated, Seller shall return
all payments made by Purchaser, or Purchaser may elect to close the sale and
waive failure of the warranties. if Purchaser receives notice that any warranty
or representation of Seller was untrue when made, or because of information
subsequently obtained could no longer be truthfully made by Seller's, Purchaser
shall immediately notify Seller in writing.
8.3 BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Notwithstanding
the provisions of 8.2 above, seller shall indemnify purchaser for all reasonable
costs incurred as a result of the failure of any of Seller's representations,
warranties or covenants contained herein to remain true as of the date of
closing, except the warranty described in subparagraph 8.1(G), and if Seller
cannot continue to make such warranty because of notices received after the date
hereof, Purchaser's sole remedy shall be to terminate this Agreement.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 PROPERTY DAMAGE. If, prior to closing, any part of the Property is
damaged by fire or other casualty in an amount not greater than TWO HUNDRED
THOUSAND ($200,000) DOLLARS as to the Brandywine Park Apartments or ONE HUNDRED
THOUSAND ($100,000) DOLLARS as to the Oakwood Creek Apartments, Purchaser agrees
to accept the Property with an assignment of: (i) the insurance proceeds, (ii)
any deductible, and (iii) rent loss insurance proceeds. If the damage is greater
than $200,000 as to Brandywine Park Apartments and $100,000 as to Oakwood Creek
Apartments, Purchaser may terminate this Agreement. If Purchaser elects to carry
out this Agreement despite such damage, Seller shall assign to Purchaser all
insurance proceeds and any deductible arising from such damage and will
compensate Purchaser for lost rent collections to the extent of insurance
proceeds received. Seller shall promptly notify Purchaser in writing upon the
occurrence of any such damage.
9.2 CONDEMNATION. In the event of any actual or
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threatened taking, pursuant to the power of eminent domain, all or any part
thereof, or any actual or proposed sale in lieu thereof, the Seller shall give
written notice thereof to the Purchaser promptly after Seller learns or receives
notice thereof. Upon a taking of a material part of the Property greater than
TWO HUNDRED THOUSAND ($200,000) DOLLARS or any part more than 5% of the parking
areal Purchaser of the building or may elect to either (a) terminate this
Agreement, in which event the deposit shall be immediately returned to Purchaser
and all other rights and obligations of the parties hereunder shall terminate
immediately, or (b) waive its right to terminate this Agreement and proceed to
closing, in which event all proceeds, awards and other payments arising out of
such condemnation or sale (actual or threatened) shall be paid to the purchaser
at Closing, if such payment has been received. If payment has not received, but
an amount has been agreed upon, Seller shall assign the claim to Purchaser. The
provisions of this Section 9-2 shall not apply to the proposed widening of
Abrams Road, as evidenced by documents delivered to Purchaser prior to the
execution of this Agreement.
9.3 RISK OF LOSS. Prior to closing, all risks of loss or damage by every
casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 COMMISSION. Seller agrees to pay a brokerage fee to TOM FLOOD,
HENDRICKS & PARTNERS, pursuant to a separate agreement. Said brokerage fee shall
be deemed earned if, and only IF, settlement occurs hereunder, and shall not be
deemed earned even if Purchaser and/or Seller wrongfully fail(s) to consummate
the purchase and sale herein contemplated. Seller and Purchaser represent and
warrant to each other that no other brokerage fees are or shall be owing in
connection with this transaction or in any way with the Apartments and Seller
and Purchaser hereby indemnify and hold the other harmless from any and all
claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 DEFAULT DEFINED. Default for the purpose of this Agreement shall mean
any failure by Seller or Purchaser to fulfill in any material respect all the
terms, conditions and covenants contained herein, however, it shall not be an
event of default for either party to exercise its rights to terminate this
contract as contained in other provisions herein.
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11.2 SELLER'S DEFAULT. Upon Seller's default, the Purchaser, at it's
election arid as its sole remedy, may either (1) require specific performance of
Seller, or (2) cancel this Agreement and obtain a prompt return of the deposit,
in which case this Agreement shall be terminated and the parties released from
all obligations hereunder, or (3) the Purchaser may waive such defaults and
proceed to settlement. Seller shall indemnify Purchaser for any reasonable costs
incurred by Purchaser if Purchaser elects to pursue its option (1) noted above,
to include reasonable attorney fees.
11.3 PURCHASER' DEFAULT. Upon Purchaser's default, this Agreement shall be
terminated and both parties released from all obligations hereunder, and the
deposit shall he retained by the Seller as liquidated damages. Such amount and
terms are agreed upon by and between Seller and Purchaser as liquidated damages,
due to the difficulty and inconvenience of ascertaining and measuring actual
damages, and the uncertainty thereof, and the payment of the deposit and the
terms provided herein shall constitute full satisfaction of Purchaser's
obligations under this Agreement. Such amount is agreed upon by and between
Seller and Purchaser as a reasonable estimate of just compensation for the harm
caused by Purchaser's default. Seller shall have no other remedy against
Purchaser in the event of Purchaser's default.
11.4 ASSIGNEE'S\THIRD-PARTY DEFAULT. In the event that Purchaser shall
enter into a contract and assign its right to the property known as Oakwood
Creek Apartments described in Paragraph 1.1(B) and the Assignee's\Third Party
defaults under the agreement, the Purchaser or the Seller herein shall have a
right to terminate this Agreement. In such event, the Seller shall be entitled
to $200,000 placed in escrow, pursuant to Paragraph 2.3, and the Purchaser shall
receive the $100,000 deposited by it pursuant to said Paragraph 2.3, and all
other rights and obligations of the parties hereunder shall terminate.
11.5 ASSIGNOR'S (PURCHASER) DEFAULT. In the event that Purchaser shall
enter into a contract and assign its right to the property known as Oakwood
Creek Apartments described in Paragraph 1.1(B) and the Assignor defaults under
the agreement, the Purchaser or the Seller herein shall have a right to
terminate this Agreement. In such event, the Seller shall be entitled to
$100,000 placed in escrow, pursuant to Paragraph 2.3, and the Assignee shall
receive the $200,000 deposited by it pursuant to said Paragraph 2.3, and all
other rights and obligations of the parties hereunder shall terminate.
ARTICLE XII
MISCELLANEOUS PROVISIONS
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12.1 ENTIRE AGREEMENT. This Agreement sets forth the entire understanding
between THE parties; it superseded all previous agreements and representations
which are deemed merged herein and may not be modified except in writing.
12.2 ASSIGNMENT. Purchaser may assign this Agreement without the consent of
Seller.
12.3 SEVERABILITY. if any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 BINDING EFFECT. The parties to the Agreement mutually agree that it
shall he binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 CONTROLLING LAW. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State of Texas.
12.6 COUNTERPARTS. To facilitate execution, this Agreement may be executed
in as many counterparts as may be required. it shall not be necessary that the
signature on behalf of both parties hereto appear in each counterpart hereof,
and it shall be sufficient that the signature on behalf of both parties hereto
appear on one or more such counterparts. All counterparts shall collectively
constitute a single contract. A faxed signature page may be considered an
original.
12.7 INCORPORATION BY REFERENCE. All of the Exhibits referred to herein
and/or attached hereto shall be deemed to constitute a part of the Agreement.
12.8 HEADINGS. The headings of the Articles and sections hereof are
inserted for convenience only and shall not be deemed to constitute a part of
the Agreement.
12.9 CONSTRUCTION OF CONTRACT. Each party hereto have reviewed and revised
(or requested revisions of) this Agreement, and therefore the normal rule of
construction that any ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this Contract
or any amendments or exhibits hereto.
15
<PAGE>
12.10 CONFIDENTIALITY. The parties shall keep confidential the existence of
this Agreement, the transactions described herein, and all information obtained
from the other party both during and subsequent to the transaction. However, the
covenants contained in this paragraph shall not apply in respect to any
information which (a) was already known to either party when such information
was received from the other, (b) was readily available to the general public at
the time of such receipt, (c) subsequently becomes known Lo the general public
through no fault or omission by the other party, (d) is subsequently disclosed
by a third party which has the bona fide right to make such disclosure, or (e)
is required to be disclosed by law or a governmental agency or which is
disclosed to attorneys, accountants and lenders of the party, provided such
recipients agree to be bound hereby. This clause shall survive closing.
12.11 HOLIDAYS. If any of the deadlines in this Contract ends on, or if any
event is to occur on, a Saturday, Sunday, or legal holiday, the deadline or the
date for performance shall automatically be extended to the next day which is
not a Saturday, Sunday, or legal holiday.
12.12 LEAD WARNING STATEMENT. Every purchaser of any interest in
residential real property on which a residential dwelling was built prior to
1978 is notified that such property may present exposure to lead from lead-
based parent that may place young children at risk of developing lead poisoning.
Lead poisoning in young children may produce permanent neurological damage,
including learning disabilities, reduced intelligence quotients behavioral
problems, and impaired memory. Lead poisoning also poses a particular risk to
pregnant women. The seller of any interest in residential real property is
required to provide the buyer with any information on lead-based paint hazards
from risk assessments or inspections in the seller's possession and notify the
buyer of any known lead-based paint hazards. A risk assessment or inspection for
possible lead-based paint hazards is recommended prior to purchase.
12.12.1. Except as may be disclosed in documents delivered hereunder,
Seller has no knowledge of lead-based paint and/or lead-based paint hazard in
the housing.
12.12.2. Except as may be included in reports delivered upon execution
hereof, Seller has no reports or records pertaining to lead-based paint and/or
lead-based paint hazards in the housing.
12.13 EXHIBITS. The following exhibits are attached
16
<PAGE>
to this Agreement and are incorporated into this Agreement by to this Agreement
and are incorporated into this Agreement by this reference and made a part
hereof for all purposes:
(a) EXHIBIT A, the legal description of the Land.
(b) EXHIBIT B, list of personal property
(c) EXHIBIT C, the form of Deed (including Permitted Exceptions).
(d) EXHIBIT D, the form of the Assignment and Assumption of Personal
Property, Service Contracts, Warranties and Leases.
(e) EXHIBIT E, the form of the Representation Letter.
(f) EXHIBIT F, Closing Memorandum and Indemnification Agreement
ARTICLE XIII
NOTICE
13.1 NOTICE. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: Kevin Flynn, Esq.
Novakov Davidson & Flynn
750 N. St. Paul #2000
Dallas, TX 75201-3286
Fax: (214) 969-7557
To Purchaser: Mr, Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
Chestnut St., P.O.Box 488
Cedarhurst, NY 11516
Fax:(516) 374-3490
-and
17
<PAGE>
Robert S. Morrison, Esq.
Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, TX 75201
Fax: (214) 999-6170
13.2 DELIVER OF NOTICE. Notice sent either by Registered or certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given one (1) business day after deposited in tho United States mail, postage
prepaid, or delivered to a reliable overnight courier or by fax. Notice sent in
any other manner shall be deemed given only when actually delivered at the
specified address.
IN WITNESS WHEREOF, the Seller and t:he Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
ABRAMS ONE PROPERTIES LIMITED PARTNERSHIP
BY: ABRAMS ONE PROPERTIES MANAGEMENT, INC.
BY: (ILLEGIBLE)
------------------
Its: President
------------------
CWG/OAKWOOD PROPERTIES LIMITED PARTNERSHIP
BY: CWG/OAKWOOD PROPERTIES MANAGEMENT, INC.
BY: (ILLEGIBLE)
------------------
Its: President Date: Oct. 27, 1998
------------------ -------------
PURCHASER:
CORNERSTONE REALTY GROUP. INC.
BY: /s/ Gus G. Remppies
-------------------
Its: V.P. Date: 10-28-98
------------------- -------------
EXHIBIT 10.3
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 28th day of October, 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 Burney Oaks Apartments (hereinafter referred
to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and for
other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby engages
Manager as sole and exclusive manager to rent, manage and operate the Property,
upon the conditions and for the term and compensation herein set forth. All or a
portion of the services being performed by Manager may be contracted or
subcontracted to another property management company, provided that such company
agrees to be bound by the terms of this Agreement.
2. Term of Agreement: Renewal. This Agreement shall be valid for an initial
term of two (2) years. In the event Owner sells its interest in the Property,
this Agreement will terminate upon the date of such sale. Unless either party by
written notice sent to the other party at least sixty (60) days before the end
of any two-year term hereof elects not to renew this Agreement, this Agreement
shall renew automatically for successive terms of two (2) years on the same
terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as the
manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the Property,
provided that nothing herein contained shall constitute a guarantee by Manager
of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment, tools,
appliances, materials, supplies and uniforms necessary for the maintenance or
operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas, electricity and
other services necessary for the operation and maintenance of the Property;
d. The advertising for the rental of space in the Property, the cost
of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property rented by
procuring tenants for the Property and negotiating and executing on behalf of
Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other documents
(other than promissory notes, mortgages, deeds of trust or other documents or
instruments which would encumber the Property) required under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act, or any similar
federal or state legislation. Manager shall also file returns and reports, and
pay from Owner's funds, all sums as may from time to time be required by the
state or locality in which the Property is located;
h. The maintenance of full books of account with correct entries of
all receipts and expenditures, which books of account shall be the property of
Owner and shall at all times be open to the inspection of Owner or any of its
employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property inspection
letters regarding repairs necessary to avoid mortgage loan defaults. The
furnishing monthly of a detailed statement of all receipts and disbursements for
that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by 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 prececeding 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
-------------------------------------
Title: Vice President
----------------------------------
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ S. J. Olander
-------------------------------------
Title: Vice President
----------------------------------
EXHIBIT 10.4
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 29th day of October, 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 Brandywine Park Apartments (hereinafter
referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby engages
Manager as sole and exclusive manager to rent, manage and operate the Property,
upon the conditions and for the term and compensation herein set forth. All or a
portion of the services being performed by Manager may be contracted or
subcontracted to another property management company, provided that such company
agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an initial
term of two (2) years. In the event Owner sells its interest in the Property,
this Agreement will terminate upon the date of such sale. Unless either party by
written notice sent to the other party at least sixty (60) days before the end
of any two-year term hereof elects not to renew this Agreement, this Agreement
shall renew automatically for successive terms of two (2) years on the same
terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as the
manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the Property,
provided that nothing herein contained shall constitute a guarantee by Manager
of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment, tools,
appliances, materials, supplies and uniforms necessary for the maintenance or
operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas, electricity and
other services necessary for the operation and maintenance of the Property;
d. The advertising for the rental of space in the Property, the cost
of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property rented by
procuring tenants for the Property and negotiating and executing on behalf of
Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other documents
(other than promissory notes, mortgages, deeds of trust or other documents or
instruments which would encumber the Property) required under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act, or any similar
federal or state legislation. Manager shall also file returns and reports, and
pay from Owner's funds, all sums as may from time to time be required by the
state or locality in which the Property is located;
h. The maintenance of full books of account with correct entries of
all receipts and expenditures, which books of account shall be the property of
Owner and shall at all times be open to the inspection of Owner or any of its
employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property inspection
letters regarding repairs necessary to avoid mortgage loan defaults. The
furnishing monthly of a detailed statement of all receipts and disbursements for
that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by 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
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: Vice President
----------------------------------
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ S. J. Olander
-------------------------------------
Title: Vice President
----------------------------------
