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: February 13, 1998
APPLE RESIDENTIAL INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 333-10635 54-1816010
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
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APPLE RESIDENTIAL INCOME TRUST, INC.
FORM 8-K
Index
Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a. Independent Auditors' Report
(Timberglen Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Timberglen Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Timberglen Apartments)*
b. Pro Forma Balance Sheet as of
December 31, 1997 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1997
(unaudited)*
c. Exhibits
10.1 Purchase Contract for Timberglen Apartments
10.2 Property Management Agreement for Timberglen
Apartments
23.1 Consent of Independent Auditors*
-2-
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* To be filed by amendment.
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Item 2. Acquisition or Disposition of Assets
On February 13, 1998, Apple Residential Income Trust, Inc. (the
"Company") purchased the Timberglen Apartments located at 3773 Timberglen Road
in Dallas, Texas (The "Property"). The Property comprises 304 apartment units.
The purchase price for the Property was $12,000,000. The seller was
Timberglen Apartments, Ltd., a Texas limited partnership which is not affiliated
with the Company, Apple Residential Advisors, Inc. or their Affiliates. The
entire purchase price was paid using proceeds from the sale of Company common
shares. Title to the Property was conveyed to the Company by limited warranty
deed.
Location. The Property is located in the north area of Dallas, within
the greater Dallas/Fort Worth Consolidated 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. Dallas is the second largest city in the state, behind
Houston.
The economy of the Dallas/Fort Worth area is complex and diversified.
Key economic factors include a large manufacturing base (including as products
military hardware, electronics, automobiles, industrial equipment, oil-field
parts, food products and chemicals), banking, insurance services,
communications, oil and gas production and air transportation. Major employers
in the area include Texas Instruments, Southwestern Bell, General Motors, J.C.
Penney, NationsBank and Vought Aircraft Company.
The Metroplex is also an established transportation center for the
nation. The Dallas/Fort Worth International Airport occupies approximately
17,800 acres of land between the two cities. It is the largest commercial
airport in the United States in terms of land area, and is the fourth busiest
airport in the world, with 1,700 daily arrivals and departures.
The area also has a well-established system of interstate highways and
supporting secondary routes. The Metroplex is located at the hub of Interstates
35,45, 20 and 30. Two outer loops, Interstate 635 in Dallas and Interstate 820
in Fort Worth, surround the respective cities.
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.
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The immediate area surrounding the Property consists of other
multi-family, commercial and retail development. The Property is located near
restaurants, businesses, schools, and churches, and is readily accessible from
Interstate 35, the North Dallas Tollway, Central Expressway and LBJ Freeway. The
Property is an approximately 15-minute drive from downtown Dallas.
Description of the Property. The Property consists of 304 garden and
townhouse style apartment units in 28 two-story and three-story buildings on
approximately 10.5 acres of land. The Property was constructed in 1984.
The Property offers five different unit types. The unit mix and rents
being charged new tenants as of February, 1998 are as follows:
<TABLE>
<CAPTION>
Approximate
Interior
Quantity Type Square Footage Monthly Rental
<S> <C> <C> <C>
120 One bedroom/one bathroom 512 $485
80 One bedroom/one bathroom 743 570
32 One bedroom/one bathroom w/den 841 650
48 Two bedrooms/two bathrooms 983 710
24 Two bedrooms/two bathrooms/studio TH 1,100 810
</TABLE>
The apartments provide a total of approximately 221,000 square feet of
net rentable area.
The Company believes that the Property has generally been well
maintained and is in good condition. The Company has budgeted approximately
$228,000 for additional capital improvements to the Property. These improvements
will include clubhouse renovations, landscaping and interior upgrades.
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 (743 square feet) rented for
$410 in 1993, $420 in 1994, $440 in 1995, $485 in 1996 and $510 in 1997. The
average effective annual rental per square foot at the Property for 1993, 1994,
1995, 1996 and 1997 was $6.97, $7.14, $7.48, $8.25, and $8.67, respectively.
The buildings are wood-frame construction with a combination of brick
veneer, stucco and masonite hardboard siding on reinforced concrete slab
foundations. Roofs are sloped fiberglass shingled on plywood.
The Property has a two-tiered outdoor swimming pool, two laundry
facilities and an access gate to the Property. There is also a clubhouse which
includes a kitchen, entertainment area and a leasing office. There is ample
paved parking for the tenants.
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All apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and baths. Each apartment unit has a cable
television hook-up and an individually controlled heating and air conditioning
unit. Each kitchen is equipped with a refrigerator/freezer, electric range and
oven, dishwasher, microwave and garbage disposal. Each apartment unit (other
than the smallest one-bedroom unit) has a fireplace and washer/dryer
connections. About 16 units substitute a dry bar for the fireplace. Each
apartment unit (other than the largest two-bedroom unit) has a large patio with
exterior storage. All of the upper level units have vaulted ceilings. The owner
of the Property pays for cold water, gas usage for hot water, sewer service and
trash removal. Tenants pay for their own electricity service, which includes
cooking, lighting, heating and air conditioning.
There are at least 10 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 in the nearby competing properties now averages
approximately 95%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 94% in 1993, 95% in 1994, 97% in 1995, 97%
in 1996, and 97% in 1997. As of February 12, 1998, the Property was 97 %
occupied. The tenants are a mix of white-collar workers, blue-collar workers,
students and retired persons.
The following table sets forth the 1997 real estate tax information of
the Property:
Assessed
Jurisdiction Value Rate Tax
- ------------ -------- ---- ---
City of Dallas $9,423,870 $0.65160 $61,405.94
County of Denton 9,500,000 0.25590 24,310.50
Carollton-Farmers Branch ISD 9,423,870 1.49610 140,990.52
----------
$226,706.96
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $9,600,176) will generally 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:
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1. The Dallas/Fort Worth area generally and the specific area in which
the Property is located were perceived as being characterized by a diverse,
stable and steadily growing economy. Accordingly, it was believed that such
economy and its anticipated growth and development would support stable
occupancy rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs and
improvements will allow future increases in rents at the Property.
3. The Company owns multiple properties in The Metroplex. Accordingly,
the Company believes that it is knowledgeable concerning the rental market and
may also benefit from certain economics in scale in the operation of its
properties.
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.
Acquisition and Management Services and Fees. In consideration of
services rendered to the Company in connection with the selection and
acquisition of the Property, the Company will pay Cornerstone Realty Income
Trust, Inc., a property acquisition fee equal to 2% of the purchase price of the
Property, or $240,000. Cornerstone Realty Income Trust, Inc. will serve as
property manager for the Property and for its services will be paid by the
Company a monthly management fee equal to 5% of the gross revenues of the
Property plus reimbursement of certain expenses.
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ITEM 7.a.*
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* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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ITEM 7.b.*
- ----------
* To be filed by amendment. It is impracticable to include herein the required
pro forma financial information. The required pro forma financial information
will be filed as an amendment to this report as soon as possible, but in no
event more than 60 days after the date of filing of this report.
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<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Apple Residential Income Trust, Inc.
Date: February 23, 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 February 13, 1998
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
10.1 Purchase Contract for Timberglen
Apartments
10.2 Property Management Agreement
for Timberglen Apartments
23.1 Consent of Independent Auditors*
- ----------
* To be filed by amendment.
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Exhibit 10.1
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this _ day of February 1998, (the
"Effective Date"), between CORNERSTONE REALTY GROUP, INC. or its nominee,
(hereinafter called "Purchaser") and TIMBERGLEN APARTMENTS LTD., (hereinafter
called "Seller").
ARTICLE I
THE PROPERTY
1.1 SALE OF PROPERTY. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as TIMBERGLEN APARTMENTS
located in DALLAS, TX, with all buildings and improvements located thereon, as
more particularly described in the attached legal description in EXHIBIT A
including, but not limited to 304 individually heated and air conditioned
apartment units, with all appurtenances, together with all appliances, drapes,
carpeting, shrubbery and all other personal property located at the project
which is owned by Seller and is used in connection with the premises, including,
the inventory of personal property to be supplied by Seller and attached hereto
as EXHIBIT B (all such real and personal property hereinafter collectively
referred to as the "Property" unless the context clearly indicates otherwise).
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 PURCHASE PRICE. The total purchase price shall be TWELVE MILLION
($12,000,000) DOLLARS as evidenced by cash or cash equivalent at closing.
2.2 DEPOSIT. ONE HUNDRED THOUSAND ($100,000) DOLLARS to be placed in escrow
at the end of the "Inspection Period" described in Article VI below. Said
deposit shall be placed in escrow with Commonwealth Land Title Insurance
Corporation or its authorized agent (the "Title Company") as an earnest money
deposit which may be credited against the purchase price or applied as per
Article XI below.
2.3 INDEPENDENT CONTRACT CONSIDERATION. Purchaser shall, concurrently with
its execution hereof, deliver to Seller a check in the amount of FIFTY ($50)
DOLLARS (the "Independent Contract Consideration"), which amount Seller and
Purchaser agree has been bargained for as consideration for Seller's execution
and delivery of this Contract and Purchaser's right to inspect the
<PAGE>
Property. The Independent Contract Consideration is in addition to and
independent of any other consideration or payment provided for in this Contract
and is non-refundable in all events.
ARTICLE III
TITLE MATTERS
3.1 TITLE. Seller, shall convey good and indefeasible title by Special
Warranty Deed 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, which are not objected to, or are ultimately otherwise
accepted pursuant to sections 3.2, 3.5, and 3.6 below.
(A) Title shall be free from any and all liens or mortgages and Seller
shall be responsible for any prepayment penalties necessary to deliver such free
title.
3.2 TITLE DEFECTS; ELECTION TO CURE. Seller shall furnish to Purchaser at
Seller's expense a commitment for Title Insurance from the Title Company, (the
"Commitment" or the "Title Report") within ten (10) days after the Effective
Date, covering the Property binding the Title Company to issue a Texas owner
Policy of Title Insurance (the "Title Policy") on the standard form prescribed
by the Texas State Board of Insurance at the Closing, in the full amount of the
Purchase Price, insuring Purchaser's fee simple title to the Property to be good
and indefeasible, together with true and correct copies of all instruments
listed on Schedule B to the Commitment (as well as any other documents or
instruments listed therein which will not be released at closing). If the title
commitment shows any exceptions, which are not acceptable to Purchaser in
Purchaser's sole discretion, Purchaser shall give written notice of such defects
in title to Seller's counsel during the Inspection Period. Seller may, at its
option, elect whether to cure said defects or by written notice to Purchaser
indicate its intention not to cure.
3.3 ELECTION NOT TO CURE DEFECTS. Should Seller elect not to cure title
defects, this Agreement, at Purchaser's option (exercised within five (5) days
of the notice by Seller that it will not cure the objections), shall be void;
each party shall thereupon be released from all obligations hereunder; and all
deposits shall be immediately returned to Purchaser.
3.4 SURVEY. As soon as reasonably possible, and in any event within ten
(10) days after the Effective Date , Seller shall, at Seller's expense, deliver
or cause to be delivered to the Seller, the Title Company, and to Purchaser a
current or updated
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on-the-ground perimeter survey (the "Survey") of the Property prepared by a
Registered Professional Land Surveyor reasonably acceptable to the Purchaser.
The Survey shall show the location and size of all of the following on or
adjacent to the Property, if any:
buildings, buildings lines, improvements, streets,
pavements, easements, rights-of-way, protrusions,
encroachments, fences, 100-year flood plain,
apparent public utilities, and recording
information of easements.
The Survey shall show the gross land area and the Net Land Area. The Survey
shall be in a form and of a date acceptable to Purchaser and to the Title
Company, and in acceptable form in order to allow the Title Company to delete
the survey exception from the Title Policy. The term "Net Land Area" means the
gross land area of the Property less the land area included in utility
easements, drainage easements, ingress/egress easements, rights-of-way, 100-year
flood plain and encroachments on or across the Property. The area within the
100-year flood plain shall be as defined by the Federal Emergency Management
Agency or other applicable governmental authority.
3.5 The Survey shall show no encroachments onto the Land from any adjacent
property, no encroachments by or from the land onto adjacent property and no
violation of or encroachments upon any recorded building lines, restrictions or
easements affecting the Property. If the Survey discloses any such encroachment
or violation, Seller shall have thirty (30) days from the date of delivery of
the Survey (with a commensurate extension of the closing date) to have the Title
Insurer issue its endorsement insuring against damage caused by such
encroachment or violation and to provide evidence thereof to Purchaser, and if
Seller fails to or is unable to have the same insured against within such thirty
(30) day period, Purchaser may elect, on or before the expiration of the
Inspection Period, to (i) terminate this Agreement (in which case the Earnest
Money shall be returned to Purchaser) and neither party shall have any further
liability or obligation to the other hereunder, or (ii) accept the property
subject to any such encroachment or violation, as "Permitted Exceptions".
3.6 Purchaser agrees to deliver to Seller, within the Inspection Period,
written notice as to which items on the title report or the Survey are
objectionable. In the event that the Purchaser does not deliver written notice
to Seller specifying in detail the objections which the Purchaser has with
respect to the survey, the Title Report and instruments listed on Schedule B to
the Title Report prior to the date of expiration of the inspection Period, or
extensions thereof, then the Purchaser shall be deemed to have accepted all
matters disclosed in the preceding which are not the subject of a timely written
objection from the Purchaser to
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the Seller. Wherever "timely" is used, it shall be no less than the expiration
date of the Inspection Period.
ARTICLE IV
PRORATIONS
4.1 INCOME AND EXPENSE ALLOCATIONS. The following shall be prorated, on a
calendar-month basis, to 12:01 a.m. on the day of the closing so long as the
Title Company has Purchaser's funds available by 1:00 p.m. Dallas, Texas time on
the closing date: rents and other income from the Property; operating expenses
(on such service contracts and other obligations as Purchaser may agree 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).
4.2 CLOSING COSTS. Purchaser and Seller shall pay their customary share of
all taxes, recording fees, if any, imposed on the Deed, or any other documents
executed in connection with the transfer of the Property. Seller agrees to pay
cost of title insurance. Seller shall pay any prepayment penalty charged by the
holders of any existing notes.
4.3 ALLOCATION OF RENTS. Rents collected by Seller prior to Closing shall
be prorated as agreed in 4.1 above. Purchaser shall apply rents received after
Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 PRIOR LEASE CONCESSIONS. 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.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 POSSESSION. Possession of the Property shall be delivered to Purchaser
at closing, subject to the rights of the tenants under existing leases and
rental agreements and subject to 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:
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(A) Receipt by Purchaser of an engineering report of building and site
conditions, satisfactory to Purchaser in its sole discretion, said report to
include in part, a description of any hazardous waste sites, hazardous wastes
and/or hazardous materials affecting the property. Purchaser shall have until
the date of expiration of the Inspection Period in which to review the reports
set forth herein and exercise its right to reject the Property based thereon or
the right hereunder shall be deemed waived.
(B) The receipt by Purchaser of Seller documents described in 7.2 below.
(C) On the condition that Sellers representations and warranties described
in Article VIII below remain true and correct.
(D) On the condition that there have been no material or adverse changes to
the property or leases.
(E) Seller acknowledges that Purchaser is a public entity and that it is
required to furnish financial statements to the Securities and Exchange
Commission in connection with this acquisition. Seller agrees to make the
information available for Purchaser 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.
(F) Purchaser determining during the Inspection Period that all water,
sewer, gas, electric, telephone, and drainage facilities and all other utilities
required by law or by the normal use and operation of the Property are and at
the time of closing will be installed to the property line, are and at the time
of closing will be connected pursuant to valid permits, and are and at the time
OF closing will be adequate to service the Property and to permit full
compliance with all requirements of law and normal usage of the Property by the
tenants thereof and their licensees and invitees.
6.2 INSPECTION. This Agreement shall be further subject to and contingent
upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 PREPARATION FOR INSPECTION. At the execution of this Agreement,
Seller shall deliver to Purchaser copies of the following (collectively,
"Documents") : (The Inspection Period shall be extended as a result of any
delays by Seller in producing the items requested herein unless the Seller does
not have them and
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notifies Purchaser with an extension of time to reflect delays of notification.)
The current rent roll for the Property; detailed statements of income and
expenses with respect to the Property for the past two years; the most recent
tax bills for the Property; utility bills for the Property for the twelve (12)
months previous to the date hereof; all service contracts; all insurance
policies applicable to the Property to include loss runs for the last five (5)
years; Plans and specifications for the Property, if available, service
contracts, Certificates of Occupancy, to the extent reasonably available in
Seller's possession; a copy of Title Report (together with true and correct
copies of the instruments listed thereon which evidence exceptions to title,
except those which will be released at and as a condition of closing) and most
recent survey for the Property, and if in seller's possession, a copy of any
environmental or engineering reports on the property. All these items shall be
certified BY Seller's management company to be accurate and complete to the best
of its knowledge and belief.
6.2.2 INSPECTION OF BOOKS AND RECORDS; ACCESS. Upon receipt by Purchaser of
all documents requested in the paragraph above, Purchaser, its employees, agents
and contractors shall have fourteen (14) days (the "Inspection Period", as the
same may be extended) to enter upon the Property (subject to the rights of the
tenants) during normal business hours after notice to Seller for the purpose of
making physical inspections thereof, including but not limited to roofs,
heating, cooling, electrical and plumbing systems, swimming pool, appliances,
and structural elements of the buildings. Upon the conclusion of the Inspection
Period this contract shall be deemed to be a firm agreement of purchase and sale
binding the parties hereto, except as it may be terminated prior to the end of
the Inspection Period and subject to the other provisions and conditions
contained herein, including but not limited to the condition imposed by
Paragraph 6.1(A) above. The Inspection Period shall be extended by one (1) day
for each day beyond ten (10) days from the Effective Date delivery of the Survey
and title commitment are delayed.
6.2.3 RIGHT OF TERMINATION DURING INSPECTION PERIOD. Purchaser shall also
be permitted to review all original leases, expense records, tenant cards and
occupancy data available. If Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the right to
terminate this Agreement only by giving written notice to Seller or its attorney
before the end of the Inspection Period, and no party hereto shall have any
further liability to any other party hereto, and all deposits shall be returned
to Purchaser.
6.2.4 "RENT READY". During the Inspection Period, both Seller and Purchaser
will inspect an apartment unit at the Property and mutually agree that said
apartment shall be
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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.
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 (the cost of any repair
obligations of Seller not to exceed $25,000) 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.
6.2.6 NOTIFICATION OF TESTS. Purchaser shall notify Seller, in writing, of
its intention, or the intention of its agents or representatives, to conduct
tests on the Property at least twenty-four (24) hours prior to such intended
tests. Purchaser shall bear the cost of all such inspections and tests. At
Seller's option, Seller may be present for any inspection or test.
6.2.7 PROPRIETARY INFORMATION. Purchaser acknowledges that any and all of
the Documents are proprietary and confidential in nature and will be delivered
to Purchaser solely to assist Purchaser in determining the feasibility of
purchasing the Property. Purchaser agrees not to disclose the contents of the
Documents to any party outside of Purchaser's organization except to certain of
its attorneys, accountants, engineers, architects, contractors, consultants,
lenders, or investors (collectively, the "Permitted Outside Parties"). Purchaser
further agrees that the Documents shall be disclosed and exhibited only to those
persons within Purchaser's organization or to those Permitted Outside Parties
who are responsible for determining the feasibility of Purchaser's acquisition
of the Property and who have been informed of the confidentiality of such
information as required herein. In permitting the Permitted outside Parties to
review the Documents or other information to assist Purchaser, Seller has not
waived any privilege or claim of confidentiality with respect thereto, and no
third party benefits or relationships of any kind, either express or implied,
have been offered, intended or created by Seller and any such claims are
expressly rejected by Seller and waived BY Purchaser and the Permitted outside
Parties, for whom, by its execution of this Agreement, Purchaser is acting as an
agent with regard to such waiver.
6.2.8 RETURN OF DOCUMENTS. Purchaser shall return all of the Documents, any
and all copies Purchaser has made of the
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Documents, and if Seller agrees to pay for, Purchaser will deliver all copies of
any third-party studies, reports or test results obtained by Purchaser in
connection with its inspection of the Property, other than proprietary,
privileged and/or internally generated studies, reports and results
(collectively, "Purchaser's Information"), at such time as this Agreement is
terminated for any reason other than a Seller default; provided, however, that
all environmental studies, reports and results obtained from third parties shall
constitute Purchaser's Information, regardless of whether they are proprietary
or privileged.
6.2.9 PURCHASER'S RESPONSIBILITIES. In conducting any inspections,
investigations or tests of the Property and/or Documents, Purchaser and its
agents and representatives shall: (i) not damage any part of the Property; (ii)
not injure or otherwise cause bodily harm to Seller or its agents, guests,
invitees, contractors and employees; (iii) maintain comprehensive general
liability (occurrence) insurance in terms and amounts reasonably satisfactory to
Seller covering any accident arising in connection with the presence of
Purchaser, its agents and representatives on the Property and shall deliver a
certificate of insurance verifying such coverage to Seller prior to entry upon
the Property; (iv) promptly pay when due the costs of all tests, investigations,
and examinations done with regard to the Property; (v) not permit any liens to
attach to the Real Property by reason of the exercise of its rights hereunder;
(vi) fully restore the Land and the Improvements to the condition in which the
same were found before any such inspection or tests were undertaken; and (vii)
not reveal or disclose any information obtained during the Inspection Period
concerning the Property and the Documents to anyone outside Purchaser's
organization, except in accordance with the confidentiality standards set forth
in Section 6.2.7 hereof.
6.2.10 PURCHASER'S AGREEMENT TO INDEMNIFY. Purchaser hereby indemnities and
holds Seller harmless from and against any and all liens, claims, causes of
action, damages, liabilities and expenses (including reasonable attorneys' fees)
arising out of purchaser's inspections or tests or any violation of the
provisions of section 6.2.9.
6.2.11 "HAZARDOUS SUBSTANCES" DEFINED. For purposes hereof, "Hazardous
Substances" means any hazardous, toxic or dangerous waste, substance or
material, pollutant or contaminant, as defined for the purposes of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Sections 9601 et seq.), as amended ("CERCLA"), or the Resource
Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.) , as amended
("RCRA"), or any other federal, state or local law, ordinance, rule or
regulation applicable to the Property, or any substance which is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutaqenic or otherwise hazardous, or any substance which contains gasoline,
diesel fuel or
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other petroleum hydrocarbons, polychlorinated biphenyls (pcbs) , radon gas, urea
formaldehyde, asbestos, lead or electromagnetic waves.
6.2.12 DISCLAIMER OF REPRESENTATIONS SELLER. EXCEPT AS EXPRESSLY PROVIDED
IN THIS AGREEMENT, PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT MADE,
DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS,
WARRANTIES (OTHER THAN THE SPECIAL WARRANTY OF TITLE AS SET OUT IN THE DEED OR
AS EXPRESSLY SET FORTH HEREIN), PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF
ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN,
PAST, PRESENT, OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO: (1) THE
VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING, WITHOUT
LIMITATION, THE WATER, SOIL AND GEOLOGY; (2) THE INCOME TO BE DERIVED FROM THE
PROPERTY; (3) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND
USES WHICH PURCHASER MAY CONDUCT THEREON; (4) THE COMPLIANCE OF OR BY THE
PROPERTY OF ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY
APPLICABLE GOVERNMENTAL AUTHORITY OR BODY; (5) THE HABITABILITY,
MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OF THE PROPERTY; (6) THE MANNER OR QUALITY OF THE CONSTRUCTION OR
MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY; (7) THE MANNER, QUALITY,
STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY; OR (8) ANY OTHER MATTER WITH
RESPECT TO THE PROPERTY. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
PURCHASER ACKNOWLEDGES SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY
DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR
GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER REGARDING COMPLIANCE WITH ANY
ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USES LAWS, REGULATIONS, ORDERS OR
REQUIREMENTS, INCLUDING THE EXISTENCE IN OR ON THE PROPERTY OF HAZARDOUS
MATERIALS.
6.2.13 SALE "AS IS". EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,,
PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY
TO INSPECT THE PROPERTY DURING THE REVIEW PERIOD, PURCHASER IS RELYING SOLELY ON
ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO
BE PROVIDED BY SELLER, AND AT CLOSING AGREES TO ACCEPT THE PROPERTY AND WAIVE
ALL OBJECTIONS OR CLAIMS AGAINST SELLER ARISING FROM OR RELATED TO THE PROPERTY
OR TO ANY HAZARDOUS MATERIALS ON THE PROPERTY. PURCHASER FURTHER ACKNOWLEDGES
AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED OR TO BE MADE
AVAILABLE TO PURCHASER WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY
OF SOURCES, EXCEPT WITH REGARD TO THE INFORMATION AND MATERIALS REFERRED TO IN
OR FORMING THE BASIS OF SELLER'S REPRESENTATIONS WARRANTIES AND COVENANTS
CONTAINED HEREIN, SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR
VERIFICATION OF SUCH INFORMATION AND EXCEPT AS EXPRESSLY PROVIDED HEREIN SELLER
MAKES NO REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR
GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER AS TO THE ACCURACY OR
COMPLETENESS OF SUCH INFORMATION. SELLER IS NOT LIABLE OR BOUND IN ANY MANNER BY
ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS
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OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED
BY ANY REAL ESTATE BROKER (INCLUDING WITHOUT LIMITATION THE BROKER), AGENT,
EMPLOYEE, SERVANT OR OTHER PERSON. PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, EXCEPT AS EXPRESSLY PROVIDED
HEREIN, THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS"
CONDITION AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND AGREED THAT THE
PURCHASER PRICE HAS BEEN NEGOTIATED BASED ON THE FACT THAT THE PROPERTY IS SOLD
BY SELLER AND PURCHASED BY PURCHASER SUBJECT TO THE FOREGOING. THE PROVISIONS OF
THIS PARAGRAPH AND SECTION 6.2.12 SHALL SURVIVE THE CLOSING IN PERPETUITY AND
SHALL BE CONTAINED IN THE DEED.
If each of the warranties does not remain true up and including the Closing as
to any material matter and Purchaser has knowledge of the failure of such
warranty to remain true, at Purchaser's option, this Agreement may be terminated
by Purchaser if Seller does not cure such inaccuracy within ten (10) days after
notice thereof to Seller, or Purchaser may elect to close the sale and thereby
forever waive any claim for a breach of any such warranty.
ARTICLE VII
CLOSING
7.1 CLOSING. Closing will be held on or about seven (7) days after the
completion of the Inspection Period, at such place and at such time as the
parties may agree.
7.2 SELLERS DELIVERIES. At closing, Seller shall execute and deliver to
Purchaser the Special Warranty Deed referred to in Paragraph 3 hereof and shall
also execute, where necessary, and deliver to Purchaser, the following in a form
reasonably acceptable to Purchaser:
(A) A Bill of Sale, with special warranty of title transferring the
personal property (as shown in Schedule B) to Purchaser free of all liens,
charges and encumbrances.
(B) The Title Policy or Title Company's commitment to issue to
Purchaser the Title Policy to be issued by the underwriter for the Title Company
pursuant to the Title Commitment, subject only to the Permitted Exceptions, in
the full amount of the Purchase Price, dated as of the date of Closing.
(C) Originals or copies of all signed leases and rental agreements in
effect with tenants of the Property not for more than one (1) year to be
delivered at the Property offices).
(D) All security and cleaning deposits made by such tenants. Seller
will give the tenants the required notice of such transfer in compliance with
the laws of TEXAS.
(E) An affidavit of Seller in such form as will cause the Title Company
to omit from the title insurance policy the
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exclusion relating to unrecorded mechanics and materialmen's liens.
(F) A rent roll certified by Seller's management company to be true and
correct as of the date of closing showing the name of, and the amount of monthly
rental payable, by each tenant of the Property, the apartment occupied by the
tenant, the date to which rent has been paid, any advance payment of rent, and
the amount of any escrow, or security deposit of tenant.
(G) An affidavit of Seller 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.
(H) Seller shall provide, a certificate from a licensed extermination
contractor, who is regularly engaged in the business of pest control, that all
buildings are free from any termite or other wood-boring insect infestation.
Said certificate shall be dated within 90 days of closing, bearing the
Contractor's name, contractors license number, the signature of the party
authorized to sign for the Contractor and the date of the inspection. Should
damage exist, Seller may, but shall not be obligated to proceed to have any
corrective work completed prior to closing. If Seller does not make the repairs
prior to closing, Purchaser, at its option, may either proceed to settlement and
have such sums required for repairs (not to exceed $25,000) deducted from
Seller's proceeds, or may in its sole discretion terminate this Agreement.
Seller shall promptly return Purchaser's deposit upon such termination.
(I) 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.
(J) Assignments without recourse of all warranties and guarantees (see
Exhibit D) to the extent such are assignable and still in effect and provide
Purchaser with copies of all such warranties and guarantees without limitation
for all appliances, dishwashers, disposals, refrigerators, heating and air
conditioning units, washers and dryers.
(K) Consent of the Seller's authorized officer to the sale of the
Property and any other approvals required under Seller's articles, by-laws or
other organizational documents, which may affect Seller's ability to convey
marketable title.
(L) Provide documents for the transfer of the telephone, electric,
water and sewer, and gas utilities, as may be
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required by the utility, for execution at closing.
(M) Satisfactory evidence of the power and authority of Seller to enter
into and consummate this agreement, including but not limited to:
(i) An opinion of Seller's counsel, in a form reasonably
satisfactory to Purchaser, stating that:
(a) The individual(s) executing the deed and related
documents are duly authorized to do all such acts as are necessary to consummate
this sale, without further consent of any other party.
(b) That the partner or officer can bind the Partnership or
Corporation.
(N) Affidavit that Seller has received no notice of the presence of
asbestos and/or any other hazardous material at the Property.
(0) Seller shall provide a satisfactory and valid written termination
of the management agreement executed by the existing management and rental agent
for the Property, without cost to the Purchaser.
(P) A notice letter to all the residents of the apartment complex as to
change of ownership in the form prepared by the Purchaser.
(Q) 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.
(R) A representation letter as normally required by auditors for a
public company in the form attached hereto as EXHIBIT E. This clause shall
survive closing for one year.
(S) 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 obligations under leases,
securities, any contracts which may be accepted by the Purchaser and any other
obligations specifically set forth herein.
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(C) Deliver to the seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate the
transfer.
(D) Execute all such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Seller or its counsel.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 REPRESENTATIONS OF THE PARTIES. Seller warrants (which warranties shall
not survive settlement unless designated to the contrary) that as of the date
hereof and as of closing hereof:
(A) That Seller, is the owner in fee simple of the Property and has the
power to convey same.
(B) That Seller is not subject to any other agreements or arrangements,
with the exception of those contained in any existing mortgage documents which
would prevent Seller from selling the Property to Purchaser. This warranty shall
survive for one year following closing.
(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents. This
warranty shall survive for one year following closing.
(D) Seller has no actual knowledge and has not been advised in writing
that it is in default under any lease, rental agreement service or equipment
contract, or mortgage or other encumbrances relating to the Property. This
warranty shall survive for one year following closing.
(E) Seller has no actual knowledge of any latent defect in the Property
or any part thereof. This warranty shall survive for one year following closing.
(F) Seller has no actual knowledge of any existing or threatened
litigation which relates to or which would affect the Property. This warranty
shall survive for one year following closing.
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(G) The Property abuts on and has direct vehicular access to a public
road.
(H) All building and other improvements at the Property are located
entirely within the boundary lines of the Property, except as disclosed on the
Survey.
(I) Seller has no actual knowledge 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 one year following closing.
(J) That to the best knowledge of the Seller, the drainage within the
project is satisfactory and complies in all respects with all government
regulation. This warranty shall survive for one year following closing.
(K) 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.
(L) 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.
(M) 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.
(N) Seller warrants that it has complied with the keyless, dead-bolt
lock requirement.
8.2 CONTINUATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS TO THE DATE
OF CLOSING. If each of the warranties set
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forth in this section does not remain true up to and including the time of
closing as to any material matters, this Agreement, at Purchaser's election,
shall be terminated, Seller shall return all payments made by Purchaser, or
Purchaser may elect to close the sale and waive failure of the warranties.
8.3 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 materially true as of the
date of closing. Seller's liability pursuant to the provisions of this Section
8.3 shall never exceed $25,000 regardless of the amount of reasonable costs
incurred by the Purchaser in connection with a breach which is discovered prior
to the date of closing. It is intended that the indemnification by Seller of
Purchaser shall only cover Purchaser's actual out-of-pocket expenses incurred
with and paid to non-affiliated third parties of the Purchaser in connection
with the negotiation of this Contract and the conduct of the Purchaser's due
diligence in anticipation of the acquisition of the Property. The Seller shall
have no obligation to indemnify Purchaser and shall have no liability to
Purchaser for damages in the nature of loss of bargain damages, consequential
damages, punitive damages, indirect damages, lost profits, lost opportunities,
opportunity costs, detrimental reliance or other damages which do not constitute
Purchaser's actual out-of-pocket expenses paid to non-affiliated third parties
as aforesaid, except as set forth otherwise in this Agreement. Further, whenever
it is expressed in this Agreement that a warranty shall survive the Closing for
one year, it is intended that covenants, representations and warranties of the
Seller not be restated or continue subsequent to the Closing. Instead, it is
intended that if it is determined that the Seller breached a representation or
warranty prior to Closing and such breach of representation or warranty was not
known to the Purchaser prior to Closing, then the Purchaser shall have a period
of one year in which to initiate litigation by filing suit against the Seller
and obtaining service of process on the Seller. The one-year survival period is
effectively a contractual statute of limitations which shall govern and control
over any other statute of limitations applicable to the breach of warranty or
representation. Of course, if a breach of warranty or representation is known to
the Seller and the Purchaser at the time of the Closing, and the Purchaser
closes the transaction notwithstanding such breach of representation and
warranty, then, as provided elsewhere in this Agreement, the Purchaser shall
have waived its rights, causes of action or claims against the Seller as a
result of such breach of representation or warranty by the Seller which was
known to the Purchaser unless waived in writing or survives pursuant to this
Agreement.
8.4 SELLER'S KNOWLEDGE. As used herein, "Seller's
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Knowledge" or words to that effect means matters which are, in fact, actually
known to Richard W. Weyand at the time of the making of the representation,
without having made any investigation and does not mean constructive knowledge.
As used herein, "Seller has not received any written notice", or words to that
effect, means Richard W. Weyand had not actually received any such written
notice, and does not mean constructive notice. Further, no knowledge of or
notice received by any agent, employee or contractor of the Seller or any
partner of the Seller shall be deemed to have been received by, or shall be
attributed to Richard W. Weyand by virtue of any laws of agency, partnership or
other similar laws whereby knowledge of one may be attributed to another. None
of these terms shall be construed to impose upon Richard W. Weyand any duty to
investigate the matter to which such actual knowledge, or absence thereof,
pertains.
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, Seller shall repair such damage before the
date provided herein for closing. If such damage cannot be repaired by such
time, this Agreement may be canceled at the option of the Purchaser. In the
event of cancellation as aforesaid, this Agreement shall become null and' void
and the parties shall be released and all payments made shall be returned.
Should Purchaser elect 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 threatened taking, pursuant
to the power of eminent domain, all or any part thereof, or any actual or
proposed sale in lieu thereof, the Seller shall give written notice thereof to
the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property (any part of the building or more than
5% of the parking area) , Purchaser may elect to either (a) terminate this
Agreement, in which event the Deposit shall be immediately returned to Purchaser
and all other rights and obligations of the parties hereunder shall terminate
immediately, or (b) to waive its right to terminate this Agreement and proceed
to closing, in which event all proceeds, awards and other payments arising out
of such condemnation or sale (actual or threatened) shall be paid to the
Purchaser at closing, if such payment has been received or Seller shall assign
to Purchaser the rights to such payments.
9.3 RISK OF LOSS. Prior to closing, all risks of loss or damage by every
casualty shall be borne by the Seller.
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ARTICLE X
BROKER'S COMMISSION
10.1 COMMISSION. Seller agrees to pay a brokerage fee to PINNACLE REALTY,
pursuant to a separate agreement. Said brokerage fee shall be deemed earned if,
and only if, settlement occurs hereunder and Seller receives its proceeds of the
sale, and shall not be deemed earned even if Purchaser and/or Seller wrongfully
fail(s) to consummate the purchase and sale herein contemplated. Seller and
Purchaser represent and warrant to each other that no other brokerage fees are
or shall be owing in connection with this transaction or in any way with the
Apartments and Seller and Purchaser hereby indemnify and hold the other harmless
from any and all claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 DEFAULT DEFINED. Default for the purpose of this Agreement shall mean
any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 SELLER'S DEFAULT. Upon Seller's default, the Purchaser, at its
election, may either, as its sole and exclusive remedy: (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. In the event that the remedy of specific
performance is not available to the Purchaser solely by virtue of the Seller
having transferred, encumbered or conveyed the Property in violation of this
Agreement, then the Purchaser may pursue the Seller for recovery of its actual
damages incurred as a result of Seller's default. Purchaser shall have no other
remedies, other than those specified in this Section 11.2 in the event of
Seller's default. 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'S DEFAULT. Upon Purchaser's default, this Agreement shall be
terminated and both parties released from all obligations hereunder, and the
deposit shall be retained by the Seller as liquidated damages. Purchaser shall
indemnify Seller for any reasonable costs incurred by Seller in recovering the
deposit if litigated. Seller shall have no other remedy against Purchaser in the
event of Purchaser's default.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 ENTIRE AGREEMENT. This Agreement sets forth the entire understanding
between the parties; it supersedes all previous agreements and representations
which are deemed merged herein and may not be modified except in writing.
12.2 ASSIGNMENT. Purchaser may assign this Agreement without the consent of
Seller.
12.3 SEVERABILITY. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 BINDING EFFECT. The parties to the Agreement mutually agree that it
shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 CONTROLLING LAW. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State of Texas.
12.6 COUNTERPARTS. To facilitate execution, this Agreement may be executed
in as many counterparts as may be required. It shall not be necessary that the
signature an behalf of both parties hereto appear in each counterpart hereof,
and it shall be sufficient that the signature on behalf of both parties hereto
appear on one or more such counterparts. All counterparts shall collectively
constitute a single contract.
12.7 INCORPORATION BY REFERENCE. All of the Exhibits referred to herein
and/or attached hereto shall be deemed to constitute a part of the Agreement.
12.8 HEADINGS. The headings of the Articles and sections hereof are
inserted for convenience only and shall not be deemed to constitute a part of
the Agreement.
12.9 CONSTRUCTION OF CONTRACT. Each party hereto have reviewed and revised
(or requested revisions of) this Agreement, and therefore the normal rule of
construction that any ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this Contract
or any amendments or exhibits hereto.
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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 to 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. 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
paint that may place young children at risk of developing lead poisoning. Lead
poisoning in young children may produce permanent neurological damage, including
learning disabilities, reduced, intelligence quotient, behavioral problems, and
impaired memory. Lead poisoning also poses a particular risk to pregnant women.
The seller of any interest in residential real property is required to provide
the buyer with any information on lead-based paint hazards from risk assessments
or inspections in the seller's possession and notify the buyer of any known
lead-based paint hazards. A risk assessment or inspection for possible
lead-based paint hazards is recommended prior to purchase.
12.12.1. Seller has no knowledge of lead-based paint and/or lead-based
paint hazard in the housing.
12.12.2. Seller has no reports or records pertaining to lead-based paint
and/or lead-based paint hazards in the housing.
12.12.3. Purchaser is hereby granted a 10-day opportunity (or the length of
the Inspection Period, whichever is longer) to conduct a risk assessment or
inspection for the presence of lead-based paint and/or lead-based paint hazards.
12.13 EXHIBITS. The following exhibits are attached to this Agreement and
are incorporated into this Agreement by this
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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.
(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
12.14 DISCHARGE OF OBLIGATIONS. Except as otherwise provided herein, the
acceptance of the Deed by Purchaser at Closing shall be deemed to be a full
performance and discharge of every representation, warranty and covenant made by
Seller herein, and every agreement and obligation on the part of Seller to be
performed pursuant to the provision hereof, and such representations, warranties
and covenants shall be deemed to merge into the documents delivered at Closing.
12.15 CALCULATION OF TIME PERIODS. Unless otherwise specified, in computing
any period of time described in this Agreement, the day of the act or event
after which the designated period of time begins to run is not to be included,
and the last day of the period so computed is to be included unless such last
day is a Saturday, Sunday or legal holiday under the laws of the State of Texas,
in which event the period shall run until the end of the next day which is
neither a Saturday, Sunday or legal holiday.
12.16 NO RECORDATION. No party hereto shall record this Agreement in any
public records and no reference hereto shall be made in any recorded instrument
in any public records unless all other parties have consented to such
recordation in writing.
12.17 PREPARATION OF DOCUMENTS. All of the documents that are not attached
hereto as Exhibits to be executed at Closing shall be in the form prepared to
the reasonable satisfaction of the parties hereto.
12.18 TIME IS OF THE ESSENCE. Time is of the essence of this Agreement, and
each and every covenant hereof. However, this shall not prohibit either party
from requesting and receiving a reasonable adjournment not to exceed thirty (30)
days.
ARTICLE XIII
NOTICE
13.1 NOTICE. All notices required or permitted to be
20
<PAGE>
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: Timberglen Apartments Ltd.
15209 Addison Road
Addison, TX 75248
Attention: Richard W. Weyand
Fax: (972) 239-5722
With a copy to
Seller's Attorneys: J. Scott Jackson, Esq.
Glast, Phillips & Murray, P.C.
One Galleria Tower
13355 Noel Road, Suite 2200
Dallas, TX 75240
Fax: (972) 419-8329
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and
Robert E. Morrison, Esq.
Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, TX 75201
Fax: (214) 999-6170
13.2 DELIVERY OF NOTICE. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier or by fax. Notices sent in any other manner shall
be deemed given only when actually delivered at the specified address.
21
<PAGE>
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed this day and date first written above.
SELLER:
TIMBERGLEN APARTMENTS LTD.
By: MILTON & WEYAND LTD., General Partner
By: WEYAND CORPORATION
By: /s/ J. Scott Jackson
----------------------
J. Scott Jackson
Its: Authorized Signatory
----------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
BY: /s/ S.J. Olander
----------------------
S.J. Olander
Its: Senior Vice President
----------------------
22
<PAGE>
"EXHIBIT A"
Lot 3, Block B/8750, of Rosemead Addition, an Addition to the City of Dallas,
Denton County, Texas, according to the Plat thereof recorded in Cabinet C, Slide
294 of the Map Records of Denton County, Texas.
<PAGE>
EXHIBIT "B"
INVENTORY
1 FAX MACHINE o SHARP
1 TRW CREDIT PROMPTER
1 PENCIL SHARPENER
1 COMPUTER W/ GOLDSTAR MONITOR, MODEM, MOUSE AND KEYBOARD
1 PRINTER o PANASONIC DOT MATRIX
1 DESK W/ SECRETARY AND KEYBOARD TRAY
2 METAL FOLDING CHAIRS
1 PADDED WICKER BACKED CHAIR
2 SECRETARIAL CHAIRS
3 4 DRAWER FILE CABINETS
1 3 LINE TELEPHONE
1 MGR DESK
1 2 DRAWER FILE CABINET (METAL)
1 DESK CHAIR
8 PADDED WOODEN CHAIRS
1 OVAL END TABLE
1 WOOD AND GLASS TABLE
4 LAMPS
9 SILK PLANTS
2 MAKE READY BOARDS (1 LARGE 1 SMALL)
1 2 DRAWER FILE CABINET (WOOD)
1 LEASING DESK
1 TYPEWRITER
2 4 LINE PHONES
4 LONG SOFA TABLES
3 DROP SIDE END TABLES
1 COFFEEE TABLE
2 RADIOS
1 AREA RUG
2 GLASS CANDLE HOLDERS W/ CANDLES
3 MIRRORS
1 FRAMED SITE MAP
20 FRAMED PICTURES
1 REFRIGERATOR
1 MICROWAVE
1 STEREO W/2 SPEAKERS
1 SOFA-NEW
2 LEATHER CHAIRS-NEW
1 DININGROOM TABLE
1 DECORATIVE POT w/ NUTS ?
6 TRASH CANS
1 BIRD HOUSE
2 SMALL PLANTERS W/ PLANTS
1 WOODEN POT w/ WHITE FLOWERS
1 WICKER BASKET WITH PLANTS
1 VACUUM CLEANER
1 GLASS PLATE w/ DECORATIVE BALLS
2 CALCULATORS
1 MISC. MINI-MODEL ITEMS
1 ILCO 025 KEY CUTTING MACHINE
1 6 FT. A-FRAME WOOD LADDER
1 APPLIANCE DOLLY
1 SHERMAN WILLIAMS NOVA 6PX SPRAY RUG
1 SEROON 4000 RECOVERY RECYCLE
8 RECOVERY TANKS
2 MICROWAVES (NEW)
1 GOLF CART & CHARGER
1 OB 120 WEEDEATER
1 FLOWER
MISC. PARTS
1 EXT. LADDER 28FT.
2 HALVES OF EXT LADDERS (BROKEN)
1 REGULAR DOLLY
POOL FURNITURE = 33 CHAIRS
2 TABLES
<PAGE>
EXHIBIT "C"
AFTER RECORDING RETURN TO:
Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, TX 75201
Attn: S. Leigh Moore
SPECIAL WARRANTY DEED
THE STATE OF TEXAS ss.
ss. KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF _________ss.
THAT, _______________, a __________________ ("Grantor"), for and in
consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and
valuable consideration in hand paid to Grantor by APPLE REIT LIMITED
PARTNERSHIP, a Virginia limited partnership ("Grantee"), whose mailing address
is 306 E. Main Street, Richmond, VA 23219 the receipt and sufficiency of such
consideration being hereby acknowledged, has GRANTED, SOLD AND CONVEYED, and by
these presents does GRANT, SELL AND CONVEY unto Grantee that certain real
property being more particularly described in Exhibit "A" attached hereto and
made a part hereof for all purposes, together with all improvements, structures,
and fixtures situated thereon (collectively, the "Property"); subject, however,
to those matters more particularly described in Exhibit "B" attached hereto and
made a part hereof for all purposes (collectively, the "Permitted Exceptions").
TO HAVE AND TO HOLD the Property, together with all and singular the
rights, privileges, tenements, hereditaments, easements, appendages and
appurtenances thereto in anywise belonging, unto Grantee, its successors and
assigns forever, subject to the Permitted Exceptions; and Grantor does hereby
bind itself and its successors to WARRANT AND FOREVER DEFEND all and singular
the Property, subject to the Permitted Exceptions, unto Grantee, its successors
and assigns, against every person whomsoever lawfully claiming, or claim the
same, or any part thereof, by, through, or under Grantor, but not otherwise.
In addition, Grantor hereby conveys to Grantee, for the same consideration
set forth above and subject to the Permitted Exceptions, all of Grantor's right,
title and interest, if any, in and to adjacent streets, alleys, rights-of-way
and strips and gores of land abutting or adjoining the Property.
[As set forth in the Purchase Agreement to which this is attached, the
provisions of Sections 6.2.12 and 6.2.13 of the Purchase Agreement shall be
incorporated herein]
<PAGE>
IN WITNESS WHEREROF, this instrument has been executed as of (but not
necessarily on) this ___________ day of ________ 199_.
GRANTOR:
-----------------------,
a ___________________
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
THE STATE OF ______________ ss.
ss.
COUNTY OF _________________ ss.
This instrument was acknowledged before me on ____________, 199_, by
_________________________, of _____________, a _________, on behalf of such
___________.
-----------------------------------
Notary Public, State of ___________
<PAGE>
EXHIBIT "D"
BLANKET CONVEYANCE, BILL OF SALE AND ASSIGNMENT
-----------------------------------------------
THE STATE OF TEXAS ss.
ss. KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF ________ ss.
That concurrently with the execution and delivery hereof, ________________,
a ______________________ _____________ ("Assignor"), is conveying to APPLE REIT
LIMITED PARTNERSHIP, a Virginia limited partnership ("Assignee"), by Special
Warranty Deed ( the "Deed"), that certain tract of land, together with the
improvements thereon, commonly known as ____________, City of ___________,
____________ County, Texas, more particularly described on Exhibit "A" attached
to the Deed and made a part thereof for all purposes (the "Property").
It is the desire of Assignor hereby to assign, transfer and convey to
Assignee all fixtures, fittings, appliances, apparatus, equipment, machinery,
contract rights, claims, trade names, bonds, warranties and guaranties,
licenses, permits, existing telephone numbers for the Property, the name
"___________________________," and other items of personal property, both
tangible and intangible (excluding cash), owned by Assignor, if any, and affixed
or attached to, or placed or situated upon, or used or acquired in any way
whatsoever in connection with the complete and comfortable use, enjoyment,
occupancy or operation of the Property, excluding, however, any personal
property owned or leased by Tenants of the Property (all of such properties and
assets being hereinafter collectively referred to as the "Assigned Properties").
NOW, THEREFORE, in consideration of the receipt of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, in hand paid by Assignee to
Assignor, the receipt and sufficiency of which are hereby acknowledged and
confessed by Assignor, Assignor does hereby ASSIGN, TRANSFER, SET OVER, CONVEY
and DELIVER to Assignee, its successors, legal representatives and assigns all
of Assignor's right, title and interest in and to the Assigned Properties,
subject to the Permitted Exceptions (as defined in the Deed).
Assignor represents that it has not pledged or encumbered the Assigned
Properties except to secure indebtedness which will be paid in full upon
conveyance of the Assigned Property. This instrument may be executed in multiple
counterparts, each of which shall be deemed an original but together shall
constitute one in the same instrument.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this instrument as
of (but not necessarily on) this ______ day of _____________________, 1998.
ASSIGNOR:
---------------------,
a ___________________
By: ___________________________
Name: _________________________
Title: _________________________
<PAGE>
ASSIGNEE:
APPLE REIT LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., a Virginia
corporation, its general partner
By: _________________________
Name: _______________________
Title:_______________________
<PAGE>
EXHIBIT "E"
L.P. Martin & Company, P.C.
4132 Innslake Drive
Glen Allen, VA 23060
In connection with your audit of the statement of income and direct
operating expenses of ____________________ Apartments for the twelve (12) month
period ended __________________, for the purpose of expressing an opinion as to
whether the financial statement presents fairly, in all material respects, the
results of operations of _____________ Apartments in conformity with generally
accepted accounting principles we confirm, to the best of our knowledge and
belief, the following representations made to you during your audit:
1. We are responsible for the fair presentation of the statement of
operations in conformity with cash, tax or accrual accounting
principles. We are also responsible for adopting sound accounting
policies, establishing and maintaining internal control, and
preventing and detecting fraud.
2. We have made available to you all financial records and related data.
3. There have been no:
a. Fraudulent financial reporting or misappropriation of assets
involving management or employees who have significant roles in
internal control.
b. Fraudulent financial reporting or misappropriation of assets
involving other employees that could have a material effect on
the financial statements.
C. Communications from regulatory agencies concerning noncompliance
with, or deficiencies in financial reporting practices that could
have a material effect on the financial statements.
4. The following, if applicable, have been properly recorded in the
accounting records and/or disclosed to you.
a. Related party transactions and related accounts receivable or
payable, including sales, purchases, loans, transfers, leasing
arrangements, and guarantees.
b. Arrangements with financial institutions involving
<PAGE>
L.P. Martin & Company, P.C.
Page 2
compensating balances or other arrangements involving
restrictions on cash balances and 1ine-of-credit or similar
arrangements.
5. There are no:
a. Violations or potential violations of laws or regulations whose
effect should be considered for disclosure in the financial
statements or as a basis for recording a loss contingency.
b. Other material liabilities or gain or loss contingencies that are
required to be accrued or disclosed by Statement of Financial
Accounting Standards No. 5.
6. We are not aware of any pending or threatened litigation, claims, or
assessments or unasserted claims or assessments that are required to
be accrued or disclosed in the financial statements in accordance with
Statement of Financial Accounting Standards No. 5, and we have not
consulted a lawyer concerning litigation, claims or assessments.
7. There are no material transactions that have not been properly
recorded in the accounting records underlying the financial
statements.
8. We have complied with all aspects of contractual agreements that would
have a material effect on the financial statements in the event of
noncompliance.
9. We have identified all accounting estimates that could be material to
the financial statements, including the key factors and significant
assumptions underlying those estimates, and we believe the estimates
are reasonable in the circumstances.
10. No events have occurred subsequent to ____________ that would require
adjustment to, or disclosure in, the financial statements.
- --------------------------
Signature
- --------------------------
Title
- --------------------------
Date
<PAGE>
EXHIBIT "F"
CLOSING MEMORANDUM AND INDEMNIFICATION AGREEMENT
THE STATE OF TEXAS ss.
ss. KNOW ALL MEN BY THESE PRESENTS
COUNTY OF ____________ ss.
THIS CLOSING MEMORANDUM AND INDEMNIFICATION AGREEMENT (the "Agreement") is
entered into effect as of _____________, 199_ (the "Closing Date") by and
between __________________, a ____________________________ ("Seller"), and APPLE
RESIDENTIAL INCOME TRUST, INC., a Virginia corporation ("Purchaser").
In connection with and in consideration of the closing ("Closing") of the
transaction contemplated under that certain ________________ (the "Contract")
dated __________, 199_, by and between Seller and Cornerstone Realty Group, Inc.
covering that certain property more particularly described in the Contract (the
"Property"), Seller and Purchaser hereby agree as follows:
1. Proration Date. Except as shown on the closing statements ("Closing
Statements") executed by the parties in connection with the Closing, all
prorations have been made as of the Closing Date.
2. Operating Expenses. Except as otherwise provided in the Contract or
herein or on the Closing Statements, any and all costs and expenses relating to
the operation, management, leasing or ownership of the Property for the period
prior to the Closing Date, including, but not limited to, accounts and payments
under service contracts, utility charges and other costs required to be paid by
the landlord under, and/or with respect to, any leases for all or any portion of
the Property and commission agreements relating thereto are the responsibility
of Seller and will be paid by Seller promptly upon receipt of billing therefor,
and Seller hereby agrees to reimburse Purchaser for any loss, cost or expense
relating to the operation, management, leasing or ownership of the Property for
the period prior to the Closing Date. Any and all costs and expenses relating to
the operation, management, leasing or ownership of the Property for the period
from and after the Closing Date, including, but not limited to, accounts and
payments under service contracts, utility charges and other costs required to be
paid by the landlord under, and/or with respect to, any leases for all or any
portion of the Property are the responsibility of Purchaser and will be paid by
the Purchaser promptly upon receipt of billing therefor, and Purchaser agrees to
reimburse Seller for, any loss, cost or expense relating to same. To the extent
not reflected in the Closing Statements evidencing the transaction contemplated
under the Contract, Purchaser and Seller agree to adjust between themselves
outside of Closing any amounts which are the responsibility of the other
pursuant to this paragraph.
<PAGE>
3. Earnest Money. Seller and Purchaser acknowledge the application of the
Earnest Money Deposit (as defined in the Contract) previously deposited with the
Title Company (as defined in the Contract) against the purchase price of the
Property as reflected in the Closing Statements.
4. Real Estate Taxes. All ad valorem and similar taxes and assessments (the
"taxes") relating to the Property for the current year were prorated between
Seller and Purchaser as reflected in the Closing Statements based upon the best
available estimates of the amount of taxes that will be due and payable on the
Property during the current year. At such time as the actual amount of taxes
against the Property for the current year is known. Seller and Purchaser shall,
if required, readjust the amount of taxes to be paid by each party pursuant to
this paragraph so that Seller shall pay for those taxes attributable to the
period of time occurring prior to the Closing Date, and the Purchaser shall pay
for those taxes attributable to the period of time occurring from and after the
Closing Date.
5. Rents. All rents have been prorated as of the Closing Date to the extent
same have actually been collected by Seller. Seller shall pay to Purchaser,
Purchaser's pro rata share of any delinquent or unpaid tents attributable to the
Property which are paid to Seller after the Closing Date and which relate to the
period after the Closing Date, and Purchaser shall pay to Seller. Seller's pro
rata share of said delinquent or unpaid rents attributable to the Property,
relating to the period up to the Closing Date, which are paid by tenants after
the Closing Date, when received by Purchaser, once Purchaser has received and
been credited with all rents owed or owing to Purchaser. Seller and Purchaser
agree that all rent attributable to the Property received after the Closing Date
shall be applied first to current rentals and then to delinquent rentals (in
inverse order of maturity).
6. Brokerage Commissions. Except as set forth in Section ________ of the
Contract, Seller and Purchaser each hereby agree to reimburse the other for any
and all loss, cost or expense (including, without limitation, reasonable
attorneys' fees and costs) resulting from any claim for any fee, commission or
similar payment by any broker, agent, finder or realtor as a result of any
action of Seller or Purchaser, respectively, related to the origination,
negotiation, or consummation of the transactions contemplated by the Contract.
7. Errors or Omissions. Seller and Purchaser agree to adjust between
themselves after Closing any errors or omissions in the prorations or
adjustments set forth in the Closing Statements.
8. Survival. This Agreement and the agreements and the provisions contained
herein shall survive Closing and the execution and delivery of any documents in
connection therewith subject, however, to the limitations set forth in Article
_______ of the Contract, all of which are hereby incorporated into this
Agreement by this reference as if restated in their entirety, This Agreement
shall be binding on the parties hereto, their successors and assigns. This
instrument may be executed in multiple counterparts, each of which shall be
deemed an original but together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by Seller and
Purchaser as of (but not necessarily on) the day and year first above written.
SELLER:
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
PURCHASER
APPLE REIT LIMITED PARTNERSHIP,
a Virginia limited partnership
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Exhibit 10.2
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 13th day of February,
1998, by and between Apple Residential Income Trust, Inc., a Virginia
corporation (hereinafter referred to as "Owner"), and Apple Residential
Management Group, Inc., a Virginia corporation (hereinafter referred to as
"Manager").
W I T N E S S E T H :
WHEREAS, Owner is the owner of Timberglen 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;
<PAGE>
b. The purchase, at the expense of Owner, of all equipment, tools,
appliances, materials, supplies and uniforms necessary for the maintenance or
operation of the Property;
c. The contracting on behalf of Owner for water, gas, electricity and
other services necessary for the operation and maintenance of the Property;
d. The advertising for the rental of space in the Property, the cost of
which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property rented by
procuring tenants for the Property and negotiating and executing on behalf of
Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other documents (other
than promissory notes, mortgages, deeds of trust or other documents or
instruments which would encumber the Property) required under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act, or any similar
federal or state legislation. Manager shall also file returns and reports, and
pay from Owner's funds, all sums as may from time to time be required by the
state or locality in which the Property is located;
h. The maintenance of full books of account with correct entries of all
receipts and expenditures, which books of account shall be the property of Owner
and shall at all times be open to the inspection of Owner or any of its
employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property inspection
letters regarding repairs necessary to avoid mortgage loan defaults. The
furnishing monthly of a detailed statement of all receipts and disbursements for
that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by canceled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year
2
<PAGE>
to date, and for the same month of the preceding year. The cost of performing
the accounting functions outlined in paragraphs h and i shall be paid for by
Owner pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall contain a
composite financial report of the monthly statements provided in accordance with
paragraph i, plus a statement by Manager as to the operations of the Property
during the previous year and recommendations, if any, as to necessary policy
changes or improvements which should be implemented in the forthcoming year,
which recommendations shall be accompanied by an estimated budget for such
items;
k. The furnishing from time to time, at least semi-annually, of a
tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary to
operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents, tenant
security deposits or other deposits on space in the Property, deposits on keys
and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to the
Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of
3
<PAGE>
coverage and the risks insured shall be subject to the approval of Owner.
6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any and every kind incurred
by or asserted against Manager by reason of or in connection with the employment
of Manager hereunder, the performance by Manager of the services described
herein or the occurrence or existence of any event or circumstance which results
or is alleged to have resulted in death or injury to any person or destruction
of or damage to any property and any suit, action or proceeding (whether
threatened, initiated or completed) by reason of the foregoing; provided,
however, that no such indemnification of Manager shall be made, and Manager
shall indemnify and hold Owner harmless against, and to the extent of, any loss
that a court of competent jurisdiction shall, by final adjudication, determine
to have resulted from willful misconduct, gross negligence or fraud by or on the
part of Manager.
7. Compensation of Manager for Managing the Property. Owner shall pay to
Manager a "Property Management Fee" for management of the Property pursuant to
this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for Manager's
expenses, including salaries and related overhead expenses, associated with
bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget prepared
by Manager, pursuant to paragraph 3(k), will contain a category labeled "Reserve
for Capital Items." Owner agrees to place rents and other income in a bank
account, or to permit Manager to transfer Owner's funds to such account, 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.
4
<PAGE>
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month covered by the budget, to place sufficient funds in a bank account,
or to permit Manager to transfer Owner's funds to such account, to make up the
budgeted operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints Manager
its true and lawful attorney-in-fact, for it and in its name, place and stead
and for its use and benefit to sign, acknowledge and file all documents and
agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by canceling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that Manager
is and shall operate as an independent contractor in performing its duties under
this Agreement, and shall not be deemed an employee or agent of Owner.
13. Entire Agreement. This Agreement represents the entire understanding
between the parties hereto with regard to the transactions described herein and
may only be amended by a written instrument signed by the party against whom
enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with and
be governed by the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
OWNER:
APPLE RESIDENTIAL INCOME TRUST, INC.,
a Virginia corporation
By: /s/ S.J. Olander
-------------------------------------
Title: Secretary
-------------------------------------
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ S.J. Olander
------------------------------------
Title: Secretary
----------------------------------------
