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: May 8, 1998
APPLE RESIDENTIAL INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 0-23983 54-1816010
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
<PAGE>
APPLE RESIDENTIAL INCOME TRUST, INC.
FORM 8-K
Index
<TABLE>
<CAPTION>
Page
Number
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<S> <C> <C>
Item 2. Acquisition or Disposition of Assets 4
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a. Independent Auditors' Report 9
(Bitter Creek Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Bitter Creek Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Bitter Creek Apartments)*
b. Pro Forma Statement of Operations 10
for the Year ended December 31, 1997
(unaudited)*
Pro Forma Statement of Operations
for the Quarter ended March 31, 1998
(unaudited)*
Pro Forma Balance Sheet as of
March 31, 1998 (unaudited)*
c. Exhibits
10.1 Purchase Contract for Bitter Creek Apartments
10.2 Property Management Agreement for Bitter Creek
Apartments
</TABLE>
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* To be filed by amendment.
<PAGE>
23.1 Consent of Independent Auditors*
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* To be filed by amendment.
<PAGE>
Item 2. Acquisition or Disposition of Assets
BITTER CREEK APARTMENTS
Grand Prairie, Texas
On May 8, 1998, Apple REIT Limited Partnership (together with its
parent company, Apple Residential Income Trust, Inc., the "Company") purchased
the Bitter Creek Apartments located at 2934 Alouette in Grand Prairie, Texas
(the "Property").
The Property comprises 472 apartment units. The purchase price for the
Property was $13,505,000. The seller was Bitter Creek, L.P., a Texas limited
partnership which was not affiliated with the Company, Apple Residential
Advisors, Inc. (the "Advisor") or their affiliates. The purchase price was paid
entirely in cash using proceeds from the sale of common shares of the Company.
Title to the Property was conveyed to the Company by limited warranty deed.
Location. The Property is located on Highway 360 in Grand Prairie,
Texas, in Tarrant County, which is part of 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. The Dallas metropolitan area is the second largest in
the state, behind Houston.
The economy of the Dallas/Fort Worth area is complex and diversified.
Key economic factors include a large manufacturing base (including as products
military hardware, electronics, automobiles, industrial equipment, oil-field
parts, food products and chemicals), banking, insurance services,
communications, oil and gas production and air transportation. Major employers
in the area include Texas Instruments, Southwestern Bell, General Motors, J.C.
Penney, NationsBank and Vought Aircraft Company.
The Metroplex is also an established transportation center for the
nation. The Dallas/Fort Worth International Airport occupies approximately
17,600 acres of land between the two cities. It is the second largest commercial
airport in the United States in terms of land area, and is the second busiest
airport in the world, with more than 2,500 daily arrivals and departures.
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
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outer loops, Interstate 635 in Dallas and Interstate 820 in Fort Worth, surround
the respective cities.
The many institutions of higher learning in the area include Southern
Methodist University, the University of Texas at Dallas, the University of Texas
at Arlington, the University of North Texas, and Texas Christian University.
The immediate area surrounding the Property consists of other
multi-family housing, single-family housing, commercial and retail development.
The Property is an approximately 10-minute drive from the Dallas/Fort Worth
International Airport, an approximately 20-minute drive from downtown Fort Worth
and an approximately 20-minute drive from downtown Dallas.
Description of the Property. The Property consists of 472 apartment
units in 36 buildings on approximately 20.7 acres of land. The Property was
constructed in 1982.
The Property offers five different unit types. The unit mix and rents
being charged new tenants as of March 1998 are as follows:
<TABLE>
<CAPTION>
Approximate Interior
Quantity Type Square Footage Monthly Rental
-------- ---- -------------- --------------
<S> <C> <C> <C>
48 One bedroom, one 600 $439
bathroom
192 One bedroom, one 720 459
bathroom
128 Two bedrooms, two 950 529
bathrooms
72 Two bedrooms, two 1,000 579
bathrooms
32 Three bedrooms, two 1,150 699
bathrooms
</TABLE>
All unit types are available with a fireplace for an extra $10 per
month. The apartments provide a total of approximately 397,000 square feet of
net rentable area.
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<PAGE>
The Company believes that the Property has generally been well
maintained and is in good condition. However, the Company has budgeted
approximately $354,000 for repairs and capital improvements to the Property.
These repairs and improvements will include clubhouse renovations, exterior
painting and wood replacement, interior upgrades and a new fitness center.
The following information is provided by the seller. Physical occupancy
at the property averaged approximately 94% in 1993, 92% in 1994, 91% in 1995,
92% in 1996 and 96% in 1997. Leases at the property are generally for terms of
one year or less. Average rental rates for the past five years have generally
increased. As an example, a two-bedroom, two-bathroom apartment (1,000 square
feet) rented for $499 in 1993, $509 in 1994, $519 in 1995, $529 in 1996 and $539
in 1997. The average effective annual rental per square foot at the property for
1993, 1994, 1995, 1996 and 1997 was $6.83, 6.96, 7.10, 7.24, and 7.37,
respectively.
The Property has two outdoor swimming pools with fountains, a tennis
court, four laundry facilities and a sand volleyball court. There is also a
clubhouse with a kitchen, entertainment area and a leasing office.
The buildings are wood-frame construction with a combination of brick
veneer and masonite hardboard on concrete slab foundations. Roofs are pitched
and covered with fiberglass shingled on plywood.
Each apartment unit has wall-to-wall carpeting in the living area and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and an individually controlled heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, dishwasher and
garbage disposal. Each unit (except the smallest one-bedroom unit) has
full-sized washer/dryer connections. A total of 232 units have woodburning
fireplaces, and each second-floor unit has vaulted ceilings. Each unit has
walk-in closets, outside storage, a covered balcony or patio and ceiling fans.
The owner of the property pays for cold water, sewer charges, gas (for hot
water) and trash removal. The tenants pay for electricity service, which
includes cooking, lighting, heating and air-conditioning.
There are at least 12 apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy at nearby competing properties averaged
approximately 92% at March 31, 1998.
As of April 14, 1998, the Property was approximately 92% occupied.
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<PAGE>
The following table sets forth the 1997 real estate tax information on
the Property:
<TABLE>
<CAPTION>
Assessed
Jurisdiction Value Rate Tax
------------ ----- ---- ---
<S> <C> <C> <C>
County of Tarrant $8,700,000 $1.99520 $173,582.05
City of Grand Prairie 8,929,790 0.68000 60,722.40
Total $234,304.45
</TABLE>
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $10,526,521) will be depreciated over
27.5 years on a straight-line basis. The basis of the personal property portion
will be depreciated in accordance with the modified accelerated cost recovery
system of the Internal Revenue Code of 1986, as amended (the "Code"). Amounts to
be spent by the Company on repairs and improvements will be treated for tax
purposes as permitted by the Code based on the nature of the expenditures.
The Advisor and the Company believe that the Property is and will
continue to be adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. The Dallas/Fort Worth area generally and the specific area in which
the Property is located were perceived as being characterized by a diverse,
stable and steadily growing economy. Accordingly, it was believed that such
economy and its anticipated growth and development would support stable
occupancy rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs and
improvements will allow an increase in rents at the Property.
3. The Property has an advantageous location - approximately mid-way
between Dallas and Fort Worth and near the Dallas/Fort Worth International
Airport - and is located in a rapidly-growing area proximate to centers of
employment and retail development.
Acquisition and Management Services and Fees. In consideration of
services rendered to the Company in connection with the selection and
acquisition of the Property, the Company paid Cornerstone Realty Income Trust,
Inc. a property acquisition fee equal to 2% of the purchase price of the
property, or $270,000. Cornerstone Realty Income Trust, Inc. will serve as
property manager for the Property and for its services will be paid by the
Company a
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<PAGE>
monthly management fee equal to 5% of the gross revenues of the Property plus
reimbursement of certain expenses.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
-8-
<PAGE>
ITEM 7.a.*
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* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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<PAGE>
ITEM 7.b.*
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* To be filed by amendment. It is impracticable to include herein the required
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: May 22, 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 May 8, 1998
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
10.1 Purchase Contract for Bitter Creek
Apartments
10.2 Property Management Agreement
for Bitter Creek Apartments
23.1 Consent of Independent Auditors*
</TABLE>
* To be filed by amendment.
-12-
Exhibit 10.1
BITTER
PURCHASE CONTRACT
-----------------
THIS AGREEMENT made and entered into this _______ day of March 1998 (the
"Effective Date"), between CORNERSTONE REALTY GROUP, INC. or its nominee,
(hereinafter called "Purchaser") and BITTER CREEK, L.P., a Texas Limited
Partnership (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 BITTER CREEK APARTMENTS
located in GRAND PRAIRIE, 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 472 individually heated and air
conditioned apartment units, with all appurtenances, together with all
appliances, drapes, carpeting, shrubbery and all other personal property owned
by Seller and located on and used in connection with operation and maintenance
of the premises, including, the inventory of all personal property (other than
appliances in apartment units) of $100 in value to be supplied by Seller and
attached hereto as EXHIBIT B (all such real and personal property hereinafter
collectively referred to as the "Property", subject to Purchaser's inventory
prior to closing, unless the context clearly indicates otherwise). Seller agrees
that it will not remove any of the personal property from the date of this
Agreement to the date of closing.
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 PURCHASE PRICE. The total purchase price shall be THIRTEEN MILLION FIVE
HUNDRED THOUSAND ($13,500,000) DOLLARS as evidenced by cash or cash equivalent
at Closing.
2.2 DEPOSIT. TWENTY FIVE THOUSAND ($25,000) DOLLARS upon the execution of
this Agreement by Seller and Purchaser and an additional SEVENTY FIVE THOUSAND
($75,000) 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
American Title Company, 1330 Summit Avenue, Fort Worth, TX 76102, Attention:
Joanna Cloud, 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. The Title Company shall hold the funds in an interest-bearing
account with interest to be credited in the same manner as the deposit.
<PAGE>
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 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 D, subject only to general
taxes for the current year not yet due and payable, rights of tenants claiming
under the leases, none of which shall be for more than one year or other than
residential purposes, except laundry room leases, 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 pursuant to section 3.2 below.
(A) Title shall be free from any and all liens, except the liens
securing unpaid taxes not yet due and payable 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 fifteen (15) 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 and Seller's counsel during the Inspection Period. If
Purchaser fails to notify Seller of any exceptions which are not acceptable to
Purchaser during the Inspection Period, then Purchaser shall be deemed to have
accepted those matters not objected to. Seller may, at its option, elect whether
to cure said defects or by written notice to Purchaser indicate its intention
not to cure.
2
<PAGE>
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 during the
Inspection Period), shall be terminated; each party shall thereupon be released
from all obligations hereunder, except as provided in Paragraph 6.2.2; and all
deposits shall be immediately returned to Purchaser. If Purchaser does not elect
to terminate this Agreement, all title defects that remain uncured at Closing
shall be deemed "Permitted Exceptions."
3.4 SURVEY. As soon as reasonably possible, and in any event within twenty
(20) 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 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, 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, Purchaser shall give written notice thereof to Seller and Seller
shall have ten (10) days from the date of Purchaser's notice (with a
commensurate extension of the closing date) to request 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 ten (10) day period,
Purchaser may elect, on or before the expiration of the Inspection Period, to
(i) terminate this Agreement (in which case
3
<PAGE>
the Earnest Money shall be returned to Purchaser) and neither party shall have
any further liability or obligation to the other hereunder, except as provided
in Paragraph 6.2.2 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,
notice as to which items on the title report or the Survey are objectionable.
3.7 COMMENCEMENT AND TERMINATION OF INSPECTION PERIOD. It is understood
that the Inspection Period begins on the date on which both parties have
executed this Agreement, with date inserted on the first page, and shall
terminate at 5:00 p.m. CST on the thirtieth (30th) day unless said 30th day
shall be a Saturday or Sunday, in which case the next business day shall be the
date of the termination of the Inspection Period. It is further understood that
unless there is an extension in writing, the Inspection Period must be completed
by said date.
3.8 NOTICE REQUIRED. The parties agree that whenever a notice shall be
required by either party, said notice must be given within the "Inspection
Period", except notices dealing with the closing or survival.
ARTICLE IV
PRORATIONS
4.1 INCOME AND EXPENSE ALLOCATIONS. The following shall be prorated, on a
calendar-month basis, to the 1st day of the month of the closing: 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). If funding by
Purchaser does not occur by noon CST on Closing Date, adjustments shall be as of
the date of funding prior to noon CST.
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 and Purchaser agrees to pay the additional premium to
obtain "Survey deletion". Seller shall pay any prepayment penalty charged by the
holders of any existing notes.
Seller and Purchaser acknowledge that Purchaser is purchasing one or more
additional properties from partnerships affiliated with Seller upon
substantially the same terms and provisions as set forth in this Agreement.
Notwithstanding the foregoing, Seller shall pay the title insurance premium for
title
4
<PAGE>
insurance on all properties purchased by Purchaser as if issued under one
owner's policy for the full amount of the total accumulated purchase price of
all properties. If Purchaser desires separate owner's policies on each property,
Purchaser shall pay the incremental cost of the issuance of separate owner's
policies.
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. Seller agrees to maintain its normal leasing
procedure until the Closing. Seller agrees that it will not give any free rent
concession other than in the ordinary course of business. If any free rent is
given by Seller under its normal leasing procedure after the date of this
Agreement, all free rent must be given in the first month of the lease term and
shall not be for a period in excess of one (1) month. Upon request, Purchaser
may waive this clause.
4.5 ADJUSTMENT OF PRORATION. In the event Purchaser or Seller provides
notice to the other within six (6) months of Closing that any of the rent
prorated pursuant to Section 4.3 above or the security or cleaning deposits
transferred to Purchaser at Closing pursuant to Section 7.2 (D) below is in
error on account of a misstatement or error in the certified rent roll delivered
to Purchaser at Closing pursuant to Section 7.2(F) below, Seller and Purchaser
shall adjust such proration or deposit transfer between themselves by cash
payment so as to achieve accurate proration or deposit transfer.
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 Permitted Exceptions.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT. Purchaser's obligation to
5
<PAGE>
purchase shall be subject to and contingent upon the satisfaction of the
following conditions precedent:
(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 fifteen
(15) days, but no later than the termination 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) Seller's representations and warranties described in Article VIII
below remain true and correct.
(D) There have been no material or adverse changes to the property or
leases since the expiration of the Inspection Period.
(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.
(G) Purchaser acknowledges that the selling partnership requires the
approval of its Limited Partners. Seller represents that it has commenced to
seek the approval of its Limited Partners and has twenty-one (21) days from the
date hereof to do so. Seller shall inform Purchaser within said period of time
whether or not the Limited Partners have approved the sale. Seller may terminate
this Agreement in the event it does not obtain the requisite consent from its
Limited Partners. Upon termination on account of the failure to obtain the
consent of the Limited
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<PAGE>
Partners of Seller, all earnest money shall be returned to Purchaser.
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 to the extent not
previously delivered to Purchaser: (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 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
contract, mortgages, and other documents creating liens of security interest on
the Property, or any part thereof and all promissory notes secured thereby; all
insurance policies applicable to the Property to include loss runs for the last
three (3) years; Plans and Specifications for the Property to the extent in
Seller's possession, service contracts, Certificates of Occupancy to the extent
reasonably available; a copy of title policy and most recent survey for the
Property. A copy of any environmental or engineering reports on the property.
The rent roll shall be certified by Seller to be materially accurate and
complete to Seller's knowledge. Except as expressly set forth in this Agreement,
the delivery of the documents by Seller does not constitute a representation
(expressed or implied) by Seller of the truth, accuracy, source or completeness
of such information and Purchaser agrees to look to its own inspection and
studies to determine such matters. However, Seller warrants that all such
documents were used by Seller in the ordinary course of business and were
produced from Seller's files.
6.2.2 INSPECTION OF BOOKS AND RECORDS; ACCESS. Purchaser, its employees,
agents and contractors shall have during the Inspection Period provided in
paragraph 3.7 above, to enter upon the Property (subject to the rights of the
tenants) during normal business hours 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.
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<PAGE>
Purchaser's rights to inspect the Property are subject to Purchaser's
agreement that (i) the Property is not damaged by Purchaser, (ii) the Property
is left in a clean and safe condition (if found that way), (iii) no tenant of
Seller is unreasonably disturbed, (iv) no employee, independent contractor or
representative of Seller or any tenant is injured, interfered with or harassed
as a result of Purchaser's actions, (v) such inspection does not interfere with
Seller's operation of the Property, and (vi) Purchaser maintains general
liability (occurrence) insurance in terms and amounts satisfactory to Seller
covering any accident arising in connection with the presence of Purchaser or
its agents on the Property. The inspection rights afforded herein are expressly
made subject to the rights of tenants under the Leases. All inspections fees,
appraisal fees, engineering fees and other expenses of any kind incurred by
Purchaser relating to the inspection of the Property will be solely at
Purchaser's expense. Seller shall cooperate with Purchaser in all reasonable
respects in making such inspections; however, Seller shall not be required to
spend any sums to cooperate with Purchaser, except pay its employees and other
normal costs. Seller hereby reserves the right to have a representative of
Seller present at the time any such inspection is made. Except as specifically
provided in this Agreement, Purchaser acknowledges that Seller has no obligation
whatsoever to undertake any remedial work or other curative action as a result
of Purchaser's inspections. Purchaser shall notify Seller no less than
forty-eight (48) hours in advance of making any inspection of the interior
apartment units on the Property. Purchaser agrees to indemnify and hold Seller,
its tenants, contractors and employees harmless from any and all injuries,
losses, liens, claims, judgments, liabilities, costs, expenses or damages
(including reasonable attorney's fees and court costs) sustained against Seller
which result from or arise out of any inspections or entry on the Property by
Purchaser or its representatives or agents pursuant to this Agreement. The
indemnification obligation set forth in the immediately preceding sentence shall
survive the termination or cancellation of this Agreement and the closing of
transaction evidenced by this Agreement for six (6) months.
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 by giving written notice to Seller before the end of
the Inspection Period, and no party hereto shall have any further liability to
any other party hereto, except as provided in Paragraph 6.2.2, and all deposits
shall be returned to Purchaser.
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6.2.4 "RENT READY". On or prior to the Closing Date, Purchaser may inspect
all apartment units at the Property and note any missing appliances or personal
property or dead-bolt locks and provide Seller written notice of same. Seller
may elect, but shall have no obligation, to replace any missing appliances or
personal property or dead-bolt locks that in fact were located at the Property
as of the expiration of the Inspection Period.
6.2.5 CONDITION OF PERSONAL PRORERTY 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 reasonable wear and tear excepted. If Seller fails to replace any
missing appliances or personal property or dead-bolt locks that were located on
the Property as of the expiration of the Inspection Period, Purchaser shall have
the option of waiving such requirement, in writing, and proceeding to closing,
or Purchaser may terminate this Agreement and obtain a prompt return of its
deposit.
ARTICLE VII
CLOSING
7.1 CLOSING. Closing will be held on or about ten (10) days after the
completion of the Inspection Period, at such place and at such time as the
parties may agree.
7.2 SELLER'S 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 Seller and 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, except those assumed by the Purchaser.
(B) The Title Policy 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.
(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 so that Seller is no longer responsible for the tenants'
security deposits.
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(E) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(F) A rent roll certified by Seller to Seller's knowledge to be
materially accurate and complete as of the date of closing in the form and
content of the rent roll normally kept by Seller in its ordinary course of
business, however, containing the actual rental, apartment number, any escrow,
security deposit, etc.
(G) An affidavit of Seller, as the title company may normally require,
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) Purchaser shall cause an inspection to be made by a licensed
extermination contractor, who is regularly engaged in the business of pest
control. If said contractor's report indicates that there is any termite or
other wood-boring insects infestation and/or damage to the Property, the Seller
shall proceed to have any and all corrective treatment of the infestation, but
not repair of damage, completed prior to closing. (If not possible prior to
closing, Seller shall deposit sufficient sums as required by the extermination
contractor to make the treatment.)
(I) Assignments of all Seller's interest in the following in the form
attached hereto as EXHIBIT E: (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 E) to the extent such are still in effect and provide Purchaser with
copies of all such warranties in Seller's possession 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 partnership agreement
or other organizational documents, which may affect Seller's ability to convey
indefeasible title.
(L) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement acceptable to the title company.
(M) Affidavit that to the knowledge of Seller, Seller has received no
notice of the presence of asbestos and/or
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any other hazardous material at the Property, except as set forth in any reports
or information provided to Purchaser pursuant to Paragraph 6.2.1.
(N) 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.
(0) A notice letter to all the residents of the apartment complex as
to change of ownership in the form prepared by the Purchaser.
(P) 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.
(Q) A representation letter as normally required by auditors for a
public company in the form attached hereto as EXHIBIT F. This clause shall
survive closing for one year.
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 (Exhibit "E") in a form reasonably
acceptable to Purchaser and Seller.
(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.
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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:
As used in this Agreement, the phrase "Seller's current actual
knowledge", "Seller's knowledge" or words of like effect (i) shall mean and
apply to the knowledge of Robert J. Werra, who is a General Partner of Seller
and directly involved in the negotiation of sale and purchase transaction
described herein and not to any other parties, (ii) shall mean the current
actual knowledge of such person, it being understood and acknowledged that (a)
such person, in many instances, is not involved in the day-to day operations of
the Property and in many instances, is not involved in the negotiation or
execution of the leases, management contracts, service contracts, or other
agreements in question, and (b) such person is not charged with the knowledge of
all of the acts and/or omissions of the predecessors in title to the Property or
with knowledge of all of the acts and/or omissions of Seller's agents or
employees, and (iii) shall not apply to or be construed to apply to information
or material which may be in the possession of Seller generally, or incidentally,
but which is not actually known to Robert J. Werra. As used herein, the term
"current actual knowledge" of a party shall mean that no facts have come to the
party's attention in the ordinary course of business that would give the party
knowledge or notice that any such facts are not true, correct, and complete, and
the party has undertaken no investigation, inquiry, or verification as to such
matters to determine the existence or absence of such facts, and no inference of
the party's knowledge of the existence or absence of such facts should be drawn
from the statements made herein.
(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 the requirement to procure its partners'
consent and 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 knowledge and to Seller's knowledge it has not
been advised in writing that it is in default
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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 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.
(F) Seller has no 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.
(G) 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.
(H) That to Seller's current knowledge, the Property was never
utilized as a disposal site for hazardous waste products.
(I) 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.
(J) Seller agrees that prior to closing, it will comply with the
keyless, dead-bolt lock requirement to the extent set forth in Paragraph 6.2.5.
8.2 CONTINUATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS TO THE DATE
OF CLOSING. If each of the warranties set forth in this section does not remain
true up to and including the time of closing as to any material matters, this
Agreement, at Purchaser's election, shall be terminated, Seller shall return all
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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. The Seller agrees
to notify the Purchaser upon acquiring knowledge that any of Seller's
representations, warranties or covenants contained herein do not remain true as
of the date of Closing. Purchaser shall have the right to terminate this
Agreement for a material breach and receive the refund of the deposit and any
interest earned thereon. However, if Seller fails to notify Purchaser upon
acquiring such knowledge, notwithstanding the provisions of 8.2 above, Seller
shall indemnify Purchaser for all reasonable costs incurred as a result of the
failure of any of Seller's representations, warranties or covenants contained
herein to remain true as of the date of closing.
8.4 "AS IS". EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER
ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY
NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, 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 (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY,
INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, (B) THE INCOME TO BE
DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL
ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREOF, (D) THE COMPLIANCE OF
OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR
REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE
HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY, (F) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, (G) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, OR (H) ANY
OTHER MATTER WITH RESPECT TO THE PROPERTY, AND SPECIFICALLY, THAT SELLER HAS NOT
MADE, DOES NOT MAKE, AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS REGARDING
COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES,
REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING SOLID WASTE, AS DEFINED BY THE
U.S. ENVIRONMENTAL PROTECTION AGENCY REGULATIONS AT 40 C. F. R. , PART 261, OR
THE DISPOSAL OR EXISTENCE, IN OR ON THE PROPERTY, OF ANY HAZARDOUS MATERIALS.
PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY
TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF
THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER.
UPON CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING,
BUT NOT LIMITED TO, ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS MAY NOT HAVE
BEEN REVEALED BY PURCHASER'S INSPECTIONS AND INVESTIGATIONS. EXCEPT AS SET FORTH
IN THIS AGREEMENT, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT ANY
INFORMATION PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED
FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE
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ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO
REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. SELLER
SHALL NOT BE LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS,
REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION
THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER
PERSON. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT 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 PURCHASE PRICE HAS BEEN ADJUSTED BY
PRIOR NEGOTIATION TO REFLECT THAT ALL OF THE PROPERTY IS SOLD BY SELLER AND
PURCHASED BY PURCHASER SUBJECT TO THE FOREGOING. THE PROVISIONS OF THIS
PARAGRAPH 8.4 SHALL SURVIVE THE CLOSING AND SHALL BE INCORPORATED IN THE DEED
AND BILL OF SALE.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 PROPERTY DAMAGE. If, prior to closing, any part of the Property is
damaged by fire or other casualty in an amount not greater than TWO HUNDRED
THOUSAND ($200,000, DOLLARS, Purchaser agrees to accept the Property with an
assignment of: (i) the insurance proceeds, (ii) any deductible, and (iii) rent
loss insurance proceeds. Seller may repair such damage before the date provided
herein for closing. In the event that the damage as a result of fire or other
casualty shall be over TWO HUNDRED THOUSAND ($200,000) DOLLARS and such damage
cannot reasonably 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, except
as provided in Paragraph 6.2.2 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 greater than TWO HUNDRED FIFTY
THOUSAND ($250,000) DOLLARS or 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)
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shall be paid to the Purchaser at closing, if such payment has been received. If
payment has not as yet been received, but an amount has been agreed upon, Seller
shall assign the claim to Purchaser.
9.3 RISK OF LOSS. Prior to closing, all risks of loss or damage by every
casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 COMMISSION. Purchaser 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 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 as Purchaser's sole and exclusive remedy, pursue one, but not all
of the following: (1) require specific performance of Seller, (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, except as set forth in Section 6.2.2, or (3) the Purchaser may waive
such defaults and proceed to settlement. Seller shall indemnify Purchaser for
any reasonable attorneys' fees incurred by Purchaser if Purchaser elects to
pursue its option (1) noted above. Purchaser shall have no other remedy against
Seller in the event of Seller's default.
11.3 PURCHASER'S DEFAULT. Upon Purchaser's default, this Agreement shall be
terminated and both parties released from all obligations hereunder, except as
provided in Paragraph 6.2.2, and the deposit shall be retained by the Seller as
liquidated damages. Such amount and terms are agreed upon by and between Seller
and Purchaser as liquidated damages, due to the difficulty and inconvenience of
ascertaining and measuring actual damages, and
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the uncertainty thereof, and the payment of the deposit and the terms provided
herein shall constitute full satisfaction of Purchaser's obligations under this
Agreement. Such amount is agreed upon by and between Seller and Purchaser as a
reasonable estimate of just compensation for the harm caused by Purchaser's
default. Seller shall have no other remedy against Purchaser in the event of
Purchaser's default.
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 to APPLE RESIDENTIAL INCOME TRUST, INC. or to a company owned by APPLE
RESIDENTIAL INCOME TRUST, INC.
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 on behalf of both parties hereto appear in each counterpart hereof,
and it shall be sufficient that the signature on behalf of both parties hereto
appear on one or more such counterparts. All counterparts shall collectively
constitute a single contract.
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
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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.
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 TIME OF THE ESSENCE. Both parties agree that time is of the essence.
However, each party shall be entitled to an adjournment of not more than thirty
(30) days.
12.12 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.
12.13 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.
12.13.1. Seller has no knowledge of lead-based paint and/or lead-based
paint hazard in the housing.
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12.13.2. Seller has no reports or records pertaining to lead-based paint
and/or lead-based paint hazards in the housing.
12.13.3. 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.
12.14 EXHIBITS. The following exhibits are attached to this Agreement and
are incorporated into this Agreement by this reference and made a part hereof
for all purposes:
(a) EXHIBIT A, the legal description of the Land.
(b) EXHIBIT B, list of personal property
(c) EXHIBIT C, (intentionally omitted)
(d) EXHIBIT D, the form of Deed.
(e) EXHIBIT E, the form of the Assignment and Assumption of Personal
Property, Service Contracts, Warranties and Leases.
(f) EXHIBIT F, the form of the Representation Letter.
12.15 PURCHASER'S FAILURE TO PREVAIL. Notwithstanding anything to the
contrary contained or implied elsewhere herein, in the event Purchaser (i) files
a Lis Pendens or an action for specific performance against Seller or otherwise
clouds Seller's title to the Property or any portion thereof and fails to
prevail in a final, non-appealable judgment, or (ii) breaches Purchaser's
agreements of indemnity contained in this Agreement, which survive, Seller shall
be entitled to pursue any remedies available at law or in equity, including but
not limited to, suit for damages from Purchaser (including, but not limited to,
attorney's fees and costs incurred by Seller in connection therewith).
12.16 GENERAL RELEASE. In the event this Agreement is terminated and under
the terms of the termination, the Purchaser is entitled to a refund of the
deposit and any interest thereon and Purchaser is satisfied that it has no
additional claims, it shall forward a General Release of Seller and Title
Company to the escrow holder/Title Company, which shall immediately refund the
deposit to the Purchaser with any interest thereon and expenses. A copy of said
General Release shall be sent to Seller.
12.17 LIMITATION DATE. Purchaser and Seller hereby agree that,
notwithstanding any provision of this Agreement or any provision of law to the
contrary, any action which may be brought by Purchaser against Seller for breach
of this Agreement or any representations and warranties under this Agreement or
arising out of or in connection with the sale and purchase transaction described
herein, shall be forever barred unless Purchaser: (i) delivers to Seller not
later than one (1) year after the Closing Date a written notice of its claims
setting forth in reasonable
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detail the factual basis for such claim and Purchaser's good faith estimate of
damages arising out of such claim, (ii) files a complaint or petition against
Seller alleging such claim in a court of competent appropriate jurisdiction no
later than two (2) years after the Closing Date (the "Limitation Date"). No
warranties or representations or covenants of Seller as set forth in this
Agreement shall survive beyond the Limitation Date and no action based thereon
shall be commenced after the Limitation Date.
12.18 NO RECORDATION. This Agreement shall not be recorded by Purchaser for
any reason, except for a breach of this Agreement by Seller, and an attempt to
do so shall render the Purchaser liable to Seller for any damages allowable at
law or in equity on account of such breach.
ARTICLE XIII
NOTICE
13.1 NOTICE. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: Bitter Creek, L.P.
Attention: John R. Werra
6210 Campbell Road, Suite 140
Dallas, TX 75248
Fax: (972) 931-0015
With a copy to
Seller's Attorneys: Nathan M. Rosen, Esq.
Nathan M. Rosen, P.C.
4949 Westgrove Drive, Suite 300
Dallas, TX 75248
Fax (972) 818-7606
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
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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 and confirmed by hard copy by reliable
overnight courier. Notices sent in any other manner shall be deemed given only
when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed this day and date first written above.
SELLER:
BITTER CREEK, L.P.
By: /s/ Illegible
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Its: General Partner
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PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ Gus Remmpies
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Its: Vice President-Acquisitions
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Exhibit 10.2
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 8th day of May, 1998
by and between Apple REIT Limited Partnership, a Virginia limited partnership
(hereinafter referred to as "Owner"), and Apple Residential Management Group,
Inc., a Virginia corporation (hereinafter referred to as "Manager").
W I T N E S S E T H :
WHEREAS, Owner is the owner of Bitter Creek Apartments (hereinafter
referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate upon the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the
Property, provided that nothing herein contained shall constitute a guarantee by
Manager of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment,
tools, appliances, materials, supplies and uniforms necessary for the
maintenance or operation of the Property;
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c. The contracting on behalf of Owner for water, gas,
electricity and other services necessary for the operation and maintenance of
the Property;
d. The advertising for the rental of space in the Property,
the cost of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property
rented by procuring tenants for the Property and negotiating and executing on
behalf of Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other
documents (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) required under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act, or any
similar federal or state legislation. Manager shall also file returns and
reports, and pay from Owner's funds, all sums as may from time to time be
required by the state or locality in which the Property is located;
h. The maintenance of full books of account with correct
entries of all receipts and expenditures, which books of account shall be the
property of Owner and shall at all times be open to the inspection of Owner or
any of its employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by cancelled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h and I shall be paid for by Owner
pursuant to the terms of this Agreement;
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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 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
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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.
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.
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11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by cancelling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire
understanding between the parties hereto with regard to the transactions
described herein and may only be amended by a written instrument signed by the
party against whom enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OWNER:
APPLE REIT LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., general partner
By: /s/ S.J. Olander
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Title: Secretary
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MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ S.J. Olander
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Title: Secretary
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