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: March 31, 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
<PAGE>
APPLE RESIDENTIAL INCOME TRUST, INC.
FORM 8-K
Index
<TABLE>
<CAPTION>
<S> <C>
Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a. Independent Auditors' Report
(Copper Ridge Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Copper Ridge Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Copper Ridge Apartments)*
b. Pro Forma Statement of Operations for the Year ended December
31, 1997 (unaudited)*
Pro Forma Statement of Operations for the Quarter
ended March 31, 1998 (unaudited)*
c. Exhibits
10.1 Purchase Contract for Copper Ridge Apartments
10.2 Property Management Agreement for Copper Ridge
Apartments
23.1 Consent of Independent Auditors*
</TABLE>
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* To be filed by amendment.
<PAGE>
Item 2. Acquisition or Disposition of Assets
COPPER RIDGE APARTMENTS
Fort Worth, Texas
On March 31, 1998, Apple REIT Limited Partnership (together with its
parent company, Apple Residential Income Trust, Inc., the "Company") purchased
the Copper Ridge Apartments located at 5643 Bellaire Drive South in Fort Worth,
Texas (the "Property"). The Property comprises 200 apartment units. The purchase
price for the Property was $4,525,000. The seller was Copper Limited
Partnership, a Missouri limited partnership which was not affiliated with the
Company, Apple Residential Advisors, Inc. or their Affiliates. The entire
purchase price was paid using proceeds from the sale of common shares of Apple
Residential Income Trust, Inc. Title to the Property was conveyed to the Company
by limited warranty deed.
The Property is adjacent to the Copper Crossing Apartments, which were
purchased by the Company in November 1997. These two properties will be operated
by the Company as a single property under the name "Copper Crossing Apartments."
Location. The Property is located off of Bryant-Irvin Highway in Fort
Worth, 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. 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
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<PAGE>
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 located near restaurants, businesses, schools, and churches, and
is readily accessible from Interstate 20, Highway 183 and Interstate 820, which
are the major highways in the area.
The Property is close to Hulen Mall, a major regional mall. This
regional mall has spurred significant construction and corresponding retail
growth in the Hulen Mall/Benbrook area. The Property is an approximately
30-minute drive from the Dallas/Fort Worth International Airport, an
approximately 15-minutes drive from the Fort Worth central business district and
an approximately 30-minute drive from the Dallas central business district.
Description of the Property. The Property consists of 200 garden-style
apartment units in 15 two-story buildings on approximately seven acres of land.
The Property was constructed in 1980.
The Property offers six 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> <C> <C>
64 One bedroom, one 651 $410-455
bathroom
48 One bedroom, one 732 435-460
bathroom
16 One bedroom, one 878 490-560
bathroom with den
32 Two bedrooms, two 918 540-560
bathrooms
24 Two bedrooms, two 945 555-600
bathrooms
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Approximate Interior
Quantity Type Square Footage Monthly Rental
-------- ---- -------------- --------------
<S> <C> <C> <C> <C> <C>
16 Two bedrooms, two 1,110 650-675
bathrooms with den
</TABLE>
The apartments provide a total of approximately 160,000 square feet of
net rentable area.
The Company believes that the Property has generally been well
maintained and is in good condition. However, the Company has budgeted
approximately $200,000 for repairs and capital improvements to the Property.
These repairs and improvements will include clubhouse renovations, exterior
painting and wood replacement.
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 unit (918 square feet) rented for
$420 in 1993, $430 in 1994, $440 in 1995, $450 in 1996, and $450 in 1997. The
average effective annual rental per square foot at the Property for 1993, 1994,
1995, 1996, 1997, was $5.73, $5.87, $6.01, $6.14, and $6.14, respectively.
The buildings are wood-frame construction with a combination of brick
veneer and hardboard ship-lap siding on reinforced concrete slab foundations.
Roofs are sloped fiberglass shingled on plywood.
The Property has an outdoor swimming pool, laundry facility and
barbecue areas. There is also a clubhouse with a leasing office. There is ample
paved parking for the tenants.
All apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bathrooms. 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 and garbage disposal. Each apartment unit has a woodburning
fireplace, a screened patio or balcony, ceiling fans, miniblinds and a
pass-through bar, and some of the apartment units have washer/dryer connections.
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 five other 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 94%.
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<PAGE>
According to information provided by the seller, physical occupancy at
the Property averaged approximately 92% in 1996 and 91% in 1997.Information for
earlier periods is not available. As of March 31, 1998, the Property was 90 %
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:
<TABLE>
<CAPTION>
Assessed
Jurisdiction Value Rate Tax
------------ ----- ---- ---
<S> <C> <C> <C>
County of Tarrant $3,537,000 $2.01160 $71,150.15
City of Benbrook 3,537,000 0.78500 27,765.45
Total $98,915.60
</TABLE>
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $3,796,661) will be depreciated over 27.5
years on a straight-line basis. The basis of the personal property portion will
be depreciated in accordance with the modified accelerated cost recovery system
of the Code. Amounts to be spent by the Company on repairs and improvements will
be treated for tax purposes as permitted by the Code based on the nature of the
expenditures.
The Advisor and the Company believe that the Property is and will
continue to be adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. The Dallas/Fort Worth area generally and the specific area in which
the Property is located were perceived as being characterized by a diverse,
stable and steadily growing economy. Accordingly, it was believed that such
economy and its anticipated growth and development would support stable
occupancy rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs and
improvements will allow an increase in rents at the Property.
3. The Property is strategically located in the "Hulen Mall/Benbrook
area," which is one of the most commercially active areas in the Metroplex. In
addition, the Company and the Advisor believe that the combination and operation
of the Property with the adjacent Copper Crossing Apartments will offer
operational efficiencies and competitive advantages.
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 $90,500. Cornerstone Realty Income Trust, Inc. will serve as
property manager for the Property and for its services will be paid by the
Company a monthly management fee equal to 5% of the gross revenues of the
Property plus reimbursement of certain expenses.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
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<PAGE>
ITEM 7.a.*
- ----------
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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<PAGE>
ITEM 7.b.*
- ----------
* To be filed by amendment. It is impracticable to include herein the required
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: April 15, 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 March 31, 1998
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
10.1 Purchase Contract for Copper Ridge
Apartments
10.2 Property Management Agreement
for Copper Ridge 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 12th day of March 1998 (the
"Effective Date"), between CORNERSTONE REALTY GROUP, INC. or its nominee,
(hereinafter called "Purchaser") and COPPER LIMITED PARTNERSHIP, a Missouri
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 COPPER RIDGE APARTMENTS
located in BENBROOK (TARRANT COUNTY), 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 200 individually heated
and air conditioned apartment units, with all appurtenances, together with all
appliances, drapes, carpeting, shrubbery and all other personal property used in
connection with the premises, including, the inventory of personal property to
be supplied by Seller and attached hereto as EXHIBIT B (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 FOUR MILLION FIVE
HUNDRED TWENTY FIVE THOUSAND ($4,525,000) DOLLARS as evidenced by cash or cash
equivalent at closing.
2.2 DEPOSIT. TWENTY FIVE THOUSAND ($25,000) DOLLARS to be placed in escrow
upon the execution of this Agreement by both parties and 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
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
<PAGE>
delivery of this Contract and Purchaser's right to inspect the Property. The
Independent Contract Consideration is in addition to and independent of any
other consideration or payment provided for in this Contract and is
non-refundable in all events.
ARTICLE III
TITLE MATTERS
3.1 TITLE. Seller, shall convey good and indefeasible title by Special
Warranty Deed in the form attached hereto as EXHIBIT C, subject only to general
taxes for the current year not yet due and payable and utility easements which
do not interfere with the present use of the Property, and the "Permitted
Exceptions". "Permitted Exceptions" are those title exceptions listed in the
title commitment, which are not objected to pursuant to section 3.2 below.
(A) At Closing, 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 shall within
five (5) days elect whether to cure said defects by delivering written notice to
Purchaser of its intention to cure said defects within five (5) days after
expiration of the Inspection Period.
3.3 ELECTION NOT TO CURE DEFECTS. If Seller elects not to cure title
defects, this Agreement, at Purchaser's option (exercised by delivery of notice
thereof to Seller within five (5) days after the date that Seller's option to
cure such title defects expired) , shall be void; each party shall thereupon be
released from all obligations hereunder except for Purchaser's indemnification
obligation herein; and all deposits shall be immediately returned to Purchaser.
Purchaser shall have the option to waive defects and proceed to Closing and in
such event these items shall be deemed Permitted Exceptions.
3.4 SURVEY. As soon as reasonably possible, and in any
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<PAGE>
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 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 revise
the survey exception in the Title Policy to state "shortages in area"; provided,
however, that the cost of such deletion shall be the responsibility of
Purchaser. 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 If Survey discloses any encroachments onto the Land from any adjacent
property, encroachments by or from the Land onto adjacent property and/or
violations of or encroachments upon any recorded building lines, restrictions or
easements affecting the Property, which are not acceptable to Purchaser, then
Purchaser shall deliver notice thereof to Seller. Seller shall have five (5)
days (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 five
(5) day period, Purchaser may elect, on or before the expiration of the 5-day
period thereafter, 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 (except for Purchaser's
indemnification obligation set forth in Paragraph 6.2.6, 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
<PAGE>
ARTICLE IV PRORATIONS
4.1 INCOME AND EXRENSE ALLOCATIONS. The following shall be prorated, to the
day of 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).
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 based upon coverage in the amount of the Purchase Price;
provided, however, that Purchaser shall pay for any endorsements not normally
included in the title policy, special revisions to the Survey exceptions and any
special coverages Purchaser may desire. 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, which are not reflected in the existing leases
and rent roll and 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.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT. Purchaser's obligation to purchase shall be
subject to and contingent upon the satisfaction
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<PAGE>
of the following conditions precedent:
(A) On the condition that Sellers representations and warranties
described in Article VIII are true and correct in all respects as of Closing.
(B) On the condition that there have been no material adverse changes
to the Property or leases.
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. Within five (5) days after the execution
of this Agreement, Seller shall deliver to Purchaser copies of the following to
the extent in Seller's possession: 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
contracts; all insurance policies applicable to the Property to include loss
runs for the last three (3) years to the extent available; Plans and
Specifications for the Property, service contracts which will survive closing,
Certificates of occupancy, to the extent reasonably available; a copy of
Seller's title policy (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. A copy of any environmental or engineering reports on the property.
All these items are believed by Seller to be accurate and complete to the best
of its knowledge and belief, but are not warranted to the extent prepared by
third parties. However, Seller represents that it has relied upon these
documents in the ordinary course of business.
6.2.2 INSPECTION OF BOOKS AND RECORDS; ACCESS. Purchaser, its employees,
agents and contractors shall have twenty-one (21) days after the date Seller
accepts this Agreement (the "Inspection Period"), as the same may be extended)
to enter upon the Property (subject to the rights of the tenants) upon
reasonable advance notice and 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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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 for Purchaser's indemnification obligation
herein, 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 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 the property is not in working order and the total cost to put
into the same working condition does not exceed Ten Thousand ($10,000) Dollars,
the Purchaser agrees to close without reduction in the Purchase Price. In the
event the cost exceeds Ten Thousand ($10,000) Dollars, but less that Twenty
Thousand ($20,000) Dollars, the Purchaser agrees to close with a credit of Ten
Thousand ($10,000) Dollars of the Purchase Price. If the condition is such that
the cost is over Twenty Thousand ($20,000) Dollars, Purchaser shall have the
option of waiving said requirement in writing, accepting a Ten Thousand
($10,000) Dollar credit and proceeding to Closing or Purchaser may void this
Agreement and obtain a prompt return of its deposit.
6.2.6 PURCHASER'S INDEMNIFICATION. Purchaser hereby agrees to indemnify,
defend and hold harmless Seller and Seller's partners, property management
company, agents, employees and tenants (collectively the "Seller Parties") from
and against any and all claims, causes of action, losses, damages and expenses
(including, without limitation, reasonable attorneys fees if litigated, and
expenses) which may be suffered or incurred by any one or more of the Seller
Parties as a result of the entry onto the Property by Purchaser or its agents or
contractors. Purchaser agrees to repair and restore, at Purchaser's expense, any
damage to the Property caused by such inspection. Purchaser also agrees not
6
<PAGE>
to drill, bore or otherwise perform any invasive testing of the Property without
the prior written consent of Sellers. Purchaser's obligations under this
paragraph shall survive closing or any termination of this Agreement for six (6)
months days.
6.2.7 PROPERTY AS-IS. The property is being sold in its "as is" condition
with all faults. Seller hereby disclaims any and all express or implied
warranties of merchantability or fitness for any particular purpose relative to
the property. Purchaser acknowledges and agrees that no representations and
warranties have been made by Seller, or by any person, firm or agent acting or
purporting to act on behalf of Seller, as to (i) the presence or absence on or
in the Property of any particular materials or substances (including, without
limitation, asbestos, hydrocarbons or hazardous or toxic substances), (ii) the
condition or repair of the Property or any portion thereof, (iii) the value,
expense of operation or income potential of the Property, (iv) the accuracy or
completeness of any title, survey or other information provided to Purchaser
relative to the Property, or (v) any other fact or condition which has or might
affect the Property or the condition, repair, value, expense of operation or
income potential thereof. Purchaser represents that the representatives of
Purchaser are knowledgeable and experienced in the acquisition and operation of
multi-family properties comparable to the Property and agrees that Purchaser
will be relying solely on Purchaser's inspections of the Property in closing on
the purchase of the Property.
ARTICLE VII
CLOSING
7.1 CLOSING. Closing will be held on or before seven (7) days after the
completion of the Inspection Period, at the Title Company.
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 Purchaser:
(A) A Bill of Sale, with special warranty of title transferring the
personal property (as shown in Exhibit B) to Purchaser free of all liens,
charges and encumbrances.
(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.
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(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 exclusion relating to
unrecorded mechanic's and materialmen's liens.
(F) A rent roll certified by Seller to be true and correct as of the
date of closing showing the name of, and the amount of monthly rental payable,
by each tenant of the Property, the apartment occupied by the tenant, the date
to which rent has been paid, any advance payment of rent, and the amount of any
escrow, or security deposit of tenant.
(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 has delivered to Purchaser a copy of its Metrotech Lifetime
Termite Control Service Agreement dated November 7, 1995 and a bill for the
period June 1997 through June 1998, a copy of which is annexed hereto as EXHIBIT
D, for the review and acceptance of the Purchaser during the Inspection Period.
(I) Assignments of all Seller's interest in the following in the form
attached hereto as EXHIBITS E, H, AND I: (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 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 be reasonably requested by the Title
Company.
(L) Provide document for the transfer of the telephone number for
execution at closing.
(M) Affidavit that Seller has received no notice of the presence of
asbestos and/or any other hazardous material at
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the Property, except as has been disclosed by any documents turned over to
Purchaser by Seller.
(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.
(O) 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.
(R) Closing Memorandum in the form attached hereto as EXHIBIT G.
(S) Closing Statement reflecting all closing adjustments.
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,
security deposits, all contracts which may be accepted by the Purchaser and any
other obligations specifically set forth herein as provided in EXHIBIT H annexed
hereto.
(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 restricted 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
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normally transferred at settlement in the jurisdiction in which the property is
located or are reasonably requested by Seller or its counsel.
(E) Closing Statement.
(F) Closing Memorandum as per Exhibit G.
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. This representation shall merge with Deed at Closing.
(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 six (6) months 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 which
default has not been cured. This warranty shall survive for six (6) months
following closing.
(E) Seller has no actual knowledge of any patent or latent defect in
the Property or any part thereof. This warranty shall survive for six (6) months
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 six (6) months following closing.
(G) Seller has received no notice that any part of the Property or the
operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building code or of any private restriction
which has not been cured, that any governmental authority requires any work to
be done
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on or affecting the Property which has not been completed, OR that any
governmental authority has expressed an intent to condemn or to make special
improvements for the benefit of the Property or any part thereof. This warranty
shall survive for six (6) months following closing. Seller hereby discloses to
Purchaser that Seller has been advised THAT THE CONVEYANCE OF THE PROPERTY to
Seller's predecessor in title was not in compliance with applicable subdivision
ordinances and Purchaser assumes the liability therefor after Closing date.
(H) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1986, as amended (the "Code") , and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(I) That to the best of Seller's knowledge, the Property was never
utilized as a disposal site for hazardous waste products and will furnish to
Purchaser an affidavit confirming same, except as it may have been disclosed.
(J) Seller covenants and agrees that, between this date and the date
of closing, Seller shall continue to maintain, operate and manage the Property
in a manner consistent with its prior practices, making every reasonable effort
to do nothing which might damage the reputation of the Property or the
relationships with the tenants. Seller shall not permit the modification,
extension or cancellation of any tenant lease (except in accordance with the
terms of such lease) or any dealing with any tenant other than the ordinary
course of managing the Property, without the prior written consent of Purchaser.
If the leases of any tenants expire before thirty (30) days after the date of
closing, Seller shall, up to the date of closing and without cost to the
Purchaser, continue its normal course of operation with respect to causing
tenants to be obtained for apartments which are unrented.
(K) Seller warrants that it has complied with the keyless, dead-bolt
lock requirement.
(L) 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. This shall
survive for six (6) months following closing.
8.1.2 Purchaser represents and warrants to Seller as follows:
(A) All necessary action has been taken by
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Purchaser to authorize the execution of this Agreement and the performance of
the obligations contemplated hereunder.
(B) Purchaser is not subject to any other agreements or arrangements
which would prevent Purchaser from purchasing the Property from Seller.
(C) Title to the Property will be taken by Purchaser in the same name
as the owner of the property adjacent to the Property, which adjacent property
is known as "Copper Crossing".
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: (i) shall be terminated, Seller shall return
all payments made by Purchaser and Seller shall reimburse Purchaser for its
out-of-pocket expenses incurred in inspecting the Property (provided that such
reimbursement obligation shall not exceed $25,000), or (ii) Purchaser may elect
to close the sale and waive failure of the warranties; provided, that if
Purchaser elects to close in a written instrument delivered to Seller, Purchaser
shall have the right to adjourn the Closing for up to five (5) business days to
allow for the curing of such warranties.
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
FIFTY THOUSAND ($250,000) DOLLARS, Purchaser agrees to accept the Property with
an assignment of: (i) the insurance proceeds, (ii) any deductible, and (iii)
rent loss insurance proceeds for period after Closing. Seller may repair such
damage before the date provided herein for closing. In the event that the damage
shall be over TWO HUNDRED FIFTY THOUSAND ($250,000) DOLLARS and such damage
cannot be repaired by such time, this Agreement may be canceled at the option of
the Purchaser prior to or on date of Closing. 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
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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)
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 WILLIAM C.
JENNINGS & CO., 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 it's
election, may either (1) require specific performance of Seller, or pursue its
other remedies at law or equity, (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.
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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. Such amount and
terms are agreed upon by and between Seller and Purchaser as liquidated damages,
due to the difficulty and inconvenience of ascertaining and measuring actual
damages, and the uncertainty thereof, and the payment of the deposit and the
terms provided herein shall constitute full satisfaction of Purchaser's
obligations under this Agreement. Such amount is agreed upon by and between
Seller and Purchaser as a reasonable estimate of just compensation for the harm
caused by Purchaser's default. Seller shall have no other remedy against
Purchaser in the event of Purchaser's default. Nothing in the foregoing,
however, shall limit Purchaser's liability under Section 6.2.6 above with
respect to Purchaser's indemnification obligation.
11.4 In the event of any litigation under this Agreement, the prevailing
party shall be entitled to recover its reasonable attorneys' fees incurred in
connection with such litigation from the non-prevailing party.
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 any company owned by said
REIT. Any other assignment shall require Seller's consent, which consent shall
not be unreasonably withheld.
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
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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 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, provided
that this Agreement may be disclosed to the respective attorneys, agents, and
accountants. 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
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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.
If Purchaser is not satisfied with such assessment, Purchaser shall have the
right to terminate as provided in 6.2.3.
12.13 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, the form of Deed
(d) EXHIBIT D, Metrotech Service Agreement
(e) EXHIBIT E, the form of the Blanket Conveyance,
Bill of Sale and Assignment
(f) EXHIBIT F, the form of the Representation
Letter
(g) EXHIBIT G, Closing Memorandum
(h) EXHIBIT H, Assignment of Leases
(i) EXHIBIT I, Assignment of Contracts
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):
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To Seller: Copper Limited Partnership
c/o Mr. Jakob Medve
8251 Maryland, Suite 10
St. Louis, MO 63105
Fax: (314) 726-1542
With a copy to
Seller's Attorneys: Paul Macon, Esq.
Thompson & Coburn
One Mercantile Center
St. Louis, MO 63101
Fax: (314) 552-7000
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
57 5 Chestnut St. , P. 0. Box 4 8 8
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 and confirmed by reliable overnight
courier. Notices sent in any other manner shall be deemed given only when
actually delivered at the specified address.
ARTICLE XIV
LIKE-KIND EXCHANGE
14.1 1031 EXCHANGE. Sellers have advised Purchaser of Seller's intention to
seek to effect a tax deferred exchange pursuant to Section 1031 of the Internal
Revenue Code in connection with the conveyance of the Property. In this regard,
prior to the transfer of the Property to Purchaser, Seller intends to sell the
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Property to a neutral third party (a "Qualified Intermediary") subject to the
terms of this Agreement. The Qualified Intermediary will assume and fulfill the
contractual obligations of Seller contained herein and the Qualified
Intermediary shall cause the Seller to directly convey title to the Property to
Purchaser pursuant to the terms of this Agreement in the time and in the manner
set forth herein. Purchaser agrees to consent in writing to such assignment and,
otherwise, to cooperate with Seller with respect to such exchange, provided,
however, Seller shall reimburse Purchaser for any reasonable increased expenses
incurred by Purchaser in this transaction resulting from the structuring of this
transaction as a like-kind exchange under Section 1031 of the Internal Revenue
Code.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed this day and date first written above.
SELLER:
COPPER LIMITED PARTNERSHIP, A MISSOURI LIMITED PARTNERSHIP
BY: HILLTOP TOWNHOMES, INC., Its General Partner
By: /s/ Jakob Medve
------------------------------------------
Jakob Medve
Its: President
-----------------------------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By:
-----------------------------------------
S.J. Olander
Its: Senior Vice President
-----------------------------------------
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Property to a neutral third party (a "Qualified Intermediary") subject to the
terms of this Agreement. The Qualified Intermediary will assume and fulfill the
contractual obligations of Seller contained herein and the Qualified
Intermediary shall cause the Seller to directly convey title to the Property to
Purchaser pursuant to the terms of this Agreement in the time and in the manner
set forth herein. Purchaser agrees to consent in writing to such assignment and,
otherwise, to cooperate with Seller with respect to such exchange, provided,
however, Seller shall reimburse Purchaser for any reasonable increased expenses
incurred by Purchaser in this transaction resulting from the structuring of this
transaction as a like-kind exchange under Section 1031 of the Internal Revenue
Code.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed this day and date first written above.
SELLER:
COPPER LIMITED PARTNERSHIP, A MISSOURI LIMITED PARTNERSHIP
BY: HILLTOP TOWNHOMES, INC., Its General Partner
By:
------------------------------------------
Jakob Medve
Its: President
-----------------------------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S.J. Olander
-----------------------------------------
S.J. Olander
Its: Senior Vice President
-----------------------------------------
18
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 31st day of March,
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 Copper Ridge Apartments
(hereinafter referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate upon the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the
Property, provided that nothing herein contained shall constitute a guarantee by
Manager of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment,
tools, appliances, materials, supplies and uniforms necessary for the
maintenance or operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas,
electricity and other services necessary for the operation and maintenance of
the Property;
d. The advertising for the rental of space in the Property,
the cost of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property
rented by procuring tenants for the Property and negotiating and executing on
behalf of Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other
documents (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) required under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act, or any
similar federal or state legislation. Manager shall also file returns and
reports, and pay from Owner's funds, all sums as may from time to time be
required by the state or locality in which the Property is located;
h. The maintenance of full books of account with correct
entries of all receipts and expenditures, which books of account shall be the
property of Owner and shall at all times be open to the inspection of Owner or
any of its employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by cancelled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h and I shall be paid for by Owner
pursuant to the terms of this Agreement;
<PAGE>
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
----------------------------------------
Title:Secretary
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By:/s/ S.J. Olander
----------------------------------------
Title:Secretary
