SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report: February 4, 1998
APPLE RESIDENTIAL INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 333-10635 54-1816010
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
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APPLE RESIDENTIAL INCOME TRUST, INC.
FORM 8-K
Index
Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a. Independent Auditors' Report
(Main Park Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Main Park Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Main Park Apartments)*
b. Pro Forma Balance Sheet as of
December 31, 1997 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1997
(unaudited)*
c. Exhibits
10.1 Purchase Contract for Main Park Apartments
10.2 Property Management Agreement for Main Park Apartments
23.1 Consent of Independent Auditors*
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* To be filed by amendment.
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Item 2. Acquisition or Disposition of Assets
On February 4, 1998, Apple Residential Income Trust, Inc. (the
"Company") purchased the Main Park Apartments located at 1303 South Main Street
in Duncanville (southwest of Dallas), Texas (The "Property").
The Property comprises 192 apartment units. The purchase price for the
Property was $8,000,000. The seller was MGW Apartments Partnership, a Texas
limited partnership which is not affiliated with the Company, Apple Residential
Advisors, Inc. or their Affiliates. The entire purchase price was paid using
proceeds from the sale of Company common shares. Title to the Property was
conveyed to the Company by limited warranty deed.
Location. The Property is located on South Main Street in Duncanville,
southwest of Dallas, within the greater Dallas/Fort Worth Consolidated
Metropolitan Statistical Area, or as it is called locally, "The Metroplex." The
following information is based in part upon information provided by the Dallas
Chamber of Commerce.
The Dallas/Fort Worth Metroplex is in the north-central part of Texas
and is composed of nine counties. The 1996 population of The Metroplex was
approximately 4,400,000. Dallas is the second largest city in the state, behind
Houston.
The economy of the Dallas/Fort Worth area is complex and diversified.
Key economic factors include a large manufacturing base (including as products
military hardware, electronics, automobiles, industrial equipment, oil-field
parts, food products and chemicals), banking, insurance services,
communications, oil and gas production and air transportation. Major employers
in the area include Texas Instruments, Southwestern Bell, General Motors, J.C.
Penney, NationsBank and Vought Aircraft Company.
The Metroplex is also an established transportation center for the
nation. The Dallas/Fort Worth International Airport occupies approximately
17,800 acres of land between the two cities. It is the largest commercial
airport in the United States in terms of land area, and is the fourth busiest
airport in the world, with 1,700 daily arrivals and departures.
The area also has a well-established system of interstate highways and
supporting secondary routes. The Metroplex is located at the hub of Interstates
35,45, 20 and 30. Two outer loops, Interstate 635 in Dallas and Interstate 820
in Fort Worth, surround the respective cities.
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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, single-family, commercial and retail development. The Property is
located near restaurants, businesses, schools, and churches, and is readily
accessible from Interstate 20 and Highway 67. The Property is an approximately
20-minute drive from downtown Dallas.
Description of the Property. The Property consists of 192 garden-style
apartment units in 24 two-story buildings on approximately 10.4 acres of land.
The Property was constructed in 1984.
The Property offers eight different unit types. The unit mix and rents
being charged new tenants as of February, 1998 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
49 One bedroom/one bathroom 757 $579
11 One bedroom/one bathroom (view) 757 609
22 One bedroom/one bathroom w/den 901 689
8 One bedroom/one bathroom w/den (view) 901 709
39 Two bedrooms/two bathrooms 1,056 749
15 Two bedrooms/two bathrooms (view) 1,056 769
38 Two bedrooms/two bathrooms 1,058 769
10 Two bedrooms/two bathrooms (view) 1,058 789
The apartments provide a total of approximately 180,000 square feet of
net rentable area.
The Company believes that the Property has generally been well
maintained and is in good condition. The Company has budgeted approximately
$144,000 for additional capital improvements to the Property. These improvements
will include clubhouse renovations, exterior painting and interior upgrades.
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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 (1,058 square feet) rented
for $608 in 1993, $618 in 1994, $655 in 1995, $683 in 1996 and $702 in 1997. The
average effective annual rental per square foot at the Property for 1993, 1994,
1995, 1996 and 1997 was $7.08, $7.20, $7.63, $7.96, and $8.18, respectively.
The buildings are wood-frame construction with a combination of brick
veneer and masonite hardboard siding on reinforced concrete slab foundations.
Roofs are sloped fiberglass shingled on plywood.
The Property has two outdoor swimming pools, a jacuzzi, two laundry
facilities and a wooded creek view. There is also a clubhouse which includes a
kitchen, entertainment area and 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, bath, entry and utility areas. 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 fireplace, washer/dryer connections, miniblinds, exterior storage and a
private balcony or patio. All upstairs units have vaulted ceilings. The owner of
the Property pays for cold water, gas usage for hot water, sewer service and
trash removal. Tenants pay for their own electricity service, which includes
cooking, lighting, heating and air conditioning.
There are at least four apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy in the nearby competing properties now averages
approximately 94%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 94% in 1993, 95% in 1994, 96% in 1995, 96%
in 1996, and 96% in 1997. As of February 4, 1998, the Property was 95 %
occupied. The tenants are a mix of white-collar workers, blue-collar workers,
students and retired persons.
The following table sets forth the 1997 real estate tax information of
the Property:
Assessed
Jurisdiction Value Rate Tax
- ------------ ----- ---- ---
County of Dallas $6,850,180 $2.80107 $191,878.34
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The basis of the depreciable residential real property portion of the
Property (currently estimated at about $7,458,550) will generally be depreciated
over 27.5 years on a straight-line basis. The basis of the personal property
portion will be depreciated in accordance with the modified accelerated cost
recovery system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.
The Advisor and the Company believe that the Property is and will
continue to be adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. The Dallas/Fort Worth area generally and the specific area in which
the Property is located were perceived as being characterized by a diverse,
stable and steadily growing economy. Accordingly, it was believed that such
economy and its anticipated growth and development would support stable
occupancy rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs and
improvements will allow future increases in rents at the Property.
3. The Property is strategically located in the Duncanville area, which
is one of the most commercially active areas in the Metroplex, and has a
well-respected school system.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
Acquisition and Management Services and Fees. In consideration of
services rendered to the Company in connection with the selection and
acquisition of the Property, the Company will pay Cornerstone Realty Income
Trust, Inc., a property acquisition fee equal to 2% of the purchase price of the
Property, or $160,000. Cornerstone Realty Income Trust, Inc. will serve as
property manager for the Property and for its services will be paid by the
Company a monthly management fee equal to 5% of the gross revenues of the
Property plus reimbursement of certain expenses.
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ITEM 7.a.*
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* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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ITEM 7.b.*
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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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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Apple Residential Income Trust, Inc.
Date: February 18, 1998 By: /s/ Glade M. Knight
-------------------------
Glade M. Knight
President
of Apple Residential
Income Trust, Inc.
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EXHIBIT INDEX
Apple Residential Income Trust, Inc.
Form 8-K dated February 4, 1998
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
10.1 Purchase Contract for Main Park
Apartments
10.2 Property Management Agreement
for Main Park Apartments
23.1 Consent of Independent Auditors*
* To be filed by amendment.
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EXHIBIT 10.1
FIRST MODIFICATION TO AGREEMENT OF SALE AND PURCHASE
(MAIN PARK APARTMENTS)
This First Modification to Agreement of Sale and Purchase ("Modification")
is made and entered into this 3rd day of February 1998 between MGW APARTMENTS
PARTNERSHIP ("Seller") and CORNERSTONE REALTY GROUP, INC. ("Purchaser").
WHEREAS, Purchaser and Seller entered into an Agreement of Sale and
Purchase on the 20th day of January 1998 ("Agreement"); and
WHEREAS, Purchaser and Seller now desire to modify and amend the Agreement
as set forth herein.
NOW, THEREFORE, in consideration of the promises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:
1. All terms not specifically defined herein shall have the same meaning as
ascribed to them in the Agreement.
2. ARTICLE I, Paragraph 1.1.4 Purchase Price is hereby amended to read as
follows:
"1.1.4 Purchase Price: $8,000,000, payable all in cash in U.S. Dollars
at Closing (defined below), subject to the prorations and
adjustments as hereinafter set forth."
3. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
4. In the event there is any conflict in the terms of this Modification and
the terms of the Agreement, the terms of this Modification shall govern.
5. This Modification may be executed in separate counterparts, each of
which shall be deemed an original and all of which taken together will
constitute one agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Modification on
the date first above written.
SELLER:
MGW APARTMENTS PARTNERSHIP
By: 3636 COLORADO, INC., GENERAL PARTNER
By: /s/ John Flaten
----------------------------------------
Name: John Flaten
Title: Secretary
By: BORLAND ARIZONA CORPORATION,
GENERAL PARTNER
By: /s/ David C. Borger
----------------------------------------
David C. Borger
Vice President, Development
/s/ Alan A. Borger, Jr.
----------------------------------------
Alan A. Borger, Jr.
Executive Vice President
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S.J. Olander
--------------------------------------------
Name: S.J. Olander
Title: Vice President
<PAGE>
AGREEMENT OF SALE AND PURCHASE
(MAIN PARK APARTMENTS)
THIS AGREEMENT OF SALE AND PURCHASE (the "Agreement") is made and entered
into by and between the parties listed below as "Seller" and "Purchaser",
effective as of the Effective Date (defined below).
I.
BASIC TERMS
1.1 The following shall constitute the Basic Terms (herein so called) of this
Agreement, and the terms having initial capital letters, used in the captions,
or otherwise defined in this Article I shall have the same meaning when used in
other Articles of this Agreement, unless the context otherwise requires a
different meaning. Also, in the event of any conflict between the Basic Terms
and other provisions in this Agreement, the Basic Terms shall control.
1.1.1 Seller: MGW APARTMENTS PARTNERSHIP
Address: c/o Mr. Kim L. Lawrence
12700 Preston Road, Suite 235
Dallas, Texas 75230
Phone (972) 661-2145
Facsimile (972) 661-3283
1.1.2 Purchaser: CORNERSTONE REALTY GROUP, INC.
Address: 306 East Main Street
Richmond, Virginia 23219
Attn: Mr. Gus G. Remppies
Phone: (804) 643-1761
Facsimile: (804)782-9302
1.1.3 Property/Project: The 192 unit apartment complex known as "Main
Park Apartments", 1303 S. Main Street, Duncanville, Texas 75131,
and located on the Land (herein so called) legally described on
Exhibit "A" attached hereto. The Property is more particularly
described in Article II below.
1.1.4 Purchase Price: $8,025,000.00, payable all in cash in U.S.
Dollars at Closing (defined below), subject to the prorations and
adjustments as hereinafter set forth.
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1.1.5 Earnest Money: $100,000.00, to be delivered to the Title Company
(defined below) on or before two (2) business days after the
Effective Date (defined below). The Earnest Money is to be placed
in an interest-bearing account. An additional, non-refundable
$100.00 shall be paid by Purchaser to Seller at the same time as
the Earnest Money as an option fee.
1.1.6 Title Company: Commonwealth Land Title of Dallas
1700 Pacific, Suite 4740
Dallas, Texas 75201
Attention: Jodi Joles
Phone 214-855-8411
Facsimile 214-754-9066
1.1.7 Review Period: Fourteen (14) days after the Effective Date.
1.1.8 Closing or Closing Date: Seven (7) days after the expiration of
the Review Period, or such earlier date as the parties may agree
upon, at the office of the Title Company.
1.1.9 Broker: CB Commercial, to be paid by Seller a commission pursuant
to a separate agreement.
II.
DESCRIPTION OF THE PROPERTY
2.1 In consideration of the Purchase Price and upon the terms and conditions
hereinafter set forth, Seller shall sell to Purchaser and Purchaser shall
purchase from Seller:
2.1.1 The Land, together with all rights and appurtenances pertaining to
such real estate, including, without limitation, any and all rights of Seller in
and to all roads, alleys, easements, streets and ways adjacent to the Land,
strips and gores and rights of ingress and egress thereto and any reversionary
rights relating thereto;
2.1.2 All improvements, structures and fixtures placed, constructed or
installed on the Land, being the Project, related parking spaces and all other
structures and amenities located thereon (the "Improvements");
2.1.3 All fixtures, furniture, carpeting, draperies, appliances, building
supplies, equipment, tools, machinery, inventory, and other items of personal
property owned by Seller
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and presently and hereafter affixed, attached to, placed or situated upon the
Land or Improvements and used in connection with the ownership, operation and
occupancy of the Land or improvements ("Personalty"), including those items
described on Exhibit "B" attached hereto, but speciflcally excluding any items
of personal property owned by tenants ("Tenants") of the Land or Improvements
and further excluding any items of personal property owned by third parties and
leased to Seller;
2.1.4 Seller's interest in all apartment leases ("Leases") now or hereafter
affecting the Land or Improvements, together with all refundable security
deposits in Seller's possession ("Security Deposits") of Tenants occupying the
Land or Improvements as shown in such Leases, which Security Deposits shall be
credited against the Purchase Price in accordance with Section 7.1;
2.1.5 Seller's interest in all assignable leasing, service, supply and
maintenance contracts and all deposits made thereunder, excluding utility
deposits ("Contracts") and all trade names, rights to plans and drawings, if
any, and other intangible property, including all leasing records and documents
of Seller which pertain to the operation of the Property (the "Intangible
Property") relating to the Land, Improvements, or Personalty; and
2.1.6 All transferable licenses, permits, certificates, approvals,
authorizations, variances and consents, if any (collectively "Permits"), issued
or granted by governmental or quasi-governmental bodies, officers or authorities
in respect of the ownership, occupancy, use and operation of the Land,
Improvements and Personalty.
2.2 The items described In Section 2.1 shall be referred to collectively herein
as the "Property" or the "Project".
III.
CLOSING
3.1 The procedure to be followed by the parties in connection with the Closing
shall be as follows:
3.1.1 At the Closing the Seller shall cause to be delivered to the Title
Company (sometimes herein referred to as the "Escrow Agent") or to Purchaser, as
applicable, the items specified herein and the following documents and
instruments duly executed and acknowledged, in recordable form and in form
reasonably acceptable to Seller and Purchaser:
3.1.1.1 A special warranty deed (the "Deed") dated as of the Closing Date,
in favor of Purchaser or its assignee pursuant to Section 12.6;
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3.1.1.2 An assignment of Leases (the "Assignment of Leases") dated as of
the Closing Date, in favor of Purchaser or its assignee, in the form attached
hereto as Exhibit "C";
3.1.1.3 A bill of sale in a form reasonably acceptable to Seller and
Purchaser, conveying the Personalty and an Assignment assigning Seller's
interest in the Intangible Property, Permits and all assignable Contracts which
Purchaser assumes hereunder. Purchaser must provide Seller with written notice
specifying those Contracts it desires to terminate on or before ten (10) days
prior to the Closing provided any such Contracts are terminable without cost to
Seller;
3.1.1.4 A certificate (the "Bills Paid Certificate") executed by or on
behalf of Seller and dated as of the Closing Date, in a form satisfactory to the
Title Company to remove any applicable title exceptions to such matters;
3.1.1.5 A certified rent roll (the "Rent Roll Certificate") for the
Project, certified by Seller or its agents to be true and correct as of the
Closing Date in a form satisfactory to the Title Company to remove any
applicable title exceptions to such matters;
3.1.1.6 Evidence acceptable to Title Company, authorizing the consummation
by Seller of the purchase and sale transaction contemplated hereby and the
execution and delivery of the closing documents on behalf of Seller, including
documentation confirming the legal existence of Seller, the authority of Seller
to execute and deliver such closing documents and the valid execution of such
closing documents on behalf of Seller;
3.1.1.7 All keys to all locks on the Property in the possession of Seller
and all documents in the possession of the Seller pertaining to tenants of the
Property, including, but not limited to all Leases, applications, correspondence
and credit reports relating to each such Tenant;
3.1.1.8 To the extent available, all Permits relating to the Property;
3.1.1.9 All plans, specifications, mechanical, electrical and plumbing
layouts, operating manuals, leasing information and the like in the possession
of Seller and utilized in connection with the operation of the Property, if
available;
3.1.1.10 Possession of the Property, subject only to the Permitted
Exceptions (hereinafter defined);
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3.1.1.11 A form tenant notice letter informing Tenants of the change in
ownership of the Property, which Purchaser shall cause to be delivered to all
tenants within five (5) days after the Closing Date;
3.1.1.12 A Closing Memorandum and Indemnification Agreement in the form
attached hereto as Exhibit "D"; and
3.1.1.13 All other documents and instruments reasonably required by
Purchaser or the Title Company to effectuate the Closing.
3.1.2 At the Closing, Purchaser, or its assignee, shall cause to be
delivered to the Title Company funds payable to the Title Company representing
the Purchase Price due in accordance with Article I hereof, less the Earnest
Money together with all accrued interest thereon, which is to be applied to the
payment required, and plus or minus prorations and adjustments hereinafter
provided.
3.1.3 At the Closing, Seller and Purchaser shall cause to be delivered to
the Title Company such other instruments and documents as may be necessary and
appropriate and required hereunder in order to complete the Closing of the
transactions contemplated hereunder.
3.1.4 At the Closing, Seller shall deliver to the Purchaser and the Title
Company a certificate in such form as may be required by the Internal Revenue
Service pursuant to Section 1445 of the Internal Revenue Code of 1986, as
amended, or the regulations issued pursuant thereto, certifying as to the
nonforeign status of a transferor, in the form required by the Internal Revenue
Service ("IRS"). In the event that Seller fails or refuses to deliver such
certificate to Purchaser and the Title Company at the Closing, Seller authorizes
the Purchaser or the Title Company to withhold from the cash portion of the
Purchase Price as authorized by the IRS.
3.2 Upon the completion of the deliveries specified in Section 3.1 above, the
Escrow Agent shall be authorized to cause the appropriate closing documents to
be immediately recorded in the appropriate records of the counties in which the
Property is located, and shall deliver the balance of the proceeds from the sale
to Seller, after deducting all expenses thereof or such other items as may be
specified herein and appearing on the closing statements.
3.3 Seller shall furnish Purchaser with a Texas Standard Owner's Policy of Title
Insurance (the "Owner's Title Policy") or an irrevocable commitment to issue the
Owner's Title Policy, in the full amount of the Purchase Price, wherein the
Title Company shall insure that fee simple title to the Project is vested in
Purchaser, containing no exception to such title other
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than the Permitted Exceptions (hereinafter defined) and the standard printed
exceptions (provided that the area and boundaries exceptions shall be amended at
Purchaser's expense to except only to "Shortages in Area", the exception for
restrictive covenants shall be endorsed "None of Record" or shall list only
those restrictive covenants as may be Permitted Exceptions, the exception for
taxes shall be limited to taxes for the year in which Closing occurs and
subsequent years, and subsequent assessments for prior years due to change in
land usage or ownership, and endorsed "Not Yet Due and Payable"), any exception
for parties in possession of the Property shall be limited to rights of tenants
in possession, as tenants only, pursuant to unrecorded written leases, and there
shall be no exception for visible and apparent easements, roads and highways or
any other matters which would be disclosed by a current survey of the Property.
3.4 Seller shall pay the cost of the Owner's Title Policy provided for above.
Seller and Purchaser shall each pay one-half(1/2) of the escrow fee charged by
the Tide Company and of the recording fees for the Deed imposed in connection
with this transaction. Seller shall pay any and all prepayment penalties and
other fees and expenses related to the payoff and discharge of any and all liens
securing loans related to the Property, as well as the cost of the Survey
(defined in Section 4.1.2 below). All other expenses incurred by Seller and
Purchaser with respect to the Closing including, without limitation, the
attorneys' fees and costs and expenses incurred in connection with negotiating,
preparing and closing the transaction contemplated by this Agreement, shall be
borne and paid exclusively by the party incurring the same, unless otherwise
expressly provided in this Agreement.
IV.
ITEMS FOR REVIEW; REVIEW PERIOD
4.1 Upon execution of this Agreement, Purchaser and/or Seller, as the case may
be, shall perform the following within the time stated, each of which shall be a
condition precedent:
4.1.1 On or before three (3) days after the date hereof, Seller shall
obtain a Commitment for Title insurance or a Commitment to insure (the
"Commitment") dated not earlier than the date of this Agreement, issued by the
Title Company, showing Seller's tide to the Property to be good and
indefeasible, together with true, correct and legible copies of all items and
documents referred to therein. Purchaser shall have five (5) days after receipt
of said items (and the Survey hereinafter referred to) to examine the condition
of title and approve or disapprove the same in writing. Those items listed in
the Commitment and not disapproved of by Purchaser (including without limitation
the Leases, Contracts and Permits) shall be referred to as the "Permitted
Exceptions." In the event that Purchaser disapproves of all or any item referred
to in the Commitment or the Survey, subject to the terms and conditions hereof,
Seller shall have the opportunity for a period of two (2) days after receipt
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of Purchaser's objections within which to provide Purchaser with written
evidence that it cured or removed all such exceptions or a written commitment
to, on or before the Closing cure or remove such exceptions. Seller shall
reasonably cooperate with Purchaser (provided, Seller shall not be obligated to
make any expenditures in this regard), at Purchaser's request, to resolve any
reasonable objections made by Purchaser. Notwithstanding the foregoing, Seller
shall be obligated to discharge at Closing, at Seller's sole cost and expense,
any title exceptions that represent liens or encumbrances (other than any
obligations and covenants under documents constituting the Permitted Exceptions)
securing the payment of any monetary amounts not exceeding $10,000; provided,
such $10,000 limit shall not apply to loans secured by the Property. In the
event Seller falls or refuses to provide such written evidence or such written
commitment to cure all of such items within such two (2) day cure period,
Purchaser shall have the right, within two (2) days after the lapse of the
above-described 2 day cure period, to terminate this Agreement, whereupon the
Title Company is hereby authorized to, and shall, upon request of Purchaser,
return to Purchaser all Earnest Money that has been theretofore paid or
deposited by Purchaser to it under or in connection with this Agreement, and the
parties hereto shall be released from all obligations hereunder. In the
alternative, at the written request of Purchaser, Seller shall deliver the title
subject to the exceptions which Seller has not cured or committed to cure (such
exceptions becoming Permitted Exceptions) and Purchaser shall, by acceptance of
such title, waive any objections to such Permitted Exceptions.
4.1.2 Within three (3) days after the date of this Agreement, Seller, at
Seller's sole cost and expense, shall cause to be prepared and furnished to
Purchaser a currently dated " as-built" survey (the "Survey") of the Property,
which Survey shall be reasonably acceptable to Purchaser and the Title Company
for purposes of amending the survey exception. If necessary the Survey shall be
revised at Seller's expense as requested by the Title Company for such purpose.
However, any revisions requested by any lender financing the purchase shall be
done at Purchaser's expense.
4.1.3 On or before three (3) days after the date hereof, Seller shall
deliver to Purchaser the following:
4.1.3.1 Access at the Property to records, instruments, contracts and
agreements in Seller's possession (or Seller's management company) which affect
the ownership or operation of the Project.
4.1.3.2 A true, correct and complete copy of any and all service contracts,
environmental review reports or materials, and certificates of occupancy
relating to or affecting the Property in Seller's possession. Copies of the
Leases will be made available for inspection at the Property.
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4.1.3.3 An inventory of the Personalty.
4.1.3.4 An operating statement for the previous year and all completed
months of 1998 and rent roll for the Project certified by Seller's management
company to be true, complete and correct as of the date hereof. The rent roll
(the "Rent Roll") shall show for each unit the tenant name, suite number,
monthly rental, lease rent, security deposit held, any defaults known to Seller
in any lease, the commencement and expiration date of each lease and designating
any rights to renew or extend a lease and details of any concessions or
specials. The rent roll and operating statement will be updated and delivered to
Purchaser monthly during the term of this Agreement up to the Closing Date.
4.1.3.5 Insurance information for the Property, including the type and
limits of coverage currently in place and the premiums paid by Seller therefor.
4.1.3.6 A summary of Seller's payroll reflecting the actual payroll
("Payroll Summary") for all employees having direct maintenance or management
responsibility for the Property, including a designation of each job and its
duties and the wages and benefits (including vacation and housing benefits)
payable therefor.
4.1.3.7 A copy of tax receipts for the preceding three (3) years.
4.1.3.8 Copies of the last 12 months of bills for gas, electric, water and
sewer services,
4.2 During the Review Period, Purchaser shall have the right to perform at its
sole expense any and all inspections or studies of the Property which Purchaser
may desire, including but not limited to a physical, environmental (provided any
intrusive testing or coring shall require the prior written approval of Seller
acting reasonably) and mechanical inspection of the Property, a feasibility
study of the Property (including the right to enter vacant premises and with the
provision of adequate notice and the tenants' consent the right to enter leased
areas), an inspection of all books and records and financial information
pertaining thereto, and interviews with on-site employees and the staff of
Seller's management company. Seller or its agents shall be entitled to be
present at all such inspections and interviews. Seller shall otherwise cooperate
and cause its agents and employees to cooperate with Purchaser's inspections and
reviews. If Purchaser shall find such inspections or studies to be
unsatisfactory, for any reason, or if Purchaser otherwise determines that the
Property is not suitable for its intended use thereof, for any reason
whatsoever, in Purchaser's sole discretion, Purchaser shall have the right, at
its option, to terminate this Agreement within the Review Period and, upon such
termination, all Earnest Money previously deposited shall be immediately
refunded to Purchaser and the parties hereto shall have no further liabilities
one to the other. This
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Agreement shall automatically terminate without notice at 5:00 p.m. Dallas,
Texas time on the last day of the Review Period, unless on or before such time
and date Purchaser notifies Seller in writing that Purchaser does not elect to
terminate this Agreement pursuant to its rights under this Section 4.2. In the
event of the automatic termination of this Agreement pursuant to the immediately
preceding sentence, Seller hereby directs and authorizes the Title Company, and
the Title Company shall, notwithstanding any contrary instructions that Seller
may hereafter give, immediately to return any and all Earnest Money and all
interest accrued thereon to Purchaser without further inquiry of any sort
whatsoever in regard to the Seller. Purchaser shall promptly thereafter deliver
to Seller all of Seller's reports and documents and third party reports and
documents delivered to or prepared for Purchaser, and Purchaser shall destroy
the copies of such reports and documents in its possession as well as its
Internal reports and documents. Purchaser shall repair any damage to the
Property caused by its inspections or studies and Purchaser shall indemnify,
defend and hold Seller harmless from and against any loss, cost, damage or
expense, including reasonable attorneys' fees and court costs, suffered or
incurred by Seller as a result of any activities conducted by Purchaser, its
agents, employees, contractors or representatives on or about the Property.
Purchaser's obligations contained in this paragraph shall survive the Closing or
other termination of this Agreement.
V.
REPRESENTATIONS AND WARRANTIES;
COVENANTS OF SELLER UNTIL CLOSING
5.1 In addition to the representations and warranties contained in other
articles of this Agreement, Seller makes the following representations and
warranties which shall be true and correct as of the Closing Date and shall
survive the Closing as provided in this Agreement, and the truth of which shall
be a condition precedent to Purchaser's obligations to close the transaction
contemplated herein. Also, as used in this Agreement, Seller's knowledge shall
mean the actual knowledge of Dennis R. McDaniel or David R. Roelke (the
President and Chief Financial Officer of Seller's management company,
respectively), and in connection with the delivery of the following
representations and warranties (i) Seller has made no specific examination of
files or records, nor has Seller made inquiry of any other employee of Seller,
its advisors, or any management company engaged by Seller, (ii) no constructive
knowledge of any matter shall be imputed to Seller as to matters not within the
actual conscious knowledge of the above-named persons, and (iii) no personal
liability shall attach to such persons as a result of any violation of any
representation or warranty.
5.1.1 Seller has full power and authority to enter into this Agreement and
to consummate all of the transactions contemplated hereby, and the persons
executing this Agreement and all other documents required to consummate the
transactions contemplated
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hereby on behalf of Seller are duly authorized to execute this Agreement and
such other documents on behalf of Seller, and are authorized to bind Seller to
the terms hereof.
5.1.2 To the best of Seller's knowledge, Seller has received no notice from
any governmental authority advising Seller of its violation of a governmental
ordinance, order or regulation including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act and to Seller's
knowledge, there are no underground storage tanks located on the Property.
Seller agrees to provide Purchaser with copies of any such notices it receives
following the date hereof.
5.1.3 To the best of Seller's knowledge, the financial information to be
delivered to Purchaser pursuant to Article IV of this Agreement, including but
not limited to, the rent roll, expense information, maintenance costs and
operating expenses, is true, complete and correct.
5.1.4 After the date hereof, Seller agrees to operate the Project in the
ordinary course of business consistent with its past practices, including
repairs, maintenance and leasing until Closing. Specifically, all units becoming
vacant on or before five (5) days prior to the Closing shall be made Rent Ready
(defined below)by Seller. As to any units becoming vacant within five (5) days
of Closing, at Closing Purchaser shall receive a credit against the Purchase
Price in an amount necessary to make such units Rent Ready. "Rent Ready" shall
mean the condition of vacant units inspected by Purchaser's representatives on
January 14, 1998 (i.e., units 7-113, 12-214 and 22-1339). Additionally, between
the date hereof and Closing, Seller agrees not to remove any Personalty unless
it is replaced with a comparable item of equal quality and quantity and Seller
agrees not to enter into any written or oral contract, other than a Lease,
unless such contract or agreement is terminable by the owner of the property for
any reason, without any penalty or termination payment, upon not more than
thirty (30) days' prior notice.
5.1.5 The Property is not subject to any agreements of sale, or any
options or other rights of third parties to acquire any interest therein (other
than pursuant to this Agreement) and Seller has and at the Closing will have and
will convey to Purchaser good and indefeasible fee simple title to the Property,
free and clear of all conditions, exceptions, reservations,, liens, leases and
other encumbrances, except the Permitted Exceptions.
5.1.6 To Seller's knowledge, (i) no condemnation proceedings, eminent
domain proceedings or similar actions or proceedings are now pending or
threatened against the Property, and (ii) there are no proposals pending or
threatened for rezoning or otherwise changing the land use of the Property.
5.1.7 Seller has received no notice of any legal actions, suits, or
other legal or governmental administrative proceedings, pending or threatened,
against or affecting the Property, except those disclosed in writing to
Purchaser.
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5.1.8 To the best knowledge of Seller, and except as shown on the Rent Roll
or Payroll Summary, each Lease (including any and all modifications, amendments
or supplements thereto) furnished to Purchaser with respect to the Property
pursuant to this Agreement is in full force and effect, and has not been
otherwise amended, modified or supplemented in any way. The Leases furnished to
Purchaser with respect to the Property pursuant to this Agreement constitute the
only written or oral agreements of any kind for the leasing, rental or occupancy
of any portion of the Property. No party to any Lease has delivered to Seller
any written notice alleging the occurrence of any breach thereof or default or
event of default thereunder by Seller. No rental under any Leases has been
collected in advance of the current month, and there are no concessions,
bonuses, free months' rental, rebates or other matters affecting the rental for
any Tenant thereunder, except as set forth on the Rent Roll or the Payroll
Summary. Seller is the owner of the entire landlord's interest in and to each of
the Leases and none of the Leases or the rental or other sums payable thereunder
has been assigned or otherwise encumbered except pursuant to a collateral
assignment to Seller's lender which will be released at Closing.
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, PURCHASER ACKNOWLEDGES AND
AGREES THAT SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND
DISCLAIMS ANY REPRESENTATIONS, WARRANTIES (OTHER THAN THE SPECIAL WARRANTY OF
TITLE AS SET OUT IN THE DEED OR AS EXPRESSLY SET FORTH HEREIN), PROMISES,
COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER
EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT, OR FUTURE, OF, AS TO,
CONCERNING OR WITH RESPECT TO: (1) THE VALUE, NATURE, QUALITY OR CONDITION OF
THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY; (2)THE
INCOME TO BE DERIVED FROM THE PROPERTY; (3) THE SUITABILITY OF THE PROPERTY FOR
ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREON; (4) THE
COMPLIANCE OF OR BY THE PROPERTY OF ITS OPERATION WITH ANY LAWS, RULES,
ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY; (5)
THE HABITABILITY, MERCHANTABILITY MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY; (6) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY; (7) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY; OR (8) ANY
OTHER MATTER WITH RESPECT TO THE PROPERTY. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, PURCHASER ACKNOWLEDGES SELLER HAS NOT MADE, DOES NOT MAKE AND
SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS, WARRANTIES PROMISES, COVENANTS,
AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER REGARDING
COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USES LAWS,
REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING THE EXISTENCE IN OR ON THE
PROPERTY OF HAZARDOUS MATERIALS. EXCEPT AS EXPRESSLY
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PROVIDED IN THIS AGREEMENT, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY DURING THE REVIEW
PERIOD, PURCHASER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND
NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER, AND AT CLOSING
AGREES TO ACCEPT THE PROPERTY AND WAIVE ALL OBJECTIONS OR CLAIMS AGAINST SELLER
ARISING FROM OR RELATED TO THE PROPERTY OR TO ANY HAZARDOUS MATERIALS ON THE
PROPERTY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION
PROVIDED OR TO BE PROVIDED OR TO BE MADE AVAILABLE TO PURCHASER WITH RESPECT TO
THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE
ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND EXCEPT AS
EXPRESSLY PROVIDED HEREIN SELLER MAKES NO REPRESENTATIONS, WARRANTIES, PROMISES,
COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER AS TO
THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. SELLER IS NOT LIABLE OR BOUND
IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR
INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY
ANY REAL ESTATE BROKER (INCLUDING WITHOUT LIMITATION THE BROKER), AGENT,
EMPLOYEE, SERVANT OR OTHER PERSON. PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, EXCEPT AS EXPRESSLY PROVIDED
HEREIN, THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS"
CONDITION AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND AGREED THAT THE
PURCHASE PRICE HAS BEEN NEGOTIATED BASED ON THE FACT THAT THE PROPERTY IS SOLD
BY SELLER AND PURCHASED BY PURCHASER SUBJECT TO THE FOREGOING. THE PROVISIONS OF
THIS PARAGRAPH SHALL SURVIVE THE CLOSING IN PERPETUITY AND SHALL BE CONTAINED IN
THE DEED.
If each of the warranties does not remain true up to and including the Closing
as to any material matter and Purchaser has knowledge of the failure of such
warranty to remain true, at Purchaser's option, this Agreement may be terminated
by Purchaser if Seller does not cure such inaccuracy within 10 days after notice
thereof to Seller, or Purchaser may elect to close the sale and thereby forever
waive any claim for a breach of any such warranty.
5.4 Purchaser's Representations. Purchaser hereby represents and warrants to
Seller that Purchaser has full power and authority to enter into this Agreement
and to consummate all of the transactions contemplated hereby, and the persons
executing this Agreement and all other documents required to consummate the
transactions contemplated hereby on behalf of Purchaser are duly authorized to
execute this Agreement and such other documents on behalf of Purchaser, and are
authorized to bind Purchaser. This Agreement constitutes the legal, valid and
binding obligation of Purchaser enforceable in accordance with its terms and
provisions.
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VI.
SURVIVAL
6.1 All warranties, representations, covenants, obligations and agreements
contained in this Agreement shall survive the execution and delivery of the Deed
and shall survive the Closing hereof for a period of six (6) months after the
Closing Date.
VII.
PRORATIONS AND ADJUSTMENTS
7.1 Operating expenses, ad valorem taxes on the Property for the current year,
and utility charges shall be prorated at the Closing, effective as of the
Closing Date, utilizing the best available computations of such items. If any of
the items subject to proration under the foregoing provisions of this Section
7.1 cannot be prorated at the Closing because of the unavailability of the
information necessary to compute such proration, or if any errors or omissions
in computing prorations at the Closing are discovered subsequent to the Closing,
then such item shall be reapportioned and such errors and omissions corrected as
soon as practicable after the Closing and the proper party promptly reimbursed
in cash which obligation shall survive the Closing for a period (the "Proration
Period") from the Closing until one (1) year after the Closing. Notwithstanding
anything to the contrary contained herein, neither party hereto shall have the
right to require a recomputation of a Closing proration or a correction of an
error or omission in a Closing proration unless within the Proration Period one
of the parties hereto (i) has obtained the previously unavailable information or
has discovered the error or omission, and (ii) has given written notice thereof
to the other party together with a copy of its good faith recomputation of the
proration and copies of all substantiating information used in such
recomputation. The failure of a party to obtain any previously unavailable
information or discover an error or omission with respect to an item subject to
proration hereunder and to give written notice thereof as provided above within
the Proration Period shall be deemed a waiver of its right to cause a
recomputation or a correction of an error or omission with respect to such item
after the Closing. Income and expenses for the Closing Date shall be allocated
to Seller. Delinquent rents collected by Purchaser shall be first applied to any
amounts due Purchaser by any such tenant and next to any amounts due to Seller.
If current ad valorem tax assessments are unavailable at Closing, said ad
valorem taxes shall be adjusted based on tax assessments for the immediately
preceding tax year, with said tax proration to be adjusted in cash between the
parties, based on actual taxes for the current year, at the time such actual
taxes are determined; provided, however, all special tax assessments made by any
taxing authority with respect to the Project which are due and payable on or
before the Closing shall be the sole responsibility of Seller and shall be paid
by Seller at Closing. Purchaser shall receive a credit against the Purchase
Price for tenant security deposits that are not yet forfeited or due to be
refunded to tenants of the Property prior to Closing. The provisions of this
paragraph shall survive Closing.
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VIII.
COMMISSIONS
8.1 Except for any commission and/or fee payable to Wyndmere Capitol
("Wyndmere"), Seller shall be solely responsible for the payment of any and all
real estate commissions, claims for such commissions and/or similar type fees
arising, directly or indirectly, out of this transaction, including but not
limited to the Broker (the "Commissions"), and Seller does hereby agree to
indemnify Purchaser against and hold Purchaser harmless from any and all such
Commissions including attorneys' fees incurred in any lawsuit regarding such
Commissions. In connection therewith, Purchaser does hereby represent and
warrant that except for a separate agreement with Wyndmere, it, its officers,
employees and agents, have contracted for no such real estate commissions and/or
similar type fees, nor has it contacted real estate agents or brokers, other
than the Broker, nor has it acted in a manner so as to give rise to a claim for
such real estate commissions or similar fees. Purchaser shall be solely
responsible for the payment of any and all real estate commissions, claims for
such commissions and/or similar type fees arising directly or indirectly out of
this transaction to Wyndmere (the "Wyndmere Commission") and Purchaser does
hereby agree to indemnify Seller against and hold Seller harmless from any and
all of the Wyndmere Commission including any attorneys' fees incurred in any
lawsuit regarding the Wyndmere Commission.
8.2 By its execution hereof Purchaser acknowledges that it has been informed by
real estate brokers involved with this transaction that the Purchaser should
have the abstract covering the Property examined by an attorney of the
Purchaser's selection or that the Purchaser should be furnished with or obtain
an owner's policy of title insurance covering the Property.
IX.
TERMINATION AND REMEDIES
9.1 In the event that any of the Seller's representations or warranties
contained herein are untrue or if Seller shall have failed to have performed any
of the covenants and/or agreements contained herein which are to be performed by
Seller, or if any of the conditions precedent to Purchaser's obligation to
consummate the transactions contemplated hereby shall have failed to occur,
Purchaser may, at its option, terminate this Agreement by giving written notice
of termination to Seller and receive a full and immediate refund of any and all
Earnest Money previously deposited, or Purchaser may seek to enforce specific
performance of this Agreement, as its sole remedies.
9.2 If this Agreement is terminated by Purchaser pursuant to any provision of
this Agreement authorizing such termination, Purchaser shall be entitled to the
immediate refund
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of any and all Earnest Money previously deposited, together with all interest
accrued thereon and thereafter Purchaser shall have no further obligations
hereunder.
9.3 If Seller is not then in default in its obligations or agreements, and the
Purchaser has not terminated this Agreement pursuant to any of the provisions
authorizing such termination, and Purchaser fails to close the transaction
contemplated hereby, Seller shall be entitled to receive the Earnest Money and
all interest accrued thereon as liquidated damages for Purchaser's default
(Seller and Purchaser hereby acknowledging that the amount of damages in the
event of Purchaser's default is difficult or impossible to ascertain but that
such amount is a fair estimate of such damage).
X.
RISK OF LOSS
10.1 Risk of loss until the Closing shall be borne by Seller. In the event that
damage, loss or destruction of the Property or any part thereof, by fire or
other casualty, or through condemnation or sale in lieu thereof, occurs prior to
the actual closing of the transactions contemplated hereby, the extent of such
damage or taking involving more than 10% of the Purchase Price or a diminution
of the parking area by the greater of 5% or an amount making the remainder of
the parking area non-compliant with applicable code requirements (a "Material
Event"), the Purchaser shall, at its option, elect one of the following:
10.1.1 To terminate this Agreement and receive an immediate refund of all
Earnest Money previously deposited together with all interest accrued thereon.
10.1.2 To close the transactions contemplated hereby and take an assignment
of and receive in cash all insurance (including rent loss) or condemnation
proceeds payable as a result of such casualty loss or condemnation, and receive
a credit in the amount of any deductible applicable to such insurance coverage.
10.2 In the event of less than a Material Event, Purchaser shall close the
transactions contemplated hereby and take an assignment of and receive in cash
all insurance or condemnation proceeds payable as a result of such casualty loss
or condemnation, and receive a credit in the amount of any deductible applicable
to such insurance coverage.
10.3 Seller shall maintain the current insurance coverage in force for the
Property in full force and effect up to and including the Closing Date.
10.4 In this regard, and in connection with the foregoing, at Purchaser's
request, Seller shall:
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i. prior to the Closing, file any claim in a timely manner under any
property insurance policy covering the Property currently held by Seller which
Purchaser in good faith believes is covered by such policy;
ii. prior to the Closing, take all actions necessary to preserve the
insured's rights respecting such claims, including, without limitation,
complying with all policy requirements respecting such claims;
iii. at the Closing, to the extent assignable, assign its rights as to the
claim to the Purchaser;
iv. after the Closing, reasonably cooperate with Purchaser and/or its
representatives in connection with any claims made under the policy (before or
after the Closing) including providing any documents or testimony required in
connection with such claims.
In consideration of the performance by Seller of its obligations under
subparagraph (iv) above, Purchaser agrees that it shall reasonably compensate
Seller and its members, managers, agents, officers and employees for any
reasonable expenses from or related to its performance under item (iv) above.
This paragraph shall survive Closing.
XI.
NOTICES
11.1 Any notice, request, demand, instruction or other communication to be given
to either party hereunder, except those required to be delivered at Closing,
shall be in writing, and shall be deemed to be given upon receipt, if hand
delivered or delivered by express delivery service or via facsimile (provided a
confirmation of transmittal is obtained), or two (2) days after deposit of such
notice in registered or certified mail, return receipt requested (provided that
any notice of termination shall be effective immediately upon deposit in
registered or certified mail, return receipt requested), addressed to the
respective parties at the address provided in Article I.
11.2 The addresses and addressees for the purpose of this article may be changed
by either party by giving notice of such change to the other party in the manner
provided herein for giving notice. For the purpose of changing such addresses or
addressees only, unless and until such written notice is received, the last
address and addressee stated in Article I shall be deemed to continue in effect
for all purposes.
XII.
MISCELLANEOUS
12.1 Entire Agreement. THIS AGREEMENT AND THE EXHIBITS ATTACHED HERETO CONTAIN
THE ENTIRE AGREEMENT BETWEEN THE PARTIES, AND NO PROMISE, REPRESENTATION,
WARRANTY, AGREEMENT, GUARANTY OR COVENANT NOT
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INCLUDED IN THIS AGREEMENT OR ANY SUCH REFERENCED AGREEMENTS HAS BEEN OR IS
RELIED UPON BY EITHER PARTY.
12.2 No Oral Modification. NO MODIFICATION OR AMENDMENT OF THIS AGREEMENT SHALL
BE OF ANY FORCE OR EFFECT UNLESS MADE IN WRITING AND EXECUTED BY BOTH PURCHASER
AND SELLER.
12.3 Choice of Law and Venue. In the event that any litigation arises hereunder,
it is specifically stipulated that this Agreement shall be interpreted and
construed according to the laws of the State of Texas, and shall be performable
in Dallas County, Texas.
12.4 Attorneys' Fees. The prevailing party in any litigation between the parties
arising under this Agreement shall be entitled to recover reasonable attorney's
fees.
12.5 Counterparts. This Agreement may be executed in any number of counterparts
and may be delivered by facsimile, which if so executed and delivered shall
constitute the agreement of the parties. The article headings herein contained
are for purposes of identification only and shall not be considered in
construing this Agreement.
12.6 Assignment. This Agreement, and the rights and obligations hereunder, may
be assigned by Purchaser at any time to Apple Residential Income Trust, Inc. or
an affiliated entity without the consent of Seller upon not less than five (5)
days prior written notice to the Seller. This Agreement may not be assigned by
Seller.
12.7 Date of Agreement. All references in this Agreement to "the date hereof,"
"Effective Date", or similar references shall be deemed to refer to the last
date, in point of time, on which all parties hereto have executed this Agreement
and the Title Company has received and receipted fully executed copies of this
Agreement.
12.8 Parties Bound. This Agreement and the terms and provisions hereof shall
inure to the benefit of and be binding upon the parties hereto and their
respective heirs, executors, personal representatives, successors and assigns
whenever the context so requires or admits.
12.9 Enforceability. If any provisions of this Agreement are held to be illegal,
invalid or unenforceable under present or future laws, such provisions shall be
fully severable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect and not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement, provided that both parties
hereto may still effectively realize the complete benefit of the transaction
contemplated hereby.
12.10 Gender; Number. Any references to one gender used herein, whether
masculine, feminine or neuter, shall be deemed to be a reference to any other
gender as may be
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appropriate under the circumstances; further, the singular shall include the
plural and the plural the singular.
12.11 Term of Offer. This Agreement constitutes an offer by the party first
executing this Agreement on the terms and conditions and for the Purchase Price
specified herein. Unless sooner terminated or withdrawn by notice In writing to
other party, this offer shall lapse and terminate five (5) business days after
the first party's delivery of this Agreement unless, prior to such time, the
other party has executed and returned to the first party two (2) fully executed
copies of this Agreement.
12.12 Obligations. To the extent necessary to carry out the terms and provisions
hereof, the terms, conditions, obligations and rights set forth herein shall not
be deemed terminated at the time of Closing, nor will they merge into the
various documents executed and delivered at the time of Closing.
12.13 Day of Performance. In the event the day for which performance is
scheduled hereunder is a Saturday, Sunday, or a holiday observed by national
banking associations in Dallas, Texas, then the day for such performance shall
be the immediately following business day. Any reference to a "business day" in
this Agreement shall mean a day other than a Saturday, Sunday or holiday
observed by national banking associations in Dallas, Texas.
12.14 Confidentiality. This Agreement and all of the terms and provisions hereof
are confidential. Purchaser and Seller agree to keep confidential (and shall use
their best efforts to cause their agents, employees and the Broker to keep
confidentially) all discussions of this Agreement, the proposed acquisition, all
documents and materials delivered pursuant to this Agreement, except for
necessary disclosure to prospective investors, prospective partners, employees,
accountants, attorneys, lenders and consultants of the parties hereto. Prior to
Closing, no public announcements concerning this Agreement or the transaction
contemplated herein shall be made by either party without the mutual consent of
the parties hereto. Notwithstanding any of the foregoing, this Section 12.1 4
shall survive a termination of this Agreement by Purchaser or by Seller and
shall be binding on Purchaser after such termination, but this Section 12.1 4
shall terminate and be of no force and effect if the transaction contemplated by
this Agreement closes.
12.15 Special Agreement Regarding Purchaser's Public Status. 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 (to the extent in
Seller's management agent's possession) 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. In this regard, upon Purchaser's request, Seller shall cause its
management agent to provide a representation letter in the form attached hereto
as Exhibit E and this agreement shall survive the Closing for a period of one
(1) year.
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SELLER:
MGW APARTMENTS PARTNERSHIP
By: 3636 COLORADO, INC., GENERAL PARTNER
/s/ Richard E. Archer
--------------------------------------------------------
Name: Richard E. Archer
Title: Chairman of the Board and Chief Executive Officer
BY: BORLAND ARIZONA CORPORATION,
GENERAL PARTNER
/s/ David C. Borger
--------------------------------------------------------
David C. Borger, Vice-President, Development
/s/ Alan A. Borger, Jr.
--------------------------------------------------------
Alan A. Borger, Jr., Executive Vice President
Date: January 20, 1998
---------------------------------------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
/s/ S.J. Olander
-----------------------------------------------------------------
S.J. Olander, Vice President
Date: 1/20/98
-----------------------------------------------------------
ACCEPTANCE BY TITLE COMPANY
The undersigned title company, COMMONWEALTH LAND TITLE OF DALLAS referred to in
the foregiong Contract as the "Title Company", hereby acknowledges receipt of a
fully executed copy (or executed counterparts) of the foregoing Contract and
accepts the obligations of the Title Company as set forth in such Contract.
COMMONWEALTH LAND TITLE OF DALLAS
/s/ Jodi Joles
--------------------------------------------
By: Jodi Joles
-----------------------------------------
Date: January 20, 1998
---------------------------------------
19
EXHIBIT 10.2
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 4th day of February,
1998, by and between Apple Residential Income Trust, Inc., a Virginia
corporation (hereinafter referred to as "Owner"), and Apple Residential
Management Group, Inc., a Virginia corporation (hereinafter referred to as
"Manager").
W I T N E S S E T H :
WHEREAS, Owner is the owner of Main Park Apartments (hereinafter referred
to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and for
other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby engages
Manager as sole and exclusive manager to rent, manage and operate the Property,
upon the conditions and for the term and compensation herein set forth. All or a
portion of the services being performed by Manager may be contracted or
subcontracted to another property management company, provided that such company
agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an initial
term of two (2) years. In the event Owner sells its interest in the Property,
this Agreement will terminate upon the date of such sale. Unless either party by
written notice sent to the other party at least sixty (60) days before the end
of any two-year term hereof elects not to renew this Agreement, this Agreement
shall renew automatically for successive terms of two (2) years on the same
terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as the
manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the Property,
provided that nothing herein contained shall constitute a guarantee by Manager
of the payment of rent by tenants;
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b. The purchase, at the expense of Owner, of all equipment, tools,
appliances, materials, supplies and uniforms necessary for the maintenance or
operation of the Property;
c. The contracting on behalf of Owner for water, gas, electricity and
other services necessary for the operation and maintenance of the Property;
d. The advertising for the rental of space in the Property, the cost of
which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property rented by
procuring tenants for the Property and negotiating and executing on behalf of
Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other documents (other
than promissory notes, mortgages, deeds of trust or other documents or
instruments which would encumber the Property) required under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act, or any similar
federal or state legislation. Manager shall also file returns and reports, and
pay from Owner's funds, all sums as may from time to time be required by the
state or locality in which the Property is located;
h. The maintenance of full books of account with correct entries of all
receipts and expenditures, which books of account shall be the property of Owner
and shall at all times be open to the inspection of Owner or any of its
employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property inspection
letters regarding repairs necessary to avoid mortgage loan defaults. The
furnishing monthly of a detailed statement of all receipts and disbursements for
that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by canceled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year
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to date, and for the same month of the preceding year. The cost of performing
the accounting functions outlined in paragraphs h and i shall be paid for by
Owner pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall contain a
composite financial report of the monthly statements provided in accordance with
paragraph i, plus a statement by Manager as to the operations of the Property
during the previous year and recommendations, if any, as to necessary policy
changes or improvements which should be implemented in the forthcoming year,
which recommendations shall be accompanied by an estimated budget for such
items;
k. The furnishing from time to time, at least semi-annually, of a
tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary to
operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents, tenant
security deposits or other deposits on space in the Property, deposits on keys
and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to the
Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of
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coverage and the risks insured shall be subject to the approval of Owner.
6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any and every kind incurred
by or asserted against Manager by reason of or in connection with the employment
of Manager hereunder, the performance by Manager of the services described
herein or the occurrence or existence of any event or circumstance which results
or is alleged to have resulted in death or injury to any person or destruction
of or damage to any property and any suit, action or proceeding (whether
threatened, initiated or completed) by reason of the foregoing; provided,
however, that no such indemnification of Manager shall be made, and Manager
shall indemnify and hold Owner harmless against, and to the extent of, any loss
that a court of competent jurisdiction shall, by final adjudication, determine
to have resulted from willful misconduct, gross negligence or fraud by or on the
part of Manager.
7. Compensation of Manager for Managing the Property. Owner shall pay to
Manager a "Property Management Fee" for management of the Property pursuant to
this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for Manager's
expenses, including salaries and related overhead expenses, associated with
bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget prepared
by Manager, pursuant to paragraph 3(k), will contain a category labeled "Reserve
for Capital Items." Owner agrees to place rents and other income in a bank
account, or to permit Manager to transfer Owner's funds to such account, in
sufficient amounts to meet the needs reflected in such budget. Such funds shall
be placed in the account on a monthly basis as reflected in the budget.
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10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month covered by the budget, to place sufficient funds in a bank account,
or to permit Manager to transfer Owner's funds to such account, to make up the
budgeted operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints Manager
its true and lawful attorney-in-fact, for it and in its name, place and stead
and for its use and benefit to sign, acknowledge and file all documents and
agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by canceling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that Manager
is and shall operate as an independent contractor in performing its duties under
this Agreement, and shall not be deemed an employee or agent of Owner.
13. Entire Agreement. This Agreement represents the entire understanding
between the parties hereto with regard to the transactions described herein and
may only be amended by a written instrument signed by the party against whom
enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with and
be governed by the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
OWNER:
APPLE RESIDENTIAL INCOME TRUST, INC.,
a Virginia corporation
By: /s/ S.J. Olander
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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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