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: July 9, 1998
APPLE RESIDENTIAL INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 0-23983 54-1816010
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
<PAGE>
APPLE RESIDENTIAL INCOME TRUST, INC.
FORM 8-K
Index
<TABLE>
<CAPTION>
Page
Number
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<S> <C> <C> <C>
Item 2. Acquisition or Disposition of Assets 7
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a. Independent Auditors' Report
(Cottonwood Crossing Apartments) 31
Historical Statement of Income and Direct Operating Expenses
(Cottonwood Crossing Apartments) 32
Note to Historical Statement of Income and Direct Operating
Expenses
(Cottonwood Crossing Apartments) 33
b. Independent Auditors' Report
(Pace's Point Apartments) 35
Historical Statement of Income and Direct Operating Expenses
(Pace's Point Apartments) 36
Note to Historical Statement of Income and Direct Operating
Expenses
(Pace's Point Apartments) 37
c. Independent Auditors' Report
(Pepper Square Apartments) 39
Historical Statement of Income and Direct Operating Expenses
(Pepper Square Apartments) 40
Note to Historical Statement of Income and Direct Operating
Expenses
(Pepper Square Apartments) 41
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
Number
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d. Independent Auditors' Report
(Emerald Oaks Apartments) 43
Historical Statement of Income and Direct Operating Expenses
(Emerald Oaks Apartments) 44
Note to Historical Statement of Income and Direct Operating
Expenses
(Emerald Oaks Apartments) 45
e. Independent Auditors' Report
(Hayden's Crossing Apartments) 47
Historical Statement of Income and Direct Operating Expenses
(Hayden's Crossing Apartments) 48
Note to Historical Statement of Income and Direct Operating
Expenses
(Hayden's Crossing Apartments) 49
f. Independent Auditors' Report
(Newport Apartments) 51
Historical Statement of Income and Direct Operating Expenses
(Newport Apartments) 52
Note to Historical Statement of Income and Direct Operating
Expenses
(Newport Apartments) 53
g. Independent Auditors' Report
(Estrada Oaks Apartments) 55
Historical Statement of Income and Direct Operating Expenses
(Estrada Oaks Apartments) 56
Note to Historical Statement of Income and Direct Operating
Expenses
(Estrada Oaks Apartments) 57
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
h. Pro Forma Consolidated Statement of Operations for the Year ended December
31, 1997 (unaudited) 59
Pro Forma Consolidated Statement of Operations
for the Three Month Period ended March 31, 1998
(unaudited) 61
Pro Forma Consolidated Balance Sheet as of March 31, 1998
(unaudited) 62
i. Exhibits
4 Instruments Defining the Rights of Lenders
10.1 Certificate of Limited Partnership for Apple REIT II
Limited Partnership
10.2 Certificate of Limited Partnership for Apple REIT III
Limited Partnership
10.3 Certificate of Limited Partnership for Apple REIT IV
Limited Partnership
10.4 Certificate of Limited Partnership for Apple REIT V
Limited Partnership
10.5 Certificate of Limited Partnership for Apple REIT VI
Limited Partnership
10.6 Limited Partnership Agreement for Apple REIT II
Limited Partnership
10.7 Limited Partnership Agreement for Apple REIT III
Limited Partnership
10.8 Limited Partnership Agreement for Apple REIT IV
Limited Partnership
10.9 Limited Partnership Agreement for Apple REIT V
Limited Partnership
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
10.10 Limited Partnership Agreement for Apple REIT VI
Limited Partnership
10.11 Purchase Contract for Cottonwood Crossing
Apartments
10.12 Purchase Contract for Pace's Point Apartments,
as amended
10.13 Purchase Contract for Pepper Square Apartments,
as amended
10.14 Purchase Contract for Emerald Oaks Apartments,
as amended
10.15 Purchase Contract for Hayden's Crossing Apartments,
as amended
10.16 Purchase Contract for Newport Apartments,
as amended
10.17 Purchase Contract for Estrada Oaks Apartments
10.18 Property Management Agreement for Cottonwood
Crossing Apartments
10.19 Property Management Agreement for Pace's Point
Apartments
10.20 Property Management Agreement for Pepper Square
Apartments
10.21 Property Management Agreement for Emerald Oaks
Apartments
10.22 Property Management Agreement for Hayden's
Crossing Apartments
10.23 Property Management Agreement for Newport
Apartments
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
10.24 Property Management Agreement for Estrada Oaks
Apartments
10.25 Property Management Agreement Subcontract for
Pace's Point Apartments
10.26 Property Management Agreement Subcontract for
Pepper Square Apartments
10.27 Property Management Agreement Subcontract for
Emerald Oaks Apartments
10.28 Property Management Agreement Subcontract for
Hayden's Crossing Apartments
10.29 Property Management Agreement Subcontract for
Newport Apartments
10.30 Consent of Independent Auditors
(Cottonwood Crossing Apartments)
10.31 Consent of Independent Auditors
(Pace's Point Apartments)
10.32 Consent of Independent Auditors
(Pepper Square Apartments)
10.33 Consent of Independent Auditors
(Emerald Oaks Apartments)
10.34 Consent of Independent Auditors
(Hayden's Crossing Apartments)
10.35 Consent of Independent Auditors
(Newport Apartments)
10.36 Consent of Independent Auditors
(Estrada Oaks Apartments)
</TABLE>
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<PAGE>
Item 2. Acquisition or Disposition of Assets
All references herein to the "Company" include Apple Residential Income
Trust, Inc. and its subsidiaries, Apple REIT Limited Partnership, Apple REIT II
Limited Partnership, Apple REIT III Limited Partnership, Apple REIT IV Limited
Partnership, Apple REIT V Limited Partnership and Apple REIT VI Limited
Partnership.
COTTONWOOD CROSSING APARTMENTS
Grand Prairie, Texas
On July 9, 1998, Apple REIT Limited Partnership purchased the
Cottonwood Crossing Apartments located at 2105 Cottonwood Club, in Arlington,
Texas (the "Property").
The Property comprises 200 apartment units. The purchase price for the
Property was $5,700,000. The seller was Cottonwood Realty Associates, a New York
general partnership which was not affiliated with the Company, Apple Residential
Advisors, Inc. (the "Advisor") or their affiliates. The purchase price was paid
using proceeds from the sale of Shares of the Company. Title to the Property was
conveyed to the Company by limited warranty deed.
Location. The Property is located on Cottonwood Club off of Pioneer
Parkway (Spur 303), a major east/west thoroughfare in Arlington, Texas. The
Property is located within the greater Dallas/Forth Worth metropolitan
statistical area, or as it is called locally, "The Metroplex."
The following information is based in part upon information provided by
the Dallas Chamber of Commerce. The Dallas/Fort Worth Metroplex is in the
north-central part of Texas and is composed of nine counties. The 1996
population of The Metroplex was approximately 4,400,000. The Dallas metropolitan
area is the second largest in the state, behind Houston.
The economy of the Dallas/Fort Worth area is complex and diversified.
Key economic factors include a large manufacturing base (including as products
military hardware, electronics, automobiles, industrial equipment, oil-field
parts, food products and chemicals), banking, insurance services,
communications, oil and gas production and air transportation. Major employers
in the area include Texas Instruments, Southwestern Bell, General Motors, J.C.
Penney, NationsBank and Vought Aircraft Company.
The Metroplex is also an established transportation center for the
nation. The Dallas/Fort Worth International Airport occupies approximately
17,600 acres of land between the two cities. It is the second largest commercial
airport in the United States in terms of land area, and is the second busiest
airport in the world, with more than 2,500 daily arrivals and departures.
-7-
<PAGE>
The area also has a well-established system of interstate highway and
supporting secondary routes. The Metroplex is located at the hub of Interstates
35, 45, 20 and 30. Two outer loops, Interstate 635 in Dallas and Interstate 820
in Fort Worth, surround the respective cities.
The many institutions of higher learning in the area include Southern
Methodist University, the University of Texas at Dallas, the University of Texas
at Arlington, the University of North Texas, and Texas Christian University.
The immediate neighborhood surrounding the Property consists of other
multi-family and single-family housing and commercial and retail development.
The Property is conveniently located near fine restaurants, businesses, schools
and churches and is readily available from Interstates 360, 20 and 30, the
Arlington area interstates. The Property is an approximately 20- minute drive
from Dallas/Fort Worth International Airport, an approximately 15-minute drive
from downtown Fort Worth and an approximately 30-minute drive from downtown
Dallas.
Description of the Property. The Property consists of 200 apartment
units in 10 buildings on approximately 6.8 acres of land. The Property was
constructed in 1985.
The Property offers four different unit types. The unit mix and rents
being charged new tenants as of July 1998 are as follows:
<TABLE>
<CAPTION>
APPROXIMATE INTERIOR
QUANTITY TYPE SQUARE FOOTAGE MONTHLY RENTAL
-------- ---- -------------- --------------
<S> <C> <C> <C> <C>
100 One bedroom, one bathroom 628 $400
52 One bedroom, one bathroom 868 545
w/den
8 Two bedrooms, one bathroom 868 555
40 Two bedrooms, two bathrooms 883 575
</TABLE>
The apartments provide a total of approximately 150,200 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 $300,000 for repairs and capital improvements to the Property to
include clubhouse renovations, exterior painting, landscaping and interior
upgrades.
The following information was provided by the seller. Physical
occupancy at the Property averaged approximately 92% in 1993, 94% in 1994, 95%
in 1995, 96% in 1996 and 96% in 1997. Leases at the Property are generally for
terms of one year or less. Average rental rates
-8-
<PAGE>
for the past five years have generally increased. As an example, a one-bedroom,
one- bathroom apartment (868 square feet) rented for $440 in 1993, $455 in 1994,
$455 in 1995, $465 in 1996 and $475 in 1997. The average effective annual rental
per square foot at the Property for 1993, 1994, 1995, 1996 and 1997 was $6.19,
$6.40, $6.40, $6.54, and $6.68, respectively.
The Property has an outdoor swimming pool with a fountain and a
clubhouse with a leasing office. The buildings are wood framed construction with
a combination of brick veneer and wood siding on concrete slab foundations.
Roofs are pitched composition.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually controlled heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, dishwasher and
garbage disposal. All of the units include ceiling fans, french patio doors,
full size washer/dryer connections, fireplace, a patio or balcony and outside
storage. The owner of the Property pays for cold water, sewer charges, gas (for
hot water) and trash removal. The tenants pay for their electricity service,
which includes cooking, lighting, heating and air-conditioning.
There are at least three apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy at nearby competing properties averaged
approximately 97% on June 30, 1998.
As of June 30, 1998, the Property was approximately 89% occupied. The
tenants are primarily a mix of blue-collar and white-collar workers, students
and retired persons.
The following table sets forth the 1997 real estate tax information on
the Property:
<TABLE>
<CAPTION>
JURISDICTION ASSESSED VALUE RATE TAX
------------ -------------- ---- ---
<S> <C> <C> <C>
County of Tarrant . . . . . . . . . . . . $4,700,000 $1.9952 $ 93,774.21
City of Arlington . . . . . . . . . . . . . $4,700,000 $0.6380 $ 29,986.00
-----------
Total . . . . . . . . . . . . . . . . $123,760.21
</TABLE>
The basis of the depreciable residential real property portion of the
Property (approximately $5,248,575 at the time of acquisition) will be
depreciated over 27.5 years on a straight-line basis. The basis of the personal
property portion will be depreciated in accordance with the modified accelerated
cost recovery system of the Internal Revenue Code of 1986, as amended (the
"Code"). Amounts to be spent by the Company on repairs and improvements will be
treated for tax purposes as permitted by the Code based on the nature of the
expenditures.
-9-
<PAGE>
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 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 increase in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs and
improvements will allow an increase in rents at the Property.
3. The Property has an advantageous location - between Dallas and Fort
Worth, and near the Dallas/Fort Worth International Airport - and is located in
a rapidly-growing area proximate to centers of employment and retail
development.
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 the 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, Cornerstone Realty Income Trust, Inc. earned a
property acquisition fee equal to 2% of the purchase price of the property, or
$114,000.
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.
PACE'S POINT APARTMENTS
Lewisville, Texas
On July 17, 1998, Apple REIT V Limited Partnership purchased the Pace's
Point Apartments located at 247 East Corporate Drive, in Lewisville, Texas (the
"Property").
The Property comprises 300 apartment units. The purchase price for the
Property was $11,405,000. The seller was Corporate Drive, L.P., a Texas limited
partnership which was not affiliated with the Company, the Advisor or their
affiliates. The purchase price was paid through a combination of (i)
approximately $3,691,383 in cash using proceeds from the sale of the Shares of
the Company and (ii) approximately $7,713,617 by assumption of a mortgage loan.
Title to the Property was conveyed to the Company by special warranty deed.
The Property was acquired with the assumption of a mortgage loan in the
original principal amount of $7,836,000 held by the Federal National Mortgage
Association ("Fannie Mae"). On July 17, 1998, the outstanding principal balance
of the mortgage loan was $7,713,616.57. The interest on the mortgage loan is
8.555% per annum; amortization is based on a 30-year amortization term; and
prepayments are permitted upon notice and payment of a prepayment premium based
on a yield maintenance formula contained in the loan documents. The maturity
date of the mortgage loan is July, 1, 2003, and the balance due at maturity,
assuming no payment has been made on principal in advance of its due date, is
$7,307,129.73
-10-
<PAGE>
Location. The Property is located on East Corporate Drive in
Lewisville, Texas. The Property is located within "The Metroplex." For
information on The Metroplex, see under "Cottonwood Crossing Apartments" above.
The immediate neighborhood surrounding the Property consists of other
multi-family and single-family housing and commercial and retail development.
The Property is an approximately 15-minute drive from Dallas/Fort Worth
International Airport, an approximately 25-minute drive from downtown Dallas and
an approximately 20-minute drive from downtown Fort Worth.
Description of the Property. The Property consists of 300 apartment
units in 14 buildings on approximately 12.6 acres of land. The Property was
constructed in 1985.
The Property offers six different unit types. The unit mix and rents
being charged new tenants as of July 1998 are as follows:
<TABLE>
<CAPTION>
APPROXIMATE INTERIOR
QUANTITY TYPE SQUARE FOOTAGE MONTHLY RENTAL
-------- ---- -------------- --------------
<S> <C> <C> <C> <C> <C>
36 One bedroom, one bathroom 535 $479 - 499
24 One bedroom, one bathroom 581 499 - 519
84 One bedroom, one bathroom 683 539 - 559
40 One bedroom, one bathroom 779 599 - 619
with den
56 Two bedrooms, two bathrooms 875 649 - 669
60 Two bedrooms, two bathrooms 966 689 - 709
</TABLE>
The apartments provide a total of approximately 229,000 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 $225,000 for repairs and capital improvements to the Property to
include clubhouse renovations, additional landscaping and interior upgrades.
The following information was 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. Leases at the Property are generally for
terms of one year or less. Average rental rates for the past five years have
generally increased. As an example, a one-bedroom, one- bathroom apartment (581
square feet) rented for $400 in 1993, $449 in 1994, $449 in 1995, $449 in 1996
and $469 in 1997. The average effective annual rental per square foot at
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<PAGE>
the Property for 1993, 1994, 1995, 1996 and 1997 was $7.36, $8.26, $8.26,
$8.26, and $8.63, respectively.
The Property has two outdoor swimming pools, a jacuzzi, a sand
volleyball court, a fitness center, a sauna, 23 carports and two laundry
facilities. The Property also has a clubhouse with a leasing office.
The buildings are wood framed construction with a combination of brick
veneer and painted horizonal wood siding on concrete slab foundations. Roofs are
pitched and covered with fiberglass shingled on plywood.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually controlled heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, dishwasher and
garbage disposal. All units have full-sized washer/dryer connections. Some of
the units have wood-burning fireplaces, vaulted ceilings and alarm systems. Each
unit has walk-in closets, outside storage, a covered balcony or patio and
ceiling fans. The owner of the Property pays for cold water, sewer charges, gas
(for hot water) and trash removal. The tenants pay for their electricity
service, which includes cooking, lighting, heating and air-conditioning.
There are at least 15 apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy at nearby competing properties averaged
approximately 95% on June 30, 1998.
As of June 30, 1998, the Property was approximately 95% occupied. The
tenants are primarily a mix of white-collar and blue-collar workers, students
and retired persons.
The following table sets forth the 1997 real estate tax information on
the Property:
JURISDICTION ASSESSED VALUE RATE TAX
------------ -------------- ---- ---
County of Denton............... $9,389,517 $0.25590 $ 24,027.77
City of Lewisville............. $9,389,517 $1.51600 $142,345.08
Lewisville I.S.D............... $9,389,517 $0.48949 $ 45,960.75
-------------
Total................. $212,333.60
The basis of the depreciable residential real property portion of the
Property (approximately $9,633,257 at the time of acquisition) 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.
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<PAGE>
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 Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Dallas/Fort Worth area generally and the specific area in which
the Property is located were perceived as being characterized by a diverse,
stable and steadily growing economy. Accordingly, it was believed that such
economy and its anticipated growth and development would support stable
occupancy rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs and
improvements will allow an increase in rents at the Property.
3. The Property has an advantageous location - convenient to the
Dallas/Fort Worth International Airport, downtown Dallas and downtown Fort Worth
- - and is located in a rapidly growing area proximate to centers of employment
and retail development.
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 the 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, Cornerstone Realty Income Trust, Inc. earned a
property acquisition fee equal to 2% of the purchase price of the property, or
$228,100. At closing, Cornerstone Realty Income Trust, Inc. was paid a portion
of the property acquisition fee corresponding to the portion of the purchase
price of the property paid in cash by the Company. The cash portion of the
purchase price was approximately $3,691,383, and 2% of that amount was
approximately $73,828. The balance of the property acquisition fee will be paid
if, when and as the indebtedness taken subject to at closing is repaid by the
Company.
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.
PEPPER SQUARE APARTMENTS
North Dallas, Texas
On July 17, 1998, Apple REIT VI Limited Partnership purchased the
Pepper Square Apartments located at 6069 Beltline Road, in North Dallas, Texas
(the "Property").
The Property comprises 144 apartment units. The purchase price for the
Property was $5,205,000. The seller was Pepper Square Associates, Ltd., a Texas
limited partnership which was not affiliated with the Company, the Advisor or
their affiliates. The purchase price was paid through a combination of (i)
approximately $1,561,576 in cash using proceeds from the sale of the Shares of
the Company and (ii) approximately $3,643,424 by assumption of a mortgage loan.
Title to the Property was conveyed to the Company by special warranty deed.
The Property was acquired with the assumption of a mortgage loan in the
original principal amount of $3,701,000 held by Fannie Mae. On July 17, 1998,
the outstanding principal balance of the mortgage loan was $3,643,423.53. The
interest on the mortgage loan is 8.575% per annum; amortization is based on a
30-year amortization term; and prepayments are permitted upon notice and payment
of a prepayment premium based on a yield maintenance formula contained in the
loan documents. The maturity date of the mortgage loan is July 1, 2006, and the
balance due at maturity, assuming no payment has been made on principal in
advance of its due date, is $3,312,543.23.
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<PAGE>
Location. The Property is located on Beltline Road in North Dallas,
Texas. The Property is located within "The Metroplex." For information on The
Metroplex, see under "Cottonwood Crossing Apartments" above.
The immediate neighborhood surrounding the Property consists of other
multi-family and single-family housing and commercial and retail development.
The Property is an approximately five-minute drive from Preston Mall, the
Galleria Mall and Valley View Mall. The Property is an approximately 25-minute
drive from Dallas/Fort Worth International Airport.
Description of the Property. The Property consists of 144 apartment
units in 15 buildings on approximately 5.9 acres of land. The Property was
constructed in 1978.
The Property offers six different unit types. The unit mix and rents
being charged new tenants as of July 1998 are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
QUANTITY TYPE INTERIOR SQUARE MONTHLY
-------- ---- FOOTAGE RENTAL
------- -------------
<S> <C> <C> <C> <C>
24 One bedroom, one bathroom 622 $449
32 One bedroom, one bathroom 777 499
24 One bedroom, one bathroom 888 559
32 Two bedrooms, two bathrooms 948 659
30 Two bedrooms, two bathrooms 1,044 679
2 Two bedrooms, two bathrooms 1,185 799
with sun room
</TABLE>
The apartments provide a total of approximately 126,090 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 $288,000 for repairs and capital improvements to the Property to
include clubhouse renovations, siding repair and replacement, exterior painting,
landscaping and interior upgrades.
The following information was provided by the seller. Physical
occupancy at the Property averaged approximately 94% in 1993, 93% in 1994, 95%
in 1995, 93% in 1996 and 95% in 1997. Leases at the Property are generally for
terms of one year or less. Average rental rates for the past five years have
generally increased. As an example, a one-bedroom, one-bathroom apartment (777
square feet) rented for $459 in 1993, $479 in 1994, $489 in 1995, $489 in 1996
and $499 in 1997. The average effective annual rental per square foot at
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<PAGE>
the Property for 1993, 1994, 1995, 1996 and 1997 was $7.30, $7.61, $7.77,
$7.77, and $7.93, respectively.
The Property has an outdoor swimming pool, a weight room, a jogging
trail, 63 carports and a laundry facility. The Property also has a clubhouse
with a leasing office.
The buildings are wood framed construction with a combination of brick
veneer and painted stucco and shingled wood exterior walls on concrete slab
foundations. Roofs are pitched and covered with fiberglass shingled on plywood.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually controlled heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, dishwasher and
garbage disposal. Some units have a wood burning fireplace or full-sized
washer/dryer connections. Each unit has walk-in closets, outside storage, a
covered balcony or patio and ceiling fans. The owner of the Property pays for
cold water, sewer charges, gas (for hot water) and trash removal. The tenants
pay for their electricity service, which includes cooking, lighting, heating and
air-conditioning.
There are at least 13 apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy at nearby competing properties averaged
approximately 94% on June 30, 1998.
As of June 30, 1998, the Property was approximately 94% occupied. The
tenants are primarily a mix of white-collar and blue-collar workers, students
and retired persons.
The following table sets forth the 1997 real estate tax information on
the Property:
JURISDICTION ASSESSED VALUE RATE TAX
------------ -------------- ---- ---
County of Dallas...................$4,059,090 $0.44307 $ 17,984.61
City of Dallas.....................$4,059,090 $0.65160 $ 26,449.03
Dallas I.S.D.......................$4,059,090 $1.46053 $ 59,284.23
------------
Total..................... $103,717.87
The basis of the depreciable residential real property portion of the
Property (approximately $3,607,225 at the time of acquisition) 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.
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<PAGE>
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 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 near the Preston Mall,
Galleria Mall and Valley View Mall, and is convenient to the Dallas/Fort Worth
International Airport.
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 the 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, Cornerstone Realty Income Trust, Inc. earned a
property acquisition fee equal to 2% of the purchase price of the property, or
$104,100. At closing, Cornerstone Realty Income Trust, Inc. was paid a portion
of the property acquisition fee corresponding to the portion of the purchase
price of the property paid in cash by the Company. The cash portion of the
purchase price was approximately $1,561,576, and 2% of that amount was
approximately $31,232. The balance of the property acquisition fee will be paid
if, when and as the indebtedness taken subject to at closing is repaid by the
Company.
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.
EMERALD OAKS APARTMENTS
Grapevine, Texas
On July 24, 1998, Apple REIT II Limited Partnership purchased the
Emerald Oaks Apartments located at 2100 Grayson Drive, in Grapevine, Texas (the
"Property").
The Property comprises 250 apartment units. The purchase price for the
Property was $10,930,000. The seller was Newemerald Texas, Ltd., a Texas limited
partnership which was not affiliated with the Company, the Advisor or their
affiliates. The purchase price was paid through a combination of (i)
approximately $4,244,294 in cash using proceeds from the sale of the Shares of
the Company and (ii) approximately $6,685,706 by assumption of a mortgage loan.
Title to the Property was conveyed to the Company by special warranty deed.
The Property was acquired with the assumption of a mortgage loan in the
original principal amount of $9,650,000 held by Fannie Mae. On July 24, 1998,
the outstanding principal balance of the mortgage loan was $6,685,706.08. The
interest on the mortgage loan is 6.75% per annum; amortization is based on a
30-year amortization term; and prepayments are permitted under the following
circumstances: after May 1, 2001 to April 30, 2002 at 102% of the principal
balance of the mortgage loan, from May 1,2002 to April 30, 2003 at 101% of the
principal balance, and from May 1, 2003 and thereafter at 100% of the principal
balance. The maturity date of the mortgage loan is April 1, 2007, and the
balance due at maturity, assuming no payment has been made on principal in
advance of its due date, is $5,509,607.59.
In connection with the original financing of the Property, the previous
owner of the Property agreed to certain restrictions on the use of the Property
set forth in a special warranty deed and deed restrictions. In connection with
the purchase of the Property and the assumption of the mortgage loan, the
Company entered into an assumption of the special warranty deed and deed
restrictions. Among the restrictions agreed to by the Company is at least 20% of
the apartment units must be occupied by persons who, at the time of the initial
occupancy of the apartment units, are "low or moderate income tenants." The term
low or moderate income tenants is defined, generally, as one or more persons who
occupy an apartment unit whose aggregate anticipated income does not exceed 80%
of the median income for the area where the Property is located.
-16-
<PAGE>
Location. The Property is located on Grayson Drive, within Tarrant
County, northwest of the City of Dallas and near the Dallas/Fort Worth
International Airport. The Property is located within "The Metroplex." For
Information on The Metroplex, see under "Cottonwood Crossing Apartments" above.
The immediate neighborhood surrounding the Property consists of other
multi-family and single-family housing and commercial and retail development.
The Property is an approximately 10-minute drive from Dallas/Fort Worth
International Airport, an approximately 25-minute drive from downtown Dallas,
and an approximately 15-minute drive from downtown Fort Worth.
Description of the Property. The Property consists of 250 apartment
units in 19 buildings on approximately 13.5 acres of land. The Property was
constructed in 1986.
The Property offers five different unit types. The unit mix and rents
being charged new tenants as of July 1998 are as follows:
<TABLE>
<CAPTION>
APPROXIMATE INTERIOR
QUANTITY TYPE SQUARE FOOTAGE MONTHLY RENTAL
-------- ---- -------------- --------------
<S> <C> <C> <C> <C>
28 One bedroom, one bathroom 600 $479
92 One bedroom, one bathroom 750 569
70 One bedroom, one bathroom with 900 669
den
44 Two bedrooms, two bathrooms 1,018 779
16 Three bedrooms, two bathrooms 1,186 899
</TABLE>
The apartments provide a total of approximately 213,000 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 $250,000 for repairs and capital improvements to the Property to
include clubhouse renovations, exterior painting, installation of new gutters
and downspouts and paving repairs.
The following information was provided by the seller. Physical
occupancy at the Property averaged approximately 90% in 1993, 94% in 1994, 94%
in 1995, 92% in 1996 and 93% in 1997. Leases at the Property are generally for
terms of one year or less. Average rental rates for the past five years have
generally increased. As an example, a one-bedroom, one-bathroom apartment (750
square feet) rented for $425 in 1993, $450 in 1994, $480 in 1995, $519 in 1996
and $549 in 1997. The average effective annual rental per square foot at
-17-
<PAGE>
the Property for 1993, 1994, 1995, 1996 and 1997 was $6.76, $7.16, $7.64,
$8.26, and $8.74, respectively.
The Property has two outdoor swimming pools with picnic areas and
grills, a jacuzzi, a sand volleyball court, 19 carports and two laundry
facilities. The Property also has a clubhouse with a leasing office.
The buildings are wood framed construction with a combination of brick
veneer, stucco and painted wood siding on concrete slab foundations. Roofs are
pitched and covered with fiberglass shingled on plywood.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually controlled heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, dishwasher, and
garbage disposal. All units (except for the smallest one-bedroom unit) have
full-sized washer/dryer connections. Each upstairs unit has a fireplace and each
downstairs unit has a built-in bookcase and nine-foot ceilings. The owner of the
Property pays for cold water, sewer charges, gas (for hot water) and trash
removal. The tenants pay for their electricity service, which includes cooking,
lighting, heating and air-conditioning.
There are at least three apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy at nearby competing properties averaged
approximately 96% on June 30, 1998.
As of June 30, 1998, the Property was approximately 92% occupied. The
tenants are primarily a mix of white-collar workers, students and retired
persons.
The following table sets forth the 1997 real estate tax information on
the Property:
JURISDICTION ASSESSED VALUE RATE TAX
------------ -------------- ---- ---
County of Tarrant............... $7,850,000 $0.5566 $ 43,692.79
City of Grapevine............... $7,850,000 $1.9427 $152,501.95
-----------
Total.................. $196,194.74
The basis of the depreciable residential real property portion of the
Property (approximately $10,224,983 at the time of acquisition) 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.
-18-
<PAGE>
Material Factors Considered in Assessing the Property. The factors
considered by 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 increase in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs and
improvements will allow an increase in rents at the Property.
3. The Property has an advantageous location - convenient to the
Dallas/Fort Worth International Airport, downtown Dallas and downtown Fort Worth
- - and is located in a rapidly growing area proximate to centers of employment
and retail development.
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 the 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, Cornerstone Realty Income Trust, Inc. earned a
property acquisition fee equal to 2% of the purchase price of the property, or
$218,600. At closing, Cornerstone Realty Income Trust, Inc. was paid a portion
of the property acquisition fee corresponding to the portion of the purchase
price of the property paid in cash by the Company. The cash portion of the
purchase price was approximately $4,244,294, and 2% of that amount was
approximately $84,886. The balance of the property acquisition fee will be paid
if, when and as the indebtedness taken subject to at closing is repaid by the
Company.
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.
HAYDEN'S CROSSING APARTMENTS
Grand Prairie, Texas
On July 24, 1998, Apple REIT III Limited Partnership purchased the
Hayden's Crossing Apartments located at 2802 South State Highway 360, in Grand
Prairie, Texas (the "Property").
The Property comprises 170 apartment units. The purchase price for the
Property was $4,705,000. The seller was Hayden's Crossing, Ltd., a Texas limited
partnership which was not affiliated with the Company, the Advisor or their
affiliates. The purchase price was paid through a combination of (i)
approximately $1,632,601 in cash using proceeds from the sale of the Shares of
the Company and (ii) approximately $3,072,399 by assumption of a mortgage loan.
Title to the Property was conveyed to the Company by special warranty deed.
The Property was acquired with the assumption of a mortgage loan in
the original principal amount of $5,550,00 held by Fannie Mae. On July 24, 1998,
the outstanding principal amount of the mortgage loan was $3,072,399.07. The
interest on the mortgage loan is 6.47% per annum; amortization is based on a
30-year amortization term; and prepayments are permitted under the following
circumstances: after May 1, 2001 to April 30, 2002 at 102% of the principal
balance of the mortgage loan, from May 1, 2002 to April 30, 2003 at 101% of the
principal balance, and from may 1, 2003 and thereafter at 100% of the principal
balance. The maturity date of the mortgage loan is April 1, 2004, and the
balance due at maturity, assuming no payment has been made on principal in
advance of its due date, is $2,743,814.97.
In connection with the original financing of the Property, the previous
owner of the Property agreed to certain restrictions on the use of the Property
set forth in a special warranty deed and deed restrictions. In connection with
the purchase of the Property and the assumption of the mortgage loan, the
Company entered into an assumption of the special warranty deed and deed
restrictions. Among the restrictions agreed to by the Company is that at least
20% of the apartment units must be occupied by persons who, at the time of
initial occupancy of the apartment units, are "low or moderate income tenants."
The term low or moderate income tenants is defined, generally, as one or more
persons who occupy an apartment unit whose aggregate anticipated income does not
exceed 80% of the median income for the area where the Property is located.
-19-
<PAGE>
Location. The Property is located on South State Highway 360 in Grand
Prairie, Texas and is adjacent to Bitter Creek Apartments which were purchase by
the Company on May 8, 1998. The Property is located within "The Metroplex." For
information on The Metroplex, see under "Cottonwood Crossing Apartments" above.
The immediate neighborhood surrounding the Property consists of other
multi-family and single-family housing and commercial and retail development.
The Property is an approximately 10-minute drive from Dallas/Fort Worth
International Airport and an approximately 20-minute drive from either downtown
Dallas or downtown Fort Worth.
Description of the Property. The Property consists of 170 apartment
units in 12 buildings on approximately 7.1 acres of land. The Property was
constructed in 1984.
The Property offers four different unit types. The unit mix and rents
being charged new tenants as of July 1998 are as follows:
<TABLE>
<CAPTION>
APPROXIMATE INTERIOR
QUANTITY TYPE SQUARE FOOTAGE MONTHLY RENTAL
-------- ---- -------------- --------------
<S> <C> <C> <C> <C>
56 One bedroom, one bathroom 556 $429
52 One bedroom, one bathroom 716 469
36 Two bedrooms, two bathrooms 878 549
26 Two bedrooms, two bathrooms 1,000 620
</TABLE>
All unit types are available with a fireplace for an extra $10 per
month. The apartments provide a total of approximately 126,000 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 $340,000 for repairs and capital improvements to the Property to
include clubhouse renovations, exterior painting, wood replacement and a new
fitness center.
The following information was provided by the seller. Physical
occupancy at the Property averaged approximately 93% in 1993, 92% in 1994, 96%
in 1995, 96% in 1996 and 95% in 1997. Leases at the Property are generally for
terms of one year or less. Average rental rates for the past five years have
generally increased. As an example, a two-bedroom, two-bathroom apartment (878
square feet) rented for $449 in 1993, $474 in 1994, $484 in 1995, $489 in 1996
and $509 in 1997. The average effective annual rental per square foot at the
Property for 1993, 1994, 1995, 1996 and 1997 was $6.54, $6.91, $7.05, $7.13, and
$7.42, respectively.
The Property has an outdoor swimming pool, a jacuzzi, a tennis court
and a laundry facility. The Property also has a clubhouse with a kitchen,
entertainment area and leasing office.
-20-
<PAGE>
The buildings are wood framed construction with a combination of brick
veneer and hardboard ship-lap siding on concrete slab foundations. Roofs are
pitched and covered with fiberglass shingled on plywood.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually controlled heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, dishwasher and
garbage disposal. The largest one-bedroom and the largest two-bedroom units have
full-sized washer/dryer connections. A total of 92 units have a wood-burning
fireplace and each second-floor unit has vaulted ceilings. Each unit has walk-in
closets, outside storage, a covered balcony or patio, and ceiling fans. The
owner of the Property pays for cold water, sewer charges, gas (for hot water)
and trash removal. The tenants pay for their electricity service, which includes
cooking, lighting, heating and air-conditioning.
There are at least eight apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy at nearby competing properties averaged
approximately 95% on June 30, 1998.
As of June 30, 1998, the Property was approximately 89% occupied. The
tenants are primarily a mix of white-collar and blue-collar workers, students
and retired persons.
The following table sets forth the 1997 real estate tax information on
the Property:
JURISDICTION ASSESSED VALUE RATE TAX
------------ -------------- ---- ---
County of Tarrant.......... $3,150,000 $1.9952 $62,848.67
City of Grand Prairie...... $3,312,080 $0.6800 $22,522.08
------------
Total ............ $85,370.75
The basis of the depreciable residential real property portion of the
Property (approximately $3,739,211 at the time of acquisition) 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 Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
-21-
<PAGE>
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 increase in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs and
improvements will allow an increase in rents at the Property.
3. The Property has an advantageous location - approximately mid-way
between Dallas and Fort Worth and near the Dallas/Fort Worth International
Airport - and is located in a rapidly- growing area proximate to centers of
employment and retail development. In addition, the Company and the Advisor
believe that the combination and operation of the Property with the adjacent
Bitter Creek Apartments will offer operational efficiencies and competitive
advantages.
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 the 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, Cornerstone Realty Income Trust, Inc. earned a
property acquisition fee equal to 2% of the purchase price of the property, or
$94,100. At closing, Cornerstone Realty Income Trust, Inc. was paid a portion of
the property acquisition fee corresponding to the portion of the purchase price
of the property paid in cash by the Company. The cash portion of the purchase
price was approximately $1,632,601, and 2% of that amount was approximately
$32,652. The balance of the property acquisition fee will be paid if, when and
as the indebtedness taken subject to at closing is repaid by the Company.
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.
NEWPORT APARTMENTS
Austin, Texas
On July 24, 1998, Apple REIT IV Limited Partnership purchased the
Newport Apartments located at 1930 West Rundberg Lane, in Austin, Texas (the
"Property").
The Property comprises 200 apartment units. The purchase price for the
Property was $6,330,000. The seller was Newemerald Texas, Ltd., a Texas limited
partnership which was not affiliated with the Company, the Advisor or their
affiliates. The purchase price was paid through a combination of (i)
approximately $ 3,286,127 in cash using proceeds from the sale of the Shares of
the Company and (ii) approximately $ 3,043,873 by assumption of a mortgage loan.
Title to the Property was conveyed to the Company by special warranty deed.
The Property was acquired with the assumption of a mortgage loan in
the original principal amount of $6,275,000 held by Fannie Mae. On July 24,
1998, the outstanding principal balance of the mortgage loan was $3,043,873.04.
The interest on the mortgage loan is 6.675% per annum; amortization is based on
a 30-year amortization term; and prepayments are permitted under the following
circumstance: after May 1, 2001 to April 30, 2002 at 102% of the principal
balance of the mortgage loan, from May 1, 2002 to April 30, 2003 at 101% of the
principal balance, and from May 1, 2003 and thereafter at 100% of the principal
balance. The maturity date of the mortgage loan is December 1, 2005, and the
balance due at maturity, assuming no payment has been made on principal in
advance of its due date, is $2,614,373.31.
In connection with the original financing of the Property, the previous
owner of the Property agreed to certain restrictions on the use of the Property
set forth in a special warranty deed and deed restrictions. In connection with
the purchase of the Property and the assumption of the mortgage loan, the
Company entered into an assumption of the special warranty deed and deed
restrictions. Among the restrictions agreed to by the Company is that at least
20% of the apartment units must be occupied by the persons who, at the time of
initial occupancy of the apartments units, are "low or moderate income tenants."
The term low or moderate income tenants is defined, generally, as one or more
persons who occupy an apartment unit whose aggregate anticipated income does not
exceed 80% of the median income for the area where the Property is located.
-22-
<PAGE>
Location. The Property is located on West Rundberg Lane in Austin,
Texas, which is the capital of Texas. The following information on Austin is
based in part on information provided by the greater Austin Chamber of Commerce.
The economy of the greater Austin metropolitan area is diversified,
with key economic factors being the semiconductor and computer industries,
manufacturing, real estate and higher education. The rapid development of the
semiconductor and computer industries has been accompanied by rapid developments
in the transportation, finance, insurance, communications and utilities
capabilities of the area.
The Metropolitan Statistical Area that includes Austin had a 1995
population that exceeded one million and is expected to have a population of
approximately 1.1 million by the end of 1998. Much of the recent population
growth in the area is due to relocations from other parts of the country,
although the percentage of total population growth represented by relocated
persons is expected to decrease over the coming years. Currently, job gains in
the Austin metropolitan area are at approximately four percent per year.
The immediate neighborhood surrounding the Property consists of other
multi-family and single-family housing and commercial and retail development.
Newport Apartments are located near The Colonade Mall and Northcross Mall, and
are an approximately 20-minute drive from an IBM facility and a Texas
Instruments facility. This property is within a few blocks of a new Dell
Computer facility and is a 15-minute drive from the downtown Austin business
district.
Description of the Property. The Property consists of 200 apartment
units in 15 buildings on approximately 10 acres of land. The Property was
constructed in 1988.
The Property offers four different unit types. The unit mix and rents
being charged new tenants as of July 1998 are as follows:
<TABLE>
<CAPTION>
APPROXIMATE INTERIOR
QUANTITY TYPE SQUARE FOOTAGE MONTHLY RENTAL
-------- ---- -------------- --------------
<S> <C> <C> <C> <C>
60 One bedroom, one bathroom 510 $469
60 One bedroom, one bathroom 710 549
40 One bedroom, one bathroom 875 629
40 One bedroom, one bathroom 1,000 699
with den
</TABLE>
The apartments provide a total of approximately 148,000 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 $400,000 for repairs and capital improvements to the Property to
include clubhouse renovations, exterior painting and siding replacement and
interior upgrades.
-23-
<PAGE>
The following information was provided by the seller. Physical
occupancy at the Property averaged approximately 97% in 1993, 96% in 1994, 95%
in 1995, 93% in 1996 and 88% in 1997. Leases at the Property are generally for
terms of one year or less. Average rental rates for the past five years have
generally increased. As an example, a one-bedroom, one-bathroom apartment (1000
square feet) rented for $426 in 1993, $465 in 1994, $669 in 1995, $679 in 1996
and $689 in 1997. The average effective annual rental per square foot at the
Property for 1993, 1994, 1995, 1996 and 1997 was $5.66, $6.18, $8.90, $9.03, and
$9.16, respectively.
The Property has an outdoor swimming pool, a lighted tennis court, a
picnic area and two laundry facilities. The Property also has a clubhouse with a
leasing office.
The buildings are wood framed construction with a combination of brick
veneer and wood siding on concrete slab foundations. Roofs are pitched and
covered with fiberglass shingled on plywood.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually controlled heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, dishwasher and
garbage disposal. All units have full-sized washer/dryer connections and all
upper-level units have vaulted ceilings. Some of the units have wood-burning
fireplaces, dry bars and private patios or decks. Each unit has walk-in closets,
outside storage and ceiling fans. The owner of the Property pays for cold water,
sewer charges, gas (for hot water) and trash removal. The tenants pay for their
electricity service, which includes cooking, lighting, heating and
air-conditioning.
There are at least four apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy at nearby competing properties averaged
approximately 96% on June 30, 1998.
As of June 30, 1998, the Property was approximately 93% occupied. The
tenants are primarily a mix of white-collar and blue-collar workers, students
and retired persons.
The following table sets forth the 1997 real estate tax information on
the Property:
JURISDICTION ASSESSED VALUE RATE TAX
------------ -------------- ---- ---
Travis County ............. $6,600,000 $0.4938 $ 32,590.80
City of Austin............. $6,600,000 $0.5401 $ 35,646.60
Austin I.S.D............... $6,600,000 $1.4010 $ 92,466.00
ACC (Travis)............... $6,600,000 $0.0500 $ 3,300.00
------------
Total ............ $164,003.40
-24-
<PAGE>
The basis of the depreciable residential real property portion of the
Property (approximately $5,920,449 at the time of acquisition) 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 Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Austin area generally and the specific area in which the
Property is located were perceived as being characterized by a diverse and
rapidly developing 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 on 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 conveniently located near The Colonade Mall,
Northcross Mall, an IBM facility, a Texas Instruments facility and a new Dell
Computer facility.
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 the 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, Cornerstone Realty Income Trust, Inc. earned a
property acquisition fee equal to 2% of the purchase price of the property, or
$126,600. At closing, Cornerstone Realty Income Trust, Inc. was paid a portion
of the property acquisition fee corresponding to the portion of the purchase
price of the property paid in cash by the Company. The cash portion of the
purchase price was approximately $3,286,127, and 2% of that amount was
approximately $65,723. The balance of the property acquisition fee will be paid
if, when and as the indebtedness taken subject to at closing is repaid by the
Company.
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.
-25-
<PAGE>
ESTRADA OAKS APARTMENTS
Irving, Texas
On July 27, 1998, Apple REIT Limited Partnership purchased the Estrada
Oaks Apartments located at 2115 Estrada Parkway, in Irving, Texas (the
"Property").
The Property comprises 248 apartment units. The purchase price for the
Property was $9,350,000. The seller was Dallas - Fort Worth Properties, L.P., a
Texas limited partnership which was not affiliated with the Company, the Advisor
or their affiliates. The purchase price was paid using proceeds from the sale of
Shares of the Company. Title to the Property was conveyed to the Company by
limited warranty deed.
Location. The Property is located on Estrada Parkway south of Airport
Freeway (SH 183) and west of Belt Line Road in Irving, Texas. The Property is
readily available from Highways 181 and 163, two major highways in Irving,
Texas. The Property is located within "The Metroplex." For information on The
Metroplex, see under "Cottonwood Crossing Apartments" above.
The immediate neighborhood surrounding the Property consists of other
multi-family and single-family housing and commercial and retail development.
The Property is conveniently located near fine restaurants, businesses, schools
and churches. The Property is an approximately 5-minute drive from Dallas/Fort
Worth International Airport, an approximately 25-minute drive from downtown
Dallas and downtown Fort Worth.
Description of the Property. The Property consists of 248 apartment
units in 14 buildings on approximately 10.1 acres of land. The Property was
constructed in 1983.
The Property offers ten different unit types. The unit mix and rents
being charged new tenants as of July 1998 are as follows:
<TABLE>
<CAPTION>
APPROXIMATE INTERIOR
QUANTITY TYPE SQUARE FOOTAGE MONTHLY RENTAL
-------- ---- -------------- --------------
<S> <C> <C> <C>
24 One bedroom, one bathroom 490 $480
56 One bedroom, one bathroom 608 510
60 One bedroom, one bathroom 744 565
10 One bedroom, one bathroom 744 575
tennis court view
10 One bedroom, one bathroom 744 580
pool view
24 Two bedrooms, one bathroom 886 670
30 Two bedrooms, two bathrooms 942 715
2 Two bedrooms, two bathrooms 942 730
pool view
30 Two bedrooms, two bathrooms 1081 770
</TABLE>
-26-
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE INTERIOR
QUANTITY TYPE SQUARE FOOTAGE MONTHLY RENTAL
-------- ---- -------------- --------------
<S> <C> <C> <C> <C>
2 Two bedrooms, two bathrooms 1081 785
pool view
</TABLE>
The apartments provide a total of approximately 191,328 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 $248,000 for repairs and capital improvements to the Property to
include clubhouse renovations, exterior painting and wood replacement.
The following information was provided by the seller. Physical
occupancy at the Property averaged approximately 94% in 1993, 94% in 1994, 95%
in 1995, 96% in 1996 and 95% in 1997. Leases at the Property are generally for
terms of one year or less. Average rental rates for the past five years have
generally increased. As an example, a one-bedroom, one-bathroom apartment (744
square feet) rented for $430 in 1993, $470 in 1994, $470 in 1995, $470 in 1996
and $490 in 1997. The average effective annual rental per square foot at the
Property for 1993, 1994, 1995, 1996 and 1997 was $7.16, $7.82, $7.82, $7.82, and
$8.16, respectively.
The Property has an outdoor swimming pool, a jacuzzi, lighted tennis
courts, a fitness center, a laundry facility and 80 covered parking spaces. The
Property also has a clubhouse with a leasing office.
The buildings are wood framed construction with a combination of brick
veneer and painted wood siding on concrete slab foundations. Roofs are high
sloped with asphalt shingles.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually controlled heating and air-conditioning unit. All of
the units include ceiling fans, intrusion alarm systems, patio/balcony and
outside storage. All of the units, except the two smallest one bedroom floor
plans, include full size washer/dryer connections and all of the units, except
the smallest one bedroom floor plan, include wood burning fireplaces with
mantels. Select units includes microwaves, icemakers and double french patio
doors. All kitchens are equipped with a frost free refrigerator/freezer,
self-cleaning electric range and oven, dishwasher and garbage disposal. The
owner of the Property pays for cold water, sewer charges, gas (for hot water)
and trash removal. The tenants pay for their electricity service, which includes
cooking, lighting, heating and air-conditioning.
There are at least three apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy at nearby competing properties averaged
approximately 98% on June 30, 1998.
-27-
<PAGE>
As of July 27, 1998, the Property was approximately 97% occupied. The
tenants are primarily a mix of blue-collar and white-collar workers, students
and retired persons.
The following table sets forth the 1997 real estate tax information on
the Property:
JURISDICTION ASSESSED VALUE RATE TAX
------------ -------------- ---- ---
County of Dallas........... $7,009,660 $0.44307 $ 31,057.70
City of Irving............. $7,009,660 $0.49300 $ 34,557.62
Irving I.S.D............... $7,009,660 $1.64840 $115,547.24
------------
Total ............ $181,162.56
The basis of the depreciable residential real property portion of the
Property (approximately $7,579,500 at the time of acquisition) 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 Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Dallas/Fort Worth area generally and the specific area in which
the Property is located were perceived as being characterized by a diverse,
stable and steadily growing economy. Accordingly, it was believed that such
economy and its anticipated growth and development would support stable
occupancy rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs and
improvements will allow an increase in rents at the Property.
3. The Property has an advantageous location - convenient to the
Dallas/Fort Worth International Airport, downtown Dallas and downtown Fort Worth
- - and is located in a rapidly growing area proximate to centers of employment
and retail development.
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 the report not to be necessarily indicative of future
operating results.
-28-
<PAGE>
Acquisition and Management Services and Fees. In consideration of
services rendered to the Company in connection with the selection and
acquisition of the Property, Cornerstone Realty Income Trust, Inc. earned a
property acquisition fee equal to 2% of the purchase price of the property, or
$187,000.
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.
-29-
<PAGE>
ITEM 7.a.
-30-
<PAGE>
[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS REPORT
Board of Directors
Apple Residential Income Trust, Inc.
Richmond, VA
We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Cottonwood Crossing Apartments located in Arlington, Texas for the
twelve month period ended May 31, 1998. This statement is the responsibility of
the management of Cottonwood Crossing Apartments. Our responsibility is to
express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Apple Residential Income Trust, Inc.) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Cottonwood
Crossing Apartments, (as defined above) for the twelve month period ended May
31, 1998, in conformity with generally accepted accounting principles.
Richmond, Virginia /s/ L. P. Martin & Co., P.C.
July 21, 1998
-31-
<PAGE>
COTTONWOOD CROSSING APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MAY 31, 1998
INCOME
Rental and Other Income $1,130,293
----------
DIRECT OPERATING EXPENSES
Administrative and Other 152,528
Insurance 21,082
Repairs and Maintenance 171,801
Taxes, Property 127,051
Utilities 109,392
----------
TOTAL DIRECT OPERATING EXPENSES 581,854
----------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 548,439
==========
See accompanying notes to the financial statement.
-32-
<PAGE>
COTTONWOOD CROSSING APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MAY 31, 1998
NOTE 1 - ORGANIZATION
Cottonwood Crossing Apartments is a 200 unit garden style apartment complex
located on approximately 6.77 acres in Arlington, Texas. The assets comprising
the property were owned by Cottonwood Realty Associates, an entity unaffiliated
with Apple Residential Income Trust, Inc., during the financial statement
period. Apple Residential Income Trust, Inc. purchased the property July 9,
1998.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation and management fees.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements arc
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
-33-
<PAGE>
ITEM 7.b.
-34-
<PAGE>
[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct operating
expenses exclusive of Items not comparable to the proposed future operations of
the property Pace's Point Apartments located in Lewisville, Texas for the twelve
month period ended March 31, 1998. This statement is the responsibility of the
management of Pace's Point Apartments. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Apple Residential Income Trust, Inc,) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Pace's Point
Apartments (as defined above) for the twelve month period ended March 31, 1998,
in conformity with generally accepted accounting principles.
Richmond, Virginia /s/ L. P. Martin & Co., P. C.
May 14, 1998
-35-
<PAGE>
PACE'S POINT APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO' THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MARCH 31, 1998
INCOME
Rental and Other Income $ 2,001,209
-----------
DIRECT OPERATING EXPENSES
Administrative and Other 159,320
Insurance 33,013
Repairs and Maintenance 275,296
Taxes, Property 212,334
Utilities 164,368
-----------
TOTAL DIRECT OPERATING EXPENSES 844,331
-----------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 1,156,878
===========
See accompanying notes to the financial statement.
-36-
<PAGE>
PACE'S POINT APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MARCH 31, 1998
NOTE 1 - ORGANIZATION
Pace's Point Apartments is a 300 unit garden style apartment complex located on
approximately 12.623 acres in Lewisville, Texas. The assets comprising the
property were owned by Corporate Drive, L. P., an entity unaffiliated with Apple
Residential Income Trust, Inc., during the financial statement period, Apple
Residential Income Trust, Inc. has a contract to purchase the property.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation, amortization,
professional fees, management fees and entity expenses.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
-37-
<PAGE>
ITEM 7.c.
-38-
<PAGE>
[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Pepper Square Apartments located in Dallas, Texas for the twelve
month period ended March 31, 1998. This statement is the responsibility of the
management of Pepper Square Apartments. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared far the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Apple Residential Income Trust, Inc.) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Pepper Square
Apartments (as defined above) for the twelve month period ended March 31, 1998,
in conformity with generally accepted accounting principles.
Richmond, Virginia /s/ L.P. Martin & Co.,P.C.
May 14, 1998
-39-
<PAGE>
PEPPER SQUARE APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MARCH 31, 1998
INCOME
Rental and Other Income $ 915,474
---------
DIRECT OPERATING EXPENSES
Administrative and Other 81,772
Insurance 26,467
Repairs and Maintenance 130,420
Taxes, Property 103,718
Utilities 55,426
---------
TOTAL DIRECT OPERATING EXPENSES 397,803
---------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 517,671
=========
See accompanying notes to the financial statement.
-40-
<PAGE>
PEPPER SQUARE APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MARCH 31,1998
NOTE 1 - ORGANIZATION
Pepper Square Apartments is a 144 unit garden style apartment complex located on
approximately 5.96 acres in Dallas, Texas. The assets comprising the property
were owned by Pepper Square Associates, Ltd., an entity unaffiliated with Apple
Residential Income Trust, Inc., during the financial statement period. Apple
Residential Income Trust, Inc. has a contract to purchase the property.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation, amortization,
professional fees, management fees and entity expenses.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
-41-
<PAGE>
ITEM 7.d.
-42-
<PAGE>
[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Emerald Oaks Apartments located in Grapevine, Texas for the twelve
month period ended March 31, 1998. This statement is the responsibility of the
management of Emerald Oaks Apartments. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards, Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Apple Residential Income Trust, Inc.) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Emerald Oaks
Apartments (as defined above) for the twelve month period ended March 31, 1998,
in conformity with generally accepted accounting principles.
Richmond, Virginia /s/ L.P. Martin & Co., P.C.
May 14, 1998
-43-
<PAGE>
EMERALD OAKS APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MARCH 31, 1998
INCOME
Rental and Other Income 1,793,934
-----------
DIRECT OPERATING EXPENSES
Administrative and Other 145,666
Insurance 33,368
Repairs and Maintenance 185,844
Taxes, Property 196,202
Utilities 156,835
-----------
TOTAL DIRECT OPERATING EXPENSES 717,915
-----------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 1,076,019
===========
See accompanying notes to the financial statement,
-44-
<PAGE>
EMERALD OAKS APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MARCH 31, 1998
NOTE 1 - ORGANIZATION
Emerald Oaks Apartments is a 250 unit garden style apartment complex located on
approximately 13.55 acres in Grapevine, Texas. The assets comprising the
property were owned by New Emerald Texas, Ltd., an entity unaffiliated with
Apple Residential Income Trust, Inc., during the financial statement period.
Apple Residential Income Trust, Inc. has a contract to purchase the property.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting, In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation, amortization,
professional fees, management fees and entity expenses.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period, Actual results could differ from those estimates.
Repairs and maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
-45-
<PAGE>
ITEM 7.e.
-46-
<PAGE>
[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Hayden's Crossing Apartments located in Grand Prairie, Texas for
the twelve month period ended March 31, 1998. This statement is the
responsibility of the management of Hayden's Crossing Apartments. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards, Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Apple Residential Income Trust, Inc.) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Hayden's Crossing
Apartments (as defined above) for the twelve month period ended March 31, 1998,
in conformity with generally accepted accounting principles.
Richmond, Virginia. /s/ L.P. Martin & Co., P.C.
May 14, 1998
-47-
<PAGE>
HAYDEN'S CROSSING APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MARCH 31, 1998
INCOME
Rental and Other Income $ 920,520
---------
DIRECT OPERATING EXPENSES
Administrative and Other 100,602
Insurance 20,159
Repairs and Maintenance 123,227
Taxes, Property 85,371
Utilities 99,152
---------
TOTAL DIRECT OPERATING EXPENSES 428,511
---------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 492,009
=========
See accompanying notes to the financial statement.
-48-
<PAGE>
HAYDEN'S CROSSING APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MARCH 31, 1998
NOTE 1 - ORGANIZATION
Hayden's Crossing Apartments is a 170 unit garden style apartment complex
located on approximately 7.11 acres in Grand Prairie, Texas. The assets
comprising the property were owned by Hayden's Crossing Ltd., an entity
unaffiliated with Apple Residential Income Trust, Inc., during the financial
statement period. Apple Residential Income Trust, Inc. purchased the property in
1998.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation, amortization,
professional fees, management fees and entity expenses.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
-49-
<PAGE>
ITEM 7.f.
-50-
<PAGE>
[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Newport Apartments located in Austin, Texas for the twelve month
period ended March 31, 1998. This statement is the responsibility of the
management of Newport Apartments. Our responsibility is to express an opinion on
this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Apple Residential Income Trust, Inc.) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Newport
Apartments (as defined above) for the twelve month period ended March 31, 1998,
in conformity with generally accepted accounting principles.
Richmond, Virginia /s/ L.P. Martin & Co., P.C.
May 14, 1998
-51-
<PAGE>
NEWPORT APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE, OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MARCH 31, 1998
INCOME
Rental and Other income $ 1,177,562
-----------
DIRECT OPERATING EXPENSES
Administrative and Other 142,510
Insurance 23,904
Repairs and Maintenance 155,564
Taxes, Property 164,453
Utilities 104,973
-----------
TOTAL DIRECT OPERATING EXPENSES 591,404
-----------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 586,158
===========
See accompanying notes to the financial statement.
-52-
<PAGE>
NEWPORT APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MARCH 31, 1998
NOTE 1 - ORGANIZATION
Newport Apartments is a 200 unit garden style apartment complex located on
approximately 6.64 acres in Austin, Texas, The assets comprising the property
were owned by New Emerald Texas, Ltd,, an entity unaffiliated with Apple
Residential Income Trust, Inc., during the financial statement period. Apple
Residential Income Trust, Inc. has a contract to purchase the property.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation, amortization,
professional fees, management fees and entity expenses.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
-53-
<PAGE>
ITEM 7.g.
-54-
<PAGE>
[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Estrada Oaks Apartments located in Irving, Texas for the twelve
month period ended June 30, 1998. This statement is the responsibility of the
management of Estrada Oaks Apartments. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Apple Residential Income Trust, Inc.) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Estrada Oaks
Apartments (as defined above) for the twelve month period ended June 30, 1998,
in conformity with generally accepted accounting principles.
Richmond, Virginia /s/ L.P. Martin & Co., P.C.
July 15, 1998
-55-
<PAGE>
ESTRADA OAKS APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED JUNE 30, 1998
INCOME
Rental and Other Income $ 1,650,389
-----------
DIRECT OPERATING -EXPENSES
Administrative and Other 136,212
Insurance 28,334
Repairs and Maintenance 247,734
Taxes, Property 185,695
Utilities 98,819
-----------
TOTAL DIRECT OPERATING EXPENSES 696,794
-----------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 953,595
===========
See accompanying notes to the financial statement.
-56-
<PAGE>
ESTRADA OAKS APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED JUNE 30, 1998
NOTE 1 - ORGANIZATION
Estrada Oaks Apartments is a 248 unit garden style apartment complex located on
approximately 10.12 acres in Irving, Texas. The assets comprising the property
were owned by Dallas-Fort Worth Properties, Limited Partnership, an entity
unaffiliated with Apple Residential Income Trust, Inc., during the financial
statement period. The owner has contracted to sell the property to Apple
Residential Income Trust, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation, professional fees and
management fees.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
-57-
<PAGE>
ITEM 7.h.
-58-
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1997 (UNAUDITED)
The Unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1997 is presented as if the 12 property acquisitions during 1997
and the 13 property acquisitions during 1998 had occurred on January 1, 1997.
The Unaudited Pro Forma Consolidated Statement of Operations assumes the
Company qualifying as a REIT, distributing at least 95% of its taxable income,
and, therefore, incurring no federal income tax liability for the period
presented. In the opinion of management, all adjustments necessary to reflect
the effects of these transactions have been made.
The Unaudited Pro Forma Consolidated Statement of Operations is presented for
comparative purposes only and is not necessarily indicative of what the actual
results of the Company would have been for the year ended December 31, 1997 if
the acquisitions had occurred at the beginning of the period presented, nor
does it purport to be indicative of the results of operations in future
periods. The Unaudited Pro Forma Consolidated Statement of Operations should be
read in conjunction with, and is qualified in its entirety by, the Company's
respective historical financial statements and notes thereto.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA MAIN PARK TIMBERGLEN
STATEMENT OF 1997 PRO FORMA BEFORE 1998 PRO FORMA PRO FORMA
OPERATIONS ACQUISITONS(F) ADJUSTMENTS ACQUISITIONS ADJUSTMENTS ADJUSTMENTS
- ---------------------------- ------------- ----------------- --------------- ---------------- --------------- -------------
DATE OF ACQUISITION -- -- -- -- 2/4/98 2/13/98
<S> <C> <C> <C> <C> <C> <C>
Rental income $12,005,968 $ 5,392,558 -- $ 17,398,526 $ 1,469,496 $ 1,954,938
Rental expenses:
Property and maintenance 3,571,484 1,982,189 -- 5,553,673 536,090 477,771
Taxes and insurance 1,765,741 706,939 -- 2,472,680 225,564 258,159
Property management 656,267 -- $ 295,813 (A) 952,080 -- --
General and administrative 351,081 -- 67,262 (B) 418,343 -- --
Amortization 28,490 -- -- 28,490 -- --
Depreciation of rental
property 1,898,003 -- 792,074 (C) 2,690,077 -- --
--------- ----------- ----------- --------- ----------- -----------
Total expenses 8,271,066 2,689,128 1,155,149 12,115,343 761,654 735,930
Income before interest
income (expense) 3,734,902 2,703,430 (1,155,149) 5,283,183 707,842 1,219,008
Interest income 222,676 -- -- 222,676 --
Interest expense (458,384) -- -- (458,384) --
----------- ----------- ----------- ------------ ----------- -----------
Net income $ 3,499,194 $ 2,703,430 ($ 1,155,149) $ 5,047,475 $ 707,842 $ 1,219,008
Basic and diluted earnings
per common share $ 0.54 $ 0.53
Wgt. avg. number of common
shares outstanding 6,493,114 3,106,405 (E) 9,599,519
<CAPTION>
COPPER BITTER SUMMER PARK HAYDEN'S PACE'S
RIDGE CREEK TREE VILLAGE COTTONWOOD CROSSING POINT
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
- ---------------------------- --------------- ------------- ------------- ------------- ------------ ------------ -------------
DATE OF ACQUISITION 3/31/98 5/8/98 6/1/98 7/1/98 7/9/98 7/24/98 7/17/98
<S> <C> <C> <C> <C> <C> <C> <C>
Rental income $ 914,447 $ 2,629,983 $ 1,212,080 $ 1,282,097 $ 1,130,293 $ 920,520 $ 2,001,209
Rental expenses:
Property and maintenance 589,618 926,213 485,827 448,932 433,721 322,981 598,984
Taxes and insurance 119,708 295,801 151,473 159,700 148,133 105,530 245,347
Property management -- -- -- -- -- -- --
General and administrative -- -- -- -- -- -- --
Amortization -- -- -- -- -- -- --
Depreciation of rental
property -- -- -- -- -- -- --
------- ---------- ----------- ---------- ---------- -------- ------------
Total expenses 709,326 1,222,014 637,300 608,632 581,854 428,511 844,331
Income before interest
income (expense) 205,121 1,407,969 574,780 673,465 548,439 492,009 1,156,878
Interest income -- -- -- -- -- -- --
Interest expense -- -- -- -- -- -- --
------- ---------- ----------- ---------- ---------- --------- ------------
Net income $ 205,121 $ 1,407,969 $ 574,780 $ 673,465 $ 548,439 $ 492,009 $ 1,156,878
Basic and diluted earnings
per common share
Wgt. avg. number of common
shares outstanding
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PEPPER EMERALD
SQUARE NEWPORT OAKS ESTRADA
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA TOTAL
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENT ADJUSTMENTS PRO FORMA
- ---------------------------- ------------- ------------- ------------- -------------- ------------- --------------
DATE OF ACQUISITION 7/17/98 7/24/98 7/24/98 7/27/98 -- --
<S> <C> <C> <C> <C>
Rental income $ 915,474 $ 1,177,562 $ 1,793,934 $ 1,650,389 -- $36,450,948
Rental expenses:
Property and maintenance 267,618 403,047 488,345 482,765 12,015,585
Taxes and insurance 130,185 188,357 229,570 $ 214,029 -- 4,944,236
Property management -- -- -- -- 1,047,121(A) 1,999,201
General and administrative -- -- -- -- 204,500(B) 622,843
Amortization -- -- -- -- -- 28,490
Depreciation of rental
property -- -- -- -- 3,155,180(C) 5,845,257
-------- ---------- ---------- ---------- ----------- ----------
Total expenses 397,803 591,404 717,915 696,794 4,406,801 25,455,612
Income before interest
income (expense) 517,671 586,158 1,076,019 953,595 (4,406,801) 10,995,336
Interest income -- -- -- -- -- 222,676
Interest expense -- -- -- -- (1,833,108)(E) (2,291,492)
--------- ------------ ----------- ----------- -------------- ------------
Net income $ 517,671 $ 586,158 $ 1,076,019 $ 953,595 ($ 6,239,909) $ 8,926,520
Basic and diluted earnings
per common share $ 0.47
Wgt. avg. number of common
shares outstanding
9,402,287 (D) 19,001,806
</TABLE>
(A) Represents the property management fees of 5% of rental income and
processing costs equal to $2.50 per apartment per month charged by the
external management company for the period not owned by the Company.
(B) Represents the advisory fee of .25% of accumulated capital contributions
under the "best efforts" offering for the period of time not owned by the
Company.
(C) Represents the depreciation expense of the properties acquired based on the
purchase price, excluding amounts allocated to land, for the period of
time not owned by the Company. The weighted average life of the property
depreciated was 27.5 years.
(D) Represents the interest expense for 5 of the 13 properties for the period
in which the properties were not owned for the three months period ended
March 31, 1998, interest was computed based on interest rates on the
properties debt that was assumed at acquisition.
(E) Represents additional common shares assuming the properties were acquired on
January 1, 1997 with the net proceeds from the "best efforts" offering of $9
per share () net $7.83 per share) for the first $15 million and $10 per
share (net $8.70 per share) above $15 million.
(F) Represents properties during 1997 for the period of time during 1997 not
owned by the company, see page 60.
-59-
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1997 (UNAUDITED)
The following schedule provides detail of 1997 acquisitions by property
included in the Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1997.
<TABLE>
<CAPTION>
BROOKFIELD EAGLE CREST ASPEN HILLS MILL CROSSING POLO RUN WILDWOOD
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
------------- ------------- ------------- --------------- ------------- -------------
DATE OF ACQUISITIONS 1/31/97 1/31/97 1/31/97 2/28/97 03/31/97 03/31/97
<S> <C> <C> <C> <C> <C> <C>
Rental income $99,879 $266,385 $100,023 $151,389 $326,137 $202,389
Expenses
Property and maintenance 32,430 74,735 51,643 77,882 121,983 78,111
Taxes and insurance 12,720 36,546 12,099 19,230 40,508 25,216
Property management -- -- -- -- -- --
General and administrative -- -- -- -- -- --
Depreciation of real estate -- -- -- -- -- --
Amortization -- -- -- -- -- --
------- -------- -------- -------- ------- -------
45,150 111,281 63,742 97,112 162,491 103,327
Income before interest income 54,729 155,104 36,281 54,277 163,646 99,062
Interest income -- -- -- -- -- --
Interest expense -- -- -- -- -- --
------- -------- -------- -------- -------- --------
Net income $54,729 $155,104 $ 36,281 $ 54,277 $163,646 $ 99,062
<CAPTION>
COPPER
TOSCANA THE ARBORS PACES COVE CHAPAROSA RIVERHILL CROSSING
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA TOTAL
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------- ------------- ------------- ------------- ------------- ------------- -------------
DATE OF ACQUISITIONS 03/31/97 4/25/97 6/30/97 8/6/97 8/6/97 11/25/97
<S> <C> <C> <C> <C> <C> <C> <C>
Rental income $270,812 $460,338 $916,348 $ 801,713 $ 892,295 $ 904,850 $5,392,558
Expenses
Property and maintenance 82,722 102,132 314,521 286,943 338,906 420,181 1,982,189
Taxes and insurance 35,674 60,729 128,306 97,242 124,028 114,641 706,939
Property management -- -- -- -- -- -- 0
General and administrative -- -- -- -- -- -- 0
Depreciation of real estate -- -- -- -- -- -- 0
Amortization -- -- -- -- -- -- 0
------- -------- -------- -------- -------- -------- ---------
118,396 162,861 442,827 384,185 462,934 534,822 2,689,128
Income before interest income 152,416 297,477 473,521 417,528 429,361 370,028 2,703,430
Interest income -- -- -- -- -- -- 0
Interest expense -- -- -- -- -- -- 0
-------- -------- -------- --------- --------- --------- ----------
Net income $152,416 $297,477 $473,521 $ 417,528 $ 429,361 $ 370,028 $2,703,430
</TABLE>
-60-
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED
MARCH 31, 1998 (UNAUDITED)
The Unaudited Pro Forma Consolidated Statement of Operations for the three month
period ended March 31, 1998 is presented as if the three property acquisitions
on or prior to March 31, 1998, and the ten property acquistions after March 31,
1998, had occurred on January 1, 1998. The Unaudited Pro Forma Consolidated
Statement of Operations assumes the Company qualifying as a REIT, distributing
at least 95% of its taxable income, and, therefore, incurring no federal income
tax liability for the period presented. In the opinion of management, all
adjustments necessary to reflect the effects of these transactions have been
made.
The Unaudited Pro Forma Consolidated Statement of Operations is presented for
comparative purposes only and is not necessarily indicative of what the actual
results of the Company would have been for the three month period ended March
31, 1998 if the acquisitions had occurred at the beginning of the period
presented, nor does it purport to be indicative of the results of operations in
future periods. The Unaudited Pro Forma Consolidated Statement of Operations
should be read in conjunction with, and is qualified in its entirety by, the
Company's respective historical financial statements and notes thereto.
<TABLE>
<CAPTION>
COPPER BITTER
HISTORICAL MAIN PARK TIMBERGLEN RIDGE CREEK
STATEMENT OF PRO FORMA PRO FORMA PRO FORMA PRO FORMA
OPERATIONS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
-------------- ------------- ------------- ------------- -------------
DATE OF ACQUISITION -- 2/4/98 2/13/98 3/31/98 5/8/98
<S> <C> <C> <C> <C> <C>
Rental income $ 4,928,751 $ 122,458 $ 162,912 $ 228,612 $ 657,496
Rental expenses:
Property and maintenance 1,236,828 44,674 39,814 147,405 231,553
Taxes and insurance 738,151 18,797 21,513 29,927 73,950
Property management 257,038 -- -- -- --
General and administrative 162,873 -- -- -- --
Amortization 8,484 -- -- -- --
Depreciation of rental property 889,545 -- -- -- --
------------ -------- -------- -------- ---------
Total expenses 3,292,919 63,471 61,327 177,332 305,503
Income before interest income
(expense) 1,635,832 58,987 101,585 51,280 351,993
Interest income 336,387 -- -- -- --
Interest expense (12,501) -- -- -- --
----------- --------- --------- --------- ---------
Net income $ 1,959,718 $ 58,987 $ 101,585 $ 51,280 $ 351,993
Basic and diluted earnings per
common share $ $0.14
Wgt. avg. number of common
shares outstanding 13,882,117
<CAPTION>
SUMMER PARK HAYDEN'S PACE'S PEPPER
TREE VILLAGE COTTONWOOD CROSSING POINT SQUARE
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
------------- ------------- ------------- ------------- ------------- -------------
DATE OF ACQUISITION 6/1/98 7/1/98 7/9/98 7/24/98 7/17/98 7/17/98
<S> <C> <C> <C> <C> <C> <C>
Rental income $ 303,020 $ 320,524 $ 282,573 $ 230,130 $ 500,302 $ 228,869
Rental expenses:
Property and maintenance 121,457 112,233 108,430 80,745 149,746 66,905
Taxes and insurance 37,868 39,925 37,033 26,383 61,337 32,546
Property management -- -- -- -- -- --
General and administrative -- -- -- -- -- --
Amortization -- -- -- -- -- --
Depreciation of rental property -- -- -- -- -- --
--------- --------- --------- --------- -------- --------
Total expenses 159,325 152,158 145,463 107,128 211,083 99,451
Income before interest income
(expense) 143,695 168,366 137,110 123,002 289,219 129,418
Interest income -- -- -- -- -- --
Interest expense -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Net income $ 143,695 $ 168,366 $ 137,110 $ 123,002 $ 289,219 $ 129,418
Basic and diluted earnings per
common share
Wgt. avg. number of common
shares outstanding
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMERALD
NEWPORT OAKS ESTRADA
PRO FORMA PRO FORMA PRO FORMA PRO FORMA TOTAL
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------- ------------- ------------- -------------------- -------------
DATE OF ACQUISITION 7/24/98 7/24/98 7/27/98 -- --
<S> <C> <C> <C> <C> <C>
Rental income $ 294,391 $ 448,484 $ 412,597 -- $ 9,121,119
Rental expenses:
Property and maintenance 100,762 122,086 120,691 -- 2,683,329
Taxes and insurance 47,089 57,393 53,507 -- 1,275,419
Property management -- -- -- $ 230,763 (A) 487,801
General and administrative -- -- -- 42,625 (B) 205,498
Amortization -- -- -- -- 8,484
Depreciation of rental property -- -- -- 683,457 (C) 1,573,002
--------- -------- --------- ----------- ----------
Total expenses 147,851 179,479 174,198 956,845 6,233,533
Income before interest income
(expense) 146,540 269,005 238,399 (956,845) 2,887,586
Interest income -- -- -- (300,000)(D) 36,387
Interest expense -- -- -- (458,277)(E) (470,778)
--------- --------- --------- ----------- -----------
Net income $ 146,540 $ 269,005 $ 238,399 ($ 1,715,122) $ 2,453,195
Basic and diluted earnings per
common share $ 0.13
Wgt. avg. number of common
shares outstanding 5,080,448 (F) 18,962,565
</TABLE>
(A) Represents the property management fees of 5% of rental income and
processing costs equal to $2.50 per apartment per month charged by the
external management company for the period not owned by the Company.
(B) Represents the advisory fee of .25% of accumulated capital contributions
under the "best efforts" offering for the period of time not owned by the
Company.
(C) Represents the depreciation expense of the properties acquired based on the
purchase price, excluding amounts allocated to land, for the period of
time not owned by the Company. The weighted average life of the property
depreciated was 27.5 years.
(D) Represents reduction of interest income to reflect use of cash ($24
million) used to purchase properties, based on Company's actual investment
income rate of 5%.
(E) Represents the interest expense for 5 of the 13 properties for the period
in which the properties were not owned for the three months period ended
March 31, 1998, interest was computed based on interest rates on the
properties debt that was assumed at acquisition.
(F) Represents additional common shares, after consideration of cash, assuming
the properties were acquired on January 1, 1998 with the net proceeds
from the "best efforts" offering of $10 per share (net $8.70 per share)
(Also see note D).
-61-
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 (UNAUDITED)
The accompanying Unaudited Pro Forma Consolidated Balance Sheet as of March 31,
1998 is presented as if the Company had owned the properties included in the
table below as of March 31, 1998. In the opinion of management all adjustments
necessary to reflect the effects of the Offering have been made.
The Unaudited Pro Forma Consolidated Balance Sheet is presented for comparative
purposes only and is not necessarily indicative of what the actual financial
position of the Company would have been at March 31, 1998, nor does it purport
to represent the future financial position of the Company. This Unaudited Pro
Forma Consolidated Balance Sheet should be read in conjunction with, and is
qualified in its entirety by, the Company's respective historical financial
statements and notes thereto.
<TABLE>
<CAPTION>
BITTER SUMMER PARK HAYDEN'S
HISTORICAL CREEK TREE VILLAGE COTTONWOOD CROSSING
BALANCE PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
SHEET ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
---------------- ---------------- -------------- --------------- ----------------------------
DATE OF ACQUISITION 5/8/98 6/1/98 7/1/98 7/9/98 7/24/97
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in rental property
Land................................ $ 19,242,535 $ 3,168,273 $ 3,023,280 $ 856,800 $ 465,120 $ 1,042,283
Building and improvements .......... 95,914,449 10,606,827 2,790,720 6,283,200 5,348,880 3,695,369
Furniture and fixtures ............. 1,410,819 -- -- -- -- --
------------- ------------- ------------ ------------ ------------- -----------
116,567,803 13,775,100 5,814,000 7,140,000 5,814,000 4,737,652
Less accumulated depreciation....... (2,787,548) -- -- -- -- --
------------- ------------- ------------ ------------ ------------- -----------
113,780,255 13,775,100 5,814,000 7,140,000 5,814,000 4,737,652
Cash and cash equivalents .......... 36,601,110 (13,775,100) (5,814,000) (7,140,000) (5,814,000) --
Prepaid expenses ................... 90,784 -- -- -- -- --
Other assets ....................... 774,271 -- -- -- -- --
------------- ------------- ------------ ------------ ------------- -----------
37,466,165 (13,775,100) (5,814,000) (7,140,000) (5,814,000) --
------------- ------------- ------------ ------------ ------------- -----------
Total Assets ........................ $ 151,246,420 $ -- $ -- $ -- $ -- $ 4,737,652
============= ============= ============ ============ ============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Notes payable ...................... -- -- -- -- -- $ 3,072,399
Accounts payable ................... $ 355,938 -- -- -- -- --
Accrued expenses ................... 2,143,818 -- -- -- -- --
Rents received in advance .......... 23,902 -- -- -- -- --
Tenant security deposits ........... 492,175 -- -- -- -- --
------------- ------------- ------------ ------------ ------------- -----------
3,015,833 -- -- -- -- 3,072,399
Shareholders' equity
Common stock ....................... 148,058,824 -- -- -- -- 1,665,253
Class B convertible stock .......... 20,000 -- -- -- -- --
Receivable from officer-shareholder. (20,000) -- -- -- -- --
Distributions greater than net
income ............................ 171,763 -- -- -- -- --
------------- ------------- ------------ ------------ ------------- -----------
148,230,587 -- -- -- -- 1,665,253
------------- ------------- ------------ ------------ ------------- -----------
Total Liabilities and Shareholders'
Equity ............................ $ 151,246,420 $ -- $ -- $ -- $ -- $ 4,737,652
============= ============= ============ ============ ============= ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PACE'S PEPPER EMERALD
POINT SQUARE NEWPORT OAKS ESTRADA
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA TOTAL
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS PRO FORMA
--------------- ------------- ------------ --------------- ------------- ---------------
DATE OF ACQUISITION 7/17/98 7/17/98 7/24/98 7/24/98 7/27/97
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in rental property
Land.................................. $ 1,951,401 $ 1,675,594 $ 511,658 $ 881,191 $ 1,812,030 $ 34,630,165
Building and improvements ............ 9,527,427 3,560,637 5,884,065 10,133,695 7,724,970 161,470,239
Furniture and fixtures ............... -- -- -- -- -- 1,410,819
------------ ----------- ----------- ------------ ----------- -------------
11,478,828 5,236,231 6,395,723 11,014,886 9,537,000 197,511,223
Less accumulated depreciation......... -- -- -- -- -- (2,787,548)
------------ ----------- ----------- ------------ ----------- -------------
11,478,828 5,236,231 6,395,723 11,014,886 9,537,000 194,723,675
Cash and cash equivalents ............ -- -- -- -- -- 4,058,010
Prepaid expenses ..................... -- -- -- -- -- 90,784
Other assets ......................... -- -- -- -- -- 774,271
------------ ----------- ----------- ------------ ----------- -------------
-- -- -- -- -- 4,923,065
------------ ----------- ----------- ------------ ----------- -------------
Total Assets .......................... $ 11,478,828 $ 5,236,231 $ 6,395,723 $ 11,014,886 $ 9,537,000 $ 199,646,740
============ =========== =========== ============ =========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Notes payable ........................ $ 7,713,617 $ 3,643,424 $ 3,043,873 $ 6,685,706 -- $ 24,159,019
Accounts payable ..................... -- -- -- -- -- 355,938
Accrued expenses ..................... -- -- -- -- -- 2,143,818
Rents received in advance ............ -- -- -- -- -- 23,902
Tenant security deposits ............. -- -- -- -- -- 492,175
------------ ----------- ----------- ------------ ----------- -------------
7,713,617 3,643,424 3,043,873 6,685,706 -- 27,174,852
Shareholders' equity
Common stock ......................... 3,765,211 1,592,807 3,351,850 4,329,180 9,537,000 172,300,125
Class B convertible stock ............ -- -- -- -- -- 20,000
Receivable from officer-shareholder .. -- -- -- -- -- (20,000)
Distributions greater than net
income ............................. -- -- -- -- -- 171,763
------------ ----------- ----------- ------------ ----------- -------------
3,765,211 1,592,807 3,351,850 4,329,180 9,537,000 172,471,888
------------ ----------- ----------- ------------ ----------- -------------
Total Liabilities and Shareholders'
Equity ............................. $ 11,478,828 $ 5,236,231 $ 6,395,723 $ 11,014,886 $ 9,537,000 $ 199,646,740
============ =========== =========== ============ =========== =============
</TABLE>
Notes to Pro Forma Balance Sheet
Pro Forma adjustments represent the purchase price of the related property,
including the 2% acquisition fee to Cornerstone Realty Income Trust, Inc.
allocated between land and building. Adjustments to cash and common stock
reflect the use of net proceeds from sales of common stock from the Company's
continuous offering to purchase properties. Adjustments to notes payable
reflect the debt assumed on 5 of the 13 acquisitions.
-62-
<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: August 3, 1998 By: /s/ Glade M. Knight
----------------------------------
Glade M. Knight
President of Apple Residential
Income Trust, Inc.
-63-
<PAGE>
EXHIBIT INDEX
Apple Residential Income Trust, Inc.
Form 8-K dated July 9, 1998
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
4 Instruments Defining the Rights of Lenders
10.1 Certificate of Limited Partnership for Apple REIT II
Limited Partnership
10.2 Certificate of Limited Partnership for Apple REIT III
Limited Partnership
10.3 Certificate of Limited Partnership for Apple REIT IV
Limited Partnership
10.4 Certificate of Limited Partnership for Apple REIT V
Limited Partnership
10.5 Certificate of Limited Partnership for Apple REIT VI
Limited Partnership
10.6 Limited Partnership Agreement for Apple REIT II
Limited Partnership
10.7 Limited Partnership Agreement for Apple REIT III
Limited Partnership
</TABLE>
-39-
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
10.8 Limited Partnership Agreement for Apple REIT IV
Limited Partnership
10.9 Limited Partnership Agreement for Apple REIT V
Limited Partnership
10.10 Limited Partnership Agreement for Apple REIT VI
Limited Partnership
10.11 Purchase Contract for Cottonwood Crossing Apartments,
as amended
10.12 Purchase Contract for Pace's Point Apartments,
as amended
10.13 Purchase Contract for Pepper Square Apartments,
as amended
10.14 Purchase Contract for Emerald Oaks Apartments,
as amended
10.15 Purchase Contract for Hayden's Crossing Apartments,
as amended
10.16 Purchase Contract for Newport Apartments,
as amended
10.17 Purchase Contract for Estrada Oaks Apartments,
as amended
10.18 Property Management Agreement for Cottonwood
Crossing Apartments
10.19 Property Management Agreement for Pace's Point
Apartments
10.20 Property Management Agreement for Pepper Square
Apartments
10.21 Property Management Agreement for Emerald Oaks
Apartments
10.22 Property Management Agreement for Hayden's
Crossing Apartments
10.23 Property Management Agreement for Newport
Apartments
</TABLE>
-40-
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
10.24 Property Management Agreement for Estrada Oaks
Apartments
10.25 Property Management Agreement Subcontract for
Pace's Point Apartments
10.26 Property Management Agreement Subcontract
for Pepper Square Apartments
10.27 Property Management Agreement Subcontract
for Emerald Oaks Apartments
10.28 Property Management Agreement Subcontract
for Hayden's Crossing Apartments
10.29 Property Management Agreement Subcontract
for Newport Apartments
10.30 Consent of Independent Auditors
(Cottonwood Crossing Apartments)
10.31 Consent of Independent Auditors
(Pace's Point Apartments)
10.32 Consent of Independent Auditors
(Pepper Square Apartments)
10.33 Consent of Independent Auditors
(Emerald Oaks Apartments)
10.34 Consent of Independent Auditors
(Hayden's Crossing Apartments)
10.35 Consent of Independent Auditors
(Newport Apartments)
</TABLE>
-41-
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
10.36 Consent of Independent Auditors
(Estrada Oaks Apartments)
</TABLE>
-42-
Exhibit 4
Instruments Defining the Rights of Lenders
The instruments defining the rights of the holders of the long-term
debt encumbering the Pace's Point, Pepper Square, Emerald Oaks, Hayden's
Crossing and Newport Apartment are omitted, pursuant to the rules of Item 601
(b)(4)(iii)(A), because such debt is not being registered and the amount of each
does not exceed 10% of the total assets of the registrant and its subsidiaries
on a consolidated bases. The registrant agrees to furnish a copy of all such
instruments defining the rights of such holders of the long-term debt upon the
request of the Securities and Exchange Commission.
CERTIFICATE OF LIMITED PARTNERSHIP
OF
APPLE REIT II LIMITED PARTNERSHIP
Apple General, Inc., a Virginia corporation, is the general partner of
Apple REIT II Limited Partnership (the "Partnership").
The General Partner submits this Certificate of Limited Partnership
for filing in the office of the Virginia State Corporation Commission in
accordance with Section 50-73.11 of the Virginia Revised Uniform Limited
Partnership Act (the "Act"):
1. The name of the Partnership is Apple REIT II Limited Partnership.
2. (a) The post office and street address of the office of the
Partnership at which the records of the Partnership required to be maintained by
Section 50-73.8 of the Act shall be kept is as follows:
306 East Main Street
Richmond, Virginia 23219
(City of Richmond, Virginia)
(b) The registered agent of the Partnership is Martin B. Richards,
who is a resident of Virginia and a member of the Virginia State Bar. The post
office address of the registered agent is c/o McGuire, Woods, Battle & Boothe
LLP, One James Center, 901 East Cary Street, Richmond, Virginia 23219. This
address is in the City of Richmond, Virginia.
3. The name and post office address of the General Partner are as
follows:
Apple General, Inc.
(a Virginia corporation)
306 East Main Street
Richmond, Virginia 23219
4. The Partnership shall be dissolved and its affairs wound up on
December 31, 2100 or at such earlier time as is required by law or the agreement
of limited partnership of the Partnership.
<PAGE>
IN WITNESS WHEREOF, the General Partner has executed this Certificate
of Limited Partnership as of June 22, 1998.
APPLE GENERAL, INC.
By: /s/ Glade M. Knight
---------------------------
Name: Glade M. Knight
Title: President
2
CERTIFICATE OF LIMITED PARTNERSHIP
OF
APPLE REIT III LIMITED PARTNERSHIP
Apple General, Inc., a Virginia corporation, is the general partner of
Apple REIT III Limited Partnership (the "Partnership").
The General Partner submits this Certificate of Limited Partnership for
filing in the office of the Virginia State Corporation Commission in accordance
with Section 50-73.11 of the Virginia Revised Uniform Limited Partnership Act
(the "Act"):
1. The name of the Partnership is Apple REIT III Limited Partnership.
2. (a) The post office and street address of the office of the
Partnership at which the records of the Partnership required to be maintained by
Section 50-73.8 of the Act shall be kept is as follows:
306 East Main Street
Richmond, Virginia 23219
(City of Richmond, Virginia)
(b) The registered agent of the Partnership is Martin B.
Richards, who is a resident of Virginia and a member of the Virginia State Bar.
The post office address of the registered agent is c/o McGuire, Woods, Battle &
Boothe LLP, One James Center, 901 East Cary Street, Richmond, Virginia 23219.
This address is in the City of Richmond, Virginia.
3. The name and post office address of the General Partner are as
follows:
Apple General, Inc.
(a Virginia corporation)
306 East Main Street
Richmond, Virginia 23219
4. The Partnership shall be dissolved and its affairs wound up on
December 31, 2100 or at such earlier time as is required by law or the agreement
of limited partnership of the Partnership.
<PAGE>
IN WITNESS WHEREOF, the General Partner has executed this Certificate
of Limited Partnership as of June 22, 1998.
APPLE GENERAL, INC.
By: /s/ Glade M. Knight
----------------------------
Name: Glade M. Knight
Title: President
2
CERTIFICATE OF LIMITED PARTNERSHIP
OF
APPLE REIT IV LIMITED PARTNERSHIP
Apple General, Inc., a Virginia corporation, is the general partner of
Apple REIT IV Limited Partnership (the "Partnership").
The General Partner submits this Certificate of Limited Partnership for
filing in the office of the Virginia State Corporation Commission in accordance
with Section 50-73.11 of the Virginia Revised Uniform Limited Partnership Act
(the "Act"):
1. The name of the Partnership is Apple REIT IV Limited Partnership.
2. (a) The post office and street address of the office of the
Partnership at which the records of the Partnership required to be maintained by
Section 50-73.8 of the Act shall be kept is as follows:
306 East Main Street
Richmond, Virginia 23219
(City of Richmond, Virginia)
(b) The registered agent of the Partnership is Martin B.
Richards, who is a resident of Virginia and a member of the Virginia State Bar.
The post office address of the registered agent is c/o McGuire, Woods, Battle &
Boothe LLP, One James Center, 901 East Cary Street, Richmond, Virginia 23219.
This address is in the City of Richmond, Virginia.
3. The name and post office address of the General Partner are as
follows:
Apple General, Inc.
(a Virginia corporation)
306 East Main Street
Richmond, Virginia 23219
4. The Partnership shall be dissolved and its affairs wound up on
December 31, 2100 or at such earlier time as is required by law or the agreement
of limited partnership of the Partnership.
<PAGE>
IN WITNESS WHEREOF, the General Partner has executed this Certificate
of Limited Partnership as of June 22, 1998.
APPLE GENERAL, INC.
By: /s/ Glade M. Knight
--------------------------
Name: Glade M. Knight
Title: President
2
CERTIFICATE OF LIMITED PARTNERSHIP
OF
APPLE REIT V LIMITED PARTNERSHIP
Apple General, Inc., a Virginia corporation, is the general partner of
Apple REIT V Limited Partnership (the "Partnership").
The General Partner submits this Certificate of Limited Partnership for
filing in the office of the Virginia State Corporation Commission in accordance
with Section 50-73.11 of the Virginia Revised Uniform Limited Partnership Act
(the "Act"):
1. The name of the Partnership is Apple REIT V Limited Partnership.
2. (a) The post office and street address of the office of the
Partnership at which the records of the Partnership required to be maintained by
Section 50-73.8 of the Act shall be kept is as follows:
306 East Main Street
Richmond, Virginia 23219
(City of Richmond, Virginia)
(b) The registered agent of the Partnership is Martin B.
Richards, who is a resident of Virginia and a member of the Virginia State Bar.
The post office address of the registered agent is c/o McGuire, Woods, Battle &
Boothe LLP, One James Center, 901 East Cary Street, Richmond, Virginia 23219.
This address is in the City of Richmond, Virginia.
3. The name and post office address of the General Partner are as
follows:
Apple General, Inc.
(a Virginia corporation)
306 East Main Street
Richmond, Virginia 23219
4. The Partnership shall be dissolved and its affairs wound up on
December 31, 2100 or at such earlier time as is required by law or the agreement
of limited partnership of the Partnership.
<PAGE>
IN WITNESS WHEREOF, the General Partner has executed this Certificate
of Limited Partnership as of June 22, 1998.
APPLE GENERAL, INC.
By: /s/ Glade M. Knight
------------------------------
Name: Glade M. Knight
Title: President
2
CERTIFICATE OF LIMITED PARTNERSHIP
OF
APPLE REIT VI LIMITED PARTNERSHIP
Apple General, Inc., a Virginia corporation, is the general partner of
Apple REIT VI Limited Partnership (the "Partnership").
The General Partner submits this Certificate of Limited Partnership for
filing in the office of the Virginia State Corporation Commission in accordance
with Section 50-73.11 of the Virginia Revised Uniform Limited Partnership Act
(the "Act"):
1. The name of the Partnership is Apple REIT VI Limited Partnership.
2. (a) The post office and street address of the office of the
Partnership at which the records of the Partnership required to be maintained by
Section 50-73.8 of the Act shall be kept is as follows:
306 East Main Street
Richmond, Virginia 23219
(City of Richmond, Virginia)
(b) The registered agent of the Partnership is Martin B.
Richards, who is a resident of Virginia and a member of the Virginia State Bar.
The post office address of the registered agent is c/o McGuire, Woods, Battle &
Boothe LLP, One James Center, 901 East Cary Street, Richmond, Virginia 23219.
This address is in the City of Richmond, Virginia.
3. The name and post office address of the General Partner are as
follows:
Apple General, Inc.
(a Virginia corporation)
306 East Main Street
Richmond, Virginia 23219
4. The Partnership shall be dissolved and its affairs wound up on
December 31, 2100 or at such earlier time as is required by law or the agreement
of limited partnership of the Partnership.
<PAGE>
IN WITNESS WHEREOF, the General Partner has executed this Certificate
of Limited Partnership as of June 22, 1998.
APPLE GENERAL, INC.
By: /s/ Glade M. Knight
--------------------------
Name: Glade M. Knight
Title: President
2
LIMITED PARTNERSHIP AGREEMENT
OF
APPLE REIT II LIMITED PARTNERSHIP
This LIMITED PARTNERSHIP AGREEMENT (the "Partnership Agreement") is
made as of June 23, 1998, by and between Apple General, Inc., a Virginia
corporation, the general partner ("General Partner"), and Apple Limited, Inc., a
Virginia corporation, the limited partner ("Limited Partner" and together with
the General Partner, the "Partners").
INTRODUCTION
A. The General Partner and the Limited Partner have agreed to form a
limited partnership (the "Partnership") pursuant to the provisions of the
"Virginia Revised Uniform Limited Partnership Act" (the "Act"). The existence of
the Partnership shall commence upon the filing of a certificate of limited
partnership with the Virginia State Corporation Commission (the "Commission").
B. The rights, duties and obligations of the Partners shall be governed
by the Act except as otherwise provided in this Partnership Agreement. The term
"Person," as used herein, means an individual or an entity.
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 NAME. The name of the Partnership is Apple REIT II Limited
Partnership. The Partnership may trade or transact business under the name
Emerald Oaks Apartments or such other name as shall be selected by the General
Partner.
1.2 PURPOSE. The Partnership is formed to acquire, hold, operate and in
all respects act as owner of the Emerald Oaks Apartments in Grapevine, Texas
(located on the property more specifically described on Exhibit A) and to engage
in any and all activities related or incidental thereto or agreed to by the
Partners from time to time provided, however, such activities shall be limited
to and conducted in such a manner as to permit Apple Residential Income Trust,
Inc. (the "Apple REIT") at all times to qualify as a real estate investment
trust ("REIT") under sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code").
1.3 FILINGS.
(a) The Partnership has filed with the Commission a certificate of
limited partnership (the "Certificate") pursuant to Va Code Section 50-73.11.
(b) The Certificate designates 306 East Main Street, Richmond,
Virginia 23219 as the principal office (the "Principal Office") of the
Partnership. It designates c/o McGuire, Woods, Battle & Boothe LLP, One James
Center, 901 East Cary Street, Richmond, Virginia 23219 as its registered office
(the "Registered Office") and Martin B. Richards, Esq., at that address, as its
registered agent (the "Registered Agent").
<PAGE>
ARTICLE II
MANAGEMENT
2.1 THE GENERAL PARTNER. The General Partner shall have the sole and
exclusive right, duty and power to manage the business of the Partnership,
including, without limitation, the right and power to:
(i) acquire, hold, sell, maintain, encumber, improve,
develop or lease Partnership property, real or personal, and any
interest therein on such terms and conditions as the General Partner
deems advisable;
(ii) borrow money on behalf of the Partnership,
secure any such borrowings with Partnership assets, and repay the same
at any time or from time to time;
(iii) establish investment accounts for the
Partnership and deposit and withdraw funds in or from such accounts;
(iv) assign, compromise or release any claim of, or
debt due, the Partnership;
(v) institute and defend actions at law or in equity
on behalf of the Partnership and consent to arbitrate any disputes or
controversies of the Partnership;
(vi) engage and retain accountants, lawyers and other
professional persons to perform services for the Partnership, and
purchase such goods and other services as may be required to conduct
the business of the Partnership; and
(vii) enter into such contracts and perform such
other acts as may be necessary to further the business of the
Partnership.
2.2 LIMITATIONS ON POWER AND AUTHORITY. Notwithstanding anything to the
contrary in this Partnership Agreement, the General Partner's rights, authority
and power are subject to and limited by certain provisions of the Bylaws of the
Apple REIT (including Article XIII therein) and actions described in such Bylaws
(including such Article) may only be undertaken in compliance with the
provisions thereof, including the obtaining of any consents referred to therein.
-2-
<PAGE>
ARTICLE III
LIMITED PARTNERS
3.1 PARTICIPATION IN MANAGEMENT. The Limited Partner shall not
participate in the management or control of the business of the Partnership, and
shall have no power to sign for or bind the Partnership.
ARTICLE IV
CAPITAL; PROFITS AND LOSSES; COMPENSATION; DISTRIBUTIONS
4.1 CAPITAL CONTRIBUTIONS. Each of the Partners has contributed to the
capital of the Partnership the property set forth on Schedule A. The Partners
shall not be required to make any additional capital contributions except as
required by law, but the Partners may make such additional contributions of cash
or property as they may mutually agree. No Partner shall have any right to
require the return of all or any part of its capital, or to receive interest
with respect thereto.
4.2 CAPITAL ACCOUNTS. A separate capital account ("Capital Account")
shall be maintained for each Partner. The value of each Capital Account shall be
the sum of the cash contributions to the account, the agreed upon value of
contributions of property to the account and the share of Partnership profits
allocated to the account, less all distributions made from the account and the
share of Partnership losses allocated to the account.
4.3 PROFITS AND LOSSES. The net profits and net losses of the
Partnership for any period (except for the profits and losses upon dissolution)
shall be credited or charged to the Capital Accounts of the Partners in the
percentages set forth on Schedule A under the heading "Partners' Percentages"
(as the same may be amended from time to time, the "Partners' Percentages").
4.4 DISTRIBUTIONS. Any cash which, in the opinion of the General
Partner, is not reasonably required for the operation of the business of the
Partnership or for Partnership reserves (other than amounts distributed upon
dissolution) shall be distributed to the Partners in accordance with the
Partners' Percentages not less frequently than each calendar quarter. Other
distributions of assets may be made from time to time in the same manner.
4.5 REIT DISTRIBUTIONS. Notwithstanding anything to the contrary in
this Agreement, the General Partner shall cause the Partnership to distribute
amounts sufficient to enable the Apple REIT to pay its shareholders dividends
that will allow the Apple REIT to (i) meet the distribution requirement for
qualification as a REIT as set forth in Section 857(a)(1) of the Code and (ii)
avoid any federal income or excise tax liability imposed by the Code.
4.6 LOANS. A loan by a Partner to the Partnership shall not be
considered a capital contribution and shall be repaid as debt of the
Partnership.
-3-
<PAGE>
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION.
(a) The Partnership shall indemnify each Partner (and each
director and officer of a Partner) who was, is or is threatened to be made a
party to any action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, and whether formal or informal (a
"Proceeding"), (i) solely by reason of being or having been a Partner or a
director or officer of a Partner or (ii) as a result of having served at the
request of the Partnership as a fiduciary for an employee benefit or other plan
related to the business of the Partnership, against any liability and reasonable
expenses (including reasonable attorney's fees), incurred as a result of such
Proceeding, except such liabilities and expenses which are incurred as a result
of a breach of this Partnership Agreement, willful misconduct or a knowing
violation of the law.
(b) The Partnership shall promptly make advances or
reimbursements for reasonable expenses (including attorney's fees) incurred by
any Partner or a director or officer of a Partner claiming indemnification under
this Article unless it has been determined that such Partner, director or
officer is not entitled to indemnification. Advances or reimbursements made in
advance of any such determination shall be conditioned upon receipt from the
Partner, director or officer claiming indemnification of a written undertaking
to repay the amount of such advances or reimbursements if it is ultimately
determined that such Partner, director or officer is not entitled to
indemnification.
ARTICLE VI
EVENTS OF DISSOLUTION
6.1 EVENTS OF DISSOLUTION. The Partnership shall only be dissolved:
(i) upon the election of the General Partner;
(ii) at such time as there is no General Partner
serving unless, within 90 days, the Limited Partner consents to
continue the business of the Partnership and appoints one or more
General Partners;
(iii) upon automatic cancellation of the certificate
of limited partnership for failure to pay annual registration fees,
unless steps to obtain reinstatement are promptly taken; or
(iv) by judicial decree.
-4-
<PAGE>
ARTICLE VII
DISSOLUTION, WINDING UP AND TERMINATION
7.1 GENERAL. Upon dissolution without continuation, the business of the
Partnership shall be wound up by the General Partner or, if there is no General
Partner, by a representative designated by the Limited Partner (either of which
or whom is hereinafter referred to as the "Liquidating Representative"). The
Liquidating Representative shall proceed with reasonable promptness to liquidate
the business and assets of the Partnership and may determine whether and to
which Partners properties should be distributed in kind. Partnership assets
shall be distributed in the following order:
(i) to creditors of the Partnership, including
Partners who are creditors, in the order of priority provided by law;
(ii) to the creation of such reserves for
contingencies as the Liquidating Representative may deem necessary or
advisable;
(iii) to the Limited Partner to the extent of its
contribution to capital;
(iv) to the General Partner to the extent of its
contribution to capital;
(v) to the Partners, General and Limited, according
to their Capital Account balances, after all adjustments.
ARTICLE VIII
MISCELLANEOUS
8.1 BOOKS OF ACCOUNT AND RECORDS. The Partnership shall keep complete
books of account at the Principal Office which shall be open to examination by
the Partners, the Apple REIT and their authorized representatives during normal
business hours. The books shall be kept on a cash or accrual basis, as
determined by the General Partner.
8.2 TAX COMPLIANCE. Notwithstanding anything to the contrary contained
in this Partnership Agreement, all actions taken in the conduct of the business
of the Partnership, or on its dissolution, shall comply with the provisions of
Section 704 of the Code and the Regulations thereunder. The General Partner
shall be the "Tax Matters Partner" required by the Code.
8.3 POWER OF ATTORNEY. The Limited Partner hereby appoints the General
Partner its attorney-in-fact, or agent, to execute, acknowledge, deliver and
file in its name any document required by law to be filed by the Partnership or
such Partner with any governmental body or agency. Any such appointment is a
special power, coupled with an interest, and shall remain in effect as long as
the Partner granting it has any interest in the Partnership or remains
responsible for any obligations under this Partnership Agreement.
-5-
<PAGE>
8.4 COUNTERPARTS. This Partnership Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.5 AMENDMENTS. This Partnership Agreement may be amended only with the
consent of the General Partner and the Limited Partner.
8.6 THIRD PARTIES; SUCCESSORS AND ASSIGNS. The agreements contained
herein are for the benefit of the parties hereto and their permitted successors
and assigns and are not for the benefit of any third parties, including, without
limitation, creditors of the Partnership.
8.7 HEADINGS. The section headings herein are for convenience only and
shall not affect the interpretation of this Partnership Agreement.
8.8 INTERPRETATION. This Partnership Agreement is executed and
delivered in the Commonwealth of Virginia and shall be construed and enforced in
accordance with the laws of such state without giving effect to its choice of
law rules.
WITNESS the following signatures.
GENERAL PARTNER
Apple General, Inc.
By: /s/ Glade M. Knight
-------------------------
Name: Glade M. Knight
Title: President
LIMITED PARTNER:
Apple Limited, Inc.
By: /s/ Glade M. Knight
-------------------------
Name: Glade M. Knight
Title: President
-6-
<PAGE>
SCHEDULE A
GENERAL PARTNER
Name and Capital Partners'
Business Address Contribution Percentages
Apple General, Inc. $ 1.00 1%
306 East Main Street
Richmond, Virginia 23219
LIMITED PARTNER
Name and
Business Address
Apple Limited, Inc. $99.00 99%
306 East Main Street
Richmond, Virginia 23219
-7-
<PAGE>
EXHIBIT A
BEING a tract of land out of the J. R. STEVENS, ABSTRACT NO. 1490, in the City
of Grapevine, TARRANT County, Texas, and being all of GRAYSON SQUARE APARTMENTS,
PHASE II, an addition to the City of Grapevine as recorded in Volume 388-198,
Pages 65 and 66, Plat Records, TARRANT County, Texas, and being more
particularly described as follows:
BEGINNING at an iron rod located on the West line of Grayson Drive (a 70 foot
Right-of-Way), said point being located 459.0 feet from the West Right-of-Way
line of S. H. 121 along said West line of Grayson Drive;
THENCE South 60 degrees 36 minutes 52 seconds West a distance of 441.37 feet to
an iron rod found for corner;
THENCE South 89 degrees 51 minutes 52 seconds West a distance of 290.00 feet to
an iron rod found for corner;
THENCE North 00 degrees and 08 minutes 08 seconds West a distance of 261.59 feet
to an iron rod found for corner, said iron rod being the beginning of a curve to
the left having a central angle of 45 degrees 00 minutes 00 second, a radius of
426.78 feet and a tangent of 176.78 feet;
THENCE along said curve to the left an arc length of 335.19 feet to an iron rod
found for corner, said iron rod being a point of reverse curvature of a curve to
the right having a central angle of 13 degrees 20 minutes 55 seconds, a radius
of 426.78 feet and a tangent of 49.94 feet;
THENCE along said curve to the right an arc length of 99.43 feet to an iron rod
found for corner;
THENCE North 52 degrees 30 minutes 48 seconds East a distance of 721.03 feet to
an iron rod found for corner, said point being located on the West Right-of-Way
line of the aforementioned Grayson Drive, also being located in a curve to the
left having a central angle of 24 degrees 37 minutes 23 seconds, a radius of
370.00 feet, a tangent 80.75 feet and a chord bearing of South 28 degrees 51
minutes 04 seconds East;
THENCE along the said West line of Grayson Drive the following:
Along said curve to the left an arc length of 159.01 feet to an iron rod found
for corner;
South 41 degrees 09 minutes 46 seconds East a distance of 132.59 feet to an iron
rod found for corner, said iron rod being the beginning of a curve to the right
having a central angle of 38 degrees 00 minutes 04 seconds, a radius of 370.00
feet and a tangent of 127.41 feet;
Along said curve to the right an arc length of 245.40 feet to a point for
corner;
South 03 degrees 09 minutes 42 seconds East a distance of 301.66 feet to an iron
rod found for corner, said iron rod being the beginning of a curve to the left
having a central angle of 15 degrees 49 minutes 12 seconds, a radius of 370.00
feet and a tangent of 51.41 feet;
Along said curve to the left an arc length of 102.16 feet to the POINT OF
BEGINNING and CONTAINING 13.5518 acres of land, more or less.
LIMITED PARTNERSHIP AGREEMENT
OF
APPLE REIT III LIMITED PARTNERSHIP
This LIMITED PARTNERSHIP AGREEMENT (the "Partnership Agreement") is
made as of June 23, 1998, by and between Apple General, Inc., a Virginia
corporation, the general partner ("General Partner"), and Apple Limited, Inc., a
Virginia corporation, the limited partner ("Limited Partner" and together with
the General Partner, the "Partners").
INTRODUCTION
A. The General Partner and the Limited Partner have agreed to form a
limited partnership (the "Partnership") pursuant to the provisions of the
"Virginia Revised Uniform Limited Partnership Act" (the "Act"). The existence of
the Partnership shall commence upon the filing of a certificate of limited
partnership with the Virginia State Corporation Commission (the "Commission").
B. The rights, duties and obligations of the Partners shall be governed
by the Act except as otherwise provided in this Partnership Agreement. The term
"Person," as used herein, means an individual or an entity.
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 NAME. The name of the Partnership is Apple REIT III Limited
Partnership. The Partnership may trade or transact business under the name
Hayden's Crossing Apartments or such other name as shall be selected by the
General Partner.
1.2 PURPOSE. The Partnership is formed to acquire, hold, operate and in
all respects act as owner of the Hayden's Crossing Apartments in Grand Prairie,
Texas (located on the property more specifically described on Exhibit A) and to
engage in any and all activities related or incidental thereto or agreed to by
the Partners from time to time provided, however, such activities shall be
limited to and conducted in such a manner as to permit Apple Residential Income
Trust, Inc. (the "Apple REIT") at all times to qualify as a real estate
investment trust ("REIT") under sections 856 through 860 of the Internal Revenue
Code of 1986, as amended (the "Code").
1.3 FILINGS.
(a) The Partnership has filed with the Commission a
certificate of limited partnership (the "Certificate") pursuant to Va Code
Section 50-73.11.
(b) The Certificate designates 306 East Main Street, Richmond,
Virginia 23219 as the principal office (the "Principal Office") of the
Partnership. It designates c/o McGuire, Woods, Battle & Boothe LLP, One James
Center, 901 East Cary Street, Richmond,
<PAGE>
Virginia 23219 as its registered office (the "Registered Office") and Martin B.
Richards, Esq., at that address, as its registered agent (the "Registered
Agent").
ARTICLE II
MANAGEMENT
2.1 THE GENERAL PARTNER. The General Partner shall have the sole and
exclusive right, duty and power to manage the business of the Partnership,
including, without limitation, the right and power to:
(i) acquire, hold, sell, maintain, encumber, improve,
develop or lease Partnership property, real or personal, and any
interest therein on such terms and conditions as the General Partner
deems advisable;
(ii) borrow money on behalf of the Partnership,
secure any such borrowings with Partnership assets, and repay the same
at any time or from time to time;
(iii) establish investment accounts for the
Partnership and deposit and withdraw funds in or from such accounts;
(iv) assign, compromise or release any claim of, or
debt due, the Partnership;
(v) institute and defend actions at law or in equity
on behalf of the Partnership and consent to arbitrate any disputes or
controversies of the Partnership;
(vi) engage and retain accountants, lawyers and other
professional persons to perform services for the Partnership, and
purchase such goods and other services as may be required to conduct
the business of the Partnership; and
(vii) enter into such contracts and perform such
other acts as may be necessary to further the business of the
Partnership.
2.2 LIMITATIONS ON POWER AND AUTHORITY. Notwithstanding anything to the
contrary in this Partnership Agreement, the General Partner's rights, authority
and power are subject to and limited by certain provisions of the Bylaws of the
Apple REIT (including Article XIII therein) and actions described in such Bylaws
(including such Article) may only be undertaken in compliance with the
provisions thereof, including the obtaining of any consents referred to therein.
-2-
<PAGE>
ARTICLE III
LIMITED PARTNERS
3.1 PARTICIPATION IN MANAGEMENT. The Limited Partner shall not
participate in the management or control of the business of the Partnership, and
shall have no power to sign for or bind the Partnership.
ARTICLE IV
CAPITAL; PROFITS AND LOSSES; COMPENSATION; DISTRIBUTIONS
4.1 CAPITAL CONTRIBUTIONS. Each of the Partners has contributed to the
capital of the Partnership the property set forth on Schedule A. The Partners
shall not be required to make any additional capital contributions except as
required by law, but the Partners may make such additional contributions of cash
or property as they may mutually agree. No Partner shall have any right to
require the return of all or any part of its capital, or to receive interest
with respect thereto.
4.2 CAPITAL ACCOUNTS. A separate capital account ("Capital Account")
shall be maintained for each Partner. The value of each Capital Account shall be
the sum of the cash contributions to the account, the agreed upon value of
contributions of property to the account and the share of Partnership profits
allocated to the account, less all distributions made from the account and the
share of Partnership losses allocated to the account.
4.3 PROFITS AND LOSSES. The net profits and net losses of the
Partnership for any period (except for the profits and losses upon dissolution)
shall be credited or charged to the Capital Accounts of the Partners in the
percentages set forth on Schedule A under the heading "Partners' Percentages"
(as the same may be amended from time to time, the "Partners' Percentages").
4.4 DISTRIBUTIONS. Any cash which, in the opinion of the General
Partner, is not reasonably required for the operation of the business of the
Partnership or for Partnership reserves (other than amounts distributed upon
dissolution) shall be distributed to the Partners in accordance with the
Partners' Percentages not less frequently than each calendar quarter. Other
distributions of assets may be made from time to time in the same manner.
4.5 REIT DISTRIBUTIONS. Notwithstanding anything to the contrary in
this Agreement, the General Partner shall cause the Partnership to distribute
amounts sufficient to enable the Apple REIT to pay its shareholders dividends
that will allow the Apple REIT to (i) meet the distribution requirement for
qualification as a REIT as set forth in Section 857(a)(1) of the Code and (ii)
avoid any federal income or excise tax liability imposed by the Code.
4.6 LOANS. A loan by a Partner to the Partnership shall not be
considered a capital contribution and shall be repaid as debt of the
Partnership.
-3-
<PAGE>
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION.
(a) The Partnership shall indemnify each Partner (and each
director and officer of a Partner) who was, is or is threatened to be made a
party to any action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, and whether formal or informal (a
"Proceeding"), (i) solely by reason of being or having been a Partner or a
director or officer of a Partner or (ii) as a result of having served at the
request of the Partnership as a fiduciary for an employee benefit or other plan
related to the business of the Partnership, against any liability and reasonable
expenses (including reasonable attorney's fees), incurred as a result of such
Proceeding, except such liabilities and expenses which are incurred as a result
of a breach of this Partnership Agreement, willful misconduct or a knowing
violation of the law.
(b) The Partnership shall promptly make advances or
reimbursements for reasonable expenses (including attorney's fees) incurred by
any Partner or a director or officer of a Partner claiming indemnification under
this Article unless it has been determined that such Partner, director or
officer is not entitled to indemnification. Advances or reimbursements made in
advance of any such determination shall be conditioned upon receipt from the
Partner, director or officer claiming indemnification of a written undertaking
to repay the amount of such advances or reimbursements if it is ultimately
determined that such Partner, director or officer is not entitled to
indemnification.
ARTICLE VI
EVENTS OF DISSOLUTION
6.1 EVENTS OF DISSOLUTION. The Partnership shall only be dissolved:
(i) upon the election of the General Partner;
(ii) at such time as there is no General Partner
serving unless, within 90 days, the Limited Partner consents to
continue the business of the Partnership and appoints one or more
General Partners;
(iii) upon automatic cancellation of the certificate
of limited partnership for failure to pay annual registration fees,
unless steps to obtain reinstatement are promptly taken; or
(iv) by judicial decree.
-4-
<PAGE>
ARTICLE VII
DISSOLUTION, WINDING UP AND TERMINATION
7.1 GENERAL. Upon dissolution without continuation, the business of the
Partnership shall be wound up by the General Partner or, if there is no General
Partner, by a representative designated by the Limited Partner (either of which
or whom is hereinafter referred to as the "Liquidating Representative"). The
Liquidating Representative shall proceed with reasonable promptness to liquidate
the business and assets of the Partnership and may determine whether and to
which Partners properties should be distributed in kind. Partnership assets
shall be distributed in the following order:
(i) to creditors of the Partnership, including
Partners who are creditors, in the order of priority provided by law;
(ii) to the creation of such reserves for
contingencies as the Liquidating Representative may deem necessary or
advisable;
(iii) to the Limited Partner to the extent of its
contribution to capital;
(iv) to the General Partner to the extent of its
contribution to capital;
(v) to the Partners, General and Limited, according
to their Capital Account balances, after all adjustments.
ARTICLE VIII
MISCELLANEOUS
8.1 BOOKS OF ACCOUNT AND RECORDS. The Partnership shall keep complete
books of account at the Principal Office which shall be open to examination by
the Partners, the Apple REIT and their authorized representatives during normal
business hours. The books shall be kept on a cash or accrual basis, as
determined by the General Partner.
8.2 TAX COMPLIANCE. Notwithstanding anything to the contrary contained
in this Partnership Agreement, all actions taken in the conduct of the business
of the Partnership, or on its dissolution, shall comply with the provisions of
Section 704 of the Code and the Regulations thereunder. The General Partner
shall be the "Tax Matters Partner" required by the Code.
8.3 POWER OF ATTORNEY. The Limited Partner hereby appoints the General
Partner its attorney-in-fact, or agent, to execute, acknowledge, deliver and
file in its name any document required by law to be filed by the Partnership or
such Partner with any governmental body or agency. Any such appointment is a
special power, coupled with an interest, and shall remain in effect as long as
the Partner granting it has any interest in the Partnership or remains
responsible for any obligations under this Partnership Agreement.
-5-
<PAGE>
8.4 COUNTERPARTS. This Partnership Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.5 AMENDMENTS. This Partnership Agreement may be amended only with the
consent of the General Partner and the Limited Partner.
8.6 THIRD PARTIES; SUCCESSORS AND ASSIGNS. The agreements contained
herein are for the benefit of the parties hereto and their permitted successors
and assigns and are not for the benefit of any third parties, including, without
limitation, creditors of the Partnership.
8.7 HEADINGS. The section headings herein are for convenience only and
shall not affect the interpretation of this Partnership Agreement.
8.8 INTERPRETATION. This Partnership Agreement is executed and
delivered in the Commonwealth of Virginia and shall be construed and enforced in
accordance with the laws of such state without giving effect to its choice of
law rules.
WITNESS the following signatures.
GENERAL PARTNER
Apple General, Inc.
By: /s/ Glade M. Knight
---------------------------
Name: Glade M. Knight
Title: President
LIMITED PARTNER:
Apple Limited, Inc.
By: /s/ Glade M. Knight
---------------------------
Name: Glade M. Knight
Title: President
-6-
<PAGE>
SCHEDULE A
GENERAL PARTNER
Name and Capital Partners'
Business Address Contribution Percentages
Apple General, Inc. $ 1.00 1%
306 East Main Street
Richmond, Virginia 23219
LIMITED PARTNER
Name and
Business Address
Apple Limited, Inc. $99.00 99%
306 East Main Street
Richmond, Virginia 23219
-7-
<PAGE>
EXHIBIT A
BEING a tract of land situated in the WILLIAM J. WHITING SURVEY, ABSTRACT NO.
1614, and the GARCIA, MONTEZ AND DURAN SURVEY, ABSTRACT NO. 629, and being
SUNSET CROSSING III , an addition to the City of Grand Prairie as recorded in
Volume 388-165, Page 26, Plat Records, TARRANT County, Texas and being more
particularly described as follows:
BEGINNING at an iron rod found for corner in the curving East line of State
Highway 360 (variable width right-of-way), said iron rod being the Southwest
corner of said Sunset Crossing III and the Northwest corner of Sunset Crossing
as recorded in Volume 388-143, Page 26, Plat Records, TARRANT County, Texas and
also curving in a Northeasterly direction to the right with a radial bearing of
South 71 degrees 13 minutes 58 seconds East, a central angle of 04 degrees 57
minutes 30 seconds, a radius of 1889.36 feet, and a tangent distance of 81.80
feet;
THENCE along said East line of State Highway 360 and said curve to the right an
arc distance of 163.50 feet to an iron rod found for corner, said iron rod being
the point of tangency;
THENCE North 23 degrees 43 minutes 32 seconds East along said East line of State
Highway 360 a distance of 152.72 feet to an iron rod found for corner;
THENCE departing said State Highway 360, South 89 degrees 31 minutes 34 seconds
East a distance of 230.00 feet to an iron rod found for corner;
THENCE North 44 degrees 49 minutes 30 seconds East a distance of 226.81 feet to
an iron rod found for corner;
THENCE South 89 degrees 31 minutes 34 seconds East a distance of 310.00 feet to
an iron rod found for corner situated in the curving Westerly line of Hawco
Drive (a 60 foot right-of-way);
THENCE along said Westerly line of Hawco Drive the following;
Along said curve to the left in a Southeasterly direction, having a radial
bearing of North 86 degrees 39 minutes 17 seconds East, a central angle of 14
degrees 55 minutes 51 seconds, a radius of 830.00 feet, a tangent distance of
108.76 feet, and an arc length of 216.29 feet to an iron rod found for corner;
South 18 degrees 16 minutes 34 seconds East a distance of 238.99 feet to an iron
rod found for corner, said point being the point of curvature to the right;
Along said curve to the right having a radial bearing of South 71 degrees 43
minutes 26 seconds West, a central angle of 01 degree 22 minutes 13 seconds, a
radius of 770.00 feet, a tangent distance of 9.21 feet and an arc length of
18.42 feet to an iron rod found for corner, said corner being the Southeast
corner of Sunset Crossing III and the Northeast corner of Sunset Crossing;
THENCE departing said Hawco Drive, North 89 degrees 31 minutes 34 seconds West
along the common South line of Sunset Crossing III with the North line of Sunset
Crossing a distance of 941.55 feet to the POINT OF BEGINNING and CONTAINING
7.1121 acres of land, more or less.
LIMITED PARTNERSHIP AGREEMENT
OF
APPLE REIT IV LIMITED PARTNERSHIP
This LIMITED PARTNERSHIP AGREEMENT (the "Partnership Agreement") is
made as of June 23, 1998, by and between Apple General, Inc., a Virginia
corporation, the general partner ("General Partner"), and Apple Limited, Inc., a
Virginia corporation, the limited partner ("Limited Partner" and together with
the General Partner, the "Partners").
INTRODUCTION
A. The General Partner and the Limited Partner have agreed to form a
limited partnership (the "Partnership") pursuant to the provisions of the
"Virginia Revised Uniform Limited Partnership Act" (the "Act"). The existence of
the Partnership shall commence upon the filing of a certificate of limited
partnership with the Virginia State Corporation Commission (the "Commission").
B. The rights, duties and obligations of the Partners shall be governed
by the Act except as otherwise provided in this Partnership Agreement. The term
"Person," as used herein, means an individual or an entity.
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 NAME. The name of the Partnership is Apple REIT IV Limited
Partnership. The Partnership may trade or transact business under the name
Newport Apartments or such other name as shall be selected by the General
Partner.
1.2 PURPOSE. The Partnership is formed to acquire, hold, operate and in
all respects act as owner of the Newport Apartments in Austin, Texas (located on
the property more specifically described on Exhibit A) and to engage in any and
all activities related or incidental thereto or agreed to by the Partners from
time to time provided, however, such activities shall be limited to and
conducted in such a manner as to permit Apple Residential Income Trust, Inc.
(the "Apple REIT") at all times to qualify as a real estate investment trust
("REIT") under sections 856 through 860 of the Internal Revenue Code of 1986, as
amended (the "Code").
1.3 FILINGS.
(a) The Partnership has filed with the Commission a
certificate of limited partnership (the "Certificate") pursuant to Va Code
Section 50-73.11.
(b) The Certificate designates 306 East Main Street, Richmond,
Virginia 23219 as the principal office (the "Principal Office") of the
Partnership. It designates c/o McGuire, Woods, Battle & Boothe LLP, One James
Center, 901 East Cary Street, Richmond, Virginia 23219 as its registered office
(the "Registered Office") and Martin B. Richards, Esq., at that address, as its
registered agent (the "Registered Agent").
<PAGE>
ARTICLE II
MANAGEMENT
2.1 THE GENERAL PARTNER. The General Partner shall have the sole and
exclusive right, duty and power to manage the business of the Partnership,
including, without limitation, the right and power to:
(i) acquire, hold, sell, maintain, encumber, improve,
develop or lease Partnership property, real or personal, and any
interest therein on such terms and conditions as the General Partner
deems advisable;
(ii) borrow money on behalf of the Partnership,
secure any such borrowings with Partnership assets, and repay the same
at any time or from time to time;
(iii) establish investment accounts for the
Partnership and deposit and withdraw funds in or from such accounts;
(iv) assign, compromise or release any claim of, or
debt due, the Partnership;
(v) institute and defend actions at law or in equity
on behalf of the Partnership and consent to arbitrate any disputes or
controversies of the Partnership;
(vi) engage and retain accountants, lawyers and other
professional persons to perform services for the Partnership, and
purchase such goods and other services as may be required to conduct
the business of the Partnership; and
(vii) enter into such contracts and perform such
other acts as may be necessary to further the business of the
Partnership.
2.2 LIMITATIONS ON POWER AND AUTHORITY. Notwithstanding anything to the
contrary in this Partnership Agreement, the General Partner's rights, authority
and power are subject to and limited by certain provisions of the Bylaws of the
Apple REIT (including Article XIII therein) and actions described in such Bylaws
(including such Article) may only be undertaken in compliance with the
provisions thereof, including the obtaining of any consents referred to therein.
-2-
<PAGE>
ARTICLE III
LIMITED PARTNERS
3.1 PARTICIPATION IN MANAGEMENT. The Limited Partner shall not
participate in the management or control of the business of the Partnership, and
shall have no power to sign for or bind the Partnership.
ARTICLE IV
CAPITAL; PROFITS AND LOSSES; COMPENSATION; DISTRIBUTIONS
4.1 CAPITAL CONTRIBUTIONS. Each of the Partners has contributed to the
capital of the Partnership the property set forth on Schedule A. The Partners
shall not be required to make any additional capital contributions except as
required by law, but the Partners may make such additional contributions of cash
or property as they may mutually agree. No Partner shall have any right to
require the return of all or any part of its capital, or to receive interest
with respect thereto.
4.2 CAPITAL ACCOUNTS. A separate capital account ("Capital Account")
shall be maintained for each Partner. The value of each Capital Account shall be
the sum of the cash contributions to the account, the agreed upon value of
contributions of property to the account and the share of Partnership profits
allocated to the account, less all distributions made from the account and the
share of Partnership losses allocated to the account.
4.3 PROFITS AND LOSSES. The net profits and net losses of the
Partnership for any period (except for the profits and losses upon dissolution)
shall be credited or charged to the Capital Accounts of the Partners in the
percentages set forth on Schedule A under the heading "Partners' Percentages"
(as the same may be amended from time to time, the "Partners' Percentages").
4.4 DISTRIBUTIONS. Any cash which, in the opinion of the General
Partner, is not reasonably required for the operation of the business of the
Partnership or for Partnership reserves (other than amounts distributed upon
dissolution) shall be distributed to the Partners in accordance with the
Partners' Percentages not less frequently than each calendar quarter. Other
distributions of assets may be made from time to time in the same manner.
4.5 REIT DISTRIBUTIONS. Notwithstanding anything to the contrary in
this Agreement, the General Partner shall cause the Partnership to distribute
amounts sufficient to enable the Apple REIT to pay its shareholders dividends
that will allow the Apple REIT to (i) meet the distribution requirement for
qualification as a REIT as set forth in Section 857(a)(1) of the Code and (ii)
avoid any federal income or excise tax liability imposed by the Code.
4.6 LOANS. A loan by a Partner to the Partnership shall not be
considered a capital contribution and shall be repaid as debt of the
Partnership.
-3-
<PAGE>
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION.
(a) The Partnership shall indemnify each Partner (and each
director and officer of a Partner) who was, is or is threatened to be made a
party to any action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, and whether formal or informal (a
"Proceeding"), (i) solely by reason of being or having been a Partner or a
director or officer of a Partner or (ii) as a result of having served at the
request of the Partnership as a fiduciary for an employee benefit or other plan
related to the business of the Partnership, against any liability and reasonable
expenses (including reasonable attorney's fees), incurred as a result of such
Proceeding, except such liabilities and expenses which are incurred as a result
of a breach of this Partnership Agreement, willful misconduct or a knowing
violation of the law.
(b) The Partnership shall promptly make advances or
reimbursements for reasonable expenses (including attorney's fees) incurred by
any Partner or a director or officer of a Partner claiming indemnification under
this Article unless it has been determined that such Partner, director or
officer is not entitled to indemnification. Advances or reimbursements made in
advance of any such determination shall be conditioned upon receipt from the
Partner, director or officer claiming indemnification of a written undertaking
to repay the amount of such advances or reimbursements if it is ultimately
determined that such Partner, director or officer is not entitled to
indemnification.
ARTICLE VI
EVENTS OF DISSOLUTION
6.1 EVENTS OF DISSOLUTION. The Partnership shall only be dissolved:
(i) upon the election of the General Partner;
(ii) at such time as there is no General Partner
serving unless, within 90 days, the Limited Partner consents to
continue the business of the Partnership and appoints one or more
General Partners;
(iii) upon automatic cancellation of the certificate
of limited partnership for failure to pay annual registration fees,
unless steps to obtain reinstatement are promptly taken; or
(iv) by judicial decree.
-4-
<PAGE>
ARTICLE VII
DISSOLUTION, WINDING UP AND TERMINATION
7.1 GENERAL. Upon dissolution without continuation, the business of the
Partnership shall be wound up by the General Partner or, if there is no General
Partner, by a representative designated by the Limited Partner (either of which
or whom is hereinafter referred to as the "Liquidating Representative"). The
Liquidating Representative shall proceed with reasonable promptness to liquidate
the business and assets of the Partnership and may determine whether and to
which Partners properties should be distributed in kind. Partnership assets
shall be distributed in the following order:
(i) to creditors of the Partnership, including
Partners who are creditors, in the order of priority provided by law;
(ii) to the creation of such reserves for
contingencies as the Liquidating Representative may deem necessary or
advisable;
(iii) to the Limited Partner to the extent of its
contribution to capital;
(iv) to the General Partner to the extent of its
contribution to capital;
(v) to the Partners, General and Limited, according
to their Capital Account balances, after all adjustments.
ARTICLE VIII
MISCELLANEOUS
8.1 BOOKS OF ACCOUNT AND RECORDS. The Partnership shall keep complete
books of account at the Principal Office which shall be open to examination by
the Partners, the Apple REIT and their authorized representatives during normal
business hours. The books shall be kept on a cash or accrual basis, as
determined by the General Partner.
8.2 TAX COMPLIANCE. Notwithstanding anything to the contrary contained
in this Partnership Agreement, all actions taken in the conduct of the business
of the Partnership, or on its dissolution, shall comply with the provisions of
Section 704 of the Code and the Regulations thereunder. The General Partner
shall be the "Tax Matters Partner" required by the Code.
8.3 POWER OF ATTORNEY. The Limited Partner hereby appoints the General
Partner its attorney-in-fact, or agent, to execute, acknowledge, deliver and
file in its name any document required by law to be filed by the Partnership or
such Partner with any governmental body or agency. Any such appointment is a
special power, coupled with an interest, and shall remain in effect as long as
the Partner granting it has any interest in the Partnership or remains
responsible for any obligations under this Partnership Agreement.
-5-
<PAGE>
8.4 COUNTERPARTS. This Partnership Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.5 AMENDMENTS. This Partnership Agreement may be amended only with the
consent of the General Partner and the Limited Partner.
8.6 THIRD PARTIES; SUCCESSORS AND ASSIGNS. The agreements contained
herein are for the benefit of the parties hereto and their permitted successors
and assigns and are not for the benefit of any third parties, including, without
limitation, creditors of the Partnership.
8.7 HEADINGS. The section headings herein are for convenience only and
shall not affect the interpretation of this Partnership Agreement.
8.8 INTERPRETATION. This Partnership Agreement is executed and
delivered in the Commonwealth of Virginia and shall be construed and enforced in
accordance with the laws of such state without giving effect to its choice of
law rules.
WITNESS the following signatures.
GENERAL PARTNER
Apple General, Inc.
By: /s/ Glade M. Knight
------------------------------
Name: Glade M. Knight
Title: President
LIMITED PARTNER:
Apple Limited, Inc.
By: /s/ Glade M. Knight
------------------------------
Name: Glade M. Knight
Title: President
-6-
<PAGE>
SCHEDULE A
GENERAL PARTNER
Name and Capital Partners'
Business Address Contribution Percentages
Apple General, Inc. $ 1.00 1%
306 East Main Street
Richmond, Virginia 23219
LIMITED PARTNER
Name and
Business Address
Apple Limited, Inc. $99.00 99%
306 East Main Street
Richmond, Virginia 23219
-7-
<PAGE>
EXHIBIT A
All of that certain tract or parcel of land out of the George W. Davis Survey in
Travis County, Texas, being all of Lot 23 and Lot 24, NORTHGATE TERRACE SECTION
TWO, a subdivision in the City of Austin, Travis County, Texas, the herein
described tract being more particularly described by metes and bounds as
follows:
BEGINNING at a 1 inch iron pipe found at the most Southerly corner of the said
Lot 23, being at the most Westerly corner of Tract "A" Crest Royal Addition, a
subdivision in the City of Austin, Travis County, as recorded in Plat Book 65,
Page 89 of the Plat Records of Travis County, Texas, being in the North right of
way line of West Rundberg Lane (a 90 foot public right of way) for the most
Southerly corner and PLACE OF BEGINNING hereof;
THENCE along the North right of way line of Rundberg Lane, being the Southwest
lines of the said Lots 23 and 24, North 60 degrees 02 minutes 45 seconds West
for a distance of 515.93 feet to a 1/2 inch iron pin found at the most Westerly
corner of the said Lot 24, for the most Westerly corner of the said Lot 24, for
the most Westerly corner hereof;
THENCE along the Northwest line of the said Lot 24, North 30 degrees 01 minutes
East for a distance of 560.06 feet to a 1 inch iron pipe found at the most
Northerly corner of the said Lot 24, for the most Northerly corner hereof;
THENCE along the Northeast lines of the said Lots 23 and 24, South 60 degree 11
minutes 15 seconds East passing a 1/2 inch iron pin found at a distance of 0.86
feet and continuing for a total distance of 515.78 feet to a 1 inch iron pipe
found at the most Easterly corner of the said Lot 23, being at the most
Northerly corner of the said Tract "A", for the most Easterly corner hereof;
THENCE along the Southeast line of the said Lot 23, South 30 degrees 00 minutes
West for a distance of 561.34 feet to the PLACE OF BEGINNING and containing
6.640 acres of land, more or less.
LIMITED PARTNERSHIP AGREEMENT
OF
APPLE REIT V LIMITED PARTNERSHIP
This LIMITED PARTNERSHIP AGREEMENT (the "Partnership Agreement") is
made as of June 23, 1998, by and between Apple General, Inc., a Virginia
corporation, the general partner ("General Partner"), and Apple Limited, Inc., a
Virginia corporation, the limited partner ("Limited Partner" and together with
the General Partner, the "Partners").
INTRODUCTION
A. The General Partner and the Limited Partner have agreed to form a
limited partnership (the "Partnership") pursuant to the provisions of the
"Virginia Revised Uniform Limited Partnership Act" (the "Act"). The existence of
the Partnership shall commence upon the filing of a certificate of limited
partnership with the Virginia State Corporation Commission (the "Commission").
B. The rights, duties and obligations of the Partners shall be governed
by the Act except as otherwise provided in this Partnership Agreement. The term
"Person," as used herein, means an individual or an entity.
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 NAME. The name of the Partnership is Apple REIT V Limited
Partnership. The Partnership may trade or transact business under the name
Pace's Point Apartments or such other name as shall be selected by the General
Partner.
1.2 PURPOSE. The Partnership is formed to acquire, hold, operate and in
all respects act as owner of the Pace's Point Apartments in Lewisville, Texas
(located on the property more specifically described on Exhibit A) and to engage
in any and all activities related or incidental thereto or agreed to by the
Partners from time to time provided, however, such activities shall be limited
to and conducted in such a manner as to permit Apple Residential Income Trust,
Inc. (the "Apple REIT") at all times to qualify as a real estate investment
trust ("REIT") under sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code").
1.3 FILINGS.
(a) The Partnership has filed with the Commission a
certificate of limited partnership (the "Certificate") pursuant to Va Code
Section 50-73.11.
(b) The Certificate designates 306 East Main Street, Richmond,
Virginia 23219 as the principal office (the "Principal Office") of the
Partnership. It designates c/o McGuire, Woods, Battle & Boothe LLP, One James
Center, 901 East Cary Street, Richmond, Virginia 23219 as its registered office
(the "Registered Office") and Martin B. Richards, Esq., at that address, as its
registered agent (the "Registered Agent").
<PAGE>
ARTICLE II
MANAGEMENT
2.1 THE GENERAL PARTNER. The General Partner shall have the sole and
exclusive right, duty and power to manage the business of the Partnership,
including, without limitation, the right and power to:
(i) acquire, hold, sell, maintain, encumber, improve,
develop or lease Partnership property, real or personal, and any
interest therein on such terms and conditions as the General Partner
deems advisable;
(ii) borrow money on behalf of the Partnership,
secure any such borrowings with Partnership assets, and repay the same
at any time or from time to time;
(iii) establish investment accounts for the
Partnership and deposit and withdraw funds in or from such accounts;
(iv) assign, compromise or release any claim of, or
debt due, the Partnership;
(v) institute and defend actions at law or in equity
on behalf of the Partnership and consent to arbitrate any disputes or
controversies of the Partnership;
(vi) engage and retain accountants, lawyers and other
professional persons to perform services for the Partnership, and
purchase such goods and other services as may be required to conduct
the business of the Partnership; and
(vii) enter into such contracts and perform such
other acts as may be necessary to further the business of the
Partnership.
2.2 LIMITATIONS ON POWER AND AUTHORITY. Notwithstanding anything to the
contrary in this Partnership Agreement, the General Partner's rights, authority
and power are subject to and limited by certain provisions of the Bylaws of the
Apple REIT (including Article XIII therein) and actions described in such Bylaws
(including such Article) may only be undertaken in compliance with the
provisions thereof, including the obtaining of any consents referred to therein.
-2-
<PAGE>
ARTICLE III
LIMITED PARTNERS
3.1 PARTICIPATION IN MANAGEMENT. The Limited Partner shall not
participate in the management or control of the business of the Partnership, and
shall have no power to sign for or bind the Partnership.
ARTICLE IV
CAPITAL; PROFITS AND LOSSES; COMPENSATION; DISTRIBUTIONS
4.1 CAPITAL CONTRIBUTIONS. Each of the Partners has contributed to the
capital of the Partnership the property set forth on Schedule A. The Partners
shall not be required to make any additional capital contributions except as
required by law, but the Partners may make such additional contributions of cash
or property as they may mutually agree. No Partner shall have any right to
require the return of all or any part of its capital, or to receive interest
with respect thereto.
4.2 CAPITAL ACCOUNTS. A separate capital account ("Capital Account")
shall be maintained for each Partner. The value of each Capital Account shall be
the sum of the cash contributions to the account, the agreed upon value of
contributions of property to the account and the share of Partnership profits
allocated to the account, less all distributions made from the account and the
share of Partnership losses allocated to the account.
4.3 PROFITS AND LOSSES. The net profits and net losses of the
Partnership for any period (except for the profits and losses upon dissolution)
shall be credited or charged to the Capital Accounts of the Partners in the
percentages set forth on Schedule A under the heading "Partners' Percentages"
(as the same may be amended from time to time, the "Partners' Percentages").
4.4 DISTRIBUTIONS. Any cash which, in the opinion of the General
Partner, is not reasonably required for the operation of the business of the
Partnership or for Partnership reserves (other than amounts distributed upon
dissolution) shall be distributed to the Partners in accordance with the
Partners' Percentages not less frequently than each calendar quarter. Other
distributions of assets may be made from time to time in the same manner.
4.5 REIT DISTRIBUTIONS. Notwithstanding anything to the contrary in
this Agreement, the General Partner shall cause the Partnership to distribute
amounts sufficient to enable the Apple REIT to pay its shareholders dividends
that will allow the Apple REIT to (i) meet the distribution requirement for
qualification as a REIT as set forth in Section 857(a)(1) of the Code and (ii)
avoid any federal income or excise tax liability imposed by the Code.
4.6 LOANS. A loan by a Partner to the Partnership shall not be
considered a capital contribution and shall be repaid as debt of the
Partnership.
-3-
<PAGE>
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION.
(a) The Partnership shall indemnify each Partner (and each
director and officer of a Partner) who was, is or is threatened to be made a
party to any action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, and whether formal or informal (a
"Proceeding"), (i) solely by reason of being or having been a Partner or a
director or officer of a Partner or (ii) as a result of having served at the
request of the Partnership as a fiduciary for an employee benefit or other plan
related to the business of the Partnership, against any liability and reasonable
expenses (including reasonable attorney's fees), incurred as a result of such
Proceeding, except such liabilities and expenses which are incurred as a result
of a breach of this Partnership Agreement, willful misconduct or a knowing
violation of the law.
(b) The Partnership shall promptly make advances or
reimbursements for reasonable expenses (including attorney's fees) incurred by
any Partner or a director or officer of a Partner claiming indemnification under
this Article unless it has been determined that such Partner, director or
officer is not entitled to indemnification. Advances or reimbursements made in
advance of any such determination shall be conditioned upon receipt from the
Partner, director or officer claiming indemnification of a written undertaking
to repay the amount of such advances or reimbursements if it is ultimately
determined that such Partner, director or officer is not entitled to
indemnification.
ARTICLE VI
EVENTS OF DISSOLUTION
6.1 EVENTS OF DISSOLUTION. The Partnership shall only be dissolved:
(i) upon the election of the General Partner;
(ii) at such time as there is no General Partner
serving unless, within 90 days, the Limited Partner consents to
continue the business of the Partnership and appoints one or more
General Partners;
(iii) upon automatic cancellation of the certificate
of limited partnership for failure to pay annual registration fees,
unless steps to obtain reinstatement are promptly taken; or
(iv) by judicial decree.
-4-
<PAGE>
ARTICLE VII
DISSOLUTION, WINDING UP AND TERMINATION
7.1 GENERAL. Upon dissolution without continuation, the business of the
Partnership shall be wound up by the General Partner or, if there is no General
Partner, by a representative designated by the Limited Partner (either of which
or whom is hereinafter referred to as the "Liquidating Representative"). The
Liquidating Representative shall proceed with reasonable promptness to liquidate
the business and assets of the Partnership and may determine whether and to
which Partners properties should be distributed in kind. Partnership assets
shall be distributed in the following order:
(i) to creditors of the Partnership, including
Partners who are creditors, in the order of priority provided by law;
(ii) to the creation of such reserves for
contingencies as the Liquidating Representative may deem necessary or
advisable;
(iii) to the Limited Partner to the extent of its
contribution to capital;
(iv) to the General Partner to the extent of its
contribution to capital;
(v) to the Partners, General and Limited, according
to their Capital Account balances, after all adjustments.
ARTICLE VIII
MISCELLANEOUS
8.1 BOOKS OF ACCOUNT AND RECORDS. The Partnership shall keep complete
books of account at the Principal Office which shall be open to examination by
the Partners, the Apple REIT and their authorized representatives during normal
business hours. The books shall be kept on a cash or accrual basis, as
determined by the General Partner.
8.2 TAX COMPLIANCE. Notwithstanding anything to the contrary contained
in this Partnership Agreement, all actions taken in the conduct of the business
of the Partnership, or on its dissolution, shall comply with the provisions of
Section 704 of the Code and the Regulations thereunder. The General Partner
shall be the "Tax Matters Partner" required by the Code.
8.3 POWER OF ATTORNEY. The Limited Partner hereby appoints the General
Partner its attorney-in-fact, or agent, to execute, acknowledge, deliver and
file in its name any document required by law to be filed by the Partnership or
such Partner with any governmental body or agency. Any such appointment is a
special power, coupled with an interest, and shall remain in effect as long as
the Partner granting it has any interest in the Partnership or remains
responsible for any obligations under this Partnership Agreement.
-5-
<PAGE>
8.4 COUNTERPARTS. This Partnership Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.5 AMENDMENTS. This Partnership Agreement may be amended only with the
consent of the General Partner and the Limited Partner.
8.6 THIRD PARTIES; SUCCESSORS AND ASSIGNS. The agreements contained
herein are for the benefit of the parties hereto and their permitted successors
and assigns and are not for the benefit of any third parties, including, without
limitation, creditors of the Partnership.
8.7 HEADINGS. The section headings herein are for convenience only and
shall not affect the interpretation of this Partnership Agreement.
8.8 INTERPRETATION. This Partnership Agreement is executed and
delivered in the Commonwealth of Virginia and shall be construed and enforced in
accordance with the laws of such state without giving effect to its choice of
law rules.
WITNESS the following signatures.
GENERAL PARTNER
Apple General, Inc.
By: /s/ Glade M. Knight
-----------------------------
Name: Glade M. Knight
Title: President
LIMITED PARTNER:
Apple Limited, Inc.
By: /s/ Glade M. Knight
-----------------------------
Name: Glade M. Knight
Title: President
-6-
<PAGE>
SCHEDULE A
GENERAL PARTNER
Name and Capital Partners'
Business Address Contribution Percentages
Apple General, Inc. $ 1.00 1%
306 East Main Street
Richmond, Virginia 23219
LIMITED PARTNER
Name and
Business Address
Apple Limited, Inc. $99.00 99%
306 East Main Street
Richmond, Virginia 23219
-7-
<PAGE>
EXHIBIT A
BEING a tract of land situated in the CHARLES DEMAY SURVEY, ABSTRACT NO. 335 and
the B.B.B. & C.R.R. SURVEY, ABSTTACT NO. 1457, DENTON County, Texas and being
part of Lot 1, Block A of PACE'S POINT, an Addition to the City of Lewisville,
DENTON County, Texas, according to the plat thereof recorded in Cabinet D, Page
184, Plat Records, DENTON County, Texas, and being more particularly described
as follows:
BEGINNING at a 1 inch iron pipe with cap found for corner situated in the
curving northerly line of Corporate Drive (70 foot right of way), said iron pipe
also being the Southwest corner of the aforementioned Lot 1, Block A;
THENCE departing the northerly line of said Corporate Drive and along the
westerly line of said Lot 1, Block A, the following:
North 18 degrees 58 minutes 33 seconds West a distance of 399.46 feet to a 1
inch iron pipe with cap found for corner;
North 29 degrees 04 minutes 52 second West a distance of 425.94 feet to a 3/4
inch iron rod found for corner;
North 31 degrees 28 minuted 20 seconds West a distance of 217.69 feet to a brass
monument found for corner situated in the East line of U.S. Highway 121
(variable right of way);
THENCE along the east line of said U.S. Highway 121 the following:
North 00 degrees 03 minutes 30 seconds West a distance of 101.66 feet to a
brass monument found for corner;
South 89 degrees 56 minutes 30 seconds West a distance of 10.00 feet to a
brass monument found for corner;
North 00 degrees 03 minutes 30 seconds West a distance of 61.53 feet to a
1/2 inch iron rod found for corner;
THENCE North 89 degrees 33 minuted 49 seconds East departing the east line of
said U.S. Highway 121 and along the north line of said Lot 1, Block A, a
distance of 311.71 feet to a 1/2 inch iron rod found for corner;
THENCE South 43 degrees 23 minutes 30 seconds East along the easterly line of
said Lot 1, Block A, distance of 1092.95 feet to a 5/8 inch iron rod set for
corner situated in the curving northerly line of said Corporate Drive;
THENCE along the curving northerly line of said Corporate Drive to the right
having a central angle of 22 degrees 04 minutes 02 seconds, a radius of 1765.00
feet, an arc length of 679.78 feet and a chord bearing of South 62 degrees 58
minutes 20 seconds West to the POINT OF BEGINNING.
BEING a 12.5421 acres tract of land, more or less.
LIMITED PARTNERSHIP AGREEMENT
OF
APPLE REIT VI LIMITED PARTNERSHIP
This LIMITED PARTNERSHIP AGREEMENT (the "Partnership Agreement") is
made as of June 23, 1998, by and between Apple General, Inc., a Virginia
corporation, the general partner ("General Partner"), and Apple Limited, Inc., a
Virginia corporation, the limited partner ("Limited Partner" and together with
the General Partner, the "Partners").
INTRODUCTION
A. The General Partner and the Limited Partner have agreed to form a
limited partnership (the "Partnership") pursuant to the provisions of the
"Virginia Revised Uniform Limited Partnership Act" (the "Act"). The existence of
the Partnership shall commence upon the filing of a certificate of limited
partnership with the Virginia State Corporation Commission (the "Commission").
B. The rights, duties and obligations of the Partners shall be governed
by the Act except as otherwise provided in this Partnership Agreement. The term
"Person," as used herein, means an individual or an entity.
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 NAME. The name of the Partnership is Apple REIT VI Limited
Partnership. The Partnership may trade or transact business under the name
Pepper Square Apartments or such other name as shall be selected by the General
Partner.
1.2 PURPOSE. The Partnership is formed to acquire, hold, operate and in
all respects act as owner of the Pepper Square Apartments in North Dallas, Texas
(located on the property more specifically described on Exhibit A) and to engage
in any and all activities related or incidental thereto or agreed to by the
Partners from time to time provided, however, such activities shall be limited
to and conducted in such a manner as to permit Apple Residential Income Trust,
Inc. (the "Apple REIT") at all times to qualify as a real estate investment
trust ("REIT") under sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code").
1.3 FILINGS.
(a) The Partnership has filed with the Commission a
certificate of limited partnership (the "Certificate") pursuant to Va Code
Section 50-73.11.
(b) The Certificate designates 306 East Main Street, Richmond,
Virginia 23219 as the principal office (the "Principal Office") of the
Partnership. It designates c/o McGuire, Woods, Battle & Boothe LLP, One James
Center, 901 East Cary Street, Richmond, Virginia 23219 as its registered office
(the "Registered Office") and Martin B. Richards, Esq., at that address, as its
registered agent (the "Registered Agent").
<PAGE>
ARTICLE II
MANAGEMENT
2.1 THE GENERAL PARTNER. The General Partner shall have the sole and
exclusive right, duty and power to manage the business of the Partnership,
including, without limitation, the right and power to:
(i) acquire, hold, sell, maintain, encumber, improve,
develop or lease Partnership property, real or personal, and any
interest therein on such terms and conditions as the General Partner
deems advisable;
(ii) borrow money on behalf of the Partnership,
secure any such borrowings with Partnership assets, and repay the same
at any time or from time to time;
(iii) establish investment accounts for the
Partnership and deposit and withdraw funds in or from such accounts;
(iv) assign, compromise or release any claim of, or
debt due, the Partnership;
(v) institute and defend actions at law or in equity
on behalf of the Partnership and consent to arbitrate any disputes or
controversies of the Partnership;
(vi) engage and retain accountants, lawyers and other
professional persons to perform services for the Partnership, and
purchase such goods and other services as may be required to conduct
the business of the Partnership; and
(vii) enter into such contracts and perform such
other acts as may be necessary to further the business of the
Partnership.
2.2 LIMITATIONS ON POWER AND AUTHORITY. Notwithstanding anything to the
contrary in this Partnership Agreement, the General Partner's rights, authority
and power are subject to and limited by certain provisions of the Bylaws of the
Apple REIT (including Article XIII therein) and actions described in such Bylaws
(including such Article) may only be undertaken in compliance with the
provisions thereof, including the obtaining of any consents referred to therein.
-2-
<PAGE>
ARTICLE III
LIMITED PARTNERS
3.1 PARTICIPATION IN MANAGEMENT. The Limited Partner shall not
participate in the management or control of the business of the Partnership, and
shall have no power to sign for or bind the Partnership.
ARTICLE IV
CAPITAL; PROFITS AND LOSSES; COMPENSATION; DISTRIBUTIONS
4.1 CAPITAL CONTRIBUTIONS. Each of the Partners has contributed to the
capital of the Partnership the property set forth on Schedule A. The Partners
shall not be required to make any additional capital contributions except as
required by law, but the Partners may make such additional contributions of cash
or property as they may mutually agree. No Partner shall have any right to
require the return of all or any part of its capital, or to receive interest
with respect thereto.
4.2 CAPITAL ACCOUNTS. A separate capital account ("Capital Account")
shall be maintained for each Partner. The value of each Capital Account shall be
the sum of the cash contributions to the account, the agreed upon value of
contributions of property to the account and the share of Partnership profits
allocated to the account, less all distributions made from the account and the
share of Partnership losses allocated to the account.
4.3 PROFITS AND LOSSES. The net profits and net losses of the
Partnership for any period (except for the profits and losses upon dissolution)
shall be credited or charged to the Capital Accounts of the Partners in the
percentages set forth on Schedule A under the heading "Partners' Percentages"
(as the same may be amended from time to time, the "Partners' Percentages").
4.4 DISTRIBUTIONS. Any cash which, in the opinion of the General
Partner, is not reasonably required for the operation of the business of the
Partnership or for Partnership reserves (other than amounts distributed upon
dissolution) shall be distributed to the Partners in accordance with the
Partners' Percentages not less frequently than each calendar quarter. Other
distributions of assets may be made from time to time in the same manner.
4.5 REIT DISTRIBUTIONS. Notwithstanding anything to the contrary in
this Agreement, the General Partner shall cause the Partnership to distribute
amounts sufficient to enable the Apple REIT to pay its shareholders dividends
that will allow the Apple REIT to (i) meet the distribution requirement for
qualification as a REIT as set forth in Section 857(a)(1) of the Code and (ii)
avoid any federal income or excise tax liability imposed by the Code.
4.6 LOANS. A loan by a Partner to the Partnership shall not be
considered a capital contribution and shall be repaid as debt of the
Partnership.
-3-
<PAGE>
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION.
(a) The Partnership shall indemnify each Partner (and each
director and officer of a Partner) who was, is or is threatened to be made a
party to any action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, and whether formal or informal (a
"Proceeding"), (i) solely by reason of being or having been a Partner or a
director or officer of a Partner or (ii) as a result of having served at the
request of the Partnership as a fiduciary for an employee benefit or other plan
related to the business of the Partnership, against any liability and reasonable
expenses (including reasonable attorney's fees), incurred as a result of such
Proceeding, except such liabilities and expenses which are incurred as a result
of a breach of this Partnership Agreement, willful misconduct or a knowing
violation of the law.
(b) The Partnership shall promptly make advances or
reimbursements for reasonable expenses (including attorney's fees) incurred by
any Partner or a director or officer of a Partner claiming indemnification under
this Article unless it has been determined that such Partner, director or
officer is not entitled to indemnification. Advances or reimbursements made in
advance of any such determination shall be conditioned upon receipt from the
Partner, director or officer claiming indemnification of a written undertaking
to repay the amount of such advances or reimbursements if it is ultimately
determined that such Partner, director or officer is not entitled to
indemnification.
ARTICLE VI
EVENTS OF DISSOLUTION
6.1 EVENTS OF DISSOLUTION. The Partnership shall only be dissolved:
(i) upon the election of the General Partner;
(ii) at such time as there is no General Partner
serving unless, within 90 days, the Limited Partner consents to
continue the business of the Partnership and appoints one or more
General Partners;
(iii) upon automatic cancellation of the certificate
of limited partnership for failure to pay annual registration fees,
unless steps to obtain reinstatement are promptly taken; or
(iv) by judicial decree.
-4-
<PAGE>
ARTICLE VII
DISSOLUTION, WINDING UP AND TERMINATION
7.1 GENERAL. Upon dissolution without continuation, the business of the
Partnership shall be wound up by the General Partner or, if there is no General
Partner, by a representative designated by the Limited Partner (either of which
or whom is hereinafter referred to as the "Liquidating Representative"). The
Liquidating Representative shall proceed with reasonable promptness to liquidate
the business and assets of the Partnership and may determine whether and to
which Partners properties should be distributed in kind. Partnership assets
shall be distributed in the following order:
(i) to creditors of the Partnership, including
Partners who are creditors, in the order of priority provided by law;
(ii) to the creation of such reserves for
contingencies as the Liquidating Representative may deem necessary or
advisable;
(iii) to the Limited Partner to the extent of its
contribution to capital;
(iv) to the General Partner to the extent of its
contribution to capital;
(v) to the Partners, General and Limited, according
to their Capital Account balances, after all adjustments.
ARTICLE VIII MISCELLANEOUS
8.1 BOOKS OF ACCOUNT AND RECORDS. The Partnership shall keep complete
books of account at the Principal Office which shall be open to examination by
the Partners, the Apple REIT and their authorized representatives during normal
business hours. The books shall be kept on a cash or accrual basis, as
determined by the General Partner.
8.2 TAX COMPLIANCE. Notwithstanding anything to the contrary contained
in this Partnership Agreement, all actions taken in the conduct of the business
of the Partnership, or on its dissolution, shall comply with the provisions of
Section 704 of the Code and the Regulations thereunder. The General Partner
shall be the "Tax Matters Partner" required by the Code.
8.3 POWER OF ATTORNEY. The Limited Partner hereby appoints the General
Partner its attorney-in-fact, or agent, to execute, acknowledge, deliver and
file in its name any document required by law to be filed by the Partnership or
such Partner with any governmental body or agency. Any such appointment is a
special power, coupled with an interest, and shall remain in effect as long as
the Partner granting it has any interest in the Partnership or remains
responsible for any obligations under this Partnership Agreement.
-5-
<PAGE>
8.4 COUNTERPARTS. This Partnership Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.5 AMENDMENTS. This Partnership Agreement may be amended only with the
consent of the General Partner and the Limited Partner.
8.6 THIRD PARTIES; SUCCESSORS AND ASSIGNS. The agreements contained
herein are for the benefit of the parties hereto and their permitted successors
and assigns and are not for the benefit of any third parties, including, without
limitation, creditors of the Partnership.
8.7 HEADINGS. The section headings herein are for convenience only and
shall not affect the interpretation of this Partnership Agreement.
8.8 INTERPRETATION. This Partnership Agreement is executed and
delivered in the Commonwealth of Virginia and shall be construed and enforced in
accordance with the laws of such state without giving effect to its choice of
law rules.
WITNESS the following signatures.
GENERAL PARTNER
Apple General, Inc.
By: /s/ Glade M. Knight
-----------------------------
Name: Glade M. Knight
Title: President
LIMITED PARTNER:
Apple Limited, Inc.
By: /s/ Glade M. Knight
-----------------------------
Name: Glade M. Knight
Title: President
-6-
<PAGE>
SCHEDULE A
GENERAL PARTNER
Name and Capital Partners'
Business Address Contribution Percentages
Apple General, Inc. $ 1.00 1%
306 East Main Street
Richmond, Virginia 23219
LIMITED PARTNER
Name and
Business Address
Apple Limited, Inc. $99.00 99%
306 East Main Street
Richmond, Virginia 23219
-7-
<PAGE>
EXHIBIT A
BEING a description of a 5.9561 acre tract if land situated in the JAMES BYRD
SURVEY, ABSTRACT NO. 84 in the City of Dallas, DALLAS County, Texas. Being a
portion of City of Dallas Block No. 8189 (Official City Block Numbers), and also
all of BELT LINE APARTMENTS, an addition to the City of Dallas, as shown on the
final plat recorded in Volume 78049, at Page 783, of the Map Records of DALLAS
County, Texas, said 5.9561 acre tract being more particularly described as
follows:
BEGINNING at a 1/2 inch iron rod set for corner at the most northerly end of a
corner clip at the intersection of the sourtheasterly right of way line of Berry
Trail (a 56 foot wide right of way) with the northeasterly right of way line of
Belt Line Road (a 100 foot wide right of way);
THENCE North 54 degrees 05 minutes 43 seconds East, departing said corner clip,
and along said southeasterly line of Berry Trail, a distance of 198.00 feet to a
1/2 iron rod set for corner at the beginning of a curve to the left having a
central angle of 17 degrees 35 minutes 32 seconds, a radius distance of 328.00
feet, a chord distance of 100.32 feet, and a chord bearing of North 45 degrees
17 minutes 57 seconds East;
THENCE Northeasterly along said curve to the left and said southeasterly right
of way line, an arc distance of 100.71 feet to a 1/2 inch iron rod found for a
corner, and being the most westerly southwest corner of Prestonwood Gardens, an
addition to the City of Dallas as shown on a plat recorded in Volume 80182, at
Page 1028 of the Map Records of DALLAS County, Texas;
THENCE South 52 degrees 42 minutes 23 seconds East, departing said southeasterly
right of way line, and along a common line between said Prestonwood Gardens and
said Belt Line Apartments Addition a distance of 143.41 feet to a 1/2 inch iron
rod set for corner;
THENCE North 44 degrees 23 minutes 15 seconds East, continuing along a common
line between said Prestonwood Gardens Addition, and said Belt Line Apartments
Addition, a distance of 16.85 feet to a 1/2 inch iron rod set for corner;
THENCE South 47 degrees 07 minutes 27 seconds East, continuing along a common
line between said additions, a distance of 180.68 feet to a 1/2 inch iron rod
set for corner and being a westerly corner of Prestonwood Estates, Eighth
Section, an addition to the City of Dallas, as shown on a plat recorded in
Volume 73020, at Page 848 of the Map Records of DALLAS County, Texas;
THENCE Southeasterly along the common lines between said Belt Line Addition and
said Prestonwood Estates and generally along the meanders of Kiowa Branch the
following:
South 23 degrees 00 minutes 41 seconds East, departing said Prestonwood
Gardens, a distance of 174.63 feet to a 1/2 inch iron rod set for corner;
South 03 degrees 54 minutes 35 seconds East, a distance of 166.06 feet, to
a 1/2 inch iron rod set for corner;
South 12 degrees 47 minutes 35 seconds East, a distance of 191.68 feet to a
chiseled "X" set in rock for corner;
South 36 degrees 17 minutes 35 seconds West, a distance of 124.64 feet, to
a 1/2 inch iron rod set for corner;
South 04 degrees 49 minutes 38 seconds East, a distance of 65.76 feet to a
chiseled "X" set in concrete for corner and being on the curving
northeasterly right of way line of Belt
(CONT. ON EXH. A, PAGE 2)
<PAGE>
EXHIBIT A (page 2)
Line Road, a curve to the right, having a central angle of 16 degrees 47
minutes 22 seconds, a radius distance of 949.95 feet, a chord distance of
277.37 feet and a chord bearing of North 44 degrees 17 minutes 58 seconds
West;
THENCE departing said common line, along said curve to the right and said
northeasterly right of way line, an arc distance of 278.37 feet to a 1/2 inch
iron rod set for corner;
THENCE North 35 degrees 54 minutes 17 seconds West, continuing along said
northeasterly right of way line, a distance of 598.72 feet to a 1/2 inch iron
rod set for corner at the South end of the aforementioned corner clip;
THENCE North 09 degrees 05 minutes 43 seconds East, along said corner clip, a
distance of 7.07 feet to the POINT OF BEGINNING;
And CONTAINING 5.9561 acres, or 259,450 square feet of land, more or less.
EXHIBIT 10.11
AGREEMENT OF SALE AND PURCHASE
COTTONWOOD CROSSING APARTMENTS
ARLINGTON, TEXAS
THIS AGREEMENT OF SALE AND PURCHASE (this "Agreement") is entered into by
and between COTTONWOOD REALTY ASSOCIATES, a New York general partnership
("Seller") and CORNERSTONE REALTY INCOME TRUST, INC., a Virginia corporation
("Purchase") to be effective as of July __, 1998.
RECITALS
WHEREAS, Seller is the owner of (i) that certain parcel of real property
located in Arlington, Tarrant County, Texas, as more particularly described in
Exhibit A (collectively, the "Land"), (ii) the approximately 200-unit apartment
complex located on the Land and commonly known as "Cottonwood Crossing
Apartments" and (iii) certain furnishings, fixtures, equipment, tangible
personal property and intangible property contained therein and used in
connection therewith; and
WHEREAS, Purchaser desires to purchase such real and personal property on
the terms and conditions hereinafter set forth, and Seller is agreeable to the
sale and to such terms and conditions.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the respective
undertakings of the parties hereinafter set forth, as well as other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
I.
SALE OF PROPERTY
1.1 In consideration of the Purchase Price (as hereinafter defined) and
upon the terms and conditions hereinafter set forth, Seller shall sell to
Purchaser and Purchaser shall purchase from Seller:
1.1.1 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;
1.1.2 All improvements, structures and fixtures placed, constructed or
installed on the Land (the "Improvements");
1.1.3 All equipment, furnishings, materials, inventory, supplies and
other tangible personal property, to the extent transferable (the "Personal
Property") owned by Seller and placed or installed on the Land or
Improvements and used as part thereof and appearing on the inventory
attached hereto as Exhibit 1 (the "Personal Property
<PAGE>
Inventory"), expressly excluding, however, all computers, monitors,
software and printers, which shall remain the property of Seller; and
1.1.4 All rights, title and interest of Seller in and to all
intangible property (the "Intangible Property") now or hereafter owned or
held by Seller in connection with the Land, Improvements or Personal
Property, or the apartment rental business now conducted thereon,
including, without limitation, all right, title and interest of Seller, if
any, in and to the name "Cottonwood Crossing Apartments."
1.2 The Land, the Improvements, the Personal Property and the Intangible
Property are collectively referred to herein as the "Property" or the "Project."
II.
PURCHASE PRICE AND EARNEST MONEY
2.1 The purchase price (the "Purchase Price") for the Property shall be
Five Million Seven Hundred Thousand Dollars ($5,700,000.00) and shall be payable
in the manner set forth in Article III below, and shall be adjusted to reflect
the appropriate prorations and adjustments set forth in Article IX of this
Agreement.
2.2 Within three (3) business days after the date of this Agreement,
Purchaser shall deposit earnest money in the amount of One Hundred Thousand
Dollars ($100,000,00) (the "Earnest Money") in escrow with Chicago Title
Insurance Company, 350 North St. Paul, Suite 250, Dallas, Texas 75251 (Attn:
Gerald Dunn) (the "Title Company"). The Earnest Money shall be deposited in
cash. Should Purchaser fail to terminate this Agreement on or prior to the
expiration of the Review Period (hereinafter defined) in accordance with the
provisions of Section 5.4 hereof, the Earnest Money shall automatically become
nonrefundable to Purchaser for any reason except in the event Seller defaults in
the performance of its covenants, duties and obligations under the terms of this
Agreement. The Earnest Money deposited pursuant hereto shall be placed in an
interest-bearing account pursuant to the instructions of Purchaser, with all
interest accruing thereon becoming a part of said Earnest Money. Any interest
which accrues on the Earnest Money shall be deemed to have been deposited in
escrow with the Title Company by Purchaser under the terms of this Agreement.
The Earnest Money shall be held and disbursed by the Title Company in accordance
with the terms of this Agreement. In the event the closing of the transaction
contemplated herein shall not occur on or prior to the Closing Date (hereinafter
defined) for any reason except Seller's default hereunder or because Purchaser
has timely exercised its right to terminate this Agreement in accordance with
the terms and conditions hereof, the Earnest Money shall be immediately funded
by the Title Company to Seller.
2.3 In addition to the Earnest Money, Purchaser shall deliver to Seller,
prior to the expiration of three (3) business days from the date hereof, a check
in the amount of One Hundred Dollars ($100.00) (the "Independent Contract
Consideration"), which amount the parties bargained for and agreed to as
consideration for Seller's execution and delivery of this Agreement. This
Independent Contract Consideration is in addition to and independent of any
other consideration or payment provided in this Agreement, is non-refundable
under any circumstances and shall be retained by Seller notwithstanding any
other provision of this Agreement.
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III.
PAYMENT OF PURCHASE PRICE
3.1 The entire Purchase Price shall be paid by Purchaser's delivering cash,
a cashier's check or another form of current, collected federal funds in that
amount to the Title Company for disbursement by it to Seller or for Seller's
account at the Closing (hereinafter defined).
3.2 At Purchaser's option, the Earnest Money shall either be applied at
Closing to the Purchase Price due on such date in accordance with Section 3.1
above or returned to Purchaser at Closing.
IV.
CLOSING
4.1 The closing of the transaction contemplated herein shall be held on or
before the date which is five (5) days after the expiration of the Review Period
(as hereinafter defined) (or if such date falls on a Saturday, Sunday or
holiday, then on the first business day thereafter) (the "Closing Date" or the
"Closing"), and the exact date of Closing shall be designated by Purchaser in a
written notice to Seller and the Title Company; provided, however, that if
Seller fails to deliver both the Commitment and the Survey (as each is
hereinafter defined) within ten (10) days after the execution of this Agreement,
then the Closing shall be extended one (1) day for each day after the expiration
of such ten-day period until both the Commitment and the Survey have been
delivered to Purchaser. The Closing shall be held at the offices of the Title
Company or at another location acceptable to both parties. The procedure to be
followed by the parties in connection with the Closing shall be as follows:
4.1.1 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 following documents and instruments, duly
executed and acknowledged (where appropriate):
4.1.1.1 A special warranty deed (the "Deed") dated as of the
Closing Date, in the form of Exhibit B attached hereto and made a part
hereof by reference for all purposes, in favor of Purchaser or its
Permitted Assignee (hereinafter defined);
4.1.1.2 An assignment and assumption of leases (the "Assignment
of Leases") dated as of the Closing Date, in the form of Exhibit C
attached hereto and made a part hereof by reference for all purposes,
in favor of Purchaser or its Permitted Assignee assigning all tenant,
commercial and other leases (the "Leases"), security deposits and
prepaid rents, covering all or any part of the Land, Improvements or
Personal Property;
4.1.1.3 A blanket conveyance, bill of sale, assignment and
assumption (the "Bill of Sale"), conveying and assigning to Purchaser
or its Permitted Assignee all Personal Property and all Intangible
Property, and assigning to Purchaser or its Permitted Assignee such
service contracts and maintenance agreements as may be designated by
Purchaser, which may be in
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force with regard to the Property, such instrument to be in the form
of Exhibit D attached hereto and made a part hereof by reference for
all purposes;
4.1.1.4 A certificate (the "Bills Paid Certificate") executed by
or on behalf of Seller and dated as of the Closing Date, in the form
of Exhibit E attached hereto and made a part hereof by reference for
all purposes or in such other form as may be acceptable to the Title
Company, Seller and Purchaser;
4.1.1.5 A certified rent roll (the "Rent Roll Certificate") for
the Project, certified by Seller to be true and correct as of the
Closing Date, with such certificate to be in the form of Exhibit F
attached hereto and made a part hereof by reference for all purposes;
4.1.1.6 Evidence reasonably acceptable to Purchaser and the 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;
4.1.1.7 All keys to all locks on the Property and all documents
in the possession of the Seller pertaining to tenants of the Property,
including, but not limited to all original leases, applications,
correspondence and credit reports relating to each such tenant (which
items referred to in this Section 4.1.1.7 may be delivered at the
Project rather than at the Closing);
4.1.1.8 To the extent not previously delivered to Purchaser, and
in Seller's possession and control, all necessary permits issued by
appropriate governmental authorities and utility companies when the
Improvements were completed;
4.1.1.9 To the extent not previously delivered to Purchaser, and
in Seller's possession and control, one copy of each of the 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;
4.1.1.10 To the extent not previously delivered to Purchaser, and
to the extent in Seller's possession and control, current tax
statements, if available, and tax certificates for the preceding two
(2) years;
4.1.1.11 The Notice to Tenants (herein so called) addressed to
each tenant of the Project and in the form of Exhibit G attached
hereto and incorporated herein by reference for all purposes; and
4.1.1.12 An audit letter (the "Audit Letter") substantially in
the form of Exhibit K attached hereto and made a part hereof by
reference for all purposes.
4.1.2 At the Closing, the Purchaser, or its assignee, shall cause to
be delivered to the Title Company the following documents and instruments,
duly executed and acknowledged (where appropriate);
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4.1.2.1 Funds payable to the Title Company representing the
Purchase Price due in accordance with Article III hereof, less, if
applicable, the Earnest Money already deposited which is to be applied
to the Purchase Price, as adjusted to reflect the appropriate
prorations and adjustments set forth in Article IX of this Agreement;
4.1.2.2 Evidence reasonably acceptable to Seller and the Title
Company, authorizing the consummation by Purchaser of the purchase and
sale transaction contemplated hereby and the execution and delivery of
the closing documents on behalf of Purchaser;
4.1.2.3 The Assignment of Leases wherein Purchaser assumes the
lessor's obligations under the Leases;
4.1.2.4 The Bill of Sale wherein Purchaser assumes the Approved
Service Contracts (as defined in Section 5.4 hereof); and
4.1.2.5 The Notice to Tenants.
4.1.3 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 transaction contemplated hereunder.
4.1.4 At the Closing, Seller shall deliver to 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 non-foreign status of a transferor, with such certificate to be
substantially in the form of Exhibit H attached hereto and made a part
hereof for all purposes, or such variation thereof as may be required by
the Internal Revenue Service.
4.2 Upon the completion of the deliveries specified in Section 4.1 above,
the Escrow Agent shall be authorized to cause the appropriate closing documents
to be immediately recorded in the appropriate records of Tarrant County, Texas,
and shall deliver the proceeds from the sale to Seller.
4.3 As a condition precedent to Closing, Seller shall furnish Purchaser
with an Owner's Policy of Title Insurance (the "Owners Title Policy") at
Closing, 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 than the Permitted Exceptions
(hereinafter defined) and the standard printed exceptions (provided that the
area and boundaries exceptions shall not be amended to except only to "Shortages
in Area" unless the additional premium therefore is paid by Purchaser, the
exception for restrictive covenants shall be endorsed "Deleted in its Entirety"
or shall list only those restrictive covenants as may be Permitted Exceptions,
and the exception for standby fees, taxes and assessments shall be limited to
standby fees, taxes and assessments for the year in which Closing occurs and
subsequent years (and subsequent assessments for prior years due to change in
land usage or ownership)), any exception for parties in possession of the
Property shall be limited to rights of tenants in possession, as
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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.
4.4 Seller shall pay the cost of the Owner's Title Policy provided for
above excluding any premium for amendment of the survey exception. Any escrow
fee charged by the Title Company shall be paid one-half (1/2) by Seller and
one-half (1/2) by Purchaser. Purchaser shall pay the fee for the recording of
the Deed(s) and other instruments delivered by Seller to Purchaser hereunder.
All other closing costs shall be allocated to and paid by Seller and Purchaser
in accordance with the manner in which such costs are customarily borne by such
parties in sales of similar property in Tarrant County, Taxes, on the date of
Closing; provided, however, Purchaser shall pay all costs, including without
limitation, all third-party costs and inspection fees incurred by Purchaser in
connection with its feasibility studies on the Project. Each party shall pay its
own attorneys' fees.
V.
REQUIREMENTS AND CONDITIONS
5.1 Upon execution of this Agreement, Purchaser and/or Seller, as the cash
may be, shall perform the following within the time stated, each of which shall
be a condition precedent to Closing:
5.1.1 Seller shall, within five (5) days after the execution of this
Agreement, deliver to Purchaser a Commitment for Title Insurance (the
"Commitment") issued by the Title Company, showing Seller's title to the
Property to be good and indefeasible, together with true, correct and
legible copies of all items and documents referred to therein. In the event
that Purchaser disapproves of any or all items referred to in the
Commitment, Purchaser shall deliver written notice of same to Seller
("Purchaser's Title Objection Letter") within five (5) business days after
Purchaser's receipt of the Commitment. Those items listed in the Commitment
and not timely disapproved of by Purchaser shall be referred to as the
"Permitted Exceptions." Seller shall have a period of ten (10) days after
receipt of Purchaser's Title Objection Letter within which it may, but
without obligation to spend any sum of money or to pursue any litigation,
cure or remove such exceptions to Purchaser's reasonable satisfaction. In
the event Seller is unable or unwilling to cure all such items to
Purchaser's reasonable satisfaction within the ten (10) day cure period,
Purchaser shall have the right, exercisable within two (2) days after the
expiration of said ten (10) days cure period, (i) to waive its objections
to the uncured items and close the transactions contemplated herein (in
which case, any such items shall become Permitted Exceptions), or (ii) to
terminate this Agreement by written notice to Seller, whereupon the Title
Company is hereby authorized to, and shall, upon written request of
Purchaser, return to Purchaser all Earnest Money that has been 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,
except the obligation of Purchaser to indemnify Seller as set forth in
Section 5.4. If Purchaser does not timely terminate this Agreement in the
manner set forth above, Seller shall deliver the title in its existing
condition, and Purchaser shall, by acceptance of such title, waive any
objections to such title which have not been cured prior to the Closing
Date, except as to any warranties contained in the documents of conveyance.
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5.1.2 Within ten (10) days after the date of this Agreement, Seller,
at Seller's sole cost and expense, shall cause to be prepared and furnished
to Purchaser and the Title Company a survey of the Property (the "Survey"),
prepared by a duly licensed land surveyor reasonably acceptable to the
Title Company. The Survey shall be dated not earlier than the date of this
Agreement, shall show the location on the Property of all improvements,
recorded building and set-back lines, fences, evidence of abandoned fences,
ponds, creeks, streams, rivers, the approximate location of officially
designated flood hazard zones, canals, watercourses, easements, roads,
rights-of-way, encroachments and such other exceptions located on the
Property as may be described in the Commitment; and shall contain a legal
description of the boundaries of the Property by metes and bounds which
shall also include a reference to the recorded plat, if any. The surveyor
shall certify to Purchaser, Purchaser's lender and to the Title Company
that the Survey is correct and was made on the ground; and that there are
no visible discrepancies, conflicts, encroachments, overlapping of
improvements, violations of recorded set-back lines, fences, evidence of
abandoned fences, ponds, creeks, streams, rivers, officially designated
100-years flood plains or flood prone areas, canals, watercourses,
easements, roads or rights-of-way except as are shown on the Survey. All
recorded easements, licenses or similar exceptions referenced in the
Commitment shall be shown on said Survey and shall be legibly identified by
appropriate volume and page recording references. If Purchaser timely
disapproves of the Survey, Purchaser shall have the right, within the time
periods provided for in Section 5.1.1, as Purchaser's sole and exclusive
remedy, to terminate this Agreement by written notice to Seller and, upon
such termination, all Earnest Money previously deposited shall be
immediately refunded to Purchaser, and the parties hereto shall have no
further liability or obligations hereunder, except the obligation of
Purchaser to indemnify Seller as set forth in Section 5.4.
5.1.3 As soon as possible, but not later than three (3) days after the
execution of this Agreement, Seller shall provide Purchaser with the
following items, to the extent in Seller's possession or under Seller's
control (to the extent the same have not previously been delivered to
Purchaser):
5.1.3.1 A true, correct and complete copy of any and all service
contracts, construction contracts under which work is still being
performed or under which warranties are still in effect, and, if in
Seller's possession or under Seller's control, any bonds, warranties
and guarantees and copies of all building permits and certificates of
occupancy relating to or affecting the Property. Copies of all leases
shall be made available at the Project for Purchaser's inspection but
need not be delivered to Purchaser.
5.1.3.2 A rent roll for the Project certified by Seller as of the
date hereof and showing for each unit the tenant name, unit number,
monthly rental, security deposit held, any defaults in any lease, the
expiration date of each lease, any rental concessions granted and
designating any rights to renew or extend a lease.
5.1.3.3 Insurance information for the Property, including the
type and limits of coverage currently in place, the premiums paid by
Seller therefor and
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a list of all claims, if any, made during the immediately preceding
2-year period, including the amount of any such claims.
5.1.3.4 To the extent within Seller's control and possession, a
copy of tax receipts for the preceding two (2) years. Copies of the
utility receipts will be made available at the Project or at Seller's
office.
5.1.3.5 Financial and operating statements for the Project for
fiscal years 1996 and 1997, and operating statements for calendar year
1998 to the date of this Agreement.
5.1.3.6 To the extent within Seller' control and possession, a
list of all utility deposits pertaining to the Project.
5.1.3.7 To the extent within Seller's control and possession,
real estate tax statements for calendar year and 1997, together with
the current assessed valuation of the Project to calendar year 1998.
5.2 If Seller shall have failed to deliver any item required pursuant to
Section 5.1 and the subsections thereof set out above, Purchaser shall, within
five (5) days after the date hereof, provide Seller notice of any item which it
has not previously received, and Seller shall promptly forward such item to
Purchaser.
5.3 During the Review Period (defined in Section 5.4), Purchaser may
inspect the Property to determine that the entire Property is free and clear of
all termites, fungus, dry rot, beetles and other wood-destroying insects and
pests.
5.4 For a period (the "Review Period") expiring at 5:00 p.m. (Dallas, Texas
time) on July 7, 1998, Purchaser shall have the right to have performed any and
all inspections or studies of the Property which Purchaser may desire, including
but not limited to a physical and mechanical inspection of the Property, an
environmental inspection of the Property, an economic feasibility study of the
Property, an inspection of all books and records and financial information
pertaining thereto and an inspection of all items delivered pursuant to Section
5.1.3 above. Purchaser shall have the right to make and retain copies of any
document or item reviewed by Purchaser during its inspection. If either party
terminates this Agreement for any reason, Purchaser shall not disclose any such
item to any third party and Purchaser shall promptly deliver to Seller (i) all
documents and items and copies thereof from Seller or obtained at the Project
and (ii) shall transfer and convey to Seller the proprietary rights of Purchaser
in and to any and all environmental reports, physical and mechanical reports,
financial due diligence materials and all other reports, studies, audits and
information pertaining to the Property which were obtained by Purchaser from
third party consultants during its due diligence review of the Property. On or
before the expiration of the Review Period, Purchaser shall send to Seller a
written notice setting forth the service contracts (the "Approved Service
Contracts") which Purchaser desires to assume. If Purchaser shall not so notify
Seller of any Approved Service Contracts, then it shall be assumed Purchaser doe
not desire to assume any service contracts. Seller shall, to the extent
reasonably possible, on or before Closing, terminate all service contracts which
are not Approved Service Contracts. If, however, Seller is unable to terminate
some or all service contracts (the "Non-Cancelable Service Contracts"), and
Purchaser does not timely exercise its right to terminate this Agreement in
accordance with the terms and conditions
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hereof, then Purchaser must assume all such Non-Cancelable Service Contracts
together with the Approved Service Contracts at Closing. The Non-Cancelable
Service Contracts are listed on Exhibit J attached hereto and made a part hereof
by reference for all purposes. 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 and as its sole and exclusive remedy, to terminate this
Agreement prior to the expiration of the Review Period by written notice to
Seller and, upon such termination, all Earnest Money previously deposited shall
be immediately refunded to Purchaser, and the parties hereto shall have no
further liabilities hereunder. Purchaser may thus terminate this Agreement by
delivering a written statement to Seller and to the Title Company stating "the
Agreement is terminated pursuant to Section 5.4 thereof" on or before the
expiration of the Review Period. Prior to such time as Purchaser or Purchaser's
authorized representative enters the Property, Purchaser shall obtain policies
of general liability insurance which shall name Seller as an additional named
insured and which are with such insurance companies, provide such coverage and
carry such limits as Seller shall reasonably require. Purchaser shall indemnify
and hold Seller harmless from any and all liability or damage sustained by
Seller as a result of or arising out of any injuries, accidents or damage to or
on the Property caused by Purchaser or Purchaser's inspecting agents during
Purchaser's inspections. With respect to inspecting individual apartment units,
Purchaser shall give Seller written notice of Purchaser's desire to inspect such
units at least three (3) days in advance of the inspection. Further, if any
inspections may reasonably be expected to materially damage or alter the
Property, Purchaser shall not conduct same except upon Seller's prior written
approval. If Purchaser shall not have terminated this Agreement on or before the
expiration of the Review Period (which termination shall be at Purchaser's sole
discretion), then Purchaser shall be deemed to have waived its rights to
terminate pursuant to this Section 5.4.
VI.
REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Seller makes the following representations, warranties and covenants,
to Seller's current, actual (but not constructive, implied or imputed) knowledge
without inquiry or investigation, each of which shall be true and correct in all
material respects as of the Closing Date, and the truth of which (in all
material respects) shall be a condition precedent to Purchaser's obligations to
close the transaction contemplated herein:
6.1.1 Seller has received no written notice of any pending or proposed
changes or modifications to the current zoning of the Property.
6.1.2 Seller has good and indefeasible title to the Property, and the
Property is free and clear from any liens or encumbrances except those
described herein, shown on the Survey or set forth in the Commitment.
6.1.3 The executed copies of the leases to be delivered to Purchaser
(and to be assigned at Closing) shall be true and correct, and Seller is
not in default thereunder. No such tenants are entitled to any rebates,
rent concessions or free rent except as shown on the rent roll referred to
in Section 5.1.3.2. If any current tenants are owed any such rebates, rent
concessions or free rent, then Purchaser shall be credited for same on a
dollar-for-dollar basis at Closing.
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6.1.4 There are no attachments, executions, assignments for the
benefit of creditors or voluntary or involuntary proceedings in bankruptcy
pending against or contemplated by Seller, and no such actions have been
threatened against it.
6.1.5 Neither the execution and delivery of this Agreement by Seller
nor Seller's performance of its obligations hereunder will result in a
violation or breach of any term or provision or constitute a default or
accelerate the performance required under any other agreement or document
to which Seller is a party or is otherwise bound or to which the Property,
or any part thereof, is subject, and will not constitute a violation of any
law, ruling, regulation or order to which Seller is subject.
6.1.6 Except as set forth in Section 6.4 below, Seller has received no
written notice that the maintenance, operation, use and occupancy of the
buildings and other improvements presently constituting part of the
Property violate any zoning, building, health, fire, safety or similar law
or ordinance, order or regulation, or the certificate or certificates of
occupancy issued or to be issued for the Property. Seller shall provide to
Purchaser copies of any notices of such violations it may receive following
the date hereof.
6.1.7 As of the Closing Date, Seller shall have obtained all necessary
consents and permissions related to the transactions herein contemplated
and required under any covenant, agreement, encumbrance, law or regulation.
6.1.8 No portion of the Property is subject to a special ad valorem
tax valuation, such that a change of ownership or use will cause additional
ad valorem taxes to be imposed upon the Property or any part thereof.
6.1.9 Except as set forth in Section 6.4 below, Seller has received no
written notices that the Property is in violation in any material respect
of any existing, applicable Environmental Law, or that the Property is
subject to any existing, pending or threatened investigation or inquiry by
any governmental authority or that the Property is subject to any remedial
action or obligations under any Environmental Law. To Seller's actual
knowledge and belief, no underground storage tanks have been or are now
located on the Property, and no hazardous substances or toxic wastes have
been disposed of on the Property during the period of time Seller has owned
the Property. As used herein, the term "Environmental Law" shall mean any
law, statute, ordinance, rule, regulation, order or determination of any
governmental authority or agency affecting the Property and pertaining to
health or the environment including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1982 and the
Resource Conservation and Recovery Act of 1986. Seller agrees to promptly
notify Purchaser of any fact of which Seller becomes aware which would
cause this representation to become false or of any notice that Seller
receives regarding the matters set forth in this Section 6.1.9.
6.1.10 Seller has received no written notice of any pending
improvements, liens or special assessments to be made against the Property
by any governmental authority.
6.1.11 No person, firm or corporation or other entity has any right or
option to acquire the Property, or any part thereof, from Seller.
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6.1.12 Seller is neither a "foreign person" nor a "foreign
corporation" as those terms are defined in Section 7701 of the Internal
Revenue Code of 1986, as amended.
6.1.13 From and after the date hereof, and until the Closing or
earlier termination of this Agreement, Seller shall not sell, assign or
create any right, title or interest whatsoever in or to the Property or
create any lien, encumbrance or charge thereon, other than liens or
encumbrances either noted in the Commitment or those which shall be
released at Closing.
6.1.14 From and after the date hereof, and until the Closing or
earlier termination of this Agreement, Seller shall not intentionally take
any action, or intentionally omit to take any action, which action or
omission would have the effect of violating any of the representations,
warranties or covenants of Seller contained in this Agreement.
6.1.15 Seller shall satisfy any and all claims for mechanics' or
materialmen's liens against the Property or any part thereof on or prior to
Closing; provided, however, Seller shall have the right to contest any such
claims so long as a bond is posted by Seller and/or other procedures
reasonably acceptable to Purchaser are followed in order to protect the
Property, so long as no exception therefor appears in the Owner's Title
Policy described in Section 4.3 hereof.
6.1.16 Seller shall neither transfer nor remove any Personal Property
or fixtures from the Property subsequent to the date hereof without the
prior written consent of Purchaser, except as provided for in this
Agreement or for purposes of replacement thereof, in which case such
replacements shall be promptly installed prior to Closing and shall be
comparable in quantity to the item(s) being replaced.
6.1.17 From and after the date hereof, and until the Closing or
earlier termination of this Agreement, Seller will not execute any new
employment, maintenance, management or service contracts pertaining to the
Property which cannot be canceled or terminated without any liability upon
written notice of thirty (30) days or less.
6.1.18 Seller shall operate and maintain the Property through Closing
in accordance with its current management practices.
6.1.19 From the date hereof, and until the Closing or earlier
termination of this Agreement, Seller shall conduct its leasing activities
in the normal course of business and shall execute no new tenant leases
other than on the form of lease currently used by Seller or such other form
as may be reasonably approved by Purchaser, with such new tenant leases
being for a term (including renewals) no longer than one (1) year past the
Closing Date without Purchaser's prior written approval, which approval
shall not be unreasonably withheld, conditioned or delayed. A copy of any
new tenant lease so executed by Seller shall be transmitted to Purchaser
immediately upon the execution thereof.
6.2 Seller shall have no liability with respect to any of the foregoing
representations and warranties if, prior to the Closing, Buyer discovers or
learns of information, from whatever source, including without limitation, as a
result of Buyer's due diligence tests, investigations and inspections of the
Property or disclosure by Seller or Seller's agents and employees, that
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contradicts any of the foregoing representations and warranties, or renders any
of the foregoing representations and warranties untrue or incorrect, and Buyer
nevertheless consummates the transaction contemplated by this Agreement.
6.3 NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR
IN ANY EXHIBIT ATTACHED HERETO, IT IS UNDERSTOOD AND AGREED THAT THE PROPERTY IS
BEING SOLD AND CONVEYED HEREUNDER "AS IS" WITH ANY AND ALL FAULTS AND LATENT AND
PATENT DEFECTS WITHOUT ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY BY
SELLER OR ANY REPRESENTATIVE OF SELLER OR ANY OTHER PERSON ACTING OR PURPORTING
TO ACT FOR OR ON BEHALF OF SELLER, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN
ANY EXHIBIT ATTACHED HERETO. SELLER HAS NOT MADE, DOES NOT HEREBY MAKE AND
HEREBY SPECIFICALLY DISCLAIMS (EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY
EXHIBIT ATTACHED HERETO) ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR
CHARACTER WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY (OTHER
THAN SELLER'S SPECIAL WARRANTY OF TITLE CONTAINED IN THE SPECIAL WARRANTY DEED
TO BE DELIVERED AT CLOSING), ITS CONDITION (INCLUDING WITHOUT LIMITATION ANY
REPRESENTATION OR WARRANTY REGARDING QUALITY OF CONSTRUCTION, STATE OF REPAIR,
WORKMANSHIP, MERCHANTABILITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE), ITS COMPLIANCE WITH ENVIRONMENTAL LAWS OR OTHER LAWS, AVAILABILITY OF
ACCESS, INGRESS OR EGRESS, INCOME TO BE DERIVED THEREFROM OR EXPENSES TO BE
INCURRED WITH RESPECT THERETO, THE OBLIGATIONS, RESPONSIBILITIES OR LIABILITIES
OF THE OWNER THEREOF, OR ANY OTHER MATTER OR THING RELATING TO OR AFFECTING THE
PROPERTY, AND SELLER HEREBY DISCLAIMS AND RENOUNCES ANY OTHER REPRESENTATION OR
WARRANTY TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW. PURCHASER
ACKNOWLEDGES AND AGREES THAT PURCHASER IS ENTERING INTO THIS AGREEMENT WITHOUT
RELYING (EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY EXHIBIT ATTACHED HERETO)
UPON ANY REPRESENTATION, WARRANTY, STATEMENT OR OTHER ASSERTION, ORAL OR
WRITTEN, MADE BY SELLER OR ANY REPRESENTATIVE OF SELLER OR ANY OTHER PERSON
ACTING OR PURPORTING TO ACT FOR OR ON BEHALF OF SELLER WITH RESPECT TO THE
PROPERTY BUT RATHER IS RELYING UPON ITS OWN EXAMINATION AND INSPECTION OF THE
PROPERTY. PURCHASER REPRESENTS THAT IT IS A KNOWLEDGEABLE AND EXPERIENCED
PURCHASER OF REAL ESTATE, THAT IT HAS CONDUCTED WHATEVER STUDIES, TESTS,
EXAMINATIONS AND ANALYSES THAT IT DETERMINES TO BE NECESSARY OR DESIRABLE AND
THAT IT IS RELYING SOLELY ON ITS OWN EXPERTISE AND THAT OF ITS CONSULTANTS IN
ALL MATTERS RELATING TO PURCHASER'S DECISION TO PURCHASE THE PROPERTY. THE TERMS
AND CONDITIONS OF THIS PARAGRAPH SHALL EXPRESSLY SURVIVE THE CLOSING, SHALL NOT
MERGE WITH THE PROVISIONS OF ANY CLOSING DOCUMENT AND SHALL BE INCORPORATED INTO
THE SPECIAL WARRANTY DEED TO BE DELIVERED BY SELLER AT CLOSING. PURCHASER
FURTHER ACKNOWLEDGES AND AGREES
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THAT THE PROVISIONS OF THIS PARAGRAPH WERE A MATERIAL FACTOR IN THE
DETERMINATION OF THE PURCHASE PRICE FOR THE PROPERTY.
6.4 Purchaser acknowledges that Seller has advised Purchaser that the
improvements comprising a part of the Property may contain lead-based paint and
may contain asbestos containing material (as defined in 29 CFR Section
1926.1101(b) and/or other applicable laws, regulations or governmental
requirements, "ACM") and presumed asbestos containing material (as defined in 29
CFR Section 1926.1101(b) and/or other applicable laws, regulations or
governmental requirements, "PACM"). As used herein: "ACM" includes any material
containing more than one percent (1%) asbestos; and "PACM" includes, in
buildings constructed no later than 1980, thermal system insulation (such as
insulation applied to pipes, fittings, boilers, breeching, tanks, ducts or other
structural components) and sprayed or troweled on, or otherwise applied,
surfacing material (such as asphalt and vinyl flooring material, acoustical
plaster on ceilings and fireproofing materials on structural members).
NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT, ANY EXHIBIT HERETO OR ANY
CLOSING DOCUMENT(S) TO BE DELIVERED IN CONNECTION HEREWITH TO THE CONTRARY,
SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO
THE PRESENCE, ABSENCE OR EFFECT OF LEAD-BASED PAINT, ACM AND/OR PACM IN OR ON
THE PROPERTY, INCLUDING BUT NOT LIMITED TO VIOLATION OR COMPLIANCE OR
NONCOMPLIANCE WITH ENVIRONMENTAL, HEALTH, SAFETY OR OTHER LAWS, RULES,
REGULATIONS, ORDINANCES OR ORDERS OF THE UNITED STATES OR ANY AGENCY OR
DEPARTMENT THEREOF OR OF ANY STATE, LOCAL OR OTHER POLITICAL SUBDIVISION THEREOF
OR ANY AGENCY OR DEPARTMENT OR OTHER BODY ORGANIZED UNDER ANY OF THE FOREGOING.
Purchaser agrees that Seller shall have no liability or responsibility to take
or for failure to take any action to comply with such laws, rules, regulations,
ordinances or orders and shall have no liability to Purchaser for claims or
causes of action asserted by third parties against Purchaser in any way arising
out of or relating to the presence of lead based paint or asbestos containing
materials in or on the Property as of the Closing Date. The terms and provisions
of this Section 6.4 shall survive delivery and recordation of the Deed.
6.5 Purchaser makes the following representations and warranties, which
shall be true and correct in all material respects as of the Closing Date and
which shall survive the Closing for a period of six (6) months, the truth of
which (in all material respects) shall be a condition precedent to Seller's
obligations hereunder:
6.5.1 Purchaser is duly organized and legally existing as a Virginia
corporation. The execution and delivery of, and performance under, this
Agreement are within Purchaser's powers and have been duly authorized by
all requisite corporate action. The person executing this Agreement on
behalf of Purchaser has the authority to do so. This Agreement constitutes
the legal, valid and binding obligation of Purchaser enforceable in
accordance with its terms, subject to laws applicable generally to
creditor's rights. Performance of this Agreement will not result in any
breach of, or constitute any default under, any agreement or other
instrument to which Purchaser is a party or by which Purchaser might be
bound.
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VII.
SURVIVAL AND LIMITATIONS
7.1 All warranties and representations 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. Any claim brought by Seller or Purchaser
for a breach of any of the representations and warranties of Seller or Purchaser
set forth in this Agreement must be filed in a court of law having appropriate
jurisdiction within the six (6) month period after the Closing. To the extent
that either Seller or Purchaser fails to bring such a claim against the other
party by appropriate proceedings in a court of law having proper jurisdiction
within such six (6) month period, all of such claims will be forever barred.
Notwithstanding anything in this Agreement to the contrary, Purchaser may not
bring suit against Seller for a breach of any of the representations and
warranties in Section 6 unless Purchaser suffers losses directly resulting from
such breach in an amount not less than $25,000, and in no event shall Seller be
liable to Purchaser for any amount in excess of the Purchase Price.
VIII.
POSSESSION
8.1 Purchaser shall be entitled to full possession of the Property at
Closing, subject only to tenant leases and the Permitted Exceptions and Approved
Service Contracts.
IX.
PRORATIONS AND ADJUSTMENTS
9.1 Collected rents, operating expenses, ad valorem taxes on the Property
for the current year, utility charges and all other items (including prepaid
items) of income and expense shall be prorated at the Closing, effective as of
the Closing Date, utilizing the best available computations of such items. If
current ad valorem tax assessments are unavailable at Closing, said ad valorem
taxes shall be adjusted based on the tax rate for the immediately preceding year
applied to the latest assessed value of the Property; provided, however, all
special tax assessments made by any taxing authority with respect to the Project
prior to Closing shall be the sole responsibility of Seller and shall be paid by
Seller at Closing and those assessed after the Closing Date shall be paid by
Purchaser. If the taxes for the current year are more or less than the taxes for
the preceding year, Seller and Purchaser shall adjust the proration of such
taxes and Seller or Purchaser, as the case may be, shall pay to the other any
amount required as a result of such adjustment, and this covenant shall not
merge with the Deed delivered hereunder but shall survive the Closing. Purchaser
shall receive a credit for tenant security deposits that are not yet forfeited.
With respect to delinquent rents, Seller and Purchaser agree that only amounts
paid in rent to Seller prior to Closing for periods after Closing shall be paid
by Seller to Purchaser and that delinquent rents will not be prorated. In the
event there are rents due but unpaid on the Closing Date which are collected
after Closing by Purchaser, that portion of the rent paid for periods prior to
Closing shall be delivered by Purchaser to Seller. Purchaser shall have the
obligation to take all reasonable efforts to collect delinquent rents owing to
Seller, provided that Purchaser shall not be obligated to file suit or incur any
out-of-pocket expenses to collect delinquent rents. Any funds paid by any tenant
after Closing shall be applied first to the current rents due and owing to
Purchaser and the balance to the oldest outstanding delinquent rents. If Seller
receives any rents after Closing relating to periods of time after Closing,
Seller shall remit such rents to Purchaser.
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X.
COMMISSIONS
10.1 In connection with the transaction describe in this Agreement, Seller
hereby agrees to pay a real estate commission to (a) Stephen W. Church in an
amount equal to one percent (1%) of the Purchase Price and (b) Price Realty
Corporation in an amount equal to one percent (1%) of the Purchase Price, if and
only if the transactions contemplated herein shall close. If such transactions
are not closed for any reason, including without limitation failure of title or
default by Seller or Purchaser or termination of this Agreement pursuant to the
terms hereof, then such commission will not be deemed to have been earned and
shall not be due or payable. Seller does hereby agree to indemnify Purchaser
against and hold Purchaser harmless from any and all real estate commissions,
claims for such commissions or similar fees, including attorneys' fees incurred
in any lawsuit regarding such commissions or fees arising by, through or under
Seller. Purchaser does hereby agree to indemnify Seller against and hold Seller
harmless from any and all real estate commissions, claims for such commissions
or similar fees including, attorneys' fees incurred in any lawsuit regarding
such commissions or fees, arising by, through or under Purchaser. In connection
therewith, Purchaser and Seller hereby represent and warrant to each other that
neither such party, their officers, employees and agents, have contracted for
any such real estate commissions, nor have they, without knowledge of the other,
contacted real estate agents or brokers, other than the parties set forth in
this Section 10.1, nor have they, without the other's knowledge, acted in a
manner so as to give rise to a claim for such real estate commissions or similar
fees. The provisions of this Section 10.1 shall survive the execution and
delivery of the Deed and shall survive the Closing hereof.
10.2 By its execution hereof Purchaser acknowledges that it has been
informed by the parties set forth in Section 10.1 above that the Purchaser
should have an 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.
XI.
FURTHER INSTRUMENTS
11.1 Seller will, whenever and as often as it shall be reasonably requested
so to do by Purchaser, and Purchaser will, whenever and as often as it shall be
reasonably requested so to do by Seller, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, any and all conveyances,
assignments and all other instruments and documents as may be reasonably
necessary in order to complete the transaction herein provided and to carry out
the intent and purposes of this Agreement.
XII.
TERMINATION AND REMEDIES
12.1 If Purchaser is not then in default in its obligations or agreements
hereunder, and 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, as its sole and exclusive remedy, either (i) terminate this
Agreement by giving written notice of termination to Seller and receive a full
and immediate refund of any and all Earnest Money
15
<PAGE>
previously deposited, or (ii) seek to enforce specific performance of this
Agreement. If Purchaser chooses to seek specific performance of this Agreement,
and is ultimately successful on such claim, then, upon receipt of a written
invoice therefore, Seller shall reimburse Purchaser for the documented,
out-of-pocket, third-party expenses actually incurred by Purchaser in connection
with Purchaser's suit for specific performance of this Agreement.
12.2 If Seller is not then in default in its obligations or agreements
hereunder, and 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 such
Earnest Money as may have been previously deposited as liquidated damages, and
as Seller's sole and exclusive remedy for such failure, Seller hereby
specifically waiving any and all rights which it may have to other damages or
specific performance as a result of Purchaser's default under this Agreement.
XIII.
RISK OF LOSS; CONDEMNATION
13.1 Risk of loss until the Closing shall be borne by Seller. In the event
that damage, loss or destruction of the Property, which requires less than
$250,000.00 to be expended to repair or restore the damaged Property, by fire or
other casualty occurs prior to the actual Closing of the transactions
contemplated hereby, Purchaser shall not have the right to terminate this
Agreement but shall be obligated to close the transaction contemplated hereby
and take an assignment of and receive in cash all insurance proceeds payable as
a result of such casualty loss and receive a credit against the Purchase Price
due at Closing in the amount of any deductible applicable to such insurance
coverage, or, if such proceeds are not made available by the holder or holders
of any indebtedness secured by liens against the Property, to receive a credit
against the Purchase Price in the amount of such casualty loss. In the event
that damage, loss or destruction of the Property, which requires $250,000.00 or
more to be expended to repair or restore the damaged Property, by fire or other
casualty occurs prior to the actual closing of the transactions contemplated
hereby, the Purchaser shall, at its option, elect one of the following:
13.1.1 To terminate this Agreement and receive an immediate refund of
all Earnest Money previously deposited; or
13.1.2 To close the transactions contemplated hereby and take an
assignment of and receive in cash all insurance proceeds (including
proceeds from any "loss of rent" policy, if any, then in force) payable as
a result of such casualty loss and receive a credit against the Purchase
Price due at Closing in the amount of any deductible applicable to such
insurance coverage, or, if such proceeds are not made available by the
holder or holders of any indebtedness secured by liens against the
Property, to receive a credit against the Purchase Price in the amount of
such casualty loss. If the Purchaser elects to proceed under this Section
13.1.2, then Purchaser shall have the right to settle any claim with the
applicable insurance company. Other than receiving a credit against the
Purchase Price due at Closing as provided in this Section 13.1.2, there
shall be no reduction in the Purchase Price by reason of such damage.
13.2 Notwithstanding the foregoing, in the event that damage, loss or
destruction of the Property occurs which requires more than $250,000.00 but less
than $1,000,000.00 to be expended to repair or restore the damaged Property, by
fire or other casualty. Seller shall have the
16
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right to elect to repair and restore the Property and extend the Closing Date
for a period of time up to one hundred eight (180) days in order to complete
such repair or restoration. Should Seller make such election to repair and
restore the Property and provide Purchaser with written notice of such election
within ten (10) days of the date of such damage or destruction, Purchaser shall
be obligated to agree to extend the Closing Date for the period of time
necessary to complete such repairs or restoration (but not to exceed 180 days),
and there shall be no reduction in the Purchase Price; provided, however, that
if Seller delivers to Purchaser the notice contemplated in this Section 13.2,
then Purchaser shall have the option, exercisable by written notice to Seller
within five (5) days of Purchaser's receipt of Seller's notice, to close the
transactions contemplated herein and take an assignment of the insurance
proceeds, if any, payable as a result of the casualty, as more fully set forth
in Section 13.1.2 above. If for any reason Seller fails to elect to repair and
restore the Property within such ten (10) day period, Purchaser may terminate
this Agreement and obtain a refund of its Earnest Money.
13.3 The risk of loss resulting from any pending or threatened condemnation
or eminent domain proceeding which is commenced prior to Closing remains with
Seller until Closing. If, prior to the Closing, all or any material portion of
the Property shall be subjected to a bona fide threat of condemnation, eminent
domain or other proceeding, Seller so notify Purchaser, and Purchaser may elect
to (i) terminate this Agreement, in which event the Earnest Money shall be
returned to Purchaser by the Title Company, or (ii) Purchaser may declare this
Agreement to remain in full force and effect and at Closing, Seller shall
assign, transfer and set over to Purchaser all of the right, title and interest
of Seller in and to any awards or claims that may thereafter be made for such
taking.
13.4 Seller shall maintain the current insurance coverage for the Property
in full force and effect through the Closing Date.
XIV.
NOTICES
14.1 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, delivered by express delivery service, transmitted by facsimile
with confirming receipt, or as of the date of first attempted delivery at the
address provided herein if sent by registered or certified mail, return receipt
requested, addressed as follows:
IF TO PURCHASER: COPY TO:
---------------- --------
Cornerstone Realty Income Trust, Inc. Zuckerbrod & Taubenfeld
306 East Main Street 575 Chestnut Street
Richmond, VA 23219 P.O. Box 488
Attn: Gus G. Remppies Cedarhurst, NY 11516
Facsimile No.: (804) 648-2675 Attn: Harry S. Taubenfeld, Esq.
Facsimile No.: (516) 374-3490
17
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AND COPY TO:
------------
Brown McCarroll & Oaks Hartline
300 Crescent Court
Suite 1400
Dallas, TX 75201
Attn: Robert E. Morrison, Esq.
Facsimile No.: (214) 999-6170
IF TO SELLER: COPY TO:
------------- --------
First Worthing Company Gibson, Dunn & Crutcher LLP
8144 Walnut Hill Lane 1717 Main Street
Suite 550, LB-6 Suite 5400
Dallas, TX 75231 Dallas, TX 75201
Attn: Steven R. Utley Attn: David L. Herbert, Esq.
Facsimile No.: (214) 369-4130 Facsimile No.: (214) 698-3400
14.2 The addresses and addressees for the purposed of this Section 14 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 herein shall be deemed to continue in
effect for all purposes.
XV.
MISCELLANEOUS
15.1 Entire Agreement. This Agreement and the exhibits attached hereto
contain the entire agreement between the parties, and no promise,
representation, warranty or covenant not included in this Agreement or any such
referenced agreements has been or is relied upon by either party.
15.2 Reliance. Neither party has made any representations, warranties or
covenants to the other concerning any tax benefits or tax treatment which may
accrue to be given to the other party in connection with the transactions
contemplated hereby. Each party has relied upon its own examination of the full
Agreement and the provisions thereof, and the counsel of its own advisors, and
the warranties, representations and covenant expressly contained in this
Agreement itself.
15.3 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.
15.4 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.
15.5 Attorneys' Fees. Should either party hereto institute any action or
proceeding in court to enforce any provision hereof or for damages by reason of
any alleged breach of this
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Agreement or for any other judicial remedy, the prevailing party in any
litigation between the parties arising under this Agreement shall be entitled to
recover reasonable attorneys' fees and all court costs in connection therewith
from the losing party.
15.6 Counterparts: Headings. This Agreement may be executed in any number
of counterparts which together 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.
15.7 Assignment. This Agreement, and the rights and obligations hereunder,
may not be assigned by Purchaser at any time except to an entity (a "Permitted
Assignee") which is owned by Purchaser, owns or is under common ownership with
Purchaser or is an entity which Purchaser or an affiliate of Purchaser manages
or controls. In the event of any such Permitted Assignment (herein so called),
Purchaser shall notify Seller in writing of such assignment and shall execute
and deliver a written assumption agreement under which all of the obligations of
Purchaser hereunder are expressly assumed by the Permitted Assignee.
15.8 Date of Agreement. All references in this Agreement to "the date
hereof" 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.
15.9 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 successors and assigns whenever the context so requires or admits.
15.10 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.
15.11 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 appropriate under the circumstances; further, the singular
shall include the plural and the plural the singular.
15.12 Term of Offer. This Agreement constitutes an offer by Purchaser to
purchase the Property on the terms and conditions and for the Purchaser Price
specified herein. Unless sooner terminated or withdrawn by notice in writing to
Seller, this offer shall lapse and terminate at 5:00 p.m. (Dallas, Texas time)
on the third business day following execution hereof by Purchaser, unless, prior
to such time, Seller has executed and returned to Purchaser two (2) fully
executed copies of this Agreement.
15.13 Waiver. Purchaser acknowledges that it has been represented by
competent counsel of its choice throughout the negotiation and documentation of
the transaction contemplated by this Agreement, and Purchaser waives its right
to file or pursue any claim or action with respect to the rule that ambiguities
in this Agreement or any other document delivered pursuant to it are to be
resolved against the drafting party.
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XVI.
MISCELLANEOUS
16.1 Confidentiality. All information relating to the Property which is
acquired by either party hereto, or any information regarding the operation of
Seller or Purchaser, shall be confidential and shall not be disseminated without
the prior written approval of the other party, which approval may be withheld in
such party's sole discretion.
[signatures appear on next page]
20
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EXECUTED by Purchaser this 2 day of July, 1998.
CORNERSTONE REALTY INCOME TRUST, INC.,
a Virginia corporation
By: /s/ Gus G. Remppies
-------------------------------
Name: Gus G. Remppies
-----------------------------
Title: V.P.
----------------------------
EXECUTED by Seller this ___ day of July, 1998.
COTTONWOOD REALTY ASSOCIATES,
a New York general partnership
By: Captiva Developement Corp.,
a New York corporation,
General Partner
By:
---------------------------
Name:
-------------------------
Title:
------------------------
21
EXHIBIT 10.12
FIRST AMENDMENT TO PURCHASE CONTRACT
(PACE'S POINT APARTMENTS)
This First Amendment to Purchase Contract (the "Amendment") is made by and
between Corporate Drive, L.P., a Texas limited partnership ("Seller") and
Cornerstone Realty Group, Inc., a Virginia corporation ("Purchaser"), to be
effective as of the 9th day of April, 1998.
RECITALS
A. Effective on or about March 10, 1998, Seller and Purchaser entered into
a certain Purchase Contract (the "Contract") relating to a parcel of land and
the improvements thereon located in Lewisville, Denton County, Texas. All terms
used herein with their initial letter capitalized shall, unless otherwise
specified herein, have the meaning given to such terms in the Contract.
B. The parties desire to amend the Contract to extend the Inspection Period
stated in Section 3.7 of the Contract and have entered into this Amendment to
reflect such agreements.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser and Seller hereby agree as follows:
1. The Inspection Period stated in Section 3.7 of the Contract shall expire
at 11:59 p.m. CST on April 17, 1998, subject to any extension of the Inspection
Period provided in the Contract, and the Purchase Price shall be increased by
$5,000.
2. Except as modified herein, the Contract remains in full force and effect
without modification.
3. Purchaser and Seller hereby ratify and confirm the Contract, as herein
modified, for all purposes.
4. This Amendment may be executed in counterparts, each of which will be
deemed to be an original, but all of which will constitute one and the same
document. A counterpart signed by a party and transmitted by facsimile to the
other party will have the same effect as the delivery of an original.
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first set forth above.
SELLER: CORPORATE DRIVE, L.P.,
a Texas limited partnership
By: /s/ Robert J. Werra
----------------------------------
Name: Robert J. Werra
--------------------------------
Title: General Partner
-------------------------------
PURCHASER: CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By: /s/ Gus G. Remppies
----------------------------------
Name: Gus G. Remppies
--------------------------------
Title: V.P. Acquisitions
--------------------------------
<PAGE>
PACE'S
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this day of March 1998 (the "Effective
Date"), between CORNERSTONE REALTY GROUP, INC. or its nominee, (hereinafter
called "Purchaser") and CORPORATE DRIVE, L.P., a Texas Limited Partnership
(hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 SALE OF PROPERTY. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as PACE'S POINT APARTMENTS
located in LEWISVILLE, 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 300 individually heated and air conditioned
apartment units, with all appurtenances, together with all appliances, drapes,
carpeting, shrubbery and all other personal property owned by Seller and located
on and used in connection with operation and maintenance the premises,
including, the inventory of all personal property (other than appliances in
apartment units) of $100 in value to be supplied by Seller and attached hereto
as EXHIBIT B (all such real and personal property hereinafter collectively
referred to as the "Property", subject to Purchaser's inventory prior to
closing, unless the context clearly indicates otherwise). Seller agrees that it
will not remove any of the personal property from the date of this Agreement to
the date of closing.
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 PURCHASE PRICE. The total purchase price shall be ELEVEN MILLION FOUR
HUNDRED THOUSAND ($11,400,000) DOLLARS payable as follows:
2.2 PAYMENT
(A) DEPOSIT. TWENTY FIVE THOUSAND ($25,000) DOLLARS upon the execution
of this Agreement by Seller and Purchaser and an additional SEVENTY FIVE
THOUSAND ($75,000) DOLLARS to be placed in escrow at the end of the "Inspection
Period" described in Article VI below. Said deposit shall be placed in escrow
with American Title Company, 1330 Summit Avenue, Fort Worth, TX 76102,
Attention: Joanna Cloud, or its authorized agent (the "Title Company") as an
earnest money deposit which may be credited
<PAGE>
against the purchase price or applied as per Article XI below. The Title Company
shall hold the funds in an interest-bearing account with interest to be credited
in the same manner as-the deposit.
(B) EXISTING MORTGAGE.
(a) The Property shall be conveyed Subject to Purchaser's
assumption and promise to pay in accordance with its terms the loan (the "Loan")
evidenced by that certain Promissory Note (the "Note"), dated 6/21/96 in the
original principal sum of SEVEN MILLION EIGHT HUNDRED THIRTY SIX THOUSAND
($7,836,000) DOLLARS payable to the order of THE PATRICIAN FINANCIAL CO., A
Maryland corporation (the "Lender"), and assumption and promise to perform all
covenants and obligations of Seller under the documents or instruments
governing, securing, evidencing or pertaining to the indebtedness evidenced by
the Note (collectively, the "Loan Documents"), including, but not limited to,
that certain Indenture of Mortgage, Deed of Trust, Deed to secure Debt, Security
Agreement, Fixture Filing, Financing Statement and Assignment of Rents and
leases of even date with the Note (the "Deed of Trust") recorded in the Real
Property Records of Denton County, Texas.
(b) Seller represents and warrants that (i) Seller will deliver
to Purchaser true and complete copies of the existing Deed of Trust, the Note
secured thereby and any extensions and modifications thereof in its possession
or in the possession of its attorney, and (ii) there are no monetary defaults by
Seller under the terms of the Loan Documents and it has received no written
notice of any default under any of the terms of the Loan Documents. From and
after the Effective Date of this Agreement to the Closing Date, Seller agrees to
pay to Lender all installments of principal, interest and escrows and any other
sums of which Seller has notice that are due and payable under the Loan
Documents, as and when such payments are due. Seller shall use reasonable
efforts to provide Purchaser with an Estoppel Certificate from the Lender.
Failure of Purchaser to receive an Estoppel Certificate from Lender prior to
Closing shall give the Purchaser an option to terminate this Agreement and
receive a refund of the deposit or waive the requirement and proceed to closing.
(c) Seller shall immediately upon the execution of this Agreement
take whatever steps are necessary to contact the Lender and initiate the
procedure to procure the right to assign the mortgage to the Purchaser pursuant
to an Assignment and Assumption Agreement. The Purchaser and Seller agree to
cooperate with the other in procuring permission for Purchaser to purchase the
Property and assume the Loan set forth herein above. Seller agrees to provide
copies of all correspondence and applications to the Purchaser. The parties
further agrees to use their best efforts to procure said approval within the
Purchaser's Inspection Period (30 days from the date of this Agreement).
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(d) Purchaser agrees to execute and deliver to the Lender all
documents and instruments reasonably requested by the Lender in CONNECTION WITH
THE ASSUMPTION AND further agrees to pay to the Lender all reasonable fees and
reasonable expenses of the Lender, and its reasonable counsel fees in connection
with the assumption, including, but not limited to, any assumption or transfer
fee provided for in the Deed of Trust and the reasonable fees of Lender's
attorney in connection with preparation of the assumption documents. Purchaser
shall also pay all premiums for any endorsements required by the Lender in
connection with the assumption to the Lender's mortgagee policy of title
insurance or the cost of a new mortgagee policy of title insurance, if required
by the lender. Seller shall not be obligated to incur any expenses other than
normally required in a sale and its legal fees.
(e) If there is a mortgagee escrow account or reserve fund,
Seller shall assign it to Purchaser, if it can be assigned, and in that case
Purchaser shall pay the amount in the escrow account or reserve fund to Seller
at Closing.
(f) Purchaser agrees that it will reasonably cooperate with
Seller in attempting to obtain the full and unconditional release of Seller from
the obligations arising out of the Note and Loan Documents, but Purchaser shall
not be obligated to expend any sum or incur any additional liability on account
thereof. In the event Seller and/or Purchaser is unable to obtain the full and
unconditional release of Seller from all obligations arising out of the Note and
Loan Documents, in addition to other indemnities provided in this Agreement,
Purchaser agrees at all times after closing to indemnify, protect, defend, save
and hold harmless Seller and its General Partners from and against any and all
debts, duties, obligations, liabilities, suits, claims, demands, causes of
action, damages, losses, liens, costs and expenses (including, without
limitations, attorney's fees and expenses incurred in connection with enforcing
this indemnity or opposing any such claims, damages, or causes of action) and
court costs asserted or incurred at any time after the Closing Date relating to
or arising out of (i) the failure by Purchaser or its successors and assigns to
perform all covenants and obligations of borrower under the Note and Loan
Documents or (ii) a default by Purchaser or its successors and assigns under the
Note and Loan Documents. This indemnity shall relate to matters first occurring
after the Closing Date. This indemnification and the obligations thereunder
shall survive the closing of the transaction evidenced by this Agreement.
However, the Seller shall notify the Purchaser of any claims as made and Seller
shall give Purchaser the right to defend any claims which they feel are invalid.
(C) BALANCE. Balance at Closing as evidenced by cash or immediately
available cash equivalent.
2.3 INDEPENDENT CONTRACT CONSIDERATION. Purchaser
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shall, concurrently with its execution hereof, deliver to Seller a check in the
amount of FIFTY ($50) DOLLARS (the "Independent Contract Consideration"), which
amount Seller and Purchaser agree has been bargained for as consideration for
Seller's execution and delivery of this Contract and Purchaser's right to
inspect the Property. The Independent Contract Consideration is in addition to
and independent of any other consideration or payment provided for in this
Contract and is non-refundable in all events.
ARTICLE III
TITLE MATTERS
3.1 TITLE. Seller, shall convey good and indefeasible title by Special
Warranty Deed in the form attached hereto as EXHIBIT D, subject only to general
taxes for the current year not yet due and payable, rights of tenants claiming
under the leases, none of which shall be for more than one year or other than
residential purposes, except laundry room leases, and utility easements which do
not interfere with the present use of the Property, and the "Permitted
Exceptions". "Permitted Exceptions" are those title exceptions listed in the
title commitment, which are not objected to pursuant to section 3.2 below.
(A) Title shall be free from any and all liens, except the liens
securing unpaid taxes not yet due and payable and mortgages as set forth in
Paragraph 2.2(B), and Seller shall be responsible for any prepayment penalties
necessary to deliver such free title.
3.2 TITLE DEFECTS; ELECTION TO CURE. Seller shall furnish to Purchaser at
Seller's expense a commitment for Title Insurance from the Title Company, (the
"Commitment" or the "Title Report") within fifteen (15) days after the Effective
Date, covering the Property binding the Title Company to issue a Texas Owner
Policy of Title Insurance (the "Title Policy") on the standard form prescribed
by the Texas State Board of Insurance at the Closing, in the full amount of the
Purchase Price, insuring Purchaser's fee simple title to the Property to be good
and indefeasible, together with true and correct copies of all instruments
listed on Schedule B to the Commitment (as well as any other documents or
instruments listed therein which will not be released at closing). If the title
commitment shows any exceptions, which are not acceptable to Purchaser in
Purchaser's sole discretion, Purchaser shall give written notice of such defects
in title to Seller and Seller's counsel during the Inspection Period. If
Purchaser fails to notify Seller of any exceptions which are not acceptable to
Purchaser during the Inspection Period, then Purchaser shall be deemed to have
accepted those matters not objected to. Seller may, at its option, elect whether
to cure said defects or by written notice to Purchaser indicate its intention
not to cure.
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3.3 ELECTION NOT TO CURE DEFECTS. Should Seller elect not to cure title
defects, this Agreement, at Purchaser's option (exercised within five (5) days
of the notice by 'Seller that it will not cure the objections during the
Inspection Period), shall be terminated; each party shall thereupon be released
from all obligations hereunder, except as provided in Paragraph 6.2.2; and all
deposits shall be immediately returned to Purchaser. if Purchaser does not elect
to terminate this Agreement, all title defects that remain uncured at Closing
shall be deemed "Permitted Exceptions."
3.4 SURVEY. As soon as reasonably possible, and in any event within twenty
(20) days after the Effective Date, Seller shall, at Seller's expense, deliver
or cause to be delivered to the Seller, the Title Company, and to Purchaser a
current or updated on-the-ground perimeter survey (the "Survey") of the Property
prepared by a Registered Professional Land Surveyor reasonably acceptable to the
Purchaser. The Survey shall show the location and size of all of the following
on or adjacent to the Property, if any:
buildings, buildings lines, improvements, streets, pavements,
easements, rights-of-way, protrusions, encroachments, fences, 100-year
flood plain, public utilities, and recording information of easements.
The Survey shall show the gross land area and the Net Land Area. The Survey
shall be in a form and of a date acceptable to Purchaser and to the Title
Company, and in acceptable form in order to allow the Title Company to delete
the survey exception from the Title Policy. The term "Net Land Area" means the
gross land area of the Property less the land area included in utility
easements, drainage easements, ingress/egress easements, rights-of-way, 100-year
flood plain and encroachments on or across the Property. The area within the
100-year flood plain shall be as defined by the Federal Emergency Management
Agency or other applicable governmental authority.
3.5 The survey shall show no encroachments onto the Land from any adjacent
property, no encroachments by or from the Land onto adjacent property and no
violation of or encroachments upon any recorded building lines, restrictions or
easements affecting the Property. If the Survey discloses any such encroachment
or violation, Purchaser shall give written notice thereof to Seller and Seller
shall have ten (10) days from the date of Purchaser's notice (with a
commensurate extension of the closing date) to request the Title Insurer issue
its endorsement insuring against damage caused by such encroachment or violation
and to provide evidence thereof to Purchaser, and if Seller fails to or is
unable to have the same insured against within such ten (10) day period,
Purchaser may elect, on or before the expiration of the Inspection Period, to
(i) terminate this Agreement (in which case
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the Earnest Money shall be returned to Purchaser) and neither party shall have
any further liability or obligation to the other hereunder, except as provided
in Paragraph 6.2.2 or (ii) accept the property subject to any such encroachment
or violation, as "Permitted Exceptions".
3.6 Purchaser agrees to deliver to Seller, within the inspection Period,
notice as to which items on the title report or the Survey are objectionable.
3.7 COMMENCEMENT AND TERMINATION OF INSPECTION PERIOD. It is understood
that the Inspection Period begins on the date on which both parties have
executed this Agreement, with date inserted on the first page, and shall
terminate at 5:00 p.m. CST on the thirtieth (30th) day unless said 30th day
shall be a Saturday or Sunday, in which case the next business day shall be the
date of the termination of the Inspection Period. It is further understood that
unless there is an extension in writing, the Inspection Period must be completed
by said date.
3.8 NOTICE REQUIRED. The parties agree that whenever a notice shall be
required by either party, said notice must be given within the "Inspection
Period", except notices dealing with the closing or survival.
ARTICLE IV
PRORATIONS
4.1 INCOME AND EXPENSE ALLOCATIONS. The following shall be prorated, on a
calendar-month basis, to the 1st day of the month of the closing: rents and
other income from the Property; operating expenses (on such service contracts
and other obligations as Purchaser may agree to assume); and general and real
property taxes and personal and business property taxes for the year of closing
(based on the most recent assessment and the most recent levy). If funding by
Purchaser does not occur by noon CST on Closing Date, adjustments shall be as of
the date of funding prior to noon CST.
4.2 CLOSING COSTS. Purchaser and Seller shall pay their customary share of
all taxes, recording fees, if any, imposed on the Deed, or any other documents
executed in connection with the transfer of the Property. Seller agrees to pay
cost of title insurance and Purchaser agrees to pay the additional premium to
obtain "Survey deletion". Except as set forth in Section 3.1(A), Purchaser shall
pay any prepayment penalty charged by the holders of any existing notes or
assumption fees, if any.
Seller and Purchaser acknowledge that Purchaser is purchasing one or
more additional properties from partnerships affiliated with Seller upon
substantially the same terms and provisions as set forth in this Agreement.
Notwithstanding the
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foregoing, Seller shall pay the title insurance premium for title insurance on
all properties purchased by Purchaser as if issued under one owner's policy for
the full amount -of the total accumulated purchase price of all properties. If
Purchaser desires separate owner's policies on each property, Purchaser shall
pay the incremental cost of the issuance of separate owner's policies.
4.3 ALLOCATION OF RENTS. Rents collected by Seller prior to Closing shall
be prorated as agreed in 4.1 above. Purchaser shall apply rents received after
Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 PRIOR LEASE CONCESSIONS. Seller agrees to maintain its normal leasing
procedure until the Closing. Seller agrees that it will not give any free rent
concession other than in the ordinary course of business. if any free rent is
given by Seller under its normal leasing procedure after the date of this
Agreement, all free rent must be given in the first month of the lease term and
shall not be for or a period in excess of one (1) month. upon request, Purchaser
may waive this clause.
4.5 ADJUSTMENT OF PRORATION. In the event Purchaser or Seller provides
notice to the other within six (6) months of Closing that any of the rent
prorated pursuant to Section 4.3 above or the security or cleaning deposits
transferred to Purchaser at Closing pursuant to Section 7.2 (D) below is in
error on account of a misstatement or error In the certified rent roll delivered
to Purchaser at Closing pursuant to Section 7.2(F) below, Seller and Purchaser
shall adjust such proration or deposit transfer between themselves by cash
payment so as to achieve accurate proration or deposit transfer.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 POSSESSION. Possession of the property shall be delivered to Purchaser
at closing, subject to the rights of the tenants under existing leases and
rental agreements and Permitted Exceptions.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT. Purchaser's obligation to
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purchase shall be Subject to and contingent upon the satisfaction of the
following conditions precedent:
(A) Receipt by Purchaser of an engineering report of building and site
conditions, satisfactory to Purchaser in its sole discretion, said report to
include in part, a description of any hazardous waste sites, hazardous wastes
and/or hazardous materials affecting the property. Purchaser shall have fifteen
(15) days, but no later than the termination of the Inspection Period in which
to review the reports set forth herein and exercise its right to reject the
Property based thereon or the right hereunder shall be deemed waived.
(B) The receipt by Purchaser of Seller documents described in 7.2
below.
(C) Sellers representations and warranties described in Article VIII
below remain true and correct.
(D) There have been no material or adverse changes to the property or
leases since the expiration of the inspection Period.
(E) Seller acknowledges that Purchaser is a public entity and that it
is required to furnish financial statements to the Securities and Exchange
commission in connection with this acquisition. Seller agrees to make the
information available for Purchaser to audit the last 12 months of operation of
the Property so that a report can be generated that is in compliance with
accounting Regulation S-X of the Securities and Exchange commission.
(F) Purchaser determining during the Inspection Period that all water,
sewer, gas, electric, telephone, and drainage facilities and all other utilities
required by law or by the normal use and operation of the Property are and at
the time of closing will be installed to the property line, are and at the time
of closing will be connected pursuant to valid permits, and are and at the time
of closing will be adequate to service the Property and to permit full
compliance with all requirements of law and normal usage of the Property by the
tenants thereof and their licensees and invitees.
(G) Purchaser acknowledges that the selling partnership requires the
approval of its Limited Partners. Seller represents that it has commenced to
seek the approval Of its Limited Partners and has twenty-one (21) days from the
date hereof to do so. Seller shall inform Purchaser within said period of time
whether or not the Limited Partners have approved the sale. Seller may terminate
this Agreement in the event it does not obtain the requisite consent from its
Limited Partners. Upon termination on account of the failure to obtain the
consent of the Limited
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Partners of Seller, Purchaser. all earnest money shall be returned to Purchaser.
6.2 INSPECTION. This Agreement shall be further subject to and contingent
upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 PREPARATION FOR INSPECTION. At the execution of this Agreement,
Seller shall deliver to Purchaser copies of the following to the extent not
previously delivered to Purchaser: (The Inspection Period shall be extended as a
result of any delays by Seller in producing the items requested herein unless
the Seller does not have them and notifies Purchaser with an extension of time
to reflect delays of notification.) The current rent roll for the Property;
detailed statements of income and expenses with respect to the Property for the
past two years; the most recent tax bills for the Property; utility bills for
the Property for the twelve (12) months previous to the date hereof; all
contract, mortgages, and other documents creating liens of security interest on
the Property, or any part thereof and all promissory notes secured thereby; all
insurance policies applicable to the Property to include loss runs for the last
three (3) years; Plans and Specifications for the Property to the extent in
Seller's possession, service contracts, Certificates of occupancy to the extent
reasonably available; a copy of title policy and most recent survey for the
Property. A copy of any environmental or engineering reports on the property.
The rent roll shall be certified by Seller to be materially accurate and
complete to Seller's knowledge. Except as expressly set forth in this Agreement,
the delivery of the documents by Seller does not constitute a representation
(expressed or implied) by Seller of the truth, accuracy, source or completeness
of such information and Purchaser agrees to look to its own inspection and
studies to determine such matters. However, Seller warrants that all such
documents were used by Seller in the ordinary course of business and were
produced from Seller's files.
6.2.2 INSPECTION OF BOOKS AND RECORDS; ACCESS. Purchaser, its employees,
agents and contractors shall have during the Inspection Period provided in
paragraph 3.7 above, to enter upon the Property (subject to the rights of the
tenants) during normal business hours for the purpose of making physical
inspections thereof, including but not limited to roofs, heating, cooling,
electrical and plumbing systems, swimming pool, appliances, and structural
elements of the buildings. Upon the conclusion of the Inspection Period this
contract shall be deemed to be a firm agreement of purchase and sale binding the
parties hereto, except as it may be terminated prior to the end of the
Inspection Period and subject to the other provisions and conditions contained
herein, including but not limited to the condition imposed by Paragraph 6.1(A)
above.
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Purchaser's rights to inspect the Property are subject to Purchaser's
agreement that (i) the Property is not damaged by Purchaser, (ii) the Property
is left in a clean and safe condition (if found that way), (iii) no tenant of
Seller is unreasonably disturbed, (iv) no employee, independent contractor or
representative of Seller or any tenant is injured, interfered with or harassed
as a result of Purchaser's actions, (v) such inspection does not interfere with
Seller's operation of the Property, and (vi) Purchaser maintains general
liability (occurrence) insurance in terms and amounts satisfactory to Seller
covering any accident arising in connection with the presence of Purchaser or
its agents on the Property. The inspection rights afforded herein are expressly
made subject to the rights of tenants under the Leases. All inspections fees,
appraisal fees, engineering fees and other expenses of any kind incurred by
Purchaser relating to the inspection of the Property will be solely at
Purchaser's expense. Seller shall cooperate with Purchaser in all reasonable
respects in making such inspections; however, Seller shall not be required to
spend any sums to cooperate with Purchaser, except pay its employees and other
normal costs. Seller hereby reserves the right to have a representative of
Seller present at the time any such inspection is made. Except as specifically
provided in this Agreement, Purchaser acknowledges that Seller has no obligation
whatsoever to undertake any remedial work or other curative action as a result
of Purchaser's inspections. Purchaser shall notify Seller no less than
forty-eight (48) hours in advance of making any inspection of the interiors
apartment units on the Property. Purchaser agrees to indemnify and hold Seller,
its tenants, contractors and employees harmless from any and all injuries,
losses, liens, claims, judgments, liabilities, costs, expenses or damages
(including reasonable attorney's fees and court costs) sustained against Seller
which result from or arise out of any inspections or entry on the Property by
Purchaser or its representatives or agents pursuant to this Agreement. The
indemnification obligation set forth in the immediately preceding sentence shall
survive the termination or cancellation of this Agreement and the closing of
transaction evidenced by this Agreement for six (6) months.
6.2.3 RIGHT OF TERMINATION DURING INSPECTION PERIOD. Purchaser shall also
be permitted to review all original leases, expense records, tenant cards and
occupancy data available. if Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller before the end of
the Inspection Period, and no party hereto shall have any further liability to
any other party hereto, except as provided in Paragraph 6.2.2, and all deposits
shall be returned to Purchaser.
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6.2.4 MORTGAGE ASSIGNMENT DUE DILIGENCE. Purchaser and Seller agree that
this Agreement in addition to permitting an Inspection Period of thirty (30)
days, is subject to the approval of the Lender and the acceptance by Purchaser
of the terms for assumption of the Loan, which may not be to Purchaser's liking.
Therefore, only as to the approval to assume the underlying Loan, the Inspection
Period shall continue until five (5) days after the final consent for the sale
subject to the mortgages is received.
6.2.5 "RENT READY". On or prior to the Closing Date, Purchaser may inspect
all apartment units at the Property and note any missing appliances or personal
property or dead-bolt locks and provide Seller written notice of same. Seller
may elect, but shall have no obligation, to replace any missing appliances or
personal property or dead-bolt locks that in fact were located at the Property
as of the expiration of the Inspection Period.
6.2.6 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 reasonable wear and tear excepted. If Seller fails to replace any
missing appliances or personal property or dead-bolt locks that were located on
the Property as of the expiration of the Inspection Period, Purchaser shall have
the option of waiving such requirement, in writing, and proceeding to closing,
or Purchaser may terminate this Agreement and obtain a prompt return of its
deposit.
ARTICLE VII
CLOSING
7.1 CLOSING. Closing will be held on or about ten (10) days after the
agreement by the Lender as to the assignment and the assumption of the Loan by
the Purchaser, however, no later than ninety (90) days after the completion of
the Inspection Period, at such place and at such time as the parties may agree.
7.2 SELLER'S DELIVERIES. At closing, Seller shall execute and deliver to
Purchaser the Special Warranty Deed referred to in Paragraph 3 hereof and shall
also execute, where necessary, and deliver to Purchaser, the following in a form
reasonably acceptable to Seller and Purchaser:
(A) A Bill of Sale, with special warranty of title transferring the
personal property (as shown in Schedule B) to Purchaser free of all liens,
charges and encumbrances, except those assumed by the Purchaser.
(B) The Title Policy issued by the underwriter for the Title Company
pursuant to the Title Commitment, subject only to
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the Permitted Exceptions, in the full amount of the Purchase Price, dated as of
the date of Closing.
(C) Originals or copies of all signed leases and rental agreements in
effect with tenants of the Property not for more than one (1) year.
(D) All security and cleaning deposits made by such tenants. Seller
will give the tenants the required notice of such transfer in compliance with
the laws of TEXAS-so that Seller is no longer responsible for the tenants'
security deposits.
(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 1iens.
(F) A rent roll certified by Seller to seller's knowledge to be
materially accurate and complete as of the date of closing in the form and
content of the rent roll normally kept by Seller in its ordinary course of
business, however, containing the actual rental, apartment number, any escrow,
security deposit, etc.
(G) An affidavit of Seller, as the title company may normally require,
that to the best of its information and belief there are, on the date of
closing, no unsatisfied judgments, creditor's claims other than in the course of
business, tax liens, or pending bankruptcies involving Seller.
(H) Purchaser shall cause an inspection to be made by a licensed
extermination contractor, who is regularly engaged in the business of pest
control. If said contractor's report indicates that there is any termite or
other wood-boring insects infestation and/or damage to the Property, the Seller
shall proceed to have any and all corrective treatment of the infestation, but
not repair of damage, completed prior to closing. (If not possible prior to
closing,. Seller shall deposit sufficient sums as required by the extermination
contractor to make the treatment.)
(I) Assignments of all Seller's interest in the following in the form
attached hereto as EXHIBIT E: (1) all assignable licenses, and permits relating
to the operation of the Property, (2) the leases and rental agreements with
tenants of the Property, (3) the existing Property telephone number and (4) the
business and trade name as set forth in Par. 1.1.
(J) Assignments without recourse of all warranties and guarantees (see
Exhibit E) to the extent such are still in effect and provide Purchaser with
copies of all such warranties in Seller's possession and guarantees without
limitation for all appliances, dishwashers, disposals, refrigerators, heating
and air conditioning units, washers and dryers.
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(K) Consent of the Seller's authorized officer to the sale of the
Property and any other approvals required under Seller's partnership agreement
or other organizational documents, which may affect Seller's ability to convey
indefeasible title.
(L) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement acceptable to the title company.
(M) Affidavit that to the knowledge of Seller, Seller has received no
notice of the presence of asbestos and/or any other hazardous material at the
Property, except as set forth in any reports or information provided to
Purchaser pursuant to Paragraph 6.2.1.
(N) Seller shall provide a satisfactory and valid written termination
of the management agreement executed by the existing management and rental agent
for the Property, without cost to the Purchaser.
(0) A notice letter to all the residents of the apartment complex as
to change of ownership in the form prepared by the Purchaser.
(P) All such other documents as are normally transferred at settlement
in the jurisdiction in which the property is located or are reasonably requested
by Purchaser or its counsel.
(Q) A representation letter as normally required by auditors for a
public company in the form attached hereto as EXHIBIT F. This clause shall
survive closing for one year.
7.3 PURCHASER'S DELIVERIES. At closing and contemporaneously with the
Seller's compliance with the provisions of section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price, adjusted for
the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under leases,
securities, any contracts which may be accepted by the Purchaser and any other
obligations specifically set forth herein (Exhibit "E") in a form reasonably
acceptable to Purchaser and Seller.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
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(ii) Purchaser has complete unrestricted power to buy the
Property from the seller and to execute any documents required to effectuate the
transfer.
(D) Execute all such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Seller or its counsel.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 REPRESENTATIONS OF THE PARTIES. Seller warrants (which warranties shall
not survive settlement unless designated to the contrary) that as of the date
hereof and as of closing hereof:
As used in this Agreement, the phrase "Sellers current actual
knowledge", "Seller's knowledge" or words of like effect (i) shall mean and
apply to the knowledge of Robert J. Werra, who is a General Partner of Seller
and directly involved in the negotiation of sale and purchase transaction
described herein and not to any other parties, (ii) shall mean the current
actual knowledge of such person, it being understood and acknowledged that (a)
such person, in -many instances, is not involved in the day-to day operations of
the Property and in many instances, is not involved in the negotiation or
execution of the leases, management contracts, service contracts, or other
agreements in question, and (b) such person is not charged with the knowledge of
all of the acts and/or omissions of the predecessors in title to the Property or
with knowledge of all of the acts/or omissions of Seller's agents or employees,
and (iii) shall not apply to or be construed to apply to information or material
which may be in the possession of Seller generally, or incidentally, but which
is not actually known to Robert J. Werra. As used herein, the term "current
actual knowledge" of a party shall mean that no facts have come to the party's
attention in the ordinary course of business that would give the party knowledge
or notice that any such facts are not true, correct, and complete, and the party
has undertaken no investigation, inquiry, or verification as to such matters to
determine the existence or absence of such facts, and no inference of the
party's knowledge of the existence or absence of such facts should be drawn from
the statements made herein.
(A) That Seller, is the owner in fee simple of the Property and has
the power to convey same.
(B) That seller is not subject to any other agreements or
arrangements, with the exception of the requirement to procure its partners'
consent and those contained in any existing mortgage documents which would
prevent Seller from selling the Property to Purchaser. This warranty shall
survive for one year following closing.
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(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are. not excluded elsewhere in existing mortgage documents.
This warranty shall survive for one year following closing.
(D) Seller has no knowledge and to Seller's knowledge it has not been
advised in writing that it is in default under any lease, rental agreement
service or equipment contract, or mortgage or other encumbrances relating to the
Property. This warranty shall survive for one year following closing.
(E) Seller has no knowledge of any existing or threatened litigation
which relates to or which would affect the Property. This warranty shall survive
for one year following closing.
(F) Seller has no knowledge that any part of the Property or the
operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building code or of any private restriction,
that any governmental authority requires any work to be done on or affecting the
Property, or that any governmental authority has expressed an intent to condemn
or to make special improvements for the benefit of the Property or any part
thereof. This warranty shall survive for one year following closing.
(G) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(H) That to Seller's current knowledge, the Property was never
utilized as a disposal site for hazardous waste products.
(I) Seller covenants and agrees that, between this date and the date
of closing, Seller shall continue to maintain, operate and manage the Property
in a manner consistent with its prior practices, making every reasonable effort
to do nothing which might damage the reputation of the Property or the
relationships with the tenants. Seller shall not permit the modification,
extension or cancellation of any tenant lease (except in accordance with the
terms of such lease, or any dealing with any tenant other managing the Property,
without the prior written consent of Purchaser. It the leases of any tenants
expire before thirty (30) days after the date of closing, Seller shall, up to
the date of closing and without cost to the Purchaser, continue its normal
course of operation with respect to causing tenants to be obtained for
apartments which are unrented.
(J) Seller agrees that prior to closing, it will
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comply with the keyless, dead-bolt lock requirement to the extent set forth in
Paragraph 6.2.5.
8.2 CONTINUATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS TO THE DATE
OF CLOSING. If each of the warranties set forth in this section does not remain
true up to and including the time of closing as to any material matters, this
Agreement, at Purchaser's election, shall be terminated, Seller shall return all
payments made by Purchaser, or Purchaser may elect to close the sale and waive
failure of the warranties.
8.3 BREACH of REPRESENTATIONS, WARRANTIES AND COVENANTS. The Seller agrees
to notify the Purchaser upon acquiring knowledge that any of Seller's
representations, warranties or covenants contained herein do not remain true as
of the date of Closing. Purchaser shall have the right to terminate this
Agreement for a material breach and receive the refund of the deposit and any
interest earned thereon. However, if Seller fails to notify Purchaser upon
acquiring such knowledge, notwithstanding the provisions of 8.2 above, Seller
shall indemnify Purchaser for all reasonable costs incurred as a result of the
failure of any of Seller's representations, warranties or covenants contained
herein to remain true as of the date of closing.
8.4 "AS IS". EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER
ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY
NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS,
AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR
IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH
RESPECT TO (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY,
INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, (B) THE INCOME TO BE
DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL
ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREOF, (D) THE COMPLIANCE OF
OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR
REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE
HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY, (F) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, (G) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, OR (H) ANY
OTHER MATTER WITH RESPECT TO THE PROPERTY, AND SPECIFICALLY, THAT SELLER HAS NOT
MADE, DOES NOT MAKE, AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS REGARDING
COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES,
REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING SOLID WASTE, AS DEFINED BY THE
U.S. ENVIRONMENTAL PROTECTION AGENCY REGULATIONS AT 40 C.F.R., PART 261, OR THE
DISPOSAL OR EXISTENCE, IN OR ON THE PROPERTY, OF ANY HAZARDOUS MATERIALS.
PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY
TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF
THE
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PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER. UPON
CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING, BUT
NOT LIMITED TO, ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS MAY NOT HAVE BEEN
REVEALED BY PURCHASER'S INSPECTIONS AND INVESTIGATIONS. EXCEPT AS SET FORTH IN
THIS AGREEMENT, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION
PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A
VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR
VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY
OR COMPLETENESS OF SUCH INFORMATION. SELLER SHALL NOT BE LIABLE OR BOUND IN ANY
MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION
PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL
ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. PURCHASER FURTHER
ACKNOWLEDGES AND AGREES THAT THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS
MADE ON AN "AS IS" CONDITION AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND
AGREED THAT THE PURCHASE PRICE HAS BEEN ADJUSTED BY PRIOR NEGOTIATION TO REFLECT
THAT ALL OF THE PROPERTY IS SOLD BY SELLER AND PURCHASED BY PURCHASER SUBJECT TO
THE FOREGOING. THE PROVISIONS OF THIS PARAGRAPH 8.4 SHALL SURVIVE THE CLOSING
AND SHALL BE INCORPORATED IN THE DEED AND BILL OF SALE.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 PROPERTY DAMAGE. If, prior to closing, any part of the Property is
damaged by fire or other casualty in an amount not greater than TWO HUNDRED
THOUSAND ($200,000, DOLLARS, Purchaser agrees to accept the Property with an
assignment of: (i) the insurance proceeds, (ii) any deductible, and (iii) rent
loss insurance proceeds. Seller may repair such damage before the date provided
herein for closing. In the event that the damage as a result of fire or other
casualty shall be over TWO HUNDRED THOUSAND ($200,000) DOLLARS and such damage
cannot reasonably be repaired by such time, this Agreement may be canceled at
the option of the Purchaser. In the event of cancellation as aforesaid, this
Agreement shall become null and void and the parties shall be released, except
as provided in Paragraph 6.2.2 and all payments made shall be returned. should
Purchaser elect to carry out this Agreement despite such damage Seller shall
assign to Purchaser all insurance proceeds and any deductible arising from such
damage and will compensate Purchaser for lost rent collections to the extent of
insurance proceeds received. Seller shall promptly notify Purchaser in writing
upon the occurrence of any such damage.
9.2 CONDEMNATION. In the event of any actual or threatened taking, pursuant
to the power of eminent domain, all or any part thereof, or any actual or
proposed sale in lieu thereof, the Seller shall give written notice thereof to
the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property greater than TWO HUNDRED
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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 PINNACLE
REALTY, pursuant to a separate agreement. Said brokerage fee shall be deemed
earned if, and only if, settlement occurs hereunder, and shall not be deemed
earned even if Purchaser and/or Seller wrongfully fail(s) to consummate the
purchase and sale herein contemplated. seller and Purchaser represent and
warrant to each other that no other brokerage fees are or shall be owing in
connection with this transaction or in any way with the Apartments and Seller
and Purchaser hereby indemnify and hold the other harmless from any and all
claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 DEFAULT DEFINED. Default for the purpose of this Agreement shall mean
any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 SELLER'S DEFAULT. Upon seller's default, the Purchaser, at its
election, may as Purchaser's sole and exclusive remedy, pursue one, but not all
of the following: (1) require specific performance of Seller, (2) cancel this
Agreement and obtain a prompt return of the deposit, in which case this
Agreement shall be terminated and the parties released from all obligations
hereunder, except as set forth in Section 6.2.2, or (3) the Purchaser may waive
such defaults and proceed to settlement. Seller shall indemnify Purchaser for
any reasonable attorneys' fees incurred by Purchaser if Purchaser elects to
pursue its option (1) noted above. Purchaser shall have no other remedy against
Seller in the event of seller's default.
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11.3 PURCHASER"S DEFAULT. Upon Purchaser's default, this Agreement shall be
terminated and both parties released from all obligations hereunder, except as
provided in Paragraph 6.2.2, and the deposit shall be retained by the Seller as
liquidated damages. Such amount and terms are agreed upon by and between Seller
and Purchaser as liquidated damages, due to the difficulty and inconvenience of
ascertaining and measuring actual damages, and the uncertainty thereof, and the
payment of the deposit and the terms provided herein shall constitute full
satisfaction of Purchaser's obligations under this Agreement. Such amount is
agreed upon by and between Seller and Purchaser as a reasonable estimate of just
compensation for the harm caused by Purchaser's default. Seller shall have no
other remedy against Purchaser in the event of Purchaser's default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 ENTIRE AGREEMENT. This Agreement sets forth the entire understanding
between the parties; it supersedes all previous agreements and representations
which are deemed merged herein and may not be modified except in writing.
12.2 ASSIGNMENT. Purchaser may assign this Agreement without the consent of
Seller to APPLE RESIDENTIAL INCOME TRUST, INC. or a company owned by APPLE
RESIDENTIAL INCOME TRUST, INC.
12.3 SEVERABILITY. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 BINDING EFFECT. The parties to the Agreement mutually agree that it
shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 CONTROLLING LAW. it is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State of Texas.
12.6 COUNTERPARTS. To facilitate execution, this Agreement may be executed
in as many counterparts as may be required. It shall not be necessary that the
signature on behalf of both parties hereto appear in each counterpart hereof,
and it shall be sufficient that the signature on behalf of both parties hereto
appear on one or more such counterparts. All counterparts shall collectively
constitute a single contract.
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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. However, the
covenants contained in this paragraph shall not apply in respect to any
information which (a) was already known to either party when such information
was received from the other, (b) was readily available to the general public at
the time of such receipt, (c) subsequently becomes known to the general public
through no fault or omission by the other party, (d) is subsequently disclosed
by a third party which has the bona fide right to make such disclosure, or (e)
is required to be disclosed by law or a governmental agency. This clause shall
survive closing.
12.11 TIME OF THE ESSENCE. Both parties agree that time is of the essence.
However, any times set forth in this Agreement for Closing are subject to
receiving permission from Seller's mortgagee to transfer. The parties further
agree that the Closing will take place within ten (10) days after receipt of the
written approval and completion of the documents among Purchaser, Seller and
lender.
12.12 HOLIDAYS. If any of the deadlines in this contract ends on, or if any
event is to occur on, a Saturday, Sunday, or legal holiday, the deadline or the
date for performance shall automatically be extended to the next day which is
not a Saturday, Sunday, or legal holiday.
12.13 LEAD WARNING STATEMENT. Every purchaser of any interest in
residential real property on which a residential dwelling was built prior to
1978 is notified that such property may present exposure to lead from lead-based
paint that may place young children at risk of developing lead poisoning. Lead
poisoning in young children may produce permanent neurological damage, including
learning disabilities, reduced intelligence quotient, behavioral problems, and
impaired memory. Lead poisoning also poses a particular risk to pregnant women.
The seller of any interest in
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residential real property is required to provide the buyer with any information
on lead-based paint hazards from risk assessments or inspections in the seller's
possession and notify the buyer of any known lead-based paint hazards. A risk
assessment or inspection for possible lead-based paint hazards is recommended
prior to purchase.
12.13.1. Seller has no knowledge of lead-based paint and/or lead-based
paint hazard in the housing.
12.13.2. Seller has no reports or records pertaining to lead-based paint
and/or lead-based paint hazards in the housing.
12.13.3. Purchaser is hereby granted a 10-day opportunity (or the length of
the Inspection Period, whichever is longer) to conduct a risk assessment or
inspection for the presence of lead-based paint and/or lead-based paint hazards.
12.14 EXHIBITS. The following exhibits are attached to this Agreement and
are incorporated into this Agreement by this reference and made a part hereof
for all purposes:
(a) EXHIBIT A, the legal description of the Land.
(b) EXHIBIT B, list of personal property
(c) EXHIBIT C, (intentionally omitted)
(d) EXHIBIT D, the form of Deed.
(e) EXHIBIT E, the form of the Assignment and Assumption of Personal
Property, Service Contracts, Warranties and Leases.
(f) EXHIBIT F, the form of the Representation Letter.
12.15 PURCHASER'S FAILURE TO PREVAIL. Notwithstanding anything to the
contrary contained or implied elsewhere herein, in the event Purchaser (i) files
a Lis Pendens or an action for specific performance against Seller or otherwise
clouds Seller's title to the Property or any portion thereof and fails to
prevail in a final, non-appealable judgment, or (ii) breaches Purchaser's
agreements of indemnity contained in this Agreement, which survive, Seller shall
be entitled to pursue any remedies available at law or in equity, including but
not limited to, suit for damages from Purchaser (including, but not limited to,
attorney's fees and costs incurred by Seller in connection therewith).
12.16 GENERAL RELEASE. In the event this Agreement is terminated and under
the terms of the termination, the Purchaser is entitled to a refund of the
deposit and any interest thereon and Purchaser is satisfied that it has no
additional claims, it shall forward a General Release of Seller and Title
Company to the escrow holder/Title Company), which shall immediately refund the
deposit to the Purchaser with any interest thereon and expenses. A copy of said
General Release shall be sent to Seller.
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12.17 LIMITATION DATE. Purchaser and seller hereby agree that,
notwithstanding any provision of this Agreement or any provision of law to the
contrary, any action which may be brought by Purchaser against Seller for breach
of this Agreement or any representations and warranties' under this Agreement or
arising out of or in connection with the sale and purchase transaction described
herein, shall be forever barred unless Purchaser; (i) delivers to Seller not
later than one (1) year after the Closing Date a written notice of its claims
setting forth in reasonable detail the factual basis for such claim and
Purchaser's good faith estimate of damages arising out of such claim, (ii)
files a complaint or petition against Seller alleging such claim in a court of
competent appropriate jurisdiction no later than two (2) years after the Closing
Date (the "Limitation Date"). No warranties or representations or covenants of
Seller as set forth in this Agreement shall survive beyond the Limitation Date
and no action based thereon shall be commenced after the Limitation Date.
12.18 NO RECORDATION. This Agreement shall not be recorded by Purchaser for
any reason, except for a breach of this Agreement by Seller, and an attempt to
do so shall render the Purchaser liable to Seller for any damages allowable at
law or in equity on account of such breach.
ARTICLE XIII
NOTICE
13.1 NOTICE. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: Corporate Drive, L.P.
Attention: John R. Werra
6210 Campbell Road, suite 140
Dallas, TX 75248
Fax: (972) 931-0015
With a copy to
Seller's Attorneys: Nathan M. Rosen, Esq.
Nathan M. Rosen, P.C.
4949 Westgrove Drive, Suite 300
Dallas, TX 75248
Fax (972) 818-7606
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
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With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and
Robert E. Morrison, Esq.
Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, TX 75201
Fax: (214) 999-6170
13.2 DELIVERY OF NOTICE. Notices sent either by Registered or certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier or by fax and confirmed by hard copy by reliable
overnight courier. Notices sent in any other manner shall be deemed given only
when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed this day and date first written above.
SELLER:
CORPORATE DRIVE, L.P.
BY: /s/ Nathan M. Rosen
----------------------
Its: General Partner
----------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
BY: /s/ Gus Remppies
----------------------
Its: V. P. Acquisition
----------------------
23
EXHIBIT 10.13
FIRST AMENDMENT TO PURCHASE CONTRACT
(PEPPER SQUARE APARTMENTS)
This First Amendment to Purchase Contract (the "Amendment") is made by and
between Pepper Square Associates, Ltd., a Texas limited partnership ("Seller")
and Cornerstone Realty Group, Inc., a Virginia corporation ("Purchaser"), to be
effective as of the 9th day of April, 1998.
RECITALS
C. Effective on or about March 10, 1998, Seller and Purchaser entered into
a certain Purchase Contract (the "Contract") relating to a parcel of land and
the improvements thereon located in Dallas, Dallas County, Texas. All terms used
herein with their initial letter capitalized shall, unless otherwise specified
herein, have the meaning given to such terms in the Contract.
D. The parties desire to amend the Contract to extend the Inspection Period
stated in Section 3.7 of the Contract and have entered into this Amendment to
reflect such agreements.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser and Seller hereby agree as follows:
1. The Inspection Period stated in Section 3.7 of the Contract shall expire
at 11:59 p.m. CST on April 17, 1998, subject to any extension of the Inspection
Period provided in the Contract, and the Purchase Price shall be increased by
$5,000.
2. Except as modified herein, the Contract remains in full force and effect
without modification.
3. Purchaser and Seller hereby ratify and confirm the Contract, as herein
modified, for all purposes.
4. This Amendment may be executed in counterparts, each of which will be
deemed to be an original, but all of which will constitute one and the same
document. A counterpart signed by a party and transmitted by facsimile to the
other party will have the same effect as the delivery of an original.
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first set forth above.
SELLER: PEPPER SQUARE ASSOCIATES, LTD.,
a Texas limited partnership
By: /s/ Robert J. Werra
----------------------------------
Name: Robert J. Werra
--------------------------------
Title: General Partner
-------------------------------
PURCHASER: CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By: /s/ Gus G. Remppies
----------------------------------
Name: /s/ Gus G. Remppies
--------------------------------
Title: V.P. Acquisitions
-------------------------------
<PAGE>
PEPPER
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this ___ day of March 1998 (the
"Effective Date"), between CORNERSTONE REALTY GROUP, INC. or its nominee,
(hereinafter called "Purchaser") and PEPPER SQUARE ASSOCIATES, LTD., a Texas
Limited Partnership (HEREINAFTER CALLED "SELLER").
ARTICLE I
THE PROPERTY
1.1 SALE OF PROPERTY. Seller agrees to sell and convey, and Purchaser
agrees 'to purchase, Seller's real property known as PEPPER SQUARE APARTMENTS
located in DALLAS, TX, with all buildings and improvements located thereon, as
more particularly described in the attached legal description in EXHIBIT A
including, but not limited to 144 individually heated and air conditioned
apartment units, with all appurtenances, together with all appliances, drapes,
carpeting, shrubbery and all other personal property owned by Seller and located
on and used in connection with operation and maintenance the premises,
including, the inventory of all personal property (other than appliances in
apartment units) of $100 in value to be supplied by Seller and attached hereto
as EXHIBIT B (all such real and personal property hereinafter collectively
referred to as the "Property", subject to Purchaser's inventory prior to
closing, unless the context clearly indicates otherwise). Seller agrees that it
will not remove any of the personal property from the date of this Agreement to
the date of closing.
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 PURCHASE PRICE. The total purchase price shall be FIVE MILLION TWO
HUNDRED THOUSAND ($5,200,000) DOLLARS payable as follows:
2.2 PAYMENT:
(A) Deposit. TWENTY FIVE THOUSAND ($25,000) DOLLARS upon the execution
of this Agreement by Seller and Purchaser and an additional SEVENTY FIVE
THOUSAND ($75,000) DOLLARS to be placed in escrow at the end of the "Inspection
Period" described in Article VI below. Said deposit shall be placed in escrow
with American Title Company, 1330 Summit Avenue, Fort Worth, TX 76102,
Attention: Joanna Cloud, or its authorized agent (the "Title Company") as an
earnest money deposit which may be credited
<PAGE>
against the purchase price or applied as per Article XI below. The Title Company
shall hold the funds in an interest-bearing account with interest to be credited
in the same manner as the deposit.
(B) EXISTING MORTGAGE.
(a) The Property shall be conveyed subject to Purchaser's
assumption and promise to pay in accordance with its terms the loan (the "Loan")
evidenced by that certain Promissory Note (the "Note"), dated 6/28/96 in
the-original principal sum of THREE MILLION SEVEN HUNDRED THOUSAND ($3,700,000)
DOLLARS payable to the order of NEWPORT MORTGAGE COMPANY, L.P., A TEXAS LIMITED
PARTNERSHIP, (the "Lender"), and assumption and promise to perform all covenants
and obligations of Seller under the documents or instruments governing,
securing, evidencing or pertaining to the indebtedness evidenced by the Note
(collectively, the "Loan Documents"), including, but not limited to, that
certain indenture of Mortgage, Deed of Trust, Deed to Secure Debt, Security
Agreement, Fixture Filing, Financing Statement and Assignment of Rents and
leases of even date with the Note (the "Deed of Trust") recorded in the Real
Property Records of Dallas County, Texas.
(b) Seller represents and warrants that (i) Seller will deliver
to Purchaser true and complete copies of the existing Deed of Trust, the Note
secured thereby and any extensions and modifications thereof in its possession
or in the possession of its attorney, and (ii) there are no monetary defaults by
Seller under the terms of the Loan Documents and it has received no written
notice of any default under any of the terms of the Loan Documents. From and
after the Effective Date of this Agreement to the Closing Date, Seller agrees to
pay to Lender all installments of principal, interest and escrows and any other
sums of which Seller has notice that are due and payable under the Loan
Documents, as and when such payments are due. Seller shall use reasonable
efforts to provide Purchaser with an Estoppel Certificate from the Lender.
Failure of Purchaser to receive an Estoppel Certificate from Lender prior to
Closing shall give the Purchaser an option to terminate this Agreement and
receive a refund of the deposit or waive the requirement and proceed to Closing.
(c) Seller shall immediately upon the execution of this Agreement
take whatever steps are necessary to contact the Lender and initiate the
procedure to procure the right to assign the mortgage to the Purchaser pursuant
to an Assignment and Assumption Agreement. The Purchaser and Seller agree to
cooperate with the other in procuring permission for Purchaser to purchase the
Property and assume the Loan set forth herein above. Seller agrees to provide
copies of all correspondence and applications to the Purchaser. The parties
further agrees to use their best efforts to procure said approval within the
Purchaser's Inspection Period (30 days from the date of this Agreement).
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(d) Purchaser agrees to execute and deliver to the Lender all
documents and instruments reasonably requested by the Lender in connection with
the assumption and further agrees to pay to the Lender all reasonable fees and
reasonable expenses of the Lender, and its reasonable counsel fees in connection
with the assumption, including, but not limited to, any assumption or transfer
fee provided for in the Deed of Trust and the reasonable fees of Lender's
attorney in connection with preparation of the assumption documents. Purchaser
shall also pay all premiums for any endorsements required by the Lender in
connection with the assumption to the Lender's mortgagee policy of title
insurance or the cost of a new mortgagee policy of title insurance, if required
by the lender. Seller shall not be obligated to incur any expenses other than
normally required in a sale and its legal fees.
(e) If there is a mortgagee escrow account or reserve fund,
Seller shall assign it to Purchaser, if it can be assigned, and in that case
Purchaser shall pay the amount in the escrow account or reserve fund to Seller
at Closing.
(f) Purchaser agrees that it will reasonably cooperate with
Seller in attempting to obtain the full and unconditional release of Seller from
the obligations arising out of the Note and Loan Documents, but Purchaser shall
not be obligated to expend any sum or incur any additional liability on account
thereof. In the event Seller and/or Purchaser is unable to obtain the full and
unconditional release of Seller from all obligations arising out of the Note and
Loan Documents, in addition to other indemnities provided in this Agreement,
Purchaser agrees at all times after Closing to indemnify, protect, defend, save
and hold harmless Seller and its General Partners from and against any and all
debts, duties, obligations, liabilities, suits, claims, demands, causes of
action, damages, losses, liens, costs and expenses (including, without
limitations, attorney's fees and expenses incurred in connection with enforcing
this indemnity or opposing any such claims, damages, or causes of action) and
court costs asserted or incurred at any time after the Closing Date relating to
or arising out of (i) the failure by Purchaser or its successors and assigns to
perform all covenants and obligations of borrower under the Note and Loan
Documents or (ii) a default by Purchaser or its successors and assigns under the
Note and Loan Documents. This indemnity shall relate to matters first occurring
after the Closing Date. This indemnification and the obligations thereunder
shall survive the closing of the transaction evidenced by this Agreement.
However, the Seller shall notify the Purchaser of any claims as made and Seller
shall give Purchaser the right to defend any claims which they feel are invalid.
(C) BALANCE. Balance at Closing as evidenced by cash or
immediately available cash equivalent.
2.3 INDEPENDENT CONTRACT CONSIDERATION. Purchaser
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shall, concurrently with its execution hereof, deliver to Seller a check in the
amount of FIFTY ($50) DOLLARS (the "Independent Contract Consideration"), which
amount Seller and Purchaser agree has been bargained for as consideration for
Seller's execution and delivery of this Contract and Purchasers right to inspect
the Property. The Independent Contract Consideration is in addition to and
independent of any other consideration or payment provided for in this Contract
and is non-refundable in all events.
ARTICLE III
TITLE MATTERS
3. 1 TITLE. Seller, shall convey good and indefeasible title by Special
Warranty Deed in the form attached hereto as EXHIBIT D, subject only to general
taxes for the current year not yet due and payable, rights of tenants claiming
under the leases, none of which shall be for more than one year or other than
residential purposes, except laundry room leases, and utility easements which do
not interfere with the present use of the Property, and the "Permitted
Exceptions". "Permitted Exceptions" are those title exceptions listed in the
title commitment, which are not objected to pursuant to section 3.2 below.
(A) Title shall be free from any and all liens, except the liens
securing unpaid taxes not yet due and payable and mortgages as set forth in
Paragraph 2.2(B), and Seller shall be responsible for any prepayment penalties
necessary to deliver such free title.
3.2 TITLE DEFECTS; ELECTION TO CURE. Seller shall furnish to Purchaser at
Seller's expense a commitment for Title Insurance from the Title Company, (the
"Commitment" or the "Title Report") within fifteen (15) days after the Effective
Date, covering the Property binding the Title Company to issue a Texas Owner
Policy of Title Insurance (the "Title Policy") on the standard form prescribed
by the Texas State Board of Insurance at the Closing, in the full amount of the
Purchase Price, insuring Purchaser's fee simple title to the Property to be good
and indefeasible, together with true and correct copies of all instruments
listed on Schedule B to the Commitment (as well as any other documents or
instruments listed therein which will not be released at closing). If the title
commitment shows any exceptions, which are not acceptable to Purchaser in
Purchaser's sole discretion, Purchaser shall give written notice of such defects
in title to Seller and Seller's counsel during the Inspection Period. If
Purchaser fails to notify Seller of any exceptions which are not acceptable to
Purchaser during the Inspection Period, then Purchaser shall be deemed to have
accepted those matters not objected to. Seller may, at its option, elect whether
to cure said defects or by written notice to Purchaser indicate its intention
not to cure.
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3.3 ELECTION NOT TO CURE DEFECTS. Should Seller elect not to cure title
defects, this Agreement, at Purchaser's option (exercised within five (5) days
of the notice by Seller that it will not cure the objections during the
Inspection Period), shall be terminated; each party shall thereupon be released
from all obligations hereunder, except as provided in Paragraph 6.2.2; and all
deposits shall be immediately returned to Purchaser. if Purchaser does not elect
to terminate this Agreement, all title defects that remain uncured at Closing
shall be deemed "Permitted Exceptions."
3.4 SURVEY. As soon as reasonably possible, and in any event within twenty
(20) days after the Effective Date, Seller shall, at Seller's expense, deliver
or cause to be delivered to the Seller, the Title Company, and to Purchaser a
current or updated on-the-ground perimeter survey (the "Survey") of the Property
prepared by a Registered Professional Land Surveyor reasonably acceptable to the
Purchaser. The Survey shall show the location and size of all of the following
on or adjacent to the Property, if any:
buildings, buildings lines, improvements, streets, pavements,
easements, rights-of-way, protrusions, encroachments, fences, 100-year
flood plain, public utilities, and recording information of easements.
The Survey shall show the gross land area and the Net Land Area. The Survey
shall be in a form and of a date acceptable to Purchaser and to the Title
Company, and in acceptable form in order to allow the Title Company to delete
the survey exception from the Title Policy. The term "Net Land Area" means the
gross land area of the Property less the land area included in utility
easements, drainage easements, ingress/egress easements, rights-of-way, 100-year
flood plain and encroachments on or across the Property. The area within the
100-year flood plain shall be as defined by the Federal Emergency Management
Agency or other applicable governmental authority.
3.5 The Survey shall show no encroachments onto the Land from any adjacent
property, no encroachments by or from the Land onto adjacent property and no
violation of or encroachments upon any recorded building lines, restrictions or
easements affecting the Property. If the Survey discloses any such encroachment
or violation, Purchaser shall give written notice thereof to Seller and Seller
shall have ten (10) days from the date of Purchaser's notice (with a
commensurate extension of the closing date) to request the Title Insurer issue
its endorsement insuring against damage caused by such encroachment or violation
and to provide evidence thereof to Purchaser, and if Seller fails to or is
unable to have the same insured against within such ten (10) day period,
Purchaser may elect, on or before the expiration of the Inspection Period, to
(i) terminate this Agreement (in which case
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the Earnest Money shall be returned to Purchaser) and neither party shall have
any further liability or obligation to the other hereunder, except as provided
in Paragraph 6.2.2 or (ii) accept the property subject to any such encroachment
or violation, as "Permitted Exceptions".
3.6 Purchaser agrees to deliver to Seller, within the Inspection Period,
notice as to which items on the title report or the Survey are objectionable.
3.7 COMMENCEMENT AND TERMINATION OF INSPECTION PERIOD. It is understood
that the Inspection Period begins on the date on which both parties have
executed this Agreement, with date inserted on the first page, and shall
terminate at 5:00 p.m. CST on the thirtieth (30th) day unless said 30th day
shall be a Saturday or Sunday, in which case the next business day shall be the
date of the termination of the Inspection Period. It is further understood that
unless there is an extension in writing, the Inspection Period must be completed
by said date.
3.8 NOTICE REQUIRED. The parties agree that whenever a notice shall be
required by either party, said notice must be given within the "Inspection
Period", except notices dealing with the closing or survival.
ARTICLE IV
PRORATIONS
4.1 INCOME AND EXPENSE ALLOCATIONS. The following shall be prorated, on a
calendar-month basis, to the 1st day of the month of the closing: rents and
other income from the Property; operating expenses (on such service contracts
and other obligations as Purchaser may agree to assume); and general and real
property taxes and personal and business property taxes for the year of closing
(based on the most recent assessment and the most recent levy). If funding by
Purchaser does not occur by noon CST on Closing Date, adjustments shall be as of
the date of funding prior to noon CST.
4.2 CLOSING COSTS. Purchaser and Seller shall pay their customary share of
all taxes, recording fees, if any, imposed on the Deed, or any other documents
executed in connection with the transfer of the Property. Seller agrees to pay
cost of title insurance and Purchaser agrees to pay the additional premium to
obtain "Survey deletion". Except as set forth in Section 3.1(A), Purchaser shall
pay any prepayment penalty charged by the holders of any existing notes or
assumption fees, if any.
Seller and Purchaser acknowledge that Purchaser is purchasing one or more
additional properties from partnerships affiliated with Seller upon
substantially the same terms and provisions as set forth in this Agreement.
Notwithstanding the
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foregoing, Seller shall pay the title insurance premium for title insurance on
all properties purchased by Purchaser as if issued under one owner's policy for
the full amount of the total accumulated purchase price of all properties. If
Purchaser desires separate owner's policies on each property, Purchaser shall
pay the incremental cost of the issuance of separate owner's policies.
4.3 ALLOCATION OF RENTS. Rents collected by Seller prior to Closing shall
be prorated as agreed in 4.1 above. Purchaser shall apply rents received after
closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 PRIOR LEASE CONCESSIONS. Seller agrees to maintain its normal leasing
procedure until the closing. Seller agrees that it will not give any free rent
concession other than in the ordinary course of business. If any free rent is
given by Seller under its normal leasing procedure after the date of this
Agreement, all free rent must be given in the first month of the lease term and
shall not be for a period in excess of one (1) month. Upon request, Purchaser
may waive this clause.
4.5 ADJUSTMENT OF PRORATION. In the event Purchaser or Seller provides
notice to the other within six (6) months of Closing that any of the rent
prorated pursuant to section 4.3 above or the security or cleaning deposits
transferred to Purchaser at Closing pursuant to Section 7.2(D) below is in error
on account of a misstatement or error in the certified rent roll delivered to
Purchaser at Closing pursuant to section 7.2(F) below, Seller and Purchaser
shall adjust such proration or deposit transfer between themselves by cash
payment so as to achieve accurate proration or deposit transfer.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 POSSESSION. Possession of the Property shall be delivered to Purchaser
at closing, subject to the rights of the tenants under existing leases and
rental agreements and Permitted Exceptions.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT. Purchaser's obligation to
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purchase shall be subject to and contingent upon the satisfaction of the
following conditions precedent:
(A) Receipt by Purchaser of an engineering report of building and site
conditions, satisfactory to Purchaser in its sole discretion, said report to
include in part, a description of any hazardous waste sites, hazardous wastes
and/or hazardous materials affecting the property. Purchaser shall have fifteen
(15) days, but no later than the termination of the Inspection Period in which
to review the reports set forth herein and exercise its right to reject the
Property based thereon or the right hereunder shall be deemed waived.
(B) The receipt by Purchaser of Seller documents described in 7.2
below.
(C) Sellers representations and warranties described in Article VIII
below remain true and correct.
(D) There have been no material or adverse changes to the property or
leases since the expiration of the Inspection Period.
(E) Seller acknowledges that Purchaser is a public entity and that it
is required to furnish financial statements to the Securities and Exchange
Commission in connection with this acquisition. Seller agrees to make the
information available for Purchaser to audit the last 12 months of operation of
the Property so that a report can be generated that is in compliance with
accounting Regulation S-X of the Securities and Exchange Commission.
(F) Purchaser determining during the Inspection Period that all water,
sewer, gas, electric, telephone, and drainage facilities and all other utilities
required by law or by the normal use and operation of the Property are and at
the time of closing will be installed to the property line, are and at the time
of closing will be connected pursuant to valid permits, and are and at the time
of closing will be adequate to service the Property and to permit full
compliance with all requirements of law and normal usage of the Property by the
tenants thereof and their licensees and invitees.
(G) Purchaser acknowledges that the selling partnership requires the
approval of its Limited Partners. Seller represents that it has commenced to
seek the approval of its Limited Partners and has twenty-one (21) days from the
date hereof to do so. Seller shall inform Purchaser within said period of time
whether or not the Limited Partners have approved the sale. Seller may terminate
this Agreement in the event it does not obtain the requisite consent from its
Limited Partners. Upon termination on account of the failure to obtain the
consent of the Limited
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Partners of Seller, all earnest money shall be returned to Purchaser.
6.2 INSPECTION. This Agreement shall be further subject to and contingent
upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 PREPARATION FOR INSPECTION. At the execution of this Agreement,
Seller shall deliver to Purchaser copies of the following to the extent not
previously delivered to Purchaser: (The Inspection Period shall be extended as a
result of any delays by Seller in producing the items requested herein unless
the Seller does not have them and notifies Purchaser with an extension of time
to reflect delays of notification.) The current rent roll for the Property;
detailed statements of income and expenses with respect to the Property for the
past two years; the most recent tax bills for the Property; utility bills for
the Property for the twelve (12) months previous to the date hereof; all
contract, mortgages, and other documents creating liens of security interest on
the Property, or any part thereof and all promissory notes secured thereby; all
insurance policies applicable to the Property to include loss runs for the last
three (3) years; Plans and Specifications for the Property to the extent in
Seller's possession, service contracts, Certificates of Occupancy to the extent
reasonably available; a copy of title policy and most recent survey for the
Property. A copy of any environmental or engineering reports on the property.
The rent roll shall be certified by Seller to be materially accurate and
complete to Seller's knowledge. Except as expressly set forth in this Agreement,
the delivery of the documents by Seller does not constitute a representation
(expressed or implied) by Seller of the truth, accuracy, source or completeness
of such information and Purchaser agrees to look to its own inspection and
studies to determine such matters. However, Seller warrants that all such
documents were used by Seller in the ordinary course of business and were
produced from Seller's files.
6.2.2 INSPECTION OF BOOKS AND RECORDS; ACCESS. Purchaser, its employees,
agents and contractors shall have during the Inspection Period provided in
paragraph 3.7 above, to enter upon the Property (subject to the rights of the
tenants) during normal business hours for the purpose of making physical
inspections thereof, including but not limited to roofs, heating, cooling,
electrical and plumbing systems, swimming pool, appliances, and structural
elements of. the buildings. upon the conclusion of the Inspection Period this
contract shall be deemed to be a firm agreement of purchase and sale binding the
parties hereto, except as it may be terminated prior to the end of the
Inspection Period and subject to the other provisions and conditions contained
herein, including but not limited to the condition imposed by Paragraph 6.1(A)
above.
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Purchaser's rights to inspect the Property are subject to Purchaser's
agreement that (i) the Property is not damaged by Purchaser, (ii) the Property
is left in a clean and safe condition (if found that way), (iii) no tenant of
Seller is unreasonably disturbed, (iv) no employee, independent contractor or
representative of Seller or any tenant is injured, interfered with or harassed
as a result of Purchaser's actions, (v) such inspection does not interfere with
Seller's operation of the Property, and (vi) Purchaser maintains general
liability (occurrence) insurance in terms and amounts satisfactory to Seller
covering any accident arising in connection with the presence of Purchaser or
its agents on the Property. The inspection rights afforded herein are expressly
made subject to the rights of tenants under the Leases. All inspections fees,
appraisal fees, engineering fees and other expenses of any kind incurred by
Purchaser relating to the inspection of the Property will be solely at
Purchaser's expense. Seller shall cooperate with Purchaser in all reasonable
respects in making such inspections; however, Seller shall not be required to
spend any sums to cooperate with Purchaser, except pay its employees and other
normal costs. Seller hereby reserves the right to have a representative of
Seller present at the time any such inspection is made. Except as specifically
provided in this Agreement, Purchaser acknowledges that Seller has no obligation
whatsoever to undertake any remedial work or other curative action as a result
of Purchaser's inspections. Purchaser shall notify Seller no less than
forty-eight (48) hours in advance of making any inspection of the interiors
apartment units on the Property. Purchaser agrees to indemnify and hold Seller,
its tenants, contractors and employees harmless from any and all injuries,
losses, liens, claims, judgments, liabilities, costs, expenses or damages
(including reasonable attorney's fees and court costs) sustained against Seller
which result from or arise out of any inspections or entry on the Property by
Purchaser or its representatives or agents pursuant to this Agreement. The
indemnification obligation set forth in the immediately preceding sentence shall
survive the termination or cancellation of this Agreement and the closing of
transaction evidenced by this Agreement for six (6) months.
6.2.3 RIGHT OF TERMINATION DURING INSPECTION PERIOD. Purchaser shall also
be permitted to review all original leases, expense records, tenant cards and
occupancy data available. if Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller before the end of
the Inspection Period, and no party hereto shall have any further liability to
any other party hereto, except as provided in Paragraph 6.2.2, and all deposits
shall be returned to Purchaser.
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6.2.4 MORTGAGE ASSIGNMENT DUE DILIGENCE. Purchaser and seller agree that
this Agreement in addition to permitting an Inspection Period of thirty (30)
days, is subject to the approval of the Lender and the acceptance by Purchaser
of the terms for assumption of the Loan, which may not be to Purchaser's liking.
Therefore, only as to the approval to assume the underlying Loan, the Inspection
Period shall continue until five (5) days after the final consent for the sale
subject to the mortgages is received.
6.2.5 "RENT READY". on or prior to the closing Date, Purchaser may inspect
all apartment units at the Property and note any missing appliances or personal
property or dead-bolt locks and provide Seller written notice of same. Seller
may elect, but shall have no obligation, to replace any missing appliances or
personal property or dead-bolt locks that in fact were located at the Property
as of the expiration of the Inspection Period.
6.2.6 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 reasonable wear and tear excepted. if Seller fails to replace any
missing appliances or personal property or dead-bolt locks that were located on
the Property as of the expiration of the Inspection Period, Purchaser shall have
the option of waiving such requirement, in writing, and proceeding to closing,
or Purchaser may terminate this Agreement and obtain a prompt return of its
deposit.
ARTICLE VII
CLOSING
7.1 CLOSING. Closing will be held on or about ten (10) days after the
agreement by the Lender as to the assignment and the assumption of the Loan by
the Purchaser, however, no later than ninety (90) days after the completion of
the Inspection Period, at such place and at such time as the parties may agree.
7.2 SELLER'S DELIVERIES. At closing, seller shall execute and deliver to
Purchaser the Special Warranty Deed referred to in Paragraph 3 hereof and shall
also execute, where necessary, and deliver to Purchaser, the following in a form
reasonably acceptable to Seller and Purchaser;
(A) A Bill of sale, with special warranty of title transferring the
personal property (as shown in Schedule B) to Purchaser free of all liens,
charges and encumbrances, except those assumed by the Purchaser.
(B) The Title policy issued by the underwriter for the Title company
pursuant to the Title Commitment, subject only to
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the Permitted Exceptions, in the full amount of the Purchase Price, dated as of
the date of Closing.
(C) Originals or copies of all signed leases and rental agreements in
effect with tenants of the Property not for more than one (1) year.
(D) All security and cleaning deposits made by such tenants. Seller
will give the tenants the required notice of such transfer in compliance with
the laws of TEXAS so that Seller is no longer responsible for the tenants'
security deposits.
(E) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(F) A rent roll certified by Seller to Seller's knowledge to be
materially accurate and complete as of the date of closing in the form and
content of the rent roll normally kept by Seller in its ordinary course of
business, however, containing the actual rental, apartment number, any escrow,
security deposit, etc.
(G) An affidavit of Seller, as the title company may normally require,
that to the best of its information and belief there are, on the date of
closing, no unsatisfied judgments, creditor's claims other than in the course of
business, tax liens, or pending bankruptcies involving Seller.
(H) Purchaser shall cause an inspection to be made by a licensed
extermination contractor, who is regularly engaged in the business of pest
control. If said contractor's report indicates that there is any termite or
other wood-boring insects infestation and/or damage to the Property, the Seller
shall proceed to have any and all corrective treatment of the infestation, but
not repair of damage, completed prior to closing. (If not possible prior to
closing, Seller shall deposit sufficient sums as required by the extermination
contractor to make the treatment.)
(I) Assignments of all Seller's interest in the following in the form
attached hereto as EXHIBIT E: (1) all assignable licenses, and permits relating
to the operation of the Property, (2) the leases and rental agreements with
tenants of the Property, (3) the existing Property telephone number and (4) the
business and trade name as set forth in Par. 1.1.
(J) Assignments without recourse of all warranties and guarantees (see
Exhibit E) to the extent such are still in effect and provide Purchaser with
copies of all such warranties in Seller's possession and guarantees without
limitation for all appliances, dishwashers, disposals, refrigerators, heating
and air conditioning units, washers and dryers.
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(K) Consent of the Seller's authorized officer to the sale of the
Property and any other approvals required under Seller's partnership agreement
or other organizational documents, which may affect Seller's ability to convey
indefeasible title.
(L) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement acceptable to the title company.
(M) Affidavit that to the knowledge of Seller, Seller has received no
notice of the presence of asbestos and/or any other hazardous material at the
Property, except as set forth in any reports or information provided to
Purchaser pursuant to Paragraph 6.2.1.
(N) Seller shall provide a satisfactory and valid written termination
of the management agreement executed by the existing management and rental agent
for the Property, without cost to the Purchaser.
(0) A notice letter to all the residents of the apartment complex as
to change of ownership in the form prepared by the Purchaser.
(P) All such other documents as are normally transferred at settlement
in the jurisdiction in which the property is located or are reasonably requested
by Purchaser or its counsel.
(Q) A representation letter as normally required by auditors for a
public company in the form attached hereto as EXHIBIT F. This clause shall
survive closing for one year.
7.3 PURCHASER'S DELIVERIES. At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price, adjusted for
the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under leases,
securities, any contracts which may be accepted by the Purchaser and any other
obligations specifically set forth herein (Exhibit "Ell) in a form reasonably
acceptable to Purchaser and Seller.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
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(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate the
transfer.
(D) Execute all such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Seller or its counsel.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 REPRESENTATIONS OF THE PARTIES. Seller warrants (which warranties shall
not survive settlement unless designated to the contrary) that as of the date
hereof and as of closing hereof:
As used in this Agreement, the phrase "Seller's current actual
knowledge", "Seller's knowledge" or words of like effect (i) shall mean and
apply to the knowledge of Robert J. Werra, who is a General Partner of Seller
and directly involved in the negotiation of sale and purchase transaction
described herein and not to any other parties, (ii) shall mean the current
actual knowledge of such person, it being understood and acknowledged that (a)
such person, in many instances, is not involved in the day-to day operations of
the Property and in many instances, is not involved in the negotiation or
execution of the leases, management contracts, service contracts, or other
agreements in question, and (b) such person is not charged with the knowledge of
all of the acts and/or omissions of the predecessors in title to the Property or
with knowledge of all of the acts/or omissions of Seller's AGENTS OR employees,
and (iii) shall not apply to or be construed to apply to information or material
which may be in the possession of Seller generally, or incidentally, but which
is not actually known to Robert J. Werra. As used herein, the term "current
actual knowledge" of a party shall mean that no facts have come to the party's
attention in the ordinary course of business that would give the party knowledge
or notice that any such facts are not true, correct, and complete, and the party
has undertaken no investigation, inquiry, or verification as to such matters to
determine the existence or absence of such facts, and no inference of the
party's knowledge of the existence or absence of such facts should be drawn from
the statements made herein.
(A) That Seller, is the owner in fee simple of the Property and has
the power to convey same.
(B) That Seller is not subject to any other agreements or
arrangements, with the exception of the requirement to procure its partners'
consent and those contained in any existing mortgage documents which would
prevent Seller from selling the Property to Purchaser. This warranty shall
survive 'for one year following closing.
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(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents. This
warranty shall survive for one year following closing.
(D) Seller has no knowledge and to Seller's knowledge it has not been
advised in writing that it is in default under any lease, rental agreement
service or equipment contract, or mortgage or other encumbrances relating to the
Property. This warranty shall survive for one year following closing.
(E) Seller has no knowledge of any existing or threatened litigation
which relates to or which would affect the Property. This warranty shall survive
for one year following closing.
(F) Seller has no knowledge that any part of the Property or the
operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building code or of any private restriction,
that any governmental authority requires any work to be done on or affecting the
Property, or that any governmental authority has expressed an intent to condemn
or to make special improvements for the benefit of the Property or any part
thereof. This warranty shall survive for one year following closing.
(G) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(H) That to Seller's current knowledge, the Property was never
utilized as a disposal site for hazardous waste products.
(I) Seller covenants and agrees that, between this date and the date
of closing, Seller shall continue to maintain, operate and manage the Property
in a manner consistent with its prior practices, making every reasonable effort
to do nothing which might damage the reputation of the Property or the
relationships with the tenants. Seller shall not permit the modification,
extension or cancellation of any tenant lease (except in accordance with the
terms of such lease) or any dealing with any tenant other than the ordinary
course of managing the Property, without the prior written consent of Purchaser.
If the leases of any tenants expire before thirty (30) days after the date of
closing, Seller shall, up to the date of closing and without cost to the
Purchaser, continue its normal course of operation with respect to causing
tenants to be obtained for apartments which are unrented.
(J) Seller agrees that prior to closing, it will
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comply with the keyless, dead-bolt lock requirement to the extent set forth in
Paragraph 6.2.5.
8.2 CONTINUATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS TO THE DATE
OF CLOSING. If each of the warranties set forth in this section does not remain
true up to and including the time of closing as to any material matters, this
Agreement, at Purchaser's election, shall be terminated, Seller shall return all
payments made by Purchaser, or Purchaser may elect to close the sale and waive
failure of the warranties.
8.3 BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The Seller agrees
to notify the Purchaser upon acquiring knowledge that any of Seller's
representations, warranties or covenants contained herein do not remain true as
of the date of Closing. Purchaser shall have the right to terminate this
Agreement for a material breach and receive the refund of the deposit and any
interest earned thereon. However, if Seller fails to notify Purchaser upon
acquiring such knowledge, notwithstanding the provisions of 8.2 above, Seller
shall indemnify Purchaser for all reasonable costs incurred as a result of the
failure of any of Seller's representations, warranties or covenants contained
herein to remain true as of the date of closing.
8.4 "AS IS". EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER
ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY
NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS,
AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR
IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH
RESPECT TO (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY,
INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, (B) THE INCOME TO BE
DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL
ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREOF, (D) THE COMPLIANCE OF
OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR
REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE
HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY, (F) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, (G) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, OR (H) ANY
OTHER MATTER WITH RESPECT TO THE PROPERTY, AND SPECIFICALLY, THAT SELLER RAS NOT
MADE, DOES NOT MAKE, AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS REGARDING
COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES,
REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING SOLID WASTE, AS DEFINED BY THE
U.S. ENVIRONMENTAL PROTECTION AGENCY REGULATIONS AT 40 C.F.R., PART 2 6 1, OR
THE DISPOSAL OR EXISTENCE, IN OR ON THE PROPERTY, OF ANY HAZARDOUS MATERIALS.
PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY
TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF
THE
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PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER. UPON
CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING, BUT
NOT LIMITED TO, ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS MAY NOT RAVE BEEN
REVEALED BY PURCHASER'S INSPECTIONS AND INVESTIGATIONS. EXCEPT AS SET FORTH IN
THIS AGREEMENT, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION
PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A
VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR
VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY
OR COMPLETENESS OF SUCH INFORMATION. SELLER SHALL NOT BE LIABLE OR BOUND IN ANY
MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION
PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL
ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. PURCHASER FURTHER
ACKNOWLEDGES AND AGREES THAT THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS
MADE ON AN "AS IS" CONDITION AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND
AGREED THAT THE PURCHASE PRICE HAS BEEN ADJUSTED BY PRIOR NEGOTIATION TO REFLECT
THAT ALL OF THE PROPERTY IS SOLD BY SELLER AND PURCHASED BY PURCHASER SUBJECT TO
THE FOREGOING. THE PROVISIONS OF THIS PARAGRAPH 8.4 SHALL SURVIVE THE CLOSING
AND SHALL BE INCORPORATED IN THE DEED AND BILL OF SALE.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 PROPERTY DAMAGE. If, prior to closing, any part of the Property is
damaged by fire or other casualty in an amount not greater than TWO HUNDRED
THOUSAND ($200,000, DOLLARS, Purchaser agrees to accept the Property with an
assignment of: (i) the insurance proceeds, (ii) any deductible, and (iii) rent
loss insurance proceeds. Seller may repair such damage before the date provided
herein for closing. In the event that the damage as a result of fire or other
casualty shall be over TWO HUNDRED THOUSAND ($200,000) DOLLARS and such damage
cannot reasonably be repaired by such time, this Agreement may be canceled at
the option of the Purchaser. In the event of cancellation as aforesaid, this
Agreement shall become null and void and the parties shall be released, except
as provided in Paragraph 6.2.2 and all payments made shall be returned. Should
Purchaser elect to carry out this Agreement despite such damage Seller shall
assign to Purchaser all insurance proceeds and any deductible arising from such
damage and will compensate Purchaser for lost rent collections to the extent of
insurance proceeds received. Seller shall promptly notify Purchaser in writing
upon the occurrence of any such damage.
9.2 CONDEMNATION. In the event of any actual or threatened taking, pursuant
to the power of eminent domain, all or any part thereof, or any actual or
proposed sale in lieu thereof, the Seller shall give written notice thereof to
the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property greater than TWO HUNDRED
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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 PINNACLE
REALTY, pursuant to a separate agreement. Said brokerage fee shall be deemed
earned if, and only if, settlement occurs hereunder, and shall not be deemed
earned even if Purchaser and/or Seller wrongfully fail(s) to consummate the
purchase and sale herein contemplated. Seller and Purchaser represent and
warrant to each other that no other brokerage fees are or shall be owing in
connection with this transaction or in any way with the Apartments and Seller
and Purchaser hereby indemnify and hold the other harmless from any and all
claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 DEFAULT DEFINED. Default for the purpose of this Agreement shall mean
any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 SELLER'S DEFAULT. Upon Seller"s default, the Purchaser., at its
election, may as Purchaser's sole and exclusive remedy, pursue one, but not all
of the following: (1) require specific performance of Seller, (2) cancel this
Agreement and obtain a prompt return of the deposit, in which case this
Agreement shall be terminated and the parties released from all obligations
hereunder, except as set forth in Section 6.2.2, or (3) the Purchaser may waive
such defaults and proceed to settlement. Seller shall indemnify Purchaser for
any reasonable attorneys' fees incurred by Purchaser if Purchaser elects to
pursue its option (1) noted above. Purchaser shall have no other remedy against
Seller in the event of Seller's default.
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11.3 PURCHASER'S DEFAULT. Upon Purchaser's default, this Agreement shall be
terminated and both parties released from all obligations hereunder, except as
provided in Paragraph 6.2.2, and the deposit shall be retained by the Seller as
liquidated damages. Such amount and terms are agreed upon by and between Seller
and Purchaser as liquidated damages, due to the difficulty and inconvenience of
ascertaining and measuring actual damages, and the uncertainty thereof, and the
payment of the deposit and the terms provided herein shall constitute full
satisfaction of Purchaser's obligations under this Agreement. Such amount is
agreed upon by and between Seller and Purchaser as a reasonable estimate of just
compensation for the harm caused by Purchaser's default. Seller shall have no
other remedy against Purchaser in the event of Purchaser's default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 ENTIRE AGREEMENT. This Agreement sets forth the entire understanding
between the parties; it supersedes all previous agreements and representations
which are deemed merged herein and may not be modified except in writing.
12.2 ASSIGNMENT. Purchaser may assign this Agreement without the consent of
Seller to APPLE RESIDENTIAL INCOME TRUST, INC. or a company owned by APPLE
RESIDENTIAL INCOME TRUST, INC.
12.3 SEVERABILITY. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 BINDING EFFECT. The parties to the Agreement mutually agree that it
shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 CONTROLLING LAW. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State of Texas.
12.6 COUNTERPARTS. To facilitate execution! this Agreement may be executed
in as many counterparts as may be required. It shall not be necessary that the
signature on behalf of both parties hereto appear in each counterpart hereof,
and it shall be sufficient that the signature on behalf of both parties hereto
appear on one or more such counterparts. All counterparts shall collectively
constitute a single contract.
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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. However, the
covenants contained in this paragraph shall not apply in respect to any
information which (a) was already known to either party when such information
was received from the other, (b) was readily available to the general public at
the time of such receipt, (c) subsequently becomes known to the general public
through no fault or omission by the other party, (d) is subsequently disclosed
by a third party which has the bona fide right to make such disclosure, or (e)
is required to be disclosed by law or a governmental agency. This clause shall
survive closing.
12.11 TIME OF THE ESSENCE. Both parties agree that time is of the essence.
However, any times set forth in this Agreement for Closing are subject to
receiving permission from Seller's mortgagee to transfer. The parties further
agree that the Closing will take place within ten (10) days after receipt of the
written approval and completion of the documents among Purchaser, Seller and
lender.
12.12 HOLIDAYS. If any of the deadlines in this Contract ends on, or if any
event is to occur on, a Saturday, Sunday, or legal holiday, the deadline or the
date for performance shall automatically be extended to the next day which is
not a Saturday, Sunday, or legal holiday.
12.13 LEAD WARNING STATEMENT. Every purchaser of any interest in
residential real property on which a residential dwelling was built prior to
1978 is notified that such property may present exposure to lead from lead-based
paint that may place young children at risk of developing lead poisoning. Lead
poisoning in young children may produce permanent neurological damage, including
learning disabilities, reduced intelligence quotient, behavioral problems, and
impaired memory. Lead poisoning also poses a particular risk to pregnant women.
The seller of any interest in
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residential real property is required to provide the buyer with any information
on lead-based paint hazards from risk assessments or inspections in the seller's
possession and notify the buyer of any known lead-based paint hazards. A risk
assessment or inspection for possible lead-based paint hazards is recommended
prior to purchase.
12.13.1. Seller has no knowledge of lead-based paint and/or lead-based
paint hazard in the housing.
12.13.2. Seller has no reports or records pertaining to lead-based paint
and/or lead-based paint hazards in the housing.
12.13.3. Purchaser is hereby granted a 10-day opportunity (or the length of
the inspection Period, whichever is longer) to conduct a risk assessment or
inspection for the presence of lead-based paint and/or lead-based paint hazards.
12.14 EXHIBITS. The following exhibits are attached to this Agreement and
are incorporated into this Agreement by this reference and made a part hereof
for all purposes:
(a) EXHIBIT A, the legal description of the Land.
(b) EXHIBIT B, list of personal property
(c) EXHIBIT C, (intentionally omitted)
(d) EXHIBIT D, the form of Deed.
(e) EXHIBIT E, the form of the Assignment and Assumption of Personal
Property, Service Contracts, Warranties and Leases.
(f) EXHIBIT F, the form of the Representation Letter.
12.15 PURCHASER'S FAILURE TO PREVAIL. Notwithstanding anything to the
contrary contained or implied elsewhere herein, in the event Purchaser (i) files
a Lis Pendens or an action for specific performance against Seller or otherwise
clouds Seller's title to the Property or any portion thereof and fails to
prevail in a final, non-appealable judgment, or (ii) breaches Purchaser's
agreements of indemnity contained in this Agreement, which survive, Seller shall
be entitled to pursue any remedies available at law or in equity, including but
not limited to, suit for damages from Purchaser (including, but not limited to,
attorney's fees and costs incurred by Seller in connection therewith).
12.16 GENERAL RELEASE. in the event this Agreement is terminated and under
the terms of the termination, the Purchaser is entitled to a refund of the
deposit and any interest thereon and Purchaser is satisfied that it has no
additional claims, it shall forward a General Release of Seller and Title
Company to the escrow holder/Title Company), which shall immediately refund the
deposit to the Purchaser with any interest thereon and expenses. A copy of said
General Release shall be sent to Seller.
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12.17 LIMITATION DATE. Purchaser and Seller hereby agree that,
notwithstanding any provision of this Agreement or any provision of law to the
contrary, any action which may be brought by Purchaser against Seller for breach
of this Agreement or any representations and warranties under this Agreement or
arising out of or in connection with the sale and purchase transaction described
herein, shall be forever barred unless Purchaser: (i) delivers to Seller not
later than one (1) year after the closing Date a written notice of its claims
setting forth in reasonable detail the factual basis for such claim and
Purchaser's good faith estimate of damages arising out of such claim, (ii) files
a complaint or petition against Seller alleging such claim in a court of
competent appropriate jurisdiction no later than two (2) years after the Closing
Date (the "Limitation Date"). No warranties or representations or covenants of
Seller as set forth in this Agreement shall survive beyond the Limitation Date
and no action based thereon shall be commenced after the Limitation Date.
12.18 NO RECORDATION. This Agreement shall not be recorded by Purchaser for
any reason, except for a breach of this Agreement by Seller, and an attempt to
do so shall render the Purchaser liable to Seller for any damages allowable at
law or in equity on account of such breach.
ARTICLE XIII
NOTICE
13.1 NOTICE. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing);
To Seller: Pepper Square Associates, Ltd.
Attention: John R. Werra
6210 Campbell Road, Suite 140
Dallas, TX 75248
Fax: (972) 931-0015
With a copy to
Seller's Attorneys: Nathan M. Rosen, Esq.
Nathan M. Rosen, P.C.
4949 Westgrove Drive, Suite 300
Dallas, TX 75248
Fax (972) 818-7606
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
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With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and
Robert E. Morrison, Esq.
Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, TX 75201
Fax: (214) 999-6170
13.2 DELIVERY OF NOTICE. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier or by fax and confirmed by hard copy by reliable
overnight courier. Notices sent in any other manner shall be deemed given only
when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed this day and date first written above.
SELLER:
PEPPER SQUARE ASSOCIATES, LTD.
BY: /s/ Nathan M. Rosen
---------------------------
Its: General Partner
--------------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ Gus Remppies
----------------------------
Its: V.P. Acquisition
---------------------------
23
EXHIBIT 10.14
FIRST AMENDMENT TO PURCHASE CONTRACT
(EMERALD OAKS APARTMENTS)
This First Amendment to Purchase Contract (the "Amendment") is made by and
between New Emerald Texas, Ltd., a Texas limited partnership ("Seller") and
Cornerstone Realty Group, Inc., a Virginia corporation ("Purchaser"), to be
effective as of the 9th day of April, 1998.
RECITALS
K. Effective on or about March 10, 1998, Seller and Purchaser entered into
a certain Purchase Contract (the "Contract") relating to a parcel of land and
the improvements thereon located in Grapevine, Tarrant County, Texas. All terms
used herein with their initial letter capitalized shall, unless otherwise
specified herein, have the meaning given to such terms in the Contract.
L. The parties desire to amend the Contract to extend the Inspection Period
stated in Section 3.7 of the Contract and have entered into this Amendment to
reflect such agreements.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser and Seller hereby agree as follows:
1. The Inspection Period stated in Section 3.7 of the Contract shall expire
at 11:59 p.m. CST on April 17, 1998, subject to any extension of the Inspection
Period provided in the Contract, and the Purchase Price shall be increased by
$5,000.
2. Except as modified herein, the Contract remains in full force and effect
without modification.
3. Purchaser and Seller hereby ratify and confirm the Contract, as herein
modified, for all purposes.
4. This Amendment may be executed in counterparts, each of which will be
deemed to be an original, but all of which will constitute one and the same
document. A counterpart signed by a party and transmitted by facsimile to the
other party will have the same effect as the delivery of an original.
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first set forth above.
SELLER: NEW EMERALD TEXAS, LTD.,
a Texas limited partnership
By: /s/ Robert J. Werra
----------------------------------
Name: Robert J. Werra
--------------------------------
Title: General Partner
-------------------------------
PURCHASER: CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By: /s/ Gus G. Remppies
----------------------------------
Name: Gus G. Remppies
-------------------------------
Title: V.P. Acquisitions
--------------------------------
<PAGE>
PURCHASE CONTRACT
-----------------
THIS AGREEMENT made and entered into this ___ day of March 1998 (the
"Effective Date"), between CORNERSTONE REALTY GROUP, INC. or its nominee,
(hereinafter called "Purchaser") and NEW EMERALD TEXAS, LTD., a Texas Limited
Partnership (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 SALE OF PROPERTY. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as EMERALD OAKS APARTMENTS
located in GRAPEVINE, 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 250 individually heated and air conditioned
apartment units, with all appurtenances, together with all appliances, drapes,
carpeting, shrubbery and all other personal property owned by Seller and located
on and used in connection with operation and maintenance the premises,
including, the inventory of all personal property (other than appliances in
apartment units) of $100 in value to be supplied by Seller and attached hereto
as EXHIBIT B (all such real and personal property hereinafter collectively
referred to as the "Property", subject to Purchaser's inventory prior to
closing, unless the context clearly indicates otherwise). Seller agrees that it
will not remove any of the personal property from the date of this Agreement to
the date of closing.
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 PURCHASE PRICE. The total purchase price shall be TEN MILLION NINE
HUNDRED TWENTY FIVE THOUSAND ($10,925,000) DOLLARS payable as follows:
2.2 PAYMENT:
(A) DEPOSIT. TWENTY FIVE THOUSAND ($25,000) DOLLARS upon the
execution of this Agreement by Seller and Purchaser and an additional SEVENTY
FIVE THOUSAND ($75,000) DOLLARS to be placed in escrow at the end of the
,Inspection Period" described in Article VI below. Said deposit shall be placed
in escrow with American Title Company, 1330 Summit Avenue, Fort Worth, TX 76102,
Attention: Joanna Cloud, or its authorized agent (the "Title Company") as an
earnest money deposit which may be credited
<PAGE>
against the purchase price or applied as per Article XI below. The Title Company
shall hold the funds in an interest-bearing account with interest to be credited
in the same manner as the deposit.
(B) EXISTING MORTGAGE.
(a) The Property shall be conveyed subject to Purchaser's
assumption and promise to pay in accordance with its terms the loan (the "Loan")
evidenced by that certain Promissory Note (the "Note"), dated 10/17/89 in the
original principal sum of NINE MILLION SIX HUNDRED FIFTY THOUSAND ($9,650,000)
DOLLARS payable to the order of MTRUST CORP., NATIONAL ASSOCIATION, (the
"Lender"), and assumption and promise to perform all covenants and obligations
of Seller under the documents or instruments governing, securing, evidencing or
pertaining to the indebtedness evidenced by the Note (collectively, the "Loan
Documents"), including, but not limited to, that certain Indenture of Mortgage,
Deed of Trust, Deed to Secure Debt, Security Agreement, Fixture Filing,
Financing Statement and Assignment of Rents and leases of even date with the
Note (the "Deed of Trust") recorded in the Real Property Records of Tarrant
County, Texas.
(b) Seller represents and warrants that (i) Seller will deliver
to Purchaser true and complete copies of the existing Deed of Trust, the Note
secured thereby and any extensions and modifications thereof in its possession
or in the possession of its attorney, and (ii) there are no monetary defaults by
Seller under the terms of the Loan Documents and it has received no written
notice of any default under any of the terms of the Loan Documents. From and
after the Effective Date of this Agreement to the Closing Date, Seller agrees to
pay to Lender all installments of principal, interest and escrows and any other
sums of which Seller has notice that are due and payable under the Loan
Documents, as and when such payments are due. Seller shall use reasonable
efforts to provide Purchaser with an Estoppel Certificate from the Lender.
Failure of Purchaser to receive an Estoppel Certificate from Lender prior to
Closing shall give the Purchaser an option to terminate this Agreement and
receive a refund of the deposit or waive the requirement and proceed to Closing.
(c) Seller shall immediately upon the execution of this
Agreement take whatever steps are necessary to contact the Lender and initiate
the procedure to procure the right to assign the mortgage to the Purchaser
pursuant to an Assignment and Assumption Agreement. The Purchaser and Seller
agree to cooperate with the other in procuring permission for Purchaser to
purchase the Property and assume the Loan set forth herein above. Seller agrees
to provide copies of all correspondence and applications to the Purchaser. The
parties further agrees to use their best efforts to procure said approval within
the Purchaser's Inspection Period (30 days from the date of this Agreement).
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(d) Purchaser agrees to execute and deliver to the Lender all
documents and instruments reasonably requested by the Lender in connection with
the assumption and further agrees to pay to the Lender all reasonable fees and
reasonable expenses of the Lender, and its reasonable counsel fees in connection
with the assumption, including, but not limited to, any assumption or transfer
fee provided for in the Deed of Trust and the reasonable fees of Lender's
attorney in connection with preparation of the assumption documents. Purchaser
shall also pay all premiums for any endorsements required by the Lender in
connection with the assumption to the Lender's mortgagee policy of title
insurance or the cost of a new mortgagee policy of title insurance, if required
by the lender. Seller shall not be obligated to incur any expenses other than
normally required in a sale and its legal fees.
(e) If there is a mortgagee escrow account or reserve fund, Seller
shall assign it to Purchaser, if it can be assigned, and in that case Purchaser
shall pay the amount in the escrow account or reserve fund to Seller at Closing.
(f) Purchaser agrees that it will reasonably cooperate with Seller in
attempting to obtain the full and unconditional release of Seller from the
obligations arising out of the Note and Loan Documents, but Purchaser shall not
be obligated to expend any sum or incur any additional liability on account
thereof. In the event Seller and/or Purchaser is unable to obtain the full and
unconditional release of Seller from all obligations arising out of the Note and
Loan Documents, in addition to other indemnities provided in this Agreement,
Purchaser agrees at all times after Closing to indemnify, protect, defend, save
and hold harmless Seller and its General Partners from and against any and all
debts, duties, obligations, liabilities, suits, claims, demands, causes of
action, damages, losses, liens, costs and expenses (including, without
limitations, attorney's fees and expenses incurred in connection with enforcing
this indemnity or opposing any such claims, damages, or causes of action) and
court costs asserted or incurred at any time after the Closing Date relating to
or arising out of (i) the failure by Purchaser or its successors and assigns to
perform all covenants and obligations of borrower under the Note and Loan
Documents or (ii) a default by Purchaser or its successors and assigns under the
Note and Loan Documents.' This indemnity shall relate to matters first occurring
after the Closing Date. This indemnification and the obligations thereunder
shall survive the closing of the transaction evidenced by this Agreement.
However, the Seller shall notify the Purchaser of any claims as made and Seller
shall give Purchaser the right to defend any claims which they feel are invalid.
(C) BALANCE. Balance at Closing as evidenced by cash or immediately
available cash equivalent.
2.3 INDEPENDENT CONTRACT CONSIDERATION. Purchaser
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shall, concurrently with its execution hereof, deliver to Seller a check in the
amount of FIFTY ($50) DOLLARS (the Independent Contract Consideration"), which
amount Seller and Purchaser agree has been bargained for as consideration for
Seller's execution and delivery of this Contract and Purchaser's right to
inspect the Property. The Independent Contract Consideration is in addition to
and independent of any other consideration or payment provided for in this
Contract and is non-refundable in all events.
ARTICLE III
TITLE MATTERS
3.1 TITLE. Seller, shall convey good and indefeasible title by Special
Warranty Deed in the form attached hereto as EXHIBIT D, subject only to general
taxes for the current year not yet due and payable, rights of tenants claiming
under the leases, none of which shall be for more than one year or other than
residential purposes, except laundry room leases, and utility easements which do
not interfere with the present use of the Property, and the "Permitted
Exceptions". "Permitted Exceptions" are those title exceptions listed in the
title commitment, which are not objected to pursuant to section 3.2 below.
(A) Title shall be free from any and all liens, except the liens
securing unpaid taxes not yet due and payable and mortgages as set forth in
Paragraph 2.2(B), and Seller shall be responsible for any prepayment penalties
necessary to deliver such free title.
3.2 TITLE DEFECTS; ELECTION TO CURE. Seller shall furnish to Purchaser
at Seller's expense a commitment for Title Insurance from the Title Company,
(the "Commitment" or the "Title Report") within fifteen (15) days after the
Effective Date, covering the Property binding the Title Company to issue a Texas
Owner Policy of Title Insurance (the "Title Policy") on the standard form
prescribed by the Texas State Board of Insurance at the Closing, in the full
amount of the Purchase Price, insuring Purchaser's fee simple title to the
Property to be good and indefeasible, together with true and correct copies of
all instruments listed on Schedule B to the Commitment (as well as any other
documents or instruments listed therein which will not be released at closing).
If the title commitment shows any exceptions, which are not acceptable to
Purchaser in Purchaser's sole discretion, Purchaser shall give written notice of
such defects in title to Seller and Seller's counsel during the Inspection
Period. If Purchaser fails to notify Seller of any exceptions which are not
acceptable to Purchaser during the Inspection Period, then Purchaser shall be
deemed to have accepted those matters not objected to. Seller may, at its
option, elect whether to cure said defects or by written notice to Purchaser
indicate its intention not to cure.
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3.3 ELECTION NOT TO CURE DEFECTS. Should Seller elect not to cure title
defects, this Agreement, at Purchaser's option (exercised within five (5) days
of the notice by Seller that it will not cure the objections during the
Inspection Period), shall be terminated; each party shall thereupon be released
from all obligations hereunder, except as provided in Paragraph 6.2.2; and all
deposits shall be immediately returned to Purchaser. If Purchaser does not elect
to terminate this Agreement, all title defects that remain uncured at Closing
shall be deemed "Permitted Exceptions."
3.4 SURVEY. As soon as reasonably possible, and in any event within
twenty (20) days after the Effective Date, Seller shall, at Seller's expense,
deliver or cause to be delivered to the Seller, the Title Company, and to
Purchaser a current or updated on-the- ground perimeter survey (the "Survey") of
the Property prepared by a Registered Professional Land Surveyor reasonably
acceptable to the Purchaser. The Survey shall show the location and size of all
of the following on or adjacent to the Property, if any:
buildings, buildings lines, improvements, streets, pavements,
easements, rights-of-way, protrusions, encroachments, fences,
100- year flood plain, public utilities, and recording
information of easements.
The Survey shall show the gross land area and the Net Land Area. The Survey
shall be in a form and of a date acceptable to Purchaser and to the Title
Company, and in acceptable form in order to allow the Title Company to delete
the survey exception from the Title Policy. The term "Net Land Area" means the
gross land area of the Property less the land area included in utility
easements, drainage easements, ingress/egress easements, rights-of-way, 100-year
flood plain and encroachments on or across the Property. The area within the
100- year flood plain shall be as defined by the Federal Emergency Management
Agency or other applicable governmental authority.
3.5 The Survey shall show no encroachments onto the Land from any
adjacent property, no encroachments by or from the Land onto adjacent property
and no violation of or encroachments upon any recorded building lines,
restrictions or easements affecting the Property. If the Survey discloses any
such encroachment or violation, Purchaser shall give written notice thereof to
Seller and Seller shall have ten (10) days from the date of Purchaser's notice
(with a commensurate extension of the closing date) to request the Title Insurer
issue its endorsement insuring against damage caused by such encroachment or
violation and to provide evidence thereof to Purchaser, and if Seller fails to
or is unable to have the same insured against within such ten (10) day period,
Purchaser may elect, on or before the expiration of the Inspection Period, to
(i) terminate this Agreement (in which case
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the Earnest Money shall be returned to Purchaser) and neither party shall have
any further liability or obligation to the other hereunder, except as provided
in Paragraph 6.2.2 or (ii) accept the property subject to any such encroachment
or violation, as ,'Permitted Exceptions".
3.6 Purchaser agrees to deliver to Seller, within the Inspection
Period, notice as to which items on the title report or the Survey are
objectionable.
3.7 COMMENCEMENT AND TERMINATION OF INSPECTION PERIOD. It is understood
that the Inspection Period begins on the date on which both parties have
executed this Agreement, with date inserted on the first page, and shall
terminate at 5:00 p.m. CST on the thirtieth (30th) day unless said 30th day
shall be a Saturday or Sunday, in which case the next business day shall be the
date of the termination of the Inspection Period. It is further understood that
unless there is an extension in writing, the Inspection Period must be completed
by said date.
3.8 NOTICE REQUIRED. The parties agree that whenever a notice shall be
required by either party, said notice must be given within the "Inspection
Period", except notices dealing with the closing or survival.
ARTICLE IV
PRORATIONS
4.1 INCOME AND EXPENSE ALLOCATIONS. The following shall be prorated, on
a calendar month basis, to the 1st day of the month of the closing: rents and
other income from the Property; operating expenses (on such service contracts
and other obligations as Purchaser may agree to assume); and general and real
property taxes and personal and business property taxes for the year of closing
(based on the most recent assessment and the most recent levy). If funding by
Purchaser does not occur by noon CST on Closing Date, adjustments shall be as of
the date of funding prior to noon CST.
4.2 CLOSING COSTS. Purchaser and Seller shall pay their customary share
of all taxes, recording fees, if any, imposed on the Deed, or any other
documents executed in connection with the transfer of the Property. Seller
agrees to pay cost of title insurance and Purchaser agrees to pay the additional
premium to obtain "Survey deletion". Except as set forth in Section 3.1(A),
Purchaser shall pay any prepayment penalty charged by the holders of any
existing notes or assumption fees, if any.
Seller and Purchaser acknowledge that Purchaser is purchasing one
or more additional properties from partnerships affiliated with Seller upon
substantially the same terms and provisions as set forth in this Agreement.
Notwithstanding the
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foregoing, Seller shall pay the title insurance premium for title insurance on
all properties purchased by Purchaser as if issued under one owner's policy for
the full amount of the total accumulated purchase price of all properties. If
Purchaser desires separate owner's policies on each property, Purchaser shall
pay the incremental cost of the issuance of separate owner's policies.
4.3 ALLOCATION OF RENTS. Rents collected by Seller prior to Closing
shall be prorated as agreed in 4.1 above. Purchaser shall apply rents received
after Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 PRIOR LEASE CONCESSIONS. Seller agrees to maintain its normal
leasing procedure until the Closing. Seller agrees that it will not give any
free rent concessionother than in the ordinary course of business. If any free
rent is given by Seller under its normal leasing procedure after the date of
this Agreement, all free rent must be given in the first month of the lease term
and shall not be for a period in excess of one (1) month. Upon request,
Purchaser may waive this clause.
4.5 ADJUSTMENT OF PRORATION. In the event Purchaser or Seller provides
notice to the other within six (6) months of Closing that any of the rent
prorated pursuant to Section 4.3 above or the security or cleaning deposits
transferred to Purchaser at Closing pursuant to Section 7.2(D) below is in error
on account of a misstatement or error in the certified rent roll delivered to
Purchaser at Closing pursuant to Section 7.2(F) below, Seller and Purchaser
shall adjust such proration or deposit transfer between themselves by cash
payment so as to achieve accurate proration or deposit transfer.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 POSSESSION. Possession of the Property shall be delivered to
Purchaser at closing, subject to the rights of the tenants under existing leases
and rental agreements and Permitted Exceptions.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT. Purchaser's obligation to
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purchase shall be subject to and contingent upon the satisfaction of the
following conditions precedent:
(A) Receipt by Purchaser of an engineering report of building
and site conditions, satisfactory to Purchaser in its sole discretion, said
report to include in part, a description of any hazardous waste sites, hazardous
wastes and/or hazardous materials affecting the property. Purchaser shall have
fifteen (15) days, but no later than the termination of the Inspection Period in
which to review the reports set forth herein and exercise its right to reject
the Property based thereon or the right hereunder shall be deemed waived.
(B) The receipt by Purchaser of Seller documents described in
7.2 below.
(C) Sellers representations and warranties described in
Article VIII below remain true and correct.
(D) There have been no material or adverse changes to the
property or leases since the expiration of the Inspection Period.
(E) Seller acknowledges that Purchaser is a public entity and
that it is required to furnish financial statements to the Securities and
Exchange Commission in connection with this acquisition. Seller agrees to make
the information available for Purchaser to audit the last 12 months of operation
of the Property so that a report can be generated that is in compliance with
accounting Regulation S-X of the Securities and Exchange Commission.
(F) Purchaser determining during the Inspection Period that
all water, sewer, gas, electric, telephone, and drainage facilities and all
other utilities required by law or by the normal use and operation of the
Property are and at the time of closing will be installed to the property line,
are and at the time of closing will be connected pursuant to valid permits, and
are and at the time of closing will be adequate to service the Property and to
permit full compliance with all requirements of law and normal usage of the
Property by the tenants thereof and their licensees and invitees.
(G) Purchaser acknowledges that the selling partnership
requires the approval of its Limited Partners. Seller represents that it has
commenced to seek the approval of its Limited Partners and has twenty-one (21)
days from the date hereof to do so. Seller shall inform Purchaser within said
period of time whether or not the Limited Partners have approved the sale.
Seller may terminate this Agreement in the event it does not obtain the
requisite consent from its Limited Partners. Upon termination on account of the
failure to obtain the consent of the Limited
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Partners of Seller, all earnest money shall be returned to Purchaser.
6.2 INSPECTION. This Agreement shall be further subject to and
contingent upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 PREPARATION FOR INSPECTION. If the execution of this Agreement,
Seller shall deliver to purchaser copies of the following to the extent not
previously delivered to purchaser: (The Inspection Period shall be extended as a
result of any delays by Seller in producing the items requested herein unless
the Seller does not have them and notifies purchaser with an extension of time
to reflect delays of notification.) The current rent roll for the Property;
detailed statements of income and expenses with respect to the Property for the
past two years; the most recent tax bills for the Property; utility bills for
the Property for the twelve (12) months previous to the date hereof; all
contract, mortgages, and other documents creating liens of security interest on
the Property, or any part thereof and all promissory notes secured thereby; all
insurance policies applicable to the Property to include loss runs for the last
three (3) years; Plans and Specifications for the Property to the extent in
Seller's possession, service contracts, Certificates of Occupancy to the extent
reasonably available; a copy of title policy and most recent survey for the
Property. A copy of any environmental or engineering reports on the property.
The rent roll shall be certified by Seller to be materially accurate and
complete to Seller's knowledge. Except as expressly set forth in this Agreement,
the delivery of the documents by Seller does not constitute a representation
(expressed or implied) by Seller of the truth, accuracy, source or completeness
of such information and purchaser agrees to look to its own inspection and
studies to determine such matters. However, Seller warrants that all such
documents were used by Seller in the ordinary course of business and were
produced from Seller's files.
6.2.2 INSPECTION OF BOOKS AND RECORDS; ACCESS. Purchaser, its
employees, agents and contractors shall have during the Inspection Period
provided in paragraph 3.7 above, to enter upon the Property (subject to the
rights of the tenants) during normal business hours for the purpose of making
physical inspections thereof, including but not limited to roofs, heating,
cooling, electrical and plumbing systems, swimming pool, appliances, and
structural elements of the buildings. Upon the conclusion of the Inspection
Period this contract shall be deemed to be a firm agreement of purchase and sale
binding the parties hereto, except as it may be terminated prior to the end of
the Inspection Period and subject to the other provisions and conditions
contained herein, including but not limited to the condition imposed by
Paragraph 6.1(A) above.
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Purchaser's rights to inspect the Property are subject to
Purchaser's agreement that (i) the Property is not damaged by Purchaser, (ii)
the Property is left in a clean and safe condition (if found that way), (iii) no
tenant of Seller is unreasonably disturbed, (iv) no employee, independent
contractor or representative of Seller or any tenant is injured, interfered with
or harassed as a result of Purchaser's actions, (v) such inspection does not
interfere with Seller's operation of the Property, and (vi) Purchaser maintains
general liability (occurrence) insurance in terms and amounts satisfactory to
Seller covering any accident arising in connection with the presence of
Purchaser or its agents on the Property. The inspection rights afforded herein
are expressly made subject to the rights of tenants under the Leases. All
inspections fees, appraisal fees, engineering fees and other expenses of any
kind incurred by Purchaser relating to the inspection of the Property will be
solely at Purchaser's expense. Seller shall cooperate with Purchaser in all
reasonable respects in making such inspections; however, Seller shall not be
required to spend any sums to cooperate with Purchaser, except pay its employees
and other normal costs. Seller hereby reserves the right to have a
representative of Seller present at the time any such inspection is made. Except
as specifically provided in this Agreement, Purchaser acknowledges that Seller
has no obligation whatsoever to undertake any remedial work or other curative
action as a result of Purchaser's inspections. Purchaser shall notify Seller no
less than forty-eight (48) hours in advance of making any inspection of the
interiors apartment units on the Property. Purchaser agrees to indemnify and
hold Seller, its tenants, contractors and employees harmless from any and all
injuries, losses, liens, claims, judgments, liabilities, costs, expenses or
damages (including reasonable attorney's fees and court costs) sustained against
Seller which result from or arise out of any inspections or entry on the
Property by Purchaser or its representatives or agents pursuant to this
Agreement. The indemnification obligation set forth in the immediately preceding
sentence shall survive the termination or cancellation of this Agreement and the
closing of transaction evidenced by this Agreement for six (6) months.
6.2.3 RIGHT OF TERMINATION DURING INSPECTION PERIOD. Purchaser shall
also be permitted to review all original leases, expense records, tenant cards
and occupancy data available. If Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller before the end of
the Inspection Period, and no party hereto shall have any further liability to
any other party hereto, except as provided in Paragraph 6.2.2, and all deposits
shall be returned to Purchaser.
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6.2.4 MORTGAGE ASSIGNMENT DUE DILIGENCE. Purchaser and Seller agree
that this Agreement in addition to permitting an Inspection Period of thirty
(30) days, is subject to the approval of the Lender and the acceptance by
Purchaser of the terms for assumption of the Loan, which may not be to
Purchaser's liking. Therefore, only as to the approval to assume the underlying
Loan, the Inspection Period shall continue until five (5) days after the final
consent for the sale subject to the mortgages is received.
6.2.5 RENT READY On or prior to the Closing Date, Purchaser may inspect
all apartment units at the Property and note any missing appliances or personal
property or dead-bolt locks and provide Seller written notice of same. Seller
may elect, but shall have no obligation, to replace any missing appliances or
personal property or dead-bolt locks that in fact were located at the Property
as of the expiration of the Inspection Period.
6.2.6 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 reasonable wear and tear excepted. If Seller fails to replace any
missing appliances or personal property or dead-bolt locks that were located on
the Property as of the expiration of the Inspection Period, Purchaser shall have
the option of waiving such requirement, in writing, and proceeding to closing,
or Purchaser may terminate this Agreement and obtain a prompt return of its
deposit.
ARTICLE VII
CLOSING
7.1 CLOSING. Closing will be held on or about ten (10) days after the
agreement by the Lender as to the assignment and the assumption of the Loan by
the Purchaser, however, no later than ninety (90) days after the completion of
the Inspection Period, at such place and at such time as the parties may agree.
7.2 SELLER'S DELIVERIES. At closing, Seller shall execute and deliver
to Purchaser the Special Warranty Deed referred to in Paragraph 3 hereof and
shall also execute, where necessary, and deliver to Purchaser, the following in
a form reasonably acceptable to Seller and Purchaser:
(A) A Bill of Sale, with special warranty of title transferring the
personal property (as shown in Schedule B) to Purchaser free of all liens,
charges and encumbrances, except those assumed by the Purchaser.
(B) The Title Policy issued by the underwriter for the Title
Company pursuant to the Title Commitment, subject only to
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the Permitted Exceptions, in the full amount of the Purchase Price, dated as of
the date of Closing.
(C) Originals or copies of all signed leases and rental agreements
in effect with tenants of the Property not for more than one (1) year.
(D) All security and cleaning deposits made by such tenants. Seller
will give the tenants the required notice of such transfer in compliance with
the laws of TEXAS so that Seller is no longer responsible for the tenants'
security deposits.
(E) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(F) A rent roll certified by Seller to Seller's knowledge to be
materially accurate and complete as of the date of closing in the form and
content of the rent roll normally kept by Seller in its ordinary course of
business, however, containing the actual rental, apartment number, any escrow,
security deposit, etc.
(G) An affidavit of Seller, as the title company may normally
require, that to the best of its information and belief there are, on the date
of closing, no unsatisfied judgments, creditor's claims other than in the course
of business, tax liens, or pending bankruptcies involving Seller.
(H) Purchaser shall cause an inspection to be made by a licensed
extermination contractor, who is regularly engaged in the business of pest
control. If said contractor's report indicates that there is any termite or
other wood-boring insects infestation and/or damage to the Property, the Seller
shall proceed to have any and all corrective treatment of the infestation, but
not repair of damage, completed prior to closing. (If not possible prior to
closing, Seller shall deposit sufficient sums as required by the extermination
contractor to make the treatment.)
(I) Assignments of all Seller's interest in the following in the
form attached hereto as EXHIBIT E: (1) all assignable licenses, and permits
relating to the operation of the Property, (2) the leases and rental agreements
with tenants of the Property, (3) the existing Property telephone number and (4)
the business and trade name as set forth in Par. 1.1.
(J) Assignments without recourse of all warranties and guarantees
(see Exhibit E) to the extent such are still in effect and provide Purchaser
with copies of all such warranties in Seller's possession and guarantees without
limitation for all appliances, dishwashers, disposals, refrigerators, heating
and air conditioning units, washers and dryers.
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(K) Consent of the Seller's authorized officer to the sale of the
Property and any other approvals required under Seller's partnership agreement
or other organizational documents, which may affect Seller's ability to convey
indefeasible title.
(L) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement acceptable to the title company.
(M) Affidavit that to the knowledge of Seller, Seller has received
no notice of the presence of asbestos and/or any other hazardous material at the
Property, except as set forth in any reports or information provided to
Purchaser pursuant to Paragraph 6.2.1.
(N) Seller shall provide a satisfactory and valid written
termination of the management agreement executed by the existing management and
rental agent for the Property, without cost to the Purchaser.
(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.
7.3 PURCHASER'S DELIVERIES. At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price, adjusted
for the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under leases,
securities, any contracts which may be accepted by the Purchaser and any other
obligations specifically set forth herein (Exhibit "E") in a form reasonably
acceptable to Purchaser and Seller.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
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(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate the
transfer.
(D) Execute all such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Seller or its counsel.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 REPRESENTATIONS OF THE PARTIES. Seller warrants (which warranties
shall not survive settlement unless designated to the contrary) that as of the
date hereof and as of closing hereof:
As used in this Agreement, the phrase "Seller's current actual
knowledge", "Seller's knowledge" or words of like effect (i) shall mean and
apply to the knowledge of Robert J. Werra, who is a General Partner of Seller
and directly involved in the negotiation of sale and purchase transaction
described herein and not to any other parties, (ii) shall mean the current
actual knowledge of such person, it being understood and acknowledged that (a)
such person, in many instances, is not involved in the day-to day operations of
the Property and in many instances, is not involved in the negotiation or
execution of the leases, management contracts, service contracts, or other
agreements in question, and (b) such person is not charged with the knowledge of
all of the acts and/or omissions of the predecessors in title to the Property or
with knowledge of all of the acts/or omissions of Seller's agents or employees,
and (iii) shall not apply to or be construed to apply to information or material
which may be in the possession of Seller generally, or incidentally, but which
is not actually known to Robert J. Werra. As used herein, the term "current
actual knowledge" of a party shall mean that no facts have come to the party's
attention in the ordinary course of business that would give the party knowledge
or notice that any such facts are not true, correct, and complete, and the party
has undertaken no investigation, inquiry, or verification as to such matters to
determine the existence or absence of such facts, and no inference of the
party's knowledge of the existence or absence of such facts should be drawn from
the statements made herein.
(A) That Seller, is the owner in fee simple of the Property and has
the power to convey same.
(B) That Seller is not subject to any other agreements or
arrangements, with the exception of the requirement to procure its partners
consent and those contained in any existing mortgage documents which would
prevent Seller from selling the Property to Purchaser. This warranty shall
survive for one year following closing.
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(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents. This
warranty shall survive for one year following closing.
(D) Seller has no knowledge and to Seller's knowledge it has not
been advised in writing that it is in default under any lease, rental agreement
service or equipment contract, or mortgage or other encumbrances relating to the
Property. This warranty shall survive for one year following closing.
(E) Seller has no knowledge of any existing or threatened
litigation which relates to or which would affect the Property. This warranty
shall survive for one year following closing.
(F) Seller has no knowledge that any part of the Property or the
operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building code or of any private restriction,
that any governmental authority requires any work to be done on or affecting the
Property, or that any governmental authority has expressed an intent to condemn
or to make special improvements for the benefit of the Property or any part
thereof. This warranty shall survive for one year following closing.
(G) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(H) That to Seller's current knowledge, the Property was never
utilized as a disposal site for hazardous waste products.
(I) Seller covenants and agrees that, between this date and the
date of closing, Seller shall continue to maintain, operate and manage the
Property in a manner consistent with its prior practices, making every
reasonable effort to do nothing which might damage the reputation of the
Property or the relationships with the tenants. Seller shall not permit the
modification, extension or cancellation of any tenant lease (except in
accordance with the terms of such lease) or any dealing with any tenant other
than the ordinary course of managing the Property, without the prior written
consent of Purchaser. If the leases of any tenants expire before thirty (30)
days after the date of closing, Seller shall, up to the date of closing and
without cost to the Purchaser, continue its normal course of operation with
respect to causing tenants to be obtained for apartments which are unrented.
(J) Seller agrees that prior to closing, it will
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comply with the keyless, dead-bolt lock requirement to the extent set forth in
Paragraph 6.2.5.
8.2 CONTINUATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS TO THE
DATE OF CLOSING. If each of the warranties set forth in this section does not
remain true up to and including the time of closing as to any material matters,
this Agreement, at Purchaser's election, shall be terminated, Seller shall
return all payments made by Purchaser, or Purchaser may elect to close the sale
and waive failure of the warranties.
8.3 BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The Seller
agrees to notify the Purchaser upon acquiring knowledge that any of Seller's
representations, warranties or covenants contained herein do not remain true as
of the date of Closing. Purchaser shall have the right to terminate this
Agreement for a material breach and receive the refund of the deposit and any
interest earned thereon. However, if Seller fails to notify Purchaser upon
acquiring such knowledge, notwithstanding the provisions of 8.2 above, Seller
shall indemnify Purchaser for all reasonable costs incurred as a result of the
failure of any of Seller's representations, warranties or covenants contained
herein to remain true as of the date of closing.
8.4 "AS IS". EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER
ACKNOWLEDGES AND AGREES THAT SELLRR HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY
NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS,
AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR
IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH
RESPECT TO (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY,
INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, (B) THE INCOME TO BE
DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL
ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREOF, (D) THE COMPLIANCE OF
OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR
REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE
HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY, (F) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, (G) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, OR (H) ANY
OTHER MATTER WITH RESPECT TO THE PROPERTY, AND SPECIFICALLY, THAT SELLER HAS NOT
MADE, DOES NOT MAKE, AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS REGARDING
COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES,
REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING SOLID WASTE, AS DEFINED BY THE
U.S. ENVIRONMENTAL PROTECTION AGENCY REGULATIONS AT 40 C.F.R., PART 261, OR THE
DISPOSAL OR EXISTENCE, IN OR ON THE PROPERTY, OF ANY HAZARDOUS
MATERIALS.PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN
INVESTIGATION OF THE
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PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER. UPON
CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING, BUT
NOT LIMITED TO, ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS MAY NOT HAVE BEEN
REVEALED BY PURCHASER'S INSPECTIONS AND INVESTIGATIONS. EXCEPT AS SET FORTH IN
THIS AGREEMENT, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION
PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A
VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR
VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY
OR COMPLETENESS OF SUCH INFORMATION. SELLER SHALL NOT BE LIABLE OR BOUND IN ANY
MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION
PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL
ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. PURCHASER FURTHER
ACKNOWLEDGES AND AGREES THAT THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS
MADE ON AN "AS IS" CONDITION AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND
AGREED THAT THE PURCHASE PRICE HAS BEEN ADJUSTED BY PRIOR NEGOTIATION TO REFLECT
THAT ALL OF THE PROPERTY IS SOLD BY SELLERAND PURCHASED BY PURCHASER SUBJECT TO
THE FOREGOING. THE PROVISIONS OF THIS PARAGRAPH 8.4 SHALL SURVIVE THE CLOSING
AND SHALL BE INCORPORATED IN THE DEED AND BILL OF SALE.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 PROPERTY DAMAGE. If, prior to closing, any part of the Property is
damaged by fire or other casualty in an amount not greater than TWO HUNDRED
THOUSAND ($200,000, DOLLARS, Purchaser agrees to accept the Property with an
assignment of: (i) the insurance proceeds, (ii) any deductible, and (iii) rent
loss insurance proceeds. Seller may repair such damage before the date provided
herein for closing. In the event that the damage as a result of fire or other
casualty shall be over TWO HUNDRED THOUSAND ($200,000) DOLLARS and such damage
cannot reasonably be repaired by such time, this Agreement may be canceled at
the option of the Purchaser. In the event of cancellation as aforesaid, this
Agreement shall become null and void and the parties shall be released, except
as provided in Paragraph 6.2.2 and all payments made shall be returned. Should
Purchaser elect to carry out this Agreement despite such damage Seller shall
assign to Purchaser all insurance proceeds and any deductible arising from such
damage and will compensate Purchaser for lost rent collections to the extent of
insurance proceeds received. Seller shall promptly notify Purchaser in writing
upon the occurrence of any such damage.
9.2 CONDEMNATION. In the event of any actual or threatened taking, pursuant
to the power of eminent domain, all or any part thereof, or any actual or
proposed sale in lieu thereof, the Seller shall give written notice thereof to
the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property greater than TWO HUNDRED
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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
PINNACLE REALTY, pursuant to a separate agreement. Said brokerage fee shall be
deemed earned if, and only if, settlement occurs hereunder, and shall not be
deemed earned even if Purchaser and/or Seller wrongfully fail(s) to consummate
the purchase and sale herein contemplated. Seller and Purchaser represent and
warrant to each other that no other brokerage fees are or shall be owing in
connection with this transaction or in any way with the Apartments and Seller
and Purchaser hereby indemnify and hold the other harmless from any and all
claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 DEFAULT DEFINED. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 SELLER'S DEFAULT. Upon Seller's default, the Purchaser, at its
election, may as Purchaser's sole and exclusive remedy, pursue one, but not all
of the following: (1) require specific performance of Seller, (2) cancel this
Agreement and obtain a prompt return of the deposit, in which case this
Agreement shall be terminated and the parties released from all obligations
hereunder, except as set forth in Section 6.2.2, or (3) the Purchaser may waive
such defaults and proceed to settlement. Seller shall indemnify Purchaser for
any reasonable attorneys' fees incurred by Purchaser if Purchaser elects to
pursue its option (1) noted above. Purchaser shall have no other remedy against
Seller in the event of Seller's default.
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11.3 PURCHASER'S DEFAULT. Upon Purchaser's default, this Agreement
shall be terminated and both parties released from all obligations hereunder,
except as provided in Paragraph 6.2.2, and the deposit shall be retained by the
Seller as liquidated damages. Such amount and terms are agreed upon by and
between Seller and Purchaser as liquidated damages, due to the difficulty and
inconvenience of ascertaining and measuring actual damages, and the uncertainty
thereof, and the payment of the deposit and the terms provided herein shall
constitute full satisfaction of Purchaser's obligations under this Agreement.
Such amount is agreed upon by and between Seller and Purchaser as a reasonable
estimate of just compensation for the harm caused by Purchaser's default. Seller
shall have no other remedy against Purchaser in the event of Purchaser's
default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between the parties; it supersedes all previous agreements and
representations which are deemed merged herein and may not be modified except in
writing.
12.2 ASSIGNMENT. Purchaser may assign this Agreement without the
consent of Seller to APPLE RESIDENTIAL INCOME TRUST, INC. or a company owned by
APPLE RESIDENTIAL INCOME TRUST, INC.
12.3 SEVERABILITY. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 BINDING EFFECT. The parties to the Agreement mutually agree that
it shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 CONTROLLING LAW. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State of Texas.
12.6 COUNTERPARTS. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear in each counterpart
hereof, and it shall be sufficient that the signature on behalf of both parties
hereto appear on one or more such counterparts. All counterparts shall
collectively constitute a single contract.
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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. However, the covenants contained in this paragraph shall not apply
in respect to any information which (a) was already known to either party when
such information was received from the other, (b) was readily available to the
general public at the time of such receipt, (c) subsequently becomes known to
the general public through no fault or omission by the other party, (d) is
subsequently disclosed by a third party which has the bona fide right to make
such disclosure, or (e) is required to be disclosed by law or a governmental
agency. This clause shall survive closing.
12.11 TIME OF THE ESSENCE. Both parties agree that time is of the
essence. However, any times set forth in this Agreement for Closing are subject
to receiving permission from Seller's mortgagee to transfer. The parties further
agree that the Closing will take place within ten (10) days after receipt of the
written approval and completion of the documents among Purchaser, Seller and
lender.
12.12 HOLIDAYS. If any of the deadlines in this Contract ends on, or if
any event is to occur on, a Saturday, Sunday, or legal holiday, the deadline or
the date for performance shall automatically be extended to the next day which
is not a Saturday, Sunday, or legal holiday.
12.13 LEAD WARNING STATEMENT. Every purchaser of any interest in
residential real property on which a residential dwelling was built prior to
1978 is notified that such property may present exposure to lead from lead-based
paint that may place young children at risk of developing lead poisoning. Lead
poisoning in young children may produce permanent neurological damage, including
learning disabilities, reduced intelligence quotient, behavioral problems, and
impaired memory. Lead poisoning also poses a particular risk to pregnant women.
The seller of any interest in
20
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residential real property is required to provide the buyer with any information
on lead based paint hazards from risk assessments or inspections in the seller's
possession and notify the buyer of any known lead-based paint hazards. A risk
assessment or inspection for possible lead-based paint hazards is recommended
prior to purchase.
12.13.1. Seller has no knowledge of lead-based paint and/or lead-based
paint hazard in the housing.
12.13.2. Seller has no reports or records pertaining to lead-based
paint and/or lead- based paint hazards in the housing.
12.13.3. Purchaser is hereby granted a 10-day opportunity (or the
length of the Inspection Period, whichever is longer) to conduct a risk
assessment or inspection for the presence of lead-based paint and/or lead-based
paint hazards.
12.14 Exhibits. The following exhibits are attached to this Agreement
and are incorporated into this Agreement by this reference and made a part
hereof for all purposes:
(a) EXHIBIT A, the legal description of the Land.
(b) EXHIBIT B, list of personal property
(c) EXHIBIT C, (intentionally omitted)
(d) EXHIBIT D, the form of Deed.
(e) EXHIBIT E, the form of the Assignment and Assumption of
Personal Property, Service Contracts, Warranties and
Leases.
(f) EXHIBIT F, the form of the Representation Letter.
12.15 PURCHASER'S FAILURE TO PREVAIL. Notwithstanding anything to the
contrary contained or implied elsewhere herein, in the event Purchaser (i) files
a Lis Pendens or an action for specific performance against Seller or otherwise
clouds Seller's title to the Property or any portion thereof and fails to
prevail in a final, non-appealable judgment, or (ii) breaches Purchaser's
agreements of indemnity contained in this Agreement, which survive, Seller shall
be entitled to pursue any remedies available at law or in equity, including but
not limited to, suit for damages from Purchaser (including, but not limited to,
attorney's fees and costs incurred by Seller in connection therewith).
12.16 GENERAL RELEASE. In the event this Agreement is terminated and
under the terms of the termination, the Purchaser is entitled to a refund of the
deposit and any interest thereon and Purchaser is satisfied that it has no
additional claims, it shall forward a General Release of Seller and Title
Company to the escrow holder/Title Company), which shall immediately refund the
deposit to the Purchaser with any interest thereon and expenses. A copy of said
General Release shall be sent to Seller.
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12.17 LIMITATION DATE. Purchaser and Seller hereby agree that,
notwithstanding any provision of this Agreement or any provision of law to the
contrary, any action which may be brought by Purchaser against Seller for breach
of this Agreement or any representations and warranties under this Agreement or
arising out of or in connection with the sale and purchase transaction described
herein, shall be forever barred unless Purchaser: (i) delivers to Seller not
later than one (1) year after the Closing Date a written notice of its claims
setting forth in reasonable detail the factual basis for such claim and
Purchaser's good faith estimate of damages arising out of such claim, (ii) files
a complaint or petition against Seller alleging such claim in a court of
competent appropriate jurisdiction no later than two (2) years after the Closing
Date (the "Limitation Date"). No warranties or representations or covenants of
Seller as set forth in this Agreement shall survive beyond the Limitation Date
and no action based thereon shall be commenced after the Limitation Date.
12.18 NO RECORDATION. This Agreement shall not be recorded by Purchaser
for any reason, except for a breach of this Agreement by Seller, and an attempt
to do so shall render the Purchaser liable to Seller for any damages allowable
at law or in equity on account of such breach.
ARTICLE
XIII NOTICE
13.1 NOTICE. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: New Emerald Texas, Ltd.
Attention: John R. Werra
6210 Campbell Road, Suite 140
Dallas, TX 75248
Fax: (972) 931-0015
With a copy to
Seller's Attorneys: Nathan M. Rosen, Esq.
Nathan M. Rosen, P.C.
4949 Westgrove Drive, Suite 300
Dallas, TX 75248
Fax (972) 818-7606
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
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With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and
Robert E. Morrison, Esq.
Brown McCarroll & Oaks Hartline 300
Crescent Court, Suite 1400
Dallas, TX 75201
Fax: (214) 999-6170
13.2 DELIVERY 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 Hail, postage prepaid, or delivered to
a reliable overnight courier or by fax and confirmed by hard copy by reliable
overnight courier. Notices sent in any other manner shall be deemed given only
when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER
NEW EMERALD TEXAS, LTD.
BY: /s/ R. J. Werra
_________________________
Its: General Partner
________________________
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
BY:_________________________
Its:________________________
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With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and
Robert E. Morrison, Esq.
Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, TX 75201
Fax: (214) 999-6170
13.2 DELIVERY OF NOTICE. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier or by fax and confirmed by hard copy by reliable
overnight courier. Notices sent in any other manner shall be deemed given only
when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
NEW EMERALD TEXAS, LTD.
BY:
--------------------------
Its:
-------------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
BY: /s/ Gus G. Remppies
--------------------------
Its: V.P. Acquisitions
-------------------------
23
EXHIBIT 10.15
FIRST AMENDMENT TO PURCHASE CONTRACT
(HAYDEN'S CROSSING APARTMENTS)
This First Amendment to Purchase Contract (the "Amendment") is made by and
between Hayden's Crossing, L.P., a Texas limited partnership ("Seller") and
Cornerstone Realty Group, Inc., a Virginia corporation ("Purchaser"), to be
effective as of the 9th day of April, 1998.
RECITALS
G. Effective on or about March 10, 1998, Seller and Purchaser entered into
a certain Purchase Contract (the "Contract") relating to a parcel of land and
the improvements thereon located in Grand Prairie, Tarrant County, Texas. All
terms used herein with their initial letter capitalized shall, unless otherwise
specified herein, have the meaning given to such terms in the Contract.
H. The parties desire to amend the Contract to extend the Inspection Period
stated in Section 3.7 of the Contract and have entered into this Amendment to
reflect such agreements.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser and Seller hereby agree as follows:
1. The Inspection Period stated in Section 3.7 of the Contract shall expire
at 11:59 p.m. CST on April 17, 1998, subject to any extension of the Inspection
Period provided in the Contract, and the Purchase Price shall be increased by
$5,000.
2. Except as modified herein, the Contract remains in full force and effect
without modification.
3. Purchaser and Seller hereby ratify and confirm the Contract, as herein
modified, for all purposes.
4. This Amendment may be executed in counterparts, each of which will be
deemed to be an original, but all of which will constitute one and the same
document. A counterpart signed by a party and transmitted by facsimile to the
other party will have the same effect as the delivery of an original.
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first set forth above.
SELLER: HAYDEN'S CROSSING, L.P.,
a Texas limited partnership
By: /s/ Robert J. Werra
----------------------------------
Name: Robert J. Werra
--------------------------------
Title: General Partner
-------------------------------
PURCHASER: CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By: /s/ Gus G. Remppies
----------------------------------
Name: Gus G. Remppies
--------------------------------
Title: V.P. Acquisitions
-------------------------------
<PAGE>
PURCHASE CONTRACT
-----------------
THIS AGREEMENT made and entered into this day of March 1998 (the
"Effective Date"), between CORNERSTONE REALTY GROUP, INC. or its nominee,
(hereinafter called "Purchaser") and HAYDEN'S CROSSING, LTD., a Texas Limited
Partnership (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 SALE OF PROPERTY. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as HAYDEN'S CROSSING APARTMENTS
located in GRAND PRAIRIE, TX, with all buildings and improvements located
thereon, as more particularly described in the attached legal description in
EXHIBIT A including, but not limited to 170 individually heated and air
conditioned apartment units, with all appurtenances, together with all
appliances, drapes, carpeting, shrubbery and all other personal property owned
by Seller and located on and used in connection with operation and maintenance
the premises, including, the inventory of all personal property (other than
appliances in apartment units) of $100 in value to be supplied by Seller and
attached hereto as EXHIBIT B (all such real and personal property hereinafter
collectively referred to as the "Property", subject to Purchaser's inventory
prior to closing, unless the context clearly indicates otherwise). Seller agrees
that it will not remove any of the personal property from the date of this
Agreement to the date of closing.
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 PURCHASE PRICE. The total purchase price shall be FOUR MILLION
SEVEN HUNDRED THOUSAND ($4,700,000) DOLLARS payable as follows:
2.2 PAYMENT:
(A) DEPOSIT. TWENTY FIVE THOUSAND ($25,000) DOLLARS upon the
execution of this Agreement by Seller and Purchaser and an additional SEVENTY
FIVE THOUSAND ($75,000) DOLLARS to be placed in escrow at the end of the
"Inspection Period" described in Article VI below. Said deposit shall be placed
in escrow with American Title Company, 1330 Summit Avenue, Fort Worth, TX 76102,
Attention: Joanna Cloud, or its authorized agent (the "Title Company") as an
earnest money deposit which may be credited
<PAGE>
against the purchase price or applied as per Article XI below. The Title Company
shall hold the funds in an interest-bearing account with interest to be credited
in the same manner as the deposit.
(B) EXISTING MORTGAGE
(a) The Property shall be conveyed subject to Purchaser's
assumption and promise to pay in accordance with its terms the loan (the "Loan")
evidenced by that certain Promissory Note (the "Note"), dated 10/17/89 in the
original principal sum of FIVE MILLION FIVE HUNDRED FIFTY THOUSAND ($5,550,000)
DOLLARS payable to the order of MTRUST CORP., NATIONAL ASSOCIATION (the
"Lender") the documents or instruments governing, securing, evidencing or
pertaining to the indebtedness evidenced by the Note (collectively, the "Loan
Documents"), including, but not limited to, that certain Indenture of Mortgage,
Deed of Trust, Deed to Secure Debt, Security Agreement, Fixture Filing,
Financing Statement and Assignment of Rents and leases of even date with the
Note (the "Deed of Trust") recorded in the Real Property Records of Tarrant
County, Texas.
(b) Seller represents and warrants that (i) Seller will deliver
to Purchaser true and complete copies of the existing Deed of Trust, the Note
secured thereby and any extensions and modifications thereof in its possession
or in the possession of its attorney, and (ii) there are no monetary defaults by
Seller under the terms of the Loan Documents and it has received no written
notice of any default under any of the terms of the Loan Documents. From and
after the Effective Date of this Agreement to the Closing Date, Seller agrees to
pay to Lender all installments of principal, interest and escrows and any other
sums of which Seller has notice that are due and payable under the Loan
Documents, as and when such payments are due. Seller shall use reasonable
efforts to provide Purchaser with an Estoppel Certificate from the Lender.
Failure of Purchaser to receive an Estoppel Certificate from Lender prior to
Closing shall give the Purchaser an option to terminate this Agreement and
receive a refund of the deposit or waive the requirement and proceed to Closing.
(c) Seller shall immediately upon the execution of this
Agreement take whatever steps are necessary to contact the Lender and initiate
the procedure to procure the right to assign the mortgage to the Purchaser
pursuant to an Assignment and Assumption Agreement. The Purchaser and Seller
agree to cooperate with the other in procuring permission for Purchaser to
purchase the Property and assume the loan set forth herein above. Seller agrees
to provide copies of all correspondence and applications to the Purchaser. The
parties further agrees to use their best efforts to procure said approval within
the Purchaser's Inspection Period (30 days from the date of this Agreement).
2
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(d) Purchaser agrees to execute and deliver to the Lender all
documents and instruments reasonably requested by the Lender in connection with
the assumption and further agrees to pay to the Lender all reasonable fees and
reasonable expenses of the Lender, and its reasonable counsel fees in connection
with the assumption, including, but not limited to, any assumption or transfer
fee provided for in the Deed of Trust and the reasonable fees of Lender's
attorney in connection with preparation of the assumption documents. Purchaser
shall also pay all premiums for any endorsements required by the Lender in
connection with the assumption to the Lender's mortgagee policy of title
insurance or the cost of a new mortgagee policy of title insurance, if required
by the lender. Seller shall not be obligated to incur any expenses other than
normally required in a sale and its legal fees.
(e) If there is a mortgagee escrow account or reserve fund,
Seller shall assign it to Purchaser, if it can be assigned, and in that case
Purchaser shall pay the amount in the escrow account or reserve fund to Seller
at Closing.
(f) Purchaser agrees that it will reasonably cooperate with
Seller in attempting to obtain the full and unconditional release of Seller from
the obligations arising out of the Note and Loan Documents, but Purchaser shall
not be obligated to expend any sum or incur any additional liability on account
thereof. In the event Seller and/or Purchaser is unable to obtain the full and
unconditional release of Seller from all obligations arising out of the Note and
Loan Documents, in addition to other indemnities provided in this Agreement,
Purchaser agrees at all times after Closing to indemnify, protect, defend, save
and hold harmless Seller and its General Partners from and against any and all
debts, duties, obligations, liabilities, suits, claims, demands, causes of
action, damages, losses, liens, costs and expenses (including, without
limitations, attorney's fees and expenses incurred in connection with enforcing
this indemnity or opposing any such claims, damages, or causes of action) and
court costs asserted or incurred at any time after the Closing Date relating to
or arising out of (i) the failure by Purchaser or its successors and assigns to
perform all covenants and obligations of borrower under the Note and Loan
Documents or (ii) a default by Purchaser or its successors and assigns under the
Note and Loan Documents. This indemnity shall relate to matters first occurring
after the Closing Date. This indemnification and the obligations thereunder
shall survive the closing of the transaction evidenced by this Agreement.
However, the Seller shall notify the Purchaser of any claims as made and Seller
shall give Purchaser the right to defend any claims which they feel are invalid.
(C) BALANCE. Balance at Closing as evidenced by cash or immediately
available cash equivalent.
2.3 INDEPENDENT CONTRACT CONSIDERATION. Purchaser
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shall, concurrently with its execution hereof, deliver to Seller a check in the
amount of FIFTY ($50) DOLLARS (the "Independent Contract Consideration"), which
amount Seller and Purchaser agree has been bargained for as consideration for
Seller's execution and delivery of this Contract and Purchaser's right to
inspect the Property. The Independent Contract Consideration is in addition to
and independent of any other consideration or payment provided for in this
Contract and is non-refundable in all events.
ARTICLE III
TITLE MATTERS
3.1 TITLE. Seller, shall convey good and indefeasible title by Special
Warranty Deed in the form attached hereto as EXHIBIT D, subject only to general
taxes for the current year not yet due and payable, rights of tenants claiming
under the leases, none of which shall be for more than one year or other than
residential purposes, except laundry room leases, and utility easements which do
not interfere with the present use of the Property, and the "Permitted
Exceptions". "Permitted Exceptions" are those title exceptions listed in the
title commitment, which are not objected to pursuant to section 3.2 below.
(A) Title shall be free from any and all liens, except the liens
securing unpaid taxes not yet due and payable and mortgages as set forth in
Paragraph 2.2(B), and Seller shall be responsible for any prepayment penalties
necessary to deliver such free title.
3.2 TITLE DEFECTS; ELECTION TO CURE. Seller shall furnish to Purchaser
at Seller's expense a commitment for Title Insurance from the Title Company,
(the "Commitment" or the "Title Report") within fifteen (15) days after the
Effective Date, covering the Property binding the Title Company to issue a Texas
Owner Policy of Title Insurance (the "Title Policy") on the standard form
prescribed by the Texas State Board of Insurance at the Closing, in the full
amount of the Purchase Price, insuring Purchaser's fee simple title to the
Property to be good and indefeasible, together with true and correct copies of
all instruments listed on Schedule B to the Commitment (as well as any other
documents or instruments listed therein which will not be released at closing).
If the title commitment shows any exceptions, which are not acceptable to
Purchaser in Purchaser's sole discretion, Purchaser shall give written notice of
such defects in title to Seller and Seller's counsel during the Inspection
Period. If Purchaser fails to notify Seller of any exceptions which are not
acceptable to Purchaser during the Inspection Period, then Purchaser shall be
deemed to have accepted those matters not objected to. Seller may, at its
option, elect whether to cure said defects or by written notice to Purchaser
indicate its intention not to cure.
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3.3 ELECTION NOT TO CURE DEFECTS. Should Seller elect not to cure title
defects, this Agreement, at Purchaser's option (exercised within five (5) days
of the notice by Seller that it will not cure the objections during the
Inspection Period), shall be terminated; each party shall thereupon be released
from all obligations hereunder, except as provided in Paragraph 6.2.2; and all
deposits shall be immediately returned to Purchaser. If Purchaser does not elect
to terminate this Agreement, all title defects that remain uncured at Closing
shall be deemed "Permitted Exceptions."
3.4 SURVEY. As soon as reasonably possible, and in any event within
twenty (20) days after the Effective Date, Seller shall, at Seller's expense,
deliver or cause to be delivered to the Seller, the Title Company, and to
Purchaser a current or updated on-the-ground perimeter survey (the "Survey") of
the Property prepared by a Registered Professional Land Surveyor reasonably
acceptable to the Purchaser. The Survey shall show the location and size of all
of the following on or adjacent to the Property, if any:
buildings, buildings lines, improvements, streets, pavements,
easements, rights-of-way, protrusions, encroachments, fences,
100-year flood plain, public utilities, and recording information
of easements.
The Survey shall show the gross land area and the Net Land Area. The Survey
shall be in a form and of a date acceptable to Purchaser and to the Title
Company, and in acceptable form in order to allow the Title Company to delete
the survey exception from the Title Policy. The term "Net Land Area" means the
gross land area of the Property less the land area included in utility
easements, drainage easements, ingress/egress easements, rights-of-way, 100-year
flood plain and encroachments on or across the Property. The area within the
100-year flood plain shall be as defined by the Federal Emergency Management
Agency or other applicable governmental authority.
3.5 The Survey shall show no encroachments onto the Land from any
adjacent property, no encroachments by or from the Land onto adjacent property
and no violation of or encroachments upon any recorded building lines,
restrictions or easements affecting the Property. If the Survey discloses any
such encroachment or violation, Purchaser shall give written notice thereof to
Seller and Seller shall have ten (10) days from the date of Purchaser's notice
(with a commensurate extension of the closing date) to request the Title Insurer
issue its endorsement insuring against damage caused by such encroachment or
violation and to provide evidence thereof to Purchaser, and if Seller fails to
or is unable to have the same insured against within such ten (10) day period,
Purchaser may elect, on or before the expiration of the Inspection Period, to
(i) terminate this Agreement (in which case
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the Earnest Money shall be returned to Purchaser) and neither party shall have
any further liability or obligation to the other hereunder, except as provided
in Paragraph 6.2.2 or (ii) accept the property subject to any such encroachment
or violation, as "Permitted Exceptions".
3.6 Purchaser agrees to deliver to Seller, within the Inspection
Period, notice as to which items on the title report or the Survey are
objectionable.
3.7 COMMENCEMENT AND TERMINATION OF INSPECTION PERIOD. It is understood
that the Inspection Period begins on the date on which both parties have
executed this Agreement, with date inserted on the first page, and shall
terminate at 5:00 p.m. CST on the thirtieth (30th) day unless said 30th day
shall be a Saturday or Sunday, in which case the next business day shall be the
date of the termination of the Inspection Period. It is further understood that
unless there is an extension in writing, the Inspection Period must be completed
by said date.
3.8 NOTICE REQUIRED. The parties agree that whenever a notice shall be
required by either party, said notice must be given within the "Inspection
Period", except notices dealing with the closing or survival.
ARTICLE IV
PRORATIONS
4.1 INCOME AND EXPENSE ALLOCATIONS. The following shall be prorated, on
a calendar-month basis, to the 1st day of the month of the closing: rents and
other income from the Property; operating expenses (on such service contracts
and other obligations as Purchaser may agree to assume); and general and real
property taxes and personal and business property taxes for the year of closing
(based on the most recent assessment and the most recent levy). If funding by
Purchaser does not occur by noon CST on Closing Date, adjustments shall be as of
the date of funding prior to noon CST.
4.2 CLOSING COSTS. Purchaser and Seller shall pay their customary share
of all taxes, recording fees, if any, imposed on the Deed, or any other
documents executed in connection with the transfer of the Property. Seller
agrees to pay cost of title insurance and Purchaser agrees to pay the additional
premium to obtain "Survey deletion". Except as set forth in Section 3.1(A),
Purchaser shall pay any prepayment penalty charged by the holders of any
existing notes or assumption fees, if any.
Seller and Purchaser acknowledge that Purchaser is purchasing one
or more additional properties from partnerships affiliated with Seller upon
substantially the same terms and provisions as set forth in this Agreement.
Notwithstanding the
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foregoing, Seller shall pay the title insurance premium for title insurance on
all properties purchased by Purchaser as if issued under one owner's policy for
the full amount of the total accumulated purchase price of all properties. If
Purchaser desires separate owner's policies on each property, Purchaser shall
pay the incremental cost of the issuance of separate owner's policies.
4.3 ALLOCATION OF RENTS. Rents collected by Seller prior to Closing
shall be prorated as agreed in 4.1 above. Purchaser shall apply rents received
after Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 PRIOR LEASE CONCESSIONS. Seller agrees to maintain its normal
leasing procedure until the Closing. Seller agrees that it will not give any
free rent concession other than in the ordinary course of business. If any free
rent is given by Seller under its normal leasing procedure after the date of
this Agreement, all free rent must be given in the first month of the lease term
and shall not be for a period in excess of one (1) month. Upon request,
Purchaser may waive this clause.
4.5 ADJUSTMENT OF PRORATION. In the event Purchaser or Seller provides
notice to the other within six (6) months of Closing that any of the rent
prorated pursuant to Section 4.3 above or the security or cleaning deposits
transferred to Purchaser at Closing pursuant to Section 7.2(D) below is in error
on account of a misstatement or error in the certified rent roll delivered to
Purchaser at Closing pursuant to Section 7.2(F) below, Seller and Purchaser
shall adjust such proration or deposit transfer between themselves by cash
payment so as to achieve accurate proration or deposit transfer.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 POSSESSION. Possession of the Property shall be delivered to
Purchaser at closing, subject to the rights of the tenants under existing leases
and rental agreements and Permitted Exceptions.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT. Purchaser's obligation to
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purchase shall be subject to and contingent upon the satisfaction of the
following conditions precedent:
(A) Receipt by Purchaser of an engineering report of building
and site conditions, satisfactory to Purchaser in its sole discretion, said
report to include in part, a description of any hazardous waste sites, hazardous
wastes and/or hazardous materials affecting the property. Purchaser shall have
fifteen (15) days, but no later than the termination of the Inspection Period in
which to review the reports set forth herein and exercise its right to reject
the Property based thereon or the right hereunder shall be deemed waived.
(B) The receipt by Purchaser of Seller documents described in
7.2 below.
(C) Sellers representations and warranties described in Article
VIII below remain true and correct.
(D) There have been no material or adverse changes to the
property or leases since the expiration of the Inspection Period.
(E) Seller acknowledges that Purchaser is a public entity and
that it is required to furnish financial statements to the Securities and
Exchange Commission in connection with this acquisition. Seller agrees to make
the information available for Purchaser to audit the last 12 months of operation
of the Property so that a report can be generated that is in compliance with
accounting Regulation S-X of the Securities and Exchange Commission.
(F) Purchaser determining during the Inspection Period that all
water, sewer, gas, electric, telephone, and drainage facilities and all other
utilities required by law or by the normal use and operation of the Property are
and at the time of closing will be installed to the property line, are and at
the time of closing will be connected pursuant to valid permits, and are and at
the time of closing will be adequate to service the Property and to permit full
compliance with all requirements of law and normal usage of the Property by the
tenants thereof and their licensees and invitees.
(G) Purchaser acknowledges that the selling partnership
requires the approval of its Limited Partners. Seller represents that it has
commenced to seek the approval of its Limited Partners and has twenty-one (21)
days from the date hereof to do so. Seller shall inform Purchaser within said
period of time whether or not the Limited Partners have approved the sale.
Seller may terminate this Agreement in the event it does not obtain the
requisite consent from its Limited Partners. Upon termination on account of the
failure to obtain the consent of the Limited
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Partners of Seller, all earnest money shall be returned to Purchaser.
6.2 INSPECTION. This Agreement shall be further subject to and
contingent upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 PREPARATION FOR INSPECTION. At the execution of this Agreement,
Seller shall deliver to Purchaser copies of the following to the extent not
previously delivered to Purchaser: (The Inspection Period shall be extended as a
result of any delays by Seller in producing the items requested herein unless
the Seller does not have them and notifies Purchaser with an extension of time
to reflect delays of notification.) The current rent roll for the Property;
detailed statements o(pound) income and expenses with respect to the Property
for the past two years; the most recent tax bills for the Property; utility
bills for the Property for the twelve (12) months previous to the date hereof;
all contract, mortgages, and other documents creating liens of security interest
on the Property, or any part thereof and all promissory notes secured thereby;
all insurance policies applicable to the Property to include loss runs for the
last three (3) years; Plans and Specifications for the Property to the extent in
Seller's possession, service contracts, Certificates of Occupancy to the extent
reasonably available; a copy of title policy and most recent survey for the
Property. A copy of any environmental or engineering reports on the property.
The rent roll shall be certified by Seller to be materially accurate and
complete to Seller's knowledge. Except as expressly set forth in this Agreement,
the delivery of the documents by Seller does not constitute a representation
(expressed or implied) by Seller of the truth, accuracy, source or completeness
of such information and Purchaser agrees to look to its own inspection and
studies to determine such matters. However, Seller warrants that all such
documents were used by Seller in the ordinary course of business and were
produced from Seller's files.
6.2.2 INSPECTION OF BOOKS AND RECORDS; ACCESS. Purchaser, its
employees, agents and contractors shall have during the Inspection Period
provided in paragraph 3.7 above, to enter upon the Property (subject to the
rights of the tenants) during normal business hours for the purpose of making
physical inspections thereof, including but not limited to roofs, heating,
cooling, electrical and plumbing systems, swimming pool, appliances, and
structural elements of the buildings. Upon the conclusion of the Inspection
Period this contract shall be deemed to be a firm agreement of purchase and sale
binding the parties hereto, except as it may be terminated prior to the end of
the Inspection Period and subject to the other provisions and conditions
contained herein, including but not limited to the condition imposed by
Paragraph 6.1(A) above.
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Purchaser's rights to inspect the Property are subject to
Purchaser's agreement that (i) the Property is not damaged by Purchaser, (ii)
the Property is left in a clean and safe condition (if found that way), (iii) no
tenant of Seller is unreasonably disturbed, (iv) no employee, independent
contractor or representative of Seller or any tenant is injured, interfered with
or harassed as a result of Purchaser's actions, (v) such inspection does not
interfere with Seller's operation of the Property, and (vi) Purchaser maintains
general liability (occurrence) insurance in terms and amounts satisfactory to
Seller covering any accident arising in connection with the presence of
Purchaser or its agents on the Property. The inspection rights afforded herein
are expressly made subject to the rights of tenants under the Leases. All
inspections fees, appraisal fees, engineering fees and other expenses of any
kind incurred by Purchaser relating to the inspection of the Property will be
solely at Purchaser's expense. Seller shall cooperate with Purchaser in all
reasonable respects in making such inspections; however, Seller shall not be
required to spend any sums to cooperate with Purchaser, except pay its employees
and other normal costs. Seller hereby reserves the right to have a
representative of Seller present at the time any such inspection is made. Except
as specifically provided in this Agreement, Purchaser acknowledges that Seller
has no obligation whatsoever to undertake any remedial work or other curative
action as a result of Purchaser's inspections. Purchaser shall notify Seller no
less than forty-eight (48) hours in advance of making any inspection of the
interiors apartment units on the Property. Purchaser agrees to indemnify and
hold Seller, its tenants, contractors and employees harmless from any and all
injuries, losses, liens, claims, judgments, liabilities, costs, expenses or
damages (including reasonable attorney's fees and court costs) sustained against
Seller which result from or arise out of any inspections or entry on the
Property by Purchaser or its representatives or agents pursuant to this
Agreement. The indemnification obligation set forth in the immediately preceding
sentence shall survive the termination or cancellation of this Agreement and the
closing of transaction evidenced by this Agreement for six (6) months.
6.2.3 RIGHT OF TERMINATION DURING INSPECTION PERIOD. Purchaser shall
also be permitted to review all original leases, expense records, tenant cards
and occupancy data available. If Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller before the end of
the Inspection Period, and no party hereto shall have any further liability to
any other party hereto, except as provided in Paragraph 6.2.2, and all deposits
shall be returned to Purchaser.
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6.2.4 MORTGAGE ASSIGNMENT DUE DILIGENCE. Purchaser and Seller agree
that this Agreement in addition to permitting an Inspection Period of thirty
(30) days, is subject to the approval of the Lender and the acceptance by
Purchaser of the terms for assumption of the Loan, which may not be to
Purchaser's liking. Therefore, only as to the approval to assume the underlying
Loan, the Inspection Period shall continue until five (5) days after the final
consent for the sale subject to the mortgages is received.
6.2.5 "RENT READY". On or prior to the Closing Date, Purchaser may
inspect all apartment units at the Property and note any missing appliances or
personal property or dead-bolt locks and provide Seller written notice of same.
Seller may elect, but shall have no obligation, to replace any missing
appliances or personal property or dead-bolt locks that in fact were located at
the Property as of the expiration of the Inspection Period.
6.2.6 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 reasonable wear and tear excepted. If Seller fails to replace any
missing appliances or personal property or dead-bolt locks that were located on
the Property as of the expiration of the Inspection Period, Purchaser shall have
the option of waiving such requirement, in writing, and proceeding to closing,
or Purchaser may terminate this Agreement and obtain a prompt return of its
deposit.
ARTICLE VII
CLOSING
7.1 CLOSING. Closing will be held on or about ten (10) days after the
agreement by the Lender as to the assignment and the assumption of the Loan by
the Purchaser, however, no later than ninety (90) days after the completion of
the Inspection Period, at such place and at such time as the parties may agree.
7.2 SELLER'S DELIVERIES. At closing, Seller shall execute and deliver
to Purchaser the Special Warranty Deed referred to in Paragraph 3 hereof and
shall also execute, where necessary, and deliver to Purchaser, the following in
a form reasonably acceptable to Seller and Purchaser:
(A) A Bill of Sale, with special warranty of title transferring
the personal property (as shown in Schedule B) to Purchaser free of all liens,
charges and encumbrances, except those assumed by the Purchaser.
(B) The Title Policy issued by the underwriter for the Title
Company pursuant to the Title Commitment, subject only to
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the Permitted Exceptions, in the full amount of the Purchase Price, dated as of
the date of Closing.
(C) Originals or copies of all signed leases and rental
agreements in effect with tenants of the Property not for more than one (1)
year.
(D) All security and cleaning deposits made by such tenants.
Seller will give the tenants the required notice of such transfer in compliance
with the laws of TEXAS so that Seller is no longer responsible for the tenants'
security deposits.
(E) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(F) A rent roll certified by Seller to Seller's knowledge to be
materially accurate and complete as of the date of closing in the form and
content of the rent roll normally kept by Seller in its ordinary course of
business, however, containing the actual rental, apartment number, any escrow,
security deposit, etc.
(G) An affidavit of Seller, as the title company may normally
require, that to the best of its information and belief there are, on the date
of closing, no unsatisfied judgments, creditor's claims other than in the course
of business, tax liens, or pending bankruptcies involving Seller.
(H) Purchaser shall cause an inspection to be made by a
licensed extermination contractor, who is regularly engaged in the business of
pest control. If said contractor's report indicates that there is any termite or
other wood-boring insects infestation and/or damage to the Property, the Seller
shall proceed to have any and all corrective treatment of the infestation, but
not repair of damage, completed prior to closing. (If not possible prior to
closing, Seller shall deposit sufficient sums as required by the extermination
contractor to make the treatment.)
(I) Assignments of all Seller's interest in the following in
the form attached hereto as EXHIBIT E: (1) all assignable licenses, and permits
relating to the operation of the Property, (2) the leases and rental agreements
with tenants of the Property, (3) the existing Property telephone number and (4)
the business and trade name as set forth in Par. 1.1.
(J) Assignments without recourse of all warranties and
guarantees (see Exhibit E) to the extent such are still in effect and provide
Purchaser with copies of all such warranties in Seller's possession and
guarantees without limitation for all appliances, dishwashers, disposals,
refrigerators, heating and air conditioning units, washers and dryers.
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(K) Consent of the Seller's authorized officer to the sale of
the Property and any other approvals required under Seller's partnership
agreement or other organizational documents, which may affect Seller's ability
to convey indefeasible title.
(L) Satisfactory evidence of the power and authority of Seller
to enter into and consummate this agreement acceptable to the title company.
(M) Affidavit that to the knowledge of Seller, Seller has
received no notice of the presence of asbestos and/or any other hazardous
material at the Property, except as set forth in any reports or information
provided to Purchaser pursuant to Paragraph 6.2.1.
(N) Seller shall provide a satisfactory and valid written
termination of the management agreement executed by the existing management and
rental agent for the Property, without cost to the Purchaser.
(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.
7.3 PURCHASER'S DELIVERIES. At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price,
adjusted for the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under
leases, securities, any contracts which may be accepted by the Purchaser and any
other obligations specifically set forth herein (Exhibit "E") in a form
reasonably acceptable to Purchaser and Seller.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
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(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate the
transfer.
(D) Execute all such other documents as are normally
transferred at settlement in the jurisdiction in which the property is located
or are reasonably requested by Seller or its counsel.
ARTICLE VIII
SELLER'S REPRESENTATION, WARRANTIES AND COVENANTS
8.1 REPRESENTATIONS OF THE PARTIES. Seller warrants (which warranties
shall not survive settlement unless designated to the contrary) that as of the
date hereof and as of closing hereof:
As used in this Agreement, the phrase "Seller's current actual
knowledge", "Seller's knowledge" or words of like effect (i) shall mean and
apply to the knowledge of Robert J. Werra, who is a General Partner of Seller
and directly involved in the negotiation of sale and purchase transaction
described herein and not to any other parties, (ii) shall mean the current
actual knowledge of such person, it being understood and acknowledged that (a)
such person, in many instances, is not involved in the day-to-day operations of
the Property and in many instances, is not involved in the negotiation or
execution of the leases, management contracts, service contracts, or other
agreements in question, and (b) such person is not charged with the knowledge of
all of the acts and/or omissions of the predecessors in title to the Property or
with knowledge of all of the acts/or omissions .of Seller's agents or employees,
and (iii) shall not apply to or be construed to apply to information or material
which may be in the possession of Seller generally, or incidentally, but which
is not actually known to Robert J. Werra. As used herein, the term "current
actual knowledge" of a party shall mean that no facts have come to the party's
attention in the ordinary course of business that would give the party knowledge
or notice that any such facts are not true, correct, and complete, and the party
has undertaken no investigation, inquiry, or verification as to such matters to
determine the existence or absence of such facts, and no inference of the
party's knowledge of the existence or absence of such facts should be drawn from
the statements made herein.
(A) That Seller, is the owner in fee simple of the Property and
has the power to convey same.
(B) That Seller is not subject to any other agreements or
arrangements, with the exception of the requirement to procure its partners'
consent and those contained in any existing mortgage documents which would
prevent Seller from selling the Property to Purchaser. This warranty shall
survive for one year following closing.
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(C) All necessary action has been taken by Seller to authorize
the execution of this Agreement and the performance of the obligations
contemplated hereunder, which are not excluded elsewhere in existing mortgage
documents. This warranty shall survive for one year following closing.
(D) Seller has no knowledge and to Seller's knowledge it has
not been advised in writing that it is in default under any lease, rental
agreement service or equipment contract, or mortgage or other encumbrances
relating to the Property. This warranty shall survive for one year following
closing.
(E) Seller has no knowledge of any existing or threatened
litigation which relates to or which would affect the Property. This warranty
shall survive for one year following closing.
(F) Seller has no knowledge that any part of the Property or
the operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building code or of any private restriction,
that any governmental authority requires any work to be done on or affecting the
Property, or that any governmental authority has expressed an intent to condemn
or to make special improvements for the benefit of the Property or any part
thereof. This warranty shall survive for one year following closing.
(G) That Seller is not a "foreign person" within the meaning of
the Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(K) That to Seller's current knowledge, the Property was never
utilized as a disposal site for hazardous waste products.
(I) Seller covenants and agrees that, between this date and the
date of closing, Seller shall continue to maintain, operate and manage the
Property in a manner consistent with its prior practices, making every
reasonable effort to do nothing which might damage the reputation of the
Property or the relationships with the tenants. Seller shall not permit the
modification, extension or cancellation of any tenant lease (except in
accordance with the terms of such lease) or any dealing with any tenant other
than the ordinary course of managing the Property, without the prior written
consent of Purchaser. If the leases of any tenants expire before thirty (30)
days after the date of closing, Seller shall, up to the date of closing and
without cost to the Purchaser, continue its normal course of operation with
respect to causing tenants to be obtained for apartments which are unrented.
(J) Seller agrees that prior to closing, it will
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comply with the keyless, dead-bolt lock requirement to the extent set forth in
Paragraph 6.2.5.
8.2 CONTINUATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS TO THE
DATE OF CLOSING. If each of the warranties set forth in this section does not
remain true up to and including the time of closing as to any material matters,
this Agreement, at Purchaser's election, shall be terminated, Seller shall
return all payments made by Purchaser, or Purchaser may elect to close the sale
and waive failure of the warranties.
8.3 BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The Seller
agrees to notify the Purchaser upon acquiring knowledge that any of Seller's
representations, warranties or covenants contained herein do not remain true as
of the date of Closing. Purchaser shall have the right to terminate this
Agreement for a material breach and receive the re(pound)und of the deposit and
any interest earned thereon. However, if Seller fails to notify Purchaser upon
acquiring such knowledge, notwithstanding the provisions of 8.2 above, Seller
shall indemnify Purchaser for all reasonable costs incurred as a result of the
failure of any of Seller's representations, warranties or covenants contained
herein to remain true as of the date of closing.
8.4 "AS IS". EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER
ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY
NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS,
AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR
IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH
RESPECT TO (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY,
INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, (B) THE INCOME TO BE
DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL
ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREOF, (D) THE COMPLIANCE OF
OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR
REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE
HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY, (F) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, (G) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, OR (H) ANY
OTHER MATTER WITH RESPECT TO THE PROPERTY, AND SPECIFICALLY, THAT SELLER HAS NOT
MADE, DOES NOT MAKE, AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS REGARDING
COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES,
REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING SOLID WASTE, AS DEFINED BY THE
U.S. ENVIRONMENTAL PROTECTION AGENCY REGULATIONS AT 40 C.F.R., PART 261, OR THE
DISPOSAL OR EXISTENCE, IN OR ON THE PROPERTY, OF ANY HAZARDOUS MATERIALS.
PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY
TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF
THE
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PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER. UPON
CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING, BUT
NOT LIMITED TO, ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS MAY NOT HAVE BEEN
REVEALED BY PURCHASER'S INSPECTIONS AND INVESTIGATIONS. EXCEPT AS SET FORTH IN
THIS AGREEMENT, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION
PROVIDED OR TO BE PROVIDED WITHRESPECT TO THE PROPERTY WAS OBTAINED FROM A
VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR
VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY
OR COMPLETENESS OF SUCH INFORMATION. SELLER SHALL NOT BE LIABLE OR BOUND IN ANY
MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION
PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL
ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. PURCHASER FURTHER
ACKNOWLEDGES AND AGREES THAT THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS
MADE ON AN "AS IS" CONDITION AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND
AGREED THAT THE PURCHASE PRICE HAS BEEN ADJUSTED BY PRIOR NEGOTIATION TO REFLECT
THAT ALL OF THE PROPERTY IS SOLD BY SELLER AND PURCHASED BY PURCHASER SUBJECT TO
THE FOREGOING. THE PROVISIONS OF THIS PARAGRAPH 8.4 SHALL SURVIVE THE CLOSING
AND SHALL BE INCORPORATED IN THE DEED AND BILL OF SALE.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 PROPERTY DAMAQE. If, prior to closing, any part of the Property is
damaged by fire or other casualty in an amount not greater than TWO HUNDRED
THOUSAND ($200,000, DOLLARS, Purchaser agrees to accept the Property with an
assignment of: (i) the insurance proceeds, (ii) any deductible, and (iii) rent
loss insurance proceeds. Seller may repair such damage before the date provided
herein for closing. In the event that the damage as a result of fire or other
casualty shall be over TWO HUNDRED THOUSAND ($200,000) DOLLARS and such damage
cannot reasonably be repaired by such time, this Agreement may be canceled at
the option of the Purchaser. In the event of cancellation as aforesaid, this
Agreement shall become null and void and the parties shall be released, except
as provided in Paragraph 6.2.2 and all payments made shall be returned. Should
Purchaser elect to carry out this Agreement despite such damage Seller shall
assign to Purchaser all insurance proceeds and any deductible arising from such
damage and will compensate Purchaser for lost rent collections to the extent of
insurance proceeds received. Seller shall promptly notify Purchaser in writing
upon the occurrence of any such damage.
9.2 CONDEMNATION. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any actual
or proposed sale in lieu thereof, the Seller shall give written notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property greater than TWO HUNDRED
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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 PINNACLE
REALTY, pursuant to a separate agreement. Said brokerage fee shall be deemed
earned if, and only if, settlement occurs hereunder, and shall not be deemed
earned even if Purchaser and/or Seller wrongfully fail(s) to consummate the
purchase and sale herein contemplated. Seller and Purchaser represent and
warrant to each other that no other brokerage fees are or shall be owing in
connection with this transaction or in any way with the Apartments and Seller
and Purchaser hereby indemnify and hold the other harmless from any and all
claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 DEFAULT DEFINED. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 SELLER'S DEFAULT. Upon Seller's default, the Purchaser, at its
election, may as Purchaser's sole and exclusive remedy, pursue one, but not all
of the following: (1) require specific performance of Seller, (2) cancel this
Agreement and obtain a prompt return of the deposit, in which case this
Agreement shall be terminated and the parties released from all obligations
hereunder, except as set forth in Section 6.2.2, or (3) the Purchaser may waive
such defaults and proceed to settlement. Seller shall indemnify Purchaser for
any reasonable attorneys' fees incurred by Purchaser if Purchaser elects to
pursue its option (1) noted above. Purchaser shall have no other remedy against
Seller in the event of Seller's default.
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11.3 PURCHASER'S DEFAULT. Upon Purchaser's default, this Agreement
shall be terminated and both parties released from all obligations hereunder,
except as provided in Paragraph 6.2.2, and the deposit shall be retained by the
Seller as liquidated damages. Such amount and terms are agreed upon by and
between Seller and Purchaser as liquidated damages, due to the difficulty and
inconvenience of ascertaining and measuring actual damages, and the uncertainty
thereof, and the payment of the deposit and the terms provided herein shall
constitute full satisfaction of Purchaser's obligations under this Agreement.
Such amount is agreed upon by and between Seller and Purchaser as a reasonable
estimate of just compensation for the harm caused by Purchaser's default. Seller
shall have no other remedy against Purchaser in the event of Purchaser's
default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between the parties; it supersedes all previous agreements and
representations which are deemed merged herein and may not be modified except in
writing.
12.2 ASSIGNMENT. Purchaser may assign this Agreement without the
consent of Seller to APPLE RESIDENTIAL INCOME TRUST, INC. or a company owned by
APPLE RESIDENTIAL INCOME TRUST, INC.
12.3 SEVERABILITY. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 BINDING EFFECT. The parties to the Agreement mutually agree that
it shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 CONTROLLING LAW. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State of Texas.
12.6 COUNTERPARTS. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear in each counterpart
hereof, and it shall be sufficient that the signature on behalf of both parties
hereto appear on one or more such counterparts. All counterparts shall
collectively constitute a single contract.
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l2.7 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 HEADINQS. 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. However, the covenants contained in this paragraph shall not apply
in respect to any information which (a) was already known to either party when
such information was received from the other, (b) was readily available to the
general public at the time of such receipt, (c) subsequently becomes known to
the general public through no fault or omission by the other party, (d) is
subsequently disclosed by a third party which has the bona fide right to make
such disclosure, or (e) is required to be disclosed by law or a governmental
agency. This clause shall survive closing.
12.11 TIME OF THE ESSENCE. Both parties agree that time is of the
essence. However, any times set forth in this Agreement for Closing are subject
to receiving permission from Seller's mortgagee to transfer. The parties further
agree that the Closing will take place within ten (10) days after receipt of the
written approval and completion of the documents among Purchaser, Seller and
lender.
12.12 HOLIDAYS. If any of the deadlines in this Contract ends on, or if
any event is to occur on, a Saturday, Sunday, or legal holiday, the deadline or
the date for performance shall automatically be extended to the next day which
is not a Saturday, Sunday, or legal holiday.
12.13 LEAD WARNINQ STATEMENT. Every purchaser of any interest in
residential real property on which a residential dwelling was built prior to
1978 is notified that such property may present exposure to lead from lead-based
paint that may place young children at risk of developing lead poisoning. Lead
poisoning in young children may produce permanent neurological damage, including
learning disabilities, reduced intelligence quotient, behavioral problems, and
impaired memory. Lead poisoning also poses a particular risk. to pregnant women.
The seller of any interest in
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residential real property is required to provide the buyer with any information
on lead-based paint hazards from risk assessments or inspections in the seller's
possession and notify the buyer of any known lead-based paint hazards. A risk
assessment or inspection for possible lead-based paint hazards is recommended
prior to purchase.
12.13.1. Seller has no knowledge of lead-based paint and/or lead-based
paint hazard in the housing.
12.13.2. Seller has no reports or records pertaining to lead-based
paint and/or lead-based paint hazards in the housing.
12.13.3. Purchaser is hereby granted a 10-day opportunity (or the
length of the Inspection Period, whichever is longer) to conduct a risk
assessment or inspection for the presence of lead-based paint and/or lead-based
paint hazards.
12.14 EXHIBITS. The following exhibits are attached to this Agreement
and are incorporated into this Agreement by this reference and made a part
hereof for all purposes:
(a) EXHIBIT A, the legal description of the Land.
(b) EXHIBIT B, list of personal property
(c) EXHIBIT C, (intentionally omitted)
(d) EXHIBIT D, the form of Deed.
(e) EXHIBIT E, the form of the Assignment and Assumption of Personal
Property, Service Contracts, Warranties and Leases.
(f) EXHIBIT F, the form of the Representation Letter.
12.15 PURCHASER'S FAILURE TO PREVAIL. Notwithstanding anything to the
contrary contained or implied elsewhere herein, in the event Purchaser (i) files
a Lis Pendens or an action for specific performance against Seller or otherwise
clouds Seller's title to the Property or any portion thereof and fails to
prevail in a final, non-appealable judgment, or (ii) breaches Purchaser's
agreements of indemnity contained in thisAgreement, which survive, Seller shall
be entitled to pursue any remedies available at law or in equity, including but
not limited to, suit for damages from Purchaser (including, but not limited to,
attorney's fees and costs incurred by Seller in connection therewith).
12.16 GENERAL RELEASE. In the event this Agreement is terminated and
under the terms of the termination, the Purchaser is entitled to a refund of the
deposit and any interest thereon and Purchaser is satisfied that it has no
additional claims, it shall forward a General Release of Seller and Title
Company to the escrow holder/Title Company), which shall immediately refund the
deposit to the Purchaser with any interest thereon and expenses. A copy of said
General Release shall be sent to Seller.
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12.17 LIMITATION DATE. Purchaser and Seller hereby agree that,
notwithstanding any provision of this Agreement or any provision of law to the
contrary, any action which may be brought by Purchaser against Seller for breach
of this Agreement or any representations and warranties under this Agreement or
arising out of or in connection with the sale and purchase transaction described
herein, shall be forever barred unless Purchaser: (i) delivers to Seller not
later than one (1) year after the Closing Date a written notice of its claims
setting forth in reasonable detail the factual basis for such claim and
Purchaser's good faith estimate of damages arising out of such claim, (ii) files
a complaint or petition against Seller alleging such claim in a court of
competent appropriate jurisdiction no later than two (2) years after the Closing
Date (the "Limitation Date"). No warranties or representations or covenants of
Seller as set forth in this Agreement shall survive beyond the Limitation Date
and no action based thereon shall be commenced after the Limitation Date.
12.18 NO RECORDATION. This Agreement shall not be recorded by Purchaser
for any reason, except for a breach of this Agreement by Seller, and an attempt
to do so shall render the Purchaser liable to Seller for any damages allowable
at law or in equity on account of such breach.
ARTICLE XIII
NOTICE
13.1 NOTICE. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: Hayden's Crossing, Ltd.
Attention: John R. Werra
6210 Campbell Road, suite 140
Dallas, TX 75248
Fax: (972) 931-0015
With a copy to
Seller's Attorneys: Nathan M. Rosen, Esq.
Nathan M. Rosen, P.C.
4949 Westgrove Drive, Suite 300
Dallas, TX 75248
Fax (972) 818-7606
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
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With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq
Zuckerbrod & Zuckerod Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and
Robert E. Morrison, Esq.
Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, TX 75201
Fax: (214) 999-6170
13.2 DELIVERY OF NOTICE. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier or by fax and confirmed by hard copy by reliable
overnight courier. Notices sent in any other manner shall be deemed given only
when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
HAYDEN'S CROSSING, LTD.
BY: /s/ R.J. Werra
_____________________
Its:____________________
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
BY:
_____________________
ITS:
____________________
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With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
FAX: (516) 374-3490
-and
Robert E. Morrison, Esq.
Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, TX 75201
Fax: (214) 999-6170
13.2 DELIVERY OF NOTICE. Notices sent either by Registered or certifiad
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier or by fax and confirmed by hard copy by reliable
overnight courier. Notices sent in any other manner shall be deemed given only
when actually delivered at the specified address.
IN WITNESS WHEREOF the Seller and the Purchaser have caused this Agreement
to be executed thi~ day and date first written above.
SELLER
HAYDEN'S CROSSING, LTD.
By:________________________
Its:_______________________
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ Gus G. Remppies
________________________
Its: V.P. Acquisitions
_______________________
EXHIBIT 10.16
FIRST AMENDMENT TO PURCHASE CONTRACT
(NEWPORT APARTMENTS)
This First Amendment to Purchase Contract (the "Amendment") is made by and
between New Emerald Texas, Ltd., a Texas limited partnership ("Seller") and
Cornerstone Realty Group, Inc., a Virginia corporation ("Purchaser"), to be
effective as of the 9th day of April, 1998.
RECITALS
I. Effective on or about March 10, 1998, Seller and Purchaser entered into
a certain Purchase Contract (the "Contract") relating to a parcel of land and
the improvements thereon located in Austin, Travis County, Texas. All terms used
herein with their initial letter capitalized shall, unless otherwise specified
herein, have the meaning given to such terms in the Contract.
J. The parties desire to amend the Contract to extend the Inspection Period
stated in Section 3.7 of the Contract and have entered into this Amendment to
reflect such agreements.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser and Seller hereby agree as follows:
1. The Inspection Period stated in Section 3.7 of the Contract shall expire
at 11:59 p.m. CST on April 17, 1998, subject to any extension of the Inspection
Period provided in the Contract, and the Purchase Price shall be increased by
$5,000.
2. Except as modified herein, the Contract remains in full force and effect
without modification.
3. Purchaser and Seller hereby ratify and confirm the Contract, as herein
modified, for all purposes.
4. This Amendment may be executed in counterparts, each of which will be
deemed to be an original, but all of which will constitute one and the same
document. A counterpart signed by a party and transmitted by facsimile to the
other party will have the same effect as the delivery of an original.
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first set forth above.
SELLER: NEW EMERALD TEXAS, LTD.,
a Texas limited partnership
By: /s/ Robert J. Werra
----------------------------------
Name: Robert J. Werra
--------------------------------
Title: General Partner
-------------------------------
PURCHASER: CORNERSTONE REALTY GROUP, INC.
a Virginia corporation
By: /s/ Gus G. Remppies
----------------------------------
Name: Gus G. Remppies
--------------------------------
Title: V.P. Acquisitions
-------------------------------
<PAGE>
PURCHASE CONTRACT
-----------------
THIS AGREEMENT made and entered into this day of March 1998 (the
"Effective Date"), between CORNERSTONE REALTY GROUP, INC. or its nominee,
(hereinafter called "Purchaser") and NEW EMERALD TEXAS, LTD., a Texas Limited
Partnership (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 SALE OF PROPERTY. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as NEWPORT APARTMENTS located
in AUSTIN, 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 owned by Seller and located on and
used in connection with operation and maintenance the premises, including, the
inventory of all personal property (other than appliances in apartment units) of
$100 in value to be supplied by Seller and attached hereto as EXHIBIT B (all
such real and personal property hereinafter collectively referred to as the
"Property", subject to Purchaser's inventory prior to closing, unless the
context clearly indicates otherwise). Seller agrees that it will not remove any
of the personal property from the date of this Agreement to the date of closing.
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 PURCHASE PRICE. The total purchase price shall be SIX MILLION THREE
HUNDRED TWENTY FIVE THOUSAND ($6,325,000) DOLLARS payable as follows:
2.2 PAYMENT:
(A) DEPOSIT. TWENTY FIVE THOUSAND ($25,000) DOLLARS upon the
execution of this Agreement by Seller and Purchaser and an additional SEVENTY
FIVE THOUSAND ($75,000) DOLLARS to be placed in escrow at the end of the
"Inspection Period" described in Article VI below. Said deposit shall be placed
in escrow with American Title Company, 1330 Summit Avenue, Fort Worth, TX 76102,
Attention: Joanna Cloud, or its authorized agent (the "Title Company") as an
earnest money deposit which may be credited
<PAGE>
against the purchase price or applied as per Article XI below. The Title Company
shall hold the funds in an interest-bearing account with interest to be credited
in the same manner as the deposit.
(B) EXISTING MORTGAGE.
(a) The Property shall be conveyed subject to Purchaser's
assumption and promise to pay in accordance with its terms the loan (the "Loan")
evidenced by that certain Promissory Note (the "Note"), dated 12/21/89 in the
original principal sum of SIX MILLION TWO HUNDRED SEVENTY FIVE THOUSAND
($6,275,000) DOLLARS payable to the order of MTRUST CORP., NATIONAL ASSOCIATION,
(the "Lender"), and assumption and promise to perform all covenants and
obligations of Seller under the documents or instruments governing, securing,
evidencing or pertaining to the indebtedness evidenced by the Note
(collectively, the "Loan Documents"), including, but not limited to, that
certain Indenture of Mortgage, Deed of Trust, Deed to Secure Debt, Security
Agreement, Fixture Filing, Financing Statement and Assignment of Rents and
leases of even date with the Note (the "Deed of Trust") recorded in the Real
Property Records of Travis County, Texas.
(b) Seller represents and warrants that (i) Seller will
deliver to Purchaser true and complete copies of the existing Deed of Trust, the
Note secured thereby and any extensions and modifications thereof in its
possession or in the possession of its attorney, and (ii) there are no monetary
defaults by Seller under the terms of the Loan Documents and it has received no
written notice of any default under any of the terms of the Loan Documents. From
and after the Effective Date of this Agreement to the Closing Date, Seller
agrees to pay to Lender all installments of principal, interest and escrows and
any other sums of which Seller has notice that are due and payable under the
Loan Documents, as and when such payments are due. Seller shall use reasonable
efforts to provide Purchaser with an Estoppel Certificate from the Lender.
Failure of Purchaser to receive an Estoppel Certificate from Lender prior to
Closing shall give the Purchaser an option to terminate this Agreement and
receive a refund of the deposit or waive the requirement and proceed to Closing.
(c) Seller shall immediately upon the execution of this
Agreement take whatever steps are necessary to contact the Lender and initiate
the procedure to procure the right to assign the mortgage to the Purchaser
pursuant to an Assignment and Assumption Agreement. The Purchaser and Seller
agree to cooperate with the other in procuring permission for Purchaser to
purchase the Property and assume the Loan set forth herein above. Seller agrees
to provide copies of all correspondence and applications to the Purchaser. The
parties further agrees to use their best efforts to procure said approval within
the Purchaser's Inspection Period (30 days from the date of this Agreement).
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(d) Purchaser agrees to execute and deliver to the Lender
all documents and instruments reasonably requested by the Lender in connection
with the assumption and further agrees to pay to the Lender all reasonable fees
and reasonable expenses of the Lender, and its reasonable counsel fees in
connection with the assumption, including, but not limited to, any assumption or
transfer fee provided for in the Deed of Trust and the reasonable fees of
Lender's attorney in connection with preparation of the assumption documents.
Purchaser shall also pay all premiums for any endorsements required by the
Lender in connection with the assumption to the Lender's mortgagee policy of
title insurance or the cost of a new mortgagee policy of title insurance, if
required by the lender. Seller shall not be obligated to incur any expenses
other than normally required in a sale and its legal fees.
(e) If there is a mortgagee escrow account or reserve fund,
Seller shall assign it to Purchaser, if it can be assigned, and in that case
Purchaser shall pay the amount in the escrow account or reserve fund to Seller
at Closing.
(f) Purchaser agrees that it will reasonably cooperate with
Seller in attempting to obtain the full and unconditional release of Seller from
the obligations arising out of the Note and Loan Documents, but Purchaser shall
not be obligated to expend any sum or incur any additional liability on account
thereof. In the event Seller and/or Purchaser is unable to obtain the full and
unconditional release of Seller from all obligations arising out of the Note and
Loan Documents, in addition to other indemnities provided in this Agreement,
Purchaser agrees at all times after Closing to indemnify, protect, defend, save
and hold harmless Seller and its General Partners from and against any and all
debts, duties, obligations, liabilities, suits, claims, demands, causes of
action, damages, losses, liens, costs and expenses (including, without
limitations, attorney's fees and expenses incurred in connection with enforcing
this indemnity or opposing any such claims, damages, or causes of action) and
court costs asserted or incurred at any time after the Closing Date relating to
or arising out of (i) the failure by Purchaser or its successors and assigns to
perform all covenants and obligations of borrower under the Note and Loan
Documents or (ii) a default by Purchaser or its successors and assigns under the
Note and Loan Documents. This indemnity shall relate to matters first occurring
after the Closing Date. This indemnification and the obligations thereunder
shall survive the closing of the transaction evidenced by this Agreement.
However, the Seller shall notify the Purchaser of any claims as made and Seller
shall give Purchaser the right to defend any claims which they feel are invalid.
(C) BALANCE. Balance at Closing as evidenced by cash or
immediately available cash equivalent.
2.3 INDEPENDENT CONTRACT CONSIDERATION. Purchaser
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shall, concurrently with its execution hereof, deliver to Seller a check in the
amount of FIFTY ($50) DOLLARS (the "Independent Contract Consideration"), which
amount Seller and Purchaser agree has been bargained for as consideration for
Seller's execution and delivery of this Contract and Purchaser's right to
inspect the Property. The Independent Contract Consideration is in addition to
and independent of any other consideration or payment provided for in this
Contract and is non-refundable in all events.
ARTICLE III
TITLE MATTERS
3.1 TITLE. Seller, shall convey good and indefeasible title by Special
Warranty Deed in the form attached hereto as EXHIBIT D, subject only to general
taxes for the current year not yet due and payable, rights of tenants claiming
under the leases, none of which shall be for more than one year or other than
residential purposes, except laundry room leases, and utility easements which do
not interfere with the present use of the Property, and the "Permitted
Exceptions". "Permitted Exceptions" are those title exceptions listed in the
title commitment, which are not objected to pursuant to section 3.2 below.
(A) Title shall be free from any and all liens, except the liens
securing unpaid taxes not yet due and payable and mortgages as set forth in
Paragraph 2.2(B), and Seller shall be responsible for any prepayment penalties
necessary to deliver such free title.
3.2 TITLE DEFECTS; ELECTION TO CURE. Seller shall furnish to Purchaser
at Seller's expense a commitment for Title Insurance from the Title Company,
(the "Commitment" or the "Title Report") within fifteen (15) days after the
Effective Date, covering the Property binding the Title Company to issue a Texas
Owner Policy of Title Insurance (the "Title Policy") on the standard form
prescribed by the Texas State Board of Insurance at the Closing, in the full
amount of the Purchase Price, insuring Purchaser's fee simple title to the
Property to be good and indefeasible, together with true and correct copies of
all instruments listed on Schedule B to the Commitment (as well as any other
documents or instruments listed therein which will not be released at closing).
If the title commitment shows any exceptions, which are not acceptable to
Purchaser in Purchaser's sole discretion, Purchaser shall give written notice of
.such defects in title to Seller and Seller's counsel during the Inspection
Period. If Purchaser fails to notify Seller of any exceptions which are not
acceptable to Purchaser during the Inspection Period, then Purchaser shall be
deemed to have accepted those matters not objected to. Seller may, at its
option, elect whether to cure said defects or by written notice to Purchaser
indicate its intention not to cure.
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3.3 ELECTION NOT TO CURE DEFECTS. Should Seller elect not to cure title
defects, this Agreement, at Purchaser's option (exercised within five (5) days
of the notice by Seller that it will not cure the objections during the
Inspection Period), shall be terminated; each party shall thereupon be released
from all obligations hereunder, except as provided in Paragraph 6.2.2; and all
deposits shall be immediately returned to Purchaser. If Purchaser does not elect
to terminate this Agreement, all title defects that remain uncured at Closing
shall be deemed "Permitted Exceptions."
3.4 SURVEY. As soon as reasonably possible, and in any event within
twenty (20) days after the Effective Date, Seller shall, at Seller's expense,
deliver or cause to be delivered to the Seller, the Title Company, and to
Purchaser a current or updated on-the-ground perimeter survey (the "Survey") of
the Property prepared by a Registered Professional Land Surveyor reasonably
acceptable to the Purchaser. The Survey shall show the location and size of all
of the following on or adjacent to the Property, if any:
buildings, buildings lines, improvements, streets, pavements,
easements, rights-of-way, protrusions, encroachments, fences,
100-year flood plain, public utilities, and recording information
of easements.
The Survey shall show the gross land area and the Net Land Area. The Survey
shall be in a form and of a date acceptable to Purchaser and to the Title
Company, and in acceptable form in order to allow the Title Company to delete
the survey exception from the Title Policy. The term "Net Land Area" means the
gross land area of the Property less the land area included in utility
easements, drainage easements, ingress/egress easements, rights-of-way, 100-year
flood plain and encroachments on or across the Property. The area within the
100-year flood plain shall be as defined by the Federal Emergency Management
Agency or other applicable governmental authority.
3.5 The Survey shall show no encroachments onto the Land from any
adjacent property, no encroachments by or from the Land onto adjacent property
and no violation of or encroachments upon any recorded building lines,
restrictions or easements affecting the Property. If the Survey discloses any
such encroachment or violation, Purchaser shall give written notice thereof to
Seller and Seller shall have ten (10) days from the date of Purchaser's notice
(with a commensurate extension of the closing date) to request the Title Insurer
issue its endorsement insuring against damage caused by such encroachment or
violation and to provide evidence thereof to Purchaser, and if Seller fails to
or is unable to have the same insured against within such ten (10) day period,
Purchaser may elect, on or before the expiration of the Inspection Period, to
(i) terminate this Agreement (in which case
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the Earnest Money shall be returned to Purchaser) and neither party shall have
any further liability or obligation to the other hereunder, except as provided
in Paragraph 6.2.2 or (ii) accept the property subject to any such encroachment
or violation, as "Permitted Exceptions".
3.6 Purchaser agrees to deliver to Seller, within the Inspection
Period, notice as to which items on the title report or the Survey are
objectionable.
3.7 COMMENCEMENT AND TERMINATION OF INSPECTION PERIOD. It is understood
that the Inspection Period begins on the date on which both parties have
executed this Agreement, with date inserted on the first page, and shall
terminate at 5:00 p.m. CST on the thirtieth (30th) day unless said 30th day
shall be a Saturday or Sunday, in which case the next business day shall be the
date of the termination of the Inspection Period. It is further understood that
unless there is an extension in writing, the Inspection Period must be completed
by said date.
3.8 NOTICE REQUIRED. The parties agree that whenever a notice shall be
required by either party, said notice must be given within the "Inspection
Period", except notices dealing with the closing or survival.
ARTICLE IV
PRORATIONS
4.1 INCOME AND EXPENSE ALLOCATIONS. The following shall be prorated, on
a calendar-month basis, to the 1st day of the month of the closing: rents and
other income from the Property; operating expenses (on such service contracts
and other obligations as Purchaser may agree to assume); and general and real
property taxes and personal and business property taxes for the year of closing
(based on the most recent assessment and the most recent levy). If funding by
Purchaser does not occur by noon CST on Closing Date, adjustments shall be as of
the date of funding prior to noon CST.
4.2 CLOSING COSTS. Purchaser and Seller shall pay their customary share
of all taxes, recording fees, if any, imposed on the Deed, or any other
documents executed in connection with the transfer of the Property. Seller
agrees to pay cost of title insurance and Purchaser agrees to pay the additional
premium to obtain "Survey deletion". Except as set forth in Section 3.1(A),
Purchaser shall pay any prepayment penalty charged by the holders of any
existing notes or assumption fees, if any.
Seller and Purchaser acknowledge that Purchaser is purchasing one or
more additional properties from partnerships affiliated with Seller upon
substantially the same terms and provisions as set forth in this Agreement.
Notwithstanding the
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foregoing, Seller shall pay the title insurance premium for title insurance on
all properties purchased by Purchaser as if issued under one owner's policy for
the full amount of the total accumulated purchase price of all properties. If
Purchaser desires separate owner's policies on each property, Purchaser shall
pay the incremental cost of the issuance of separate owner's policies.
4.3 ALLOCATION OF RENTS. Rents collected by Seller prior to Closing
shall be prorated as agreed in 4.1 above. Purchaser shall apply rents received
after Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 PRIOR LEASE CONCESSIONS. Seller agrees to maintain its normal
leasing procedure until the Closing. Seller agrees that it will not give any
free rent concession other than in the ordinary course of business. If any free
rent is given by Seller under its normal leasing procedure after the date of
this Agreement, all free rent must be given in the first month of the lease term
and shall not be for a period in excess of one (1) month. Upon request,
Purchaser may waive this clause.
4.5 ADJUSTMENT OF PRORATION. In the event Purchaser or Seller provides
notice to the other within six (6) months of Closing that any of the rent
prorated pursuant to Section 4.3 above or the security or cleaning deposits
transferred to Purchaser at Closing pursuant to Section 7.2(D) below is in error
on account of a misstatement or error in the certified rent roll delivered to
Purchaser at Closing pursuant to Section 7.2(F) below, Seller and Purchaser
shall adjust such proration or deposit transfer between themselves by cash
payment so as to achieve accurate proration or deposit transfer.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 POSSESSION. Possession of the Property shall be delivered to
Purchaser at closing, subject to the rights of the tenants under existing leases
and rental agreements and Permitted Exceptions.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT. Purchaser's obligation to
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purchase shall be subject to and contingent upon the satisfaction
of the following conditions precedent:
(A) Receipt by Purchaser of an engineering report of building and
site conditions, satisfactory to Purchaser in its sole discretion, said report
to include in part, a description of any hazardous waste sites, hazardous wastes
and/or hazardous materials affecting the property. Purchaser shall have fifteen
(15) days, but no later than the termination of the Inspection Period in which
to review the reports set forth herein and exercise its right to reject the
Property based thereon or the right hereunder shall be deemed waived.
(B) The receipt by Purchaser of Seller documents described in 7.2
below.
(C) Sellers representations and warranties described in Article
VIII below remain true and correct.
(D) There have been no material or adverse changes to the property
or leases since the expiration of the Inspection Period.
(E) Seller acknowledges that Purchaser is a public entity and that
it is required to furnish financial statements to the Securities and Exchange
Commission in connection with this acquisition. Seller agrees to make the
information available for Purchaser to audit the last 12 months of operation of
the Property so that a report can be generated that is in compliance with
accounting Regulation S-X of the Securities and Exchange Commission.
(F) Purchaser determining during the Inspection Period that all
water, sewer, gas, electric, telephone, and drainage facilities and all other
utilities required by law or by the normal use and operation of the Property are
and at the time of closing will be installed to the property line, are and at
the time of closing will be connected pursuant to valid permits, and are and at
the time of closing will be adequate to service the Property and to permit full
compliance with all requirements of law and normal usage of the Property by the
tenants thereof and their licensees and invitees.
(G) Purchaser acknowledges that the selling partnership requires
the approval of its Limited Partners. Seller represents that it has commenced to
seek the approval of its Limited Partners and has twenty-one (21) days from the
date hereof to do so. Seller shall inform Purchaser within said period of time
whether or not the Limited Partners have approved the sale. Seller may terminate
this Agreement in the event it does not obtain the requisite consent from its
Limited Partners. Upon termination on account of the failure to obtain the
consent of the Limited
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Partners of Seller, all earnest money shall be returned to Purchaser.
6.2 INSPECTION. This Agreement shall be further subject to and
contingent upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 PREPARATION FOR INSPECTION. At the execution of this Agreement,
Seller shall deliver to Purchaser copies of the following to the extent not
previously delivered to Purchaser: (The Inspection Period shall be extended as a
result of any delays by Seller in producing the items requested herein unless
the Seller does not have them and notifies Purchaser with an extension of time
to reflect delays of notification.) The current rent roll for the Property;
detailed statements of income and expenses with respect to the Property for the
past two years; the most recent tax bills for the Property; utility bills for
the Property for the twelve (12) months previous to the date hereof; all
contract, mortgages, and other documents creating liens of security interest on
the Property, or any part thereof and all promissory notes secured thereby; all
insurance policies applicable to the Property to include loss runs for the last
three (3) years; Plans and Specifications for the Property to the extent in
Seller's possession, service contracts, Certificates of Occupancy to the extent
reasonably available; a copy of title policy and most recent survey for the
Property. A copy of any environmental or engineering reports on the property.
The rent roll shall be certified by Seller to be materially accurate and
complete to Seller's knowledge. Except as expressly set forth in this Agreement,
the delivery of the documents by Seller does not constitute a representation
(expressed or implied) by Seller of the truth, accuracy, source or completeness
of such information and Purchaser agrees to look to its own inspection and
studies to determine such matters. However, Seller warrants that all such
documents were used by Seller in the ordinary course of business and were
produced from Seller's files.
6.2.2 INSPECTION OF BOOKS AND RECORDS; ACCESS. Purchaser, its
employees, agents and contractors shall have during the Inspection Period
provided in paragraph 3.7 above, to enter upon the Property (subject to the
rights of the tenants) during normal business hours for the purpose of making
physical inspections thereof, including but not limited to roofs, heating,
cooling, electrical and plumbing systems, swimming pool, appliances, and
structural elements of the buildings. Upon the conclusion of the Inspection
Period this contract shall be deemed to be a firm agreement of purchase and sale
binding the parties hereto, except as it may be terminated prior to the end of
the Inspection Period and subject to the other provisions and conditions
contained herein, including but not limited to the condition imposed by
Paragraph 6.1(A) above.
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Purchaser's rights to inspect the Property are subject to Purchaser's
agreement that (i) the Property is not damaged by Purchaser, (ii) the Property
is left in a clean and safe condition (if found that way), (iii) no tenant of
Seller is unreasonably disturbed, (iv) no employee, independent contractor or
representative of Seller or any tenant is injured, interfered with or harassed
as a result of Purchaser's actions, (v) such inspection does not interfere with
Seller's operation of the Property, and (vi) Purchaser maintains general
liability (occurrence) insurance in terms and amounts satisfactory to Seller
covering any accident arising in connection with the presence of Purchaser or
its agents on the Property. The inspection rights afforded herein are expressly
made subject to the rights of tenants under the Leases. All inspections fees,
appraisal fees, engineering fees and other expenses of any kind incurred by
Purchaser relating to the inspection of the Property will be solely at
Purchaser's expense. Seller shall cooperate with Purchaser in all reasonable
respects in making such inspections; however, Seller shall not be required to
spend any sums to cooperate with Purchaser, except pay its employees and other
normal costs. Seller hereby reserves the right to have a representative of
Seller present at the time any such inspection is made. Except as specifically
provided in this Agreement, Purchaser acknowledges that Seller has no obligation
whatsoever to undertake any remedial work or other curative action as a result
of Purchaser's inspections. Purchaser shall notify Seller no less than
forty-eight (48) hours in advance of making any inspection of the interiors
apartment units on the Property. Purchaser agrees to indemnify and hold Seller,
its tenants, contractors and employees harmless from any and all injuries,
losses, liens, claims, judgments, liabilities, costs, expenses or damages
(including reasonable attorney's fees and court costs) sustained against Seller
which result from or arise out of any inspections or entry on the Property by
Purchaser or its representatives or agents pursuant to this Agreement. The
indemnification obligation set forth in the immediately preceding sentence shall
survive the termination or cancellation of this Agreement and the closing of
transaction evidenced by this Agreement for six (6) months.
6.2.3 RIGHT OF TERMINATION DURING INSPECTION PERIOD. Purchaser shall
also be permitted to review all original leases, expense records, tenant cards
and occupancy data available. If Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller before the end of
the Inspection Period, and no party hereto shall have any further liability to
any other party hereto, except as provided in Paragraph 6.2.2, and all deposits
shall be returned to Purchaser.
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6.2.4 MORTGAGE ASSIGNMENT DUE DILIGENCE. Purchaser and Seller agree
that this Agreement in addition to permitting an Inspection Period of thirty
(30) days, is subject to the approval of the Lender and the acceptance by
Purchaser of the terms for assumption of the Loan, which may not be to
Purchaser's liking. Therefore, only as to the approval to assume the underlying
Loan, the Inspection Period shall continue until five (5) days after the final
consent for the sale subject to the mortgages is received.
6.2.5 "RENT READY". On or prior to the Closing Date, Purchaser may
inspect all apartment units at the Property and note any missing appliances or
personal property or dead-bolt locks and provide Seller written notice of same.
Seller may elect, but shall have no obligation, to replace any missing
appliances or personal property or dead-bolt locks that in fact were located at
the Property as of the expiration of the Inspection Period.
6.2.6 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 reasonable wear and tear excepted. If Seller fails to replace any
missing appliances or personal property or dead-bolt locks that were located on
the Property as of the expiration of the Inspection Period, Purchaser shall have
the option of waiving such requirement, in writing, and proceeding to closing,
or Purchaser may terminate this Agreement and obtain a prompt return of its
deposit.
ARTICLE VII
CLOSING
7.1 CLOSING. Closing will be held on or about ten (10) days after the
agreement by the Lender as to the assignment and the assumption of the Loan by
the Purchaser, however, no later than ninety (90) days after the completion of
the Inspection Period, at such place and at such time as the parties may agree.
7.2 SELLER'S DELIVERIES. At closing, Seller shall execute and deliver
to Purchaser the Special Warranty Deed referred to in Paragraph 3 hereof and
shall also execute, where necessary, and deliver to Purchaser, the following in
a form reasonably acceptable to Seller and Purchaser:
(A) A Bill of Sale, with special warranty of title transferring the
personal property (as shown in Schedule B) to Purchaser free of all liens,
charges and encumbrances, except those assumed by the Purchaser.
(B) The Title Policy issued by the underwriter for the Title
Company pursuant to the Title Commitment, subject only to
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the Permitted Exceptions, in the full amount of the Purchase Price, dated as of
the date of Closing.
(C) Originals or copies of all signed leases and rental agreements
in effect with tenants of the Property not for more than one (1) year.
(D) All security and cleaning deposits made by such tenants. Seller
will give the tenants the required notice of such transfer in compliance with
the laws of TEXAS so that Seller is no longer responsible for the tenants'
security deposits.
(E) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(F) A rent roll certified by Seller to Seller's knowledge to be
materially accurate and complete as of the date of closing in the form and
content of the rent roll normally kept by Seller in its ordinary course of
business, however, containing the actual rental, apartment number, any escrow,
security deposit, etc.
(G) An affidavit of Seller, as the title company may normally
require, that to the best of its information and belief there are, on the date
of closing, no unsatisfied judgments, creditor's claims other than in the course
of business, tax liens, or pending bankruptcies involving Seller.
(H) Purchaser shall cause an inspection to be made by a licensed
extermination contractor, who is regularly engaged in the business of pest
control. If said contractor's report indicates that there is any termite or
other wood-boring insects infestation and/or damage to the Property, the Seller
shall proceed to have any and all corrective treatment of the infestation, but
not repair of damage, completed prior to closing. (If not possible prior to
closing, Seller shall deposit sufficient sums as required by the extermination
contractor to make the treatment.)
(I) Assignments of all Seller's interest in the following in the
form attached hereto as EXHIBIT E: (1) all assignable licenses, and permits
relating to the operation of the Property, (2) the leases and rental agreements
with tenants of the Property, (3) the existing Property telephone number and (4)
the business and trade name as set forth in Par. 1.1.
(J) Assignments without recourse of all warranties and guarantees
(see Exhibit E) to the extent such are still in effect and provide Purchaser
with copies of all such warranties in Seller's possession and guarantees without
limitation for all appliances, dishwashers, disposals, refrigerators, heating
and air conditioning units, washers and dryers.
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(K) Consent of the Seller's authorized officer to the sale of the
Property and any other approvals required under Seller's partnership agreement
or other organizational documents, which may affect Seller's ability to convey
indefeasible title.
(L) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement acceptable to the title company.
(M) Affidavit that to the knowledge of Seller, Seller has received
no notice of the presence of asbestos and/or any other hazardous material at the
Property, except as set forth in any reports or information provided to
Purchaser pursuant to Paragraph 6.2.1.
(N) Seller shall provide a satisfactory and valid written
termination of the management agreement executed by the existing management and
rental agent for the Property, without cost to the Purchaser.
(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.
7.3 PURCHASER'S DELIVERIES. At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price, adjusted
for the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under leases,
securities, any contracts which may be accepted by the Purchaser and any other
obligations specifically set forth herein (Exhibit "E") in a form reasonably
acceptable to Purchaser and Seller.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
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(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate the
transfer.
(D) Execute all such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Seller or its counsel.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND C0VENANTS
8.1 REPRESENTATIONS OF THE PARTIES. Seller warrants (which warranties
shall not survive settlement unless designated to the contrary) that as of the
date hereof and as of closing hereof:
As used in this Agreement, the phrase "Seller's current actual
knowledge", "Seller's knowledge" or words of like effect (i) shall mean and
apply to the knowledge of Robert J. Werra, who is a General Partner of Seller
and directly involved in the negotiation of sale and purchase transaction
described herein and not to any other parties, (ii) shall mean the current
actual knowledge of such person, it being understood and acknowledged that (a)
such person, in many instances, is not involved in the day-to-day operations of
the Property and in many instances, is not involved in the negotiation or
execution of the leases, management contracts, service contracts, or other
agreements in question, and (b) such person is not charged with the knowledge of
all of the acts and/or omissions of the predecessors in title to the Property or
with knowledge of all of the acts/or omissions of Seller's agents or employees,
and (iii) shall not apply to or be construed to apply to information or material
which may be in the possession of Seller generally, or incidentally, but which
is not actually known to Robert J. Werra. As used herein, the term "current
actual knowledge" of a party shall mean that no facts have come to the party's
attention in the ordinary course of business that would give the party knowledge
or notice that any such facts are not true, correct, and complete, and the party
has undertaken no investigation, inquiry, or verification as to such matters to
determine the existence or absence of such facts, and no inference of the
party's knowledge of the existence or absence of such facts should be drawn from
the statements made herein.
(A) That Seller, is the owner in fee simple of the Property and has
the power to convey same.
(B) That Seller is not subject to any other agreements or
arrangements, with the exception of the requirement to procure its partners'
consent and those contained in any existing mortgage documents which would
prevent Seller from selling the Property to Purchaser. This warranty shall
survive for one year following closing.
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(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents. This
warranty shall survive for one year following closing.
(D) Seller has no knowledge and to Seller's knowledge it has not
been advised in writing that it is in default under any lease, rental agreement
service or equipment contract, or mortgage or other encumbrances relating to the
Property. This warranty shall survive for one year following closing.
(E) Seller has no knowledge of any existing or threatened
litigation which relates to or which would affect the Property. This warranty
shall survive for one year following closing.
(F) Seller has no knowledge that any part of the Property or the
operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building code or of any private restriction,
that any governmental authority requires any work to be done on or affecting the
Property, or that any governmental authority has expressed an intent to condemn
or to make special improvements for the benefit of the Property or any part
thereof. This warranty shall survive for one year following closing.
(G) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(H) That to Seller's current knowledge, the Property was never
utilized as a disposal site for hazardous waste products.
(I) Seller covenants and agrees that, between this date and the
date of closing, Seller shall continue to maintain, operate and manage the
Property in a manner consistent with its prior practices, making every
reasonable effort to do nothing which might damage the reputation of the
Property or the relationships with the tenants. Seller shall not permit the
modification, extension or cancellation of any tenant lease (except in
accordance with the terms of such lease) or any dealing with any tenant other
than the ordinary course of managing the Property, without the prior written
consent of Purchaser. If the leases of any tenants expire before thirty (30)
days after the date of closing, Seller shall, up to the date of closing and
without cost to the Purchaser, continue its normal course of operation with
respect to causing tenants to be obtained for apartments which are unrented.
(J) Seller agrees that prior to closing, it will
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comply with the keyless, dead-bolt lock requirement to the extent set forth in
Paragraph 6.2.5.
8.2 CONTINUATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS TO THE
DATE OF CLOSING. If each of the warranties set forth in this section does not
remain true up to and including the time of closing as to any material matters,
this Agreement, at Purchaser's election, shall be terminated, Seller shall
return all payments made by Purchaser, or Purchaser may elect to close the sale
and waive failure of the warranties.
8.3 BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The Seller
agrees to notify the Purchaser upon acquiring knowledge that any of Seller's
representations, warranties or covenants contained herein do not remain true as
of the date of Closing. Purchaser shall have the right to terminate this
Agreement for a material breach and receive the refund of the deposit and any
interest earned thereon. However, if Seller fails to notify Purchaser upon
acquiring such knowledge, notwithstanding the provisions of 8.2 above, Seller
shall indemnify Purchaser for all reasonable costs incurred as a result of the
failure of any of Seller's representations, warranties or covenants contained
herein to remain true as of the date of closing.
8.4 "AS IS". EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER
ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY
NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS,
AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR
IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH
RESPECT TO (A) THE VALUE, NATURE, QUALITY CONDITION OF THE PROPERTY, INCLUDING,
WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, (B) THE INCOME TO BE DERIVED
FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL
ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREOF, (D)THE COMPLIANCE OF OR
BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS
OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE HABITABILITY,
MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OF THE PROPERTY, (F) THE MANNER OR QUALITY OF THE CONSTRUCTION OR
MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, (G) THE MANNER, QUALITY,
STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, OR (H) ANY OTHER MATTER WITH
RESPECT TO THE PROPERTY, AND SPECIFICALLY, THAT SELLER HAS NOT MADE, DOES NOT
MAKE, AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS REGARDING COMPLIANCE WITH
ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS,
ORDERS OR REQUIREMENTS, INCLUDING SOLID WASTE, AS DEFINED BY THE U.S.
ENVIRONMENTAL PROTECTION AGENCY REGULATIONS AT 40 C.F.R., PART 261, OR THE
DISPOSAL OR EXISTENCE, IN OR ON THE PROPERTY, OF ANY HAZARDOUS MATERIALS.
PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY
TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF
THE
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PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER. UPON
CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING, BUT
NOT LIMITED TO, ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS MAY NOT HAVE BEEN
REVEALED BY PURCHASER'S INSPECTIONS AND INVESTIGATIONS. EXCEPT AS SET FORTH IN
THIS AGREEMENT, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION
PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A
VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR
VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY
OR COMPLETENESS OF SUCH INFORMATION. SELLER SHALL NOT BE LIABLE OR BOUND IN ANY
MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION
PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL
ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. PURCHASER FURTHER
ACKNOWLEDGES AND AGREES THAT THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS
MADE ON AN "AS IS" CONDITION AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND
AGREED THAT THE PURCHASE PRICE HAS BEEN ADJUSTED BY PRIOR NEGOTIATION TO REFLECT
THAT ALL OF THE PROPERTY IS SOLD BY SELLER AND PURCHASED BY PURCHASER SUBJECT TO
THE FOREGOING. THE PROVISIONS OF THIS PARAGRAPH 8.4 SHALL SURVIVE THE CLOSING
AND SHALL BE INCORPORATED IN THE DEED AND BILL OF SALE.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 PROPERTY DAMAGE. If, prior to closing, any part of the Property is
damaged by fire or other casualty in an amount not greater than TWO HUNDRED
THOUSAND ($200,000, DOLLARS, Purchaser agrees to accept the Property with an
assignment of: (i) the insurance proceeds, (ii) any deductible, and (iii) rent
loss insurance proceeds. Seller may repair such damage before the date provided
herein for closing. In the event that the damage as a result of fire or other
casualty shall be over TWO HUNDRED THOUSAND ($200,000) DOLLARS and such damage
cannot reasonably be repaired by such time, this Agreement may be canceled at
the option of the Purchaser. In the event of cancellation as aforesaid, this
Agreement shall become null and void and the parties shall be released, except
as provided in Paragraph 6.2.2 and all payments made shall be returned. Should
Purchaser elect to carry out this Agreement despite such damage Seller shall
assign to Purchaser all insurance proceeds and any deductible arising from such
damage and will compensate Purchaser for lost rent collections to the extent of
insurance proceeds received. Seller shall promptly notify Purchaser in writing
upon the occurrence of any such damage.
9.2 CONDEMNATION. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any actual
or proposed sale in lieu thereof, the Seller shall give written notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property greater than TWO HUNDRED
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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 PINNACLE
REALTY, pursuant to a separate agreement. Said brokerage fee shall be deemed
earned if, and only if, settlement occurs hereunder, and shall not be deemed
earned even if Purchaser and/or Seller wrongfully fail(s) to consummate the
purchase and sale herein contemplated. Seller and Purchaser represent and
warrant to each other that no other brokerage fees are or shall be owing in
connection with this transaction or in any way with the Apartments and Seller
and Purchaser hereby indemnify and hold the other harmless from any and all
claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 DEFAULT DEFINED. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 SELLER'S DEFAULT. Upon Seller's default, the Purchaser, at its
election, may as Purchaser's sole and exclusive remedy, pursue one, but not all
of the following: (1) require specific performance of Seller, (2) cancel this
Agreement and obtain a prompt return of the deposit, in which case this
Agreement shall be terminated and the parties released from all obligations
hereunder, except as set forth in Section 6.2.2, or (3) the Purchaser may waive
such defaults and proceed to settlement. Seller shall indemnify Purchaser for
any reasonable attorneys' fees incurred by Purchaser if Purchaser elects to
pursue its option (1) noted above. Purchaser shall have no other remedy against
Seller in the event of Seller's default.
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11.3 Purchaser's Default. Upon Purchaser's default, this Agreement
shall be terminated and both parties released from all obligations hereunder,
except as provided in Paragraph 6.2.2, and the deposit shall be retained by the
Seller as liquidated damages. Such amount and terms are agreed upon by and
between Seller and Purchaser as liquidated damages, due to the difficulty and
inconvenience of ascertaining and measuring actual damages, and the uncertainty
thereof, and the payment of the deposit and the terms provided herein shall
constitute full satisfaction of Purchaser's obligations under this Agreement.
Such amount is agreed upon by and between Seller and Purchaser as a reasonable
estimate of just compensation for the harm caused by Purchaser's default. Seller
shall have no other remedy against Purchaser in the event of Purchaser's
default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between the parties; it supersedes all previous agreements and
representations which are deemed merged herein and may not be modified except in
writing.
12.2 ASSIGNMENT. Purchaser may assign this Agreement without the
consent of Seller to APPLE RESIDENTIAL INCOME TRUST, INC. or a company owned by
APPLE RESIDENTIAL INCOME TRUST, INC.
12.3 SEVERABILITY. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 BINDING EFFECT. The parties to the Agreement mutually agree that
it shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 CONTROLLING LAW. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State of Texas.
12.6 COUNTERPARTS. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear in each counterpart
hereof, and it shall be sufficient that the signature on behalf of both parties
hereto appear on one or more such counterparts. All counterparts shall
collectively constitute a single contract.
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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. However, the covenants contained in this paragraph shall not apply
in respect to any information which (a) was already known to either party when
such information was received from the other, (b) was readily available to the
general public at the time of such receipt, (c) subsequently becomes known to
the general public through no fault or omission by the other party, (d) is
subsequently disclosed by a third party which has the bona fide right to make
such disclosure, or (e) is required to be disclosed by law or a governmental
agency. This clause shall survive closing.
12.11 TIME OF THE ESSENCE. Both parties agree that time is of the
essence. However, any times set forth in this Agreement for Closing are subject
to receiving permission from Seller's mortgagee to transfer. The parties further
agree that the Closing will take place within ten (10) days after receipt of the
written approval and completion of the documents among Purchaser, Seller and
lender.
12.12 HOLIDAYS. If any of the deadlines in this Contract ends on, or if
any event is to occur on, a Saturday, Sunday, or legal holiday, the deadline or
the date for performance shall automatically be extended to the next day which
is not a Saturday, Sunday, or legal holiday.
12.13 LEAD WARNING STATEMENT. Every purchaser of any interest in
residential real property on which a residential dwelling was built prior to
1978 is notified that such property may present exposure to lead from lead-based
paint that may place young children at risk of developing lead poisoning. Lead
poisoning in young children may produce permanent neurological damage, including
learning disabilities, reduced intelligence quotient, behavioral problems, and
impaired memory. Lead poisoning also poses a particular risk. to pregnant women.
The seller of any interest in
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residential real property is required to provide the buyer with any information
on lead-based paint hazards from risk assessments or inspections in the seller's
possession and notify the buyer of any known lead-based paint hazards. A risk
assessment or inspection for possible lead-based paint hazards is recommended
prior to purchase.
12.13.1. Seller has no knowledge of lead-based paint and/or lead-based
paint hazard in the housing.
12.13.2. Seller has no reports or records pertaining to lead-based
paint and/or lead-based paint hazards in the housing.
12.13.3. Purchaser is hereby granted a 10-day opportunity (or the
length of the Inspection Period, whichever is longer) to conduct a risk
assessment or inspection for the presence of lead-based paint and/or lead-based
paint hazards.
12.14 EXHIBITS. The following exhibits are attached to this Agreement
and are incorporated into this Agreement by this reference and made a part
hereof for all purposes:
(a) EXHIBIT A, the legal description of the Land.
(b) EXHIBIT B, list of personal property
(c) EXHIBIT C, (intentionally omitted)
(d) EXHIBIT D, the form of Deed.
(e) EXHIBIT E, the form of the Assignment and
Assumption of Personal Property, Service
Contracts, Warranties and Leases.
(f) EXHIBIT F, the form of the Representation Letter.
12.15 PURCHASER'S FAILURE TO PREVAIL. Notwithstanding anything to the
contrary contained or implied elsewhere herein, in the event Purchaser (i) files
a Lis Pendens or an action for specific performance against Seller or otherwise
clouds Seller's title to the Property or any portion thereof and fails to
prevail in a final, non-appealable judgment, or (ii) breaches Purchaser's
agreements of indemnity contained in this Agreement, which survive, Seller shall
be entitled to pursue any remedies available at law or in equity, including but
not limited to, suit for damages from Purchaser (including, but not limited to,
attorney's fees and costs incurred by Seller in connection therewith).
12.16 GENERAL RELEASE. In the event this Agreement is terminated and
under the terms of the termination, the Purchaser is entitled to a refund of the
deposit and any interest thereon and Purchaser is satisfied that it has no
additional claims, it shall forward a General Release of Seller and Title
Company to the escrow holder/Title Company), which shall immediately refund the
deposit to the Purchaser with any interest thereon and expenses. A copy of said
General Release shall be sent to Seller.
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12.17 LIMITATION DATE. Purchaser and Seller hereby agree that,
notwithstanding any provision of this Agreement or any provision of law to the
contrary, any action which may be brought by Purchaser against Seller for breach
of this Agreement or any representations and warranties under this Agreement or
arising out of or in connection with the sale and purchase transaction described
herein, shall be forever barred unless Purchaser: (i) delivers to Seller not
later than one (1) year after the Closing Date a written notice of its claims
setting forth in reasonable detail the factual basis for such claim and
Purchaser's good faith estimate of damages arising out of such claim, (ii) files
a complaint or petition against Seller alleging such claim in a court of
competent appropriate jurisdiction no later than two (2) years after the Closing
Date (the "Limitation Date"). No warranties or representations or covenants of
Seller as set forth in this Agreement shall survive beyond the Limitation Date
and no action based thereon shall be commenced after the Limitation Date.
12.18 NO RECORDATION. This Agreement shall not be recorded by Purchaser
for any reason, except for a breach of this Agreement by Seller, and an attempt
to do so shall render the Purchaser liable to Seller for any damages allowable
at law or in equity on account of such breach.
ARTICLE XIII
NOTICE
13.1 NOTICE. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: New Emerald Texas, Ltd.
Attention: John R. Werra
6210 Campbell Road, suite 140
Dallas, TX 75248
Fax: (972) 931-0015
With a copy to
Seller's Attorneys: Nathan M. Rosen, Esq.
Nathan M. Rosen, P.C.
4949 Westgrove Drive, suite 300
Dallas, TX 75248
Fax (972) 818-7606
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
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With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
FAX: (516) 374-3490
-and
Robert E.Morrison, Esq. Brown
McCarroll & Oaks Hartline 300 Crescent
Court, Suite 1400 Dallas, TX 7S201
Fax: (214) 999-6170
l3.2 DELIVERY OF NOTICE. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier or by fax and confirmed by hard copy by reliable
overnight courier Notices sent in any other manner shall be deemed given only
when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
NEW EMERALD TEXAS, LTD.
BY: /s/ R. J. Werra
________________________
Its:_______________________
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
BY:_________________________
Its:________________________
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With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and
Robert E. Morrison, Esq.
Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, TX 75201
Fax: (214) 999-6170
13.2 DELIVERY OF NOTICE. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier or by fax and confirmed by hard copy by reliable
overnight courier. Notices sent in any other manner shall be deemed given only
when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
NEW EMERALD TEXAS, LTD.
BY: ________________________
Its:_______________________
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
BY: /s/ Gus G. Remppies
________________________
Its: V.P. Acquisitions
_______________________
23
REAL ESTATE CONTRACT OF SALE
Subject to the terms and provisions contained herein, DALLAS-FORT WORTH
PROPERTIES, L.P., a Texas limited partnership ("Seller"), hereby agrees to sell
and convey to CORNERSTONE REALTY GROUP, INC., a Virginia corporation, or
nominee ("Purchaser"), and Purchaser hereby agrees to buy and agrees to pay for
that certain real property known as the ESTRADA OAKS APARTMENTS, being comprised
of 248 apartment units, and located in Irving, Dallas County, Texas, said real
property being further identified on Exhibit "A" attached hereto and made a part
hereof for all purposes, together with all and singular the rights and
appurtenances pertaining thereto, including any right, title and interest of the
Seller in and to adjacent streets, alleys or rights-of-way (herein collectively
the "Land"); and all of the buildings, structures, fixtures, facilities,
installations and other improvements of every kind and description now or
hereafter in, on, over and under the land, including, without limitations, any
and all plumbing, air conditioning, heating, ventilating, mechanical, electrical
and other utility systems, parking lots and facilities, landscaping, roadways,
sidewalks, swimming pools, and other recreational facilities (collectively the
"Improvements"); and all furniture, furnishings, fixtures, equipment, machinery,
maintenance vehicles and equipment, tools, parts, recreational equipment,
carpeting, window treatments, and other tangible personal property of every kind
and description situated in, on, over, or under the Land or used in connection
with the Land and the Improvements, and all right, title and interest of Seller
in and to the Leases and Service Contracts and other intangible personal
property now or hereafter acquired by Seller in connection with the Land and
Improvements (such tangible and intangible personal property herein colle~tively
the "Personal Property"), such Land, Improvements, and Personal Property, being
hereinafter referred to collectively as the "Property ".
This Real Estate Contract of Sale (the "Contract") is executed as of the
Effective Date (which is defined to be the date on which the Contract is last
executed by Seller as shown on the signature page of this Contract), upon the
following terms and conditions:
1. Purchase Price. The Purchase Price (herein so called) for the Property
shall be the sum of NINE MILLION THREE HUNDRED FIFTY THOUSAND ($9,350,000.00)
DOLLARS. The Purchase Price shall be paid in cash, or cash equivalents, at
Closing (defined below).
2. Earnest Money: Independent Consideration.
(a) Contemporaneous with Purchaser's execution of this Contract,
Purchaser shall deposit with Title Company (defined below), or may deliver said
Deposit to Seller together with the executed Contract, for delivery to Title
Company upon Seller's execution of the Contract, or by wire transfer of funds to
the Title Company, a deposit in the amount of One Hundred Fifty Thousand and
No/100 Dollars ($150,000.00) (the "Deposit"). If this Contract closes, Purchaser
shall receive a credit for the Deposit made by Purchaser toward the Purchase
Price.
(b) Contemporaneously with Purchaser's execution of this Contract,
Purchaser shall deliver directly to Seller a check (the "Independent Contract
Consideration") in the amount
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<PAGE>
of One Hundred and No/100 Dollars ($100.00), which amount the parties bargained
for and agreed to as independent consideration for Seller's execution and
delivery of this Contract. The Independent Contract Consideration is in addition
to and independent of any other consideration and payment retained by Seller
under any other provision of this Contract, including, without limitation, the
Earnest Money. The Independent Contract Consideration is fully vested in Seller
immediately upon its receipt thereof and is non-refundable under all
circumstances.
3. Survey. Within five (5) days after the Effective Date, Seller, at
Seller's sole cost and expense, shall cause a current survey (the "Survey") to
be made of the Property, dated subsequent to the Effective Date, by a licensed
surveyor or registered professional engineer acceptable to Seller and the Title
Company (defined below) and shall furnish Purchaser with two (2) copies and the
Title Company with one (1) copy of the field notes and survey plat prepared by
such surveyor or engineer. The survey shall conform to the current Texas
Surveyors Association Standards and Specifications for a Category IA, Condition
III land title survey and shall be otherwise sufficient to permit the Title
Company to modify the standard printed exception in its owner's policy of title
insurance pertaining to discrepancies in area or boundary lines, encroachments,
overlapping of improvements or similar matters (herein called the "Survey
Exception ") so as to except only for "shortages in area", after Purchaser's
payment of any additional expenses associated with the Survey Exception. In
addition, the survey plat shall indicate:
(a) That the comers of the Property have been properly monumented;
(b) The perimeter boundaries of the Property;
(c) The location of all improvements upon the Property;
(d) The location of and, if applicable, all recording information for
all easements within or adjoining the Property.;
(e) The location of all roadways crossing or adjoining the Property,
giving recording data where applicable;
(f) That there are no encroachments except as may be specifically
shown on the survey plat; and
(g) The number of gross square feet within the Property.
The Survey shall contain a certification from the surveyor or engineer to
Seller, Purchaser, and the Title Company, certifying that the Survey conforms to
the current Texas Surveyors Association Standards and Specifications for a
Category IA, Condition III land title survey. The Survey legal description will
be used in all conveyance documents and will replace Exhibit "A" attached hereto
only for purposes of defining the Property legal description.
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<PAGE>
4. Title Commitment. Purchaser acknowledges that Seller, at Seller's sole
expense, has previously caused to be furnished to Purchaser a current title
commitment for an owner's title insurance policy (the "Commitment") issued
through Commonwealth Land Title Company, 600 Sherry Lane, Suite 600, Dallas,
Texas 75225 (the "Title Company"), setting forth the state of title of the
Property and all exceptions, including easements, restrictions, rights-of-way,
covenants, reservations and other conditions, if any, affecting the Property
which would appear in an Owner's Title Policy (herein so called) if issued,
together with legible copies of all instruments creating such exceptions. In the
event any exceptions appear in the Commitment or matters are reflected on the
Survey that are unacceptable to Purchaser, then Purchaser shall, within ten (10)
days after Purchaser receives the last to be received among the Commitment, the
copies of the instruments creating such exceptions and the Survey, notify Seller
in writing of each exception to which Purchaser objects. Any exceptions to which
Purchaser does not object shall be considered as "Permitted Exceptions ". In the
event Purchaser notifies Seller of unacceptable exceptions or conditions, as
herein provided, Seller shall have ten (10) days thereafter in which to
eliminate or modify such unacceptable exceptions or conditions, but Seller shall
have no obligation to do so. In the event Seller fails or chooses not to
eliminate or modify such unacceptable exceptions or conditions to the reasonable
satisfaction of Purchaser within said ten (10) day period, then and in such
event, Purchaser may within five (5) days following said ten (10) day period,
terminate this Contract by written notice to the Seller and the Title Company,
whereupon this Contract shall, ipso facto, terminate and the Deposit shall be
immediately returned to Purchaser by the Title Company and the parties hereto
shall have no further obligations one to the other hereunder other than the
indemnification obligations of Purchaser in Paragraph 5 below. In the event
Purchaser fails to terminate this Contract by giving such written notice to
Seller and Title Company within the five (5) day time period provided, then
Purchaser shall be deemed conclusively to have accepted all title exceptions set
forth in the Commitment and all matters disclosed by the Survey which Seller has
not cured or agreed to cure and all such exceptions contained in the Commitment
shall be included in the term "Permitted Exceptions".
5. Inspection: Closing Conditions.
(a) Subject to the requirements of this Paragraph 5, during the Inspection
Period Purchaser shall have access to the Property for the purpose of conducting
such inspections, investigations, soil tests, environmental audits, engineering
and feasibility studies of the Property as Purchaser deems necessary or
advisable in connection with the purchase of the Property. In this regard,
Seller agrees that during the Inspection Period, Purchaser and its agents and
representatives shall be entitled to enter upon the Property for inspection and
examination at all reasonable times; provided, however, that: (i) all entries,
audits, inspections and investigations by Purchaser or its authorized agents or
representatives shall not occur until one (1) business day after Seller has
received prior notice of the proposed entry, audit, inspection or investigation,
and Seller or an agent or representative of Seller shall have the option to be
present during each entry or investigation; (ii) Purchaser's activities at the
Property shall be conducted in such a manner so as to not interfere with the
occupancy of any tenant or occupant and their guests or invitees or the
date-to-day operations, maintenance and management of the Property; (iii)
Purchaser shall not cause any material alteration to any of the Property or
otherwise unreasonably disturb the condition of the Property in the course of
any of its activities and Purchaser shall not cut or
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otherwise damage any trees or landscaping on the Property; (iv) Purchaser shall
be responsible for any damages to the Property caused by Purchaser or
Purchaser's agents and representatives; (v) Purchaser shall, at Purchaser's sole
cost and expense, restore the Property to its condition prior to Purchaser's
inspection and testing of same; (vi) if this Contract does not close for reasons
other than Selle's default, Purchaser shall furnish to Seller copies of all
reports, test results, documents, audits and the like obtained by Purchaser in
the conduct of Purchaser's inspection and testing; (vii) Purchaser shall
indemnify and hold Seller and its successors, assigns, affiliates, shareholders,
partners, subsidiaries, principals, directors, trustees, parents, officers,
employees, agents, representatives, designees and attorneys (collectively, the
"Seller Group') harmless from any claims, damages, causes of action, suits,
debts due, obligations, liabilities, losses, demands, cross actions or costs
(including, without limitation, reasonable attorneys' fees, costs of suit and
all costs and-expenses of litigation or administrative proceedings at all
levels) of any kind whatsoever or threats thereof or therefor, known or unknown,
at law or in equity, originating in whole or in part at any time after the date
of Purchaser's execution of the Contract, whether past, present or future, but
the basis of which claim occurred during the period in which the Contract was in
force and affect (collectively, the "Claims') in connection with the rights
granted to Purchaser under this Contract including, without limitation, any and
all property damage or other damage or bodily injury resulting, directly or
indirectly, from the conduct of any of Purchaser or its agents, contractors,
employees, designees or representatives, in connection with the entries,
inspections, investigations and audits conducted by Purchaser or its agents,
contractors, employees, designees or representatives under this Paragraph 5 and,
notwithstanding any other provision in this Contract to the contrary, this
indemnification shall survive for one (1) year following the termination or
Closing of this Contract; and (viii) Purchaser, and Seller, shall keep
confidential the existence of this Contract and all documents, items, materials,
data and information furnished or otherwise made available by Seller pursuant to
this Contract, and, in the event this Contract is terminated for any reason
other than consummation of the transaction contemplated hereby at Closing,
Purchaser shall immediately return to Seller all such documents, items and
materials furnished or otherwise made available by Seller, including all copies
thereof made by Purchaser. As used herein, the term "keep confidential" shall
mean that Purchaser, and Seller, shall not disclose or publish the existence or
terms of this Contract or any negotiations or information in connection herewith
to any person or entity other than its officers, directors, lenders, agents,
employees, attorneys, partners, accountants, contractors and other persons
involved in the negotiation and consummation of the transaction contemplated by
this Contract. Notwithstanding anything to the contrary herein, the Title
Company shall not release the Earnest Money until Seller has given written
notice (the "Restoration Notice ") that the Property has been restored as
required herein and Purchaser has otherwise complied with all obligations under
this Paragraph 5 which Restoration Notice must be given by Seller within (5)
days following Purchaser's written request for issuance thereof, failing which
satisfactory restoration will be presumed unless Seller specifically notifies
Purchaser to the contrary and gives written notice of any deficiency. After
cure, Purchaser may again submit a written request for Restoration Notice to be
issued. Purchaser's obligations contained in this paragraph shall survive the
Closing or other termination of this Contract.
(b) Purchaser shall have until the twenty-first (21st) day after the
Effective Date (the "Inspection Period') to determine, in Purchaser's sole
discretion and judgment, if the Property is
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suitable for the purposes for which Purchaser intends to utilize the Property.
If it should be determined by Purchaser, in Purchaser's sole discretion and
judgment, that the Property is not suitable for the purposes for which the
Purchaser intends to utilize the Property or if Purchaser determines that
Purchaser does not desire, for whatever reason, or for no reason, to consummate
the transaction contemplated by this Contract, then Purchaser shall be entitled
to terminate this Contract by giving written notice thereof to Seller and the
Title Company prior to the expiration of said Inspection Period, whereupon the
Deposit shall be returned to Purchaser by Seller after Seller has delivered the
Restoration Notice, and thereafter Seller and Purchaser shall have no further
obligations or liabilities to each other hereunder other than the
indemnification obligations of Purchaser in this Paragraph 5.
(c) At all times before the termination of this Contract or the Closing,
Purchaser covenants and agrees to provide, maintain and keep in force casualty,
liability and other insurance for all Claims which may arise, directly or
indirectly, as a result of Purchaser's rights under this Contract, including,
without limitation, Purchaser's access to the Property as contemplated by this
Paragraph 5.
(d) During the Inspection Period, Seller shall make available to Purchaser,
with respect to the Property, in order that Purchaser may conduct such
examinations and inspections as Purchaser deems necessary, (i) detailed
statements of income and expenses for the past two calendar years, (ii) a rent
roll, together with all tenant occupancy data available, ,(iii) leases currently
in effect, (iv) current tax statements, (v) utility bills for the past twelve
(12) months, (vi) current insurance policies affecting the Property, and (vii)
all Service Contracts currently in effect.
(e) Notwithstanding anything to the contrary herein contained, should
Purchaser for any reason whatsoever during the Inspection Period desire to
terminate this Contract, Purchaser may do so and be entitled to a refund of the
Deposit if Purchaser gives written notice to Seller of its desire to terminate
this Contract by 5:00 PM on the day which is the twenty-first (21s) day
following the Effective Date, and the parties shall thereupon have no further
liability one to the other, except as is set forth in paragraph 5 hereof.
6. Seller's Representations and Warranties. Seller represents and warrants
to Purchaser as follows:
(a) Seller will convey to Purchaser by special warranty deed, in the
form attached hereto as Exhibit "B", good and indefeasible fee simple title to
the Property, free and clear of any and all encumbrances and title exceptions
other than the Permitted Exceptions, and will convey to Purchaser all Personal
Property by Bill of Sale in the form attached hereto as Exhibit "C".
(b) Seller is a limited partnership duly organized and existing under
the laws of the State of Texas, and its general partner is a duly organized and
existing Texas corporation. Seller has full power and authority to enter into
this Contract and to perform its obligations under this Contract. The execution,
delivery and performance of this Contract and the transactions
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<PAGE>
contemplated hereby have been duly authorized and approved and no other actions
or proceedings on its part are necessary to authorize the execution, delivery or
performance of this Contract. This Contract constitutes the legal, valid and
binding obligations of Seller enforceable in accordance with its terms.
(c) Seller is not a foreign person as defined in Section 1445 of the
Internal Revenue Code of 1986 or the regulations promulgated thereunder.
(d) That to the best of Seller's knowledge, Seller shall have operated
the Property from the Effective Date to Closing in accordance with customary
business practices to which Seller is accustomed, and Seller shall have kept the
Property in the same condition as of the Effective Date, ordinary wear and tear
excepted.
(e) That to the best of Seller's knowledge, Seller shall be in full
compliance with all federal, state, municipal and other government laws,
ordinances, requirements, rules, regulations, notices and orders issued or
imposed after the Effective Date.
(f) That Seller shall not have further encumbered the Property after
the Effective Date.
(g) That to the best of Seller's knowledge, Seller shall have
provided.to Purchaser a true and accurate Rent Roll, and copies of Service
Contracts and Leases, and true and accurate financial information with respect
to the operation of the Property as herein requested.
(h) To the best of Seller's knowledge, Seller is not aware of and has
not been advised in writing that it is in default under any lease, rental
agreement, service or equipment contract, or mortgage or othersencumbrances
relating to the property, not otherwise disclosed to Purchaser.
(i) To the best of Seller's knowledge, Seller has not received any
written notice of any existing or threatened litigation which relates to and
would affect the Property. This warranty shall survive the Closing for one (I)
year.
If any of the representations and warranties set forth in this Paragraph 6
are determined at any time on or before the date of Closing to be untrue or
unfulfilled, then Purchaser, as its sole and exclusive remedy, may terminate
this Contract by providing written notice of such termination to Seller, in
which event the Deposit, if received, shall be returned to Purchaser and
thereafter neither Seller nor Purchaser shall have any further liabilities or
obligations unto each other except for Purchaser's indemnifications and
obligations under Paragraph 5 hereof. Seller covenants and agrees to notify
Purchaser of any material change in the representations and warranties set forth
herein which occurs prior to Closing.
The representations and warranties of Seller contained in this Paragraph 6
are given and accepted with the understanding and subject to (i) Seller's right
to provide an explanation to Purchaser as to any material change in the
representations and warranties set forth herein which
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occurs prior to Closing, and (ii) the condition that the liability of any of
Seller for a breach of any such representation and warranty shall require as a
condition precedent to any action thereof written notice from Purchaser
detailing the nature of such breach to be received by Seller no later than one
hundred eighty (180) days following the Closing Date so as to allow Seller an
opportunity to cure same. Further, no action shall be commenced against Seller
for the breach of any representation or warranty following the first (lst)
anniversary date of the Closing of this Contract. Further, the total aggregate
liability for any breach(es) of any representations and/or warranties under this
Contract by Seller (if Purchaser has not elected the remedy under any other
provision of this Contract) shall be limited to a total aggregate dollar amount
not to exceed Fifteen Thousand and No/100 Dollars ($15,000.00), as its sole and
exclusive remedy, it being understood and agreed by the parties hereto that
absent the conditions set forth in clauses (i) and (ii) of this paragraph, the
aforesaid dollar limitation and the aforesaid notice provisions, Seller would
not have given any of the representations and warranties contained in this
Paragraph 6. If Purchaser is entitled to and does not elect the remedy in the
immediately preceding sentence, it shall only be paid an amount up to such
dollar limitation if it has provided to Seller evidence of its actual incurrence
and expenditure of such amount as a result of such breach of the applicable
representations and warranties.
7. Representations and Warranties of Purchaser. Purchaser hereby makes the
following representations and warranties to Seller:
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. Purchaser has full right,
title, authority and capacity to execute and perform its obligations under this
Contract and to consummate all of the transactions contemplated herein and the
officers of Purchaser who executed and delivered this Contract and all of the
documents to be delivered to Purchaser hereunder are and shall be duly
authorized to do so. Purchaser is authorized to conduct business in the State of
Texas.
(b) There are no attachments, execution, assignments for the benefit
of creditors, receiverships, conservatorships or voluntary or involuntary
proceedings in bankruptcy or pursuant to any debtor relief laws filed by
Purchaser or pending against Purchaser.
(c) Purchaser is not prohibited from consummating the transactions
contemplated in this Contract by any law, regulation, agreement, instrument,
restoration, order or judgment.
(d) Purchaser knows of no facts or circumstances regarding the
Property which, if known by Seller, would make Seller's representations and
warranties contained in Paragraph 6 above incorrect or inaccurate.
(e) Purchaser covenants and agrees with Seller that Purchaser will (i)
do such further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Contract, and (ii) not interfere with or hinder
the ownership, use, maintenance or operation of the Property or the surrounding
property or any part thereof prior to the delivery of title thereof to
Purchaser.
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<PAGE>
(f) There is no litigation or proceeding pending, or to the best
lcnowledge of Purchaser, threatened against Purchaser which would affect
Purchaser entering into this Contract or completing the transactions
contemplated hereunder.
8. Closing Date and Place. The Closing (herein so called) of this Contract
shall take place at the offices of the Title Company at 10:00 a.m. on the
Closing Date (herein so called) which shall be on or before seven (7) days after
the expiration of the Inspection Period; provided, however, that either Seller
or Purchaser may, if reasonably necessary to complete some remaining requirement
in order to Close, be entitled to a one time extension of the Closing Date for
an additional seven (7) days.
9. Risk of Loss. All risk of loss to the Property resulting from any
casualty prior to the Closing shall remain on Seller. In the event of a casualty
prior to Closing, the parties agree that each may retain such proceeds of
insurance as they may receive, and that Purchaser may, at its option, either
terminate the Contract, or accept the Property in its condition following the
casualty, but, in the later case, there will be no reduction in the Purchase
price in spite of any material damages or destruction to the property; provided,
that if Purchaser elects to purchase the Property, Seller will then assign at
the Closing all of its casualty insurance benefits to Purchaser. If, prior to
Closing, the Property becomes subject to a taking by eminent domain, to any
extent whatsoever, Purchaser may, in Purchaser's sole discretion, either (i)
close this Contract and receive the condemnation award; or (ii) terminate this
Contract and receive back the Deposit.
10. Seller's Obligations at Closing. At the Closing, Seller shall deliver
or cause to be delivered to Purchaser, at Seller's sole cost and expense, each
of the following items:
(a) A special warranty deed in the form attached hereto as EXHIBIT
"B" (the "Deed') and a Bill of Sale in the form attached hereto as EXHIBIT "C",
duly executed and acknowledged by Seller, conveying to Purchaser, good,
indefeasible fee simple title in the Property, subject only to the Permitted
Exceptions, and to the Personal Property.
(b) A non-foreign person affidavit sworn to by Seller as required by
Section 1445 of the Internal Revenue Code. In the event that Seller fails to
deliver the affidavit at Closing, then the Title Company shall be entitled to
withhold from the Purchase Price a sum equal to ten percent (10%) of the total
amount which otherwise would have been realized by Seller from such sale, which
sum will be paid by the Title Company to the United States Treasury pursuant to
the requirements of Section 1445 of the Internal Revenue Code and the
regulations promulgated thereunder.
(c) An Owner's Policy of Title Insurance in the amount of the Purchase
Price reflected on the closing statements prepared by the Title Company and
approved by Seller issued by the Title Company on the standard form in use in
the State of Texas on the Policy of a Title Insurance Company licensed to do
business in Texas insuring good and indefeasible fee simple title to the
Property in the purchaser, subject only to the Permitted Exceptions and the
standard printed exceptions, except:
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(i) The exception relating to discrepancies, conflicts or
shortages in area or boundary lines, or any encroachment or any overlapping of
improvements which a survey might show shall be modified to delete such
exception except as to "shortages in area" if the amounts required by the Title
Company to be paid for such deletion are paid by Purchaser; and,
(ii) The exception relating to ad valorem taxes shall except only
to taxes owing for the current year of closing and subsequent years; and
(d) An updated Rent Roll, certified to by Seller as being true and
accurate, together with Originals or copies of all signed Leases and rental
agreements in effect.
(e) All security and cleaning deposits.
(f) All Service Contracts in effect and not otherwise capable of being
terminated even if Purchaser may request termination thereof.
(g) Written Termination of the current management agreement without
cost to Purchaser.
(h) Possession of the Property, together with all keys.
(i) All transfers, if necessary, of utilities.
(j) A notice letter to all residents of the apartment complex as to
change or ownership in form reasonably mutually agreeable to Seller and
Purchaser.
(k) An Assignment of the Leases and Assumption of Obligations by
Purchaser agreement in a form reasonably mutually agreeable to Seller and
Purchaser.
(1) Such evidence or documents as may be reasonably required by
Purchaser or the Title Company evidencing the status and capacity of Seller and
the authority of the person or persons who are executing the various documents
on behalf of Seller in connection with the sale of the Property.
(m) An affidavit from Seller that to the best of Seller's knowledge,
information and belief, there, 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.
(n) An assignment of all assignable licenses and permits relating to
the operation of the Property, the existing telephone number, and the business
trade name as set forth in Paragraph 1.1 hereof.
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(o) Execution by Seller of all documents, if any, as may be reasonably
necessary for the transfer of the telephone, electric, water and sewer, and gas
utilities, as may be required by the utility, and which are presented to Seller
at the Closing.
(p) Such other documents as may be reasonably requested by the Title
Company in connection with this transaction.
(q) A representation letter as normally required by auditors for a
public company, in form meeting the reasonable approval of Seller's certified
public accountants.
11. Purchaser's Obligations at Closing. At the Closing, Purchaser shall
deliver to Seller the following items:
(a) The Purchase Price (net of the Deposit) in cash, or cash
equivalents, or by wire transfer to an account designated by Seller.
(b) The Deed and Bill of Sale duly executed and acknowledged by
Purchaser evidencing its acceptance thereof.
(c) Such evidence or documents as may reasonably be required by Seller
or the Title Company evidencing the status and capacity of Purchaser and the
autho, rity of the person or persons who are executing the various documents on
behalf of Purchaser in connection with the purchase of the Property.
(d) An executed Assignment of Leases and Assumption of Obligations by
Purchaser agreement in form reasonable mutually agreeable to Seller and
Purchaser.
(e) Such other documents as may be reasonably requested by Title
Company in connection with this transaction.
12. Prorations and Closing Costs. The following shall be prorated between
Seller and Purchaser, and for purposes of determining the prorations, Purchaser
shall be deemed the owner of the Property as of the Closing Date: rents and
other income from the Property, operating expenses, any prepaid rent, advances
and/or consideration on Service Contracts and other assumed obligations, and ad
valorem taxes; provided, that with respect to unpaid and delinquent rent, a true
and accurate schedule of which shall be provided by Seller at the Closing, Upon
collection of rent from a Tenant, Purchaser may apply collections to current
rents due, UNLESS Purchaser collects amounts specified by Tenant as payment of
delinquent rents, in which event, Purchaser shall remit to Seller all such
amounts collected as unpaid and delinquent rent. Seller and Purchaser shall pay
their customary share of all taxes, recording fees, escrow fees, and other costs
imposed by the Title Company. Seller and Purchaser shall be solely responsible
for payment of their own attorneys fees.
13. Seller's Default. In the event of Seller's default hereunder, Purchaser
may, at Purchaser's option and as Purchaser's sole and exclusive remedies,
either: (i) terminate this
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Contract by giving written notice from Purchaser to Seller in which event the
Deposit held by Seller will be immediately returned to Purchaser by the Title
Company, or (ii) enforce specific performance hereunder. In the event Purchaser
elects to enforce specific performance, the exercise of such remedy by Purchaser
shall be expressly contingent upon Purchaser first remitting to the Title
Company the sum of $500,000.00 (the "Additional Deposit"). If Purchaser
prevails, the balance of the Additional Deposit shall be credited against the
Purchase Price, but if Seller prevails, the balance of the Additional Deposit
shall be payable to Seller as liquidated damages, not a penalty, for the damages
caused Seller as a result of the pendency of the litigation thus preventing
Seller from entering into another contract to sell the Property. Purchaser
acknowledges that the extent and amount of actual damages would be extremely
difficult to ascertain, and that therefore, the amount of the Additional Deposit
is agreed upon by Purchaser to represent a fair and reasonable sum of actual
damages sustained by Seller as a result of any enforcement action in which
Purchaser fails to prevail.
14. Purchaser's Default. In the event that Purchaser shall fail to
consummate this Contract for any reason, except Seller's default, Seller, as
Seller's sole and exclusive remedy for such default, shall have the right to
terminate this Contract by notice to Purchaser and receive the Deposit, it being
agreed between Purchaser and Seller that such sum shall be liquidated damages
for a default of Purchaser hereunder because of the difficulty, inconvenience
and uncertainty of ascertaining actual damages for such default. Notwithstanding
the provisions of this paragraph, nothing contained herein shall limit Seller's
right to recover damages and pursue all other legal remedies available to it in
the event Purchaser fails to indemnify Seller for damages resulting from
Purchaser's activities in and about the Property pursuant to Paragraph 5a.
above.
15. Notice. Any notice or document required to be delivered hereunder shall
be in writing and shall be deemed effective when delivered and shall be deemed
delivered when actually received, or, if earlier and whether or not received,
one day after it is deposited in the United States mail, postage prepaid,
certified or registered mail (with or without return receipt requested)
addressed to the parties hereto at the respective addresses set out opposite
their names below, or at such other address as they have heretofore specified by
written notice delivered in accordance herewith:
To Seller: Dallas-Fort Worth Properties, L.P.
c/o DFWP, INC., its general partner
5950 Berkshire, LB-19, Suite 1440
Dallas, Texas 75225
Attn.: Keith P. Evans, President
Telephone: (214) 373-0851
Fax: (214) 373-0860
with copy to: Newsom, Terry, Newsom, L.L.P.
5949 Sherry Lane, Suite 600
Dallas, Texas 75225
Attn.: R. Kirk Newsom, Esq.
Telephone: (214) 739-1000; Fax: (214) 739-9009
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To Purchaser: Cornerstone Realty Group, Inc.
Attn: Gus Remppies
306 Main Street
Richmond, Virginia 23219
Fax: (804) 782-9302
With copy to: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut Street
P. O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
and/or
Robert E. Morrison, Esq.
Brown, McCarroll, Oaks, and Hartline
300 Crescent Court, Suite 1400
Dallas, Texas 75201
Fax: (214) 999-6170
Notice may also be given by telefacsimile transmission or by federal express
delivery, but shall not be deemed delivered unless and until actually received,
proof of which shall lie on the party relying upon the notice.
16. Governing Law and Venue. THIS CONTRACT SHALL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS
WITHOUT REGARD TO THE APPLICATION OF CHOICE OF LAW PRINCIPLES, AND SELLER AND
PURCHASER HEREBY CONSENT TO THE PERSONAL JURISDICTION OF THE DISTRICT COURTS OF
DALLAS COUNTY OF THE STATE OF TEXAS IN ANY ACTION THAT MAY BE COMMENCED RELATING
TO THE TRANSACTION CONTEMPLATED HEREBY.
17. No Survival. Except for Purchaser's indemnifications, agreements,
obligations, representations and covenants in Paragraphs 5, 12, 20, 24, 25, 26,
27 and 28 hereof and Seller's obligations, representations and covenants in
Paragraphs 6, 12, 20, 26, 27 and 28 hereof, no other covenant, agreement,
representation or warranty contained herein shall survive Closing.
18. Capacity. Each person executing this Contract hereby represents and
warrants that he has the authority to do so and that his signature shall bind
the entity for which he signed. Each party hereto shall provide the other parry
and the Title Company with such documentation as the Title Company or
Purchaser's or Seller's attorney deems necessary to evidence the authority of
that party to perform the actions contemplated herein.
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19. Timing. Time is of the essence of this Contract. For purposes hereof,
the Effective Date shall be the date this Contract is deposited with and
receipted for by the Title Company.
20. Attorneys' Fees and Costs. In the event either party hereto files a
suit to enforce this Contract or any provisions contained herein, the party
prevailing in such action shall be entitled to recover, in addition to all other
remedies or damages, its costs, including reasonable attorneys' fees, incurred
in such suit.
21. No Assignability. This Contract may not be assigned by Purchaser
without the prior written consent of Seller, which consent need not be given.
However, the Contract may be assigned to a limited partnership or limited
liability company controlled by Purchaser without Seller's prior written
consent.
22. Gender. Where required for proper interpretation, words in the singular
shall include the plural and the masculine gender shall include the neuter and
the feminine gender and vice versa.
23. Headings. The descriptive headings of the several Paragraphs contained
in this Contract are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
24. WAIVER OF CONSUMER RIGHTS: DTPA WAIVER. PURCHASER AND SELLER EACH HAVE
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE THEM TO
ANALYZE THE MERITS AND RISKS OF THE TRANSACTION CONTEMPLATED HEREBY, AND NEITHER
IS IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH RESPECT TO THE OTHER OR
SUCH TRANSACTION. PURCHASER AND SELLER EACH HEREBY KNOWINGLY, VOLUNTARILY ANDs
INTENTIONALLY WAIVE AND RELEASE, AFTER ADVICE OF COMPETENT COUNSEL, ANY AND ALL
RIGHTS, BENEFITS AND REMEDIES EITHER MAY HAVE AGAINST THE OTHER, NOW OR AT ANY
TIME HEREAFTER, UNDER OR PURSUANT TO SUB-CHAPTER E OF CHAPTER 17 OF THE TEXAS
BUSINESS AND COMMERCE CODE, AS NOW OR HEREAFTER AMENDED, AND/OR ANY OTHER OR
SUCCESSOR LAWS, RULES, REGULATIONS, OR JUDICIAL DOCTRINES WITH RESPECT TO
DECEPTIVE TRADE PRACTICES. AS SUCH, PURCHASER SPECIFICALLY WAIVES ITS RIGHTS
UNDER THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, SECTION 17.41 ET
SEQ., BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF PURCHASER'S OWN SELECTION,
PURCHASER VOLUNTARILY CONSENTS TO THIS WAIVER.
25. Environmental Waiver and Release. Purchaser expressly acknowledges that
there may be certain environmental issues and/or risks with respect to the
Property. Purchaser has been expressly advised by Seller to conduct an
independent investigation and inspection of the
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Property utilizing experts as Purchaser deems to be necessary for an independent
assessment of all environmental liability and risk with respect to the Property.
Purchaser further acknowledges and agrees that, having been given the
opportunity to inspect the Property, Purchaser is relying solely on its own
investigation of the Property and not on any information provided or to be
provided by Seller and hereby covenants for itself and its successors in title
not to sue Seller with respect to any claims of an environmental nature arising
from or related to the Property or to any "Hazardous Materials" (as defined
below) on the Property. For purposes of this Contract, the term "Hazardous
Materials" shall mean any substance which is or contains: (i) any "hazardous
substance" as now or hereafter defined in ' Section 101(14) of the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Section 9601 et seq.) ("CERCLA") or any regulations promulgated under
CERCLA; (ii) any "hazardous waste" as now or hereafter defined in the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) ("RCRA") or
regulations promulgated under RCRA; (iii) any substance regulated by the Toxic
Substances Control Act (I 5 U.S.C. Section 2601 et. seq.); (iv) gasoline, diesel
fuel or other petroleum hydrocarbons; (v) asbestos and asbestos containing
materials, in any form, whether friable or non-friable; (vi) polychlorinated
biphenyls; (vii) radon gas; and (viii) any additional substances or materials
which are now or hereafter classified or considered to be hazardous or toxic
under "Environmental Requirements" (as hereinafter defined) or the common law,
or any other applicable laws related to the Property. Hazardous Materials shall
include, without limitation, any substance, the presence of which on the
Property (A) requires reporting, investigation or remediation under
Environmental Requirements; (B) causes or threatens to cause a nuisance on the
Property or adjacent property or poses or threatens to pose a hazard to the
health or safety of persons on the Property or adjacent property; or (C) which,
if emanated or migrated from the Property, could constitute a trespass.
For purposes of this Contract, the term "Environmental Requirements" shall
mean all laws, ordinances, statutes, codes, rules, regulations, agreements,
judgments, orders and decrees now or hereafter enacted, promulgated or amended,
of the United States, the states, the counties, the cities or any other
political subdivisions in which,the Property is located and any other political
subdivision, agency or instrumentality exercising jurisdiction over the owner of
the Property, the Property or the use of the Property relating to pollution, the
protection or regulation of human health, natural resources or the environment,
or the emission, discharge, release or threatened release of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or waste or
Hazardous Materials into the environment (including, without limitation, ambient
air, surface water, ground water or land or soil).
Purchaser agrees that the provisions and disclaimers in this Paragraph 25
may either be inserted in the Special Warranty Deed in the form attached hereto
to be delivered at Closing or, alternatively, in a certificate dated as of
Closing reflecting the foregoing to be executed by Purchaser at Closing, but in
any event, or in lieu thereof, shall survive the termination or Closing of this
Contract. In the event the information in the Deed is to be contained in a
Certificate rather than the Deed, at the very minimum, the Special Warranty Deed
shall include the disclaimer clause of paragraph 40 hereof.
Page - 14
<PAGE>
26. Brokers. Purchaser agrees to pay a brokerage fee to TOM FLOOD, pursuant
to a separate agreement. Said brokerage fee shall be deemed earned if, and only
if, settlement and Closing 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 agrees to pay a brokerage fee of four percent
(4.00%) to EVANS COMMERCIAL CAPITAL, INC., pursuant to a separate agreement,
which fee shall also not be deemed earned until settlement and Closing occurs
hereunder. The parties acknowledge that no other brokerage fees are due in
connection with this Contract. Seller agrees to indemnify Purchaser and hold
Purchaser harmless from any loss, liability, damage, cost or expense (including,
without limitation, reasonable attorney's fees) paid or incurred by Purchaser by
reason of any claim to any broker's, finder's or other fee in connection with
this transaction by any party claiming by, through or under Seller. Purchaser
agrees to indemnify Seller and hold Seller harmless from any loss, liability,
damage, cost or expense (including, without limitation, reasonable attorney's
fees) paid or incurred by Seller by reason of any claim to any broker's,
finder's or other fee in connection with this transaction by any party claiming
by, through or under Purchaser. Purchaser acknowledges that at the time of the
execution of this Contract, the Agent advised Purchaser by this writing that
Purchaser should have an abstract covering the Property examined by an attorney
of Purchaser's own selection and should be furnished with or obtain a policy of
title insurance.
27. Complete Agreement. This Contract embodies the complete agreement
between the parties hereto and cannot be varied or terminated except by written
agreement of the parties.
28. No Partnership. Nothing contained in this Contract shall be deemed or
construed by any party, person or entity as creating any relationship of
principal and agent, of parmership, of joint venture, or any association
whatsoever between the parties hereto. No provision of this Contract and no act
or failure to act of the parties shall be deemed to create any relationship
between the parties other than the relationship of vendor or vendee.
29. Delay. No delay on the part of a party to this Contract in exercising
any rights or remedies hereunder shall operate as a waiver thereof, nor shall
any specific waiver by a party hereto of any right or remedy hereunder operate
or be construed as a waiver of any other right or remedy hereunder, nor shall
any single or partial exercise of any right or remedy hereunder preclude any
other or further exercise thereof, or the exercise of any other right or remedy
hereunder (unless the provisions of this Contract which establish any such right
or remedy provide otherwise).
30. No Third Party Beneficiary. Except for the Purchaser and Seller, no
person or entity has any rights or benefits under this Contract and no person or
entity is a third party beneficiary of this Contract.
31. Counterparts. Numerous copies of this Contract may have been executed
by the parties hereto. Each such executed copy shall have the full force and
effect of an original executed instrument.
Page - 15
<PAGE>
32. Day. If any date herein set forth for the performance of any obligations
by Seller or Purchaser or for the delivery of any instrument or notice as herein
provided should be on a Saturday, Sunday or legal holiday, the compliance with
such obligations or delivery shall be deemed acceptable on the next day
following such Saturday, Sunday or legal holiday. As used here, the term "legal
holiday" means any state or federal holiday for which financial institutions or
post offices are generally closed for observance thereof, and the term "day"
means any calendar day including Saturday, Sunday or a legal holiday.
33. Reporting Requirements. Purchaser agrees to comply with any and all
reporting requirements applicable to the transaction which is the subject of
this Contract which are set forth in any law, statute, ordinance, rule,
regulation, order or determination of any governmental authority, including but
not limited to The International Investment Survey Act of 1976, The Agricultural
Foreign Investment Disclosure Act of 1978, The Foreign Investment in Real
Property Tax Act of 1980 and the Tax Reform Act of 1984 and further agree upon
request of Seller to furnish Seller with evidence of such compliance. This
provision shall survive the termination of the Contract or the Closing. Seller
acknowledges that Purchaser has stated that it is a public entity and that it is
required to furnish financial statements to the Securities and Exchange
Commission in connection with this purchase. Seller agrees to the extent
reasonably required, and at the sole cost and expense of Purchaser with approval
of Seller's certified public accountants, to make information available for
Purchaser, at no cost or obligation to Seller, to audit the last 12 months of
operation of the Property so that a report can be generate.d that is in
compliance with accounting Regulation S-X of the Securities and Exchange
Commission.
34. Contract Construction. The parties acknowledge that their attorneys
have reviewed and revised this Contract and that the normal rule of construction
to the effect that any ambiguities are to be resolved against the drafting
'party shall not be employed in the interpretation of this Contract or any
amendments or exhibits hereto.
35. Reporting Party. Seller and Purchaser hereby designate the Title
Company as, and the Title Company agrees to act as and perform the duties and
obligations of, the "reporting person" with respect to the transaction
contemplated by this Contract for purposes of 26 C.F.R. Section 1.6045-4(e)(5)
relating to the requirements for information reporting on real estate
transactions closed on or after January 1, 1991. In this regard, Seller,
Purchaser and the Title Company each agree to execute the Designation Agreement
designating the Title Company as the reporting person with respect to the
transactions contemplated by this Contract.
36. Illegal. If any provision of this Contract is found by a court of
competent jurisdiction to be in violation of any law, and if such court should
declare such provision of this Contract to be unlawful, void, illegal or
unenforceable in any respect, the remainder of this Contract shall be severable,
and the rights, obligations and interests of the parties hereto under the
remainder of this Contract shall continued to be in full force and effect. To
the extent permitted by applicable law, the parties hereto waive any provision
of law which prohibits or renders void or unenforceable any provision hereof. If
the invalidity of any part or provision of this Contract shall deprive any party
of the economic benefit intended to be conferred by this Contract, the parties
shall negotiate, in good faith, to develop a structure, the economic effect of
Page - 16
<PAGE>
which is nearly as possible as the economic effect of this Contract without
regard to such invalidity.
37. No Personal Liability. This Contract and all documents, agreements,
understandings and arrangements relating hereto and to the transactions
contemplated hereby have been negotiated, executed and delivered on behalf of
Seller and its officers in their respective capacities and not individually, and
bind only the assets of Seller and no officer, director, employee, agent or
shareholder of any of the Seller Group shall be bound or held to any personal
liability or responsibility in connection with the agreements, obligations and
undertakings of Seller hereunder. Any person dealing with Seller in connection
herewith shall look solely to the assets of Seller for the payment of any claim
or for the performance of any of its agreements, obligations or undertakings
hereunder. Purchaser acknowledges and agrees that each agreement and any other
document executed by any of Seller in accordance or in respect of this Contract
and the transactions contemplated hereby shall be deemed and treated to include
in all respects and for all purposes the provisions of this Paragraph.
Provisions of this Paragraph shall survive the Closing or earlier termination
thereof.
38. No Memorandum to be Recorded. Purchaser and Seller hereby agree that
neither this Contract nor any memorandum hereof shall be recorded. Each party
hereby agrees to indemnify and hold harmless the other for all Claims incurred
by the other by reason of a breach of the foregoing covenant. This provision
shall survive the Closing or earlier termination of this Contract.
39. Consent to Contract. Each of Purchaser and Seller hereby acknowledge
for the benefit of the other that: (i) it has thoroughly read and reviewed the
terms and provisions of this Contract and each of the other documents and
certificates to be executed in connection herewith and is familiar with the
same; (ii) the terms and provisions hereof and thereof are clearly understood
and have been fully consented to; (iii) it has had the full benefit and advice
of counsel of its own selection, in regard to understanding the terms and
provisions hereof and thereof, the meaning and effect of this Contract and each
of the other documents and certificates to be executed in connection herewith
and otherwise as desired; and (iv) all such documents have been entered into
freely, voluntarily, in good faith and with full knowledge of the consequences
hereof and without duress.
40. DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, ITS IS
UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING AND HAS NOT MADE ANY WARRANTIES
OR REPRESNETATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO
THE PROPERTY, INCLUDING BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS
TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE
ZONING, TAX CONSEQUENCES, LATENT OR PATENT PHYSICAL OR ENVIRONMENTAL CONDITION,
UTILITIES, OPERATING HISORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS,
THE COMPLIANCE OF THE PROPERTY WITH GOVERNMENTAL LAWS, THE TRUTH ACCURACY OR
COMPLETENESS OF ANY INFORMATIONS PROVIDED BY OR
PAGE - 17
<PAGE>
ON BEHALF OF SELLER TO PURCHASER, OR ANY OTHER MATTER OR THING REGARDING THE
PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES THAT UPON THE CLOSING, SELLER SHALL
SELL, TRANSFER AND CONVERY TO PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY
"AS IS, WHEREIS, WITH ALL FAULTS", EXCEPT TO THE EXTENT EXPRESSLY PROVIDED
OTHERWISE IN THIS AGREEMENT. PURCHASER HAS NOT RELIED UPON AND WILL NOT RELY ON,
AND SELLER IS NOT LIABLE FOR OR BOUND BY ANY EXPRESS OR IMPLIED WARRANTIES,
GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE
PROPERTY OR RELATING THERETO (INCLUDING WITHOUR LIMITATION, PROPERTY INFORMATION
PACKAGES DISTRIBUTED WITH RESPECT TO THE PROPERTY OR ANY REAL ESTATE BROKER OR
AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN,
DIRECTLY OIR INDIRECTLY, ORALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTH IN
THIS AGREEMENT.
41. This Contract constitutes an offer by Purchaser which must be accepted
and signed by Seller on or before three (3) business days after the date this
Contract is signed by Purchaser AND received by Seller; provided, however, that
if Purchaser chooses to make the Deposit by wire transfer of funds to the Title
Company, Seller shall not be required to sign the Contract until after Seller
has been notified by the Title Company, in writing by facsimile transmission, of
its receipt of the Deposit from Purchaser. If this Contract is not signed by
Seller withif/said three (3) day period, AND, if appropriate as a result of
Purchaser making the Deposit by wire transfer of funds, after receipt of written
notice from the Title Company as described above in this paragraph, this
Contract shall be deemed revoked.
SIGNED by Purchaser this 2nd day of July, 1998.
PURCHASER:
CORNERSTONE REALTY GROUP, INC.,
a Virginia corporation
By: /s/ Gus G. Remppies
----------------------------------
Name: Gus G. Remppies
--------------------------------
Title: V. P.
-------------------------------
SIGNED by Seller this 6th day of July, 1998.
SELLER:
DALLAS-FORT WORTH PROPERTIES, L.P.
a Texas limited partnership
Page - 18
<PAGE>
BY: DFWP, INC.,
a Texas corporation, its general partner
By: /s/ Keith P. Evans
-------------------------------
Keith P. Evans, President
- --------------------------------------------------------------------------------
EXHIBITS:
Exhibit A - Property
Exhibit B - Special Warranty Deed
Exhibit C - Bill of Sale
- --------------------------------------------------------------------------------
RECEIPT BY TITLE COMPANY
Contract has been received by the undersigned this, the 6th day of July,
1998 (the "Effective Date").
COMMONWEALTH LAND TITLE COMPANY
By: /s/ Lisa Hart
----------------------------
Name: Lisa Hart
--------------------------
Title: Escrow Officer
-------------------------
PAGE - 19
EXHIBIT 10.18
PROPERTY MANAGEMENT AGREEMENT
-----------------------------
THIS AGREEMENT is made and entered into as of the 9th day of July, 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 Cottonwood Crossing Apartments
(hereinafter referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate upon the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the
Property, provided that nothing herein contained shall constitute a guarantee by
Manager of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment,
tools, appliances, materials, supplies and uniforms necessary for the
maintenance or operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas,
electricity and other services necessary for the operation and maintenance of
the Property;
d. The advertising for the rental of space in the Property,
the cost of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property
rented by procuring tenants for the Property and negotiating and executing on
behalf of Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other
documents (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) required under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act, or any
similar federal or state legislation. Manager shall also file returns and
reports, and pay from Owner's funds, all sums as may from time to time be
required by the state or locality in which the Property is located;
h. The maintenance of full books of account with correct
entries of all receipts and expenditures, which books of account shall be the
property of Owner and shall at all times be open to the inspection of Owner or
any of its employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by cancelled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h and I shall be paid for by Owner
pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall
contain a composite financial report of the monthly statements provided in
accordance with paragraph I, plus a statement by Manager as to the operations of
the Property during the previous year and recommendations, if any, as to
necessary policy changes or improvements which should be
<PAGE>
implemented in the forthcoming year, which recommendations shall be accompanied
by an estimated budget for such items;
k. The furnishing from time to time, at least semi-annually,
of a tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary
to operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits on
keys and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.
6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any and every kind incurred
by or asserted against Manager by reason of or in connection with the employment
of Manager hereunder, the performance by Manager of the services described
herein or the occurrence or existence of any event or circumstance which results
or is alleged to have resulted in death or injury to any person or destruction
of or damage to any property and any suit, action or proceeding (whether
threatened, initiated or completed) by reason of the foregoing; provided,
however, that no such indemnification of Manager shall be made, and Manager
shall indemnify and hold Owner harmless against, and to the extent of, any loss
that a court of competent jurisdiction shall, by final adjudication, determine
to have resulted from willful misconduct, gross negligence or fraud by or on the
part of Manager.
<PAGE>
7. Compensation of Manager for Managing the Property. Owner shall pay
to Manager a "Property Management Fee" for management of the Property pursuant
to this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for
Manager's expenses, including salaries and related overhead expenses, associated
with bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget
prepared by Manager, pursuant to paragraph 3(k), will contain a category labeled
"Reserve for Capital Items." Owner agrees to place rents and other income in a
bank account, or to permit Manager to transfer Owner's funds to such account, in
sufficient amounts to meet the needs reflected in such budget. Such funds shall
be placed in the account on a monthly basis as reflected in the budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month covered by the budget, to place sufficient funds in a bank account,
or to permit Manager to transfer Owner's funds to such account, to make up the
budgeted operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by cancelling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire
understanding between the parties hereto with regard to the transactions
described herein and may only be amended by a written instrument signed by the
party against whom enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginia.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OWNER:
APPLE REIT LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., general partner
By: /s/ Glade M. Knight
------------------------------------
Title: President
------------------------------------
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ Glade M. Knight
------------------------------------
Title: President
EXHIBIT 10.19
PROPERTY MANAGEMENT AGREEMENT
-----------------------------
THIS AGREEMENT is made and entered into as of the 17th day of July,
1998 by and between Apple REIT V 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 Pace's Point Apartments (hereinafter
referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate upon the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the
Property, provided that nothing herein contained shall constitute a guarantee by
Manager of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment,
tools, appliances, materials, supplies and uniforms necessary for the
maintenance or operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas,
electricity and other services necessary for the operation and maintenance of
the Property;
d. The advertising for the rental of space in the Property,
the cost of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property
rented by procuring tenants for the Property and negotiating and executing on
behalf of Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other
documents (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) required under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act, or any
similar federal or state legislation. Manager shall also file returns and
reports, and pay from Owner's funds, all sums as may from time to time be
required by the state or locality in which the Property is located;
h. The maintenance of full books of account with correct
entries of all receipts and expenditures, which books of account shall be the
property of Owner and shall at all times be open to the inspection of Owner or
any of its employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by cancelled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h and I shall be paid for by Owner
pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall
contain a composite financial report of the monthly statements provided in
accordance with paragraph I, plus a statement by Manager as to the operations of
the Property during the previous year and recommendations, if any, as to
necessary policy changes or improvements which should be
<PAGE>
implemented in the forthcoming year, which recommendations shall be accompanied
by an estimated budget for such items;
k. The furnishing from time to time, at least semi-annually,
of a tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary
to operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits on
keys and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.
6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any and every kind incurred
by or asserted against Manager by reason of or in connection with the employment
of Manager hereunder, the performance by Manager of the services described
herein or the occurrence or existence of any event or circumstance which results
or is alleged to have resulted in death or injury to any person or destruction
of or damage to any property and any suit, action or proceeding (whether
threatened, initiated or completed) by reason of the foregoing; provided,
however, that no such indemnification of Manager shall be made, and Manager
shall indemnify and hold Owner harmless against, and to the extent of, any loss
that a court of competent jurisdiction shall, by final adjudication, determine
to have resulted from willful misconduct, gross negligence or fraud by or on the
part of Manager.
<PAGE>
7. Compensation of Manager for Managing the Property. Owner shall pay
to Manager a "Property Management Fee" for management of the Property pursuant
to this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for
Manager's expenses, including salaries and related overhead expenses, associated
with bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget
prepared by Manager, pursuant to paragraph 3(k), will contain a category labeled
"Reserve for Capital Items." Owner agrees to place rents and other income in a
bank account, or to permit Manager to transfer Owner's funds to such account, in
sufficient amounts to meet the needs reflected in such budget. Such funds shall
be placed in the account on a monthly basis as reflected in the budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month covered by the budget, to place sufficient funds in a bank account,
or to permit Manager to transfer Owner's funds to such account, to make up the
budgeted operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by cancelling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire
understanding between the parties hereto with regard to the transactions
described herein and may only be amended by a written instrument signed by the
party against whom enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginia.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OWNER:
APPLE REIT V LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., general partner
By: /s/ Glade M. Knight
------------------------------------
Title: President
-----------------------------------
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ Glade M. Knight
------------------------------------
Title: President
------------------------------------
Exhibit 10.20
PROPERTY MANAGEMENT AGREEMENT
-----------------------------
THIS AGREEMENT is made and entered into as of the 17th day of July,
1998 by and between Apple REIT VI 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 Pepper Square Apartments (hereinafter
referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate upon the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the
Property, provided that nothing herein contained shall constitute a guarantee by
Manager of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment,
tools, appliances, materials, supplies and uniforms necessary for the
maintenance or operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas,
electricity and other services necessary for the operation and maintenance of
the Property;
d. The advertising for the rental of space in the Property,
the cost of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property
rented by procuring tenants for the Property and negotiating and executing on
behalf of Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other
documents (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) required under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act, or any
similar federal or state legislation. Manager shall also file returns and
reports, and pay from Owner's funds, all sums as may from time to time be
required by the state or locality in which the Property is located;
h. The maintenance of full books of account with correct
entries of all receipts and expenditures, which books of account shall be the
property of Owner and shall at all times be open to the inspection of Owner or
any of its employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by cancelled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h and I shall be paid for by Owner
pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall
contain a composite financial report of the monthly statements provided in
accordance with paragraph I, plus a statement by Manager as to the operations of
the Property during the previous year and recommendations, if any, as to
necessary policy changes or improvements which should be
<PAGE>
implemented in the forthcoming year, which recommendations shall be accompanied
by an estimated budget for such items;
k. The furnishing from time to time, at least semi-annually,
of a tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary
to operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits on
keys and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.
6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any and every kind incurred
by or asserted against Manager by reason of or in connection with the employment
of Manager hereunder, the performance by Manager of the services described
herein or the occurrence or existence of any event or circumstance which results
or is alleged to have resulted in death or injury to any person or destruction
of or damage to any property and any suit, action or proceeding (whether
threatened, initiated or completed) by reason of the foregoing; provided,
however, that no such indemnification of Manager shall be made, and Manager
shall indemnify and hold Owner harmless against, and to the extent of, any loss
that a court of competent jurisdiction shall, by final adjudication, determine
to have resulted from willful misconduct, gross negligence or fraud by or on the
part of Manager.
<PAGE>
7. Compensation of Manager for Managing the Property. Owner shall pay
to Manager a "Property Management Fee" for management of the Property pursuant
to this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for
Manager's expenses, including salaries and related overhead expenses, associated
with bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget
prepared by Manager, pursuant to paragraph 3(k), will contain a category labeled
"Reserve for Capital Items." Owner agrees to place rents and other income in a
bank account, or to permit Manager to transfer Owner's funds to such account, in
sufficient amounts to meet the needs reflected in such budget. Such funds shall
be placed in the account on a monthly basis as reflected in the budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month covered by the budget, to place sufficient funds in a bank account,
or to permit Manager to transfer Owner's funds to such account, to make up the
budgeted operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by cancelling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire
understanding between the parties hereto with regard to the transactions
described herein and may only be amended by a written instrument signed by the
party against whom enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginia.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OWNER:
APPLE REIT VI LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., general partner
By: /s/ Glade M. Knight
------------------------------------
Title: President
------------------------------------
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ Glade M. Knight
------------------------------------
Title: President
------------------------------------
Exhibit 10.21
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 24th day of July,
1998 by and between Apple REIT II 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 Emerald Oaks Apartments (hereinafter
referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate upon the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the
Property, provided that nothing herein contained shall constitute a guarantee by
Manager of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment,
tools, appliances, materials, supplies and uniforms necessary for the
maintenance or operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas,
electricity and other services necessary for the operation and maintenance of
the Property;
d. The advertising for the rental of space in the Property,
the cost of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property
rented by procuring tenants for the Property and negotiating and executing on
behalf of Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other
documents (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) required under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act, or any
similar federal or state legislation. Manager shall also file returns and
reports, and pay from Owner's funds, all sums as may from time to time be
required by the state or locality in which the Property is located;
h. The maintenance of full books of account with correct
entries of all receipts and expenditures, which books of account shall be the
property of Owner and shall at all times be open to the inspection of Owner or
any of its employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by cancelled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h and I shall be paid for by Owner
pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall
contain a composite financial report of the monthly statements provided in
accordance with paragraph I, plus a statement by Manager as to the operations of
the Property during the previous year and recommendations, if any, as to
necessary policy changes or improvements which should be
<PAGE>
implemented in the forthcoming year, which recommendations shall be accompanied
by an estimated budget for such items;
k. The furnishing from time to time, at least semi-annually,
of a tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary
to operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits on
keys and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.
6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any and every kind incurred
by or asserted against Manager by reason of or in connection with the employment
of Manager hereunder, the performance by Manager of the services described
herein or the occurrence or existence of any event or circumstance which results
or is alleged to have resulted in death or injury to any person or destruction
of or damage to any property and any suit, action or proceeding (whether
threatened, initiated or completed) by reason of the foregoing; provided,
however, that no such indemnification of Manager shall be made, and Manager
shall indemnify and hold Owner harmless against, and to the extent of, any loss
that a court of competent jurisdiction shall, by final adjudication, determine
to have resulted from willful misconduct, gross negligence or fraud by or on the
part of Manager.
<PAGE>
7. Compensation of Manager for Managing the Property. Owner shall pay
to Manager a "Property Management Fee" for management of the Property pursuant
to this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for
Manager's expenses, including salaries and related overhead expenses, associated
with bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget
prepared by Manager, pursuant to paragraph 3(k), will contain a category labeled
"Reserve for Capital Items." Owner agrees to place rents and other income in a
bank account, or to permit Manager to transfer Owner's funds to such account, in
sufficient amounts to meet the needs reflected in such budget. Such funds shall
be placed in the account on a monthly basis as reflected in the budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month covered by the budget, to place sufficient funds in a bank account,
or to permit Manager to transfer Owner's funds to such account, to make up the
budgeted operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by cancelling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire
understanding between the parties hereto with regard to the transactions
described herein and may only be amended by a written instrument signed by the
party against whom enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginia.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OWNER:
APPLE REIT II LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., general partner
By: /s/ Glade M. Knight
------------------------------------
Title: President
------------------------------------
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ Glade M. Knight
------------------------------------
Title: President
------------------------------------
Exhibit 10.22
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 24th day of July,
1998 by and between Apple REIT III 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 Hayden's Crossing Apartments
(hereinafter referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate upon the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the
Property, provided that nothing herein contained shall constitute a guarantee by
Manager of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment,
tools, appliances, materials, supplies and uniforms necessary for the
maintenance or operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas,
electricity and other services necessary for the operation and maintenance of
the Property;
d. The advertising for the rental of space in the Property,
the cost of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property
rented by procuring tenants for the Property and negotiating and executing on
behalf of Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other
documents (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) required under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act, or any
similar federal or state legislation. Manager shall also file returns and
reports, and pay from Owner's funds, all sums as may from time to time be
required by the state or locality in which the Property is located;
h. The maintenance of full books of account with correct
entries of all receipts and expenditures, which books of account shall be the
property of Owner and shall at all times be open to the inspection of Owner or
any of its employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by cancelled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h and I shall be paid for by Owner
pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall
contain a composite financial report of the monthly statements provided in
accordance with paragraph I, plus a statement by Manager as to the operations of
the Property during the previous year and recommendations, if any, as to
necessary policy changes or improvements which should be
<PAGE>
implemented in the forthcoming year, which recommendations shall be accompanied
by an estimated budget for such items;
k. The furnishing from time to time, at least semi-annually,
of a tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary
to operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits on
keys and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.
6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any and every kind incurred
by or asserted against Manager by reason of or in connection with the employment
of Manager hereunder, the performance by Manager of the services described
herein or the occurrence or existence of any event or circumstance which results
or is alleged to have resulted in death or injury to any person or destruction
of or damage to any property and any suit, action or proceeding (whether
threatened, initiated or completed) by reason of the foregoing; provided,
however, that no such indemnification of Manager shall be made, and Manager
shall indemnify and hold Owner harmless against, and to the extent of, any loss
that a court of competent jurisdiction shall, by final adjudication, determine
to have resulted from willful misconduct, gross negligence or fraud by or on the
part of Manager.
<PAGE>
7. Compensation of Manager for Managing the Property. Owner shall pay
to Manager a "Property Management Fee" for management of the Property pursuant
to this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for
Manager's expenses, including salaries and related overhead expenses, associated
with bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget
prepared by Manager, pursuant to paragraph 3(k), will contain a category labeled
"Reserve for Capital Items." Owner agrees to place rents and other income in a
bank account, or to permit Manager to transfer Owner's funds to such account, in
sufficient amounts to meet the needs reflected in such budget. Such funds shall
be placed in the account on a monthly basis as reflected in the budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month covered by the budget, to place sufficient funds in a bank account,
or to permit Manager to transfer Owner's funds to such account, to make up the
budgeted operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by cancelling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire
understanding between the parties hereto with regard to the transactions
described herein and may only be amended by a written instrument signed by the
party against whom enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginia.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OWNER:
APPLE REIT III LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., general partner
By: /s/ Glade M. Knight
------------------------------------
Title: President
------------------------------------
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ Glade M. Knight
------------------------------------
Title: President
------------------------------------
Exhibit 10.23
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 24th day of July,
1998 by and between Apple REIT IV 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 Newport Apartments (hereinafter referred
to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate upon the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the
Property, provided that nothing herein contained shall constitute a guarantee by
Manager of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment,
tools, appliances, materials, supplies and uniforms necessary for the
maintenance or operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas,
electricity and other services necessary for the operation and maintenance of
the Property;
d. The advertising for the rental of space in the Property,
the cost of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property
rented by procuring tenants for the Property and negotiating and executing on
behalf of Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other
documents (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) required under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act, or any
similar federal or state legislation. Manager shall also file returns and
reports, and pay from Owner's funds, all sums as may from time to time be
required by the state or locality in which the Property is located;
h. The maintenance of full books of account with correct
entries of all receipts and expenditures, which books of account shall be the
property of Owner and shall at all times be open to the inspection of Owner or
any of its employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by cancelled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h and I shall be paid for by Owner
pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall
contain a composite financial report of the monthly statements provided in
accordance with paragraph I, plus a statement by Manager as to the operations of
the Property during the previous year and recommendations, if any, as to
necessary policy changes or improvements which should be
<PAGE>
implemented in the forthcoming year, which recommendations shall be accompanied
by an estimated budget for such items;
k. The furnishing from time to time, at least semi-annually,
of a tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary
to operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits on
keys and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.
6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any and every kind incurred
by or asserted against Manager by reason of or in connection with the employment
of Manager hereunder, the performance by Manager of the services described
herein or the occurrence or existence of any event or circumstance which results
or is alleged to have resulted in death or injury to any person or destruction
of or damage to any property and any suit, action or proceeding (whether
threatened, initiated or completed) by reason of the foregoing; provided,
however, that no such indemnification of Manager shall be made, and Manager
shall indemnify and hold Owner harmless against, and to the extent of, any loss
that a court of competent jurisdiction shall, by final adjudication, determine
to have resulted from willful misconduct, gross negligence or fraud by or on the
part of Manager.
<PAGE>
7. Compensation of Manager for Managing the Property. Owner shall pay
to Manager a "Property Management Fee" for management of the Property pursuant
to this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for
Manager's expenses, including salaries and related overhead expenses, associated
with bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget
prepared by Manager, pursuant to paragraph 3(k), will contain a category labeled
"Reserve for Capital Items." Owner agrees to place rents and other income in a
bank account, or to permit Manager to transfer Owner's funds to such account, in
sufficient amounts to meet the needs reflected in such budget. Such funds shall
be placed in the account on a monthly basis as reflected in the budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month covered by the budget, to place sufficient funds in a bank account,
or to permit Manager to transfer Owner's funds to such account, to make up the
budgeted operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by cancelling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire
understanding between the parties hereto with regard to the transactions
described herein and may only be amended by a written instrument signed by the
party against whom enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginia.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OWNER:
APPLE REIT IV LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., general partner
By: /s/ Glade M. Knight
-----------------------------------
Title: President
-----------------------------------
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ Glade M. Knight
------------------------------------
Title: President
------------------------------------
Exhibit 10.24
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 27th day of July,
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 Estrada Oaks Apartments (hereinafter
referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate upon the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the
Property, provided that nothing herein contained shall constitute a guarantee by
Manager of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment,
tools, appliances, materials, supplies and uniforms necessary for the
maintenance or operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas,
electricity and other services necessary for the operation and maintenance of
the Property;
d. The advertising for the rental of space in the Property,
the cost of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property
rented by procuring tenants for the Property and negotiating and executing on
behalf of Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other
documents (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) required under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act, or any
similar federal or state legislation. Manager shall also file returns and
reports, and pay from Owner's funds, all sums as may from time to time be
required by the state or locality in which the Property is located;
h. The maintenance of full books of account with correct
entries of all receipts and expenditures, which books of account shall be the
property of Owner and shall at all times be open to the inspection of Owner or
any of its employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by cancelled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h and I shall be paid for by Owner
pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall
contain a composite financial report of the monthly statements provided in
accordance with paragraph I, plus a statement by Manager as to the operations of
the Property during the previous year and recommendations, if any, as to
necessary policy changes or improvements which should be
<PAGE>
implemented in the forthcoming year, which recommendations shall be accompanied
by an estimated budget for such items;
k. The furnishing from time to time, at least semi-annually,
of a tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary
to operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits on
keys and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.
6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any and every kind incurred
by or asserted against Manager by reason of or in connection with the employment
of Manager hereunder, the performance by Manager of the services described
herein or the occurrence or existence of any event or circumstance which results
or is alleged to have resulted in death or injury to any person or destruction
of or damage to any property and any suit, action or proceeding (whether
threatened, initiated or completed) by reason of the foregoing; provided,
however, that no such indemnification of Manager shall be made, and Manager
shall indemnify and hold Owner harmless against, and to the extent of, any loss
that a court of competent jurisdiction shall, by final adjudication, determine
to have resulted from willful misconduct, gross negligence or fraud by or on the
part of Manager.
<PAGE>
7. Compensation of Manager for Managing the Property. Owner shall pay
to Manager a "Property Management Fee" for management of the Property pursuant
to this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for
Manager's expenses, including salaries and related overhead expenses, associated
with bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget
prepared by Manager, pursuant to paragraph 3(k), will contain a category labeled
"Reserve for Capital Items." Owner agrees to place rents and other income in a
bank account, or to permit Manager to transfer Owner's funds to such account, in
sufficient amounts to meet the needs reflected in such budget. Such funds shall
be placed in the account on a monthly basis as reflected in the budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month covered by the budget, to place sufficient funds in a bank account,
or to permit Manager to transfer Owner's funds to such account, to make up the
budgeted operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by cancelling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire
understanding between the parties hereto with regard to the transactions
described herein and may only be amended by a written instrument signed by the
party against whom enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginia.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OWNER:
APPLE REIT LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., general partner
By:
--------------------------------------
Title:
--------------------------------------
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By:
--------------------------------------
Title:
--------------------------------------
Exhibit 10.25
Property Management Agreement Subcontract
This Property Management Agreement Subcontract (the "Agreement") is
made as of July 17, 1998 by and among Apple REIT V Limited Partnership, a
Virginia limited partnership trading as Pace's Point ("Apple"), Apple
Residential Management Group, Inc., a Virginia corporation ("ARMG"), and
Cornerstone Realty Income Trust, Inc., a Virginia corporation ("Cornerstone")
and provides:
RECITALS
A. As of the date of this Agreement, Apple and ARMG are parties to a
Property Management Agreement more particularly described on Exhibit A
hereto pursuant to which ARMG has agreed to provide certain property
management services to Apple, as more particularly described in such
agreement (the "Property Management Agreement").
B. ARMG desires to delegate and assign to Cornerstone, and Cornerstone
desires to accept the delegation and assignment from ARMG of, all of
ARMG's duties, obligations, rights, powers and benefits under the
Property Management Agreement attributable to the period beginning on
the date of this Agreement, and Apple is willing to consent to such
delegation and assignment, as more particularly set forth below.
NOW THEREFORE, in consideration of the foregoing, of the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the parties agree as follows:
1. ARMG does hereby delegate and assign to Cornerstone all of ARMG's
duties, obligations, rights, powers and benefits under the Property
Management Agreement (including any renewal or extension thereof)
attributable to the period beginning on the date of this Agreement.
Cornerstone accepts such delegation and assignment. The intent of such
delegation and assignment is to impose upon Cornerstone all duties and
obligations of ARMG under the terms of the Property Management
Agreement attributable to the period beginning on the date of this
Agreement, and to confer upon Cornerstone all of the correlative
rights, powers and benefits (including without limitation, the right to
receive all fees and expense reimbursements) conferred by or provided
for in the Property Management Agreement, and this Agreement shall be
interpreted and construed consistently with such intent. For so long as
this Agreement remains in effect, the term "Manager," as used in the
Property Management Agreement as to which the delegation and assignment
described herein is effective shall be deemed to refer to Cornerstone,
unless the context clearly requires otherwise.
2. Apple consents to the delegation and assignment referred to in Section
1.
3. Cornerstone may, by written notice delivered to ARMG and Apple at 306
East Main Street, Richmond, Virginia 23219, Attention: Glade M. Knight,
terminate the delegation and assignment described herein as to the
Property Management Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first written above.
APPLE REIT V LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., General Partner
By: /s/ Glade M. Knight
---------------------------------------
Title: President
---------------------------------------
APPLE RESIDENTIAL MANAGEMENT
GROUP, INC., a Virginia corporation
By: /s/ Glade M. Knight
---------------------------------------
Title: President
---------------------------------------
CORNERSTONE REALTY INCOME TRUST,
INC., a Virginia corporation
By: /s/ Glade M. Knight
---------------------------------------
Title: Chief Executive Officer
---------------------------------------
2
<PAGE>
Exhibit A
Description of Property Management Agreement
between Apple and ARMG
Property Management Agreement dated as of July 17, 1998 pertaining to Pace's
Point Apartments.
3
Exhibit 10.26
Property Management Agreement Subcontract
This Property Management Agreement Subcontract (the "Agreement") is
made as of July 17, 1998 by and among Apple REIT VI Limited Partnership, a
Virginia limited partnership trading as Pepper Square Apartments ("Apple"),
Apple Residential Management Group, Inc., a Virginia corporation ("ARMG"), and
Cornerstone Realty Income Trust, Inc., a Virginia corporation ("Cornerstone")
and provides:
RECITALS
A. As of the date of this Agreement, Apple and ARMG are parties to a
Property Management Agreement more particularly described on Exhibit A
hereto pursuant to which ARMG has agreed to provide certain property
management services to Apple, as more particularly described in such
agreement (the "Property Management Agreement").
B. ARMG desires to delegate and assign to Cornerstone, and Cornerstone
desires to accept the delegation and assignment from ARMG of, all of
ARMG's duties, obligations, rights, powers and benefits under the
Property Management Agreement attributable to the period beginning on
the date of this Agreement, and Apple is willing to consent to such
delegation and assignment, as more particularly set forth below.
NOW THEREFORE, in consideration of the foregoing, of the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the parties agree as follows:
1. ARMG does hereby delegate and assign to Cornerstone all of ARMG's
duties, obligations, rights, powers and benefits under the Property
Management Agreement (including any renewal or extension thereof)
attributable to the period beginning on the date of this Agreement.
Cornerstone accepts such delegation and assignment. The intent of such
delegation and assignment is to impose upon Cornerstone all duties and
obligations of ARMG under the terms of the Property Management
Agreement attributable to the period beginning on the date of this
Agreement, and to confer upon Cornerstone all of the correlative
rights, powers and benefits (including without limitation, the right to
receive all fees and expense reimbursements) conferred by or provided
for in the Property Management Agreement, and this Agreement shall be
interpreted and construed consistently with such intent. For so long as
this Agreement remains in effect, the term "Manager," as used in the
Property Management Agreement as to which the delegation and assignment
described herein is effective shall be deemed to refer to Cornerstone,
unless the context clearly requires otherwise.
2. Apple consents to the delegation and assignment referred to in Section
1.
3. Cornerstone may, by written notice delivered to ARMG and Apple at 306
East Main Street, Richmond, Virginia 23219, Attention: Glade M. Knight,
terminate the delegation and assignment described herein as to the
Property Management Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first written above.
APPLE REIT IV LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., General Partner
By: /s/ Glade M. Knight
-----------------------------------
Title: President
-----------------------------------
APPLE RESIDENTIAL MANAGEMENT
GROUP, INC., a Virginia corporation
By: /s/ Glade M. Knight
-----------------------------------
Title: President
-----------------------------------
CORNERSTONE REALTY INCOME TRUST,
INC., a Virginia corporation
By: /s/ Glade M. Knight
-----------------------------------
Title: Chief Executive Officer
-----------------------------------
2
<PAGE>
Exhibit A
Description of Property Management Agreement
between Apple and ARMG
Property Management Agreement dated as of July 17, 1998 pertaining to Pepper
Square Apartments.
3
Exhibit 10.27
Property Management Agreement Subcontract
This Property Management Agreement Subcontract (the "Agreement") is
made as of July 24, 1998 by and among Apple REIT II Limited Partnership, a
Virginia limited partnership trading as Emerald Oaks Apartments ("Apple"), Apple
Residential Management Group, Inc., a Virginia corporation ("ARMG"), and
Cornerstone Realty Income Trust, Inc., a Virginia corporation ("Cornerstone")
and provides:
RECITALS
A. As of the date of this Agreement, Apple and ARMG are parties to a
Property Management Agreement more particularly described on Exhibit A
hereto pursuant to which ARMG has agreed to provide certain property
management services to Apple, as more particularly described in such
agreement (the "Property Management Agreement").
B. ARMG desires to delegate and assign to Cornerstone, and Cornerstone
desires to accept the delegation and assignment from ARMG of, all of
ARMG's duties, obligations, rights, powers and benefits under the
Property Management Agreement attributable to the period beginning on
the date of this Agreement, and Apple is willing to consent to such
delegation and assignment, as more particularly set forth below.
NOW THEREFORE, in consideration of the foregoing, of the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the parties agree as follows:
1. ARMG does hereby delegate and assign to Cornerstone all of ARMG's
duties, obligations, rights, powers and benefits under the Property
Management Agreement (including any renewal or extension thereof)
attributable to the period beginning on the date of this Agreement.
Cornerstone accepts such delegation and assignment. The intent of such
delegation and assignment is to impose upon Cornerstone all duties and
obligations of ARMG under the terms of the Property Management
Agreement attributable to the period beginning on the date of this
Agreement, and to confer upon Cornerstone all of the correlative
rights, powers and benefits (including without limitation, the right to
receive all fees and expense reimbursements) conferred by or provided
for in the Property Management Agreement, and this Agreement shall be
interpreted and construed consistently with such intent. For so long as
this Agreement remains in effect, the term "Manager," as used in the
Property Management Agreement as to which the delegation and assignment
described herein is effective shall be deemed to refer to Cornerstone,
unless the context clearly requires otherwise.
2. Apple consents to the delegation and assignment referred to in Section
1.
3. Cornerstone may, by written notice delivered to ARMG and Apple at 306
East Main Street, Richmond, Virginia 23219, Attention: Glade M. Knight,
terminate the delegation and assignment described herein as to the
Property Management Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first written above.
APPLE REIT II LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., General Partner
By: /s/ Stanley J. Olander, Jr.
----------------------------------
Title: Vice President
----------------------------------
APPLE RESIDENTIAL MANAGEMENT
GROUP, INC., a Virginia corporation
By: /s/ Stanley J. Olander, Jr.
----------------------------------
Title: Vice President
----------------------------------
CORNERSTONE REALTY INCOME TRUST,
INC., a Virginia corporation
By: /s/ Stanley J. Olander, Jr.
----------------------------------
Title: Chief Financial Officer
----------------------------------
2
<PAGE>
Exhibit A
Description of Property Management Agreement
between Apple and ARMG
Property Management Agreement dated as of July 24, 1998 pertaining to Emerald
Oaks Apartments.
3
Exhibit 10.28
Property Management Agreement Subcontract
This Property Management Agreement Subcontract (the "Agreement") is
made as of July 24, 1998 by and among Apple REIT III Limited Partnership, a
Virginia limited partnership trading as Hayden's Crossing Apartments ("Apple"),
Apple Residential Management Group, Inc., a Virginia corporation ("ARMG"), and
Cornerstone Realty Income Trust, Inc., a Virginia corporation ("Cornerstone")
and provides:
RECITALS
A. As of the date of this Agreement, Apple and ARMG are parties to a
Property Management Agreement more particularly described on Exhibit A
hereto pursuant to which ARMG has agreed to provide certain property
management services to Apple, as more particularly described in such
agreement (the "Property Management Agreement").
B. ARMG desires to delegate and assign to Cornerstone, and Cornerstone
desires to accept the delegation and assignment from ARMG of, all of
ARMG's duties, obligations, rights, powers and benefits under the
Property Management Agreement attributable to the period beginning on
the date of this Agreement, and Apple is willing to consent to such
delegation and assignment, as more particularly set forth below.
NOW THEREFORE, in consideration of the foregoing, of the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the parties agree as follows:
1. ARMG does hereby delegate and assign to Cornerstone all of ARMG's
duties, obligations, rights, powers and benefits under the Property
Management Agreement (including any renewal or extension thereof)
attributable to the period beginning on the date of this Agreement.
Cornerstone accepts such delegation and assignment. The intent of such
delegation and assignment is to impose upon Cornerstone all duties and
obligations of ARMG under the terms of the Property Management
Agreement attributable to the period beginning on the date of this
Agreement, and to confer upon Cornerstone all of the correlative
rights, powers and benefits (including without limitation, the right to
receive all fees and expense reimbursements) conferred by or provided
for in the Property Management Agreement, and this Agreement shall be
interpreted and construed consistently with such intent. For so long as
this Agreement remains in effect, the term "Manager," as used in the
Property Management Agreement as to which the delegation and assignment
described herein is effective shall be deemed to refer to Cornerstone,
unless the context clearly requires otherwise.
2. Apple consents to the delegation and assignment referred to in Section
1.
3. Cornerstone may, by written notice delivered to ARMG and Apple at 306
East Main Street, Richmond, Virginia 23219, Attention: Glade M. Knight,
terminate the delegation and assignment described herein as to the
Property Management Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first written above.
APPLE REIT III LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., General Partner
By: /s/ Stanley J. Olander, Jr.
--------------------------------------
Title: Vice President
--------------------------------------
APPLE RESIDENTIAL MANAGEMENT
GROUP, INC., a Virginia corporation
By: /s/ Stanley J. Olander, Jr.
--------------------------------------
Title: Vice President
--------------------------------------
CORNERSTONE REALTY INCOME TRUST,
INC., a Virginia corporation
By: /s/ Stanley J. Olander, Jr.
--------------------------------------
Title: Chief Financial Officer
--------------------------------------
2
<PAGE>
Exhibit A
Description of Property Management Agreement
between Apple and ARMG
Property Management Agreement dated as of July 24, 1998 pertaining to Hayden's
Crossing Apartments.
3
Exhibit 10.29
Property Management Agreement Subcontract
This Property Management Agreement Subcontract (the "Agreement") is
made as of July 24, 1998 by and among Apple REIT IV Limited Partnership, a
Virginia limited partnership trading as Newport Apartments ("Apple"), Apple
Residential Management Group, Inc., a Virginia corporation ("ARMG"), and
Cornerstone Realty Income Trust, Inc., a Virginia corporation ("Cornerstone")
and provides:
RECITALS
A. As of the date of this Agreement, Apple and ARMG are parties to a
Property Management Agreement more particularly described on Exhibit A
hereto pursuant to which ARMG has agreed to provide certain property
management services to Apple, as more particularly described in such
agreement (the "Property Management Agreement").
B. ARMG desires to delegate and assign to Cornerstone, and Cornerstone
desires to accept the delegation and assignment from ARMG of, all of
ARMG's duties, obligations, rights, powers and benefits under the
Property Management Agreement attributable to the period beginning on
the date of this Agreement, and Apple is willing to consent to such
delegation and assignment, as more particularly set forth below.
NOW THEREFORE, in consideration of the foregoing, of the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the parties agree as follows:
1. ARMG does hereby delegate and assign to Cornerstone all of ARMG's
duties, obligations, rights, powers and benefits under the Property
Management Agreement (including any renewal or extension thereof)
attributable to the period beginning on the date of this Agreement.
Cornerstone accepts such delegation and assignment. The intent of such
delegation and assignment is to impose upon Cornerstone all duties and
obligations of ARMG under the terms of the Property Management
Agreement attributable to the period beginning on the date of this
Agreement, and to confer upon Cornerstone all of the correlative
rights, powers and benefits (including without limitation, the right to
receive all fees and expense reimbursements) conferred by or provided
for in the Property Management Agreement, and this Agreement shall be
interpreted and construed consistently with such intent. For so long as
this Agreement remains in effect, the term "Manager," as used in the
Property Management Agreement as to which the delegation and assignment
described herein is effective shall be deemed to refer to Cornerstone,
unless the context clearly requires otherwise.
2. Apple consents to the delegation and assignment referred to in Section
1.
3. Cornerstone may, by written notice delivered to ARMG and Apple at 306
East Main Street, Richmond, Virginia 23219, Attention: Glade M. Knight,
terminate the delegation and assignment described herein as to the
Property Management Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first written above.
APPLE REIT IV LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., General Partner
By: /s/ Stanley J. Olander, Jr.
-------------------------------------
Title: Vice President
-------------------------------------
APPLE RESIDENTIAL MANAGEMENT
GROUP, INC., a Virginia corporation
By: /s/ Stanley J. Olander, Jr.
-------------------------------------
Title: Vice President
-------------------------------------
CORNERSTONE REALTY INCOME TRUST,
INC., a Virginia corporation
By: /s/ Stanley J. Olander, Jr.
-------------------------------------
Title: Chief Financial Officer
-------------------------------------
2
<PAGE>
Exhibit A
Description of Property Management Agreement
between Apple and ARMG
Property Management Agreement dated as of July 24, 1998 pertaining to Newport
Apartments.
3
EXHIBIT 10.30
[L.P. MARTIN & COMPANY LETTERHEAD]
Consent of Independent Auditors'
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated July 21, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Cottonwood Crossing
Apartments for the twelve month period ended May 31, 1998, for inclusion in a
form 8K filing with the Securities and Exchange Commission by Apple Residential
Income Trust, Inc.
Richmond, Virginia /s/ L.P. Martin & Co., P.C.
July 29, 1998
EXHIBIT 10.31
[L.P. MARTIN & COMPANY LETTERHEAD]
Consent of Independent Auditors'
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated May 14, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Pace's Point
Apartments for the twelve month period ended March 31, 1998, for inclusion in a
form 8K filing with the Securities and Exchange Commission by Apple Residential
Income Trust, Inc.
Richmond, Virginia /s/ L.P. Martin & Co., P.C.
July 29, 1998
EXHIBIT 10.32
[L.P. MARTIN & COMPANY LETTERHEAD]
Consent of Independent Auditors'
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated May 14, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Pepper Square
Apartments for the twelve month period ended March 31, 1998, for inclusion in a
form 8K filing with the Securities and Exchange Commission by Apple Residential
Income Trust, Inc.
Richmond, Virginia /s/ L.P. Martin & Co., P.C.
July 29, 1998
EXHIBIT 10.33
[L.P. MARTIN & COMPANY LETTERHEAD]
Consent of Independent Auditors'
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated May 14, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Emerald Oaks
Apartments for the twelve month period ended March 31, 1998, for inclusion in a
form 8K filing with the Securities and Exchange Commission by Apple Residential
Income Trust, Inc.
Richmond, Virginia /s/ L.P. Martin & Co., P.C.
July 29, 1998
EXHIBIT 10.34
[L.P. MARTIN & COMPANY LETTERHEAD]
Consent of Independent Auditors'
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated May 14, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Hayden's Crossing
Apartments for the twelve month period ended March 31, 1998, for inclusion in a
form 8K filing with the Securities and Exchange Commission by Apple Residential
Income Trust, Inc.
Richmond, Virginia /s/ L.P. Martin & Co., P.C.
July 29, 1998
EXHIBIT 10.35
[L.P. MARTIN & COMPANY LETTERHEAD]
Consent of Independent Auditors'
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated May 14, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Newport Apartments
for the twelve month period ended March 31, 1998, for inclusion in a form 8K
filing with the Securities and Exchange Commission by Apple Residential Income
Trust, Inc.
Richmond, Virginia /s/ L.P. Martin & Co., P.C.
July 29, 1998
EXHIBIT 10.36
[L.P. MARTIN & COMPANY LETTERHEAD]
Consent of Independent Auditors'
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated July 15, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Estrada Oaks
Apartments for the twelve month period ended June 30, 1998, for inclusion in a
form 8K filing with the Securities and Exchange Commission by Apple Residential
Income Trust, Inc.
July 29, 1998 /s/ L.P. Martin & Co., P.C.
