SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ending December 31, 1998 Commission file number 0-13693
- ------------------------------------------- ------------------------------
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
(Exact name of registrant as specified in its charter)
Massachusetts 13-6850434
------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3111 Paces Mill Road, Suite A-200, Atlanta, GA 30339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 984-9500
--------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Beneficial Interest without par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. __
Based on the average bid and asking price on March 4, 1999 the aggregate market
value of the Registrant's shares held by non-affiliates of the Registrant was
$4,470,802.
The number of shares outstanding as of March 15, 1999 was 1,100,505.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Trust's Proxy Statement
relating to its 1999 Annual Meeting
of Shareholders are incorporated by
reference into Part III.
<PAGE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
INDEX TO FORM 10-K
PART I............................................................... ..3
ITEM 1 - Business..................................................3
ITEM 2 - Properties................................................8
ITEM 3 - Legal Proceedings.........................................8
ITEM 4 - Submission of Matters to a Vote of Shareholders...........8
PART II.............................................................. ..9
ITEM 5 - Market for Registrant's Shares of Beneficial Interest.....9
ITEM 6 - Selected Financial Information...........................10
ITEM 7 - Management's Discussion and Analysis of Financial
ITEM 7A - Quantitative and Qualitative Disclosures About
Market Risk..............................................19
ITEM 8 - Financial Statements and Supplementary Data..............19
ITEM 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure......................19
PART III...............................................................20
ITEM 10 - Directors and Executive Officers of the Registrant.......20
ITEM 11 - Executive Compensation...................................20
ITEM 12 - Security Ownership of Certain Beneficial Owners
and Management...........................................20
ITEM 13 - Certain Relationships and Related Transactions...........20
PART IV................................................................21
ITEM 14 - Exhibits, Financial Statements and Schedule and
Reports on Form 8-K....................................................21
Signatures ............................................................24
<PAGE>
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Trust's actual results could differ materially from those projected
in the forward-looking statements. Certain factors that might cause such a
difference are set forth in the section entitled "Certain Factors Affecting
Future Operating Results," in the relevant paragraphs of "Management's
Discussion and Analysis of Results of Operations and Financial Condition," and
elsewhere in this report.
PART I
======
ITEM 1 - BUSINESS
- -----------------
General Development of Business
- -------------------------------
Vinings Investment Properties Trust, a Massachusetts business trust ("Vinings"
or the "Trust") (formerly known as Mellon Participating Mortgage Trust,
Commercial Properties Series 85/10), was organized on December 7, 1984 as a
twenty year finite-life real estate investment trust ("REIT"). Its original
purpose was to invest in participating, shared appreciation, convertible and
fixed rate mortgages and joint venture financing secured by office, industrial
and retail facilities located throughout the United States. The Declaration of
Trust provided, among other things, that the Trustees would use their best
efforts to terminate the Trust within approximately ten years; provided,
however, that the Trustees would have the absolute discretion to determine in
good faith such termination date as would be in the best interests of the
shareholders of the Trust. The Trustees proceeded with the orderly liquidation
of assets and the distribution of proceeds to the shareholders. As of December
31, 1995 all of the assets to be liquidated had been sold except the Hawthorne
Note, which was sold on January 3, 1996.
In connection with the liquidation, per share final distributions of $15.60 and
$1.28 (adjusted for the Share Split, as hereinafter defined) were paid on
February 2, 1996 and March 8, 1996, respectively. The remaining assets of the
Trust were Peachtree Business Center ("Peachtree") and approximately $163,000 in
cash.
On January 31, 1996, Vinings Investment Properties, Inc. (the "Purchaser")
commenced a cash tender offer (the "Tender Offer") for a minimum of a majority
and a maximum of 85% of the outstanding shares of beneficial interest, without
par value, (the "Shares") of the Trust at a price of $0.47 per Share ($3.76
adjusted for the Share Split, as hereinafter defined). The Tender Offer expired
in accordance with its terms at midnight on February 28, 1996. The Purchaser
accepted an aggregate of 6,337,279 Shares (792,159 Shares adjusted for the Share
Split, as hereinafter defined) validly tendered pursuant to the Tender Offer,
representing approximately 73.3% of the outstanding Shares.
The purpose of the Tender Offer was for the Purchaser to acquire control of the
Trust and to rebuild Vinings' assets by expanding into the multifamily property
markets. In connection with the consummation of the Tender Offer, all of the
trustees and officers of the Trust resigned and were replaced with designees of
the Purchaser. In addition, prior to the Tender Offer, the Trust was an
externally advised REIT for which it paid advisory fees to an unrelated third
party (the "Advisor"). Upon consummation of the Tender Offer, the relationship
with the Advisor was terminated and the Trust became self-administered.
On June 11, 1996, Vinings Investment Properties, L.P. (the "Operating
Partnership"), a Delaware limited partnership, was organized. The Trust is the
sole general partner and an 80.94% limited partner in the Operating Partnership
at December 31, 1998. During the fourth quarter of the fiscal year ended
December 31, 1997 ("fiscal 1997"), 242,546 limited partnership units in the
Operating Partnership ("Units") were issued, of which 224,330 Units were issued
in connection with the acquisition of Windrush, as defined below. The Units are
redeemable by their holders for Shares of the Trust on a one-for-one basis or
for cash, at the option of the Trust. (This structure is commonly referred to as
an umbrella partnership REIT or "UPREIT").
On July 1, 1996, Vinings effected a 1-for-8 reverse share split (the "Share
Split") of its 8,645,000 outstanding Shares pursuant to which shareholders of
the Trust received one Share for every eight Shares owned. Vinings has purchased
and continues to purchase any fractional Shares at a cost of $5.50 per Share. As
of December 31, 1998, fractional Shares totaling 120 had been repurchased and
retired and 1,100,505 Shares were outstanding.
At December 31, 1998, approximately ninety two percent (92%) of Vinings' total
assets were invested in three real estate assets. They were: (1) The Thicket
Apartments ("Thicket"), a 254-unit apartment complex located in Atlanta,
Georgia, owned through Thicket Apartments, L.P., a Delaware limited partnership,
of which the Operating Partnership is a 99% limited partner and Thicket
Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of the Trust,
is the sole general partner; (2) Windrush Apartments ("Windrush"), a 202-unit
apartment community located in Atlanta, Georgia, owned through Vinings
Communities, L.P., a Delaware limited partnership of which the Operating
Partnership is a 99% limited partner and the Trust is the sole general partner
and; and (3) Peachtree, an approximately 75,000 square foot, single-story
business park located in Atlanta, Georgia, owned by the Operating Partnership.
On June 18, 1998 Vinings entered into 18 separate contracts to purchase 14
multifamily communities totaling 2,184 units located in various markets in
Mississippi. On February 15, 1999, Vinings renegotiated 17 of the contracts to
purchase 13 communities totaling 2,032 units (the "Portfolio") and terminated
one of the contracts. The renegotiated purchase price of the Portfolio is
$94,300,000, consisting of cash and the assumption of approximately $81,000,000
in existing debt (the "Acquisition Transaction"). Five of the communities,
totaling 976 units, will be purchased through a joint venture structure between
the Operating Partnership and a private investor and the remaining eight
communities, totaling 1,056 units, will be purchased by subsidiaries of the
Operating Partnership. In connection with the Acquisition Transaction, an
acquisition fee will be paid to an entity affiliated with Management, however,
the amount and form of such fee have not yet been determined.
Vinings has completed its due diligence review and the contracts are subject
only to satisfactory title conditions. Vinings has received conditional
commitments for most of its equity financing and is in the process of finalizing
its equity commitments. If Vinings receives all approvals and obtains sufficient
capital to finance the transaction, the closing of the Portfolio could take
place early in the second quarter of 1999, however, there can be no assurance
that the Acquisition Transaction will take place.
Vinings has elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended. As a REIT, Vinings will generally not be subject to federal
income taxation on that portion of its income that qualifies as REIT taxable
income to the extent that it distributes at least 95% of its taxable income to
its shareholders and satisfies certain other requirements.
Vinings' executive offices are located at 3111 Paces Mill Road, Suite A-200,
Atlanta, Georgia 30339, (770) 984-9500.
Financial Information About Industry Segments
- ---------------------------------------------
Vinings' operations and identifiable long-term assets have been attributed to
the real estate industry for the entirety of its existence. While investments
prior to the Tender Offer were primarily mortgage loans, currently Vinings'
assets are equity investments. Management plans to continue making equity
investments in the multifamily real estate markets.
Narrative Description of Business
- --------------------------------
Vinings' primary objective is to continue to expand into the multifamily real
estate markets through the acquisition of garden style apartment communities,
which are leased to middle-income residents. The middle-income resident is a
more stable and broader based market, often referred to as "the renter by
necessity." Management believes that middle market properties provide greater
potential for appreciation through increased revenues and cash flows than the
more expensive high-end apartment communities, which cater to "the renter by
choice."
Management believes that these investments will provide attractive sources of
income to Vinings, which will not only provide cash available for future
distributions, but will increase the value of Vinings' real estate portfolio as
well.
In the past, Vinings has reviewed each real estate investment in its portfolio
on a quarterly basis. Management plans to continue this review as well as to
carefully review each acquisition to insure that Vinings makes sound investments
on behalf of its shareholders. In this regard, Vinings has established an
Acquisition Committee comprised of four members of the Board of Trustees, one of
which is also an officer. The Board has also established certain investment
criteria, which must be met. The Acquisition Committee must review and approve
each potential acquisition before it is presented to the Board for final
approval.
Growth and Expansion Strategy
- -----------------------------
Management intends to implement its growth and expansion strategy by targeting
properties that have been under managed and/or under maintained, and purchase
such properties at a price which is below replacement cost. Through strategic
value added and return oriented capital improvements and intensive property
management, the Trust believes that cash flow, and in turn value, will be
increased.
Vinings currently anticipates that future acquisitions may include certain
properties within the existing multifamily property portfolios of entities that
are affiliated with Management, as well as properties acquired from unaffiliated
third parties such as the Acquisition Transaction. These properties may be
acquired either for cash, through debt financing, in exchange for Shares of the
Trust or Units or any combination thereof. In addition, the Trust may seek to
raise capital through private offerings for specific acquisitions.
Competition
- -----------
Vinings competes with a number of housing alternatives for its residents
including other multifamily communities and single family homes available for
rent as well as purchase. This competition could have an effect not only on the
properties' ability to lease rental units but also on the rents charged. Vinings
also competes with other investors for potential acquisitions, some of which may
have greater resources with which to purchase projects that the Trust may be
interested in acquiring.
Advisory and Property Management Services
- -----------------------------------------
Since the consummation of the Tender Offer, Vinings has been self-administered.
Vinings has entered into management agreements with an affiliate of certain
officers and trustees of the Trust for property management services for Thicket,
Windrush and Peachtree for a fee equal to a percentage of gross revenues
collected. Up until December 31, 1998, Peachtree was managed by a third-party
property management firm not affiliated with management. In addition, as a
commitment to the rebuilding of the Trust, The Vinings Group, Inc., also an
affiliate of certain officers and trustees of the Trust, has provided numerous
services to the Trust during the fiscal year ended December 31, 1998 ("fiscal
1998") relating to administration, acquisition, and capital and asset advisory
services at little cost to Vinings. The Trust does not anticipate that these
services will continue to be provided free of charge. However, while Vinings has
been in its rebuilding stages, the officers and trustees have been committed to
providing as many services as possible to promote the Trust's growth.
Employees
- ---------
Vinings does not currently have its own employees as The Vinings Group, Inc. has
been providing services to the Trust as described above. However, employees have
been hired through the managing agent to provide on-site property management
services for Vinings. At December 31, 1998, Thicket and Windrush had 11
employees who performed these on-site management services for the communities
and were paid with funds generated from Thicket and Windrush. In addition,
during fiscal 1998 the Trust paid a total of $45,000 to affiliated entities for
shareholder services performed exclusively for the Trust by one of its employees
and a total of $105,000 for the reimbursement of overhead expenses, which
includes salaries and benefits for other employees hired by The Vinings Group,
Inc. for the benefit of the Trust. The only compensation received by the
officers of Vinings from the Trust for their services was in the form of a Share
bonus totaling $80,000. (See Notes 6 and 13 to Vinings' December 31, 1998
Consolidated Financial Statements.)
Environmental Policy
- --------------------
Investments in real property create a potential for environmental liability on
the part of the Trust. Owners of real property may be held liable for all costs
and liabilities relating to hazardous substances present on or emanating from
their properties. Current management assesses on an as needed basis, measures
that may need to be taken to comply with environmental laws and regulations. In
the event that there is a potential of environmental responsibility, the costs
to comply with environmental laws and regulations would be estimated at that
time. At December 31, 1998, Vinings was not aware of any potential environmental
contamination relating to investments in its portfolio.
Certain Factors Affecting Future Operating Results
- --------------------------------------------------
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Vinings' actual results could differ materially from those set forth in
the forward-looking statements. Certain factors that might cause such a
difference include the following: the failure of the Trust's systems or
software, or the systems and software of a third party on which the Trust
relies, to be Year 2000 compliant, the inability of Vinings to identify
multifamily properties or property portfolios for acquisition which will have a
strategic fit with Vinings, the inability of Vinings to close the transactions
currently anticipated, including the Acquisition Transaction or such other
contracts as Vinings may enter into in the future, the less than satisfactory
performance of any property which might be acquired by Vinings, the inability to
access the capital markets in order to fund Vinings' present growth and
expansion strategy, the cyclical nature of the real estate market generally and
locally in Georgia and the surrounding southeastern states, the national
economic climate, the local economic climate in Georgia and the surrounding
southeastern states, and the local real estate conditions and competition in
Georgia and the surrounding southeastern states. There can be no assurance that,
as a result of the foregoing factors, Vinings' growth and expansion strategy
will be successful or that the business and operations of Vinings will not be
adversely affected thereby.
ITEM 2 - PROPERTIES
- -------------------
As of December 31, 1998, all of Vinings investments were equity investments in
real estate. While Vinings still owns Peachtree, a single-story business park,
it intends to continue investing only in multifamily communities. Vinings' real
estate investments are summarized below by property:
---------- ---------- -----------
Amount of Investment Occupancy
Investment Percentage at 12/31/98
---------- ---------- -----------
The Thicket Apartments $ 7,997,056 45% 98%
Windrush Apartments 7,428,038 42% 98%
Peachtree Business Center 2,219,640 13% 100%
============ ========
Totals $17,644,734 100%
============ ========
The above investment amounts are net of accumulated depreciation. Both Thicket
and Windrush are encumbered by fixed rate mortgage loans and Peachtree serves as
security for the line of credit. Vinings incorporates herein by reference the
description of owned real property on Schedule III and the notes thereto.
ITEM 3 - LEGAL PROCEEDINGS
- --------------------------
None of Vinings' properties are presently subject to any material litigation
nor, to Vinings' knowledge, is any material litigation threatened against the
Trust or any of its properties, other than routine actions or claims and
administrative proceedings arising in the ordinary course of business. Some of
these claims are expected to be covered by insurance and all of which
collectively are not expected to have a material adverse effect on the business,
the financial condition, or the results of operations of Vinings.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
- --------------------------------------------------------
No matters were submitted to a vote of the Trust's shareholders during the
fourth quarter of fiscal 1998.
<PAGE>
PART II
=======
ITEM 5 - MARKET FOR REGISTRANT'S SHARES OF BENEFICIAL INTEREST
- --------------------------------------------------------------
Stock Quotation
- ---------------
Vinings' Shares are currently traded on the Over-the-Counter Bulletin Board
under the symbol "VIPIS." On March 31, 1999, the closing sales price for
Vinings' Shares, as reported on the Over-the-Counter Bulletin Board, was $4.00.
Market Information
- ------------------
The high and low sales prices for each quarterly period during fiscal 1998 and
fiscal 1997, which reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions,
are as follows:
--------------------- ---------------------
1998 1997
--------------------- ---------------------
Quarter Ended High Low High Low
- ------------- ---- --- ---- ---
March 31 5 3 1/4 4 5/8 4 3/8
June 30 5 3 4 7/8 4 3/8
September 30 5 7/8 3 3/4 4 7/8 4
December 31 4 3/4 3 7/8 5 1/4 3 3/4
Dividends
- ---------
No dividends were declared or paid during fiscal 1998. In an effort to rebuild
the Trust's assets, all operating cash flow has been reserved for future growth
and expansion. However, as assets are acquired and operating cash flow
increases, Vinings intends to pay distributions to shareholders in amounts at
least sufficient to enable the Trust to qualify as a REIT.
Holders
- -------
Vinings had 704 holders of record of its Shares as of March 23, 1999.
ITEM 6 - SELECTED FINANCIAL INFORMATION
- ---------------------------------------
The following table sets forth selected financial information for Vinings and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations, " as well as Vinings' December
31, 1998 Consolidated Financial Statements, which are made a part of this
report. All share and per share information have been restated to reflect the
Share Split.
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
For the year ended December 31,
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $4,102,003 $2,478,824 $1,796,917 $3,244,908 $4,159,170
Expenses 3,998,110 3,146,005 2,580,195 1,779,475 2,477,923
------------- ------------- ------------- ------------- -------------
Income (loss) before loss on
real estate investments 103,893 (667,181) (783,278) 1,465,433 1,681,247
Loss on real estate investments - - (26,800) (886,887) (816,307)
------------- ------------- ------------- ------------- -------------
Income (loss) before minority interest 103,893 (667,181) (810,078) 578,546 864,940
Minority interest (18,900) 5,464 - - -
------------- ------------- ------------- ------------- -------------
Net income (loss) $ 84,993 $ (661,717) $ (810,078) $ 578,546 $ 864,940
============= ============= ============= ============= =============
Net income (loss) per share -
basic and diluted $ 0.08 $ (0.61) $ (0.75) $ 0.54 $ 0.80
============= ============= ============= ============= =============
Weighted average shares
outstanding - basic 1,090,701 1,080,513 1,080,528 1,080,625 1,080,625
============= ============= ============= ============= =============
Weighted average shares
outstanding - diluted 1,336,391 1,089,435 1,080,528 1,080,625 1,080,625
============= ============= ============= ============= =============
Dividends declared and paid:
Ordinary income $ - $ - $ - $ - $ 0.08
Return of capital - - 16.88 12.24 24.64
------------- ------------- ------------- ------------- -------------
Total dividends declared and paid $ - $ - $ 16.88 $ 12.24 $ 24.72
============= ============= ============= ============= =============
Total assets $19,148,178 $18,989,558 $11,519,469 $21,878,357 $34,348,242
============= ============= ============= ============= =============
Shareholders' equity $ 2,426,972 $ 2,268,803 $ 2,232,548 $21,284,112 $33,932,908
============= ============= ============= ============= =============
</TABLE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- ----------------------------------------------------------
Overview
- --------
Vinings Investment Properties Trust ("Vinings" or the "Trust") was organized on
December 7, 1984 as a twenty year finite-life real estate investment trust
("REIT") whose original purpose was to invest in participating, shared
appreciation, convertible and fixed rate mortgages and joint venture financing
secured by office, industrial and retail facilities located throughout the
United States. The Declaration of Trust provided, among other things, that the
Trustees would use their best efforts to liquidate and terminate the Trust
within approximately ten years. The Trustees proceeded with the orderly
liquidation of assets and the distribution of proceeds to the shareholders. The
remaining assets of the Trust were Peachtree Business Center, a 75,000 square
foot business park located in Atlanta, Georgia ("Peachtree") and approximately
$163,000 in cash.
On January 31, 1996, Vinings Investment Properties, Inc. (the "Purchaser")
commenced a cash tender offer (the "Tender Offer") which expired in accordance
with its terms at midnight on February 28, 1996. The Purchaser accepted
approximately 73.3% of the outstanding Shares and appointed new trustees and
officers ("Management").
The purpose of the Tender Offer was for Management to acquire control of the
Trust and to rebuild Vinings' assets by expanding into the multifamily real
estate markets through the acquisition of garden style apartment communities
which are leased to middle-income residents. Management believes that these
investments will provide attractive sources of income to Vinings which will not
only increase net income and provide cash available for future distributions,
but will increase the value of Vinings' real estate portfolio as well.
<PAGE>
On June 11, 1996, Vinings Investment Properties, L.P. (the "Operating
Partnership"), was organized with the Trust as the sole general partner in an
effort to facilitate acquisitions. This structure is commonly referred to as an
umbrella partnership REIT or "UPREIT".
Much of Management's efforts during the fiscal year ended December 31, 1997
("fiscal 1997") were focused on the acquisition of Windrush Apartments, a
202-unit apartment community located in Atlanta, Georgia ("Windrush"), Vinings'
first UPREIT transaction in exchange for units in the Operating Partnership
("Units"). In addition, Management spent a good portion of fiscal 1997
negotiating for a 2,365-unit portfolio, the contract for which was terminated by
the seller thirty days prior to closing (the "Portfolio Transaction"). (See Note
14 to Vinings' December 31, 1998 Consolidated Financial Statements). The costs
incurred during fiscal 1997 associated with the Portfolio Transaction are
included in the results of operations for fiscal 1997.
During the first half of the fiscal year ended December 31, 1998 ("fiscal 1998")
Management focused on the settlement of the Portfolio Transaction. The proceeds
received, net of litigation costs incurred during fiscal 1998, have been
included in the results of operations for fiscal 1998. During the second half of
fiscal 1998, Management aggressively pursued its growth strategy by negotiating
contracts for the acquisition of 13 multifamily communities totaling 2,032 units
located in various markets in Mississippi (the "Portfolio"). The aggregate
purchase price of the Portfolio is $94,300,000, consisting of cash and the
assumption of the existing debt (the "Acquisition Transaction"). Five of the
communities, totaling 976 units, will be purchased through a joint venture
structure between the Operating Partnership and a private investor and the
remaining eight communities, totaling 1,056 units, will be purchased by
subsidiaries of the Operating Partnership. (See Note 10 to Vinings' December 31,
1998 Consolidated Financial Statements). However, there can be no assurance that
the Acquisition Transaction will take place.
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the accompanying consolidated
financial statements of Vinings and the notes thereto.
Results of Operations
- ---------------------
Because Vinings has begun to implement its growth and expansion strategy, net
income has increased steadily from fiscal year ended December 31, 1996 ("fiscal
1996") to fiscal 1997 and fiscal 1998. In addition, the nature of the operating
expenses has shifted from administrative expenses and advisory fees to property
operating expenses and mortgage interest expense connected with Vinings' income
producing assets.
As a result of the liquidation of assets, change in management, and the
redirection of the Trust's business objectives, substantially all of the income
producing assets held prior to the Tender Offer are no longer held by Vinings,
with the exception of Peachtree.
Comparison of Operating Results of 1998 to Operating Results of 1997
- --------------------------------------------------------------------
Total revenues increased $1,623,179, or 65%, from $2,478,824 to $4,102,003
primarily due to the fact that Vinings continued to implement its growth and
expansion strategy with the acquisition of Windrush in December, 1997.
Rental and other property revenues increased $1,623,174, or 66%, from $2,476,746
to $4,099,920 due primarily to the revenues generated in connection with
Vinings' ownership of Windrush for an entire year during fiscal 1998 as compared
to less than one month during fiscal 1997. Revenues from Thicket and Peachtree
also increased by $122,340 and $29,190, respectively.
Property operating and maintenance expense increased $659,281, or 66%, from
$992,926 to $1,652,207. Of this increase, $633,662 represents expenses generated
in connection with Vinings' ownership of Windrush for an entire year during
fiscal 1998 as compared to less than one month during fiscal 1997. Peachtree's
operating and maintenance expense increased $24,889 from fiscal 1997 to fiscal
1998 due to various maintenance and repair items, while Thicket's remained
constant.
Depreciation and amortization increased $214,749, or 50%, from $433,011 to
$647,760. Of this increase, $193,541 relates to Vinings' ownership of Windrush
for an entire year during fiscal 1998 as compared to less than one month during
fiscal 1997. Depreciation on Thicket and Peachtree increased only slightly due
to additional improvements made during fiscal 1998.
Interest expense increased $512,726, or 63% from $816,551 to $1,329,277
primarily due to Vinings' ownership of Windrush for an entire year during fiscal
1998 as compared to less than one month during fiscal 1997. Interest expense on
the line of credit increased $22,894 due to the increased balance during fiscal
1998.
General and administrative expense increased $262,498 or 78%, from $336,375 to
$598,873. Of this increase, $105,000 represents overhead reimbursements to The
Vinings Group (see Note 6 to Vinings' December 31, 1998 Consolidated Financial
Statements); $80,000 represents compensation expense relating to the Restricted
Stock awarded on July 1, 1998 (see Note 13 to Vinings' December 31, 1998
Consolidated Financial Statements); $51,589 represents legal and accounting
fees; and $23,628 relates to travel and abandoned pursuit costs.
The unusual item, net included in operating expenses in fiscal 1998 relates to
the costs incurred, net of the settlement proceeds received in connection with
the Portfolio Transaction totaling $260,910. The costs incurred during fiscal
1997 of $532,185 include due diligence costs incurred in connection with the
Portfolio Transaction such as environmental and engineering reports, independent
financial analysis, investor appraisal costs and legal contract negotiations.
The net cost to Vinings in connection with the entire Portfolio Transaction
totaled $271,275. (See Note 14 to Vinings' December 31, 1998 Consolidated
Financial Statements).
Vinings had income before minority interest of $103,893 for fiscal 1998 as
compared to a loss of $667,181 for fiscal 1997, representing an increase of
$771,074. The minority interest of ($5,464) for fiscal 1997 represents the
allocation of losses for the short period in December 1997 during which Units in
the Operating Partnership were held. The minority interest for fiscal 1998
totaled $18,900.
Comparison of Operating Results of 1997 to Operating Results of 1996
- --------------------------------------------------------------------
Total revenues increased $681,907, or 38%, from $1,796,917 to $2,478,824 due
to the fact that Vinings had begun to pursue its growth and expansion strategy.
Rental and other property revenues increased $924,263, or 60%, from $1,552,483
to $2,476,746 due primarily to the revenues generated in connection with
Vinings' ownership of Thicket for an entire year during fiscal 1997 as compared
to six months during fiscal 1996. Revenues from Peachtree remained fairly
constant. Immaterial amounts of revenue were generated for the twelve days
Windrush was owned during fiscal 1997.
Interest income decreased by $90,579, or 98%, from $92,657 to $2,078. In fiscal
1996, interest income was generated from cash investments primarily in the first
two months of the year, prior to the payment of liquidating dividends. Since
that time there have been relatively small cash balances.
Property operating and maintenance expense increased $406,496, or 69%, from
$586,430 to $992,926, primarily due to the expenses generated in connection with
Vinings' ownership of Thicket for an entire year during fiscal 1997 as compared
to six months during fiscal 1996.
Depreciation and amortization increased $188,901, or 77%, from $244,110 to
$433,011. Depreciation on Thicket increased $185,165 due to Vinings' ownership
of Thicket for an entire year during fiscal 1997 as compared to six months
during fiscal 1996 as well as additional depreciation on improvements made
during fiscal 1997. Depreciation on Peachtree decreased slightly.
Interest expense increased $407,832, or 100% from $408,719 to $816,551 due to
Vinings' ownership of Thicket for an entire year during fiscal 1997 as compared
to six months during fiscal 1996.
General and administrative expense decreased $651,598 or 66%, from $987,973 to
$336,375. The majority of the decrease relates to costs associated with the
Tender Offer and structural reorganization of the Trust during fiscal 1996 that
did not recur during fiscal 1997. The following expense categories included in
general and administrative decreased from fiscal 1996 to fiscal 1997:
professional fees by $398,733, directors' and officers' insurance by $176,768,
trustee expense by $31,312, annual report and proxy costs by $27,361 and filing
fees by $17,425.
There were no investment advisor's fees incurred during fiscal 1997. All of the
advisor's fees during fiscal 1996 were incurred during January and February as
the services of the Advisor were terminated at the consummation of the Tender
Offer.
The unusual item, net of $532,185 included in operating expenses during fiscal
1997 relates to costs incurred in connection with the Portfolio Transaction.
These expenses include due diligence costs such as environmental and engineering
reports, independent financial analysis, investor appraisal costs and legal
contract negotiations. (See Note 14 to Vinings' December 31, 1998 Consolidated
Financial Statements).
There were no gains or losses on real estate investments during fiscal 1997. The
loss on real estate investment of $26,800 in fiscal 1996 represents commissions
and fees on the sale of the Hawthorne Note. (See Note 4 to Vinings' December 31,
1998 Consolidated Financial Statements).
Vinings incurred a loss before minority interest of $667,181 for fiscal 1997 as
compared to $810,078 for fiscal 1996, representing a decrease of $142,897, even
with the unusual item described above. Had Vinings not incurred the unusual item
associated with the Portfolio Transaction, the loss before minority interest for
fiscal 1997 would have been $134,996. The minority interest of ($5,464)
represents the allocation of losses for the short period in December 1997 during
which Units in the Operating Partnership were held.
Liquidity and Capital Resources
- -------------------------------
Operating activities provided net cash of $624,783 for fiscal 1998 as compared
to $152,536 for fiscal 1997. As discussed previously, the settlement proceeds,
litigation costs and transaction costs relating to the Portfolio Transaction
have been included in operating activities and totaled a net amount of $260,910
in income during fiscal 1998 and $532,185 in expense during fiscal 1997. (See
Note 14 to Vinings' December 31, 1998 Consolidated Financial Statements). The
balance of the increased cash provided by operating activities for fiscal 1998
relates to Vinings' ownership of Windrush for an entire year during fiscal 1998
as compared to less than one month during fiscal 1997.
As a result of the implementation of Management's growth and expansion strategy,
cash flows from investing and financing activities have changed dramatically
from fiscal years 1996 to 1997 to 1998. In fiscal 1996, $673,200 was generated
from the sale of investments in connection with prior management's liquidation
of the Trust's assets and approximately $8,700,000 was invested in Thicket.
While Windrush was acquired during fiscal 1997, it was not acquired with cash
but through the assumption of debt and the issuance of Units. Approximately
$3,800 in cash was spent in connection with the Windrush acquisition and
approximately $135,000 was used to make improvements to Thicket and Peachtree.
During fiscal 1998, $612,000 was invested in the Acquisition Transaction and
approximately $146,000 was used to make improvements to the existing assets.
Cash flows provided by or used in financing activities were comprised of (1)
distributions to shareholders, and (2) debt incurred. Final liquidating
dividends totaling $18,240,950 were made to shareholders during fiscal 1996,
with no distributions during fiscal 1997 or fiscal 1998. During fiscal 1996,
Vinings received net proceeds of $7,392,000 from a mortgage note payable, in
addition to $1,568,104 in proceeds from a secured line of credit, all of which
were used in the acquisition of Thicket. During fiscal 1997, an additional
$150,000 was drawn from the line of credit. In addition, during fiscal 1997, a
mortgage note in the amount of $6,464,898, was assumed in connection with the
acquisition of Windrush and is not considered a cash transaction. During fiscal
1998, $281,896 was drawn from the line of credit and mortgage notes payable were
reduced by $144,501.
Many of the costs associated with the liquidation of the Trust's assets and the
subsequent Tender Offer and organizational restructuring that were incurred
during fiscal 1996, have not continued into fiscal 1997 or 1998. The cash held
by Vinings at December 31, 1998, plus the cash flow from Vinings' assets,
including the Acquisition Transaction, is expected to provide sources of
liquidity to allow the Trust to meet current operating obligations. The line of
credit held by the Trust, which expired in December 1998,was purchased from the
bank by one of the Trustees. The line in now due on demand and Vinings is paying
interest monthly to the Trustee on the outstanding balance at an annual rate of
8.50%. The Trustee has agreed that he will not demand payment on the note prior
to January 1, 2000, unless alternate financing is arranged or Peachtree, which
serves as security for the note, is sold. Vinings has agreed that it will use
its best efforts to obtain a new line of credit or alternative financing to
repay the outstanding balance. (For additional information regarding the line of
credit see Note 5 to Vinings December 31, 1998 Consolidated Financial
Statements.) In addition, Vinings continues negotiations with a number of
capital sources regarding the Acquisition Transaction and intends to continue
ongoing discussions with capital sources, both public and private, as well as
explore financing alternatives, so as to allow Vinings to expand and grow its
income producing investments. (See "Growth and Expansion Strategy".)
Recent Accounting Pronouncements
- --------------------------------
Vinings adopted Statements of Financial Accounting Standards ("SFAS") No. 130,
"Reporting of Comprehensive Income," during 1998, which establishes standards
for reporting and display of comprehensive income and its components.
Comprehensive income is the total of net income and all other nonowner changes
in shareholders' equity. As of December 31, 1998, Vinings had no items of other
comprehensive income.
Vinings also adopted SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information," during 1998, which establishes new standards for
disclosure of segment information on the so called "management approach." The
management approach is based on the way that the chief operating decision maker
organizes segments within a company for making operating decisions and assessing
performance. Since Vinings' real estate portfolio has similar economic
characteristics, customers, and products and services, Vinings evaluates the
operating performance of its real estate portfolio as one reportable segment, on
the same basis of presentation for internal and external reporting. Therefore,
no additional segment information is presented herein.
Year 2000
- ---------
The statements in the following section include "Year 2000 readiness
disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act of 1998.
The "Year 2000 issue" is the term used to describe the various problems caused
from the improper processing of dates and date sensitive information by
computers and other machinery and equipment. The Year 2000 issue is the result
of many computer programs recognizing a date ending with "00" as the year 1900
rather than the year 2000, causing potential system failures or miscalculations
which could result in disruptions of normal business operations.
Vinings is currently assessing the potential impact Year 2000 will have on its
operations. A compliance program has been implemented, which will 1) determine
Vinings state of readiness for the Year 2000, including the Trust's information
technology ("IT") systems, its non-IT systems and the state of readiness of
Vinings material suppliers and third party vendors; 2) assess where potential
risks may occur, recognizing that date sensitive systems may fail at different
points in time depending on their function, and prioritize those risks; 3)
determine what steps need to be taken in order to bring remaining software,
hardware and systems, including embedded systems, into Year 2000 compliance; 4)
implement, test and re-evaluate all solutions in time to minimize any
significant detrimental effects on operations; and 5) determine a contingency
plan in the event that the Trust or any of its material suppliers or third party
vendors will not be Year 2000 compliant (the "Compliance Program"). Vinings
believes that its testing of all systems should be complete by the end of the
third quarter, 1999.
Vinings believes that most of its computer systems and related software are
already Year 2000 compliant. These systems include the on-site resident
management software and associated hardware as well as corporate financial and
accounting software and related hardware. The costs incurred to date for new
on-site hardware and software total approximately $6,200. The financial and
accounting systems are shared with The Vinings Group. The costs incurred to
upgrade these systems total approximately $70,000 and are in the form of monthly
lease payments of $1,178, which expire in November 2002. Currently these lease
payments are not a cost of the Trust. Any additional costs to upgrade or modify
these systems are not expected to be material.
Vinings is still in the process of determining whether many of its other
operational systems are Year 2000 compliant and therefore cannot determine at
this time the potential impact on the Trust's financial condition and results of
operations. These systems include administrative systems as well as mechanical
systems. However, Vinings has been in contact with the suppliers and
manufacturers of these systems and believes that all material systems within its
control will be Year 2000 compliant well in advance of January 1, 2000.
Vinings' most reasonably likely worst case scenario relates to Year 2000
non-compliance by third party vendors and service providers. Vinings' relies on
a number of suppliers for utility services, financial services, materials, etc.
Interruption of suppliers' operations due to Year 2000 issues could have a
material adverse effect on the Trust's future financial condition and results of
operations. Vinings' has taken steps to evaluate the status of suppliers'
efforts in order to determine whether any of these suppliers will have an
adverse material effect. Once evaluation is complete, Vinings will determine any
required alternatives and contingency plan requirements.
The information provided above regarding Vinings' Year 2000 compliance includes
forward-looking statements based on management's best estimates of future
events. Such forward-looking statements involve risks and uncertainties
including the availability of resources, the ability to identify and correct
potential Year 2000 sensitive problems that could have a serious impact on
operations and the ability of third party suppliers to bring their systems into
Year 2000 compliance. There can be no assurance that any of the factors or
statements regarding the Trust's Year 2000 preparedness will not change and that
any change will not affect the accuracy of the Trust's forward-looking
statements.
Other Matters
- -------------
Vinings was informed on April 3, 1998 by NASDAQ that its shares no longer met
certain maintenance requirements for continued listing on the SmallCap Market.
Although the Trust believed that all requirements were met, it made the
strategic decision not to submit a proposal for achieving compliance so that its
listing would be transferred from the SmallCap Market to the Over-the-Counter
Bulletin Board. Vinings made this decision because it feels that its growth
would have been severely hindered by newly implemented SmallCap requirements
pertaining to shareholder approval of new share issuances. Therefore, effective
April 28, 1998, Vinings' shares are traded on the Bulletin Board under the
symbol "VIPIS."
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Vinings' actual results could differ materially from those set forth in
the forward-looking statements. Certain factors that might cause such a
difference include the following: the failure of the Trust's systems or
software, or the systems and software of a third party on which the Trust
relies, to be Year 2000 compliant, the inability of Vinings to identify
multifamily properties or property portfolios for acquisition which will have a
strategic fit with Vinings, the inability of Vinings to close the transactions
currently anticipated, including the Acquisition Transaction or such other
contracts as Vinings may enter into in the future, the less than satisfactory
performance of any property which might be acquired by Vinings, the inability to
access the capital markets in order to fund Vinings' present growth and
expansion strategy, the cyclical nature of the real estate market generally and
locally in Georgia and the surrounding southeastern states, the national
economic climate, the local economic climate in Georgia and the surrounding
southeastern states, and the local real estate conditions and competition in
Georgia and the surrounding southeastern states. There can be no assurance that,
as a result of the foregoing factors, Vinings' growth and expansion strategy
will be successful or that the business and operations of Vinings will not be
adversely affected thereby.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
Vinings is exposed to market risk from changes in interest rates, which may
adversely affect its financial position, results of operations and cash flows.
In seeking to minimize the risks from interest rate fluctuations, Vinings
manages exposures through its regular operating and financing activities.
Vinings does not use financial instruments for trading or other speculative
purposes. Vinings is exposed to interest rate risk primarily through its
borrowing activities, which are described in Note 5 to Vinings' December 31,
1998 Consolidated Financial Statements. All of Vinings' borrowings are under
fixed rate instruments. Vinings has determined that there is no material market
risk exposure to its consolidated financial position, results of operations or
cash flows.
The following table presents principal reductions and related weighted average
interest rates by year of expected maturity for Vinings' debt obligations:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
There- Fair Value
(In Thousands) 1999 2000 2001 2002 2003 after Total December 31, 1999
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Reductions
In Mortgage Notes $ 157 $170 $184 $200 $7,103 $5,826 $13,640 $13,640
Average Interest Rates 8.27% 8.27% 8.27% 8.27% 8.27% 7.5% 8.27% 8.27%
Line Of Credit $2,000 - - - - - $ 2,000 $ 2,000
Interest Rate(1) 8.50% - - - - - 8.50% 8.50%
<FN>
- --------------------------------------
(1) Based on prime rate as of 12/31/98
</FN>
</TABLE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The consolidated financial statements and supplementary data are listed
under Item 14(a) and filed as part of this report on the pages indicated.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
- ----------------------------------------------------------
The information required by this Item 9 was previously reported in a
Current Report on Form 8-K filed with the Securities and Exchange Commission
on January 14, 1997.
<PAGE>
PART III
========
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The information concerning the Trustees and Executive Officers of the Registrant
required by Item 10 shall be included in the Proxy Statement to be filed
relating to the 1999 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
- --------------------------------
The information concerning the Trustees and Executive Officers of the Registrant
required by Item 11 shall be included in the Proxy Statement to be filed
relating to the 1999 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The information concerning Ownership of Certain Beneficial Owners and Management
required by Item 12 shall be included in the Proxy Statement to be filed
relating to the 1999 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information concerning Certain Relationships and Related Transactions
required by Item 13 shall be included in the Proxy Statement to be filed
relating to the 1999 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference.
<PAGE>
PART IV
=======
ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND
REPORTS ON FORM 8-K
- ---------------------------------------------------------
14(a) (1) and (2) Index to Consolidated Financial
Statements and Schedule Page
----
Report of Independent Public Accountants 25
Consolidated Balance Sheets--As of December 31, 1998 and 1997 26
Consolidated Statements of Operations--For the years ended
December 31, 1998, 1997 and 1996 27
Consolidated Statements of Shareholders' Equity--For the years ended
December 31, 1998, 1997 and 1996 28
Consolidated Statements of Cash Flows--For the years ended
December 31, 1998, 1997 and 1996 29
Notes to Consolidated Financial Statements--For the years ended
December 31, 1998, 1997 and 1996 30
Consolidated Financial Statement Schedule 48
14(a) (3) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Second Amended and Restated Declaration of Trust of Vinings (filed herewith).
3.2 Amendment No. 1 to the Second Amended and Restated Declaration of Trust of the Trust
(filed herewith).
3.3 Amendment No. 2 to the Second Amended and Restated Declaration of Trust of the Trust
(filed herewith).
3.4 Amended and Restated Bylaws of the Trust (incorporated by reference to Exhibit 3.2 to
Vinings' Registration Statement on Form S-11, No. 2-94776).
10.1 Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties,
L.P. (incorporated by reference to Exhibit 10.1 to Vinings' Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, No. 0-13693).
10.2 First Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference to Exhibit 10.2 to the Vinings'
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693).
10.3 Second Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference to Exhibit 10.3 to the Vinings'
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693).
10.4 Third Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (filed herewith).
10.5 Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (filed herewith).
10.6 Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (filed herewith)
10.7 Agreement to Contribute, dated April 1, 1997, between Vinings Investment Properties,
L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.1 to the
Trust's Current Report on Form 8-K filed December 29, 1997, No. 0-13693).
10.8 Amendment to Agreement to Contribute, dated August 11, 1997, between Vinings Investment
Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.2
to the Trust's Report on Form 8-K filed December 29, 1997, No. 0-13693).
10.9 Second Amendment to Agreement to Contribute, dated October 30, 1997, between Vinings
Investment Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to
Exhibit 10.3 to the Trust's Report on Form 8-K filed December 29, 1997, No. 0-13693).
10.10 Management Contract dated December 19, 1997 between Vinings Communities, L.P. and
Vinings Properties, Inc. (incorporated by reference to Exhibit 10.10 to Vinings' Annual
Report on Form 10-K for the fiscal year ended December 31 1997, No. 0-13693).
10.11 Management Contract dated January 1, 1999, between Thicket Apartments, L.P. and VIP
Management, LLC (filed herewith).
10.12 Management Contract dated January 1, 1999, between Vinings Communities, L.P. and VIP
Management, LLC (filed herewith).
10.13 Management Contract dated January 1, 1999, between Vinings Investment Properties, L.P.
and VIP Management, LLC (filed herewith).
10.14 Form of Amended and Restated Agreement of Purchase and Sale for The Acquisition
Transition with attached Schedule of Material Differences For All Properties (filed
herewith).
10.15 Commercial Credit Agreement between Hardwick Bank and Trust Company and the Trustees of
the Trust dated June 28, 1997 (incorporated by reference to Exhibit 10.13 to Vinings'
Annual Report on Form 10-K for the fiscal year ended December 31 1997, No. 0-13693).
10.16 Amendment to Commercial Credit Agreement between Hardwick Bank and Trust Company and the
Trustees of the Trust dated July 1, 1998 (filed herewith).
21.1 Subsidiaries of the Trust (filed herewith).
27 Financial Data Schedule (filed herewith).
</TABLE>
14(b) Reports on Form 8-K
-------------------------
Current Report on Form 8-K/A, originally dated December 29, 1997, was
filed with the Securities and Exchange Commission on March 3, 1998,
with respect to the Trust's acquisition of Windrush.
<PAGE>
SIGNATURES
==========
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
VININGS INVESTMENT PROPERTIES TRUST
By: /s/ Peter D. Anzo
- ---------------------
Peter D. Anzo
President and
Chief Executive Officer
Dated: April 15, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Peter D. Anzo Chief Executive Officer, April 15, 1999
- ------------------------- President and Trustee
Peter D. Anzo
/s/ Stephanie A. Reed Vice President, Treasurer, April 15, 1999
- ------------------------- Secretary and Trustee
Stephanie A. Reed
/s/ Phill D. Greenblatt Trustee April 15, 1999
- -------------------------
Phill D. Greenblatt
/s/ Henry Hirsch Trustee April 15, 1999
- -----------------
Henry Hirsch
/s/ Martin H. Petersen Trustee April 15, 1999
- -------------------------
Martin H. Petersen
/s/ James D. Ross Trustee April 15, 1999
- -------------------------
James D. Ross
/s/ Gilbert H. Watts, Jr. Trustee April 15, 1999
- -------------------------
Gilbert H. Watts, Jr.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
========================================
To Vinings Investment Properties Trust:
We have audited the accompanying consolidated balance sheets of Vinings
Investment Properties Trust and subsidiaries (the "Trust") as of December 31,
1998 and 1997 and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1998. These consolidated financial statements and the
schedule referred to below are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Vinings Investment
Properties Trust and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 26, 1999
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
===================================
<CAPTION>
----------------------------------
December 31,
----------------------------------
1998 1997
--------------- ---------------
ASSETS
<S> <C> <C>
Real estate assets:
Land $ 2,884,500 $ 2,884,500
Buildings and improvements 15,399,690 15,267,009
Furniture, fixtures & equipment 1,025,222 1,011,483
Less: accumulated depreciation (1,664,678) (1,036,311)
--------------- ---------------
Net real estate assets 17,644,734 18,126,681
Cash and cash equivalents 286,481 282,851
Cash escrows 330,698 314,684
Receivables and other assets 694,998 63,402
Deferred financing costs, less accumulated amortization of $77,258 and
$54,459 at December 31, 1998 and 1997, respectively 139,064 169,968
Deferred leasing costs, less accumulated amortization of $32,861 and
$39,087 at December 31, 1998 and 1997, respectively 52,203 31,972
--------------- ---------------
Total assets $ 19,148,178 $18,989,558
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $ 13,640,065 $13,784,566
Line of credit 2,000,000 1,718,104
Accounts payable and accrued liabilities 546,249 708,876
--------------- ---------------
Total liabilities 16,186,314 16,211,546
--------------- ---------------
Minority interest of unitholders in Operating Partnership 534,892 509,209
--------------- ---------------
Commitments and Contingencies (Note 10)
Shareholders' equity:
Shares of beneficial interest, without par value, unlimited shares
authorized, 1,100,505 and 1,080,512 shares issued and outstanding
at December 31, 1998 and 1997, respectively 19,502,911 19,429,735
Cumulative earnings 37,302,590 37,217,597
Cumulative distributions (54,378,529) (54,378,529)
--------------- ---------------
Total shareholders' equity 2,426,972 2,268,803
--------------- ---------------
Total liabilities and shareholders' equity $ 19,148,178 $18,989,558
=============== ===============
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
=====================================
<CAPTION>
-----------------------------------------------
For the years ended December 31,
-----------------------------------------------
1998 1997 1996
------------- ------------- -----------
<S> <C> <C> <C>
REVENUES
Rental revenues $ 3,946,828 $ 2,392,072 $ 1,482,419
Other property revenues 153,092 84,674 70,064
Interest income 1,519 2,078 92,657
Other income 564 - 151,777
------------- ------------- -----------
4,102,003 2,478,824 1,796,917
------------- ------------- -----------
EXPENSES
Property operating and maintenance 1,652,207 992,926 586,430
Depreciation and amortization 647,760 433,011 244,110
Amortization of deferred financing costs 30,903 34,957 19,502
Interest expense 1,329,277 816,551 408,719
General and administrative 598,873 336,375 987,973
Investment advisor's fee - - 333,461
Unusual item, net (260,910) 532,185 -
------------- ------------- -----------
3,998,110 3,146,005 2,580,195
------------- ------------- -----------
Loss on real estate investments - - (26,800)
Income (loss) before minority interest 103,893 (667,181) (810,078)
------------- ------------- -----------
Minority interest of unitholders in Operating Partnership (18,900) 5,464 -
------------- ------------- -----------
Net income (loss) $ 84,993 $ (661,717) $(810,078)
============= ============= ===========
NET INCOME (LOSS) PER SHARE - BASIC $ 0.08 $ (0.61) $ (0.75)
============= ============= ===========
NET INCOME (LOSS) PER SHARE - DILUTED $ 0.08 $ (0.61) $ (0.75)
============= ============= ===========
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 1,090,701 1,080,513 1,080,528
============= ============= ===========
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 1,336,391 1,089,435 1,080,528
============= ============= ===========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1996, 1997 and 1998
====================================================
<CAPTION>
-------------- -------------- -------------- --------------
Shares of Total
beneficial Cumulative Cumulative shareholders'
interest earnings distributions equity
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $36,973,249 $38,689,392 $(54,378,529) $21,284,112
Net loss - (810,078) - (810,078)
Retirement of shares (536) - - (536)
Distributions to shareholders
($16.88 per share return of capital
for federal income tax purposes) (18,240,950) - (18,240,950)
-------------- -------------- -------------- --------------
BALANCE AT DECEMBER 31, 1996 18,731,763 37,879,314 (54,378,529) 2,232,548
Adjustment for minority interest of unitholders
and issuance of units in Operating Partnership 698,056 698,056
Net loss - (661,717) - (661,717)
Retirement of shares (84) - - (84)
-------------- -------------- -------------- --------------
BALANCE AT DECEMBER 31, 1997 19,429,735 37,217,597 (54,378,529) 2,268,803
Net income - 84,993 - 84,993
Adjustment for minority interest of
unitholders in Operating Partnership (6,781) - - (6,781)
Issuance of shares to officers and directors 80,000 - - 80,000
Retirement of shares (43) - - (43)
-------------- -------------- -------------- --------------
BALANCE AT DECEMBER 31, 1998 $19,502,911 $37,302,590 $(54,378,529) $2,426,972
============== ============== ============== ==============
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
=====================================
<CAPTION>
-----------------------------------------
For the years ended December 31,
-----------------------------------------
1998 1997 1996
---------- ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $84,993 $(661,717) $ (810,078)
---------- ----------- ------------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 647,760 433,011 244,110
Amortization of deferred financing costs 30,903 34,957 19,502
Minority interest of unitholders in Operating Partnership 18,900 (5,464) -
(Gain) loss on real estate investments - - 26,800
Noncash compensation expense 80,000 - -
Changes in assets and liabilities:
Cash escrows (16,014) 75,745 (192,611)
Receivables and other assets (19,511) 22,600 260,055
Capitalized leasing costs (39,621) (36,931) (5,639)
Accounts payable and accrued liabilities (162,627) 290,335 (247,104)
---------- ----------- ------------
Total adjustments 539,790 814,253 105,113
---------- ----------- ------------
Net cash provided by (used in) operating activities 624,783 152,536 (704,965)
---------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of the Thicket Apartments - - (8,660,900)
The Thicket capital expenditures (46,129) (109,333) (49,635)
Peachtree capital expenditures (33,712) (26,205) (29,862)
Windrush capital expenditures (66,579) (3,791) -
Refundable deposits and acquisition costs (612,085) - -
Sale proceeds from real estate investments - - 673,200
---------- ----------- ------------
Net cash used in investing activities (758,505) (139,329) (8,067,197)
---------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from line of credit 281,896 150,000 1,568,104
Net proceeds from mortgage note payable - - 7,392,000
Deferred financing costs - - (224,427)
Principal repayments on mortgage notes payable (144,501) (52,008) (20,324)
Purchase of retired shares (43) (84) (536)
Distributions to shareholders - - (18,240,950)
---------- ----------- ------------
Net cash provided by (used in) financing activities 137,352 97,908 (9,526,133)
---------- ----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,630 111,115 (18,298,295)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 282,851 171,736 18,470,031
---------- ----------- ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $286,481 $282,851 $ 171,736
========== =========== ============
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
==========================================
NOTE 1 - FORMATION AND ORGANIZATION
- ----------------------------------
Vinings Investment Properties Trust ("Vinings" or the "Trust") was
organized on December 7, 1984 as a twenty year finite-life real estate
investment trust ("REIT") whose original purpose was to invest in
participating, shared appreciation, convertible and fixed rate
mortgages and joint venture financing secured by office, industrial and
retail facilities located throughout the United States. The Declaration
of Trust provided, among other things, that the Trustees would use
their best efforts to terminate the Trust within approximately ten
years. The Trustees proceeded with the orderly liquidation of assets
and the distribution of proceeds to the shareholders. The remaining
assets of the Trust were Peachtree Business Center, a 75,000 square
foot business park located in Atlanta, Georgia ("Peachtree") and
approximately $163,000 in cash.
On January 31, 1996, Vinings Investment Properties, Inc. (the
"Purchaser") commenced a cash tender offer (the "Tender Offer") for a
minimum of a majority and a maximum of 85% of the outstanding shares of
beneficial interest, without par value (the "Shares"), of the Trust.
The Tender Offer expired in accordance with its terms at midnight on
February 28, 1996, and the Purchaser accepted approximately 73.3% of
the outstanding Shares. In connection with the consummation of the
Tender Offer, all of the Trustees and officers of the Trust resigned
and were replaced with designees of the Purchaser ("Management"). In
addition, the Trust was an externally advised REIT for which it paid
advisory fees to an unrelated third party (the "Advisor"). Upon
consummation of the Tender Offer, the relationship with the Advisor was
terminated and Vinings became self-administered.
The purpose of the Tender Offer was for Management to acquire control
of the Trust and to rebuild Vinings' assets by expanding into the
multifamily real estate markets through the acquisition of garden style
apartment communities that are leased to middle-income residents.
Management believes that these investments will provide attractive
sources of income to Vinings which will not only increase net income
and provide cash available for future distributions, but will increase
the value of Vinings' real estate portfolio as well.
On June 11, 1996, Vinings Investment Properties, L.P. (the "Operating
Partnership"), a Delaware limited partnership, was organized. As of
December 31, 1998, the Trust was the sole 1% general partner and an
80.94% limited partner in the Operating Partnership. (This structure is
commonly referred to as an umbrella partnership REIT or "UPREIT").
Vinings currently owns three real estate assets, which are: (1) The
Thicket Apartments ("Thicket"), a 254-unit apartment complex located in
Atlanta, Georgia, owned through Thicket Apartments, L.P., a Delaware
limited partnership of which the Operating Partnership is a 99% limited
partner and Thicket Holdings, Inc., a Delaware corporation and
wholly-owned subsidiary of the Trust, is the sole general partner; (2)
Windrush Apartments ("Windrush"), a 202-unit apartment community
located in Atlanta, Georgia owned through Vinings Communities, L.P., a
Delaware limited partnership of which the Operating Partnership is a
99% limited partner and the Trust is the sole general partner; and (3)
Peachtree, an approximately 75,000 square foot, single-story business
park located in Atlanta, Georgia, owned by the Operating Partnership.
At December 31, 1998, Thicket, Windrush and Peachtree were 98%, 98% and
100% leased, respectively.
On July 1, 1996, Vinings effected a 1-for-8 reverse share split (the
"Share Split") of its 8,645,000 outstanding Shares. Shareholders
tendered their Shares and received one Share for every eight Shares
owned. Vinings has purchased and continues to purchase any fractional
Shares at a cost of $5.50 per share. As of December 31, 1998,
fractional Shares totaling 120 had been repurchased and retired. All
share and per share data included in the accompanying financial
statements and notes thereto have been restated to reflect the Share
Split.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------
Basis of Presentation
---------------------
The accompanying consolidated financial statements of Vinings include
the consolidated accounts of the Trust and its subsidiaries. All
significant intercompany balances and transactions have been eliminated
in consolidation. The minority interest of the unitholders in the
Operating Partnership on the accompanying balance sheet is calculated
based on the minority interest ownership percentage (18.06% as of
December 31, 1998) multiplied by the Operating Partnership's net
assets. The minority interest of the unitholders in the income or loss
of the Operating Partnership on the accompanying statement of
operations is calculated based on the weighted average number of Shares
and Units (as hereinafter defined) outstanding during the period. The
term "Vinings" or "Trust" hereinafter refers to Vinings Investment
Properties Trust and its subsidiaries, including the Operating
Partnership.
Income Taxes
------------
Vinings has elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"). As a result, Vinings will
generally not be subject to federal income taxation on that portion of
its income that qualifies as REIT taxable income to the extent that
Vinings distributes at least 95% of its taxable income to its
shareholders and satisfies certain other requirements. Accordingly, no
provision for federal income taxes has been included in the
accompanying consolidated financial statements.
Cash and Cash Equivalents
-------------------------
Vinings considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Cash Escrows
------------
Cash escrows consist of real estate tax, insurance and replacement
reserve escrows held by mortgagees. These escrows are funded monthly
from property operations and released solely for the purpose for which
they were established.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Real Estate Assets
------------------
Real estate assets are stated at depreciated cost less reductions for
impairment, if any. In identifying potential impairment, management
considers such factors as declines in a property's operating
performance or market value, a change in use, or adverse changes in
general market conditions. In determining whether an asset is impaired,
management estimates the future cash flows expected to be generated
from the asset's use and its eventual disposition. If the sum of these
estimated future cash flows on an undiscounted basis is less than the
asset's carrying cost, the asset is written down to its fair value. In
management's opinion, there has been no impairment of Vinings' real
estate assets as of December 31, 1998.
Ordinary repairs and maintenance are expensed as incurred. Major
improvements and replacements are capitalized and depreciated over
their estimated useful lives when they extend the useful life, increase
capacity or improve efficiency of the related asset. Depreciation is
computed on a straight-line basis over the useful lives of the real
estate assets (buildings and improvements, 5-40 years; furniture,
fixtures and equipment, 3-5 years; and tenant improvements, generally
over the life of the related lease).
Revenue Recognition
-------------------
All leases are classified as operating leases and rental income is
recognized when earned which materially approximates revenue
recognition on a straight-line basis.
Deferred Financing Costs and Amortization
-----------------------------------------
Deferred financing costs include fees and costs incurred to obtain
financing and are capitalized and amortized over the term of the
related debt.
Net Income (Loss) Per Share
---------------------------
The following is a reconciliation of net income (loss) available to the
common shareholders and the weighted average shares used in Vinings'
basic and diluted net income (loss) per share computations:
----------------------------------------
1998 1997 1996
----------------------------------------
Net income (loss) - basic $ 84,993 $(661,717) $(810,078)
Minority interest 18,900 (5,464) -
-----------------------------------------
Net income (loss) - diluted $103,893 $(667,181) $(810,078)
=========================================
Weighted average shares - basic 1,090,701 1,080,513 1,080,528
Dilutive Securities
Weighted average Units in
Operating Partnership 242,546 8,922 -
Share options 3,144 - -
-----------------------------------------
Weighted average shares - diluted 1,336,391 1,089,435 1,080,528
=========================================
Units in the Operating Partnership held by the minority unitholders are
redeemable for Shares of the Trust on a one-for-one basis, or for cash,
at the option of the Trust. For the twelve months ended December 31,
1998 options to purchase 27,500 shares were excluded and for the twelve
months ended December 31, 1997 options to purchase 26,000 shares were
excluded as the impact of such options was antidilutive.
Recent Accounting Pronouncement
-------------------------------
Vinings adopted Statements of Financial Accounting Standards ("SFAS")
No. 130, "Reporting of Comprehensive Income," during 1998, which
establishes a standard for reporting and display of comprehensive
income and its components. Comprehensive income is the total of net
income and all other nonowner changes in shareholders' equity. As of
December 31, 1998, Vinings had no items of other comprehensive income.
Vinings also adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," during 1998, which establishes new
standards for disclosure of segment information on the so called
"management approach." The management approach is based on the way that
the chief operating decision maker organizes segments within a company
for making operating decisions and assessing performance. Since
Vinings' real estate portfolio has similar economic characteristics,
customers, and products and services, Vinings evaluates the operating
performance of its real estate portfolio as one reportable segment, on
the same basis of presentation for internal and external reporting.
Therefore, no additional segment information is presented herein.
Reclassification
----------------
Certain 1997 and 1996 financial statement amounts have been
reclassified to conform with the current year presentation.
<PAGE>
NOTE 3 - REAL ESTATE ASSETS
- ---------------------------
Windrush Apartments
-------------------
On December 19, 1997, Vinings acquired Windrush for a purchase price of
$7,555,000 consisting of the assumption of an existing mortgage loan in
the amount of $6,464,898 and other liabilities and the issuance of
224,330 limited partnership units in the Operating Partnership
("Units").
The Thicket Apartments
----------------------
On June 28, 1996, Vinings acquired Thicket for a purchase price of
$8,650,000. The acquisition was financed by a mortgage loan on the
property in the amount of $7,392,000 and borrowings from Vinings' line
of credit.
Peachtree Business Center
-------------------------
Vinings acquired Peachtree through a deed-in-lieu of foreclosure on
April 12, 1990. Peachtree was recorded at $1,700,000, its fair market
value, which was less than the book value of the Trust's mortgage
investment at the date of foreclosure. Subsequent to the acquisition,
approximately $1,121,800 of improvements have been capitalized.
Acquisition Transaction
-----------------------
Vinings has entered into 17 separate contracts to purchase 13
multifamily communities totaling 2,032 units located in various markets
in Mississippi (the "Portfolio"). The aggregate purchase price of the
Portfolio is $94,300,000, consisting of cash and the assumption of
existing debt (the "Acquisition Transaction"). Five of the communities,
totaling 976 units, will be purchased through a joint venture structure
between the Operating Partnership and a private investor, and the
remaining eight communities, totaling 1,056 units, will be purchased by
subsidiaries of the Operating Partnership. For more information
regarding the Acquisition Transaction, see Note 10 to Vinings December
31, 1998 Consolidated Financial Statements.
NOTE 4 - REAL ESTATE INVESTMENTS
- --------------------------------
Hawthorne Note
--------------
The Trust acquired the Hawthorne Research and Development Complex
("Hawthorne") in 1992 through foreclosure of its mortgage note. The
Trust's investment in the property was written down from 1992 through
1994 to $4,605,702 to reflect its anticipated net realizable value. On
March 30, 1995, the Trust sold Hawthorne for $5,095,000 of which
$3,500,000 was paid at closing. The balance of $1,595,000 (the
"Hawthorne Note") was payable pursuant to a nonrecourse purchase money
note and was subordinate to first mortgage liens totaling $10,360,000.
In connection with the sale of Hawthorne, the Trust reported a gain of
$152,825. In connection with the liquidation of assets, the Trust
entered into an agreement with the first mortgage lien holder to sell
the Hawthorne Note for $700,000. At December 31, 1995, the Trust
established a valuation allowance of $895,000 to reflect its net
realizable value of $700,000. On January 3, 1996, the Trust closed on
the sale of the Hawthorne Note and recorded commissions and fees for a
loss on the sale of $26,800.
NOTE 5 - NOTES PAYABLE
- ---------------------
Mortgage Notes Payable
----------------------
At December 31, 1998, Vinings had the following mortgage notes payable:
1) 9.04% mortgage note payable in the original principal amount
of $7,392,000, which is secured by Thicket and which matures on July
1, 2003. Principal and interest are payable in monthly installments of
$59,691.
2) 7.5% mortgage note payable which was assumed on December 19,
1997 with a principal balance of $6,464,898, which is secured by
Windrush and which matures on July 1, 2024. Principal and interest are
payable in monthly installments of $47,457.
At December 31, 1998, the total outstanding principal for both notes
was $13,640,065. Scheduled maturities of the mortgage notes payable as
of December 31, 1998 are as follows:
1999 $ 156,664
2000 169,860
2001 184,179
2002 199,716
2003 7,103,494
Thereafter 5,826,152
------------
Total $13,640,065
============
Line of Credit
-------------
On June 28, 1998 Vinings renewed its line of credit in the amount of
$2,000,000 for six months, which expired on December 28, 1998. Vinings
did not renew the line of credit at that time and the bank informally
extended the due date to February 4, 1999 with interest continuing to
be paid monthly until Vinings secured alternate financing. On February
4, 1999 one of the independent Trustees purchased the line of credit
from the bank and Vinings is now paying interest to the Trustee monthly
at the annual rate of 8.50%. The Trustee has agreed that he will not
demand payment on the line of credit prior to January 1, 2000, unless
Vinings obtains alternative finanacing or unless the Trust sells
Peachtree, which secures the note. Vinings has agreed that is will use
its best efforts to obtain a new line of credit or alternative
financing as soon as possible, which if obtained will be used to repay
the outstanding indebtedness.
NOTE 6 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Vinings entered into management agreements with Vinings Properties,
Inc., an affiliate of certain officers and Trustees of Vinings, to
provide property management services for Thicket and Windrush for a fee
equal to a percentage of gross revenues plus a fee for data processing.
A total of $188,032, $93,235 and $44,459 in management fees and
$27,360, $15,240 and $7,620 in data processing fees were incurred by
Vinings during 1998, 1997 and 1996, respectively. On January 1, 1999,
Vinings entered into new management agreements with VIP Management,
LLC, also an affiliate of certain officers and Trustees of Vinings, to
provide property management services for Thicket, Windrush and
Peachtree on substantially the same terms as the previous agreements.
In addition, as a commitment to the rebuilding of Vinings, prior to
1998 The Vinings Group, Inc., the parent corporation of Vinings
Properties, Inc. (collectively, "The Vinings Group"), provided numerous
services at no cost to Vinings relating to administration, acquisition,
and capital and asset advisory services. Certain direct costs paid on
Vinings' behalf were reimbursed to The Vinings Group and beginning
January 1, 1998, The Vinings Group charged Vinings for certain overhead
charges. However, while Vinings has been in its initial growth stages,
The Vinings Group has been committed to providing as many services as
possible to promote the Trust's growth. A total of $45,000, $45,000 and
$15,000 was paid for 1998, 1997 and 1996, respectively, to The Vinings
Group for shareholder services provided for the sole benefit of Vinings
by one of The Vinings Group's employees. In addition, a total of
$105,000 has been incurred for the year ended December 31, 1998 to The
Vinings Group for the reimbursement of overhead expenses, which
includes salaries and benefits for other employees hired by The Vinings
Group for the benefit of the Trust. The officers of the Trust have not
received compensation from Vinings for their services during the three
year period ended December 31, 1998 except for the Restricted Stock, as
hereinafter defined, which was awarded on July 1, 1998. (See Note 13.)
On February 4, 1999 one of the independent Trustees purchased the
Trust's line of credit, which expired on December 28, 1998 and Vinings
is now paying interest to the Trustee monthly at the annual rate of
8.50%. (See Note 5.)
On December 19, 1997, the Trust acquired Windrush from Windrush
Partners, Ltd. (the "Partnership"), a Georgia limited partnership,
whose general partner was Hallmark Group Services Corp ("Hallmark"). At
the time of the transaction, Hallmark was an affiliate of the officers
and certain trustees of the Trust. In connection with the acquisition
of Windrush, an advisor's fee of $75,550 was paid by the Partnership to
MFI Realty, Inc.("MFI"), a wholly owned subsidiary of The Vinings
Group, Inc.
In connection with the acquisition of Thicket on June 28, 1996, a
broker's commission of $150,000 was paid by the seller of the property
to MFI.
In addition, the Trust paid a total of $21,000 during 1997 to
Northshore Communications, Inc., a company affiliated with one of the
Trustees, for the design and production of Vinings' 1996 annual report.
NOTE 7 - ADVISORY AGREEMENT
- ---------------------------
Prior to the consummation of the Tender Offer, the Trust had engaged
the Advisor to provide investment advisory services and act as the
administrator of Trust operations. The agreement with the Advisor,
which was terminated upon consummation of the Tender Offer, provided
for the payment of administrative, asset management and other servicing
fees to the Advisor for services rendered in administering the Trust's
operations. The Advisor earned administrative, asset management,
special services, and mortgage servicing fees aggregating $333,461 for
the year ended December 31, 1996.
NOTE 8 - DISTRIBUTIONS
- ---------------------
There were no distributions declared or distributed for the years ended
December 31, 1998 and 1997. Distributions declared and distributed for
the year ended December 31, 1996 aggregated $18,240,950, or $16.88 per
share. For federal income tax purposes, all distributions received by
shareholders for the year ended December 31, 1996 represented a return
of capital.
Since the consummation of the Tender Offer, management has not declared
any dividends. In an effort to rebuild Vinings' assets, all operating
cash flow has been reserved for future growth and expansion. However,
as assets are acquired and operating cash flow increases, Vinings
intends to pay distributions to shareholders in amounts at least
sufficient to enable the Trust to qualify as a REIT.
NOTE 9 - LEASING ACTIVITY
- -------------------------
The following is a schedule of future minimum rents due under operating
leases that have initial or remaining noncancellable lease terms in
excess of one year as of December 31, 1998, at Peachtree:
1999 $ 541,410
2000 412,217
2001 313,573
2002 120,557
------------
Total $1,387,757
============
One tenant generated 50% of Peachtree's revenues for the period
ended December 31, 1998. The same tenant accounts for 70% of the
future minimum lease payments.
NOTE 10 - Commitments and CONTINGENCIES
- ---------------------------------------
Acquisition Transaction
-----------------------
On June 18, 1998 Vinings entered into 18 separate contracts to purchase
14 multifamily communities totaling 2,184 units located in various
markets in Mississippi. On February 15, 1999, Vinings renegotiated 17
of the contracts to purchase 13 communities totaling 2,032 units (the
"Portfolio") and terminated one of the contracts. The renegotiated
purchase price of the Portfolio is $94,300,000, consisting of cash and
the assumption of existing debt (the "Acquisition Transaction"). Five
of the communities, totaling 976 units, will be purchased through a
joint venture structure between the Operating Partnership and a private
investor and the remaining eight communities, totaling 1,056 units,
will be purchased by subsidiaries of the Operating Partnership.
Vinings has completed its due diligence review and the contracts are
subject only to satisfactory title conditions. Vinings has received
conditional commitments for most of its equity financing and is in the
process of finalizing its equity commitments. If Vinings receives all
approvals and obtains sufficient capital to finance the transaction,
the closing of the Portfolio could take place early in the second
quarter of 1999, however, there can be no assurance that the
Acquisition Transaction will take place.
Miscellaneous
-------------
Vinings is, from time to time, subject to various claims that arise in
the ordinary course of business. These matters are generally covered by
insurance. While the resolution of these matters cannot be predicted
with certainty, management believes that the final outcome of such
matters will not have a material adverse effect on the financial
position or results of operations of Vinings.
NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION
- --------------------------------------------
Vinings paid interest of $1,299,005, $800,388 and $353,032 during 1998,
1997 and 1996, respectively.
In connection with the December 19, 1997 Windrush acquisition, Vinings
assumed a mortgage note payable in the amount of $6,464,898 and related
cash escrow accounts. In addition, 242,546 limited partnership units in
the Operating Partnership were issued during 1997 valued at $1,212,729.
NOTE 12 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------------------------
Based on interest rates and other pertinent information available to
Vinings as of December 31, 1998 and 1997, the Trust estimates that the
carrying value of cash and cash equivalents, the mortgage notes
payable, the line of credit, and other liabilities approximate their
fair values when compared to instruments of similar type, terms and
maturity.
Disclosure about fair value of financial instruments is based on
pertinent information available to management as of December 31, 1998
and 1997. Although management is not aware of any factors that would
significantly affect its estimated fair value amounts, such amounts
have not been comprehensively revalued for purposes of these financial
statements since December 31, 1998.
NOTE 13 - 1997 STOCK OPTION AND INCENTIVE PLAN
- ----------------------------------------------
Vinings' 1997 Stock Option and Incentive Plan (the "Plan") provides
incentives to officers, employees, Trustees, and other key persons
including the grant of share options, share appreciation rights,
restricted and unrestricted share awards, performance share awards, and
dividend equivalent rights.
Under the Plan, the maximum number of shares that may be reserved and
available for issuance is 10% of the total number of outstanding shares
at any time plus 10% of the number of Units outstanding at any time
that are subject to redemption rights. At December 31, 1998 the total
number of shares available for issuance under the Plan was 134,305.
Options granted under the Plan expire ten years from the date of grant.
During 1998 and 1997, Vinings granted non-qualified share options to
the officers, Trustees and certain key persons. The options vest in
full after one year from the date of the grant. Of the options granted
in 1998, 81,250 have an exercise price of $4.00 per share as compared
to a fair value of $3.63 on the date of the grant and 1,500 have an
exercise price of $4.75 per share, which is equal to the fair value on
the date of grant. The options granted in 1997 have an exercise price
of $5.00 per share as compared to a fair value of $4.56 per share on
the date of the grant.
On July 1, 1998 Vinings awarded 20,000 shares of restricted stock to
the officers and certain trustees (the "Restricted Stock"),
representing a total value of $80,000 (based on the fair market value
of a share of the Trust on the award date) which has been reflected in
compensation expense in the second quarter and in shareholders' equity
as of December 31, 1998. The Restricted Stock was awarded as
compensation for services to the Trust provided by such officers and
trustees as well as by The Vinings Group.
The Trust accounts for share options issued under the Plan in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," under which no compensation cost has been recognized since
all options have been granted with an exercise price equal to or above
the fair value of the Trust's shares on the date of grant.
In accordance with SFAS No. 123 "Accounting for Stock-Based
Compensation," the Trust has estimated the fair value of the Options
using a binomial option pricing model with the following weighted
average assumptions:
---------- ----------
1998 1997
---------- ----------
Risk free rate 5.50% 6.12%
Expected life 5 years 5 years
Expected volatility 30% 30%
Expected dividend yield 3.6% 3.6%
Using these assumptions, the estimated fair value of the options
granted were $87,112 and $38,000 for 1998 and 1997, respectively, which
would be included in compensation expense over the life of the vesting
period. Accordingly, had Vinings accounted for the Plan under SFAS 123,
Vinings' pro forma net income (loss) and net income (loss) per share
for the year ended December 31, 1998 and 1997 would have been as
follows:
------------------- ---------------
1998 1997
------------------- ---------------
Net income:
As reported $84,993 ($661,717)
=================== ===============
Pro forma $29,799 ($680,717)
=================== ===============
Net income per share:
As reported $0.08 ($0.61)
=================== ===============
Pro forma $0.03 ($0.63)
=================== ===============
The pro forma annual compensation cost included in determining pro
forma net income may not be representative of future pro forma annual
compensation cost since the estimated fair value of stock options is
included in compensation expense over the vesting period, and
additional stock options may be granted in future years.
A summary of stock option activity under the Plan is presented in the
following table:
<TABLE>
<CAPTION> -------------------------------------- -----------------------------------
1998 1997
------------ ------------------------- ---------- ------------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C>
Options outstanding,
beginning of year 26,000 $ 5.00 - -
Granted 82,750 $ 4.01 26,000 $5.00
------------ ------------------------- ---------- ------------------------
Options outstanding,
end of year 108,750 $ 4.25 26,000 $5.00
============ ========================= ========== ========================
Options exercisable,
end of year 26,000 $ 5.00 - -
============ ========================= ========== ========================
Weighted average per share
value of options granted $ 1.05 $1.46
========================= ========================
Options outstanding:
Exercise price range $4.00-$5.00 $5.00
========================= ========================
Weighted average
remaining life 9.11 9.5
========================= ========================
</TABLE>
NOTE 14 - UNUSUAL ITEM
- ----------------------
In August 1997, Vinings, through the Operating Partnership, began
contract negotiations for the acquisition of a 2,365-unit portfolio of
16 multifamily properties. The sellers, which were 16 individual
partnerships (the "Sellers"), were to contribute the properties to the
Operating Partnership in exchange for a combination of Units and/or
cash and the assumption of existing mortgage indebtedness (the
"Portfolio Transaction"). The officers of Vinings spent substantial
amounts of time and the Trust spent substantial amounts of money in its
due diligence on the properties and in contract negotiations
specifically for this portfolio. Vinings believes that it secured a
binding commitment from the Sellers for the Portfolio Transaction.
Conditional commitments for equity financing were obtained and Vinings
was prepared to close on the transaction in early 1998. Within thirty
days of closing, the general partner of the Sellers terminated the
contract for reasons Vinings believes to be pretextual, in breach of
the contract and not in the best interests of the partners of the
selling partnerships or the shareholders of the Trust.
On February 3, 1998, Vinings commenced an action against the Sellers,
their general partners and a related property management company
seeking specific enforcement of the contract and damages for the
defendant's willful breach of contract, lack of good faith negotiation
and tortious interference in connection with the breach and termination
of the contract. In a related case, the Sellers filed an action on
January 29, 1998 seeking a declaratory judgement that the contract was
not valid, binding and enforceable against them. Because of the
uncertainty of the legal action at December 31, 1997, Vinings expensed
as unrecoverable due diligence, contract negotiation and other
acquisition costs totaling $532,185 which has been shown as Unusual
item, net on the Statement of Operations for 1997.
On June 3, 1998, a settlement was agreed to between the parties
pursuant to a Settlement Agreement and Mutual Release, the terms of
which are confidential. All pending claims have been dismissed. Amounts
received under the Settlement Agreement and Mutual Release, net of
legal fees incurred in connection with the litigation, totaled
$260,910, which has been shown as Unusual item, net on the Statement of
Operations for 1998.
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
=======================================================
<CAPTION>
---------------------------
Initial Cost to Trust
---------------------------
Improvements
Capitalized
Building and Subsequent to
Description Encumbrance Land Improvements Acquisition Land
- -------------------------------------------------------------------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Peachtree Business Center $ 2,000,000 $ 400,000 $ 1,300,000 $1,121,835 $ 400,000
The Thicket Apartments 7,262,759 1,070,500 7,590,400 205,098 1,070,500
Windrush Apartments 6,377,306 1,414,000 6,141,000 66,579 1,414,000
--------------------------------------------- -------------- -------------
$15,640,065 $2,884,500 $15,031,400 $1,393,512 $2,884,500
============================================= ============== =============
----------------------------------------------
Gross amounts at which
carried at close of period
----------------------------------------------
Life on
which Date of
Building and Accumulated Depreciation Date Original
Description Improvements Total Depreciation is Computed Acquired Construction
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Peachtree Business Center $ 2,421,835 $ 2,821,835 $ 602,195 5-40 Years 4/90 1984
The Thicket Apartments 7,795,498 8,865,998 868,942 5-40 Years 6/96 1989
Windrush Apartments 6,207,579 7,621,579 193,541 5-40 Years 12/97 1983
----------------------------------------------
$16,424,912 $19,309,412 $1,664,678
==============================================
<FN>
The accompanying notes are an integral part of this schedule.
</FN>
</TABLE>
<PAGE>
VININGS INVESTMENT PROPERTIES TRUST
NOTES TO SCHEDULE III
December 31, 1998
===================================
(A) The Peachtree investment was acquired through a deed in-lieu of
foreclosure of an original mortgage note investment. In June 1996, the
Trust obtained a $2,000,000 line of credit, which was secured
by Peachtree. At December 31, 1998, $2,000,000 was outstanding on
the line.
(B) The Thicket Apartments was acquired on June 28, 1996 for a purchase
price of $8,650,000. It was financed by a mortgage loan in the original
amount of $7,392,000 and borrowings from the Trust's line of credit,
which is secured by Peachtree.
(C) Windrush Apartments was acquired on December 19, 1997, for a purchase
price of $7,555,000 consisting of the assumption of an existing
mortgage loan in the amount of $6,464,898 and other liabilities and the
issuance of 224,330 limited partnership units in the Operating
Partnership.
(D) Gross capitalized costs of real estate assets are summarized as follows:
---------------------------------------------
1998 1997 1996
---------------------------------------------
Balance at beginning of period $19,162,992 $11,472,454 $ 2,732,057
-------------- -------------- -------------
Additions during period:
Additions - 7,555,000 8,660,900
Improvements 146,420 135,538 79,497
-------------- -------------- -------------
Total additions 146,420 7,690,538 8,740,397
-------------- -------------- -------------
Balance at close of period $19,309,412 $19,162,992 $11,472,454
============== ============== =============
(E) Accumulated depreciation on real estate assets is as follows:
------------- ------------ -------------
1998 1997 1996
------------- ------------ -------------
Balance at beginning of period $1,036,311 $ 613,918 $374,524
------------- -------------- -------------
Additions during period:
Peachtree Business Center 76,979 74,263 76,429
The Thicket Apartments 357,847 348,130 162,965
Windrush Apartments 193,541 - -
------------- ------------ -------------
Total additions 628,367 422,393 239,394
------------- ------------ -------------
Balance at close of period $1,664,678 $1,036,311 $613,918
============= ============ =============
<PAGE>
INDEX TO EXHIBITS
=================
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Second Amended and Restated Declaration of Trust of Vinings (filed herewith).
3.2 Amendment No. 1 to the Second Amended and Restated Declaration of Trust of the Trust
(filed herewith).
3.3 Amendment No. 2 to the Second Amended and Restated Declaration of Trust of the Trust
(filed herewith).
3.4 Amended and Restated Bylaws of the Trust (incorporated by reference to Exhibit 3.2 to
Vinings' Registration Statement on Form S-11, No. 2-94776).
10.1 Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties,
L.P. (incorporated by reference to Exhibit 10.1 to Vinings' Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, No. 0-13693).
10.2 First Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference to Exhibit 10.2 to the Vinings'
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693).
10.3 Second Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference to Exhibit 10.3 to the Vinings'
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693).
10.4 Third Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (filed herewith).
10.5 Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (filed herewith).
10.6 Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (filed herewith)
10.7 Agreement to Contribute, dated April 1, 1997, between Vinings Investment Properties,
L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.1 to the
Trust's Current Report on Form 8-K filed December 29, 1997, No. 0-13693).
10.8 Amendment to Agreement to Contribute, dated August 11, 1997, between Vinings Investment
Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.2
to the Trust's Report on Form 8-K filed December 29, 1997, No. 0-13693).
10.9 Second Amendment to Agreement to Contribute, dated October 30, 1997, between Vinings
Investment Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to
Exhibit 10.3 to the Trust's Report on Form 8-K filed December 29, 1997, No. 0-13693).
10.10 Management Contract dated December 19, 1997 between Vinings Communities, L.P. and
Vinings Properties, Inc. (incorporated by reference to Exhibit 10.10 to Vinings' Annual
Report on Form 10-K for the fiscal year ended December 31 1997, No. 0-13693).
10.11 Management Contract dated January 1, 1999, between Thicket Apartments, L.P. and VIP
Management, LLC (filed herewith).
10.12 Management Contract dated January 1, 1999, between Vinings Communities, L.P. and VIP
Management, LLC (filed herewith).
10.13 Management Contract dated January 1, 1999, between Vinings Investment Properties, L.P.
and VIP Management, LLC (filed herewith).
10.14 Form of Amended and Restated Agreement of Purchase and Sale for The Acquisition
Transition with attached Schedule of Material Differences For All Properties (filed
herewith).
10.15 Commercial Credit Agreement between Hardwick Bank and Trust Company and the Trustees of
the Trust dated June 28, 1997 (incorporated by reference to Exhibit 10.13 to Vinings'
Annual Report on Form 10-K for the fiscal year ended December 31 1997, No. 0-13693).
10.16 Amendment to Commercial Credit Agreement between Hardwick Bank and Trust Company and the
Trustees of the Trust dated July 1, 1998 (filed herewith).
21.1 Subsidiaries of the Trust (filed herewith).
27 Financial Data Schedule (filed herewith).
</TABLE>
SECOND
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
MELLON PARTICIPATING MORTGAGE TRUST
COMMERCIAL PROPERTIES SERIES 85/10
----------------------------------
INDEX
- ----- Page
----
THE TRUST; DEFINITIONS 2
Name 2
Place of Business 2
Nature of Trust 3
Purpose of the Trust 3
Definitions 3
INVESTMENT POLICY 9
General Statement of Policy 9
Additional Investments 9
TRUSTEES 10
Number, Term of Office, Qualifications of Trustees 10
Compensation and Other Remuneration 10
Resignation, Removal and Death of Trustees 10
Vacancies 11
Successor and Additional Trustees 11
Actions by Trustees 11
Unaffiliated Trustees 12
Committees 12
TRUSTEES' POWERS 13
Power and Authority of Trustees 13
Specific Powers and Authorities 13
By-Laws 18
Employment of Adviser, Employees, Agents, etc 18
Term 19
Activities of Adviser 19
Adviser Compensation 19
Operating Expenses 20
PROHIBITED ACTIVITIES 20
Prohibited Investments and Activities 20
Obligor's Default 22
Percentage Determinations 22
Shares 22
Legal Ownership of Trust Estate 23
Shares Deemed Personal Property 23
Share Record, Issuance and Transferability of Shares 23
Dividends and Distributions to Shareholders 24
Transfer Agent, Dividend Disbursing Agent and Registrar 24
Shareholders' Meetings and Consents 25
Proxies 25
Reports to Shareholders 25
Fixing Record Date 26
Notice to Shareholders 26
Shareholders' Disclosure; Trustees' Right to Refuse to
Transfer Shares; Limitation on Holdings; Redemption of Shares 26
Inspection by Shareholders 29
Limitation of Liability of Trustees and Officers 29
Limitation of Liability of Shareholders, Trustees and Officers 29
Express Exculpatory Clauses in Instruments 29
Indemnification and Reimbursement of Trustees and Officers 29
Right of Trustees and Officers to Own Shares or Other Property
and to Engage in Other Business 30
Transactions with Affiliates 31
Persons Dealing With Trustees or Officers 31
Reliance 32
Duration and Termination of Trust 32
Merger, etc 33
Amendment Procedure 34
Amendment, etc. Prior to First Public Offering of Shares 34
Applicable Law 34
Filing of Copies; References; Headings 35
Provisions of the Trust in Conflict With Law or Regulations 35
Binding Effect; Successors in Interest 37
Signatures and Acknowledgments
<PAGE>
SECOND
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
MELLON PARTICIPATING MORTGAGE TRUST
COMMERCIAL PROPERTIES SERIES 85/10
-----------------------------------
THE DECLARATION OF TRUST of Mellon Participating Mortgage
Trust, Series 85/10 dated as of the 7th day of December, 1984, and previously
amended January 11, 1985 is hereby amended, effective February 6, 1985 by the
undersigned Trustees, who constitute all the Trustees of Mellon Participating
Mortgage Trust, Series 85/10, to make the amendments as set forth in the
following Amended and Restated Declaration of Trust of Mellon Participating
Mortgage Trust Commercial Properties Series 85/10:
The undersigned Trustees of Mellon Participating Mortgage
Trust, Commercial Properties Series 85/10 hereby declare that all property,
real, personal or mixed, tangible or intangible or of any other description now
held or hereafter acquired by or transferred to them in their capacity as
Trustees hereunder, together with the income and profits therefrom and the
proceeds thereof, shall be held by them in trust and shall be received, managed
and disposed of for the benefit of the Shareholders hereunder and in the manner
and subject to the terms and conditions herein provided.
WHEREAS, the Trustees named herein desire to form a trust for
the purposes of raising capital and utilizing such capital primarily to
invest in mortgage loans and other real estate related investments; and
WHEREAS, the Trustees named herein desire that such trust
qualify as a Real Estate Investment Trust under Sections 856-858 of the
Internal Revenue Code of 1954, as amended; and
WHEREAS, the beneficial interest in the assets of such trust
shall be divided into transferable shares of beneficial interest,
evidenced by certificates therefor, as hereinafter provided;
NOW THEREFORE, the Trustees named herein hereby declare that
they will hold all investments of every type and description which they may
acquire as such Trustees, together with the proceeds from the sale or other
disposition thereof, in trust, to manage, improve, hold and dispose of the same
for the benefit of the holders of record from time to time of the certificates
for shares of beneficial interest of such trust being issued and to be issued
hereunder and in the manner and subject to the provisions hereof, to wit:
ARTICLE I
THE TRUST; DEFINITIONS
1.1 NAME. The Trust created by this Declaration of Trust is
herein referred to as the "Trust" and shall be known by the name "Mellon
Participating Mortgage Trust, Commercial Properties Series 85/10." So far as may
be practicable, legal and convenient, the affairs of the Trust shall be
conducted and transacted under that name, which name shall not refer to the
Trustees individually or personally or to the beneficiaries or Shareholders of
the Trust, or to any officers, employees or agents of the Trust.
Under circumstances in which the Trustees determine that the
use of the name "Mellon Participating Mortgage Trust, Commercial Properties
Series 85-10" is not practicable, legal or convenient, they may as appropriate
use and adopt another name under which the Trust may hold property or operate in
any jurisdiction. Legal title to all the properties subject from time to time to
this Declaration of Trust shall be transferred to, vested and held by the
Trustees as joint tenants with right of survivorship as Trustees of this Trust;
provided that the Trustees shall have the power to cause legal title to any
property of the Trust to be held by and/or in the name of one or more of the
Trustees, or any other Person as nominee, on such terms, in such manner, and
with such powers as the Trustees may determine; and further provided that the
Trustees shall have the power to cause any property of the Trust to be held in
the custody of (i) any bank and that such bank may hold the property of the
Trust in the name of any nominee, partnership or nontaxable corporation, and
(ii) any depository system for the central handling of Securities.
Notwithstanding the foregoing provisions of this Section 1.1,
it is hereby acknowledged that Mellon Bank Corporation has a proprietary
interest in the name "Mellon." Accordingly, and in recognition of this right, at
any time that the Trust ceases to retain a subsidiary or affiliate of Mellon
Bank Corporation to perform the services of Adviser, the Trustees will, promptly
after receipt of a written request of Mellon Bank Corporation (if such request
is made within three months after such subsidiary or affiliate ceases to perform
such services of Adviser), change the name of the Trust to a name that does not
contain the name "Mellon" or any other word or words that might, in the sole
discretion of Mellon Bank Corporation, be susceptible of indication of some form
of relationship between the Trust and Mellon Bank Corporation or any subsidiary
or affiliate thereof. Consistent with the foregoing, it is specifically
recognized that Mellon Bank Corporation or one or more of its affiliates has in
the past and may in the future organize, sponsor or otherwise permit to exist
other investment vehicles (including vehicles for investment in real estate) and
financial and service organizations having the word "Mellon" as part of their
name, all without the need for any consent (and without the right to object
thereto) by the Trust.
1.2 PLACE OF BUSINESS. The Trust shall maintain an office, and
shall designate a resident agent for the service of process (whose name and
address shall be reported from time to time to the Secretary of State of
Massachusetts), in New York, New York. The Trust may have such other offices or
places of business within or without the Commonwealth of Massachusetts as the
Trustees may from time to time determine.
1.3 NATURE OF TRUST. The Trust is a trust or voluntary
association of the type referred to in Section 1 of Chapter 182 of the General
Laws of the Commonwealth of Massachusetts and commonly known as a business
trust. It is intended that the Trust elect to carry on business as a real estate
investment trust as described in the REIT Provisions of the Internal Revenue
Code as soon as and as long as it is deemed by the Trustees to be in the best
interest of the Shareholders to make such election. The Trust is not intended to
be, shall not be deemed to be, and shall not be treated as, a general
partnership, limited partnership, joint venture, corporation, or joint stock
company or association (but nothing herein shall preclude the Trust from being
taxable as an association under the REIT Provisions of the Internal Revenue
Code) nor shall the Trustees or Shareholders or any of them for any purpose be
deemed to be or be treated in any way whatsoever to be, liable or responsible
hereunder as partners or joint venturers or as agents of one another. The
relationship of the Shareholders to the Trustees shall be solely that of
beneficiaries of the Trust and their rights shall be limited to those conferred
upon them by this Declaration.
1.4 PURPOSE OF THE TRUST. The purpose of the Trust is to
purchase, hold, lease, manage, sell, exchange, develop, subdivide, joint
venture, mortgage, finance and improve real property and interests in real
property, including notes, bonds and other obligations secured by mortgages or
deeds of trust on real property, and in general to carry on any other acts in
connection with or arising out of the foregoing and to have and exercise all
powers that are available to voluntary associations formed under the laws of the
Commonwealth of Massachusetts and to do any or all of the things herein set
forth to the same extent as natural persons might or could do.
1.5 DEFINITIONS. The terms defined in this Section 1.5
whenever used in this Declaration shall, unless the context otherwise requires,
have the respective meanings hereinafter specified in this Section 1.5. In this
Declaration, words in the singular number include the plural and in the plural
number include the singular.
1.5.1 ADVISER. "Adviser" shall mean Mellon Real Estate
Investment Management Corporation or any other person (other than any individual
who is a direct employee of the Trust) retained by the Trustees consistent with
the provisions of Article V to manage and administer the day-to-day affairs of
the Trust.
1.5.2 AFFILIATED PERSON. An "Affiliated Person" of another
Person shall mean any Person who owns beneficially, directly or indirectly, 1%
or more of the outstanding capital stock, shares or equity interests of such
other Person or of any other Person which controls, is controlled by or is under
common control with such other Person or who is an officer, director, employee,
partner or trustee (excluding Unaffiliated Trustees not otherwise affiliated
with the entity) of such Person or of any other Person which controls, is
controlled by or is under common control with such Person.
1.5.3 ANNUAL MEETING OF SHAREHOLDERS. "Annual Meeting of
Shareholders" shall mean the meeting referred to in the first sentence of
Section 7.7.
1.5.4 ANNUAL REPORT. "Annual Report" shall mean the
Report referred to in Section 7.9.
1.5.5 Book Value. "Book Value" shall mean the value of an
asset or assets of the Trust on the books of the Trust before reserves for
depreciation or bad debts or other similar non-cash reserves, and before
deducting any Indebtedness or other liability in respect thereto.
1.5.6 BY-LAWS. "By-Laws shall mean the By-Laws referred
to in Section 4.3, if adopted.
1.5.7 DECLARATION. "Declaration" shall mean this Amended and
Restated Declaration of Trust of Mellon Participating Mortgage Trust, Commercial
Properties Series 85-10 and all amendments or modifications hereof. References
in this Declaration to "herein" and "hereunder" shall be deemed to refer to this
Declaration and shall not be limited to the particular text, Article or Section
in which such words appear.
1.5.8 FIRST MORTGAGE. "First Mortgage" shall mean a Mortgage
which takes priority or precedence over all other charges or liens upon the same
Real Property, other than a lessee's interest therein, and which must be
satisfied before such other charges are entitled to participate in the proceeds
of any sale. Such Mortgage may be upon a lessee's interest in Real Property.
Such priority shall not be deemed abrogated by liens for taxes, assessments
which are not delinquent or remain payable without penalty, contracts (other
than contracts for repayment of borrowed moneys) or leases, mechanics' and
materialmen's liens for work performed and materials furnished which are not in
default or are in good faith being contested, and other claims normally deemed
in the local jurisdiction not to abrogate the priority of a First Mortgage.
1.5.9 FIRST MORTGAGE LOAN. "First Mortgage Loan" shall
mean a Mortgage Loan secured or collateralized by a First Mortgage.
1.5.10 INDEBTEDNESS. "Indebtedness" shall mean the amount of
all obligations of the Trust for money borrowed, including all obligations
issued or assumed by the Trust as full or partial payment for property, in each
case except to the extent money shall have been set aside or deposited for the
payment thereof. "Indebtedness" shall be computed without any discount due to
the fact that the interest rate on financing associated with one or more
property acquisitions of the Trust is below a market rate of interest at the
time of any such acquisition.
1.5.11 JUNIOR MORTGAGE. "Junior Mortgage" shall mean a
Mortgage which (I) has the same priority or precedence over charges or
encumbrances upon Real Property as that required for a First Mortgage except
that it is subject to the priority of one or more Mortgages and (ii) must be
satisfied before such other charges or liens (other than prior Mortgages) are
entitled to participate in the proceeds of any sale.
1.5.12 JUNIOR MORTGAGE LOAN. "Junior Mortgage Loan" shall
mean a Mortgage Loan secured or collateralized by a Junior Mortgage, and also
includes any Subordinated Land Purchase-Leaseback.
1.5.13 LAND PURCHASE-LEASEBACK. "Land Purchase-Leaseback"
shall mean a transaction involving the purchase of the land on which
improvements are or are to be constructed, and the lease, generally to the
seller, of the land pursuant to a land or ground lease. In a "Subordinated Land
Purchase-Leaseback" transaction, the Trust's interest in the land will be
subject to a First Mortgage and other liens or security interests which are
liens on the entire Real Property, including the land.
1.5.14 LIMIT. "Limit" shall mean the number of Shares
described in Section 7.12.3.
1.5.15 MORTGAGE. "Mortgage" shall mean the security
interest in Real Property granted to secure a Mortgage Loan.
1.5.16 MORTGAGE LOAN. "Mortgage Loan" shall mean a note,
bond or other evidence of indebtedness or obligation which is secured or
collateralized by an interest in Real Property.
1.5.17 NET INCOME. "Net Income" for any period shall mean the
net income of the Trust for such period computed on the basis of its results of
operations for such period, excluding (i) any disposition fee or any incentive
fee payable to the Adviser, (ii) gains from the disposition of assets of the
Trust (including realized gains from the sale of Real Estate Investments), (iii)
amortization, depreciation or depletion of the assets of the Trust and (iv)
extraordinary items.
1.5.18 PERSON. "Person" shall include individuals,
corporations, limited partnerships, general partnerships, joint stock companies
or associations, joint ventures, associations, consortia, companies, trusts,
banks, trust companies, land trusts, common law trusts, business trusts, or
other entities and governments and agencies and political subdivisions thereof.
1.5.19 REAL ESTATE INVESTMENT. "Real Estate Investment" shall
mean any direct or indirect investment in any interest in Real Property
(including Land Purchase- Leaseback transactions) or in any Mortgage Loan, or in
any entity, partnership or venture whose principal purpose is to make any such
investment or investments.
1.5.20 REAL ESTATE INVESTMENT TRUST. "Real Estate Investment
Trust" and "REIT" shall mean a real estate investment trust as defined in the
REIT Provisions of the Internal Revenue Code, at such time as it is the policy
of the Trust (or, if applicable to a Person other than this Trust, then of such
other Person) to obtain the favorable federal income tax benefits available to a
qualified real estate investment trust.
1.5.21 REAL PROPERTY. "Real Property" shall mean and include
land, rights and interests in land, leasehold interests (including but not
limited to interests of a lessor or lessee therein), and any buildings,
structures, improvements, fixtures and equipment located on or to be located on
or used or to be used in connection with land, leasehold interests and rights in
land or interests in land, but does not include Mortgages, Mortgage Loans, or
interests therein.
1.5.22 REIT PROVISIONS OF THE INTERNAL REVENUE CODE. "REIT
Provisions of the Internal Revenue Code" shall mean Parts II and III of
Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code of 1954, as
now enacted or hereafter amended, or successor statutes, other sections of said
Code referred to or incorporated in, or referring to or incorporating, any other
provisions of said Parts II or III, and applicable regulations under and rulings
with respect to the aforesaid provisions of said Code.
1.5.23 SECURITIES. "Securities" shall mean any stock, shares,
voting trust certificates, bonds, debentures, notes or other evidences of
Indebtedness or ownership or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for, receipts for, guarantees of, or warrants,
options or rights to subscribe, to purchase or acquire any of the foregoing.
1.5.24 SHARES. "Shares" shall mean the shares of beneficial
interest in the Trust as described in Section 7.1. "Excess Shares" shall mean
Shares described as such in Section 7.12.3.
1.5.25 SHAREHOLDERS. "Shareholders" shall mean as of any
particular time the holders of record of outstanding Shares at such time.
1.5.26 TOTAL ASSETS; Invested Assets; Net Assets; Base Assets.
"Total Assets" shall mean the total invested assets of the Trust, without
deducting therefrom any liabilities of the Trust and including depreciable
assets therein at the cost of such assets on the books of the Trust. "Invested
Assets" shall mean the aggregate Book Values of the Real Estate Investments of
the Trust. "Average Invested Assets" shall mean for any period the average of
the values of Invested Assets at the beginning of the period and at the end of
each month during such period. "Base Assets" shall mean the Book Value, or such
other value as the Trustees (including a majority of the Trustees not affiliated
with the Adviser) may determine to be the fair value of Total Assets under
management less cash and unsecured indebtedness; and "Average Base Assets" for
any period shall be the average of Base Assets at the beginning of the period
and at the end of each month during such period. "Net Assets" shall mean Total
Assets (other than intangibles) less total liabilities, calculated at least
quarterly on a basis consistently applied. Notwithstanding any other provision
of this Section 1.5.26, Total Assets, Invested Assets, Average Invested Assets,
Base Assets, Average Base Assets and Net Assets shall be computed without any
discount in the carrying amount of any assets due to the fact that the interest
rate on financing associated with one or more property acquisitions of the Trust
is below market rate of interest at the time of such acquisition.
1.5.28 TOTAL OPERATING EXPENSES. "Total Operating Expenses"
for any period shall mean all cash operating expenses, including additional
expenses paid directly or indirectly by the Trust to the Adviser, Affiliated
Persons of the Adviser, or third parties based upon their relationship with the
Trust, including loan administration, servicing, engineering, inspection and all
other expenses paid by the Trust, exclusive of:
(i) Interest and discounts;
(ii) Taxes and license fees;
(iii) Expenses connected directly with the issuance, sale and
distribution, or listing on a stock exchange, of Securities
of the Trust, including but not limited to underwriting and
brokerage discounts and commissions, private placement fees
and expenses, legal and accounting costs, printing, engraving
and mailing costs, and listing and registration fees; and
(iv) Expenses connected directly with the acquisition,
disposition, operation or ownership of Trust assets,
including but not limited to costs of foreclosure;
maintenance, repair and improvement of property; maintenance
and protection of the lien of mortgages; property management
fees; legal fees; premiums for insurance on property owned by
or mortgaged to the Trust; taxes; brokerage and acquisition
fees and commissions; appraisals fees; title insurance and
abstract expenses; provisions for depreciation, depletion and
amortization; disposition fees and subordinated real estate
commissions; and losses on the disposition of assets and
provisions for such losses.
1.5.29 TRUST. "Trust" shall mean the trust created by
this Declaration.
1.5.30 TRUSTEES. "Trustees" shall mean, as of any particular
time, Trustees holding office under this Declaration at such time, whether they
be the Trustees named herein or additional or successor Trustees, and shall not
include the officers, representatives or agents of the Trust or the
Shareholders; but nothing herein shall be deemed to preclude the Trustees from
also serving as officers, representatives or agents of the Trust or owning
Shares.
1.5.31 TRUST ESTATE. "Trust Estate" shall mean as of any
particular time any and all property, real, personal or otherwise, tangible or
intangible, transferred, conveyed or paid to the Trust or Trustees, and all
rents, income, profits and gains therefrom which at such time is owned or held
by the Trust or the Trustees.
1.5.32 UNAFFILIATED TRUSTEE. "Unaffiliated Trustee" shall mean
a Trustee who (i) is not an Affiliated Person of the Adviser or of any
Affiliated Person of the Adviser owns no interest in the Adviser or in any
Affiliated Person of the Adviser, and (ii) any Trustee who performs no services
for the Trust except in his capacity as a Trustee and who has no business or
professional relationship with the Adviser or any Affiliate of the Adviser. If a
member of a Trustee's immediate family could not be an Unaffiliated Trustee,
such Trustee shall not be considered an Unaffiliated Trustee.
1.5.33 UNIMPROVED REAL PROPERTY. "Unimproved Real Property"
shall mean an investment in Real Property which (a) is an equity interest in
Real Property which has not been acquired for the purpose of producing rental or
other operating income and (b) relates to land on which (i) no development or
construction is in progress, and (ii) no development or construction is planned
in good faith to commence within one year.
1.5.34 VALUATION. "Valuation" shall mean a determination, by
the Trustees or by a Person having no economic interest in such Real Property,
who in the sole judgment of the Trustees is properly qualified to make such a
determination, of the market value, as of the date of the valuation, of Real
Property in its existing state or in a state to be created.
ARTICLE II
INVESTMENT POLICY
2.1 GENERAL STATEMENT OF POLICY. It is the general policy of
the Trust that the Trustees invest the Trust Estate principally in investments
which will conserve and protect the Trust's invested capital, produce cash
distributions, and offer the potential for capital appreciation to be realized
upon the sale, refinancing or other disposition of such investments. To achieve
this objective the Trustees intend to invest the assets of the Trust in Mortgage
Loans and Land Purchase-Leasebacks, including those with equity enhancements,
and other real estate investments which offer the potential to achieve such
objective. The consideration paid for Real Property acquired by the Trust shall
ordinarily be based on the fair market value of the property as determined by a
majority of the Trustees. In cases where a majority of the Unaffiliated Trustees
so determine, such fair market value shall be as determined by a qualified
independent real estate appraiser selected by the Trustees, including a majority
of the Unaffiliated Trustees. The Trustees, including a majority of the
Unaffiliated Trustees, shall at least annually review the investment policies of
the Trust to determine that the policies being followed by the Trust are in the
best interests of the Shareholders, and each such determination and the basis
therefor shall be set forth in the minutes of meetings of the Trustees.
2.2 ADDITIONAL INVESTMENTS. To the extent that the Trust has
assets not otherwise invested in accordance with Section 2.1, the Trustees may
invest such assets in:
2.2.1 Obligations of or guaranteed or insured by the United
States Government or any agencies or political subdivisions thereof;
2.2.2 Obligations of or guaranteed by any state, territory or
possession of the United States of America or any agencies or political
subdivisions thereof;
2.2.3 Evidences of deposits in, or obligations of, banking
institutions, state and federal savings and loan associations and savings
institutions which are members of the Federal Deposit Insurance Corporation or
of the Federal Home Loan Bank System, or shares in money market funds (whether
or not insured), including those issued by an Affiliated Person of the Adviser;
2.2.4 Shares of other REITs, to the extent permitted by
the REIT provisions of the Internal Revenue Code; or
2.2.5 Other Securities and property to the extent not
inconsistent with the REIT Provisions of the Internal Revenue Code.
ARTICLE III
TRUSTEES
3.1 NUMBER, TERM OF OFFICE, QUALIFICATIONS OF TRUSTEES. There
shall be no fewer than 3 nor more than 9 Trustees, at least a majority of whom
shall be Unaffiliated Trustees. The initial Trustees shall be the signatories
hereto. The Trustees from time to time may fix the number of Trustees within the
range established in the Declaration of Trust and may change the range in the
authorized number of Trustees, provided that the lower end of the authorized
range shall not be fewer than three. Subject to the provisions of Section 3.3,
each Trustee shall hold office for a term of one year or until the election and
qualification of his successor. At each Annual Meeting of Shareholders, the
Shareholders shall elect successors to the Trustees, unless the number of
Trustees is then being reduced. There shall be no cumulative voting in the
election of Trustees. Trustees may be re-elected without limit as to the number
of times. A Trustee shall be an individual at least 21 years of age who is not
under legal disability. Unless otherwise required by law or by action of the
Trustees, no Trustee shall be required to give bond, surety or security in any
jurisdiction for the performance of any duties or obligations hereunder. The
Trustees in their capacity as Trustees shall not be required to devote their
entire time to the business and affairs of the Trust.
3.2 COMPENSATION AND OTHER REMUNERATION. The Trustees (other
than the Unaffiliated Trustees) shall be entitled to receive such reasonable
compensation for their services as Trustees as they may determine from time to
time. The Trustees shall also be entitled to receive, directly or indirectly,
remuneration for services rendered to the Trust in any other capacity,
including, without limitation, services as an officer of or consultant to the
Trust, legal, accounting or other professional services, or services as a
transfer agent, or underwriter, or otherwise. The Trustees shall be reimbursed
for their reasonable expenses incurred in connection with their services as
Trustees.
3.3 RESIGNATION, REMOVAL AND DEATH OF TRUSTEES. A Trustee may
resign at any time by giving written notice to the remaining Trustees at the
principal offices of the Trust. Such resignation shall take effect on the date
such notice is given or at any later time specified in the notice without need
for prior accounting. A Trustee may be removed at any time with or without cause
by vote or written consent of holders of a majority of the outstanding Shares
entitled to vote thereon or with cause by all remaining Trustees. For purposes
of the immediately preceding sentence "cause" shall include physical and/or
mental inability, due to a condition or illness which is expected to be of
permanent or indefinite duration, to perform the duties of a Trustee. A Trustee
may be removed at a special meeting of Shareholders. Upon the resignation or
removal of any Trustee, or his otherwise ceasing to be a Trustee, he shall
execute and deliver such documents as the remaining Trustees shall require for
the conveyance of any Trust property held in his name, shall account to the
remaining Trustee or Trustees as they require for all property which he holds as
Trustee and shall thereupon be discharged as Trustee. Upon the incapacity or
death of any Trustee, his legal representative shall perform the acts set forth
in the preceding sentence and the discharge mentioned therein shall run to such
legal representative and to the incapacitated Trustee or the estate of the
deceased Trustee as the case may be.
3.4 VACANCIES. If any or all of the Trustees cease to be
Trustees hereunder, whether by reason of resignations, removal, incapacity,
death or otherwise, such event shall not terminate the Trust or affect its
continuity. Until vacancies are filled, the remaining Trustee or Trustees (even
though fewer than three) may exercise the powers of the Trustees hereunder.
Vacancies (including vacancies created by increases in the number of Trustees)
may be filled for the unexpired term by the remaining Trustee or by a majority
of the remaining Trustees (which majority shall include a majority of the
remaining Trustees that are Unaffiliated Trustees if the vacant position was
formerly held by an Unaffiliated Trustee). If at any time there shall be no
Trustees in office, successor Trustees shall be elected by the Shareholders as
provided in Section 7.7.
3.5 SUCCESSOR AND ADDITIONAL TRUSTEES. The right, title, and
interest of the Trustees in and to the Trust Estate shall also vest in successor
and additional Trustees upon their qualification, and they shall thereupon have
all the rights and obligations of Trustees hereunder. Such right, title and
interest shall vest in the Trustees whether or not conveyancing documents have
been executed and delivered pursuant to Section 3.3 or otherwise. Appropriate
written evidence of the election and qualification of successor and additional
Trustees shall be filed with the records of the Trust and in such other offices
or places as the Trustees may deem necessary, appropriate or desirable. Upon the
resignation, removal or death of a Trustee, he (and in the event of his death,
his estate) shall automatically cease to have any right, title or interest in or
to any of the Trustee property, and the right, title and interest in such
Trustee in and to the Trust Estate shall vest automatically in the remaining
Trustees without any further act.
3.6 ACTIONS BY TRUSTEES. The Trustees may act with or without
a meeting. A quorum for all meetings of the Trustees shall be a majority of the
Trustees. Unless specifically provided otherwise in this Declaration, any action
of the Trustees may be taken at a meeting by vote of a majority of the Trustees
present at such meeting if a quorum is present, or without a meeting by written
consent of all of the Trustees. The decision of the Trust to invest in any Real
Estate Investment shall require the approval of a majority of the Unaffiliated
Trustees. Any agreement, deed, Mortgage, lease or other instrument or writing
executed by any one or more of the Trustees or by any one or more authorized
Persons shall be valid and binding upon the Trustees and upon the Trust when
authorized by action of the Trustees or as provided in the By-Laws, if the same
are adopted. Trustees and members of any committee of the Trustees may conduct
meetings by conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such meeting.
An annual meeting of the Trustees shall be held at
substantially the same time as the Annual Meeting of Shareholders. Regular
meetings, if any, shall be held at such other times as shall be fixed by the
Trustees. No notice shall be required of an annual or a regular meeting of
Trustees.
Special meetings of the Trustees shall be called by the
Chairman or the President upon the request of any two Trustees and may be called
by the Chairman or the President on his own motion, on not less than two days'
notice to each Trustee if the meeting is to be held in person, and/or not less
than eight hours' notice if the meeting is to be held by conference telephone or
similar equipment. Such notice, which need not state the purpose of the meeting,
shall be by oral, telegraphic, telephonic or written communication stating the
time and place therefor. Notice of any special meeting need not be given to any
Trustee entitled thereto who submits a written and signed waiver of notice,
either before or after the meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice to him.
Regular or special meetings of the Trustees may be held within
or without the Commonwealth of Massachusetts, at such places as shall be
designated by the Trustees. The Trustees may adopt such rules and regulations
for their conduct and the management of the affairs of the Trust as they may
deem proper and as are not inconsistent with this Declaration.
3.7 UNAFFILIATED TRUSTEES. In order that a majority of the
Trustees shall be Unaffiliated Trustees, if at any time, by reason of one or
more vacancies, there shall not be such a majority, then within 120 days after
such vacancy occurs, the continuing Trustee or Trustees then in office shall
appoint, pursuant to Section 3.4, a sufficient number of other Persons who are
Unaffiliated Trustees, so that there shall be such a majority. Notwithstanding
the provisions of Section 3.1, of the preceding sentence of this Section 3.7, or
of any other provision of this Declaration of Trust, however, there shall be no
requirement as to the election, appointment or incumbency of, or as to any
action by, Unaffiliated Trustees at any time that all of the outstanding Shares
of the Trust are owned by the Adviser and Affiliated Persons of the Adviser and
by employees of the Adviser and of such Affiliated Persons.
3.8 COMMITTEES. The Trustees may appoint from among their
number an executive committee and such other standing committees, including
without limitation investment, audit, nominating, and compensation committees,
or special committees as the Trustees determine. Each standing committee shall
consist of three or more members, a majority of whom shall not be Affiliated
Persons of the Adviser. Each committee shall have such powers, duties and
obligations as may be required by any governmental agency or other regulatory
body or as the Trustees may be deem necessary and appropriate. Without limiting
the generality of the foregoing, the executive committee shall have the power to
conduct the business and affairs of the Trust during periods between meetings of
the Trustees. The executive committee and other committees shall report their
activities periodically to the Trustees.
ARTICLE IV
TRUSTEES' POWERS
4.1 POWER AND AUTHORITY OF TRUSTEES. The Trustees, subject
only to the specific limitations contained in this Declaration, shall have,
without further or other authorization, and free from any power of control on
the part of the Shareholders, full, absolute and exclusive power, control and
authority over the Trust Estate and over the business and affairs of the Trust
to the same extent as if the Trustees were the sole owners thereof in their own
right, and to do all such acts and things as in their sole judgment and
discretion are necessary or incidental to, or desirable for, the carrying out of
any of the purposes of the Trust or conducting the business or the Trust. Any
determination made in good faith by the Trustees of the purposes of the Trust or
the existence of any power or authority hereunder shall be conclusive. In
construing the provisions of this Declaration, presumption shall be in favor of
the grant of powers and authority to the Trustees. The enumeration of any
specific power or authority herein shall not be construed as limiting the
general powers or authority or any other specified power or authority conferred
herein upon the Trustees.
4.2 SPECIFIC POWERS AND AUTHORITIES. Subject only to the
express limitations contained in this Declaration and in addition to any powers
and authorities conferred by this Declaration or which the Trustees may have by
virtue of any present or future statute or rule of law, the Trustees without any
action or consent by the Shareholders shall have and may exercise, at any time
and from time to time, the following powers and authorities which may or may not
be exercised by them in their sole judgment and discretion, and in such manner,
and upon such terms and conditions as they may, from time to time, deem proper:
4.2.1 To retain, invest and reinvest the capital or other
funds of the Trust and, for such consideration as they deem proper, to purchase
or otherwise acquire for cash or other property or through the issuance of
Shares or other Securities of the Trust and hold for investment real or personal
property of any kind, tangible or intangible, in entirety or in participation,
all without regard to whether any such property is authorized by law for the
investment of trust funds, and to possess and exercise all the rights, powers
and privileges appertaining to the ownership of the Trust Estate with respect
thereto.
4.2.2 To sell, rent, lease, hire, exchange, release,
partition, assign, mortgage, pledge, hypothecate, grant security interests in,
encumber, negotiate, convey, transfer or otherwise dispose of or grant interests
in all or any portion of the Trust Estate by deeds, financing statements,
security agreements and other instruments, trust deeds, assignments, bills of
sale, transfers, leases or Mortgages, for any of such purposes.
4.2.3 To enter into leases, contracts, obligations, and other
agreements for a term extending beyond the term of office of the Trustees and
beyond the possible termination of the Trust or for a lesser term.
4.2.4 To borrow money and give negotiable or non-negotiable
instruments therefor; to guarantee, indemnify or act as surety with respect to
payment or performance of obligations of third parties; to enter into other
obligations on behalf of the Trust; and to assign, convey, transfer, mortgage,
subordinate, pledge, grant security interests in, encumber or hypothecate the
Trust Estate to secure any of the foregoing.
4.2.5 To lend money, whether secured or unsecured, to any
Person, including any Affiliated Person.
4.2.6 To create reserve funds for any purpose.
4.2.7 To incur and pay out of the Trust Estate any charges or
expenses, and disburse any funds of the Trust, which charges, expenses or
disbursements are, in the opinion of the Trustees, necessary or incidental to or
desirable for the carrying out of any of the purposes of the Trust or conducting
the business of the Trust, including, without limitation, taxes and other
governmental levies, charges and assessments, of whatever kind or nature,
imposed upon or against the Trustees in connection with the Trust or the Trust
Estate or upon or against the Trust Estate or any part thereof, and for any of
the purposes herein.
4.2.8 To deposit funds of the Trust in or with banks, trust
companies, savings and loan associations, money market organizations and other
depositories or issuers of depository-type accounts, whether or not such
deposits will draw interest or be insured, the same to be subject to withdrawal
or redemption on such terms and in such manner and by such Person or Persons
(including any one or more Trustees, officers, agents or representatives) as the
Trustees may determine.
4.2.9 To enter into hedging transactions to minimize the
effect of interest rate fluctuations on investments made pursuant to Section 2.2
of this Declaration.
4.2.10 To possess and exercise all the rights, powers and
privileges appertaining to the ownership of all or any Mortgages or Securities
issued or created by, or interests in, any Person, forming part of the Trust
Estate, to the same extent that an individual might and, without limiting the
generality of the foregoing, to vote or give consent, request or notice, or
waive any notice, either in person or by proxy or power of attorney, with or
without power of substitution, to one or more Persons, which proxies and powers
of attorney may be for meetings or action generally or for any particular
meeting or action, and may include the exercise of discretionary powers.
4.2.11 To cause to be organized or assist in organizing any
Person under the laws of any jurisdiction to acquire the Trust Estate or any
part or parts thereof or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, rent, lease, hire,
convey, negotiate, assign, exchange or transfer the Trust Estate or any part of
parts thereof to or with any such Person in exchange for the Securities thereof
or otherwise, and to lend money to, subscribe for the Securities of, and enter
into any contracts with, any such Person in which the Trust holds or is about to
acquire Securities or any other interest.
4.2.12 To enter into joint ventures, general or limited
partnerships and any other lawful combinations or associations.
4.2.13 To elect or appoint officers of the Trust (which shall
include a Chairman, who will be a Trustee, and a President, a Treasurer and a
Secretary, and which may include one or more Vice Presidents and other officers
as the trustees may determine, and none of whom needs be a Trustee), who may be
removed or discharged at the discretion of the Trustees, such officers to have
such powers and duties, and to serve such terms, as may be prescribed by the
Trustees or by the By-Laws of the Trust, if adopted, or as may pertain to such
officers; subject to the provisions of article V, to retain an Adviser and to
pay the Adviser for its services so retained; subject to the provisions of
Section 8.5 and 8.6, to engage or employ any persons as agents, representatives,
employees, or independent contractors (including without limitation, real estate
advisers, investment advisers, transfer agents, registrars, underwriters,
accountants, attorneys at law, real estate agents, managers, appraisers,
brokers, architects, engineers, construction managers, general contractors or
otherwise) in one or more capacities, in connection with the management of the
Trust's affairs or otherwise, and to pay compensation from the Trust for
services in as many capacities as such Person may be so engaged or employed and
notwithstanding that any such Person is, or is an Affiliated Person of, a
Trustee or officer of the Trust; and, except as prohibited by law, to delegate
any of the powers and duties of the Trustees to any one or more Trustees,
agents, representatives, officers, employees, independent contractors or other
Persons, provided, however, that no such delegation shall be made to an
Affiliated Person of the Adviser except with the approval of a majority of the
Unaffiliated Trustees.
4.2.14 To determine whether moneys, Securities or other assets
received by the Trust shall be charged or credited to income or capital or
allocated between income and capital, including the power to amortize or fail to
amortize any part or all of any premium or discount, to treat all or any part of
the profit resulting from the maturity or sale of any asset, whether purchased
at a premium or at a discount, as income or capital, or apportion the same
between income and capital, to apportion the sales price of any asset between
income and capital, and to determine in what manner any expenses or
disbursements are to be borne as between income and capital, whether or not in
the absence of the power and authority conferred by this subsection such moneys,
Securities or other assets would be regarded as income or as capital or such
expense or disbursement would be charged to income or to capital; to treat any
dividend or other distribution on any investment as income or capital or to
apportion the same between income and capital; to provide or fail to provide
reserves for depreciation, amortization or obsolescence in respect of all or any
part of the Trust Estate subject to depreciation, amortization or obsolescence
in such amounts and by such methods as they shall determine; and to determine
the method or form in which the accounts and records of the Trust shall be kept
and to change from time to time such method or form.
4.2.15 To determine from time to time the value of all or any
part of the Trust Estate and of any services, Securities, property or other
consideration to be furnished to or acquired by the Trust, and from time to time
to revalue all or any part of the Trust Estate in accordance with such
Valuations or other information, which Valuations or other information may be
provided by the Adviser and/or by other Persons retained for the purpose, as the
Trustees, in their sole judgment, may deem necessary.
4.2.16 To collect, sue for, and receive all sums of money
coming due to the Trust, and to engage in, intervene in, prosecute, join,
defend, compound, compromise, abandon or adjust, by arbitration or otherwise,
any actions, suits, proceedings, disputes, claims, controversies, demands or
other litigation relating to the Trust, the Trust Estate or the Trust's affairs,
to enter into agreements therefor, whether or not any suit is commenced or claim
accrued or asserted and, in advance of any controversy, to enter into agreements
regarding arbitration, adjudication or settlement thereof.
4.2.17 To renew, modify, release, compromise, extend,
consolidate, or cancel, in whole or in part, any obligation to or of the Trust.
4.2.18 To purchase and pay for out of the Trust Estate
insurance contracts and policies insuring the Trust Estate against any and all
risks and insuring the Trust, the Trustees, the Shareholders, the officers of
the Trust, the Adviser or any or all of them, against any and all claims and
liabilities of every nature asserted by any person arising by reason of any
action alleged to have been taken or omitted by the Trust or by the Trustees,
Shareholders, officers, or the Adviser.
4.2.19 To cause legal title to any of the Trust Estate to be
held by or in the name of the Trustees or, except as prohibited by law, by or in
the name of the Trust or one or more of the Trustees or any other Person as the
Trustees may determine, on such terms and in such manner and with such powers
(not inconsistent with Section 1.1), and with or without disclosure that the
Trust or Trustees are interested therein.
4.2.20 To adopt a fiscal year and accounting method for the
Trust, and from time to time to change such fiscal year and accounting method,
and to engage a firm of independent public accountants to audit the financial
records of the Trust.
4.2.21 To adopt and use a seal (but the use of a seal shall
not be required for the execution of instruments or obligations of the Trust).
4.2.22 With respect to any Securities issued by the Trust, to
provide that the same may be signed by the manual signature of one or more
Trustees or officers, or Persons who have theretofore been Trustees or officers
or by the facsimile signature of any such Person (with or without
countersignature by a transfer agent, registrar, authenticating agent or other
similar Person), and to provide that ownership of such Securities may be
conclusively evidenced by the books and records of the Trust or any appropriate
agent of the Trust without the necessity of any certificate, all as determined
by the Trustees from time to time to be consistent with normal commercial
practices.
4.2.23 To declare and pay dividends and distributions as
provided in Section 7.5.
4.2.24 To adopt a dividend or distribution reinvestment or
similar such plan for the Trust, and to provide for the cost of the
administration thereof to be borne by the Trust.
4.2.25 To file any and all documents and take any and all such
other action as the Trustees in their sole judgment may deem necessary in order
that the Trust may lawfully conduct its business in any jurisdiction.
4.2.26 To participate in any reorganization, readjustment,
consolidation, merger, dissolution, sale or purchase of assets, lease or similar
proceedings of any corporation, partnership or other organization in which the
Trust shall have an interest and in connection therewith to delegate
discretionary powers to any reorganization, protective or similar committee and
to pay assessments and other expenses in connection therewith.
4.2.27 To cause to be organized or assist in organizing any
Person, which may or may not be a subsidiary of the Trust, under the laws of any
jurisdiction to acquire the Trust Estate or any part or parts thereof or to
carry on any business in which the Trust shall directly or indirectly have any
interest; and, also, subject to the provisions of this Declaration, to cause the
Trust to merge with such Person or any existing Person or to sell, rent, lease,
hire, convey, negotiate, assign, exchange or transfer the Trust Estate or any
part or parts thereof to or with any such Person or any existing Person in
exchange for the Securities thereof or otherwise, and to lend money to,
subscribe for the Securities of, and enter into any contracts with, any such
Person in which the Trust holds or is about to acquire Securities or any other
interest.
4.2.28 To determine whether or not, at any time or from time
to time, to attempt to cause the Trust to qualify or to cease to qualify for
taxation as a Real Estate Investment Trust, and to take all action deemed by the
Trustees appropriate in connection with maintaining or ceasing to maintain such
qualification.
4.2.29 To make any indemnification payment authorized by this
Declaration of Trust.
4.2.30 To do all other such acts and things as are incident to
the foregoing, and to exercise all powers which are necessary or useful to carry
on the business of the Trust, to promote any of the purposes for which the Trust
is formed, and to carry out the provisions of this Declaration.
4.3 BY-LAWS. The Trustees may, but are not required to, make,
adopt, amend or repeal By-Laws containing provisions relating to the business of
the Trust, the conduct of its affairs, its rights or powers and the rights or
powers of its Shareholders, Trustees or officers not inconsistent with law or
with this Declaration. Such By-Laws may provide for the appointment by the
Chairman and President of assistant officers or of agents of the Trust in
addition to those provided for in the foregoing Section 4.2.12, subject however
to the right of the Trustees to remove or discharge such officers or agents.
ARTICLE V
ADVISER, OTHER AGENTS AND OPERATING EXPENSES
5.1 EMPLOYMENT OF ADVISER, EMPLOYEES, AGENTS, ETC. The
Trustees are responsible for the general policies of the Trust and for such
general supervision of the business of the Trust conducted by all officers,
agents, employees, advisers, managers or independent contractors of the Trust as
may be necessary to ensure that such business conforms to the provisions of this
Declaration. However, the Trustees are not, and shall not be, required
personally to conduct the business of the Trust and, consistent with their
ultimate responsibility as stated above, the Trustees shall have the power to
retain an Adviser and/or to appoint, employ or contract with any Person
(including one or more of themselves or any corporation, partnership, or trust
in which one or more of them may be directors, officers, stockholders, partners
or trustees) as the Trustees may deem necessary or proper for the transaction of
the business of the Trust, and for such purpose may grant or delegate such
authority to any such Person as the Trustees may in their sole discretion deem
necessary or desirable without regard to whether such authority is normally
granted or delegated by trustees; provided, however, that any determination to
retain an Adviser which is an Affiliated Person of a Trustee shall be valid only
if made or ratified with the approval of a majority of the Unaffiliated
Trustees.
It shall be the duty of the Trustees to evaluate the
performance of the Adviser before entering into or renewing an advisory
contract, and the Unaffiliated Trustees have a fiduciary duty to the
Shareholders to supervise the relationship of the Trust with the Adviser.
The Trustees (subject to the provisions of Section 5.5) shall
have the power to determine the terms and compensation of the Adviser or any
other Person whom they may employ or with whom they may contract. The Trustees
may exercise broad discretion in allowing the Adviser to administer and regulate
the operations of the Trust, to act as agent for the Trust, to execute documents
on behalf of the Trustees, and to make executive decisions which conform to
general policies and general principles previously established by the Trustees.
5.2 TERM. The Trustees shall not enter into any contract with
an Adviser unless such contract has an initial term of not more than one year,
provides for annual renewal or extension thereafter and provides that it may be
terminated at any time by the Trustees, without penalty, upon 60 days written
notice or by the Adviser without penalty, upon 120 days written notice.
Termination of the Adviser's contract by the Trust may be by a majority of the
Trustees or a majority of the Unaffiliated Trustees. In the event of such
termination, the Adviser will cooperate with the Trust and take all reasonable
steps requested to assist the Trustees in making an orderly transition of such
advisory function.
5.3 ACTIVITIES OF ADVISER. The Adviser may administer the
Trust as its sole and exclusive function, or engage in other activities
including, without limitation, the rendering of advice to other investors and
the management of other investments or other real estate investment trusts with
similar investment objectives, including without limitation investors and
investments advised, sponsored or organized by the Adviser, except that, until
60% of the Trust's assets are invested in Real Estate Investments, the Adviser
and its Affiliates shall not sponsor or act as investment adviser or manager for
any other real estate investment trust with investment objectives similar to the
Trust's. The Trustees may request the Adviser to engage in certain other
activities which complement the Trust's investments, including real estate
acquisition and disposition services, renovation and rehabilitation services,
and the placement or brokerage of long-term mortgage loans or secondary mortgage
financing, which activities may include providing services requested by the
prospective mortgagees or mortgagors. Nothing in this Declaration shall limit or
restrict the right of any director, officer, employee or shareholder of the
Adviser, whether or not also a Trustee, officer or employee of the Trust, to
engage in any other business or to render services of any kind to any other
partnership, corporation, firm, individual, trust or association. The Adviser
may, with respect to any loan or other investment in which the Trust may
participate or allot a participation, render advice and service, with or without
remuneration, to each and every participant in that loan or other investment.
5.4 ADVISER COMPENSATION. The Trustees, including a majority
of the Unaffiliated Trustees, shall at least annually review generally the
performance of the Adviser in order to determine whether the compensation which
the Trust has contracted to pay to the Adviser is reasonable in relation to the
nature and quality of services performed and whether the provisions of the
contract with the Adviser are being carried out. Each such determination shall
be based on such of the following and other factors as the Trustees (including
the Unaffiliated Trustees) deem relevant, and shall be reflected in the minutes
of the meetings of the Trustees:
5.4.1 the size of the advisory fee in relation to the
size, composition and profitability of the Invested Assets of the Trust;
5.4.2 the success of the Adviser in generating
opportunities that meet the investment objectives of the Trust;
5.4.3 the rates charged to other REITs and to investors other
than REITs by advisers performing similar services;
5.4.4 additional revenues realized by the Adviser and its
Affiliated Persons through their relationship with the Trust, including loan
administration, underwriting or brokerage commissions, servicing, engineering,
inspection and other fees, whether paid by the Trust or by others with whom the
Trust does business;
5.4.5 the quality and extent of service and advice
furnished by the Adviser;
5.4.6 the performance of the Invested Assets of the Trust,
including income, conservation or appreciation of capital, frequency of problem
investments and competence in dealing with distress situations; and
5.4.7 the quality of the Invested Assets of the Trust in
relationship to any investments generated by the Adviser for its own account.
5.5 Operating Expenses. Within 60 days after the end of any
fiscal quarter of the Trust for which Total Operating Expenses (for the 12
months then ended) exceed limits adopted by the North American Securities
Administrators Association's Statement of Investment Policy For Real Estate
Investment Trusts, the Unaffiliated Trustee shall send to the Shareholders a
written disclosure of such fact.
<PAGE>
ARTICLE VI
PROHIBITED ACTIVITIES
6.1 PROHIBITED INVESTMENTS AND ACTIVITIES. The Trust shall not
engage in any of the following investment practices or activities:
6.1.1 Invest in any Junior Mortgage Loan unless (a) the
capital invested in such mortgage loan is adequately secured on the basis of the
equity of the borrower in the property underlying such investment and the
ability of the borrower to repay the mortgage loan, (b) the total amount of a
Junior Mortgage Loan which, taken together with all other Indebtedness secured
by the underlying Real Property, does not exceed 100% of the value of the
security therefor, (c) the total amount of a Junior Mortgage Loan which, taken
together with all other Indebtedness secured by the underlying Real Property and
senior or pari passu to that held by the Trust, does not exceed 90% of the value
of the security therefor, (d) the senior mortgage is held by a person other than
the Adviser or one of its Affiliates, and (3) total Junior Mortgage Loans will
not exceed 25% of the Trust's assets.
6.1.2 Invest in commodities, or in commodity future contracts
or effect short sales of commodities or Securities. Such limitation is not
intended to apply to investments in interest rate futures or short sales, when
used solely for hedging purposes.
6.1.3 Invest more than 1% of its Total Assets in contracts for
the sale of Real Property, unless such contracts are recordable in the chain of
title.
6.1.4 Issue Securities redeemable at the option of the
holders thereof.
6.1.5 Grant options or warrants to purchase Shares at an
exercise price, or for consideration which consists of services or is otherwise
than for cash, that in the judgment of the Trustees (including a majority of the
Unaffiliated Trustees in the case of the grant of any operation or warrant to
the Adviser or to any officer, director or employee of the Adviser or of the
Trust) is less than the fair market value of such Shares on the date of grant,
or which may be exercisable for a period in excess of 5 years from the date of
grant, or which are for a number of Shares that (when added to the number of
other Shares exercisable pursuant to all then outstanding options and warrants)
is in excess of 9.8% of the number of Shares on the date of grant. Warrants,
options or Share purchase rights that are issued ratably to the holders of all
Shares or another class of Securities, or as part of a financing arrangement are
not prohibited by, or to be included within the limitations of, the preceding
sentence of this Section 6.1.5.
6.1.6 Engage in underwriting or the agency distribution
of Securities issued by others.
6.1.7 Invest more than 10% of Total Assets in Unimproved Real
Property, or Mortgage Loans on Unimproved Real Property.
6.1.8 Engage in trading, as compared with investment,
activities.
6.1.9 Allow the aggregate borrowings of the Trust, secured and
unsecured, to exceed 100% of the Net Assets of the Trust, in the absence of a
determination by the Trustees (including a majority of the Unaffiliated
Trustees) that a higher level of borrowing is appropriate and in the interest of
the Trust; provided, however, that no higher level of borrowing shall be made
which if unsecured exceeds the limit provided in Section 6.1.10 or if secured
exceeds 300% of the net asset value of the property securing such borrowing as
determined by the lender. Any borrowing in excess of such 100% level shall be
disclosed to the Shareholders in the next quarterly report of the Trust.
6.1.10 Make any unsecured borrowing if such borrowing will
result in an asset coverage of less than 300% unless at the time of borrowing at
least 80% of the Trust's Total Assets consist of First Mortgage Loans. "Asset
coverage" for the purpose of this Section 6.1.10 means the ratio which the
Trust's Total Assets, less all liabilities other than Indebtedness for unsecured
borrowings, bears to the aggregate amount of all unsecured borrowings of the
Trust.
6.1.11 Acquire Securities in any company holding investments
or engaging in activities prohibited by this Section 6.1.
6.1.12 Pay fees and costs associated with (i) the organization
of the Trust, (ii) the sale of its Shares pursuant to its initial public
offering of Shares and (iii) the acquisition (including brokerage expenses) of
investments with the proceeds of such initial public offering, if the aggregate
amount for all such fees and costs covered by (i), (ii) and (iii) exceed 20% of
the gross selling price of such Shares in such initial public offering; or pay
fees of the type described in Section IV, Subdivisions F, G, H and I of the
North American Securities Administrators Association's Statement of Policy
regarding Real Estate Programs effective July 1, 1984 in amounts exceeding the
limitations set forth in such Subdivisions.
6.1.13 Issue debt securities unless the historical debt
service coverage (in the most recently completed fiscal year) as adjusted for
known changes is sufficient to property service that higher level of debt.
6.2 OBLIGOR'S DEFAULT. Notwithstanding any provision in any
Article of this Declaration, when an obligor to the Trust is in default under
the terms of any obligation to the Trust, the Trustees shall have the power to
pursue any remedies permitted by law which in their sole judgment are in the
interest of the Trust and the Trustees shall have the power to enter into any
necessary investment, commitment or obligation of the Trust resulting from the
pursuit of such remedies that are necessary or desirable to dispose of property
acquired in the pursuit of such remedies.
6.3 PERCENTAGE DETERMINATIONS. Whenever standards contained in
this Article VI are expressed in terms of a percentage, whether of value, Total
Assets, cost or otherwise, such percentage shall be determined at the time of
the issuance of a commitment by the Trust for a transaction covered by such
standard hereunder.
ARTICLE VII
SHARES AND SHAREHOLDERS
7.1 SHARES. The beneficial interest in the Trust shall be
divided into transferable units of a single class, all of which are designated
as Shares, each without par value, and each Share shall (except as provided in
Section 7.12) be identical in all respects with every other Share. The total
number of Shares the Trust shall have authority to issue shall be unlimited. The
Shares may be issued for such consideration as the Trustees shall determine,
including upon the conversion of convertible debt, or by way of share dividend
or share split in the discretion of the Trustees. Outstanding Shares shall be
transferable and assignable in like manner as are shares of stock of a
Massachusetts business corporation. Shares reacquired by the Trust shall no
longer be deemed outstanding and shall have no voting or other rights unless and
until reissued. Shares reacquired by the Trust may be canceled by action of the
Trustees. All Shares shall be fully paid and nonassessable by or on behalf of
the Trust upon receipt of full consideration for which they have been issued or
without additional consideration if issued by way of share dividend, share
split, or upon the conversion of convertible debt. The Shares shall not entitle
the holder to preference, preemptive, conversion, or exchange rights of any
kind, except as the Trustees may specifically determine with respect to any
Shares at the time of issuance of such Shares and except as specifically
provided by law.
7.2 LEGAL OWNERSHIP OF TRUST ESTATE. The legal ownership of
the Trust Estate and the right to conduct the business of the Trust are vested
exclusively in the Trustees, and the Shareholders shall have no interest therein
other than the beneficial interest in the Trust conferred by their Shares issued
hereunder, and they shall have no right to compel any partition, division,
dividend or distribution of the Trust or any of the Trust Estate, nor can they
be called upon to share or assume any losses of the Trust or suffer an
assessment of any kind by virtue of their ownership of Shares.
7.3 SHARES DEEMED PERSONAL PROPERTY. The Shares shall be
personal property and shall confer upon the holders thereof only the interest
and rights specifically set forth in this Declaration. The death, insolvency or
incapacity of a Shareholder shall not dissolve or terminate the Trust or affect
its continuity nor give his legal representative any rights whatsoever, whether
against or in respect of other Shareholders, the Trustees or the Trust Estate or
otherwise except the sole right to demand and, subject to the provisions of this
Declaration, the By-Laws, if adopted, and any requirements of law, to receive a
new certificate for Shares registered in the name of such legal representative,
in exchange for the certificate held by such Shareholder.
7.4 SHARE RECORD, ISSUANCE AND TRANSFERABILITY OF SHARES.
Records shall be kept by or on behalf of and under the direction of the
Trustees, which shall contain the names and addresses of the Shareholders, the
number of Shares held by them respectively, and the number of the certificates,
if any, representing the Shares, and in which there shall be recorded all
transfers of Shares. The Persons in whose names Shares or certificates therefor
are registered on the records of the Trust shall be deemed the absolute owners
of such Shares for all purposes of this Trust; but nothing herein shall be
deemed to preclude the Trustees or officers, or their agents or representatives,
from inquiring as to the actual ownership of Shares. Until a transfer is duly
registered on the records of the Trust, the Trustees shall not be affected by
any notice of such transfer, either actual or constructive. The payment thereof
to the Person in whose name any Shares are registered on the records of the
Trust or to the duly authorized agent of such Person (or if such Shares are so
registered in the names of more than one Person, to any one of such Persons or
to the duly authorized agent of such Person) shall be sufficient discharge for
all dividends or distributions payable or deliverable in respect of such Shares
and from all liability to see to the application thereof.
In case of the loss, mutilation or destruction of any
certificate for Shares, the Trustees may issue or cause to be issued a
replacement certificate on such terms and subject to such rules and regulations
as the Trustees may from time to time prescribe. Nothing in this Declaration
shall impose upon the Trustees or a transfer agent a duty, or limit their rights
to inquire into adverse claims.
In lieu of issuing certificates for Shares, the Trustees may
adopt procedures for the Shares to be considered as uncertificated Securities to
the same extent that such procedures would be available for shares of capital
stock of a Massachusetts business corporation.
Unless the Trustees shall have determined that the Trust shall
no longer qualify as a REIT, any issuance, redemption or transfer of Trust
Shares which would operate to disqualify the Trust as a real estate investment
trust for purposes of Federal income tax, is null and void, and such transaction
will be canceled when so determined in good faith by the Trustees.
7.5 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. The Trustees
may from time to time declare and pay to Shareholders such dividends or
distributions in cash or other property, out of current or accumulated income,
capital, capital gains, principal, surplus, proceeds from the increase or
refinancing of Trust obligations, for the repayment of loans made by the Trust,
from the sale of portions of the Trust Estate, or from any other source as the
Trustees in their discretion shall determine; but, in any event, the Trustees,
shall, from time to time, declare and pay to the Shareholders such distributions
as may be necessary to continue to qualify the Trust as a Real Estate Investment
Trust, so long as such qualification, in the opinion of the Trustees, is in the
best interest of the Shareholders. Shareholders shall have no right to any
dividend or distribution unless and until declared by the Trustees. A written
statement disclosing the source shall be sent to each Shareholder who received
the distribution not later than (i) 60 days after the close of the fiscal year
in which the distribution was made, or (ii) promptly after the independent
auditors of the Trust have completed, or undertaken sufficient actions toward
completion of, the annual audit of the Trust, so that the Trustees can determine
the source of such distribution, whichever event shall occur later.
7.6 TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR.
The Trustees shall have power to employ one or more transfer agents, dividend
disbursing agents, dividend or distribution reinvestment plan agents, and
registrars and to authorize them on behalf of the Trust: to keep records, to
hold and disburse any dividends and distributions and to have and perform powers
and duties customarily had and performed by transfer agents, dividend disbursing
agents, dividend or distribution reinvestment plan agents, and registrars as may
be conferred upon them by the Trustees.
7.7 SHAREHOLDERS' MEETINGS AND CONSENTS. The Trustees shall
cause to be called and held an Annual Meeting of the Shareholders at such time
and such place as they may determine, at which Trustees shall be elected any
other proper business may be conducted. The Annual Meeting of Shareholders shall
be held within six months after the end of each fiscal year, after not fewer
than 10 days nor more than 60 days written notice of such meeting has been sent
to Shareholders by the Trustees and after delivery to the Shareholders of the
Annual Report for the fiscal year then ended. Special meetings of Shareholders
may be called by a majority of the Trustees, a majority of the Unaffiliated
Trustees, or the Chairman or other chief executive officer of the Trust, and
shall be called by any officer of the Trust upon the written request of
Shareholders holding not less than 10% of the outstanding Shares of the Trust
entitled to vote. Upon receipt of a written request either in person or by
registered mail stating the purpose(s) of the meeting requested by Shareholders,
the Trust shall provide all Shareholders written notice (either in person or by
mail) of a meeting and the purpose of such meeting to be held on a date not
fewer than 10 days nor more than 60 days after the date of such notice, at a
time and place determined by the Trustees. If there shall be no Trustees, a
special meeting of the Shareholders shall be held promptly for the election of
successor Trustees. The call and notice of any special meeting shall state the
purpose of the meeting and no other business shall be considered at such
meeting. A majority of the outstanding Shares entitled to vote at any meeting
represented in person or by proxy shall constitute a quorum at such meeting.
Whenever Shareholders are required or permitted to take any action, such action
may be taken, except as otherwise provided by this Declaration or required by
law, by a majority of the votes cast at a meeting of Shareholders at which a
quorum is present by holders of Shares entitled to vote thereon, or without a
meeting by written consent setting forth the action so taken signed by holders
of all outstanding Shares entitled to vote thereon. Notwithstanding this or any
other provision of this Declaration, no vote or consent of Shareholders shall be
required to approve the sale, exchange or other disposition by the Trustees of
one or more assets of the Trust or the pledging, hypothecating, granting
security interests in, mortgaging, encumbering or leasing of all or any of the
Trust Estate.
7.8 PROXIES. Whenever the vote or consent of Shareholders is
required or permitted under this Declaration, such vote or consent may be give
either directly by the Shareholder or by a proxy. The Trustees may solicit such
proxies from the Shareholders or any of them in any matter requiring or
permitting the Shareholders' vote or consent.
7.9 REPORTS TO SHAREHOLDERS. The Trustees shall cause to be
prepared and mailed not later than 120 days after the close of each fiscal year
of the Trust a report of the business and operation of the Trust during such
fiscal year to the Shareholders, which report shall constitute the accounting of
the Trustees for such fiscal year. The report shall be in such form and have
such content as the Trustees deem proper, but shall in any event include a
balance sheet, an income statement and a surplus statement, each prepared in
accordance with generally accepted accounting principles, shall be audited by an
independent certified public accountant and shall be accompanied by the report
of such accountant thereon. The Trustees shall also publish to the Shareholders
quarterly with respect to the Trust (1) the ratio of the costs of raising
capital during the quarter to the capital raised, and (2) the aggregate amount
of advisory fees and the aggregate amount of other fees paid to the Adviser and
all affiliates of the Adviser by the Trust and including fees or charges paid to
the Adviser and all Affiliates of the Adviser by third parties doing business
with the Trust.
7.10 FIXING RECORD DATE. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding 30 days, as the Trustees may
determine; or without closing the transfer books the Trustees may fix a date not
more than 60 days prior to the date of any meeting of Shareholders or dividend
payment or other action as a record date for the determination of Shareholders
entitled to vote at such meeting or any adjournment thereof or to receive such
dividend or to take any other action. Any Shareholder who was a Shareholder at
the time so fixed shall be entitled to vote at such meeting or any adjournment
thereof or to receive such dividend or to take such other action, even though he
has since that date disposed of his Shares, and no Shareholder becoming such
after that date shall be so entitled to vote at such meeting or any adjournment
thereof or to receive such dividend or to take such other action.
7.11 NOTICE TO SHAREHOLDERS. Any notice of meeting or other
notice, communication or report to any Shareholder shall be deemed duly
delivered to such Shareholder when such notice, communication or report is
deposited, with postage thereon prepaid, in the United States mail, addressed to
such Shareholder at his address as it appears on the records of the Trust or is
delivered in person to such Shareholder.
7.12 Shareholders' Disclosure; Trustees' Right to Refuse to
Transfer Shares; Limitation on Holdings; Redemption of Shares:
7.12.1 The Shareholders shall upon demand disclose to the
Trustees in writing such information with respect to direct and indirect
ownership of the Shares as the Trustees deem necessary to comply with the REIT
Provisions of the Internal Revenue Code or to comply with the requirements of
any taxing authority or governmental agency.
7.12.2 Whenever it is deemed by them to be reasonably
necessary to protect the tax status of the Trust as a REIT, the Trustees may
require a statement or affidavit from each Shareholder or proposed transferee of
Shares setting forth the number of Shares already owned by him and any related
Person specified in the form prescribed by the Trustees for that purpose. If, in
the opinion of the Trustees, the proposed transfer may jeopardize the
qualification of the Trust as a REIT, the Trustees shall have the right, but not
a duty, to refuse to transfer the Shares to the proposed transferee. All
contracts for the sale or other transfer of Shares shall be subject to this
provision.
7.12.3 Notwithstanding any other provision of this Declaration
of Trust to the contrary and subject to the provisions of subsection 7.12.5, no
Person, or Persons acting as a group, shall at any time directly or indirectly
acquire ownership in the aggregate of more than 9.8% of the outstanding Shares
of the Trust (the "Limit"). Shares owned by a Person or group of Persons in
excess of the Limit at any time shall be deemed "Excess Shares." For the
purposes of this Section 7.12, the term "ownership" shall be defined in
accordance with or by reference to the qualification requirements of the REIT
Provisions of the Internal Revenue Code and shall also mean ownership as defined
in Rule 13d-3 promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, and the term "group" shall have the same
meaning as that term has for purposes of Section 13(d)(3) of such Act as
amended. All Shares which any Person has the right to acquire upon exercise of
outstanding rights, options and warrants, and upon conversion of any Securities
convertible into Shares, if any, shall be considered outstanding for purposes of
the Limit if such inclusion will cause such person to own more that the Limit.
7.12.4 The Trustees, by notice to the holder thereof, may
redeem any or all Shares that are Excess Shares (including Shares that remain or
become Excess Shares because of the decrease in outstanding Shares resulting
from such redemption); and from and after the date of giving of such notice of
redemption ("redemption date") the Shares called for redemption shall cease to
be outstanding and the holder thereof shall cease to be entitled to dividends,
voting rights and other benefits with respect to such Shares excepting only the
right to payment by the Trust of the redemption price determined and payable as
set forth in the following two sentences. Subject to the limitation on payment
set forth in the following sentence, the redemption price of each Excess Share
called for redemption shall be the average daily per Share closing sales price
if the Shares of the Trust are listed on a national securities exchange, and if
the Shares are not so listed shall be the mean between the average per Share
closing bid prices and the average per Share closing asked prices, in each case
during the 30 day period ending on the business day prior to the redemption
date, or if there have been no sales on a national securities exchange and no
published bid quotations and no published asked quotations with respect to
Shares of the Trust during such 30 day period, the redemption price shall be the
price determined by the Trustees in good faith. Unless the Trustees determine
that it is in the interest of the Trust to make earlier payment of all of the
amount determined as the redemption price per Share in accordance with the
preceding sentence, the redemption price shall by payable only upon the
liquidation of the Trust and shall not exceed an amount which is the sum of the
per Share distributions designated as liquidating distributions and return of
capital distributions declared with respect to unredeemed Shares of the Trust of
record subsequent to the redemption date, and no interest shall accrue with
respect to the period subsequent to the redemption date to the date of such
payment; provided, however, that in the event that within 30 days after the
redemption date the Person from whom the Excess Shares have been redeemed sells
(and notifies the Trust of such sale) a number of the remaining Shares owned by
him at least equal to the number of such Excess Shares (and such sale is to a
Person in whose hands the Shares sold would not be Excess Shares), then the
Trust shall rescind the redemption of the Excess Shares if following such
rescission such Person would not be the holder of Excess Shares, except that if
the Trust receives an opinion of its counsel that such recission would
jeopardize the tax status of the Trust as a REIT then the Trust shall in lieu of
recission make immediate payment of the redemption price.
7.12.5 The Limit set forth in Section 7.12.3 shall not apply
to acquisitions Shares pursuant to a cash tender offer made for all outstanding
Shares of the Trust (including Securities convertible into Shares) in conformity
with applicable federal and sate securities laws where two-thirds of the
outstanding Shares (not including Shares or Securities convertible into Shares
held by the tender offerer and/or any "affiliates" or "associates" thereof
within the meaning of the Act) are duly tendered and accepted pursuant to the
cash tender offer; nor shall the Limit apply to the acquisition of Shares by an
underwriter in a public offering of Shares, or in any transaction involving the
issuance of Shares by the Trust, in which a majority of the Trustees determine
that the underwriter or other person or party initially acquiring such Shares
will make a timely distribution of such Shares to or among other holders such
that, following such distribution, none of such Shares will be Excess Shares.
The Trustees in their discretion may exempt from the Limit ownership of certain
designated Shares while owned by a person who has provided the Trustees with
evidence and assurances acceptable to the Trustees that the qualification of the
Trust as a REIT would not be jeopardized thereby.
7.12.6 Notwithstanding any other provision of this Declaration
of Trust to the contrary, any purported acquisition of Shares of the Trust which
would result in the disqualification of the Trust as a REIT shall be null and
void.
7.12.7 Nothing contained in this Section 7.12 or in any other
provision of this Declaration of Trust shall limit the authority of the Trustees
to take such other action as they deem necessary or advisable to protect the
Trust and the interests of the Shareholders by preservation of the Trust's
qualification as a REIT under the REIT Provisions of the Internal Revenue Code.
7.12.8 If any provision of this Section 7.12 or any
application of any such provision is determined to be invalid by any Federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court. To the extent this Section 7.12 may be inconsistent with any other
provision of this Declaration of Trust, this Section 7.12 shall be controlling.
7.13 INSPECTION BY SHAREHOLDERS. Shareholders of record of the
Trust shall have the same right to inspect the records of the Trust as has a
stockholder in a Massachusetts business corporation.
ARTICLE VIII
LIABILITY OF TRUSTEES, SHAREHOLDERS
AND OFFICERS, AND OTHER MATTERS
8.1 LIMITATION OF LIABILITY OF TRUSTEES AND OFFICERS. No
Trustee or officer of the Trust shall be liable to the Trust or to any Trustee
or Shareholder for any act or omission of any other Trustee, Shareholder,
officer or agent of the Trust or be held to any personal liability whatsoever in
tort, contract or otherwise in connection with the affairs of this Trust, except
only that arising from his own bad faith, willful misfeasance, gross negligence,
or reckless disregard of his duties.
8.2 LIMITATION OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND
OFFICERS. The Trustees and officers in incurring any debts, liabilities or
obligations, or in taking or omitting any other actions for or in connection
with the Trust are, and shall be deemed to be, acting as Trustees or officers of
the Trust and not in their own individual capacities. Except to the extent
provided in Section 8.1 no Trustee or officer shall, nor shall any Shareholder,
be liable for any debt, claim, demand, judgment, decree, liability or obligation
of any kind of, against or with respect to the Trust arising out of any action
taken or omitted for or on behalf of the Trust and the Trust shall be solely
liable therefor and resort shall be had solely to the Trust Estate for the
payment or performance thereof. Each Shareholder shall be entitled to pro rata
indemnity from the Trust Estate if, contrary to the provisions hereof, such
Shareholder shall be held to any such personal liability.
8.3 EXPRESS EXCULPATORY CLAUSES IN INSTRUMENTS. As far as
practicable, the Trustees shall cause any written instrument creating an
obligation of the Trust to include a reference to this Declaration and to
provide that neither the Shareholders nor the Trustees nor the officers of the
Trust shall be liable thereunder and that the other parties to such instrument
shall look solely to the Trust Estate for the payment of any claim thereunder or
for the performance thereof; however, the omission of such provision form any
such instrument shall not render the Shareholders or any Trustee or officer of
the Trust liable nor shall the Trustees or any officer of the Trust be liable to
anyone for such omission.
8.4 INDEMNIFICATION AND REIMBURSEMENT OF TRUSTEES AND
OFFICERS. Any Person made a party to any action, suit or proceeding or against
whom a claim or liability is asserted by reason of the fact that he, his
testator or intestate was or is a Trustee or officer or active in such capacity
on behalf of the Trust shall be indemnified and held harmless by the Trust
against judgments, fines, amounts paid on account thereof (whether in settlement
or otherwise) and reasonable expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense of such action, suit,
proceeding, claim or alleged liability or in connection with any appeal therein,
whether or not the same proceeds to judgment or is settled or otherwise brought
to a conclusion; provided, however, that no such Person shall be so indemnified
or reimbursed for any claim, obligation or liability which arose out of the
Trustee's or officer's bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties; and provided, further, that such Person gives
prompt notice of such action, suit or proceeding, executes such documents and
takes such action as will permit the Trust to conduct the defense or settlement
thereof and cooperates therein. In the event of a settlement approved by the
Trustees of any such claim, alleged liability, action, suit or proceeding,
indemnification and reimbursement shall be provided except as to such matters
covered by the settlement which the Trust is advised by its counsel arose from
the Trustee's or officer's bad faith, willful misfeasance, gross negligence, or
reckless disregard of his duties; provided, however, that such advice by counsel
shall not preclude any Trustee or officer from seeking a judicial determination
that he did not act in bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties and is entitled to indemnification and
reimbursement hereunder. Expenses may be paid in advance by the Trust upon
receipt of an undertaking by or on behalf of a Person indemnified to pay over
the amount unless it shall ultimately be determined he is entitled to be
indemnified by the Trust as authorized herein. Such rights of indemnification
and reimbursement shall be satisfied only out of the Trust Estate. The rights
accruing to any Person under these provisions shall not exclude any other right
to which he may be lawfully entitled, nor shall anything contained herein
restrict the right of the Trust to indemnify or reimburse any such Person in any
proper case even though not specifically provided for herein, nor shall anything
contained herein restrict such right of a Trustee to contribution as may be
available under applicable law. The Trust shall have power to purchase and
maintain liability insurance on behalf of any Person entitled to indemnity
hereunder, whether or not the Trust would have the power to indemnify against
that liability.
8.5 RIGHT OF TRUSTEES AND OFFICERS TO OWN SHARES OR OTHER
PROPERTY AND TO ENGAGE IN OTHER BUSINESS. Any Trustee or officer may acquire,
own, hold and dispose of Shares in the Trust, for his individual account, and
may exercise all rights of a Shareholder to the same extent and in the same
manner as if he were not a Trustee or officer. Any Trustee or officer may have
personal business interests and may engage in personal business activities,
which interests and activities may include the acquisition, syndication,
holding, management, development, operation or deposit in, for his own account
or for the account of others, of interests in Real Property or Persons engaged
in the real estate business, even if the same directly compete with the actual
business being conducted by the Trust. Subject to the provisions of Article V,
any Trustee or officer may be interested as trustee, officer, director,
stockholder, partner, member, Adviser, or employee, or otherwise have a direct
or indirect interest in any Person who may be engaged to render advice or
services to the Trust, and may receive compensation from such Person as well as
compensation as Trustee, officer or otherwise hereunder and no such activities
shall be deemed to conflict with his duties and powers as Trustee or officer.
8.6 TRANSACTIONS WITH AFFILIATES. The Trust shall not
knowingly invest, either directly or indirectly, in any Real Estate Investment
or entity in which any Trustee or Adviser or any of its Affiliates is an
investor, creditor or owner. The Trust shall not engage in transactions with the
Adviser, any Trustee, officer, or any Affiliated Person of such Adviser, Trustee
or officer, except to the extent that each such transaction has, after
disclosure of such affiliation, been approved or ratified by the affirmative
vote of a majority of the Trustees (or, in the case of a transaction with a
person other than the Adviser or its Affiliate, a majority of the Trustees not
having any interest in such transaction) after a determination by them that:
8.6.1 The transaction is fair and reasonable to the Trust and
its Shareholders;
8.6.2 The terms of such transaction are at least as favorable
as the terms of any comparable transactions made on an arm's length basis that
are known to such Trustees;
8.6.3 Payments to the Adviser or to any Trustee or officer for
services rendered in a capacity other than that as Adviser, Trustee, or officer
may only be made upon determination that:
(i) the compensation is not in excess of their compensation
paid for any comparable services; and
(ii) the compensation is not greater than the charges for
comparable services available from others who are competent and
not affiliated with any of the parties involved.
The provisions of this Section 8.6 shall not prohibit the Trust from
participating in any investment on a pari passu basis with any other entity
whose trustees or directors are the same persons as the Trustees of the Trust
and as a result there are no Trustees of the Trust who may not also have an
interest in said investment as trustees or directors of such other entity.
8.7 PERSONS DEALING WITH TRUSTEES OR OFFICERS. Any act of the
Trustees or officers purporting to be done in their capacity as such shall, as
to any Persons dealing with such Trustees or officers, be conclusively deemed to
be within the purposes of this Trust and within the powers of the Trustees and
officers. No Person dealing with the Trustees or any of them, or with the
authorized officers, agents or representatives of the Trust shall be bound to
see to the application of any funds or property passing into their hands or
control. The receipt of the Trustees or any of them, or of authorized officers,
agents, or representatives of the Trust, for moneys or other consideration,
shall be binding upon the Trust.
8.8 RELIANCE. The Trustees and officers may consult with
counsel (which may be a firm in which one or more of the Trustees or officers is
or are members) and the advice or opinion of such counsel shall be full and
complete personal protection to all of the Trustees and officers in respect of
any action taken or suffered by them in good faith and in reliance on or in
accordance with such advice or opinion. In discharging their duties, Trustees
and officers, when acting in good faith, may rely upon financial statements of
the Trust represented to them to be correct by the President or the officer of
the Trust having charge of its books of account, or stated in a written report
by an independent certified public accountant fairly to present the financial
position of the trust. The Trustees may rely, and shall be personally protected
in acting, upon any instrument or other document believed by them to be genuine.
ARTICLE IX
DURATION, TERMINATION, AMENDMENT
AND REORGANIZATION OF TRUST
9.1 DURATION AND TERMINATION OF TRUST. The Trustees will use
their best efforts to terminate the Trust within approximately 10 years from the
date of this Declaration of Trust. However, it shall be in the absolute
discretion of the Trustees to determine in good faith such termination date as
will be in the best interests of the Shareholders of the Trust, taking into
consideration the investments of the Trust at the time at which termination is
considered; but in any event the Trust shall terminate no later than 20 years
from the date of this Declaration. The holders of a majority of the outstanding
shares entitled to vote thereon may amend this Declaration to extent this
period. Any determination by the Trustees of the date upon which termination
shall occur shall be reflected in a vote of or written instrument singed by a
majority of all of the Trustees then in office, including a majority of the
Unaffiliated Trustees; provided, however, that any plan for the termination of
the Trust which contemplates the distribution to the Shareholders of Securities
or other property in kind (other than the right promptly to receive cash) shall
require the vote or consent of the holders of a majority of the outstanding
Shares entitled to vote thereon; and also provided that the Trust shall be
subject to termination at any time by the vote or consent of the holders of a
majority of the outstanding Shares entitled to vote thereon.
9.1.1 Upon the termination of the Trust and unless otherwise
provided in a plan for termination approved by the holders of a majority of the
outstanding Shares and agreeable to a majority of the Trustees:
(i) the Trust shall carry on no business except for the
purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust shall
have been wound up, including the power to fulfill or discharge
the contracts of the Trust, collect its assets, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any
part of the remaining Trust Estate to one or more Persons at
public or private sale for consideration which may consist in
whole or in part of cash, Securities or other property of any
kind, discharge or pay its liabilities, and do all other acts
appropriate to liquidate its business (and provided that the
Trustees may, if permitted by applicable law, and if they deem it
to be in the best interest of the Shareholders, appoint a
liquidating trust, or agent, or other entity, to perform one or
more of the foregoing functions); and
(iii) after paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements, as they deem necessary for
their protection, the Trustee or any liquidating trust, agent or
other entity appointed by them, shall distribute the remaining
Trust Estate among the Shareholders pro rata according to the
number of Shares held by each.
If any plan for the termination of the Trust approved by the holders of a
majority of the outstanding Shares and agreeable to a majority of the Trustees
provides for actions of the Trustees other than as aforesaid, the Trustees shall
have full authority to take all action as in their opinion is necessary or
appropriate to implement said plan.
9.1.2 After termination of the Trust and distribution to the
Shareholders as provided herein or in any said plan so approved by the
Shareholders, the Trustees shall execute and lodge among the records of the
Trust an instrument in writing setting forth the fact of such termination, and
the Trustees shall thereupon be discharged from all further liabilities and
duties hereunder and the rights and interests of all Shareholders hereunder
shall thereupon cease.
No Person dealing with the Trust or any Person or Persons purporting to act
as Trustees shall at any time (whether or not after 15 years from the date of
this Declaration of Trust) have any obligation to inquire whether or not the
Trust is terminated.
9.2 MERGER, ETC. Upon the vote or written consent of a
majority of the Trustees, including a majority of the Unaffiliated Trustees, and
with the approval of the holders of a majority of the Shares then outstanding
and entitled to vote, at a meeting the notice for which included a statement of
the proposed action, the Trustees may (a) merge the Trust into, or sell, convey
and transfer the Trust Estate to, any corporation, association, trust or other
organization in exchange for shares or Securities thereof, or beneficial
interests therein, or other consideration, and the assumption by such transferee
of the liabilities of the Trust and (b) thereupon terminate the Trust and,
subject to Section 9.1, distribute such shares, securities, beneficial
interests, or other consideration, ratably among the Shareholders in redemption
of their Shares.
9.3 AMENDMENT PROCEDURE. This Declaration may be amended by
the vote or written consent of a majority of the Trustees and of the holders of
a majority of the outstanding Shares entitled to vote thereon; provided,
however, that no amendment which would reduce the priority of payment or amount
payable to any class of Shares of the Trust upon liquidation of the Trust or
that would diminish or eliminate any voting rights pertaining to any class of
Shares shall be made unless approved by the vote or consent of the holders of
two-thirds of the outstanding Shares of such class. The Trustees may also amend
this Declaration by the vote of two-thirds of the Trustees without the vote or
consent of Shareholders at any time to the extent deemed by the Trustees in good
faith to be necessary to meet the requirements for qualification as a Real
Estate Investment Trust under the REIT Provisions of the Internal Revenue Code
or any interpretation thereof by a court or other governmental agency of
competent jurisdiction, but the Trustees shall not be liable for failing so to
do. Actions by the Trustees pursuant to the third paragraph of Section 1.1
hereof or pursuant to subsection 10.3.1 hereof that result in amending this
Declaration may also be effected without vote or consent of any Shareholder.
9.4 AMENDMENT, ETC. Prior to First Public Offering of Shares.
Notwithstanding any other provision of this Declaration, at such time as there
is only one holder of all of the outstanding Shares and prior to the issuance of
Shares pursuant to a registration statement under the Securities Act of 1933,
said holder of all of the outstanding Shares may, without any vote or consent of
the Trustees, (a) amend this Declaration in whole or in part, (b) terminate this
Trust, (c) remove and/or replace any or all of the Trustees, and (d) instruct
the investment and disposition of any funds or properties held by the Trustees.
<PAGE>
ARTICLE X
MISCELLANEOUS
10.1 APPLICABLE LAW. This Declaration of Trust is made in The
Commonwealth of Massachusetts; the situs, domicile and residency of the Trust
for all purposes is Massachusetts; and the Trust is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth, including the Massachusetts Business Corporation Law as the same
may be amended from time to time, to which reference is made with the intention
that matters not specifically covered herein or as to which an ambiguity may
exist shall be resolved as if the Trust were a Massachusetts business
corporation, but the reference to said Business Corporation Law is not intended
to and shall not give the Trust, the Trustees, the Shareholders or any other
person any right, power, authority or responsibility available only to or in
connection with an entity organized in corporate form.
10.2 FILING OF COPIES; REFERENCES; HEADINGS. The original or a
copy of this instrument and of each amendment hereto shall be kept at the office
of the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of The Commonwealth of Massachusetts and with the Boston City Clerk,
as well as any other governmental office where such filing may from time to time
be required, but the failure to make any such filing shall not impair the
effectiveness of this instrument or any such amendment. Anyone dealing with the
Trust may rely on a certificate by an officer of the Trust as to whether or not
any such amendments have been made, as to the identities of the Trustees and
officers, and as to an matters in connection with the Trust hereunder; and, with
the same effect as if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any such amendments.
In this instrument and in any such amendment, references to this instrument, and
all expressions like "herein", "hereof", and "hereunder" shall be deemed to
refer to this instrument as a whole as the same may be amended or affected b any
such amendments. The masculine gender shall include the feminine and neuter
genders. Headings are placed herein for convenience of reference only and shall
not be taken as part hereof or control or affect the meaning, construction or
effect of this instrument. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
10.3 PROVISIONS OF THE TRUST IN CONFLICT WITH LAW OR
REGULATIONS.
10.3.1 The provisions of this Declaration are severable, and
if the Trustees shall determine, with the advice of counsel, that any one or
more of such provisions (the "Conflicting Provisions") could have the effect of
preventing the Trust from qualifying as a real estate investment trust under the
REIT Provisions of the Internal Revenue Code (and if the Trustees have
determined the Trust should elect to be taxed as a REIT under the Internal
Revenue Code) or are in conflict with other applicable federal or state laws or
regulations, the Conflicting Provisions shall be deemed never to have
constituted a part of the Declaration; provided, however, that such
determination by the Trustees shall not affect or impair any of the remaining
provisions of this Declaration or render invalid or improper any action taken or
omitted (including but not limited to the election of Trustees) prior to such
determination. A certification signed by a majority of the Trustees setting
forth any such determination and reciting that it was duly adopted by the
Trustees, or a copy of this Declaration, with the Conflicting Provisions removed
pursuant to such a determination, signed by a majority of the Trustees, shall be
conclusive evidence (except as to Shareholders, as to whom it shall only be
prima facie evidence) of such determination when lodged in the records of the
Trust. The Trustees shall not be liable for failure to make any determination
under this Section 10.3.1. Nothing in this Section 10.3.1 shall in any way limit
or affect the right of the Trustees to amend this Declaration as provided in
Section 9.2.
10.3.2 If any provision of this Declaration shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid or
unenforceable any other provision of this Declaration, and this Declaration
shall be carried out as if any such invalid or unenforceable provisions were not
contained herein.
10.4 BINDING EFFECT; SUCCESSORS IN INTEREST. Each Person who
becomes a Shareholder shall, as a result thereof, be deemed to have agreed to
and to be bound by the provisions of this Declaration of Trust. This Declaration
shall be binding upon and inure to the benefit of the Trustees and the
Shareholders and the respective successors, assigns, heirs, distributees and
legal representatives of each of them.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Declaration as of the 6th day of February, 1985.
/s/ James L. Mooney /s/ Robert L. Kinney
James L. Mooney Robert L. Kinney
Address: Address:
157 Linden Street Mellon Real Estate Investment
Ridgewood, New Jersey 07450 Management Corporation
Mellon Financial Center
551 Madison Avenue
New York, New York 10022
/s/ Mercer L. Jackson /s/ James T. Foran
Mercer L. Jackson James T. Foran
Address: Address:
3825 North 37th Street Mellon Real Estate Investment
Arlington, Virginia 22207 Management Corporation
Mellon Financial Center
551 Madison Avenue
New York, New York 10022
/s/ Patrick E. McCarthy /s/ Arthur C. Karlin
Patrick E. McCarthy Arthur C. Karlin
Address: Address:
43 Highland Avenue E.F. Hutton & Company, Inc.
Bangor, Maine 04401 595 Madison Avenue
New York, New York 10022
/s/ Irving E.Cohen
Irving E. Cohen
Address:
E.F. Hutton & Company, Inc.
595 Madison Avenue
New York, New York 10022
STATE OF New York
COUNTY OF New York
Then personally appeared Irving E. Cohen, to me known to be one of the
Trustees who executed the foregoing Declaration of Trust and acknowledged the
same to be his free act and deed, this 11th day of February, 1985.
/s/ Kathleen M. Keenan
Notary Public
My commission expires:
3/30/85
STATE OF New York
COUNTY OF New York
Then personally appeared Arthur C. Karlin, to me known to be one of the
Trustees who executed the foregoing Declaration of Trust and acknowledged the
same to be his free act and deed, this 11th day of February, 1985.
/s/ Kathleen M. Keenan
Notary Public
My commission expires:
3-30-85
STATE OF New York
COUNTY OF New York
Then personally appeared James T. Foran, to me known to be one of the
Trustees who executed the foregoing Declaration of Trust and acknowledged the
same to be his free act and deed, this 8th day of February, 1985.
/s/ Kathleen M. Keenan
Notary Public
My commission expires:
3-30-85
MELLON PARTICIPATING MORTGAGE TRUST
COMMERCIAL PROPERTIES SERIES 85/10
AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED
DECLARATION OF TRUST
----------------------------------------------
AMENDMENT NO. 1 (the "Amendment") to the Second Amended and Restated
Declaration of Trust (the "Declaration of Trust") of MELLON PARTICIPATING
MORTGAGE TRUST COMMERCIAL PROPERTIES SERIES 85/10 (the "Trust") dated February
6, 1985, made at Atlanta, Georgia this 13th day of March, 1996 by the Board of
Trustees hereunder.
WHEREAS, the third paragraph of Section 1.1 of the Declaration of Trust
provides, among other things, that upon receipt of a written request by Mellon
Bank Corporation ("Mellon"), the Trustees shall change the name of the Trust to
a name that does not contain the name "Mellon."
WHEREAS, Section 9.3 of the Declaration of Trust provides that actions
by the Trustees pursuant to the third paragraph of Section 1.1 of the
Declaration of Trust that result in amending the Declaration of Trust may be
effected without the vote or consent of any shareholder of the Trust;
WHEREAS, Mellon has requested that the Trust no longer use the name
"Mellon" in the Trust's name; and
WHEREAS, the Board of Trustees desires to amend the Declaration of
Trust to change the name of the Trust from "Mellon Participating Mortgage Trust
Commercial Properties Series 85/10" to "Vinings Investment Properties Trust";
NOW, THEREFORE, the undersigned, being all the Trustees of the Trust,
do hereby state:
1. In accordance with Sections 1.1 and 9.3 of the Declaration of Trust,
(a) The first sentence of the first paragraph of Section 1.1
of the Declaration of Trust is hereby amended in its entirety to read
as follows:
"This Trust created by this Declaration of Trust is herein referred to
as the "Trust" and shall be known by the name "Vinings Investment
Properties Trust."
(b) All references to "Mellon Participating Mortgage Trust
Commercial Properties Series 85/10" (or any similar words) in the
Declaration of Trust shall hereafter be deemed to be references to
"Vinings Investment Properties Trust."
2. This Amendment may executed in separate counterparts, each of which so
executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument.
EXECUTED as of the 13th day of March, 1996.
TRUSTEES
/s/ Peter D. Anzo
- -----------------------
Peter D. Anzo
/s/ Martin H. Petersen
- -----------------------
Martin H. Petersen
/s/ Stephanie A. Reed
- -----------------------
Stephanie A. Reed
/s/ Gilbert H. Watts, Jr.
- -----------------------
Gilbert H. Watts, Jr.
/s/ Phill D. Greenblatt
- -----------------------
Phill D. Greenblatt
VININGS INVESTMENT PROPERTIES TRUST
AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED
DECLARATION OF TRUST
----------------------------------------------
AMENDMENT NO. 2 (the "Amendment") to the Second Amended and Restated
Declaration of Trust of VININGS INVESTMENT PROPERTIES TRUST (the "Trust") dated
February 6, 1985, as amended (the "Declaration of Trust"), made at Atlanta,
Georgia this 25th day of June, 1996 by the Board of Trustees hereunder.
WHEREAS, Section 9.3 of the Declaration of Trust provides that the
Declaration of Trust may be amended by the vote or written consent of a majority
of the Trustees and of the holders of a majority of the outstanding shares of
beneficial interest of the Trust entitled to vote thereon;
WHEREAS, the Board of Trustees desires to amend the Declaration of
Trust to (i) authorize the Board of Trustees to combine outstanding shares of
beneficial interest of the Trust by way of reverse share split, (ii) provide
that to achieve the general policy objective of the Trust, the Trustees intend
to invest the assets of the Trust in multifamily apartment properties and other
real estate properties which offer the potential to achieve such objective, and
(iii) eliminate certain restrictions on the Trust's investment practices and
activities (collectively, the "Amendments");
WHEREAS, in accordance with Section 9.3 of the Declaration of Trust,
the Trustees have approved the Amendments pursuant to a unanimous written
consent dated May 23, 1996; and
WHEREAS, in accordance with Section 9.3 of the Declaration of Trust,
the Amendments have been approved at a meeting of shareholders held on June 25,
1996, by the holders of a majority of the outstanding shares of beneficial
interest of the Trust entitled to vote thereon;
NOW, THEREFORE, the undersigned, being all the Trustees of the Trust,
do hereby state:
1. Section 2.1 of the Declaration of Trust is hereby amended in its entirety to
read as follows (new language appearing in italics):
"2.1 GENERAL STATEMENT OF POLICY. It is the general policy of the Trust
that the Trustees invest the Trust Estate principally in investments
which will conserve and protect the Trust's invested capital, produce
cash distributions, and offer the potential for capital appreciation to
be realized upon the sale, refinancing or other disposition of such
investments. To achieve this objective, the Trustees intend to invest
the assets of the Trust in Mortgage Loans and Land Purchase-Leasebacks,
including those with equity enhancements, multifamily apartment
properties and other real estate properties and investments which offer
the potential to achieve such objective. The consideration paid for Real
Property acquired by the Trust shall ordinarily be based on the fair
market value of the property as determined by a majority of the
Trustees. In cases where a majority of the Unaffiliated Trustees so
determine, such fair market value shall be as determined by a qualified
independent real estate appraiser selected by the Trustees, including a
majority of the Unaffiliated Trustees. The Trustees, including a
majority of the Unaffiliated Trustees, shall at least annually review
the investment policies of the Trust to determine that the policies
being followed by the Trust are in the best interests of the
Shareholders, and each such determination and the basis therefor shall
be set forth in the minutes of meetings of the Trustees."
2. Article VI of the Declaration of Trust is hereby deleted in its entirety.
3. Section 7.1 of the Declaration of Trust is hereby amended in its entirety to
read as follows (new language appearing in italics):
"7.1 SHARES. The beneficial interest in the Trust shall be divided into
transferable units of a single class, all of which are designated as
Shares, each without par value, and each Share shall (except as provided
in Section 7.12) be identical in all respects with every other Share.
The total number of Shares the Trust shall have authority to issue shall
be unlimited. The Shares may be issued for such consideration as the
Trustees shall determine, including upon the conversion of convertible
debt, or by way of share dividend or share split in the discretion of
the Trustees. In addition to the issuance of Shares by way of share
dividend or share split, the Trustees may combine outstanding Shares by
way of reverse share split and provide for the payment of cash in lieu
of any fractional interest in a combined Share; and the mechanics
authorized by the Trustees to implement any such combination shall be
binding upon all Shareholders, holders of convertible debt, optionees
and others with any interest in Shares. Outstanding Shares shall be
transferable and assignable in like manner as are shares of stock of a
Massachusetts business corporation. Shares reacquired by the Trust shall
no longer be deemed outstanding and shall have no voting or other rights
unless and until reissued. Shares reacquired by the Trust may be
cancelled by action of the Trustees. All Shares shall be fully paid and
nonassessable by or on behalf of the Trust upon receipt of full
consideration for which they have been issued or without additional
consideration if issued by way of share dividend, share split or
combination or upon the conversion of convertible debt. The Shares shall
not entitle the holder to preference, preemptive, conversion, or
exchange rights of any kind, except as the Trustees may specifically
determine with respect to any Shares at the time of issuance of such
Shares and except as specifically provided by law."
4. This Amendment may executed in separate counterparts, each of which so
executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument.
5. Pursuant to Section 10.2 of the Declaration of Trust, a copy of this
Amendment shall be filed with the Secretary of The Commonwealth of Massachusetts
and with the Boston City Clerk.
EXECUTED as of the 25th day of June, 1996.
TRUSTEES
/s/ Peter D. Anzo
- -------------------------
Peter D. Anzo
/s/ Martin H. Petersen
- -------------------------
Martin H. Petersen
/s/ Stephanie A. Reed
- -------------------------
Stephanie A. Reed
/s/ Gilbert H. Watts, Jr.
- -------------------------
Gilbert H. Watts, Jr.
/s/ Phill D. Greenblatt
- -------------------------
Phill D. Greenblatt
/s/ Henry Hirsch
- -------------------------
Henry Hirsch
VININGS INVESTMENT PROPERTIES, L.P.
THIRD AMENDMENT TO THE
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
-----------------------------------------------------
This Third Amendment to the Amended and Restated Agreement of Limited
Partnership of Vinings Investment Properties, L.P. is made as of December 19,
1997 by Vinings Investment Properties Trust, a Massachusetts business trust (the
"Trust"), Vinings Holdings, Inc., a Delaware corporation ("Holdings") and the
Trust as general partner (the "General Partner") of Vinings Investment
Properties, L.P., a Delaware limited partnership (the "Partnership") for the
purpose of amending the Amended and Restated Agreement of Limited Partnership of
the Partnership dated June 30, 1997, as amended (the "Partnership Agreement").
All capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Partnership Agreement.
WHEREAS, both the Trust and Holdings have made capital contributions
and have been admitted as Limited Partners of the Partnership; and
WHEREAS, Holdings desires to withdraw as a Limited Partner from the
Partnership (the "Withdrawing Limited Partner") and transfer its Limited Partner
interest in the Partnership to the Trust and the General Partner has consented
to such transfer;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Transfer of Limited Partner's Interest.
(a) Holdings does hereby sell, grant, convey, transfer, assign, set
over and deliver unto the Trust all of its interest in the Partnership (the
"Interest").
To have and to hold the Interest, together with all and singular
rights, privileges and appurtenances thereto, and anywise belonging or in any
way appertaining to Holdings unto the Trust, its successors and assigns,
forever.
(b) Holdings hereby represents and warrants that Holdings is the sole
owner of legal and beneficial title to all of the Interest and Holdings has made
no previous assignment of the Interest.
(c) Pursuant to Section 11.4 of the Partnership Agreement, the General
Partner hereby consents to the transfer of the Interest from Holdings to the
Trust pursuant to Section 11.3 A of the Partnership Agreement.
(d) The change in limited partnership interests in the Partnership
shall become effective as of the date of this Agreement.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE
SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND EXEMPTIONS FROM THE
SECURITIES ACT OF 1933, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACTS OR PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SUCH ACTS.
SECTION 2. AMENDMENT TO PARTNERSHIP AGREEMENT.
Pursuant to Section 14.1 B of the Partnership Agreement, the General
Partner, as general partner of the Partnership and as attorney-in-fact for its
Limited Partners, hereby amends the Partnership Agreement by deleting Exhibit A
thereto in its entirety and replacing it with the Exhibit A attached hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
VININGS INVESTMENT PROPERTIES TRUST VININGS HOLDINGS, INC.
As General Partner As Withdrawing Limited Partner
By: /s/ Peter D. Anzo By: /s/ Stephanie A. Reed
------------------------- ---------------------------
Name: Peter D. Anzo Name: Stephanie A. Reed
Title: President Title: Vice President
VININGS INVESTMENT PROPERTIES TRUST
As Limited Partner
By: /s/ Peter D. Anzo
-------------------------
Name: Peter D. Anzo
Title: President
<PAGE>
Vinings Investment Properties, L.P.
Third Amendment to the Amended and Restated Partnership Agreement
-----------------------------------------------------------------
Exhibit A
---------
Name and Address Percentage Number of
of Contributor Interest Units Issued
- ----------------- -------- ------------
GENERAL PARTNER:
Vinings Investment Properties Trust 1.00% 13,232
LIMITED PARTNERS:
Vinings Investment Properties Trust 80.67% 1,067,393
The Vinings Group, Inc. .69% 9,108
Hallmark Group Real Estate Service Corp. .69% 9,108
Windrush Partners, Ltd. 16.95% 224,330
------ ---------
Total 100.00% 1,323,171
VININGS INVESTMENT PROPERTIES, L.P.
FOURTH AMENDMENT TO THE
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
-----------------------------------------------------
This Fourth Amendment to the Amended and Restated Agreement of Limited
Partnership of Vinings Investment Properties, L.P. is made as of July 1, 1998 by
Vinings Investment Properties Trust, a Massachusetts business trust (the
"Trust"), as general partner (the "General Partner") of Vinings Investment
Properties, L.P., a Delaware limited partnership (the "Partnership"), and the
Trust, limited partner of the Partnership for the purpose of amending the
Amended and Restated Agreement of Limited Partnership of the Partnership dated
June 30, 1997, as amended (the "Partnership Agreement"). All capitalized terms
used herein and not otherwise defined shall have the respective meanings
ascribed to them in the Partnership Agreement.
WHEREAS, the Trust has made a capital contribution and has been
admitted as a Limited Partner of the Partnership;
WHEREAS, the Trust has purchased and retired a total of 117 of its
shares of beneficial interest ("Shares") and the General Partner wishes to
adjust the interests in the Partnership pursuant to Section 4.1 of the
Partnership Agreement to accurately reflect such redemption;
WHEREAS, the Trust has also issued a total of 20,000 additional Shares
and has made an additional capital contribution to the Partnership and the
General Partner has issued to the Trust additional units in the Partnership (the
"Units") pursuant to Section 4.2 of the Partnership Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. CHANGE IN PERCENTAGE INTEREST.
(a) Pursuant to Section 4.2 of the Partnership Agreement, the Trust's
interest in the Partnership shall decrease by the number of Units associated
with the redemption of Shares and shall increase by the number of Units issued
in connection with the issuance of Shares as reflected on Exhibit A;
(b) The change in limited partnership interests in the Partnership
shall become effective as of the date of this Agreement.
SECTION 2. AMENDMENT TO PARTNERSHIP AGREEMENT.
Pursuant to Section 4.1 of the Partnership Agreement, the General
Partner, as general partner of the Partnership, hereby amends the Partnership
Agreement by deleting Exhibit A thereto in its entirety and replacing it with
the Exhibit A attached hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date first written above.
VININGS INVESTMENT PROPERTIES, L.P.
By: Vinings Investment Properties Trust
General Partner
By: /s/ Peter D. Anzo
----------------------------
Peter D. Anzo
President
VININGS INVESTMENT PROPERTIES TRUST
By: /s/ Peter D. Anzo
----------------------------
Peter D. Anzo
President
<PAGE>
Vinings Investment Properties, L.P.
Fourth Amendment to the Amended and Restated Partnership Agreement
Exhibit A
---------
Percentage Number of
Name and Address of Contributor Interest Units Issued
- ------------------------------- -----------------------------------
GENERAL PARTNER:
- ----------------------
Vinings Investment Properties Trust 1.00% 13,432
LIMITED PARTNERS:
- ------------------
Vinings Investment Properties Trust 80.94% 1,087,193
The Vinings Group, Inc. 0.67% 9,108
Hallmark Group Real Estate Service Corp. 0.67% 9,108
ASSIGNEES:
- -------------
Irving Abrams 0.49% 6,598
Tim R. Altman 0.25% 3,299
William E. & Mary E. Butler 0.25% 3,299
Donald E. Chace 0.49% 6,598
Terry D. Douglass 0.49% 6,598
Hazel E. Earsley 0.25% 3,299
Stanley D. Eason 0.49% 6,598
C.W. Gustav & Janice S. Eifrig 0.25% 3,299
Jane L. Finchum 0.12% 1,649
Esty Foster 0.49% 6,598
Robert Hesseltine 0.49% 6,598
Betty T. Hinds 0.49% 6,598
Albert H. Hooper, Jr. 0.49% 6,598
Mary Susan Leahy, Executor for the
Estate of Joseph Dunbar Shields, Jr. 0.49% 6,598
Trustmark National Bank, Agent for
Kathryn D. Little, Investment 0.49% 6,598
Patrick Paul McCarthy 0.25% 3,299
James A. Melvin, Jr. 0.49% 6,598
John R. Mileski 0.49% 6,598
J. Cary Monroe 0.25% 3,299
E. Ray Morris 0.49% 6,598
Thomas W. Orcutt, M.D. 0.49% 6,598
Thomas D. Price 0.25% 3,299
Frederick R. Radcliffe 0.25% 3,299
Joseph D. Shields, III, M.D. 0.25% 3,299
M.F. Soukkar 0.49% 6,598
Virginia G. Sturwold 0.25% 3,299
Oliver H. Tallman, II 0.25% 3,299
Lewis F. Wood, Jr. 0.49% 6,598
Homer R. Yook 0.25% 3,299
Alice C. Young 0.25% 3,299
The Vinings Group, Inc. 0.12% 1,650
Hallmark Group Real Estate Service Corp 0.12% 1,649
Robert L. Bell, M.D. 0.49% 6,598
William G. Beshears, Jr. 0.49% 6,598
Joseph Bonsall, Jr. 0.49% 6,598
Harold J. DeBlanc, Jr., M.D. 0.49% 6,598
William A. Hall 1.96% 26,391
Robert G. Randall 0.49% 6,598
Thomas L. Williams 0.25% 3,299
Don M. Updegraff, Jr. 0.12% 1,649
Majed S. Zakaria 0.49% 6,598
----------- -------------
Total 100.00% 1,343,171
========== =============
VININGS INVESTMENT PROPERTIES, L.P.
FIFTH AMENDMENT TO THE
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
-----------------------------------------------------
This Fifth Amendment to the Amended and Restated Agreement of Limited
Partnership of Vinings Investment Properties, L.P. is made as of January 1, 1999
by Vinings Investment Properties Trust, a Massachusetts business trust (the
"Trust"), as general partner (the "General Partner") of Vinings Investment
Properties, L.P., a Delaware limited partnership (the "Partnership"), Windrush
Partners, Ltd. ("Windrush"), a limited partner, and the individuals listed in
Exhibit B, (the "Additional Limited Partners") for the purpose of amending the
Amended and Restated Agreement of Limited Partnership of the Partnership dated
June 30, 1997, as amended (the "Partnership Agreement"). All capitalized terms
used herein and not otherwise defined shall have the respective meanings
ascribed to them in the Partnership Agreement.
WHEREAS, Windrush has made a capital contribution and has been admitt-
ed as a Limited Partner of the Partnership;
WHEREAS, Windrush has previously assigned and transferred, pursuant to
Section 11.3 of the Partnership Agreement, its interest as a Limited Partner of
the Partnership to its limited partners;
WHEREAS, Windrush desires to dissolve and to withdraw as a Limited
Partner from the Partnership (the "Withdrawing Limited Partner") and the
Additional Limited Partners wish to be admitted to the Partnership as Substitute
Limited Partners (as defined in the Partnership Agreement);
Whereas, each Additional Limited Partner has previously granted
Hallmark Group Real Estate Services, Corp., the general partner of Windrush (the
"Windrush General Partner"), a special power of attorney to permit the Windrush
General Partner to execute and deliver any instrument necessary to admit such
Additional Limited Partner as a Substitute Limited Partner in the Partnership;
and
WHEREAS, The consent of the General Partner of the Partnership is
required under the Partnership Agreement for the Additional Limited Partners to
be admitted as Substitute Limited Partners of the Partnership.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. ADMISSION OF THE ADDITIONAL LIMITED PARTNERS.
(a) Pursuant to Section 11.4 of the Partnership Agreement, the General
Partner hereby consents to the admission of each of the Additional Limited
Partners as Substitute Limited Partners.
(b) The change in limited partnership interests in the Partnership
shall become effective as of the date of this Agreement.
SECTION 2. AMENDMENT TO PARTNERSHIP AGREEMENT.
Pursuant to Section 14.1 B of the Partnership Agreement, the General
Partner, as general partner of the Partnership and as attorney-in-fact for its
Limited Partners, hereby amends the Partnership Agreement by deleting Exhibit A
thereto in its entirety and replacing it with the Exhibit A attached hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date first written above.
VININGS INVESTMENT PROPERTIES, L.P.
By: Vinings Investment Properties Trust
General Partner
By: /s/ Peter D. Anzo
- ---------------------
Peter D. Anzo
President
<PAGE>
WINDRUSH PARTNERS, LTD.
Withdrawing Limited Partner
By: Hallmark Group Real Estate Services Corp.
General Partner
By: /s/ Martin H. Petersen
- --------------------------
Martin H. Petersen
President
SUBSTITUTE LIMITED PARTNERS
By: Hallmark Group Real Estate Services Corp.
As Attorney-in-Fact
By: /s/ Martin H. Petersen
- ---------------------------
Martin H. Petersen
President
Vinings Investment Properties, L.P.
Fifth Amendment to the Amended and Restated Partnership Agreement
Exhibit A
---------
Percentage Number of
Name and Address of Contributor Interest Units Issued
- ------------------------------- -------- ------------
Vinings Investment Properties Trust 1.00% 13,432
LIMITED PARTNERS:
Vinings Investment Properties Trust 80.94% 1,087,193
The Vinings Group, Inc. 0.67% 9,108
Hallmark Group Real Estate Service Corp. 0.67% 9,108
Irving Abrams 0.49% 6,598
Tim R. Altman 0.25% 3,299
William E. & Mary E. Butler 0.25% 3,299
Donald E. Chace 0.49% 6,598
Terry D. Douglass 0.49% 6,598
Hazel E. Earsley 0.25% 3,299
Stanley D. Eason 0.49% 6,598
C.W. Gustav & Janice S. Eifrig 0.25% 3,299
Jane L. Finchum 0.12% 1,649
Esty Foster 0.49% 6,598
Robert Hesseltine 0.49% 6,598
Betty T. Hinds 0.49% 6,598
Albert H. Hooper, Jr. 0.49% 6,598
Mary Susan Leahy, Executor for the
Estate of Joseph Dunbar Shields, Jr. 0.49% 6,598
Trustmark National Bank, Agent for
Kathryn D. Little, Investment 0.49% 6,598
Patrick Paul McCarthy 0.25% 3,299
James A. Melvin, Jr. 0.49% 6,598
John R. Mileski 0.49% 6,598
J. Cary Monroe 0.25% 3,299
E. Ray Morris 0.49% 6,598
Thomas W. Orcutt, M.D. 0.49% 6,598
Thomas D. Price 0.25% 3,299
Frederick R. Radcliffe 0.25% 3,299
Joseph D. Shields, III, M.D. 0.25% 3,299
M.F. Soukkar 0.49% 6,598
Virginia G. Sturwold 0.25% 3,299
Oliver H. Tallman, II 0.25% 3,299
Lewis F. Wood, Jr. 0.49% 6,598
Homer R. Yook 0.25% 3,299
Alice C. Young 0.25% 3,299
The Vinings Group, Inc. 0.12% 1,650
Hallmark Group Real Estate Service Corp 0.12% 1,649
ASSIGNEES:
Robert L. Bell, M.D. 0.49% 6,598
William G. Beshears, Jr. 0.49% 6,598
Joseph Bonsall, Jr. 0.49% 6,598
Harold J. DeBlanc, Jr., M.D. 0.49% 6,598
William A. Hall 1.96% 26,391
Robert G. Randall 0.49% 6,598
Thomas L. Williams 0.25% 3,299
Don M. Updegraff, Jr. 0.12% 1,649
Majed S. Zakaria 0.49% 6,598
- ---------------- ----- ---------
Total 100% 1,343,171
===== =========
<PAGE>
Vinings Investment Properties, L.P.
Fifth Amendment to the Amended and Restated Partnership Agreement
Exhibit B
---------
Additional Limited Partner No. of Units
-------------------------- ------------
Irving Abrams 6,598
Tim R. Altman 3,299
William E. & Mary E. Butler 3,299
Donald E. Chace 6,598
Terry D. Douglass 6,598
Stanley D. Eason 6,598
Hazel E. Earsley 3,299
C.W. Gustav & Janice S. Eifrig 3,299
Jane L. Finchum 1,648
Esty Foster 6,598
Robert Hesseltine 6,598
Betty T. Hinds 6,598
Albert H. Hooper, Jr. 6,598
Kathryn D. Little 6,598
Patrick Paul McCarthy 3,299
James A. Melvin, Jr. 6,598
John R. Mileski 6,598
J. Cary Monroe 3,299
E. Ray Morris 6,598
Thomas W. Orcutt, M.D. 6,598
Thomas D. Price 3,299
Frederick R. Radcliffe 3,299
Joseph D. Shields, III, M.D. 3,299
J. Dunbar Shields, Jr., M.D. 6,598
M.F. Soukkar 6,598
Virginia G. Sturwold 3,299
Oliver H. Tallman, III 3,299
Lewis F. Wood, Jr. 6,598
Homer R. Yook 3,299
Alice C. Young 3,299
The Vinings Group, Inc. 1,650
Hallmark Group Real Estate Services, Corp. 1,649
===============
Subtotal 153,402
===============
MANAGEMENT AGREEMENT
--------------------
This MANAGEMENT AGREEMENT made in Atlanta, Georgia between The Thicket
Apartments, L.P. ("Owner"), and VIP Management, LLC, ("Agent") a Georgia Limited
Liability Company, shall become effective as of January 1, 1999.
NOW THEREFORE in consideration of the promises and mutual covenants
contained herein, Owner appoints VIP Management, LLC as the exclusive Property
management and leasing Agent for the Property as defined below.
ARTICLE I
Definition
----------
1.01 Affiliate. (a) Any person directly or indirectly controlling,
controlled by or under common control with another person; (b) any person owning
or controlling 10% or more of the outstanding voting securities of such other
person; and (c) any officer, manager, director, partner or trustee of such
person. The term "person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or unincorporated
organization.
1.02 Budget. A written estimate or projection of all receipts and
expenditures for the operation of the Property during a Fiscal Year, including,
without limitation, all estimated rentals (including ancillary income) and all
estimated repairs, maintenance and capital projects.
1.03 Fiscal Year. Each calendar year ending December 31, all or a part
of which falls within the term of this Agreement, unless otherwise stipulated
herein.
1.04 Gross Receipts. All Gross Receipts of every kind and nature
derived from the operation of the Property during a specified period, without
limitation, laundry income, application fees, late fees, and recreation area
fees; excluding only: (a) security deposits (to the extent not applied to
delinquent rents or damages); (b) proceeds from a sale or refinance of the
Property: (c) proceeds from insurance for the reimbursement of loss or damage to
the Property, or any part thereof, except that insurance payments for loss of
rents will be considered as part of Gross Receipts; (c) condemnation awards or
payments received in lieu of condemnation of the Property, or any part thereof;
and (d) any trade discounts and rebates received in connection with the purchase
of Personal Property or services in connection with the operation of the
Property.
1.05 Personal Property. All equipment, supplies, furnishings, furniture
and all other items of Personal Property now or hereafter owned by Owner and
located upon or used, or useful for, or necessary or adapted for the operation
of the Property.
1.06 Property. The 254 unit apartment community known and doing
business as The Thicket Apartments, located at 10 Thicket Way, Decatur, Georgia
30035. The term Property used herein includes all of the Land, Building(s) and
the Personal Property collectively associated with the above mentioned apartment
community.
ARTICLE II
Term of Agreement
-----------------
2.01 The initial term of this Agreement is two (2) years, commencing on
January 1, 1999 and ending on December 31, 2000. This Agreement shall
automatically renew for consecutive one (1) year periods, under the same terms
and conditions as the initial term, unless either party delivers written notice
of non-renewal, at least sixty (60) days prior to the expiration date of the
initial term or subsequent renewal term.
2.02 This contract is exclusive and non-cancelable except as stipulated
herein. This contract may only be immediately terminated, with notice in
writing, under one or more of the following conditions:
(a) mutual agreement of Owner and Agent;
(b) sale or transfer of ownership in an arms length transaction;
(c) gross violation by the Agent of the terms and responsibilities outlined
in this agreement;
(d) any criminal action or gross negligence on the part of the Agent,
its employees or assigns including such acts as fraud,
misappropriation of funds, etc.;
(e) in the event a petition of bankruptcy is filed by or against
either the Agent or Owner, or in the event either makes an
assignment for the benefit of creditors or takes advantage of any
insolvency act.
2.03 If this Agreement is cancelled at any time or for any reason, other than at
the end of the initial term or subsequent renewal term, with the exception of
2.02(c) or 2.02(d) above, a cancellation fee equal to two months fee will become
due and payable.
ARTICLE III
Appointment
-----------
Owner hereby grants to Agent, or an Affiliate, the sole and exclusive
right to manage, lease and operate the Property, subject to the terms and
provisions of this Agreement. During the term of this Agreement, Owner shall not
participate in the day-to-day operation of the Property and shall not at any
time directly order or instruct any Employees or other personnel engaged in the
management or operation of the Property.
ARTICLE IV
Management
----------
4.01 Costs of Operation: All costs incurred by Agent in connection with
the management, leasing and operation of the Property shall be borne by Owner,
including, but not limited to, copies, phone charges, postage, payroll
processing, and computer charges, etc. except for the following costs which
shall be borne by Agent:
(a) costs relating to bookkeeping services required to be performed
hereunder that are performed at the Agent's home office; and
(b) Salaries and payroll expenses of multi-site and home office
Employees of Agent; however budgeted salaries, expenses and benefits of
personnel employed for the operation or management of the Property in accordance
with Section 4.04 hereof shall be paid by the Owner.
4.02 General Management Duties: Agent shall use diligence to manage,
lease and operate the Property in a professional manner, and shall consult with
Owner and keep Owner advised as to all major or extraordinary matters and
without limitation, at Owner's expense, perform the following services and
duties for Owner in a faithful, diligent and efficient manner:
(a) Maintain businesslike relations with tenants of the Property whose
service requests shall be received, considered and recorded in systematic
fashion in order to show the action taken with respect to each. Complaints of a
serious nature shall, after thorough investigation, be reported to Owner with
appropriate recommendations;
(b) Collect all rents and other sums and charges due from tenants,
subtenants, licensees and concessionaires of the Property and, if required,
retain attorneys or collection agencies for such purpose;
(b) Pay all expenses of the property, to the extent funds are
available, in a timely fashion from funds collected and deposited into Property
back accounts;
(c) Prepare or cause to be prepared for execution and filing all forms,
reports and returns required by all federal, state and local laws in connection
with unemployment insurance, worker's compensation, insurance, disability
benefits, Social Security and other similar taxes now in effect or hereafter
imposed, and also any other requirements relating to the employment of personnel
for the Property; however, Agent shall not be obligated to prepare any of
Owner's local, state, or federal income tax returns;
(d) Pay all sums and make all deposits becoming due and payable under
the provisions of any ground lease or any loan secured by a mortgage or trust
deed against the Property, or any part thereof, and otherwise perform all
covenants and obligations required to be performed under the provisions of any
such ground lease, mortgage or trust deed (to the extent that the performance of
such covenants and obligations are within the control of Agent); and
(e) Perform such other acts and deeds as are reasonable, necessary and
proper in the discharge of its management duties under this Agreement.
4.03 Budgets: Agent shall prepare and submit for approval of Owner not
later than thirty (30) days prior to the end of each Fiscal Year, a proposed
budget with respect to the operation and management of the Property for the
ensuing Fiscal Year. Such Budget shall include all Gross Receipts expected to be
collected, as well as all cash expenditures of the property including but not
limited to all salaries and benefits, leasing and advertising costs,
administrative costs, maintenance and repair items, utilities, taxes and
insurance, debt service and capital or replacement reserve items. In the event
Owner, in Owner's sole and reasonable judgement, disapproves of any proposed
Budget submitted by Agent, Owner shall give Agent written notice thereof, in
which event Agent shall make all revisions thereto which Owner shall direct and
resubmit the proposed Budget to Owner for approval. In the absence of such
written notice of disapproval within thirty (30) days after delivery of the
Budget to Owner, the Budget shall be deemed to have been approved by Owner. Each
approved Budget shall constitute the control instrument under which Agent shall
operate for the Fiscal Year covered thereby. Approval of the Budget shall be
deemed to be approval by Owner of all items specified therein. Agent shall not
incur or permit to be incurred, expenses in any approved Budget (excluding
utility expenses, general real estate taxes, insurance premiums, financing costs
and emergency expenses) in excess of ten percent (10%) of the amount set forth
in the Budget for any single line item in an expense classification, on a year
to date basis, (e.g., cleaning expenses, H.V.A.C. expenses, etc.) or in excess
of five percent (5%) of the aggregate expenditures in each expense
classification, on a year to date basis. Except as set forth herein and in
Section 4.06, there shall be no variance from any approved Budget, without the
prior written consent of Owner.
4.04 Property Personnel: In accordance with approved Budgets, Agent
shall, at Owner's expense, hire, employ, supervise and discharge all Employees
required in connection with the operation and management of the Property. All
Employees working on the Property are considered to be Employees of the Owner
and not the Agent even though salaries and benefits may be paid through a master
agency account. All salaries, taxes, insurance and other benefits paid to such
Employees through a master agency account shall be reimbursed immediately and
shall not be considered an expense of the management company. The Agent shall
not grant any non-budgeted Employee fringe benefits and plans not required by
laws or union contract without written consent of Owner. Agent will not
discriminate against any Employee or applicant for employment because of race,
creed, color, sex or national origin. Said Employees shall include the
following:
(a) Site Manager: A person who is experienced in the administration and
operation of residential Property.
(b) Rental Consultant: A person who is trained to lease apartments to
qualified prospective Residents, as apartments become vacant throughout the
year.
(c) Such other sales, office and maintenance personnel required to
operate and maintain the Property including air-conditioning mechanics,
electricians, plumbers, painters, carpenters, grounds keepers, janitorial and
custodial persons, as Agent reasonably deems necessary.
4.05 Contracts and Supplies: Agent shall, at Owner's expense, upon the
best terms available, enter into contracts on behalf of Owner for the furnishing
to the Property of required utility services, heating and air conditioning
services, pest control, other maintenance, and any other services and
concessions which are required in connection with the maintenance and operation
of the Property. Agent shall also place purchase orders for services and
Personal Property as are necessary to properly maintain the Property. All such
contracts and orders shall be subject to the limitations set forth in the
approved Budget. When taking bids or issuing purchase orders, Agent shall use
its best efforts to secure for and credit to Owner, any discounts, commissions
or rebates obtainable as a result of such purchases or services. Agent shall use
its best efforts to make purchases and (where necessary or desirable) obtain
bids for necessary labor and materials at the lowest possible cost as in its
judgement is consistent with good quality, workmanship and service standards.
Agent shall not incur any obligation to any person or entity in which Agent or
any of Agent's officers has a financial interest at a price or fee higher than
that which would have been charged as a result of bona fide arms-length
negotiations.
4.06 Alterations, Repairs and Maintenance:
(a) Agent shall, at Owner's expense, perform or cause to be performed
all necessary or desirable repairs, maintenance, cleaning, painting and
decorating, alterations, replacements and improvements in and to the Property as
are customarily made in the operation of properties of the kind, size and
quality of the Property; provided, however, that no unbudgeted alterations,
additions or improvements involving a fundamental change in the character of any
of the buildings or constituting a major new construction program shall be made
without the prior written approval of Owner (unless performed pursuant to any
lease or budget previously approved by Owner). In addition, no unbudgeted
expenditure in excess of $2,000 per item shall be made except as provided for in
Section 4.03, or unless such repairs are immediately necessary for the
preservation or the safety of the Property, or for the safety of the tenants of
the Property, or required to avoid the suspension of any necessary service to
the Property, or are required by any judicial or governmental authority having
jurisdiction. These repairs may be made by the Agent without prior approval and
<PAGE>
regardless of the cost limitations imposed by this Section 4.06(a); further,
provided that Agent shall as soon as practicable give written notice to Owner of
any such emergency repairs for which prior approval is not required.
(b) In accordance with the terms of approved Budgets or upon written
request of Owner, Agent shall, from time to time during the term hereof, at
Owner's expense, make or cause to be made all required capital improvements,
replacements or repairs to the Property; provided, however, if Agent is required
to perform extraordinary services in connection with such improvements, repairs
or replacements, which services exceed those customarily rendered by managing
agents of properties similar to the Property, then Agent shall receive an
additional fee therefore in an amount mutually agreed upon by Owner and Agent in
advance of the rendition of such services.
(c) Agent shall give Owner written notice of any material defect in the
Property and all parts thereof immediately after ascertainment thereof by Agent,
including without limitation, material defects in the roofs, foundations and
walls of the buildings and in the sewer, water, electrical, structural,
plumbing, heating, ventilation and air conditioning systems; provided, however,
that Agent shall have no obligation to inspect the buildings in order to
discover any such condition.
4.07 Licenses and Permits: Agent shall, at Owner's expense, obtain and
maintain in the name of Owner all licenses and permits required of Owner or
Agent in connection with the management and operation of the Property. Owner
agrees to execute and deliver any and all applications and other documents to
otherwise cooperate with Agent in applying for, obtaining and maintaining such
licenses and permits.
4.08 Compliance with Laws: Agent shall, at Owner's expense, comply with
all laws, regulations and requirements for any federal, state or municipal
government having jurisdiction respecting the use or manner of use of the
Property or the maintenance of operation thereof. Agent shall immediately inform
Owner of all notices, summons, suits, fines or violations sent to or served upon
Agent regarding the Property.
4.09 Legal Proceedings: Agent shall, at Owner's expense, institute any
and all legal and/or administrative actions or proceedings to collect charges,
rents or other income from the Property, to dispossess tenants or other persons
in possession, to cancel or terminate any lease, license or concession agreement
for the breach thereof or default thereunder by the tenant, licensee or
concessionaire and to protest increases in taxes and/or assessments levied
against the Property, or any portion thereof.
4.10 Inventory: The Agent shall maintain a current inventory of all
Personal Property.
4.11 Insurance Coverage: Owner shall procure and maintain throughout
the term hereof, the following insurance coverages with respect to the Property:
(a) Fire and extended coverage insurance;
(b) Worker's compensation insurance;
(c) Comprehensive public liability insurance for injury or death
to persons and damage to or loss to Property of not less than
$2,000,000 / $1,000,000 per occurrence;
(d) Burglary and theft insurance;
(e) Boiler insurance;
(f) Fidelity Bond or crime coverage of not less than $500,000;
(g) Employment practices liability insurance; and
(h) Such other insurance which Owner shall direct or as Agent
shall reasonably deem appropriate for the protection of Owner
and Agent against claims, losses and liabilities arising out
of the operation and improvement of the Property.
Agent shall, at Owner's request, procure such coverages on behalf of
Owner, at Owner's expense. All such policies of insurance shall name the Owner,
Agent and such other parties as Owner or Agent shall direct as the named insured
thereunder, as their respective interests may appear. Agent shall promptly
investigate and report to the Owner and the insurance company involved all
accidents and claims for damage relating to the ownership, operation and
maintenance of the Property and any damage or destruction to the Property.
4.12 Signs: Owner agrees to allow Agent to place one or more signs on
or about the Property stating that Agent is providing management for the
Property, provided that the signs and location thereof shall be subject to
Owner's approval.
<PAGE>
4.13 Debts of Owner: In the performance of its duties as managing Agent
of the Property, Agent shall act as the agent of the Owner. All debts and
liabilities to third persons and Employees of the Property incurred by Agent in
the course of its operation and management of the Property shall be the debts
and liabilities of the Owner only, and Agent shall not be liable for any such
debts or liabilities, except to the extent Agent has exceeded its authority
hereunder.
4.14 Allocation of Costs: The parties hereto acknowledge that the
Property may be operated in conjunction with other properties managed by Agent,
and certain costs may be allocated or shared among such properties with such
costs being reimbursed to Agent.
4.15 Other Duties: Agent may provide other duties such as oversee major
property renovation, new construction or renovation lease up, coordinate
partnership audits, tax returns, bankruptcy filings, loan refinancing, etc. as
requested by Owner for additional fees to be mutually agreed upon by Owner and
Agent.
4.16 Exclusivity: Agent is not precluded from providing management or
other services to other owners or properties even if such properties might be in
direct competition with the subject Property.
ARTICLE V
Management Fees
---------------
5.01 Compensation of Agent: As consideration for the performance by
Agent of all its management obligations under this Agreement, Owner agrees to
pay Agent a management fee each month during the term of this Agreement in an
amount equal to five percent (5%) of Gross Receipts. Said management fee shall
be paid not later than the 10th day of the month following the month for which
such fee is earned. Provided that Agent is not in default under this Agreement,
Agent shall be entitled to pay itself the monthly management fee herein provided
from the Property bank account referred to in Article VI hereof. In addition,
Agent shall charge and collect an accounting/computer fee of five dollars
($5.00) per unit per month, to be paid in the same manner described herein.
5.02 Reimbursement of Agent's Expenses: Owner agrees to reimburse Agent
upon demand therefore for any monies that Agent may elect to advance for the
account of Owner. It is expressly understood that Agent is under no obligation
to advance any monies for the account of the Owner. Owner shall further
reimburse Agent for all of Agent's expenses incurred in connection with the
operation of the Property or as a result of Agent's compliance with this
Agreement during the preceding month, including, without limitation copies,
postage, Agent's long distance travel and long distance phone expenses and
expenses relating to the duties set forth in this Agreement.
ARTICLE VI
Procedure for Handling Receipts and Operating Capital
-----------------------------------------------------
6.01 Bank Deposits: Agent shall establish and maintain, at cost of
Owner, separate bank accounts in the name of the Property, as Agent deems
appropriate, into which all monies received by Agent for or on behalf of Owner
in connection with the operation and management of the Property shall be
deposited by Agent.
6.02 Disbursement of Deposits: Agent shall disburse and pay from the
bank account specified in Section 6.01 hereof, such amounts and at such times as
the same are required in connection with the management and operation of the
Property in accordance with the provision of this Agreement. As requested by
Owner, Agent will disburse to Owner all funds as in the Agent's sole discretion,
after providing sufficient reserves, shall be considered available for Owner.
6.03 Authorized Signatories: Designated officers and/or Employees of
Agent shall be the authorized signatories on the bank account established by
Agent pursuant to Section 6.01 hereof and shall have authority to make
disbursements from such account.
ARTICLE VII
Accounting
----------
7.01 Books and Records: Agent shall maintain at the central office of
Agent, a comprehensive system of office records, books and accounts pertaining
to the Property, which records, books and accounts shall be available for
examination by Owner and its agents, accountants and attorneys at regular
business hours with reasonable notice. Agent shall preserve all records, books
and accounts for a period of three (3) years.
7.02 Periodic Statements; Audits:
(a) On or before fifteen (15) days following the end of each month
during the term of this Agreement, Agent shall deliver or cause to be delivered
to Owner a summary of Gross Receipts and disbursements for the preceding
calendar month and the Fiscal Year to date showing variances from the approved
Budget;
(b) Within sixty (60) days after the end of each Fiscal Year, Agent
will deliver or cause to be delivered to Owner, at Owner's expense, an income
and expense statement showing the results of operation of the Property during
the preceding Fiscal Year. At Owner's request, such statement shall be prepared
and audited by a certified public accountant as designated by Owner. At Owner's
request and at Owner's expense, Agent shall prepare, or cause to be prepared,
other financial reports and perform other bookkeeping services in addition to
those provided herein.
ARTICLE VIII
Indemnification
---------------
8.01 Indemnification: Owner agrees to:
a) hold and save Agent harmless from damages as a result of injuries to person
or Property by reason of any cause whatsoever either in and about the Property
or elsewhere when Agent is carrying out the provisions of this Agreement;
b) reimburse Agent, upon demand, for any money which the Agent is required to
pay for any reason whatsoever in connection with the Property, including payment
for operating expenses, attorneys' fees or costs, fees and judgements in
connection with the defense of any claim, civil or criminal action, proceeding,
charge, or prosecution made, instituted or maintained against Agent or Owner,
jointly or severally, affecting or due to any of the following:
i. the condition or use of the Property;
ii. acts or omissions of Agent, employees or agents of Agent, and employees
of Owner;
iii. claims made by or against any employees of Owner;
iv. claims arising out of or based upon any law, regulation requirement,
contract, or award relating to employment, working conditions, wages and/or
compensation of employees or former employees of Owner; or
v. any other cause in connection with the Property.
c) defend promptly and diligently, at Owner's sole expense, any claim, action or
proceeding in connection with any of the foregoing;
d) hold harmless or fully indemnify Agent from any judgement, loss or settlement
on account thereof, including reasonable attorneys' fees. It is expressly
understood and agreed that the foregoing provisions shall survive the
termination of this Agreement to the extent the cause arose prior to
termination.
8.02 Gross Negligence: Notwithstanding the foregoing, Owner shall not be
required to indemnify Agent against damages suffered as a result of gross
negligence or willful misconduct on the part of Agent, its agents, employees or
employees of Owner.
ARTICLE IX
Miscellaneous Provisions
------------------------
9.01 Notices: Any notice or communication hereunder must be in writing,
and shall be personally delivered or mailed by registered or certified mail,
return receipt requested, and if mailed shall be deemed to have been given and
received two (2) days after its mailing. Such notices or communications shall be
given to the parties hereto at their following addresses:
To Agent: VIP Management, LLC,
3111 Paces Mill Road, A-200
Atlanta, Georgia 30339
Attn: Douglas D. Chasick
To Owner: The Thicket Apartments, L.P.
3111 Paces Mill Road, A-200
Atlanta, Georgia 30339
Attn: Peter D. Anzo
Any party hereto may at any time by giving ten (10) days written notice to the
other party hereto designate any other address in substitution of the foregoing
address to which such notice or communications shall be given.
9.02 Severability: If any term, covenant or condition of this Agreement
or the application thereof to any person or circumstance shall, to any extent,
be held to be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and shall be enforced to the fullest extent permitted by law.
9.03 Attorney's Fees: Should either party retain attorneys to enforce
any of the provisions hereof or to protect its interest in any manner arising
under this Agreement, or to recover damages for the breach of this Agreement,
each party agrees to pay its own attorney's fees expended or incurred in
connection therewith.
9.04 Total Agreement: This agreement is a total and complete
integration of any and all representations and agreements existing between Agent
and Owner and supersedes any prior oral or written representations and
agreements between them.
9.05 Article and Section Headings: Article and section headings
contained in this Agreement are for reference only, and shall not be deemed to
have any substantive effect or to limit or define the provisions contained
therein.
9.06 Successors and Assigns: This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns; provided, however, that Agent shall not have the right to
assign this Agreement without the prior written consent of Owner unless to an
Affiliate.
9.07 Governing Law: This Agreement shall be construed in accordance
with the laws of the State of Georgia.
IN WITNESS WHEREOF, this Agreement has been executed in Atlanta,
Georgia, effective as of the date first above written.
OWNER: The Thicket Apartments, L.P.
By: /s/ Peter D. Anzo
- ---------------------
Peter D. Anzo
AGENT: VIP Management, LLC
By /s/ Douglas D. Chasick
- ------------------------
Douglas D. Chasick
MANAGEMENT AGREEMENT
--------------------
This MANAGEMENT AGREEMENT made in Atlanta, Georgia between Vinings
Communities, L.P. ("Owner"), and VIP Management, LLC, ("Agent") a Georgia
Limited Liability Company, shall become effective as of January 1, 1999.
NOW THEREFORE in consideration of the promises and mutual covenants
contained herein, Owner appoints VIP Management, LLC as the exclusive Property
management and leasing Agent for the Property as defined below.
ARTICLE I
Definition
----------
1.01 Affiliate. (a) Any person directly or indirectly controlling,
controlled by or under common control with another person; (b) any person owning
or controlling 10% or more of the outstanding voting securities of such other
person; and (c) any officer, manager, director, partner or trustee of such
person. The term "person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or unincorporated
organization.
1.02 Budget. A written estimate or projection of all receipts and
expenditures for the operation of the Property during a Fiscal Year, including,
without limitation, all estimated rentals (including ancillary income) and all
estimated repairs, maintenance and capital projects.
1.03 Fiscal Year. Each calendar year ending December 31, all or a part
of which falls within the term of this Agreement, unless otherwise stipulated
herein.
1.04 Gross Receipts. All Gross Receipts of every kind and nature
derived from the operation of the Property during a specified period, without
limitation, laundry income, application fees, late fees, and recreation area
fees; excluding only: (a) security deposits (to the extent not applied to
delinquent rents or damages); (b) proceeds from a sale or refinance of the
Property: (c) proceeds from insurance for the reimbursement of loss or damage to
the Property, or any part thereof, except that insurance payments for loss of
rents will be considered as part of Gross Receipts; (c) condemnation awards or
payments received in lieu of condemnation of the Property, or any part thereof;
and (d) any trade discounts and rebates received in connection with the purchase
of Personal Property or services in connection with the operation of the
Property.
1.05 HUD. U.S. Department of Housing and Urban Development.
1.06 Personal Property. All equipment, supplies, furnishings, furniture
and all other items of Personal Property now or hereafter owned by Owner and
located upon or used, or useful for, or necessary or adapted for the operation
of the Property.
1.07 Property. The 202 unit apartment community known and doing
business as Windrush Apartments, located at 3841 Kensington Road, Decatur,
Georgia 30032. The term Property used herein includes all of the Land,
Building(s) and the Personal Property collectively associated with the above
mentioned apartment community.
ARTICLE II
Term of Agreement
-----------------
2.01 The initial term of this Agreement is two (2) years, commencing on
January 1, 1999 and ending on December 31, 2000. This Agreement shall
automatically renew for consecutive one (1) year periods, under the same terms
and conditions as the initial term, unless either party delivers written notice
of non-renewal, at least sixty (60) days prior to the expiration date of the
initial term or subsequent renewal term.
2.02 This contract is exclusive and non-cancelable except as stipulated
herein. This contract may only be immediately terminated, with notice in
writing, under one or more of the following conditions:
(a) mutual agreement of Owner and Agent;
(b) sale or transfer of ownership in an arms length transaction;
(c) gross violation by the Agent of the terms and responsibilities outlin-
ed in this agreement;
(d) any criminal action or gross negligence on the part of the Agent,
its employees or assigns including such acts as fraud,
misappropriation of funds, etc.;
(e) in the event a petition of bankruptcy is filed by or against
either the Agent or Owner, or in the event either makes an
assignment for the benefit of creditors or takes advantage of any
insolvency act.
2.03 If this Agreement is cancelled at any time or for any reason,
other than at the end of the initial term or subsequent renewal term, with the
exception of 2.02(c) or 2.02(d) above, a cancellation fee equal to two months
fee will become due and payable.
2.04 Notwithstanding any of the above, HUD and/or the lender has the
right to terminate this agreement pursuant to the Project Owner's/Management
Agent's Certification signed in conjunction with this agreement.
ARTICLE III
Appointment
-----------
Owner hereby grants to Agent, or an Affiliate, the sole and exclusive
right to manage, lease and operate the Property, subject to the terms and
provisions of this Agreement. During the term of this Agreement, Owner shall not
participate in the day-to-day operation of the Property and shall not at any
time directly order or instruct any Employees or other personnel engaged in the
management or operation of the Property.
ARTICLE IV
Management
----------
4.01 Costs of Operation: All costs incurred by Agent in connection with
the management, leasing and operation of the Property shall be borne by Owner,
including, but not limited to, copies, phone charges, postage, payroll
processing, and computer charges, etc. except for the following costs which
shall be borne by Agent:
(a) costs relating to bookkeeping services required to be performed
hereunder that are performed at the Agent's home office; and
(b) Salaries and payroll expenses of multi-site and home office
Employees of Agent; however budgeted salaries, expenses and benefits of
personnel employed for the operation or management of the Property in accordance
with Section 4.04 hereof shall be paid by the Owner.
4.02 General Management Duties: Agent shall use diligence to manage,
lease and operate the Property in a professional manner, and shall consult with
Owner and keep Owner advised as to all major or extraordinary matters and
without limitation, at Owner's expense, perform the following services and
duties for Owner in a faithful, diligent and efficient manner:
(a) Maintain businesslike relations with tenants of the Property whose
service requests shall be received, considered and recorded in systematic
fashion in order to show the action taken with respect to each. Complaints of a
serious nature shall, after thorough investigation, be reported to Owner with
appropriate recommendations;
(b) Collect all rents and other sums and charges due from tenants,
subtenants, licensees and concessionaires of the Property and, if required,
retain attorneys or collection agencies for such purpose;
(b) Pay all expenses of the property, to the extent funds are
available, in a timely fashion from funds collected and deposited into Property
back accounts;
(c) Prepare or cause to be prepared for execution and filing all forms,
reports and returns required by all federal, state and local laws in connection
with unemployment insurance, worker's compensation, insurance, disability
benefits, Social Security and other similar taxes now in effect or hereafter
imposed, and also any other requirements relating to the employment of personnel
for the Property; however, Agent shall not be obligated to prepare any of
Owner's local, state, or federal income tax returns;
(d) Pay all sums and make all deposits becoming due and payable under
the provisions of any ground lease or any loan secured by a mortgage or trust
deed against the Property, or any part thereof, and otherwise perform all
covenants and obligations required to be performed under the provisions of any
such ground lease, mortgage or trust deed (to the extent that the performance of
such covenants and obligations are within the control of Agent); and
(e) Perform such other acts and deeds as are reasonable, necessary and
proper in the discharge of its management duties under this Agreement.
4.03 Budgets: Agent shall prepare and submit for approval of Owner not
later than thirty (30) days prior to the end of each Fiscal Year, a proposed
budget with respect to the operation and management of the Property for the
ensuing Fiscal Year. Such Budget shall include all Gross Receipts expected to be
collected, as well as all cash expenditures of the property including but not
limited to all salaries and benefits, leasing and advertising costs,
administrative costs, maintenance and repair items, utilities, taxes and
insurance, debt service and capital or replacement reserve items. In the event
Owner, in Owner's sole and reasonable judgement, disapproves of any proposed
Budget submitted by Agent, Owner shall give Agent written notice thereof, in
which event Agent shall make all revisions thereto which Owner shall direct and
resubmit the proposed Budget to Owner for approval. In the absence of such
written notice of disapproval within thirty (30) days after delivery of the
Budget to Owner, the Budget shall be deemed to have been approved by Owner. Each
approved Budget shall constitute the control instrument under which Agent shall
operate for the Fiscal Year covered thereby. Approval of the Budget shall be
deemed to be approval by Owner of all items specified therein. Agent shall not
incur or permit to be incurred, expenses in any approved Budget (excluding
utility expenses, general real estate taxes, insurance premiums, financing costs
and emergency expenses) in excess of ten percent (10%) of the amount set forth
in the Budget for any single line item in an expense classification, on a year
to date basis, (e.g., cleaning expenses, H.V.A.C. expenses, etc.) or in excess
of five percent (5%) of the aggregate expenditures in each expense
classification, on a year to date basis. Except as set forth herein and in
Section 4.06, there shall be no variance from any approved Budget, without the
prior written consent of Owner.
4.04 Property Personnel: In accordance with approved Budgets, Agent
shall, at Owner's expense, hire, employ, supervise and discharge all Employees
required in connection with the operation and management of the Property. All
Employees working on the Property are considered to be Employees of the Owner
and not the Agent even though salaries and benefits may be paid through a master
agency account. All salaries, taxes, insurance and other benefits paid to such
Employees through a master agency account shall be reimbursed immediately and
shall not be considered an expense of the management company. The Agent shall
not grant any non-budgeted Employee fringe benefits and plans not required by
laws or union contract without written consent of Owner. Agent will not
discriminate against any Employee or applicant for employment because of race,
creed, color, sex or national origin. Said Employees shall include the
following:
(a) Site Manager: A person who is experienced in the administration and
operation of residential Property.
(b) Rental Consultant: A person who is trained to lease apartments to
qualified prospective Residents, as apartments become vacant throughout the
year.
(c) Such other sales, office and maintenance personnel required to
operate and maintain the Property including air-conditioning mechanics,
electricians, plumbers, painters, carpenters, grounds keepers, janitorial and
custodial persons, as Agent reasonably deems necessary.
4.05 Contracts and Supplies: Agent shall, at Owner's expense, upon the
best terms available, enter into contracts on behalf of Owner for the furnishing
to the Property of required utility services, heating and air conditioning
services, pest control, other maintenance, and any other services and
concessions which are required in connection with the maintenance and operation
of the Property. Agent shall also place purchase orders for services and
Personal Property as are necessary to properly maintain the Property. All such
contracts and orders shall be subject to the limitations set forth in the
approved Budget. When taking bids or issuing purchase orders, Agent shall use
its best efforts to secure for and credit to Owner, any discounts, commissions
or rebates obtainable as a result of such purchases or services. Agent shall use
its best efforts to make purchases and (where necessary or desirable) obtain
bids for necessary labor and materials at the lowest possible cost as in its
judgement is consistent with good quality, workmanship and service standards.
Agent shall not incur any obligation to any person or entity in which Agent or
any of Agent's officers has a financial interest at a price or fee higher than
that which would have been charged as a result of bona fide arms-length
negotiations.
4.06 Alterations, Repairs and Maintenance:
(a) Agent shall, at Owner's expense, perform or cause to be performed
all necessary or desirable repairs, maintenance, cleaning, painting and
decorating, alterations, replacements and improvements in and to the Property as
are customarily made in the operation of properties of the kind, size and
quality of the Property; provided, however, that no unbudgeted alterations,
additions or improvements involving a fundamental change in the character of any
of the buildings or constituting a major new construction program shall be made
without the prior written approval of Owner (unless performed pursuant to any
lease or budget previously approved by Owner). In addition, no unbudgeted
expenditure in excess of $2,000 per item shall be made except as provided for in
Section 4.03, or unless such repairs are immediately necessary for the
preservation or the safety of the Property, or for the safety of the tenants of
the Property, or required to avoid the suspension of any necessary service to
the Property, or are required by any judicial or governmental authority having
jurisdiction. These repairs may be made by the Agent without prior approval and
regardless of the cost limitations imposed by this Section 4.06(a); further,
provided that Agent shall as soon as practicable give written notice to Owner of
any such emergency repairs for which prior approval is not required.
(b) In accordance with the terms of approved Budgets or upon written
request of Owner, Agent shall, from time to time during the term hereof, at
Owner's expense, make or cause to be made all required capital improvements,
replacements or repairs to the Property; provided, however, if Agent is required
to perform extraordinary services in connection with such improvements, repairs
or replacements, which services exceed those customarily rendered by managing
agents of properties similar to the Property, then Agent shall receive an
additional fee therefore in an amount mutually agreed upon by Owner and Agent in
advance of the rendition of such services.
(c) Agent shall give Owner written notice of any material defect in the
Property and all parts thereof immediately after ascertainment thereof by Agent,
including without limitation, material defects in the roofs, foundations and
walls of the buildings and in the
sewer, water, electrical, structural, plumbing, heating, ventilation and air
conditioning systems; provided, however, that Agent shall have no obligation to
inspect the buildings in order to discover any such condition.
4.07 Licenses and Permits: Agent shall, at Owner's expense, obtain and
maintain in the name of Owner all licenses and permits required of Owner or
Agent in connection with the management and operation of the Property. Owner
agrees to execute and deliver any and all applications and other documents to
otherwise cooperate with Agent in applying for, obtaining and maintaining such
licenses and permits.
4.08 Compliance with Laws: Agent shall, at Owner's expense, comply with
all laws, regulations and requirements for any federal, state or municipal
government having jurisdiction respecting the use or manner of use of the
Property or the maintenance of operation thereof. Agent shall immediately inform
Owner of all notices, summons, suits, fines or violations sent to or served upon
Agent regarding the Property.
4.09 Legal Proceedings: Agent shall, at Owner's expense, institute any
and all legal and/or administrative actions or proceedings to collect charges,
rents or other income from the Property, to dispossess tenants or other persons
in possession, to cancel or terminate any lease, license or concession agreement
for the breach thereof or default thereunder by the tenant, licensee or
concessionaire and to protest increases in taxes and/or assessments levied
against the Property, or any portion thereof.
4.10 Inventory: The Agent shall maintain a current inventory of all
Personal Property.
4.11 Insurance Coverage: Owner shall procure and maintain throughout
the term hereof, the following insurance coverages with respect to the Property:
(a) Fire and extended coverage insurance;
(b) Worker's compensation insurance;
(c) Comprehensive public liability insurance for injury or death
to persons and damage to or loss to Property of not less than
$2,000,000 / $1,000,000 per occurrence;
(d) Burglary and theft insurance;
(e) Boiler insurance;
(f) Fidelity Bond or crime coverage of not less than $500,000;
(g) Employment practices liability insurance; and
(h) Such other insurance which Owner shall direct or as Agent
shall reasonably deem appropriate for the protection of Owner
and Agent against claims, losses and liabilities arising out
of the operation and improvement of the Property.
Agent shall, at Owner's request, procure such coverages on behalf of
Owner, at Owner's expense. All such policies of insurance shall name the Owner,
Agent and such other parties as Owner or Agent shall direct as the named insured
thereunder, as their respective interests may appear. Agent shall promptly
investigate and report to the Owner and the insurance company involved all
accidents and claims for damage relating to the ownership, operation and
maintenance of the Property and any damage or destruction to the Property.
4.12 Signs: Owner agrees to allow Agent to place one or more signs on
or about the Property stating that Agent is providing management for the
Property, provided that the signs and location thereof shall be subject to
Owner's approval.
4.13 Debts of Owner: In the performance of its duties as managing Agent
of the Property, Agent shall act as the agent of the Owner. All debts and
liabilities to third persons and Employees of the Property incurred by Agent in
the course of its operation and management of the Property shall be the debts
and liabilities of the Owner only, and Agent shall not be liable for any such
debts or liabilities, except to the extent Agent has exceeded its authority
hereunder.
4.14 Allocation of Costs: The parties hereto acknowledge that the
Property may be operated in conjunction with other properties managed by Agent,
and certain costs may be allocated or shared among such properties with such
costs being reimbursed to Agent.
4.15 Other Duties: Agent may provide other duties such as oversee major
property renovation, new construction or renovation lease up, coordinate
partnership audits, tax returns, bankruptcy filings, loan refinancing, etc. as
requested by Owner for additional fees to be mutually agreed upon by Owner and
Agent.
4.16 Exclusivity: Agent is not precluded from providing management or
other services to other owners or properties even if such properties might be in
direct competition with the subject Property.
ARTICLE V
Management Fees
---------------
5.01 Compensation of Agent: As consideration for the performance by
Agent of all its management obligations under this Agreement, Owner agrees to
pay Agent a management fee each month during the term of this Agreement in an
amount equal to five percent (5%) of Gross Receipts. Said management fee shall
be paid not later than the 10th day of the month following the month for which
such fee is earned. Provided that Agent is not in default under this Agreement,
Agent shall be entitled to pay itself the monthly management fee herein provided
from the Property bank account referred to in Article VI hereof. In addition,
Agent shall charge and collect an accounting/computer fee of five dollars
($5.00) per unit per month, to be paid in the same manner described herein.
5.02 Reimbursement of Agent's Expenses: Owner agrees to reimburse Agent
upon demand therefore for any monies that Agent may elect to advance for the
account of Owner. It is expressly understood that Agent is under no obligation
to advance any monies for the account of the Owner. Owner shall further
reimburse Agent for all of Agent's expenses incurred in connection with the
operation of the Property or as a result of Agent's compliance with this
Agreement during the preceding month, including, without limitation copies,
postage, Agent's long distance travel and long distance phone expenses and
expenses relating to the duties set forth in this Agreement.
ARTICLE VI
Procedure for Handling Receipts and Operating Capital
-----------------------------------------------------
6.01 Bank Deposits: Agent shall establish and maintain, at cost of
Owner, separate bank accounts in the name of the Property, as Agent deems
appropriate, into which all monies received by Agent for or on behalf of Owner
in connection with the operation and management of the Property shall be
deposited by Agent.
6.02 Disbursement of Deposits: Agent shall disburse and pay from the
bank account specified in Section 6.01 hereof, such amounts and at such times as
the same are required in connection with the management and operation of the
Property in accordance with the provision of this Agreement. As requested by
Owner, Agent will disburse to Owner all funds as in the Agent's sole discretion,
after providing sufficient reserves, shall be considered available for Owner.
6.03 Authorized Signatories: Designated officers and/or Employees of
Agent shall be the authorized signatories on the bank account established by
Agent pursuant to Section 6.01 hereof and shall have authority to make
disbursements from such account.
ARTICLE VII
Accounting
----------
7.01 Books and Records: Agent shall maintain at the central office of
Agent, a comprehensive system of office records, books and accounts pertaining
to the Property, which records, books and accounts shall be available for
examination by Owner and its agents, accountants and attorneys at regular
business hours with reasonable notice. Agent shall preserve all records, books
and accounts for a period of three (3) years.
<PAGE>
7.02 Periodic Statements; Audits:
(a) On or before fifteen (15) days following the end of each month
during the term of this Agreement, Agent shall deliver or cause to be delivered
to Owner a summary of Gross Receipts and disbursements for the preceding
calendar month and the Fiscal Year to date showing variances from the approved
Budget;
(b) Within sixty (60) days after the end of each Fiscal Year, Agent
will deliver or cause to be delivered to Owner, at Owner's expense, an income
and expense statement showing the results of operation of the Property during
the preceding Fiscal Year. At Owner's request, such statement shall be prepared
and audited by a certified public accountant as designated by Owner. At Owner's
request and at Owner's expense, Agent shall prepare, or cause to be prepared,
other financial reports and perform other bookkeeping services in addition to
those provided herein.
7.03 Disclosure: Upon request of the U.S. Department of Housing and
Urban Development ("HUD"), the lender holding the deed of trust secured by the
Property (the "Lender"), or the Owner, Agent will make available, at a
reasonable time and place, its records and records of identity-of-interest
companies which relate to goods and services charged to the project. Records and
information will be sufficient to permit HUD or the Lender to determine the
services performed, the dates the services were performed, the location at which
the services were performed, the time consumed in providing the services, the
charges made for materials, and the per-unit and total charges levied for said
services.
ARTICLE VIII
Indemnification
---------------
8.01 Indemnification: Owner agrees to:
a) hold and save Agent harmless from damages as a result of injuries to person
or Property by reason of any cause whatsoever either in and about the Property
or elsewhere when Agent is carrying out the provisions of this Agreement;
b) reimburse Agent, upon demand, for any money which the Agent is required to
pay for any reason whatsoever in connection with the Property, including payment
for operating expenses, attorneys' fees or costs, fees and judgements in
connection with the defense of any claim, civil or criminal action, proceeding,
charge, or prosecution made, instituted or maintained against Agent or Owner,
jointly or severally, affecting or due to any of the following:
i. the condition or use of the Property;
ii. acts or omissions of Agent, employees or agents of Agent, and employees
of Owner;
iii. claims made by or against any employees of Owner;
iv. claims arising out of or based upon any law, regulation requirement,
contract, or award relating to employment, working conditions, wages and/or
compensation of employees or former employees of Owner; or
v. any other cause in connection with the Property.
c) defend promptly and diligently, at Owner's sole expense, any claim, action or
proceeding in connection with any of the foregoing;
d) hold harmless or fully indemnify Agent from any judgement, loss or settlement
on account thereof, including reasonable attorneys' fees. It is expressly
understood and agreed that the foregoing provisions shall survive the
termination of this Agreement to the extent the cause arose prior to
termination.
8.02 Gross Negligence: Notwithstanding the foregoing, Owner shall not be
required to indemnify Agent against damages suffered as a result of gross
negligence or willful misconduct on the part of Agent, its agents, employees or
employees of Owner.
ARTICLE IX
Miscellaneous Provisions
------------------------
9.01 Notices: Any notice or communication hereunder must be in writing,
and shall be personally delivered or mailed by registered or certified mail,
return receipt requested, and if mailed shall be deemed to have been given and
received two (2) days after its mailing. Such notices or communications shall be
given to the parties hereto at their following addresses:
To Agent: VIP Management, LLC,
3111 Paces Mill Road, A-200
Atlanta, Georgia 30339
Attn: Douglas D. Chasick
To Owner: Vinings Communities, L.P.
3111 Paces Mill Road, A-200
Atlanta, Georgia 30339
Attn: Peter D. Anzo
Any party hereto may at any time by giving ten (10) days written notice to the
other party hereto designate any other address in substitution of the foregoing
address to which such notice or communications shall be given.
9.02 Severability: If any term, covenant or condition of this Agreement
or the application thereof to any person or circumstance shall, to any extent,
be held to be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and shall be enforced to the fullest extent permitted by law.
9.03 Attorney's Fees: Should either party retain attorneys to enforce
any of the provisions hereof or to protect its interest in any manner arising
under this Agreement, or to recover damages for the breach of this Agreement,
each party agrees to pay its own attorney's fees expended or incurred in
connection therewith.
9.04 Total Agreement: This agreement is a total and complete
integration of any and all representations and agreements existing between Agent
and Owner and supersedes any prior oral or written representations and
agreements between them.
9.05 Article and Section Headings: Article and section headings
contained in this Agreement are for reference only, and shall not be deemed to
have any substantive effect or to limit or define the provisions contained
therein.
9.06 Successors and Assigns: This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns; provided, however, that Agent shall not have the right to
assign this Agreement without the prior written consent of Owner unless to an
Affiliate.
9.07 Governing Law: This Agreement shall be construed in accordance
with the laws of the State of Georgia.
IN WITNESS WHEREOF, this Agreement has been executed in Atlanta,
Georgia, effective as of the date first above written.
OWNER: Vinings Communities, L.P.
BY: Vinings Investment Properties Trust, General Partner
By: /s/ Peter D. Anzo
- ----------------------
Peter D. Anzo
Chief Executive Officer & President
AGENT: VIP Management, LLC
By: /s/ Douglas D. Chasick
- --------------------------
Douglas D. Chasick
Manager
MANAGEMENT AGREEMENT
--------------------
This MANAGEMENT AGREEMENT made in Atlanta, Georgia between Vinings
Investment Properties, L.P. ("Owner"), and VIP Management, LLC, ("Agent") a
Georgia Limited Liability Company, shall become effective as of January 1, 1999.
NOW THEREFORE in consideration of the promises and mutual covenants
contained herein, Owner appoints VIP Management, LLC as the exclusive Property
management and leasing Agent for the Property as defined below.
ARTICLE I
Definition
----------
1.01 Affiliate. (a) Any person directly or indirectly controlling,
controlled by or under common control with another person; (b) any person owning
or controlling 10% or more of the outstanding voting securities of such other
person; and (c) any officer, manager, director, partner or trustee of such
person. The term "person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or unincorporated
organization.
1.02 Budget. A written estimate or projection of all receipts and
expenditures for the operation of the Property during a Fiscal Year, including,
without limitation, all estimated rentals (including ancillary income) and all
estimated repairs, maintenance and capital projects.
1.03 Fiscal Year. Each calendar year ending December 31, all or a part
of which falls within the term of this Agreement, unless otherwise stipulated
herein.
1.04 Gross Receipts. All Gross Receipts of every kind and nature
derived from the operation of the Property during a specified period, without
limitation, laundry income, application fees, late fees, and recreation area
fees; excluding only: (a) security deposits (to the extent not applied to
delinquent rents or damages); (b) proceeds from a sale or refinance of the
Property: (c) proceeds from insurance for the reimbursement of loss or damage to
the Property, or any part thereof, except that insurance payments for loss of
rents will be considered as part of Gross Receipts; (c) condemnation awards or
payments received in lieu of condemnation of the Property, or any part thereof;
and (d) any trade discounts and rebates received in connection with the purchase
of Personal Property or services in connection with the operation of the
Property.
1.05 Personal Property. All equipment, supplies, furnishings, furniture
and all other items of Personal Property now or hereafter owned by Owner and
located upon or used, or useful for, or necessary or adapted for the operation
of the Property.
1.06 Property. The office building known and doing business as
Peachtree Business Center, located at 3039 Amwiler Road, Atlanta, GA 30360. The
term Property used herein includes all of the Land, Building(s) and the Personal
Property collectively associated with the above mentioned office building.
ARTICLE II
Term of Agreement
-----------------
2.01 The initial term of this Agreement is two (2) years, commencing on
January 1, 1999 and ending on December 31, 2000. This Agreement shall
automatically renew for consecutive one (1) year periods, under the same terms
and conditions as the initial term, unless either party delivers written notice
of non-renewal, at least sixty (60) days prior to the expiration date of the
initial term or subsequent renewal term.
2.02 This contract is exclusive and non-cancelable except as stipulated
herein. This contract may only be immediately terminated, with notice in
writing, under one or more of the following conditions:
(a) mutual agreement of Owner and Agent;
(b) sale or transfer of ownership in an arms length transaction;
(c) gross violation by the Agent of the terms and responsibilities
outlined in this agreement;
(d) any criminal action or gross negligence on the part of the Agent,
its employees or assigns including such acts as fraud, misappropriation of
funds, etc.;
(e) in the event a petition of bankruptcy is filed by or against
either the Agent or Owner, or in the event either makes an assignment for
the benefit of creditors or takes advantage of any insolvency act.
2.03 If this Agreement is cancelled at any time or for any reason,
other than at the end of the initial term or subsequent renewal term, with the
exception of 2.02(c) or 2.02(d) above, a cancellation fee equal to two months
fee will become due and payable.
ARTICLE III
Appointment
-----------
Owner hereby grants to Agent, or an Affiliate, the sole and exclusive
right to manage, lease and operate the Property, subject to the terms and
provisions of this Agreement. During the term of this Agreement, Owner shall not
participate in the day-to-day operation of the Property and shall not at any
time directly order or instruct any Employees or other personnel engaged in the
management or operation of the Property.
ARTICLE IV
Management
----------
4.01 Costs of Operation: All costs incurred by Agent in connection with
the management, leasing and operation of the Property shall be borne by Owner,
including, but not limited to, copies, phone charges, postage, payroll
processing, and computer charges, etc. except for the following costs which
shall be borne by Agent:
(a) costs relating to bookkeeping services required to be performed
hereunder that are performed at the Agent's home office; and
(b) Salaries and payroll expenses of multi-site and home office
Employees of Agent; however budgeted salaries, expenses and benefits of
personnel employed for the operation or management of the Property in accordance
with Section 4.04 hereof shall be paid by the Owner.
4.02 General Management Duties: Agent shall use diligence to manage and
operate the Property in a professional manner, and shall consult with Owner and
keep Owner advised as to all major or extraordinary matters and without
limitation, at Owner's expense, perform the following services and duties for
Owner in a faithful, diligent and efficient manner:
(a) Maintain businesslike relations with tenants of the Property whose
service requests shall be received, considered and recorded in systematic
fashion in order to show the action taken with respect to each. Complaints of a
serious nature shall, after thorough investigation, be reported to Owner with
appropriate recommendations;
(b) Collect all rents and other sums and charges due from tenants,
subtenants, licensees and concessionaires of the Property and, if required,
retain attorneys or collection agencies for such purpose;
(b) Pay all expenses of the property, to the extent funds are
available, in a timely fashion from funds collected and deposited into Property
back accounts;
(c) Prepare or cause to be prepared for execution and filing all forms,
reports and returns required by all federal, state and local laws in connection
with unemployment insurance, worker's compensation, insurance, disability
benefits, Social Security and other similar taxes now in effect or hereafter
imposed, and also any other requirements relating to the employment of personnel
for the Property; however, Agent shall not be obligated to prepare any of
Owner's local, state, or federal income tax returns;
(d) Pay all sums and make all deposits becoming due and payable under
the provisions of any ground lease or any loan secured by a mortgage or trust
deed against the Property, or any part thereof, and otherwise perform all
covenants and obligations required to be performed under the provisions of any
such ground lease, mortgage or trust deed (to the extent that the performance of
such covenants and obligations are within the control of Agent); and
(e) Perform such other acts and deeds as are reasonable, necessary and
proper in the discharge of its management duties under this Agreement.
4.03 Budgets: Agent shall prepare and submit for approval of Owner not
later than thirty (30) days prior to the end of each Fiscal Year, a proposed
budget with respect to the operation and management of the Property for the
ensuing Fiscal Year. Such Budget shall include all Gross Receipts expected to be
collected, as well as all cash expenditures of the property including but not
limited to all salaries and benefits, leasing and advertising costs,
administrative costs, maintenance and repair items, utilities, taxes and
insurance, debt service and capital or replacement reserve items. In the event
Owner, in Owner's sole and reasonable judgement, disapproves of any proposed
Budget submitted by Agent, Owner shall give Agent written notice thereof, in
which event Agent shall make all revisions thereto which Owner shall direct and
resubmit the proposed Budget to Owner for approval. In the absence of such
written notice of disapproval within thirty (30) days after delivery of the
Budget to Owner, the Budget shall be deemed to have been approved by Owner. Each
approved Budget shall constitute the control instrument under which Agent shall
operate for the Fiscal Year covered thereby. Approval of the Budget shall be
deemed to be approval by Owner of all items specified therein. Agent shall not
incur or permit to be incurred, expenses in any approved Budget (excluding
utility expenses, general real estate taxes, insurance premiums, financing costs
and emergency expenses) in excess of ten percent (10%) of the amount set forth
in the Budget for any single line item in an expense classification, on a year
to date basis, (e.g., cleaning expenses, H.V.A.C. expenses, etc.) or in excess
of five percent (5%) of the aggregate expenditures in each expense
classification, on a year to date basis. Except as set forth herein and in
Section 4.06, there shall be no variance from any approved Budget, without the
prior written consent of Owner.
4.04 Property Personnel: In accordance with approved Budgets, Agent
shall, at Owner's expense, hire, employ, supervise and discharge all Employees
required in connection with the operation and management of the Property. All
salaries, taxes, insurance and other benefits paid to such Employees shall be an
expense of the Owner and shall not be considered an expense of the management
company. The Agent shall not grant any non-budgeted Employee fringe benefits and
plans not required by laws or union contract without written consent of Owner.
Agent will not discriminate against any Employee or applicant for employment
because of race, creed, color, sex or national origin.
4.05 Contracts and Supplies: Agent shall, at Owner's expense, upon the
best terms available, enter into contracts on behalf of Owner for the furnishing
to the Property of required utility services, heating and air conditioning
services, pest control, other maintenance, and any other services and
concessions which are required in connection with the maintenance and operation
of the Property. Agent shall also place purchase orders for services and
Personal Property as are necessary to properly maintain the Property. All such
contracts and orders shall be subject to the limitations set forth in the
approved Budget. When taking bids or issuing purchase orders, Agent shall use
its best efforts to secure for and credit to Owner, any discounts, commissions
or rebates obtainable as a result of such purchases or services. Agent shall use
its best efforts to make purchases and (where necessary or desirable) obtain
bids for necessary labor and materials at the lowest possible cost as in its
judgement is consistent with good quality, workmanship and service standards.
Agent shall not incur any obligation to any person or entity in which Agent or
any of Agent's officers has a financial interest at a price or fee higher than
that which would have been charged as a result of bona fide arms-length
negotiations.
4.06 Alterations, Repairs and Maintenance:
(a) Agent shall, at Owner's expense, perform or cause to be performed
all necessary or desirable repairs, maintenance, cleaning, painting and
decorating, alterations, replacements and improvements in and to the Property as
are customarily made in the operation of properties of the kind, size and
quality of the Property; provided, however, that no unbudgeted alterations,
additions or improvements involving a fundamental change in the character of any
of the buildings or constituting a major new construction program shall be made
without the prior written approval of Owner (unless performed pursuant to any
lease or budget previously approved by Owner). In addition, no unbudgeted
expenditure in excess of $2,000 per item shall be made except as provided for in
Section 4.03, or unless such repairs are immediately necessary for the
preservation or the safety of the Property, or for the safety of the tenants of
the Property, or required to avoid the suspension of any necessary service to
the Property, or are required by any judicial or governmental authority having
jurisdiction. These repairs may be made by the Agent without prior approval and
regardless of the cost limitations imposed by this Section 4.06(a); further,
provided that Agent shall as soon as practicable give written notice to Owner of
any such emergency repairs for which prior approval is not required.
(b) In accordance with the terms of approved Budgets or upon written
request of Owner, Agent shall, from time to time during the term hereof, at
Owner's expense, make or cause to be made all required capital improvements,
replacements or repairs to the Property; provided, however, if Agent is required
to perform extraordinary services in connection with such improvements, repairs
or replacements, which services exceed those customarily rendered by managing
agents of properties similar to the Property, then Agent shall receive an
additional fee therefore in an amount mutually agreed upon by Owner and Agent in
advance of the rendition of such services.
(c) Agent shall give Owner written notice of any material defect in the
Property and all parts thereof immediately after ascertainment thereof by Agent,
including without limitation, material defects in the roofs, foundations and
walls of the buildings and in the sewer, water, electrical, structural,
plumbing, heating, ventilation and air conditioning systems; provided, however,
that Agent shall have no obligation to inspect the buildings in order to
discover any such condition.
4.07 Licenses and Permits: Agent shall, at Owner's expense, obtain and
maintain in the name of Owner all licenses and permits required of Owner or
Agent in connection with the management and operation of the Property. Owner
agrees to execute and deliver any and all applications and other documents to
otherwise cooperate with Agent in applying for, obtaining and maintaining such
licenses and permits.
4.08 Compliance with Laws: Agent shall, at Owner's expense, comply with
all laws, regulations and requirements for any federal, state or municipal
government having jurisdiction respecting the use or manner of use of the
Property or the maintenance of operation thereof. Agent shall immediately inform
Owner of all notices, summons, suits, fines or violations sent to or served upon
Agent regarding the Property.
4.09 Legal Proceedings: Agent shall, at Owner's expense, institute any
and all legal and/or administrative actions or proceedings to collect charges,
rents or other income from the Property, to dispossess tenants or other persons
in possession, to cancel or terminate any lease, license or concession agreement
for the breach thereof or default thereunder by the tenant, licensee or
concessionaire and to protest increases in taxes and/or assessments levied
against the Property, or any portion thereof.
4.10 Inventory: The Agent shall maintain a current inventory of all
Personal Property.
4.11 Insurance Coverage: Owner shall procure and maintain throughout
the term hereof, the following insurance coverages with respect to the Property:
(a) Fire and extended coverage insurance;
(b) Worker's compensation insurance;
(c) Comprehensive public liability insurance for injury or death
to persons and damage to or loss to Property of not less than
$2,000,000/$1,000,000 per occurrence;
(d) Burglary and theft insurance;
(e) Boiler insurance;
(f) Fidelity Bond or crime coverage of not less than $500,000;
(g) Employment practices liability insurance; and
(h) Such other insurance which Owner shall direct or as Agent
shall reasonably deem appropriate for the protection of Owner
and Agent against claims, losses and liabilities arising out
of the operation and improvement of the Property.
Agent shall, at Owners request, procure such coverages on behalf of
Owner, at Owner's expense. All such policies of insurance shall name the Owner,
Agent and such other parties as Owner or Agent shall direct as the named insured
thereunder, as their respective interests may appear. Agent shall promptly
investigate and report to the Owner and the insurance company involved all
accidents and claims for damage relating to the ownership, operation and
maintenance of the Property and any damage or destruction to the Property.
4.12 Signs: Owner agrees to allow Agent to place one or more signs on
or about the Property stating that Agent is providing management for the
Property, provided that the signs and location thereof shall be subject to
Owner's approval.
4.13 Debts of Owner: In the performance of its duties as managing Agent
of the Property, Agent shall act as the agent of the Owner. All debts and
liabilities to third persons and Employees of the Property incurred by Agent in
the course of its operation and management of the Property shall be the debts
and liabilities of the Owner only, and Agent shall not be liable for any such
debts or liabilities, except to the extent Agent has exceeded its authority
hereunder.
4.14 Allocation of Costs: The parties hereto acknowledge that the
Property may be operated in conjunction with other properties managed by Agent,
and certain costs may be allocated or shared among such properties with such
costs being reimbursed to Agent.
4.15 Other Duties: Agent may provide other duties such as lease space,
oversee major property renovation, new construction or renovation lease up,
coordinate partnership audits, tax returns, bankruptcy filings, loan
refinancing, etc. as requested by Owner for additional fees to be mutually
agreed upon by Owner and Agent.
<PAGE>
4.16 Exclusivity: Agent is not precluded from providing management or
other services to other owners or properties even if such properties might be in
direct competition with the subject Property.
ARTICLE V
Management Fees
---------------
5.01 Compensation of Agent: As consideration for the performance by
Agent of all its management obligations under this Agreement, Owner agrees to
pay Agent a management fee each month during the term of this Agreement in an
amount equal to five percent (5%) of Gross Receipts. Said management fee shall
be paid not later than the 10th day of the month following the month for which
such fee is earned. Provided that Agent is not in default under this Agreement,
Agent shall be entitled to pay itself the monthly management fee herein provided
from the Property bank account referred to in Article VI hereof.
5.02 Reimbursement of Agent's Expenses: Owner agrees to reimburse Agent
upon demand therefore for any monies that Agent may elect to advance for the
account of Owner. It is expressly understood that Agent is under no obligation
to advance any monies for the account of the Owner. Owner shall further
reimburse Agent for all of Agent's expenses incurred in connection with the
operation of the Property or as a result of Agent's compliance with this
Agreement during the preceding month, including, without limitation copies,
postage, Agent's long distance travel and long distance phone expenses and
expenses relating to the duties set forth in this Agreement.
ARTICLE VI
Procedure for Handling Receipts and Operating Capital
-----------------------------------------------------
6.01 Bank Deposits: Agent shall establish and maintain, at cost of
Owner, separate bank accounts in the name of the Property, as Agent deems
appropriate, into which all monies received by Agent for or on behalf of Owner
in connection with the operation and management of the Property shall be
deposited by Agent.
6.02 Disbursement of Deposits: Agent shall disburse and pay from the
bank account specified in Section 6.01 hereof, such amounts and at such times as
the same are required in connection with the management and operation of the
Property in accordance with the provision of this Agreement. As requested by
Owner, Agent will disburse to Owner all funds as in the Agent's sole discretion,
after providing sufficient reserves, shall be considered available for Owner.
6.03 Authorized Signatories: Designated officers and/or Employees of
Agent shall be the authorized signatories on the bank account established by
Agent pursuant to Section 6.01 hereof and shall have authority to make
disbursements from such account.
ARTICLE VII
Accounting
----------
7.01 Books and Records: Agent shall maintain at the central office of
Agent, a comprehensive system of office records, books and accounts pertaining
to the Property, which records, books and accounts shall be available for
examination by Owner and its agents, accountants and attorneys at regular
business hours with reasonable notice. Agent shall preserve all records, books
and accounts for a period of three (3) years.
7.02 Periodic Statements; Audits:
(a) On or before fifteen (15) days following the end of each month
during the term of this Agreement, Agent shall deliver or cause to be delivered
to Owner a summary of Gross Receipts and disbursements for the preceding
calendar month and the Fiscal Year to date showing variances from the approved
Budget;
(b) Within sixty (60) days after the end of each Fiscal Year, Agent
will deliver or cause to be delivered to Owner, at Owner's expense, an income
and expense statement showing the results of operation of the Property during
the preceding Fiscal Year. At Owner's request, such statement shall be prepared
and audited by a certified public accountant as designated by Owner. At Owner's
request and at Owner's expense, Agent shall prepare, or cause to be prepared,
other financial reports and perform other bookkeeping services in addition to
those provided herein.
ARTICLE VIII
Indemnification
---------------
8.01 Indemnification: Owner agrees to:
a) hold and save Agent harmless from damages as a result of injuries to person
or Property by reason of any cause whatsoever either in and about the Property
or elsewhere when Agent is carrying out the provisions of this Agreement;
b) reimburse Agent, upon demand, for any money which the Agent is required to
pay for any reason whatsoever in connection with the Property, including payment
for operating expenses, attorneys' fees or costs, fees and judgements in
connection with the defense of any claim, civil or criminal action, proceeding,
charge, or prosecution made, instituted or maintained against Agent or Owner,
jointly or severally, affecting or due to any of the following:
i. the condition or use of the Property;
ii. acts or omissions of Agent, employees or agents of Agent, and
employees of Owner;
iii. claims made by or against any employees of Owner;
iv. claims arising out of or based upon any law, regulation
requirement, contract, or award relating to employment, working conditions,
wages and/or compensation of employees or former employees of Owner; or
v. any other cause in connection with the Property.
c) defend promptly and diligently, at Owner's sole expense, any claim, action or
proceeding in connection with any of the foregoing;
d) hold harmless or fully indemnify Agent from any judgement, loss or settlement
on account thereof, including reasonable attorneys' fees. It is expressly
understood and agreed that the foregoing provisions shall survive the
termination of this Agreement to the extent the cause arose prior to
termination.
8.02 Gross Negligence: Notwithstanding the foregoing, Owner shall not be
required to indemnify Agent against damages suffered as a result of gross
negligence or willful misconduct on the part of Agent, its agents, employees or
employees of Owner.
ARTICLE IX
Miscellaneous Provisions
------------------------
9.01 Notices: Any notice or communication hereunder must be in writing,
and shall be personally delivered or mailed by registered or certified mail,
return receipt requested, and if mailed shall be deemed to have been given and
received two (2) days after its mailing. Such notices or communications shall be
given to the parties hereto at their following addresses:
To Agent: VIP Management, LLC,
3111 Paces Mill Road, A-200
Atlanta, Georgia 30339
Attn: Douglas D. Chasick
To Owner: Vinings Investment Properties, L.P.
3111 Paces Mill Road, A-200
Atlanta, Georgia 30339
Attn: Peter D. Anzo
Any party hereto may at any time by giving ten (10) days written notice to the
other party hereto designate any other address in substitution of the foregoing
address to which such notice or communications shall be given.
9.02 Severability: If any term, covenant or condition of this Agreement
or the application thereof to any person or circumstance shall, to any extent,
be held to be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and shall be enforced to the fullest extent permitted by law.
9.03 Attorney's Fees: Should either party retain attorneys to enforce
any of the provisions hereof or to protect its interest in any manner arising
under this Agreement, or to recover damages for the breach of this Agreement,
each party agrees to pay its own attorney's fees expended or incurred in
connection therewith.
9.04 Total Agreement: This agreement is a total and complete
integration of any and all representations and agreements existing between Agent
and Owner and supersedes any prior oral or written representations and
agreements between them.
9.05 Article and Section Headings: Article and section headings
contained in this Agreement are for reference only, and shall not be deemed to
have any substantive effect or to limit or define the provisions contained
therein.
9.06 Successors and Assigns: This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns; provided, however, that Agent shall not have the right to
assign this Agreement without the prior written consent of Owner unless to an
Affiliate.
9.07 Governing Law: This Agreement shall be construed in accordance
with the laws of the State of Georgia.
IN WITNESS WHEREOF, this Agreement has been executed in Atlanta,
Georgia, effective as of the date first above written.
OWNER: Vinings Investment Properties, L.P.
By: /s/ Peter D. Anzo
- ---------------------
Peter D. Anzo
AGENT: VIP Management, LLC
By /s/ Douglas D. Chasick
- -----------------------
Douglas D. Chasick
AMENDMENT
TO
COMMERCIAL CREDIT AGREEMENT
---------------------------
THIS AMENDMENT TO COMMERCIAL CREDIT AGREEMENT (this "Amendment"), is made
and entered into as of the 1st day of July, 1998, by and between HARDWICK BANK
AND TRUST COMPANY ("Hardwick"), and the TRUSTEES OF THE VININGS INVESTMENT
PROPERTIES TRUST, a Massachusetts business trust ("Borrower")-
WITNESSETH:
WHEREAS, Hardwick and Borrower have heretofore entered into a certain
Commercial Credit Agreement (hereafter the "Credit Agreement"), dated June 28,
1997, pursuant to the terms of which Hardwick, among other things, opened and
extended to Borrower a line of credit in the amount of TWO MILLION AND NO/100
DOLLARS ($2,000,000.00); and
WHEREAS, the Borrower has requested that Hardwick extend the Credit Line
Termination Date established in said Credit Agreement, and Hardwick is willing
to do so upon the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and One Dollar ($1.00) in
hand paid by each party to the other, and further good and valuable
considerations, the receipt and legal sufficiency of which are hereby
acknowledge, the parties hereto do mutually agree as follows:
Section 1. The "Credit Line Termination Date" as set forth in Section 1.08
of the Credit Agreement is hereby deleted and the following is substituted
therefore:
1.08 "Credit Line Termination Date": December 28, 1998.
Section 2. Representations and Warranties of Borrower. As an inducement to
Hardwick to enter into this Amendment, the Borrower hereby represents, covenants
and warrants as follows:
(a) The Borrower has duly executed and delivered this Amendment free
of duress, coercion and other defenses to the execution, delivery and
performance hereof. This Amendment, the Credit Agreement, and all Financing
Documents (as defined in Credit Agreement) are the valid, binding and
legally enforceable obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms.
(b) Each of the representations, warranties and certifications of the
Borrower contained in the Credit Agreement and this Amendment is accurate
and complete in all respects on the date of this Amendment.
(c) There does not now exist any condition which with the giving of
notice or the lapse of time, or both, would constitute a default or Event
of Default under the terms of the Agreement.
Section 3. Construction of the Credit Agreement. From and after the date
hereof, the Credit Agreement and each of the Financing Documents (as defined in
the Agreement) shall be construed, interpreted and enforced by reference to this
Amendment, and to the extent that the terms of this Amendment vary from or
contradict the terms of the Credit Agreement the terms of this Amendment shall
govern.
Section 4. Binding Effect. The Credit Agreement, as amended by this
Amendment, shall remain in full force and effect except to the extent
specifically set forth herein. This Amendment shall inure to the benefit of and
be binding upon the parties hereto and their respective executors, legal
representatives, successors and assigns.
Section 5. Governing Law. This Amendment has been prepared and entered into
in the State of Georgia and with the intention that the laws of the State of
Georgia shall govern its construction, interpretation and enforcement.
IN WITNESS WHEREOF, the parties hereto have hereunto affixed their hands
and seals on the day and year first above written.
VININGS INVESTMENT PROPERTIES TRUST HARDWICK BANK AND TRUST COMPANY
By: /s/ Peter D. Anzo By: /s/ Marshall Mauldin
- --------------------------------- -------------------------------
Peter D. Anzo, Authorized Trustee, Title: President
on behalf of all of the Trustees
FORM OF
AMENDED AND RESTATED
AGREEMENT OF PURCHASE AND SALE
FOR ACQUISITION TRANSITION
ARTICLE 1. PARTIES
------------------
101. The parties to this Agreement are _______________________________
("Seller"), and __________________________, L.P., or its assigns ("Purchaser").
ARTICLE 2. PROPERTY TO BE PURCHASED
-----------------------------------
201. In consideration of Ten Dollars ($10.00) cash in hand paid by
Purchaser to Seller, the receipt and sufficiency of which are hereby
acknowledged, Seller agrees to sell to Purchaser and Purchaser agrees to
purchase from Seller, on the terms and conditions hereinafter set forth, that
certain parcel(s) of land (the "Land") owned by Seller as identified and
particularly described in Exhibit "A", attached hereto and incorporated herein
by this reference, together with the following property: (a) all buildings,
structures and other improvements located on the Land, and all fixtures and
appurtenances thereto, (herein collectively called the "Improvements"); (b) all
appliances and installed equipment owned by Seller, located at, on or in the
Improvements or Land listed in Exhibit "B" attached hereto and incorporated
herein by this reference (herein collectively called the "Equipment"); (c) any
portion of the Land lying in the right-of-way of any alley, passageway, street,
road, highway or avenue, proposed, open, or closed, adjoining all or any part of
the Land and in any and all strips, gores and rights-of-way; (d) all riparian
rights, hereditament, easements and other rights, privileges and immunities
appurtenant to the Land; (e) all leases, rents and profits accruing with respect
to the Land's Improvements and Equipment after the Closing; and (f) all of the
Seller's right, title and interest in all transferable (to the extent, if any,
such rights are transferable) intangible property of every nature whatsoever
pertaining to the Land and Improvements, including without limitation, all the
Service Agreements, licenses, permits, escrow deposits, contract rights,
instruments, claims, chooses in action, building and property names and signs,
property phone numbers, booklets, manuals and transferable utility contracts,
but excluding all cash, bank accounts, utility deposits, and other revenues and
income accruing prior to Closing. All of the foregoing real and personal
property is hereinafter collectively called the "Property".
ARTICLE 3. PURCHASE PRICE
-------------------------
The Purchase Price for the Property shall be $____________
inclusive of all amounts owed to the existing first lienholder identified in
Exhibit "A", with the cash portion being subject to all prorations and
adjustments provided herein. The cash portion of the Purchase Price shall be
paid as follows:
301. On or prior to the Effective Date, Purchaser shall deposit in cash
or by check, with Taylor, Covington & Smith, P.A., as agents for Mississippi
Valley Title Insurance Company (the "Escrow Agent") the sum of $25,000.00 as
earnest money deposit (the "Earnest Money"). Escrow Agent shall immediately
deposit the Earnest Money in an interest bearing insured account acceptable to
Purchaser. Escrow Agent shall hold and administer the Earnest Money in
accordance with the terms and conditions of this Agreement. At Closing, Escrow
Agent shall pay the Earnest Money to Seller and Purchaser shall receive a credit
for said amount against the cash portion of the Purchase Price. The terms of the
escrow arrangement shall be as described in Exhibit "D" attached hereto.
302. The remainder of the Purchase Price, less the Earnest Money
credited to Purchaser and the balance of the existing secured debt currently
encumbering the Property as of the closing date in an amount not exceeding the
amount set forth in Exhibit "A", shall be paid at Closing by (a) certified check
drawn on a national or state bank, (b) cashier's check issued by a national or
state bank, or (c) bank wire transfer. The Property shall be conveyed to Seller
subject to the existing mortgage described herein on terms acceptable to
Purchaser. Purchaser and Seller agree to execute all documents requested by the
current lienholder of the Property and HUD to evidence a transfer of the
Property subject to such debt. Purchaser and Seller agree to fully cooperate
with HUD and the current lienholder to effectuate transfer of the Property
subject to the existing lien described in Exhibit "A".
ARTICLE 4. CASH ADJUSTMENTS AND CLOSING COSTS
---------------------------------------------
401. The following items shall be apportioned between Seller and
Purchaser as of 11:59 p.m. on the Closing Date or a date to be agreed upon by
the parties, and the net amount of all such adjustments shall increase or
decrease, as the case may be, the net amount payable by Purchaser to Seller at
Closing pursuant to Section 302 hereof:
401.1 All rent paid, prepaid or collected by Seller with
respect to any leases, rental agreements or occupancy agreements for the
Property (collectively, the "Leases"), including, without limitation, those
items described in Exhibit "C" attached hereto and incorporated herein by this
reference, collected during the month of Closing. All unprorated rents for the
period prior to closing belong to the Seller.
401.2 All real and personal property taxes and other taxes
imposed on the ownership of the Property for the 1999 tax year. If 1999 taxes
are unknown, said tax proration shall be estimated based on the taxes paid for
the year 1998. All special assessments assessed prior to the Closing Date shall
be paid by Seller. If taxes are prorated based on an estimate, and if actual
1999 taxes vary from the estimate, the parties shall re-prorate when the 1999
taxes become known. This re-proration obligation shall survive closing.
401.3 Utility charges, payable by the owner of the Property,
including without limitation, water, sewer, electric, gas, telephone, trash
removal, and garbage removal. To the extent practicable, the parties shall
cooperate in seeking to obtain a transfer to the utility accounts on the Closing
Date, with a full release of Seller. If any utility accounts are not transferred
on the Closing Date, the parties shall cooperate in arranging for said transfer
as soon as practicable after the Closing Date.
401.4 All charges under any and all contracts for goods and
services furnished to the Property. If Purchaser does not choose to assume any
of such contracts, Purchaser shall so inform Seller within fifteen (15) days of
the Effective Date, in which event Seller shall cancel at Closing all contracts
cancelable by their terms prior to Closing, and if not cancelable by their terms
prior to Closing, Seller, at its option, may either (i) work out some mutual
agreement with Purchaser, or (ii) terminate this Agreement. At Closing Seller
and Purchaser shall execute an agreement in which each party indemnifies the
other for any claims arising out of such assumed contracts, which, as to
Seller's indemnity, shall be for the period through the date of Closing and
which, as to Purchaser's indemnity, shall be for the period after Closing.
402. Any item of income or expense required to be apportioned under
this Article that for any reason is not apportioned at Closing shall be
apportioned as soon thereafter as practicable. If any mutual mistake, including
without limitation, any erroneous mathematical calculation, is made in any
apportionment at Closing, Seller and Purchaser shall, promptly, correct said
mistake and make any payment required to produce an accurate apportionment.
These obligations shall survive the Closing.
403. Seller shall pay at Closing all recording costs for any release or
title clearance documents and the State of Mississippi transfer or stamp tax.
Purchaser shall pay the cost of recording the limited warranty deed. Each party
shall be responsible for and shall pay its own attorneys' fees and expenses,
together with any other costs and expenses incurred by a party and not
specifically allocated herein.
404. Seller acknowledges that Section 1445 of the Internal Revenue Code
of 1986, as amended and applicable state laws (the "Codes") may require
Purchaser to withhold a portion of the net proceeds payable to Seller at Closing
unless Seller establishes to the satisfaction of counsel to Purchaser that
withholding is not required under the Codes.
405. At closing, Seller shall transfer and pay to Purchaser in good
funds, or Purchaser shall receive a credit, for all tenant and pet security
deposits or deposits collected by Seller applicable to all Leases described in
Exhibit "C" as revised to take into account move-outs and new leases through
closing.
406. Purchaser shall purchase the balance of any tax and insurance
escrow account or replacement reserve account established with Seller's first in
priority secured lender as of the Closing from Seller provided such balances are
transferred at closing.
407. Seller shall provide, deliver and pay for the preparation and
issuance of an Owner's title insurance commitment insuring the Purchaser for the
full amount of the Purchase Price with no exceptions other than the Permitted
Exceptions and including all endorsements as the Secretary of the United States
Department of Housing and Urban Development may require as a condition of
closing. Purchaser shall pay for the cost of any title insurance premiums.
408. Each party shall be responsible for and pay its own attorney's
fees in connection with this transaction.
409. Purchaser shall pay to HUD the required fee for the processing of
the Application for the Transfer of Physical Assets and all costs and expenses
charged by the holder of the HUD insured loan for processing and granting its
approval or consent to the transfer of the Property and the assumption of its
loan.
ARTICLE 5. CLOSING DATE AND PLACE
---------------------------------
501. Unless extended in accordance with this Agreement, the Closing of
this transaction shall take place on or before ten (10) days from Purchaser's
receipt of the written consents required in Articles 902 and 903 for all of the
entities listed in Exhibit "E", unless waived by Purchaser, and in accordance
with the terms of this Agreement. The Closing date shall be set by the Purchaser
upon no less than five (5) days prior notice to Seller from Purchaser. Closing
shall occur at the offices of Taylor, Covington & Smith, 315 Tombigbee Street,
Jackson, Mississippi 39201 or such other date and place as the parties may
mutually agree.
502. The Purchaser may extend the closing date for an additional thirty
days by depositing additional earnest money in the amount of $25,000.00 with the
Escrow Agent for such extension prior to the Closing Date.
ARTICLE 6. TITLE AND SURVEY
---------------------------
601. Seller shall convey to Purchaser by limited warranty deed good,
marketable and insurable title to the Property free and clear of all liens,
leases, encumbrances, tenants, encroachments, restrictions, covenants,
assessments, charges, agreements, taxes and easements, except for the Permitted
Title Exceptions determined in accordance with this Section 601. The Permitted
Title Exceptions shall include only the following: (i) 1999 state, county and
municipal ad valorem taxes on the Property which are a lien but not yet due and
payable as of Closing; (ii) the Leases; (iii) easements for the maintenance of
public utilities that serve and benefit the Property, and slope and right-of-way
easements for adjacent public rights-of-way which do not affect the use or value
of the Property; and (iv) the existing lien documents set forth in Exhibit "A"
attached hereto provided that the amount secured thereunder does not exceed the
amount set forth in Article 302; and (v) the exceptions listed in Schedule B of
the Title Insurance Commitment previously furnished Purchaser, except for 1998
property taxes; however Permitted Title Exceptions shall not be deemed to
include any matters occurring after the effective date of the aforesaid Title
Insurance Commitment. Purchaser shall have the right to re-examine title to the
Property on or immediately prior to the day of Closing. If such examination
reveals any new defects or encumbrances, Purchaser may object thereto in writing
on or before the date of Closing, and in such event Seller shall have up to five
(5) days thereafter to cure same or Purchaser may cancel this Agreement and
receive a full return of its Earnest Money. Seller agrees that it shall not
voluntarily encumber title to the Property after the date of final execution
hereof.
602. Seller has previously delivered to Purchaser, at Seller's expense,
a survey of the Property prepared to ALTA\ACSM and HUD standards by a
Mississippi registered land surveyor ("Purchaser's Survey"). At least ten (10)
days prior to Closing, Seller shall furnish to Purchaser, at Seller's expense,
an updated survey of the Property showing new exceptions appearing since the
date of the Title Commitment referenced in Article 601(v).
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF SELLER
---------------------------------------------------
As a material inducement to Purchaser to enter into this Agreement and
to consummate the transaction provided for herein, Seller hereby represents,
warrants and agrees to Purchaser, as of the Contract Date as to the matters set
forth below. At Closing, Seller shall again represent and warrant said matters.
701. No service agreements or contracts exist as to the Property except
as listed in Exhibit "B-1" attached hereto and incorporated herein by this
reference.
702. (a) Seller owns good, marketable, insurable, indefeasible fee
simple title to the Property, subject only to the Permitted Title Exceptions,
and is in undisputed and peaceful possession of the Property subject to the
Leases; (b) no other Person claims or is entitled to possession of all or any
portion of the Property except for the tenants pursuant to the Leases; and (c)
there are no unpaid or unsatisfied security deeds, mortgages, claims of lien
special assessments or bills for sewerage, water, street improvements, taxes or
similar charges that constitute a lien against the Property or any of the
Improvements, other than the Permitted Title Exceptions and other Encumbrances
that Seller will release or cause to be released from the Property on or before
Closing.
703. There is no litigation (other than eviction proceedings commenced
by Seller in which no counterclaims against Seller have been asserted),
condemnation, zoning or administrative proceeding or real estate tax protest or
proceeding pending or threatened against or affecting (a) Seller, which pertains
to the Property, or (b) all or any part of the Property.
704. Seller has not received any written notice, nor to the best of its
knowledge any oral, or informal notice of (a) any alleged violation of any
private covenant or legal requirement, including without limitation, applicable
zoning laws, building codes, anti-pollution laws, health, safety and fire laws,
sewerage laws, environmental laws or regulations or any covenant, condition or
restriction affecting the Property; (b) any possible widening of any streets
adjoining the Property; (c) any possible condemnation of all or any portion of
the Property; or (d) any possible imposition of any special tax or assessment
against all or any portion of the Property; (e) any lack or deficiency or
surface or subsurface support relating to the Property or any portion thereof;
(f) the need or advisability of special flood or water damage insurance; or (g)
any possible special assessments, increases in tax rates or insurance rates for
all or any portion of the Property.
705. To the best of Seller's knowledge: all utilities facilities,
including, but not limited to, water, sanitary sewer, storm sewer, electricity,
telephone, trash removal, and garbage removal are in good working order and good
repair; all utilities services are available to said utilities facilities and
operating for the benefit of the Property in such a manner and capacities as are
necessary and appropriate for the operation of the Improvements for their
present use at standard rates, without any requirement for the payment of any
tap-on fees or other extraordinary charges.
706. Seller has not received any written notice or to the best of its
knowledge any oral or informal notice of any possible curtailment of any utility
service supplied to the Property.
707. To the best of Seller's knowledge, the Property has all
appurtenant easements that are necessary and appropriate (a) for the
installation, maintenance and use of all necessary and appropriate facilities
for water, sanitary sewer, storm sewer, electricity, gas, telephone services,
trash disposal and garbage disposal and (b) to connect all said facilities to
the appropriate sources of said services.
708. To the best of Seller's knowledge, the Equipment and the
Improvements and all portions thereof, including without limitation, all roofs,
walls, windows, foundations, footings, columns, supports, joists, heating
ventilating and cooling systems, electrical systems, plumbing systems, paving,
and parking facilities, are in good order, repair and operating condition.
Without limiting the generality of the foregoing sentence, to the best of
Seller's knowledge (a) there is no termite or other pest infestation, dry rot or
similar damage with respect to the improvements; (b) all of the improvements are
water tight; (c) there is no subsistence or other soil condition that presently
does or may in the future adversely affect the Property; and (d) Seller has no
knowledge or any defects in the foregoing improvements.
709. To the best of Seller's knowledge, there is legal access to the
Property from public streets, and any and all curb cuts and similar permits or
licenses necessary or appropriate to provide or facilitate such access have been
properly issued and remain in full force and effect.
710. Seller has not used any portion of the Land, and to Seller's
knowledge, no portion of the Land has been used, as a landfill or dump.
711. Seller knows of no underground petroleum tanks on the Property.
Further, to the best of Seller's knowledge, the Property has not been used for
the manufacture, storage, use or disposal of any hazardous, polluting,
radioactive or other dangerous material or substance.
712. Seller has the right, power and authority to enter into this
Agreement, and the right, power and authority to convey the Property in
accordance with the terms, provisions and conditions of this Agreement. The
entry by Seller into this Agreement with Purchaser does not violate any other
agreement relating to the Property regardless of whether Seller is a party
thereto, and Seller is capable of complying with all the terms, provisions and
conditions contained in this Agreement.
713. The only lease agreements, occupancy agreements or other rental
agreements with respect to the Property are the Leases identified in Exhibit
"C", and the rentals, security deposits, terms and other conditions of the
Leases as expressed in the rent roll described in Exhibit "C" attached hereto
are true and accurate, except for any tenant subleases of which Seller has no
knowledge. To the best of its knowledge, Seller is not in default of any of its
obligations contained in the Leases, and except as otherwise disclosed to
Purchaser in writing, no tenant under any Lease is currently in default of its
obligations under its Lease. Seller has not collected any rent due with respect
to the Leases except for the month during which the execution of this Agreement
falls except as shown in Exhibit "C". Seller will make available to Purchaser
for copying and inspection at the Property, copies of all of the Leases, and
Seller represents and warrants that such documents are true, correct and full
copies of each of the Leases and that no other modifications of the Leases
exist, whether written or oral, formal or informal.
714. Each of the Leases is fully assignable by Seller to Purchaser
without approval by any tenant under the Leases.
ARTICLE 8. COVENANTS OF SELLER
------------------------------
801. Seller hereby covenants and agrees with Purchaser that, from the
Contract Date until Closing, Seller shall: (a) maintain and operate the Property
in substantially the same manner as previously operated by Seller; (b) maintain
the Improvements in their current repair, working order and condition; (c) pay
all expenses incurred in connection with the ownership, maintenance, repair and
operation of the Property as and when they come due; (d) maintain, manage,
insure and operate the Property and all portions thereof in compliance with any
and all legal requirements and private covenants applicable thereto; (e) make
all payments and perform all other obligations of Seller as and when required by
all other encumbrances on the Property and the service agreements; (f) except
due to a lessee's default maintain each of the Leases in full force and effect,
and will not modify, amend, alter any of the Leases or waive any default by any
tenant under each of the Leases; (g) perform each and every obligation of Seller
under the terms of each of the Leases; (h) not collect any prepaid rent under
the Leases for more than one month in advance of the current month.
801(A). Seller hereby covenants and agrees with Purchaser that all
appliances (air conditioners, refrigerators, stoves etc.) in place as of the
Contract Date hereof shall be in operating order and in place on the Property as
of the date of closing and if unoccupied at closing, the apartment shall be in
rent ready condition and if not, then Purchaser shall be entitled to a credit of
$150 per apartment unit for making the apartment unit rent ready, exclusive of
the cost of replacing any non-turnkey damage and missing appliances for which
Purchaser shall be entitled to an additional credit. For the purpose of this
Agreement, "turnkey" shall mean cleaning and repainting the apartments and minor
sheetrock and carpet repairs.
802. Seller hereby covenants and agrees with Purchaser that, from the
Contract Date until Closing, Seller shall not, without the prior written consent
of Purchaser; (a) enter into any new lease affecting the Property not in the
ordinary course of business and under no circumstance shall any lease or renewal
have a lease term of less than six (6) months, nor more than twelve (12) months
or have a rental rate not agreed to by the Purchaser and Seller; (b) terminate,
modify, amend or supplement any of the Service Agreements; (c) place any
Encumbrance on all or any portion of the Property; (d) terminate, modify, alter,
or supplement any appurtenant easement or any of the Permitted Title Exceptions;
(e) engage in any transaction out of the ordinary course of business with
respect to the Property or any portion thereof; (f) transfer, assign, convey or
sell all or any portion of the Property; or (g) enter into encumbrance with
respect to all or any portion of the Property.
803. On the Effective Date, Seller shall make available for inspection
and copying by Purchaser in one location mutually acceptable to the Purchaser
and Seller and if the parties cannot agree, then at the offices of Taylor,
Covington & Smith, P.A., true, correct, complete and legible copies of the
following items which have not been previously delivered to Purchaser, including
without limitation copies of all the following items which have come into
existence on or after August 28, 1998:
803.1 All documents evidencing any and all portions of the
Property that constitute intangible property.
803.2 All insurance policies maintained by Seller with respect
to the Property.
803.3 All existing architectural plans and specifications
pursuant to which the Improvements were constructed.
803.4 Any and all termite inspection reports and guarantees
with respect to all or any portion of the Improvements, if Seller has any such
reports or guaranties.
803.5 Any and all building permits, certificates of occupancy,
zoning certificates, subdivision approvals and other material permits, licenses
and approvals in Seller's possession required by any Government Authority in
connection with the ownership, use, operation or maintenance of the Property.
803.6 All existing engineering studies, test results and
reports with respect to the Land, the Improvements, or both, including without
limitation, those relating to water, sewerage and drainage with respect to the
existing Improvements and any possible future renovation, remodeling or
additional development of the Property and planning, soil, hydrology, and
similar studies relating to the Property.
803.7 Any and all material permits, licenses, reports or other
similar documents in Seller's possession relating to compliance or noncompliance
of the Property or any portion thereof with any and all applicable land use,
zoning, building, fire, health, safety, environmental, subdivision, water
quality air quality and sanitation laws, regulations and other similar types of
control.
803.8 Copies of all 1996, 1997 and 1998 Property Tax bills.
803.9 All of the Leases.
803.10 All of the service agreements referenced in Section
701 hereunder.
803.11 1996, 1997, 1998 and year to date 1999 capital
improvement and deferred maintenance reports and evaluations and operating and
year end operating statements for the Property.
803.12 All correspondence with the United States Department of
Housing and Urban Development, including all physical and management reviews and
inspection reports and replacement reserve draws and statements;
803.13. All loan documents for any indebtedness encumbering
the Property or to be assumed by Purchaser at closing, including all regulatory
agreements.
804. Seller hereby covenants and agrees with Purchaser that, from the
Contract Date until Closing, Seller shall maintain in full force and effect
liability, fire and extended coverage insurance on the Property.
805. Seller hereby covenants and agrees with Purchaser that, from the
Effective Date until Closing, Purchaser and its agents, representatives and
contractors, shall have the right to enter upon the Property at reasonable times
for any lawful purpose, including without limitation, to make investigations,
surveys, tests and studies, provided, however (a) Purchaser shall not interfere
with the normal operation of the Property and the quiet enjoyment of the Tenant,
and (b) Purchaser shall promptly pay for all work performed by order of
Purchaser, its agents, representatives, or contractors with respect to the
Property and shall not cause the creation of any lien with respect to the
Property in favor of any Person, including without limitation, any contractor,
subcontractor, materialmen, mechanic, surveyor, architect or laborer. Purchaser
shall indemnify Seller from all claims, losses or damages as a result of the
activities of Purchaser or its agents or representatives making inspections and
tests on the Property.
806. The debt owed to the first lienholder as identified in Exhibit "A"
shall not exceed the amount set forth in Exhibit "A" as of the Closing Date and
there are not presently and shall be no defaults pursuant to the mortgage
documents identified in Exhibit "A" or otherwise associated with such debt.
ARTICLE 9. CONDITIONS PRECEDENT FOR THE BENEFIT OF PURCHASER
------------------------------------------------------------
Notwithstanding any other provision of this Agreement, Purchaser shall
not be obligated to purchase the Property unless and until each and every of the
following conditions precedent shall have been satisfied in full or waived by
Purchaser. The conditions precedent referred to in this Article are:
901. At Closing: (a) Purchaser shall have received all items required
by this Agreement to be delivered by Seller at or prior to Closing; (b) there
shall not exist any default, event of default, or event that with the passage of
time, the giving of notice, or both, would constitute a default or event or
default by Seller under this Agreement; and (c) each and every covenant,
representation and warranty made by Seller in this Agreement shall be true and
correct in all material respects.
902. The Parties acknowledge that the Property is subject to a
mortgage, insured by the United States Department of Housing and Urban
Development's ("HUD") as referred to in Exhibit "A". Purchaser's obligation
under this Agreement to purchase the Property is made expressly subject to the
following:
(1) The Purchaser's receipt of written preliminary approval by HUD of the
application for transfer of physical assets.
(2) HUD issuing a Form 2530 clearance of the Purchaser and all of
Purchaser's principals for whom HUD Form 2530 Clearance is required under HUD's
regulations.
(3) HUD issuing a Form 2530 clearance of CMS Multifamily II Partners and
CMS Diversified Partners, LP, or such other entities as CMS may designate as a
limited partner of the Purchaser, but only to the extent HUD requires such
forms.
(4) HUD agreeing in writing to a transfer of the Property subject to the
existing first lien debt as identified in Exhibit "A" attached hereto on terms
satisfactory to the Purchaser, including that the debt remain non-recourse.
Purchaser shall promptly, but not later than fourteen (14) days from the
Effective Date, submit to HUD all information necessary to obtain the foregoing
approvals and clearance and any approvals required in Section 903. If the
foregoing conditions have not been satisfied within ninety (90) days of the
Effective Date, or waived in writing by Purchaser, then Purchaser shall have the
option of terminating this Agreement and having all Earnest Money returned to
Purchaser immediately and neither party shall have any further rights under this
Agreement. Notwithstanding the foregoing, Purchaser shall have the right to have
this Agreement remain in full force and effect provided that the additional
Earnest Money provided for in Article 502 has been paid in accordance therewith.
If at the conclusion of this thirty (30) day extension period the conditions of
this Article 902 has not been satisfied or waived in writing by Purchaser, then
Purchaser shall have the right to terminate this Agreement and receive a full
refund of its Earnest Money. Seller shall cooperate with Purchaser in obtaining
all necessary consents and approval, including providing such information from
its records and from its accounts and other professionals, and shall execute
such documents and provide such information as may be required by the current
lender or HUD in order to satisfy the requirements and conditions of this
Article 902.
903. This Agreement is expressly conditioned upon preliminary approval
by HUD of the transaction as set forth in Form HUD 92266, Application for
Transfer of Physical Assets, and supporting documents submitted to HUD. No
transfer of any interest in the project under this sale agreement shall be
effective prior to such HUD approval. Purchaser will not take possession of the
project nor assume benefits of project ownership prior to such approval by HUD.
The Purchaser, his heirs, executors, administrators or assigns, shall have no
right upon any breach by Seller hereunder to seek damages, directly or
indirectly, from the FHA Project which is the subject of this transaction,
including from any assets, rents, issues or profits thereof, and Purchaser shall
have no right to effect a lien upon this project or the assets, rents, issues,
or profits thereof.
904. All of Purchaser's rights of termination hereunder are cumulative.
In the event Purchaser terminates this Agreement prior to Closing for any
reason, then Purchaser agrees to return all documents and written information
furnished to Purchaser by Seller, its attorneys and agents and provide Seller
with a sample copy of the HUD Form 92266, Application for Transfer of Physical
Assets, and supporting documents, submitted by Purchaser to the United States
Department of Housing and Urban Development in connection with this transaction
for one of the properties listed on Exhibit "E" with any proprietary or
confidential information redacted. Seller shall also have the right to purchase
and receive an assignment of Purchaser's rights in and to all of the
environmental studies and reports obtained by Purchaser on each of the
Properties listed in Exhibit "E" by reimbursing Purchaser for the amount paid by
it for such reports.
ARTICLE 10. ITEMS TO BE DELIVERED BY SELLER AT CLOSING
------------------------------------------------------
At Closing, Seller shall deliver to Purchaser:
1001. A duly executed limited warranty deed and quitclaim deed, in form
acceptable for recording and acceptable to HUD, conveying the Land and the
Improvements, subject only to the Permitted Title Exceptions.
1002. A duly executed limited warranty bill of sale assigning and
transferring good and marketable title to Purchaser of all the Equipment subject
only to the Permitted Title Exceptions and acceptable to HUD.
1003. A duly executed assignment of all transferable warranties and
guaranties, if any, of which Seller is the beneficiary with respect to any
portion of the Property, to the extent, if any, such warranties and guarantees
are transferable. Seller shall also deliver to Purchaser all originals of the
warranties and guaranties assigned pursuant to this Section, to the extent that
Seller has them in its possession or is able to obtain them prior to Closing.
1004. A duly executed certificate with respect to the Codes stating,
among other things, that Seller is not a foreign corporation or non-resident
alien, as defined in the Codes and regulations issued pursuant thereto.
1005. A duly executed affidavit of title with respect to the Property
in form and substance reasonably satisfactory to Purchaser's Title Company for
the purpose of marking the Title Commitment and issuing the Title Policy with an
Effective Date on the Closing Date without exception for mechanic's or
materialmen's liens, other statutory liens, or the rights of Persons in
possession (except for those persons identified in Exhibit "C") together with
all evidence of corporate or entity authority to deliver the documents required
at the closing and to consummate the transaction contemplated by this Agreement.
1006. Physical possession of all the Property subject to the rights of
those persons identified in "Exhibit "C".
1007. A duly executed Assignment of Leases and Rents transferring all
of Seller's right, title and interest in and to all of the Leases. The form of
the Assignment shall be acceptable to Purchaser and Purchaser's counsel, and
shall contain an indemnification from Seller for all obligations of Seller under
the Leases prior to the Closing Date and an indemnification from Purchaser for
all obligations of Purchaser under the Leases after closing. The Assignment
shall also contain a provision requiring Seller to turn over to Purchaser any
rents collected under the Leases after the date of Closing.
1008. A standard wood infestation\termite inspection report from a
company acceptable to Purchaser and properly licensed in the State of
Mississippi dated as of a date after the Effective Date stating that the
improvements on the Property are free of active termite infestation. At the
option of the Purchaser, Seller may be relieved of this obligation and Purchaser
shall receive a credit for the Seller's cost of such report.
1009. Such documents as Purchaser and Purchaser's counsel shall deem
necessary to verify that all contractors and suppliers relating to the
construction of the Improvements have no lien rights against the Property.
10010. The originals of all items to be transferred to Purchaser prior
to Closing in Seller's possession (e.g. tenant leases).
10011. Such other instruments, documents, certificates, affidavits,
closing statements or agreements reasonably requested by Purchaser's counsel,
HUD and the current mortgage holder.
10012. A cancellation of all service, maintenance, management and other
goods and services contracts or services, including those identified in Exhibit
"B-1", except to the extent specifically assumed by Purchaser as contemplated by
Article 401.4 or for which Seller has advised Purchaser in writing it will or
cannot cancel by written notice within twenty one (21) days from the Contract
Date.
ARTICLE 11. ITEMS TO BE DELIVERED BY PURCHASER AT CLOSING
---------------------------------------------------------
At Closing, Purchaser shall deliver to Seller the funds required to be
paid pursuant to Section 302 and any other documents required of Purchaser by
this Agreement and any assignment of Purchaser's rights under this Agreement.
ARTICLE 12. DAMAGE, DESTRUCTION OR CONDEMNATION
-----------------------------------------------
1201. If prior to Closing there shall occur any damage or destruction
to the Improvements by fire or other casualty, Seller shall give prompt written
notice thereof to Purchaser and Purchaser shall have the option, in its sole
judgment and discretion, (a) to receive an assignment at Closing of all
insurance proceeds payable to Seller as a result of such damage or destruction,
other than any proceeds representing loss of rental income prior to the closing
which shall belong to Seller; or (b) to terminate this Agreement. If Purchaser
elects to terminate this Agreement, Purchaser shall give written notice thereof
to Seller and to Brokers within thirty (30) days after Purchaser shall have
received written notice of such damage or destruction. If Purchaser does not
give such notice within such time period, then Purchaser shall be conclusively
deemed to have elected to proceed with the Closing, subject to receipt of the
insurance proceeds described above, and shall not have any further right to
terminate this Agreement as a result of such damage or destruction. All payments
from loss of rent insurance for rent due or as prorated through the Closing Date
shall belong to the Seller.
1202. If, prior to Closing, there shall occur any Condemnation of the
Property, Seller shall give prompt written notice thereof to Purchaser, and
Purchaser shall have the option, in its sole judgment and discretion, either (a)
to terminate this Agreement by giving written notice of termination within
thirty (30) days after Purchaser shall have received written notice of such
Condemnation; or (b) to complete the transaction provided for in this Agreement,
in which event all Condemnation proceeds collected by Seller prior to Closing if
any shall be credited against the Purchase Price and, at Closing, Seller shall
assign to Purchaser any and all condemnation proceeds that have not been paid at
that time. If Purchaser does not give such notice within such time period, then
Purchaser shall be deemed to have conclusively elected to proceed with the
Closing, subject to the receipt of assignment of condemnation proceeds as
provided above, and shall have no further right to terminate this Agreement as a
result of such condemnation.
1203. Seller shall be obligated to perform up to $25,000 of remedial
work to repair any termite damage and eradicate any termite infestation
discovered during the Inspection Period through closing which work shall be
completed prior to the Closing Date. If the cost of such work will exceed
$25,000, then Seller may either elect to perform such work and complete it prior
to the Closing Date, or it may terminate this Agreement upon written notice to
Purchaser delivered not later than ten (10) days after receipt of the termite
report, but in no event later than ten (10) days prior to the Closing Date,
whereupon this Agreement shall terminate and Purchaser shall be entitled to the
immediate return of all of its Earnest Money. If Seller fails to give written
notice to the Purchaser, then it shall be deemed to have elected to make the
repairs and proceed with the sale. If at the Closing Date, the repairs have not
been completed then Seller shall escrow the unpaid cost of the required work
with a title company designated by Purchaser until such time as the work has
been completed in accordance with the terms of this Agreement.
ARTICLE 13. RESERVED
--------------------
ARTICLE 14. REMEDIES ON DEFAULT
-------------------------------
1401. If Purchaser shall default in its performance of this Agreement,
and such default shall continue uncured for more than fifteen (15) days after
Purchaser shall have received written notice from Seller of said default, then,
in such event, Seller shall have the option to terminate this Agreement by
giving written notice of termination to Purchaser and Escrow Agent whereupon
Escrow Agent shall pay to Seller all the Earnest Money being held by Escrow
Agent, as liquidated damages, which shall be the sole remedy of Seller against
Purchaser under this Agreement, Seller hereby expressly waiving any right to
specific performance and to damages in excess of said liquidated amount. Seller
and Purchaser hereby agree that if Purchaser should default under this
Agreement, the amount of damages to Seller would be difficult, if not
impossible, to determine, and such liquidated damages are just, fair and
reasonable.
1402. If Seller shall be in default in respect in its performance of
this Agreement, and said default shall remain uncured for more than ten (10)
days after Seller shall have received written notice thereof, then, in such
event, Purchaser shall have the right to either: (A) seek specific performance;
or (B) to terminate this Agreement, receive a complete return of all Earnest
Money and receive liquidated damages of $25,000.00, Purchaser hereby expressly
waiving any right to damages in excess of said liquidated amount. Seller and
Purchaser hereby agree that if Seller should default under this Agreement, the
amount of damages to Purchaser would be difficult, if not impossible, to
determine, and such liquidated damages are just, fair and reasonable
1403. If at closing, any entity listed in Exhibit "E" fails or refuses
to close the sale of their property as listed in Exhibit "E" to Purchaser
simultaneously with the closing of the Property, then Purchaser may terminate
this Agreement at closing without notice and receive a full and complete return
of all Earnest Money. If, at closing, any entity purchasing one of the apartment
complexes listed in Exhibit "E" breaches its contract for sale and fails or
refuses to close the purchase of such complex, then Seller may terminate this
Agreement at Closing without notice and retain all Earnest Money as liquidated
damages, notwithstanding any provision of this Contract to the contrary.
ARTICLE 15. RESERVED
--------------------
ARTICLE 16. OTHER TERMS AND CONDITIONS
--------------------------------------
1601. Time is of the essence of each and every provision in this
Agreement.
1602. All representations, warranties, covenants, indemnities,
agreements and obligations of Seller under this agreement shall survive the
Closing for a period of twelve (12) months.
1603. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective representatives, heirs, successors and
assigns.
1604. Any notice, or other communication (a "Notice") to be given to
any party with respect to this Agreement may be given either by the party or its
counsel and shall be deemed to have been properly sent and given when delivered
by hand to the specific named individual or when sent by certified mail, return
receipt requested or by same-day or overnight receipted courier service. If
delivered by hand, a Notice shall be deemed to have been sent, given and
received when actually received by the addressee. If sent by certified mail, a
Notice shall be deemed to have been sent and given when properly deposited with
the United States Postal Service with the proper address and postage paid
therewith, and shall be deemed to have been received on the date of delivery or
first date of refusal of delivery as shown by the return receipt. The addresses
to which Notices shall be sent are:
If to Seller: Heritage Properties
16 Northtown Drive, Suite 200
Jackson, Mississippi 39211
Attn: James Carney
With a copy to: Bobby Covington, Esq.
Taylor, Covington & Smith
315 Tombigbee Street
Jackson, Mississippi 39201
If to Purchaser: Vinings Holdings, Inc.
3111 Paces Mill Road
Suite A-200
Atlanta, Georgia 30339
Attn: Peter Anzo
With a copy to: Schreeder, Wheeler & Flint, LLP
Attention: John A. Christy, Esq.
1600 Candler Building
127 Peachtree Street, N.E.
Atlanta, Georgia 30303-1845
Each party shall have the right to change the address to which Notices to it are
to be sent by giving written notice of said change to the other parties as
provided in this Section.
1605. This Agreement constitutes the sole and entire agreement between
the parties hereto, and no modification, alteration, or amendment of this
Agreement shall be binding unless signed by the party against whom such
modification, alteration, or amendment is sought to be enforced. No
representation, warranty, covenant, inducement or obligation not included in
this Agreement shall be binding upon either party hereto.
1606. This Agreement shall be governed by and construed in accordance
with the laws of the state of Mississippi. If all or any portion of any
provision of this Agreement shall be declared invalid or unenforceable under
applicable law, then the performance of such portion shall be excused to the
extent of such invalidity or unenforceability, but the remainder of this
Agreement shall remain in full force and effect; provided, however, that if the
excused performance of such unenforceable provision shall materially adversely
affect the interest of either party, the party so affected shall have the right
to terminate this Agreement by written notice thereof to the other party and
Broker, whereupon this Agreement shall become null and void, except for those
indemnities that are specified in this Agreement to survive the termination of
this Agreement prior to Closing.
1607. Whenever in this Agreement there is any reference to any article,
section, or exhibit, unless the context shall clearly indicate otherwise, such
reference shall be interpreted to refer to an article, section, or exhibit in or
to this Agreement. Each exhibit referred to in this Agreement in the same manner
as if it were restated verbatim herein. The titles and captions of the articles
and sections of this Agreement are included for ease of reference only, are not
intended to represent the full scope of the matters included or excluded from
such provisions, and shall not be used to interpret this agreement or to
construe the intent of the parties.
1608. This Agreement may be executed in multiple counterparts, each of
which shall be an original and all of which together shall constitute one and
the same Agreement. It shall not be necessary that each party executes each
counterpart, or that any one counterpart be executed by more than one party, so
long as each party executes at least one counterpart.
1609. The parties acknowledge that each party and its counsel have
participated in the negotiation and preparation of this Agreement. This
Agreement shall be construed without regard to any presumption or other rule
requiring construction against the party causing the Agreement to be drafted. If
any provision of this Agreement requires that action be taken on or before a
particular date that falls on a day that is not a Business Day, the time for the
taking of such action shall automatically be postponed until the next following
Business Day.
1610. All words and phrases used in this Agreement, including, without
limitation, all defined words and phrases, regardless of the number or gender in
which used, shall be deemed to include any other number or gender as may be
reasonably required by the context. If Seller is designated in this Agreement to
be more than one Person, then, in such event, each Person so designated shall be
jointly and severally liable for all duties, obligations and liabilities of
Seller.
1611. This Agreement may be assigned by Purchaser to an affiliate of
Purchaser or an entity organized by Purchaser without Seller's consent, provided
that the assignee, as a condition of said assignment, shall assume all of the
obligations of Purchaser pursuant to this Agreement and that such assignment
shall not release Purchaser from its obligations hereunder.
1612. If any act required by this Agreement must be taken on a
Saturday, Sunday or legal holiday in the States of Georgia or Mississippi, then
the time period for taking or performing such action shall be extended until the
next business day.
1613. The Purchaser shall reimburse the Seller for up to $5,000.00 of
documented costs for the purchase of new computers by Seller after September 30,
1998, for use at the Property and which is included in the personalty to be
conveyed at closing to Purchaser.
1614. Purchaser's obligation to purchase the Property is expressly
contingent on its having simultaneously purchased and closed the acquisition of
the adjoining property owned by Bradford Place Apartments II, L.P., identified
in Exhibit "E" attached hereto. If Purchaser does not close the acquisition of
the property owned by Bradford Place Apartments II, L.P. simultaneously with the
closing of the Property, then it may terminate and cancel this Agreement and
receive a full return of its Earnest Money.
1615. If Purchaser elects to terminate this Agreement on or prior to
Closing, then Purchaser shall reimburse Seller for all of its direct
out-of-pocket expenses paid to third parties in connection with providing all
due diligence and other materials pursuant to this Agreement, provided, however,
that the sum paid hereunder shall when aggregated with any sums paid pursuant to
the Agreements for Sale and Purchase of the properties identified in Exhibit "E"
shall not exceed $50,000.00.
ARTICLE 17. OFFER AND ACCEPTANCE
--------------------------------
1701. Purchaser's execution of this Agreement is intended as a
continuing offer by purchaser to purchase the property from Seller, in
accordance with the terms hereof, until 5:00 P.M. on the seventh (7th) day after
Purchaser executes and dates this Agreement. If Seller does not accept this
offer by delivering to Escrow Agent an unaltered, executed copy of this
agreement by that time, then this offer shall be deemed to have been revoked and
withdrawn by Purchaser prior to Seller's acceptance.
1702. This Agreement shall be retroactive to June 25, 1998; however,
the Effective Date of this Agreement is the date on which the last party to this
Agreement executes it and all parties listed on Exhibit "E" have executed and
delivered agreements in a form acceptable to Seller for the sale of the
properties listed on Exhibit "E" to Seller.
1703. The Contract Date is the date on which the Purchaser executes it.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as on dates indicated by their signatures.
Signed, sealed and delivered SELLING ENTITY
on the 17th day of February,
1999 in the presence of:
By:/s/ James P. Carney
-----------------------------
/s/ Brenda O. Perry
- --------------------- Title: General Partner
Witness Date: February 17, 1999
/s/ Beatrice Lee Ratcliffe [SEAL]
- ------------------------------
Notary Public
Signed, sealed and delivered PURCHASER:
on the 15th day of February,
1999 in the presence of: _______________________, L.P.
By:Vinings Holdings, Inc.
Its sole General Partner
By:/s/ Stephanie A. Reed
------------------------------
Stephanie Reed
/s/ Amanda A. Davis
- --------------------------
Amanda A. Davis Title: Vice President
Witness Date: February 17, 1999
/s/ Cynthia M. Samuels
- ---------------------------
Cynthia M. Samuels
Notary Public
[SEAL]
As to Article 301 only, Taylor, Covington & Smith, P.A. joins in this
Agreement.
Taylor, Covington & Smith, P.A.
/s/ Brenda O. Perry /s/ Bobby A. Covington
- ---------------------- -------------------------
Brenda O. Perry By: Bobby A. Covington
Witness Its: Shareholder
Date: February 17, 1999
/s/ Beatrice Lee Ratcliffe
- -------------------------
Beatrice Lee Ratcliffe
Notary Public
[SEAL]
Exhibit "A"- Property Description and First Lien Debt
Exhibit "B"- List of Equipment and Personal Property Exhibit
"B-1"-List of Service Contracts Exhibit
"C"- Rent Roll Exhibit
"D"- Escrow Conditions Exhibit
"E"- Other Properties
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
FORM OF AMENDED AND RESTATED AGREEMENT OF PURCHASE AND SALE
SCHEDULE OF MATERIAL DIFFERENCES
FOR ALL PROPERTIES
------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Purchase
Property Seller Purchaser Price
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bradford Place Apartments Crystal Ridge Apartments, L.P. Bradford Place I, L.P. $5,650,363
Bradford Place II Apartments Bradford Place Apartments II, L.P. Bradford Place II, L.P. 5,700,377
Cambridge Apartments Cambridge Apartments Partnership Cambridge Apartments, L.P. 5,823,555
Cottonwood Apartments Cottonwood Apartments, LLC Cottonwood, L.P. 4,962,120
Delta Bluff Apartments Delta Bluff Apartments, LLC Delta Bluff, L.P. 7,228,973
Foxgate Apartments Foxgate Apartments and Racquet Club, LLC Foxgate, L.P. 7,622,024
Hampton House Apartments Hampton House Apartments, LLC Hampton House, L.P. 5,930,980
Heritage Place Apartments Heritage Place Apartments, LLC Heritage Place, L.P. 3,339,382
The Landings Apartments The Landings Apartments, L.L.C. The Landings I, L.P. 6,321,935
Northwood Place Apartments Northwood Place Apartments Partnership Northwood Place, L.P. 5,808,026
River Pointe Apartments River Pointe Apartments, LLC River Pointe, L.P. 7,228,973
Riverchase Apartments Riverchase Apartments, L.P. Riverchase I, L.P. 3,270,926
Riverchase II Apartments Riverchase Apartments II, L.P. Riverchase II, L.P. 6,164,447
Riverchase III Apartments Riverchase Apartments III, L.P. Riverchase III, L.P. 5,091,991
Southwind Apartments Southwind Apartments Partnership Southwind I, L.P. 3,192,856
Southwind II Apartments Southwind Apartments II, L.P. Southwind II Apartments, L.P. 5,418,153
Trace Ridge Apartments Trace Ridge Apartments, L.L.C. Trace Ridge, L.P. 5,544,918
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
VININGS INVESTMENT PROPERTIES TRUST
SCHEDULE OF SUBSIDIARIES OF
December 31, 1998
-----------------
- ---------------------------------------------------------
Jurisdiction of
Subsidiary Organization
- ---------------------------------------------------------
Bradford Place I, L.P. Delaware
Bradford Place II, L.P. Delaware
Cambridge Apartments, L.P. Delaware
Cottonwood, L.P. Delaware
Delta Bluff, L.P. Delaware
Foxgate, L.P. Delaware
Hampton House, L.P. Delaware
Heritage Place, L.P. Delaware
The Landings I, L.P. Delaware
Laurelwood, L.P. Delaware
Northwood Place, L.P. Delaware
River Pointe L.P. Delaware
Riverchase I, L.P. Delaware
Riverchase II, L.P. Delaware
Riverchase III, L.P. Delaware
Southwind I, L.P. Delaware
Southwind II Apartments, L.P. Delaware
Thicket Apartments, L.P. Delaware
Thicket Holdings, Inc. Delaware
Trace Ridge, L.P. Delaware
Vinings Communities, L.P. Delaware
Vinings Holdings, Inc. Delaware
Vinings Investment Properties, L.P. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
consolidated balance sheet and statement of operations for Vinings Investment
Properties Trust for the period ended December 31, 1998 and is qualified in its
entirety by reference to such financial statements as contained in the Form 10-K
report for the year ended December 31, 1998.
</LEGEND>
<CIK> 0000759174
<NAME> Vinings Investment Properties Trust
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 617179
<SECURITIES> 0
<RECEIVABLES> 56008
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19309412
<DEPRECIATION> 1664678
<TOTAL-ASSETS> 19148178
<CURRENT-LIABILITIES> 0
<BONDS> 15640065
0
0
<COMMON> 0
<OTHER-SE> 2426972
<TOTAL-LIABILITY-AND-EQUITY> 19148178
<SALES> 0
<TOTAL-REVENUES> 4102003
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2668833
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1329277
<INCOME-PRETAX> 84993
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84993
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
