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, 1999 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:
Common 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 1, 2000 the aggregate market
value of the Registrant's common shares of beneficial interest held by
non-affiliates of the Registrant was $1,353,638.
The number of shares outstanding as of March 15, 2000 was 1,100,491.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Trust's Proxy Statement relating to its 2000 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....................................................6
ITEM 3 - Legal Proceedings.............................................7
ITEM 4 - Submission of Matters to a Vote of Shareholders...............7
PART II.......................................................................8
ITEM 5 - Market for Registrant's Shares of Beneficial Interest.........8
ITEM 6 - Selected Financial Information................................9
ITEM 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................10
ITEM 7A - Quantitative and Qualitative Disclosures About Market Risk ...15
ITEM 8 - Financial Statements and Supplementary Data...................16
ITEM 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...........................16
PART III......................................................................17
ITEM 10 - Directors and Executive Officers of the Registrant.............17
ITEM 11 - Executive Compensation.........................................17
ITEM 12 - Security Ownership of Certain Beneficial Owners
and Management.................................................17
ITEM 13 - Certain Relationships and Related Transactions.................17
PART IV.......................................................................18
ITEM 14 - Exhibits, Financial Statements and Schedule and
Reports on Form 8-K............................................18
Signatures ...................................................................21
<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 ("Vinings" or the "Trust") was organized on
December 7, 1984 as a mortgage real estate investment trust ("REIT") whose
original plan was to liquidate within approximately ten years. On February 28,
1996, Vinings Investment Properties, Inc. completed a tender offer to acquire
control of the Trust in order 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. Current
management believes that these investments have the potential to 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.
Currently Vinings conducts all of its operations through Vinings Investment
Properties, L.P. (the "Operating Partnership"), a Delaware limited partnership.
As of December 31, 1999, 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 an "UPREIT").
On April 29, 1999, the Operating Partnership offered, in a private transaction
pursuant to a Securities Purchase Agreement, Series A Convertible Preferred
Partnership interests (the "Preferred Units"), the proceeds from which were used
to acquire thirteen multifamily communities (collectively, the "Portfolio
Properties") from seventeen limited partnerships and limited liability
companies. Eight of the Portfolio Properties were purchased through subsidiary
partnerships of the Operating Partnership. The remaining Portfolio Properties
were purchased through a joint venture structure. (See Notes 3 and 4 to Vinings'
December 31, 1999 Consolidated Financial Statements.) As of December 31, 1999, a
total of 1,988,235 Preferred Units had been issued for an aggregate purchase
price of $8,450,000. (See Note 5 to Vinings' December 31, 1999 Consolidated
Financial Statements.) On March 15, 2000 the Board of Trustees voted to convert
the Preferred Units into a newly created class of preferred shares of beneficial
interest in Vinings, and consequently authorized the issuance of 1,988,235
preferred shares with the same rights, preferences and privileges as the
Preferred Units (the "Preferred Shares"). (See Note 15 to Vinings' December 31,
1999 Consolidated Financial Statements.)
Vinings currently owns, through wholly owned subsidiaries, ten apartment
communities totaling 1,520 units and a 75,000 square foot, single story business
park. In addition, Vinings holds a 20% interest in and is the general partner of
an unconsolidated joint venture, which owns through subsidiary partnerships five
additional apartment communities totaling 968 units. (See Note 4 to Vinings'
December 31, 1999 Consolidated Financial Statements.) At December 31, 1999, the
average occupancy of Vinings' portfolio, including the communities held by the
unconsolidated joint venture, was 94%.
<PAGE>
Effective March 1, 2000, 628,927 shares of Vinings were purchased in a privately
negotiated transaction by the officers, one of their affiliates and an affiliate
of one of the Trustees from a limited number of shareholders, which included
three of the Trustees and certain of their affiliates (the "Stock Transaction").
In connection with the transaction, the three selling Trustees -- James D. Ross,
Martin H. Petersen and Gilbert H. Watts, Jr. -- resigned from the Board of
Trustees.
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.
As a result of the Stock Transaction, fewer than five shareholders own in excess
of 50% of the equity in Vinings. On March 15, 2000, the Board of Trustees voted
to waive the ownership limitations in Vinings' Declaration of Trust with respect
to shareholders acquiring shares in the Stock Transaction as well as with
respect to certain holders of Preferred Units who will be acquiring Preferred
Shares. The Board is currently considering whether it is in the best interests
of shareholders for Vinings to continue to qualify as a REIT for federal income
tax purposes in light of the restrictions imposed on Vinings in order for it to
qualify as a REIT. To maintain its REIT status, Vinings would be required to
effect a change in its ownership structure prior to June 30, 2000. However,
there can be no assurances that the Trust will be successful in effecting such a
change prior to June 30, 2000.
Presently, the Board does not believe that there would be negative tax
consequences to the shareholders should Vinings lose its REIT status due to the
fact that the Trust is not currently generating taxable income. However,
management is continuing to investigate all alternatives for maintaining REIT
status as well as all consequences to the shareholders should Vinings lose its
REIT status.
Vinings' executive offices are located at 3111 Paces Mill Road, Suite A-200,
Atlanta, Georgia 30339, and its phone number is (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.
<PAGE>
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' Board has established an
Acquisition Committee that must review and approve each potential acquisition
based on certain investment criteria 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. These properties may be acquired either for cash, through debt
financing, in exchange for shares of beneficial interest in the Trust or for
partnership units in its Operating Partnership or any combination thereof. In
addition, the Trust may seek to raise capital through private offerings for
specific acquisitions or may seek to grow through mergers or combinations with
other real estate companies whose objectives and goals are similar to its own.
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 varies greatly from market to market
depending on the location of each community and the alternative housing
available in that particular area. 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, including
other REITs as well as other private real estate companies, some of which may
have greater resources with which to purchase projects that the Trust may be
interested in acquiring. Vinings also competes with these companies for its
source of equity, whether from the public markets or from private investors,
which could have an impact on Vinings' ability to acquire property in the
future.
Advisory and Property Management Services
- -----------------------------------------
On January 1, 1999, Vinings entered into management agreements with VIP
Management, LLC ("VIP"), an affiliate of the officers, who are also Trustees of
Vinings, to provide property management services for a fee equal to varying
percentages ranging from three and one half to six percent of gross revenues,
plus a fee for data processing. Prior to January 1, 1999, Vinings had entered
into management agreements with Vinings Properties, Inc., also an affiliate of
the officers of Vinings, to provide property management services on
substantially the same terms as the current agreements. 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 Vinings, prior to 1998 The
Vinings Group, Inc., the parent corporation of Vinings Properties, Inc.
(collectively with VIP, "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. Beginning January 1, 1998, The Vinings Group has charged
Vinings for certain overhead charges. Beginning August 1, 1999, the Trust has
also paid for its pro-rata share of rent, administrative and other overhead
charges, which includes reimbursing The Vinings Group for a pro-rata portion of
salaries and benefits for the officers and other employees providing services to
Vinings.
<PAGE>
Employees
- ---------
Vinings does not currently hire its own employees, as The Vinings Group has been
providing services to the Trust as described above. In addition, The Vinings
Group, as managing agent, provides on-site property management services for the
Trust and during fiscal 1999, the Trust paid a total of $265,280 to The Vinings
Group for these services. At December 31, 1999, Vinings, through its managing
agent, had engaged 43 associates who performed on-site management services for
the communities and were paid with funds generated from the properties.
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, 1999, Vinings was not aware of any potential environmental
contamination relating to investments in its portfolio.
ITEM 2 - PROPERTIES
- -------------------
As of December 31, 1999, Vinings directly owned ten apartment communities and a
single-story business park, Peachtree. While Vinings still owns Peachtree, it
intends to continue investing only in multifamily communities. Vinings' directly
owned real estate investments are summarized below by property:
Date No. Amount of Occupancy at
Owned Properties Acquired Units Investment 12/31/99
---------------- -------- ----- -------- ------------
Cottonwood Apartments 05/01/99 120 $ 4,915,643 96%
Delta Bluff Apartments 05/01/99 152 7,147,327 92%
Foxgate Apartments 05/01/99 160 7,527,293 94%
Hampton House Apartments 05/01/99 128 5,869,095 96%
Heritage Place Apartments 05/01/99 80 3,314,055 95%
Northwood Place Apartments 05/01/99 136 5,741,989 90%
River Pointe Apartments 05/01/99 152 7,156,034 100%
Trace Ridge Apartments 05/01/99 136 5,479,482 94%
The Thicket Apartments 06/28/96 254 7,713,183 97%
Windrush Apartments 12/19/97 202 7,378,876 98%
Peachtree Business Center 04/12/90 N/A 2,167,217 100%
----- ----------- ------------
Totals 1,520 $64,410,194 96%
===== =========== ============
<PAGE>
In addition as of December 31, 1999, Vinings was the general partner of and
owned a 20% interest in an unconsolidated Joint Venture, which owned five
apartment communities summarized as follows:
Joint Venture Date No. Amount of Occupancy at
Properties Acquired Units Investment 12/31/99
------------------------- -------- ----- ----------- ------------
Bradford Place Apartments 05/01/99 240 $11,242,296 96%
Cambridge Apartments 05/01/99 120 5,778,944 83%
The Landings Apartments 05/01/99 120 6,245,084 75%
Riverchase Apartments 05/01/99 280 14,420,506 92%
Southwind Apartments 05/01/99 208 8,529,058 94%
---- ----------- ------------
Totals 968 $46,215,888 90%
==== =========== ============
The above investment amounts are net of accumulated depreciation. All of the
properties are encumbered by fixed rate mortgage loans, except for Peachtree
Business Center, which 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 1999.
<PAGE>
PART II
-------
ITEM 5 - MARKET FOR REGISTRANT'S COMMON SHARES OF BENEFICIAL INTEREST
- ---------------------------------------------------------------------
Stock Quotation
- ---------------
Vinings' common shares of beneficial interest are currently traded on the
over-the-counter Bulletin Board under the symbol "VIPIS." On March 1, 2000, the
closing sales price for Vinings' common shares, as reported on the
over-the-counter Bulletin Board, was $4.97.
Market Information
- ------------------
The high and low sales prices for each quarterly period during fiscal 1999 and
fiscal 1998, which reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions,
are as follows:
------------------ ------------------
1999 1998
------------------ ------------------
Quarter Ended High Low High Low
- ------------- ------ ------ ------- -----
March 31 4 5/16 3 1/2 5 3 1/4
June 30 4 3/8 3 9/16 5 3
September 30 4 3/8 4 5 7/8 3 3/4
December 31 4 5/8 4 4 3/4 3 7/8
Dividends
- ---------
Vinings intends to pay distributions to shareholders in amounts at least
sufficient to enable the Trust to qualify as a REIT. For fiscal year 1999, the
Trust declared cash distributions per share as shown below. Vinings did not
declare or pay any cash distributions during fiscal 1998. For a discussion of
the federal income tax consequences of these distributions, refer to Note 8 of
Vinings' December 31, 1999, Consolidated Financial Statements.
- ----------- ------------ ------------
Record Payment Dividend
Date Date Amount
- ----------- ------------ ------------
8/16/99 9/1/99 $0.05
11/26/99 12/8/99 $0.05
Sales of Unregistered Securities
- --------------------------------
On April 29, 1999, the Operating Partnership offered Preferred Units in a
private transaction. The holders of Preferred Units are entitled to receive
cumulative preferential cash distributions at the per annum rate of $0.4675 per
Preferred Unit. Under certain circumstances, the holders of Preferred Units may
convert any part or all of such Preferred Units into common units, common
shares, or shares of preferred interests of Vinings. As of December 31, 1999, a
total of 1,988,235 Preferred Units had been issued for an aggregate purchase
price of $8,450,000. On March 15, 2000, the Board of Trustees voted to convert
the Preferred Units and concurrently authorized the issuance of 1,988,235
Preferred Shares. For more information with respect to such sale, refer to our
current report on Form 8-K, filed on May 10, 1999. (See Note 15 to Vinings'
December 31, 1999, Consolidated Financial Statements.)
Holders
- -------
Vinings had 660 holders of record of its common shares of beneficial interest as
of March 21, 2000.
<PAGE>
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,
1999 Consolidated Financial Statements, which are made a part of this report.
All share and per share information have been restated to reflect the 1-for-8
reverse share split on July 1, 1996.
<TABLE>
<CAPTION>
For the year ended December 31,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 9,341,144 $ 4,102,003 $ 2,478,824 $ 1,796,917 $ 3,244,908
Expenses 9,898,237 3,998,110 3,146,005 2,580,195 1,779,475
-------------- ------------- ------------ ------------ ------------
Income (loss) before loss on
real estate investments (557,093) 103,893 (667,181) (783,278) 1,465,433
Loss on real estate investments - - - (26,800) (886,887)
-------------- ------------- ------------ ------------ ------------
Income (loss) before equity in loss of
unconsolidated Joint Venture and minority
interests (557,093) 103,893 (667,181) (810,078) 578,546
Equity in loss of unconsolidated Joint Venture (137,366) - - - -
-------------- ------------- ------------ ------------ ------------
Income (loss) before minority interests (694,459) 103,893 (667,181) (810,078) 578,546
Less Minority interests in Operating Partnership:
Preferred partnership interests (903,344) - - - -
Common partnership interests 288,553 (18,900) 5,464 - -
-------------- ------------- ------------ ------------- ------------
Net income (loss) $(1,309,250) $ 84,993 $ (661,717) $ (810,078) $ 578,546
============== ============= ============= ============ ============
Net income (loss) per share - basic and diluted $(1.19) $0.08 $(0.61) $(0.75) $ 0.54
============== ============= ============ ============ ============
Weighted average shares outstanding - basic 1,100,501 1,090,701 1,080,513 1,080,528 1,080,625
============== ============= ============ ============ ============
Weighted average shares outstanding - diluted 1,343,047 1,336,391 1,089,435 1,080,528 1,080,625
============== ============= ============ ============ ============
Dividends declared and paid:
Ordinary income $ - $ - $ - $ - $ -
Return of capital 0.10 - - 16.88 12.24
-------------- ------------- ------------ ------------ ------------
Total dividends declared and paid $0.10 $ - $ - $16.88 $12.24
============== ============= ============ ============ ============
Total assets $69,114,314 $19,148,178 $18,989,558 $11,519,469 $21,878,357
============== ============= ============ ============ ============
Shareholders' equity $ 1,007,617 $ 2,426,972 $ 2,268,803 $ 2,232,548 $21,284,112
============== ============= ============ ============ ============
</TABLE>
<PAGE>
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 mortgage real estate investment trust ("REIT") whose
original plan was to liquidate within approximately ten years. On February 28,
1996, Vinings Investment Properties, Inc. completed a tender offer 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. Current
management believes that these investments will provide attractive sources of
income to Vinings that 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.
Currently Vinings conducts all of its operations through Vinings Investment
Properties, L.P. (the "Operating Partnership"). As of December 31, 1999, 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 an "UPREIT").
On April 29, 1999, the Operating Partnership offered, in a private transaction
pursuant to a Securities Purchase Agreement, Series A Preferred Partnership
interests (the "Preferred Units"). See Note 5 to Vinings' December 31, 1999
Consolidated Financial Statements. As of December 31, 1999, a total of 1,988,235
Preferred Units had been issued for an aggregate purchase price of $8,450,000,
the proceeds from which were used to acquire thirteen multifamily communities
(collectively, the "Portfolio Properties") from seventeen limited partnerships
and limited liability companies. Eight of the Portfolio Properties (the
"Mississippi Properties") were purchased through subsidiary partnerships of the
Operating Partnership. The remaining Portfolio Properties (the "Joint Venture
Properties") were purchased through a joint venture in which the Operating
Partnership has a 20% limited partner interest and is the general partner (the
"Joint Venture"). See Notes 3 and 4 to Vinings' December 31, 1999 Consolidated
Financial Statements.
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
- ---------------------
Comparison of Operating Results of 1999 to Operating Results of 1998
- --------------------------------------------------------------------
Total revenues increased $5,239,141 or 128%, from $4,102,003 to $9,341,144, due
primarily to the fact that Vinings continued its growth and expansion with the
acquisition of the Mississippi Properties on May 1, 1999.
Rental and other property revenues increased $5,209,287, or 127%, from
$4,099,920 to $9,309,207. $5,123,614 of this increase was due to the revenues
generated in connection with the Trust's ownership of the Mississippi Properties
for the eight months ended December 31, 1999, which were not in Vinings'
portfolio during 1998. There were also increases to Windrush and Thicket's
rental and other property revenues of $56,616 and $26,068, respectively.
Interest and other income increased $29,854 from $2,083 to $31,937. This
increase was due primarily to interest earned on earnest money deposits held in
escrow in connection with the acquisition of the Mississippi Properties, and
interest earned on replacement reserve accounts.
<PAGE>
Property operating and maintenance expense increased by $1,961,172, or 119%,
from $1,652,207 to $3,613,379. Of this increase, $2,037,188 was due to expenses
generated in connection with the Trust's ownership of the Mississippi Properties
for the eight months ended December 31, 1999, which were not in Vinings'
portfolio during 1998. This increase was offset by decreases in operating
expenses totaling $76,016, of which $47,651 was due primarily to savings in
Thicket's cable TV expense and salary and benefits expense and $23,736 was due
to reduced maintenance expense, utilities and commissions at Peachtree.
Depreciation and amortization increased by $1,065,753, or 165%, from $647,760 to
$1,713,513. This increase is due primarily to depreciation generated in
connection with the Trust's ownership of the Mississippi Properties for the
eight months ended December 31, 1999, which were not in Vinings' portfolio
during 1998. There was a slight increase in Windrush and Thicket's depreciation
due to capital additions.
Amortization of deferred financing costs increased by $19,495, or 63%, from
$30,903 to $50,398, due to costs incurred in connection with the refinancing of
the line of credit.
Interest expense increased $2,503,241, or 188%, from $1,329,277 to $3,832,518,
due primarily to the mortgage interest generated in connection with the Trust's
ownership of the Mississippi Properties for the eight months ended December 31,
1999, which were not in the Vinings' portfolio during 1998. In addition,
interest on Vinings' line of credit decreased slightly due to the reduced
balance on the line of credit during fiscal 1999. Windrush and Thicket had
slight decreases in interest expense due to principal amortization.
General and administrative expense increased $89,556, or 15%, from $598,873 to
$688,429. This increase consists of: (1) overhead allocations paid to The
Vinings Group totaling $58,902; (2) accounting and audit fees totaling $45,624;
(3) office expense totaling $23,750; (3) legal expense totaling $7,769; and (4)
trustee expense totaling $5,866. These increases are offset by the following
decreases: (1) abandoned project expense totaling $34,531; (2) travel expense
totaling $11,285; and (3) investor relations expense totaling $5,866.
The Unusual item, net totaling ($260,910) in 1998, relates to costs incurred,
net of settlement proceeds, in connection with litigation involving an
acquisition in which the seller breached its contract with the Trust.
There were no costs incurred in this regard during 1999.
Vinings had a loss before equity in loss of unconsolidated Joint Venture and
minority interests of $557,903 for fiscal 1999, as compared to income of
$103,893 for fiscal 1998-representing a decrease of $661,796. The majority of
this decrease is due to the loss generated in connection with the Trusts'
ownership of the Mississippi Properties for the eight months ended December 31,
1999, which were not in the Vinings' portfolio during fiscal 1998.
Vinings had equity in loss of unconsolidated Joint Venture of $137,366 for
fiscal 1999. This loss is due to the Trust's equity ownership in the
unconsolidated Joint Venture for the eight months ended December 31, 1999, which
was not held by Vinings' portfolio during fiscal 1998. (See Note 4 to Vinings'
December 31, 1999 Consolidated Financial Statements.)
The minority interest of common partnership interests for fiscal 1999 totals
($288,553), as compared to ($18,900) for fiscal 1998. The minority interest of
preferred partnership interests represents the accrued preferred 11% return on
the Preferred Units ($623,341) and the accrued pro rata liquidation preference
of $0.21 per Preferred Unit ($280,003) for fiscal 1999. The Preferred Units had
not been issued during fiscal 1998 (See Note 5).
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 7 to Vinings' December 31, 1999 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, 1999
Consolidated Financial Statements); $51,589 represents legal and accounting
fees; and $23,628 relates to travel and abandoned pursuit costs.
The unusual item, net totaling ($260,910) included in operating expenses for
fiscal 1998 relates to the costs incurred, net of the settlement proceeds, in
connection with litigation involving an acquisition in which the seller breached
its contract with the Trust. The costs incurred during fiscal 1997 of $532,185
include due diligence costs incurred in connection with the proposed acquisition
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 transaction totaled $271,275. (See Note 14
to Vinings' December 31, 1999 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.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash provided by operating activities increased $524,478, or 85%, from
$614,612 to $1,139,090 for fiscal 1999. This increase is due primarily to the
Trust's ownership of the Mississippi Properties for the eight months ended
December 31, 1999, which were not in the Trust's portfolio during fiscal 1998.
Cash flows used in investing activities are made up of the following items: (1)
cash used to purchase the Mississippi Properties during the second quarter of
1999 totaling $6,066,073; (2) cash investment in the Joint Venture totaling
$1,705,100 during the second quarter of 1999; (3) cash used for capital
expenditures at the properties, which increased $247,352, or 169%, from $146,420
to $393,772 due primarily to Vinings' ownership of the Mississippi Properties
for the eight months ended December 31, 1999, which were not in Trust's
portfolio during fiscal 1998 and (4) distributions received from the Joint
Venture in the third quarter of fiscal 1999 totaling $15,760.
Cash flows provided by financing activities increased by $7,630,656 for fiscal
1999, as compared to the same period in fiscal 1998. Of this increase,
$8,450,000 was provided by the Operating Partnership's issuance of the Preferred
Units, which was offset by cash used for: (1) deferred financing costs totaling
$29,242 relating to the refinancing of the line of credit during the second
quarter of fiscal 1999; (2) cash used to make principal repayments on the line
of credit totaling $285,000 during fiscal 1999 as compared to draw downs on the
line of credit totaling $281,896 for the same period during fiscal 1998; (3)
cash used to make principal repayments on mortgage notes payable totaling
$257,645 during fiscal 1999 as compared to principal repayments on mortgage
notes payable totaling $144,501 for the same period during fiscal 1998; and (4)
distributions to common shareholders totaling $110,042 during fiscal 1999.
The cash held by Vinings at December 31, 1999, plus the cash flow from Vinings'
assets, including the investment in the Joint Venture, is expected to provide
sources of liquidity to allow Vinings to meet all current operating obligations.
Management plans to continue ongoing discussions with capital sources, both
public and private, as well as explore financing alternatives, so as to allow
the Trust to continue to expand and grow its income producing investments.
RECENT ACCOUNTING PRONOUNCEMENTS
- --------------------------------
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, 1999 and 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.
<PAGE>
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 phrase 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 has assessed the potential impact Year 2000 may have on its operations
and has implemented a requisite course of action internally to minimize its
impact and to ensure that neither significant costs nor disruption of normal
business operations are encountered. However, there is no guarantee that the
business of the Trust with outside vendors and other associated entities, which
affect the Trust, will be Year 2000 compliant, and therefore, Vinings remains
susceptible to consequences of the Year 2000 issue. As of the date of this
report, Vinings has not encountered any Year 2000 disruptions of normal business
operations.
During fiscal 1999 Vinings incurred costs to purchase computer hardware and
related software for its on-site resident management systems at the Mississippi
Properties. These systems were Year 2000 compliant when purchased and would have
been purchased regardless of the Year 2000 issue. The costs to implement the
resident management systems totaled approximately $38,200.
The financial and accounting systems Vinings uses are shared with The Vinings
Group. The costs incurred to upgrade these systems totaled 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 a shared cost between the
Trust and The Vinings Group. Vinings does not anticipate additional costs to
upgrade or modify any of its systems for Year 2000 compliance.
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 possibility of future Year 2000 problems, the ability to correct
any future Year 2000 issues that could have a serious impact on operations and
the possibility that third party suppliers may have future Year 2000 problems.
There can be no assurance that any of the factors or statements regarding the
Trust's Year 2000 compliance will not change and that any change will not affect
the accuracy of the Trust's forward-looking statements.
OTHER MATTERS
- -------------
Effective March 1, 2000, 628,927 shares of Vinings were purchased in a privately
negotiated transaction by the officers, one of their affiliates and an affiliate
of one of the Trustees from a limited number of shareholders, which included
three of the Trustees and certain of their affiliates (the "Stock Transaction").
In connection with the Stock Transaction, the three selling Trustees -- James D.
Ross, Martin H. Petersen and Gilbert H. Watts, Jr.-- resigned from the Board of
Trustees.
As a result of the Stock Transaction, fewer than five shareholders own in excess
of 50% of the equity in Vinings. On March 15, 2000, the Board of Trustees voted
to waive the ownership limitations in Vinings' Declaration of Trust with respect
to shareholders acquiring shares in the Stock Transaction, as well as with
respect to certain holders of Preferred Units who will be acquiring Preferred
Shares. The Board is currently considering whether it is in the best interests
of shareholders for Vinings to continue to qualify as a REIT for federal income
tax purposes in light of the restrictions imposed on Vinings in order for it to
qualify as a REIT. To maintain its REIT status, Vinings would be required to
effect a change in its ownership structure prior to June 30, 2000. However,
there can be no assurances that the Trust will be successful in effecting such a
change prior to June 30, 2000.
Presently, the Board does not believe that there would be negative tax
consequences to the shareholders should Vinings lose its REIT status due to the
fact that the Trust is not currently generating taxable income. However,
management is continuing to investigate all alternatives for maintaining REIT
status as well as all consequences to the shareholders should Vinings lose its
REIT status.
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 inability of Vinings to identify
properties for acquisition; the inability of Vinings to continue to acquire
properties 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, Mississippi
and the surrounding southeastern states; the national economic climate; the
local economic climate in Georgia, Mississippi and the surrounding southeastern
states; the local real estate conditions and competition in Georgia, Mississippi
and the surrounding southeastern states; the ability of Vinings to correct any
future Year 2000 sensitive problems; and the inability of Vinings to continue to
qualify as a REIT. 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.
<PAGE>
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 6 to Vinings' December 31,
1999 Consolidated Financial Statements. All of Vinings' borrowings are under
fixed rate instruments, except the line of credit, which is at prime plus 1%. As
of December 31, 1999, Vinings' exposure to market risk has changed due to the
acquisition of the Mississippi Properties and the assumption of the related
mortgage indebtedness. However, Vinings has determined that there is no material
market risk exposure to its consolidated financial position, results of
operations or cash flows due to changes in interest rates because of the fixed
rate nature of its long-term debt.
The following table presents principal reductions and related weighted average
interest rates by year of expected maturity for Vinings' debt obligations as of
December 31, 1999:
<TABLE>
<CAPTION>
Fair Value
There- December
(In Thousands) 2000 2001 2002 2003 2004 after Total 31, 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Reductions
In Mortgage Notes $ 333 $362 $393 $7,315 $367 $46,305 $55,075 $55,075
Average Interest Rates 8.63% 8.63% 8.63% 8.63% 8.58% 8.58% 8.63% 8.63%
Line Of Credit $1,715 - - - - - $ 1,715 $ 1,715
Interest Rate 9.75% - - - - - 9.75% 9.75%
- -------------------------------------------------------------------------------------------------------
</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 February
23, 2000 and is incorporated herein by reference.
<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 2000 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 2000 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 2000 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 2000 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.....................................22
Report of Independent Public Accountants.....................................23
Consolidated Balance Sheets--As of December 31, 1999 and 1998................24
Consolidated Statements of Operations--For the years ended
December 31, 1999, 1998 and 1997.............................................25
Consolidated Statements of Shareholders' Equity--For the years ended
December 31, 1999, 1998 and 1997.............................................26
Consolidated Statements of Cash Flows--For the years ended
December 31, 1999, 1998 and 1997.............................................27
Notes to Consolidated Financial Statements--For the years ended
December 31, 1999, 1998 and 1997.............................................28
Schedule III - Real Estate and Accumulated Depreciation......................43
14(a) (3) Exhibits
<TABLE>
Exhibit No. Description
- ---------- -----------
<S> <C>
3.1 Third Amended and Restated Declaration of Trust of Vinings (incorporated by reference as
Exhibit 3.1 to Vinings' Quarterly Report on Form 10-Q for the quarter ended September 30,
1999, No. 0-13693).
3.2 Amended and Restated Bylaws of the Trust (incorporated by reference as Exhibit 3.2 to
Vinings' Registration Statement on Form S-11, No. 2-94776).
10.1 Vinings Investment Properties Trust 1997 Stock Option and Incentive Plan as approved by the
Shareholders on July 1, 1997 (incorporated by reference as Exhibit A to Vinings' report on
Form Schedule 14A filed on May 28, 1997).
10.2 Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P.
(incorporated by reference as Exhibit 10.1 to Vinings' Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, No. 0-13693).
10.3 First Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference as Exhibit 10.2 to the Vinings'
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693).
<PAGE>
10.4 Second Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference as Exhibit 10.3 to the Vinings'
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693).
10.5 Third Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference as Exhibit 10.4 on Form 10-K for year
ended December 31, 1998).
10.6 Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference as Exhibit 10.5 on Form 10-K for year
ended December 31, 1998).
10.7 Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference as Exhibit 10.6 on Form 10-K for year
ended December 31, 1998).
10.8 Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P., dated as of April 29, 1999 (incorporated by reference as
Exhibit 4.1 to the Trust's report on Form 8-K filed on May 7, 1999).
10.9 Promissory Note dated April 27, 1999 between Vinings Investment Properties, L.P., and Bank
Atlanta (filed herewith).
10.10 Deed to Secure Debt and Security Agreement dated April 27, 1999 between Vinings Investment
Properties, L.P. and Bank Atlanta (filed herewith).
10.11 Form of Management Contract dated May 1, 1999 between certain subsidiaries of Vinings and
VIP Management, LLC for the Mississippi Properties (filed herewith).
10.12 Management Contract dated January 1, 1999, between Thicket Apartments, L.P. and VIP
Management, LLC (incorporated by reference as Exhibit 10.11 on Form 10-K for the year ended
December 31, 1998).
10.13 Management Contract dated January 1, 1999, between Vinings Communities, L.P. and VIP
Management, LLC (incorporated by reference as Exhibit 10.12 on Form 10-K for the year ended
December 31, 1998).
10.14 Management Contract dated January 1, 1999, between Vinings Investment Properties, L.P. and
VIP Management, LLC (incorporated by reference as Exhibit 10.13 on Form 10-K for the year
ended December 31, 1998).
10.15 Form of Amended and Restated Agreement of Purchase and Sale with attached Revised Schedule
of Material Differences For Properties Acquired May 1, 1999 (filed herewith).
10.16 Securities Purchase Agreement, dated as of April 29, 1999, Relating to Series A Convertible
Preferred Units of Vinings Investment Properties, L.P., by and among Vinings Investment
Properties Trust, Vinings Investment Properties, L.P. and the Purchasers named therein
(incorporated by reference as Exhibit 10.1 to Vinings' report on Form 8-K filed on May 7,
1999).
<PAGE>
10.17 Form of Registration Rights and Lock Up Agreement, dated as of April 29, 1999 (incorporated
by reference as Exhibit 10.2 to Vinings' report on Form 8-K filed on May 7, 1999).
10.18 Vinings/CMS Master Partnership, L.P., Agreement of Limited Partnership (incorporated by
reference as Exhibit 10.1 to Vinings' report on Form 8-K/A filed on July 15, 1999).
21.1 Subsidiaries of the Trust (filed herewith).
23.1 Consent of Independent Public Accountants (filed herewith).
23.2 Consent of Independent Public Accountants (filed herewith).
27.1 Financial Data Schedule for the fiscal year ended December 31, 1999 (filed herewith).
</TABLE>
14(b) Reports on Form 8-K
- -------------------------
Vinings did not file any current reports on Form 8-K during the fourth quarter
of 1999.
14(c) Index to Exhibits
- -----------------------
See Item 14(a)(3) above.
<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: March 30, 2000
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, March 30, 2000
- ------------------------- President and Trustee
Peter D. Anzo
/s/ Stephanie A. Reed Vice President, Treasurer, March 30, 2000
- ------------------------- Secretary and Trustee
Stephanie A. Reed (Principal Financial and
Accounting Officer)
/s/ Phill D. Greenblatt Trustee March 30, 2000
- -------------------------
Phill D. Greenblatt
/s/ Henry Hirsch Trustee March 30, 2000
- -------------------------
Henry Hirsch
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To Vinings Investment Properties Trust:
We have audited the accompanying consolidated balance sheet of Vinings
Investment Properties Trust and subsidiaries (the "Trust") as of December 31,
1999 and the related consolidated statements of operations, shareholders'
equity, and cash flows for the year ended December 31, 1999. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit 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, 1999, and the results of
their operations and their cash flows for the year ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
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 audit 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.
HABIF, AROGETI & WYNNE, LLP
/s/ HABIF, AROTETI & WYNNE, LLP
Atlanta, Georgia
March 17, 2000
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Vinings Investment Properties Trust:
We have audited the accompanying consolidated balance sheet of Vinings
Investment Properties Trust and subsidiaries (the "Trust") as of December 31,
1998 and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the two 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 auditing standards generally accepted
in the United States. 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 the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1998 in conformity with accounting principles generally
accepted in the United States.
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, as it relates to the financial data for the years
ended December 31, 1998 and 1997, 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>
<CAPTION>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31,
----------------------------------------
1999 1998
----------------- ----------------
ASSETS
<S> <C> <C>
Real estate assets:
Land $ 8,247,900 $ 2,884,500
Buildings and improvements 55,545,257 15,399,690
Furniture, fixtures & equipment 3,968,848 1,025,222
Less: accumulated depreciation (3,351,811) (1,664,678)
----------------- ----------------
Net real estate assets 64,410,194 17,644,734
Investment in unconsolidated Joint Venture 1,551,974 -
Cash and cash equivalents 916,215 158,302
Restricted cash 1,816,102 458,877
Receivable from Joint Venture 27,356 -
Receivables and other assets 236,900 694,998
Deferred financing costs, less accumulated amortization of $127,656 and
$77,258 at December 31, 1999 and December 31, 1998, respectively 117,908 139,064
Deferred leasing costs, less accumulated amortization of $59,240 and
$32,861 at December 31, 1999 and December 31, 1998, respectively 37,665 52,203
----------------- ----------------
Total assets $69,114,314 $19,148,178
================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $55,074,923 $13,640,065
Line of credit 1,715,000 2,000,000
Accounts payable and accrued liabilities 1,899,937 546,249
Distributions payable to Preferred Unitholders 464,750 -
----------------- ----------------
Total liabilities 59,154,610 16,186,314
----------------- ----------------
Minority interests of unitholders in Operating Partnership:
Preferred partnership interests 8,730,003 -
Common partnership interests 222,084 534,892
----------------- ----------------
Total minority interests 8,952,087 534,892
----------------- ----------------
Shareholders' equity:
Common shares of beneficial interest, without par or stated value,
25,000,000 authorized, 1,100,493 and 1,100,505 shares issued and
outstanding at December 31, 1999 and December 31, 1998, respectively - -
Additional paid in capital 3,295,998 3,406,103
Accumulated deficit (2,288,381) (979,131)
----------------- ----------------
Total shareholders' equity 1,007,617 2,426,972
----------------- ----------------
Total liabilities and shareholders' equity $69,114,314 $19,148,178
================= ================
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31,
--------------------------------------------------
1999 1998 1997
-------------- ------------- ------------
REVENUES
<S> <C> <C> <C>
Rental revenues $ 8,815,240 $3,946,828 $2,392,072
Other property revenues 493,967 153,092 84,674
Interest income 30,937 1,519 2,078
Other income 1,000 564 -
-------------- ------------- ------------
9,341,144 4,102,003 2,478,824
-------------- ------------- ------------
EXPENSES
Property operating and maintenance 3,613,379 1,652,207 992,926
Depreciation and amortization 1,713,513 647,760 433,011
Amortization of deferred financing costs 50,398 30,903 34,957
Interest expense 3,832,518 1,329,277 816,551
General and administrative 688,429 598,873 336,375
Unusual item, net - (260,910) 532,185
-------------- ------------- ------------
9,898,237 3,998,110 3,146,005
-------------- ------------- ------------
Income (loss) before equity in loss of unconsolidated
Joint Venture and minority interests (557,093) 103,893 (667,181)
Equity in loss of unconsolidated Joint Venture (137,366) - -
-------------- ------------- ------------
Income (loss) before minority interests (694,459) 103,893 (667,181)
Less minority interests in Operating Partnership:
Preferred partnership interests (903,344) - -
Common partnership interests 288,553 (18,900) 5,464
-------------- ------------- ------------
Net income (loss) $(1,309,250) $ 84,993 $ (661,717)
============== ============= ============
NET INCOME (LOSS) PER SHARE - BASIC $ (1.19) $ 0.08 $ (0.61)
============== ============= ============
NET INCOME (LOSS) PER SHARE - DILUTED $ (1.19) $ 0.08 $ (0.61)
============== ============= ============
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 1,100,501 1,090,701 1,080,513
============== ============= ============
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 1,343,047 1,336,391 1,089,435
============== ============= ============
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1997, 1998 and 1999
Additional Total
paid in Accumulated shareholders'
capital deficit equity
------------- --------------- ----------------
<S> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 $2,634,955 $ (402,407) $ 2,232,548
Net loss - (661,717) (661,717)
Retirement of shares (84) - (84)
Adjustment for minority interest of unitholders
and issuance of units in Operating Partnership 698,056 - 698,056
------------- --------------- ----------------
BALANCE AT DECEMBER 31, 1997 3,332,927 (1,064,124) 2,268,803
Net income - 84,993 84,993
Retirement of shares (43) - (43)
Adjustment for minority interest of
unitholders in Operating Partnership (6,781) - (6,781)
Issuance of shares to officers and directors 80,000 - 80,000
------------- --------------- ----------------
BALANCE AT DECEMBER 31, 1998 3,406,103 (979,131) 2,426,972
Net loss - (1,309,250) (1,309,250)
Retirement of shares (63) - (63)
Distributions (110,042) - (110,042)
------------- --------------- ----------------
BALANCE AT DECEMBER 31, 1999 $3,295,998 $(2,288,381) $ 1,007,617
============= =============== ================
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the twelve months ended December 31,
-------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1999 1998 1997
------------- ------------ -------------
<S> <C> <C> <C>
Net income (loss) $(1,309,250) $ 84,993 $(661,717)
------------- ------------ -------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,713,513 647,760 433,011
Amortization of deferred financing costs 50,398 30,903 34,957
Equity in loss of unconsolidated Joint Venture 137,366 - -
Minority interests in Operating Partnership:
Preferred partnership interests 903,344 - -
Common partnership interests (288,553) 18,900 (5,464)
Distributions to common unitholders (24,255) - -
Distributions to preferred unitholders (158,591) - -
Noncash compensation expense - 80,000 -
Changes in assets and liabilities, net of the effect
of real estate assets acquired
Restricted cash (331,754) (26,185) 26,738
Receivable from Joint Venture (27,356) - -
Receivables and other assets (68,493) (19,511) 22,600
Capitalized leasing costs (11,842) (39,621) (36,931)
Accounts payable and accrued liabilities 554,563 (162,627) 290,335
------------- ------------ -------------
Total adjustments 2,448,340 529,619 765,246
------------- ------------ -------------
Net cash provided by operating activities 1,139,090 614,612 103,529
------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of real estate assets (6,066,073) - -
Capital expenditures (393,772) (146,420) (139,329)
Refundable deposits and acquisition costs - (612,085) -
Investment in unconsolidated Joint Venture (1,705,100) - -
Distributions from Joint Venture 15,760 - -
------------- ------------ -------------
Net cash used in investing activities (8,149,185) (758,505) (139,329)
------------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred financing costs (29,242) - -
Net proceeds (repayments) on line of credit (285,000) 281,896 150,000
Principal repayments on mortgage notes payable (257,645) (144,501) (52,008)
Purchase of retired shares (63) (43) (84)
Proceeds from issuance of preferred partnership interests 8,450,000 - -
Distributions to shareholders (110,042) - -
------------- ------------ -------------
Net cash provided by financing activities 7,768,008 137,352 97,908
------------- ------------ -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 757,913 (6,541) 62,108
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 158,302 164,843 102,735
------------- ------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 916,215 $158,302 $ 164,843
============= ============ =============
<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, 1999, 1998 and 1997
NOTE 1 - FORMATION AND ORGANIZATION
- -----------------------------------
Vinings Investment Properties Trust ("Vinings" or the "Trust") was
organized on December 7, 1984 as a mortgage real estate investment
trust ("REIT") whose original plan was to liquidate within
approximately ten years. On February 28, 1996, Vinings Investment
Properties, Inc. completed a tender offer to acquire control of the
Trust in order 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.
Current 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.
Currently Vinings conducts all of its operations through Vinings
Investment Properties, L.P. (the "Operating Partnership"), a Delaware
limited partnership. As of December 31, 1999, 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 an "UPREIT").
On April 29, 1999, the Operating Partnership offered, in a private
transaction pursuant to a Securities Purchase Agreement, Series A
Convertible Preferred Partnership interests (the "Preferred Units"),
the proceeds from which were used to acquire thirteen multifamily
communities (collectively, the "Portfolio Properties") from seventeen
limited partnerships and limited liability companies. Eight of the
Portfolio Properties were purchased through subsidiary partnerships of
the Operating Partnership. The remaining Portfolio Properties were
purchased through a joint venture structure. (See Notes 3 and 4.) As of
December 31, 1999, a total of 1,988,235 Preferred Units had been issued
for an aggregate purchase price of $8,450,000 (See Note 5). On March
15, 2000 the Board of Trustees voted to convert the Preferred Units
into a newly created class of preferred shares of beneficial interest
in Vinings and consequently authorized the issuance of 1,988,235
preferred shares with the same rights, preferences and privileges as
the Preferred Units (the "Preferred Shares") (See Notes 5 and 15).
Vinings currently owns, through wholly owned subsidiaries, ten
apartment communities totaling 1,520 units and a 75,000 square foot,
single story business park. In addition, Vinings holds a 20% interest
in and is the general partner of an unconsolidated joint venture, which
owns through subsidiary partnerships five additional apartment
communities totaling 968 units (See Note 4). At December 31, 1999, the
average occupancy of Vinings' portfolio, including the communities held
by the unconsolidated joint venture, was 94 %.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Basis of Presentation
---------------------
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and with the instructions
to Form 10-K and Article 10 of Regulation S-X.
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. Vinings accounts for its investment in the
unconsolidated joint venture using the equity method of accounting. The
term "Vinings" or "Trust" hereinafter refers to Vinings Investment
Properties Trust and its subsidiaries, including the Operating
Partnership.
The minority interests of the common unitholders in the Operating
Partnership (the "Common Units") reflected on the accompanying balance
sheets are calculated based on the common unitholders' minority
interest ownership percentage (18.06% as of December 31, 1999)
multiplied by the Operating Partnership's net assets. The minority
interests of the preferred unitholders on the accompanying balance
sheet represent cash contributed in exchange for those units and the
accrued liquidation preference of $0.21 per Preferred Unit ($280,003 at
December 31, 1999). The minority interests of the common unitholders in
the income or loss of the Operating Partnership on the accompanying
statements of operations is calculated based on the weighted average
minority interest ownership percentage (approximately 18% for all
periods presented) multiplied by income (loss) before minority
interests after subtracting income allocated to the preferred
partnership interests. The minority interests of the preferred
unitholders on the statements of operations represents the accrued
preferred 11% return on the Preferred Units ($623,341 for the period
ended December 31, 1999) and the accrued pro rata liquidation
preference of $0.21 per Preferred Unit ($280,003 for the period ended
December 31, 1999) (See Note 5).
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.
As a result of the Stock Transaction, fewer than five shareholders own
in excess of 50% of the equity in Vinings (See Note 15). On March 15,
2000, the Board of Trustees voted to waive the ownership limitations in
Vinings' Declaration of Trust with respect to shareholders acquiring
shares in the Stock Transaction, as well as with respect to certain
holders of Preferred Units who will be acquiring Preferred Shares. The
Board is currently considering whether it is in the best interests of
shareholders for Vinings to continue to qualify as a REIT for federal
income tax purposes in light of the restrictions imposed on Vinings in
order for it to qualify as a REIT. To maintain its REIT status, Vinings
would be required to effect a change in its ownership structure prior
to June 30, 2000. However, there can be no assurances that the Trust
will be successful in effecting such a change prior to June 30, 2000.
Presently, the Board does not believe that there would be negative tax
consequences to the shareholders should Vinings lose its REIT status
<PAGE>
due to the fact that the Trust is not currently generating taxable
income. However, management is continuing to investigate all
alternatives for maintaining REIT status as well as all consequences to
the shareholders should Vinings lose its REIT status.
Cash and Cash Equivalents
-------------------------
Vinings considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Restricted Cash
---------------
Restricted cash consists of real estate tax, insurance and replacement
reserve escrows held by mortgagees, which are funded monthly from
property operations and released solely for the purpose for which they
were established. Restricted cash also includes security deposits
collected and held on behalf of the residents and tenants.
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, 1999.
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, 3-7 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:
<TABLE>
----------------------------------------
1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
Net income (loss) - basic $(1,309,250) $ 84,993 $(661,717)
Minority interests in Operating Partnership:
Preferred partnership interests - - -
Common partnership interests (288,553) 18,900 (5,464)
---------------------------------------
Total minority interest (288,553) 18,900 (5,464)
---------------------------------------
Net income (loss) - diluted $(1,597,803) $103,893 $(667,181)
========================================
Weighted average shares - basic 1,100,501 1,090,701 1,080,513
Dilutive Securities:
Weighted average Common Units 242,546 242,546 8,922
Weighted average Preferred Units - - -
Share options - 3,144 -
========================================
Weighted average shares - diluted 1,343,047 1,336,391 1,089,435
========================================
</TABLE>
Both common and preferred units in the Operating Partnership held by
the minority unitholders are redeemable for shares of beneficial
interest of the Trust ("Shares") on a one-for-one basis, or for cash,
at the option of the Trust. For the twelve months ended December 31,
1999, 1998 and 1997, options to purchase 107,750 shares, 27,500 shares
and 26,000 shares, respectively were excluded as the impact of such
options was antidilutive. For the twelve months ended December 31, 1999
the Preferred Units totaling 1,988,235 were also excluded as the impact
of such units was antidilutive. On March 15, 2000, the Board of
Trustees voted to convert the Preferred Units into Preferred Shares
(See Notes 5 and 15).
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, 1999 and 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.
Reclassifications
-----------------
Certain 1998 and 1997 financial statement amounts have been
reclassified to conform with the current year presentation.
NOTE 3 - REAL ESTATE ASSETS
- ---------------------------
On May 1, 1999, Vinings, through its subsidiaries, completed the
acquisition of the Portfolio Properties from seventeen limited
partnerships and limited liability companies. Eight of the Portfolio
Properties (the "Mississippi Properties") were purchased through
subsidiary partnerships of the Operating Partnership. The remaining
Portfolio Properties (the "Joint Venture Properties") were purchased
through a joint venture structure. (See Note 4.)
The Mississippi Properties, totaling 1,064 units, were purchased by
eight individual partnerships in each of which Vinings Holdings, Inc.,
a wholly owned subsidiary of the Trust, owns a .1% general partnership
interest and the Operating Partnership owns a 99.9% limited partnership
interest. The aggregate purchase price for the Mississippi Properties
was $47,665,396 (excluding closing costs), which included the
assumption of debt of approximately $41,693,000 with the balance paid
in cash, which was funded by the issuance of the Preferred Units. A
total of approximately $749,200 in escrows held by the mortgagees was
also purchased.
In addition Vinings owns, also through subsidiary partnerships of the
Operating Partnership, two additional multifamily communities in the
metropolitan Atlanta area for a total of 1,520 units in ten
communities, as well as a 75,000 square foot business center. All of
the multifamily communities are encumbered by fixed rate mortgage
financing and the business center is security for the line of credit.
For more detailed information see Schedule III attached hereto.
NOTE 4 - INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
- ---------------------------------------------------
On May 1, 1999, Vinings also purchased, through a joint venture
structure, five apartment communities, totaling 968 units (the "Joint
Venture Properties"). The Joint Venture Properties were purchased by
nine individual partnerships in each of which Vinings Holdings, Inc., a
wholly owned subsidiary of the Trust, owns a .1% general partnership
interest and Vinings/CMS Master Partnership, L.P. (collectively, the
"Joint Venture"), a Delaware limited partnership, owns a 99.9% limited
partnership interest. The Operating Partnership has a .1% general
partner interest and a 19.98% limited partner interest in the Joint
Venture, for which it paid $1,705,100. This investment was funded by
the issuance of the Preferred Units. The remaining limited partnership
interests in the Joint Venture are held by an unaffiliated third party.
The Joint Venture was formed on March 22, 1999, primarily to acquire
the limited partner interest in limited partnerships that acquire,
operate, manage, hold and sell certain real property, specifically the
Joint Venture Properties. The aggregate purchase price paid by the
property partnerships for the Joint Venture Properties was $46,634,603
(excluding closing costs), which included the assumption of
approximately $39,265,000 of debt with the balance paid in cash. A
total of approximately $716,400 in escrows held by the mortgagees was
also purchased.
Vinings accounts for its investment in the Joint Venture using the
equity method of accounting. The following is a summary of the results
of operations of the Joint Venture and Vinings' share of the equity in
the loss from the Joint Venture for the eight month period from May 1,
1999 to December 31, 1999:
<TABLE>
<CAPTION>
For the eight
months ended
December 31, 1999
------------------
<S> <C>
Revenues $ 4,642,957
------------
Expenses:
Property operating and maintenance 1,971,574
General and administrative 55,894
Depreciation and amortization 995,872
Interest expense 2,306,447
------------
Total Expenses 5,329,787
------------
Net loss (686,830
Vinings' equity percentage 20%
------------
Vinings' equity in loss of unconsolidated Joint Venture $ (137,366
============
Distributions received by Vinings from Joint Venture $ 15,760
============
Cash flows provided by operating activities $ 441,635
============
Cash flows used in investing activities $(8,251,050
============
Cash flows provided by financing activities $ 8,315,729
============
</TABLE>
The following summarizes the balance sheet of the Joint Venture as of
December 31, 1999:
<TABLE>
<S> <C>
Real estates assets, net of accumulated depreciation $46,215,888
Cash and other assets 2,066,983
------------
Total assets $48,282,871
============
Mortgage notes payable $39,136,338
Other liabilities 1,387,062
------------
Total liabilities 40,523,400
------------
Capital - Vinings 1,551,974
Capital - Other 6,207,497
------------
Total capital 7,759,471
------------
Total liabilities and capital $48,282,871
============
</TABLE>
Mortgage notes payable held by the Joint Venture are non-recourse fixed
rate notes secured by the individual properties. All of the notes
except one are insured by the U.S. Department of Housing and Urban
Development ("HUD") and, therefore, distributions from the properties
are subject to "surplus cash" as defined by HUD. The maturity dates of
the notes payable range from June 2007 to November 2037 and interest
rates range from 8.00% to 8.75%.
<PAGE>
NOTE 5 - SHAREHOLDERS' EQUITY AND PREFERRED PARTNERSHIP INTERESTS
- -----------------------------------------------------------------
On April 29, 1999, the Operating Partnership offered in a private
transaction Preferred Units. The holders of Preferred Units are
entitled to receive cumulative preferential cash distributions at the
per annum rate of $0.4675 per Preferred Unit. Upon the occurrence of
certain triggering events, the holders of Preferred Units are entitled
to receive, in addition to an amount equal to any accumulated and
unpaid distributions on such holder's Preferred Units, a liquidation
preference of $4.46 per Preferred Unit, or, if any such triggering
event occurs prior to one year from the date of issuance $4.25 per
Preferred Unit.
Under certain circumstances, the holders of Preferred Units may convert
any part or all of such Preferred Units into common partnership units,
common shares, or Preferred Shares. In lieu of converting Preferred
Units into common shares, the Operating Partnership, in its sole
discretion, may satisfy its conversion obligations through certain cash
payments, as further set forth in the partnership agreement of the
Operating Partnership.
Generally, the holders of Preferred Units do not have the right to vote
on any matter on which any general or limited partner of the Operating
Partnership may vote. The holders of Preferred Units do, however, have
the right to vote as a separate class of Partnership Interests on
certain transactions including, without limitation, certain
authorizations and issuances of preferred units of partnership
interests designated as ranking senior to the Preferred Units, certain
amendments to the Partnership Agreement, and certain sales or other
dispositions of assets of the Operating Partnership, certain mergers or
consolidations of the Operating Partnership, and transactions which
result in the liquidation of the Partnership.
As of December 31, 1999, a total of 1,988,235 Preferred Units had been
issued for an aggregate purchase price of $8,450,000. The Operating
Partnership used the proceeds of such sales of Preferred Units to pay
the cash consideration for the Operating Partnership's interests in the
property partnerships that acquired the Mississippi Properties, and its
interest in the Joint Venture. (See Notes 3 and 4.)
At the annual meeting of shareholders held on June 29, 1999, Vinings'
shareholders approved proposals to amend the Trust's Declaration of
Trust to decrease the total number of common shares of beneficial
interest authorized from an unlimited amount to 25,000,000 and to
authorize a new class of 7,050,000 preferred shares of beneficial
interest which, upon the affirmative vote of two-thirds of the Board of
Trustees, may be issued in such amounts, in one or more series, and
with such designations, preferences, limitations and relative rights
for each series as the Board of Trustees shall determine.
On March 15, 2000, the Board of Trustees voted to convert the Preferred
Units into Preferred Shares (See Note 15).
<PAGE>
NOTE 6 - NOTES PAYABLE
- ----------------------
Mortgage Notes Payable
----------------------
Mortgage notes payable were secured by the following apartment
communities at December 31, 1999 and December 31, 1998, as follows:
<TABLE>
Fixed interest
rate as of Principal balance as of
Maturity 12/31/99 12/31/99 12/31/98
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cottonwood 10/01/2036 8.875% $ 4,683,888 $ -
Delta Bluff 08/01/2036 9.25 % 6,203,591 -
Foxgate I 06/01/2037 8.50 % 6,598,549 -
Hampton House 08/01/2037 8.50 % 5,169,167 -
Heritage Place 10/01/2036 8.75 % 3,141,865 -
Northwood 06/01/2034 8.75 % 4,482,862 -
River Pointe 01/01/2037 8.625% 5,981,475 -
Trace Ridge 07/01/2036 8.50 % 5,330,125 -
The Thicket 07/01/2003 9.04 % 7,200,487 7,262,759
Windrush 07/01/2024 7.50 % 6,282,914 6,377,306
------------ --------------
Total $55,074,923 $13,640,065
============ ==============
</TABLE>
All of the notes except that secured by The Thicket are insured by HUD
and therefore distributions from the properties are subject to "surplus
cash" as defined by HUD.
Scheduled maturities of the mortgage notes payable as of December 31,
1999 are as follows:
2000 $ 332,715
2001 361,792
2002 393,425
2003 7,314,761
2004 367,596
Thereafter 46,304,634
-----------
Total $55,074,923
===========
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 and on February 4, 1999, one of the
independent Trustees purchased the line of credit from the bank and
Vinings paid interest to the Trustee monthly at the annual rate of
8.50% from such date through April 27, 1999, at which time Vinings
obtained a new line of credit in the amount of $2,000,000 from a
financial institution. The independent Trustee who purchased the line
of credit was repaid in full on April 27, 1999. The interest rate on
the line of credit is one percent over prime as posted in The Wall
Street Journal, which was 9.50% at December 31, 1999. The principal
balance of the line of credit as of December 31, 1999 was $1,715,000
and the maturity date is April 27, 2000. Vinings has received a
commitment from the lender to renew the line of credit until April 30,
2001.
NOTE 7 - RELATED PARTY TRANSACTIONS
- -----------------------------------
On January 1, 1999, Vinings entered into management agreements with VIP
Management, LLC ("VIP"), an affiliate of the officers, who are also
Trustees of Vinings, to provide property management services for a fee
equal to varying percentages ranging from three and one half to six
percent of gross revenues, plus a fee for data processing. Prior to
January 1, 1999, Vinings had entered into management agreements with
Vinings Properties, Inc., also an affiliate of the officers of Vinings,
to provide property management services on substantially the same terms
as the current 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 with VIP,
"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. Beginning January 1, 1998 the Vinings Group has
charged Vinings for certain overhead charges. Beginning August 1, 1999,
the Trust has also paid for its pro-rata share of rent, administrative
and other overhead charges, which includes reimbursing The Vinings
Group for a pro-rata portion of salaries and benefits for the officers
and other employees providing services to Vinings. At December 31,
1999, the Trust owed The Vinings Group $53,358, which was subsequently
paid.
The following table reflects payments made to The Vinings Group:
<TABLE>
<CAPTION>
Twelve months ended
---------------------------------------------
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Vinings
Management fees $402,551 $188,032 $ 93,235
Data processing fees 52,896 27,360 15,240
Overhead reimbursements 265,280 150,000 45,000
============= ============ ============
Total $720,727 $365,392 $153,475
============= ============ ============
Joint Venture
Management fees $197,539 $ - $ -
Data processing fees 38,720 - -
============= ============ =============
Total $236,259 $ - $ -
============= ============ =============
</TABLE>
On December 19, 1997, the Trust acquired Windrush from Windrush
Partners, Ltd, 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 seller to MFI Realty,
Inc.("MFI"), a wholly owned subsidiary of The Vinings Group, Inc.
On February 4, 1999 one of the independent Trustees purchased the
Trust's line of credit, which expired on December 28, 1998 and Vinings
paid interest to the Trustee monthly at the annual rate of 8.50%
through April 27, 1999, at which time the Trustee was repaid in full.
For more information regarding the line of credit see Note 6.
In connection with the acquisition of the Portfolio Properties, MFI
received fees totaling $400,276 of which $167,103 was paid by the
Operating Partnership and $233,173 was paid by the Joint Venture.
Effective March 1, 2000, 628,927 shares of Vinings were purchased by
the Officers, VIP and an affiliate of one of the Trustees in a
privately negotiated transaction from a limited number of shareholders,
which included three of the Trustees and certain of their affiliates
(See Note 15).
<PAGE>
NOTE 8 - DISTRIBUTIONS
- ----------------------
Vinings declared two dividends of five cents per share each, which were
paid September 1, 1999 and December 8, 1999, respectively to
shareholders of record on August 16, 1999 and November 26, 1999,
respectively. No dividends were declared or paid during 1998. For
federal income tax purposes these distributions represented a return of
capital. Vinings intends to continue to pay distributions to
shareholders in amounts at least sufficient to enable the Trust to
qualify as a REIT (See Note 2).
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, 1999, at Peachtree:
2000 $403,412
2001 391,065
2002 148,236
--------
Total $942,713
========
One tenant generated 49% of Peachtree's revenues for the period ended
December 31, 1999. The same tenant accounts for 73% of the future
minimum lease payments.
NOTE 10 - CONTINGENCIES
- -----------------------
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 $3,667,542, $1,299,005 and $800,388 during
1999, 1998 and 1997, respectively. In connection with the 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. In connection with the acquisition of
the Mississippi Properties, Vinings assumed mortgage indebtedness
totaling $41,692,503 and related cash escrow accounts.
NOTE 12 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------------------------
Based on interest rates and other pertinent information available to
Vinings as of December 31, 1999 and 1998, 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.
<PAGE>
Disclosure about fair value of financial instruments is based on
pertinent information available to management as of December 31, 1999
and 1998. 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, 1999.
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, 1999 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 was 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. There were no options granted during 1999.
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 was reflected in
compensation expense and shareholders' equity in 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:
1999 1998 1997
----------- ---------- -----------
Risk free rate 5.36% 5.50% 6.12%
Expected life 5 years 5 years 5 years
Expected volatility 30% 30% 30%
Expected dividend yield 3.6% 3.6% 3.6%
<PAGE>
Using these assumptions, the estimated fair value of the options
granted were $0, $87,112 and $38,000 for 1999, 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, 1999, 1998 and
1997 would have been as follows:
1999 1998 1997
------------- ---------- -------------
Net income:
As reported ($1,309,250) $84,993 ($661,717)
============= ========== ============
Pro forma ($1,341,004) $29,799 ($680,717)
============= ========== ============
Net income per share:
As reported ($1.19) $0.08 ($0.61)
============= ========== ============
Pro forma ($1.22) $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>
1999 1998 1997
----------------------------- ----------------------------- ----------------------------
Weighted Average Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
----------------------------- ----------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
Beginning of year 108,750 $4.25 26,000 $5.00 - -
Granted - - 82,750 $4.01 26,000 $5.00
-------------------------- ----------------------------- ----------------------------
Options outstanding,
end of year 108,750 $4.25 108,750 $4.25 26,000 $5.00
========================== ============================= ============================
Options exercisable,
end of year 108,750 $4.25 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 $4.00-$5.00 $5.00
============== ================ =================
Weighted average
Remaining life 8.11 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.
<PAGE>
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.
NOTE 15 - SUBSEQUENT EVENT
- --------------------------
Effective March 1, 2000, 628,927 shares of Vinings were purchased in a
privately negotiated transaction by the Officers, one of their
affiliates and an affiliate of one of the Trustees from a limited
number of shareholders, which included three of the Trustees and
certain of their affiliates (the "Stock Transaction"). In connection
with the Stock Transaction, the three selling Trustees -- James D.
Ross, Martin H. Petersen and Gilbert H. Watts, Jr. -- resigned from the
Board of Trustees.
In addition, on March 15, 2000, the Board of Trustees voted to convert
the Preferred Units of its operating partnership into a newly created
class of preferred shares of beneficial interest in Vinings, and
consequently authorized the issuance of 1,988,235 preferred shares with
the same rights, preferences and privileges as the existing Preferred
Units. The issuance of preferred shares had been approved by
shareholders at the last annual meeting.
As a result of the Stock Transaction, fewer than five shareholders own
in excess of 50% of the equity in Vinings. On March 15, 2000, the Board
of Trustees voted to waive the ownership limitations in Vinings'
Declaration of Trust with respect to shareholders acquiring shares in
the Stock Transaction, as well as with respect to certain holders of
Preferred Units who will be acquiring Preferred Shares. The Board is
currently considering whether it is in the best interests of
shareholders for Vinings to continue to qualify as a REIT for federal
income tax purposes in light of the restrictions imposed on Vinings in
order for it to qualify as a REIT. To maintain its REIT status, Vinings
would be required to effect a change in its ownership structure prior
to June 30, 2000. However, there can be no assurances that the Trust
will be successful in effecting such a change prior to June 30, 2000.
<PAGE>
Presently, the Board does not believe that there would be negative tax
consequences to the shareholders should Vinings lose its REIT status
due to the fact that the Trust is not currently generating taxable
income. However, management is continuing to investigate all
alternatives for maintaining REIT status as well as all consequences to
the shareholders should Vinings lose its REIT status.
<PAGE>
<TABLE>
<CAPTION>
VININGS INVESTMENT PROPERTIES TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
Initial Cost to Trust Improvements
--------------------------- Capitalized
Buildings and Subsequent to
Description Encumbrance Land Improvements Acquisition
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cottonwood Apartments $ 4,683,888 $ 605,300 $ 4,401,715 $ 18,339
Delta Bluff Apartments 6,203,591 765,700 6,519,178 16,635
Foxgate Apartments 6,598,549 805,700 6,872,119 11,795
Hampton House Apartments 5,169,167 645,200 5,334,988 16,536
Heritage Place Apartments 3,141,865 404,100 2,971,124 12,812
Northwood Place Apartments 4,482,862 685,700 5,171,264 11,671
River Pointe Apartments 5,981,475 765,700 6,516,567 28,570
Trace Ridge Apartments 5,330,125 686,000 4,908,464 7,007
The Thicket Apartments 7,200,487 1,070,500 7,590,400 293,673
Windrush Apartments 6,282,914 1,414,000 6,141,000 229,089
Peachtree Business Center 1,715,000 400,000 1,300,000 1,141,159
------------------------------------------------------------
$56,789,923 $8,247,900 $57,726,819 $1,787,286
============================================================
</TABLE>
<TABLE>
<CAPTION>
Gross amounts at which
carried at close of period Life on
-------------------------------------------------------- which Date of
Buildings and Accumulated Depreciation Date Original
Description Land Improvements Total Depreciation is Computed Acquired Construction
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cottonwood Apartments $ 605,300 $ 4,420,054 $ 5,025,354 $ 109,711 5-40 Years 5/99 1997
Delta Bluff Apartments 765,700 6,535,813 7,301,513 154,186 5-40 Years 5/99 1996
Foxgate Apartments 805,700 6,883,914 7,689,614 162,320 5-40 Years 5/99 1997
Hampton House Apartments 645,200 5,351,524 5,996,724 127,630 5-40 Years 5/99 1997
Heritage Place Apartments 404,100 2,983,936 3,388,036 73,981 5-40 Years 5/99 1996
Northwood Place Apartments 685,700 5,182,935 5,868,635 126,646 5-40 Years 5/99 1994
River Pointe Apartments 765,700 6,545,137 7,310,837 154,802 5-40 Years 5/99 1996
Trace Ridge Apartments 686,000 4,915,471 5,601,471 121,989 5-40 Years 5/99 1996
The Thicket Apartments 1,070,500 7,884,073 8,954,573 1,241,390 5-40 Years 6/96 1989
Windrush Apartments 1,414,000 6,370,089 7,784,089 405,213 5-40 Years 12/97 1983
Peachtree Business Center 400,000 2,441,159 2,841,159 673,943 5-40 Years 4/90 1982
- ------------------------------------------------------------------------------------------------------------------------------------
$8,247,900 $59,514,105 $67,762,005 $3,351,811
==========================================================================================
<FN>
The accompanying notes are an integral part of this schedule.
</FN>
</TABLE>
<PAGE>
VININGS INVESTMENT PROPERTIES TRUST
NOTES TO SCHEDULE III
December 31, 1999
(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 is secured by
Peachtree. At December 31, 1999, $1,715,000 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) The Mississippi Properties were acquired on May 1, 1999, for an
aggregate purchase price $47,665,396 (excluding closing costs), which
included the assumption of debt of approximately $41,693,000 and the
balance being paid in cash, which was funded by the issuance of the
Preferred Units.
(E) Gross capitalized costs of real estate assets are summarized as
follows:
<TABLE>
<CAPTION>
----------------------------------------------------------
1999 1998 1997
----------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $19,309,412 $19,162,992 $11,472,454
----------------- ----------------- -----------------
Additions during period:
Additions 48,058,819 - 7,555,000
Improvements 393,774 146,420 135,538
----------------- ----------------- -----------------
48,452,593 146,420 7,690,538
----------------- ----------------- -----------------
Balance at close of period $67,762,005 $19,309,412 $19,162,992
================= ================= =================
</TABLE>
(F) Accumulated depreciation on real estate assets is as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------
1999 1998 1997
----------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $1,664,678 $1,036,311 $ 613,918
Additions during period 1,687,133 628,367 422,393
----------------- ----------------- -----------------
Balance at close of period $3,351,811 $1,664,678 $1,036,311
================= ================= =================
</TABLE>
<PAGE>
<TABLE>
Index to Exhibits
-----------------
Exhibit No. Description
- ---------- -----------
<S> <C>
3.1 Third Amended and Restated Declaration of Trust of Vinings (incorporated by reference as
Exhibit 3.1 to Vinings' Quarterly Report on Form 10-Q for the quarter ended September 30,
1999, No. 0-13693).
3.2 Amended and Restated Bylaws of the Trust (incorporated by reference as Exhibit 3.2 to
Vinings' Registration Statement on Form S-11, No. 2-94776).
10.1 Vinings Investment Properties Trust 1997 Stock Option and Incentive Plan as approved by the
Shareholders on July 1, 1997 (incorporated by reference as Exhibit A to Vinings' report on
Form Schedule 14A filed on May 28, 1997).
10.2 Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P.
(incorporated by reference as Exhibit 10.1 to Vinings' Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, No. 0-13693).
10.3 First Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference as Exhibit 10.2 to the Vinings'
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693).
10.4 Second Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference as Exhibit 10.3 to the Vinings'
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693).
10.5 Third Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference as Exhibit 10.4 on Form 10-K for year
ended December 31, 1998).
10.6 Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference as Exhibit 10.5 on Form 10-K for year
ended December 31, 1998).
10.7 Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (incorporated by reference as Exhibit 10.6 on Form 10-K for year
ended December 31, 1998).
10.8 Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P., dated as of April 29, 1999 (incorporated by reference as
Exhibit 4.1 to the Trust's report on Form 8-K filed on May 7, 1999).
10.9 Promissory Note dated April 27, 1999 between Vinings Investment Properties, L.P., and Bank
Atlanta (filed herewith).
10.10 Deed to Secure Debt and Security Agreement dated April 27, 1999 between Vinings Investment
Properties, L.P. and Bank Atlanta (filed herewith).
<PAGE>
10.11 Form of Management Contract dated May 1, 1999 between certain subsidiaries of Vinings and
VIP Management, LLC for the Mississippi Properties (filed herewith).
10.12 Management Contract dated January 1, 1999, between Thicket Apartments, L.P. and VIP
Management, LLC (incorporated by reference as Exhibit 10.11 on Form 10-K for the year ended
December 31, 1998).
10.13 Management Contract dated January 1, 1999, between Vinings Communities, L.P. and VIP
Management, LLC (incorporated by reference as Exhibit 10.12 on Form 10-K for the year ended
December 31, 1998).
10.14 Management Contract dated January 1, 1999, between Vinings Investment Properties, L.P. and
VIP Management, LLC (incorporated by reference as Exhibit 10.13 on Form 10-K for the year
ended December 31, 1998).
10.15 Form of Amended and Restated Agreement of Purchase and Sale with attached Revised Schedule
of Material Differences For Properties Acquired May 1, 1999 (filed herewith).
10.16 Securities Purchase Agreement, dated as of April 29, 1999, Relating to Series A Convertible
Preferred Units of Vinings Investment Properties, L.P., by and among Vinings Investment
Properties Trust, Vinings Investment Properties, L.P. and the Purchasers named therein
(incorporated by reference as Exhibit 10.1 to Vinings' report on Form 8-K filed on May 7,
1999).
10.17 Form of Registration Rights and Lock Up Agreement, dated as of April 29, 1999 (incorporated
by reference as Exhibit 10.2 to Vinings' report on Form 8-K filed on May 7, 1999).
10.18 Vinings/CMS Master Partnership, L.P., Agreement of Limited Partnership (incorporated by
reference as Exhibit 10.1 to Vinings' report on Form 8-K/A filed on July 15, 1999).
21.1 Subsidiaries of the Trust (filed herewith).
23.1 Consent of Independent Public Accountants (filed herewith).
23.2 Consent of Independent Public Accountants (filed herewith).
27.1 Financial Data Schedule for the fiscal year ended December 31, 1999 (filed herewith).
</TABLE>
PROMISSORY NOTE
---------------
U.S. $2,000,000.00 April 27, 1999
FOR VALUE RECEIVED, the undersigned, VININGS INVESTMENT PROPERTIES,
L.P., a Delaware limited partnership (hereinafter referred to as "Maker"),
promises to pay to the order of BANK ATLANTA, a national bank (hereinafter,
together with its successors and assigns, referred to as "Holder"), at its
office at 1221 Clairmont Road, Decatur, Georgia 30030, or at such other place as
Holder hereof may from time to time designate in writing, in lawful money of the
United States of America, the principal sum of TWO MILLION AND NO/100 DOLLARS
($2,000,000.00), together with simple interest on the principal balance from
time to time outstanding as follows: A rate of interest equal to the sum of one
percent (1.00%) per annum plus the Prime Rate, which Prime Rate is currently
seven and three-fourths percent (7.75%) per annum as of the date of this Note.
For the purposes of this Note, the term "Prime Rate" shall mean the interest
rate posted in The Wall Street Journal on each and every business day. The Prime
Rate is one of several interest rate bases used by Holder. Holder lends at
interest rates above and below the Prime Rate. In the event that Holder shall
abolish or abandon the practice of establishing its Prime Rate, Holder shall
designate a comparable reference rate which shall be deemed to be the Prime Rate
hereunder. Interest shall be computed hereunder with respect to each day during
the term of this Note by multiplying the outstanding principal balance hereunder
at the close of business on that day (or on the most recent day on which Holder
was open for business) by a daily interest factor, which daily interest factor
shall be calculated by dividing the aforesaid interest rate per annum in effect
on that day by 360. Interest so computed shall accrue for each and every day on
which any indebtedness remains outstanding hereunder, including the day on which
the funds are initially advanced regardless of the time of day such advance is
made, and including the day on which funds are repaid unless repayment is
credited prior to close of business. The initial interest rate hereunder is
eight and three-fourths percent (8.75%) per annum.
The indebtedness described herein shall be repaid in eleven (11)
monthly installments of interest only on the outstanding principal of this Note.
The first installment shall be due beginning on May 27, 1999 and installments
shall continue on each and every successive 27th day of each month thereafter.
On April 27, 2000, this Note shall mature and a final installment shall be due
and payable in an amount equal to the principal balance of this Note together
with accrued but unpaid interest to date of receipt of said final installment.
All payments made herein shall be first be applied to accrued and unpaid late
charges and other fees and expenses due hereunder.
This Note evidences a line of credit loan, and, provided no default
exists under the terms of this Note, the Security Deed, or any Loan Document,
Maker shall be entitled to borrow and reborrow amounts hereunder not to exceed
the face principal amount of this Note.
This Note may be prepaid in whole or in part at any time without
penalty or premium on the amount prepaid.
This Note is secured by that certain Deed to Secure Debt and Security
Agreement (the "Security Deed") between Maker and Holder of even date herewith
encumbering certain real property lying and being in Land Lot 277 of the 6th
District of Gwinnett County, Georgia, together with easements and appurtenances,
any improvements thereon and related fixtures and personal property (herein
collectively the "Property"). This Note is also secured by that certain
Assignment of Rents and Leases of even date herewith, assigning certain rents,
revenues, leases and profits of the Property, and certain related contracts,
permits, licenses and other items related thereto. The obligations of Maker with
respect to the property are further secured and evidenced by a Compliance and
Indemnity Agreement Regarding Hazardous Materials and Handicapped Access Laws
executed by Maker in favor of Holder on even date herewith, and certain UCC-1
and UCC-2 Financing Statements with regard to the Property. This Note, the
Security Deed, and all of the aforesaid instruments listed above and any other
instrument given to evidence, secure or in any manner otherwise related to this
Note are hereinafter referred to collectively as the "Loan Documents."
If (i) any payment of principal or interest on this Note is not
received by Holder after the same is due; or (ii) a default occurs in the
performance of any other covenant or agreement of Maker in this Note, the
Security Deed or in any other Loan Document and is not cured within any
applicable grace period; or (iii) any of the following events occur with respect
to Maker, or any guarantor of this Note ("Guarantor") to wit: insolvency or
inability to pay debts, commission of an act of bankruptcy, assignment for the
benefit of creditors, calling a meeting of creditors, appointment of a committee
of creditors or liquidating agent, offer of a composition or extension to
creditors, assignment, pledge or mortgage (other than to, or with the written
consent of, Holder) of any account receivable or other property relating to the
property described in the Security Deed executed in connection herewith; or (iv)
Maker or any Guarantor commences any proceeding, suit or action (at law or in
equity, or under any of the provisions of the Bankruptcy Code, as amended), or
any similar suit for reorganization, composition, extension, arrangement, wage
earner plan, receivership, liquidation or dissolution; or (v) voluntary
appointment of or application for a receiver, conservator, rehabilitator or
similar officer or committee for Maker, for any property or for any Guarantor,
or an involuntary appointment or application that is not removed within thirty
(30) days of filing; or (vi) Maker is dissolved or any Guarantor is dissolved,
terminated or dies; or (vii) entry of judgment or issuance of a warrant of
attachment or injunction before or after the date of this Note against Maker or
against the property encumbered by the Security Deed is made or commencement of
any bankruptcy or receivership against Maker or proceedings supplementary or
execution relating to any judgment against Maker is made, which judgment,
warrant of attachment, injunction or proceeding is not stayed, vacated, enjoined
or satisfied within thirty (30) days from the entry, issuance or commencement
thereof; then, upon the occurrence of any one (1) or more of such events, all
obligations of Maker to Holder, including this Note, although otherwise
unmatured or contingent, shall, at the option of Holder, forthwith mature, and
the entire principal balance and all accrued interest and other charges due
Holder shall become immediately due and payable without any notice or demand
whatsoever. From and after maturity, whether by acceleration or otherwise, the
principal balance hereunder shall, at Holder's option, bear interest at the
default rate stated below.
In the event that Holder institutes legal proceedings to enforce this
Note or refers the same to an attorney-at-law for enforcement or collection
after default or maturity, Maker agrees to pay to Holder, in addition to any
indebtedness due and unpaid, all costs and expenses of such proceedings,
including attorneys' fees in the amount of fifteen percent (15%) of the
principal and interest due under this Note.
Holder shall not by any act of omission or commission be deemed to
waive any of its rights or remedies hereunder unless such waiver be in writing
and signed by an authorized officer of Holder and then only to the extent
specifically set forth therein; a waiver on one occasion shall not be construed
as continuing or as a bar to or waiver of such right or remedy on any other
occasion. All remedies conferred upon Holder by this Note or any other
instrument or agreement connected herewith or related hereto shall be cumulative
and none is exclusive, and such remedies may be exercised concurrently or
consecutively at Holder's option.
Every person or entity at any time liable for the payment of the debt
evidenced hereby, waives presentment for payment, demand, notice of non-payment
of this Note, protest and notice of protest, except such notice as is expressly
provided herein, and consents that Holder may extend the time of payment of any
part or the whole of the debt at any time at the request of any other person or
entity liable.
This Note is hereby expressly limited so that in no contingency or
event whatsoever, whether by acceleration of maturity of the debt evidenced
hereby or otherwise, shall the amount paid or agreed to be paid to Holder for
the use, forbearance or retention of the money advanced or to be advanced
hereunder exceed the highest lawful rate permissible under applicable laws in
accordance with the written agreement of the parties. If, from any circumstances
whatsoever, fulfillment of any provision hereof or of any other agreement
evidencing or securing the debt, at the time performance of such provisions
shall be due, shall involve the payment of interest in excess of that authorized
by law, the obligation to be fulfilled shall be reduced to the limit so
authorized by law, and if from any circumstances Holder shall ever receive as
interest an amount which would exceed the highest lawful rate applicable to
Maker, such amount shall be applied to the reduction of the unpaid principal
balance of the debt evidenced hereby and not to the payment of interest,
regardless of any books or records of Maker which may indicate the contrary. In
the event the principal balance has been repaid in full, any such excess shall
upon demand be forthwith returned to Maker.
This Note is given and accepted as evidence of indebtedness only, and
not in payment or satisfaction of any indebtedness or obligation.
If the principal balance of this Note is accelerated, any installment
due hereunder is not paid as and when the same is due, or if the principal
balance of this Note is not paid at maturity, then Holder shall have the option
by mailing written notice to Maker, to increase the interest rate to a rate
which is the lesser of (i) eighteen percent (18%) per annum, or (ii) the highest
rate permitted by law.
If any monthly payment is not received within ten (10) days after its
due date, Maker shall, at Holder's option, pay a late charge equal to five
percent (5%) of the late payment, such payment to be due with the succeeding
monthly payment.
Time is of the essence with respect to all of Maker's obligations and
agreements under this Note.
This Note and all provisions, conditions, promises and covenants hereof
shall be binding in accordance with the terms hereof upon Maker, its successors
and assigns, provided nothing herein shall be deemed consent to any assignment
or conveyance which is restricted or prohibited by the terms of this Note.
All notices hereunder shall be sent by certified mail, return receipt
requested, or overnight delivery or professional messenger service where proof
of receipt or refusal is required (failure to pick up such notice being deemed a
refusal), and shall be deemed received upon the receipt or refusal thereof.
Notices to Maker shall be sent to:
Vinings Investment Properties, L.P.
3111 Paces Mill Road, Suite A-200
Atlanta, Georgia 30339
All notices to Holder shall be sent to:
Bank Atlanta
1221 Clairmont Road
Decatur, Georgia 30030
Attn: Vice President, Commercial Lending
With a copy to:
Clifford A. Barshay, Esq.
Schreeder, Wheeler & Flint, LLP
1600 Candler Building
127 Peachtree Street, N.E.
Atlanta, GA 30303-1845
This Note shall be governed and construed under the laws of the State
of Georgia.
IN WITNESS WHEREOF, Maker has signed, sealed and delivered this Note on
the date first hereinabove written.
MAKER:
VININGS INVESTMENT PROPERTIES, L.P.,
a Delaware limited partnership
By: Vinings Investment Properties Trust,
a Massachusetts business trust, as general partner
By: /s/ Peter D. Anzo (SEAL)
--------------------------------------------------------
Peter D. Anzo, Chief Executive Officer of
Vinings Investment Properties Trust,
on behalf of all Trustees
After recording please return to:
Clifford A. Barshay, Esq.
SCHREEDER, WHEELER & FLINT
1600 Candler Building
127 Peachtree Street, N.E.
Atlanta, GA 30303-1845
404-681-3450
STATE OF GEORGIA
COUNTY OF DEKALB
DEED TO SECURE DEBT AND SECURITY AGREEMENT
------------------------------------------
THIS INDENTURE (sometimes referred to as a "Deed" or a "Security
Deed"), made as of the 27th day of April, 1999, between VININGS INVESTMENT
PROPERTIES, L.P., a Delaware limited partnership, with an address of 3111 Paces
Mill Road, Suite A-200, Atlanta, Georgia 30339, as party of the first part,
hereinafter called "Grantor," and BANK ATLANTA, a national bank, with a mailing
address of 1221 Clairmont Road, Decatur, Georgia 30030, as party of the second
part, hereinafter called "Grantee."
W I T N E S S E T H T H A T:
-------------------------------
For and in consideration of the sum of Ten and 00/100 Dollars ($10.00)
in hand paid, the loan evidenced by the Note hereinafter described, and other
good and valuable considerations, the receipt and sufficiency of which is hereby
acknowledged, Grantor does hereby bargain, sell, grant, convey and assign to
Grantee, its successors and assigns, all of the following described land,
easements, buildings, improvements, fixtures, furniture and appliances and other
personal property (hereinafter sometimes collectively called the "Premises"),
to-wit:
(a) All that tract or parcel of land lying and being in Land Lot 277 of
the 6th District of Gwinnett County, Georgia being more particularly described
in Exhibit "A" attached hereto and made a part hereof;
<PAGE>
(b) All buildings, structures and improvements now or hereafter located
upon said properties; and
(c) All machinery, apparatus, equipment, fittings, furniture and
fixtures, whether actually or constructively attached to said properties and
including all trade, domestic and ornamental fixtures, and articles of personal
property of every kind and nature, now or hereafter located in, upon or under
said properties, used or usable in connection with any present or future
operation of said properties, and now owned or hereafter acquired by Grantor,
including, but without limiting the generality of the foregoing, all heating,
air conditioning, freezing, lighting, laundry, incinerating and power equipment;
engines; pipes; pumps; tanks; motors; conduits; switchboards and other
electrical equipment; plumbing, lifting, cleaning, fire prevention,
refrigerating and communications apparatus; sewer treatment plants, facilities
and apparatus; boilers, heaters and furnaces; refrigerators, ranges,
dishwashers, disposals and other appliances; vacuum cleaning systems; elevators;
escalators; shades; awnings; screens; doors and windows; cabinets; partitions;
ducts and compressors; rugs and carpets; draperies; furniture and furnishings;
all swimming pool, clubhouse and other recreational equipment and supplies; all
building materials and equipment now or hereafter delivered to said properties
and intended to be installed therein; all posters, signs and billboards and
other outdoor advertising displays; and all additions, replacements and
substitutions thereof and the proceeds of sale or leasing of any of said
fixtures and personal property.
TOGETHER WITH all insurance policies insuring or relating to the
Premises and the proceeds thereof, and all condemnation proceeds and causes of
action related to the Premises as set out hereafter.
TOGETHER WITH all and singular the rights, members, tenements,
hereditaments, easements and appurtenances whatsoever, in any way belonging,
relating or appertaining to any of the Premises hereinabove mentioned or which
hereafter shall in any way belong, relate or be appurtenant thereto, whether now
owned or hereafter acquired by Grantor, including but not limited to, all rents,
profits, issues and revenues of the Premises from time to time accruing, whether
under leases or tenancies now existing or hereafter created.
TO HAVE AND TO HOLD the Premises and all parts, rights, members and
appurtenances thereof, to the use, benefit and behoof of Grantee, its successors
and assigns, in fee simple forever; and Grantor covenants and warrants that
Grantor is lawfully seized and possessed of the Premises in fee, has good title
and right to convey the same, that the same are unencumbered, and that Grantor
will warrant and defend title thereto against the claims of all persons
whomsoever.
This conveyance is intended to and shall constitute and be construed as
a deed passing title to the Premises to Grantee, and is made under those
provisions of the existing laws of the State of Georgia (O.C.G.A. ss.44-14-60 et
seq.) relating to conveyances and deeds to secure debt (a/k/a "Security Deed"),
and not as a mortgage. This instrument shall also constitute a security
agreement under the Uniform Commercial Code as to all that part of the Premises
which does not constitute real property. This deed is given to secure: (a) a
<PAGE>
debt evidenced by a certain Promissory Note of even date herewith executed by
Grantor payable to the order of Grantee at the office and place of business of
Grantee as stated in the Note, or at such other place as the holder thereof may
from time to time designate in writing, in the principal sum of $2,000,000.00
with interest thereon at the rate therein specified, and having a maturity date
of May 26, 2000 (herein called the "Note") together with any renewal, increase,
modification, alteration or extension of said Note; (b) any other indebtedness
or obligations of Grantor to Grantee arising under the provisions of the Note,
this Security Deed or any other instrument evidencing, guaranteeing, securing or
related to the Note, including, without limitation, that certain Assignment and
Security Agreement of even date herewith between Grantor and Grantee
(hereinafter called the "Additional Loan Documents"), and (c) any other or
future advances made by Grantee to or for the account of Grantor, and all future
debts and obligations of Grantor to Grantee.
Grantor covenants, represents and warrants to and with Grantee as
follows:
ARTICLE I
---------
1.01 PAYMENT OF INDEBTEDNESS. Grantor will pay the Note according to
the terms thereof, and all other sums secured by this Deed, promptly as the same
shall become due.
1.02 TAXES, LIENS AND OTHER CHARGES.
(a) Grantor shall pay all intangible, documentary, recording or other
tax, charge, expense, cost or fee now or hereafter levied or assessed against or
in respect of the Note or this instrument, whether levied or charged against
Grantor or Grantee, and in the event of the passage of any state, federal,
municipal or other governmental law, order, rule or regulation, in any manner
changing or modifying the laws now in force governing the taxation of debts
secured by security deeds or the manner of collecting taxes so as to affect
adversely Grantee, Grantor will promptly pay any such tax. If Grantor fails to
make such payment, then Grantee may make such payments, and such sums will
become an indebtedness secured by this Deed.
(b) Grantor will pay, before the same become delinquent, all taxes,
liens, assessments and charges of every character levied or assessed or that may
hereafter be levied or assessed upon or against the Premises, and all utility
charges, whether public or private; and upon demand will furnish Grantee
receipted bills evidencing such payment.
(c) Grantor will not suffer any mechanics', materialmen's, laborers',
statutory or other lien to be created and remain outstanding or unbonded upon
any part of the Premises for a period exceeding thirty (30) days.
1.03 INSURANCE.
(a) Grantor (or, in the event any portion of the Premises is ground
leased to a third party, any ground lessee of the Premises) will keep the
buildings, fixtures and property conveyed by this Deed, whether now standing on
the Premises or hereafter erected, continuously insured in such amounts as
Grantee may require (not to exceed one hundred (100%) percent of replacement
value) against all risk of loss or damage by fire and all other casualties or
hazards, including, but not limited to, wind storm, hail, explosion, smoke,
riot, riot attending a strike, civil commotion, aircraft and vehicles and
<PAGE>
malicious mischief, together with rents loss and business interruption insurance
covering the loss of rents and income of the Premises due to casualty for a
period of six (6) months. Grantor shall also cause the issuance and maintenance
of comprehensive general public liability insurance policy naming Grantee as an
additional named insured in such amount as Grantee may require. During the time
when improvements are being constructed on the Premises, Grantor and its general
contractor will maintain builder's all-risk insurance on the Premises,
protecting Grantor and Grantee as insured in such amounts as Grantee may
require.
(b) All such insurance at all times will be with an insurance company
or companies lawfully operating in the State of Georgia and having a financial
condition and reputation satisfactory to Grantee. Policy forms and terms must be
acceptable to Grantee, Each policy shall provide that any loss shall be payable
to Grantee as its interest may appear, pursuant to a New York Standard mortgagee
clause or other clause which shall be satisfactory to Grantee, and providing for
thirty (30) days advance notice of expiration, cancellation or non-renewal to
Grantee. Each policy must contain an agreed amount endorsement. Forthwith upon
the issuance of such policies, Grantor will deliver to Grantee an original
counterpart of same, and all renewals thereof, to Grantee, and , unless premium
payments are made through Grantee, receipts for premiums. Any policies furnished
Grantee shall become its property in the event Grantee becomes the owner of
Premises by foreclosure or otherwise. Grantee is hereby authorized and
empowered, at its option, to adjust or compromise any loss under any insurance
policies on the Premises, and to collect and receive the proceeds from any such
policy or policies. Each insurance company is hereby authorized and directed to
make payment for all such losses directly to Grantee, instead of to Grantor and
Grantee jointly.
(c) In case of loss under any such policy of insurance, Grantee may
apply the net insurance proceeds to the payment of the indebtedness hereby
secured, whether due or not; or Grantee may require the building to be repaired
or replaced by the use of said net proceeds (Grantor advancing any additional
funds required). No such action shall affect the lien and title of this Security
Deed or the indebtedness secured hereby, nor shall it delay or satisfy any
installment due under the Note.
1.04 CARE OF PREMISES.
(a) Grantor will keep the improvements now or hereafter erected on the
Premises in good condition and repair, will not commit or suffer any waste and
will not do or suffer to be done anything which will increase the risk of fire
or other hazard to the Premises or any part thereof.
(b) Grantor will not remove, demolish nor materially alter the design
or structural character of any building, fixture, chattel or other part of
Premises without the written consent of Grantee.
(c) Grantee or its representatives shall have access to and is hereby
authorized to enter upon and inspect the Premises at all times.
(d) Grantor will promptly comply with all present and future laws,
ordinances, rules and regulations of any governmental authority affecting the
Premises or any part thereof.
<PAGE>
(e) If all or any part of the Premises shall be damaged by fire or
other casualty, Grantor will give immediate written notice of same to Grantee.
If Grantee agrees to release the insurance proceeds received due to such
casualty for restoration of the Premises (which proceeds to be released as
construction and restoration progresses), Grantor will promptly restore the
Premises to the equivalent of its original condition and will advance any funds
necessary for such purpose. If a part of the Premises shall be damaged through
condemnation, Grantor will promptly restore, repair or alter the remaining
property in a manner satisfactory to Grantee.
1.05 FURTHER ASSURANCES. Grantor, from time to time within ten (10)
days after request by Grantee, shall execute, acknowledge and deliver to Grantee
such chattel mortgages, security agreements or other similar security
instruments, in form and content satisfactory to Grantee, covering all property
of any kind and nature owned by Grantor or in which Grantor has an interest
which, in the opinion of Grantee, is essential or necessary to the operation of
the Premises. Grantor shall also, from time to time within ten (10) days after
request by Grantee, execute, acknowledge and deliver any financing statements,
renewal affidavits, certificates, continuation statements or other documents as
Grantee may request in order to perfect, preserve, continue, extend or maintain
the lien and security interest under this Security Deed and the priority of this
Security Deed or any such chattel mortgage or security instrument as a first
lien. Grantor further agrees to pay Grantee on demand all costs and expenses
incurred by Grantee in connection with preparation, execution, filing or
re-filing of any such instrument or document, including charges for examining
title and attorneys fees for preparation of such documents or rendering opinions
as to the priority thereof. However, neither requests so made by Grantee nor the
failure of Grantee to make such requests shall be construed as a release of such
property or any part thereof from the lien and title of this Security Deed, it
being understood and agreed that this covenant and any such security agreement
or other similar security instruments delivered to Grantee are cumulative and
are given as additional security. If Grantor fails to execute any document upon
request, Grantee may make, execute and record same for and in the name of
Grantor, and Grantor hereby irrevocably appoints Grantee the agent and
attorney-in-fact of Grantor so to do.
1.06 LEASES AND RENTAL AGREEMENTS AFFECTING THE PREMISES.
(a) Grantor shall faithfully perform the covenants of Grantor as lessor
under any present and future leases and rental agreements affecting all or any
portion of the Premises, and neither do nor neglect to do, nor permit to be done
anything which may cause the termination of said leases and rental agreements,
or any of them, or which may diminish or impair their value or the rents
provided for them or the interest of Grantor or Grantee therein or thereunder.
Grantor shall procure and deliver to Grantee, at any time within thirty (30)
days after notice and demand, estoppel letters or certificates from each lessee,
tenant or occupant in possession of the Premises, confirming the status of the
lease, payment of rent, any alleged or actual defaults, and other statements
required by Grantee, in form and substance satisfactory to, Grantee. Grantee
shall have the right of prior approval of the form and content of all leases,
management contracts and rental agreements used by Grantor for the Premises.
(b) With respect to any existing or future leases, tenancies or other
occupancy arrangements affecting the Premises or any part thereof, Grantor
agrees that Grantor shall not, without the prior written consent of Grantee: (i)
amend or modify any such lease; or (ii) waive any obligation of any tenant
thereunder or accept the surrender or cancellation thereof; or (iii) grant any
approval of consent or waiver to any tenant thereunder (including, without
limitation, an approval or consent to any assignment or subletting); or (iv)
cause, permit or omit to take any action which might reasonably result in the
impairment of the value to Grantee of the security interest of Grantee in any
<PAGE>
such lease, or might reasonably result in any termination (other than by normal
expiration) or loss of rental thereunder; (v) collect rents for more than thirty
(30) days in advance; or (vi) cause, permit or consent to any default
thereunder, or any event or circumstance which might reasonably be expected to
ripen into a default with the passage of time or notice.
1.07 EXPENSES. Grantor will immediately pay or reimburse Grantee for
all reasonable attorneys' fees actually incurred and all costs and expenses
incurred by Grantee in any legal proceeding or dispute of any kind to which
Grantee is made a party, or appears as party plaintiff, defendant or otherwise,
affecting this Deed or the indebtedness secured by or the interest created by
this Deed, or the Premises, including but not limited to, any condemnation
action involving the Premises, any bankruptcy or insolvency proceeding affecting
Grantor or the Premises or any action to protect the security hereof. Any such
amounts paid by Grantee shall be added to the indebtedness secured by this Deed.
The rights under this paragraph are in addition to Grantee's right to attorneys'
fees as defined and limited by O.C.G.A. ss.13-1-11.
1.08 SUBROGATION. Grantee shall be subrogated to the claims and liens
of all parties whose claims or liens are discharged or paid with the proceeds of
the indebtedness secured hereby.
1.09 PERFORMANCE BY GRANTEE OF DEFAULTS BY GRANTOR. If Grantor shall
default (or if it shall appear to Grantee that Grantor may default) in the
payment of any tax, lien, assessment or charge levied or assessed against the
Premises; in the payment of any utility charge, whether public or private; in
the procurement of insurance coverage and the delivery of the insurance policies
required hereunder; in any obligation of Grantor as landlord in any lease of all
or portion of the Premises; or in the performance or observance of any other
covenant, condition or term of this instrument, then Grantee, at its option, may
perform or observe the same, and all payments made for or costs incurred by
Grantee in connection therewith shall be secured hereby and shall be immediately
repaid by Grantor to Grantee with interest thereon at the lesser of the rate
stated in the Note or the maximum permitted by law. Grantee shall be the sole
judge of the necessity for any action, payment or performance by Grantee under
this section and of the legality, validity and priority of any such tax, lien,
assessment, charge, claim and premium, of the necessity for any such action and
of the amount necessary to be paid in satisfaction thereof. Grantee is hereby
empowered to enter and to authorize others to enter upon the Premises or any
part thereof for the purpose of performing or observing any such defaulted
covenant, condition or term, without thereby becoming liable to Grantor or any
person in possession holding under Grantor.
1.10 RECORDS AND REPORTS. Grantor shall maintain complete and accurate
books and records pertaining to the ownership, operation and leasing of the
Premises. Grantee shall have the right to inspect all books and records of
Grantor pertaining to the ownership, operation and leasing of the Premises, at
any time at the place of business of Grantor. Grantor shall, without expense to
Grantee, within thirty (30) days after the close of each calendar quarter and
within ninety (90) days after the close of the fiscal or operational year of the
Premises, furnish a balance sheet and a statement of the operations of the
Premises showing in reasonable detail: (i) gross revenues and other income of
the Premises; (ii) operating expenses such as taxes, assessments, insurance
premiums, repairs, maintenance, salaries and wages; (iii) net operating income;
<PAGE>
and (iv) depreciation claimed for federal income tax purposes. Such financial
reports shall be certified to and sworn under oath to be correct by Grantor, if
an individual or by the chief executive officer, or chief financial officer or a
general partner in Grantor is a business entity. In the event of default
hereunder or on demand of Grantee, such reports will be audited and certified by
a certified public accountant as in accordance with generally accepted
accounting principles.
1.11 CONDEMNATION. If all or any part of the Premises shall be damaged
or taken through condemnation (which term shall include any damage or taking by
any governmental authority under the power of eminent domain or otherwise and
any transfer by private sale or conveyance in lieu thereof), either temporarily
or permanently, Grantee shall be entitled to all compensation, awards and other
payments or relief thereof, and Grantee is hereby authorized, at its option, to
commence, appear in and prosecute, in its own or Grantor's name, or compromise
any claim in connection therewith. All such compensation, awards, damages,
claims, rights of action and proceeds and the rights thereto are hereby conveyed
and assigned by Grantor to Grantee. Grantee may deduct from all condemnation
proceeds received by it, its expenses (including attorneys fees) related to the
condemnation and may release all or any part of the monies so received to
Grantor or for restoration of the Premises, or Grantee may apply the same in
such manner and amount as Grantee may determine to the reduction of the
indebtedness secured by this Deed. No such release or application of
condemnation proceeds shall affect the lien or title of this Deed. Grantor
agrees to execute such further assignment of any compensation, awards, damages,
claims, rights of action and proceeds as Grantee may require. The payment of any
condemnation proceeds to Grantee shall not excuse or delay the payment of any
installment of the indebtedness secured by this Deed.
1.12 SECURITY AGREEMENT. As to that portion of the Premises (if any)
which constitutes personal property, as opposed to real property or fixtures,
this Deed shall constitute a security agreement, and Grantee, as a secured
party, shall have all of the rights and remedies of a secured party under the
Uniform Commercial Code in addition to the rights and remedies provided in this
Deed or in any other instrument evidencing or securing the Note or by applicable
law. Without implying that other means of disposition would not be commercially
reasonable, the parties agree that it would be commercially reasonable to
foreclose the personal property (if any) encumbered by this Deed in the same
foreclosure sale at which the real estate conveyed by this Deed is foreclosed,
either with or without conducting a separate bid for the personal property.
Nevertheless, to the full extent permitted by law, all parts of the Premises
shall be deemed to be real property or fixtures and a part of the freehold, and
not personal property. The information provided in Exhibit "B" attached hereto
is provided in order that this Deed shall comply with the requirements of the
Uniform Commercial Code as a financing statement. Grantor warrants that the
information provided in Exhibit "B" regarding Grantor as debtor is true and
correct.
1.13 OBLIGATIONS VALID. Grantor covenants and warrants that the Note,
this Deed, and the other instruments securing the Note or relating to the loan
evidenced by the Note are valid, binding and enforceable in accordance with
their terms, and that the execution and delivery of said instruments and the
performance by Grantor of Grantor's obligations thereunder do not and will not
contravene any law or regulation, nor shall they violate or contravene the
provisions of any mortgage, deed of trust, deed to secure debt, joint venture or
partnership agreement, banking agreement, credit agreement nor any other
agreement, or any judgment, order or decree affecting Grantor or the Premises or
to which Grantor may be bound.
<PAGE>
1.14 IDENTITY OF GRANTOR. The identity of Grantor and the continued
ownership of the Premises by Grantor is a material inducement to the making of
the loan secured by this instrument. Therefore, Grantor agrees not to convey the
Premises or any part thereof or interest therein, either voluntarily or by
operation of law, or to encumber the Premises or secure secondary financing on
the Premises, without the written consent of Grantee.
1.15 HAZARDOUS WASTE. Grantor warrants and represents to Grantee, to
the best of its knowledge after diligent inquiry and investigation, that the
Premises is not now and has never been used for the manufacture, storage,
handling, use or disposal of any hazardous, toxic, radioactive or dangerous
material or waste. Grantor covenants with Grantee that the Premises will not be
used for the manufacture, storage, handling, use or disposal of such materials,
nor will any such materials be brought on or kept about the Premises. Grantor
will indemnify and hold Grantee harmless from and against any such claim or loss
as a result of a breach of the foregoing representations and covenants,
including, but not limited to, costs of clean-up, removal, fines, damage awards,
attorneys' fees and court costs. This indemnity survives the repayment of the
Note and discharge of this instrument.
1.16 MONTHLY DEPOSITS. Upon an event of default hereunder and at
Grantee's option, to further secure the payment of taxes, assessments and
premiums for hazard insurance on the Premises, Grantor will deposit with
Grantee, on the due date of each monthly installment under the Note, a sum which
in the estimation of Grantee shall be equal to one-twelfth (1/12th) of the
annual taxes, assessments and hazard insurance premiums for the Premises; said
deposits to be held by Grantee free of interest and free of any liens or claims
on the part of creditors of Grantor and as a part of the security of Grantee.
Such sums shall be used by Grantee to pay current taxes, assessments and hazard
insurance premiums on the Premises as the same accrue and are payable, but said
sums shall not be deemed trust funds and may be commingled with the general
funds of Grantee. Grantee shall be under no obligation to pay such taxes,
assessments and hazard insurance premiums unless sufficient funds are available
from said deposits to pay same, and if said deposits are insufficient, Grantor
will deposit with Grantee an additional sum or sums as may be required in order
for Grantee to pay such taxes, assessments and hazard insurance premiums in full
when due. Upon any default under the provisions of this indenture or in the
Note, Grantee may, at its option, apply any money in the funds resulting from
said deposits to the payment of the indebtedness secured hereby in such manner
as it may elect.
ARTICLE II
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2.01 EVENT OF DEFAULT. The term "default" or "event of default,"
wherever used in this indenture, shall mean any one or more of the following
events:
(a) Should the indebtedness secured hereby, or any part thereof or
interest or charge thereon, not be paid when due.
(b) Should any other covenant, condition, or agreement of Grantor under
this indenture not be duly and promptly performed or observed, and such failure
is not cured within fifteen (15) days after notice of such default from Grantee.
<PAGE>
(c) Any assignment by Grantor or any guarantor of the Note for the
benefit of creditors, or the appointment of a receiver, liquidator or trustee of
Grantor or for any of Grantor's or any guarantor's property, or the filing of
any voluntary petition for the bankruptcy, reorganization or arrangement of
Grantor or any guarantor pursuant to the Federal Bankruptcy Code or any similar
statute, or the adjudication of Grantor or any guarantor as a bankrupt or
insolvent, or if Grantor or any guarantor dies or is dissolved, terminated or
expires.
(d) An event of default occurs under and as defined in any of the
Additional Loan Documents or any and all other documents, instruments or
writings between the parties in connection with or related to the loan made by
Grantee to Grantor.
(e) Filing of any federal tax lien or claim of lien for labor and
material against Grantor or the Premises, if the same shall not be removed by
payment or bond within thirty (30) days from the date of record in the county
land records.
(f) If any claim of priority over this deed by title, lien (which lien
is not removed by bond) or otherwise be asserted in any legal or equitable
proceeding and the title insurer of Grantor's interest fails to promptly and
unconditionally acknowledge that it will indemnify and defend against same.
(g) If Grantor violates Section 1.14 above or conveys, transfers, or
encumbers the Premises or any part thereof or interest therein, either
voluntarily or by operation of law, without first obtaining the written consent
of Grantee.
The foregoing events of default shall occur without notice to or demand on
Grantor or any other person and without grace period or opportunity to cure,
except as is specifically set forth herein.
2.02 ACCELERATION OF MATURITY. If an event of default shall have
occurred, then the whole unpaid principal sum of the indebtedness secured hereby
with interest accrued thereon shall, at the option of Grantee, become due and
payable without notice or demand, time being of the essence of this indenture;
and no omission or delay on the part of Grantee to exercise such option when
entitled so to do shall be considered as a waiver of such right.
2.03 RIGHT OF GRANTEE TO ENTER AND TAKE POSSESSION.
(a) If an event of default shall have occurred and be continuing,
Grantor, upon demand of Grantee, shall forthwith surrender to Grantee the actual
possession of the Premises and if, and to the extent permitted by law, Grantee
may enter and take possession of the Premises and may exclude Grantor and
Grantor's agents and employees wholly therefrom.
(b) Upon every such entering and taking of possession, Grantee may
hold, store, use, operate, manage, control and maintain the Premises and conduct
the business thereof, and from time to time: (i) make all necessary and proper
repairs, renewals, replacements, additions and improvements thereto and thereon
and purchase or otherwise acquire additional fixtures, personalty and other
property; (ii) insure or keep the Premises insured; (iii) manage and operate the
Premises and exercise all the rights and powers of Grantor in its name; and (iv)
enter into any and all agreements with respect to the exercise by others of any
<PAGE>
of the powers herein granted Grantee, all as Grantee may from time to time
determine to be to its best advantage; and Grantee may collect and receive all
of the income, rents, profits, issues and revenues of the Premises, including
the past due as well as those accruing thereafter and, after deducting (aa) all
expenses of taking, holding, managing and operating the Premises (including
compensation for the services of all persons employed for such purposes); (bb)
the cost of all such maintenance, repairs, renewals, replacements, additions,
improvements and acquisitions; (cc) the cost of insurance; (dd) such taxes,
assessments and other charges prior to the lien of this indenture as Grantee
shall determine to pay; (ee) other charges upon the Premises or any part thereof
as Grantee shall determine to pay; and (ff) the compensation and expenses of
attorneys and agents of Grantee as provided in this instrument; the remainder of
the money so received by Grantee shall apply first to the payment of accrued
interest, and then to the payment of principal on the Note or other indebtedness
secured hereby.
(c) For the purpose of carrying out the provisions of this Paragraph
2.03, Grantor hereby constitutes and appoints Grantee the true and lawful
attorney-in-fact of Grantor to do and perform, from time to time, any and all
actions necessary and incidental to such purpose and does, by these presents,
ratify and confirm any and all actions of said attorney-in-fact.
(d) Whenever all such events of default have been cured and satisfied,
Grantee shall surrender possession of the Premises to Grantor, provided that the
right of Grantee to take possession from time to time pursuant to Paragraph 2.03
shall exist if any subsequent event of default shall occur and be continuing.
2.04 APPOINTMENT OF A RECEIVER.
(a) If an event of default shall have occurred and be continuing,
Grantee, upon application to a court of competent jurisdiction, shall be
entitled, without notice and without regard to the adequacy of any security for
the indebtedness hereby secured or the solvency of any party or guarantor bound
for its payment, to the appointment of a receiver to take possession of and to
operate the Premises and to collect the rents, profits, issues, and revenues
thereof, and apply the same to payment of the debt secured by this Mortgage or
as the court may direct. The receiver shall have all rights and powers permitted
by law and as are conferred by the court making such appointment.
(b) Grantor will pay to Grantee upon demand all expenses, including
receivers' fees, reasonable attorney's fees, costs and agents' compensation,
incurred pursuant to the provisions contained within this Paragraph 2.04, and
all such expenses shall be secured by this indenture. Grantee may loan funds to
a receiver for use in connection with the receiver's duties or the Premises on
terms satisfactory to Grantee and the receiver, and any notes or receiver's
certificate evidencing such loans shall be secured by this Deed.
2.05 ENFORCEMENT.
(a) If an event of default shall have occurred, Grantee, at its option,
may sell the Premises or any part of the Premises at one or more public sale or
sales before the door of the courthouse of the county in which the Premises or
any part of the Premises is situated, to the highest bidder for cash, in order
to pay the Indebtedness, and all expenses of sale and of all proceedings in
connection therewith, including attorneys' fees in the amount of fifteen percent
<PAGE>
(15%) of the principal and interest owed to Grantee, after advertising the time,
place and terms of sale once a week for four (4) weeks immediately preceding
such sale (but without regard to the number of days) in a newspaper in which
Sheriff's sales are advertised in said county. At any such public sale, Grantee
may execute and deliver to the purchaser a conveyance of the Premises or any
part of the Premises in fee simple with full warranties of title, and to this
end Grantor hereby constitutes and appoints Grantee the agent and
attorney-in-fact of Grantor to make such sale and conveyance, and thereby to
divest Grantor of all right, title and equity that Grantor may have in and to
the Premises and to vest the same in the purchaser or purchasers at such sale or
sales, and all the acts and doings of said agent and attorney-in-fact are hereby
ratified and confirmed and any recitals in said conveyance or conveyances as to
facts essential to a valid sale shall be binding upon Grantor. The aforesaid
power of sale and agency hereby granted are coupled with an interest and are
irrevocable by death or otherwise, are granted as cumulative of the other
remedies provided hereby or by law for collection of the indebtedness secured
hereby and shall not be exhausted by one exercise thereof but may be exercised
until full payment of all of the indebtedness secured hereby. In the event of
any sale under this Deed by virtue of the exercise of the powers herein granted,
or pursuant to any order in any judicial proceeding or otherwise, the Premises
may be sold as an entirety or in separate parcels and in such manner or order as
Grantee in its sole discretion may elect, and if Grantee so elects, Grantee may
sell the personal property covered by this Deed at one or more separate sales in
any manner permitted by the Uniform Commercial Code of the State of Georgia, and
one or more exercises of the powers herein granted shall not extinguish nor
exhaust such powers, until the entire Premises are sold or the indebtedness
secured hereby is paid in full. If the indebtedness secured hereby is now or
hereafter further secured by any chattel mortgages, pledges, contracts of
guaranty, assignments of lease or other security instruments, Grantee may at its
option exhaust the remedies granted under any of said security instruments
either concurrently or independently, and in such order as Grantee may
determine. Grantee may, in addition to and not in abrogation of the rights
covered under this paragraph 2.05, either with or without entry or taking
possession as herein provided or otherwise, proceed by a suit or suits in law or
in equity or by any other appropriate proceeding or remedy (i) to enforce
payment of the Note or the performance of any term, covenant, condition or
agreement of this Deed or any other right or (ii) to pursue any other remedy
available to it, all as Grantee at its sole discretion shall elect.
2.06 AUTHORITY TO CONVEY. At and after any such public sale, Grantee
may execute and deliver to the purchaser a conveyance of the Premises or any
part of the Premises with full warranties of title, and to this end, Grantor
hereby constitutes and appoints Grantee the agent and attorney-in-fact of
Grantor to make such sale and conveyance pursuant to Paragraph 2.05 through 2.07
hereof, and thereby to divest Grantor of all right, title or equity that Grantor
may have in and to the Premises and to vest the same in the purchaser or
purchasers at such sale or sales, and all of the acts and doings of said agent
and attorney-in-fact are hereby ratified and confirmed, and any recitals in said
conveyance or conveyances as to facts essential to a valid sale shall be binding
on Grantor. The aforesaid power of sale and agency hereby granted are coupled
with an interest and are irrevocable by death or otherwise, are granted as
cumulative of the other remedies provided by law for collection of the
indebtedness secured hereby, and shall not be exhausted by any one exercise
thereof but may be exercised until full payment of all such sums secured hereby.
2.07 APPLICATION OF THE PROCEEDS OF SALE. Upon any such public sale
pursuant to the aforementioned power of sale and agency, the proceeds of such
sale shall be applied first to the expenses of such sale and all proceedings in
<PAGE>
connection therewith (including attorneys' fees in the amount of 15% of the
principal and interest due under the Note if the foreclosure is referred to or
handled by an attorney-at-law), then to payment of the indebtedness secured
hereby and all accrued interest thereon, then to insurance premiums, liens,
assessments, taxes and charges, including utility charges, with accrued interest
thereon, and the remainder, if any, shall be paid to Grantor or other person
entitled thereto.
2.08 LEASES. Grantee may, at its option, foreclose this Deed subject to
the rights of any tenant of the Premises or may agree not to disturb the rights
of any tenant, and such event shall not be asserted as a defense to any
foreclosure or deficiency judgment. No foreclosure hereunder shall terminate any
lease of any tenant of the Premises whose rights are subordinated to this Deed
unless Grantee or the purchaser at foreclosure sale shall, at its option and in
its sole discretion, elect to terminate any one or more leases or tenant rights,
and shall notify the tenant that its rights are terminated.
2.09 GRANTOR AS TENANT HOLDING OVER. In the event of any public sale
pursuant to the aforesaid power of sale and agency, or any other foreclosure
sale of the Premises, Grantor shall be deemed a tenant holding over, and shall
forthwith deliver possession to the purchaser or purchasers at such sale or be
summarily dispossessed according to provisions of law applicable to tenants
holding over.
2.10 GRANTEE'S RIGHT TO PURCHASE. In the event of any sale pursuant to
the aforesaid power of sale and agency or any other foreclosure sale of the
Premises, Grantee shall be entitled to bid at said sale and, if successful, to
purchase and acquire the Premises or any part thereof or interest therein. In
such event Grantee may, in lieu of paying in cash therefor, make settlement for
the purchase price by crediting against the indebtedness secured by this Deed,
the net sales price, after deducting the expenses of sale and other sums which
Grantee is authorized to deduct under Paragraph 2.07, above.
2.11 DISCONTINUANCE OF PROCEEDINGS AND RESTORATION OF THE PARTIES. In
case Grantee shall have proceeded to enforce any right or remedy under this
indenture by receiver, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to Grantee, then, and in every such case, Grantor and Grantee shall be restored
to their former positions and rights hereunder, and all rights, powers and
remedies of Grantee shall continue as if no such proceeding has been taken.
2.12 REMEDIES CUMULATIVE. No right, power or remedy conferred upon or
reserved to Grantee by this indenture or the Note, the Assignment of Rents and
Leases, Loan Agreement or any other document relating to or securing the loan is
intended to be exclusive of any other right, power or remedy, but each and every
such right, power and remedy shall be cumulative and concurrent and shall be in
addition to any other right, power and remedy given hereunder or now or
hereafter existing at law or in equity or by statute. No act of Grantee shall be
construed as a waiver or as an election to proceed under any provision herein or
the other documents evidencing the loan or securing same to the exclusion of any
other provisions, and Grantee shall have the right to exercise any and all
rights and remedies severally or concurrently as Grantee shall see fit. No
release or subordination by Grantee of any part of the Premises, nor of any
collateral or obligation securing the Note shall release or impair Grantee's
rights as to property not released in writing.
<PAGE>
2.13 WAIVER. GRANTOR ACKNOWLEDGES THE RIGHTS GIVEN HEREIN TO GRANTEE TO
ACCELERATE THE DEBT SECURED HEREBY AND TO SELL THE PREMISES AT PUBLIC AUCTION
PURSUANT TO THE POWER OF ATTORNEY GRANTED HEREIN. GRANTOR WAIVES ANY RIGHTS TO
NOTICE AND HEARING PRIOR TO SUCH SALE UNDER POWER, OTHER THAN AS EXPRESSLY
PROVIDED IN THIS DEED. GRANTOR WAIVES ALL RIGHT OR EQUITY OF REDEMPTION IN THE
PREMISES AFTER A FORECLOSURE SALE.
ARTICLE III
-----------
3.01 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. The words "Grantor"
and "Grantee", whenever used herein, shall include the respective heirs,
executors, administrators, legal representatives, successors, and assigns of the
parties hereto, and all those holding under either of them and the
successors-in-title to Grantor. The pronouns used herein shall include, when
appropriate, either masculine, feminine or neuter gender and both singular and
plural number.
3.02 HEADINGS. The headings of the sections, paragraphs and
subdivisions of this indenture are for convenience of reference only, are not to
be considered a part hereof and shall not limit or otherwise affect any of the
terms hereof.
3.03 INVALID PROVISIONS TO AFFECT NO OTHERS. If fulfillment of any
provisions hereof or any transaction related hereto or to the Note, at the time
performance of such provisions shall be due, shall involve transcending the
limit of validity prescribed by law, the obligation to be fulfilled shall
automatically be reduced to the limit of such validity; and if any clause or
provisions herein contained operates or would operate to invalidate this
indenture in whole or in part, then such clause or provision only shall be held
for naught, as though not herein contained, and the remainder of this indenture
shall remain operative and in full force and effect.
3.04 DEPARTURE FROM TERMS. Any indulgence or departure at any time by
the Grantee from any of the provisions hereof or of any obligation hereby
secured, or failure to exercise rights and remedies, shall not modify the same
or relate to the future, or waive future compliance therewith by Grantor.
3.05 INTEREST. Any sums which may be due to Grantee hereunder before
default shall bear interest at the pre-default rate specified in the Note and
after default, at Grantee's option, shall bear interest at the default rate
specified in the Note or the highest rate permitted by applicable law, whichever
is less.
3.06 NOTICES. Any notice or demand from Grantee to Grantor under this
Deed or the Note shall be deemed delivered if such notice or demand is in
writing and is deposited in the United States mail addressed to Grantor at the
address in the caption of this instrument (or such other address as Grantor
shall have notified Grantee in writing) or by delivery of such notice or demand
to said address. Notice shall be deemed received on the date delivered to
Grantor's address or the next day after same is mailed by certified or
registered mail.
<PAGE>
3.07 WAIVER OF HOMESTEAD. Grantor hereby waives and renounces all
homestead and exemption rights provided for by the Constitution and laws of the
United States and any state thereof as against the collection of the
indebtedness secured hereby and any part thereof. Grantor covenants and warrants
that the Premises is not the homestead of Grantor.
3.08 TIME OF ESSENCE. Time is of the essence with respect to each and
every covenant, agreement and obligation of Grantor under this Security Deed,
the Note and any other instrument now or hereafter evidencing, securing or
otherwise relating to the indebtedness secured hereby.
{Signatures appear on following page}
<PAGE>
IN WITNESS WHEREOF, Grantor has signed and sealed this instrument as of
the day and year first above written.
GRANTOR:
VININGS INVESTMENT PROPERTIES, L.P.,
a Delaware limited partnership
By: Vinings Investment Properties Trust,
a Massachusetts business trust,
as general partner
Signed, sealed and delivered in
the presence of:
/s/ Christine Stomper By: /s/ Peter D. Anzo (SEAL)
- --------------------- --------------------------------
Unofficial Witness Peter D. Anzo, Chief Executive Officer
of Vinings Investment Properties Trust,
on behalf of all Trustees
/s/ Clifford A. Barshay
- -----------------------
Notary Public
(NOTARIAL SEAL)
My Commission Expires:
March 22, 2003
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT made in Atlanta, Georgia
between__________________________ ("Owner"), and VIP Management, LLC, ("Agent")
a Georgia Limited Liability Company, shall become effective as of May 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 ____ unit apartment community known and doing
business as ______________________________, located at _____________________,
_____________, MS. ________. The term Property used herein includes all of the
Land, Building(s) and the Personal Property collectively associated with the
above mentioned apartment community.
<PAGE>
ARTICLE II
Term of Agreement
-----------------
2.01 The initial term of this Agreement is two (2) years, commencing on May
1, 1999 and ending on April 30, 2001. 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 then current 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, gross negligence or willful misconduct on the part
of the Agent, its employees or assigns including such acts as fraud,
misappropriation of funds, etc.;
<PAGE>
(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 Upon the termination of this Agreement, either by written notice of
non-renewal or by any earlier termination as herein provided, Agent shall:
(a) deliver to Owner a final accounting;
(b) surrender and deliver up to Owner possession of the Property and all
rents and income, including tenant security deposits and other monies of Owner
on hand and in any bank accounts, less amounts owed to Agent pursuant to this
Agreement;
(c) deliver to Owner, as received, any monies due Owner under this
Agreement but received after such termination;
(d) deliver to Owner all equipment not owned by Agent, materials and
supplies, keys, contracts and documents, and such other accounting papers and
records pertaining to this Agreement as Owner shall request;
(e) assign any right Agent may have in and to any existing contracts
relating to the operations and maintenance of the Property as Owner shall
require; and
(f) deliver to Owner, or Owner's duly appointed agent, all books and
records, contracts, leases, receipts for deposits and unpaid bills.
2.05 Termination of this Agreement shall terminate all rights and
obligations of the parties hereunder, except that such termination shall not
prejudice the rights of either party against the other for any breach of this
Agreement. Without limitation on the generality of the foregoing. Owner's
termination of this Agreement shall terminate any and all rights of Agent to act
on behalf of or with respect to the Property (except to the extent Agent or its
Affiliates have such rights by virtue of their interest in Owner as evidenced by
the Partnership Agreement) and Agent shall, if Owner so requests, execute a
notice to third parties that Agent's rights have been so terminated; provided,
however, that in the event this Agreement is terminated, Agent shall cooperate
prior to such termination with Owner to allow Owner to effectively and
productively continue the leasing and other management activities of Agent.
Without limitation on the foregoing, Agent shall deliver to Owner such
information and documentation as Owner may reasonably request concerning
potential tenants for the Property.
2.06 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.
2.07 In the event of default by Agent hereunder, Owner shall promptly give
Agent written notice of such default. If the default is the failure to pay any
sum payable to the Owner hereunder (a "Monetary Default"), Agent shall have ten
(10) days to cure such default. If the default is any other than a Monetary
Default (a "Non-Monetary Default"), Agent shall have 30 days to cure such
Non-Monetary Default, or such longer period as necessary to cure such default if
the Non-Monetary Default is not susceptible to cure with the 30 days and the
Agent is diligently undertaking the cure thereof. A Non-Monetary Default shall
be the failure of the Agent to comply with any agreement, covenant or
undertaking in this Agreement, other than those pertaining to the payments of
sums to the Owner hereunder.
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 may participate in
the day-to-day operation of the Property, however, it shall not at any time
directly order or instruct any onsite employees or other personnel engaged in
the management or operation of the Property but shall give its directions or
discuss any problems it may have with the appropriate supervisory personnel of
the Agent.
<PAGE>
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, including instituting
actions required to evict tenants and recover possession of the Property, sue
for and recover rent and when expedient settle, compromise and release such
actions or suits or reinstate such tenancies;
(c) perform and cause to be performed marketing, advertising and leasing
activities designed to meet Owner goals as contained in the Approved Budget;
(d) execute new and renewal leases with tenants in accordance with the
Approved Budget; screen prospective tenants for credit-worthiness and other
appropriate leasing criteria; maintain accurate leasing records and files; and
perform other normal and customary duties related to maintaining the occupancy
of the Property in accordance with the goals contained in the Approved Budget;
(e) inspect and process move-outs and related paperwork promptly; handle
all tenant security deposits in accordance with all applicable laws concerning
the Manager's and/or Owner's responsibility for security deposits and record
keeping requirements, if any.
(f) enforce the provisions of the lease and community rules and regulations
in a consistent manner with all tenants; periodically review community rules and
<PAGE>
regulations and make such additions, modifications or deletions as appropriate;
cause the lease and other legal documents used in the leasing and post-leasing
process to be reviewed by an attorney and changed as necessary to maintain
compliance with all applicable laws.
(g) pay all expenses of the property, to the extent funds are available, in
a timely fashion from funds collected and deposited into Property bank accounts;
(h) 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;
(i) 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);
(j) apply for all replacement reserve or escrow reimbursements from
accounts held by any lender or mortgage servicer in accordance with all
applicable rules and provisions; and
(k) 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.
(a) 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
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.
(b) 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
<PAGE>
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. However, Owner agrees
to review and approve an annual bonus plan for on-site Employees at the time of
Budget approval should bonuses not be included in the approved Budget. 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) Community Manager: A person who is experienced in the administration
and operation of residential Property.
(b) Customer Service Representative: A person who is trained to lease
apartments to qualified prospective Residents, as apartments become vacant
throughout the year and trained to assist the Manager in resolving all property
and resident issues.
(c) Maintenance Technician: A person who is trained in maintaining and
enhancing the physical property condition by responding to resident service
requests and performing routine and preventive maintenance.
(d) Such other sales, office and maintenance personnel required to operate
and maintain the Property including additional office personnel,
air-conditioning mechanics, electricians, plumbers, painters, carpenters,
grounds keepers, janitorial and custodial persons, as Agent reasonably deems
necessary and is included in the approved budget.
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
<PAGE>
Personal Property as are necessary to properly maintain the Property. All such
contracts and orders shall be subject to the limitations set forth in section
4.03 hereof. 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 at a price or fee higher than
that which would have been charged as a result of a bona fide arms length
negotiation.
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 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 any work to be performed.
(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.
<PAGE>
4.09 LEGAL PROCEEDINGS.
(a) Agent shall, in Owners name and 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.
(b) Any other legal proceeding involving the property including the protest
of increases in taxes and/or assessments levied against the Property, or any
portion thereof shall require prompt notice to and discussion with Owner prior
to any response.
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.
<PAGE>
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 three and one-half percent (3.50%) 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 three
dollars ($3.00) 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.
<PAGE>
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 that shall be considered available
as required by HUD and in accordance with any regulatory agreement to which the
Property may be subject.
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 kept separate and
apart from all others and 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.
<PAGE>
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.
<PAGE>
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, Suite A-200
Atlanta, Georgia 30339
Attn: Stephanie A. Reed
To Owner: _______________________________
c/o Vinings Holdings, Inc.
3111 Paces Mill Road, Suite 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 ATTORNEYS' 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.
<PAGE>
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.
(The remainder of this page left intentionally blank)
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed in Atlanta, Georgia,
effective as of the date first above written.
OWNER: ____________________________
By: Vinings Holdings, Inc.
General Partner
____________________________
By: Peter D. Anzo
President
AGENT: VIP MANAGEMENT, LLC
___________________________
By: Stephanie A. Reed
Manager
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
REVISED SCHEDULE OF MATERIAL DIFFERENCES
FOR PROPERTIES ACQUIRED MAY 1, 1999
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Property Seller Purchaser Purchase
Price
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
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
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, 1999
-----------------
- ---------------------------------------------------------
Jurisdiction of
Subsidiary Organization
- ---------------------------------------------------------
Cottonwood, L.P. Delaware
Delta Bluff, L.P. Delaware
Foxgate, L.P. Delaware
Hampton House, L.P. Delaware
Heritage Place, L.P. Delaware
Northwood Place, L.P. Delaware
River Pointe L.P. Delaware
Thicket Apartments, L.P. Delaware
Thicket Holdings, Inc. Delaware
Trace Ridge, L.P. Delaware
Vinings/CMS Master Partnership, L.P. Delaware
Vinings Communities, L.P. Delaware
Vinings Holdings, Inc. Delaware
Vinings Investment Properties, L.P. Delaware
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 of VININGS INVESTMENT PROPERTIES TRUST of our report
dated March 17, 2000 appearing in the Annual Report on Form 10-K.
HABIF, AROGETI & WYNNE, LLP
/s/ Habif, Arogeti & Wynne, LLP
Atlanta, Georgia
March 29, 2000
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of our
report dated February 26, 1999 included in this Form 10-K, into Vinings
Investment Properties Trust's previously filed Registration Statement on Form
S-8 (File No. 333-76487).
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 27, 2000
<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, 1999 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, 1999.
</LEGEND>
<CIK> 0000759174
<NAME> VININGS INVESTMENT PROPERTIES TRUST
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 916215
<SECURITIES> 0
<RECEIVABLES> 108646
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 67762005
<DEPRECIATION> 3351811
<TOTAL-ASSETS> 69114314
<CURRENT-LIABILITIES> 0
<BONDS> 56789923
0
0
<COMMON> 0
<OTHER-SE> 1007617
<TOTAL-LIABILITY-AND-EQUITY> 69114314
<SALES> 0
<TOTAL-REVENUES> 9341144
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6065719
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3832518
<INCOME-PRETAX> (1309250)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1309250)
<EPS-BASIC> (1.19)
<EPS-DILUTED> (1.19)
</TABLE>
