SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to ________________
Commission File No. 0-16456
Development Partners II (A Massachusetts Limited Partnership)
(formerly Berry and Boyle Development Partners II)
(Exact name of registrant as specified in its charter)
Massachusetts 04-2946004
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S.
Employer incorporation or organization)
Identification No.)
5110 Langdale Way, Colorado Springs, CO 80906
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(Address of principal executive offices) (Zip Code)
(719) 527-0544
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 and 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. [ X ]
Aggregate market value of voting securities held by non-affiliates: Not
applicable, since securities are not actively traded on any exchange.
Documents incorporated by reference: None
The Exhibit Index is located on page F-21
<PAGE>
PART I
ITEM 1. BUSINESS
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. Actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
Development Partners II (A Massachusetts Limited Partnership) (the
"Partnership"), formerly Berry and Boyle Development Partners II, was formed on
January 9, 1987. The General Partners are Stephen B. Boyle and GP L'Auberge
Communities, L.P., a California Limited Partnership (formerly Berry and Boyle
Management).
The primary business of the Partnership is to operate and ultimately dispose of
a diversified portfolio of income-producing residential real properties directly
or through its joint venture interests in joint ventures which own such
properties. Descriptions of such properties are included below in Item 2, as
well as in Notes 5 and 6 of the Notes to the Consolidated Financial Statements
included in this report and incorporated herein by reference thereto.
As further discussed in Item 2 below and in Note 10 of the Notes to the
Consolidated Financial Statements, after taking into consideration such factors
as the price to be realized, the possible risks of continued ownership and the
anticipated advantages to be gained for the partners, the General Partners
determined during 1997 that it would be in the best interests of the Partnership
and the partners to dissolve the Partnership and liquidate its assets in 1998
(the "Dissolution"). Under the provisions of the Partnership's Partnership
Agreement, the Dissolution of the Partnership requires the consent of a majority
in interest of the limited partners. In March 1998, the General Partners
requested the consent of the limited partners to the Dissolution pursuant to a
Consent Solicitation Statement first mailed to the limited partners on or about
March 20, 1998. Such consents will be solicited until April 15, 1998, which date
may be extended by the General Partners until not later than June 1, 1998. Each
of the properties owned by the Partnership or in which the Partnership owns an
interest is under contract to be sold to a purchaser unaffiliated with the
General Partners. Net proceeds from the sales will not be reinvested by the
Partnership or its joint ventures, but will be distributed to the partners so
that the Partnership will, in effect, be self-liquidating.
On-site management of all Partnership properties is currently provided by an
affiliate of the General Partners. The terms of such property management
services between the Partnership (or joint venture) and the property manager are
embodied in a written management agreement with respect to each property.
Property management fees equal 4% of the gross revenues from each property, plus
reimbursable expenses. The property manager is responsible for on-site
operations and maintenance, generation and collection of rental income, and
payment of operating expenses.
The difference between rental income and expenses related to operations,
including items such as local taxes and assessments, utilities, insurance
premiums, maintenance, repairs and improvements (and reserves therefor),
bookkeeping and payroll expenses, legal and accounting fees, property management
fees and other expenses incurred, constitute the properties' operating cash
flow. The Partnership's internal administrative expenses are paid out of the
Partnership's share of such cash flow from the various properties and from
interest income which the Partnership earns on its short-term investments.
The success of the Partnership will depend upon factors which are difficult to
predict and many of which are beyond the control of the Partnership. Such
factors include, among others, general economic and real estate market
conditions, both on a national basis and in those areas where the Partnership's
investments are located, competitive factors, the availability and cost of
borrowed funds, real estate tax rates, federal and state income tax laws,
operating expenses (including maintenance and insurance), energy costs,
government regulations, and potential liability under and changes in
environmental and other laws, as well as the successful management of the
properties.
The Partnership's investments in real estate are also subject to certain
additional risks including, but not limited to, (i) competition from existing
and future projects held by other owners in the areas of the Partnership's
properties, (ii) possible reduction in rental income due to an inability to
maintain high occupancy levels, (iii) adverse changes in mortgage interest
rates, (iv) possible adverse changes in general economic conditions and adverse
local conditions, such as competitive over-bidding, or a decrease in employment
or adverse changes in real estate zoning laws, (v) the possible future adoption
of rent control legislation which would not permit the full amount of increased
costs to be passed on to tenants in the form of rent increases, and (vi) other
circumstances over which the Partnership may have little or no control.
The Partnership's investments are subject to competition in the rental, lease
and sale of similar types of properties in the localities in which the
Partnership's real property investments are located. Furthermore, the General
Partners of the Partnership are affiliated with other partnerships owning
similar properties in the vicinity in which the Partnership's properties are
located.
The Partnership considers itself to be engaged in only one industry segment,
real estate investment.
ITEM 2. PROPERTIES
The Partnership owns a majority joint venture interest in the Canyon View East
Joint Venture, an Arizona joint venture that owns and operates Canyon View East,
a 96-unit multifamily rental property in Tucson, Arizona, subject to first
mortgage financing in the original principal amount of $3,847,465. The
Partnership also owns a majority interest in the Pines at Cheyenne Creek Joint
Venture which owns and operates L'Auberge Cheyenne Creek (formerly The Pines on
Cheyenne Creek) ("Cheyenne Creek'), a 108-unit multifamily rental property in
Colorado Springs, Colorado, subject to first mortgage financing in the original
principal amount of $3,133,018. The Partnership also owns a minority interest in
Casabella Associates which in turn, owns and operates Casabella, a 154-unit
multifamily, rental property in Scottsdale, Arizona, subject to first mortgage
financing in the original amount of $7,320,000. Until its sale on September 30,
1997, the Partnership owned and operated Mariposa, an 84-unit multifamily rental
property in Scottsdale, Arizona. The ownership of Mariposa was formerly
structured as a joint venture of which the Partnership owned a majority
interest. The Pines at Cheyenne Creek originally included the developer of
Cheyenne Creek as a joint venturer. With regard to the termination of the
Mariposa Joint Venture and the resignation of the developer from the Pines on
Cheyenne Creek Joint Venture, see Note 5 of Notes to Consolidated Financial
Statements. As further discussed below under "Pending Sales" and in Note 10 of
the Notes to Consolidated Financial Statements, each of the properties owned by
the Partnership or in which the Partnership owns an interest is under contract
to be sold to a purchaser unaffiliated with the General Partners.
Canyon View East
On March 8, 1989, the Partnership acquired a majority interest in the Canyon
View East Joint Venture. The Partnership has been designated as the managing
venturer of the joint venture. In accordance with the terms of the purchase
agreement and of the joint venture agreement, through December 31, 1997, the
Partnership has contributed total capital of $4,334,180 to the joint venture
which was used to repay a portion of the construction loan from a third party
lender, to pay costs related to the permanent loan refinancing, to cover
operating deficits incurred during the lease up period and to fund certain
capital improvements. The Partnership also incurred $523,022 of property
acquisition and organization costs which were subsequently treated as a capital
contribution to the joint venture.
The property was 89% occupied as of February 3, 1998, compared to 96%
approximately one year ago. At December 1997 and 1996, the market rents for the
various unit types were as follows:
Unit Type ............................. 1997 1996
- ----------------------------------------------- ----- ----
Two bedroom two bath .......................... $1095 $865
Three bedroom two bath ........................ 1265 980
Cheyenne Creek
On September 26, 1988, the Partnership acquired a majority interest in the Pines
on Cheyenne Creek Joint Venture. Initially, the other joint venture partners
were the developer of the property and a limited partnership affiliated with the
General Partners (the "Affiliated Partnership"). The Partnership and the
Affiliated Partnership act as co-managing venturers of the Pines on Cheyenne
Creek Joint Venture. In accordance with the terms of the purchase agreement and
the joint venture agreement, through December 31, 1997, the Partnership has
contributed total capital of $4,720,041 to the Pines on Cheyenne Creek Joint
Venture which was used to repay a portion of the construction loan from a third
party lender, to pay costs related to the refinancing of the permanent loan, to
cover operating deficits incurred during the lease up period and to fund certain
capital improvements. The Partnership also incurred $470,870 of property
acquisition and organization costs which were subsequently treated as a capital
contribution to the Cheyenne Creek Joint Venture. The Affiliated Partnership has
made proportionate capital contributions for the same purposes as outlined
above.
As of January 27, 1998, the property was 83% occupied, compared to 84%
approximately one year ago. At December 1997 and 1996, the market rents for the
various unit types were as follows:
Unit Type ............................ 1997 1996
- ---------------------------------------------- ---- ----
One bedroom den .............................. $900 $810
Two bedroom two bath ......................... 1050 925
Mariposa
On February 3, 1989, the Partnership acquired a majority interest in the joint
venture which owned and operated Mariposa. The Partnership was the managing
venturer of the Mariposa Joint Venture. In accordance with the terms of the
purchase agreement and of the joint venture agreement, through December 31,
1997, the Partnership contributed total capital of $2,870,546 to the Mariposa
Joint Venture which was used to repay a portion of the construction loan from a
third party lender, to pay costs related to the refinancing of the permanent
loan and to fund certain capital improvements. The Partnership also incurred
$430,474 of property acquisition and organization costs which were subsequently
treated as a capital contribution to the Mariposa Joint Venture.
On September 30, 1997, Mariposa was sold pursuant to the terms of the Sales
Agreement dated May 6, 1997, as amended. Mariposa was sold to Mariposa
Condominium Ventures Limited Partnership, an Arizona Limited Partnership
unaffiliated with the Partnership. The net selling price for Mariposa was
$5,037,000 subject to certain customary adjustments. Proceeds from the sale were
used for the repayment of mortgage financing in the amount of $2,862,000, paid
at closing. The Partnership recorded a gain on sale of approximately $215,000.
Casabella
On September 28, 1990, the Partnership purchased an approximate 38% interest in
Casabella Associates ("Associates"), a general partnership consisting of the
Partnership and two other affiliated partnerships. Associates was formed to
acquire a majority interest in the Casabella Joint Venture which was formed to
own and operate Casabella. Associates was designated as the managing partner of
Casabella. The Partnership accounts for its investment in Associates utilizing
the equity method of accounting. Under the terms of the purchase, the
Partnership contributed $1,800,000 to Associates. In addition to its $1,800,000
contribution to Associates, the Partnership incurred $268,861 of acquisition
expenses.
As of January 27, 1998, the property was 94% occupied, compared to 99%
approximately one year ago. At December 31, 1997 and 1996, the market rents for
the various unit types were as follows:
Unit Type ............................. 1997 1996
- ---------------------------------------------- ------ ------
One bedroom two bath w/den ................... $ 950 $ 820
Two bedroom two bath ......................... 1,160 950
Two bedroom two bath w/den ................... 1,225 1,185
<PAGE>
Pending Sales
The following table sets forth certain information regarding the Partnership's
remaining properties and the pending purchase and sale agreements ("Purchase
Agreements").
<TABLE>
Purchase Agreements
Projected
Mortgage
Property Name and Location Indebtedness Purchase Closing
at 3/30/98 Price Purchaser Date(1)
- ------------------------------
<S> <C> <C>
Canyon View East, $3,824,280 $6,648,503 Tucson Realty Holding Co. Inc. 4/24/98(3)
Tucson, AZ(2)
- ------------------------------
Cheyenne Creek, $3,114,835 $6,300,000 DRA Advisors, Inc. 4/30/98
Colorado Springs, CO(4)
- ------------------------------
Casabella, $6,734,895 $11,700,000 JPR Capital LLC (6)
Scottsdale, AZ(5)
(1) Subject to the consent of the limited partners to the Dissolution.
(2) The Partnership owns a joint venture interest in Canyon View East Joint Venture which holds fee simple
title to this property. The Partnership's co-venturers are unaffiliated with the Partnership and the
General Partners. No co-venturer will be entitled to receive any portion of the proceeds of the sale of
Canyon View East. Under the terms of the Canyon View East Joint Venture Agreement, the Partnership's
co-venturers (or any of them) were granted a right of first refusal to purchase Canyon View East on the
same terms and conditions as an accepted third party offer to purchase the property. With respect to
the proposed sale to Tucson Realty Holding Co. Inc. ("TRH"), the co-venturers had until the close of
business on March 13, 1998 to exercise the right of first refusal on the terms contained in the Canyon
View Purchase Agreement. On March 13, 1998, one of the co-venturers purported to exercise the right of
first refusal. The Partnership believes, and has asserted, that the purported exercise was not in
conformity with the material terms and conditions of the Canyon View Purchase Agreement and, therefore,
that the right of first refusal lapsed without exercise. Accordingly, the Partnership is proceeding to
close the sale of Canyon View East to TRH pursuant to the Canyon View Purchase Agreement. The
co-venturer has filed a lawsuit claiming that it, not TRH, has the right to acquire Canyon View East.
The lawsuit seeks specific performance of the right of first refusal to require the Partnership to sell
the property to the co-venturer or, if the court will not grant specific performance, monetary damages
in an amount to be proven at trial. In addition, the co-venturer has filed a lis pendens on the
property as a means of prohibiting its sale to TRH. The Partnership intends to seek to expunge the lis
pendens and to defend against the claims of the co-venturer. Although the Partnership believes that the
pending lawsuit has no merit, it could materially delay the Partnership's sale of Canyon View East.
Canyon View East will be sold together with an adjacent property which is owned by a joint venture in
which a public limited partnership of which the General Partners or their affiliates are the general
partners is the managing venturer. Accordingly, the sale of Canyon View East is also conditioned upon
the consent of the limited partners of the affiliated partnership to the dissolution of such
partnership. The $16,750,000 total purchase price for the two adjacent properties was allocated between
the two joint ventures based on gross rent potential of the two properties.
(3) The Closing Date may occur earlier than the date indicated if the
consent of the limited partners to the Dissolution is received prior
thereto.
(4) The Partnership owns an approximate 82% joint venture interest in the
Pines at Cheyenne Creek JointVenture which holds fee simple title to
this property. The Partnership's co-venturer is a private limited
partnership of which the General Partners or their affiliates are the
general partners. A former joint venture partner in the joint venture
retained an economic interest in the property's cash flow and sales
proceeds under certain circumstances. The former joint venture partner
will not be entitled to receive any portion of the proceeds of the sale
of Cheyenne Creek.
(5) The Partnership owns an approximate 38% interest in Associates, a general partnership which holds fee
simple title to the property. The Partnership's share of the net proceeds from the sale of Casabella is
estimated to be approximately $838,563. The Partnership's partners in Associates are two public
limited partnerships of which the General Partners or their affiliates are the general partners.
Accordingly, the sale of Casabella is also conditioned upon the consent of the limited partners of the
affiliated partnerships to the dissolution of such partnerships. Associates' former joint venture
partner in the joint venture which previously held title to the property retained an economic interest
in the property's cash flow and sales proceeds under certain circumstances. The former joint venture
partner will not be entitled to receive any portion of the proceeds of the sale of Casabella.
(6) Approximately 90 days after the limited partner consents described in note (5) above are received, but
not later than June 15, 1998.
</TABLE>
Each Purchase Agreement provides that the purchaser has the right to conduct its
"due diligence" review of the property. This review includes, but is not limited
to, a physical inspection and examination of title and environmental matters.
During the due diligence period, each purchaser has the customary right to
withdraw its offer for any reason. Because each of the property sales is subject
to the respective purchaser's due diligence review of the property, there can be
no assurance that any or all proposed sales described above will actually occur.
Alternatively, as is customary in similar real estate transactions, if, during
the due diligence period, the purchaser identifies conditions which are
unacceptable to it, the purchaser may seek a purchase price adjustment, which
the General Partners would consider and negotiate as they deem appropriate. Each
Purchase Agreement provides that in the event that the purchaser defaults by
failing to close following the end of the due diligence period, the Partnership
will be entitled to retain the purchaser's deposit as liquidated damages.
ITEM 3. LEGAL PROCEEDINGS
There are no pending material legal proceedings to which the Partnership or any
joint venture in which it owns an interest is a party, or of which any of the
properties is subject. Although the General Partners do not believe it to be
material or with merit, for information regarding a lawsuit related to the
pending sale of Canyon View East, see the discussion in note (2) to the table
under the subheading "Pending Sales" in Item 2 above.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1997.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The transfer of Units is subject to certain limitations contained in the
Partnership Agreement. There is no public market for the Units and it is not
anticipated that any such public market will develop.
The number of holders of Units as of December 31, 1997 was 1,849.
Distributions are made to the Partners on a quarterly basis based upon Net Cash
from Operations, as calculated under Section 10 of the Partnership Agreement. On
December 29, 1997, proceeds from the sale of Mariposa were distributed as return
of capital. Total cash distributions to the Limited Partners for 1997 and 1996
were paid as follows:
Date of
Quarter Ended ................................... Payment Amount
- --------------------------------------------- ------------------ -----------
March 31, 1996 ............................. May 15, 1996 $ 46,204
June 30, 1996 .............................. August 15, 1996 $ 46,204
September 30, 1996 ......................... $ -0-
December 31, 1996 .......................... $ -0-
March 31, 1997 ............................. $ -0-
June 30, 1997 .............................. $ -0-
September 30, 1997 ......................... $ -0-
December 31, 1997 .......................... December 29, 1997 $ 1,663,335
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Partnership and consolidated
subsidiaries has been derived from consolidated financial statements audited by
Coopers & Lybrand, LLP, whose reports for the periods ended December 31, 1997,
1996 and 1995 are included elsewhere in the Form 10K and should be read in
conjunction with the full consolidated financial statements of the Partnership
including the Notes thereto.
<TABLE>
Year Ended
-------------------------------------------------------------------------
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Rental income $2,344,767 $2,497,278 $2,668,640 $2,616,008 $2,448,937
Net income (loss) ($936,619) ($568,209) ($105,066) ($83,198) ($365,788)
Net income (loss) allocated to Partners:
Limited Partners - Per Unit - basic and
diluted:
Aggregate 36,963 Units ($27.38) ($15.22) ($2.81) ($2.23) ($9.80)
General Partners ($75,403) ($5,682) ($1,051) ($832) ($3,658)
Cash distributions to Partners:
Limited Partners:
Aggregate 36,963 Units $45.00 $3.75 $9.15 $13.50 $9.00
General Partners - $2,829 $6,902 $10,184 $6,789
Total assets $14,419,602 $20,190,066 $20,996,900 $21,434,192 $22,138,698
Long term obligations $6,960,055 $9,890,787 $9,991,674 $10,083,673 $10,166,105
Long term obligations become due in 1998. The Partnership intends to sell the
properties prior to the due date. See Item 7 below.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning the
General Partners' expectations regarding future financial performance and future
events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
Liquidity; Capital Resources
During its public offering in 1987 and 1988, the Partnership admitted 1,918
investors who purchased a total of 36,963 Units aggregating $18,481,500. These
offering proceeds, net of organizational and offering costs of $2,772,225,
provided $15,709,275 of net proceeds to be used for the purchase of
income-producing residential properties, including related fees and expenses,
and working capital reserves. The Partnership has expended $14,689,033 to (i)
acquire its interests in the Pines on Cheyenne Creek Joint Venture, the Mariposa
Joint Venture, the Canyon View East Joint Venture and Associates, (ii) to pay
acquisition expenses, including acquisition fees to the General Partners, (iii)
pay costs associated with the refinancing of the permanent loans for Cheyenne
Creek, Mariposa and Canyon View East and (iv) to cover operating deficits
incurred during the initial lease up period. The remaining net proceeds of
$1,020,242 were used to establish working capital reserves sufficient to meet
the future needs of the Partnership, including contributions that may be
required at the various joint ventures, as determined by the General Partners.
As of December 31, 1997, $666,512 cumulatively was contributed to the joint
ventures for this purpose.
In addition to the proceeds generated from the public offering, the Partnership
has utilized external sources of financing at the joint venture level to
purchase properties. The Partnership Agreement limits the aggregate mortgage
indebtedness which may be incurred in connection with the acquisition of
Partnership properties to 80% of the purchase price of such properties.
On September 30, 1997, Mariposa was sold pursuant to the terms of a Sales
Agreement and Escrow Instructions, dated as of May 6, 1997 as amended. Mariposa
was sold to Mariposa Condominium Ventures Limited Partnership, an Arizona
limited partnership unaffiliated with the Partnership. The net purchase price
for Mariposa was $5,037,000 subject to certain customary adjustments. The
proceeds were used for the repayment of mortgage financing in the amount of
$2,862,000 paid at closing. The Partnership recorded a gain on sale of $215,000.
The working capital reserves of the Partnership consisted of cash and cash
equivalents and short-term investments. Together these amounts provide the
Partnership with the necessary liquidity to carry on its day-to-day operations
and to make necessary contributions to the various joint ventures. In 1997, the
aggregate net increase in working capital reserves was $150,609. The increase
resulted primarily from proceeds from the sale of Mariposa of $5,037,417, offset
by $2,930,731 of principal payments on mortgage notes payable, distributions to
partners of $1,663,335, $240,400 of fixed asset additions, loan refinancing
costs of $33,780 and cash used in operations of $15,091.
In 1996, the aggregate net decrease in working capital reserves was $113,850.
The decrease resulted primarily from cash provided by operations of $1,922,
contributions from the minority interest of $6,113, proceeds from maturities of
short term investments of $200,329, and distributions of $180,311 received from
the Partnership, offset by $236,642 of fixed asset additions, distributions to
partners of $141,441, distributions to the minority interest of $30,795 and
principal payments on mortgage notes payable of $100,887.
With regard to certain balloon payments on existing first mortgage debt (see
Note 7 of the Notes to Consolidated Financial Statements) on the Partnership's
properties which are due and payable in 1998, the General Partners anticipate
repaying such loans utilizing a portion of the sales proceeds from the pending
sales of the properties. See Item 2 above. In the event that one or more of the
pending sales is not consummated, the General Partners will seek to renegotiate
these mortgage notes with its existing lenders or seek new sources of financing
for these properties. To date, the General Partners have neither sought to
extend or renegotiate the existing mortgage debt nor have they sought new
financing for the properties and there can be no assurance that they would be
successful in doing so. The General Partners believe that existing cash flows
from the properties will be sufficient to support a level of borrowing that is
at least equal to amounts outstanding as of December 31, 1997. If the general
economic climate for real estate in these respective locations were to
deteriorate resulting in an increase in interest rates for mortgage financing or
a reduction in the availability of real estate mortgage financing or a decline
in the market values of real estate it may affect the Partnership's ability to
complete these refinancings. See also projected 1998 operating results.
In the event that Partnership properties are not sold pursuant to the Purchase
Agreements, the Partnership would continue to operate the properties until
substitute sales could be negotiated and consummated. The Partnership's ability
to generate cash adequate to meet its needs is dependent primarily on the
successful operations of its real estate investments. Such ability may also be
dependent upon the future availability of bank borrowings, and upon the future
refinancing and sale of the Partnership's real estate investments and the
collection of any mortgage receivable which may result from such sales. These
sources of liquidity will be used by the Partnership for payment of expenses
related to real estate operations, debt service and professional and management
fees and expenses. Net Cash From Operations and Net Proceeds, if any, as defined
in the Partnership Agreement, will then be available for distribution to the
Partners in accordance with Section 10 of the Partnership Agreement. The General
Partners believe that the current working capital reserves together with
projected cash flows for 1998 are adequate to meet the Partnership's operating
cash needs in the coming year if the Partnership is required to continue to own
and operate its properties assuming the existing mortgage debt can be extended,
renegotiated or
Results of Operations
For the year ended December 31, 1997, the Partnership's operating results were
comprised of its share of the income (losses) from Cheyenne Creek, Mariposa
(through the date of sale), the Canyon View East Joint Venture and the
Partnership's share of the income from Casabella Associates, as well as
partnership level interest income earned on its short-term investments, reduced
by administrative expenses. A summary of these operating results (unaudited)
appears below:
<TABLE>
Cheyenne Canyon Partnership Consolidated
Creek Mariposa View East Level Totals
<S> <C> <C> <C> <C> <C>
Revenue $900,213 $768,652 $894,780 $39,263 $2,602,908
Expenses:
General and administrative - - - 216,339 216,339
Operating Expense 476,076 324,068 392,762 1,048 1,193,954
Depreciation and amortization 197,439 98,061 174,511 - 470,011
Impairment 861,066 861,066
Interest 316,663 232,920 378,700 - 928,283
Equity in loss from partnership - - - 45,244 45,244
--------------- -------------- -------------- ------------ --------------
1,851,244 655,049 945,973 262,631 3,714,897
--------------- -------------- -------------- ------------ --------------
Net income (loss) before minority interest (951,031) 113,603 (51,193) (223,368) (1,111,989)
--------------- -------------- -------------- ------------ --------------
Minority Interests' share of net loss 175,370 - - - 175,370
--------------- -------------- -------------- ------------ --------------
Net income (loss) ($775,661) $113,603 ($51,193) ($223,368) ($936,619)
=============== ============== ============== ============ ==============
</TABLE>
<PAGE>
For the year ended December 31, 1996, the Partnership's operating results were
comprised of its share of the income (losses) from the Pines on Cheyenne Creek
Joint Venture, the Canyon View East Joint Venture and the Mariposa Joint
Ventures, and the Partnership's share of the income from Casabella Associates,
as well as partnership level interest income earned on its short-term
investments, reduced by administrative expenses. A summary of these operating
results (unaudited) appears below:
<TABLE>
Cheyenne Canyon Partnership Consolidated
Creek Mariposa View East Level Totals
<S> <C> <C> <C> <C> <C>
Revenue $974,124 $712,602 $812,990 $15,808 $2,515,524
Expenses:
General and Administrative - 383 10 353,242 353,635
Operating Expense 428,227 363,463 404,581 10,743 1,207,014
Depreciation and amortization 183,482 118,497 166,693 - 468,672
Interest 317,456 279,524 380,305 - 977,285
Equity in (income) loss from partnership - - - 68,837 68,837
--------------- ----------- ------------ ------------- --------------
929,165 761,867 951,589 432,822 3,075,443
--------------- ----------- ------------ ------------- --------------
Net income (loss) before minority interest 44,959 (49,265) (138,599) (417,014) (559,919)
Minority Interests' share of net income (8,290) - - - (8,290)
--------------- ----------- ------------ ------------- --------------
Net income (loss) $36,669 ($49,265) ($138,599) ($417,014) ($568,209)
=============== =========== ============ ============= ==============
</TABLE>
For the year ended December 31, 1995, the Partnership's operating results were
comprised of its share of the income (losses) from the Pines on Cheyenne Creek
Joint Venture, the Canyon View East Joint Venture and the Mariposa Joint
Ventures, and the Partnership's share of the income from Casabella Associates,
as well as partnership level interest income earned on its short-term
investments, reduced by administrative expenses. A summary of these operating
results (unaudited) appears below:
<TABLE>
The Canyon Partnership Consolidated
Pines Mariposa View East Level Totals
<S> <C> <C> <C> <C> <C>
Revenue $1,010,840 $767,057 $892,366 $36,079 $2,706,342
Expenses:
General and administrative 7,254 7,200 6,954 186,662 208,070
Operating Expense 479,676 320,225 379,117 - 1,179,018
Depreciation and amortization 171,560 114,438 159,599 - 445,597
Interest 320,438 282,262 384,030 - 986,730
Equity in (income) loss from partnership - - - (13,892) (13,892)
----------- -------------- ---------------------------------------
978,928 724,125 929,700 172,770 2,805,523
------------ ----------- -------------------------------------------
Net income (loss) before minority interest 31,912 42,932 (37,334) (136,691) (99,181)
Minority Interests' share of net income (5,885) - - - (5,885)
------------ ----------- -------------------------------------------
Net income (loss) $26,027 $42,932 ($37,334) ($136,691) ($105,066)
============ =========== ===========================================
</TABLE>
Comparison of 1997 and 1996 Operating Results:
Revenue increased by $87,384 or 4% primarily due to the fact that Mariposa was
sold on September 30, 1997. The Partnership recorded a gain from the sale of
Mariposa of $215,233 which was offset by a decrease in rental revenue from
Mariposa of $127,849 since only nine months are presented. Operating expenses
decreased by $13,060 or 1%. Cheyenne Creek and Canyon View's operating expenses
increased by $36,030 primarily due to one-time costs of preparing the properties
for disposition, including an increase in repairs, maintenance, advertising and
promotion expense. However, Mariposa's operating expenses decrease by $39,395
since only nine months of cost are represented. General and administrative
expenses decreased by $137,296 primarily due to the Evans Withycombe and
Highland termination fees of $65,715 in 1996. A contributing factor to the
additional reduction of $71,581 was due in part to the re-stabilization of costs
associated with Partnership administrative, financial and investor services
functions following the office relocation to Colorado Springs. In addition, as
discussed in Note 2 of the Notes to Consolidated Financial Statements, the
Partnership recorded an impairment of $861,066 on Cheyenne Creek.
Comparison of 1996 and 1995 Operating Results
In accordance with its disposition strategy, the Partnership incurred one time
costs associated with the Evans Withycombe termination ($65,715), the Highland
termination (($8,600) and their related legal costs. (Refer to Note 5 of the
Consolidated Financial Statement.) In addition, the Partnership incurred
one-time costs associated with its property interior and exterior refurbishment
program, the change in on-site management following the Evans Withycombe
termination, the outsourcing of much of the Partnership's administration work to
an administrative agent and the relocation of the remaining administration,
financial and investor services functions to a more cost efficient location in
Colorado Springs, Colorado. Consequently, competitive pressures and
disposition-related activities led to rental operating expenses (including
advertising, promotion, apartment locator and concession costs) to increase by
$27,996 or 2% over the prior year and total general and administrative expenses
of the Partnership increased $145,565 (70%) over the prior year. As a result of
the factors described above, distributions to partners decreased $199,599 from
$338,211 in 1995 to $138,612 in 1996.
Projected 1998 Operating Results:
As further discussed in Item 2 above and in Note 10 of the Notes to the
Consolidated Financial Statements, each of the properties owned by the
Partnership or in which the Partnership owns an interest is under contract to be
sold to a purchaser unaffiliated with the General Partners. Under the terms of
the Purchase Agreements, it is anticipated that the closings would occur during
the second quarter of 1998. If the sales do occur as anticipated, the
Partnership and its related entities will likely be liquidated in 1998. Although
there can be no assurance the Partnership will dispose of any or all of its
properties during 1998 pursuant to the Purchase Agreements or otherwise, if the
Dissolution is approved by the Limited Partners, the Partnership will continue
to seek to dispose of its properties. In the event that the Partnership were to
dispose of any property during 1998, operating results of the Partnership would
vary significantly from those achieved in prior periods.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership is a limited partnership and, as such, has no executive officers
or directors. The General Partners of the Partnership are Stephen B. Boyle and
GP L'Auberge Communities, L.P., a California limited partnership, of which
L'Auberge Communities Inc. (formerly known as Berry and Boyle Inc.)("L'Auberge")
is the general partner.
Stephen B. Boyle
Stephen B. Boyle, age 57, is President, Executive Officer and Director of
L'Auberge and a general partner and co-founder of LP L'Auberge Communities, a
California limited partnership (formerly Berry and Boyle), a limited partnership
formed in 1983 to provide funds to various affiliated general partners of real
estate limited partnerships, one of which is GP L'Auberge Communities, L.P.
GP L'Auberge Communities, L.P.
GP L'Auberge Communities, L.P. was formed in 1983 for the purpose of
acting as a general partner in partnerships formed to invest directly or
indirectly in real property. L'Auberge is the sole general partner of GP
L'Auberge Communities, L.P. The following sets forth certain biographical
information with respect to the executive officers and directors of L'Auberge
other than Stephen B. Boyle who is discussed above. There are no familial
relationships between or among any officer or director and any other officer or
director.
Name Position
- ---------------------------
Stephen B. Boyle President, Executive Officer and Director
- ---------------------------
Earl C. Robertson Executive Vice President and Chief Financial Officer
- ---------------------------
Donna Popke Vice President and Secretary
Earl C. Robertson, age 50, has been Executive Vice President of L'Auberge since
April 1995 and its Chief Financial Officer of L'Auberge since May 1996. Mr.
Robertson joined L'Auberge in April 1995 as Executive Vice President. Prior to
joining L'Auberge, Mr. Robertson had over 20 years experience as a senior
development officer, partner and consultant in several prominent real estate
development companies, including Potomac Investment Associates, a developer of
planned golf course communities nationwide, where he was employed from 1989 to
June 1993. He also served as a consultant to Potomac Sports Properties from July
1993 to April 1995. Mr. Robertson was also a key member of the management team
that developed the nationally acclaimed Inn at the Market in Seattle.
Donna Popke, age 37, has been Vice President of L'Auberge since November 1995.
Ms. Popke joined L'Auberge in June 1994 as Accounting Manager. Prior to joining
L'Auberge, Ms. Popke was Accounting Manager for David R. Sellon & Company, a
Colorado Springs land development company, from August 1989 to June 1994 and for
Intermec of the Rockies from September 1985 to July 1989.
ITEM 11. EXECUTIVE COMPENSATION
None of the General Partners or any of their officers or directors received any
compensation from the Partnership. See Item 13 below with respect to a
description of certain transactions of the General Partners and their affiliates
with the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 21, 1998, no person of record owned or was known by the General
Partners to own beneficially more than 5% of the Partnership's outstanding
Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1997, the Partnership paid or accrued
remuneration to the General Partners or their affiliates as set forth below. In
addition to the information provided herein, certain transactions are described
in Note 9 in the Notes to Financial Statements appearing in Appendix A, which
are included in this report and are incorporated herein by reference thereto.
Net Cash From Operations distributed during 1997 to the General Partners $ 0
Allocation of Income or Loss to the General Partners ............... ($75,403)
Property management fees paid to an affiliate of the General Partners $ 92,249
Reimbursements to General Partners .................................. $ 65,240
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1,2 See Page F-2
3 See Exhibit Index contained herein
(b) Reports on Form 8-K
The Partnership has filed the Purchase and Sale Agreement
and Escrow Instructions for the sale of Mariposa on Form 8-K on October
13, 1997.
(c) See Exhibit Index contained herein
(d) See Page F-2.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 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.
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P., A California Limited Partnership,
General Partner
By: L'Auberge Communities, Inc., its General Partner
By: ____/s/ Earl C. Robertson________________
Earl C. Robertson, Executive Vice President and
Chief Financial Officer
Date: March 26, 1998
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/ Stephen B. Boyle _____ Director, President and March 26, 1998
STEPHEN B. BOYLE Principal Executive
Officer of L'Auberge
Communities, Inc.
___/s/ Earl C. Robertson _ Executive Vice President and March 26, 1998
EARL C. ROBERTSON Principal Financial Officer of
L'Auberge Communities, Inc.
<PAGE>
F-8
APPENDIX A
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
---------
CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the years ended December 31, 1997 and 1996
<PAGE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants ........................................ F-3
Consolidated Balance Sheets at December 31, 1997 and 1996 .. ............. F-4
Consolidated Statements of Operations for
the years ended December 31, 1997, 1996 and 1995........................ F-5
Consolidated Statements of Partners' Equity (Deficit) for the years ended
December 31, 1997, 1996 and 1995 ................... ..................... F-6
Consolidated Statements of Cash Flows for
the years ended December 31, 1997, 1996, and 1995................. F-7 -- F-8
Notes to Consolidated Financial Statements ....................... F-9 -- F-20
All Schedules are omitted as they are not applicable, not required, or the
information is provided in the financial statements or the notes thereto.
<PAGE>
Report of Independent Accountants
To the Partners of
Development Partners II
(A Massachusetts Limited Partnership):
We have audited the accompanying consolidated balance sheets of
Development Partners II (A Massachusetts Limited Partnership) and subsidiaries
as of December 31, 1997 and 1996, and the related consolidated statements of
operations, partners' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the General Partners of the Partnership. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners of the Partnership, 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Development Partners II (A Massachusetts Limited Partnership) and subsidiaries
as of December 31, 1997 and 1996 and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
As discussed in Note 10, the General Partners of the Partnership have
entered into sales agreements to sell all of the Partnership's properties. If
closing of these sales were to occur, any proceeds from the sale will be
allocated to the Partners in accordance with the terms of the Partnership
Agreement and the Partnership will likely be liquidated.
Coopers & Lybrand, L.L.P.
Denver, Colorado
February 27, 1998
<PAGE>
<TABLE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
---------------
ASSETS
1997 1996
---- ----
Assets held for sale/Property, at cost (Notes 3,10)
<S> <C> <C>
Land $3,722,346 $5,150,693
Buildings and improvements 11,998,544 15,989,689
Equipment, furnishings and fixtures 1,875,577 2,311,300
-------------- ---------------
17,596,467 23,451,682
Less accumulated depreciation and impairment (4,842,299) (4,807,665)
-------------- ---------------
12,754,168 18,644,017
Cash and cash equivalents 469,355 318,746
Deposits and prepaid expenses 1,446 2,512
Accounts receivable 6,730 350
Investment in partnership 1,165,443 1,210,686
Deferred expenses, net of accumulated
amortization of $536,426 and $513,417 22,460 13,755
-------------- ---------------
Total assets $14,419,602 $20,190,066
============== ===============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Mortgage notes payable $6,960,055 $9,890,787
Accounts payable 89,606 101,716
Accrued expenses 137,348 176,354
Due to affiliates (Note 9) 16,787 17,430
Rents received in advance 850 2,607
Tenant security deposits 55,025 60,385
-------------- ---------------
Total liabilities 7,259,671 10,249,279
Minority Interest 557,555 738,457
General Partners' deficit (11,160) (86,563)
Limited Partners' equity 6,613,536 9,288,893
-------------- ---------------
Total liabilities and partners' equity $14,419,602 $20,190,066
============== ===============
<PAGE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1997, 1996 and 1995
---------------
1997 1996 1995
---- ---- ----
Revenue:
<S> <C> <C> <C>
Rental income $2,344,767 $2,497,278 $2,668,640
Interest income 42,908 18,246 37,702
Gain from sale of property (Note 8) 215,233 - -
-------------- --------------- ---------------
2,602,908 2,515,524 2,706,342
Operating Expenses 1,193,954 1,207,014 1,179,018
Interest 928,283 977,285 986,730
Depreciation and amortization 470,011 468,672 445,597
Impairment - Cheyenne Creek (Note 2) 861,066 - -
General and administrative 216,339 353,635 208,070
Equity in income (loss) from partnership 45,244 68,837 (13,892)
-------------- --------------- ---------------
3,714,897 3,075,443 2,805,523
-------------- --------------- ---------------
Net loss before minority interest (1,111,989) (559,919) (99,181)
Minority interests' equity in
subsidiary (income) loss 175,370 (8,290) (5,885)
-------------- --------------- ---------------
Net loss ($936,619) ($568,209) ($105,066)
============== =============== ===============
Net income (loss) allocated to:
General Partners $75,403 ($5,682) ($1,051)
Basic and diluted per unit net loss allocated to Investor
Limited
Partner interest:
36,963 units issued ($27.38) ($15.22) ($2.81)
<PAGE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the years ended December 31, 1997, 1996, and 1995
---------------
Investor Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1994 (70,099) 10,432,258 10,362,159
Cash distributions (6,902) (338,211) (345,113)
Net loss (1,051) (104,015) (105,066)
--------------- -------------- ---------------
Balance at December 31, 1995 (78,052) 9,990,032 9,911,980
Cash distributions (2,829) (138,612) (141,441)
Net loss (5,682) (562,527) (568,209)
--------------- -------------- ---------------
Balance at December 31, 1996 (86,563) 9,288,893 9,202,330
Cash distributions - (1,663,335) (1,663,335)
Net income (loss) 75,403 (1,012,022) (936,619)
--------------- -------------- ---------------
Balance at December 31, 1997 ($11,160) $6,613,536 $6,602,376
=============== ============== ===============
<PAGE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996 and 1995
---------------
1997 1996 1995
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Interest received $42,908 $17,516 $50,855
Cash received from rental income 2,337,650 2,499,640 2,658,246
General and administrative expenses (230,935) (339,475) (206,486)
Operating expense (1,224,522) (1,198,060) (1,116,194)
Interest paid (940,192) (977,699) (987,104)
--------------- -------------- --------------
Net cash (used) provided by operating activities (15,091) 1,922 399,317
Cash flows from investing activities:
Proceeds from sale of property 5,037,417 - -
Capital Improvements (240,400) (236,642) (488,268)
Proceeds from maturities of short-term investments - 200,329 635,346
Distributions received from partnership - 180,311 70,472
Deferred costs - 9,300 15,553
--------------- -------------- --------------
Net cash provided by investing activities 4,797,017 153,298 233,103
Cash flows from financing activities:
Distributions to partners (1,663,335) (141,441) (345,113)
Cash paid for loan refinancing (33,780)
- -
Principal payments on mortgage notes payable (2,930,731) (100,887) (91,999)
Distributions paid to the minority interest (5,532) (30,795) (15,490)
Contributions from the minority interest 6,113 58,034
-
Cash paid for deposits 2,061 (2,060) 1,415
-------------- -------------- ---------------
Net cash used by financing activities (4,631,317) (269,070) (393,153)
-------------- -------------- ---------------
Net increase (decrease) in cash and cash equivalents 150,609 (113,850) 239,267
Cash and cash equivalents at beginning of year 318,746 432,596 193,329
-------------- -------------- ---------------
Cash and cash equivalents at end of year $469,355 $318,746 $432,596
============== ============== ===============
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996 and 1995
---------------
Reconciliation of net loss to net cash (used) provided by operating activities:
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net loss ($936,619) ($568,209) ($105,066)
Adjustments to reconcile net loss to net cash (used)
provided by operating activities:
Depreciation and amortization 470,011 468,672 445,597
Impairment - Cheyenne Creek 861,066 - -
Gain from sale of property (215,233) - -
Equity in (income) loss from partnership 45,244 68,837 (13,892)
Minority interests' equity in subsidiary income (loss) (175,370) 8,290 5,885
Change in assets and liabilities net of effects
of investing and financing activities:
(Increase) decrease in accounts receivable (6,380) 2,217 10,336
Decrease in deposits and prepaid expenses 1,066 2,020 -
(Decrease) increase in accounts payable and accrued (51,116) 11,981 66,781
expenses
(Decrease) increase in due to affiliates (643) 5,752 70
(Decrease) increase in rents received in advance (1,757) 2,607 (4,988)
Decrease in tenant security deposits (5,360) (245) (5,406)
-------------- -------------- ---------------
Net cash (used) provided by operating activities ($15,091) $1,922 $399,317
============== ============== ===============
</TABLE>
<PAGE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1. Organization of Partnership:
Development Partners II (A Massachusetts Limited Partnership) (the
"Partnership"), formerly Berry and Boyle Development Partners II, was formed on
January 9, 1987. GP L'Auberge Communities, L.P., a California Limited
Partnership, (formerly Berry and Boyle Management) and Stephen B. Boyle are the
General Partners. In September, 1995, with the consent of Limited Partners
holding a majority of the outstanding Units, as well as the consent of the
mortgage lenders for the Partnership's three properties, Richard G. Berry
resigned as a general partner of the Partnership. Except under certain limited
circumstances upon termination of the Partnership, the General Partners are not
required to make any additional capital contributions. The General Partners or
their affiliates will receive various fees for services and reimbursement for
various organizational and selling costs incurred on behalf of the Partnership.
On February 13, 1987 the Securities and Exchange Commission declared the
Partnership's public offering of up to 60,000 units of Limited Partnership
Interests at $500 per unit (the "Units") effective and the marketing and sale of
the Units commenced shortly thereafter. The initial closing of the offering took
place on June 30, 1987 at which time the holders of 5,231 Units were admitted to
the Partnership. The Partnership continued to admit subscribers monthly
thereafter until August 10, 1988 when it terminated the offering having admitted
1,918 investors acquiring 36,963 Units totaling $18,481,500. There were 1,849
investors at December 31, 1997.
The Partnership will continue until December 31, 2010, unless earlier terminated
by the sale of all, or substantially all, of the assets of the Partnership, or
as otherwise provided in the Partnership Agreement (See Note 10.)
2. Significant Accounting Policies:
A. Basis of Presentation
The consolidated financial statements include the accounts of the
Partnership and its subsidiaries: The Pines on Cheyenne Creek Joint
Venture, Mariposa Joint Venture and Canyon View East Joint Venture. All
intercompany accounts and transactions have been eliminated in
consolidation. The Partnership accounts for its investment in Casabella
Associates utilizing the equity method of accounting. The Partnership's
investment account is adjusted to reflect its pro rata share of
profits, losses and distributions from Casabella Associates. Refer to
Notes 5 and 6 regarding the termination of the joint ventures and sale
of Mariposa.
The Partnership follows the accrual basis of accounting.
B. Cash and Cash Equivalents
The Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. The
carrying value of cash and cash equivalents approximates fair value. It
is the Partnership's policy to invest cash in income-producing
temporary cash investments. The Partnership mitigates any potential
risk from such concentration of credit by placing investments with high
quality financial institutions.
2. Significant Accounting Policies, continued
C. Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and 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.
D. Depreciation
Depreciation is provided for by the use of the straight-line method
over estimated useful lives as follows:
Buildings and improvements 39-40 years
Equipment, furnishings and fixtures 5-15 years
E. Deferred Expenses
Costs of obtaining the mortgages on the properties are being amortized
over the mortgage term using the straight-line method, which
approximates the effective interest method.
F. Income Taxes
The Partnership is not liable for Federal or state income taxes because
Partnership income or loss is allocated to the Partners for income tax
purposes. If the Partnership's tax returns are examined by the Internal
Revenue Service or state taxing authority and such an examination
results in a change in Partnership taxable income (loss), such change
will be reported to the Partners.
G. Rental Income
Leases require the payment of rent in advance, however, rental income
is recorded as earned.
H. Long-Lived Assets
In 1996, the Partnership adopted Statement of Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed of." SFAS 121 requires that
long-lived assets be reviewed for impairment whenever events or changes
in circumstances indicate that their carrying value may not be
recoverable. The adoption of SFAS 121 had no effect on reported results
in 1996. Upon determination that a permanent impairment has occurred,
rental properties are reduced to fair value.
2. Significant Accounting Policies, continued
In the fourth quarter of 1997, the partnership recorded a charge to
operations of $861,066 related to impairment in its carrying value of
Cheyenne Creek. This impairment charge is based on the Partnership's
determination of fair market value as of the balance sheet date. The
Partnership entered into a sale agreement and is currently pursuing the
sale of Cheyenne Creek. As further discussed in Note 10, for the year
ended December 31, 1997, the Partnership recorded its assets at the
lower of carrying value or net realizable value and has classified its
properties as Held for Sale.
For the year ended December 31, 1996 permanent impairment conditions
did not exist at any of the Partnership's properties.
I. Reclassification
Certain items in the financial statements for the years ended December
31, 1996 and 1995 have been reclassified to conform to the 1997
presentation.
J. New Accounting Standards
In 1997, the Partnership adopted Statement of Financial Accounting
Standards No. 128 (SFAS 128), "Earnings Per Share." This accounting
standard specifies new computation, presentation, and disclosure
requirements for earnings per share to be applied retroactively. Among
other things, SFAS 128 requires presentation of basic and diluted
earnings per share on the face of the income statement. The computation
of basic and diluted earnings per share was based on income available
to the Limited Partners divided by the weighted average number of units
outstanding during the period. The Partnership has no dilutive type
securities. The adoption of SFAS 128 had no effects on the per unit
results previously reported.
<PAGE>
3. Assets held for sale:
Assets held for sale consisted of the following at December 31, 1997:
<TABLE>
Initial Cost Costs
Capitalized Amount at Which Carried
to Subsequent to Acquisition at Close of Period
Partnership
------------------------------ -------------------------------------------------- ------------ -------------
Buildings Equipment, Buildings Equipment, Buildings Equipment,
Property and Furnishings and Furnishings and Furnishings
Description Land Improvements & Fixtures Land Improv. & Fixtures Land Improv. & Fixtures Accum. Total
Deprec.
- --------------------- ------------------------------ ------------------------- ------------------------- ------------ -------------
L'Auberge CheyenneCreek,
a 108-unit residential
rental complex
located in
Colo. Springs, Colo
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,865,535 $6,105,495 $657,308 $0 $47,529 $549,615 $1,865,535 $6,153,024 $1,206,923($3,011,676) $6,213,806
Canyon View East, 96-unit
residential rental
complex located in
Tucson, Az 1,844,761 5,801,389 500,895 12,050 44,131 167,759 1,856,811 5,845,520 668,654 (1,830,623) 6,540,362
-------------------------------- ------------------------ -------------------------- ------------- ---------
$3,710,296 $11,906,884 $1,158,203 $12,050 $91,660 $717,374 $3,722,346 $11,998,544 $1,875,577 ($4,842,299)$12,754,168
================================= ======================== ================================== =========== ==========
Each of the properties is encumbered by a nonrecourse mortgage note payable (see
Note 7). As of December 31, 1997 all assets are held for sale (see Note 10).
The changes in total real estate assets for the years The change in accumulated depreciation for the year ended
ended December 31, 1997, 1996, and 1995 are as December 31, 1997, 1996, and 1995 are as
follows: follows:
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Balance, beginning of $23,451,682 $23,215,040 $22,726,772 Balance, beginning of year $4,807,665 $4,359,624 $3,934,660
year
Additions during the Depreciation for the period 447,002 448,041 424,964
period:
Improvements 240,400 236,642 488,268
Impairment of Cheyenne Creek 861,066 - -
Deductions during the period:
Sale of Mariposa (6,095,615) - - Disposition of Mariposa (1,273,434) - -
------------------------------------------ -------------------------------------
Balance at end of year $17,596,467 $23,451,682 $23,215,040 Balance at end of year $4,842,299 $4,807,665 $4,359,624
========================================== =====================================
</TABLE>
4. Cash and Cash Equivalents:
Cash and cash equivalents at December 31, 1997 and 1996 consisted of the
following:
1997 1996
-------- --------
Cash on hand ........ $469,355 $107,660
Money market accounts -- 211,086
-------- --------
$469,355 $318,746
======== ========
5. Joint Venture and Property Acquisitions:
The Partnership has invested in three properties located in Scottsdale and
Tucson, Arizona and Colorado Springs, Colorado. The success of the Partnership
will depend upon factors which are difficult to predict including general
economic and real estate market conditions, both on a national basis and in the
areas where the Partnership's investments are located. The Partnership holds a
majority interest in these properties and controls the operations of the joint
venture. The Mariposa joint venture was effectively terminated on December 31,
1996. Mariposa was sold on September 30, 1997.
Cheyenne Creek
On September 26, 1988, the Partnership and a limited partnership affiliated with
the General Partners (the "Affiliated Partnership") acquired L'Auberge Cheyenne
Creek ("Cheyenne Creek"), formerly The Pines on Cheyenne Creek, a 108-unit
residential property located in Colorado Springs, Colorado and simultaneously
contributed the property to the Pines on Cheyenne Creek Joint Venture comprised
of the Partnership, the Affiliated Partnership and the property developer. The
Partnership owns a majority interest in the Pines on Cheyenne Creek Joint
Venture and, therefore, the accounts and operations of the Pines on Cheyenne
Creek Joint Venture have been consolidated into the Partnership. The Affiliated
Partnership owns an 18% interest in the Pines on Cheyenne Creek. The Partnership
and the Affiliated Partnership have been designated the co-managing joint
venture partners of the Pines on Cheyenne Creek Joint Venture and will have
control over all decisions affecting the joint venture and the property.
The co-venture partner was Highland Properties, Inc. ("Highland"), a Colorado
based residential development, construction and management firm. Highland
developed the property known as L'Auberge Cheyenne Creek.
In accordance with the terms of the purchase agreement and the joint venture
agreement, through December 31, 1997, the Partnership has contributed $4,720,041
to the Pines on Cheyenne Creek Joint Venture which was used to: (1) repay a
portion of the construction loan from a third party lender, (2) pay certain
costs related to the refinancing of the permanent loan, (3) cover operating
deficits incurred during the lease up period, and (3) fund certain capital
improvements. In addition, the Partnership funded $470,870 of property
acquisition costs which were subsequently treated as a capital contribution to
the Pines on Cheyenne Creek Joint Venture.
Net cash from operations (as defined in the joint venture agreement) was to be
distributed as available to each joint venture partner quarterly as follows:
5. Joint Venture and Property Acquisitions, continued
First, to the Partnership and the Affiliated Partnership,
proportionately, an amount equal to 11.25% per annum, noncumulative
(computed daily on a simple noncompounded basis from the date of
completion funding) of their respective capital investment (as defined
in the joint venture agreement);
Second, the balance 65.25% to the Partnership, 14.75% to the Affiliated
Partnership, and 20% to the property developer.
All losses from operations and depreciation for the Pines on Cheyenne Creek
Joint Venture were allocated 81.56% to the Partnership and 18.44% to the
Affiliated Partnership, in proportion to their respective joint venture
interest.
All profits from operations to the extent of cash distributions were first
allocated to the Partnership, the Affiliated Partnership, and the property
developer in the same proportion as the cash distributions. Any remaining
profits were allocated 65.25% to the Partnership, 14.75% to the Affiliated
Partnership, and 20% to the property developer.
In the case of certain capital transactions and distributions as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
affected by the relative balances in the individual partners' capital accounts.
On July 3, 1996, the Partnership and certain affiliates consummated an agreement
with Highland Properties, Inc. ("Highland") which separated the interests of
Highland and the Partnership, thus affording the Partnership greater flexibility
in the operation and disposition of the property. In consideration of a payment
by the Partnership, to Highland totaling $8,600, and delivery of certain mutual
releases, Highland (i) relinquished its option to exercise its rights of first
refusal with regard to the sale of the property and (ii) assigned all of its
interest in the Pines on Cheyenne Creek Joint Venture to the Partnership, (while
preserving the economic interests of the venturer in these Joint Ventures).
Highland may still share in the cash flow distributions or proceeds from sale if
certain performance levels are met.
For the years ended December 31, 1997, 1996 and 1995, The Pines on Cheyenne
Creek Joint Venture had a net loss, including impairment, of $951,031 and net
income of $44,959 and $31,912, respectively.
Mariposa
On February 3, 1989, the Partnership acquired a joint venture interest in the
Mariposa Joint Venture which owns and operates an 84-unit residential property
located in Scottsdale, Arizona known as Mariposa. Since the Partnership owns a
majority interest in the Mariposa Joint Venture, the accounts and operations of
the Mariposa Joint Venture have been consolidated into those of the Partnership.
The Partnership has been designated the managing joint venture partner of the
Mariposa Joint Venture and will have control over all decisions affecting the
Mariposa Joint Venture and the property. The Mariposa joint venture was
effectively terminated on December 31, 1996. The Partnership has eliminated the
minority interest related to this joint venture, as such, the Partnership owned
100% of the underlying assets as of December 31, 1996.
The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a
Phoenix based residential development, construction and management firm. EWI
developed the property known as Mariposa.
5. Joint Venture and Property Acquisitions, continued
In accordance with the terms of the sale agreement and the joint venture
agreement, through December 31, 1997, the Partnership has contributed $3,301,020
to the Mariposa Joint Venture, which was used to: (1) repay a portion of the
construction loan from a third party lender, (2) cover operating deficits
incurred during the lease up period, (3) pay for certain capital improvements,
(4) fund $430,474 of property acquisition costs and (5) pay certain costs
associated with the refinancing of the permanent loan.
JANUARY 1, 1996 THROUGH MAY 13, 1996
Net cash from operations (as defined in the joint venture agreement) was to be
distributed, as available, to each joint venture partner, not less often than
quarterly, as follows:
First, to the Partnership an amount equal to 10.6% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of the Partnership's capital investment (as
defined in the joint venture agreement);
Second, the balance 70% to the Partnership and 30% to the other joint
venture partner.
All losses from operations and depreciation for the Mariposa Joint Venture were
allocated 99.5% to the Partnership and 0.5% to the other joint venture partner.
All profits from operations were allocated to each joint venture partner pro
rata in accordance with the distribution of net cash from operations for such
fiscal year.
In the case of certain capital transactions and distributions as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
affected by the relative balances in the individual partners' capital accounts.
MAY 14, 1996 THROUGH SEPTEMBER 30, 1997
On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI")
which separated the interests of EWI and the Partnership, thus affording the
Partnership greater flexibility in the operation and disposition of the
properties. In consideration of a payment by the Partnership to EWI of $38,732
and for certain mutual releases, EWI (i) relinquished its contract to manage
certain Partnership properties and its option to exercise its rights of first
refusal with regard to the sale of those properties and (ii) assigned all of its
interest in the Mariposa Joint Venture to the Partnership (while preserving the
economic interests of the venturer in the Joint Venture), which resulting in the
dissolution of the Mariposa Joint Venture. EWI may still share in the cash flow
distributions or proceeds from sale if certain performance levels are met.
The Partnership sold the Mariposa property on September 30, 1997 for a net sales
price of $5,037,000 to an unaffiliated third party. A gain on sale of
approximately $215,000 was recognized in the accompanying statement of
operations. Net proceeds from the sale of $1,663,335 were distributed to the
partners based on the terms of the original Joint Venture Agreement. This
agreement provides for EWI to receive a distribution of proceeds from sale in
the event certain performance levels are met. The property did not meet these
performance levels; as such, all proceeds were distributed to existing limited
partners. The Partnership repaid first mortgage financing in the amount of
$2,862,000 at closing utilizing a portion of the proceeds of the sale. 5. Joint
Venture and Property Acquisitions, continued
For the years ended December 31, 1997, 1996 and 1995, the Mariposa had net
income, including gain on sale, of $113,603, net loss of $49,265, and net income
of $42,932, respectively.
Canyon View East
On March 8, 1989, the Partnership acquired an interest in the Canyon View East
Joint Venture which owns and operates a 96-unit residential property located in
Tucson, Arizona known as Canyon View East. Since the Partnership owns a majority
interest in the Canyon View East Joint Venture, the accounts and operations of
the joint venture have been consolidated into those of the Partnership. The
Partnership has been designated the managing joint venture partner of the Canyon
View East Joint Venture and will have control over all decisions affecting the
Canyon View East Joint Venture and the property.
In accordance with the terms of the purchase agreement and the joint venture
agreement, the Partnership has contributed $4,857,203 to the Canyon View East
Joint Venture through December 31, 1997, which was used to: (1) repay a portion
of the construction loan from a third party lender, (2) cover operating deficits
incurred during the lease up period, (3) fund $523,022 of property acquisition
costs and (5) pay certain costs associated with the permanent loan refinancing.
Net cash from operations (as defined in the joint venture agreement) is to be
distributed, as available, to each joint venture partner, not less often than
quarterly, as follows:
First, to the Partnership an amount equal to 11.25% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of the Partnership's capital investment (as
defined in the joint venture agreement);
Second, the balance 75% to the Partnership and 25% to the other joint
venture partners.
All losses from operations and depreciation for the Canyon View East Joint
Venture were allocated 100% to the Partnership.
All profits from operations were allocated to each joint venture partner in
accordance with, and to the extent of, the distribution of net cash from
operations. Any excess profits were allocated 100% to the Partnership. In the
case of certain capital transactions and distributions as defined in the joint
venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
effected by the relative balances in the individual partners' capital accounts.
For the years ended December 31, 1997, 1996 and 1995, the Canyon View East Joint
Venture had net losses of $51,193, $138,599 and $37,334, respectively.
6. Investment in Partnership:
On September 28, 1990, the Partnership contributed $1,800,000 to purchase an
approximate 38.3% interest in Casabella Associates, a general partnership among
the Partnership, Berry and Boyle Development Partners (A Massachusetts Limited
Partnership) ("DPI") and Berry and Boyle Development Partners III (A
Massachusetts Limited Partnership) ("DPIII"). In addition to its contribution
referred to above, the Partnership incurred $268,861 of acquisition costs,
including $186,300 in acquisition fees paid to the General Partners. The
difference between the partnership's carrying value of the investment in
Casabella Associates and the amount of underlying equity in net assets is
$186,300, representing a portion of the acquisition costs stated above that were
not recorded on the books of Casabella Associates.
The co-venturer partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a
Phoenix based residential development, construction and management firm. EWI is
also the developer of the Casabella property.
Supplemental financial statements for Casabella Associates are presented in an
exhibit to this 10-K.
<PAGE>
7. Mortgage Notes Payable:
All of the property owned by the Partnership is pledged as collateral for the
nonrecourse mortgage notes payable outstanding at December 31, 1997 and 1996,
which consisted of the following:
1997 1996
---------- ----------
Cheyenne Creek . $3,124,041 $3,158,647
Mariposa ....... -- 2,851,944
Canyon View East 3,836,014 3,880,196
---------- ----------
$6,960,055 $9,890,787
========== ==========
The original maturity dates for these notes were September 15, 1997.
Cheyenne Creek
On September 10, 1997, the lender extended the terms of the Cheyenne Creek
mortgage note for a period of one year. Under the modification agreement,
monthly principal and interest payments of $29,076 and fixed interest rate of
10% remain unchanged. The terms of the agreement provided for a prepayment
penalty of .5% of the outstanding loan amount in the event that the note is paid
prior to 60 days before it becomes due. The balance of the note will be due on
September 15, 1998.
Mariposa
The original maturity date for this note was September 15, 1997. On September
10, 1997, the lender extended the terms of this mortgage note for a period of
one year. The monthly principal and interest payments for Mariposa of $25,759
and the fixed interest rate of 9.75% remained unchanged. The terms of the
agreement provided for a prepayment penalty of .5% of the outstanding loan
balance if the notes were paid prior to 60 days before the maturity date. As
discussed in Note 5, on September 30, 1997 the Partnership sold Mariposa. In
connection with this sale, the outstanding mortgage debt for the property was
paid off. The Partnership incurred a prepayment penalty fee of $14,139, which
amount is included in interest expense in the Consolidated Statement of
Operations for the year ended December 31, 1997.
Canyon View East
On September 10, 1997, the lender extended the terms of the Canyon View East
mortgage note for a period of one year. Under the modification agreement,
monthly principal and interest payments of $35,047 and fixed interest rate of
9.75% remain unchanged. The terms of the agreement provided for a prepayment
penalty of .5% of the outstanding loan amount in the event that the note is paid
prior to 60 days before it becomes due. The balance of the note will be due on
September 15, 1998.
Cheyenne Creek and Canyon View East:
As discussed in Note 10, the Partnership entered into a Sales Agreement for
these properties. The estimated sales price is sufficient to cover the mortgage
note balance. However, there can be no assurance that the sale of these
properties will occur.
7. Mortgage Notes Payable, continued
In the event that the sales do not occur, the Partnership will seek new sources
of financing for the properties on a long term basis or seek to renegotiate the
mortgage note with its existing lender. If the general economic climate for real
estate in these respective locations were to deteriorate resulting in an
increase in interest rates for mortgage financing or a reduction in the
availability of real estate mortgage financing or a decline in the market values
of real estate it may affect the Partnership's ability to complete these
refinancings or sell the properties.
Interest included in Accrued expenses in the Consolidated Balance Sheets at
December 31, 1997 and 1996 consisted of the following:
1997 1996
------- -------
Cheyenne Creek . $13,017 $13,161
Mariposa ....... -- 11,586
Canyon View East 15,584 15,763
------- -------
$28,601 $40,510
======= =======
The principal balance of the mortgage notes payable appearing on the
consolidated balance sheets at December 31, 1997 and 1996 approximates the fair
value of such notes.
8. Partners' Equity:
Under the terms of the Partnership Agreement profits are allocated 98% to the
Limited Partners and 2% to the General Partners; losses are allocated 99% to the
Limited Partners and 1% to the General Partners.
Cash distributions to the partners are governed by the Partnership Agreement and
are made, to the extent available, 98% to the Limited Partners and 2% to the
General Partners.
The allocation of the related profits, losses, and distributions, if any, would
be different than described above in the case of certain events as defined in
the Partnership Agreement, such as the sale of an investment property or an
interest in a joint venture partnership.
Gain from the sale of properties is to be allocated as defined by the
Partnership Agreement. The total gain on the sale of Mariposa of $215,233 was
allocated as follows. The General Partners received a gain from sale allocation
of $88,006 and the Limited Partners a gain from sale allocation of $127,227 in
accordance with the terms of the Partnership Agreement.
Cash distributions of net proceeds of approximately $1,660,000 were allocated to
the Limited Partners in accordance with the terms of the Partnership Agreement.
Approximately $375,000 of the net proceeds from the sale of Mariposa was
retained by the partnership for use in operations.
<PAGE>
9. Related Party Transactions:
L'Auberge Communities, Inc. is a General Partner of L'Auberge Communities,
which owns a 99% interest in GP L'Auberge Communities, L.P. (formerly Berry and
Boyle Management). Due to affiliates at December 31, 1997 and 1996 consisted of
$16,787 and $17,430, respectively, relating to reimbursable costs due to
L'Auberge Communities, Inc.
In 1997, 1996 and 1995, general and administrative expenses included $65,240,
$83,195, and $87,138, respectively, of salary reimbursements paid to the General
Partners for certain administrative and accounting personnel who performed
services for the Partnership.
During the years ended December 31, 1996 and 1995, property management fees of
$14,590 and $38,308, respectively, were paid or accrued to Evans Withycombe,
Inc. These fees were 5% of rental revenue.
Residential Services - L'Auberge, formerly Berry and Boyle Residential Services,
the property manager of Cheyenne Creek, Canyon View East and Mariposa, is an
affiliate of the General Partners of the Partnership. During the years ended
December 31, 1997, 1996 and 1995, property management fees of $92,249, $81,243,
and $94,973, respectively, were paid to Residential Services - L'Auberge. These
fees were 4% of rental revenue in 1997 and 1996, and 5% of rental revenue in
1995.
10. Assets Held for Sale:
During the fourth quarter of 1997, the General Partners of the Partnership
committed to a plan to dispose of Pines on Cheyenne Creek in Colorado Springs,
Colorado and Canyon View East in Tucson, Arizona. On January 15, 1998 the
Partnership entered into Sales Agreements (the "Agreements") to sell the Pines
on Cheyenne Creek and Canyon View East to unaffiliated third parties. The
selling prices for the Pines on Cheyenne Creek and Canyon View East are
approximately $6,300,000 and $6,650,000, respectively. The Agreements are
subject to completion of customary due diligence to the satisfaction of the
purchaser, and the purchaser obtaining a financing commitment on commercially
reasonable terms and conditions. The Partnership expects to consummate these
sales in 1998. In addition, under certain conditions the sale is contingent upon
the approval of the Limited Partners.
As it is the intent of the General Partners to pursue the sale of these
properties, the Partnership has recorded the assets at the lower of carrying
value or net realizable value and has included these amounts as Assets Held for
Sale on the Consolidated Balance Sheets at December 31, 1997. In accordance with
SFAS 121, the Partnership has stopped depreciating these assets effective
January 1, 1998. If closing of the sales were to occur, any proceeds from sale
will be allocated to the Partners in accordance with the terms of the
Partnership Agreement and the Partnership will likely be liquidated.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Casabella Associates
We have audited the accompanying consolidated balance sheet of Casabella
Associates (the "Partnership") as of December 31, 1997 and the related
consolidated statements of operations, partners' equity, and cash flows for the
year ended December 31, 1997. These financial statements are the responsibility
of the General Partners of the Partnership. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the 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 our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Casabella Associates as of
December 31, 1997 and the results of its operations and its cash flows for the
year ended December 31, 1997 in conformity with generally accepted accounting
principles.
As discussed in Note 9, the General Partners of the Partnership have entered
into a sales agreement to sell the property of the Partnership. If closing of
this sale were to occur, any proceeds from sale will be allocated to the
Partners in accordance with the terms of the Partnership Agreement and the
Partnership will likely be liquidated.
Coopers & Lybrand, L.L.P.
Denver, CO
March 25, 1998
CASABELLA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
INFORMATION WITH RESPECT TO THE YEARS ENDED
DECEMBER 31, 1996 AND 1995 IS UNAUDITED
--------------
CASABELLA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
INFORMATION WITH RESPECT TO THE YEARS ENDED
DECEMBER 31, 1996 AND 1995 IS UNAUDITED
1. Organization of Partnership
Casabella Associates, a general partnership (the "Partnership") was formed on
July 1, 1998. Development Partners (A Massachusetts Limited Partnership),
("DPI"), formerly Berry and Boyle Development Partners, and Development Partners
II (A Massachusetts Limited Partnership), ("DPII"), formerly Berry and Boyle
Development Partners II, and Development Partners III (A Massachusetts Limited
Partnership), ("DPIII"), formerly Berry and Boyle Development Partners III are
the General Partners. DPI, DPII and DPIII own an 8.5%, 38.3%, and 53.2%
interest, respectively in the Partnership.
Casabella Associates was formed to acquire a majority interest in the Casabella
Joint Venture, which owns Casabella, a 154-unit residential property, located in
Scottsdale, Arizona. Since the Partnership owns a majority interest in Casabella
Joint Venture, the accounts and operations of Casabella Joint Venture have been
consolidated into the Partnership.
The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a
Phoenix based residential development, construction and management firm. EWI
also developed the property known as Casabella.
The Partnership will continue until December 31, 2018, unless earlier terminated
by the sale of all or substantially all of the assets of the Partnership, or as
otherwise provided in the Partnership Agreement (See Note 9).
2. Significant Accounting Policies
A. Basis of Presentation
The consolidated financial statements include the accounts of the
Partnership and its subsidiary Casabella Joint Venture. All
intercompany accounts and transactions have been eliminated in
consolidation. The Partnership follows the accrual basis of accounting.
Refer to Note 5 regarding the termination of the Casabella Joint
Venture.
B. Cash and Cash Equivalents
The Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. The
carrying value of cash and cash equivalents approximates fair value. It
is the Partnership's policy to invest cash in income-producing
temporary cash investments. The Partnership mitigates any potential
risk from such concentration of credit by placing investments with high
quality financial institutions.
C. Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and 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.
2. Significant Accounting Policies, continued
D. Depreciation
Depreciation is provided for by the use of the straight-line method
over the estimated useful lives as follows:
Buildings and improvements 39-40 years
Equipment, furnishings and fixtures 5-15 years
E. Deferred Expenses
Costs of obtaining or extending the mortgage on Casabella are being
amortized over the mortgage term using the straight-line method, which
approximates the effective interest method. Any unamortized costs
remaining at the date of refinancing are expensed in the year of
refinancing.
F. Income Taxes
The Partnership is not liable for Federal or state income taxes because
Partnership income or loss is allocated to the Partners for income tax
purposes. If the Partnership's tax returns are examined by the Internal
Revenue Service or state taxing authority and such an examination
results in a change in Partnership taxable income (loss), such change
will be reported to the Partners.
G. Rental Income
Leases require the payment of rent in advance, however, rental income
is recorded as earned.
H. Reclassification
Certain items in the financial statements for the years ended December
31, 1996 and 1995 have been reclassified to conform to the 1997
presentation.
I. Long-Lived Assets
In 1996, the Partnership adopted Statement of Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed of." SFAS 121 requires that
long-lived assets be reviewed for impairment whenever events or changes
in circumstances indicate that their carrying value may not be
recoverable. The adoption of SFAS 121 had no effect on reported results
in 1996. As further discussed in Note 9, for the year ended December
31, 1997 the Partnership recorded its property at the lower of carrying
value or net realizable value and has included these amounts as Assets
Held for Sale.
For the years ended December 31, 1997 and 1996, permanent impairment
conditions did not exist at the Partnership's property.
Note 3 Depreciation
<PAGE>
4. Cash and cash equivalents
Cash and cash equivalents December 31, 1997 and 1996 consisted of the following:
1997 1996
-------- --------
Cash on hand .......... $ 49,163 $ 46,194
Money market accounts . 33,769 --
Certificates of Deposit ______- 208,201
--------
$ 82,932 $254,395
======== ========
5. Joint Venture and Property Acquisitions
At December 31, 1997, DPI, DPII and DPIII had contributed $400,000, $1,800,000
and $2,500,000, respectively, to the Partnership. Of the total contributions,
$3,845,154 was used to purchase the majority interest in the Casabella Joint
Venture and $500,000 was used to fund an escrow account maintained by the
permanent lender. In addition to the $4,700,000 of cash contributions referred
to above, DPI, DPII and DPIII collectively incurred $280,930 of acquisition
costs which have been recorded as additional capital contributions to Casabella
Associates.
The Partnership has invested in a single property located in Scottsdale,
Arizona. The success of the Partnership will depend upon factors which are
difficult to predict including general economic and real estate market
conditions, both on a national basis and in the area where the Partnership's
investment is located.
PRIOR TO MAY 13, 1996:
Net cash from operations of the Casabella Joint Venture, to the extent
available, shall be distributed not less often than quarterly with respect to
each fiscal year, as follows:
(A) First, to Associates, an amount equal to a 10.6% per annum
(computed on a simple noncompounded daily basis from the date
of the closing) of their capital investment;
(B) Second, the balance 70% to Associates and 30% to the property
developer.
All losses from operations and depreciation for the Casabella Joint Venture were
allocated 99.5% to Associates and 0.5% to the property developer.
All profits from operations of the Casabella Joint Venture were allocated in
accordance with distributions of net cash from operations; provided, however,
that if any fiscal year has no distributable net cash from operations, profits
will be allocated 99.5% to Associates and 0.5% to the property developer.
In the case of certain capital transactions and distributions as defined in the
Casabella joint venture agreement, the allocation of related profits, losses and
cash distributions, if any, would be different than as described above and would
be affected by the relative balance in the individual partners' capital
accounts.
MAY 14, 1996 THROUGH DECEMBER 31, 1997:
On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI")
which separated the interests of EWI and the Partnership, thus affording the
Partnership greater flexibility in the operation and disposition of Casabella.
In consideration of a total
5. Joint Venture and Property Acquisitions, continued
payment by DPI, DPII, and DPIII of $71,009 to EWI and delivery of certain mutual
releases, EWI (i) relinquished its contract to manage Casabella and its option
to exercise its rights to first refusal with regard to the sale of the property
and (ii) assigned all of its interest in the Casabella Joint Venture to the
Partnership (while preserving the economic interest of the venture in these
Joint Ventures), which resulted in the dissolution of the Casabella Joint
Venture. EWI may still share in the cash flow distributions or the proceeds from
sale of the properties if certain performance levels are met.
6. Mortgage Note Payable
All of the property owned by the Partnership is pledged as collateral for the
nonrecourse mortgage note payable pertaining to Casabella in the original
principal amount of $7,320,000. The original maturity date for this note was
July 15, 1997. On July 10, 1997 the lender extended the terms of the mortgage
note for a period of one year. Under the modification agreement, monthly
principal and interest payments of $61,887 and a fixed interest rate of 9.125%
remain unchanged. The terms of the agreement provide for a pre-payment penalty
of 0.5% of the outstanding loan amount in the event the note is paid prior to 60
days before the note becomes due. The balance of the note will be due on July
15, 1998.
As discussed in Note 9, the Partnership entered into a Sales Agreement for
Casabella. The estimated sales price is sufficient to cover the mortgage loan
balance. However, there can be no assurance that the sale of the property will
occur.
In the event the sale of the property does not occur, the Partnership will seek
new sources of financing for the property on a long-term basis or seek to
renegotiate the mortgage note with its existing lender. If the general economic
climate for real estate in these respective locations were to deteriorate
resulting in an increase in interest rates for mortgage financing or a reduction
in the availability of real estate mortgage financing or a decline in the market
values of real estate it may affect the Partnership's ability to complete the
refinancing or sell the property.
Accrued interest included in accounts payable and accrued expenses on the
Balance Sheet of the Consolidated Financial Statements at December 31, 1997 and
1996, consisted of $25,727 and $26,180, respectively.
The principal balance of the mortgage note payable appearing on the consolidated
balance sheets approximates the fair value of such note at December 31, 1997 and
1996.
7. Partners' Equity
Cash distributions and allocations of income and loss from Casabella Associates
are governed by the partnership agreement and are generally based on the ratio
of capital contributed by each of the joint venture partners, DPI, DPII and
DPIII.
In the case of certain events as defined in the Partnership Agreement, such as
the sale of an investment property or an interest in a joint venture
partnership, the allocation of the related profits, losses, and distributions,
if any, would be different than described above.
8. Related Party Transactions
L'Auberge Communities, Inc.(formerly Berry and Boyle, Inc.) is a General Partner
of L'Auberge Communities, which owns a 99% interest in GP L'Auberge Communities,
L.P. (formerly Berry and Boyle Management).
The officers and principal shareholders of Evans Withycombe, Inc., the developer
of Casabella, together hold a two and one half percent cumulative profit or
partnership voting interest in LP L'Auberge Communities, formerly Berry and
Boyle, an affiliate of the General Partners.
During the years ended December 31, 1996 and 1995, property management fees of
$37,735 and $78,663, respectively, were paid to Evans Withycombe, Inc. This
represents 5% of the rental revenues. During the years ended December 31, 1997
and 1996, property management fees of $59,244 and $6,612, respectively, were
paid to Residential Services-L'Auberge, an affiliate of the General Partner.
This represents 4% of the rental revenues.
9. Asset Held for Sale
During the fourth quarter of 1997, the General Partners of the Partnership
committed to a plan to dispose of Casabella in Scottsdale, Arizona. On February
4, 1998, the Partnership entered into a Sales Agreement (the "Agreement") to
sell Casabella to an unaffiliated third party. The selling price for Casabella
is approximately $11,700,000. The Agreement is subject to completion of
customary due diligence to the satisfaction of the purchaser, and the purchaser
obtaining a financing commitment for the purchase of the property on
commercially reasonable terms and conditions. The Partnership expects to
consummate this sale in 1998.
As it is the intent of the General Partners to pursue the sale of this Property,
the Partnership has recorded the assets at the lower of carrying value or net
realizable value and has included these amounts as Assets held for Sale on the
Consolidated Balance Sheets at December 31, 1997. In accordance with SFAS 121,
the Partnership has stopped depreciating these assets effective January 1, 1998.
If closing of the sale were to occur, any proceeds from the sale will be
allocated to the Partners in accordance with the terms of the Partnership
Agreement and the Partnership will likely be liquidated.
<PAGE>
CASABELLA ASSOCIATES
FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996, and 1995
<TABLE>
CASABELLA ASSOCIATES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
1997 1996
(unaudited)
ASSETS
Assets held for sale/Property, at cost (Notes 3, 9)
<S> <C> <C>
Land $2,809,851 $2,809,851
Buildings and improvements 7,648,060 7,648,060
Equipment, furnishings and fixtures 1,122,596 995,909
------------- ------------
11,580,507 11,453,820
Less accumulated depreciation (2,228,967) (1,996,504)
------------- ------------
9,351,540 9,457,316
Cash and cash equivalents 82,932 254,395
Accounts and interest receivable 5,907 3,015
Real estate tax escrow and prepaid 25,821 24,268
expenses
Deposits 1,950 1,950
Deferred expenses, net of accumulated
amortization of $123,914 and 13,927 11,212
$100,918
------------- ------------
Total assets $9,482,077 $9,752,156
============= ============
LIABILITIES AND PARTNERS' EQUITY
Mortgage note payable 6,766,437 $6,885,673
Accounts payable and accrued expenses 144,493 173,500
Due to affiliates (Note 8) 2,195 646
Tenant security deposits 23,090 24,834
Rents received in advance 3,507
-
------------- ------------
Total liabilities 6,936,215 7,088,160
Partners' equity 2,545,862 2,663,996
------------- ------------
Total liabilities and $9,482,077 $9,752,156
partners' equity
============= ============
CASABELLA ASSOCIATES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
(unaudited) (unaudited)
Revenue:
<S> <C> <C> <C>
Rental income $1,507,910 $1,361,622 $1,579,782
Interest Income 8,651 30,226 44,533
------------- ------------- ------------
$1,516,561 $1,391,848 $1,624,315
Expenses:
Operating Expenses 747,479 665,878 561,516
Interest 625,459 633,360 642,857
Depreciation and amortization 255,643 266,730 375,234
General and administrative 6,114 6,223 10,200
------------- ------------- ------------
1,634,695 1,572,191 1,589,807
------------- ------------- ------------
Net loss (118,134) (180,343) $34,508
============= ============= ============
Net income (loss) allocated to:
General Partners ($118,134) ($180,343) $34,508
CASABELLA ASSOCIATES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
For the years ended December 31, 1997, 1996 and 1995
Total
Partners'
Equity
<S> <C>
Balance at December 31, 1994 3,464,618
(unaudited)
Cash distributions (184,000)
Net income 34,508
-------------
Balance at December 31, 1995 3,315,126
(unaudited)
Cash distributions (470,787)
Net loss (180,343)
-------------
Balance at December 31, 1996 2,663,996
(unaudited)
Cash distributions -
Net loss (118,134)
-------------
Balance at December 31, 1997 $2,545,862
=============
CASABELLA ASSOCIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
(unaudited) (unaudited)
Cash flows from operating activities:
<S> <C> <C> <C>
Interest received $11,666 $41,626 $42,047
Cash received from rents 1,502,659 1,356,103 1,579,281
Administrative expenses (7,472) (11,916) (18,901)
Rental operations expenses (780,586) (577,518) (549,753)
Interest paid (625,912) (633,774) (643,235)
------------- ------------- ------------
Net cash provided by operating 100,355 174,521 409,439
activities
Cash flows from investing activities:
Capital Improvements (126,687) (156,015) (47,771)
Cash received from short-term investments - 581,813 107,147
------------- ------------- ------------
Net cash provided (used) by investing (126,687) 425,798 59,376
activities
Cash flows from financing activities:
Distributions to partners - (470,787) (184,000)
Payments on mortgage note payable (119,236) (108,873) (99,414)
Cash paid for deposits - (1,950) -
Cash paid for loan refinancing (25,895) - -
------------- ------------- ------------
Net cash provided (used) by financing (145,131) (581,610) (283,414)
activities
------------- ------------- ------------
Net increase (decrease) in cash and cash (171,463) 18,709 185,401
equivalents
Cash and cash equivalents at beginning of 254,395 235,686 50,285
year
------------- ------------- ------------
Cash and cash equivalents at end of $82,932 $254,395 $235,686
year
============= ============= ============
CASABELLA ASSOCIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996 and 1995
Reconciliation of net income (loss) to net cash provided by
operating activities:
1997 1996 1995
(unaudited) (unaudited)
<S> <C> <C> <C>
Net income (loss) ($118,134) ($180,343) $34,508
Adjustments to reconcile net income (loss) to
net cash
provided by operating activities:
Depreciation and amortization 255,643 266,730 375,234
Change in assets and liabilities net of
effects
from investing and financing
activities:
(Increase) decrease in accounts and (2,892) 11,400 (2,486)
interest receivable
(Increase) decrease in real estate tax (1,553) (583) 3,748
escrow and prepaid expenses
(Decrease) increase in accounts
payable and accrued expenses (29,007) 82,150 8,515
(Decrease) increase in due to 1,549 686 (9,579)
affiliates
(Decrease) increase in rents received in (3,507) 3,507 (101)
advance
Decrease in tenant security (1,744) (9,026) (400)
deposits
------------- ------------- ------------
Net cash provided by operating $100,355 $174,521 $409,439
activities
============= ============= ============
</TABLE>
EXHIBIT INDEX
Exhibit
Number
(4)(a)(1) Amended and Restated Certificate and Agreement of Limited
Partnership (included in Partnership's Registration Statement
No. 33-10345, declared effective on February 13, 1987, (the
"Registration Statement") and incorporated herein by reference).
(4)(a)(2) Seventeenth Amendment to Amended and Restated Certificate of
Limited Partnership dated May 31, 1990 (included as an exhibit to
the Partnership's Form 10-K for the year ended December 31, 1990
and incorporated herein by reference).
(4)(b) Subscription Agreement (included as an exhibit in the Registration
Statement and incorporated herein by reference).
(10)(a) Agreement of Joint Venture of Casabella Associates dated September
27, 1990 (filed as Exhibit (10)(f) to the Form 10-K of Berry and
Boyle Development Partners for the year ended December 31, 1990,
and incorporated herein by reference).
(10)(b) Property Management Agreement between Canyon View East Joint
Venture and L'Auberge Communities Inc. dated May 15, 1996.
(10)(c) Property Management Agreement between Pines on Cheyenne Creek
Joint Venture and Berry and Boyle Residential Services dated
August 1, 1990 (included as an exhibit to the Partnership's Form
10-K for the year ended December 31, 1990, and incorporated herein
by reference).
(10)(d) Documents pertaining to the $3,252,000 permanent loan for The
Pines on Cheyenne Creek Joint Venture (included as an exhibit to
the Partnership's Form 10-K for the year ended December 31, 1990,
and incorporated herein by reference).
(10)(e) Documents pertaining to the $4,000,000 permanent loan for the
Canyon View East Joint Venture (included as an exhibit to the
Partnership's Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference).
(10)(f) Documents pertaining to the $2,940,000 permanent loan for the
Mariposa Joint Venture (included as an exhibit to the
Partnership's Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference).
(10)(g) Documents pertaining to the $7,300,000 permanent loan for the
Casabella Joint Venture filed as an exhibit to the Annual Report
on Form 10K for the year ended December 31, 1992 for Berry and
Boyle Development Partners III and incorporated herein by
reference.
(10)(h) Property Management Agreement regarding Casabella between
Casabella Associates and L'Auberge Communities Inc. dated
November 1, 1996.
(10)(i) Property Management Agreement regarding Mariposa between
Development Partners II and L'Auberge Communities Inc. dated
November 1, 1996.
(10)(j) First Amendment to Joint Venture Agreement of L'Auberge Cheyenne
Creek Joint Venture and Related Assignment of Joint Venture
Interest.
(10)(k) Agreement regarding Mariposa Joint Venture.
(10)(l) Agreement regarding Casabella Joint Venture.
(10)(m) Purchase and Sale Agreement and Escrow Instructions dated January
26, 1998 to sell Mariposa (filed as an exhibit to the Form 10-K of
Development Partners II for the year ended December 31, 1997, and
incorporated herein by reference).
(10)(n) Purchase and Sale Agreement and Escrow Instructions dated
January 26, 1998 to sell Cheyenne Creek
(10)(o) Purchase and Sale Agreement and Escrow Instructions dated
February 4, 1998 to sell Casabella
(10)(p) Purchase and Sale Agreement and Escrow Instructions dated
February 19, 1998 to sell Canyon View
(27) Financial Data Schedule
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
[L'Auberge Cheyenne Creek Apartments]
BETWEEN
THE PINES ON CHEYENNE CREEK JOINT VENTURE,
a Colorado joint venture partnership,
as Seller,
AND
DRA ADVISORS, INC.,
a Delaware corporation
as Purchaser
<PAGE>
-6-
LA980570.056
TABLE OF CONTENTS
Paragraph/Topic Page
Recitals 1
Section 1. Definitions..................................................... 2
Section 2. Purchase and Sale............................................... 4
Section 3. Purchase Price.................................................. 4
Section 4. Closing......................................................... 6
Section 5. Conditions to Closing............................................ 9
Section 6. Title and Survey................................................ 12
Section 7. Representations and Warranties.................................. 13
Section 8. Purchaser's Acceptance of Property As-Is........................ 18
Section 9. Seller's Covenants.............................................. 19
Section 10. Prorations..................................................... 19
Section 11. Transfer Taxes; Title Charges;
Other Closing Costs and Escrow Cancellation................ 22
Section 12. Risk of Loss................................................... 23
Section 13. Condemnation................................................... 24
Section 14. Default........................................................ 25
Section 15. Notices........................................................ 26
Section 16. Time of Essence................................................ 27
Section 17. Termination of Agreement....................................... 27
Section 18. Governing Law; Jurisdiction; Venue............................. 28
Section 19. Counterparts and Facsimile Signatures.......................... 28
Section 20. Captions....................................................... 28
Section 21. Assignability.................................................. 28
Section 22. Binding Effect................................................. 29
Section 23. Modifications; Waiver.......................................... 29
Section 24. Entire Agreement............................................... 29
Section 25. Partial Invalidity; Further Assurances......................... 29
Section 26. Survival....................................................... 30
Section 27. No Third-Party Rights.......................................... 30
Section 28. Attorneys' Fees................................................ 30
Section 29. Broker......................................................... 31
Section 30. Opening of Escrow.............................................. 31
Section 31. Exhibits....................................................... 31
Section 32. Form of Title Policy........................................... 32
Section 33. No Partnership or Other Liability.............................. 32
Section 34. General Provisions Regarding Title Company..................... 32
Section 35. Limited Partners' Consent.......................................33
Section 36. Limited Prohibition on Negotiations.............................34
LIST OF EXHIBITS
.........A -- Legal Description
.........B -- Diagram of the Property and Improvements
.........C -- Schedule of Personal Property
.........D -- Form of Special Warranty Deed
.........E -- Form of Bill of Sale
.........F -- Form of Assignment of Leases
.........G -- Assignment of Tradename and Trademark Rights
.........H -- Form of Assignment of Intangible Property
.........I -- Form of Tenant Letters
.........J -- Certificate of Rent Roll
.........K -- Form of Non-Foreign Affidavit
.........L -- Form of Affidavit of Value
<PAGE>
LA980570.056
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
[L'Auberge Cheyenne Creek Apartments]
This Purchase and Sale Agreement and Escrow Instructions (Agreement) is
entered into as of January __, 1998 (Effective Date), by and between The Pines
on Cheyenne Creek Joint Venture, a Colorado joint venture partnership (Seller),
and DRA Advisors, Inc., a Delaware corporation or its assignee (Purchaser), with
reference to the following:
Recitals
A........Seller is the owner of:
(1)......the land (Real Property) in Colorado Springs (the City),
Colorado, and located at 115 West Cheyenne Road. The Real Property is more
particularly described in Exhibit A and generally depicted on Exhibit B attached
hereto and incorporated herein by this reference and is commonly known as
L'Auberge Cheyenne Creek Apartments;
(2)......all structures, buildings, improvements and fixtures on the
Real Property (collectively, Improvements), including without limitation an
apartment complex consisting of 130 units (the Units) situated in fourteen (14)
buildings (the Complex) together with all equipment, appliances, and amenities
used in connection with the Complex;
(3)......certain personal property on the Real Property or the
Improvements or personal property used primarily in connection with the
operation and maintenance of the Real Property or the Improvements, more
particularly described in Exhibit C attached hereto and incorporated herein by
this reference (Personal Property);
(4)......all of Seller's interest in all leases and other agreements,
if any, to occupy all or any portion on the Units, as amended from time to time
(such leases and agreements being sometimes collectively referred to in this
Agreement as Leases);
(5)......all of Seller's interest, if any, in mineral, water and
irrigation rights, if any, running with or otherwise pertaining to the Real
Property; and,
(6)......all intangible property used in connection with the Real
Property, the Improvements or the Personal Property, including but not limited
to the trade name Cheyenne Creek and related trademarks and associated good will
(collectively the Tradename) used in connection with the Real Property or the
Improvements (but not any tradename utilizing the term "L'Auberge"); plans and
specifications in possession, custody or control of Seller or its property
manager that were prepared in connection with the construction of the
Improvements; all hereditaments, privileges, tenements and appurtenances
pertaining to the Real Property; all Seller's rights to open or proposed
highways, streets, roads, avenues, alleys, easements, strips, gores and
rights-of-way in any way affecting the Real Property; all currently effective
and transferable licenses, permits and warranties for the Real Property, the
Improvements and the Personal Property; and all written contracts and guarantees
running in favor of Seller in effect at Closing as approved by Purchaser that
relate in any way to the Property (Contracts) (collectively, Intangible
Property).
The Real Property, the Improvements, the Personal Property, the Leases
and the Intangible Property are sometimes collectively referred to in this
Agreement as the Property.
B........Purchaser desires to purchase the Property from Seller, and
Seller desires to sell the Property to Purchaser, on the terms and conditions
set forth in this Agreement.
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties agree as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall be defined in
Section 1:
Additional Earnest Money is defined in Section 3(b).
Agreement is defined in the preamble.
Approved Exceptions is defined in Section 6(b).
Business Day means a calendar day on which banks in Denver, Colorado
shall be open to transact business (other than by automated teller or
similar equipment).
City is defined in Recital A(1).
Closing is defined in Section 4(a).
Closing Date is defined in Section 4(a).
Code is defined in Section 5(a)(viii).
Complex is defined in Recital A(2).
Contracts is defined in Recital A(6).
Court is defined in Section 5(a)(1).
Disapproval Notice is defined in Section 6(b).
Disapproved Exceptions is defined in Section 6(b).
Due Diligence Period is defined in Section 5(a).
Effective Date is defined in the preamble.
Earnest Money is defined in Section 3(b).
Escrow is defined in Section 4(a).
Improvements is defined in Recital A(2).
Initial Earnest Money is defined in Section 3(a).
Intangible Property is defined in Recital A(6).
Leases is defined in Recital A(4).
Loss Threshold is defined in Section 12(a).
Opening of Escrow is defined in Section 30.
Personal Property is defined in Recital A(3).
Preliminary Report is defined in Section 6(a).
Property is defined in Recital A.
Purchase Price is defined in Section 3.
Purchase Transaction is defined in Section 2.
Purchaser is defined in the preamble.
Purchaser's Event of Default is defined in Section 14(a).
Real Property is defined in Recital A(1).
Seller is defined in the preamble.
Seller's actual knowledge is defined in Section 7(a).
Seller's Broker is defined in Section 29.
Seller's Disclosure Documentation is defined in Section 5(a)(ii).
Seller's Event of Default is defined in Section 14(b).
Studies is defined in Section 5(a)(i).
Survey is defined in Section 6(c).
Survival Items is defined in Section 5(a).
Tenants is defined in Section 4(b).
Tenant Letters is defined in Section 4(c)(vi).
Title Company is defined in Section 3(a).
Title Policy is defined in Section 6(b).
Tradename is defined in Recital A(6).
Unit is defined in Recital A(2).
Section 2. Purchase and Sale.
In consideration of the mutual covenants contained in this Agreement,
Seller agrees to sell the Property to Purchaser, and Purchaser agrees to
purchase the Property from Seller, on the terms and conditions hereinafter set
forth (the Purchase Transaction).
Section 3. Purchase Price.
The purchase price for the Property shall be Six Million Three Hundred
Thousand and No/100 Dollars ($6,300,000.00) (Purchase Price). The Purchase Price
shall be payable as follows:
(a) The sum of Sixty-Three Thousand and No/100 Dollars ($63,000.00)
shall be tendered to Seller in the form of Purchaser's check or wire transfer
made payable to Chicago Title Insurance Company (Title Company), simultaneously
with Purchaser's delivery of fully executed originals of this Agreement to Title
Company in triplicate, as earnest money (Initial Earnest Money). The Initial
Earnest Money shall be applied to the Purchase Price at Closing or paid to
Seller or Purchaser, as applicable, upon cancellation of this Agreement as
provided in this Agreement. Upon execution of this Agreement by Seller, the
Initial Earnest Money shall be deposited with and held by Title Company in
accordance with this Agreement. Any interest on the Earnest Money shall belong
to Purchaser and shall be applied to the Purchase Price in accordance with
Section 3(c), unless the Purchase Transaction fails to close or is terminated
because of a Purchaser's Event of Default (as defined below). Purchaser shall
concurrently with its deposit of the Initial Earnest Money furnish its Federal
Taxpayer Identification No. to Title Company.
(b) Within two (2) Business Days after satisfaction or waiver, in
writing, of the conditions precedent in Section 5(a), Purchaser shall in each
case tender to Seller the sum of Sixty-Three Thousand and No/100 Dollars
($63,000.00) in the form of Purchaser's check or wire transfer made payable to
Title Company (Additional Earnest Money). The Initial Earnest Money and the
Additional Earnest Money (collectively, Earnest Money) shall be invested by
Title Company in a federally insured, daily interest-bearing account as directed
by Purchaser, and all interest shall become part of the Earnest Money. As long
as the conditions precedent in Section 5(a) shall have been satisfied or
otherwise waived, in writing, by Purchaser and Seller does not default in the
performance of its obligations under this Agreement, the Earnest Money shall be
applied against the Purchase Price at the Closing or, if a Purchaser's Event of
Default exists under this Agreement, immediately disbursed to Seller pursuant to
Section 14 as Seller's agreed and total liquidated damages, it being
acknowledged and agreed by Purchaser and Seller that it would be extremely
difficult or impossible to determine Seller's exact damages. If a Seller's Event
of Default exists under this Agreement and Purchaser elects to terminate this
Agreement, the Earnest Money together with accrued interest thereon shall be
immediately released to Purchaser.
(c) On or before the Closing Date, Purchaser shall deposit with Title
Company, in immediately available funds in addition to the Earnest Money, the
sum necessary to make the total consideration equal to the Purchase Price, plus
or minus prorations and closing costs, in accordance with this Agreement, which
funds are to be held in escrow by Title Company until cancellation of this
Agreement as provided in this Agreement or paid to Seller at the Closing.
Section 4. Closing.
(a) The purchase and sale of the Property (Closing) shall be
consummated through an escrow established by the Title Company (Escrow) that
shall close at Title Company's office by 5:00 p.m. MST on the date (Closing
Date) that is thirty (30) days after the expiration of the Due Diligence Period
(as defined below), unless such date is extended pursuant to this Agreement or
otherwise by written agreement signed by the parties.
(b) Prior to or at the Closing, Purchaser shall pay the Purchase Price
into the Escrow, Purchaser and Seller shall execute and deliver into Escrow all
necessary documents and Seller shall deliver marketable fee title and possession
of the Property to Purchaser free and clear of all tenants or occupants other
than the tenants of the Units under the Leases (Tenants).
(c) On or before the Closing Date, Seller shall deliver into Escrow the
following documents and things:
(i) a Special Warranty Deed, in recordable form and
properly executed and acknowledged on behalf of Seller, conveying to
Purchaser the Real Property and the Improvements in fee simple, in
substantially the form attached hereto as Exhibit D and incorporated
herein by this reference;
(ii) a Bill of Sale executed by Seller transferring to
Purchaser the Personal Property, with a warranty of title only. No
warranty of condition or fitness for any use or purpose will be made.
The Bill of Sale shall be substantially in the form attached hereto as
Exhibit E and incorporated herein by this reference;
(iii) a duly executed Assignment of Leases that assigns and
transfers to Purchaser, as of the Closing, all of Seller's interests
under the Leases and that contains an assumption by Purchaser of
Seller's obligations under the Leases, including without limitation
obligations relating to security deposits. The Assignment of Leases
shall be substantially in the form attached hereto as Exhibit F and
incorporated herein by this reference;
(iv) a duly executed Assignment of Tradename and Trademark
Rights that assigns and transfers all of Seller's interest in the
Tradename. The Assignment of Tradename and Trademark Rights shall be
substantially in the form attached hereto as Exhibit G and incorporated
by reference;
(v) a duly executed and acknowledged Assignment of
Intangible Property that assigns and transfers to Purchaser as of the
Closing all of Seller's interests to the Intangible Property and the
Contracts substantially in the form attached hereto as Exhibit H and
incorporated herein by this reference;
(vi) a form of letter to Tenants (Tenant Letters) at the
Real Property and Improvements that instruct the Tenants, after the
Closing Date, to pay rent to Purchaser and to recognize Purchaser as
the new lessor under their respective Leases substantially in the form
attached hereto as Exhibit I attached hereto and incorporated by
reference;
(vii) originals or, if originals are not available, complete
copies, of all Leases in the possession of Seller or its property
manager, together with a Certificate of Rent Roll substantially in the
form of Exhibit J attached hereto and incorporated herein by this
reference dated as of the Closing Date;
(viii) Seller's affidavit that Seller is not a foreign person
within the meaning of Section 1445(f)(3) of the Internal Revenue Code
of 1986, as amended (the Code) substantially in the form attached
hereto as Exhibit K and incorporated by reference as prescribed by
Treas. Reg. 1.1445-2(b). If Seller does not timely furnish the
Non-Foreign Affidavit, Purchaser may withhold (or direct Title Company
to withhold) from the Purchase Price an amount equal to the amount
required to be so withheld pursuant to Section 1445(a) of the Code, and
such withheld funds shall be deposited with the Internal Revenue
Service as required by Section 1445(a) and the regulations promulgated
thereunder. The amount withheld, if any, shall nevertheless be deemed
to be part of the Purchase Price paid to Seller;
(ix) a duly executed and acknowledged Affidavit of Value
substantially in the form attached hereto as Exhibit L and incorporated
by reference; and
(x) termination notices that terminate, as of the Closing
Date, all of the management, service and leasing contracts for the
Improvements as selected by Purchaser in accordance with this
Agreement;
(xi) delivery by Seller to Purchaser at Closing of the
security deposits under the Leases that have not been applied in the
form of a credit in favor of Purchaser against the Purchase Price;
(xii) delivery by Seller to Purchaser at Closing of a
complete list of the names, addresses and telephone numbers of all
contractors, subcontractors and materials suppliers known to Seller or
Property Manager and who worked on or supplied materials in regard to
the Improvements within the last twelve (12) months prior to Closing;
(xiii) Seller, at Seller's cost and prior to Closing, paying
in full all real estate commissions which may be due from Seller in
regard to the Leases, including any commission due in regard to any of
the Leases which commissions shall be due and payable on or before
Closing or within three (3) months after Closing. In this regard,
Seller shall deposit with Title Company, for delivery to Purchaser at
Closing, written documentation signed by the applicable real estate
brokers that such commissions, if any, to be paid by Seller have been
paid in full;
(xiv) Seller, at Seller's cost, completing by Closing all
improvements, if any, to the Units required under the respective
Leases; and
(xv) current estoppel from the applicable homeowner's
association (if any) as to (A) the amount of current assessments, (B)
the date through which such assessments are paid and (C) the absence of
any default on the part of Seller under the documents creating such
homeowner's association.
If the foregoing conditions have not been satisfied by the specified date or
Closing, as the case may be, then Purchaser shall have the right, at Purchaser's
sole option, exercisable by written notice to Seller and Title Company but
subject to Seller's right to satisfy any such condition identified in writing by
Purchaser within five (5) Business Days following Seller's receipt of such
written notice, to cancel this Agreement, whereupon the Earnest Money plus
interest shall be paid immediately by Title Company to Purchaser and, subject to
the provisions of Section 14 and except for any Survival Items (as defined
below), neither Purchaser nor Seller shall have any further liability or
obligation under this Agreement.
Section 5. Conditions to Closing.
In addition to the other conditions to the completion of the Purchase
Transaction, Seller and Purchaser agree that the Closing is subject to the
satisfaction, approval or waiver, in writing, by Purchaser, in Purchaser's sole
discretion, of the following conditions contained in this Section 5:
(a) Purchaser's due diligence conditions shall be the following:
(i) the conduct and approval of any inspection, investigation
and approval, deemed necessary by Purchaser in Purchaser's sole
discretion and at Purchaser's sole cost and expense, of any physical,
structural, geological and environmental or other condition of the
Property (including without limitation the availability of access,
utility services, zoning, environmental risks, engineering and soil
conditions) deemed necessary by Purchaser to determine the feasibility
of acquiring the Property (collectively, the Studies). In the event
Purchaser withdraws from the Purchase Transaction for any reason
whatsoever (other than a Seller's Event of Default) to the extent
permitted by the respective third party provider, Purchaser shall
immediately deliver to Seller each and all of the Studies prepared or
undertaken by or for the benefit of Purchaser in connection therewith.
The Studies shall include, but not be limited to, Purchaser's right to:
(i) review and approve the Survey (as defined below), the Leases and
the Contracts; and (ii) meet and confer with Seller's property manager.
For the purpose of conducting physical inspections by Purchaser, Seller
agrees to provide full and complete access to the Property at
reasonable times, upon not less than two (2) Business Days' notice to
Seller or to Seller's property manager, up to and including the Closing
Date. Purchaser shall conduct such inspections in a nondisruptive
manner as to the Tenants and in compliance with any applicable legal
requirements and shall in no event conduct destructive testing of the
Real Property and the Improvements without Seller's prior written
consent, which consent may be granted or withheld in Seller's sole
discretion; provided, however, that for such purpose customary Phase I
environmental investigation (including lead paint sampling and soil
borings) shall not be deemed "destructive testing." Purchaser agrees to
defend, indemnify and hold Seller, Seller's agents and employees, and
the Property harmless from and against any losses, costs, damages,
claims or liabilities, including but not limited to mechanics' and
materialmen's liens, personal injury or death, property damage and
attorneys' fees and costs, arising from or otherwise relating to
Purchaser's entry upon the Property for the aforementioned purposes
under this subsection. Purchaser shall immediately repair any damage
caused by such inspection and shall restore the Real Property and the
Improvements to their condition prior to such testing. Purchaser's
indemnity, hold harmless and repair obligations under this Section
shall survive the termination or expiration of this Agreement or the
Closing, as applicable, for a period of twelve (12) months after which
Purchaser's obligations shall automatically terminate unless prior to
the end of the twelve-month period, Seller shall have brought suit
against Purchaser in the El Paso County, Colorado Superior Court or the
United States District Court for the District of Colorado located in
Denver, Colorado (either, the Court) to enforce Purchaser's indemnity,
hold harmless and repair obligations.
(ii) subject to Seller's delivery obligations under Section
5(b), inspection and approval, in Purchaser's sole discretion, of all
documents relating to the Property that are in the possession of Seller
or its property manager or under their custody or control
(collectively, Seller's Disclosure Documentation), all of which shall
be made available at all reasonable times after Opening of Escrow to
Purchaser at the Property for Purchaser's inspection and copying at
Purchaser's sole cost and expense. The information made available to
Purchaser by Seller under this subsection shall not be released or
otherwise disclosed by Purchaser to any third parties other than to
Purchaser's attorneys, accountants or in-house property evaluation
personnel or to any prospective assignee or partner of, or lender to,
Purchaser in connection with the Purchase Transaction. If the Purchase
Transaction does not close for any reason, Purchaser and Purchaser's
agents, representatives, attorneys and accountants shall refrain from
disclosing such information to any third party whatsoever. Purchaser
shall defend, indemnify and hold Seller harmless (which indemnification
shall survive the termination or expiration of this Agreement) for all
loss, damage or expense incurred by Seller because of any unauthorized
disclosure of such information by Purchaser or Purchaser's attorneys,
accountants or in-house property evaluation personnel; provided,
however, that Purchaser's indemnity and hold harmless obligations shall
only exist for a period of twelve (12) months after the effective date
of such termination or expiration after which Purchaser's obligations
shall automatically terminate unless prior to the end of the
twelve-month period, Seller shall have brought suit against Purchaser
in the Court to enforce Purchaser's indemnity and hold harmless
obligations.
During the period commencing with the Opening of Escrow (as defined below) and
ending at 5:00 p.m. (MST) on the thirtieth (30th) day thereafter (Due Diligence
Period), Purchaser shall have the right to examine and investigate to
Purchaser's sole satisfaction the physical, financial and legal status of the
Property and the Seller's Disclosure Documentation; provided, however, that in
the event Purchaser is despite good faith efforts unable to obtain any studies,
reports of inspections to be prepared for Purchaser by third parties within such
thirty-day period, Purchaser shall be entitled to extend the Due Diligence
Period for up to fifteen (15) additional days upon delivery of written notice to
Seller setting forth the basis for such extension. In the event Purchaser
notifies Seller in writing within the Due Diligence Period that Purchaser is
terminating this Agreement for any reason or for no reason, this Agreement shall
terminate at the end of the final day of the Due Diligence Period. Upon
termination of this Agreement, the Earnest Money, together with accrued interest
thereon, shall be immediately refunded to Purchaser by Title Company, both
Seller and Purchaser shall be released from all further obligations under this
Agreement (excluding the indemnity, hold harmless and repair obligations of
Purchaser under Section 5(a)) and neither Seller nor Purchaser shall be subject
to a claim by the other for damages of any kind, except for Purchaser's
indemnity, hold harmless and repair obligations provided in Section 5(a) of this
Agreement and in other indemnity provisions of this Agreement, if any (a
Survival Item). In the event Purchaser fails to notify Seller in writing within
the Due Diligence Period that Purchaser is terminating this Agreement for any
reason or for no reason, each of such conditions shall conclusively be deemed to
have been satisfied.
(b) Seller agrees to make available and to cause its property manager
to make available at the Property to Purchaser or Purchaser's agents or
employees all information requested by Purchaser in writing that is in the
possession, custody or control of Seller or its property manager relating to the
leasing, operating, maintenance, construction, repair, zoning, platting,
engineering, soil tests, water tests, environmental tests, construction, master
planning, architectural drawings and like matters regarding the Property as part
of Seller's Disclosure Documentation.
(c) Seller's representations and warranties contained in this Agreement
shall be true and correct in all material respects as of the Closing, and Seller
shall have performed each and every obligation to be performed by Seller under
this Agreement prior to or at the Closing.
Section 6. Title and Survey.
(a) Within seven (7) Business Days following the Opening of Escrow,
Seller shall cause Title Company to deliver to Purchaser a current title
insurance commitment from Title Company covering the Property, together with
full and legible copies of all supporting documents (collectively, Preliminary
Report). The Preliminary Report is to be preliminary to the extended coverage
owner's policy of title insurance to be issued to Purchaser by Title Company
insuring Purchaser's fee simple title to the Property in the amount of the
Purchase Price (the Title Policy). Seller shall pay only the premium for a
standard owner's policy in the amount of the Purchase Price with the Purchaser
to pay all additional costs in regard to extended coverage, if elected by
Purchaser, and for all endorsements, if any, required by Purchaser.
(b) In addition to the contingencies set forth in Section 5, Purchaser
shall have to the end of the Due Diligence Period to disapprove, in writing, any
exceptions to title shown on the Preliminary Report or reflected on the Survey
(as defined below) (collectively, Disapproved Exceptions) and to provide Seller
and Title Company with notice of disapproval in writing describing the defect
with reasonable particularity (Disapproval Notice). In the event Purchaser fails
to deliver a Disapproval Notice to Seller and Title Company within the Due
Diligence Period, all such exceptions to title shall be deemed to have been
approved. Within ten (10) Business Days after Seller's receipt of the
Disapproval Notice, if any, Seller shall notify Purchaser whether Seller does or
does not intend to remove the Disapproved Exceptions. Seller shall remove all
monetary liens and all other encumbrances created by Seller after the Effective
Date that shall not have been approved in writing by Purchaser. If Seller
notifies Purchaser in writing within such ten-day period that Seller intends to
eliminate some or all of the Disapproved Exceptions, Seller shall do so prior to
or at the Closing. If Seller fails to notify Purchaser in writing within such
ten-day period that Seller intends to eliminate all of the Disapproved
Exceptions or if Seller elects to eliminate some but not all of the Disapproved
Exceptions, Purchaser may, by notifying Seller and Title Company within five (5)
Business Days after Purchaser's receipt of Seller's notice to Purchaser, elect
either to terminate this Agreement or to take title to the Property subject to
the Disapproved Exceptions that Seller has not undertaken to remove. Purchaser's
failure to notify Seller and Title Company of Purchaser's election to terminate
this Agreement within such five Business Day period shall be deemed an election
to take title to the Property subject to the Disapproved Exceptions that Seller
has not undertaken to remove. Seller shall cause the Title Company to issue the
Title Policy at the Close of Escrow insuring marketable fee title to the Real
Property in Purchaser in the amount of the Purchase Price, subject only to the
following matters (collectively, Approved Exceptions):
(i) a lien for current real property taxes or general or
special assessments not then delinquent;
(ii) matters affecting title to the Property not disapproved
by Purchaser in accordance with this Section 6(b); and
(iii) matters affecting title to the Property created by or
with the consent of Purchaser.
(c) Seller, at Seller's sole cost, shall deliver to Purchaser and Title
Company on or before 5:00 p.m. MST on the tenth Business Day (10th) day after
Opening of Escrow, a certified ALTA survey of the Property (the Survey) to be
completed by a surveyor licensed in the State of Colorado, whereupon the legal
description in the Survey shall control over the description in Exhibit A to the
extent they may be inconsistent. The Survey shall set forth the legal
description and boundaries of the Property and all easements, encroachments and
Improvements thereon and shall comply with all requirements of Title Company in
regard to Title Company's issuance of the Title Policy.
Section 7. Representations and Warranties.
(a) As used herein, "Seller's actual knowledge" shall mean the actual
knowledge of Stephen B. Boyle, the president of the corporate general partner of
the general partner of the managing venturer of Seller, without any duty of
inquiry except inquiry of the on-site property manager. Seller represents and
warrants to Purchaser, as of the Effective Date and again as of the Closing
Date, as follows:
(i) that to Seller's actual knowledge, Seller has received
no notice from any governmental authority of (A) any existing or
threatened zoning, building, fire or health code violations or
violations of other governmental regulations concerning the Property or
the operation of the Property that has not previously been corrected or
(B) any existing or threatened condemnation of the Property or any part
of the Property. Seller further covenants that if Seller should receive
any such notice prior to the Closing Date, Seller will provide
Purchaser with copies of the notice promptly following the receipt
thereof by Seller. As an additional condition precedent to Closing,
Seller agrees to use reasonable efforts to correct any matters
disclosed in any such notice on or before Closing; provided, however,
that Seller need not expend more than an aggregate amount of
Twenty-Five Thousand Dollars ($25,000) for such corrections. If any
such matter(s) cannot be corrected by Seller by Closing, Seller shall
give Purchaser a credit at Closing for the amount reasonably estimated
by Seller and Purchaser required to correct the matter(s), but in no
event more than Twenty-Five Thousand Dollars ($25,000). If the
estimated cost to correct the matter(s) is greater than Twenty-Five
Thousand Dollars ($25,000) and Seller, by written notice to Purchaser,
elects not to correct the matter(s) prior to Closing, Purchaser may
deliver written notice of termination of this Agreement to Seller and
Title Company whereupon this Agreement shall terminate and the Earnest
Money shall be immediately returned to Purchaser, unless Purchaser, in
Purchaser's sole discretion, elects in writing to pay the excess
required to correct the matter(s);
(ii) that to Seller's actual knowledge, no legal actions are
existing or threatened against the Property, nor are there any
violations of building codes or other statutes affecting the use,
operation, occupancy and enjoyment of the Property;
(iii) that to Seller's actual knowledge, there exist no
violations of any statutes, ordinances, regulations or administrative
or judicial orders or holdings, whether or not appearing in public
records, with respect to the Improvements or the Property, and the
present use of the Property complies with existing zoning laws and
ordinances;
(iv) that to Seller's actual knowledge, Seller has received
no notices from insurers of defects in the Improvements which have not
been corrected;
(v) that to Seller's actual knowledge, there exist no
continuing, pending or threatened public improvements that would result
in a tax assessment or other similar charge being levied or assessed
against the Property;
(vi) that Seller has disclosed to Purchaser all information,
records and studies for the Property in the possession, custody or
control of Seller or its property manager concerning hazardous, toxic
or governmentally regulated materials that are or have been stored,
handled, disposed of or released on the Property;
(vii) that no leases or other agreements for occupancy are in
effect for the Property except for the Leases as described on the rent
roll attached hereto as Exhibit J;
(viii) that to Seller's actual knowledge, all mechanical,
electrical, structural and plumbing systems for the Property are in
good operating condition;
(ix) that there exist no (A) agreements or arrangements
pursuant to which goods, services, water, equipment, labor, supplies or
any other items are being or will be furnished to the Property, except
for the Contracts or as relate to the other Intangible Property or to
standard arrangements for utility services; (B) agreements other than
the Leases whereby any person or entity holds any right, license or
privilege to possess or use the Property; and (C) licenses, franchises
or permits issued or required for the ownership of the Property;
(x) that to Seller's actual knowledge, there exist no
agreements or understandings relating to the Property, except for this
Agreement and the agreements (if any) shown as exceptions to the title
to the Property;
(xi) the Purchase Transaction will not in any material
respect violate any other agreements to which Seller is a party;
(xii) prior to Closing or any earlier termination of this
Agreement, Seller will not enter into or execute any employment,
management or service contract with respect to the Property without
Purchaser's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, unless such contract so
entered by Seller shall provide that such contract can be terminated by
Seller, or Seller's successor, at any time without penalty, upon not
more than thirty (30) days' prior written notice to the other party
thereto. When any such contracts are fully executed, Seller shall
deliver a copy thereof to Purchaser;
(xiii) no default of Seller exists under any of the Contracts
and, to Seller's actual knowledge, no default of the other parties
exists under any of the Contracts. Between the Effective Date and the
Closing Date, or any earlier termination of this Agreement, Seller,
without Purchaser's prior written consent which consent shall not be
unreasonably withheld, conditioned or delayed, shall not amend, modify
in any material respect (such as increasing or decreasing the term or
monetary obligations thereunder) or terminate, or agree to amend,
modify or terminate, any Contract or Lease or waive any substantial
right thereunder;
(xiv) except as expressly provided otherwise in Section 35
below, no consent of any third party is required in order for Seller to
enter into this Agreement and perform Seller's obligation hereunder.
Without limiting the generality of the foregoing, no consent of any
third party is required in order for Seller to assign the Contracts to
Purchaser;
(xv) except for any item to be prorated at Closing in
accordance with this Agreement, all bills or other charges, costs or
expenses arising out of or in connection with or resulting from
Seller's construction, use, ownership, or operation of the Property up
to Closing shall be paid in full by Seller on or before Closing;
(xvi) all general real estate taxes, assessments and personal
property taxes that have become due with respect to the Property
(except for those that will be prorated at Closing in accordance with
this Agreement) have been paid or will be so paid by Seller prior to
Closing;
(xvii) between the Effective Date and later of the Closing
Date or any earlier termination of this Agreement, Seller shall not
execute or enter into any new lease of any part of the Improvements,
except in the normal course of business using Seller's standard form of
lease and adhering to Seller's standard rental schedule;
(xviii) except in the ordinary course of business or as
required by a governmental agency, Seller shall not place or permit to
be placed on any portion of the Real Property any new improvements of
any kind or remove or permit any improvements to be removed from the
Real Property without the prior written consent of Purchaser, which
consent may be granted or withheld for any reason;
(xix) Seller shall not restrict, rezone, file or modify any
development plan or zoning plan or establish or participate in the
establishment of any improvements district with respect to all or any
portion of the Real Property without Purchaser's prior written consent,
which consent may be granted or withheld for any reason; and,
(xx) without Purchaser's prior written consent, which may
be granted or withheld for any reason, Seller shall not, by voluntary
or intentional act or omission to act, further cause or create any
easement, encumbrance, or mechanic's or materialmen's liens, and/or
similar liens or encumbrances to arise or to be imposed upon the
Property or any portion thereof.
(b) If Seller learns of anything that would make the representations
and warranties set forth above untrue in any material respect following the
expiration of the Due Diligence Period and prior to the Closing, Seller shall
immediately notify Purchaser in writing. Upon written notice to Seller and Title
Company within five (5) Business Days following receipt of Seller's notice,
Purchaser shall be entitled to (i) terminate this Agreement if Purchaser
reasonably concludes that the Property will be adversely affected in any
material respect by such untrue representation or warranty, in which case
Purchaser shall be entitled to an immediate return of the Earnest Money together
with accrued interest thereon and reimbursement of Purchaser's reasonable
out-of-pocket expenses actually paid to third parties in connection with
Purchaser's due diligence investigation and documented to Seller's reasonable
satisfaction (such reimbursement, however, in no event to exceed Nineteen
Thousand Dollars ($19,000.00) in the aggregate) or (ii) allow Seller a
reasonable period (not to exceed an additional ten (10) Business Days) within
which to cure such untrue representation or warranty. After such disposition of
the Earnest Money, the Escrow shall be canceled and neither party shall have any
rights or responsibilities to the other except as otherwise expressly provided
by this Agreement.
(c) Each of the parties represents and warrants to the other that each
of the persons executing this Agreement on behalf of the warranting party is
authorized to do so; that the execution, delivery and performance of this
Agreement will not conflict with, or result in a breach or other violation of,
any contract, agreement or instrument to which Purchaser or Seller, as the case
may be, is a party; and that upon execution, this Agreement shall be a valid
obligation of, binding upon and enforceable against Purchaser or Seller, as the
case may be.
(d) All representations made in this Agreement by Seller shall survive
the execution and delivery of this Agreement or the cancellation of this
Agreement or Closing, as applicable. Seller shall and does hereby indemnify and
hold Purchaser harmless from and against any loss, damage, liability and
expense, together with all court costs and attorneys' fees which Purchaser may
incur, by reason of any third party claims asserted against Purchaser and based
upon any material misrepresentation by Seller or any material breach of any of
Seller's warranties; provided, however, that Seller's representations and
indemnity obligations under this Section 7 shall survive for six (6) months
after cancellation of this Agreement or Closing, as applicable, whereupon
Seller's obligations shall terminate automatically unless Purchaser shall have
commenced an action thereon against Seller in the Court within such period;
provided, however, that Seller's liability with respect to any action commenced
within the fourth (4th), fifth (5th) or sixth (6th) months of such period shall
be limited to Fifty Thousand Dollars ($50,000.00) in the aggregate.
Section 8. Purchaser's Acceptance of Property As-Is.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN AND/OR IN THE DOCUMENTS
TO BE DELIVERED AT CLOSING, PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER HAS
NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF
ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN,
PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE,
NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING WITHOUT LIMITATION THE
WATER, SOIL AND GEOLOGY, AND ANY IMPROVEMENTS CONSTRUCTED THEREON, (B) THE
INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR
ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREON, (D) THE
HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY, (E) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, OR (F) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY. EXCEPT FOR
THOSE ITEMS OF SELLER'S DISCLOSURE DOCUMENTATION THAT HAVE BEEN PREPARED BY
SELLER, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN
INVESTIGATION OF THE PROPERTY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
ANY INFORMATION PROVIDED OR TO BE PROVIDED TO PURCHASER WITH RESPECT TO THE
PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY
INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO
REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER'S DISCLOSURE
DOCUMENTATION OR IN THE DOCUMENTS TO BE DELIVERED AT CLOSING, SELLER IS NOT AND
SHALL NOT BE LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS,
REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION
THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER
PERSON. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN AND/OR IN THE DOCUMENTS TO
BE DELIVERED AT CLOSING, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT TO THE
MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN
IS MADE ON AN "AS IS," "WHERE IS" AND "WITH ALL FAULTS" CONDITION AND BASIS.
Section 9. Seller's Covenants.
From and after the Effective Date until Closing, and so long as this
Agreement remains in effect, Seller shall:
(a) except as otherwise provided in Section 7(a), maintain, manage and
operate the Property substantially in accordance with the established practices
of Seller and its property manager;
(b) comply with all applicable covenants, conditions and other
restrictions of record, including those relating to a homeowner's association
(if any);
(c) maintain the Property in its present condition, ordinary wear and
tear and casualty loss excepted;
(d) maintain all casualty, liability and hazard insurance currently in
force for the Property;
(e) except as otherwise provided in Section 7(a), operate, manage and
enter into contracts for the Property and maintain present services and
sufficient supplies and equipment for the operation and maintenance of the
Property, all in the same manner as that done by Seller and its property manager
prior to the Effective Date; provided, however, that Seller shall not enter into
any service contract that cannot be terminated within thirty (30) days following
notice to the vendor; and
(f) continue to enter into Leases in the ordinary course of Seller's
business in accordance with the standards of Section 7(a)(xvii).
If Seller enters into leases or grants concessions in violation of this Section
9, Purchaser may either waive the violation or, as Purchaser's sole remedy,
terminate this Agreement and require the return of the Earnest Money together
with accrued interest thereon.
Section 10. Prorations.
The following adjustments to the Purchase Price shall be made between
Seller and Purchaser:
(a) The following items, as applicable, shall be prorated between
Purchaser and Seller on a per diem basis as of the Closing Date:
(i) all nondelinquent real estate taxes, installments of
general and special assessments, homeowner's association dues, if any,
and fire protection service charges, if any, due and payable in the
calendar year in which Closing occurs, based upon the most recent
information available to Seller. If Closing shall occur before the tax
rate or assessment for the current year is fixed, the initial proration
of such taxes or assessments shall be based upon the latest available
information. Thereafter, when the actual tax rate for such current year
becomes known, Seller and Purchaser shall, outside of escrow and after
Closing, re-prorate any such taxes or assessments to the extent that
the actual rate thereof was different than the rate used for prorations
made at Closing and shall pay, one to the other, any adjustment due as
a result of such re-proration;
(ii) current rents, advance rentals, nonrefundable deposits
and other charges, if any, payable by Tenants under the Leases; and
(iii) all charges for fuel, water, sewer, electricity and
other utility services furnished to the Property which are not metered
to Tenants. Seller, to the extent the same is obtainable, shall furnish
meter readings for such utilities through the close of business on the
day prior to the Closing. If any such meter readings are not so
obtainable, then Seller shall provide meter readings as of a date not
more than thirty (30) days prior to the Closing Date, and the proration
of utility charges shall initially be based upon such prior reading.
Upon the taking of actual meter readings first after Closing, such
proration shall be readjusted outside of escrow after Closing and
Seller or Purchaser, as the case may be, shall promptly pay to the
other the amount determined to be so due upon such readjustment.
(b) All other items of accrued or prepaid income and expense, except
delinquent rents, shall be prorated as of the Closing Date, on the basis of the
most recent ascertainable amounts of or other reliable information for each item
of income and expense. Seller and Purchaser shall duly cooperate with each other
and the Title Company in making prorations, adjustments and credits pursuant to
this Section 10 and shall, as requested by the Title Company, furnish to the
Title Company such information as is in the possession of or obtainable by them
to assist in making such prorations, adjustments or credits. In the event, for
any reason beyond the reasonable control of the parties hereto, information
necessary to calculate any proration, adjustment or credit for any item required
to be prorated, adjusted or credited under this Section 10 is not available
prior to Closing, then such items shall be prorated, adjusted or credited
outside of escrow after Closing as soon as such information is available, and
Seller and Purchaser shall duly cooperate with each other in regard thereto and
shall pay, one to the other, any amounts which may be owing as a result of any
such subsequent proration, adjustment or credit. In the event, at any time
within six (6) months after Closing, errors shall be discovered in any
prorations, adjustments or credits made pursuant to this Section 10, Seller and
Purchaser shall correct such errors and shall pay, one to the other, any sums
owning as a result of such correction.
(c) For purposes of all prorations provided for in this Agreement,
Seller shall be responsible for all days up to the Closing Date, and Purchaser
shall be responsible for all days including and after the Closing Date. Except
as otherwise expressly provided in this Agreement, all prorations shall be
final.
(d) Security deposits, including cleaning and pet deposits and prepaid
rent and any interest thereon, shall be credited to Purchaser at Closing.
(e) If on the Closing Date any Tenant is delinquent in the payment of
rent, including any additional rent billed but unpaid at the time of Closing,
the delinquent rent shall remain the property of Seller and be paid to Seller
if, as and when collected by Purchaser out of the funds received by Purchaser
from such Tenant, and no proration of such delinquent rent shall be made at
Closing. For a period of one hundred eighty (180) days after Closing, Purchaser
shall diligently attempt to collect and shall remit to Seller any such
delinquent rents owing to Seller; provided, however, that (i) Purchaser shall be
required only to periodically send bills to the Tenant(s) owing such delinquent
rent and shall not be required to commence any litigation or undertake any other
collection efforts in regard thereto; and (ii) in the event Purchaser collects
rent from a person who owes rent for any period of time after Closing and for a
period of time prior to Closing, all amounts collected from such person shall be
applied first to the amount of rents owing by such person for the period of time
after Closing shall be retained by Purchaser and only the excess, if any, shall
be remitted to Seller.
(f) Contemporaneously with the Closing, Seller shall deliver to
Purchaser at the offices of Seller's property manager all originals (including
computer discs and tapes) of books and records of accounts, contracts, leases,
leasing correspondence, receipts for deposits, bills and other papers that
pertain to the Property, together with all advertising materials, booklets, keys
and other items, if any, used in the Property's operation, provided that Seller,
at Seller's cost, may retain a copy of the foregoing items for tax reporting
purposes. For a period of two (2) years after the Closing and solely for the
purposes of Section 10, Seller, upon at least five (5) days' prior written
request to Purchaser and at Seller's sole cost and expense, shall have the right
to inspect the books and records for the Property located at the office of
Purchaser and/or Purchaser's property manager to verify that Purchaser is
remitting to Seller the proper amounts according to this Agreement and for any
other purpose related to Seller's prior ownership of the Property.
(g) The cost of any tenant improvements paid or incurred by Seller for
Leases approved by Purchaser and executed after the date of this Agreement shall
be paid in full by Seller at or before Closing. Seller shall supply to Purchaser
and Title Company paid invoices and final lien waivers for all such tenant
improvement work to the extent performed on or prior to the Closing Date. Any
provision of this Agreement to the contrary notwithstanding, after the Effective
Date, Seller shall not undertake any tenant improvement work on any Unit without
the prior written consent of Purchaser, such consent not to be unreasonably
withheld, conditioned or delayed.
Section 11. Transfer Taxes; Title Charges;
Other Closing Costs and Escrow Cancellation.
(a) Seller and Purchaser agree to execute any real estate transfer
declarations required by the state, county or municipality in which the Real
Property is located. Seller shall pay: (i) one-half of the escrow charges of
Title Company; (ii) one-half of the cost of recording the instruments of
conveyance; (iii) the cost of the Survey; and (iv) the portion of the premium
charged for the Title Policy attributable to standard coverage. Purchaser shall
pay all other costs of consummating this transaction, including without
limitation the premium for the Title Policy in excess of standard coverage and
for any endorsements required by Purchaser, all transfer taxes and other fees
(if any) assessed by any governmental authority against the Real Property
because of this sale and transfer, all sales and transfer taxes or other fees
assessed by any governmental authority against the Personal Property (if any)
and the cost of any municipal deed or transfer taxes (if any). The parties shall
each pay their own attorneys' fees in regard to the negotiation and
documentation of the Purchase Transaction.
(b) If the Escrow fails to close because of a Seller's Event of
Default, Seller shall be liable for the cancellation charge, if any, of Title
Company. If the Escrow fails to close because of a Purchaser's Event of Default,
Purchaser shall be liable for the cancellation charge, if any, of Title Company.
If the Escrow fails to close for any other reason, Seller and Purchaser shall
each be liable for one-half of the cancellation charge, if any, of Title
Company.
Section 12. Risk of Loss.
(a) Except as provided in any indemnity provisions of this Agreement,
Seller shall bear all risk of loss for the Property up to the Closing.
(b) The foregoing to the contrary notwithstanding, if the Property is
damaged by fire or other casualty prior to the Closing Date and is insured under
one or more fire or casualty insurance policies maintained by Seller, and if
Seller determines, in Seller's reasonable good faith discretion, that repair of
the Property would cost less than Two Hundred Fifty Thousand Dollars
($250,000.00) (Loss Threshold), Purchaser shall not have the right to terminate
this Agreement and Seller, in Seller's sole discretion, may elect either: (i) to
repair and restore the Property to its condition immediately preceding the fire
or casualty if such repair and restoration can be substantially completed within
thirty (30) days following the date originally scheduled as the Closing Date; or
(ii) to proceed to close this Purchase Transaction without reduction in the
Purchase Price provided that, as a condition precedent thereto and in a form
acceptable to Purchaser in Purchaser's reasonable discretion, Seller assigns and
transfers to Purchaser on the Closing Date all of Seller's right, title and
interest in and to the insurance proceeds paid or payable to Seller under the
policy or policies covering the damage and pays to Purchaser the amount of
Seller's deductible under the insurance policy or policies.
(c) However, if the Property is damaged by fire or other casualty prior
to the Closing Date and is insured under one or more fire or casualty insurance
policies maintained by Seller, and if Seller determines, in Seller's reasonable
good faith discretion, that the repair of the damage would cost an amount equal
to or in excess of the Loss Threshold, Purchaser, in Purchaser's sole
discretion, may elect either: (i) to terminate this Agreement and have the Title
Company immediately return the Earnest Money together with accrued interest
thereon to Purchaser; or (ii) to proceed to close this Purchase Transaction,
without reduction in the Purchase Price, and, as a condition precedent thereto
and in a form acceptable to Purchaser in Purchaser's reasonable discretion, have
Seller assign and transfer to Purchaser on the Closing Date all of Seller's
right, title and interest in and to the insurance proceeds paid or payable to
Seller under the policy or policies covering the damage and pay to Purchaser the
amount of Seller's deductible under the insurance policy or policies.
(d) Immediately after Seller obtains notice of any fire or casualty,
Seller shall notify Purchaser thereof in writing, including Seller's reasonable
determination of the repair cost; provided, however, that in the event Purchaser
shall in good faith dispute the repair cost so determined by Seller, Purchaser
shall immediately notify Seller of such dispute, in which event Seller shall as
soon as practicable obtain three (3) bids to repair such damage from reputable
contractors licensed in the State of Colorado and furnish copies thereof to
Purchaser. The average of the two bids that are the closest to each other shall
be determinative as to whether the Loss Threshold shall have been exceeded. If
the repair cost so determined exceeds the Loss Threshold, Purchaser shall notify
Seller in writing within fifteen (15) Business Days after Purchaser's receipt of
Seller's notice whether Purchaser elects to terminate this Agreement in
accordance with this Section 12. Closing shall be delayed, if necessary, to
allow Purchaser to make such election. If Purchaser fails to notify Seller of
Purchaser's election within such fifteen-day period, Purchaser shall be deemed
to have elected to perform its obligations under this Agreement.
Section 13. Condemnation.
(a) If, between the Effective Date and the Closing Date, any
condemnation or eminent domain proceedings are commenced or threatened that
might result in the taking of all or any material part of the Real Property or
the Improvements or the taking or closing of any access right to the Property,
Purchaser, in Purchaser's sole discretion, may either:
(i) terminate this Agreement by written notice to Seller and
have the Title Company return the Earnest Money together with accrued
interest thereon; or
(ii) proceed with the Closing and, as a condition precedent
thereto and in a form acceptable to Purchaser, in Purchaser's sole
discretion, have Seller assign to Purchaser all of Seller's right,
title and interest in and to any award made or to be made for the
condemnation or eminent domain action.
(b) Immediately after Seller obtains notice of the commencement or the
threatened commencement of eminent domain or condemnation proceedings, Seller
shall notify Purchaser in writing. Purchaser shall then notify Seller, within
fifteen (15) Business Days after Purchaser's receipt of Seller's notice, whether
Purchaser elects to terminate this Agreement in accordance with Section
13(a)(i). Closing shall be delayed, if necessary, to allow Purchaser to make
such election. If Purchaser fails to make the election within such fifteen-day
period, Purchaser shall be deemed to have elected to terminate this Agreement.
Section 14. Default.
(a) Purchaser shall be in default under this Agreement (a Purchaser's
Event of Default) if any of the following events shall occur:
(i Purchaser fails to close the Escrow on the date scheduled
therefor as provided in this Agreement;
(ii) Purchaser shall fail to pay any monies due in accordance
with this Agreement (other than the obligations referenced in Subparagraph (i))
by 5:00 p.m. MST on the stated due date; or
(iii) Purchaser shall fail to fully and timely perform any of
Purchaser's obligations (other than the monetary obligations referenced in
Subparagraphs (i) and (ii)) arising under this Agreement by 5:00 p.m. MST on the
fifth (5th) Business Day after Purchaser's receipt of written notice from Seller
specifying Purchaser's nonperformance.
(b) Seller shall be in default under this Agreement (a Seller's Event
of Default) if:
(i) Seller fails to close the Escrow on the date scheduled
therefor as provided in this Agreement; or,
(ii) Seller shall fail to fully and timely perform any of
Seller's obligations arising under this Agreement (other than the obligations
referenced in Subparagraph (i)) and such failure shall continue past 5:00 p.m.
MST on the fifth (5th) Business Day after Seller's receipt of written notice
from Purchaser specifying Seller's nonperformance.
(c) If a Seller's Event of Default shall exist, Purchaser, at
Purchaser's sole option and as Purchaser's sole remedies, may (i) cancel this
Agreement by written notice to Seller and Title Company whereupon the Earnest
Money plus interest thereon and reimbursement of Purchaser's reasonable
out-of-pocket expenses actually paid to third parties in connection with
Purchaser's due diligence investigation and documented to Seller's reasonable
satisfaction (such reimbursement, however, in no event to exceed Nineteen
Thousand Dollars ($19,000.00) in the aggregate) shall be paid immediately by
Title Company to Purchaser and, except as otherwise provided in this Agreement
as to any Survival Item, neither Purchaser nor Seller shall have any further
liability or obligation hereunder; or, (ii) seek specific performance against
Seller by delivering the Purchase Price into the Escrow; provided, however, that
as conditions precedent to such action for specific performance: [a] no uncured
Purchaser's Event of Default shall exist and no event shall have occurred which
with the passage of time or with notice, or both, could become a Purchaser's
Event of Default; and [b] Purchaser shall not seek to amend the Purchase Price
in such action, in which event the Closing shall be automatically extended as
necessary.
(d) If a Purchaser's Event of Default shall exist, as Seller's sole
remedy (in lieu of any other legal or equitable remedies against Purchaser which
Seller expressly waives except as hereinafter provided otherwise) Seller shall
be entitled to retain the Earnest Money only in accordance with Section 3(b) as
Seller's agreed and total liquidated damages unless Purchaser objects to, fails
to cooperate with or otherwise opposes Seller's withdrawal of such Earnest Money
out of the Escrow, in which event Seller shall have all of the remedies
otherwise available to Seller at law or in equity.
Section 15. Notices.
All notices under this Agreement shall be in writing and sent by: (a)
certified or registered mail, postage prepaid and return receipt requested, in
which case notice shall be deemed delivered at the earlier of actual receipt or
three (3) Business Days after deposit in the United States Mail, (b) by a
nationally recognized overnight courier, in which case notice shall be deemed
delivered one (1) Business Day after deposit with that courier, or (c) telecopy
or similar means, if a copy of the notice is also sent by United States
certified mail, in which case notice shall be deemed delivered on the date of
confirmed receipt, as follows:
If to Seller:
c/o L'Auberge Communities Inc.
14988 North 78th Way, Suite 211
Scottsdale, Arizona 85260
Attention: Stephen B. Boyle
Facsimile No.: (602) 607-9773
With a copy to:
Hughes Hubbard & Reed LLP
350 South Grand Avenue, Suite 3600
Los Angeles, California 90071-3442
Attention: George A. Furst, Esq.
Facsimile No.: (213) 613-2950
If to Purchaser:
DRA Advisors, Inc.
1180 Avenue of the Americas, 18th Floor
New York, New York 10036
Attention: Francis X. Tarsey
Facsimile No.: (212) 764-3571
With a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Russel T. Hamilton, Esq.
Facsimile No.: (212) 259-6333
The addresses above may be changed by written notice to the other
party; provided, however, that no notice of a change of address shall be
effective until actual receipt of the notice by the addressee thereof. Copies of
notices are for informational purposes only, and a failure to give or receive
copies of any notice shall not be deemed a failure to give notice.
Section 16. Time of Essence.
Time is of the essence in this Agreement and the performance of each
and every obligation hereunder, except that Purchaser shall have a one-time
right to extend the Closing Date for five (5) Business Days upon prior written
notice delivered to Seller not less than five (5) Business Days prior to the
originally scheduled Closing Date. However, if this Agreement requires any act
to be done or action to be taken on a date which is a Saturday, Sunday or legal
holiday, such act or action shall be deemed to have been validly done or taken
if done or taken on the next succeeding day which is not a Saturday, Sunday or
legal holiday.
Section 17. Termination of Agreement.
If triplicate fully executed originals of this Agreement have not been
delivered by Purchaser to Seller by 5:00 p.m. MST on January 27, 1998, for
immediate deposit by Purchaser with Title Company along with the Initial Earnest
Money, this Agreement shall automatically be deemed revoked and null and void.
Section 18. Governing Law; Jurisdiction; Venue.
This Agreement shall be governed by and construed in accordance with
Colorado law. In regard to any litigation which may arise in regard to this
Agreement, the parties shall and do hereby submit to the sole jurisdiction of
and the parties hereby agree that the sole proper venue shall be in the Court.
Section 19. Counterparts and Facsimile Signatures.
(a) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(b) The execution of this Agreement by the parties may be evidenced by
facsimile signatures with originals to be immediately distributed thereafter
albeit the Agreement may be deemed binding upon transmittal of the facsimiles.
Section 20. Captions.
The captions in this Agreement are inserted for convenience of
reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of its provisions.
Section 21. Assignability.
(a) Purchaser shall not have the right to assign this Agreement or any
of Purchaser's rights under this Agreement prior to Closing to any person or
entity (other than an entity controlling, controlled by, or under common control
with Purchaser) without the prior written consent of Seller, which consent may
be granted or withheld in Seller's sole discretion. In the event of such an
assignment: (i) such assignee shall assume Purchaser's duties and obligations
under this Agreement by delivering to Seller and Title Company duplicate
originals of an assumption agreement in form and substance reasonably acceptable
to Seller, (ii) Purchaser shall not be released from any of its obligations
under this Agreement, (iii) Seller shall not incur any additional expense
because of such assignment and (iv) such assignment shall not delay the Closing.
(b) Seller shall not have the right or authority to assign this
Agreement or any of Seller's rights under this Agreement prior to Closing to any
person or entity without the prior written consent of Purchaser, which consent
may be granted or withheld in Purchaser's sole discretion. In the event
Purchaser consents to such an assignment, (i) such consent may be conditioned
upon the assignee's assumption of Seller's duties and obligations under this
Agreement by delivery to Purchaser and Title Company of duplicate originals of
an assumption agreement in form and substance reasonably acceptable to
Purchaser, (ii) Seller shall not be released from any of its obligations under
this Agreement, (iii) Purchaser shall not incur any additional expense because
of such assignment and (iv) such assignment shall not delay the Closing.
Section 22. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective legal representatives, successors, heirs and
permitted assigns, subject to the provisions of Section 21 hereof.
Section 23. Modifications; Waiver.
No waiver, modification, amendment, discharge or other change of this
Agreement shall be valid unless it is in writing and signed by the party against
which the enforcement of the modification, waiver, amendment, discharge or other
change is sought.
Section 24. Entire Agreement.
This Agreement and the exhibits attached hereto contain the entire
agreement between the parties relating to the Purchase Transaction. All prior or
contemporaneous letters of intent (including but not limited to that certain
non-binding letter of intent, agreements, understandings, representations or
statements, whether oral or written, with respect to the subject matter hereof
are superseded hereby.
Section 25. Partial Invalidity; Further Assurances.
If any provision of this Agreement shall be determined by any
court to be invalid, illegal or unenforceable to any extent, the remainder of
this Agreement shall not be affected and this Agreement shall be construed as if
the invalid, illegal or unenforceable provision had never been contained in this
Agreement. Prior to and after the Closing, the parties hereto agree to take such
action and execute, acknowledge, file and record any additional documents
reasonably necessary to effectuate the terms and provisions of this Agreement.
Section 26. Survival.
Except as expressly provided in this Agreement to the contrary, all
representations, warranties, covenants, agreements and other obligations of
Seller and Purchaser in this Agreement shall not survive the Closing of the
Purchase Transaction.
Section 27. No Third-Party Rights.
Nothing in this Agreement, express or implied, is intended to confer
upon any person, other than the parties to this Agreement and their respective
successors and permitted assigns, any rights or remedies.
Section 28. Attorneys' Fees.
If any legal action or any other proceeding, including without
limitation an action for declaratory relief, is brought to enforce this
Agreement or any rights or obligations hereunder or because of a dispute,
breach, default or misrepresentation in connection with this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
other costs incurred in that action or proceeding (including without limitation
any appeal or post-judgment enforcement proceedings), in addition to any other
relief to which that party may be entitled. "Prevailing party" shall include the
party determined to be the prevailing party by the Court.
Section 29. Broker.
Seller and Purchaser each represent and warrant to the other that it
has not had any dealings with any broker, finder or other party concerning
Purchaser's purchase of the Property, except Amercon Realty Services, Inc.
(Seller's Broker). Seller agrees to pay at Closing a commission to Seller's
Broker pursuant to a separate agreement between Seller and Seller's Broker, a
copy of which shall be deposited in escrow on or before Closing if Seller's
Broker is to be paid through escrow at Closing. Seller and Purchaser each agree
to defend, indemnify and hold the other harmless from and against any such all
loss, liability, damage, cost or expense, including without limitation
reasonable attorneys' fees, incurred by the other as a result of any claim
arising out of the acts of the indemnifying party, or others on that party's
behalf, for a commission, finder's fee or similar compensation made by any
broker (including Seller's Broker), finder or any person who claims to have
dealt with the indemnifying party. The representations, warranties and covenants
contained in this Section 29 shall survive the Closing or termination of this
Agreement.
Section 30. Opening of Escrow.
The term "Opening of Escrow" shall mean the date of delivery to Title
Company of triplicate fully executed originals of this Agreement by Seller and
Purchaser together with the delivery by Purchaser to Title Company of the
Initial Earnest Money.
Section 31. Exhibits.
The following exhibits have been attached to this Agreement and
incorporated herein by reference:
Exhibit A -- Legal Description
Exhibit B -- Diagram of the Property and Improvements Exhibit C --
Schedule of Personal Property Exhibit D -- Form of Special Warranty
Deed Exhibit E -- Form of Bill of Sale Exhibit F -- Form of Assignment
of Leases Exhibit G -- Assignment of Tradename and Trademark Rights
Exhibit H -- Form of Assignment of Intangible Property Exhibit I --
Form of Tenant Letters Exhibit J -- Certificate of Rent Roll Exhibit K
-- Form of Non-Foreign Affidavit Exhibit L -- Form of Affidavit of
Value
Section 32. Form of Title Policy.
The Title Policy to be issued by Title Company shall be Title Company's
most current form. A specimen of the Title Policy is to be delivered to
Purchaser within thirty (30) days following the delivery of the Preliminary
Report to the parties. The Policy is to include, among other things, the
following endorsements which are also to be delivered to Purchaser at
Purchaser's cost: (i) a survey endorsement to the effect that the insured legal
description and the legal description in the Survey describe one and the same
property; (ii) if necessary, a patent endorsement; (iii) if necessary, a
contiguity endorsement; and (iv) if necessary, an endorsement insuring against
archaic deed restrictions.
Section 33. No Partnership or Other Liability.
Any and all provisions, implications, or interpretations of or from
this Agreement to the contrary notwithstanding, no partnership, joint venture or
other relationship is created, implied or acknowledged between or among the
parties.
Section 34. General Provisions Regarding Title Company.
(a) Title Company will make all adjustments and/or prorations on the
basis of the actual number of days in a month, and by credit and/or debit to the
respective accounts of Seller and Purchaser in the Escrow.
(b) For purposes of the instructions to Title Company, the expression
"Closing" shall mean the date on which the Deed is recorded.
(c) Title Company shall: (i) make disbursements by wire transfer of
federal funds; (ii) mail instruments to the addresses of the parties shown
above, unless Title Company is instructed otherwise; and (iii) wire funds to
Seller by wire transfer as directed by Seller.
(d) No change of instructions shall be of any effect on Title Company
unless given in writing by all of the parties hereto. In the event conflicting
demands are made or conflicting notices served upon Title Company with respect
to the Escrow, the parties expressly agree that Title Company shall have the
absolute right at Title Company's election to do either or both of the
following: (i) withhold and stop all further proceedings in, and performance of,
the Escrow; or (ii) file a suit in interpleader and obtain an order from the
Court requiring the parties to interplead and litigate in the Court their
several claims and rights among themselves. In the event such interpleader suit
is brought, Title Company shall ipso facto be fully released and discharged from
all obligations to further perform any and all duties or obligations imposed
upon Title Company in the Escrow, and the parties jointly and severally agree to
pay all reasonable costs, expenses and reasonable attorneys' fees expended or
incurred by Title Company, the amount thereof to be fixed and a judgment
therefor entered by the Court in such suit.
(e) Except for Title Company's negligence, fraud, willful misconduct or
breach of contract, Title Company shall not be held liable for the identity,
authority or rights of any person executing any document deposited in the
Escrow, or for failure by Seller or Purchaser to comply with any of the
provisions of any agreement, contract or other instrument deposited in the
Escrow, and Title Company's duties hereunder shall be limited to the safekeeping
of such money, instruments or other documents received by Title Company as
escrow holder and to the disposition of same in accordance with the written
instructions accepted by Title Company in the Escrow.
(f) It is agreed by the parties to this Agreement that so far as Title
Company's rights and liabilities are concerned, this transaction is an escrow
and not any other legal relation.
Section 35. Limited Partners' Consent.
Notwithstanding anything contained herein to the contrary, the
obligations of Seller hereunder are subject to and conditioned upon the
procurement of the consent of a majority in interest of the limited partners of
the joint venture partners of Seller to the Purchase Transaction. Seller shall
use diligent efforts to obtain such consent. If Seller shall not have received
such consent within sixty (60) days after the Opening of Escrow and provided
evidence thereof to Purchaser, Purchaser may upon written notice to Seller
terminate this Agreement whereupon the Earnest Money plus interest thereon and
(provided that Purchaser shall have elected or be deemed to have elected to
purchase the Property at or prior to the expiration of the Due Diligence Period)
reimbursement of Purchaser's reasonable out-of-pocket expenses actually paid to
third parties in connection with Purchaser's due diligence investigation and
documented to Seller's reasonable satisfaction (such reimbursement, however, in
no event to exceed Nineteen Thousand Dollars ($19,000.00) in the aggregate)
shall be paid immediately by Title Company to Purchaser, and except as otherwise
provided in this Agreement as to any Survival Item, neither Purchaser nor Seller
shall have any further liability or obligation hereunder.
<PAGE>
Section 36. Limited Prohibition on Negotiations
Seller agrees to refrain from actively marketing the Property,
submitting due diligence packages for the Property to any third parties,
soliciting offers for the Property or accepting any offers as backup offers for
the Property during the Due Diligence Period, and to cease all discussions and
negotiations with any third parties for the sale of the Property or any interest
therein following the expiration or earlier termination of the Due Diligence
Period during the term of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
"PURCHASER"
DRA ADVISORS, INC.,
a Delaware corporation
By: /s/ Francis X. Tansey__________________
Name: Francis X. Tansey
Title: President
"SELLER"
THE PINES ON CHEYENNE CREEK,
a Colorado joint venture partnership
By: Development Partners II
(A Massachusetts Limited Partnership),
its managing venturer
By: GP L'Auberge Communities, L.P.,
a California limited partnership,
a general partner
By: L'Auberge Communities Inc.,
a California corporation
its general partner
By: /s/ Stephen B. Boyle_____________
Name: Stephen B. Boyle
Title: President
<PAGE>
TITLE COMPANY'S ACCEPTANCE
The foregoing fully executed Agreement together with the Initial
Earnest Money is accepted by the undersigned this 28th day of January, 1998,
which for the purposes of this Agreement shall be deemed to be the date of
"Opening of Escrow".
CHICAGO TITLE INSURANCE COMPANY,
a Delaware corporation
By: /s/ Tiffany Olmstead__________
Name: Tiffany Olmstead
Its: Escrow Officer
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
[Casabella]
BETWEEN
CASABELLA ASSOCIATES
an Arizona joint venture partnership,
as Seller,
AND
JPR CAPITAL, L.L.C.,
an Arizona limited liability company,
as Purchaser
<PAGE>
LA980570.051
TABLE OF CONTENTS
Paragraph/Topic Page
Recitals 1
Section 1. Definitions..................................................... 2
Section 2. Purchase and Sale............................................... 4
Section 3. Purchase Price.................................................. 5
Section 4. Closing......................................................... 6
Section 5. Conditions to Closing............................................ 8
Section 6. Title and Survey................................................ 12
Section 7. Representations and Warranties.................................. 14
Section 8. Purchaser's Acceptance of Property As-Is........................ 18
Section 9. Seller's Covenants.............................................. 19
Section 10. Prorations..................................................... 20
Section 11. Transfer Taxes; Title Charges;
Other Closing Costs and Escrow Cancellation................ 23
Section 12. Risk of Loss................................................... 24
Section 13. Condemnation................................................... 25
Section 14. Default........................................................ 26
Section 15. Notices........................................................ 27
Section 16. Time of Essence................................................ 28
Section 17. Termination of Agreement....................................... 28
Section 18. Governing Law; Jurisdiction; Venue............................. 29
Section 19. Counterparts and Facsimile Signatures.......................... 29
Section 20. Captions....................................................... 29
Section 21. Assignability.................................................. 29
Section 22. Binding Effect................................................. 30
Section 23. Modifications; Waiver.......................................... 30
Section 24. Entire Agreement............................................... 30
Section 25. Partial Invalidity; Further Assurances......................... 30
Section 26. Survival....................................................... 31
Section 27. No Third-Party Rights.......................................... 31
Section 28. Attorneys' Fees................................................ 31
Section 29. Broker......................................................... 31
Section 30. Opening of Escrow.............................................. 32
Section 31. Exhibits....................................................... 32
Section 32. Intentionally deleted.......................................... 32
Section 33. Form of Title Policy........................................... 32
Section 34. No Partnership or Other Liability.............................. 33
Section 35. General Provisions Regarding Title Company..................... 33
LIST OF EXHIBITS
.........A -- Legal Description
.........B -- Diagram of the Property and Improvements
.........C -- Schedule of Personal Property
.........D -- Form of General Warranty Deed
.........E -- Form of Bill of Sale
.........F -- Form of Assignment of Leases
.........G -- Assignment of Tradename and Trademark Rights
.........H -- Form of Assignment of Intangible Property
.........I -- Form of Tenant Letters
.........J -- Certificate of Rent Roll
.........K -- Form of Non-Foreign Affidavit
.........L -- Form of Affidavit of Value
.........M -- Form of Property Management Agreement
<PAGE>
LA980570.051
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
[Casabella]
This Purchase and Sale Agreement and Escrow Instructions (Agreement) is
entered into as of February __, 1998 (Effective Date), by and between CASABELLA
ASSOCIATES, an Arizona joint venture partnership (Seller), and JPR CAPITAL,
L.L.C., an Arizona limited liability company (Purchaser), with reference to the
following:
Recitals
A........Seller is the owner of:
(1)......the land (Real Property) in Scottsdale (the "City"), Arizona,
and located at 10101 North Arabian Trail, Scottsdale, Arizona . The Real
Property is more particularly described in Exhibit A and generally depicted on
Exhibit B attached hereto and incorporated herein by this reference and is
commonly known as Casabella Apartments;
(2)......all structures, buildings, improvements and fixtures on the
Real Property (collectively, Improvements), including without limitation an
apartment complex consisting of 154 units (the Units) situated in seventeen (17)
buildings (the Complex) together with all equipment, appliances and amenities
(including without limitation a clubhouse and other recreational facilities)
used in connection with the Complex;
(3)......certain personal property on the Real Property or the
Improvements or personal property used primarily in connection with the
operation and maintenance of the Real Property or the Improvements, more
particularly described in Exhibit C attached hereto and incorporated herein by
this reference (Personal Property);
(4)......all of Seller's interest in all leases and other agreements,
if any, to occupy all or any portion on the Units, as amended from time to time
(such leases and agreements being sometimes collectively referred to in this
Agreement as Leases);
(5)......all of Seller's interest, if any, in mineral, water and
irrigation rights, if any, running with or otherwise pertaining to the Real
Property; and,
(6)......all intangible property used in connection with the Real
Property, the Improvements or the Personal Property, including but not limited
to the trade name Casabella and related trademarks and associated good will
(collectively the Tradename) used in connection with the Real Property or the
Improvements (but not any tradename utilizing the term "L'Auberge" except as
otherwise provided in the Property Management Agreement (hereinafter defined));
plans and specifications in Seller's or Property Manager's possession, custody
or control that were prepared in connection with the construction of the
Improvements; all hereditaments, privileges, tenements and appurtenances
pertaining to the Real Property; all Seller's rights to open or proposed
highways, streets, roads, avenues, alleys, easements, strips, gores and
rights-of-way in any way affecting the Real Property; all currently effective
and transferable licenses, permits and warranties for the Real Property, the
Improvements and the Personal Property; and all written contracts and guarantees
running in favor of Seller in effect at Closing as approved by Purchaser that
relate in any way to the Property (Contracts) (collectively, Intangible
Property).
The Real Property, the Improvements, the Personal Property, the Leases
and the Intangible Property are sometimes collectively referred to in this
Agreement as the Property.
B........Purchaser desires to purchase the Property from Seller, and
Seller desires to sell the Property to Purchaser, on the terms and conditions in
this Agreement.
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties agree as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall be defined in
Section 1:
Agreement is defined in the preamble.
Approved Exceptions is defined in Section 6(b).
Assignee Purchaser is defined in Section 21(b).
Assignment is defined in Section 21(b).
Business Day means a calendar day on which banks in Phoenix, Arizona
shall be open to transact business (other than by automated teller or
similar equipment).
City is defined in Recital A(1).
Closing is defined in Section 4(a).
Closing Date is defined in Section 4(a).
Code is defined in Section 5(a)(viii).
Complex is defined in Section 5(c).
Consent is defined in Section 5.
Contracts is defined in Recital A(6).
Court is defined in Section 5(a)(i).
Disapproval Notice is defined in Section 6(b).
Disapproved Exceptions is defined in Section 6(b).
Due Diligence Period is defined in Section 5(a).
Effective Date is defined in the preamble.
Earnest Money is defined in Section 3(a).
Escrow is defined in Section 4(a).
Final Plans is defined in Section 5(b).
Improvements is defined in Recital A(2).
Intangible Property is defined in Recital A(6).
Leases is defined in Recital A(4).
Loss Threshold is defined in Section 12(a).
Offer Period is defined in Section 17.
Opening of Escrow is defined in Section 30.
Personal Property is defined in Recital A(3).
Preliminary Report is defined in Section 6(a).
Property is defined in Recital A.
Property Management Agreement is defined in Section 4(d).
Property Manager is defined in Section 4(d).
Purchase Price is defined in Section 3.
Purchase Transaction is defined in Section 2.
Purchaser is defined in the preamble.
Purchaser's Event of Default is defined in Section 14(a).
Real Property is defined in Recital A(1).
Rent Concession is defined in Section 10(a)(iv).
Seller is defined in the preamble.
Seller's actual knowledge is defined in Section 7(a).
Seller's Broker is defined in Section 29.
Seller's Disclosure Documentation is defined in Section 5(a)(ii).
Seller's Event of Default is defined in Section 14(b).
Studies is defined in Section 5(a)(i).
Survey is defined in Section 6(a).
Survival Items is defined in Section 5(a).
Tenant Letters is defined in Section 4(c)(vi).
Tenants is defined in Section 4(b).
Title Company is defined in Section 3.
Title Policy is defined in Section 6(b).
Tradename is defined in Recital A(6).
Unit is defined in Recital A.
Section 2. Purchase and Sale.
In consideration of the mutual covenants contained in this Agreement,
Seller agrees to sell the Property to Purchaser, and Purchaser agrees to
purchase the Property from Seller, on the terms and conditions hereinafter set
forth (the Purchase Transaction).
Section 3. Purchase Price.
The purchase price for the Property shall be Eleven Million Seven
Hundred Thousand and No/100 Dollars ($11,700,000.00) (Purchase Price). The
Purchase Price shall be payable as follows:
(a) The sum of One Hundred Seventeen Thousand and No/100 Dollars
($117,000.00) shall be tendered to Seller in the form of Purchaser's check made
payable to First American Title Insurance Company (Title Company) or Purchaser's
wire transfer of immediately available funds to Title Company within two (2)
Business Days after delivery of triplicate fully executed counterpart originals
of this Agreement to Title Company, as earnest money (Earnest Money). Purchaser
shall concurrently with its deposit of the Earnest Money furnish its Federal
Taxpayer Identification No. to Title Company. The Earnest Money shall be
invested by Title Company in a federally insured, daily interest-bearing account
as directed by Purchaser, and all interest shall become part of the Earnest
Money. As long as the conditions precedent to Purchaser's obligation to close in
Section 5 and elsewhere in this Agreement and in Section 5(b) shall have been
satisfied or otherwise waived, in writing, by Purchaser and Seller does not
default in the performance of its obligations under this Agreement, the Earnest
Money shall be applied against the Purchase Price at the Closing or, if a
Purchaser's Event of Default exists under this Agreement, immediately disbursed
to Seller pursuant to Section 14 as Seller's agreed and total liquidated
damages, it being acknowledged and agreed by Purchaser and Seller that it would
be extremely difficult or impossible to determine Seller's exact damages. If a
Seller's Event of Default exists under this Agreement and Purchaser elects to
terminate this Agreement, the Earnest Money together with accrued interest
thereon shall be immediately released to Purchaser.
(b) On or before the Closing Date, Purchaser shall deposit with Title
Company, in immediately available funds in addition to the Earnest Money, the
sum necessary to make the total consideration equal to the Purchase Price, plus
or minus prorations, in accordance with this Agreement, which funds are to be
held in escrow by Title Company until cancellation of this Agreement as provided
in this Agreement or paid to Seller at the Closing.
Section 4. Closing.
(a) The purchase and sale of the Property (Closing) shall be
consummated through an escrow established by the Title Company (Escrow) that
shall close at Title Company's office or, at Purchaser's option, at the office
of Purchaser's counsel in Phoenix, Arizona, by 5:00 p.m. MST on the date
(Closing Date) that is forty-five (45) days after the expiration or earlier
termination of the Due Diligence Period (as defined below), but in no event
later than June 15, 1998, unless such date is extended pursuant to this
Agreement or otherwise by written agreement signed by the parties.
(b) Prior to or at the Closing, Purchaser shall pay the Purchase Price
into the Escrow, Purchaser and Seller shall execute and deliver into Escrow all
necessary documents and Seller shall deliver marketable fee title and possession
of the Property to Purchaser free and clear of all tenants or occupants other
than the tenants of the Units under the Leases (Tenants).
(c) On or before the Closing Date, Seller shall deliver into Escrow the
following documents and things:
(i) a Special Warranty Deed, in recordable form and
properly executed and acknowledged on behalf of Seller, conveying to
Purchaser the Real Property and the Improvements in fee simple, in
substantially the form attached hereto as Exhibit D and incorporated
herein by this reference;
(ii) a Bill of Sale executed by Seller transferring to
Purchaser the Personal Property, with a warranty of title only. No
warranty of condition or fitness for any use or purpose will be made.
The Bill of Sale shall be substantially in the form attached hereto as
Exhibit E and incorporated herein by this reference;
(iii) a duly executed Assignment of Leases that assigns and
transfers to Purchaser, as of the Closing, all of Seller's interests
under the Leases and that contains an assumption by Purchaser of
Seller's obligations under the Leases, including without limitation
obligations relating to security deposits. The Assignment of Leases
shall be substantially in the form attached hereto as Exhibit F and
incorporated herein by this reference;
(iv) a duly executed Assignment of Tradename and Trademark
Rights that assigns and transfers all of Seller's interest in the
Tradename. The Assignment of Tradename shall be substantially in the
form attached hereto as Exhibit G and incorporated by reference;
(v) a duly executed and acknowledged Assignment of
Intangible Property that assigns and transfers to Purchaser as of the
Closing all of Seller's interests to the Intangible Property and the
Contracts substantially in the form attached hereto as Exhibit H and
incorporated herein by this reference;
(vi) a form of letter to Tenants (Tenant Letters) that
instruct the Tenants, after the Closing Date, to pay rent to Purchaser
and to recognize Purchaser as the new lessor under their respective
Leases substantially in the form attached hereto as Exhibit I attached
hereto and incorporated by reference;
(vii) originals or, if originals are not available, complete
copies, of all Leases in Seller's or Property Manager's possession,
together with a Certificate of Rent Roll substantially in the form of
Exhibit J attached hereto and incorporated herein by this reference
dated as of the Closing Date;
(viii) Seller's affidavit that Seller is not a foreign person
within the meaning of Section 1445(f)(3) of the Internal Revenue Code
of 1986, as amended (the Code) substantially in the form attached
hereto as Exhibit K and incorporated by reference as prescribed by
Treas. Reg. 1.1445-2(b). If Seller does not timely furnish the
Non-Foreign Affidavit, Purchaser may withhold (or direct Title Company
to withhold) from the Purchase Price an amount equal to the amount
required to be so withheld pursuant to Section 1445(a) of the Code, and
such withheld funds shall be deposited with the Internal Revenue
Service as required by Section 1445(a) and the regulations promulgated
thereunder. The amount withheld, if any, shall nevertheless be deemed
to be part of the Purchase Price paid to Seller;
(ix) a duly executed and acknowledged Affidavit of Value
substantially in the form attached hereto as Exhibit L and incorporated
by reference; and
(x) termination notices that terminate, as of the Closing
Date, all of the management services and leasing contracts for the
Improvements as selected by Purchaser in accordance with this
Agreement; and
(xi) delivery by Seller to Purchaser at Closing of the
security deposits under the Leases that have not been applied in the
form of a credit in favor of Purchaser against the Purchase Price.
If the foregoing conditions have not been satisfied by the specified date or
Closing, as the case may be, then Purchaser shall have the right, at Purchaser's
sole option, exercisable by written notice to Seller and Title Company, either
(i) to cancel this Agreement, whereupon the Earnest Money plus interest shall be
paid immediately by Title Company to Purchaser and, except for any Survival
Items (as defined below), neither Purchaser nor Seller shall have any further
liability or obligation under this Agreement, or (ii) to seek specific
performance under Section 14(c) if the failure to satisfy such conditions
constitutes a Seller's Event of Default.
(d) At Closing, Purchaser shall enter into a Property Management
Agreement (the Property Management Agreement) substantially in the form attached
hereto as Exhibit M and incorporated herein by this reference, pursuant to which
Residential Services LLC, an Arizona limited liability company (Property
Manager) affiliated with Seller, shall render management services to the
Property for the benefit of Purchaser on the terms and conditions set forth
therein.
Section 5. Conditions to Closing.
In addition to the other conditions to the completion of the Purchase
Transaction, Seller and Purchaser agree that the Closing is subject to the
satisfaction, approval or waiver, in writing, by Purchaser, in Purchaser's sole
discretion, of the following conditions contained in this Section 5:
(a) Purchaser's due diligence conditions shall be the following:
(i) the conduct and approval of any inspection, investigation
and approval, deemed necessary by Purchaser in Purchaser's sole
discretion and at Purchaser's sole cost and expense, of any physical,
structural, geological and environmental or other condition of the
Property (including without limitation the availability of access,
utility services, zoning, environmental risks, engineering and soil
conditions) deemed necessary by Purchaser to determine the feasibility
of acquiring, owning and operating the Property (collectively, the
"Studies"). The Studies shall include, but not be limited to,
Purchaser's right to: (i) review and approve the Survey (as defined
below), the Leases and the Contracts; and, (ii) meet and confer with
the Property Manager. For the purpose of conducting physical
inspections by Purchaser or Purchaser's lender, Seller agrees to
provide full and complete access to the Property at reasonable times,
upon not less than two (2) Business Days' notice to Seller or to
Property Manager, up to and including the Closing Date. Purchaser shall
conduct such inspections in a nondisruptive manner as to the Tenants
and in compliance with any applicable legal requirements and shall in
no event conduct destructive testing of the Real Property and the
Improvements without Seller's prior written consent, such consent not
to be unreasonably withheld. Except for the negligence, breach of
contract or willful misconduct by Seller or Seller's agents or
employees, Purchaser agrees to defend, indemnify and hold Seller,
Seller's agents and employees, and the Property harmless from and
against any losses, costs, damages, claims, or liabilities, including
but not limited to mechanics' and materialmen's liens, personal injury
or death, property damage and attorneys' fees and costs, arising from
or otherwise relating to Purchaser's entry upon the Property for the
aforementioned purposes under this subsection. Except for Seller's or
Seller's agents' or employees' negligence, breach of contract or
non-feasance, Purchaser shall immediately repair any damage caused by
such inspection and shall restore the Real Property and the
Improvements to their condition prior to such testing. Purchaser's
indemnity and hold harmless obligations under this Section shall
survive the termination or expiration of this Agreement or the Closing,
as applicable, for a period of twelve (12) months after which
Purchaser's obligations shall automatically terminate unless prior to
the end of the twelve-month period, Seller shall have brought suit
against Purchaser in the Maricopa County, Arizona Superior Court or the
United States District Court for the District of Arizona located in
Phoenix, Arizona (either, the Court) to enforce Purchaser's indemnity
and hold harmless obligations.
(ii) subject to Seller's delivery obligations under Section
5(b), inspection and approval, in Purchaser's sole discretion, of all
documents relating to the Property that are in Seller's or Property
Manager's possession or under Seller's or Property Manager's custody or
control (collectively, Seller's Disclosure Documentation), all of which
shall be made available at all reasonable times after Opening of Escrow
to Purchaser at the Property for Purchaser's inspection and copying,
all at Purchaser's sole cost and expense. The information made
available to Purchaser by Seller under this subsection shall not be
released or otherwise disclosed by Purchaser to any third parties other
than to Purchaser's attorneys, accountants or in-house property
evaluation personnel or to any prospective partner of, or lender to,
Purchaser in connection with the Purchase Transaction. If the Purchase
Transaction does not close for any reason, Purchaser and Purchaser's
agents, representatives, attorneys and accountants shall refrain from
disclosing such information to any third party whatsoever. Except for
the negligence, breach of contract or willful misconduct of Seller or
Seller's agents or employees, Purchaser shall defend, indemnify and
hold Seller harmless (which indemnification shall survive the
termination or expiration of this Agreement) for all loss, damage or
expense incurred by Seller because of any unauthorized disclosure of
such information by Purchaser or Purchaser's attorneys, accountants or
in-house property evaluation personnel; provided, however, that
Purchaser's indemnity and hold harmless obligations shall only exist
for a period of twelve (12) months after the effective date of such
termination or expiration after which Purchaser's obligations shall
automatically terminate unless prior to the end of the twelve-month
period, Seller shall have brought suit against Purchaser in the Court
to enforce Purchaser's indemnity and hold harmless obligations.
During the period commencing with the Opening of Escrow and ending at 5:00 p.m.
(MST) on the earlier of the forty-fifth (45th) day after the satisfaction or
waiver by Purchaser and Seller of the condition requiring procurement of the
Consent (as defined below in this Section 5) and April 20, 1998 (Due Diligence
Period), Purchaser shall have the right to examine and investigate to
Purchaser's full and complete satisfaction the physical, financial and legal
status of the Property, the Seller's Disclosure Documentation and all other
aspects of the Property which Purchaser elects to investigate in its sole
discretion. In the event Purchaser notifies Seller in writing within the Due
Diligence Period that Purchaser does not elect to acquire the Property for any
reason in Purchase's sole and absolute discretion, this Agreement shall
terminate at the end of the final day of the Due Diligence Period. Upon
termination of this Agreement, the Earnest Money, together with accrued interest
thereon, shall be immediately refunded to Purchaser by Title Company, both
Seller and Purchaser shall be released from all further obligations under this
Agreement (excluding the indemnity obligations of Purchaser under Section 5(a))
and neither Seller nor Purchaser shall be subject to a claim by the other for
damages of any kind, except for Purchaser's indemnity and hold harmless
agreement provided in Section 5(a) of this Agreement and in other indemnity
provisions of this Agreement, if any (a Survival Item). In the event Purchaser
fails to notify Seller in writing within the Due Diligence Period that one or
more of such conditions shall not have been satisfied or waived by Purchaser,
each of such conditions shall conclusively be deemed to have been satisfied.
(b) Seller agrees to make available and to cause Property Manager to
make available at the Property to Purchaser or Purchaser's agents or employees
contemporaneously with the Opening of Escrow all information in Seller's or
Property Manager's possession, custody or control relating to the leasing,
operating, maintenance, construction, repair, zoning, platting, engineering,
soil tests, water tests, environmental tests, construction, master planning,
architectural drawings and like matters regarding the Property as part of
Seller's Disclosure Documentation. The foregoing shall include, but not be
limited to, copies of all: (i) Contracts; (ii) books of account and records for
the Property for the last twenty-four (24) months; (iii) the Leases including
any amendments thereto and a current detailed rent roll in regard thereto; (iv)
a detailed listing of all capital expenditures on the Property for the last
twenty-four (24) months; (v) the maintenance history of the Property for the
last twenty-four (24) months; (vi) all current service and maintenance contracts
for the Property including any amendments thereto whether or not such contracts
include month-to-month or thirty-day termination provisions; (vii) all
agreements, if any, with the City regarding the Property; (viii) claims or suits
by the Tenants or third parties involving the Property or any contracts (whether
or not covered by insurance); (ix) a list of all claims or suits by or against
Seller regarding the Property for the last twenty-four (24) months; and (x) the
plans, as approved by the City, pursuant to which the Improvements were
constructed (the Final Plans).
(c) Seller's representations and warranties contained in this Agreement
shall be true and correct in all material respects as of the Closing, and Seller
shall have performed each and every obligation to be performed by Seller under
this Agreement prior to or at the Closing.
Anything contained herein to the contrary notwithstanding, the obligations of
Seller and Purchaser under this Agreement shall be conditioned upon the
procurement by the joint venture partners of Seller of the written consent of
their respective limited partners to the Purchase Transaction as is required
under their respective limited partnership agreements (collectively, the
Consent). Seller shall use diligent good faith efforts to obtain such Consent.
In the event Seller shall despite such diligent good faith efforts not satisfy
such condition by depositing the Consent into Escrow or Seller and Purchaser
shall each fail to waive such condition in writing, by 5:00 p.m. MST on the
sixtieth (60th) day following the Opening of Escrow, this Agreement shall
automatically terminate. In the event of such termination, the Earnest Money and
all interest earned thereon and (unless that Purchaser shall have elected not to
purchase the Property at or prior to the expiration of the Due Diligence Period)
reimbursement of Purchaser's reasonable out-of-pocket expenses actually paid to
third parties in connection with Purchaser's due diligence investigation and
documented to Seller's reasonable satisfaction (such reimbursement, however, in
no event to exceed Eighteen Thousand Dollars and No/100 ($18,000.00) in the
aggregate) shall immediately be paid to Purchaser and, except as otherwise
provided in this Agreement as to any Survival Item, neither party shall have any
obligation or liability to the other under this Agreement. The Due Diligence
Period and the establishment of the Closing Date shall be calculated from the
date on which Seller delivers written notice to Purchaser that the Consent shall
have been obtained or from the date on which Purchaser and Seller deliver
written notice to Title Company that the condition that the Consent be obtained
shall have been waived.
Section 6. Title and Survey.
(a) Within seven (7) Business Days following the Opening of Escrow,
Seller shall cause Title Company to deliver to Purchaser a current title
insurance commitment from Title Company covering the Property, together with
full and legible copies of all supporting documents (collectively, Preliminary
Report). The Preliminary Report is to be preliminary to an extended coverage
owner's policy of title insurance to be issued to Purchaser (if Purchaser elects
to obtain extended coverage) by Title Company insuring Purchaser's fee simple
title to the Property in the amount of the Purchase Price (the Title Policy).
Seller shall pay only the premium for a standard owner's policy in the amount of
the Purchase Price with the Purchaser to pay all additional costs in regard to
extended coverage, if elected by Purchaser, and for all endorsements, if any,
required by Purchaser.
(b) In addition to the contingencies set forth in Section 5, Purchaser
shall have to the end of the Due Diligence Period to disapprove, in writing, any
exceptions to title shown on the Preliminary Report or reflected on the Survey
(as defined below) (collectively, Disapproved Exceptions) and to provide Seller
and Title Company with notice of disapproval in writing describing the defect
with reasonable particularity (Disapproval Notice). In the event Purchaser fails
to deliver a Disapproval Notice to Seller and Title Company within the Due
Diligence Period, all such exceptions to title shall be deemed to have been
approved. Within ten (10) Business Days after Seller's receipt of the
Disapproval Notice, if any, Seller shall notify Purchaser whether Seller intends
to remove the Disapproved Exceptions. If Seller notifies Purchaser in writing
within such ten-day period that Seller intends to eliminate the Disapproved
Exceptions, Seller shall do so on or before 5:00 p.m. MST on the thirtieth
(30th) day following the expiration of the Due Diligence Period. If Seller fails
to notify Purchaser in writing within such ten-day period that Seller intends to
eliminate all the Disapproved Exceptions or Seller elects to eliminate less than
all of the Disapproved Exceptions, Purchaser may, by notifying Seller and Title
Company within ten (10) days after the later of: (i) Purchaser's receipt of
Seller's notice to Purchaser; or (ii) the end of Seller's ten-day notice period,
elect either to terminate this Agreement and obtain an immediate refund of the
Earnest Money plus interest or to take title to the Property subject to the
Disapproved Exceptions that Seller has not undertaken to remove. Seller shall
cause the Title Company to issue the Title Policy at the Close of Escrow
insuring marketable fee title to the Real Property in Purchaser in the amount of
the Purchase Price, subject only to the following matters (collectively,
Approved Exceptions):
(i) a lien for current real property taxes or general or
special assessments not then delinquent;
(ii) matters affecting title to the Property not disapproved
by Purchaser in accordance with this Section 6(b); and
(iii) matters affecting title to the Property created by or
with the consent of Purchaser.
(c) Seller shall deliver to Purchaser and Title Company on or before
5:00 p.m. MST on the fifteenth (15th) day after Opening of Escrow, a certified
ALTA survey of the Property (the Survey) to be completed by a surveyor licensed
in the State of Arizona, whereupon the legal description in the Survey shall
control over the description in Exhibit A to the extent they may be
inconsistent. The Survey shall set forth the legal description and boundaries of
the Property and all easements, encroachments and Improvements thereon and shall
comply with all requirements of Title Company in regard to Title Company's
issuance of the Title Policy. Purchaser shall reimburse the cost of such Survey
to Seller within five (5) Business Days following delivery of the Survey to
Purchaser and written request for such reimbursement.
(d) Notwithstanding the foregoing provisions of this Section 6,
Purchaser shall have until five (5) Business Days after receipt of an amended
Preliminary Report or an amended Survey (and the Closing Date shall
automatically be extended for such period, if necessary) within which to object
in writing to Seller and Title Company to any new matters constituting
Disapproved Exceptions set forth therein and not appearing in the Preliminary
Report(s) or Survey(s) previously issued pursuant hereto, whereupon Purchaser
shall have the same rights as described with respect to the objections to the
first Preliminary Report described in Section 6(b) above or the first Survey
described in Section 6(c) above. If Seller does not cure or is unable to cure
all of the new Disapproved Exceptions objected to by Purchaser within five (5)
days after notice of Purchaser's objection (and the Closing Date shall
automatically be extended for such period, if necessary), then Purchaser may, in
its sole discretion, elect either (i) to waive such objection, take title to the
Property subject to the new Disapproved Exceptions that Seller has not
undertaken to remove and close Escrow subject thereto, or (ii) to cancel this
Agreement by notice to Seller and Title Company, whereupon the Escrow and this
Agreement shall terminate, all Earnest Money and all accrued interest thereon
shall be returned to Purchaser, and neither party shall thereafter have any
further obligations or liabilities to the other hereunder with the exception of
the Survival Items.
Section 7. Representations and Warranties.
(a) As used herein, "Seller's actual knowledge" shall mean the actual
knowledge of the corporate general partner of the general partner of the general
partner of the managing venturer of Seller, Stephen B. Boyle, Karen Boyle and
the onsite property manager without any duty of inquiry. Seller represents and
warrants to Purchaser, as of the Effective Date and again as of the Closing
Date, as follows:
(i) that to Seller's actual knowledge, Seller has received
no notice from any governmental authority of (A) any pending or
threatened zoning, building, fire or health code violations or
violations of other governmental regulations concerning the Property or
the operation of the Property that has not previously been corrected or
(B) any pending or threatened condemnation of the Property or any part
of the Property. Seller further covenants that if Seller should receive
any such notice prior to the Closing Date, Seller will provide
Purchaser with copies of the notice promptly following the receipt
thereof by Seller. As an additional condition precedent to Closing,
Seller agrees to use reasonable efforts to correct any matters
disclosed in any such notice on or before Closing; provided, however,
that Seller need not expend more than an aggregate amount of
Twenty-Five Thousand Dollars ($25,000) for such corrections. If any
such matter(s) cannot be corrected by Seller by Closing, Seller shall
give Purchaser a credit at Closing for the amount reasonably estimated
by Seller and Purchaser required to correct the matter(s), but in no
event more than Twenty-Five Thousand Dollars ($25,000). If the
estimated cost to correct the matter(s) is greater than Twenty-Five
Thousand Dollars ($25,000) and Seller, by written notice to Purchaser,
elects not to correct the matter(s) prior to Closing, Purchaser may
deliver written notice of termination of this Agreement to Seller and
Title Company whereupon this Agreement shall terminate and the Earnest
Money plus interest shall be immediately returned to Purchaser, unless
Purchaser, in Purchaser's sole discretion, elects in writing to pay the
excess required to correct the matter(s) in which event Purchaser shall
receive a credit of Twenty-Five Thousand Dollars ($25,000) against the
Purchase Price;
(ii) that to Seller's actual knowledge, no legal actions are
pending or threatened against the Property, nor are there any
violations of building codes or other statutes affecting the use,
operation, occupancy and enjoyment of the Property;
(iii) that to Seller's actual knowledge, there exist no
violations of any statutes, laws, ordinances, regulations or
administrative or judicial orders or holdings, whether or not appearing
in public records, with respect to the Property, including without
limitation those pertaining to zoning, health, use, air pollution,
water pollution and/or environmental pollution of any federal, state,
county or municipal authorities;
(iv) that to Seller's actual knowledge, Seller has received
no notices from insurers of defects in the Improvements which have not
been corrected;
(v) that to Seller's actual knowledge, there exist no
continuing, pending or threatened public improvements that would result
in a tax assessment or other similar charge being levied or assessed
against the Property;
(vi) that Seller has disclosed to Purchaser all information,
records and studies for the Property in Seller's or Property Manager's
possession, custody or control concerning hazardous, toxic or
governmentally regulated materials that are or have been stored,
handled, disposed of or released on the Property, and Seller has
received no written notice that the Property has been utilized for the
treatment, storage or disposal of hazardous substances or wastes or
that hazardous substances or wastes have ever been located upon the
Property;
(vii) that no leases or other agreements for occupancy are in
effect for the Property except for the Leases as described on the rent
roll attached hereto as Exhibit J;
(viii) that to Seller's actual knowledge, all mechanical,
electrical, structural and plumbing systems for the Property are in
good operating condition;
(ix) that to Seller's actual knowledge, there exist no
agreements or understandings relating to the Property, except for this
Agreement and the agreements (if any) shown as exceptions to the title
to the Property;
(x) the Purchase Transaction will not in any material
respect violate any other agreements to which Seller is a party;
(xi) prior to Closing or any earlier termination of this
Agreement, Seller will not enter into or execute any employment,
management or service contract with respect to the Property without
Purchaser's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, and any such contract so
entered by Seller with Purchaser's consent shall provide that such
contract can be terminated by Seller, or Seller's successor, at any
time without penalty, upon not more than thirty (30) days' prior
written notice to the other party thereto. When any such contracts are
fully executed, Seller shall deliver a copy thereof to Purchaser;
(xii) no default of Seller exists under any of the Contracts
and, to Seller's actual knowledge, no default of the other parties
exists under any of the Contracts. Between the Effective Date and the
Closing Date, or any earlier termination of this Agreement, Seller,
without Purchaser's prior written consent which consent shall not be
unreasonably withheld, conditioned or delayed, shall not amend, modify
in any material respect (such as increasing or decreasing the term or
monetary obligations thereunder) or terminate any Contract or Lease or
waive any substantial right thereunder;
(xiii) no consent of any third party is required in order for
Seller to enter into this Agreement and perform Seller's obligations
hereunder except for the Consent. Without limiting the generality of
the foregoing, no consent of any third party is required in order for
Seller to assign to Purchaser the Contracts;
(xiv) except for any item to be prorated at Closing in
accordance with this Agreement, all bills or other charges, costs or
expenses arising out of or in connection with or resulting from
Seller's construction, use, ownership, or operation of the Property up
to Closing shall be paid in full by Seller on or before Closing;
(xv) all general real estate taxes, assessments and personal
property taxes that have become due with respect to the Property
(except for those that will be prorated at Closing in accordance with
this Agreement) have been paid or will be so paid by Seller prior to
Closing;
(xvi) between the Effective Date and the Closing Date or any
earlier termination of this Agreement, Seller shall not execute or
enter into any new lease of any part of the Improvements, except in the
normal course of business using Seller's standard form of lease and
adhering to Seller's standard rental schedule;
(xvii) except in the ordinary course of business or as
required by a governmental agency, Seller shall not place or permit to
be placed on any portion of the Real Property any new improvements of
any kind or remove or permit any improvements to be removed from the
Real Property without the prior written consent of Purchaser, which
consent may be granted or withheld for any reason;
(xviii) Seller shall not restrict, rezone, file or modify any
development plan or zoning plan or establish or participate in the
establishment of any improvements district with respect to all or any
portion of the Real Property or enter into any agreement affecting any
portion of the Real Property (whether or not recorded) without
Purchaser's prior written consent, which consent may be granted or
withheld for any reason; and,
(xix) without Purchaser's prior written consent, which may
be granted or withheld for any reason, Seller shall not, by voluntary
or intentional act or omission to act, further cause or create any
easement, encumbrance, or mechanic's or materialmen's liens, and/or
similar liens or encumbrances to arise or to be imposed upon the
Property or any portion thereof.
(b) If Seller learns of anything that would make the representations
and warranties set forth above untrue in any material respect prior to the
Closing, Seller shall immediately notify Purchaser in writing. Upon written
notice to Seller and Title Company within five (5) Business Days following
receipt of Seller's notice, Purchaser shall be entitled to terminate this
Agreement if Purchaser reasonably concludes that the Property will be adversely
affected in any material respect, in which case Purchaser shall be entitled to
an immediate return of the Earnest Money together with accrued interest thereon.
After such disposition of the Earnest Money, the Escrow shall be canceled and
neither party shall have any rights or responsibilities to the other except as
otherwise expressly provided by this Agreement.
(c) Each of the parties represents and warrants to the other that each
of the persons executing this Agreement on behalf of the warranting party is
authorized to do so; that the execution, delivery and performance of this
Agreement will not conflict with, or result in a breach or other violation of,
any contract, agreement or instrument to which Purchaser or Seller, as the case
may be, is a party; and that upon execution, this Agreement shall be a valid
obligation of, binding upon and enforceable against Purchaser or Seller, as the
case may be.
(d) All representations made in this Agreement by Seller shall survive
the execution and delivery of this Agreement or the cancellation of this
Agreement or Closing, as applicable. Seller shall and does hereby indemnify
against and hold Purchaser harmless from any loss, damage, liability and
expense, together with all court costs and attorneys' fees which Purchaser may
incur, by reason of any third party claims asserted against Purchaser and based
upon any material misrepresentation by Seller or any material breach of any of
Seller's warranties. Seller's representations and indemnity obligations under
this Section 7 shall survive for three (3) months after cancellation of this
Agreement or Closing, as applicable, whereupon Seller's obligations shall
terminate automatically unless Purchaser shall have commenced an action thereon
against Seller in the Court within such period.
Section 8. Purchaser's Acceptance of Property As-Is.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN AND/OR IN THE DOCUMENTS
TO BE DELIVERED AT CLOSING, PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER HAS
NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF
ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN,
PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE,
NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING WITHOUT LIMITATION THE
WATER, SOIL AND GEOLOGY, AND ANY IMPROVEMENTS CONSTRUCTED THEREON, (B) THE
INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR
ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREON, (D) THE
HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY, (E) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, OR (F) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY. EXCEPT FOR
THOSE ITEMS OF SELLER'S DISCLOSURE DOCUMENTATION THAT HAVE BEEN PREPARED BY
SELLER, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN
INVESTIGATION OF THE PROPERTY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
ANY INFORMATION PROVIDED OR TO BE PROVIDED TO PURCHASER WITH RESPECT TO THE
PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY
INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO
REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER'S DISCLOSURE
DOCUMENTATION OR IN THE DOCUMENTS TO BE DELIVERED AT CLOSING, SELLER IS NOT AND
SHALL NOT BE LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS,
REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION
THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER
PERSON. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT AND/OR IN THE
DOCUMENTS TO BE DELIVERED AT CLOSING, PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS
PROVIDED FOR HEREIN IS MADE ON AN "AS IS," "WHERE IS" AND "WITH ALL FAULTS"
CONDITION AND BASIS.
Section 9. Seller's Covenants.
From and after the Effective Date until Closing, and so long as this
Agreement remains in effect, Seller shall:
(a) except as otherwise provided in Section 7(a), maintain, manage and
operate the Property substantially in accordance with Seller's and Property
Manager's established practices;
(b) maintain the Property in its present condition, ordinary wear and
tear and casualty loss excepted;
(c) maintain all casualty, liability and hazard insurance currently in
force for the Property;
(d) except as otherwise provided in Section 7(a), operate, manage and
enter into contracts for the Property and maintain present services and
sufficient supplies and equipment for the operation and maintenance of the
Property, all in the same manner as that done by Seller and Property Manager
prior to the Effective Date; provided, however, that Seller shall not enter into
any service contract that cannot be terminated without penalty, premium or
charge within thirty (30) days following notice to the vendor;
(e) except as otherwise provided in Section 7(a), not enter into any
Lease of the Real Property and the Improvements other than in the ordinary
course of Seller's business; and
(f) substantially in accordance with Seller's and Property Manager's
established practices, keep as many Units leased as possible and, in this
regard, after the Due Diligence Period ends and assuming Purchaser has not
theretofore canceled this Agreement as Purchaser is entitled so to do, Seller
and Property Manager shall meet and confer with Purchaser or Purchaser's duly
appointed agents by telephone or in person at Seller's offices in Scottsdale,
Arizona, on a weekly basis to review and approve Seller's and Property Manager's
plans and proposals for continued leasing of the Units.
If Seller enters into leases or grants concessions in violation of this Section
9, Purchaser may either waive the violation or, as Purchaser's sole remedy,
terminate this Agreement and require the return of the Earnest Money together
with accrued interest thereon.
Section 10. Prorations.
The following adjustments to the Purchase Price shall be made between
Seller and Purchaser:
(a) The following items, as applicable, shall be prorated between
Purchaser and Seller on a per diem basis as of the Closing Date:
(i) all nondelinquent real estate taxes, installments of
general and special assessments, homeowner's association dues, if any,
and fire protection service charges, if any, due and payable in the
calendar year in which Closing occurs, based upon the most recent
information available to Seller. If Closing shall occur before the tax
rate or assessment for the current year is fixed, the initial proration
of such taxes or assessments shall be based upon the latest available
information. Thereafter, when the actual tax rate for such current year
becomes known, Seller and Purchaser shall, outside of escrow and after
Closing, re-prorate any such taxes or assessments to the extent that
the actual rate thereof was different than the rate used for prorations
made at Closing and shall pay, one to the other, any adjustment due as
a result of such re-proration;
(ii) current rents and other charges, if any, paid or payable
by Tenants under the Leases;
(iii) all charges for natural gas, water, sewer, electricity
and other utility services furnished to the Property which are not
metered to Tenants. Seller, to the extent the same is obtainable, shall
furnish meter readings for such utilities through the close of business
on the day prior to the Closing. If any such meter readings are not so
obtainable, then Seller shall provide meter readings as of a date not
more than thirty (30) days prior to the Closing Date, and the proration
of utility charges shall initially be based upon such prior reading.
Upon the taking of actual meter readings first after Closing, such
proration shall be readjusted outside of escrow after Closing and
Seller or Purchaser, as the case may be, shall promptly pay to the
other the amount determined to be so due upon such readjustment; and,
(iv) with regard to any rental concession (whether in the
form of free rent, a rent concession coupon or otherwise (collectively,
a Rent Concession)) which Seller has granted to Tenants prior to
Seller's execution of this Agreement and which is applicable to the
period following the Closing and which is not applicable over the term
of the Lease on a substantially amortized basis, Seller hereby grants
to Buyer and Buyer hereby accepts a credit equal to the amount of such
Rent Concession. If, after Closing, a Tenant is entitled to use or
apply any Rent Concession theretofore granted to such Tenant by Seller,
Purchaser, at Purchaser's sole cost, shall honor and apply such Rent
Concession to the rent due from such Tenant. Seller represents and
warrants to Buyer, in regard to the Rent Concessions, if any, granted
by Seller between the Effective Date of this Agreement and Closing,
that Seller will not grant any Rent Concessions which exceed in
economic value: (a) 1/2 month's rent on a "6 month lease" or (b) 1
month's rent on a "12 month lease."
(b) All other items of accrued or prepaid income and expense, except
delinquent rents, shall be prorated as of the Closing Date, on the basis of the
most recent ascertainable amounts of or other reliable information for each item
of income and expense. Seller and Purchaser shall duly cooperate with each other
and the Title Company in making prorations, adjustments and credits pursuant to
this Section 10 and shall, as requested by the Title Company, furnish to the
Title Company such information as is in the possession of or obtainable by them
to assist in making such prorations, adjustments or credits. In the event, for
any reason beyond the reasonable control of the Parties hereto, information
necessary to calculate any proration, adjustment or credit for any item required
to be prorated, adjusted or credited under this Section 10 is not available
prior to Closing, then such items shall be prorated, adjusted or credited
outside of escrow after Closing as soon as such information is available, and
Seller and Purchaser shall duly cooperate with each other in regard thereto and
shall pay, one to the other, any amounts which may be owing as a result of any
such subsequent proration, adjustment or credit. In the event, at any time
within six (6) months after Closing, errors shall be discovered in any
prorations, adjustments or credits made pursuant to this Section 10, Seller and
Purchaser shall correct such errors and shall pay, one to the other, any sums
owning as a result of such correction.
(c) For purposes of all prorations provided for in this Agreement,
Seller shall be responsible for all days up to and including the Closing Date,
and Purchaser shall be responsible for all days after the Closing Date. Except
as otherwise expressly provided in this Agreement, all prorations shall be
final.
(d) Security deposits, including cleaning and pet deposits and prepaid
rent and any interest thereon, shall be credited to Purchaser at Closing.
(e) If on the Closing Date any Tenant is delinquent in the payment of
rent, including any additional rent billed but unpaid at the time of Closing,
the delinquent rent shall remain the property of Seller and be paid to Seller
if, as and when collected by Purchaser out of last moneys received by Purchaser
from such tenant, and no proration of such delinquent rent shall be made at
Closing. For a period of ninety (90) days after Closing, Purchaser shall attempt
to collect and shall remit to Seller any such delinquent rents owing to Seller;
provided, however, that (i) Purchaser shall be required only to periodically
send bills to the Tenant(s) owing such delinquent rent and shall not be required
to commence any litigation or undertake any other collection efforts in regard
thereto; and (ii) in the event Purchaser collects rent from a person who owes
rent for any period of time after Closing and for a period of time prior to
Closing, all amounts collected from such person shall be applied first to the
amount of rents owing by such person for the period of time after Closing and
only the excess, if any, shall be remitted to Seller.
(f) Contemporaneously with the Closing, Seller shall deliver to
Purchaser at the offices of the Property Manager all originals (including
computer discs and tapes) of books and records of accounts, contracts, leases,
leasing correspondence, receipts for deposits, bills and other papers that
pertain to the Property, together with all advertising materials, booklets, keys
and other items, if any, used in the Property's operation. Seller, at Seller's
cost, may retain a copy of the foregoing items for tax reporting purposes. After
the Closing and solely for the purposes of Section 10, Seller, at Seller's sole
cost and upon at least five (5) days' prior written request to Purchaser, shall
have the right to inspect the books and records for the Property located at
Property Manager's office to verify that Purchaser is remitting to Seller the
proper amounts according to this Agreement and for any other purpose related to
Seller's prior ownership of the Property.
Section 11. Transfer Taxes; Title Charges;
Other Closing Costs and Escrow Cancellation.
(a) Seller and Purchaser agree to execute any real estate transfer
declarations required by the state, county or municipality in which the Real
Property is located. Seller shall pay: (i) one-half of the escrow charges of
Title Company (which are to be at the "developer rate"); (ii) one-half of the
cost of recording the instruments of conveyance; and (iii) the portion of the
premium charged for the Title Policy attributable to standard coverage.
Purchaser shall pay all other costs of consummating this transaction, including
without limitation the premium for the Title Policy in excess of standard
coverage and for any endorsements required by Purchaser, all transfer taxes and
other fees (if any) assessed by any governmental authority against the Real
Property because of this sale and transfer, all sales and transfer taxes or
other fees assessed by any governmental authority against the Personal Property
(if any) and the cost of any municipal deed or transfer taxes (if any). The
parties shall each pay their own attorneys' fees in regard to the negotiation
and documentation of the Purchase Transaction.
(b) If the Escrow fails to close because of a Seller's Event of
Default, Seller shall be liable for the cancellation charge, if any, of Title
Company. If the Escrow fails to close because of Purchaser's Event of Default,
Purchaser shall be liable for the cancellation charge, if any, of Title Company.
If the Escrow fails to close for any other reason, Seller and Purchaser shall
each be liable for one-half of the cancellation charge, if any, of Title
Company.
Section 12. Risk of Loss.
(a) Except as provided in any indemnity provisions of this Agreement,
Seller shall bear all risk of loss for the Property up to the Closing.
(b) The foregoing to the contrary notwithstanding, if the Property is
damaged by fire or other casualty prior to the Closing Date and is insured under
one or more fire or casualty insurance policies maintained by Seller, and if
Seller determines, in Seller's reasonable good faith discretion, that repair of
the Property would cost less than One Hundred Thousand Dollars ($100,000.00)
(Loss Threshold), Purchaser shall not have the right to terminate this Agreement
and Seller, in Seller's sole discretion, may elect either: (i) to repair and
restore the Property to its condition immediately preceding the fire or
casualty; or (ii) to proceed to close this Purchase Transaction without
reduction in the Purchase Price provided that, as a condition precedent thereto
and in a form acceptable to Purchaser, in Purchaser's reasonable discretion,
Seller assigns and transfers to Purchaser on the Closing Date all of Seller's
right, title and interest in and to the insurance proceeds paid or payable to
Seller under the policy covering the damage and pay to Purchaser the amount of
Seller's deductible under the insurance policy.
(c) However, if the Property is damaged by fire or other casualty prior
to the Closing Date and is insured under one or more fire or casualty insurance
policies maintained by Seller, and if Seller determines, in Seller's reasonable
good faith discretion, that the repair of the damage would cost an amount equal
to or in excess of the Loss Threshold, Purchaser, in Purchaser's sole
discretion, may elect either: (i) to terminate this Agreement and have the Title
Company immediately return the Earnest Money together with accrued interest
thereon to Purchaser; or (ii) to proceed to close this Purchase Transaction,
without reduction in the Purchase Price, and, as a condition precedent thereto
and in a form acceptable to Purchaser in Purchaser's reasonable discretion, have
Seller assign and transfer to Purchaser on the Closing Date all of Seller's
right, title and interest in and to the insurance proceeds paid or payable to
Seller under the policy covering the damage and pay to Purchaser the amount of
Seller's deductible under the insurance policy.
(d) Immediately after Seller obtains notice of any fire or casualty,
Seller shall notify Purchaser thereof in writing, including Seller's reasonable
determination of the repair cost; provided, however, that in the event Purchaser
shall in good faith dispute the repair cost so determined by Seller, Purchaser
shall immediately notify Seller of such dispute, in which event Seller shall as
soon as practicable obtain three (3) bids to repair such damage from reputable
contractors licensed in the State of Arizona and furnish copies thereof to
Purchaser. The average of the two bids that are the closest to each other shall
be determinative as to whether the Loss Threshold shall have been exceeded. If
the repair cost so determined exceeds the Loss Threshold, Purchaser shall notify
Seller in writing within fifteen (15) Business Days after Purchaser's receipt of
Seller's Notice whether Purchaser elects to terminate this Agreement in
accordance with this Section 12. Closing shall be delayed, if necessary, to
allow Purchaser to make such election. If Purchaser fails to make the election
within such fifteen-day period, Purchaser shall be deemed to have elected to
terminate this Agreement.
Section 13. Condemnation.
(a) If, between the Effective Date and the Closing Date, any
condemnation or eminent domain proceedings are commenced or threatened that
might result in the taking of all or any part of the Real Property or the
Improvements or the taking or closing of any access right to the Property,
Purchaser, in Purchaser's sole discretion, may either:
(i) terminate this Agreement by written notice to Seller and
have the Title Company return the Earnest Money together with accrued
interest thereon; or
(ii) proceed with the Closing and, as a condition precedent
thereto and in a form acceptable to Purchaser, in Purchaser's sole
discretion, have Seller assign to Purchaser all of Seller's right,
title and interest in and to any award made or to be made for the
condemnation or eminent domain action.
(b) Immediately after Seller obtains notice of the commencement or the
threatened commencement of eminent domain or condemnation proceedings, Seller
shall notify Purchaser in writing. Purchaser shall then notify Seller, within
fifteen (15) Business Days after Purchaser's receipt of Seller's notice, whether
Purchaser elects to terminate this Agreement in accordance with Section
13(a)(i). Closing shall be delayed, if necessary, to allow Purchaser to make
such election. If Purchaser fails to make the election within such fifteen-day
period, Purchaser shall be deemed to have elected to terminate this Agreement.
Section 14. Default.
(a) Purchaser shall be in default under this Agreement (a Purchaser's
Event of Default) if any of the following events shall occur:
(i) Purchaser fails to close the Escrow on the date
scheduled therefor as provided in this Agreement; provided, however, that the
failure of the Closing to occur solely as a result of: [a] the breach by
Purchaser's lender of the lender's obligation to fund under the Commitment; or
[b] the failure of a condition in the Commitment that is not caused by any
action or inaction by Purchaser or by any failure by Purchaser to use its best
efforts to close the Loan at Closing, shall not constitute a Purchaser's Event
of Default and shall entitle Purchaser to terminate this Agreement and obtain an
immediate refund of the Earnest Money plus interest;
(ii) Purchaser shall fail to pay any monies due in accordance
with this Agreement (other than the obligations referenced in Subparagraph (i))
by 5:00 p.m. MST on the third Business Day after the stated due date; or,
(iii) Purchaser shall fail to fully and timely perform any of
Purchaser's obligations (other than the monetary obligations referenced in
Subparagraphs (i) and (ii)) arising under this Agreement by 5:00 p.m. MST on the
fifth (5th) Business Day after Purchaser's receipt of written notice from Seller
specifying Purchaser's nonperformance.
(b) Seller shall be in default under this Agreement (a "Seller's Event
of Default") if:
(i) Seller fails to close the Escrow on the date scheduled
therefor as provided in this Agreement; or,
(ii) Seller shall fail to fully and timely perform any of
Seller's obligations arising under this Agreement (other than the obligations
referenced in Subparagraph (i)) and such failure shall continue past 5:00 p.m.
MST on the fifth (5th) Business Day after Seller's receipt of written notice
from Purchaser specifying Seller's nonperformance.
(c) If a Seller's Event of Default shall exist, Purchaser, at
Purchaser's sole option and as Purchaser's sole remedies, may also: (i) by
written notice to Seller and Title Company, cancel this Agreement whereupon the
Earnest Money plus interest shall be paid immediately by Title Company to
Purchaser and, except as otherwise provided in this Agreement as to any Survival
Item, neither Purchaser nor Seller shall have any further liability or
obligation hereunder; or, (ii) seek specific performance against Seller by
delivering the Purchase Price into the Escrow; provided, however, that as
conditions precedent to such action: [a] no uncured Purchaser's Event of Default
shall exist and no event shall have occurred which with the passage of time or
with notice, or both, could become a Purchaser's Event of Default; [b] Purchaser
delivers the Purchase Price into the Escrow albeit Purchaser shall be entitled
thereafter to withdraw immediately from the Escrow the Purchase Price (less the
Earnest Money) pending the outcome of the action; and [c] Purchaser shall not
seek to amend the Purchase Price in such action, in which event the Closing
shall be automatically extended as necessary.
(d) If a Purchaser's Event of Default shall exist, as Seller's sole
remedy (in lieu of any other legal or equitable remedies against Purchaser which
Seller expressly waives except as hereinafter provided otherwise) Seller shall
be entitled to retain the Earnest Money only in accordance with Section 3(b) as
Seller's agreed and total liquidated damages unless Purchaser objects to, fails
to cooperate with or otherwise opposes Seller's withdrawal of such Earnest Money
out of the Escrow, in which event Seller shall have all of the remedies
otherwise available to Seller at law or in equity.
Section 15. Notices.
All notices under this Agreement shall be in writing and sent by: (a)
certified or registered mail, postage prepaid and return receipt requested, in
which case notice shall be deemed delivered at the earlier of actual receipt or
three (3) business days after deposit in the United States Mail, (b) by a
nationally recognized overnight courier, in which case notice shall be deemed
delivered one (1) business day after deposit with that courier, or (c) telecopy
or similar means, if a copy of the notice is also sent by United States
certified mail, in which case notice shall be deemed delivered on the date of
confirmed receipt, as follows:
If to Seller:
c/o L'Auberge Communities Inc.
14988 North 78th Way, Suite 211
Scottsdale, Arizona 85260
Attention: Stephen B. Boyle
Facsimile No.: (602) 607-9773
With a copy to:
Hughes Hubbard & Reed LLP
350 South Grand Avenue, Suite 3600
Los Angeles, California 90071-3442
Attention: George A. Furst, Esq.
Facsimile No.: (213) 613-2950
If to Purchaser:
JPR Capital, L.L.C.
5950 North 78th Street, Suite 109
Scottsdale, Arizona 85250
Attention: Robert L. Lyles, Member
Facsimile No.: (602) 945-4146
With a copy to:
Lorence M. Zimtbaum, Esq.
34522 North Scottsdale Road, Suite D-8
Scottsdale, Arizona 85262
Facsimile No.: (602) 595-9699
The addresses above may be changed by written notice to the other
party; provided, however, that no notice of a change of address shall be
effective until actual receipt of the notice by the addressee thereof. Copies of
notices are for informational purposes only, and a failure to give or receive
copies of any notice shall not be deemed a failure to give notice.
Section 16. Time of Essence.
Time is of the essence in this Agreement and the performance of each
and every obligation hereunder. However, if this Agreement requires any act to
be done or action to be taken on a date which is a Saturday, Sunday or legal
holiday, such act or action shall be deemed to have been validly done or taken
if done or taken on the next succeeding day which is not a Saturday, Sunday or
legal holiday.
Section 17. Termination of Agreement.
If triplicate fully executed originals of this Agreement have not been
delivered by Purchaser to Seller by 5:00 p.m. MST on February __, 1998 for
immediate deposit by Purchaser with Title Company along with the Earnest Money,
this Agreement shall automatically be deemed revoked and null and void.
Section 18. Governing Law; Jurisdiction; Venue.
This Agreement shall be governed by and construed in accordance with
Arizona law. In regard to any litigation which may arise in regard to this
Agreement, the parties shall and do hereby submit to the sole jurisdiction of
and the parties hereby agree that the sole proper venue shall be in the Court.
Section 19. Counterparts and Facsimile Signatures.
(a) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(b) The parties' execution of this Agreement may be evidenced by
facsimile signatures with originals to be immediately distributed thereafter
albeit the Agreement may be deemed binding upon transmittal of the facsimiles.
Section 20. Captions.
The captions in this Agreement are inserted for convenience of
reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of its provisions.
Section 21. Assignability.
(a) Except as expressly set forth in Section 21(b) below, Purchaser
shall not have the right to assign this Agreement or any of Purchaser's rights
under this Agreement prior to Closing to any person or entity without the prior
written consent of Seller, which consent shall not be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, such consent shall be
conditioned upon the assignee's assumption of Purchaser's duties and obligations
under this Agreement by delivering to Seller and Title Company duplicate
originals of an assumption agreement in form and substance reasonably acceptable
to Seller, Seller shall not incur any additional expense because of such
assignment and such assignment shall not delay the Closing.
(b) Purchaser may, upon written notice to Seller and Title Company but
without being obligated to seek or obtain Seller's written consent, assign all
(or any part) of Purchaser's rights under this Agreement (for purposes of this
Section 21(c), the Assignment) to a third party entity (the Assignee Purchaser);
provided, however, that: (i) the Assignment shall not occur prior to the tenth
(10th) day before the date scheduled for the Closing; (ii) an uncured
Purchaser's Event of Default does not then exist and no event shall have
occurred which with the passage of time or with notice, or both, could become a
Purchaser's Event of Default; (iii) the Assignee Purchaser is a newly formed
entity in which Purchaser shall have an interest of not less than ten percent
(10%); and (iv) Purchaser and the Assignee Purchaser shall comply with the
requirements in the second sentence of Section 21(a).
(c) Seller shall not have the right or authority to assign this
Agreement or any of Seller's rights under this Agreement prior to Closing to any
person or entity without the prior written consent of Purchaser, which consent
may be granted or withheld in Purchaser's sole discretion. In the event
Purchaser consents to such an assignment, the consent may be conditioned upon
the assignee's assumption of Seller's duties and obligations under this
Agreement by delivery to Purchaser and Title Company of duplicate originals of
an assumption agreement in form and substance reasonably acceptable to
Purchaser.
Section 22. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective legal representatives, successors, heirs and
permitted assigns.
Section 23. Modifications; Waiver.
No waiver, modification, amendment, discharge or other change of this
Agreement shall be valid unless it is in writing and signed by the party against
which the enforcement of the modification, waiver, amendment, discharge or other
change is sought.
Section 24. Entire Agreement.
This Agreement and the exhibits attached hereto contain the entire
agreement between the parties relating to the Purchase Transaction. All prior or
contemporaneous letters of intent (including but not limited to that certain
non-binding letter of intent between Seller and Purchaser dated December 16,
1997), agreements, understandings, representations or statements, whether oral
or written, with respect to the subject matter hereof are superseded hereby.
Section 25. Partial Invalidity; Further Assurances.
If any provision of this Agreement shall be determined by any
court to be invalid, illegal or unenforceable to any extent, the remainder of
this Agreement shall not be affected and this Agreement shall be construed as if
the invalid, illegal or unenforceable provision had never been contained in this
Agreement. Prior to and after Closing, the parties hereto agree to take such
action and execute, acknowledge, file and record any additional documents
reasonably necessary to effectuate the terms and provisions of this Agreement.
Section 26. Survival.
Except as expressly provided in this Agreement to the contrary, all
representations, warranties, covenants, agreements and other obligations of
Seller and Purchaser in this Agreement shall not survive the Closing of the
Purchase Transaction.
Section 27. No Third-Party Rights.
Nothing in this Agreement, express or implied, is intended to confer
upon any person, other than the parties to this Agreement and their respective
successors and permitted assigns, any rights or remedies.
Section 28. Attorneys' Fees.
If any legal action or any other proceeding, including without
limitation an action for declaratory relief, is brought to enforce this
Agreement or any rights or obligations hereunder or because of a dispute,
breach, default or misrepresentation in connection with this Agreement, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action or proceeding (including without limitation
any appeal or post-judgment enforcement proceedings), in addition to any other
relief to which that party may be entitled. "Prevailing party" shall include the
party determined to be the prevailing party by the Court.
Section 29. Broker.
Seller and Purchaser each represent and warrant to the other that it
has not had any dealings with any broker, finder or other party concerning
Purchaser's purchase of the Property, except Amercon Realty Services, Inc.
(Seller's Broker). Seller agrees to pay at Closing a commission to Seller's
Broker pursuant to a separate agreement between Seller and Seller's Broker, a
copy of which shall be deposited in escrow on or before Closing if Seller's
Broker is to be paid through escrow at Closing. Seller and Purchaser each agree
to defend, indemnify and hold the other harmless from and against any such all
loss, liability, damage, cost or expense, including without limitation
reasonable attorneys' fees, incurred by the other as a result of any claim
arising out of the acts of the indemnifying party, or others on that party's
behalf, for a commission, finder's fee or similar compensation made by any
broker (including Seller's Broker), finder or any person who claims to have
dealt with the indemnifying party. The representations, warranties and covenants
contained in this Section 29 shall survive the Closing or termination of this
Agreement.
Section 30. Opening of Escrow.
The term "Opening of Escrow" shall mean the date of delivery to Title
Company of triplicate fully executed originals of this Agreement by Seller and
Purchaser together with the delivery by Purchaser to Title Company of the
Earnest Money.
Section 31. Exhibits.
The following exhibits have been attached to this Agreement and
incorporated herein by reference:
Exhibit A -- Legal Description
Exhibit B -- Diagram of the Property and Improvements Exhibit C --
Schedule of Personal Property Exhibit D -- Form of Special Warranty
Deed Exhibit E -- Form of Bill of Sale Exhibit F -- Form of Assignment
of Leases Exhibit G -- Assignment of Tradename and Trademark Rights
Exhibit H -- Form of Assignment of Intangible Property Exhibit I --
Form of Tenant Letters Exhibit J -- Certificate of Rent Roll Exhibit K
-- Form of Non-Foreign Affidavit Exhibit L -- Form of Affidavit of
Value Exhibit M -- Form of Property Management Agreement
Section 32. Severability.
[Intentionally deleted.]
Section 33. Form of Title Policy.
The Title Policy to be issued by Title Company shall be Title Company's
most current form. A specimen of the Title Policy is to be delivered to
Purchaser not more than twenty (20) days after the delivery of the Preliminary
Report to the Parties. The Policy is to include, among other things, any or all
of the following endorsements which are requested by Purchaser (in its sole
discretion) and which are also to be delivered to Purchaser at Purchaser's cost:
(i) a survey endorsement to the effect that the insured legal description and
the Survey legal description describe one and the same property; (ii) a patent
endorsement; (iii) a contiguity endorsement; (iv) an endorsement insuring
against archaic deed restrictions; (v) the owner's equivalent of a 3R and 5
endorsement; and (vi) any other endorsements reasonably requested by Purchaser.
Section 34. No Partnership or Other Liability.
Any and all provisions, implications, or interpretations of or from
this Agreement to the contrary notwithstanding, no partnership, joint venture or
other relationship is created, implied or acknowledged between or among the
Parties.
Section 35. General Provisions Regarding Title Company.
(a) Title Company will make all adjustments and/or prorations on the
basis of the actual number of days in a month, and by credit and/or debit to the
respective accounts of Seller and Purchaser in the Escrow.
(b) For purposes of the instructions to Title Company, the expression
"Closing" shall mean the date the Deed is recorded.
(c) Title Company shall: (i) make disbursements by wire transfer of
federal funds; (ii) mail instruments to the addresses of the Parties shown
above, unless Title Company is instructed otherwise; and, (iii) wire funds to
Seller by wire transfer as directed by Seller.
(d) No change of instructions shall be of any effect on Title Company
unless given in writing by all of the Parties hereto. In the event conflicting
demands are made or conflicting notices served upon Title Company with respect
to the Escrow, the Parties expressly agree that Title Company shall have the
absolute right at Title Company's election to do either or both of the
following: (i) withhold and stop all further proceedings in, and performance of,
the Escrow; or (ii) file a suit in interpleader and obtain an order from the
Court requiring the Parties to interplead and litigate in the Court their
several claims and rights among themselves. In the event such interpleader suit
is brought, Title Company shall ipso facto be fully released and discharged from
all obligations to further perform any and all duties or obligations imposed
upon Title Company in the Escrow, and the Parties jointly and severally agree to
pay all reasonable costs, expenses, and reasonable attorneys' fees expended or
incurred by Title Company, the amount thereof to be fixed and a judgment
therefor entered by the Court in such suit.
(e) Except for Title Company's negligence, fraud, willful misconduct or
breach of contract, Title Company shall not be held liable for the identity,
authority or rights of any person executing any document deposited in the
Escrow, or for Seller or Purchaser's failure to comply with any of the
provisions of any agreement, contract or other instrument deposited in the
Escrow, and Title Company's duties hereunder shall be limited to the safekeeping
of such money, instruments or other documents received by Title Company as
escrow holder, and to the disposition of same in accordance with the written
instructions accepted by Title Company in the Escrow.
(f) It is agreed by the Parties to this Agreement that so far as Title
Company's rights and liabilities are concerned, this transaction is an escrow
and not any other legal relation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
"Purchaser"
JPR CAPITAL, L.L.C.,
an Arizona limited liability company
By: /s/ Robert Lyles__________________
Name: Robert Lyles
Title: Member
"Seller"
CASABELLA ASSOCIATES,
an Arizona joint venture partnership
By: Development Partners
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P.,
a California limited partnership,
its general partner
By: L'Auberge Communities Inc.,
a California corporation,
its general partner
By: /s/ Stephen B. Boyle_____________
Name: Stephen B. Boyle
Title: President
[Signatures continued.]
<PAGE>
By: Development Partners II
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P.,
a California limited partnership,
its general partner
By: L'Auberge Communities Inc.,
a California corporation,
its general partner
By: /s/ Stephen B. Boyle_____________
Name: Stephen B. Boyle
Title: President
By: Development Partners III
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P.,
a California limited partnership,
its general partner
By: L'Auberge Communities Inc.,
a California corporation,
its general partner
By: /s/ Stephen B. Boyle_____________
Name: Stephen B. Boyle
Title: President
<PAGE>
TITLE COMPANY'S ACCEPTANCE
The foregoing fully executed Agreement together with the Earnest Money
is accepted by the undersigned this _____ day of February, 1998, which for the
purposes of this Agreement shall be deemed to be the date of "Opening of
Escrow".
First American Title Insurance Company
By: /s/ Sharon McKenzie______________
Its: Escrow Officer
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
[Canyon View Apartments]
BETWEEN
CANYON VIEW JOINT VENTURE,
an Arizona Joint Venture Partnership
and
CANYON VIEW EAST JOINT VENTURE,
an Arizona Joint Venture Partnership,
as Seller,
AND
TUCSON REALTY HOLDING CO., INC.,
a Delaware corporation,
as Purchaser
<PAGE>
TABLE OF CONTENTS
Paragraph/Topic Page
Recitals 1
Section 1. Definitions.................................................... 2
Section 2. Purchase and Sale.............................................. 4
Section 3. Purchase Price................................................. 4
Section 4. Closing........................................................ 5
Section 5. Conditions to Closing........................................... 8
Section 6. Title and Survey............................................... 11
Section 7. Representations and Warranties................................. 13
Section 8. Purchaser's Acceptance of Property As-Is....................... 19
Section 9. Seller's Covenants............................................. 20
Section 10. Prorations.................................................... 21
Section 11. Transfer Taxes; Title Charges;
Other Closing Costs and Escrow Cancellation............... 23
Section 12. Risk of Loss.................................................. 24
Section 13. Condemnation.................................................. 25
Section 14. Default....................................................... 26
Section 15. Notices....................................................... 28
Section 16. Time of Essence............................................... 29
Section 17. Termination of Agreement...................................... 29
Section 18. Governing Law; Jurisdiction; Venue............................ 29
Section 19. Counterparts and Facsimile Signatures......................... 29
Section 20. Captions...................................................... 29
Section 21. Assignability................................................. 30
Section 22. Binding Effect................................................ 30
Section 23. Modifications; Waiver......................................... 30
Section 24. Entire Agreement.............................................. 30
Section 25. Partial Invalidity; Further Assurances........................ 31
Section 26. Survival...................................................... 31
Section 27. No Third-Party Rights......................................... 31
Section 28. Attorneys' Fees............................................... 31
Section 29. Broker........................................................ 31
Section 30. Opening of Escrow............................................. 32
Section 31. Exhibits...................................................... 32
Section 32. Form of Title Policy.......................................... 32
Section 33. No Partnership or Other Liability............................. 33
Section 34. General Provisions Regarding Title Company.................... 33
Section 35. Conditions to Seller's Performance.............................34
LIST OF EXHIBITS
.........A -- Legal Description
.........B -- Diagram of the Property and Improvements
.........C -- Schedule of Personal Property
.........D -- Form of Special Warranty Deed
.........E -- Form of Bill of Sale
.........F -- Form of Assignment of Leases
.........G -- Assignment of Tradename and Trademark Rights
.........H -- Form of Assignment of Intangible Property
.........I -- Form of Tenant Letters
.........J -- Certificate of Rent Roll
.........K -- Form of Non-Foreign Affidavit
.........L -- Form of Affidavit of Value
<PAGE>
LA980570.058
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
Canyon View Apartments
This Purchase and Sale Agreement and Escrow Instructions (Agreement) is
entered into as of February 19, 1998 (Effective Date), by and between Canyon
View Joint Venture, an Arizona joint venture partnership, and Canyon View East
Joint Venture, an Arizona joint venture partnership (collectively, Seller), and
Tucson Realty Holding Co., Inc., a Delaware corporation (Purchaser), with
reference to the following:
Recitals
A........Seller is the owner of:
(1)......the land (Real Property) in Tucson (the City), Arizona, and
located at 6655 Canyon Crest Drive. The Real Property is more particularly
described in Exhibit A and generally depicted on Exhibit B attached hereto and
incorporated herein by this reference and is commonly known as Canyon View
Apartments;
(2)......all structures, buildings, improvements and fixtures on the
Real Property (collectively, Improvements), including without limitation an
apartment complex consisting of 264 units (the Units) situated in twenty-seven
(27) buildings (the Complex) together with all equipment, appliances, and
amenities used in connection with the Complex;
(3)......certain personal property on the Real Property or the
Improvements or personal property used primarily in connection with the
operation and maintenance of the Real Property or the Improvements, more
particularly described in Exhibit C attached hereto and incorporated herein by
this reference (Personal Property);
(4)......all of Seller's interest in all leases and other agreements,
if any, to occupy all or any portion on the Units, as amended from time to time
(such leases and agreements being sometimes collectively referred to in this
Agreement as Leases);
(5)......all of Seller's interest, if any, in mineral, water and
irrigation rights, if any, running with or otherwise pertaining to the Real
Property; and,
(6)......all intangible property used in connection with the Real
Property, the Improvements or the Personal Property, including but not limited
to the trade names Canyon View and Canyon View East and related trademarks and
associated good will (collectively the Tradename) used in connection with the
Real Property or the Improvements (but not any tradename utilizing the term
"L'Auberge"); plans and specifications in possession, custody or control of
Seller or its property manager that were prepared in connection with the
construction of the Improvements; all hereditaments, privileges, tenements and
appurtenances pertaining to the Real Property; all Seller's rights to open or
proposed highways, streets, roads, avenues, alleys, easements, strips, gores and
rights-of-way in any way affecting the Real Property; all currently effective
and transferable licenses, permits and warranties for the Real Property, the
Improvements and the Personal Property; and all written contracts and guarantees
running in favor of Seller in effect at Closing as approved by Purchaser that
relate in any way to the Property (Contracts) (collectively, Intangible
Property).
The Real Property, the Improvements, the Personal Property, the Leases
and the Intangible Property are sometimes collectively referred to in this
Agreement as the Property.
B........Purchaser desires to purchase the Property from Seller, and
Seller desires to sell the Property to Purchaser, on the terms and conditions
set forth in this Agreement.
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties agree as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall be defined in
Section 1:
Agreement is defined in the preamble.
Approved Exceptions is defined in Section 6(b).
Business Day means a calendar day on which banks in Phoenix, Arizona
shall be open to transact business (other than by automated teller or
similar equipment).
City is defined in Recital A(1).
Closing is defined in Section 4(a).
Closing Date is defined in Section 4(a).
Code is defined in Section 4(c)(viii).
Complex is defined in Recital A(2).
Contracts is defined in Recital A(6).
Court is defined in Section 5(a)(1).
Disapproval Notice is defined in Section 6(b).
Disapproved Exceptions is defined in Section 6(b).
Due Diligence Period is defined in Section 5(a).
Effective Date is defined in the preamble.
Earnest Money is defined in Section 3(b).
Escrow is defined in Section 4(a).
ERISA is defined in Section 7(d).
Hazardous Material is defined in Section 7(a)(vi).
Improvements is defined in Recital A(2).
Intangible Property is defined in Recital A(6).
Leases is defined in Recital A(4).
Loss Threshold is defined in Section 12(b).
Opening of Escrow is defined in Section 30.
Personal Property is defined in Recital A(3).
Preliminary Report is defined in Section 6(a).
Property is defined in Recital A.
Purchase Price is defined in Section 3.
Purchase Transaction is defined in Section 2.
Purchaser is defined in the preamble.
Purchaser's Event of Default is defined in Section 14(a).
Real Property is defined in Recital A(1).
Seller is defined in the preamble.
Seller's actual knowledge is defined in Section 7(a).
Seller's Broker is defined in Section 29.
Seller's Disclosure Documentation is defined in Section 5(a)(ii).
Seller's Event of Default is defined in Section 14(b).
Studies is defined in Section 5(a)(i).
Survey is defined in Section 6(c).
Survival Items is defined in Section 5(a).
Tenants is defined in Section 4(b).
Tenant Letters is defined in Section 4(c)(vi).
Title Company is defined in Section 3(a).
Title Policy is defined in Section 6(a).
Tradename is defined in Recital A(6).
Unit is defined in Recital A(2).
Section 2. Purchase and Sale.
In consideration of the mutual covenants contained in this Agreement,
Seller agrees to sell the Property to Purchaser, and Purchaser agrees to
purchase the Property from Seller, on the terms and conditions hereinafter set
forth (the Purchase Transaction).
Section 3. Purchase Price.
The purchase price for the Property shall be Sixteen Million Seven
Hundred Fifty Thousand and No/100 Dollars ($16,750,000.00) (Purchase Price). The
Purchase Price shall be payable as follows:
(a) The sum of Two Million and No/100 Dollars ($2,000,000.00) shall be
tendered to Seller in the form of Purchaser's check or wire transfer made
payable to Chicago Title Insurance Company (Title Company) simultaneously with
the Opening of Escrow (Earnest Money). The Earnest Money shall be deposited with
and held by Title Company in accordance with this Agreement. Purchaser shall
concurrently with its deposit of the Earnest Money furnish its Federal Taxpayer
Identification No. to Title Company. The Earnest Money shall be invested by
Title Company in a federally insured, daily interest-bearing account as directed
by Purchaser, and all interest shall become part of the Earnest Money. As long
as the conditions precedent in Section 5(a) shall have been satisfied or
otherwise waived, in writing, by Purchaser and Seller does not default in the
performance of its obligations under this Agreement, the Earnest Money shall be
applied against the Purchase Price at the Closing or, if a Purchaser's Event of
Default exists under this Agreement, immediately disbursed to Seller pursuant to
Section 14 as Seller's agreed and total liquidated damages, it being
acknowledged and agreed by Purchaser and Seller that it would be extremely
difficult or impossible to determine Seller's exact damages. If a Seller's Event
of Default exists under this Agreement and Purchaser elects to terminate this
Agreement, the Earnest Money together with accrued interest thereon shall be
immediately released to Purchaser. In the event this Agreement is terminated or
cancelled as provided herein, the parties agree to execute such documentation as
may reasonably be requested by Title Company to effectuate the release of the
Earnest Money to the party entitled thereto.
(b) On or before the Closing Date, Purchaser shall deposit with Title
Company, in immediately available funds in addition to the Earnest Money, the
sum necessary to make the total consideration equal to the Purchase Price, plus
or minus prorations and closing costs, in accordance with this Agreement, which
funds are to be held in escrow by Title Company until cancellation of this
Agreement as provided in this Agreement or paid to Seller at the Closing.
Section 4. Closing.
(a) The purchase and sale of the Property (Closing) shall be
consummated through an escrow established by the Title Company (Escrow) that
shall close at Title Company's office by 5:00 p.m. MST on the date (Closing
Date) that is the later of five (5) Business Days after the expiration of the
Due Diligence Period (as defined below) and five (5) Business Days after the
consents required in Section 35(b) below shall have been obtained unless such
Closing Date is extended pursuant to this Agreement or otherwise by written
agreement signed by the parties.
(b) Prior to or at the Closing, Purchaser shall pay the Purchase Price
as set forth in Section 3(c) above into the Escrow, Purchaser and Seller shall
execute and deliver into Escrow all necessary documents and Seller shall deliver
marketable fee title free and clear of all liens, encumbrances, or judgments and
possession of the Property to Purchaser free and clear of all tenants or
occupants other than the tenants of the Units under the Leases (Tenants).
(c) On or before the Closing Date, Seller shall deliver into Escrow the
following documents and things:
(i) a Special Warranty Deed, in recordable form and
properly executed and acknowledged on behalf of Seller, conveying to
Purchaser the Real Property and the Improvements in fee simple, subject
only to the Approved Exceptions, in substantially the form attached
hereto as Exhibit D and incorporated herein by this reference;
(ii) a Bill of Sale executed by Seller transferring to
Purchaser the Personal Property, with a warranty of title only. No
warranty of condition or fitness for any use or purpose will be made.
The Bill of Sale shall be substantially in the form attached hereto as
Exhibit E and incorporated herein by this reference;
(iii) a duly executed Assignment of Leases that assigns and
transfers to Purchaser, as of the Closing, all of Seller's interests
under the Leases and that contains an assumption by Purchaser of
Seller's obligations under the Leases, including without limitation
obligations relating to security deposits. The Assignment of Leases
shall be substantially in the form attached hereto as Exhibit F and
incorporated herein by this reference;
(iv) a duly executed Assignment of Tradename and Trademark
Rights that assigns and transfers all of Seller's interest in the
Tradename. The Assignment of Tradename and Trademark Rights shall be
substantially in the form attached hereto as Exhibit G and incorporated
by reference;
(v) a duly executed and acknowledged Assignment of
Intangible Property that assigns and transfers to Purchaser as of the
Closing all of Seller's interests to the Intangible Property and the
Contracts substantially in the form attached hereto as Exhibit H and
incorporated herein by this reference;
(vi) a form of letter to Tenants (Tenant Letters) at the
Real Property and Improvements that instruct the Tenants, after the
Closing Date, to pay rent to Purchaser and to recognize Purchaser as
the new lessor under their respective Leases substantially in the form
attached hereto as Exhibit I attached hereto and incorporated by
reference;
(vii) originals or, if originals are not available, complete
copies, of all Leases and amendments thereto and tenant files in the
possession of Seller or its property manager, together with a
Certificate of Rent Roll substantially in the form of Exhibit J
attached hereto and incorporated herein by this reference dated as of
the Closing Date and certified no later than five (5) days prior to the
Closing Date;
(viii) Seller's affidavit that Seller is not a foreign person
within the meaning of Section 1445(f)(3) of the Internal Revenue Code
of 1986, as amended (the Code) substantially in the form attached
hereto as Exhibit K and incorporated by reference as prescribed by
Treas. Reg. 1.1445-2(b). If Seller does not timely furnish the
Non-Foreign Affidavit, Purchaser may withhold (or direct Title Company
to withhold) from the Purchase Price an amount equal to the amount
required to be so withheld pursuant to Section 1445(a) of the Code, and
such withheld funds shall be deposited with the Internal Revenue
Service as required by Section 1445(a) and the regulations promulgated
thereunder. The amount withheld, if any, shall nevertheless be deemed
to be part of the Purchase Price paid to Seller;
(ix) a duly executed and acknowledged Affidavit of Value
substantially in the form attached hereto as Exhibit L and incorporated
by reference; and
(x) termination notices that terminate, as of the Closing
Date, all of the management services and leasing contracts for the
Improvements as selected by Purchaser in accordance with this
Agreement;
(xi) delivery by Seller to Purchaser at Closing of the
security deposits under the Leases, less any portion that has not been
applied, in the form of a credit in favor of Purchaser against the
Purchase Price;
(xii) delivery by Seller to Purchaser at Closing of a
complete list of the names, addresses and telephone numbers of all
contractors, subcontractors and materials suppliers known to Seller or
its property manager and who worked on or supplied materials in regard
to the Improvements within the last twelve (12) months prior to
Closing;
(xiii) Seller, at Seller's cost and prior to Closing, paying
in full all real estate commissions which may be due from Seller in
regard to the Leases, including any commission due in regard to any of
the Leases which commissions shall be due and payable on or before
Closing or within three (3) months after Closing. In this regard,
Seller shall deposit with Title Company, for delivery to Purchaser at
Closing, written documentation signed by the applicable real estate
brokers that such commissions, if any, to be paid by Seller have been
paid in full;
(xiv) Seller, at Seller's cost, completing by Closing all
improvements, if any, to the Units required under the respective Leases
and, in the event any Unit is vacated by a Tenant up to (but not
including) the fifth (5th) Business Day prior to the Closing,
refurbishing such Unit to a "tenant-ready" condition;
(xv) delivery by Seller to Purchaser at Closing of any
plans, specifications and contracts relating to the Property in any
material respect that had not previously been delivered by Seller to
Purchaser; and
Purchaser shall have obtained or otherwise received at Closing evidence that all
transaction privilege taxes, sales taxes and personal property taxes of the
Property, if any, have been paid to the day immediately prior to the Closing
Date or that such payment has been adequately provided for, such evidence to be
in the form of tax clearance certificates from the City of Tucson and the State
of Arizona.
If the foregoing conditions or any other condition to Purchaser's obligation to
close the Purchase Transaction as set forth in this Agreement have not been
satisfied by the specified date or Closing, as the case may be, then Purchaser
shall have the right, at Purchaser's sole option, exercisable by written notice
to Seller and Title Company but subject to Seller's right to satisfy any such
condition identified in writing by Purchaser within five (5) Business Days
following Seller's receipt of such written notice, to cancel this Agreement,
whereupon the Earnest Money plus interest shall be paid immediately by Title
Company to Purchaser and, except for any Survival Items (as defined below),
neither Purchaser nor Seller shall have any further liability or obligation
under this Agreement.
Section 5. Conditions to Closing.
In addition to the other conditions to the completion of the Purchase
Transaction, Seller and Purchaser agree that the Closing is subject to the
satisfaction, approval or waiver, in writing, by Purchaser, in Purchaser's
reasonable discretion, of the following conditions contained in this Section 5:
(a) Purchaser's due diligence conditions shall be the following:
(i) the conduct and approval of any inspection, investigation
and approval, deemed necessary by Purchaser in Purchaser's reasonable
discretion and at Purchaser's sole cost and expense, of any physical,
structural, geological and environmental or other condition of the
Property (including without limitation the availability of access,
utility services, zoning, environmental risks, engineering and soil
conditions) deemed necessary by Purchaser to determine the feasibility
of acquiring the Property (collectively, the Studies). In the event
Purchaser withdraws from the Purchase Transaction for any reason
whatsoever other than pursuant to Section 35(a) below, Purchaser shall
immediately deliver to Seller each and all of the Studies prepared or
undertaken by or for the benefit of Purchaser in connection therewith.
The Studies shall include, but not be limited to, Purchaser's right to:
(i) review and approve the Survey (as defined below), the Leases and
the Contracts; and (ii) meet and confer with Seller's property manager.
For the purpose of conducting physical inspections by Purchaser, Seller
agrees to provide full and complete access to the Property at
reasonable times, upon not less than two (2) Business Days' notice to
Seller or to Seller's property manager, up to and including the Closing
Date. Purchaser shall conduct such inspections in a nondisruptive
manner as to the Tenants and in compliance with any applicable legal
requirements and shall in no event conduct destructive testing of the
Real Property and the Improvements without Seller's prior written
consent, which consent may be granted or withheld in Seller's sole
discretion. Purchaser agrees to defend, indemnify and hold Seller,
Seller's agents and employees, and the Property harmless from and
against any losses, costs, damages, claims or liabilities, including
but not limited to mechanics' and materialmen's liens, personal injury
or death, property damage and attorneys' fees and costs, arising from
or otherwise relating to Purchaser's entry upon the Property for the
aforementioned purposes under this subsection. Purchaser shall
immediately repair any damage caused by such inspection and shall
restore the Real Property and the Improvements to their condition prior
to such testing. Purchaser's indemnity, hold harmless and repair
obligations under this Section shall survive the termination or
expiration of this Agreement or the Closing, as applicable, for a
period of twelve (12) months after which Purchaser's obligations shall
automatically terminate unless prior to the end of the twelve-month
period, Seller shall have brought suit against Purchaser in the Pima
County, Arizona Superior Court or the United States District Court for
the District of Arizona located in Phoenix, Arizona (either, the Court)
to enforce Purchaser's indemnity, hold harmless and repair obligations.
(ii) subject to Seller's delivery obligations under Section
5(b), inspection and approval, in Purchaser's reasonable discretion, of
all documents relating to the Property that are in the possession of
Seller or its property manager or under their custody or control
(collectively, Seller's Disclosure Documentation), all of which shall
be made available at all reasonable times after Opening of Escrow to
Purchaser at the Property for Purchaser's inspection and copying at
Purchaser's sole cost and expense. The information made available to
Purchaser by Seller under this subsection shall not be released or
otherwise disclosed by Purchaser to any third parties other than to
Purchaser's attorneys, accountants or in-house property evaluation
personnel, consultants or engineers or to any prospective partner of,
or lender to, Purchaser in connection with the Purchase Transaction or
as required by law or court order. If the Purchase Transaction does not
close for any reason, Purchaser and Purchaser's agents,
representatives, attorneys and accountants shall refrain from
disclosing such information to any third party whatsoever. Purchaser
shall defend, indemnify and hold Seller harmless (which indemnification
shall survive the termination or expiration of this Agreement) for all
loss, damage or expense incurred by Seller because of any unauthorized
disclosure of such information by Purchaser or Purchaser's attorneys,
accountants or in-house property evaluation personnel; provided,
however, that Purchaser's indemnity and hold harmless obligations shall
only exist for a period of twelve (12) months after the effective date
of such termination or expiration after which Purchaser's obligations
shall automatically terminate unless prior to the end of the
twelve-month period, Seller shall have brought suit against Purchaser
in the Court to enforce Purchaser's indemnity and hold harmless
obligations.
During the period commencing with the Opening of Escrow (as defined below) and
ending at 5:00 p.m. (MST) on the fourteenth (14th) day thereafter (Due Diligence
Period), Purchaser shall have the right to examine and investigate to
Purchaser's reasonable satisfaction the physical, financial and legal status of
the Property and the Seller's Disclosure Documentation. In the event Purchaser
notifies Seller in writing within the Due Diligence Period with reasonable
particularity that one or more of the conditions in Section 5(a) and 6(b) shall
not have been satisfied or otherwise waived by Purchaser, this Agreement shall
terminate at the end of the final day of the Due Diligence Period. Upon
termination of this Agreement, the Earnest Money, together with accrued interest
thereon, shall be immediately refunded to Purchaser by Title Company, both
Seller and Purchaser shall be released from all further obligations under this
Agreement (excluding the indemnity, hold harmless and repair obligations of
Purchaser under Section 5(a)) and neither Seller nor Purchaser shall be subject
to a claim by the other for damages of any kind, except for Purchaser's
indemnity, hold harmless and repair obligations provided in Section 5(a) of this
Agreement and in other indemnity provisions of this Agreement, if any (a
Survival Item). In the event Purchaser fails to notify Seller in writing within
the Due Diligence Period that one or more of such conditions shall not have been
satisfied or waived by Purchaser, each of such conditions shall conclusively be
deemed to have been disapproved.
(b) Seller agrees to make available and to cause its property manager
to make available at the Property to Purchaser or Purchaser's agents or
employees all information requested by Purchaser in writing that is in the
possession, custody or control of Seller or its property manager relating to the
leasing, operating, maintenance, construction, repair, zoning, platting,
engineering, soil tests, water tests, environmental tests, construction, master
planning, architectural drawings and like matters regarding the Property as part
of Seller's Disclosure Documentation.
(c) Seller's representations and warranties contained in this Agreement
shall be true and correct in all material respects as of the Closing, and Seller
shall have performed each and every obligation to be performed by Seller under
this Agreement prior to or at the Closing.
Section 6. Title and Survey.
(a) Within five (5) Business Days following the Opening of Escrow,
Seller shall cause Title Company to deliver to Purchaser a current title
insurance commitment from Title Company covering the Property, together with
full and legible copies of all supporting documents (collectively, Preliminary
Report). The Preliminary Report is to be preliminary to the extended coverage
owner's policy of title insurance to be issued to Purchaser by Title Company
insuring Purchaser's fee simple title to the Property in the amount of the
Purchase Price (the Title Policy). Seller shall pay only the premium for a
standard owner's policy in the amount of the Purchase Price with the Purchaser
to pay all additional costs in regard to extended coverage, if elected by
Purchaser, and for all endorsements, if any, required by Purchaser.
(b) In addition to the contingencies set forth in Section 5, Purchaser
shall have to the end of the Due Diligence Period to disapprove, in writing, any
exceptions to title shown on the Preliminary Report or reflected on the Survey
(as defined below) (collectively, Disapproved Exceptions) and to provide Seller
and Title Company with notice of disapproval in writing describing the defect
with reasonable particularity (Disapproval Notice). In the event Purchaser fails
to deliver a Disapproval Notice to Seller and Title Company within the Due
Diligence Period, all such exceptions to title shall be deemed to have been
disapproved. Within ten (10) Business Days after Seller's receipt of the
Disapproval Notice, if any, Seller shall notify Purchaser whether Seller intends
to remove the Disapproved Exceptions. If Seller notifies Purchaser in writing
within such ten-day period that Seller intends to eliminate the Disapproved
Exceptions, Seller shall do so prior to or at the Closing. If Seller fails to
notify Purchaser in writing within such ten-day period that Seller intends to
eliminate all of the Disapproved Exceptions or Seller elects to eliminate some
but not all of the Disapproved Exceptions, Purchaser may, by notifying Seller
and Title Company within five (5) Business Days after the later of (i)
Purchaser's receipt of Seller's notice to Purchaser or (ii) the end of Seller's
ten-day notice period, elect either to terminate this Agreement or to take title
to the Property subject to the Disapproved Exceptions that Seller has not
undertaken to remove. It shall be a condition to Purchaser's obligations
hereunder that Title Company issue the Title Policy at the Close of Escrow
insuring marketable fee title to the Real Property in Purchaser in the amount of
the Purchase Price, subject only to the following matters (collectively,
Approved Exceptions):
(i) a lien for current real property taxes or general or
special assessments not then delinquent;
(ii) matters affecting title to the Property not disapproved
by Purchaser in accordance with this Section 6(b); and
(iii) matters affecting title to the Property created by or
with the consent of Purchaser.
(c) Seller, at Seller's sole cost, shall deliver to Purchaser and Title
Company on or before 5:00 p.m. MST on or before February 10, 1998, a certified
ALTA survey of the Property (the Survey) to be completed by a surveyor licensed
in the State of Arizona, whereupon the legal description in the Survey as
approved by Buyer shall control over the description in Exhibit A to the extent
they may be inconsistent. The Survey shall be certified to Purchaser and Title
Company and shall set forth the legal description and boundaries of the Property
and all easements, encroachments and Improvements thereon and shall comply with
all requirements of Title Company in regard to Title Company's issuance of the
Title Policy. In the event Seller's delivery of the Survey is delayed beyond
February 10, 1998, the Due Diligence Period shall be extended for the same
period of delay, if any, beyond such date as Purchaser's sole remedy.
Section 7. Representations and Warranties.
(a) As used herein, "Seller's actual knowledge" shall mean the actual
knowledge of Stephen B. Boyle, the president of the corporate general partner of
the general partner of the managing venturer of Seller, without any duty of
inquiry. Seller represents and warrants to Purchaser, as of the Effective Date
and again as of the Closing Date, as follows:
(i) that to Seller's actual knowledge, Seller has
received no notice from any governmental authority of (A) any pending
or threatened zoning, building, fire or health code violations or
violations of other governmental regulations concerning the Property or
the operation of the Property that has not previously been corrected or
(B) any pending or threatened condemnation of the Property or any part
of the Property. Seller further covenants that if Seller should receive
any such notice prior to the Closing Date, Seller will provide
Purchaser with copies of the notice promptly following the receipt
thereof by Seller. As an additional condition precedent to Closing,
Seller agrees to use reasonable efforts to correct any matters
disclosed in any such notice on or before Closing; provided, however,
that Seller need not expend more than an aggregate amount of Ten
Thousand Dollars ($10,000) for such corrections. If any such matter(s)
cannot be corrected by Seller by Closing, Seller shall give Purchaser a
credit at Closing for the amount reasonably estimated by Seller and
Purchaser required to correct the matter(s), but in no event more than
Ten Thousand Dollars ($10,000). If the estimated cost to correct the
matter(s) is greater than Ten Thousand ($10,000) and Seller, by written
notice to Purchaser, elects not to correct the matter(s) prior to
Closing, Purchaser may deliver written notice of termination of this
Agreement to Seller and Title Company whereupon this Agreement shall
terminate and the Earnest Money shall be immediately returned to
Purchaser, unless Purchaser, in Purchaser's sole discretion, elects in
writing to pay the excess required to correct the matter(s);
(ii) that to Seller's actual knowledge, no legal
actions are pending or threatened against the Property, nor are there
any violations of building codes or other statutes affecting the use,
operation, occupancy and enjoyment of the Property;
(iii) that to Seller's actual knowledge, there exist no
violations of any statutes, ordinances, regulations or administrative
or judicial orders or holdings, whether or not appearing in public
records, with respect to the Improvements or the Property, and the
present use of the Property complies with existing zoning laws and
ordinances;
(iv) that to Seller's actual knowledge, Seller has
received no notices from insurers of defects in the Improvements which
have not been corrected;
(v) that to Seller's actual knowledge, there exist no
continuing, pending or threatened public improvements that would result
in a tax assessment or other similar charge being levied or assessed
against the Property;
(vi) that Seller has disclosed to Purchaser all
information, records and studies for the Property in the possession,
custody or control of Seller or its property manager concerning any
hazardous or toxic substance or material (as defined under any federal,
state or local law, statute, rule, regulation or ordinance) (Hazardous
Material) that are or have been stored, handled, disposed of or
released in, on or about the Property;
(vii) that to Seller's actual knowledge, Seller has not
participated in or approved, and there has not occurred, any
contamination of or release or disposal of any Hazardous Material in,
on or about the Property;
(viii) that no leases or other agreements for occupancy
are in effect for the Property except for the Leases as described on
the rent roll attached hereto as Exhibit J;
(ix) that to Seller's actual knowledge, Seller is not
in default in the performance of its obligations under any of the
Leases, and that Seller will not be in default thereunder as a result
of the passage of time.
(x) that to Seller's actual knowledge, all
mechanical, electrical, structural and plumbing systems for the
Property are in good operating condition;
(xi) that there exist no (A) agreements or
arrangements pursuant to which goods, services, water, equipment,
labor, supplies or any other items are being or will be furnished to
the Property, except as relate to the Intangible Property or to
standard arrangements for utility and maintenance services; (B)
agreements other than the Leases whereby any person or entity holds any
right, license or privilege to possess or use the Property; and (C)
licenses, franchises or permits issued or required for the ownership of
the Property;
(xii) that to Seller's actual knowledge, there exist no
agreements or understandings relating to the Property, except for this
Agreement and the agreements (if any) shown as exceptions to the title
to the Property;
(xiii) that the Purchase Transaction will not in any
material respect violate any other agreements to which Seller is a
party;
(xiv) that prior to Closing or any earlier termination
of this Agreement, Seller will not enter into or execute any
employment, management or service contract with respect to the Property
without Purchaser's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, unless such contract so
entered by Seller shall provide that such contract can be terminated by
Seller, or Seller's successor, at any time without penalty, upon not
more than thirty (30) days' prior written notice to the other party
thereto. When any such contracts are fully executed, Seller shall
deliver a copy thereof to Purchaser;
(xv) that no default of Seller exists under any of the
Contracts and, to Seller's actual knowledge, no default of the other
parties exists under any of the Contracts. Between the Effective Date
and the Closing Date, or any earlier termination of this Agreement,
Seller, without Purchaser's prior written consent which consent shall
not be unreasonably withheld, conditioned or delayed, shall not amend,
modify in any material respect (such as increasing or decreasing the
term or monetary obligations thereunder) or terminate any Contract or
Lease or waive any substantial right thereunder;
(xvi) that except as expressly provided otherwise in
Section 35 below, no consent of any third party is required in order
for Seller to enter into this Agreement and perform Seller's
obligations hereunder. Without limiting the generality of the
foregoing, no consent of any third party is required in order for
Seller to assign the Contracts to Purchaser;
(xvii) that except for any item to be prorated at
Closing in accordance with this Agreement, all bills or other charges,
costs or expenses arising out of or in connection with or resulting
from Seller's construction, use, ownership, or operation of the
Property up to Closing shall be paid in full by Seller on or before
Closing;
(xviii) that all general real estate taxes, assessments
and personal property taxes that have become due with respect to the
Property (except for those that will be prorated at Closing in
accordance with this Agreement) have been paid or will be so paid by
Seller prior to Closing;
(xix) that between the Effective Date and later of the
Closing Date or any earlier termination of this Agreement, Seller shall
not execute or enter into any new lease of any part of the
Improvements, except in the normal course of business using Seller's
standard form of lease and adhering to Seller's standard rental
schedule or otherwise subject to Purchaser's prior written consent,
such consent not to be unreasonably withheld, conditioned or delayed;
(xx) that except in the ordinary course of business or
as required by a governmental agency, Seller shall not place or permit
to be placed on any portion of the Real Property any new improvements
of any kind or remove or permit any improvements to be removed from the
Real Property without the prior written consent of Purchaser, which
consent may be granted or withheld for any reason;
(xxi) that Seller shall not restrict, rezone, file or
modify any development plan or zoning plan or establish or participate
in the establishment of any improvements district with respect to all
or any portion of the Real Property without Purchaser's prior written
consent, which consent may be granted or withheld for any reason;
(xxii) without Purchaser's prior written consent, which
may be granted or withheld for any reason, Seller shall not, by
voluntary or intentional act or omission to act, further cause or
create any easement, encumbrance, or mechanic's or materialmen's liens,
and/or similar liens or encumbrances to arise or to be imposed upon the
Property or any portion thereof;
(xxiii) that all information made available to Purchaser
by Seller in accordance with this Agreement is, to Seller's actual
knowledge, true, complete and accurate; and
(xxiv) that Seller has not assigned its rights hereunder
to any other person, firm or entity and no further consent is necessary
or required to make the Assignment of Leases and the Assignment of
Contracts effective.
(b) If Seller learns of anything that would make the representations
and warranties set forth above untrue in any material respect prior to the
Closing, Seller shall immediately notify Purchaser in writing. Upon written
notice to Seller and Title Company within five (5) Business Days following
receipt of Seller's notice, Purchaser shall be entitled to terminate this
Agreement if Purchaser reasonably concludes that the Property will be adversely
affected in any material respect, in which case Purchaser shall be entitled to
an immediate return of the Earnest Money together with accrued interest thereon.
After such disposition of the Earnest Money, the Escrow shall be canceled and
neither party shall have any rights or responsibilities to the other except as
otherwise expressly provided by this Agreement.
(c) Each of the parties represents and warrants to the other that each
of the persons executing this Agreement on behalf of the warranting party is
authorized to do so; that the execution, delivery and performance of this
Agreement will not conflict with, or result in a breach or other violation of,
any contract, agreement or instrument to which Purchaser or Seller, as the case
may be, is a party; and that upon execution, this Agreement shall be a valid
obligation of, binding upon and enforceable against Purchaser or Seller, as the
case may be.
(d) The parties hereto make the following representations and
warranties with respect to the Employee Retirement Income Security Act of 1974,
as amended (ERISA):
(i) Seller's ERISA Representations. To the best knowledge of Seller,
Seller is not an affiliate of Morgan Guaranty Trust Company of New York, a
Delaware corporation (Morgan Guaranty), and the consummation of the transactions
contemplated hereby shall constitute a reconfirmation of the truth and accuracy
of the foregoing representation as of the Closing Date. From and after the date
of this Agreement through and including the Closing Date, Seller covenants
promptly to notify Purchaser should Seller reasonably anticipate becoming a
party in interest with respect to any employee benefit plan which Purchaser has
disclosed to Seller pursuant to Section 7(d)(ii) below as having more than ten
percent (10%) interest in the Fund (as defined below), other than solely by
reason of providing services to such plan (including services as a fiduciary) or
by reason of a relationship to a service provider (including a fiduciary)
described in Section 3(14) (F), (G), (H) or (I) of ERISA, or both, and Seller
will take such steps as become necessary to prevent any transaction contemplated
in this Agreement or related documents from being a prohibited transaction for
Purchaser or Seller under ERISA.
(ii) Purchaser's ERISA Representations.
(A) The sole shareholder of Purchaser is the collective investment fund
identified as Morgan Guaranty Trust Company of New York as Trustee under
Declaration of Trust dated December 9, 1960, as amended for the Commingled
Pension Trust Fund (J.P. Morgan Strategic Property Fund) (the Fund), consisting
in whole or in part of assets invested by employee benefit plans, and all funds
which will be used to make the purchase will be assets of such Fund. Morgan
Guaranty is the sole trustee of, and has discretion over, the Fund.
(B) Seller neither exercises nor has any discretionary authority,
control, responsibility or influence with respect to the investment of plan
assets in, or held by, the Fund.
(C) To the best knowledge of Purchaser, there are currently no employee
benefit plans having an interest in the Fund which, alone or together with the
interests of any other employee benefit plans maintained by the same employer or
employee organization in the Fund, exceeds ten percent (10%) of the total of all
assets in such Fund.
(D) From and after the date hereof and through and including the
Closing Date, Purchaser will promptly notify Seller if any employee benefit
plan, in Purchaser's judgment, may have or acquire an interest in the Fund
which, alone or together with the interest of any other employee benefit plans
maintained by the same employer or employee organization in the Fund, exceeds
ten percent (10%) of the total of all assets in such Fund and shall promptly
furnish to Seller a list containing (1) the name of each such plan and (2) an
explanation of whether any portion of such interest in excess of ten percent
(10%) results from an increase in the assets allocated to the Fund by such plan
within the meaning of Section IV(h) of Prohibited Transaction Class Exemption
91-38.
(iii) Definitions. For purposes of subsections (i) and (ii) hereof, the
term "affiliate" shall mean (A) any person directly or indirectly through one or
more intermediaries, controlling, controlled by, or under common control with
the person, (B) any officer, director, employee, relative of, or partner in such
person, and (C) any corporation or partnership of which such person is an
officer, director, partner or employee; the term "control" shall mean the power
to exercise a controlling influence over the management or policies of a person
other than an individual; the term "collective investment fund" shall mean a
common or collective trust fund or pooled investment fund maintained by a bank
or trust company; the term `employee benefit plan" shall have the meaning
ascribed to it in Section 3(3) of ERISA; the term "prohibited transaction" shall
have the meaning ascribed to Revenue Code; and the term "party in interest"
shall have the meaning ascribed to it in Section 3(14) of ERISA and the meaning
ascribed to "disqualified person" in Section 4975(a) of the Internal Revenue
Code; and the term "party in interest" shall have the meaning ascribed to it in
Section 3(14) of ERISA and the meaning ascribed to "disqualified person" in
Section 4975(e)(2) of the Internal Revenue Code.
(e) All representations made in this Agreement by Seller shall survive
the execution and delivery of this Agreement or the cancellation of this
Agreement or Closing, as applicable. Seller shall and does hereby indemnify and
hold Purchaser harmless from and against any loss, damage, liability and
expense, together with all court costs and attorneys' fees which Purchaser may
incur, by reason of any third party claims asserted against Purchaser and based
upon any material misrepresentation by Seller or any material breach of any of
Seller's warranties; provided, however, that Seller's representations and
indemnity obligations under this Section 7 shall survive for three (3) months
after cancellation of this Agreement or Closing, as applicable, whereupon
Seller's obligations shall terminate automatically unless Purchaser shall have
delivered written notice of any asserted misrepresentations and/or breach of
such warranties to Purchaser identifying such misrepresentation(s) and/or
breach(es) with particularity within such three-month period and shall in
addition have commenced an action thereon against Seller in the Court within
four (4) months after cancellation of this Agreement or Closing, as applicable.
Section 8. Purchaser's Acceptance of Property As-Is.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN AND/OR IN THE DOCUMENTS
TO BE DELIVERED AT CLOSING, PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER HAS
NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF
ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN,
PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE,
NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING WITHOUT LIMITATION THE
WATER, SOIL AND GEOLOGY, AND ANY IMPROVEMENTS CONSTRUCTED THEREON, (B) THE
INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR
ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREON, (D) THE
HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY, (E) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, OR (F) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY. EXCEPT FOR
THOSE ITEMS OF SELLER'S DISCLOSURE DOCUMENTATION THAT HAVE BEEN PREPARED BY
SELLER, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN
INVESTIGATION OF THE PROPERTY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
ANY INFORMATION PROVIDED OR TO BE PROVIDED TO PURCHASER WITH RESPECT TO THE
PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY
INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO
REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER'S DISCLOSURE
DOCUMENTATION OR IN THE DOCUMENTS TO BE DELIVERED AT CLOSING, SELLER IS NOT AND
SHALL NOT BE LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS,
REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION
THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER
PERSON. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN AND/OR IN THE DOCUMENTS TO
BE DELIVERED AT CLOSING, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT TO THE
MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN
IS MADE ON AN "AS IS," "WHERE IS" AND "WITH ALL FAULTS" CONDITION AND BASIS.
Section 9. Seller's Covenants.
From and after the Effective Date until Closing, and so long as this
Agreement remains in effect, Seller shall:
(a) except as otherwise provided in Section 7(a), maintain, manage and
operate the Property in accordance with the established practices of Seller and
its property manager;
(b) maintain the Property in its present condition, ordinary wear and
tear and casualty loss excepted, and not remove any of the Personal Property
from the Real Property except in the ordinary course of Seller's business;
(c) maintain all casualty, liability and hazard insurance currently in
force for the Property;
(d) except as otherwise provided in Section 7(a), operate, manage and
enter into contracts for the Property and maintain present services and
sufficient supplies and equipment for the operation and maintenance of the
Property, all in the same manner as that done by Seller and its property manager
prior to the Effective Date; provided, however, that Seller shall not enter into
any service contract that cannot be terminated within thirty (30) days following
notice to the vendor; and
(e) except as otherwise provided in Section 7(a), not enter into any
Lease of the Real Property and the Improvements other than in the ordinary
course of Seller's business.
If Seller enters into leases or grants concessions in violation of this Section
9, Purchaser may either waive the violation or, as Purchaser's sole remedy,
terminate this Agreement and require the return of the Earnest Money together
with accrued interest thereon.
Section 10. Prorations.
The following adjustments to the Purchase Price shall be made between
Seller and Purchaser:
(a) The following items, as applicable, shall be prorated between
Purchaser and Seller on a per diem basis as of the Closing Date:
(i) all nondelinquent real estate taxes, installments of
general and special assessments, homeowner's association dues, if any,
and fire protection service charges, if any, due and payable in the
calendar year in which Closing occurs, based upon the most recent
information available to Seller. If Closing shall occur before the tax
rate or assessment for the current year is fixed, the initial proration
of such taxes or assessments shall be based upon the latest available
information. Thereafter, when the actual tax rate for such current year
becomes known, Seller and Purchaser shall, outside of escrow and after
Closing, re-prorate any such taxes or assessments to the extent that
the actual rate thereof was different than the rate used for prorations
made at Closing and shall pay, one to the other, any adjustment due as
a result of such re-proration;
(ii) current rents for the month in which the Closing occurs
as actually paid, advance rentals, nonrefundable deposits and other
charges, if any, payable by Tenants under the Leases; and
(iii) all charges for fuel, water, sewer, electricity and
other utility services furnished to the Property which are not metered
to Tenants. Seller, to the extent the same is obtainable, shall furnish
meter readings for such utilities through the close of business on the
day prior to the Closing. If any such meter readings are not so
obtainable, then Seller shall provide meter readings as of a date not
more than thirty (30) days prior to the Closing Date, and the proration
of utility charges shall initially be based upon such prior reading.
Upon the taking of actual meter readings first after Closing, such
proration shall be readjusted outside of escrow after Closing and
Seller or Purchaser, as the case may be, shall promptly pay to the
other the amount determined to be so due upon such readjustment.
(b) All other items of accrued or prepaid income and expense shall be
prorated as of the Closing Date, on the basis of the most recent ascertainable
amounts of or other reliable information for each item of income and expense.
Seller and Purchaser shall duly cooperate with each other and the Title Company
in making prorations, adjustments and credits pursuant to this Section 10 and
shall, as requested by the Title Company, furnish to the Title Company such
information as is in the possession of or obtainable by them to assist in making
such prorations, adjustments or credits. In the event, for any reason beyond the
reasonable control of the parties hereto, information necessary to calculate any
proration, adjustment or credit for any item required to be prorated, adjusted
or credited under this Section 10 is not available prior to Closing, then such
items shall be prorated, adjusted or credited outside of escrow after Closing as
soon as such information is available, and Seller and Purchaser shall duly
cooperate with each other in regard thereto and shall pay, one to the other, any
amounts which may be owing as a result of any such subsequent proration,
adjustment or credit. In the event, at any time within six (6) months after
Closing, errors shall be discovered in any prorations, adjustments or credits
made pursuant to this Section 10, Seller and Purchaser shall correct such errors
and shall pay, one to the other, any sums owning as a result of such correction.
(c) For purposes of all prorations provided for in this Agreement,
Seller shall be responsible for all days up to the Closing Date, and Purchaser
shall be responsible for all days including and after the Closing Date. Except
as otherwise expressly provided in this Agreement, all prorations shall be
final.
(d) Security deposits, including cleaning and pet deposits, and prepaid
rent and any interest thereon, in the amounts set forth in the Leases (or if not
set forth therein, as set forth on the Rent Roll) shall be credited to Purchaser
at Closing.
(e) If on the Closing Date any Tenant is delinquent in the payment of
rent, including any additional rent billed but unpaid at the time of Closing,
the delinquent rent attributable to the period prior to the Closing shall remain
the property of Seller and be paid to Seller if, as and when collected by
Purchaser out of the funds received by Purchaser from such Tenant, and no
proration of such delinquent rent shall be made at Closing. For a period of one
hundred eighty (180) days after Closing, Purchaser shall use reasonable efforts
to attempt to collect and shall remit to Seller any such delinquent rents owing
to Seller; provided, however, that (i) Purchaser shall be required only to
periodically send bills to the Tenant(s) owing such delinquent rent and shall
not be required to commence any litigation or undertake any other collection
efforts in regard thereto; and (ii) in the event Purchaser collects rent from a
person who owes rent for any period of time after Closing and for a period of
time prior to Closing, all amounts collected from such person shall be applied
first to the amount of rents owing by such person for the period of time after
Closing and retained by Purchaser and only the excess, if any, shall be remitted
to Seller.
(f) Contemporaneously with the Closing, Seller shall deliver to
Purchaser at the offices of Seller's property manager all originals (including
computer discs and tapes) of books and records of accounts, contracts, leases,
leasing correspondence, receipts for deposits, bills and other papers that
pertain to the Property, together with all advertising materials, booklets, keys
and other items, if any, used in the Property's operation, provided that Seller,
at Seller's cost, may retain a copy of the foregoing items for tax reporting
purposes. After the Closing and solely for the purposes of Section 10, Seller,
upon at least five (5) days' prior written request to Purchaser, shall have the
right to inspect the books and records for the Property located at the office of
Purchaser and/or Purchaser's property manager to verify that Purchaser is
remitting to Seller the proper amounts according to this Agreement and for any
other purpose related to Seller's prior ownership of the Property.
(g) The cost of any tenant improvements paid or incurred by Seller for
Leases approved by Purchaser and executed after the date of this Agreement shall
be paid in full by Seller at or before Closing. Seller shall supply to Purchaser
and Title Company paid invoices and final lien waivers for all such tenant
improvement work to the extent performed on or prior to the Closing Date. Any
provision of this Agreement to the contrary notwithstanding, after the Effective
Date, Seller shall not undertake any tenant improvement work on any Unit without
the prior written consent of Purchaser, such consent not to be unreasonably
withheld, conditioned or delayed.
Section 11. Transfer Taxes; Title Charges;
Other Closing Costs and Escrow Cancellation.
(a) Seller and Purchaser agree to execute any real estate transfer
declarations required by the state, county or municipality in which the Real
Property is located. Seller shall pay: (i) one-half of the escrow charges of
Title Company; (ii) one-half of the cost of recording the instruments of
conveyance; and (iii) the portion of the premium charged for the Title Policy
attributable to standard coverage. Purchaser shall pay all other costs of
consummating this transaction, including without limitation the premium for the
Title Policy in excess of standard coverage and for any endorsements required by
Purchaser, all transfer taxes and other fees (if any) assessed by any
governmental authority against the Real Property because of this sale and
transfer, all sales and transfer taxes or other fees assessed by any
governmental authority against the Personal Property (if any) and the cost of
any municipal deed or transfer taxes (if any). The parties shall each pay their
own attorneys' fees in regard to the negotiation and documentation of the
Purchase Transaction.
(b) If the Escrow fails to close because of a Seller's Event of
Default, Seller shall be liable for the cancellation charge, if any, of Title
Company. If the Escrow fails to close because of a Purchaser's Event of Default,
Purchaser shall be liable for the cancellation charge, if any, of Title Company.
If the Escrow fails to close for any other reason, Seller and Purchaser shall
each be liable for one-half of the cancellation charge, if any, of Title
Company.
Section 12. Risk of Loss.
(a) Except as provided in any indemnity provisions of this Agreement,
Seller shall bear all risk of loss for the Property up to the Closing.
(b) The foregoing to the contrary notwithstanding, if the Property is
damaged by fire or other casualty prior to the Closing Date and is insured under
one or more fire or casualty insurance policies maintained by Seller, and if
Seller determines, in Seller's reasonable good faith discretion, that repair of
the Property would cost less than Three Hundred Thousand Dollars ($300,000.00)
(Loss Threshold), Purchaser shall not have the right to terminate this Agreement
and Seller, in Seller's sole discretion, may elect either: (i) to repair and
restore the Property to its condition immediately preceding the fire or
casualty; or (ii) to proceed to close this Purchase Transaction without
reduction in the Purchase Price provided that, as a condition precedent thereto
and in a form acceptable to Purchaser in Purchaser's reasonable discretion,
Seller assigns and transfers to Purchaser on the Closing Date all of Seller's
right, title and interest in and to the insurance proceeds paid or payable to
Seller under the policy or policies covering the damage and pays to Purchaser
the amount of Seller's deductible under the insurance policy or policies.
(c) However, if the Property is damaged by fire or other casualty prior
to the Closing Date and is insured under one or more fire or casualty insurance
policies maintained by Seller, and if Seller determines, in Seller's reasonable
good faith discretion, that the repair of the damage would cost an amount equal
to or in excess of the Loss Threshold, Purchaser, in Purchaser's sole
discretion, may elect either: (i) to terminate this Agreement and have the Title
Company immediately return the Earnest Money together with accrued interest
thereon to Purchaser; or (ii) to proceed to close this Purchase Transaction,
without reduction in the Purchase Price, and, as a condition precedent thereto
and in a form acceptable to Purchaser in Purchaser's reasonable discretion, have
Seller assign and transfer to Purchaser on the Closing Date all of Seller's
right, title and interest in and to the insurance proceeds paid or payable to
Seller under the policy or policies covering the damage and Seller shall pay to
Purchaser the amount of Seller's deductible under the insurance policy or
policies.
(d) Immediately after Seller obtains notice of any fire or casualty,
Seller shall notify Purchaser thereof in writing, including Seller's reasonable
determination of the repair cost; provided, however, that in the event Purchaser
shall in good faith dispute the repair cost so determined by Seller, Purchaser
shall immediately notify Seller of such dispute, in which event Seller shall as
soon as practicable obtain three (3) bids to repair such damage from reputable
contractors acceptable to Purchaser in Purchaser's reasonable discretion and
licensed in the State of Arizona and furnish copies thereof to Purchaser. The
average of the two bids that are the closest to each other shall be
determinative as to whether the Loss Threshold shall have been exceeded. If the
repair cost so determined exceeds the Loss Threshold, Purchaser shall notify
Seller in writing within fifteen (15) Business Days after Purchaser's receipt of
Seller's notice whether Purchaser elects to terminate this Agreement in
accordance with this Section 12. Closing shall be delayed, if necessary, to
allow Purchaser to make such election. If Purchaser fails to notify Seller of
Purchaser's election within such fifteen-day period, Purchaser shall be deemed
to have elected to terminate this Agreement.
Section 13. Condemnation.
(a) If, between the Effective Date and the Closing Date, any
condemnation or eminent domain proceedings are commenced or threatened that
might result in the taking of all or any material part of the Real Property or
the Improvements or the taking or closing of any access right to the Property,
Purchaser, in Purchaser's sole discretion, may either:
(i) terminate this Agreement by written notice to Seller and
have the Title Company return the Earnest Money together with accrued
interest thereon; or
(ii) proceed with the Closing and, as a condition precedent
thereto and in a form acceptable to Purchaser, in Purchaser's sole
discretion, have Seller assign to Purchaser all of Seller's right,
title and interest in and to any award made or to be made for the
condemnation or eminent domain action.
(b) Immediately after Seller obtains notice of the commencement or the
threatened commencement of eminent domain or condemnation proceedings, Seller
shall notify Purchaser in writing. Purchaser shall then notify Seller, within
fifteen (15) Business Days after Purchaser's receipt of Seller's notice, whether
Purchaser elects to terminate this Agreement in accordance with Section
13(a)(i). Closing shall be delayed, if necessary, to allow Purchaser to make
such election. If Purchaser fails to make the election within such fifteen-day
period, Purchaser shall be deemed to have elected to terminate this Agreement.
Section 14. Default.
(a) Purchaser shall be in default under this Agreement (a Purchaser's
Event of Default) if any of the following events shall occur:
(i) If Purchaser shall be obligated to close the Escrow
pursuant to the terms of this Agreement and Purchaser fails to pay the Purchase
Price and to close the Escrow on the date scheduled therefor as provided in this
Agreement;
(ii) Purchaser shall fail to pay any monies due in accordance
with this Agreement (other than the obligations referenced in Subparagraph (i))
by 5:00 p.m. MST on the stated due date; or
(iii) Purchaser shall fail to fully and timely perform any of
Purchaser's obligations (other than the monetary obligations referenced in
Subparagraphs (i) and (ii)) arising under this Agreement by 5:00 p.m. MST on the
fifth (5th) Business Day after Purchaser's receipt of written notice from Seller
specifying Purchaser's nonperformance.
(b) Seller shall be in default under this Agreement (a Seller's Event
of Default) if any of the following events shall occur:
(i) If Seller shall be obligated to close the Escrow
pursuant to the terms of this Agreement and Seller fails to close the Escrow on
the date scheduled therefor as provided in this Agreement;
(ii) Seller shall fail to fully and timely perform any of
Seller's obligations arising under this Agreement (other than the obligations
referenced in Subparagraph (i)) and such failure shall continue past 5:00 p.m.
MST on the fifth (5th) Business Day after Seller's receipt of written notice
from Purchaser specifying Seller's nonperformance; or
(iii) any representation of Seller becomes untrue in any
material respect and Seller fails to cure such untruth in accordance with
Section 7(b).
(c) If a Seller's Event of Default shall exist, Purchaser, at
Purchaser's sole option and as Purchaser's sole remedies, may (i) cancel this
Agreement by written notice to Seller and Title Company whereupon the Earnest
Money plus interest thereon shall be paid immediately by Title Company to
Purchaser and, except as otherwise provided in this Agreement as to any Survival
Item, neither Purchaser nor Seller shall have any further liability or
obligation hereunder; or, (ii) seek specific performance against Seller by
delivering the Purchase Price into the Escrow; provided, however, that as
conditions precedent to such action for specific performance: [a] no uncured
Purchaser's Event of Default shall exist and no event shall have occurred which
with the passage of time or with notice, or both, could become a Purchaser's
Event of Default; and [b] Purchaser shall not seek to amend the Purchase Price
in such action, in which event the Closing shall be automatically extended as
necessary.
(d) If a Purchaser's Event of Default shall exist, as Seller's sole
remedy (in lieu of any other legal or equitable remedies against Purchaser which
Seller expressly waives except as hereinafter provided otherwise) Seller shall
be entitled to retain the Earnest Money only in accordance with Section 3(b) as
Seller's agreed and total liquidated damages unless Purchaser objects to, fails
to cooperate with or otherwise opposes Seller's withdrawal of such Earnest Money
out of the Escrow, in which event Seller shall have all of the remedies
otherwise available to Seller at law or in equity.
Section 15. Notices.
All notices under this Agreement shall be in writing and sent by: (a)
certified or registered mail, postage prepaid and return receipt requested, in
which case notice shall be deemed delivered at the earlier of actual receipt or
three (3) Business Days after deposit in the United States Mail, (b) by a
nationally recognized overnight courier, in which case notice shall be deemed
delivered one (1) Business Day after deposit with that courier, or (c) telecopy
or similar means, if a copy of the notice is also sent by United States
certified mail, in which case notice shall be deemed delivered on the date of
confirmed receipt, as follows:
If to Seller:
c/o L'Auberge Communities Inc.
14988 North 78th Way, Suite 211
Scottsdale, Arizona 85260
Attention: Stephen B. Boyle
Facsimile No.: (602) 607-9773
With a copy to:
Hughes Hubbard & Reed LLP
350 South Grand Avenue, Suite 3600
Los Angeles, California 90071-3442
Attention: George A. Furst, Esq.
Facsimile No.: (213) 613-2950
If to Purchaser:
Tucson Realty Holding Co., Inc.
c/o J.P. Morgan Investment Management, Inc.
522 Fifth Avenue
New York, New York 10036
Attention: Kevin J. Faxon
Facsimile No.: (212) 837-2604
With a copy to:
Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17th Floor
Costa Mesa, California 92626-1924
Attention: Janet Toll Davidson, Esq.
Facsimile: (714) 979-1921
The addresses above may be changed by written notice to the other
party; provided, however, that no notice of a change of address shall be
effective until actual receipt of the notice by the addressee thereof. Copies of
notices are for informational purposes only, and a failure to give or receive
copies of any notice shall not be deemed a failure to give notice.
Section 16. Time of Essence.
Time is of the essence in this Agreement and the performance of each
and every obligation hereunder. However, if this Agreement requires any act to
be done or action to be taken on a date which is a Saturday, Sunday or legal
holiday, such act or action shall be deemed to have been validly done or taken
if done or taken on the next succeeding day which is not a Saturday, Sunday or
legal holiday.
Section 17. Termination of Agreement.
If triplicate fully executed originals of this Agreement have not been
delivered by Purchaser to Seller by 5:00 p.m. MST on January 23, 1998 for
immediate deposit by Purchaser with Title Company along with the Earnest Money,
this Agreement shall automatically be deemed revoked and null and void.
Section 18. Governing Law; Jurisdiction; Venue.
This Agreement shall be governed by and construed in accordance with
Arizona law. In regard to any litigation which may arise in regard to this
Agreement, the parties shall and do hereby submit to the sole jurisdiction of
and the parties hereby agree that the sole proper venue shall be in the Court.
Section 19. Counterparts and Facsimile Signatures.
(a) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(b) The execution of this Agreement by the parties may be evidenced by
facsimile signatures with originals to be immediately distributed thereafter
albeit the Agreement may be deemed binding upon transmittal of the facsimiles.
Section 20. Captions.
The captions in this Agreement are inserted for convenience of
reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of its provisions.
Section 21. Assignability.
(a) Purchaser shall not have the right to assign this Agreement or any
of Purchaser's rights under this Agreement prior to Closing to any person or
entity without the prior written consent of Seller, which consent may be granted
or withheld in Seller's sole discretion. In the event of such an assignment: (i)
such assignee shall assume Purchaser's duties and obligations under this
Agreement by delivering to Seller and Title Company duplicate originals of an
assumption agreement in form and substance reasonably acceptable to Seller, (ii)
Purchaser shall not be released from any of its obligations under this
Agreement, (iii) Seller shall not incur any additional expense because of such
assignment and (iv) such assignment shall not delay the Closing.
(b) Seller shall not have the right or authority to assign this
Agreement or any of Seller's rights under this Agreement prior to Closing to any
person or entity without the prior written consent of Purchaser, which consent
may be granted or withheld in Purchaser's sole discretion. In the event
Purchaser consents to such an assignment, (i) such consent may be conditioned
upon the assignee's assumption of Seller's duties and obligations under this
Agreement by delivery to Purchaser and Title Company of duplicate originals of
an assumption agreement in form and substance reasonably acceptable to
Purchaser, (ii) Seller shall not be released from any of its obligations under
this Agreement, (iii) Purchaser shall not incur any additional expense because
of such assignment and (iv) such assignment shall not delay the Closing.
Section 22. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective legal representatives, successors, heirs and
permitted assigns, subject to the provisions of Section 21 hereof.
Section 23. Modifications; Waiver.
No waiver, modification, amendment, discharge or other change of this
Agreement shall be valid unless it is in writing and signed by the party against
which the enforcement of the modification, waiver, amendment, discharge or other
change is sought.
Section 24. Entire Agreement.
This Agreement and the exhibits attached hereto contain the entire
agreement between the parties relating to the Purchase Transaction. All prior or
contemporaneous letters of intent (including but not limited to that certain
non-binding letter of intent, agreements, understandings, representations or
statements, whether oral or written, with respect to the subject matter hereof
are superseded hereby.
Section 25. Partial Invalidity; Further Assurances.
If any provision of this Agreement shall be determined by any
court to be invalid, illegal or unenforceable to any extent, the remainder of
this Agreement shall not be affected and this Agreement shall be construed as if
the invalid, illegal or unenforceable provision had never been contained in this
Agreement. Prior to and after the Closing, the parties hereto agree to take such
action and execute, acknowledge, file and record any additional documents
reasonably necessary to effectuate the terms and provisions of this Agreement.
Section 26. Survival.
Except as expressly provided in this Agreement to the contrary, all
representations, warranties, covenants, agreements and other obligations of
Seller and Purchaser in this Agreement shall not survive the Closing of the
Purchase Transaction.
Section 27. No Third-Party Rights.
Nothing in this Agreement, express or implied, is intended to confer
upon any person, other than the parties to this Agreement and their respective
successors and permitted assigns, any rights or remedies.
Section 28. Attorneys' Fees.
If any legal action or any other proceeding, including without
limitation an action for declaratory relief, is brought to enforce this
Agreement or any rights or obligations hereunder or because of a dispute,
breach, default or misrepresentation in connection with this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
other costs incurred in that action or proceeding (including without limitation
any appeal or post-judgment enforcement proceedings), in addition to any other
relief to which that party may be entitled. "Prevailing party" shall include the
party determined to be the prevailing party by the Court.
Section 29. Broker.
Seller and Purchaser each represent and warrant to the other that it
has not had any dealings with any broker, finder or other party concerning
Purchaser's purchase of the Property, except Amercon Realty Services, Inc.
(Seller's Broker). Seller agrees to pay at Closing a commission to Seller's
Broker pursuant to a separate agreement between Seller and Seller's Broker, a
copy of which shall be deposited in escrow on or before Closing if Seller's
Broker is to be paid through escrow at Closing. Seller and Purchaser each agree
to defend, indemnify and hold the other harmless from and against any such all
loss, liability, damage, cost or expense, including without limitation
reasonable attorneys' fees, incurred by the other as a result of any claim
arising out of the acts of the indemnifying party, or others on that party's
behalf, for a commission, finder's fee or similar compensation made by any
broker (including Seller's Broker), finder or any person who claims to have
dealt with the indemnifying party. The representations, warranties and covenants
contained in this Section 29 shall survive the Closing or termination of this
Agreement.
Section 30. Opening of Escrow.
The term "Opening of Escrow" shall mean the date of delivery to Title
Company of triplicate fully executed originals of this Agreement by Seller and
Purchaser together with the delivery by Purchaser to Title Company of the
Earnest Money.
Section 31. Exhibits.
The following exhibits have been attached to this Agreement and
incorporated herein by reference:
Exhibit A -- Legal Description
Exhibit B -- Diagram of the Property and Improvements Exhibit C --
Schedule of Personal Property Exhibit D -- Form of Special Warranty
Deed Exhibit E -- Form of Bill of Sale Exhibit F -- Form of Assignment
of Leases Exhibit G -- Assignment of Tradename and Trademark Rights
Exhibit H -- Form of Assignment of Intangible Property Exhibit I --
Form of Tenant Letters Exhibit J -- Certificate of Rent Roll Exhibit K
-- Form of Non-Foreign Affidavit Exhibit L -- Form of Affidavit of
Value
Section 32. Form of Title Policy.
The Title Policy to be issued by Title Company shall be Title Company's
most current form unless otherwise requested by Purchaser. A specimen of the
Title Policy is to be delivered to Purchaser within ten (10) days following the
delivery of the Preliminary Report to the parties. The Policy may include, among
other things, the following endorsements which are also to be delivered to
Purchaser at Purchaser's cost: (i) a survey endorsement to the effect that the
insured legal description and the legal description in the Survey describe one
and the same property; (ii) if necessary, a patent endorsement; (iii) if
necessary, an endorsement insuring against archaic deed restrictions; and (iv)
if necessary, the owner's equivalent of an Arizona 3R and 5 endorsement.
Section 33. No Partnership or Other Liability.
Any and all provisions, implications, or interpretations of or from
this Agreement to the contrary notwithstanding, no partnership, joint venture or
other relationship is created, implied or acknowledged between or among the
parties.
Section 34. General Provisions Regarding Title Company.
(a) Title Company will make all adjustments and/or prorations on the
basis of the actual number of days in a month, and by credit and/or debit to the
respective accounts of Seller and Purchaser in the Escrow.
(b) For purposes of the instructions to Title Company, the expression
"Closing" shall mean the date on which the Deed is recorded.
(c) Title Company shall: (i) make disbursements by wire transfer of
federal funds; (ii) mail instruments to the addresses of the parties shown
above, unless Title Company is instructed otherwise; and (iii) wire funds to
Seller by wire transfer as directed by Seller.
(d) No change of instructions shall be of any effect on Title Company
unless given in writing by all of the parties hereto. In the event conflicting
demands are made or conflicting notices served upon Title Company with respect
to the Escrow, the parties expressly agree that Title Company shall have the
absolute right at Title Company's election to do either or both of the
following: (i) withhold and stop all further proceedings in, and performance of,
the Escrow; or (ii) file a suit in interpleader and obtain an order from the
Court requiring the parties to interplead and litigate in the Court their
several claims and rights among themselves. In the event such interpleader suit
is brought, Title Company shall ipso facto be fully released and discharged from
all obligations to further perform any and all duties or obligations imposed
upon Title Company in the Escrow, and the parties jointly and severally agree to
pay all reasonable costs, expenses and reasonable attorneys' fees expended or
incurred by Title Company, the amount thereof to be fixed and a judgment
therefor entered by the Court in such suit.
(e) Except for Title Company's negligence, fraud, willful misconduct or
breach of contract, Title Company shall not be held liable for the identity,
authority or rights of any person executing any document deposited in the
Escrow, or for failure by Seller or Purchaser to comply with any of the
provisions of any agreement, contract or other instrument deposited in the
Escrow, and Title Company's duties hereunder shall be limited to the safekeeping
of such money, instruments or other documents received by Title Company as
escrow holder and to the disposition of same in accordance with the written
instructions accepted by Title Company in the Escrow.
(f) It is agreed by the parties to this Agreement that so far as Title
Company's rights and liabilities are concerned, this transaction is an escrow
and not any other legal relation.
Section 35. Conditions to Seller's Performance.
Notwithstanding anything contained herein to the contrary, the
obligations of Seller hereunder are subject to and conditioned upon the
satisfaction (or waiver in writing by Seller) of the following conditions:
(a) The procurement of the consent of a majority in interest of the
limited partners of Seller to the Purchase Transaction. Seller shall use
diligent efforts to obtain such consent. If Seller shall not have received such
consent within sixty (60) days after the Opening of Escrow and provided evidence
thereof to Purchaser, Purchaser may upon written notice to Seller terminate this
Agreement whereupon the Earnest Money plus interest thereon and (provided that
Purchaser shall have elected to purchase the Property at or prior to the
expiration of the Due Diligence Period) reimbursement of Purchaser's reasonable
out-of-pocket expenses actually paid to third parties in connection with
Purchaser's due diligence investigation and documented to Seller's reasonable
satisfaction (such reimbursement, however, in no event to exceed Fifteen
Thousand Dollars ($15,000.00) in the aggregate) shall be paid immediately by
Title Company to Purchaser, and except as otherwise provided in this Agreement
as to any Survival Item, neither Purchaser nor Seller shall have any further
liability or obligation hereunder.
(b) The lapse or other extinguishment of the rights of first refusal in
favor of the joint venture partners of Seller contained in that certain Joint
Venture Agreement of Canyon View Joint Venture dated December 30, 1985, and in
that Joint Venture Agreement of Canyon View East dated December 14, 1987. Unless
such rights of first refusal shall have lapsed or otherwise been extinguished
and Purchaser shall have been furnished with evidence of such lapse or other
extinguishment within thirty (30) days after the Opening of Escrow, Purchaser
may upon written notice to Seller terminate this Agreement whereupon the Earnest
Money plus interest thereon and (provided that Purchaser shall have elected to
purchase the Property at or prior to the expiration of the Due Diligence Period)
reimbursement of Purchaser's reasonable out-of-pocket expenses actually paid to
third parties in connection with Purchaser's due diligence investigation and
documented to Seller's reasonable satisfaction (such reimbursement, however, in
no event to exceed Fifteen Thousand Dollars ($15,000.00) in the aggregate) shall
be paid immediately by Title Company to Purchaser, and except as otherwise
provided in this Agreement as to any Survival Item, neither Purchaser nor Seller
shall have any further liability or obligation hereunder.
(c) In no event shall Purchaser be reimbursed under both of Setions
35(a) and 35(b).
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
"PURCHASER"
TUCSON REALTY HOLDING CO., INC.,
a Delaware corporation
By: /s/ Kevin J. Faxon__________________
Name: Kevin J. Faxon
Title: Vice President
[Signatures continued.]
<PAGE>
"SELLER"
CANYON VIEW JOINT VENTURE,
an Arizona joint venture partnership
By: Development Partners
(A Massachusetts Limited Partnership),
a Massachusetts limited partnership,
Managing Venturer
By: GP L'Auberge Communities, L.P.,
a California limited partnership,
General Partner
By: L'Auberge Communities Inc.,
a California corporation
General Partner
By: /s/ Stephen B. Boyle_____________
Name: Stephen B. Boyle
Title: President
CANYON VIEW EAST JOINT VENTURE,
an Arizona joint venture partnership
By: Development Partners II
(A Massachusetts Limited Partnership),
a Massachusetts limited partnership,
Managing Venturer
By: GP L'Auberge Communities, L.P.,
a California limited partnership,
General Partner
By: L'Auberge Communities Inc.,
a California corporation
its general partner
By: /s/ Stephen B. Boyle_____________
Name: Stephen B. Boyle
Title: President
<PAGE>
TITLE COMPANY'S ACCEPTANCE
The foregoing fully executed Agreement together with the Earnest Money
is accepted by the undersigned this 23rd day of February, 1998, which for the
purposes of this Agreement shall be deemed to be the date of "Opening of
Escrow".
CHICAGO TITLE INSURANCE COMPANY,
a Delaware corporation
By: /s/ Kathy Covert_____________
Name: Kathy Covert
Its: Escrow Officer
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