FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(D)
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 [No Fee Required]
For the fiscal year ended December 31, 1996
or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required]
For the transition period from.........to.........
Commission file number 33-23463
CLOVER APPRECIATION PROPERTIES I, L.P.
(Name of small business issuer in its charter)
Delaware 22-2898428
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4300 Haddonfield Road, Suite 314
Pennsauken, NJ 08109
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (609)662-1116
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 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 __
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $1,653,175
State the aggregate market value of the voting partnership interests by non-
affiliates computed by reference to the price at which the partnership interests
were sold, or the average bid and asked prices of such partnership interests, as
of a specified date within the past 60 days: Market value information for the
Registrant's partnership interests is not available. Should a trading market
develop for these interests, it is the Managing General Partner's belief that
such trading would not exceed $25,000,000.
Documents incorporated by reference: The Prospectus of the registrant dated
November 15, 1988, filed with the Commission under the Securities Act of 1933 as
a part of Registration Statement No. 33-23463 filed on August 1, 1988, is
incorporated by reference in Parts I, II and III of this Annual Report on Form
10-KSB, and Supplement No. 1 to the Prospectus dated March 9, 1989, filed with
the Commission pursuant to Rules 424(b) (3) and 424(c) on March 13, 1989, is
incorporated by reference in Part I of this Annual Report on Form 10-KSB, and
Supplement No. 3 dated September 22, 1989, filed with the Commission pursuant to
Rules 424(b) (3) and 424(c) on September 27, 1989, is incorporated by reference
in Part II of this Annual Report on Form 10-KSB.
PART I
Item 1. Description of Business
Clover Appreciation Properties I, L.P. (the "Partnership"), is a limited
partnership formed in June 1988, under the Revised Uniform Limited Partnership
Act of the State of Delaware (the "Act"), to acquire, operate and hold for
investment existing apartment complexes located primarily in the eastern half of
the United States. Crown Management Corporation, a New Jersey corporation which
is a wholly-owned subsidiary of Clover Financial Corporation ("Clover"), a New
Jersey Corporation, is the General Partner (the "General Partner") of the
Partnership. On October 1, 1990, the Partnership sold $3,588,130 of units (the
"Units") of limited partnership interest in a public offering made pursuant to a
Prospectus dated November 15, 1988 (the "Prospectus") contained in the
Partnership's Registration Statement on Form S-11 (the "Registration Statement")
under the Securities Act of 1933 (No. 33-23463). The Partnership supplemented
the Prospectus by Supplement No. 1 dated March 9, 1989 ("Supplement No. 1"),
Supplement No. 2 dated August 7, 1989 ("Supplement No. 2"), Supplement No. 3
dated September 22, 1989 ("Supplement No. 3"), Supplement No. 4 dated March 21,
1990 ("Supplement No. 4"), and Supplement No. 5 dated April 25, 1990
("Supplement No. 5") which superseded Supplement Nos. 2 and 4.
On March 12, 1997, the Partnership sold the Royal Wood Apartments (the
"Royal Wood Apartments" or the "Property"), a 256-unit garden apartment complex
located in DeKalb County, Georgia. The Partnership had acquired the Royal Wood
Apartments on January 25, 1989 from an unaffiliated seller (the "Seller"), for a
purchase price of $10,400,000. The Partnership also incurred costs of $45,805
in connection with the acquisition, and paid an acquisition fee of $197,505 to
the General Partner upon the closing of the offering of Units. The Partnership
financed the acquisition by assuming an existing first mortgage loan in the
original principal amount of $8,000,000 (the "First Mortgage Loan") payable to
Aetna Life Insurance Company and by obtaining interim bank financing in the
amount of $2,750,000. On January 26, 1989, the Partnership sold back to the
Seller an undeveloped parcel of land (approximately 15 acres) at the Royal Wood
Apartments for a cash price of $800,000, of which $200,000 was used to repay a
portion of the first mortgage loan on the property, and the balance was retained
by the Partnership as cash reserves. The $2,750,000 interim bank loan was
subsequently refinanced with a $2,750,000 loan from an affiliate of the
Partnership. The affiliate loan was repaid in full on October 1, 1990, from the
net proceeds of the offering of the Units.
During 1996, the Partnership was able to satisfy its current obligations
with cash flows from operations. Also in 1996, the Partnership continued its
program of offering rent concessions in order to attract and retain tenants.
During the fourth quarter of 1996, the General Partner distributed a
notice of special meeting and proxy statement to the limited partners of the
Partnership (the "Limited Partners") to obtain their approval of the sale of the
Partnership's sole asset, the Royal Wood Apartments. In November 1996, the
Limited Partners approved the sale of the Royal Wood Apartments and the property
was sold on March 12, 1997 for $7,443,000. The General Partner has estimated
the sales value, net of costs to sell, to be $7,370,000. Accordingly, the
Partnership recorded an impairment loss of $857,361 for the year ended December
31, 1996, to reduce the Property's carrying value to its estimated fair value
less cost to sell.
Services at the Royal Wood Apartments were performed by on-site personnel
all of whom are employees of NPI-CL Management L.P. ("NPI"), an unaffiliated
third party. Such services were provided pursuant to a written agreement
providing for fees equal to 5% of the gross revenues from the Royal Wood
Apartments. NPI replaced Allstate Management Corp. ("Allstate"), an affiliate of
the General Partner, as the property manager effective February 21, 1995. The
amounts owed to Allstate and Clover for property management fees, reimbursable
costs and prior advances were all waived and forgiven on March 12, 1997, upon
the sale of the Property.
In January 1996, NPI was acquired by an affiliate of Insignia Financial
Group, Inc. The loan agreement entered into in connection with the First
Mortgage Loan (the "Loan Agreement"), restricted the Partnership's ability to
pay Insignia and, consequently, no fees have been paid or are owed to Insignia.
Reference is made to "Item 6. Management's Discussion and Analysis or Plan
of Operations" for a further discussion of the operations of the Partnership's
business.
Item 2. Description of Properties
As a result of the sale of the Royal Wood Apartments, the Partnership does
not have any remaining interests in real estate.
The First Mortgage Loan was paid in full on March 12, 1997, for $7,000,000
from the proceeds of the sale of the Property. See "Note 3 of Notes to the
Partnership's Financial Statements" under "Item 7. Financial Statements".
The average occupancy rates at the Royal Wood Apartments for the years
ended December 31, 1996 and 1995, were 95.2% and 95.0% respectively, and the
average effective annual rentals per unit for those years were $6,783 and
$6,181, respectively. The realty tax rate for 1996 for the Royal Wood
Apartments was $41.51 per $1,000 of assessed value, resulting in annual realty
taxes of $144,552 for 1996.
Item 3. Legal Proceedings
The Partnership is unaware of any pending or outstanding litigation that
is not of a routine nature. The General Partner of the Partnership believes
that all such pending or outstanding litigation will be resolved without a
material adverse effect upon the business, financial condition, or operations of
the Partnership.
Item 4. Submission of Matters to a Vote of Security Holders
On November 2, 1996, the General Partner distributed a notice of special
meeting and proxy statement (the "Proxy Statement") to the Limited Partners to
solicit their approval of two proposals relating to the sale of the
Partnership's sole asset, the Royal Wood Apartments. The first proposal was to
approve a sale (the "Sale") of the Royal Wood Apartments to a specific,
unaffiliated buyer at a purchase price of $7,800,000 pursuant to a sale
agreement which was executed on November 18, 1996 (the "Sale Agreement") and
amended by a Reinstatement of and First Amendment to Agreement of Sale ("First
Amendment") on December 30, 1996. The terms of the Sale Agreement are described
in the Proxy Statement.
The second proposal concerned the sale of the Royal Wood Apartments to
another buyer by the General Partner (the "Alternative Sale"). The Alternative
Sale would only be authorized if the Sale was approved, but was not completed
for any reason. In addition, an Alternative Sale would have to be completed
prior to December 31, 1999, for a purchase price not less than the fair market
value of the Royal Wood Apartments (as set forth in an appraisal dated within
nine months of the execution of an Alternative Sale agreement), and the
purchaser in such transaction could not be an affiliate of the General Partner.
The Proxy Statement provided that an approval of the Sale proposal and the
Alternative Sale proposal was also to be deemed a consent to the termination and
dissolution of the Partnership (upon completion of either the Sale or the
Alternative Sale). Each proposal required the approval of the holders of more
than 50% of the outstanding Units.
A special meeting of the Limited Partners was held on November 27, 1996,
and both of the proposals were adopted by a majority of the outstanding Units.
With respect to the Sale, the Limited Partners voted 56% in favor of the matter,
4% opposed or abstained and 40% did not respond. With respect to the Alternate
Sale proposal, the Limited Partners voted 53% in favor of the matter, 7% opposed
or abstained and 40% did not respond. The Property was sold on March 12, 1997.
PART II
Item 5. Market for the Partnership's Units of Limited Partnership Interests
and Related Security Holder Matters
There is no public market for the Units, and it is not anticipated that a
public market for the Units will develop. Transferability of Units is subject to
substantial restrictions, including limitations contained in the Partnership's
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement"), included as an Exhibit to the Prospectus and incorporated herein by
reference. As of March 12, 1997, 351 limited partners held 3,591 Units of
limited partnership interest.
Cash distributions, if any, to be distributed to the partners of the
Partnership are described generally at pages 25-26 in the Prospectus and page 2
in the Supplement No. 3, which descriptions are incorporated herein by
reference. No distributions were made during 1996 or 1995 or the first quarter
of 1997. As a result of the Sale, the General Partner anticipates making a
distribution in the approximate amount of $100 per unit.
Item 6. Management's Discussion and Analysis or Plan of Operations
This item should be read in conjunction with the financial statements and
other items contained elsewhere in this report.
Financial Condition; Liquidity and Capital Resources
The Partnership previously owned one residential apartment complex located
in the Stone Mountain area east of DeKalb County, Georgia. The Property was
sold on March 12, 1997. The Partnership acquired the Royal Wood Apartments on
January 25, 1989, from an unaffiliated third party. The Partnership derived its
revenues from rental income from this Property and was responsible for operating
expenses, administrative expenses, capital improvements and debt service
payments.
At December 31, 1996, the Partnership had cash on hand of $123,872
including cash reserves of $79,179 and security deposits of $44,693. Total cash
on hand at December 31, 1995 was $141,781, including cash reserves of $104,782
and $36,999 in security deposits. The Partnership's working capital was $29,266
at December 31, 1996, compared to a working capital deficit of $55,448, at
December 31, 1995. The increase in working capital is attributable to the
reclassification of the Partnership's investment property from a long-term asset
to a current asset, partially offset by the reclassification of the mortgage
balance to a current liability due to the July 1, 1997 maturity date of the
First Mortgage Loan. The reclassification of the investment property was
necessary under the provisions of "FASB 121", as discussed below.
The Partnership's net cash flow from operations was $123,171 for the year
ended December 31, 1996, compared to $117,018 for the year ended December 31,
1995. The increase in net cash flows from operations resulted from the increase
in cash received from rentals, offset by an increase in cash paid for operating
activities and interest paid.
As of December 31, 1996, the Partnership owed a total of $808,896 to
Allstate and Clover, including $385,049 in accrued property management fees and
$423,847 in reimbursable costs and advances made to or on behalf of the
Partnership. The amounts owed to both parties were waived and forgiven upon the
occurrence of the sale of the Property on March 12, 1997 and will be recorded as
an extraordinary gain on the extinguishment of debt in the first quarter of
1997.
Effective February 21, 1995, the General Partner and certain of its
affiliates entered into an agreement with NPI, an entity unaffiliated with the
Partnership or its General Partner, pursuant to which NPI provided day-to-day
asset management services for the Partnership as well as property management
services for the Partnership. NPI is an affiliate of National Property
Investors, Inc. On January 19, 1996, the stockholders of National Property
Investors, Inc. sold all of the issued and outstanding stock to IFGP
Corporation, an affiliate of Insignia Financial Group, Inc., who has provided
property management services for the Property through the date the Property was
sold on March 12, 1997, and will continue to provide services until the
Partnership is dissolved.
Results of Operations
Total revenues for the year ended December 31, 1996, were $1,653,175
compared to $1,502,645 for the year ended December 31, 1995. The increase in
total revenue is attributable to rental rate increases at the Partnership's
investment property.
The average effective rentals per unit were $6,783 and $6,181 for 1996 and
1995, respectively. The average occupancy for the year ended December 31, 1996,
was 95.2%, compared to 95.0% for the year ended December 31, 1995.
Operating expenses for the years ended December 31, 1996 and 1995, were
$792,202 and $688,325, respectively. The increase in operating expenses is
primarily attributable to an increase in repairs and maintenance expenses
incurred in efforts to increase the curb appeal of the Partnership's property.
Depreciation expense was $204,820 and $268,693 for 1996 and 1995, respectively.
The decrease in depreciation expense is due to the classification of the
Partnership's investment property as an investment held for sale, effective
September 30, 1996, as discussed below.
During 1996, the Partnership adopted "FASB Statement No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of". This statement requires that long-lived assets that are held for disposal
be reported at the lower of the assets' carrying amount or fair value less costs
related to the assets disposition. The reclassification of the investment
property as held-for-sale resulted in an impairment loss of $572,361 upon the
determination to sell the Property. During the fourth quarter, the impairment
loss was increased to $857,361 due to a reduction in the anticipated sales
proceeds pursuant to the First Amendment.
The Partnership realized net losses for the years ended December 31, 1996
and 1995 of $900,910 and $146,810, respectively. The increase in net loss is
due primarily to the impairment loss to adjust investment property held for sale
to its fair market less costs to sell as discussed above and increased operating
expenses, offset by increased rental revenues and decreased depreciation
expense.
Subsequent Events
On March 12, 1997, the Partnership sold the Royal Wood Apartments to an
unaffiliated purchaser for a gross purchase price of $7,443,000. The gross
proceeds less costs to sell of $73,000 approximate the carrying value of the
investment property held for sale at December 31, 1996.
A substantial portion of the proceeds from the sale of the Property were
used to retire the First Mortgage Loan. The holder of the First Mortgage Loan
Note accepted $7,000,000 in satisfaction of its liability, which resulted in an
extraordinary gain on extinguishment of debt of $306,899 to be recognized in the
first quarter of 1997.
After paying all remaining debts and obligations of the Partnership,
including the costs of dissolution, the General Partner anticipates making a
distribution in the approximate amount of $100 per Unit.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CLOVER APPRECIATION PROPERTIES I, L.P.
LIST OF FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet - December 31, 1996
Statements of Operations - Years ended December 31, 1996 and 1995
Statements of Partners' (Deficit) Capital - Years ended
December 31, 1996 and 1995
Statements of Cash Flows - Years ended December 31, 1996 and 1995
Notes to Financial Statements
Schedule III - Real Estate and Accumulated Depreciation
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Clover Appreciation Properties I, L.P.
Merchantville, New Jersey
We have audited the accompanying balance sheet of Clover Appreciation Properties
I, L.P. (a Delaware limited partnership) as of December 31, 1996, and the
related statements of operations, partners' (deficit) capital and cash flows for
each of the two years in the period ended December 31, 1996. These financial
statements are the responsibility of the Partnership's management. 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
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 6 on March 12, 1997, the Partnership sold the Royal Wood
Apartments, the only revenue generating asset of the Partnership. A portion of
the proceeds from the sale was used to retire the First Mortgage loan on the
property. Other than amounts due to affiliates which will be forgiven (see Note
4), the Partnership intends to pay all of the remaining liabilities and dissolve
the Partnership.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Clover Appreciation Properties
I, L.P. as of December 31, 1996, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
February 27, 1997,
except for Notes 3 and 6,
which are as of March 12, 1997
CLOVER APPRECIATION PROPERTIES I, L.P.
BALANCE SHEET
December 31, 1996
ASSETS
ASSETS
Cash (including $44,693 of
cash held for security deposits) $ 123,872
Accounts receivable 4,662
Real estate tax escrow 29,333
Prepaid expenses 4,199
Investment property held for sale 7,370,000
Utility deposits 770
TOTAL ASSETS $7,532,836
LIABILITIES AND PARTNERS' DEFICIT
LIABILITIES
Mortgage payable $7,325,375
Accounts payable 5,471
Accrued interest 54,940
Accrued expenses 54,991
Tenants' security deposits 44,693
Prepaid rent and other liabilities 17,330
Due to affiliates 808,896
Total liabilities 8,311,696
PARTNERS' DEFICIT
General partner (44,246)
Limited partners (3,591 units outstanding) (734,614)
Total partners' deficit (778,860)
TOTAL LIABILITIES AND PARTNERS' DEFICIT $7,532,836
The accompanying notes are an integral part of these financial statements
CLOVER APPRECIATION PROPERTIES I, L.P.
STATEMENTS OF OPERATIONS
Year Ended December 31,
REVENUES 1996 1995
Rental income $1,653,107 $1,502,216
Interest income 68 429
Total revenues 1,653,175 1,502,645
EXPENSES
Professional services 14,207 21,934
Interest 685,495 670,503
Operating expenses
(including affiliate transactions of $0
in 1996 and $9,122 in 1995, respectively) 792,202 688,325
Depreciation 204,820 268,693
Impairment loss 857,361 --
Total expenses 2,554,085 1,649,455
(Net loss) $ (900,910) $ (146,810)
(Net loss) per limited partnership unit $ (248.37) $ (40.47)
The accompanying notes are an integral part of these financial statements.
CLOVER APPRECIATION PROPERTIES I, L.P.
STATEMENTS OF PARTNERS' (DEFICIT) CAPITAL
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance, December 31, 1994 $ (33,769) $ 302,629 $ 268,860
(Net loss) for the year ended
December 31, 1995 (1,468) (145,342) (146,810)
Balance, December 31, 1995 (35,237) 157,287 122,050
(Net loss) for the year ended
December 31, 1996 (9,009) (891,901) (900,910)
Balance, December 31, 1996 $(44,246) $(734,614) $(778,860)
<FN>
The accompanying notes are an integral part of these financial statements
</TABLE>
CLOVER APPRECIATION PROPERTIES I, L.P.
STATEMENTS OF CASH FLOWS
Year Ended December 31,
1996 1995
OPERATING ACTIVITIES
Cash received from rentals $1,621,567 $1,485,936
Interest received 68 429
Interest paid (686,020) (670,982)
Cash paid for other expenses (812,444) (698,365)
Net cash provided by operating activities 123,171 117,018
INVESTING ACTIVITIES
Expenditures for property (71,182) (29,924)
FINANCING ACTIVITIES
Repayment of mortgage payable (69,898) (63,903)
Net (decrease) increase in cash (17,909) 23,191
Cash, at beginning of year 141,781 118,590
Cash, at end of year $ 123,872 $ 141,781
Reconciliation of loss to net cash
provided by operating activities:
Net loss $ (900,910) $ (146,810)
Adjustments:
Depreciation 204,820 268,693
Impairment loss 857,361 --
Decrease (increase) in accounts receivable 5,924 (10,586)
(Increase) decrease in real estate tax escrow (15,904) 21,268
Decrease (increase) in prepaid expenses 5,799 (7,265)
(Decrease) in accounts payable (32,142) (20,801)
Increase in accrued expenses
and interest 31,408 5,392
Increase in tenants' security deposits 4,279 10,157
(Decrease) in prepaid rents (37,464) (12,152)
Increase in due to affiliates -- 9,122
Total adjustments 1,024,081 263,828
Net cash provided by operating activities $ 123,171 $ 117,018
The accompanying notes are an integral part of these financial statements
Rental Revenue
Rental revenue is recognized when earned and represents potential billings, net
of concessions and vacancies.
Income Taxes
The Partnership has not provided for income taxes, since all income and losses
are to be allocated to the partners for inclusion in their respective tax
returns. The tax returns, the status of the Partnership as such for tax
purposes and the amount of allocable Partnership income or loss are subject to
examination by the Internal Revenue Service. If such examinations result in
changes with respect to the Partnership status or in changes to allocable
Partnership income or loss, then the tax liability of the partners could be
changed accordingly.
Net Loss and Distributions Per Partnership Unit
Net loss and distributions per limited partnership unit are computed from the
date of the closing of the Minimum Offering (October 1, 1990) based upon net
loss and distributions allocated to the limited partners and the weighted
average number of limited partnership units outstanding. Per unit information
has been computed based on 3,591 weighted average limited partnership units
outstanding.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of 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.
Investment Property
In 1996, the Partnership adopted "FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The impairment loss is measured by comparing the fair value of
the asset to its carrying amount.
Fair Value
In 1996, the Partnership implemented "Statement of Financial Accounting
Standards No. 107, Disclosure about Fair Value of Financial Instruments," which
requires disclosure of fair value information about financial instruments for
which it is practicable to estimate the value. The carrying amount of the
Partnership's cash and cash equivalents approximates fair value due to their
short-term nature. The estimated fair value of the Partnership's mortgage note
payable approximates the present value of cash flows discounted at estimated
borrowing rates for similar debt instruments.
1. Organization and Basis of Accounting
Clover Appreciation Properties I, L.P. (the "Partnership") is a limited
partnership which was formed in June 1988, in the State of Delaware for the
purpose of acquiring, operating and holding, directly or indirectly, residential
real estate for investment purposes. Leases primarily have a term of one year
or less. The general partner of the Partnership is Crown Management Corporation
("Crown"), a wholly-owned subsidiary of Clover Financial Corporation ("Clover").
The Partnership's records are maintained on the accrual basis of accounting as
adjusted for federal income tax reporting purposes. The accompanying financial
statements have been prepared from such records after making appropriate
adjustments, where applicable, to reflect the Partnership's accounts on the
accrual basis of accounting according to generally accepted accounting
principles ("GAAP"). For tax purposes, the Partnership in 1990 filed a Section
754 election due to the transfer of the limited partners' interest during the
year resulting in stepped up basis of the Partnership's investment property. In
addition, the costs incurred to modify the mortgage agreement in 1992 have been
expensed for book purposes and capitalized for tax purposes and are being
amortized over the remaining life of the mortgage.
The net effect of these items is summarized as follows:
December 31, 1996 December 31, 1995
GAAP Basis Tax Basis GAAP Basis Tax Basis
Total assets $7,532,836 $9,495,371 $8,487,563 $9,719,442
Partners' capital
(deficit) (778,860) 1,199,874 122,050 1,353,929
Net loss (900,910) (154,055) (146,810) (188,458)
Reconciliation of net loss per financial statements to net loss per federal
income tax returns is as follows:
For the years ended December 31,
1996 1995
Net loss per financial
statement $(900,910) $(146,810)
Reconciling items:
Depreciation (103,367) (34,509)
Amortization of debt
modification costs (7,139) (7,139)
Impairment loss 857,361 --
Net loss per federal
income tax return $(154,055) $(188,458)
2. Investment Property Held for Sale
Investment property held for sale refers to the Royal Wood Apartments, a 256
unit residential apartment complex located in Stone Mountain, Georgia, and as of
December 31, 1996, it consists of:
1996
Land $1,074,058
Apartment buildings 7,520,590
Furniture and fixtures 789,227
9,383,875
Less accumulated depreciation 2,013,875
$7,370,000
During the fourth quarter of 1996, Crown Management Corporation (the "General
Partner") distributed a notice of special meeting and proxy statement to the
Limited Partners to obtain their approval of the sale of the Partnership's sole
asset, the Royal Wood Apartments. In November of 1996, the Limited Partners
voted to approve the sale of the property. The General Partner estimated the
sales value, net of costs to sell, amounting to $73,000, to be $7,370,000.
Accordingly, the Partnership recorded an impairment loss of $572,361 to reduce
the property's carrying value to its estimated fair value less cost to sell at
September 30, 1996. During the fourth quarter, the impairment loss was
increased to $857,361 due to a reduction in the sales proceeds per the final
sales contract. The impairment loss was allocated to the individual assets
based upon their individual costs.
Depreciation was historically provided over the estimated useful lives of the
various assets using the straight-line method. The estimated lives ranged from
27 to 40 years for apartment buildings and 7 to 12 years for furniture and
fixtures. Maintenance and repair costs were charged to expense as incurred.
Significant betterments and improvements were capitalized. Effective September
30, 1996, the property was classified as an investment held for sale and no
additional depreciation expense was recorded.
3. Notes and Mortgage Payable
In connection with the acquisition of the Royal Wood Apartments, the Partnership
assumed a first mortgage loan held by Aetna Life Insurance Company in the
original amount of $8,000,000. The note evidencing that loan was collateralized
by the deed to the property and by the assignment of all rents and leases. The
note bore interest at a rate of 9.375%.
On November 25, 1992, the Partnership entered into a loan modification agreement
with Aetna Life Insurance Company effective May 1, 1992. The modification
resulted in a reduction of the interest rate on the loan from 9.375 to 9%
effective August 1, 1992. From September 1992 to June 1997, monthly payments of
principal and interest of $61,053 were to be made with a balloon payment of
$7,288,004 due July 1, 1997, the maturity date of the mortgage. The lender
agreed to waive all default charges and late fees.
The modification also provided for the following:
Additional principal payments equal to the excess cash flow, as defined in the
agreement as all operating income less approved expenses for the fiscal years
ended June 30, 1993 through 1996. Approved expenses are defined as day to day
expenses relating to the operation, management or ownership of the property
exclusive of management fees, payments to the Partnership or the General Partner
and affiliates, except for health insurance costs and computer fees.
If, during any of the years ended June 30, 1995 through 1997, the additional
interest payment equals or exceeds the additional principal payment for that
period, no additional principal payment is due. Payment of additional interest
and principal are due on July 25 of each year. Through the reporting period
ended June 30, 1995 there had been no excess cash flow and, therefore, there had
been no payments of additional principal and interest due under the provisions
of the modification. During the period ended June 30, 1996, the property
remitted $19,618 in cash flow interest payments to the lender.
On March 12, 1997, the Royal Wood Apartments were sold to an unaffiliated
purchaser and the debt secured by the Property was retired for $7,000,000, which
resulted in an extraordinary gain on extinguishment of debt of $306,899 to be
recognized at the sale date.
4. Transactions With Affiliates
Clover and its affiliates are entitled to reimbursement for administrative
services rendered to the Partnership, direct expenses of Partnership operations,
and goods and services used by and for the Partnership. In addition, Clover and
its affiliates advanced the Partnership funds to pay initial offering,
organizational, and acquisition costs, as well as to fund additional working
capital outlays. These advances are non-interest bearing and a portion of the
advances were repaid by the Partnership from the proceeds of the sale of limited
partnership units. Clover and its affiliates also advanced the Partnership
funds to pay the first and second quarter 1991 distributions. As of December
31, 1996, advances due to Clover and its affiliates were $321,293.
Per the loan modification agreement, only approved expenses, which are expenses
that relate to the operation, management or ownership of the property, are
permitted to be paid. Approved expenses do not include management fees and
payments to reimburse the General Partner and its affiliates except for health
insurance costs and computer fees.
Effective February 21, 1995, NPI-CL, L.P. ("NPI") which is unaffiliated with the
general partner, replaced an affiliate of the general partner as property
manager. Until that time, as compensation for property management services
performed with respect to the Property, the affiliate was entitled to fees in an
amount not to exceed 5% of gross revenues. At December 31, 1996, these fees
were accrued. The amounts owed to both parties will be waived and forgiven upon
the sale of the property in 1997.
Reimbursable
Management Costs and
Fees Advances Total
Due to affiliates, balance
at January 1, 1995 $376,439 $423,335 $799,774
Incurred during 1995 8,610 512 9,122
Payments during 1995 -- -- --
Due to affiliates, balance
at December 31, 1995 385,049 423,847 808,896
Incurred during 1996 -- -- --
Payments during 1996 -- -- --
Due to affiliates, balance
at December 31, 1996 $385,049 $423,847 $808,896
5. Partnership Agreement
Pursuant to the terms of the Partnership Agreement, the net losses through
September 1990 were allocated 1% to the General Partner and 99% to the Initial
Limited Partner. After the sale of the Minimum Offering and the admission of
additional limited partners to the Partnership, all items of income, gain and
loss and distributions of cash are allocated as follows:
Net income of the Partnership from operations will be allocated as follows:
(a) first, if the Partnership made net cash receipts distributions with respect
to such period, an amount of net income up to the amount of such net cash
receipts distributions shall be allocated among the partners in the same
proportions as such net cash receipts distributions were made; provided,
however, that if the total amount of net income is less than the amount of net
cash receipts distributions for such a period, an amount of net income equal to
the amount of net cash receipts distributions distributed to the General Partner
shall be allocated to the General Partner and all remaining net income shall be
allocated to the Limited Partners;
(b) second, to those partners having deficit balances in their capital accounts
in proportion to and to the extent of such deficits.
(c) third, to those partners, if any, who have received cumulative net cash
receipts distributions in the current and prior periods in an amount in excess
of the cumulative amount of net income allocated to such partners in proportion
to and to the extent of any such excess and;
(d) fourth, the balance, if any, shall be allocated 10% to the General Partner
and 90% to the Limited Partners in proportion to their relative ownership of
units.
Net income or gain realized by the Partnership on a sale shall be allocated in
the following order of priority:
(a) first, to the partners with negative capital account balances,
proportionately based on the respective negative balances in their capital
accounts until each such partner has a zero capital account balance;
(b) second, to the Limited Partners until the capital account balance of each
Limited Partner shall equal his adjusted capital contribution, as determined
without reduction for any sale or refinancing proceeds distributed or to be
distributed for the current period;
(c) third, to the Limited Partners until their capital accounts equal the sum
of the priority returns (a 12% annual noncompounded cumulative return on their
adjusted capital contributions) distributed or to be distributed to the Limited
Partners and the amount described in subparagraph (b);
(d) any remaining amounts of net income or gain shall be allocated 15% to the
General Partner and 85% to the Limited Partners in proportion to their relative
ownership of units.
Net losses of the Partnership shall be allocated 1% to the General Partner and
99% to the Limited Partners, in accordance with their relative ownership of
units.
Net cash receipts shall, to the extent determined by the General Partner, be
distributed 10% to the General Partner and 90% to the Limited Partners quarterly
with respect to the periods ending March 31, June 30, September 30, and December
31 of each year, with all amounts distributed to the Limited Partners as a group
being divided among the Limited Partners in accordance with relative ownership
of units. The sale and refinancing proceeds shall be distributed to the extent
available first, to the Limited Partners in an amount equal to their adjusted
capital contributions, second to the Limited Partners in an amount equal to
their priority returns, and third, the balance shall be distributed 15% to the
General Partner and 85% to the Limited Partners in accordance with their
relative ownership of units.
6. Subsequent Events
On March 12, 1997, the Partnership sold the Royal Wood Apartments to an
unaffiliated purchaser for a gross purchase price of $7,443,000. The gross
proceeds less costs to sell of $73,000 approximate the carrying value of the
investment property held for sale at December 31, 1996.
A substantial portion of the proceeds from the sale of the Property were used to
retire the First Mortgage Loan. The holder of the First Mortgage Loan accepted
$7,000,000 in satisfaction of its liability, which resulted in an extraordinary
gain on extinguishment of debt of $306,899 which will be recognized in the first
quarter of 1997.
After paying all remaining debts and obligations of the Partnership including
the costs of dissolution, the General Partner anticipates making a distribution
in the approximate amount of $100 per Unit.
Schedules of Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Gross Amount at Which
Carried at December 31, 1996 (A) (D)
Life on Which
Depreciation Has
Buildings and Date of Date Been Computed
Land Improvements Total(B) Depreciation(C) Construction Acquired in 1996
<S> <C> <C> <C> <C> <C> <C>
$1,074,058 $8,309,817 $9,383,875 $2,013,875 1979 1/25/89 7-40 years
</TABLE>
<TABLE>
<CAPTION>
Net Cost Reduced
Initial Cost Subsequent to Acquisition
Buildings and Buildings and
Description Encumbrance Land Improvements Land Improvements
<S> <C> <C> <C> <C> <C>
256-unit residential Deed $1,132,248 $8,513,557 $(58,190) $(203,740)
apartment complex
<FN>
(A) The aggregate cost for federal income tax purposes is equal to the amount
at which the real estate is carried for financial reporting purposes, plus
the additional stepped up basis due to a Section 754 election in the amount
of $1,403,493 less the impairment loss amounting to $807,361.
(B) Reconciliation of real estate:
</TABLE>
Year Ended December 31,
1996 1995
Balance, at beginning of year $10,120,054 $10,090,130
Expenditures for property 71,182 29,924
Impairment loss (1) (807,361) --
Balance, at end of year 9,383,875 10,120,054
Less accumulated depreciation 2,013,875 1,809,055
Investment property held for sale $ 7,370,000 $ 8,310,999
(1) Impairment loss does not include $50,000 of valuation reserves recorded for
future purchases of capitalizable items during the period the property is
held for sale.
(C) Reconciliation of accumulated depreciation:
Year Ended December 31,
1996 1995
Balance, at beginning of year $1,809,055 $1,540,362
Depreciation expense 204,820 268,693
Balance, at end of year $2,013,875 $1,809,055
(D) Effective September 30, 1996, the Partnership determined that the property
was held for sale.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 9. Directors and Executive Officers of the Partnership
The General Partner has the sole right to manage the business of the
Partnership and make any and all decisions with respect thereto. The Limited
Partners are allowed to vote or consent only in limited circumstances as
permitted by the Act and as specifically set forth in the Partnership Agreement.
The General Partner has ultimate authority in all Partnership business
decisions.
The General Partner has the right to delegate management functions.
Limited Partners have no right to participate in the management of the
Partnership.
The General Partner is a New Jersey corporation which is a wholly-owned
subsidiary of Clover Financial Corporation ("Clover"), a New Jersey corporation
which has engaged, directly and indirectly, in real estate ownership and
operation since 1972. The officers and directors of the General Partner, Donald
N. Love, Steven R. Zalkind and Stanley E. Borucki, are also officers and/or
directors of Clover. In addition, Messrs. Love and Zalkind are the majority
shareholders of Clover.
Various relationships of the Partnership to the General Partner and its
affiliates are described at pages 13-15 of the Prospectus, which description is
incorporated herein by reference.
The executive officers and directors of the General Partner and
Clover are as follows:
Name Age Position
Donald N. Love 58 President, Director
Steven R. Zalkind 54 Vice President, Director
Stanley E. Borucki 43 Treasurer
Mr. Love has been President and a director of the General Partner since
its formation in 1986, and he is President and a director of Clover and various
affiliates of Clover. Mr. Love has been associated with Clover since 1971. Mr.
Love holds a B.S. degree in Business Administration from Temple University.
Mr. Zalkind has been Vice President and a director of the General Partner
since its formation in 1986, and he is Vice President and a director of Clover
and various affiliates of Clover. Mr. Zalkind has been associated with Clover
since May 1985.
Mr. Borucki has served as Treasurer of the General Partner since May 1990,
and he serves as Treasurer of various affiliates of Clover. He has been the
Assistant Treasurer of Clover since 1988. Mr. Borucki joined Clover as a staff
accountant in 1977, and he served as the Controller of Clover from 1984 to 1988.
Mr. Borucki is a Certified Public Accountant.
All of the directors and executive officers of the General Partner are
elected annually to the offices set forth above to hold office until their
successors are duly elected and qualified.
Item 10. Executive Compensation
The officers and directors of the General Partner receive no current
direct compensation for serving in such capacities. The General Partner
received acquisition fees for services rendered in connection with the selection
and acquisition of direct or indirect interests in properties and the General
Partner will be entitled to receive a share of cash distributions. Such fees and
distributions are described generally under the caption "Compensation and Fees"
at pages 10-12 and under the caption "Allocations of Profits and Losses and Cash
Distributions" on pages 25-26 of the Prospectus dated September 18, 1987 and at
pages A-7 to A-11 of the Partnership Agreement, included as an Exhibit to the
Prospectus, which descriptions are incorporated herein by reference.
The Partnership is permitted to engage in various transactions involving
the General Partner and its affiliates as described under the captions
"Compensation and Fees" at pages 10-12 and "Conflicts of Interests" at pages 13-
16 of the Prospectus and "Rights, Authority, Powers, Responsibilities and Duties
of the General Partner" at pages A-20 to A-27 of the Partnership Agreement,
included as an Exhibit to the Prospectus, which descriptions are incorporated
herein by reference.
In accordance with the Partnership Agreement, the General Partner and its
affiliates may be reimbursed by the Partnership for the actual costs advanced by
them for materials used by the Partnership and obtained from unaffiliated
parties, administrative services and direct expenses of Partnership operations.
However, the agreement entered into by the Partnership in connection with the
modification of its First Mortgage Loan prohibited the payment of any fees or
costs to the General Partner other than health insurance costs and computer
fees. Any other reimbursable costs were required to be accrued and were not
allowed to be paid until the First Mortgage Loan was fully paid. Proceeds from
the sale of the Property were used to pay the First Mortgage Loan in full and
the amounts due the General Partner and its affiliates were forgiven.
Reference is made to "Note 4" of Notes to the Partnership's Financial
Statements under "Item 7. Financial Statements", which contain information on
the amounts of acquisition fees and reimbursements which were actually earned by
the General Partner and its affiliates and actually paid by the Partnership.
Reference is made to the Statements of Partners'(Deficit) Capital in the
Partnership's Financial Statements under "Item 7. Financial Statements", which
contain information on the amount of cash distributions actually made by the
Partnership to the General Partner.
Item 11. Security Ownership of Certain Beneficial Owners and Management
No person (including any "group" as that term is used in Section 13(d)(3)
of the Securities Exchange Act of 1934) is known to the Partnership to be the
beneficial owner of more than five percent of the outstanding Units as of March
12, 1997.
As of March 12, 1997, the directors of the General Partner and the
directors and officers of the General Partner as a group subscribed for the
following Units of the Partnership:
Amount and nature
of Beneficial Percentage
Name Ownership of Units Interest
Donald N. Love 6 *
All directors and
officers as a group
(3 persons) 6 *
* Less than one percent
All the outstanding shares of the Common Stock of the General Partner are
owned by Clover as discussed under "Item 9. Directors and Executive Officers of
the Partnership".
Item 12. Certain Relationships and Related Transactions
Since January 1, 1995, there were no significant transactions or business
relationships with the General Partner or its affiliates, and none are currently
proposed, other than those described in "Item 10. Executive Compensation". As
of December 31, 1995, the Partnership was indebted to Clover and its affiliates
in the aggregate amount of $808,896, including $385,049 in accrued property
management fees and $423,847 in reimbursable costs and advances made to or on
behalf of the Partnership. The $808,896 was forgiven by the General Partner and
its affiliates upon the sale of the Property.
Item 13. Exhibits, Financial Statements, Schedules and Reports on 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
See Exhibit Index contained herein for listing of exhibits.
(b) Reports on Form 8-K filed during the fourth quarter of 1996:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CLOVER APPRECIATION PROPERTIES I, L.P.
CROWN MANAGEMENT CORPORATION,
General Partner
Date:March 27, 1997 By: /s/ Donald N. Love
Donald N. Love, President
Date:March 27, 1997 By: /s/ Stanley E. Borucki
Stanley E. Borucki, Treasurer
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 in the capacities and on the dates indicated.
Date: March 27, 1997 /s/ Donald N. Love
Donald N. Love, Director and
President of Crown Management
Corporation, the General Partner
Date: March 27, 1997 /s/ Steven R. Zalkind
Steven R. Zalkind, Director
and Vice-President of
Crown Management Corporation,
the General Partner
INDEX OF EXHIBITS
EXHIBIT NO. DOCUMENT DESCRIPTION
* 3.1 Certificate of Limited Partnership (Exhibit 3.1 to the
Registrant's Registration Statement, No. 33-23463 filed on August
1, 1988 (the "Registration Statement")).
* 3.2 Limited Partnership Agreement (Exhibit 3.2 to the Registration
Statement).
* 3.3 First Amendment to Limited Partnership Agreement (Exhibit 3.3 of
the Registration Statement).
* 3.4 Second Amendment to Limited Partnership Agreement (Exhibit 3.4 to
the registrant's Annual Report on Form 10-K for the year ended
December 31, 1988 (the "1988 Form 10-K")).
* 3.5 Amended and Restated Agreement of Limited Partnership dated
October 1, 1990 (Exhibit 3.5 to the registrant's Annual Report on
Form 10-K for the year ended December 31, 1991 (the "1991 Form
10-K")).
*10.1 Real Estate Note dated June 24, 1986 of Royal Wood Associates,
together with a First Modification of Real Estate Note dated as
of May 1, 1992 between the Partnership and Aetna Life Insurance
Company (Exhibit 10.2 to the registrant's Annual Report on Form
10-K for the year ended December 31, 1992 (the "1992 Form
10-K")).
*10.2 Deed to Secure Debt, Assignment of Rents and Security Agreement
dated June 24, 1986 between Royal Wood Associates and Aetna Life
Insurance Company, together with a First Amendment dated as of
January 25, 1989 among Royal Wood Associates, Royal Wood
Associates II, the Partnership and Aetna Life Insurance Company,
and a Second Amendment dated June 25, 1986 between the
Partnership and Aetna Life Insurance Company (Exhibit 10.3 to the
1992 Form 10-K").
10.3 Agreement of Sale dated November 18, 1996 between the
Partnership and Strand, Inc.
10.4 Reinstatement of and First Amendment to Agreement of Sale
dated December 30, 1996 between the Partnership and Strand, Inc.
27 Financial Data Schedule
*99.1 The Prospectus of the Partnership dated November 15, 1988,
contained in Amendment No. 1.
*99.2 Supplement No. 1 dated March 9, 1989 to the Prospectus, as filed
with the Commission pursuant to Rules 424(b)(3) and 424(c) on
March 13, 1989, and as part of Post-Effective Amendment No. 1 to
the Registration Statement.
*99.3 Supplement No. 3 dated September 22, 1989 to the Prospectus and
Supplements No. 1 and 2, as filed with the Commission pursuant to
Rules 424(b)(3) and 424(c) on September 27, 1989, and as part of
Post-Effective Amendment No. 3 to the Registration Statement.
*99.4 Supplement No. 5 dated April 25, 1990 to the Prospectus and
Supplements No. 1 and 3 and superseding Supplement Nos. 2 and 4,
as filed with the Commission pursuant to Rules 424(b)(3) and
424(c) on May 2, 1990, and as part of Post-Effective Amendment
No. 5 to the Registration Statement.
* Incorporated by reference.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY PARTNERSHIPS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
Pursuant to the Partnership Agreement and certain undertakings in the
Registration Statement, the Partnership is obligated to provide an annual report
to Limited Partners of the Partnership on or before April 30, 1997. The
Partnership will furnish copies of such report to the Commission when it is sent
to the Limited Partners.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Clover
Appreciation Properties I, L.P. 1996 Year-End 10-K and is qualified in its
entirety by reference to such 10-K filing.
</LEGEND>
<CIK> 0000837103
<NAME> CLOVER APPRECIATION PROPERTIES I L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 4,662
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,532,836
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 7,325,375
0
0
<COMMON> 0
<OTHER-SE> (778,860)
<TOTAL-LIABILITY-AND-EQUITY> 7,532,836
<SALES> 0
<TOTAL-REVENUES> 1,653,175
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,554,085
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 685,495
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (900,910)
<EPS-PRIMARY> (248.37)
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Investment property held for sale was $7,370,000 at December 31, 1996.
</FN>
</TABLE>
AGREEMENT OF SALE
THIS AGREEMENT, made this day of November, 1996, by and between CLOVER
APPRECIATION PROPERTIES I, L.P., a Delaware Limited Partnership, of 23 West Park
Avenue, Merchantville, New Jersey 08109, hereinafter referred to as Seller, and
STRAND INC., a Texas Corporation, of Vancouver Centre, 650 West Georgia Street,
21st Floor, Vancouver, British Columbia V6B 4N7, hereinafter referred to as
Buyer.
WHEREAS, Seller is the owner of all that certain tract or parcel of land
and premises situate, lying and being in the 18th District of DeKalb County,
Georgia, commonly known and referred to as Royal Wood Apartments; and,
WHEREAS, Seller desires to sell to the Buyer and Buyer
desires to purchase from the Seller said Royal Wood Apartments pursuant to the
terms and conditions hereinafter set forth,
WITNESSETH THAT:
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, the parties hereto, intending to be legally bound
hereby, do covenant and agree with each other as follows:
1. PREMISES: The Seller does hereby agree to sell to the Buyer and the
Buyer does hereby agree to purchase from the Seller all that certain tract or
parcel of land and premises situate, lying and being in the 18th District of
DeKalb County, Georgia, commonly known and referred to as Royal Wood Apartments,
and being more particularly described in SCHEDULE A attached hereto and made a
part hereof, which is hereinafter referred to as the Premises.
2. PURCHASE PRICE: The total purchase price which the Buyer agrees to
pay to the Seller and which the Seller agrees to accept for the Premises is the
sum of SEVEN MILLION EIGHT HUNDRED THOUSAND ($7,800,000.00) DOLLARS, which
purchase price shall be paid by Buyer to Seller as follows:
(a) The sum of ONE HUNDRED THOUSAND ($100,000.00) DOLLARS (the
"Initial Deposit") simultaneously with the execution and delivery of this
Agreement and the further sum of FIFTY THOUSAND ($50,000.00) DOLLARS (the
"Second Deposit") on or before forty-five (45) days from the date hereof.
The Initial Deposit shall be hereinafter referred to as the "Deposit" and
the Second Deposit, when made, shall be included within the definition of
the "Deposit". The Deposit shall be deposited with the Escrow Agent, as
hereinafter defined, to be held subject to the terms and conditions
hereinafter set forth, and shall be treated as payment on account of the
purchase price if Closing is made for the Premises.
(b) At the time of Closing, as hereinafter provided, the further
sum of SEVEN MILLION SIX HUNDRED FIFTY THOUSAND ($7,650,000.00) DOLLARS on
account of the purchase price, subject to appropriate pro-rations and
credits provided for in this Agreement, at Seller's option, in cash, by
certified check or by federal funds wire transfer.
3. CLOSING: Closing shall take place on or before December 31, 1996
("Closing"), at 10:00 o'clock A.M. at the offices of Sherman, Silverstein, Kohl,
Rose & Podolsky, P.A., 4300 Haddonfield Road, Suite 311, Pennsauken, New Jersey
08109. Buyer shall have the right to extend the date of Closing to on or before
January 31, 1997 by serving written notice thereof upon the Seller on or before
December 15, 1996. The said time for Closing and the said extended time for
Closing as well as all other terms set forth in this Agreement are hereby agreed
to be of the essence of this Agreement. Tender of an executed Deed is hereby
waived.
4. TITLE AND CONVEYANCE: (a) The title to the Premises to be conveyed
at Closing by Seller to Buyer shall be conveyed in fee simple by limited
warranty deed (with the only covenants being against grantors acts). Title
shall be good and marketable and insurable as such by a reputable title
insurance company, but subject, however, to those exceptions set forth herein
and/or in SCHEDULE B attached hereto and made a part hereof.
(b) If title shall not be as aforesaid, then Buyer shall have the
option of either taking such title as Seller can convey without an abatement of
the purchase price, or of terminating and cancelling this Agreement and being
repaid the Deposit; the foregoing shall be Buyer's sole rights and remedies in
the event title shall not be as aforesaid; provided, however, Seller shall be
obligated to satisfy the existing Deed to Secure Debt, Assignment of Rents and
Security Agreement held by Aetna Life Insurance Company, a Connecticut
Corporation, encumbering the Premises and to cure any title defects which are
monetary in nature for a liquidated amount limited to the maximum total sum of
$100,000.00 and as to which there is no reasonable dispute.
5. POSSESSION: (a) At Closing, Seller shall deliver to Buyer actual
possession of the Premises by delivery of the Deed and keys, and by assignment,
without representation, warranty or recourse, of all existing leases affecting
the Premises or any part thereof, hereinafter referred to as the Leases. The
said assignment of all Leases shall include Buyer's assumption of all the
obligations contained in the Leases which are by the terms thereof the
responsibility of Seller and shall further include Buyer's agreement to
indemnify and save harmless the Seller from any and all claims made by tenants
with respect to the Leases arising from and after the date of Closing hereunder.
Seller shall likewise agree to indemnify Buyer from any and all written claims
made by tenants with respect to the leases arising prior to the Closing
hereunder; provided, however, that such indemnification of Seller to Buyer shall
expire, and claims thereon shall be made, prior to three (3) months following
the date of Closing. Such indemnifications shall also include any costs,
expenses and reasonable attorney's fees.
(b) Buyer and his agents shall have the privilege of entering upon
the Premises during normal working hours upon forty-eight (48) hours advance
notice to Seller, at reasonable times between the date hereof and the date of
Closing, for the purpose of making surveys and physical inspections of the
Premises, provided no such activity shall in any way interfere with any tenants
in the Premises. Seller will cooperate with Buyer in making such surveys and
inspections. Buyer shall indemnify and save harmless the Seller from any
liability, loss, cost or expense (including reasonable attorney's fees) arising
from or in connection with such entry upon the Premises; said indemnification
shall survive Closing and/or termination of this Agreement.
(c) In addition to and not in limitation of the rights and
privileges granted to the Buyer hereinabove in Paragraph 5(b), for a period from
the date hereof to December 15, 1996, Buyer is granted the right to conduct a
physical inspection (including a lead-based paint and/or lead-based paint hazard
inspection and/or risk assessment) of the Premises and all personal property
located thereon in such a manner as not to inconvenience the tenants and to
review all leases, books and records pertaining to the Premises. At any time
during said inspection period, Buyer shall have the right to cancel and
terminate this Agreement, in its sole discretion, by serving written notice
thereof upon Seller on or before the expiration of said inspection period; if
Buyer elects to terminate this Agreement as permitted herein, then this
Agreement shall be cancelled and terminated and the Deposit shall be returned to
Buyer and neither party hereunder shall have any further liability or obligation
to the other hereunder except with respect to the indemnifications contained in
this Paragraph 5(c), Paragraph 5(b) and Paragraph 22; if Buyer fails to exercise
its right to terminate this Agreement as permitted herein, then said right shall
automatically lapse, terminate and become null and void. Buyer shall indemnify
and save harmless the Seller from any liability, loss, cost or expense
(including reasonable attorney's fees) arising from or in connection with such
inspection and/or entry upon the Premises; said indemnification shall survive
Closing and/or termination of this Agreement.
6. APPORTIONMENTS, ADJUSTMENTS AND INCIDENTAL COSTS:
(a) The following items shall be apportioned pro rata between Seller and
Buyer as of midnight of the day immediately preceding the date of Closing:
1. Current collected rents, and prepaid rents, if any, under the
Leases;
2. Real estate taxes based on the fiscal year used by the taxing
authority;
3. Water and sewer charges;
4. Any lump sum payment and/or the annual installment(s), if any,
for the year in which Closing occurs for any assessment(s) imposed by any
county, municipal and/or governmental authority, based on the fiscal year
used by the taxing authority;
5. Gas, electricity, and other public utility company charges not
billed directly to tenants;
6. Fuel oil, if applicable;
7. Amounts due on any service contracts including, but not limited
to trash collection, exterminating, maintenance, and the like assigned by
Seller to Buyer pursuant to this Agreement;
8. Any other current charges incurred in connection with the normal
operation of the Premises.
(b) The Seller shall pay for the drawing of the Deed and the realty
transfer tax. Buyer shall pay for all title searches, title insurance, surveys,
recording of the Deed and any other conveyancing expenses.
(c) The amount of all security and other refundable deposits paid
by tenants together with tenant's portion of the interest earned thereon, if
such interest is required by applicable law, shall be paid or credited to Buyer
at Closing except with respect to those security and other refundable deposits
applied against the obligations of any tenants; and Buyer will thereafter assume
responsibility for repayment or proper application of such security and other
refundable deposits so paid or credited at Closing and tenant's portion of the
interest earned thereon, if such interest is required by applicable law, and
Buyer shall indemnify and save harmless the Seller from any and all claims made
by tenants with respect to said security and other refundable deposits and
interest earned thereon, if such interest is required by applicable law; such
indemnification shall also include any costs, expenses and reasonable attorneys'
fees.
(d) All sums collected by Buyer from tenants after Closing shall be
applied by Buyer first on account of current rents due Buyer and second on
account of sums due Seller for rents accrued prior to Closing. All sums due
Seller for rents accrued prior to Closing which are collected by Buyer from
tenants after Closing shall be disbursed by Buyer to Seller within fifteen (15)
days after receipt by Buyer.
(e) Buyer is accepting title subject to any assessments imposed by
any county, municipal and/or governmental authority payable on an annual basis,
and shall be responsible for all payments due therefore after Closing.
7. PROPERTY INCLUDED: This sale includes, for the consideration set
forth in Paragraph 2 hereof, and Seller shall at Closing transfer to Buyer by a
bill of sale without representations, warranties or recourse except as to
covenants against Seller's acts only with respect to title (with respect to
those items for which a bill of sale is an appropriate instrument for transfer)
all of Seller's right, title and interest in and to all plumbing, heating, air
conditioning, lighting and electrical fixtures and equipment, together with all
equipment, fixtures, furnishings, appliances and personalty owned by Seller and
presently used in the operation of the Premises, including the items that appear
on SCHEDULE C attached hereto and made a part hereof.
8. CONDITION OF PREMISES: (a) Notwithstanding anything contained in
this Agreement to the contrary, except as otherwise set forth in this Agreement,
Seller makes no representation, either prior to or at the Closing, with respect
to the condition or character of the Premises or the use or uses to which the
Premises may be put. Buyer acknowledges that pursuant to Paragraph 5(c), Buyer
will carefully and thoroughly examine, inspect and investigate the Premises,
those items referred to hereinabove in Paragraph 7 and/or elsewhere in this
Agreement, and the Seller's operations (as to manner, income and expenses), and
Buyer will be fully satisfied with the same upon completion of the inspections
and examinations referred to in Paragraph 5(c); and Buyer is purchasing the same
on the basis of such examination, inspection and investigation and not in
reliance on any representation or warranty of Seller or any agent, employee or
representative of Seller of any kind or nature whatsoever. Accordingly, Buyer
hereby agrees to accept all of the assets being acquired by Buyer hereunder,
whether realty, personalty or mixed, on an absolutely and unconditionally "as
is" basis at the time of Closing.
(b) Notwithstanding Paragraph 8(a) above, Seller agrees that on or
before the date of Closing, Seller, at its expense, will repair the asphalt on
the parking lot, seal coat and stripe same, and make such repairs to the
concrete as may be required in Seller's sole discretion.
9. CONTINGENCY: Seller's and Buyer's obligation to close under this
Agreement is subject to and conditioned upon the receipt of any and all
approvals and consents necessary for Seller to consummate the transaction
contemplated by this Agreement. Seller will use its best efforts to endeavor to
obtain said approvals and consents. If all such approvals and consents
necessary for Seller to consummate the transaction contemplated by this
Agreement are not received on or before December 1, 1996, then this Agreement
shall be automatically cancelled and terminated, the Deposit shall be returned
to the Buyer, and neither party shall have any further liability or obligation
to the other hereunder except with respect to the indemnifications contained in
Paragraphs 5(b), 5(c) and 22.
10. RENT ROLL: Seller represents that SCHEDULE D attached hereto and
made a part hereof is a true and accurate Rent Roll; and to the best of Seller's
knowledge, the Leases are in full force and effect and not in default except as
otherwise disclosed in the Rent Roll. At Closing, Seller shall deliver an
updated Rent Roll certified to be true and correct as of such date.
11. VIOLATIONS: Seller represents that, to the best of its knowledge, as
of the date hereof Seller has not received any written notice of any
governmental violations respecting the Premises. In the event any such notices
are served or received prior to the date of this Agreement, then Seller will
correct any such violation, at Seller's sole cost and expense, prior to Closing.
If Buyer does not terminate this Agreement pursuant to Paragraph 5(c) hereof,
then, if between the date of this Agreement and the date of Closing, Seller
receives any written notice of any violations issued by any governmental
authority with respect to the Premises, Seller and Buyer will share equally the
cost and expense of correcting any such violations up to the maximum sum of
$50,000.00; if the cost to correct such violations exceeds the sum of
$50,000.00, then either Seller or Buyer shall have the right, but not the
obligation, to pay such excess and complete Closing hereunder; if neither Seller
nor Buyer elects to pay such excess, then this Agreement shall be cancelled and
terminated, and the Deposit shall be returned to the Buyer and neither party
hereunder shall have any further liability or obligation to the other hereunder
except with respect to the indemnifications contained in Paragraphs 5(b), 5(c)
and 22.
12. SERVICE OR OTHER AGREEMENTS: Seller represents that there are no
existing and outstanding agreements of sale or service or maintenance or other
contracts affecting the Premises, except such as are set forth in SCHEDULE E
attached hereto and made a part hereof, true copies of which have been
heretofore delivered to Buyer; at Closing Seller shall assign, without
representation, warranty or recourse, to Buyer such outstanding agreements
referred to in SCHEDULE E, which by their terms extend beyond the date of
Closing, which assignment shall include Buyer's assumption of all of the
obligations contained in said agreements which are by the terms thereof the
responsibility of Seller and shall further include Buyer's agreement to
indemnify and save harmless the Seller from any and all claims made thereunder
arising from and after the date of Closing hereunder which indemnity shall also
include any costs, expenses and reasonable attorney's fees. At the time of
Closing, the existing Management Agreement pertaining to the Premises shall be
terminated.
13. OPERATIONS PRIOR TO CLOSING: (a) Seller may rent any apartment on
the Premises now vacant or which becomes vacant prior to Closing and may extend
or renew Leases, provided such initial, extended or renewal term may not exceed
one (1) year and shall be effected on forms and under the terms in use by Seller
at the time of execution of this Agreement at a monthly rental equivalent to the
market rent for that type of unit. So long as Seller complies with the terms of
this Paragraph, it shall continue to operate and manage the Premises in the same
manner as it has done in the past, until Seller gives possession to Buyer at
Closing. At Closing, all vacant apartment units will be in rent ready condition
except for units which become vacant within five (5) days of Closing.
(b) Seller covenants and agrees with Buyer from the date hereof and
until the Closing, Seller shall:
(1) Perform all of its obligations under
agreements and instruments relating to or affecting the
Premises (including, without limitation, all Leases);
(2) Maintain the books of account and records for
the Premises in the usual, regular and ordinary manner;
and
(3) Not grant a mortgage, restriction or easement
further encumbering the Premises.
14. DOCUMENTS: (a) At Closing, Seller will deliver or cause to be
delivered to Buyer the aforesaid Deed; an assignment of all Leases and of
security deposits, together with tenant's portion of the interest earned
thereon, if required by applicable law, held by Seller thereunder; all Leases
affecting the Premises; an assignment of outstanding agreements as hereinabove
provided; any existing service contracts pertaining to items such as
maintenance, snow removal, laundry service, extermination, and the like; any
agreements for the rental of equipment used in connection with the normal
operation of the Premises; the aforesaid Bill of Sale; an Affidavit stating that
Seller is not a "foreign person" within the meaning of IRC Section 1445(f)3;
notices to all tenants instructing tenants to make all future rent payments to
Buyer; and such other documents as may be reasonably required to effectuate this
Agreement.
(b) At Closing, Seller shall assign, to the extent assignable and
without representation, warranty or recourse, to Buyer any right Seller may have
to the name, Royal Wood Apartments, and any plans and drawings in Seller's
possession relating to the construction of or alterations to the Premises,
including without limitation, any permits and licenses, guarantees or warranties
received by Seller from any contractors or materialmen with respect to any work
or installations in the Premises as well as any guarantees or warranties
relating to personal property.
15. (a) Buyer's Status. Buyer represents and warrants to Seller that
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas and same shall be true at the time of
Closing; Buyer has full power and authority to consummate the purchase of the
Premises as contemplated hereby, and all requisite action as required by law to
authorize the execution, delivery and performance hereof by Buyer has been
taken. At Closing, Buyer shall deliver to Seller such evidence and
documentation as Seller's counsel may reasonably require respecting Buyer in
order to verify the foregoing and the due and valid execution of any closing
documents required to be executed by Buyer hereunder.
(b) Seller's Status. Seller represents and warrants to Buyer that
Seller is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware and same shall be true at the
time of Closing; Seller has full power and authority to consummate the sale of
the Premises as contemplated hereby, and all requisite action as required by law
to authorize the execution, delivery and performance hereof by Seller has been
taken (the foregoing is subject to compliance with the provisions of Paragraph 9
of this Agreement). At Closing Seller shall deliver to Buyer such evidence and
documents as Buyer's counsel may reasonably require respecting Seller in order
to verify the foregoing and the due and valid execution of any closing documents
required to be executed by Seller hereunder.
(c) Accuracy of Schedules. To the Seller's best knowledge, no fact
or reason exists why Buyer may not rely upon the accuracy in all material
respects of the Schedules attached to and made a part of this Agreement.
(d) Litigation. Seller has received no written notice of any
pending or threatened litigation, condemnation, investigation or other legal
proceeding affecting title to the Premises or any portion thereof, and Seller
has received no written notice of any actions, suits, proceedings, orders,
administrative proceedings or investigations, pending or threatened, against the
Premises, or to the title thereto except those claims covered by insurance.
(e) Assessments. No assessments have been made against the
Premises which are unpaid or shall not be paid in full at or prior to the
Closing (except those ad valorem taxes, if any, for the then current year which
are not yet due and payable), whether or not they have become liens; and Seller
has received no written notice of any assessments against the Premises for
public improvements not yet in place.
(f) Hazardous Substances. Seller represents and warrants that to
the best of Seller's knowledge, during Seller's ownership of the Property,
Seller has not received written notice that:
(i) any underground storage tanks have been placed on or
removed from the Property;
(ii) Seller has caused or permitted to be stored, disposed of,
transferred, produced, or processed on the Property "Hazardous
Substances" (as defined below) except in compliance with all
applicable federal, state and local laws or regulations;
(iii) "Release" (as defined below) of any Hazardous Substances
on the Property which might have a material adverse affect upon the
Property has occurred;
(iv) there are any enforcement, cleanup, removal or other
governmental or regulatory actions being instituted or threatened
against it or the Property; and
(v) any claims have been made by any third party or other
person with respect to the Property relating to damage,
contribution, cost recovery, compensation, loss, or injury resulting
from Hazardous Substances.
For purposes of this Contract, the term "Release" shall have the meaning
given to it under CERCLA, as amended and the term "Hazardous Substances" shall
mean asbestos, petroleum or petroleum byproducts, PCBs, and any other waste,
substance or material now or hereafter defined, listed or designated as
hazardous, toxic, a pollutant, waste, or otherwise harmful to human health or
the environment under any law, statute, regulation or ordinance.
16. CONDEMNATION OR CASUALTY: (a) The Premises and the personal
property shall be and remain until Closing, at the risk of Seller. Until the
date of Closing, Seller covenants that it shall maintain in full force and
effect, insurance covering the Premises for fire and extended perils. In the
event of any insured damage to any of the Premises in excess of the sum of
$200,000 ("Casualty"), the Buyer shall have the right to either take the
proceeds from such insurance and complete the transaction of purchase and sale
contemplated by this Agreement, or to declare this Agreement to be null and void
and have the Deposit returned with interest as may be herein provided. Seller
shall promptly notify Buyer of such Casualty and Buyer shall notify Seller of
Buyer's decision to proceed to Closing within five (5) days of receipt of
Seller's notification. In the event such damage to the Premises is less than
$200,000, or should the Buyer elect to take proceeds from such insurance and
complete the transaction, the Seller shall do all reasonable things as may be
necessary to obtain prompt payment of the proceeds from such insurance policy,
provided, however, Seller shall not be obligated to repair or restore the
Premises. Any cost and/or expense in connection with the foregoing or securing,
repairing and/or restoring the Premises shall be paid from the insurance
proceeds. At Closing, Seller shall pay to Buyer any applicable deductible under
the insurance policy(ies). After transfer of the Premises, the risk of loss
shall be assumed by Buyer.
(b) Without limiting the generality of the provisions of Paragraph
16(a), in the event there shall be a Casualty, and this Agreement is not
cancelled by the Buyer in accordance with the provisions of Paragraph 16(a), and
as a result of which Casualty, insurance proceeds have been paid or are payable
with respect to the value of lost rental income, then in such event said rental
income insurance proceeds shall be apportioned as and when collected as of the
Closing and Seller shall transfer and/or assign to Buyer at the Closing, the
right to receive the portion of such proceeds, if any, to which Buyer is
entitled pursuant to such apportionment.
(c) In the event of any uninsured damage to any of the Premises as
a result of fire or other casualty, the Seller shall have the obligation, to
repair and/or restore the Premises provided the cost thereof does not exceed One
Hundred Fifty Thousand ($150,000.00) Dollars. In the event of any uninsured
damage to any of the Premises as a result of fire or other casualty in excess of
One Hundred Fifty Thousand ($150,000.00) Dollars, the Seller shall have the
right, but not the obligation to repair and/or restore the Premises. In either
event Seller shall serve written notice thereof upon the Buyer within thirty
(30) days following receipt of written notice of such uninsured damage; if such
damage exceeds One Hundred Fifty Thousand ($150,000.00) Dollars and Seller fails
to exercise its right to repair and/or restore the Premises as aforesaid, then
Buyer shall have the right to proceed to Closing subject to the existence of
such uninsured damage or to terminate this Agreement and be repaid the Deposit
by serving written notice of its election upon the Seller within five (5) days
of receipt of Seller's aforesaid notification.
(d) If, at any time, prior to or on the date of Closing, any
material part of the Premises shall be taken or threatened to be taken, in the
exercise of the power of eminent domain by any sovereign, the Seller immediately
shall notify Buyer of such taking and provide Buyer with copies of all documents
relevant thereto. If within five (5) days after receiving written notice from
Seller of such undertaking, Buyer shall notify Seller of Buyer's election to
terminate this Agreement, the Deposit shall be paid over to Buyer. If Buyer
shall fail, within five (5) days of receiving Seller's notice, to notify Seller
of Buyer's election to terminate this Agreement, this Agreement shall remain in
full force and effect, without reduction in the Purchase Price, and on the
Closing, Seller shall transfer and/or assign to Buyer any and all monies and
claims, including, without limitation, Buyer's share of any monies and claims
relating to such taking.
(e) If less than a material part of the Premises is taken by
eminent domain, the obligations of the parties under this Agreement shall not be
impaired and this Agreement shall not be cancelled, and Seller shall, at
Closing, assign to Buyer all of Seller's right, title and interest in and to any
awards in condemnation, or damages of any kind, to which Seller is or may become
entitled, but has not received, by reason of any exercise of the power of
eminent domain with respect to or for the taking of any part of the Premises, or
credit on account of the purchase price by reducing the amount due Seller at
Closing, the amount of any such awards or damages which Seller has theretofore
received.
(f) The provisions contained in this Paragraph 16 are subject to
the rights of Aetna Life Insurance Company, the holder of the existing Deed to
Secure Debt, Assignment of Rents and Security Agreement encumbering the Premises
and the obligations contained therein.
17. OMITTED PRIOR TO EXECUTION
18. DEFAULT BY BUYER: In the event the Buyer fails to comply with or
otherwise defaults in its obligations to close as required under this Agreement,
the Deposit shall be retained by the Seller as liquidated damages; the foregoing
shall be Seller's sole remedy in the event Buyer fails to comply with or
otherwise defaults in any of the provisions of this Agreement. Notwithstanding
anything contained in this Paragraph 18 to the contrary, the indemnifications
contained in Paragraphs 5(b), 5(c) and 22 shall survive termination of this
Agreement and remain in full force and effect.
19. SURVIVAL: Except as otherwise specifically provided in this
Agreement, none of the covenants, conditions, representations, warranties, and
agreements of Seller contained in this Agreement shall survive Closing
hereunder, notwithstanding any legal presumption which may be to the contrary.
20. ASSIGNMENT: This Agreement of Sale shall not be assigned by Buyer
except to an entity affiliated with Buyer.
21. RECORDATION: The parties hereto agree that this Agreement of Sale
shall not be recorded by either party in any public recording office or
elsewhere. Recordation of this Agreement by Buyer shall be deemed to be a
substantial breach by Buyer of this Agreement and, at Seller's option, this
Agreement may thereby be declared to be null and void and Buyer hereby grants to
Seller, without further authorization, its Power of Attorney to do whatever is
necessary to make, execute, acknowledge and deliver any and all proper documents
and/or instruments in order to discharge the said recordation of this Agreement.
22. BROKERAGE: The parties represent and warrant to each other that no
finders, real estate brokers or other persons entitled to claim a fee or
commission have interested either of them in this transaction except The
Apartment Group, 3340 Peachtree Road, N.E., Suite 2180, Atlanta, Georgia 30326,
to which broker Buyer shall pay a brokerage fee or sales commission pursuant to
a separate agreement between Buyer and said broker for effecting this
transaction; otherwise the parties hereto expressly agree to indemnify and save
harmless each other of and from the payment of any and all finders' and brokers'
fees and commissions caused and/or created by the acts or conduct of the other.
The provisions of this paragraph shall survive Closing or the termination of
this Agreement.
23. ESCROW OF DEPOSIT: (a) The Deposit shall be held in escrow by
Sherman, Silverstein, Kohl, Rose & Podolsky, P.A. and Sam E. Thomas &
Associates, Attorneys-at-Law, herein referred to as Escrow Agent, who shall pay
the same over to the Seller at the time of Closing hereunder or shall pay the
same over to the party entitled thereto upon the cancellation or termination of
this Agreement of Sale, and in either event said Escrow Agent shall thereupon be
discharged from all liabilities therefor.
(b) Said Escrow Agent shall be responsible only for the safekeeping
of the Deposit and shall not be responsible for the resolution of any questions
of fact or law. In the event of a dispute arising between the parties, said
Escrow Agent is authorized to deposit the Deposit into Court or hold the same
until said dispute is resolved. The parties hereto understand and agree that in
the event of any such dispute, none of the parties hereto shall assert or allege
that Escrow Agent has a conflict of interest respecting its obligations
hereunder, and Escrow Agent shall be permitted to represent Seller in connection
with any such dispute.
(c) The Escrow Agent shall hold the Deposit in an interest-bearing
account in a federally insured bank or savings institution. The interest earned
on the Deposit being held in escrow shall be paid to the party entitled to the
Deposit pursuant to Paragraph 23(a) above.
24. DEFAULT BY SELLER: (a) In the event of Seller's default hereunder,
Buyer's sole remedies shall be that of specific performance without abatement of
purchase price or termination of this Agreement and return of the Deposit; in no
event shall Buyer be entitled to damages of any kind or nature; provided,
however, Buyer shall be entitled to reimbursement of Buyer's actual out-of-
pocket expenses in performing under this Agreement, not to exceed the sum of
$1,000.00.
(b) With respect to any representations or warranties of Seller contained
in this Agreement, Buyer's obligations hereunder are contingent upon such
representations and/or warranties contained in this Agreement being true and
correct as of the date hereof and where the context indicates, as of the date of
Closing, but recision of this Agreement and return of the Deposit shall be
Buyer's exclusive remedy for any breach of any representation and/or warranty by
Seller.
25. ENTIRE AGREEMENT: This Agreement constitutes and expresses the whole
agreement of the parties hereto with reference to the subject matter hereof and
to any of the matters or things herein provided for or hereinbefore discussed or
mentioned in reference to the subject matter hereof; all prior promises,
undertakings, representations, agreements, understandings and arrangements
relative thereto being herein merged.
26. MODIFICATION: This Agreement may not be modified, altered, amended
or changed except by an instrument in writing duly and validly executed by the
parties hereto.
27. CONSTRUCTION: This Agreement shall be governed by and construed
according to the laws of the State of Georgia.
28. WAIVER: Failure to insist upon strict compliance with any of the
terms, covenants, or conditions hereof shall not be deemed a waiver of such
term, covenant or condition, nor shall any waiver or relinquishment of any right
or power hereunder at any one time or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
29. NOTICES: (a) All notices to be given by either party to the other
shall be in writing, shall be served in person, by Federal Express or other
overnight delivery, or by depositing such notice in the United States mails,
certified, with certification and postage charges prepaid, properly addressed
and directed to the party to receive the same as follows:
As to the Seller:
Clover Appreciation Properties I, L.P.
A Delaware Limited Partnership
ATTN: Steven Zalkind
23 West Park Avenue
Merchantville, New Jersey 08109
Telephone No.: (609) 662-4757
FAX No.: (609) 662-2154
cc: Sherman, Silverstein, Kohl, Rose & Podolsky, P.A.
ATTN: M. Zev Rose, Esquire
4300 Haddonfield Road, Suite 311
Pennsauken, NJ 08109
Telephone No.: (609) 662-0700
FAX No.: (609) 662-0165
As to the Buyer:
Strand Inc.,
A Texas Corporation
ATTN: James A. Johnston, Senior Vice President
Vancouver Centre
650 West Georgia Street, 21st Floor
Vancouver, British Columbia V6B 4N7
Telephone No.: (604) 687-1919 (Ext. #513)
FAX No.: (604) 687-3299
cc: Sam E. Thomas, Esquire
Sam E. Thomas & Associates
1819 Peachtree Street, NE
Suite 526
Atlanta, Georgia 30309
Telephone No.: (404) 350-8337
FAX No.: (404) 350-8626
(b) Either party may designate a different person or entity or
place to or at which notices shall be given by delivering a written notice to
that effect to the other party, which notice shall be effective after the same
is actually received by the other party. In lieu of mailing, the parties may
deliver any such notice, documents or papers to the aforesaid addresses.
30. CAPTIONS: The captions contained herein are not a part of this
Agreement. They are only for the convenience of the parties and do not in any
way modify, amplify, or give full notice of any of the terms, covenants or
conditions of this Agreement.
31. NUMBER AND GENDER: For purposes of this Agreement, the masculine
shall be deemed to include the feminine and the neuter, and the singular shall
be deemed to include the plural, and the plural the singular, as the context may
require.
32. BINDING EFFECT: This Agreement of Sale shall inure to the benefit of
and be binding upon the parties hereto and their respective legal or personal
representatives, heirs, executors, administrators, successors and assigns.
33. LEAD-BASED PAINT DISCLOSURE: Attached hereto and made a part hereof
and marked SCHEDULE F is a completed and executed Disclosure of Information on
Lead-Based Paint and Lead-Based Paint Hazards together with a copy of the
Pamphlet "Protect Your Family From Lead In Your Home" as required by the
Residential Lead-Based Paint Hazard Reduction Act of 1992 and the regulations
promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be signed the day and year first above
written.
SIGNED, SEALED AND DELIVERED CLOVER APPRECIATION PROPERTIES I,
IN THE PRESENCE OF: L.P.,
A Delaware Limited Partnership
BY: CROWN MANAGEMENT CORPORATION,
A New Jersey Corporation,
General Partner
BY:/s/ Steven Zalkind
STEVEN ZALKIND, Vice President
STRAND INC.,
A Texas Corporation
BY:/s/ James A. Johnston
JAMES A. JOHNSTON, Senior
Vice President
REINSTATEMENT OF AND
FIRST AMENDMENT TO
AGREEMENT OF SALE
THIS REINSTATEMENT OF AND FIRST AMENDMENT TO AGREEMENT OF SALE made this
day of December, 1996, by and between CLOVER APPRECIATION PROPERTIES I, L.P., a
Delaware Limited Partnership, of 23 West Park Avenue, Merchantville, New Jersey
08109, hereinafter referred to as Seller, and STRAND CAPITAL INC., a Texas
Corporation, of Vancouver Centre, 650 West Georgia Street, 21st Floor,
Vancouver, British Columbia V6B 4N7, hereinafter referred to as Buyer.
WHEREAS, Seller and Buyer entered into an Agreement of Sale dated November
18, 1996 for the sale from Seller to Buyer of Royal Wood Apartments, situate,
lying and being in the 18th District of DeKalb County, Georgia; and,
WHEREAS, by letter dated December 13, 1996, Buyer terminated the Agreement
of Sale; and,
WHEREAS, Buyer and Seller desire to reinstate the Agreement of Sale and to
amend herein certain terms of the Agreement of Sale,
NOW, THEREFORE, the Seller and the Buyer intending to be legally bound
hereby, do covenant and agree with each other as follows:
1. The Agreement of Sale is hereby reinstated and agreed to be in full
force and effect.
2. Paragraph 2 of the Agreement of Sale is hereby amended to read as
follows:
"2. PURCHASE PRICE: The total purchase price which the Buyer
agrees to pay to the Seller and which the Seller agrees to accept for the
Premises is the sum of SEVEN MILLION FOUR HUNDRED FORTY-THREE THOUSAND
($7,443,000.00) DOLLARS, which purchase price shall be paid by Buyer to
Seller as follows:
(a) (i) The sum of ONE HUNDRED THOUSAND ($100,000.00)
DOLLARS (the "Initial Deposit") simultaneously with the execution and
delivery of this Agreement and the further sum of FIFTY THOUSAND
($50,000.00) DOLLARS (the "Second Deposit") on or before February 14,
1997. The Initial Deposit shall be hereinafter referred to as the
"Deposit" and the Second Deposit, when made, shall be included within the
definition of the "Deposit". The Deposit shall be deposited with the
Escrow Agent, as hereinafter defined, to be held subject to the terms and
conditions hereinafter set forth, and shall be treated as payment on
account of the purchase price if Closing is made for the Premises.
(ii) In the event Closing is extended as hereinafter
provided, then the further sum of TWO HUNDRED THOUSAND ($200,000.00)
DOLLARS (the "Additional Deposit") on or before February 18, 1997. The
Additional Deposit shall be included within the definition of the
"Deposit". The Additional Deposit shall be deposited with the Escrow
Agent, as hereinafter defined, to be held subject to the terms and
conditions hereinafter set forth, and shall be treated as payment on
account of the purchase price if Closing is made for the Premises.
(b) At the time of Closing, as hereinafter provided, the
further sum of SEVEN MILLION TWO HUNDRED NINETY-THREE THOUSAND
($7,293,000.00) DOLLARS on account of the purchase price, subject to
appropriate pro-rations and credits provided for in this Agreement, at
Seller's option, in cash, by certified check or by federal funds wire
transfer; or if Closing is extended as hereinafter provided, at the time
of the extended date of Closing, as hereinafter provided, the further sum
of SEVEN MILLION NINETY-THREE THOUSAND ($7,093,000.00) DOLLARS on account
of the purchase price, subject to appropriate pro-rations and credits
provided for in this Agreement, at Seller's option, in cash, by certified
check or by federal funds wire transfer."
3. Paragraph 3 of the Agreement of Sale is hereby amended to read as
follows:
"3. CLOSING: Closing shall take place on or before February 28, 1997
("Closing"), at 10:00 o'clock A.M. at the offices of Sherman, Silverstein,
Kohl, Rose & Podolsky, P.A., 4300 Haddonfield Road, Suite 311, Pennsauken,
New Jersey 08109. Buyer shall have the right to extend the date of
Closing to on or before March 28, 1997 by serving written notice thereof
upon the Seller on or before February 18, 1997 and simultaneously
therewith delivering to the Escrow Agent the Additional Deposit required
by Paragraph 2(a)(ii). The said time for Closing and the said extended
time for Closing as well as all other terms set forth in this Agreement
are hereby agreed to be of the essence of this Agreement. Tender of an
executed Deed is hereby waived.
4. Paragraph 5(c) of the Agreement of Sale is hereby amended to read as
follows:
"(c) In addition to and not in limitation of the rights and
privileges granted to the Buyer hereinabove in Paragraph 5(b), for a
period from the date hereof to January 15, 1997, Buyer is granted
the right to conduct a physical inspection (including a lead-based
paint and/or lead-based paint hazard inspection and/or risk
assessment) of the Premises and all personal property located
thereon in such a manner as not to inconvenience the tenants and to
review all leases, books and records pertaining to the Premises. At
any time during said inspection period, Buyer shall have the right
to cancel and terminate this Agreement, in its sole discretion, by
serving written notice thereof upon Seller on or before the
expiration of said inspection period; if Buyer elects to terminate
this Agreement as permitted herein, then this Agreement shall be
cancelled and terminated and the Deposit shall be returned to Buyer
and neither party hereunder shall have any further liability or
obligation to the other hereunder except with respect to the
indemnifications contained in this Paragraph 5(c), Paragraph 5(b)
and Paragraph 22; if Buyer fails to exercise its right to terminate
this Agreement as permitted herein, then said right shall
automatically lapse, terminate and become null and void. Buyer
shall indemnify and save harmless the Seller from any liability,
loss, cost or expense (including reasonable attorney's fees) arising
from or in connection with such inspection and/or entry upon the
Premises; said indemnification shall survive Closing and/or
termination of this Agreement."
5. Paragraph 8(b) of the Agreement of Sale is hereby deleted.
6. The heading of Paragraph 9 of the Agreement of Sale is hereby amended
to read "CONTINGENCIES:", the existing Paragraph 9 shall be designated as
subparagraph "(a)" and Paragraph 9 is hereby amended to include the following
additional subparagraph (b):
"(b) This Agreement is contingent upon Buyer obtaining, at
its sole cost and expense, a written commitment for a Fannie Mae DUS
First Mortgage Loan in the sum of SEVEN MILLION ($7,000,000.00)
DOLLARS, representing eighty (80%) percent of the Purchase Price
($5,950,000.00) and eighty (80%) percent of $1,350,000.00, the cost
of Buyer's proposed capital improvements ($1,050,000.00), at the
then prevailing rate of interest (hereinafter referred to as the
"Commitment").
The Buyer, at its sole cost and expense, shall promptly apply
for the Commitment, diligently pursue same and use reasonable
efforts to obtain same. The Buyer shall supply all necessary
information and pay all fees required by the lender in connection
with applying for and obtaining said Commitment. Immediately upon
obtaining the Commitment, Buyer shall deliver a copy thereof to the
Seller.
In the event Buyer is unable to obtain the Commitment on or
before February 14, 1997, Buyer shall serve written notice thereof
upon Seller by said date and this Agreement shall be cancelled and
terminated, and the Deposit shall be returned to the Buyer and
neither party shall have any further liability or obligation to the
other hereunder except with respect to the indemnifications
contained in Paragraphs 5(b), 5(c) and 22."
7. Except as specifically amended herein, the Agreement of Sale shall be
and remain in full force and effect in accordance with its original terms.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Reinstatement of and First Amendment to Agreement of
Sale to be signed and sealed the day and year first above written.
SIGNED, SEALED AND DELIVERED CLOVER APPRECIATION PROPERTIES I,
IN THE PRESENCE OF: L.P.,
A Delaware Limited Partnership
BY: CROWN MANAGEMENT CORPORATION,
A New Jersey Corporation,
General Partner
BY:/s/Steven Zalkind
STEVEN ZALKIND, Vice President
STRAND CAPITAL INC.,
A Texas Corporation
BY:/s/ James A. Johnston
JAMES A. JOHNSTON, Senior
Vice President
