SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to ________________
Commission File No. 0-18531
Development Partners III (A Massachusetts Limited Partnership)
(formerly Berry and Boyle Development Partners III)
(Exact name of registrant as specified in its charter)
------
Massachusetts 04-3017036
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(State or other jurisdiction of (I.R.S.
Employer incorporation or organization)
Identification No.)
5110 Langdale Way, Colorado Springs, CO 80906
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(Address of principal executive offices) (Zip Code)
(719) 527-0544
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 and 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting securities held by non-affiliates: Not
applicable, since securities are not actively traded on any exchange.
Documents incorporated by reference: None
The Exhibit Index is located on page F-17.
<PAGE>
PART I
ITEM 1. BUSINESS
This form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
Development Partners III (A Massachusetts Limited Partnership) (the
"Partnership"), formerly Berry and Boyle Development Partners III, was formed on
July 11, 1988. The General Partners are Stephen B. Boyle and GP L'Auberge
Communities, L. P., a California Limited Partnership, formerly Berry and Boyle
Management.
The primary business of the Partnership is to invest in, operate, and ultimately
dispose of a 154-unit residential property known as Casabella through its
interest in Casabella Associates, a general partnership consisting of the
Partnership and two other affiliated partnerships ("Associates"). The
Partnership's acquisition is described below in Item 2. as well as in Note 5 of
the Notes to Consolidated Financial Statements included in this report and
incorporated herein by reference.
As further discussed in Item 2 below and in Note 9 of the Notes to the
Consolidated Financial Statements, after taking into consideration such factors
as the price to be realized, the possible risks of continued ownership and the
anticipated advantages to be gained for the partners, the General Partners
determined during 1997 that it would be in the best interests of the Partnership
and the partners to dissolve the Partnership and liquidate its assets in 1998
(the "Dissolution"). Under the provisions of the Partnership's Partnership
Agreement, the Dissolution of the Partnership requires the consent of a majority
in interest of the limited partners. In March 1998, the General Partners
requested the consent of the limited partners to the Dissolution pursuant to a
Consent Solicitation Statement first mailed to the limited partners on or about
March 18, 1998. Such consents will be solicited until April 15, 1998, which date
may be extended by the General Partners until not later than June 1, 1998.
Casabella is under contract to be sold to a purchaser unaffiliated with the
General Partners. Net proceeds from the sale will not be reinvested by
Associates or the Partnership, but will be distributed to the partners so that
the Partnership will, in effect, be self-liquidating.
On-site management of Casabella is currently provided by an affiliate of the
General Partners. The terms of such property management services between
Associates and the property manager are embodied in a written management
agreement. Property management fees equal 4% of the gross revenues from the
property. The property manager is responsible for on-site operations and
maintenance, generation and collection of rental income, and payment of
operating expenses.
The difference between rental income and expenses related to operations,
including items such as local taxes and assessments, utilities, insurance
premiums, maintenance, repairs and improvements (and reserves therefor),
bookkeeping and payroll expenses, legal and accounting fees, property management
fees and other expenses incurred, will constitute the property's operating cash
flow. The Partnership's internal administrative expenses will be paid out of the
Partnership's share of such cash flow from the property and from interest income
which the Partnership earns on its short-term investments.
The success of the Partnership depends upon factors which are difficult to
predict and many of which are beyond the control of the Partnership. Such
factors include, among other things, general economic and real estate market
conditions, both on a national basis and in the area where the Partnership's
investment is located, competitive factors, the availability and cost of
borrowed funds, real estate tax rates, federal and state income tax laws,
operating expenses (including maintenance and insurance), energy costs,
government regulations, and potential liability under and changes in
environmental and other laws, as well as the successful management of the
property.
The Partnership's investment in real estate is also subject to certain
additional risks including, but not limited to, (i) competition from existing
and future projects held by other owners in the area of the Partnership's
property, (ii) possible reduction in rental income due to an inability to
maintain high occupancy levels, (iii) adverse changes in mortgage interest
rates, (iv) possible adverse changes in general economic conditions and adverse
local conditions, such as competitive overbuilding, or a decrease in employment
or adverse changes in real estate zoning laws, (v) the possible future adoption
of rent control legislation which would not permit the full amount of increased
costs to be passed on to tenants in the form of rent increases, and (vi) other
circumstances over which the Partnership may have little or no control.
The Partnership's investment is also subject to competition from similar types
of properties in the locality in which the Partnership's real property
investment is located, and the Partnership will compete with other real property
owners and developers in the rental, lease and sale of such property.
Furthermore, the General Partners of the Partnership are affiliated with other
partnerships owning similar properties in the vicinity in which the
Partnership's property is located.
The Partnership considers itself to be engaged in only one industry segment,
real estate investment.
ITEM 2. PROPERTIES
On September 28, 1990, the Partnership purchased an approximate 53% interest in
Associates. Under the terms of the purchase, the Partnership contributed
$2,500,000 to Associates. In addition to its contribution to Associates, the
Partnership incurred $280,930 of acquisition expenses as of December 31, 1997.
Associates owns and operates a 154-unit multifamily rental property located in
Scottsdale, Arizona, known as Casabella. The ownership was formerly structured
as a Joint Venture of which Associates owned a majority interest. With regard to
the termination of the Casabella Joint Venture see Note 5 of Notes to
Consolidated Financial Statements.
As of January 27, 1998, the property was 94% occupied, compared to 99%
approximately one year ago. At December 31, 1997 and 1996, the market rents for
the various unit types were as follows:
Unit Type ............................. 1997 1996
- ---------------------------------------------- ------ ------
One bedroom two bath w/den ................... $ 950 $ 820
Two bedroom two bath ......................... 1,160 950
Two bedroom two bath w/den ................... 1,225 1,185
As noted above and discussed in Note 9 of the Notes to the Consolidated
Financial Statements, Casabella is under contract to be sold to a purchaser
unaffiliated with the General Partners. The following table sets forth certain
information regarding the pending purchase and sale agreement ("Purchase
Agreement").
Purchase Agreement
Projected
Mortgage
Property Name and Location Indebtedness Purchase Closing
at 6/01/98 Price Purchaser Date(1)
- ---------------------------
Casabella, $6,713,465 $11,700,000 JPR Capital LLC (3)
Scottsdale, AZ(2)
- ---------------------------
(1) Subject to the consent of the limited partners to the Dissolution.
(2) The Partnership owns an approximate 53% interest in Associates, a
general partnership which holds fee simple title to the property. The
Partnership's share of the net proceeds from the sale of Casabella is
estimated to be approximately $2,568,000. The Partnership's partners in
Associates are two public limited partnerships of which the General
Partners or their affiliates are the general partners. Accordingly, the
sale of Casabella is also conditioned upon the consent of the limited
partners of the affiliated partnerships to the dissolution of such
partnerships. Associates' former joint venture partner in the joint
venture which previously held title to the property retained an
economic interest in the property's cash flow and sales proceeds under
certain circumstances. The former joint venture partner will not be
entitled to receive any portion of the proceeds of the sale of
Casabella.
(3) Approximately 90 days after the limited partner consents described in
note (2) above are received, but not later than June 15, 1998.
The Purchase Agreement provides that the purchaser has a period of 45 days to
conduct its "due diligence" review of the property. This review includes, but is
not limited to, a physical inspection and examination of title and environmental
matters. During the due diligence period, the purchaser has the customary right
to withdraw its offer for any reason. Because the sale of Casabella is subject
to the purchaser's due diligence review of the property, there can be no
assurance that the proposed sale described above will actually occur.
Alternatively, as is customary in similar real estate transactions, if, during
the due diligence period, the purchaser identifies conditions which are
unacceptable to it, the purchaser may seek a purchase price adjustment, which
the General Partners would consider and negotiate as they deem appropriate. The
Purchase Agreement provides that in the event that the purchaser defaults by
failing to close following the end of the due diligence period, the Partnership
will be entitled to retain the purchaser's deposit as liquidated damages.
ITEM 3. LEGAL PROCEEDINGS
There is no material pending legal proceedings to which the Partnership or
Associates is a party, or of which the property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1997.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The transfer of Units is subject to certain limitations contained in the
Partnership Agreement. There is no public market for the Units and it is not
anticipated that any such public market will develop.
The number of holders of Units as of December 31, 1997 was 289.
Distributions are made to the Partners on a quarterly basis based upon Net Cash
from Operations, as calculated under Section 10 of the Partnership Agreement.
Total cash distributions to the Limited Partners for 1997 and 1996 were paid as
follows:
Quarter Ended ........................ Payment Date Amount
- -------------------------------------- ----------------- -------
March 31, 1996 ....................... May 15, 1996 $33,305
June 30, 1996 ........................ August 15, 1996 $33,305
September 30, 1996 ................... November 15, 1996 $33,305
December 31, 1996 .................... February 28, 1997 $33,304
March 31, 1997 ....................... $ 0
June 30, 1997 ........................ $ 0
September 30, 1997 ................... $ 0
December 31, 1997 .................... $ 0
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Partnership and consolidated
subsidiaries has been derived from consolidated financial statements audited by
Coopers & Lybrand, LLP, whose reports for the periods ended December 31, 1997,
1996 and 1995 are included elsewhere in the Form 10K and should be read in
conjunction with the full consolidated financial statements of the Partnership
including the Notes thereto.
<TABLE>
Year Ended
-------------------------------------------------------------------------
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Rental income $1,507,910 $1,361,622 $1,579,782 $1,544,449 $1,462,062
Net loss ($114,586) ($229,558) ($27,479) ($25,059) ($52,046)
Net loss allocated to Partners:
Limited Partners - Per Unit - basic
and diluted:
Aggregate 7,401 Units ($15.33) ($30.71) ($3.68) ($3.35) ($6.96)
General Partners ($1,146) ($2,296) ($275) ($251) ($520)
Cash distributions to Partners:
Limited Partners:
Weighted average per Unit $4.50 $18.00 $19.10 $16.40 $7.00
General Partners $2,896 $11,584 $12,115 $10,554 $4,505
Total assets $9,819,172 $10,192,774 $10,882,925 $11,229,315 $11,632,967
Long term obligations $6,766,437 $6,885,673 $6,994,549 $7,093,963 $7,184,739
Long term obligations become due in 1998. The Partnership intends to refinance
this note or sell the property prior to the due date.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning the
General Partners' expectations regarding future financial performance and future
events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
Liquidity; Capital Resources
The Partnership admitted 289 investors who purchased a total of 7,401 Units
aggregating $3,700,500. These offering proceeds, net of organizational and
offering costs of $555,075, provided $3,145,425 of net proceeds to be used for
the purchase of income-producing residential properties, including related fees
and expenses, and working capital reserves. The Partnership expended (1)
$2,780,930 to acquire its interest in Casabella Associates and to pay
acquisition expenses, including an acquisition fee to the General Partners and
(2) $52,768 to cover costs associated with discontinued acquisitions. The
remaining net proceeds of $311,727 were used to establish working capital
reserves sufficient to meet the needs of the Partnership, including
contributions that may be required at the joint venture level, as determined by
the General Partners.
In addition to the proceeds generated from the public offering, the Partnership
has utilized external sources of financing at the joint venture level to
purchase Casabella. The Partnership Agreement limits the aggregate mortgage
indebtedness which may be incurred in connection with the acquisition of
Partnership properties to 80% of the purchase price of such properties.
The working capital reserves of the Partnership consist of cash and cash
equivalents and short-term investments. These reserves provide the Partnership
with the necessary liquidity to carry on its day-to-day operations and to make
necessary contributions to Casabella. In 1997, the aggregate net decrease in
working capital reserves was $278,001. This decrease resulted primarily from
cash provided by operations of $30,017, offset by fixed asset purchases of
$126,687, principal payments on mortgage notes payable of $119,236,
distributions to partners of $36,200, and $25,895 of loan refinancing costs.
In 1996, the aggregate net increase in working capital reserves was $164,565.
This increase resulted primarily from cash provided by operations of $54,292,
and cash received on the maturities of short-term investments of $730,660 offset
by fixed asset purchases of $156,015, distributions to the minority partners
with respect to their interest in Associates of $220,331, distributions to
partners of $133,218, deposits of $1,950 and $108,873 of principal payments on
mortgage notes payable.
With regard to a balloon payment on the existing first mortgage debt on
Casabella (see Note 6 of the Notes to Consolidated Financial Statements) which
is due and payable in 1998, the General Partners anticipate repaying such loan
utilizing a portion of the sales proceeds from the pending sale of the property.
See Item 2 above. In the event that the pending sale is not consummated, the
General Partners will seek to renegotiate the mortgage note with its existing
lender or seek new sources of financing for the property. To date, the General
Partners have neither sought to extend or renegotiate the existing mortgage debt
nor have they sought new financing for the property and there can be no
assurance that they would be successful in doing so. The General Partners
believe that existing cash flow from the property will be sufficient to support
a level of borrowing that is at least equal to amount outstanding as of December
31, 1997. If the general economic climate for real estate in the location of
Casabella were to deteriorate resulting in an increase in interest rates for
mortgage financing or a reduction in the availability of real estate mortgage
financing or a decline in the market values of real estate it may affect the
Partnership's ability to complete a refinancing. See also projected 1998
operating results.
In the event that Casabella is not sold pursuant to the Purchase Agreement, the
Partnership would continue to operate the property until a substitute sales
could be negotiated and consummated. The Partnership's ability to generate cash
adequate to meet its needs is dependent primarily on the successful operations
of Casabella. Such ability may also be dependent upon the future availability of
bank borrowings, and upon the future refinancing and sale of the Partnership's
real estate investments and the collection of any mortgage receivable which may
result from such sale. These sources of liquidity will be used by the
Partnership for payment of expenses related to real estate operations, debt
service and professional and management fees and expenses. Net Cash From
Operations and Net Proceeds, if any, as defined in the Partnership Agreement,
will then be available for distribution to the Partners in accordance with
Section 10 of the Partnership Agreement. The General Partners believe that the
current working capital reserves together with projected cash flows for 1998 are
adequate to meet the Partnership's operating cash needs in the coming year if
the Partnership is required to continue to own and operate its property assuming
the existing mortgage debt can be extended, renegotiated or refinanced.
Results of Operations
The Partnership's operating results for the year ended December 31, 1997
consisted of interest earned on short-term investments, general and
administrative expenses, amortization expense and its share of the income (loss)
from Casabella Associates and Casabella. A summary of these operating results
(unaudited) appears below:
<TABLE>
Casabella Partnership Consolidated
Casabella Associates Level Totals
<S> <C> <C> <C> <C>
Revenue $1,507,910 $8,651 $9,715 $1,526,276
Expenses:
General and administrative - 6,109 61,457 67,566
Operations 747,479 - - 747,479
Depreciation and amortization 255,643 - - 255,643
Interest 625,459 - - 625,459
------------ --------------- --------------- ---------------
1,628,581 6,109 61,457 1,696,147
------------ --------------- --------------- ---------------
Net Income (loss) before minority interest (120,671) 2,542 (51,742) (169,871)
Minority Interests' share of
net (income) loss - - 55,285 55,285
------------ --------------- --------------- ---------------
Net income (loss) ($120,671) $2,542 $3,543 ($114,586)
============ =============== =============== ===============
The Partnership's operating results for the year ended December 31, 1996
consisted of interest earned on short-term investments, general and
administrative expenses, amortization expense, and its share of the income
(loss) from Casabella Associates and Casabella Joint Venture. A summary of these
operating results (unaudited) appears below:
Casabella Partnership Consolidated
Casabella Associates Level Totals
<S> <C> <C> <C> <C>
Revenue $1,362,677 $29,171 $10,822 $1,402,670
Expenses:
General and administrative 383 5,840 141,151 147,374
Operating expenses 656,435 9,443 3,000 668,878
Depreciation and amortization 266,730 - - 266,730
Interest 633,360 - - 633,360
------------- -------------- ---------------- ---------------
1,556,908 15,283 144,151 1,716,342
------------- -------------- ---------------- ---------------
Net income (loss) before minority interest (194,231) 13,888 (133,329) (313,672)
Minority Interests' share of
net loss - - 84,114 84,114
------------- -------------- ---------------- ---------------
Net income (loss) ($194,231) $13,888 ($49,215) ($229,558)
============= ============== ================ ===============
The Partnership's operating results for the year ended December 31, 1995
consisted of interest earned on short-term investments, general and
administrative expenses, amortization expense and its share of the income (loss)
from Casabella Associates and Casabella Joint Venture. A summary of these
operating results (unaudited) appears below:
Casabella Partnership Consolidated
Casabella Associates Level Totals
<S> <C> <C> <C> <C>
Revenue $1,581,184 $43,131 $17,883 $1,642,198
Expenses:
General and administrative 7,200 3,000 62,895 73,095
Operating expenses 561,516 - - 561,516
Depreciation and amortization 375,234 - - 375,234
Interest 642,857 - - 642,857
-------------- --------------- -------------- ---------------
1,586,807 3,000 62,895 1,652,702
-------------- --------------- -------------- ---------------
Net income (loss) before minority interest (5,623) 40,131 (45,012) (10,504)
Minority Interests' share of
net income - - (16,975) (16,975)
-------------- --------------- -------------- ---------------
Net income (loss) ($5,623) $40,131 ($61,987) ($27,479)
============== =============== ============== ===============
</TABLE>
Comparison of 1997 and 1996 Operating Results
Total revenue increased by $123,606 or 9%, primarily due to an increase of
rental income as a result of higher occupancy levels throughout the year.
Operating expenses increased by $78,601 or 12% primarily due to one-time costs
of preparing Casabella Apartments for disposition, including an increase of
$62,779 in repairs and maintenance and an increase of $8,245 in advertising and
promotion expense. General and administrative expenses decreased by $79,808 or
5% due in part to the one-time costs associated with the Evans Withycombe
termination fee in 1996 and the related legal costs, as well as the
re-stabilization of costs associated with the Partnership administrative,
financial and investor services functions following the office relocation to
Colorado Springs, Colorado.
Comparison of 1996 and 1995 Operating Results
In accordance with its disposition strategy, the Partnership incurred one-time
costs associated with the Evans Withycombe termination ($38,345) and the related
legal costs. (Refer to Note 5 of the Consolidated Financial Statement.) In
addition, the Partnership incurred one-time costs associated with its property
interior and exterior refurbishment program, the change in on-site management
following the Evans Withycombe termination, the outsourcing of much of the
Partnership's administration work to an administrative agent and the relocation
of the remaining administration, financial and investor services functions to a
more cost efficient location in Colorado Springs, Colorado. Consequently,
competitive pressures and disposition-related activities led to a decrease in
total revenue of $239,528 or 15%, rental operating expenses (including
advertising, promotion, apartment locator and concession costs) to increase by
$107,362 or 19% over the prior year and total general and administrative
expenses of the Partnership increased $74,279 or 102% over the prior year. Fixed
asset purchases increased $156,015, consisting of such items as carpet,
appliances, equipment for fitness center facilities, and remodeling features.
However, distributions to partners remained the same as 1995.
<PAGE>
Projected 1998 Operating Results
As further discussed in Item 2 above and in Note 9 of the Notes to the
Consolidated Financial Statements, the Partnersip's only investment property,
Casabella, is under contract to be sold to a purchaser unaffiliated with the
General Partners. Under the terms of the Purchase Agreement, it is anticipated
that the closing would occur during the second quarter of 1998. If the sale does
occur as anticipated, the Partnership and Associates will likely be liquidated
in 1998. Although there can be no assurance the Partnership will dispose of
Casabella during 1998 pursuant to the Purchase Agreement or otherwise, if the
Dissolution is approved by the Limited Partners, the Partnership will continue
to seek to dispose of its property. In the event that the Partnership disposes
of Casabella during 1998, operating results of the Partnership would vary
significantly from those achieved in prior periods.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership is a limited partnership and, as such, has no executive officers
or directors. The General Partners of the Partnership are Stephen B. Boyle and
GP L'Auberge Communities, L.P., a California limited partnership, of which
L'Auberge Communities Inc. (formerly known as Berry and Boyle Inc.)
("L'Auberge") is the general partner.
Stephen B. Boyle
Stephen B. Boyle, age 57, is President, Executive Officer and Director of
L'Auberge and a general partner and co-founder of LP L'Auberge Communities, a
California limited partnership (formerly Berry and Boyle), a limited partnership
formed in 1983 to provide funds to various affiliated general partners of real
estate limited partnerships, one of which is GP L'Auberge Communities, L.P.
GP L'Auberge Communities, L.P.
GP L'Auberge Communities, L.P. was formed in 1983 for the purpose of acting as a
general partner in partnerships formed to invest directly or indirectly in real
property. L'Auberge is the sole general partner of GP L'Auberge Communities,
L.P. The following sets forth certain biographical information with respect to
the executive officers and directors of L'Auberge other than Stephen B. Boyle
who is discussed above. There are no familial relationships between or among any
officer or director and any other officer or director.
Name Position
------------------------
Stephen B. Boyle President, Executive Officer and Director
------------------------
Earl C. Robertson Executive Vice President and Chief Financial Officer
------------------------
Donna Popke Vice President and Secretary
Earl C. Robertson, age 50, has been Executive Vice President of L'Auberge since
April 1995 and its Chief Financial Officer of L'Auberge since May 1996. Mr.
Robertson joined L'Auberge in April 1995 as Executive Vice President. Prior to
joining L'Auberge, Mr. Robertson had over 20 years experience as a senior
development officer, partner and consultant in several prominent real estate
development companies, including Potomac Investment Associates, a developer of
planned golf course communities nationwide, where he was employed from 1989 to
June 1993. He also served as a consultant to Potomac Sports Properties from July
1993 to April 1995. Mr. Robertson was also a key member of the management team
that developed the nationally acclaimed Inn at the Market in Seattle.
Donna Popke, age 38, has been Vice President of L'Auberge since November 1995.
Ms. Popke joined L'Auberge in June 1994 as Accounting Manager. Prior to joining
L'Auberge, Ms. Popke was Accounting Manager for David R. Sellon & Company, a
Colorado Springs land development company, from August 1989 to June 1994 and for
Intermec of the Rockies from September 1985 to July 1989.
ITEM 11. EXECUTIVE COMPENSATION
None of the General Partners or any of their officers or directors received any
compensation from the Partnership. See Item 13 below with respect to a
description of certain transactions of the General Partners and their affiliates
with the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 21, 1998, no person of record owned or was known by the General
Partners to own beneficially more than 5% of the Partnership's outstanding
Units. Neither of the General Partners nor any of their directors and officers
owns Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1997, the Partnership paid or accrued
remuneration to the General Partners or their affiliates as set forth below. In
addition to the information provided herein, certain transactions are described
in Notes 7 and 8 in the Notes to Consolidated Financial Statements appearing in
Appendix A, which are included in this report and are incorporated herein by
reference thereto.
Net Cash from 1997 Operations to be distributed
to the General Partners $2,896
Allocation of Loss to the General Partners ($1,146)
Property management fees paid to an affiliate of
the General Partners $59,244
Reimbursements to General Partners $18,760
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1,2 See Page F-2
3 See Exhibit Index contained herein
(b) Reports on Form 8-K
The Partnership has not filed, and was not required to
file, any reports on Form 8-K during the last quarter of
1997
(c) See Exhibit Index contained herein
(d) See Page F-2.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P., A California Limited Partnership,
General Partner
By: L'Auberge Communities, Inc., its General Partner
By: ____/s/ Earl C. Robertson________________
Earl C. Robertson, Executive Vice President and
Chief Financial Officer
Date: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
___/s/ Stephen B. Boyle _____ Director, President and March 26, 1998
STEPHEN B. BOYLE Principal Executive
Officer of L'Auberge
Communities, Inc.
___/s/ Earl C. Robertson _ Executive Vice President and March 26, 1998
EARL C. ROBERTSON Principal Financial Officer of
L'Auberge Communities, Inc.
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------
APPENDIX A
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
---------
CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the years ended December 31, 1997 and 1996
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants ....................................... F-3
Consolidated Balance Sheets at December 31, 1997 and 1996 ............... F-4
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995 ........................................ F-5
Consolidated Statements of Partners' Equity (Deficit) for the years ended
December 31, 1997, 1996 and 1995 ........................................ F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 .................................. F-7 -- F-8
Notes to Consolidated Financial Statements ....................... F-9 -- F-16
All Schedules are omitted as they are not applicable, not required, or the
information is provided in the financial statements or the notes thereto.
<PAGE>
Report of Independent Accountants
To the Partners of
Development Partners III
(A Massachusetts Limited Partnership):
We have audited the accompanying consolidated balance sheets of
Development Partners III (A Massachusetts Limited Partnership) and subsidiary as
of December 31, 1997 and 1996, the related consolidated statements of
operations, partners' equity (deficit), and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the General Partners of the Partnership. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners of the Partnership, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Development Partners III (A Massachusetts Limited Partnership) and subsidiary as
of December 31, 1997 and 1996, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997 in conformity with generally accepted accounting principles.
As discussed in Note 9, the General Partners of the Partnership have
entered into a sales agreement to sell the property of the Partnership. If
closing of this sale were to occur, any proceeds from sale will be allocated to
the Partners in accordance with the terms of the Partnership Agreement and the
Partnership will likely be liquidated.
___/s/__Coopers & Lybrand, L.L.P.
Coopers & Lybrand, L.L.P.
Denver, Colorado
February 27, 1998
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
<TABLE>
1997 1996
---------- ------------
ASSETS
Assets held for sale/Property, at cost (Notes 3, 9)
<S> <C> <C>
Land ............................................ $ 2,976,101 $ 2,976,101
Buildings and improvements ...................... 7,648,060 7,648,060
Equipment, furnishings and fixtures ............. 1,122,596 995,909
------------ ------------
------------ ------------
11,746,757 11,620,070
Less accumulated depreciation ................... (2,228,967) (1,996,504)
------------ ------------
9,517,790 9,623,566
Cash and cash equivalents ......................... 253,777 531,778
Accounts receivable ............................... 5,907 --
Real estate tax escrow and prepaid expenses ....... 25,821 24,268
Deposits .......................................... 1,950 1,950
Deferred expenses, net of accumulated
amortization of $123,914 and $100,918 ........... 13,927 11,212
------------ ------------
Total assets ............................. $ 9,819,172 $ 10,192,774
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Mortgage note payable ............................. 6,766,437 $ 6,885,673
Accounts payable and accrued expenses ............. 163,023 208,425
Due to affiliates (Note 8) ........................ 5,370 3,012
Tenant security deposits .......................... 23,090 24,834
Rents received in advance ......................... 3,507
------------ ------------
Total liabilities ........................ 6,957,920 7,125,451
Minority Interest ................................. 1,196,756 1,252,041
General Partners' deficit ......................... (51,227) (47,185)
Limited Partners' equity .......................... 1,715,723 1,862,467
------------ ------------
Total liabilities and partners' ........... $ 9,819,172 $ 10,192,774
equity
============ ============
</TABLE>
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1997, 1996 and 1995
-------------
<TABLE>
1997 1996 1995
----------- ----------- -----------
Revenue:
<S> <C> <C> <C>
Rental income ....................... $ 1,507,910 $ 1,361,622 $ 1,579,782
Interest Income ..................... 18,366 41,048 62,416
----------- ----------- -----------
----------- ----------- -----------
$ 1,526,276 $ 1,402,670 $ 1,642,198
Expenses:
Operating Expenses .................. 747,479 668,878 561,516
Interest ............................ 625,459 633,360 642,857
Depreciation and amortization ....... 255,643 266,730 375,234
General and administrative .......... 67,566 147,374 73,095
----------- ----------- -----------
----------- ----------- -----------
1,696,147 1,716,342 1,652,702
----------- ----------- -----------
----------- ----------- -----------
Net loss before minority interest ...... (169,871) (313,672) (10,504)
Minority interests' equity in
subsidiary net (income) loss ......... 55,285 84,114 (16,975)
----------- ----------- -----------
----------- ----------- -----------
Net loss ............................... ($ 114,586) ($ 229,558) ($ 27,479)
=========== =========== ===========
=========== =========== ===========
Net loss allocated to:
General Partners ..................... ($ 1,146) ($ 2,296) ($ 275)
Basic and diluted per unit of Investor
Limited
Partner interest:
7,401 Units issued .............. ($ 15.33) ($ 30.71) ($ 3.68)
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the years ended December 31, 1997, 1996 and 1995
-------------
Investor Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1994 (20,915) 2,391,510 2,370,595
Cash distributions (12,115) (141,359) (153,474)
Net loss (275) (27,204) (27,479)
--------------- -------------- ---------------
Balance at December 31, 1995 (33,305) 2,222,947 2,189,642
Cash distributions (11,584) (133,218) (144,802)
Net loss (2,296) (227,262) (229,558)
--------------- -------------- ---------------
Balance at December 31, 1996 (47,185) 1,862,467 1,815,282
Cash distributions (2,896) (33,304) (36,200)
Net loss (1,146) (113,440) (114,586)
--------------- -------------- ---------------
Balance at December 31, 1997 ($51,227) $1,715,723 $1,664,496
=============== ============== ===============
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Interest received $18,366 $56,920 $59,849
Cash received from rents 1,502,659 1,356,103 1,579,281
Administrative expenses (73,155) (144,439) (77,117)
Rental operations expenses (791,941) (580,518) (549,753)
Interest paid (625,912) (633,774) (643,235)
-------------- -------------- --------------
Net cash provided by operating activities 30,017 54,292 369,025
Cash flows from investing activities:
Capital Improvements (126,687) (156,015) (47,771)
Cash received from short-term investments - 730,660 272,724
-------------- -------------- --------------
Net cash provided (used) by investing activities (126,687) 574,645 224,953
Cash flows from financing activities:
Distributions to partners (36,200) (133,218) (153,474)
Payments on mortgage note payable (119,236) (108,873) (99,414)
Distributions paid to minority interest - (220,331) (86,112)
Cash paid for deposits - (1,950) -
Cash paid for loan refinancing (25,895) - -
-------------- -------------- --------------
Net cash provided (used) by financing activities (181,331) (464,372) (339,000)
-------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents (278,001) 164,565 254,978
Cash and cash equivalents at beginning of year 531,778 367,213 112,235
-------------- -------------- --------------
Cash and cash equivalents at end of year $253,777 $531,778 $367,213
=============== ============== ===============
Noncash financing activities:
Accrual of distribution to Partners $0 $11,584 $0
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996 and 1995
-------------
Reconciliation of net loss to net cash provided by operating activities:
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net loss ($114,586) ($229,558) ($27,479)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 255,643 266,730 375,234
Minority interests' equity in subsidiary (income) loss (55,285) (84,114) 16,975
Change in assets and liabilities net of effects from investing and financing
activities:
(Increase) decrease in accounts and interest receivable (5,907) 15,871 (2,567)
(Increase) decrease in real estate tax escrow and (1,553) (583) 3,748
prepaid expenses
(Decrease) increase in accounts
payable and accrued expenses (45,402) 93,771 10,168
(Decrease) increase in due to affiliates 2,358 (2,306) (6,553)
(Decrease) increase in rents received in advance (3,507) 3,507 (101)
Decrease in tenant security deposits (1,744) (9,026) (400)
--------------- -------------- ---------------
Net cash provided by operating activities $30,017 $54,292 $369,025
=============== ============== ===============
</TABLE>
<PAGE>
1. Organization of Partnership
Development Partners III (A Massachusetts Limited Partnership) (the
"Partnership"), formerly Berry and Boyle Development Partners III, was formed on
July 11, 1988. GP L'Auberge Communities, L.P., a California Limited Partnership
(formerly Berry and Boyle Management) and Stephen B. Boyle are the General
Partners. In September, 1995, with the consent of Limited Partners holding a
majority of the outstanding Units, as well as the consent of the mortgage
lenders for the Partnership's three properties, Richard G. Berry resigned as a
general partner of the Partnership. Except under certain limited circumstances
upon termination of the Partnership, the General Partners are not required to
make any additional capital contributions. The General Partners or their
affiliates will receive various fees for services and reimbursement for various
organizational, administrative and selling costs incurred on behalf of the
Partnership.
On January 13, 1989 the Securities and Exchange Commission declared the
Partnership's public offering (the "Prospectus") of up to 80,000 units of
Limited Partnership Interests at $500 per unit (the "Units") effective and the
marketing and sale of the Units commenced shortly thereafter. The initial
closing of the offering took place on December 28, 1989 at which time the
holders of 3,048 Units were admitted into the Partnership. The Partnership
continued to admit subscribers monthly thereafter until December 27, 1991, its
last closing date. The Partnership terminated the offering on January 13, 1992
having admitted 289 investors acquiring 7,401 Units totaling $3,700,500.
The Partnership will continue until December 31, 2018, unless earlier terminated
by the sale of all, or substantially all, of the assets of the Partnership, or
as otherwise provided in the Partnership Agreement (See Note 9.)
2. Significant Accounting Policies
A. Basis of Presentation
The consolidated financial statements include the accounts of the
Partnership and its subsidiary Casabella Associates. All intercompany
accounts and transactions have been eliminated in consolidation. The
Partnership follows the accrual basis of accounting. Refer to Note 5
regarding the termination of the Casabella Joint Venture.
B. Cash and Cash Equivalents
The Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. The
carrying value of cash and cash equivalents approximates fair value. It
is the Partnership's policy to invest cash in income-producing
temporary cash investments. The Partnership mitigates any potential
risk from such concentration of credit by placing investments with high
quality financial institutions.
C. Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
2. Significant Accounting Policies, continued
D. Depreciation
Depreciation is provided for by the use of the straight-line method
over the estimated useful lives as follows:
Buildings and improvements 39-40 years
Equipment, furnishings and fixtures 5-15 years
E. Deferred Expenses
Costs of obtaining or extending the mortgage on Casabella are being
amortized over the mortgage term using the straight-line method, which
approximates the effective interest method. Any unamortized costs
remaining at the date of refinancing are expensed in the year of
refinancing.
F. Income Taxes
The Partnership is not liable for Federal or state income taxes because
Partnership income or loss is allocated to the Partners for income tax
purposes. If the Partnership's tax returns are examined by the Internal
Revenue Service or state taxing authority and such an examination
results in a change in Partnership taxable income (loss), such change
will be reported to the Partners.
G. Rental Income
Leases require the payment of rent in advance, however, rental income
is recorded as earned.
H. Reclassification
Certain items in the financial statements for the years ended December
31, 1996 and 1995 have been reclassified to conform to the 1997
presentation.
I. Long-Lived Assets
In 1996, the Partnership adopted Statement of Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed of." SFAS 121 requires that
long-lived assets be reviewed for impairment whenever events or changes
in circumstances indicate that their carrying value may not be
recoverable. The adoption of SFAS 121 had no effect on reported results
in 1996. As further discussed in Note 9, for the year ended December
31, 1997 the Partnership recorded its property at the lower of carrying
value or net realizable value and has included these amounts as Assets
Held for Sale.
For the years ended December 31, 1997 and 1996, permanent impairment
conditions did not exist at the Partnership's property.
2. Significant Accounting Policies, continued
J. New Accounting Standard
In 1997, the Partnership adopted Statement of Financial Accounting
Standards No. 128 (SFAS 128), "Earnings Per Share." This accounting
standard specifies new computation, presentation, and disclosure
requirements for earnings per share to be applied retroactively. Among
other things, SFAS 128 requires presentation of basic and diluted
earnings per share on the face of the income statement. The computation
of basic and diluted earnings per share was based on income available
to the Limited Partners divided by the weighted average number of units
outstanding during the period. The Partnership has no dilutive type
securities. The adoption of SFAS 128 had no effect on the per unit
results previously reported.
<PAGE>
<TABLE>
3. Assets held for sale:
Assets held for sale consisted of the following at December 31, 1997:
Initial Cost Costs Capitalized Amount at Which Carried
to Subsequent to At Close of Period
Partnership Acquisition
------------------------------------ -------------------- -------------------------------- ------------- -----
Buildings Equipment, Buildings Equip, Buildings Equip.,
Property and Furnishings and Furnishings and Furnishings Accum.
Description Land Improv. & Fixtures Land Improv. & Fixtures Land Improv. & Fixtures Deprec. Total
-----------
----------------------------------- ----------------------------- ------------------------------------ ------
Casabella a 154-unit
residential rental
complex
located in
Scottsdale,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Arizona $2,976,101 $7,639,160 $782,784 - $8,900 $339,812 $2,976,101 $7,648,060 $1,122,596 ($2,228,967) $9,517,790
----------------------------------- ----- ----------------- ------------------------------------- --------- ------
$2,976,101 $7,639,160 $782,784 - $8,900 $339,812 $2,976,101 $7,648,060 $1,122,596 ($2,228,967) $9,517,790
=================================== ========================================================== =========== ========
Casabella is encumbered by a nonrecourse mortgage note payable (see Note 6). As
of December 31, 1997 all assets are held for sale (see Note 9).
The changes in total real estate assets for the years ended The change in accumulated depreciation for the years ended
December 31, 1997, 1996 and 1996 December 31, 1997, 1996 and 1995 are
as follows: as follows:
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of $11,620,070 $11,464,054 $11,416,283 Balance, beginning of $1,996,504 $1,752,197 $1,399,386
year year
Additions during
period:
Improvements 126,687 156,016 47,771 Depreciation for the 232,463 244,307 352,811
period
------------------------------------------- -----------------------------------
Balance at end of year $11,746,757 $11,620,070 $11,464,054 Balance at end of year $2,228,967 $1,996,504 $1,752,197
=========================================== ==================================
</TABLE>
4. Cash and cash equivalents
Cash and cash equivalents at December 31, 1997 and 1996 consisted of the
following:
1997 1996
-------- --------
Cash on hand .......... $167,044 $213,574
Money market accounts . 86,733 --
Certificates of Deposit ______- 318,204
--------
$253,777 $531,778
======== ========
5. Joint Venture and Property Acquisitions
On September 28, 1990, the Partnership acquired a majority interest in Casabella
Associates, a general partnership comprised of the Partnership, Development
Partners (A Massachusetts Limited Partnership) ("DPI"), formerly Berry and Boyle
Development Partners, and Development Partners II (A Massachusetts Limited
Partnership) ("DPII"), formerly Berry and Boyle Development Partners II.
Casabella Associates was formed to acquire a majority interest in the Casabella
Joint Venture which owns Casabella, a 154-unit residential property located in
Scottsdale, Arizona. Since the Partnership owns a majority interest in Casabella
Associates, the accounts and operations of Casabella Associates (including the
accounts and operations relating to Casabella Associates' majority interest in
the Casabella Joint Venture) have been consolidated into the Partnership.
The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a
Phoenix based residential development, construction and management firm. EWI
also developed the property known as Casabella.
At December 31, 1997, the Partnership, DPI and DPII had contributed $2,500,000,
$400,000 and $1,800,000, respectively, to Casabella Associates. Of the total
contributions, $3,845,154 was used to purchase the majority interest in the
Casabella Joint Venture referred to in the second preceding paragraph and
$500,000 was used to fund an escrow account maintained by the permanent lender.
In addition to the $4,700,000 of cash contributions referred to above, the
Partnership, DPI and DPII collectively incurred $280,930 of acquisition costs
which have been recorded as additional capital contributions to Casabella
Associates.
The Partnership has invested in a single property located in Scottsdale,
Arizona. The success of the Partnership will depend upon factors which are
difficult to predict including general economic and real estate market
conditions, both on a national basis and in the area where the Partnership's
investment is located.
JANUARY 1, 1996 THROUGH MAY 13, 1996:
Cash distributions and allocations of income and loss from Casabella Associates
are governed by the partnership agreement and are generally based on the ratio
of capital contributed by each of the joint venture partners.
Net cash from operations of the Casabella Joint Venture, to the extent
available, shall be distributed not less often than quarterly with respect to
each fiscal year, as follows:
(A) First, to Associates, an amount equal to a 10.6% per annum
(computed on a simple noncompounded daily basis from the date
of the closing) of their capital investment;
(B) Second, the balance 70% to Associates and 30% to the property
developer.
5. Joint Venture and Property Acquisitions, continued
All losses from operations and depreciation for the Casabella Joint Venture were
allocated 99.5% to Associates and 0.5% to the property developer.
All profits from operations of the Casabella Joint Venture were allocated in
accordance with distributions of net cash from operations; provided, however,
that if any fiscal year has no distributable net cash from operations, profits
will be allocated 99.5% to Associates and 0.5% to the property developer.
In the case of certain capital transactions and distributions as defined in the
Casabella joint venture agreement, the allocation of related profits, losses and
cash distributions, if any, would be different than as described above and would
be affected by the relative balance in the individual partners' capital
accounts.
MAY 14, 1996 THROUGH DECEMBER 31, 1997:
On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI")
which separated the interests of EWI and the Partnership, thus affording the
Partnership greater flexibility in the operation and disposition of Casabella.
The Partnership, DPI, and DPII paid $71,009 to EWI ($38,345 of which was the
Partnership's portion) and delivered certain mutual releases. EWI (i)
relinquished its contract to manage Casabella and its option to exercise its
rights to first refusal with regard to the sale of the property and (ii)
assigned all of its interest in the Casabella Joint Venture to the Partnership,
DPII and DPIII (while preserving the economic interest of the venture in these
Joint Ventures), which resulted in the dissolution of the Casabella Joint
Venture. EWI may still share in the cash flow distributions or the proceeds from
sale of the properties if certain performance levels are met.
6. Mortgage Note Payable
All of the property owned by the Partnership is pledged as collateral for the
nonrecourse mortgage note payable pertaining to Casabella in the original
principal amount of $7,320,000. The original maturity date for this note was
July 15, 1997. On July 10, 1997 the lender extended the terms of the mortgage
note for a period of one year. Under the modification agreement, monthly
principal and interest payments of $61,887 and a fixed interest rate of 9.125%
remain unchanged. The terms of the agreement provide for a pre-payment penalty
of 0.5% of the outstanding loan amount in the event the note is paid prior to 60
days before the note becomes due. The balance of the note will be due on July
15, 1998.
As discussed in Note 9, the Casabella Associates entered into a Sales Agreement
for Casabella. The estimated sales price is sufficient to cover the mortgage
loan balance. However, there can be no assurance that the sale of the property
will occur.
In the event the sales do not occur, the Partnership will seek new sources of
financing for the property on a long-term basis or seek to renegotiate the
mortgage note with its existing lender. If the general economic climate for real
estate in these respective locations were to deteriorate resulting in an
increase in interest rates for mortgage financing or a reduction in the
availability of real estate mortgage financing or a decline in the market values
of real estate it may affect the Partnership's ability to complete the
refinancing or sell the property.
6. Mortgage Note Payable, continued
Accrued interest included in accrued expenses on the Balance Sheets of the
Consolidated Financial Statements at December 31, 1997 and 1996, consisted of
$25,727 and $26,180, respectively.
The principal balance of the mortgage note payable appearing on the consolidated
balance sheets approximates the fair value of such note at December 31, 1997 and
1996.
7. Partners' Equity
Under the terms of the Partnership Agreement, as amended, profits are allocated
92% to the Limited Partners and 8% to the General Partners; losses are allocated
99% to the Limited Partners and 1% to the General Partners.
Cash distributions to the partners are governed by the Partnership Agreement and
are made, to the extent available, 92% to the Limited Partners and 8% to the
General Partners.
In the case of certain events as defined in the Partnership Agreement, such as
the sale of an investment property or an interest in a joint venture
partnership, the allocation of the related profits, losses, and distributions,
if any, would be different than described above.
8. Related Party Transactions
L'Auberge Communities, Inc. is a General Partner of L'Auberge Communities, which
owns a 99% interest in GP L'Auberge Communities, L.P. (formerly Berry and Boyle
Management). Due to affiliates at December 31, 1997 and 1996 consisted of
$5,370 and $3,012, respectively, of reimbursable costs payable to L'Auberge
Communities, Inc., formerly Berry and Boyle Inc.
In 1997, 1996 and 1995, general and administrative expenses included $18,760,
$35,441, and $29,304, respectively, of salary reimbursements paid to the General
Partners for certain administrative and accounting personnel who performed
services for the Partnership.
The officers and principal shareholders of Evans Withycombe, Inc., the developer
of Casabella, together hold a two and one half percent cumulative profit or
partnership voting interest in LP L'Auberge Communities, formerly Berry and
Boyle.
During the years ended December 31, 1996 and 1995, property management fees of
$37,735 and $78,663, respectively, were paid to Evans Withycombe, Inc. This
represents 5% of the rental revenues. During the years ended December 31, 1997
and 1996, property management fees of $59,244 and $6,612, respectively, were
paid to Residential Services-L'Auberge, an affiliate of the General Partner.
This represents 4% of the rental revenues.
<PAGE>
9. Asset Held for Sale
During the fourth quarter of 1997, the General Partners of the Partnership
committed to a plan to dispose of Casabella in Scottsdale, Arizona. On February
4, 1998, Casabella Associates entered into a Sales Agreement (the "Agreement")
to sell Casabella to an unaffiliated third party. The selling price for
Casabella is approximately $11,700,000. The Agreement is subject to completion
of customary due diligence to the satisfaction of the purchaser, and the
purchaser obtaining a financing commitment for the purchase of the property on
commercially reasonable terms and conditions. The Partnership expects to
consummate this sale in 1998. Under certain conditions, the sale is contingent
upon the approval of the Limited Partners.
As it is the intent of the General Partners to pursue the sale of this Property,
the Partnership has recorded the assets at the lower of carrying value or net
realizable value and has included these amounts as Assets held for Sale on the
Consolidated Balance Sheets at December 31, 1997. In accordance with SFAS 121,
the Partnership has stopped depreciating these assets effective January 1, 1998.
If closing of the sale were to occur, any proceeds from the sale will be
allocated to the Partners in accordance with the terms of the Partnership
Agreement and the Partnership will likely be liquidated.
<PAGE>
F-17
EXHIBIT INDEX
Exhibit
Number
(4)(a)(1) Amended and Restated Certificate and Agreement of Limited
Partnership (included as
an exhibit to the Partnership's Form 10-K for the year ended
December 31, 1989, and incorporated herein by reference).
(4)(a)(2) Fifteenth Amendment to the Amended and Restated Certificate and
Agreement of Limited partnership dated January 13, 1991.
(4)(b) Subscription Agreement included as Exhibit B to Prospectus
contained in Amendment No. 2 to the Partnership's Registration
Statement No. 33-23240 filed and declared effective January 13,
1989, and incorporated herein by reference.
(10)(a) Agreement of Joint Venture of Casabella Associates dated September
27, 1990 (filed as Exhibit (10)(f) to the Form 10-K of Berry and
Boyle Development Partners for the year ended December 31, 1990,
and incorporated herein by reference).
(10)(b) Documents pertaining to the $7,300,000 permanent loan for
Casabella Joint Venture (filed as an exhibit to the Form 10-K of
Berry and Boyle Development Partners for the year ended December
31, 1991, and incorporated herein by reference).
(10)(c) Property Management Agreement between Casabella Associates and
L'Auberge Communities Inc. dated November 1, 1996.
(10)(d) Agreement regarding Casabella Joint Venture
(10)(e) Purchase and Sale Agreement and Escrow Instructions between
Casabella Associates and JPR Capital LLC related to the sale of
Casabella dated February 4, 1998.
(27) Financial Data Schedule
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
[Casabella]
BETWEEN
CASABELLA ASSOCIATES
an Arizona joint venture partnership,
as Seller,
AND
JPR CAPITAL, L.L.C.,
an Arizona limited liability company,
as Purchaser
<PAGE>
TABLE OF CONTENTS
Paragraph/Topic Page
Recitals 1
Section 1. Definitions..................................................... 2
Section 2. Purchase and Sale............................................... 4
Section 3. Purchase Price.................................................. 5
Section 4. Closing......................................................... 6
Section 5. Conditions to Closing............................................ 8
Section 6. Title and Survey................................................ 12
Section 7. Representations and Warranties.................................. 14
Section 8. Purchaser's Acceptance of Property As-Is........................ 18
Section 9. Seller's Covenants.............................................. 19
Section 10. Prorations..................................................... 20
Section 11. Transfer Taxes; Title Charges;
Other Closing Costs and Escrow Cancellation................ 23
Section 12. Risk of Loss................................................... 24
Section 13. Condemnation................................................... 25
Section 14. Default........................................................ 26
Section 15. Notices........................................................ 27
Section 16. Time of Essence................................................ 28
Section 17. Termination of Agreement....................................... 28
Section 18. Governing Law; Jurisdiction; Venue............................. 29
Section 19. Counterparts and Facsimile Signatures.......................... 29
Section 20. Captions....................................................... 29
Section 21. Assignability.................................................. 29
Section 22. Binding Effect................................................. 30
Section 23. Modifications; Waiver.......................................... 30
Section 24. Entire Agreement............................................... 30
Section 25. Partial Invalidity; Further Assurances......................... 30
Section 26. Survival....................................................... 31
Section 27. No Third-Party Rights.......................................... 31
Section 28. Attorneys' Fees................................................ 31
Section 29. Broker......................................................... 31
Section 30. Opening of Escrow.............................................. 32
Section 31. Exhibits....................................................... 32
Section 32. Intentionally deleted.......................................... 32
Section 33. Form of Title Policy........................................... 32
Section 34. No Partnership or Other Liability.............................. 33
Section 35. General Provisions Regarding Title Company..................... 33
LIST OF EXHIBITS
.........A -- Legal Description
.........B -- Diagram of the Property and Improvements
.........C -- Schedule of Personal Property
.........D -- Form of General Warranty Deed
.........E -- Form of Bill of Sale
.........F -- Form of Assignment of Leases
.........G -- Assignment of Tradename and Trademark Rights
.........H -- Form of Assignment of Intangible Property
.........I -- Form of Tenant Letters
.........J -- Certificate of Rent Roll
.........K -- Form of Non-Foreign Affidavit
.........L -- Form of Affidavit of Value
.........M -- Form of Property Management Agreement
<PAGE>
LA980570.051
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
[Casabella]
This Purchase and Sale Agreement and Escrow Instructions (Agreement) is
entered into as of February __, 1998 (Effective Date), by and between CASABELLA
ASSOCIATES, an Arizona joint venture partnership (Seller), and JPR CAPITAL,
L.L.C., an Arizona limited liability company (Purchaser), with reference to the
following:
Recitals
A........Seller is the owner of:
(1)......the land (Real Property) in Scottsdale (the "City"), Arizona,
and located at 10101 North Arabian Trail, Scottsdale, Arizona . The Real
Property is more particularly described in Exhibit A and generally depicted on
Exhibit B attached hereto and incorporated herein by this reference and is
commonly known as Casabella Apartments;
(2)......all structures, buildings, improvements and fixtures on the
Real Property (collectively, Improvements), including without limitation an
apartment complex consisting of 154 units (the Units) situated in seventeen (17)
buildings (the Complex) together with all equipment, appliances and amenities
(including without limitation a clubhouse and other recreational facilities)
used in connection with the Complex;
(3)......certain personal property on the Real Property or the
Improvements or personal property used primarily in connection with the
operation and maintenance of the Real Property or the Improvements, more
particularly described in Exhibit C attached hereto and incorporated herein by
this reference (Personal Property);
(4)......all of Seller's interest in all leases and other agreements,
if any, to occupy all or any portion on the Units, as amended from time to time
(such leases and agreements being sometimes collectively referred to in this
Agreement as Leases);
(5)......all of Seller's interest, if any, in mineral, water and
irrigation rights, if any, running with or otherwise pertaining to the Real
Property; and,
(6)......all intangible property used in connection with the Real
Property, the Improvements or the Personal Property, including but not limited
to the trade name Casabella and related trademarks and associated good will
(collectively the Tradename) used in connection with the Real Property or the
Improvements (but not any tradename utilizing the term "L'Auberge" except as
otherwise provided in the Property Management Agreement (hereinafter defined));
plans and specifications in Seller's or Property Manager's possession, custody
or control that were prepared in connection with the construction of the
Improvements; all hereditaments, privileges, tenements and appurtenances
pertaining to the Real Property; all Seller's rights to open or proposed
highways, streets, roads, avenues, alleys, easements, strips, gores and
rights-of-way in any way affecting the Real Property; all currently effective
and transferable licenses, permits and warranties for the Real Property, the
Improvements and the Personal Property; and all written contracts and guarantees
running in favor of Seller in effect at Closing as approved by Purchaser that
relate in any way to the Property (Contracts) (collectively, Intangible
Property).
The Real Property, the Improvements, the Personal Property, the Leases
and the Intangible Property are sometimes collectively referred to in this
Agreement as the Property.
B........Purchaser desires to purchase the Property from Seller, and
Seller desires to sell the Property to Purchaser, on the terms and conditions in
this Agreement.
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties agree as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall be defined in
Section 1:
Agreement is defined in the preamble.
Approved Exceptions is defined in Section 6(b).
Assignee Purchaser is defined in Section 21(b).
Assignment is defined in Section 21(b).
Business Day means a calendar day on which banks in Phoenix, Arizona
shall be open to transact business (other than by automated teller or
similar equipment).
City is defined in Recital A(1).
Closing is defined in Section 4(a).
Closing Date is defined in Section 4(a).
Code is defined in Section 5(a)(viii).
Complex is defined in Section 5(c).
Consent is defined in Section 5.
Contracts is defined in Recital A(6).
Court is defined in Section 5(a)(i).
Disapproval Notice is defined in Section 6(b).
Disapproved Exceptions is defined in Section 6(b).
Due Diligence Period is defined in Section 5(a).
Effective Date is defined in the preamble.
Earnest Money is defined in Section 3(a).
Escrow is defined in Section 4(a).
Final Plans is defined in Section 5(b).
Improvements is defined in Recital A(2).
Intangible Property is defined in Recital A(6).
Leases is defined in Recital A(4).
Loss Threshold is defined in Section 12(a).
Offer Period is defined in Section 17.
Opening of Escrow is defined in Section 30.
Personal Property is defined in Recital A(3).
Preliminary Report is defined in Section 6(a).
Property is defined in Recital A.
Property Management Agreement is defined in Section 4(d).
Property Manager is defined in Section 4(d).
Purchase Price is defined in Section 3.
Purchase Transaction is defined in Section 2.
Purchaser is defined in the preamble.
Purchaser's Event of Default is defined in Section 14(a).
Real Property is defined in Recital A(1).
Rent Concession is defined in Section 10(a)(iv).
Seller is defined in the preamble.
Seller's actual knowledge is defined in Section 7(a).
Seller's Broker is defined in Section 29.
Seller's Disclosure Documentation is defined in Section 5(a)(ii).
Seller's Event of Default is defined in Section 14(b).
Studies is defined in Section 5(a)(i).
Survey is defined in Section 6(a).
Survival Items is defined in Section 5(a).
Tenant Letters is defined in Section 4(c)(vi).
Tenants is defined in Section 4(b).
Title Company is defined in Section 3.
Title Policy is defined in Section 6(b).
Tradename is defined in Recital A(6).
Unit is defined in Recital A.
Section 2. Purchase and Sale.
In consideration of the mutual covenants contained in this Agreement,
Seller agrees to sell the Property to Purchaser, and Purchaser agrees to
purchase the Property from Seller, on the terms and conditions hereinafter set
forth (the Purchase Transaction).
Section 3. Purchase Price.
The purchase price for the Property shall be Eleven Million Seven
Hundred Thousand and No/100 Dollars ($11,700,000.00) (Purchase Price). The
Purchase Price shall be payable as follows:
(a) The sum of One Hundred Seventeen Thousand and No/100 Dollars
($117,000.00) shall be tendered to Seller in the form of Purchaser's check made
payable to First American Title Insurance Company (Title Company) or Purchaser's
wire transfer of immediately available funds to Title Company within two (2)
Business Days after delivery of triplicate fully executed counterpart originals
of this Agreement to Title Company, as earnest money (Earnest Money). Purchaser
shall concurrently with its deposit of the Earnest Money furnish its Federal
Taxpayer Identification No. to Title Company. The Earnest Money shall be
invested by Title Company in a federally insured, daily interest-bearing account
as directed by Purchaser, and all interest shall become part of the Earnest
Money. As long as the conditions precedent to Purchaser's obligation to close in
Section 5 and elsewhere in this Agreement and in Section 5(b) shall have been
satisfied or otherwise waived, in writing, by Purchaser and Seller does not
default in the performance of its obligations under this Agreement, the Earnest
Money shall be applied against the Purchase Price at the Closing or, if a
Purchaser's Event of Default exists under this Agreement, immediately disbursed
to Seller pursuant to Section 14 as Seller's agreed and total liquidated
damages, it being acknowledged and agreed by Purchaser and Seller that it would
be extremely difficult or impossible to determine Seller's exact damages. If a
Seller's Event of Default exists under this Agreement and Purchaser elects to
terminate this Agreement, the Earnest Money together with accrued interest
thereon shall be immediately released to Purchaser.
(b) On or before the Closing Date, Purchaser shall deposit with Title
Company, in immediately available funds in addition to the Earnest Money, the
sum necessary to make the total consideration equal to the Purchase Price, plus
or minus prorations, in accordance with this Agreement, which funds are to be
held in escrow by Title Company until cancellation of this Agreement as provided
in this Agreement or paid to Seller at the Closing.
Section 4. Closing.
(a) The purchase and sale of the Property (Closing) shall be
consummated through an escrow established by the Title Company (Escrow) that
shall close at Title Company's office or, at Purchaser's option, at the office
of Purchaser's counsel in Phoenix, Arizona, by 5:00 p.m. MST on the date
(Closing Date) that is forty-five (45) days after the expiration or earlier
termination of the Due Diligence Period (as defined below), but in no event
later than June 15, 1998, unless such date is extended pursuant to this
Agreement or otherwise by written agreement signed by the parties.
(b) Prior to or at the Closing, Purchaser shall pay the Purchase Price
into the Escrow, Purchaser and Seller shall execute and deliver into Escrow all
necessary documents and Seller shall deliver marketable fee title and possession
of the Property to Purchaser free and clear of all tenants or occupants other
than the tenants of the Units under the Leases (Tenants).
(c) On or before the Closing Date, Seller shall deliver into Escrow the
following documents and things:
(i) a Special Warranty Deed, in recordable form and
properly executed and acknowledged on behalf of Seller, conveying to
Purchaser the Real Property and the Improvements in fee simple, in
substantially the form attached hereto as Exhibit D and incorporated
herein by this reference;
(ii) a Bill of Sale executed by Seller transferring to
Purchaser the Personal Property, with a warranty of title only. No
warranty of condition or fitness for any use or purpose will be made.
The Bill of Sale shall be substantially in the form attached hereto as
Exhibit E and incorporated herein by this reference;
(iii) a duly executed Assignment of Leases that assigns and
transfers to Purchaser, as of the Closing, all of Seller's interests
under the Leases and that contains an assumption by Purchaser of
Seller's obligations under the Leases, including without limitation
obligations relating to security deposits. The Assignment of Leases
shall be substantially in the form attached hereto as Exhibit F and
incorporated herein by this reference;
(iv) a duly executed Assignment of Tradename and Trademark
Rights that assigns and transfers all of Seller's interest in the
Tradename. The Assignment of Tradename shall be substantially in the
form attached hereto as Exhibit G and incorporated by reference;
(v) a duly executed and acknowledged Assignment of
Intangible Property that assigns and transfers to Purchaser as of the
Closing all of Seller's interests to the Intangible Property and the
Contracts substantially in the form attached hereto as Exhibit H and
incorporated herein by this reference;
(vi) a form of letter to Tenants (Tenant Letters) that
instruct the Tenants, after the Closing Date, to pay rent to Purchaser
and to recognize Purchaser as the new lessor under their respective
Leases substantially in the form attached hereto as Exhibit I attached
hereto and incorporated by reference;
(vii) originals or, if originals are not available, complete
copies, of all Leases in Seller's or Property Manager's possession,
together with a Certificate of Rent Roll substantially in the form of
Exhibit J attached hereto and incorporated herein by this reference
dated as of the Closing Date;
(viii) Seller's affidavit that Seller is not a foreign person
within the meaning of Section 1445(f)(3) of the Internal Revenue Code
of 1986, as amended (the Code) substantially in the form attached
hereto as Exhibit K and incorporated by reference as prescribed by
Treas. Reg. 1.1445-2(b). If Seller does not timely furnish the
Non-Foreign Affidavit, Purchaser may withhold (or direct Title Company
to withhold) from the Purchase Price an amount equal to the amount
required to be so withheld pursuant to Section 1445(a) of the Code, and
such withheld funds shall be deposited with the Internal Revenue
Service as required by Section 1445(a) and the regulations promulgated
thereunder. The amount withheld, if any, shall nevertheless be deemed
to be part of the Purchase Price paid to Seller;
(ix) a duly executed and acknowledged Affidavit of Value
substantially in the form attached hereto as Exhibit L and incorporated
by reference; and
(x) termination notices that terminate, as of the Closing
Date, all of the management services and leasing contracts for the
Improvements as selected by Purchaser in accordance with this
Agreement; and
(xi) delivery by Seller to Purchaser at Closing of the
security deposits under the Leases that have not been applied in the
form of a credit in favor of Purchaser against the Purchase Price.
If the foregoing conditions have not been satisfied by the specified date or
Closing, as the case may be, then Purchaser shall have the right, at Purchaser's
sole option, exercisable by written notice to Seller and Title Company, either
(i) to cancel this Agreement, whereupon the Earnest Money plus interest shall be
paid immediately by Title Company to Purchaser and, except for any Survival
Items (as defined below), neither Purchaser nor Seller shall have any further
liability or obligation under this Agreement, or (ii) to seek specific
performance under Section 14(c) if the failure to satisfy such conditions
constitutes a Seller's Event of Default.
(d) At Closing, Purchaser shall enter into a Property Management
Agreement (the Property Management Agreement) substantially in the form attached
hereto as Exhibit M and incorporated herein by this reference, pursuant to which
Residential Services LLC, an Arizona limited liability company (Property
Manager) affiliated with Seller, shall render management services to the
Property for the benefit of Purchaser on the terms and conditions set forth
therein.
Section 5. Conditions to Closing.
In addition to the other conditions to the completion of the Purchase
Transaction, Seller and Purchaser agree that the Closing is subject to the
satisfaction, approval or waiver, in writing, by Purchaser, in Purchaser's sole
discretion, of the following conditions contained in this Section 5:
(a) Purchaser's due diligence conditions shall be the following:
(i) the conduct and approval of any inspection, investigation
and approval, deemed necessary by Purchaser in Purchaser's sole
discretion and at Purchaser's sole cost and expense, of any physical,
structural, geological and environmental or other condition of the
Property (including without limitation the availability of access,
utility services, zoning, environmental risks, engineering and soil
conditions) deemed necessary by Purchaser to determine the feasibility
of acquiring, owning and operating the Property (collectively, the
"Studies"). The Studies shall include, but not be limited to,
Purchaser's right to: (i) review and approve the Survey (as defined
below), the Leases and the Contracts; and, (ii) meet and confer with
the Property Manager. For the purpose of conducting physical
inspections by Purchaser or Purchaser's lender, Seller agrees to
provide full and complete access to the Property at reasonable times,
upon not less than two (2) Business Days' notice to Seller or to
Property Manager, up to and including the Closing Date. Purchaser shall
conduct such inspections in a nondisruptive manner as to the Tenants
and in compliance with any applicable legal requirements and shall in
no event conduct destructive testing of the Real Property and the
Improvements without Seller's prior written consent, such consent not
to be unreasonably withheld. Except for the negligence, breach of
contract or willful misconduct by Seller or Seller's agents or
employees, Purchaser agrees to defend, indemnify and hold Seller,
Seller's agents and employees, and the Property harmless from and
against any losses, costs, damages, claims, or liabilities, including
but not limited to mechanics' and materialmen's liens, personal injury
or death, property damage and attorneys' fees and costs, arising from
or otherwise relating to Purchaser's entry upon the Property for the
aforementioned purposes under this subsection. Except for Seller's or
Seller's agents' or employees' negligence, breach of contract or
non-feasance, Purchaser shall immediately repair any damage caused by
such inspection and shall restore the Real Property and the
Improvements to their condition prior to such testing. Purchaser's
indemnity and hold harmless obligations under this Section shall
survive the termination or expiration of this Agreement or the Closing,
as applicable, for a period of twelve (12) months after which
Purchaser's obligations shall automatically terminate unless prior to
the end of the twelve-month period, Seller shall have brought suit
against Purchaser in the Maricopa County, Arizona Superior Court or the
United States District Court for the District of Arizona located in
Phoenix, Arizona (either, the Court) to enforce Purchaser's indemnity
and hold harmless obligations.
(ii) subject to Seller's delivery obligations under Section
5(b), inspection and approval, in Purchaser's sole discretion, of all
documents relating to the Property that are in Seller's or Property
Manager's possession or under Seller's or Property Manager's custody or
control (collectively, Seller's Disclosure Documentation), all of which
shall be made available at all reasonable times after Opening of Escrow
to Purchaser at the Property for Purchaser's inspection and copying,
all at Purchaser's sole cost and expense. The information made
available to Purchaser by Seller under this subsection shall not be
released or otherwise disclosed by Purchaser to any third parties other
than to Purchaser's attorneys, accountants or in-house property
evaluation personnel or to any prospective partner of, or lender to,
Purchaser in connection with the Purchase Transaction. If the Purchase
Transaction does not close for any reason, Purchaser and Purchaser's
agents, representatives, attorneys and accountants shall refrain from
disclosing such information to any third party whatsoever. Except for
the negligence, breach of contract or willful misconduct of Seller or
Seller's agents or employees, Purchaser shall defend, indemnify and
hold Seller harmless (which indemnification shall survive the
termination or expiration of this Agreement) for all loss, damage or
expense incurred by Seller because of any unauthorized disclosure of
such information by Purchaser or Purchaser's attorneys, accountants or
in-house property evaluation personnel; provided, however, that
Purchaser's indemnity and hold harmless obligations shall only exist
for a period of twelve (12) months after the effective date of such
termination or expiration after which Purchaser's obligations shall
automatically terminate unless prior to the end of the twelve-month
period, Seller shall have brought suit against Purchaser in the Court
to enforce Purchaser's indemnity and hold harmless obligations.
During the period commencing with the Opening of Escrow and ending at 5:00 p.m.
(MST) on the earlier of the forty-fifth (45th) day after the satisfaction or
waiver by Purchaser and Seller of the condition requiring procurement of the
Consent (as defined below in this Section 5) and April 20, 1998 (Due Diligence
Period), Purchaser shall have the right to examine and investigate to
Purchaser's full and complete satisfaction the physical, financial and legal
status of the Property, the Seller's Disclosure Documentation and all other
aspects of the Property which Purchaser elects to investigate in its sole
discretion. In the event Purchaser notifies Seller in writing within the Due
Diligence Period that Purchaser does not elect to acquire the Property for any
reason in Purchase's sole and absolute discretion, this Agreement shall
terminate at the end of the final day of the Due Diligence Period. Upon
termination of this Agreement, the Earnest Money, together with accrued interest
thereon, shall be immediately refunded to Purchaser by Title Company, both
Seller and Purchaser shall be released from all further obligations under this
Agreement (excluding the indemnity obligations of Purchaser under Section 5(a))
and neither Seller nor Purchaser shall be subject to a claim by the other for
damages of any kind, except for Purchaser's indemnity and hold harmless
agreement provided in Section 5(a) of this Agreement and in other indemnity
provisions of this Agreement, if any (a Survival Item). In the event Purchaser
fails to notify Seller in writing within the Due Diligence Period that one or
more of such conditions shall not have been satisfied or waived by Purchaser,
each of such conditions shall conclusively be deemed to have been satisfied.
(b) Seller agrees to make available and to cause Property Manager to
make available at the Property to Purchaser or Purchaser's agents or employees
contemporaneously with the Opening of Escrow all information in Seller's or
Property Manager's possession, custody or control relating to the leasing,
operating, maintenance, construction, repair, zoning, platting, engineering,
soil tests, water tests, environmental tests, construction, master planning,
architectural drawings and like matters regarding the Property as part of
Seller's Disclosure Documentation. The foregoing shall include, but not be
limited to, copies of all: (i) Contracts; (ii) books of account and records for
the Property for the last twenty-four (24) months; (iii) the Leases including
any amendments thereto and a current detailed rent roll in regard thereto; (iv)
a detailed listing of all capital expenditures on the Property for the last
twenty-four (24) months; (v) the maintenance history of the Property for the
last twenty-four (24) months; (vi) all current service and maintenance contracts
for the Property including any amendments thereto whether or not such contracts
include month-to-month or thirty-day termination provisions; (vii) all
agreements, if any, with the City regarding the Property; (viii) claims or suits
by the Tenants or third parties involving the Property or any contracts (whether
or not covered by insurance); (ix) a list of all claims or suits by or against
Seller regarding the Property for the last twenty-four (24) months; and (x) the
plans, as approved by the City, pursuant to which the Improvements were
constructed (the Final Plans).
(c) Seller's representations and warranties contained in this Agreement
shall be true and correct in all material respects as of the Closing, and Seller
shall have performed each and every obligation to be performed by Seller under
this Agreement prior to or at the Closing.
Anything contained herein to the contrary notwithstanding, the obligations of
Seller and Purchaser under this Agreement shall be conditioned upon the
procurement by the joint venture partners of Seller of the written consent of
their respective limited partners to the Purchase Transaction as is required
under their respective limited partnership agreements (collectively, the
Consent). Seller shall use diligent good faith efforts to obtain such Consent.
In the event Seller shall despite such diligent good faith efforts not satisfy
such condition by depositing the Consent into Escrow or Seller and Purchaser
shall each fail to waive such condition in writing, by 5:00 p.m. MST on the
sixtieth (60th) day following the Opening of Escrow, this Agreement shall
automatically terminate. In the event of such termination, the Earnest Money and
all interest earned thereon and (unless that Purchaser shall have elected not to
purchase the Property at or prior to the expiration of the Due Diligence Period)
reimbursement of Purchaser's reasonable out-of-pocket expenses actually paid to
third parties in connection with Purchaser's due diligence investigation and
documented to Seller's reasonable satisfaction (such reimbursement, however, in
no event to exceed Eighteen Thousand Dollars and No/100 ($18,000.00) in the
aggregate) shall immediately be paid to Purchaser and, except as otherwise
provided in this Agreement as to any Survival Item, neither party shall have any
obligation or liability to the other under this Agreement. The Due Diligence
Period and the establishment of the Closing Date shall be calculated from the
date on which Seller delivers written notice to Purchaser that the Consent shall
have been obtained or from the date on which Purchaser and Seller deliver
written notice to Title Company that the condition that the Consent be obtained
shall have been waived.
Section 6. Title and Survey.
(a) Within seven (7) Business Days following the Opening of Escrow,
Seller shall cause Title Company to deliver to Purchaser a current title
insurance commitment from Title Company covering the Property, together with
full and legible copies of all supporting documents (collectively, Preliminary
Report). The Preliminary Report is to be preliminary to an extended coverage
owner's policy of title insurance to be issued to Purchaser (if Purchaser elects
to obtain extended coverage) by Title Company insuring Purchaser's fee simple
title to the Property in the amount of the Purchase Price (the Title Policy).
Seller shall pay only the premium for a standard owner's policy in the amount of
the Purchase Price with the Purchaser to pay all additional costs in regard to
extended coverage, if elected by Purchaser, and for all endorsements, if any,
required by Purchaser.
(b) In addition to the contingencies set forth in Section 5, Purchaser
shall have to the end of the Due Diligence Period to disapprove, in writing, any
exceptions to title shown on the Preliminary Report or reflected on the Survey
(as defined below) (collectively, Disapproved Exceptions) and to provide Seller
and Title Company with notice of disapproval in writing describing the defect
with reasonable particularity (Disapproval Notice). In the event Purchaser fails
to deliver a Disapproval Notice to Seller and Title Company within the Due
Diligence Period, all such exceptions to title shall be deemed to have been
approved. Within ten (10) Business Days after Seller's receipt of the
Disapproval Notice, if any, Seller shall notify Purchaser whether Seller intends
to remove the Disapproved Exceptions. If Seller notifies Purchaser in writing
within such ten-day period that Seller intends to eliminate the Disapproved
Exceptions, Seller shall do so on or before 5:00 p.m. MST on the thirtieth
(30th) day following the expiration of the Due Diligence Period. If Seller fails
to notify Purchaser in writing within such ten-day period that Seller intends to
eliminate all the Disapproved Exceptions or Seller elects to eliminate less than
all of the Disapproved Exceptions, Purchaser may, by notifying Seller and Title
Company within ten (10) days after the later of: (i) Purchaser's receipt of
Seller's notice to Purchaser; or (ii) the end of Seller's ten-day notice period,
elect either to terminate this Agreement and obtain an immediate refund of the
Earnest Money plus interest or to take title to the Property subject to the
Disapproved Exceptions that Seller has not undertaken to remove. Seller shall
cause the Title Company to issue the Title Policy at the Close of Escrow
insuring marketable fee title to the Real Property in Purchaser in the amount of
the Purchase Price, subject only to the following matters (collectively,
Approved Exceptions):
(i) a lien for current real property taxes or general or
special assessments not then delinquent;
(ii) matters affecting title to the Property not disapproved
by Purchaser in accordance with this Section 6(b); and
(iii) matters affecting title to the Property created by or
with the consent of Purchaser.
(c) Seller shall deliver to Purchaser and Title Company on or before
5:00 p.m. MST on the fifteenth (15th) day after Opening of Escrow, a certified
ALTA survey of the Property (the Survey) to be completed by a surveyor licensed
in the State of Arizona, whereupon the legal description in the Survey shall
control over the description in Exhibit A to the extent they may be
inconsistent. The Survey shall set forth the legal description and boundaries of
the Property and all easements, encroachments and Improvements thereon and shall
comply with all requirements of Title Company in regard to Title Company's
issuance of the Title Policy. Purchaser shall reimburse the cost of such Survey
to Seller within five (5) Business Days following delivery of the Survey to
Purchaser and written request for such reimbursement.
(d) Notwithstanding the foregoing provisions of this Section 6,
Purchaser shall have until five (5) Business Days after receipt of an amended
Preliminary Report or an amended Survey (and the Closing Date shall
automatically be extended for such period, if necessary) within which to object
in writing to Seller and Title Company to any new matters constituting
Disapproved Exceptions set forth therein and not appearing in the Preliminary
Report(s) or Survey(s) previously issued pursuant hereto, whereupon Purchaser
shall have the same rights as described with respect to the objections to the
first Preliminary Report described in Section 6(b) above or the first Survey
described in Section 6(c) above. If Seller does not cure or is unable to cure
all of the new Disapproved Exceptions objected to by Purchaser within five (5)
days after notice of Purchaser's objection (and the Closing Date shall
automatically be extended for such period, if necessary), then Purchaser may, in
its sole discretion, elect either (i) to waive such objection, take title to the
Property subject to the new Disapproved Exceptions that Seller has not
undertaken to remove and close Escrow subject thereto, or (ii) to cancel this
Agreement by notice to Seller and Title Company, whereupon the Escrow and this
Agreement shall terminate, all Earnest Money and all accrued interest thereon
shall be returned to Purchaser, and neither party shall thereafter have any
further obligations or liabilities to the other hereunder with the exception of
the Survival Items.
Section 7. Representations and Warranties.
(a) As used herein, "Seller's actual knowledge" shall mean the actual
knowledge of the corporate general partner of the general partner of the general
partner of the managing venturer of Seller, Stephen B. Boyle, Karen Boyle and
the onsite property manager without any duty of inquiry. Seller represents and
warrants to Purchaser, as of the Effective Date and again as of the Closing
Date, as follows:
(i) that to Seller's actual knowledge, Seller has received
no notice from any governmental authority of (A) any pending or
threatened zoning, building, fire or health code violations or
violations of other governmental regulations concerning the Property or
the operation of the Property that has not previously been corrected or
(B) any pending or threatened condemnation of the Property or any part
of the Property. Seller further covenants that if Seller should receive
any such notice prior to the Closing Date, Seller will provide
Purchaser with copies of the notice promptly following the receipt
thereof by Seller. As an additional condition precedent to Closing,
Seller agrees to use reasonable efforts to correct any matters
disclosed in any such notice on or before Closing; provided, however,
that Seller need not expend more than an aggregate amount of
Twenty-Five Thousand Dollars ($25,000) for such corrections. If any
such matter(s) cannot be corrected by Seller by Closing, Seller shall
give Purchaser a credit at Closing for the amount reasonably estimated
by Seller and Purchaser required to correct the matter(s), but in no
event more than Twenty-Five Thousand Dollars ($25,000). If the
estimated cost to correct the matter(s) is greater than Twenty-Five
Thousand Dollars ($25,000) and Seller, by written notice to Purchaser,
elects not to correct the matter(s) prior to Closing, Purchaser may
deliver written notice of termination of this Agreement to Seller and
Title Company whereupon this Agreement shall terminate and the Earnest
Money plus interest shall be immediately returned to Purchaser, unless
Purchaser, in Purchaser's sole discretion, elects in writing to pay the
excess required to correct the matter(s) in which event Purchaser shall
receive a credit of Twenty-Five Thousand Dollars ($25,000) against the
Purchase Price;
(ii) that to Seller's actual knowledge, no legal actions are
pending or threatened against the Property, nor are there any
violations of building codes or other statutes affecting the use,
operation, occupancy and enjoyment of the Property;
(iii) that to Seller's actual knowledge, there exist no
violations of any statutes, laws, ordinances, regulations or
administrative or judicial orders or holdings, whether or not appearing
in public records, with respect to the Property, including without
limitation those pertaining to zoning, health, use, air pollution,
water pollution and/or environmental pollution of any federal, state,
county or municipal authorities;
(iv) that to Seller's actual knowledge, Seller has received
no notices from insurers of defects in the Improvements which have not
been corrected;
(v) that to Seller's actual knowledge, there exist no
continuing, pending or threatened public improvements that would result
in a tax assessment or other similar charge being levied or assessed
against the Property;
(vi) that Seller has disclosed to Purchaser all information,
records and studies for the Property in Seller's or Property Manager's
possession, custody or control concerning hazardous, toxic or
governmentally regulated materials that are or have been stored,
handled, disposed of or released on the Property, and Seller has
received no written notice that the Property has been utilized for the
treatment, storage or disposal of hazardous substances or wastes or
that hazardous substances or wastes have ever been located upon the
Property;
(vii) that no leases or other agreements for occupancy are in
effect for the Property except for the Leases as described on the rent
roll attached hereto as Exhibit J;
(viii) that to Seller's actual knowledge, all mechanical,
electrical, structural and plumbing systems for the Property are in
good operating condition;
(ix) that to Seller's actual knowledge, there exist no
agreements or understandings relating to the Property, except for this
Agreement and the agreements (if any) shown as exceptions to the title
to the Property;
(x) the Purchase Transaction will not in any material
respect violate any other agreements to which Seller is a party;
(xi) prior to Closing or any earlier termination of this
Agreement, Seller will not enter into or execute any employment,
management or service contract with respect to the Property without
Purchaser's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, and any such contract so
entered by Seller with Purchaser's consent shall provide that such
contract can be terminated by Seller, or Seller's successor, at any
time without penalty, upon not more than thirty (30) days' prior
written notice to the other party thereto. When any such contracts are
fully executed, Seller shall deliver a copy thereof to Purchaser;
(xii) no default of Seller exists under any of the Contracts
and, to Seller's actual knowledge, no default of the other parties
exists under any of the Contracts. Between the Effective Date and the
Closing Date, or any earlier termination of this Agreement, Seller,
without Purchaser's prior written consent which consent shall not be
unreasonably withheld, conditioned or delayed, shall not amend, modify
in any material respect (such as increasing or decreasing the term or
monetary obligations thereunder) or terminate any Contract or Lease or
waive any substantial right thereunder;
(xiii) no consent of any third party is required in order for
Seller to enter into this Agreement and perform Seller's obligations
hereunder except for the Consent. Without limiting the generality of
the foregoing, no consent of any third party is required in order for
Seller to assign to Purchaser the Contracts;
(xiv) except for any item to be prorated at Closing in
accordance with this Agreement, all bills or other charges, costs or
expenses arising out of or in connection with or resulting from
Seller's construction, use, ownership, or operation of the Property up
to Closing shall be paid in full by Seller on or before Closing;
(xv) all general real estate taxes, assessments and personal
property taxes that have become due with respect to the Property
(except for those that will be prorated at Closing in accordance with
this Agreement) have been paid or will be so paid by Seller prior to
Closing;
(xvi) between the Effective Date and the Closing Date or any
earlier termination of this Agreement, Seller shall not execute or
enter into any new lease of any part of the Improvements, except in the
normal course of business using Seller's standard form of lease and
adhering to Seller's standard rental schedule;
(xvii) except in the ordinary course of business or as
required by a governmental agency, Seller shall not place or permit to
be placed on any portion of the Real Property any new improvements of
any kind or remove or permit any improvements to be removed from the
Real Property without the prior written consent of Purchaser, which
consent may be granted or withheld for any reason;
(xviii) Seller shall not restrict, rezone, file or modify any
development plan or zoning plan or establish or participate in the
establishment of any improvements district with respect to all or any
portion of the Real Property or enter into any agreement affecting any
portion of the Real Property (whether or not recorded) without
Purchaser's prior written consent, which consent may be granted or
withheld for any reason; and,
(xix) without Purchaser's prior written consent, which may
be granted or withheld for any reason, Seller shall not, by voluntary
or intentional act or omission to act, further cause or create any
easement, encumbrance, or mechanic's or materialmen's liens, and/or
similar liens or encumbrances to arise or to be imposed upon the
Property or any portion thereof.
(b) If Seller learns of anything that would make the representations
and warranties set forth above untrue in any material respect prior to the
Closing, Seller shall immediately notify Purchaser in writing. Upon written
notice to Seller and Title Company within five (5) Business Days following
receipt of Seller's notice, Purchaser shall be entitled to terminate this
Agreement if Purchaser reasonably concludes that the Property will be adversely
affected in any material respect, in which case Purchaser shall be entitled to
an immediate return of the Earnest Money together with accrued interest thereon.
After such disposition of the Earnest Money, the Escrow shall be canceled and
neither party shall have any rights or responsibilities to the other except as
otherwise expressly provided by this Agreement.
(c) Each of the parties represents and warrants to the other that each
of the persons executing this Agreement on behalf of the warranting party is
authorized to do so; that the execution, delivery and performance of this
Agreement will not conflict with, or result in a breach or other violation of,
any contract, agreement or instrument to which Purchaser or Seller, as the case
may be, is a party; and that upon execution, this Agreement shall be a valid
obligation of, binding upon and enforceable against Purchaser or Seller, as the
case may be.
(d) All representations made in this Agreement by Seller shall survive
the execution and delivery of this Agreement or the cancellation of this
Agreement or Closing, as applicable. Seller shall and does hereby indemnify
against and hold Purchaser harmless from any loss, damage, liability and
expense, together with all court costs and attorneys' fees which Purchaser may
incur, by reason of any third party claims asserted against Purchaser and based
upon any material misrepresentation by Seller or any material breach of any of
Seller's warranties. Seller's representations and indemnity obligations under
this Section 7 shall survive for three (3) months after cancellation of this
Agreement or Closing, as applicable, whereupon Seller's obligations shall
terminate automatically unless Purchaser shall have commenced an action thereon
against Seller in the Court within such period.
Section 8. Purchaser's Acceptance of Property As-Is.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN AND/OR IN THE DOCUMENTS
TO BE DELIVERED AT CLOSING, PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER HAS
NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF
ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN,
PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE,
NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING WITHOUT LIMITATION THE
WATER, SOIL AND GEOLOGY, AND ANY IMPROVEMENTS CONSTRUCTED THEREON, (B) THE
INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR
ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREON, (D) THE
HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY, (E) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, OR (F) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY. EXCEPT FOR
THOSE ITEMS OF SELLER'S DISCLOSURE DOCUMENTATION THAT HAVE BEEN PREPARED BY
SELLER, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN
INVESTIGATION OF THE PROPERTY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
ANY INFORMATION PROVIDED OR TO BE PROVIDED TO PURCHASER WITH RESPECT TO THE
PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY
INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO
REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER'S DISCLOSURE
DOCUMENTATION OR IN THE DOCUMENTS TO BE DELIVERED AT CLOSING, SELLER IS NOT AND
SHALL NOT BE LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS,
REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION
THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER
PERSON. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT AND/OR IN THE
DOCUMENTS TO BE DELIVERED AT CLOSING, PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS
PROVIDED FOR HEREIN IS MADE ON AN "AS IS," "WHERE IS" AND "WITH ALL FAULTS"
CONDITION AND BASIS.
Section 9. Seller's Covenants.
From and after the Effective Date until Closing, and so long as this
Agreement remains in effect, Seller shall:
(a) except as otherwise provided in Section 7(a), maintain, manage and
operate the Property substantially in accordance with Seller's and Property
Manager's established practices;
(b) maintain the Property in its present condition, ordinary wear and
tear and casualty loss excepted;
(c) maintain all casualty, liability and hazard insurance currently in
force for the Property;
(d) except as otherwise provided in Section 7(a), operate, manage and
enter into contracts for the Property and maintain present services and
sufficient supplies and equipment for the operation and maintenance of the
Property, all in the same manner as that done by Seller and Property Manager
prior to the Effective Date; provided, however, that Seller shall not enter into
any service contract that cannot be terminated without penalty, premium or
charge within thirty (30) days following notice to the vendor;
(e) except as otherwise provided in Section 7(a), not enter into any
Lease of the Real Property and the Improvements other than in the ordinary
course of Seller's business; and
(f) substantially in accordance with Seller's and Property Manager's
established practices, keep as many Units leased as possible and, in this
regard, after the Due Diligence Period ends and assuming Purchaser has not
theretofore canceled this Agreement as Purchaser is entitled so to do, Seller
and Property Manager shall meet and confer with Purchaser or Purchaser's duly
appointed agents by telephone or in person at Seller's offices in Scottsdale,
Arizona, on a weekly basis to review and approve Seller's and Property Manager's
plans and proposals for continued leasing of the Units.
If Seller enters into leases or grants concessions in violation of this Section
9, Purchaser may either waive the violation or, as Purchaser's sole remedy,
terminate this Agreement and require the return of the Earnest Money together
with accrued interest thereon.
Section 10. Prorations.
The following adjustments to the Purchase Price shall be made between
Seller and Purchaser:
(a) The following items, as applicable, shall be prorated between
Purchaser and Seller on a per diem basis as of the Closing Date:
(i) all nondelinquent real estate taxes, installments of
general and special assessments, homeowner's association dues, if any,
and fire protection service charges, if any, due and payable in the
calendar year in which Closing occurs, based upon the most recent
information available to Seller. If Closing shall occur before the tax
rate or assessment for the current year is fixed, the initial proration
of such taxes or assessments shall be based upon the latest available
information. Thereafter, when the actual tax rate for such current year
becomes known, Seller and Purchaser shall, outside of escrow and after
Closing, re-prorate any such taxes or assessments to the extent that
the actual rate thereof was different than the rate used for prorations
made at Closing and shall pay, one to the other, any adjustment due as
a result of such re-proration;
(ii) current rents and other charges, if any, paid or payable
by Tenants under the Leases;
(iii) all charges for natural gas, water, sewer, electricity
and other utility services furnished to the Property which are not
metered to Tenants. Seller, to the extent the same is obtainable, shall
furnish meter readings for such utilities through the close of business
on the day prior to the Closing. If any such meter readings are not so
obtainable, then Seller shall provide meter readings as of a date not
more than thirty (30) days prior to the Closing Date, and the proration
of utility charges shall initially be based upon such prior reading.
Upon the taking of actual meter readings first after Closing, such
proration shall be readjusted outside of escrow after Closing and
Seller or Purchaser, as the case may be, shall promptly pay to the
other the amount determined to be so due upon such readjustment; and,
(iv) with regard to any rental concession (whether in the
form of free rent, a rent concession coupon or otherwise (collectively,
a Rent Concession)) which Seller has granted to Tenants prior to
Seller's execution of this Agreement and which is applicable to the
period following the Closing and which is not applicable over the term
of the Lease on a substantially amortized basis, Seller hereby grants
to Buyer and Buyer hereby accepts a credit equal to the amount of such
Rent Concession. If, after Closing, a Tenant is entitled to use or
apply any Rent Concession theretofore granted to such Tenant by Seller,
Purchaser, at Purchaser's sole cost, shall honor and apply such Rent
Concession to the rent due from such Tenant. Seller represents and
warrants to Buyer, in regard to the Rent Concessions, if any, granted
by Seller between the Effective Date of this Agreement and Closing,
that Seller will not grant any Rent Concessions which exceed in
economic value: (a) 1/2 month's rent on a "6 month lease" or (b) 1
month's rent on a "12 month lease."
(b) All other items of accrued or prepaid income and expense, except
delinquent rents, shall be prorated as of the Closing Date, on the basis of the
most recent ascertainable amounts of or other reliable information for each item
of income and expense. Seller and Purchaser shall duly cooperate with each other
and the Title Company in making prorations, adjustments and credits pursuant to
this Section 10 and shall, as requested by the Title Company, furnish to the
Title Company such information as is in the possession of or obtainable by them
to assist in making such prorations, adjustments or credits. In the event, for
any reason beyond the reasonable control of the Parties hereto, information
necessary to calculate any proration, adjustment or credit for any item required
to be prorated, adjusted or credited under this Section 10 is not available
prior to Closing, then such items shall be prorated, adjusted or credited
outside of escrow after Closing as soon as such information is available, and
Seller and Purchaser shall duly cooperate with each other in regard thereto and
shall pay, one to the other, any amounts which may be owing as a result of any
such subsequent proration, adjustment or credit. In the event, at any time
within six (6) months after Closing, errors shall be discovered in any
prorations, adjustments or credits made pursuant to this Section 10, Seller and
Purchaser shall correct such errors and shall pay, one to the other, any sums
owning as a result of such correction.
(c) For purposes of all prorations provided for in this Agreement,
Seller shall be responsible for all days up to and including the Closing Date,
and Purchaser shall be responsible for all days after the Closing Date. Except
as otherwise expressly provided in this Agreement, all prorations shall be
final.
(d) Security deposits, including cleaning and pet deposits and prepaid
rent and any interest thereon, shall be credited to Purchaser at Closing.
(e) If on the Closing Date any Tenant is delinquent in the payment of
rent, including any additional rent billed but unpaid at the time of Closing,
the delinquent rent shall remain the property of Seller and be paid to Seller
if, as and when collected by Purchaser out of last moneys received by Purchaser
from such tenant, and no proration of such delinquent rent shall be made at
Closing. For a period of ninety (90) days after Closing, Purchaser shall attempt
to collect and shall remit to Seller any such delinquent rents owing to Seller;
provided, however, that (i) Purchaser shall be required only to periodically
send bills to the Tenant(s) owing such delinquent rent and shall not be required
to commence any litigation or undertake any other collection efforts in regard
thereto; and (ii) in the event Purchaser collects rent from a person who owes
rent for any period of time after Closing and for a period of time prior to
Closing, all amounts collected from such person shall be applied first to the
amount of rents owing by such person for the period of time after Closing and
only the excess, if any, shall be remitted to Seller.
(f) Contemporaneously with the Closing, Seller shall deliver to
Purchaser at the offices of the Property Manager all originals (including
computer discs and tapes) of books and records of accounts, contracts, leases,
leasing correspondence, receipts for deposits, bills and other papers that
pertain to the Property, together with all advertising materials, booklets, keys
and other items, if any, used in the Property's operation. Seller, at Seller's
cost, may retain a copy of the foregoing items for tax reporting purposes. After
the Closing and solely for the purposes of Section 10, Seller, at Seller's sole
cost and upon at least five (5) days' prior written request to Purchaser, shall
have the right to inspect the books and records for the Property located at
Property Manager's office to verify that Purchaser is remitting to Seller the
proper amounts according to this Agreement and for any other purpose related to
Seller's prior ownership of the Property.
Section 11. Transfer Taxes; Title Charges;
Other Closing Costs and Escrow Cancellation.
(a) Seller and Purchaser agree to execute any real estate transfer
declarations required by the state, county or municipality in which the Real
Property is located. Seller shall pay: (i) one-half of the escrow charges of
Title Company (which are to be at the "developer rate"); (ii) one-half of the
cost of recording the instruments of conveyance; and (iii) the portion of the
premium charged for the Title Policy attributable to standard coverage.
Purchaser shall pay all other costs of consummating this transaction, including
without limitation the premium for the Title Policy in excess of standard
coverage and for any endorsements required by Purchaser, all transfer taxes and
other fees (if any) assessed by any governmental authority against the Real
Property because of this sale and transfer, all sales and transfer taxes or
other fees assessed by any governmental authority against the Personal Property
(if any) and the cost of any municipal deed or transfer taxes (if any). The
parties shall each pay their own attorneys' fees in regard to the negotiation
and documentation of the Purchase Transaction.
(b) If the Escrow fails to close because of a Seller's Event of
Default, Seller shall be liable for the cancellation charge, if any, of Title
Company. If the Escrow fails to close because of Purchaser's Event of Default,
Purchaser shall be liable for the cancellation charge, if any, of Title Company.
If the Escrow fails to close for any other reason, Seller and Purchaser shall
each be liable for one-half of the cancellation charge, if any, of Title
Company.
Section 12. Risk of Loss.
(a) Except as provided in any indemnity provisions of this Agreement,
Seller shall bear all risk of loss for the Property up to the Closing.
(b) The foregoing to the contrary notwithstanding, if the Property is
damaged by fire or other casualty prior to the Closing Date and is insured under
one or more fire or casualty insurance policies maintained by Seller, and if
Seller determines, in Seller's reasonable good faith discretion, that repair of
the Property would cost less than One Hundred Thousand Dollars ($100,000.00)
(Loss Threshold), Purchaser shall not have the right to terminate this Agreement
and Seller, in Seller's sole discretion, may elect either: (i) to repair and
restore the Property to its condition immediately preceding the fire or
casualty; or (ii) to proceed to close this Purchase Transaction without
reduction in the Purchase Price provided that, as a condition precedent thereto
and in a form acceptable to Purchaser, in Purchaser's reasonable discretion,
Seller assigns and transfers to Purchaser on the Closing Date all of Seller's
right, title and interest in and to the insurance proceeds paid or payable to
Seller under the policy covering the damage and pay to Purchaser the amount of
Seller's deductible under the insurance policy.
(c) However, if the Property is damaged by fire or other casualty prior
to the Closing Date and is insured under one or more fire or casualty insurance
policies maintained by Seller, and if Seller determines, in Seller's reasonable
good faith discretion, that the repair of the damage would cost an amount equal
to or in excess of the Loss Threshold, Purchaser, in Purchaser's sole
discretion, may elect either: (i) to terminate this Agreement and have the Title
Company immediately return the Earnest Money together with accrued interest
thereon to Purchaser; or (ii) to proceed to close this Purchase Transaction,
without reduction in the Purchase Price, and, as a condition precedent thereto
and in a form acceptable to Purchaser in Purchaser's reasonable discretion, have
Seller assign and transfer to Purchaser on the Closing Date all of Seller's
right, title and interest in and to the insurance proceeds paid or payable to
Seller under the policy covering the damage and pay to Purchaser the amount of
Seller's deductible under the insurance policy.
(d) Immediately after Seller obtains notice of any fire or casualty,
Seller shall notify Purchaser thereof in writing, including Seller's reasonable
determination of the repair cost; provided, however, that in the event Purchaser
shall in good faith dispute the repair cost so determined by Seller, Purchaser
shall immediately notify Seller of such dispute, in which event Seller shall as
soon as practicable obtain three (3) bids to repair such damage from reputable
contractors licensed in the State of Arizona and furnish copies thereof to
Purchaser. The average of the two bids that are the closest to each other shall
be determinative as to whether the Loss Threshold shall have been exceeded. If
the repair cost so determined exceeds the Loss Threshold, Purchaser shall notify
Seller in writing within fifteen (15) Business Days after Purchaser's receipt of
Seller's Notice whether Purchaser elects to terminate this Agreement in
accordance with this Section 12. Closing shall be delayed, if necessary, to
allow Purchaser to make such election. If Purchaser fails to make the election
within such fifteen-day period, Purchaser shall be deemed to have elected to
terminate this Agreement.
Section 13. Condemnation.
(a) If, between the Effective Date and the Closing Date, any
condemnation or eminent domain proceedings are commenced or threatened that
might result in the taking of all or any part of the Real Property or the
Improvements or the taking or closing of any access right to the Property,
Purchaser, in Purchaser's sole discretion, may either:
(i) terminate this Agreement by written notice to Seller and
have the Title Company return the Earnest Money together with accrued
interest thereon; or
(ii) proceed with the Closing and, as a condition precedent
thereto and in a form acceptable to Purchaser, in Purchaser's sole
discretion, have Seller assign to Purchaser all of Seller's right,
title and interest in and to any award made or to be made for the
condemnation or eminent domain action.
(b) Immediately after Seller obtains notice of the commencement or the
threatened commencement of eminent domain or condemnation proceedings, Seller
shall notify Purchaser in writing. Purchaser shall then notify Seller, within
fifteen (15) Business Days after Purchaser's receipt of Seller's notice, whether
Purchaser elects to terminate this Agreement in accordance with Section
13(a)(i). Closing shall be delayed, if necessary, to allow Purchaser to make
such election. If Purchaser fails to make the election within such fifteen-day
period, Purchaser shall be deemed to have elected to terminate this Agreement.
Section 14. Default.
(a) Purchaser shall be in default under this Agreement (a Purchaser's
Event of Default) if any of the following events shall occur:
(i) Purchaser fails to close the Escrow on the date
scheduled therefor as provided in this Agreement; provided, however, that the
failure of the Closing to occur solely as a result of: [a] the breach by
Purchaser's lender of the lender's obligation to fund under the Commitment; or
[b] the failure of a condition in the Commitment that is not caused by any
action or inaction by Purchaser or by any failure by Purchaser to use its best
efforts to close the Loan at Closing, shall not constitute a Purchaser's Event
of Default and shall entitle Purchaser to terminate this Agreement and obtain an
immediate refund of the Earnest Money plus interest;
(ii) Purchaser shall fail to pay any monies due in accordance
with this Agreement (other than the obligations referenced in Subparagraph (i))
by 5:00 p.m. MST on the third Business Day after the stated due date; or,
(iii) Purchaser shall fail to fully and timely perform any of
Purchaser's obligations (other than the monetary obligations referenced in
Subparagraphs (i) and (ii)) arising under this Agreement by 5:00 p.m. MST on the
fifth (5th) Business Day after Purchaser's receipt of written notice from Seller
specifying Purchaser's nonperformance.
(b) Seller shall be in default under this Agreement (a "Seller's Event
of Default") if:
(i) Seller fails to close the Escrow on the date scheduled
therefor as provided in this Agreement; or,
(ii) Seller shall fail to fully and timely perform any of
Seller's obligations arising under this Agreement (other than the obligations
referenced in Subparagraph (i)) and such failure shall continue past 5:00 p.m.
MST on the fifth (5th) Business Day after Seller's receipt of written notice
from Purchaser specifying Seller's nonperformance.
(c) If a Seller's Event of Default shall exist, Purchaser, at
Purchaser's sole option and as Purchaser's sole remedies, may also: (i) by
written notice to Seller and Title Company, cancel this Agreement whereupon the
Earnest Money plus interest shall be paid immediately by Title Company to
Purchaser and, except as otherwise provided in this Agreement as to any Survival
Item, neither Purchaser nor Seller shall have any further liability or
obligation hereunder; or, (ii) seek specific performance against Seller by
delivering the Purchase Price into the Escrow; provided, however, that as
conditions precedent to such action: [a] no uncured Purchaser's Event of Default
shall exist and no event shall have occurred which with the passage of time or
with notice, or both, could become a Purchaser's Event of Default; [b] Purchaser
delivers the Purchase Price into the Escrow albeit Purchaser shall be entitled
thereafter to withdraw immediately from the Escrow the Purchase Price (less the
Earnest Money) pending the outcome of the action; and [c] Purchaser shall not
seek to amend the Purchase Price in such action, in which event the Closing
shall be automatically extended as necessary.
(d) If a Purchaser's Event of Default shall exist, as Seller's sole
remedy (in lieu of any other legal or equitable remedies against Purchaser which
Seller expressly waives except as hereinafter provided otherwise) Seller shall
be entitled to retain the Earnest Money only in accordance with Section 3(b) as
Seller's agreed and total liquidated damages unless Purchaser objects to, fails
to cooperate with or otherwise opposes Seller's withdrawal of such Earnest Money
out of the Escrow, in which event Seller shall have all of the remedies
otherwise available to Seller at law or in equity.
Section 15. Notices.
All notices under this Agreement shall be in writing and sent by: (a)
certified or registered mail, postage prepaid and return receipt requested, in
which case notice shall be deemed delivered at the earlier of actual receipt or
three (3) business days after deposit in the United States Mail, (b) by a
nationally recognized overnight courier, in which case notice shall be deemed
delivered one (1) business day after deposit with that courier, or (c) telecopy
or similar means, if a copy of the notice is also sent by United States
certified mail, in which case notice shall be deemed delivered on the date of
confirmed receipt, as follows:
If to Seller:
c/o L'Auberge Communities Inc.
14988 North 78th Way, Suite 211
Scottsdale, Arizona 85260
Attention: Stephen B. Boyle
Facsimile No.: (602) 607-9773
With a copy to:
Hughes Hubbard & Reed LLP
350 South Grand Avenue, Suite 3600
Los Angeles, California 90071-3442
Attention: George A. Furst, Esq.
Facsimile No.: (213) 613-2950
If to Purchaser:
JPR Capital, L.L.C.
5950 North 78th Street, Suite 109
Scottsdale, Arizona 85250
Attention: Robert L. Lyles, Member
Facsimile No.: (602) 945-4146
With a copy to:
Lorence M. Zimtbaum, Esq.
34522 North Scottsdale Road, Suite D-8
Scottsdale, Arizona 85262
Facsimile No.: (602) 595-9699
The addresses above may be changed by written notice to the other
party; provided, however, that no notice of a change of address shall be
effective until actual receipt of the notice by the addressee thereof. Copies of
notices are for informational purposes only, and a failure to give or receive
copies of any notice shall not be deemed a failure to give notice.
Section 16. Time of Essence.
Time is of the essence in this Agreement and the performance of each
and every obligation hereunder. However, if this Agreement requires any act to
be done or action to be taken on a date which is a Saturday, Sunday or legal
holiday, such act or action shall be deemed to have been validly done or taken
if done or taken on the next succeeding day which is not a Saturday, Sunday or
legal holiday.
Section 17. Termination of Agreement.
If triplicate fully executed originals of this Agreement have not been
delivered by Purchaser to Seller by 5:00 p.m. MST on February __, 1998 for
immediate deposit by Purchaser with Title Company along with the Earnest Money,
this Agreement shall automatically be deemed revoked and null and void.
Section 18. Governing Law; Jurisdiction; Venue.
This Agreement shall be governed by and construed in accordance with
Arizona law. In regard to any litigation which may arise in regard to this
Agreement, the parties shall and do hereby submit to the sole jurisdiction of
and the parties hereby agree that the sole proper venue shall be in the Court.
Section 19. Counterparts and Facsimile Signatures.
(a) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(b) The parties' execution of this Agreement may be evidenced by
facsimile signatures with originals to be immediately distributed thereafter
albeit the Agreement may be deemed binding upon transmittal of the facsimiles.
Section 20. Captions.
The captions in this Agreement are inserted for convenience of
reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of its provisions.
Section 21. Assignability.
(a) Except as expressly set forth in Section 21(b) below, Purchaser
shall not have the right to assign this Agreement or any of Purchaser's rights
under this Agreement prior to Closing to any person or entity without the prior
written consent of Seller, which consent shall not be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, such consent shall be
conditioned upon the assignee's assumption of Purchaser's duties and obligations
under this Agreement by delivering to Seller and Title Company duplicate
originals of an assumption agreement in form and substance reasonably acceptable
to Seller, Seller shall not incur any additional expense because of such
assignment and such assignment shall not delay the Closing.
(b) Purchaser may, upon written notice to Seller and Title Company but
without being obligated to seek or obtain Seller's written consent, assign all
(or any part) of Purchaser's rights under this Agreement (for purposes of this
Section 21(c), the Assignment) to a third party entity (the Assignee Purchaser);
provided, however, that: (i) the Assignment shall not occur prior to the tenth
(10th) day before the date scheduled for the Closing; (ii) an uncured
Purchaser's Event of Default does not then exist and no event shall have
occurred which with the passage of time or with notice, or both, could become a
Purchaser's Event of Default; (iii) the Assignee Purchaser is a newly formed
entity in which Purchaser shall have an interest of not less than ten percent
(10%); and (iv) Purchaser and the Assignee Purchaser shall comply with the
requirements in the second sentence of Section 21(a).
(c) Seller shall not have the right or authority to assign this
Agreement or any of Seller's rights under this Agreement prior to Closing to any
person or entity without the prior written consent of Purchaser, which consent
may be granted or withheld in Purchaser's sole discretion. In the event
Purchaser consents to such an assignment, the consent may be conditioned upon
the assignee's assumption of Seller's duties and obligations under this
Agreement by delivery to Purchaser and Title Company of duplicate originals of
an assumption agreement in form and substance reasonably acceptable to
Purchaser.
Section 22. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective legal representatives, successors, heirs and
permitted assigns.
Section 23. Modifications; Waiver.
No waiver, modification, amendment, discharge or other change of this
Agreement shall be valid unless it is in writing and signed by the party against
which the enforcement of the modification, waiver, amendment, discharge or other
change is sought.
Section 24. Entire Agreement.
This Agreement and the exhibits attached hereto contain the entire
agreement between the parties relating to the Purchase Transaction. All prior or
contemporaneous letters of intent (including but not limited to that certain
non-binding letter of intent between Seller and Purchaser dated December 16,
1997), agreements, understandings, representations or statements, whether oral
or written, with respect to the subject matter hereof are superseded hereby.
Section 25. Partial Invalidity; Further Assurances.
If any provision of this Agreement shall be determined by any
court to be invalid, illegal or unenforceable to any extent, the remainder of
this Agreement shall not be affected and this Agreement shall be construed as if
the invalid, illegal or unenforceable provision had never been contained in this
Agreement. Prior to and after Closing, the parties hereto agree to take such
action and execute, acknowledge, file and record any additional documents
reasonably necessary to effectuate the terms and provisions of this Agreement.
Section 26. Survival.
Except as expressly provided in this Agreement to the contrary, all
representations, warranties, covenants, agreements and other obligations of
Seller and Purchaser in this Agreement shall not survive the Closing of the
Purchase Transaction.
Section 27. No Third-Party Rights.
Nothing in this Agreement, express or implied, is intended to confer
upon any person, other than the parties to this Agreement and their respective
successors and permitted assigns, any rights or remedies.
Section 28. Attorneys' Fees.
If any legal action or any other proceeding, including without
limitation an action for declaratory relief, is brought to enforce this
Agreement or any rights or obligations hereunder or because of a dispute,
breach, default or misrepresentation in connection with this Agreement, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action or proceeding (including without limitation
any appeal or post-judgment enforcement proceedings), in addition to any other
relief to which that party may be entitled. "Prevailing party" shall include the
party determined to be the prevailing party by the Court.
Section 29. Broker.
Seller and Purchaser each represent and warrant to the other that it
has not had any dealings with any broker, finder or other party concerning
Purchaser's purchase of the Property, except Amercon Realty Services, Inc.
(Seller's Broker). Seller agrees to pay at Closing a commission to Seller's
Broker pursuant to a separate agreement between Seller and Seller's Broker, a
copy of which shall be deposited in escrow on or before Closing if Seller's
Broker is to be paid through escrow at Closing. Seller and Purchaser each agree
to defend, indemnify and hold the other harmless from and against any such all
loss, liability, damage, cost or expense, including without limitation
reasonable attorneys' fees, incurred by the other as a result of any claim
arising out of the acts of the indemnifying party, or others on that party's
behalf, for a commission, finder's fee or similar compensation made by any
broker (including Seller's Broker), finder or any person who claims to have
dealt with the indemnifying party. The representations, warranties and covenants
contained in this Section 29 shall survive the Closing or termination of this
Agreement.
Section 30. Opening of Escrow.
The term "Opening of Escrow" shall mean the date of delivery to Title
Company of triplicate fully executed originals of this Agreement by Seller and
Purchaser together with the delivery by Purchaser to Title Company of the
Earnest Money.
Section 31. Exhibits.
The following exhibits have been attached to this Agreement and
incorporated herein by reference:
Exhibit A -- Legal Description
Exhibit B -- Diagram of the Property and Improvements Exhibit C --
Schedule of Personal Property Exhibit D -- Form of Special Warranty
Deed Exhibit E -- Form of Bill of Sale Exhibit F -- Form of Assignment
of Leases Exhibit G -- Assignment of Tradename and Trademark Rights
Exhibit H -- Form of Assignment of Intangible Property Exhibit I --
Form of Tenant Letters Exhibit J -- Certificate of Rent Roll Exhibit K
-- Form of Non-Foreign Affidavit Exhibit L -- Form of Affidavit of
Value Exhibit M -- Form of Property Management Agreement
Section 32. Severability.
[Intentionally deleted.]
Section 33. Form of Title Policy.
The Title Policy to be issued by Title Company shall be Title Company's
most current form. A specimen of the Title Policy is to be delivered to
Purchaser not more than twenty (20) days after the delivery of the Preliminary
Report to the Parties. The Policy is to include, among other things, any or all
of the following endorsements which are requested by Purchaser (in its sole
discretion) and which are also to be delivered to Purchaser at Purchaser's cost:
(i) a survey endorsement to the effect that the insured legal description and
the Survey legal description describe one and the same property; (ii) a patent
endorsement; (iii) a contiguity endorsement; (iv) an endorsement insuring
against archaic deed restrictions; (v) the owner's equivalent of a 3R and 5
endorsement; and (vi) any other endorsements reasonably requested by Purchaser.
Section 34. No Partnership or Other Liability.
Any and all provisions, implications, or interpretations of or from
this Agreement to the contrary notwithstanding, no partnership, joint venture or
other relationship is created, implied or acknowledged between or among the
Parties.
Section 35. General Provisions Regarding Title Company.
(a) Title Company will make all adjustments and/or prorations on the
basis of the actual number of days in a month, and by credit and/or debit to the
respective accounts of Seller and Purchaser in the Escrow.
(b) For purposes of the instructions to Title Company, the expression
"Closing" shall mean the date the Deed is recorded.
(c) Title Company shall: (i) make disbursements by wire transfer of
federal funds; (ii) mail instruments to the addresses of the Parties shown
above, unless Title Company is instructed otherwise; and, (iii) wire funds to
Seller by wire transfer as directed by Seller.
(d) No change of instructions shall be of any effect on Title Company
unless given in writing by all of the Parties hereto. In the event conflicting
demands are made or conflicting notices served upon Title Company with respect
to the Escrow, the Parties expressly agree that Title Company shall have the
absolute right at Title Company's election to do either or both of the
following: (i) withhold and stop all further proceedings in, and performance of,
the Escrow; or (ii) file a suit in interpleader and obtain an order from the
Court requiring the Parties to interplead and litigate in the Court their
several claims and rights among themselves. In the event such interpleader suit
is brought, Title Company shall ipso facto be fully released and discharged from
all obligations to further perform any and all duties or obligations imposed
upon Title Company in the Escrow, and the Parties jointly and severally agree to
pay all reasonable costs, expenses, and reasonable attorneys' fees expended or
incurred by Title Company, the amount thereof to be fixed and a judgment
therefor entered by the Court in such suit.
(e) Except for Title Company's negligence, fraud, willful misconduct or
breach of contract, Title Company shall not be held liable for the identity,
authority or rights of any person executing any document deposited in the
Escrow, or for Seller or Purchaser's failure to comply with any of the
provisions of any agreement, contract or other instrument deposited in the
Escrow, and Title Company's duties hereunder shall be limited to the safekeeping
of such money, instruments or other documents received by Title Company as
escrow holder, and to the disposition of same in accordance with the written
instructions accepted by Title Company in the Escrow.
(f) It is agreed by the Parties to this Agreement that so far as Title
Company's rights and liabilities are concerned, this transaction is an escrow
and not any other legal relation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
"Purchaser"
JPR CAPITAL, L.L.C.,
an Arizona limited liability company
By: /s/ Robert Lyles__________________
Name: Robert Lyles
Title: Member
"Seller"
CASABELLA ASSOCIATES,
an Arizona joint venture partnership
By: Development Partners
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P.,
a California limited partnership,
its general partner
By: L'Auberge Communities Inc.,
a California corporation,
its general partner
By: /s/ Stephen B. Boyle_____________
Name: Stephen B. Boyle
Title: President
[Signatures continued.]
<PAGE>
By: Development Partners II
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P.,
a California limited partnership,
its general partner
By: L'Auberge Communities Inc.,
a California corporation,
its general partner
By: /s/ Stephen B. Boyle_____________
Name: Stephen B. Boyle
Title: President
By: Development Partners III
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P.,
a California limited partnership,
its general partner
By: L'Auberge Communities Inc.,
a California corporation,
its general partner
By: /s/ Stephen B. Boyle_____________
Name: Stephen B. Boyle
Title: President
<PAGE>
TITLE COMPANY'S ACCEPTANCE
The foregoing fully executed Agreement together with the Earnest Money
is accepted by the undersigned this _____ day of February, 1998, which for the
purposes of this Agreement shall be deemed to be the date of "Opening of
Escrow".
First American Title Insurance Company
By: /s/ Sharon McKenzie______________
Its: Escrow Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 253,777
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 11,746,757
<DEPRECIATION> (2,228,967)
<TOTAL-ASSETS> 9,517,790
<CURRENT-LIABILITIES> 191,483
<BONDS> 6,766,437
0
0
<COMMON> 0
<OTHER-SE> 2,861,252
<TOTAL-LIABILITY-AND-EQUITY> 9,819,172
<SALES> 0
<TOTAL-REVENUES> 1,526,276
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,070,688
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 625,459
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<NET-INCOME> (114,586)
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