SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report: June 26, 1996
CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 0-23954 54-1589139
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 East Main Street
Richmond, Virginia 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
-1-
<PAGE>
CORNERSTONE REALTY INCOME TRUST, INC.
FORM 8-K
Index
Page No.
Item 2. Acquisition or Disposition of Assets 5
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report
(Lexington Towers Apartments) 27
Historical Statement of Income and
Direct Operating Expenses
(Lexington Towers Apartments) 28
Note to Historical Statement of
Income and Direct Operating
Expenses (Lexington Towers Apartments) 29
b. Independent Auditors' Report
(Oak Park Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Oak Park Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Oak Park Apartments)*
c. Independent Auditors' Report
(Paces Glen Apartments) 32
Historical Statement of Income and
Direct Operating Expenses
(Paces Glen Apartments) 33
Note to Historical Statement of
Income and Direct Operating
Expenses (Paces Glen Apartments) 34
-2-
* To be filed by amendment.
<PAGE>
d. Independent Auditors' Report
(Doctors Park Apartments) 36
Historical Statement of Income and
Direct Operating Expenses
(Doctors Park Apartments) 37
Note to Historical Statement of
Income and Direct Operating
Expenses (Doctors Park Apartments) 38
e. Independent Auditors' Report
(Hampton Glen Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Hampton Glen Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Hampton Glen Apartments)*
f. Pro Forma Statement of Operations for
the Six Months ended June 30, 1996
(unaudited)*
Pro Forma Balance Sheet as of
June 30, 1996 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1995
(unaudited)*
g. Exhibits
10.1 Purchase Contract for Lexington Towers
Apartments
10.2 Purchase Contract for Oak Park Apartments
10.3 Purchase Contract for Paces Glen
Apartments
10.4 Purchase Contract for Doctors Park
Apartments
10.5 Purchase Contract for Hampton Glen
Apartments
-3-
* To be filed by amendment.
<PAGE>
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors*
23.3 Consent of Independent Auditors
23.4 Consent of Independent Auditors
23.5 Consent of Independent Auditors*
23.6 Consent of Independent Auditors*
-4-
* To be filed by amendment.
<PAGE>
Item 2. Acquisition or Disposition of Assets
LEXINGTON TOWERS APARTMENTS
RICHMOND, VIRGINIA
On June 26, 1996, effective the same date, the Company purchased the
Lexington Towers Apartments, a 197-unit high-rise apartment building having an
address of 102 North Fifth Street, Richmond, Virginia (the "Property"). The
Company has renamed the Property the "Trolley Square Apartments."
The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $6,000,000. At closing, the Company paid
$500,000 in cash from a borrowing under the Unsecured Line of Credit. The
balance of $5.5 million is evidenced by a promissory note bearing interest at
5.65%. The principal amount of the promissory note and all accrued interest is
due three years after closing. The note is secured with a letter of credit which
will cost the Company approximately 1% per year. The note is not secured by the
Property. The Company expects to pay the note with proceeds from the sale of
Shares. Title to the Property was conveyed to the Company by limited warranty
deed.
Location. The following information is based in part upon
information provided by the Richmond Chamber of Commerce.
The current population of Richmond is approximately 202,000 and the
current population of the Metropolitan Statistical Area including the City of
Richmond is approximately 930,000. Richmond is located centrally within the
Commonwealth of Virginia, approximately midway between Washington, D.C. and
Raleigh, North Carolina.
The greater Richmond area is served by the Richmond International
Airport, and is situated at the intersection of Interstates 95 and 64. In
addition to being the capital of Virginia, Richmond is also home to numerous
Fortune 500 companies. Some of the larger employers in the area are Philip
Morris, state government, AT&T, Dupont, and NationsBank. In addition, the area
is the site of a number of institutions of higher education, including Virginia
Commonwealth University, the Medical College of Virginia, the University of
Richmond, and Virginia State University.
The Property is located in downtown Richmond, Virginia. The immediate
area consists of other multi-family housing, commercial development and retail
development. The Property is in close proximity to Virginia Commonwealth
University, and is near to the
-5-
<PAGE>
two established commercial areas known as Carytown and Shockoe Slip.
The Property is close to Virginia's 23-acre Biotechnology Research Park,
which is under development. The Park is being sponsored and master-leased by
Virginia Commonwealth University to provide a common site for public and private
medical-oriented biotechnology research and development facilities. Phase I,
consisting of approximately 100,000 square feet, was recently completed and is
fully leased. The second and third phases are under construction and are
expected to be completed in late 1996. The facility, which is adjacent to the
Medical College of Virginia campus of Virginia Commonwealth University, is
expected to impact the demand for rental housing in the area.
The Property is only a few blocks from the Richmond Downtown Expressway,
which provides ready access to Interstates 95 and 64. The Richmond International
Airport is approximately 15 minutes from the Property.
Description of the Property. The Property consists of 197 apartment
units in a single 17-story apartment building in the central business district.
The Property was built in 1965.
The Company believes that the Property is generally in good condition.
However, the Company has budgeted approximately $517,500 for various repairs and
improvements, including interior renovations of apartment units, carpet and
appliance replacement, pool renovation, and renovation of the fitness facility
and common areas.
The Property offers five unit types. The unit mix and rents currently
being charged new tenants are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
- -------- ---- -------------- --------------
42 efficiency 365 $375-450
94 junior executive 480 395-500
1 executive suite 690 550
54 1 bedroom, 1 bath 678-937 525-700
6 2 bedrooms, 2 baths 912-1,035 775-875
The apartments provide a combined total of approximately 107,000 square
feet of net rentable area.
Leases at the Property are generally for terms of one year
or less. Average rental rates for the past five years have
-6-
<PAGE>
gradually increased. As an example, a junior executive apartment rented for $370
in 1991, $380 in 1992, $380 in 1993, $390 in 1994, and $390 in 1995. The average
effective annual rental per square foot at the Property for 1991, 1992, 1993,
1994, and 1995 was $10.21, $10.49, $10.49, $10.78, and $10.78, respectively.
The Property has an outdoor swimming pool, a clubhouse and exercise room
(located on the 16th floor), a meeting/game room, laundry facilities on each
floor, and an attached parking garage, with approximately 111 parking spaces
which can be reconfigured to accommodate approximately 138 vehicles. There is
also 24-hour security at the Property.
The Company is planning to convert approximately 7,500 square feet of
unoccupied office space on the first floor and approximately 17,500 square feet
on the 16th floor that is now being used as a clubhouse and exercise facility
into new apartments. The Company believes than an additional 10 apartment units
can be added using these spaces.
The building is brick veneer over steel frame. There are concrete floor
decks. The roof is flat with modified bitumen rubber sheathing, and was replaced
within the last 12 months. Windows are single stainless steel frames.
All apartment units have wall-to-wall carpeting or parquet flooring in
the living area, and vinyl flooring in the kitchen. Each apartment unit has a
cable television hook-up and an individually controlled heating and
air-conditioning unit. Each kitchen is equipped with a refrigerator/freezer,
electric range and oven, dishwasher and garbage disposal. The owner of the
Property provides all utilities. The tenants pay for their phone and cable
services.
There are at least four apartment properties in the area which compete
with the Property. All offer similar amenities and have rents that are generally
slightly higher when compared with those of the Property. Based on a recent
telephone survey, Cornerstone Management Group, Inc. estimates that occupancy in
nearby competing projects now averages approximately 97%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 43% in 1991, 41% in 1992, 41% in 1993, 42%
in 1994, and 63% in 1995. On June 1, 1996, the Property was 95% occupied. The
tenants are a mix of white-collar and blue-collar workers and students. Many of
the current tenants have resided at the Property for many years, and detailed
information on them and their status is not available. A large number of the
residents are foreign intern students at
-7-
<PAGE>
the Medical College of Virginia. Many of the tenants on which
current information is available are employed in professional
positions in engineering, medicine and education.
The Property had been managed by its original owner since construction.
According to the prior owner, the Property historically enjoyed an excellent
occupancy rate until the prior owner decided to convert it to condominiums
approximately four years ago. Following such decision, the occupancy at the
Property decreased to below 50%. The prior owner subsequently reversed its
decision to convert to condominiums and thereafter continued to run the building
as an apartment complex. However, the occupancy at the Property remained at
approximately 50% until the fall of 1995. Cornerstone Management Company, Inc.
believes that the failure to increase occupancy was attributable to a passive
management style and insufficient on-site staff. In the fall of 1995, the owner
restaffed the Property and occupancy began to improve.
The 1995 real estate tax rate applicable to the Property was
approximately $1.445 per $100 of assessed value, and the real estate taxes for
1995 were calculated to be $53,393. The assessed value was $3,695,000. The basis
of the depreciable residential real property portion of the Property (currently
estimated at about $2,710,000) will be depreciated over 27.5 years on a straight
line basis. The basis of the personal property portion will be depreciated in
accordance with the modified accelerated cost recovery system of the Code.
Amounts to be spent by the Company on repairs and improvements will be treated
for tax purposes as permitted by the Code based on the nature of the
expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. The Company believes that the Richmond, Virginia area will enjoy
continued steady economic development and steady population increase, due to a
diversified economy, and that such development and increase will support stable
occupancy rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own
inspections, the Company believes that the Property is in sound condition.
-8-
<PAGE>
3. The Property is conveniently located and proximate to
major employers and shopping, as well as the downtown Richmond area.
4. The Company is particularly familiar with the Richmond
market since the Company's principal offices are in Richmond.
The Company is not aware of any material adverse factors relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be necessarily indicative of future operating
results.
Acquisition Services and Fees. In consideration of services rendered to
the Company in connection with the selection and acquisition of the Property,
the Company will pay Cornerstone Realty Group, Inc. a property acquisition fee
of 2% of the purchase price of the Property, or $120,000. As of September 15,
1996, $10,000 of such fee has been paid, and the balance will be paid as and
when the note issued to the Property's seller is repaid with proceeds from the
sale of Shares.
OAK PARK APARTMENTS
AUGUSTA, GEORGIA
On July 15, 1996, effective July 1, 1996, the Company purchased the Oak
Park Apartments, a 456-unit apartment complex, having an address of 1016
WoodsEdge Drive in Richmond County, near Augusta, Georgia (the "Property").
The Company purchased the Property from a seller which is unaffiliated
with the Company, the Advisor, and their Affiliates. The purchase price was
$9,804,000. At closing, $9,675,000 of the purchase price was borrowed on an
interim basis under the Company's unsecured line of credit. The balance of the
purchase price ($129,000) was paid in cash from the proceeds of the Offering.
Title to the Property was conveyed to the Company by limited warranty deed.
Location. The following information is based in part upon
information provided by the Augusta Chamber of Commerce.
The Property is located in Richmond County in Augusta, Georgia. As of
1990, Richmond County had a population of approximately 190,000, with
approximately 45,000 of such total residing within the city limits. Augusta is
an approximately 2
-9-
<PAGE>
hour drive from Atlanta and an approximately 2-1/2 hour drive from Charlotte,
North Carolina.
There are two major employers within the greater metropolitan area: Fort
Gordon, a military installation, and the medical community, which centers around
the Medical College of Georgia and University Hospital. The Medical College of
Georgia employs approximately 7,000 persons and University Hospital employs
approximately 3,500 persons. There are also a number of Fortune 500 companies
with a significant presence in the metropolitan Augusta area. These include
Allied Signal, Archer Daniels Midland, Borden, Proctor & Gamble, Sunbeam and
Philip Morris. There are two major colleges in the area: Augusta College with an
enrollment of approximately 5,700 and the Medical College of Georgia, with
approximately 5,300 students.
The major highways serving the area are Interstate 20 and Interstate
520. There is a municipal airport approximately 14 miles from the Property.
The immediate neighborhood surrounding the Property is characterized by
the intersection of Washington Road and Interstate 20. This area is the site of
numerous retail stores, restaurants, and businesses. The Property is located
within five miles of the Augusta central business district via Washington Road.
The central business district of Augusta is similar to that of other older
Southern towns, being characterized by governmental offices and banks, with a
few newer businesses.
Description of the Property. The Property consists of 456 garden-style
apartments in 57 two-story buildings located on approximately 9.5 acres of land.
The Property was constructed in 1968.
The Company believes that the Property has been wellmaintained and is
generally in good condition. However, the Company has budgeted approximately
$456,000 for repairs and improvements, including new siding, repainting,
clubhouse renovation, landscaping, model renovations and pavement repairs.
The Property offers a wide variety of unit types. The unit mix and rents
currently being charged new tenants are as follows:
-10-
<PAGE>
Approximate
Interior
Square Monthly
Quantity Type Footage Rental
-------- ---- ------- ------
72 one bedroom, one bath 585 $405
117 two bedrooms, one bath 858 430
106 two bedrooms, one bath 858 430
11 two bedrooms, one bath 908 485
w/utility room
14 two bedrooms, one bath w/den 933 465
76 two bedrooms, one bath 1,010 475
16 two bedrooms, one bath 1,010 525
2 two bedrooms, one bath w/den 1,060 510
26 two bedrooms, two baths 1,010 510
4 two bedrooms, two baths w/den 1,085 530
7 three bedrooms, two baths 1,200 595
2 three bedrooms, two baths 1,200 645
w/utility
2 three bedrooms, two baths 1,275 645
w/utility
1 three bedrooms, two baths 1,275 630
w/den
The apartments provide a combined total of approximately 398,000 square
feet of net rentable area.
Lease at the Property are for terms of one year or less. Rental rates
for the past five years have generally increased steadily. As an example, a two
bedroom, one bath apartment rented for $325 in 1991, $335 in 1992, $365 in 1993,
$395 in 1994, and $407 in 1995. The average effective annual rental per square
foot at the Property for 1991, 1992, 1993, 1994, and 1995 was $5.02, $5.02,
$5.47, $5.92, and $6.10, respectively.
The buildings are a combination of stucco, wood siding, and brick veneer
on concrete slab foundations. The roofs are flat with mansard coverings. Over
the last three years, the prior
-11-
<PAGE>
owner replaced all of the roof structures, including the mansard overhangs, and
replaced all of the appliances, countertops, kitchen sinks, vinyl floor
coverings, and carpeting. In addition, the pavement at the Property received new
asphalt approximately three years ago.
The Property has an outdoor swimming pool, a playground, a laundry room
in each building, a clubhouse, and rental office. There is ample paved parking
for tenants.
All apartments have wall-to-wall carpeting in the living room areas and
vinyl floors in the kitchen and bath. Each apartment unit has an
individually-controlled heating and air-conditioning unit, and each kitchen is
equipped with a refrigerator/freezer, electric range and oven, pantry, and
garbage disposal. As of the date of acquisition of the Property by the Company,
approximately 276 units had dishwashers, and the Company expects to install
dishwashers in all of the remaining apartment units in 1996. The owner of the
Property supplies cold water, natural gas (for heating, cooking and hot water),
sewer service, trash removal, monthly pest control, and cable television
service. The tenants pay for their own electricity usage, which includes air
conditioning and lights.
There are at least five apartment properties in the area which compete
with the Property. All offer similar amenities and have rents that are generally
higher when compared with those of the Property. Based on a recent telephone
survey, Cornerstone Management Group, Inc. estimates that occupancy in nearby
competing projects now averages approximately 87%. The Company also owns the
West Eagle Greens Apartments, which are located approximately one mile from the
Property. The occupancy at the West Eagle Greens Apartments is now approximately
85%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 71% in 1991, 72% in 1992, 74% in 1993, 83%
in 1994, and 85% in 1995. On August 1, 1996, the Property was 81% occupied. The
residents are a mix of white-collar, blue-collar, and military workers, with
some students. There is no predominant employer.
The 1995 real estate tax rate applicable to the Property was $0.02722
times 40% of assessed value, and the real estate taxes for 1995 were calculated
to be $63,268. The assessed value was $5,810,840. The basis of the depreciable
residential real property portion of the Property (currently estimated at about
$5,471,540) will be depreciated over 27.5 years on a straight-line basis. The
basis of the personal property portion will be depreciated in accordance with
the modified accelerated cost
-12-
<PAGE>
recovery system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. The Company believes that the Augusta, Georgia area will experience
continued economic development and steady population increase, and that such
development and increase will support stable occupancy rates and reasonable
increases in rents at the Property.
2. Based upon an engineering report and its own
inspections, the Company believes that the Property is in sound condition.
3. The Property is conveniently located and proximate to
major employers and shopping.
4. The Property offers a very wide variety of unit types and sizes to
accommodate a variety of tenants, which may offer competitive advantages for the
Property.
The Company is not aware of any material adverse factors relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be necessarily indicative of future operating
results.
Acquisition Services and Fees. In consideration of
services rendered to the Company in connection with the selection and
acquisition of the Property, the Company paid Cornerstone Realty Group, Inc.
a property acquisition fee of 2% of the purchase price of the Property, or
$196,080.
-13-
<PAGE>
PACES GLEN APARTMENTS
CHARLOTTE, NORTH CAROLINA
On July 19, 1996, effective July 19, 1996, the Company purchased the
Paces Glen Apartments, a 172-unit apartment complex having an address of 5600
Paces Glen Avenue in Charlotte, North Carolina (the "Property"). The Company
purchased the Property from a seller which is unaffiliated with the Company, the
Advisor, and their Affiliates. The purchase price was $7,425,000. At closing,
$7,387,335 of the purchase price was borrowed on an interim basis under the
Company's unsecured line of credit and the balance of $37,665 was paid in cash
from the proceeds of the Offering. Title to the Property was conveyed to the
Company by limited warranty deed.
Location. The following information is based in part upon
information provided by the Charlotte Chamber of Commerce.
Based in part upon its fast rate of growth and a diversified economy,
Charlotte has in recent years come to national attention as an attractive
location for business and residential growth. According to the August, 1995,
Site Selection magazine, Charlotte's corporate popularity ranked second
nationally only to Dallas during the period between 1990 and 1994, being the
site of 474 significant new and expanded facilities.
Charlotte has developed into a major financial, distribution and
transportation center, with a metropolitan population of approximately 1.3
million and a population of approximately 5.6 million within a 100-mile radius.
Charlotte's growth is also attributable to its favorable year-round climate, a
moderate cost of living, excellent quality of life, educated work force,
probusiness political climate, extensive transportation network, and strategic
geographic location.
According to the Charlotte Chamber of Commerce, during the first six
months of 1995, approximately 530 firms announced new or expanded businesses
which will provide approximately 6,200 new jobs in the area. Charlotte is home
to major offices of more than 225 of the Fortune 500 industrial firms and
approximately 300 of the Fortune 500 service firms.
Charlotte is the leading financial center of the Southeast, serving as
corporate headquarters to NationsBank and First Union, with assets of
approximately $170 billion and $124 billion, respectively. The growth of
Charlotte's banking and financial communities has had a positive effect on the
-14-
<PAGE>
growth of its supporting industries, such as insurance, accounting, legal
services, and real estate.
The city of Charlotte is located near the border of North Carolina and
South Carolina within Mecklenburg County. It is located at the intersection of
Interstates 77 and 85, the major north/south and east/west thoroughfares in the
region, which provide convenient access to all other regional areas.
The Property is located in what is known as East Charlotte. According to
the 1996 Charlotte Apartment Report, East Charlotte's rental submarket is
Charlotte's largest, with approximately 19,000 units. The predominant land use
in the area is residential. Since the beginning of 1994, the overall submarket
vacancy has ranged from 3.1% to 5.1%, and in the same period, average rents have
increased from $478 to $552.
The Property is located on a quiet road, approximately one mile from
Albemarle Road, a major collector road. Nearby shopping includes the Eastland
Mall, which includes Belk's, Dillard's, Sears', and J. C. Penney, and the
Reddman Shopping Center. There are also supermarkets, restaurants, bank
branches, and other retail and commercial establishments nearby.
Description of the Property. The Property consists of 172 garden-style
apartments located in 12 one and two-story buildings on approximately 28.7 acres
of land. The Property was constructed in 1986.
The Company believes that the Property has been wellmaintained and is
generally in good condition. However, the Company has budgeted approximately
$75,000 for repairs and improvements, including repainting, asphalt patching and
minor roof repair.
The Property offers five unit types. The unit mix and rents currently
being charged new tenants are as follows:
Approximate
Interior
Square Monthly
Quantity Type Footage Rental
- -------- ---- ------- ------
40 one bedroom, one bath 625 $490-515
52 one bedroom, one bath 788 535-575
16 two bedrooms, one bath 938 620-670
48 two bedrooms, two baths 1,136 680-730
16 two bedrooms, two baths 1,260 810-835
-15-
<PAGE>
The apartments provide a combined total of approximately 155,000 square
feet of net rentable area.
Leases at the Property are for terms of one year or less. Average rental
rents for the past five years have generally increased gradually. As an example,
a two bedroom apartment located on the first floor rented for $630 in 1991, $630
in 1992, $645 in 1993, $660 in 1994, and $680 in 1995. The average effective
annual rental per square foot at the Property for 1991, 1992, 1993, 1994, and
1995, was $6.16, $6.96, $7.13, $7.29, and $7.52, respectively.
The buildings are wood frame construction on concrete slabs
with pitched roofs covered with composition shingles. The exteriors are
masonite hardboard.
The Property features an outdoor swimming pool and hot tub, a lighted
tennis court, a laundry facility, a fitness center, a picnic area with gazebo
and gas grills, twenty-four carports and a car wash area. There is also a 1,350
square-foot clubhouse with a leasing office. There is paved parking for
approximately 290 cars. The site includes additional land which is zoned and
suitable for the construction of 18 additional apartment units.
All apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up, washer/dryer hookups and an individually-controlled heating and air
conditioning unit. Each kitchen is equipped with a refrigerator/freezer,
electric range and oven, dishwasher and garbage disposal. The owner of the
Property supplies cold water and sewer service. The tenants pay for their gas
usage, electric service, and cable television. The tenant utilities include air
conditioning, cooking, lights, and hot water.
There are at least three apartment properties in the area which compete
with the Property. All offer similar amenities and have rents that are generally
the same as those of the Property. Based on a recent telephone survey,
Cornerstone Management Group, Inc. estimates that occupancy in nearby competing
projects now averages 94%. Two properties owned by the Company (known as
Sailboat Bay and Bridgetown Bay (formerly Longmeadow), are located near the
Property and will compete with the Property for tenants. The occupancies of
these properties as of August 14, 1996, were 76% and 98%, respectively.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 96% in 1991, 96% in 1992, 98% in 1993, 98%
in 1994, and 97% in 1995. On August 1,
-16-
<PAGE>
1996, the Property was 98% occupied. A majority of the current
residents at the Property are employed in white-collar positions.
The 1995 real estate tax rate applicable to the Property was
approximately $1.233 per $100 of assessed value, and the real estate taxes for
1995 were calculated to be $77,963. The assessed value was $6,000,360. The basis
of the depreciable residential real Property portion of the Property (currently
estimated at about $4,259,700) will be depreciated over 27.5 years on a straight
line basis. The basis of the personal Property portion will be depreciated in
accordance with the modified accelerated cost recovery system of the Code.
Amounts to be spent by the Company on repairs and improvements will be treated
for tax purposes as permitted by the Code based on the nature of the
expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. The Company believes that the Charlotte, North Carolina area will
experience continued strong economic development and steady population increase,
and that such development and increase will support stable occupancy rates and
reasonable increases in rents at the Property.
2. Based upon an engineering report and its own
inspections, the Company believes that the Property is in sound condition.
3. The Property is conveniently located and proximate to
major employers and shopping.
4. The Company is very familiar with the Charlotte rental market. The
Company already owns other apartment complexes in the Charlotte area, which may
provide certain economies and efficiency in operation.
The Company is not aware of any material adverse factors relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be necessarily indicative of future operating
results.
Acquisition Services and Fees. In consideration of services rendered to
the Company in connection
-17-
<PAGE>
with the selection and acquisition of the Property, the Company paid Cornerstone
Realty Group, Inc. a property acquisition fee of 2% of the purchase price of the
Property, or $148,500.
DOCTORS PARK APARTMENTS
GREENVILLE, NORTH CAROLINA
On August 30, 1996, effective August 1, 1996, the Company purchased the
Doctors Park Apartments, a 171-unit apartment complex located on Beasley Drive
in Greenville, North Carolina (the "Property").
The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $5,462,948. At closing, the Company paid the
entire purchase price in cash from the proceeds of the Offering. Title to the
Property was conveyed to the Company by limited warranty deed.
Location. The following information is based in part upon
information provided by the Greenville, North Carolina Chamber of Commerce.
Greenville, North Carolina is located in Pitt County in eastern North
Carolina. The Greenville MSA has a population of approximately 118,000, which
reflects a population increase of approximately 23% since 1980.
The major economic influences in the area are Pitt County Memorial
Hospital and East Carolina University. The Hospital is the major medical and
research facility for eastern North Carolina and attracts a wide range of
professional, medical and support employees. East Carolina University has a
total enrollment of approximately 17,500 and employs approximately 3,700 as
faculty and staff.
The City of Greenville lies approximately 45 minutes to the east of
Interstate 95. It is in relatively close proximity to Raleigh and Wilmington,
North Carolina and to the Atlantic Ocean.
The Property is located one block from Pitt County Memorial Hospital and
therefore occupies a desirable location for residence of professionals and other
employees working at the
-18-
<PAGE>
Hospital. Apart from the Hospital, the immediate area consists
principally of commercial and retail development and single-
family housing. The Property is convenient to shopping areas and
restaurants.
Description of the Property. The Property consists of 171 garden and
townhouse style apartments located in 21 two-story buildings located on
approximately 15 acres. The Property was built in 1981.
The Company believes that the Property is generally in good condition.
However, the Company believes that there exists a certain amount of deferred
maintenance at the Property. The Company has budgeted approximately $500,000 for
various repairs and improvements, including siding replacement, painting, roof
replacement, clubhouse renovations, landscaping and pavement repairs.
The Property offers five unit types. The unit mix and rents currently
being charged new tenants are as follows:
Approximate
Interior
Square Monthly
Quantity Type Footage Rental
- -------- ---- ------- ------
49 one bedroom, one bath 706 $385
74 two bedrooms, one bath 860 475
8 two bedrooms, 1.5 baths 1,100 495
(townhouse)
24 three bedrooms, 1.5 baths 1,300 580
16 three bedrooms, 1.5 baths 1,400 600
(townhouse)
The apartments provide a combined total of approximately 177,000 square
feet of net rentable area.
Leases at the property are generally for terms of one year or less.
Average rental rates for the past five years have increased slightly. As an
example, a two bedroom apartment rented for $390 in 1991, $400 in 1992, $410 in
1993, $420 in 1994, and $420 in 1995. The average effective annual rental per
square foot at the Property for 1991, 1992, 1993, 1994 and 1995 was $4.34,
$4.45, $4.56, $4.67, and $4.67, respectively. The
-19-
<PAGE>
Property has an outdoor swimming pool, a playground and a clubhouse. There is
ample paved parking for residents.
The buildings are wood frame construction with brick veneer on concrete
slab foundations. Roofs are pitched and covered with asphalt shingles. The
exteriors also have cyprus siding and the windows are single-pane casements.
All apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and baths. Each apartment unit has a cable
television hook-up, washer/dryer connections and an individually controlled
heating and air-conditioning unit. Each kitchen is equipped with a
refrigerator/freezer, electric range and oven, dishwasher and garbage disposal.
The owner of the Property provides cold water, sewer service and trash removal.
The tenants pay for their electric usage, which includes heating,
air-conditioning, hot water, cooking and lights.
There are at least three apartment properties in the area which compete
with the Property. All offer similar amenities and have rents that are generally
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing projects now averages
approximately 88%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 98% in 1991, 90% in 1992, 96% in 1993, 91%
in 1994, and 94% in 1995. On August 30, 1996, the Property was 94% occupied.
Approximately 45% of the apartment units are occupied by employees of Pitt
County Memorial Hospital. The remainder of the tenants are employed in a
mix of white-collar and blue-collar jobs. Currently, approximately 1/3 of the
tenants have household incomes between $30,000 and $40,000, and approximately
1/4 of the tenants have household incomes in excess of $40,000.
The 1995 real estate tax rate applicable to the Property was
approximately $1.18 per $100 of assessed value, and the real estate taxes for
1995 were calculated to be $68,599. The assessed value was $5,101,640. The basis
of the depreciable residential real property portion of the Property (currently
estimated at about $4,643,540) will be depreciated over 27.5 years on a straight
line basis. The basis of the personal property portion will be depreciated in
accordance with the modified accelerated cost recovery system of the Code.
Amounts to be spent by the Company on repairs and improvements will be
-20-
<PAGE>
treated for tax purposes as permitted by the Code based on the
nature of the expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Greenville, North Carolina area will
enjoy steady economic development and population increase, and that such
development and increase will support stable occupancy rates and reasonable
increases in rents at the Property.
2. Based upon an engineering report and its own
inspections, the Company believes that the Property is in sound condition.
3. The Property is strategically located just one block
from Pitt County Memorial Hospital, one of the area's major
employers.
The Company is not aware of any material adverse factors relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be necessarily indicative of future operating
results.
HAMPTON GLEN APARTMENTS
RICHMOND, VIRGINIA
On September 4, 1996, effective August 1, 1996, the Company purchased
the Hampton Glen Apartments, a 232-unit apartment complex having an address of
4118 Whitford Circle, in Glen Allen, outside of Richmond, Virginia (the
"Property").
The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $11,599,931. At closing, the Company borrowed
the entire purchase price under the Company's Unsecured Line of Credit. Title to
the Property was conveyed to the Company by limited warranty deed.
Location. The following information is based in part upon
information provided by the Richmond Chamber of Commerce.
-21-
<PAGE>
The current population of Richmond is approximately 202,000 and the
current population of the Metropolitan Statistical Area including the City of
Richmond is approximately 930,000. Richmond is located centrally within the
Commonwealth of Virginia, approximately midway between Washington, D.C. and
Raleigh, North Carolina.
The greater Richmond area is served by the Richmond International
Airport, and is situated at the intersection of Interstates 95 and 64. In
addition to being the capital of Virginia, Richmond is also home to numerous
Fortune 500 companies. Some of the larger employers in the area are Philip
Morris, state government, AT&T, Dupont, and NationsBank. In addition, the area
is the site of a number of institutions of higher education, including Virginia
Commonwealth University, the Medical College of Virginia, the University of
Richmond, and Virginia State University.
The Property is located west of the City of Richmond in Henrico County.
The Property is conveniently close to many retail, dining and recreation areas.
The Property is near the Innsbrook Corporate Center, a large and expanding
corporate office park.
The Property is approximately a 15-minute drive from downtown Richmond
and an approximately 30-minute drive from Richmond International Airport.
Description of the Property. The Property consists of 232 garden-style
apartments located in 19 two-story buildings on approximately 16 acres. The
Property was built in 1985 and 1986.
The Company believes that the Property is generally in good condition.
However the Company has budgeted approximately $348,000 for certain repairs and
improvements, including siding replacement, painting, roof repairs, landscaping
and clubhouse renovation.
The Property offers four unit types. The unit mix and rents currently
being charged new tenants are as follows:
Approximate
Interior
Square Monthly
Quantity Type Footage Rental
- -------- ---- ------- ------
48 one bedroom, one bath 562 $545-585
-22-
<PAGE>
Approximate
Interior
Square Monthly
Quantity Type Footage Rental
- -------- ---- ------- ------
64 one bedroom, one bath 672 595-635
40 two bedrooms, 1 bath 827 665-710
80 two bedrooms, 2 baths 997 740-770
The apartments provide a combined total of approximately 183,000 square
feet of net rentable area.
Leases at the Property are generally for terms of one year or less.
Average rental rates for the past five years have gradually increased. As an
example, a one bedroom apartment rented for $445 in 1991, $450 in 1992, $460 in
1993, $480 in 1994, and $520 in 1995. The average effective annual rental per
square foot at the Property for 1991, 1992, 1993, 1994, and 1995 was $7.99,
$8.08, $8.26, $8.62, and $9.33, respectively.
The Property includes an athletic club which offers fitness amenities
including weight machines, exercycles and a racquetball court. The Property has
two outdoor swimming pools with a waterfall and an expansive sundeck, a lighted
tennis court, a basketball court, a sand volleyball court, a car wash area, and
a tree-lined walking trail surrounding the Property. The Property also has a
clubhouse and a rental office, and there is ample paved parking for residents.
The buildings are wood frame structures on concrete slab with pitched
roofs covered with three tab shingles over wood sheathing. Exteriors are brick
veneer and painted horizontal siding. Windows are aluminum frame with dual
panes. According to the seller, over the past three years, the seller expended
approximately $600,000 in improvements, including a roof replacement,
repainting, window replacement and carpet replacement.
All apartments units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and baths. Each apartment unit has a cable
television hook-up, a patio or deck with outside storage locker, large walk-in
closets and an individually controlled heating and air-conditioning unit. Each
unit also includes a washer and dryer. Each kitchen is equipped with a
refrigerator/freezer with icemaker, an electric range and self-cleaning oven, a
dishwasher, a microwave and a garbage
-23-
<PAGE>
disposal. The owner of the Property supplies cold water, sewer service and trash
removal. The tenants pay for their electricity usage, which includes heat, hot
water, air-conditioning, cooking and lights.
There are at least three apartment properties in the area which compete
with the Property. All offer similar amenities and have rents that are generally
higher when compared with those of the Property. Based on a recent telephone
survey, the Company estimates that occupancy in nearby competing projects now
averages approximately 96%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 90% in 1991, 88% in 1992, 90% in 1993, 95%
in 1994, and 97% in 1995. On August 30, 1996, the Property was 96% occupied.
Most of the tenants are employed in professional, administrative or technical
occupations. Major employers of tenants include Capital One, Circuit City,
Signet Bank, Crestar Bank and Virginia Commonwealth University. Most of the
current tenants are single. It is believed that currently approximately 30% of
the tenants have household incomes in the range of $30,000 to $40,000 and nearly
one half of the residents have household incomes in excess of $40,000.
The 1995 real estate tax rate applicable to the Property was
approximately $0.96 per $100 of assessed value, and the real estate taxes for
1995 were calculated to be $87,682. The assessed value was $9,133,500. The basis
of the depreciable residential real property portion of the Property (currently
estimated at about $8,043,100) will be depreciated over 27.5 years on a straight
line basis. The basis of the personal property portion will be depreciated in
accordance with the modified accelerated cost recovery system of the Code.
Amounts to be spent by the Company on repairs and improvements will be treated
for tax purposes as permitted by the Code based on the nature of the
expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Richmond, Virginia area
will enjoy continued steady economic development and steady
population increase, due to a diversified economy, and that such
-24-
<PAGE>
development and increase will support stable occupancy rates and reasonable
increases in rents at the Property.
2. Based upon an engineering report and its own
inspections, the Company believes that the Property is in sound
condition.
3. The Property is conveniently located and proximate to
major employers and shopping, as well as the downtown Richmond
area.
4. The Company is particularly familiar with the Richmond
market since the Company's principal offices are in Richmond.
The Company is not aware of any material adverse factors relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be necessarily indicative of future operating
results.
-25-
<PAGE>
ITEM 7.a.
[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Lexington Tower Apartments located in Richmond, Virginia for the
three month period ended March 31, 1996. This statement is the responsibility of
the management of Lexington Tower Apartments. Our responsibility is to express
an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Cornerstone Realty Income Trust, Inc.) and excludes
material expenses, described in Note 1 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Lexington Tower
Apartments (as defined above) for the three month period ended March 31, l996,
in conformity with generally accepted accounting principles.
/s/ L.P. MARTIN & CO., P.C.
Richmond, Virginia
June 21, 1996
-27-
<PAGE>
LEXINGTON TOWER APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
THREE MONTHS ENDED MARCH 31, 1996
INCOME
Rental and Other Income $ 258,897
DIRECT OPERATING EXPENSES
Administrative and Other 11,522
Insurance 4,122
Repairs and Maintenance 45,039
Taxes, Property 14,949
Utilities 40,700
TOTAL DIRECT OPERATING EXPENSES 116,332
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 142,565
See accompanying note to the financial statement.
- 28 -
<PAGE>
LEXINGTON TOWER APARTMENTS
NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
THREE MONTHS ENDED MARCH 31, 1996
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Lexington Tower Apartments is a 197 unit high rise apartment complex with
attached parking located in Richmond, Virginia. Living space totals 107,322
square feet.
The assets comprising the property were owned by Lexington Tower Associates
during the financial statement period. Cornerstone Realty Income Trust, Inc. has
a contract to purchase the property and is scheduled to close in June, 1996.
In accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation, legal fees, management
fees and accounting fees.
- 29 -
<PAGE>
ITEM 7.b.*
- ---------------------
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
-30-
<PAGE>
ITEM 7.c.
[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Paces Glen Apartments located in Charlotte, North Carolina for the
twelve month period ended June 30, 1996. This statement is the responsibility of
the management of Paces Glen Apartments. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Cornerstone Realty Income Trust, Inc.) and excludes
material expenses, described in Note 1 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Paces Glen
Apartments (as defined above) for the twelve month period ended June 30, 1996,
in conformity with generally accepted accounting principles.
/s/ L.P. MARTIN & CO., P.C.
Richmond, Virginia
August 14, 1996
- 32 -
<PAGE>
PACES GLEN APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTHS ENDED JUNE 30, 1996
INCOME
Rental and Other Income $1,160,564
DIRECT OPERATING EXPENSES
Administrative and Other 109,492
Insurance 7,749
Repairs and Maintenance 170,012
Taxes, Property 78,714
Utilities 72,111
TOTAL DIRECT OPERATING EXPENSES 438,078
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 722,486
See accompanying note to the financial statement.
- 33 -
<PAGE>
PACES GLEN APARTMENTS
NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTHS ENDED JUNE 30, 1996
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Paces Glen Apartments is a 172 unit residential garden style apartment complex
located on 28.7 acres in Charlotte, North Carolina. Living space totals 155,672
square feet.
The assets comprising the property were owned by High Equity XX Limited
Partnership during the financial statement period. Cornerstone Realty Income
Trust, Inc. purchased the property in July 1996.
In accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, loan amortization, property depreciation,
management fees and professional fees.
-34-
<PAGE>
ITEM 7.d.
[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct
operating expenses exclusive of items not comparable to the proposed future
operations of the property Doctors Park Apartments located in Greenville, North
Carolina for the twelve month period ended June 30, 1996. This statement is the
responsibility of the management of Doctors Park Apartments. Our responsibility
is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statement.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Cornerstone Realty Income Trust, Inc.) and excludes
material expenses, described in Note 1 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Doctors Park
Apartments (as defined above) for the twelve month period ended June 30, 1996,
in conformity with generally accepted accounting principles.
Richmond, Virginia
August 23, 1996 /s/ L.P. MARTIN & CO., P.C.
- 36 -
<PAGE>
DOCTORS PARK APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTHS ENDED JUNE 30, 1996
INCOME
Rental and Other Income $873,794
DIRECT OPERATING EXPENSES
Administrative and Other 65,142
Insurance 11,460
Repairs and Maintenance 210,849
Taxes, Property 69,389
Utilities 44,488
TOTAL DIRECT OPERATING EXPENSES 401,328
Operating income exclusive of items not
comparable to the proposed future operations
of the property $472,466
See accompanying notes to the financial statement.
- 37 -
<PAGE>
DOCTORS PARK APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTHS ENDED JUNE 30, 1996
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Doctors Park Apartments is a 171 unit residential garden and townhouse style
apartment complex located on 15.27 acres in Greenville, North Carolina. Living
space totals 177,254 square feet. A majority of the tenants are employed at
Pitt County Memorial Hospital.
During the financial statement period, the assets comprising the property were
owned by a nonaffiliated North Carolina partnership. The partnership is
donating the property to the Boys and Girls Club Foundation of America.
Cornerstone Realty Income Trust, Inc. has a contract to purchase the property
from the Foundation and is scheduled to close in August 1996.
In accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation, legal fees, accounting
fees and management fees.
NOTE 2 - RELATED PARTY TRANSACTIONS
During the financial statement period the property was managed by Remco East,
Inc. (Remco). Remco was paid a management fee, for services provided, based
on a percentage of property income. In addition, employees of Remco performed
the majority of repairs and maintenance services. Remco charged a mark up for
materials and supplies purchased and for labor provided. The management fees
are excluded from the statement of income and direct operating expenses.
- 38 -
<PAGE>
ITEM 7.e.*
- ---------------------
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
-39-
<PAGE>
ITEM 7.f.*
- ---------------------
* To be filed by amendment. It is impracticable to include herein the required
pro forma financial information. The required pro forma financial information
will be filed as an amendment to this report as soon as possible, but in no
event more than 60 days after the date of filing of this report.
-40-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cornerstone Realty Income Trust, Inc.
Date: September 16, 1996 By: /s/ Stanley J. Olander, Jr.
--------------------------------
Stanley J. Olander, Jr.,
Vice President of
Cornerstone Realty
Income Trust, Inc.
-41-
<PAGE>
EXHIBIT INDEX
Cornerstone Realty Income Trust
Form 8-K dated June 26, 1996
Exhibit Number Exhibit Page Number
10.1 Purchase Contract for
Lexington Towers Apartments
10.2 Purchase Contract for Oak Park
Apartments
10.3 Purchase Contract for Paces Glen
Apartments
10.4 Purchase Contract for Doctors Park
Apartments
10.5 Purchase Contract for Hampton Glen
Apartments
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors*
23.3 Consent of Independent Auditors
23.4 Consent of Independent Auditors
23.5 Consent of Independent Auditors*
23.6 Consent of Independent Auditors*
* To be filed by amendment.
-42-
Exhibit 10.1
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 1st day of March 1996,
between CORNERSTONE REALTY GROUP, INC., or its nominee, (hereinafter
called "Purchaser") and LEXINGTON TOWER ASSOCIATES, a VIRGINIA GENERAL
PARTNERSHIP, (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 Sale of Property. Seller agrees to sell and convey, and
Purchaser agrees to purchase, Seller's real property known as LEXINGTON TOWER
APARTMENTS located in Richmond, VA with all buildings and improvements
located thereon, as more particularly described in the attached legal
description in Exhibit A including, but not limited to 197 individually
heated and air conditioned apartment units, with all appurtenances, together
with all appliances, drapes, carpeting, shrubbery and all other personal
property used in connection with the premises (except for personal items of
Paul Gordon, attached hereto as Exhibit B), including, the inventory of personal
property attached hereto as Exhibit C (all such real and personal property
hereinafter collectively referred to as the "Property" unless the context
clearly indicates otherwise).
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 Purchase Price. The total purchase price shall be SIX
MILLION ($6,000,000) DOLLARS payable as follows:
A. Cash. Five Hundred Thousand ($500,000) Dollars at closing.
B. Debenture. The balance of Five Million Five Hundred Thousand
($5,500,000) Dollars to be paid by a three-year debenture in the amount of
$5,500,000 bearing interest at the rate of 5.65% per annum, in the form attached
hereto as Exhibit D.
i. The debenture shall be secured by an irrevocable Letter
of Credit issued by First Union Bank having a term equal to the debenture
set forth in Paragraph 2.1.B. in the form attached hereto as Exhibit E.
ii. Seller agrees to pay to the Purchaser Seven Thousand Seven
Hundred ($7,700) Dollars per year towards their
<PAGE>
fee required to obtain the Letter of Credit or a pro rata portion of said $7,700
in the event the debenture shall be prepaid.
ARTICLE III
TITLE MATTERS
3.1 Marketable Title. Seller, shall convey good and marketable title by
General Warranty Deed in the form attached hereto as Exhibit F, subject only to
subject only to 1995 real estate taxes and general taxes for the current year
not yet due and payable and the items (hereinafter called "Permitted
Exceptions") shown on Exhibit G attached hereto.
Seller shall pay 1995 real estate taxes on or before January 1, 1997 and
if Seller does not pay such real estate taxes by such date, then such amount
shall be deducted including penalties and interest, if any, out of the first
interest installment under the debenture. This shall not appear as an objection
to title at closing.
(A) Title shall be free from any and all liens or mortgages and
Seller shall be responsible for any prepayment penalties necessary to deliver
such free title.
3.2 Title Update. It is understood that this sale will be
"closed in escrow". Therefore, it is understood that the title company
shall be required to update the title report upon which it will issue
the insurance to the Purchaser. In the event that there are any changes
affecting the title between the execution of this Agreement and the closing
date, Seller shall be obligated to correct all conditions created after
the signing of this Agreement.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following shall be prorated, on
a calendar-month basis, to date of closing: rents and other income from the
Property; operating expenses (on such service contracts and other obligations as
Purchaser may agree to assume); and general and real property taxes and personal
and business property taxes for the year of closing (based on the most recent
assessment and the most recent levy).
4.2 Closing Costs. Purchaser and Seller shall pay their customary share
(as determined by Richmond, Virginia customs) of all taxes, recording fees, if
any, imposed on the Deed, or any other documents executed in connection with the
transfer of the Property. Purchaser agrees to pay cost of title insurance.
Seller shall pay any prepayment penalty charged by the holders of any existing
notes.
<PAGE>
4.3 Allocation of Rents. Rents collected by Seller prior to Closing
shall be prorated as agreed in 4.1 above. Purchaser
shall apply rents received after Closing first to rents due to Seller
as of closing, but uncollected prior to closing, limited to current month
only. Seller shall retain the right to commence legal action
against a tenant for any delinquent rent apportioned to the Seller.
4.4 Prior Lease Concessions. Seller shall pay to Purchaser, in a lump
sum at closing, all future monetary concessions which Seller has given to
tenants under leases existing at the time of closing.
4.5 Form of Closing Statement. The Closing Statement shall be in
the form attached hereto as Exhibit H.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 Possession. Possession of the Property shall be delivered
to Purchaser at closing, subject to the rights of the tenants under
existing leases and rental agreements.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions Precedent. Purchaser's obligation to purchase
shall be subject to and contingent upon the satisfaction of the following
conditions precedent:
(A) The receipt by Purchaser of Seller documents described in 7.2
below.
(B) On the condition that Sellers representations and warranties
described in Article VIII below remain true and correct.
(C) On the condition that there have been no material or
adverse structural (foundation, roof, load-bearing walls) changes to the
property. If there are any material or adverse structural changes to the
property, Seller shall have the option as to whether or not to correct such
defects. If Seller elects not to correct such defects, then Purchaser shall have
the option of waiving such defects and proceeding to closing or Purchaser may
void this Agreement without any liability to either party.
(D) Seller acknowledges that Purchaser is a public entity and that it
is required to furnish financial statement to the Securities and Exchange
Commission in connection with this acquisition. Seller agrees, to the extent
possible, to make the information available for Purchaser for January through
April 1996. It is understood that if Purchaser's auditors shall be able to
render the same type of opinion as they rendered for the previous year, this
contingency will be deemed satisfied.
6.2 Inspection. This Agreement shall be further subject to and
contingent upon Purchaser's satisfactory inspection as follows herein
below.
6.2.1 "Rent Ready". All vacant apartment units, are to be in a
"rent ready" condition, at the time of closing, containing, but not limited
to the following amenities, i.e., carpet, refrigerator, range, garbage
disposal, heating, plumbing and electrical systems. Purchaser agrees not
to inspect occupied units prior to closing. If Seller fails to have all
units in a "rent ready condition", Purchaser shall have the option of
waiving such requirement and continue to closing or allow Seller one additional
month to make all units "rent ready". If all units are not ready at the end
of the additional month, then Purchaser shall either waive such requirement
and continue to closing or Purchaser may void this Agreement without any
further liability to either party.
6.2.2 Condition of Personal Property at Closing. All personal property
included in the sale and all mechanical, electrical, heating, air conditioning,
sewer, water and plumbing systems will be in substantially the same working
order and condition at the time of closing as at the time of the initial
inspection by Purchaser, normal wear and tear excepted. If such items are
not in such working order and condition, Seller shall have the option as to
whether or not to correct such defects. If Seller elects not to correct such
defects, the Purchaser shall have the option of waiving such defects and
proceeding to closing or Purchaser may void this agreement without any
liability to either party.
6.2.3 Employees. Purchaser agrees not to interview Seller's employees
prior to June 20, 1996.
6.3 Conditions to Seller's Closing. Seller's obligations hereunder
are conditioned upon Seller's receipt of releases from the service contracts
described in Section 7.4(B) of this Agreement or in the alternative an
agreement from Purchaser to hold Seller harmless under all assumed contracts
subsequent to closing.
6.4 Reinspection. Seller agrees to permit Purchaser to reinspect
the property on or after June 20, 1996 for the purpose of the obligation set
forth in this contract.
ARTICLE VII
CLOSING
7.1 Closing. Closing will be held on June 30, 1996 at such place
and at such time as the parties may agree.
7.2 Delivery of documents. All documents set forth in this
Agreement, which are necessary for closing, shall be executed and delivered
to the title company to be held in escrow pursuant to the terms and conditions
set forth herein and pursuant to the escrow agreement between the title
company, Purchaser and Seller in the form attached hereto as Exhibit Y. It
being understood that the purpose of this agreement is to finalize all of
the terms and obligations and fulfill simultaneously all of the terms and
obligations. However, the deed shall not be delivered until June 30, 1996
at which time all of the other documents referred to as exhibits which have
been executed shall be delivered on the additional condition that the cash
due shall be wired as per the instructions of the Seller.
Therefore, wherever in this contract it refers to either
party delivering and executing certain documents, it is understood that the
original of those documents shall be delivered to the title company to be
held in escrow until June 30, 1996 at which time the documents shall be
delivered to the party entitled thereto in accordance to the terms of the
escrow agreement. Copies of all of the executed documents shall be
attached to this Agreement.
7.3 Seller's Deliveries. At closing, Seller shall execute and
deliver to Purchaser the General Warranty Deed referred to in Paragraph 3
hereof and shall also execute, where necessary, and deliver to Purchaser,
the following:
(A) A Bill of Sale in the form attached hereto as Exhibit I,
with warranty of title transferring the personal property (as shown in
Schedule C) to Purchaser free of all liens, charges and encumbrances.
(B) Originals or copies of all signed leases and rental
agreements in effect with tenants of the Property.
(C) All security deposits and cleaning deposits made by
such tenants. Seller will give the tenants the required notice of such
transfer in compliance with the laws of Virginia.
(D) An affidavit of Seller in the form attached hereto
as Exhibit J.
(E) A rent roll, in the form attached hereto as Exhibit K,
certified by Seller to be true and correct to the best of Seller's actual
knowledge as of the date of closing showing the name of, and the amount of
monthly rental payable, by each tenant of the Property, the apartment
occupied by the tenant, the date to which rent has been paid, any advance
payment of rent, and the amount of any escrow, or security deposit of tenant.
(F) An affidavit of Seller, in the form attached hereto as
Exhibit L, that to the best of its information and belief there are, on the
date of closing, no unsatisfied judgments, creditor's claims, tax liens,
or pending bankruptcies involving Seller.
(G) An assignment, in the form attached hereto as
Exhibit M, of all Seller's interest in the following: (1) all assignable
licenses, and permits relating to the operation of the Property, (2) the
leases and rental agreements with tenants of the Property, (3) to the extent
assignable, the existing Property telephone number and (4) the business and
trade name as set forth in Par. 1.1.
(H) An assignment, in the form attached hereto as Exhibit N,
of all warranties and guarantees to the extent such are still in effect and
provide Purchaser with copies, to the extent reasonably obtainable, of all
such warranties and guarantees without limitation for all appliances,
dishwashers, disposals, refrigerators, heating and air conditioning units,
washers and dryers. Seller makes no representation or warranty as to which
items, if any, are under warranty or guarantee.
(I) Consent, in the form attached hereto as Exhibit O, of
the Seller's authorized officer to the sale of the Property and any other
approvals required under Seller's articles or by-laws, which may affect
Seller's ability to convey marketable title.
(J) Provide documents for the transfer of the telephone,
electric, water and sewer, and gas utilities, as may be required by the
utility, for execution at closing.
(K) Satisfactory evidence, in the form attached hereto
as Exhibit Z, of the power and authority of Seller to enter into and
consummate this agreement, including but not limited to:
(i) An opinion of Seller's counsel, in the form
attached hereto as Exhibit P, stating that:
(a) The individual(s) executing the deed
and related documents are duly authorized to do all such acts as are
necessary to consummate this sale, without further consent of any other
party.
(b) That the partner or officer can
bind the Partnership or Corporation.
(L) Seller shall provide a satisfactory and valid written
termination, in the form attached hereto as Exhibit Q, of the management
agreement executed by the existing management and rental agent for the
Property, without cost to the Purchaser.
(M) A notice letter, in the form attached hereto as
Exhibit R, to all the residents of the apartment complex as to change of
ownership in the form prepared by the Purchaser.
(N) A representation letter as normally required by
auditors for a public company, which has been agreed upon between the
Seller and Purchaser's auditors and attached hereto as Exhibit S. This
clause shall survive closing for one year.
Unless facts or circumstances change which
would render any of Seller' representations untrue, Seller shall not be
required to sign any other documents or provide any other documents or
items at or before closing. If such facts or circumstances change, the
Seller shall execute and deliver all documents as are reasonably
necessary in connection with such changed facts or circumstances.
7.4 Purchaser's Deliveries. At closing and contemporaneously
with the Seller's compliance with the provisions of Section 7.3,
Purchaser shall:
(A) Pay to Seller the cash portion of the purchase
price, adjusted for the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption and indemnification
agreement, in the form attached hereto as Exhibit T, of obligations under
leases, securities, elevator contract, HVAC contract, BFI contract,
Solon contract, Terminex contract and any other obligations specifically
set forth herein.
(C) Deliver to the Seller a resolution, in the form
attached hereto as Exhibit U, of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate the
transfer.
(D) Deliver to the Seller as opinion of Purchaser's
counsel, in the form attached hereto as Exhibit V, stating that:
(i) The Purchaser is a duly authorized, validly existing entity
with due power to own its properties and to issue the debenture;
(ii) The Debenture has been duly authorized and the debenture
has been duly executed and delivered, and
(iii) The debenture constitutes the valid and legally binding
promise of the Purchaser, enforceable against the Purchaser subject to
bankruptcy, insolvency and other similar laws affecting creditors generally
and customary principles of equity.
(E) Deliver the debenture and the Letter of Credit to the Seller.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations of the Parties. Seller warrants (which warranties
shall not survive settlement unless designated to the contrary) that as of
the date of closing hereof:
(A) That Seller, is the owner in fee simple of the Property and has
the power to convey same.
(B) That Seller is not subject to any other agreements or arrangements,
with the exception of those contained in any existing mortgage documents which
would prevent Seller from selling the Property to Purchaser. This warranty
shall survive for one year following closing.
(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents.
This warranty shall survive for one year following closing.
(D) Unless facts change between the date hereof and closing, Seller
has no actual knowledge and has not been advised in writing that it is in
default under any lease, rental agreement service or equipment contract, or
mortgage or other encumbrances relating to the Property. This warranty shall
survive for one year following closing.
(E) Unless facts change between the date hereof and closing, Seller
has no actual knowledge of any existing or threatened litigation which relates
to or which would affect the Property, except for litigation relating to the
1995 real estate taxes, which litigation has been disclosed to Purchaser. There
is a possible claim relating to a guest breaking glass, which liability is
covered by insurance. In addition, there is a possible claim by HOME, which
shall be Seller's responsibility. This warranty shall survive for one year
following closing.
<PAGE>
(F) Unless facts change between the date hereof and closing, Seller has
not received any written notification from any governmental agency stating
that any part of the Property or the operation of the Property, is in
violation or may violate any governmental statute, regulation, ordinance or
building code or of any private restriction, that any governmental authority
requires any work to be done on or affecting the Property, or that any
governmental authority has expressed an intent to condemn or to make special
improvements for the benefit of the Property or any part thereof. This warranty
shall survive for one year following closing.
(G) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(H) That to the best of Seller's actual knowledge, the Property was
never utilized as a disposal site for hazardous waste products and will
furnish to Purchaser an affidavit, in the form attached hereto as Exhibit W,
confirming same.
(I) Seller covenants and agrees that, between this date and the date
of closing, Seller shall continue to maintain, operate and manage the Property
in a manner consistent with its prior practices, making every reasonable effort
to do nothing which might damage the reputation of the Property or the
relationships with the tenants. Seller shall not permit the modification,
extension or cancellation of any tenant lease (except in accordance with the
terms of such lease) or any dealing with any tenant other than the ordinary
course of managing the Property, without the prior written consent of
Purchaser. If the leases of any tenants expire before thirty (30) days after
the date of closing, Seller shall, up to the date of closing and without cost
to the Purchaser, continue its normal course of operation with respect to
causing tenants to be obtained for apartments which are unrented.
(J) Except as may have been expressly set forth in this Section 8.1,
Seller makes no representations and warranties of any kind. Purchaser is
purchasing the Property in an "AS IS" condition. Purchaser is not relying on any
representation or warranty of Seller in making its decision to purchase the
Property other than those expressly set forth in this Section 8.1.
8.2 Continuation of Representations, Warranties and Covenants to the
Date of Closing. If each of the warranties set forth in this section does not
remain true up to and including the time of closing as to any material matters,
this Agreement, at Purchaser's election, shall be terminated, Seller shall
return all payments made by Purchaser, or Purchaser may elect to close the
sale and waive failure of the warranties. Seller agrees to disclose any
changes of which it has knowledge.
<PAGE>
8.3 Breach of Representations, Warranties and Covenants.
Notwithstanding the provisions of 8.2 above, Seller shall indemnify Purchaser
for all reasonable costs incurred as a result of the failure of any of Seller's
representations, warranties or covenants contained herein to remain true as of
the date of closing.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 Property Damage. If, prior to closing, any part of the Property
is damaged by fire or other casualty, Seller shall elect whether or not to
repair such damage before the date provided herein for closing. If such
damage cannot be repaired by such time or if Seller elects not to repair
such damage, this Agreement may be canceled at the option of the Purchaser.
In the event of cancellation as aforesaid, this Agreement shall become null and
void and the parties shall be released and all payments made shall be returned.
Should Purchaser elect to carry out this Agreement despite such damage Seller
shall assign to Purchaser all insurance proceeds arising from such damage
and will compensate Purchaser for lost rent collections to the extent of
insurance proceeds received. Seller shall promptly notify Purchaser in
writing upon the occurrence of any such damage.
9.2 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any
actual or proposed sale in lieu thereof, the Seller shall give written
notice thereof to the Purchaser promptly after Seller learns or receives notice
thereof. Upon a taking of a material part of the Property (any part of the
building or more than 5% of the parking area), Purchaser may elect to either
(a) terminate this Agreement and all other rights and obligations of the
parties hereunder shall terminate immediately, or (b) to waive its right to
terminate this Agreement and proceed to closing, in which event all proceeds,
awards and other payments arising out of such condemnation or sale (actual or
threatened) shall be paid to the Purchaser at closing, if such payment has
been received or Seller shall assign to Purchaser the rights to such
payments.
9.3 Risk of Loss. Prior to closing, all risks of loss or damage by
every casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 Commission. Seller agrees to pay a brokerage fee to PAUL GORDON
ASSOCIATES and a consultation fee to WINDSOR PROPERTIES, INC. pursuant to
separate agreements between Seller, Broker and Consultant, respectively. Said
fees shall be deemed earned if, and only if, settlement occurs hereunder,
and shall not be deemed earned even if Purchaser and/or Seller wrongfully
fail(s) to consummate the purchase and sale herein contemplated. Purchaser
<PAGE>
shall not be obligated for any fees to any broker or consultant, and Seller
agrees to hold Purchaser harmless in connection with such fees. Seller and
Purchaser represent and warrant to each other that no other brokerage or
consultation fees are or shall be owing in connection with this transaction
or in any way with the Apartments and Seller and Purchaser hereby indemnify and
hold the other harmless from any and all claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 Default Defined. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions
and covenants contained herein, however, it shall not be an event of default
for either party to exercise its rights to terminate this contract as
contained in other provisions herein.
11.2 Seller's Default. Upon Seller's default, the Purchaser, at
it's election, may either (1) require specific performance of Seller, or
pursue its other remedies at law or equity, (2) cancel this Agreement, in which
case this Agreement shall be terminated and the parties released from all
obligations hereunder, or (3) the Purchaser may waive such defaults and
proceed to settlement. Seller shall indemnify Purchaser for any reasonable
costs incurred by Purchaser if Purchaser elects to pursue its option (1)
noted above, to include reasonable attorney fees.
11.3 Purchaser's Default. Upon Purchaser's default, this Agreement
shall be terminated and both parties released from all obligations hereunder,
except that Purchaser agrees to pay to Seller Fifty Thousand ($50,000) Dollars
as liquidated damages. Seller shall have no other remedy against Purchaser in
the event of Purchaser's default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement sets forth the entire
understanding between the parties; it supersedes all previous agreements and
representations which are deemed merged herein and may not be modified except
in writing.
12.2 Assignment. Purchaser may assign this Agreement, in the form
attached hereto as Exhibit X, to Cornerstone Realty Income Trust Inc. without
the consent of Seller. No other assignment may be made.
<PAGE>
12.3 Severability. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be
held invalid, the remainder of this Agreement or the application of such
provision, sentence, phrase, or word to persons or circumstances, other than
those as to which it is held invalid, shall remain in full force and effect.
12.4 Binding Effect. The parties to the Agreement mutually agree that
it shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 Controlling Law. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights
and liabilities of the parties shall be determined in accordance with the
provisions of the laws of the State set forth in Par. 1.1.
12.6 Counterparts. To facilitate execution, this Agreement may
be executed in as many counterparts as may be required. It shall not be
necessary that the signature on behalf of both parties hereto appear in each
counterpart hereof, and it shall be sufficient that the signature on behalf of
both parties hereto appear on one or more such counterparts. All counterparts
shall collectively constitute a single contract.
12.7 Incorporation by Reference. All of the Exhibits referred to
herein and/or attached hereto shall be deemed to constitute a part of the
Agreement.
12.8 Headings. The headings of the Articles and sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
of the Agreement.
12.9 Construction of Contract. Each party hereto have reviewed and
revised (or requested revisions of) this Agreement, and therefore the normal
rule of construction that any ambiguities are to be resolved against a
particular party shall not be applicable in the construction and interpretation
of this Contract or any amendments or exhibits hereto.
12.10 Confidentiality Agreement. Simultaneously with the execution of
this Agreement, the Purchaser and Seller shall execute and deliver the
confidentiality agreement in the form attached hereto as Exhibit AA.
ARTICLE XIII
NOTICE
13.1 Notice. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address
set forth below (or such other address as may be hereafter specified in
writing):
<PAGE>
To Seller: Paul Gordon
102 North Fifth Street
Richmond, VA 23219
With a copy to
Seller's Attorneys: Barry A. Wilton, Esq.
Parker, Pollard & Brown P.C.
5511 Staples Mill Road
Richmond, VA 23228
To Purchaser: S. J. Olander
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
13.2 Delivery of Notice. Notices sent either by Registered or
Certified Mail, Return Receipt Requested, or by overnight express mail
shall be deemed given when deposited in the United States Mail, postage
prepaid, or delivered to a reliable overnight courier. Notices sent in any
other manner shall be deemed given only when actually delivered at the
specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
LEXINGTON TOWER ASSOCIATES, A VA GENERAL PARTNERSHIP
By: /s/ Illegible Signature
Its: /s/ Illegible Title
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. Olander
Its: /s/ Senior Vice President
Exhibit 10.2
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 21st day of May 1996,
between CORNERSTONE REALTY GROUP, INC. or its nominee, (hereinafter called
"Purchaser") and LEA COMPANY, a Virginia General Partnership, (hereinafter
called "Seller").
ARTICLE I
THE PROPERTY
1.1 Sale of Property. Seller agrees to sell and convey, and
Purchaser agrees to purchase, Seller's real property known as OAK PARK
APARTMENTS located in AUGUSTA, GA, with all buildings and improvements located
thereon, as more particularly described in the attached legal description in
Exhibit A including, but not limited to 456 individually heated and air
conditioned apartment units, with all appurtenances, together with all
appliances, drapes, carpeting, shrubbery and all other personal property used in
connection with the premises, including, the inventory of personal property to
be supplied by Seller and attached hereto as Exhibit B (all such real and
personal property hereinafter collectively referred to as the "Property" unless
the context clearly indicates otherwise).
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 Purchase Price. The total purchase price shall be NINE MILLION
EIGHT HUNDRED FOUR THOUSAND ($9,804,000) DOLLARS as evidenced by cash or cash
equivalent at closing.
2.2 Deposit. $100,000 to be placed in escrow at the end of the
"Inspection Period" described in Article VI below. Said deposit shall be placed
in escrow with Lawyers Title Insurance Corporation or its authorized agent as an
earnest money deposit which may be credited against the purchase price or
applied as per Article XI below.
ARTICLE III
TITLE MATTERS
3.1 Marketable Title. Seller, shall convey good and marketable
title by General Warranty Deed, subject only to general taxes for the current
year not yet due and payable and utility easements which could never interfere
with the present use of the Property.
(A) Title shall be free from any and all liens or mortgages and
Seller shall be responsible for any prepayment penalties necessary to deliver
such free title.
<PAGE>
3.2 Title Defects; Election to Cure. Purchaser, at its own cost
and expense, shall secure a commitment for Title Insurance, (the
commitment). If title is not marketable, except as stated above in the
preceding paragraph, Purchaser shall give written notice of any defects in
title to Seller's counsel within fifteen (15) days after Purchaser's receipt of
a title report. Seller may, at its option, elect whether to cure said defects or
by written notice to Purchaser indicate its intention not to cure.
3.3 Election Not to Cure Defects. Should Seller elect not to cure
title defects, this Agreement, at Purchaser's option, shall be void; each party
shall thereupon be released from all obligations hereunder; and all deposits
shall be immediately returned to Purchaser.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following shall be
prorated, on a calendar-month basis, to date of delivery of deed: rents and
other income from the Property; operating expenses (on such service contracts
and other obligations as Purchaser may agree to assume including (i) the lease
agreement with Solon Automated Services, Inc., a copy of which is attached
hereto as Exhibit C, and (ii) the agreement with GE Rescome, Inc., a copy of
which is attached hereto as Exhibit D, which shall be assumed by Purchaser and
any advance shall be adjusted); and general and real property taxes and
personal and business property taxes for the year of closing (based on the most
recent assessment and the most recent levy).
4.2 Closing Costs. Purchaser and Seller shall pay their customary
share of all taxes, recording fees, if any, imposed on the Deed, or any other
documents executed in connection with the transfer of the Property. Purchaser
agrees to pay cost of title insurance. Seller shall pay any prepayment penalty
charged by the holders of any existing notes.
4.3 Allocation of Rents. Rents collected by Seller prior to
Closing shall be prorated as agreed in 4.1 above. Purchaser shall apply rents
received after Closing first to payment of the current rent due to Purchaser,
then to delinquent rents due to Purchaser, and last to rents due to Seller as of
the Closing but uncollected prior to settlement. Purchaser agrees to use its
best efforts in good faith to collect the amount of any rental arrears from
tenants and Purchaser agrees to remit promptly to Seller any such arrears
actually paid by such tenants to Purchaser. Seller shall retain the right to
commence legal action against a tenant for any delinquent rent apportioned to
the Seller.
2
<PAGE>
4.4 Prior Lease Concessions. Seller shall pay to Purchaser, in a
lump sum at closing, all future monetary concessions which Seller has
given to tenants under leases existing at the time of closing. There are four
(4) employees who reside in rent-free apartments and Seller agrees that if any
of them do not vacate prior to closing, to pay their rent for one month after
which they will vacate.
ARTICLE V
POSSESSION OF THE PROPERTY
5.l Possession. Possession of the Property shall be delivered to
Purchaser at closing, subject to the rights of the tenants under existing leases
and rental agreements.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions Precedent. Purchaser's obligation to purchase
shall be subject to and contingent upon the satisfaction of the following
conditions precedent:
(A) Receipt by Purchaser, at its own cost and expense, of an
engineering report of building and site conditions, satisfactory to Purchaser in
its sole discretion, said-report to include in part, a description of any
hazardous waste sites, hazardous wastes and/or hazardous materials affecting the
property. Purchaser shall have twenty-one (21) days (not to exceed nine (9) days
following expiration of the period defined below) in which to review the reports
set forth herein and exercise its right to reflect the Property based thereon
or the right hereunder shall be deemed waived.
(B) The receipt by Purchaser of Seller documents described in
7.2 below.
(C) on the condition that Sellers representations and
warranties described in Article VIII below remain true and correct.
(D) On the condition that there have been no material or
adverse changes to the property or leases.
(E) Seller acknowledges that Purchaser is a public entity and
that it is required to furnish financial statements to the Securities and
Exchange Commission in connection with this acquisition. Seller agrees to make
the information available for Purchaser to audit the last 12 months of operation
of the Property 80 that a report can be generated that is in compliance with
accounting Regulation S-X of the Securities and Exchange Commission.
(F) Survey which shall show no encroachments onto
3
<PAGE>
the Land from any adjacent property, no encroachments by or from the Land onto
adjacent property and no violation of or encroachments upon any recorded
building lines, restrictions or easements affecting the Property. If the Survey
discloses any such encroachment or violation, Seller shall have thirty (30) days
from the date of delivery of the Survey (with a commensurate extension of the
closing date) to have the Title Insurer issue its endorsement insuring
against damage caused by such encroachment or violation and to provide evidence
thereof to Purchaser, and if Seller fails to or is unable to have the same
insured against within such thirty (30) day period, Purchaser may elect, on or
before the Closing Date, to (i) terminate this Agreement (in which case the
Earnest Money shall be returned to Purchaser) and neither party shall have any
further liability or obligation to the other hereunder, or (ii) accept the
property subject to any such encroachment or violation.
6.2 Inspection. This Agreement shall be further subject to
and contingent upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 Preparation for Inspection. At the execution of this
Agreement, Seller shall deliver to Purchaser copies of the following: The
current rent roll for the Property; detailed statements of income and expenses
with respect to the Property for the past two years; the most recent tax bills
for the Property; utility bills for the Property for the twelve (12) months
previous to the date hereof; all contract, mortgages, and other documents
creating liens of security interest on the Property, or any part thereof and all
promissory notes secured thereby; all insurance policies applicable to the
Property to include loss runs for the last five (5) years; Plans and
Specifications for the Property, service contracts, Certificates of
Occupancy, to the extent reasonably available; a copy of the title policy and
most recent survey for the Property. A copy of any environmental or
engineering reports on the property. All these items shall be certified by
Seller to be accurate and complete to the best of its knowledge and belief.
6.2.2 Inspection of Books and Records; Access. Upon receipt by
Purchaser of all documents requested in the paragraph above, Purchaser, its
employees, agents and contractors shall have 21 days (the "Inspection Period")
to enter upon the Property subject to the rights of the tenants during normal
business hours for the purpose of making physical inspections thereof, including
but not limited to roofs, heating, cooling, electrical and plumbing systems,
swimming pool, appliances, and structural elements of the buildings. Upon the
conclusion of the Inspection Period this contract shall be deemed to be a firm
agreement of purchase and sale binding the parties hereto, except as it may be
terminated by other provisions and conditions contained herein, including but
not limited to the condition imposed by Paragraph 6.1(A) above.
4
<PAGE>
6.2.3 Right of Termination During Inspection Period. Purchaser shall also
be permitted to review all original leases, expense records, tenant cards and
occupancy data available. If Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller before the end of
the Inspection Period, and no party hereto shall have any further liability
to any other party hereto, and all deposits shall be returned to Purchaser.
6.2.4 "Rent Ready". During the "Inspection Period", both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree that
said apartment shall be representative of a "rent ready" unit by which all other
units shall be judged for "rent ready" condition at closing. All vacant
apartment units, are to be in a "rent ready" condition (as defined above), at
the time of closing, containing, but not limited to the following amenities,
i.e., carpet, refrigerator, range, garbage disposal, heating, plumbing and
electrical systems.
6.2.5 Condition of Personal Property at Closing. All personal property
included in the sale and all mechanical, electrical, heating, air conditioning,
sewer, water and plumbing systems will be in the same working order at the time
of closing and in the same condition as at the time of the initial inspection
by Purchaser. If Seller fails to make reasonable efforts to conserve the
property, Purchaser shall have the option of waiving such requirement, in
writing, and proceeding to closing, or Purchaser may void this Agreement and
obtain a prompt return of its deposit.
ARTICLE VII
CLOSING
7.1 Closing. Closing will be held 14 days after the completion of the
Inspection Period at such time and place as the parties may agree. The parties
may agree to extend the closing once to no later than July 30, 1996 with
prorations as of July 1st. However, in the event closing takes place after
July 1st, Seller agrees to increase the Purchase Price by $2,830 per day.
7.2 Seller's Deliveries. At closing, Seller shall execute and deliver to
Purchaser the General Warranty Deed referred to in Paragraph 3 hereof and shall
also execute, where necessary, and deliver to Purchaser, the following:
(A) A Bill of Sale, with warranty of title transferring the personal
property (as shown in Schedule B) to Purchaser free of all liens, charges and
encumbrances.
(B) Originals or copies of all signed leases and rental agreements
in effect with tenants of the Property.
(C) All security deposits made by such tenants.
5
<PAGE>
Seller will give the tenants the required notice of such transfer in compliance
with the laws of GEORGIA.
(D) An affadavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(E) A rent roll certified by Seller to be true and correct as of the
date of closing showing the name of, and the amount of monthly rental payable,
by each tenant of the Property, the apartment occupied by the tenant, the date
to which rent has been paid, any advance payment of rent, and the amount of any
escrow, or security deposit of tenant.
(F) An affidavit of Seller that to the best of its information and
belief there are, on the date of closing, no unsatisfied judgments, creditor's
claims, tax liens, or pending bankruptcies involving Seller.
(G) Seller shall provide, a certificate from a licensed extermination
contractor, who is regularly engaged in the business of pest control, that all
buildings are free from any termite or other wood-boring insect infestation.
Said certificate shall be dated within 90 days of closing, bearing the
Contractor's name, contractors license number, the signature of the party
authorized to sign for the Contractor and the date of the inspection. Should
damage exist, Seller shall proceed to have any corrective work completed prior
to closing or Purchaser, at its option, may either proceed to settlement and
have such sums required for repairs deducted from Seller's proceeds, or may in
its sold discretion terminate this Agreement. Seller shall promptly return
Purchaser's deposit upon such termination.
(H) Assignments of all Seller's interest in the following: (1) all
assignable licenses, and permits relating to the operation of the Property, (2)
the leases and rental agreements with tenants of the Property, (3) the existing
Property telephone number and (4) the business and trade name as set forth in
Par. 1.1.
(I) Assignments of all warranties and guarantees to the extent such
are still in effect and provide Purchaser with copies of all such warranties
and guarantees without limitation for all appliances, dishwashers, disposals,
refrigerators, heating and air conditioning units, washers and dryers.
(J) To the best of Seller's knowledge and belief, a representation
to Purchaser that all water, sewer, gas, electric, telephone, and drainage
facilities and all other utilities required by law or by the normal use and
operation of the Property are and at the time of closing will be installed to
the property line, are and at the time of closing will be connected pursuant
to valid permits, and are and at the time of closing adequate to service the
6
<PAGE>
Property and to permit full compliance with all requirements of law and normal
usage of the Property by the tenants thereof and their licensees and invitees.
(K) Consent of the Seller's authorized officer to the sale of the
Property and any other approvals required under Seller's articles or by-laws,
which may affect Seller's ability to convey marketable title.
(L) Provide documents for the transfer of the telephone, electric,
water and sewer, and gas utilities, as may be required by the utility, for
execution at closing (any existing security deposits to be refunded to Seller).
(M) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement, including but not limited to:
(i) An opinion of Seller's counsel, in a form satisfactory to
Purchaser, stating that:
(a) The individual(s) executing the deed and related
documents are duly authorized to do all such acts as are necessary to consummate
this sale, without further consent of any other party.
(b) That the partner or officer can bind the Partnership or
Corporation.
(N) Affidavit that Seller has no actual knowledge of the presence of
asbestos and/or any other hazardous material at the Property, other that vinyl
asbestos tile in the kitchen and bathrooms of a few apartments and in some
laundry areas.
(O) Seller shall provide a satisfactory and valid written termination
of the management agreement executed by the existing management and rental agent
for the Property, without cost to the Purchaser.
(P) A notice letter to all the residents of the apartment complex as
to change of ownership in the form prepared by the Purchaser.
(Q) All such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Purchaser or its counsel.
(R) A representation letter as normally required by auditors for a
public company, a copy of which is attached hereto as Exhibit E. This clause
shall survive closing for one year.
7.3 Purchaser's Deliveries. At closing and contemporaneously with the
Seller's compliance with the provisions
7
<PAGE>
of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price, adjusted
for the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under leases,
securities, any contracts which may be accepted by the Purchaser and any other
obligations specifically set forth herein.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate
the transfer.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations of the Parties. Seller warrants (which warranties
shall not survive settlement unless designated to the contrary) that as of the
date of closing hereof:
(A) That Seller, is the owner in fee simple of the Property and has
the power to convey same.
(B) That Seller is not subject to any other agreements or
arrangements, with the exception of those contained in any existing mortgage
documents which would prevent Seller from selling the Property to Purchaser.
This warranty shall survive for six months following closing.
(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents.
This warranty shall survive for six months following closing.
(D) Seller has no actual knowledge and has not been advised in
writing that it is in default under any lease, rental agreement service or
equipment contract, or mortgage or other encumbrances relating to the Property.
This warranty shall survive for six months the following closing.
(E) Seller has no actual knowledge of any existing or threatened
litigation which relates to or which would affect the
8
<PAGE>
Property. This warranty shall survive for six months following closing.
(F) The Property abuts on and has direct vehicular access to a public
road.
(G) All building and other improvements at the Property are located
entirely within the boundary lines of the Property.
(H) Seller has no actual knowledge that any part of the Property or
the operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building code or of any private restriction,
that any governmental authority requires any work to be done on or affecting
the Property, or that any governmental authority has expressed an intent to
condemn or to make special improvements for the benefit of the Property or any
part thereof. This warranty shall survive for six months following closing.
(I) That to the best knowledge of the Seller, the drainage within
the project is satisfactory and complies in all respects with all government
regulation. This warranty shall survive for six months following closing.
(J) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(K) That to the best of Seller's knowledge, the Property was never
utilized as a disposal site for hazardous waste products and will furnish to
Purchaser an affidavit confirming same.
(L) Seller covenants and agrees that, between this date and the date
of closing, Seller shall continue to maintain, operate and manage the Property
in a manner consistent with its prior practices, making every reasonable effort
to do nothing which might damage the reputation of the Property or the
relationships with the tenants. Seller shall not permit the modification,
extension or cancellation of any tenant lease (except in accordance with the
terms of such lease) or any dealing with any tenant other than the ordinary
course of managing the Property, without the prior written consent of
Purchaser. If the leases of any tenants expire before thirty (30) days after
the date of closing, Seller shall, up to the date of closing and without cost
to the Purchaser, continue its normal course of operation with respect to
causing tenants to be obtained for apartments which are unrented.
8.2 Continuation of Representations, Warranties and Convenants to the
Date of Closing. If each of the warranties set forth in this section does not
remain true up to and including the
9
<PAGE>
time of closing as to any material matters, this Agreement, at Purchaser's
election, shall be terminated, Seller shall return all payments made by
Purchaser, or Purchaser may elect to close the sale and waive failure of the
warranties.
8.3 Breach of Representations, Warranties and Covenants. Nothwithstanding
the provisions of 8.2 above, Seller shall indemnify Purchaser for all reasonable
costs incurred as a result of the failure of any of Seller's representations,
warranties or covenants contained herein to remain true as of the date of
closing.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 Property Damage. If, prior to closing, any part of the Property is
damaged by fire or other casualty, Seller shall repair such damage before the
date provided herein for closing. If such damage cannot be repaired by such
time, this Agreement may be canceled at the option of the Purchaser. In the
event of cancellation as aforesaid, this Agreement shall become null and void
and the parties shall be released and all payments made shall be returned.
Should Purchaser elect to carry out this Agreement despite such damage Seller
shall assign to Purchaser all insurance proceeds arising from such damage and
will compensate Purchaser for lost rent collections to the extent of insurance
proceeds received. Seller shall promptly notify Purchaser in writing upon the
occurrence of any such damage.
9.2 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any actual
or proposed sale in lieu thereof, the Seller shall give written notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof. Upon
a taking of a material part of the Property (any part of the building or more
than 5% of the parking area), Purchaser may elect to either (a) terminate this
Agreement, in which event the Deposit shall be immediately returned to Purchaser
and all other rights and obligations of the parties hereunder shall terminate
immediately, or (b) to waive its right to terminate this Agreement and proceed
to closing, in which event all proceeds, awards and other payments arising out
of such condemnation or sale (actual or threatened) shall be paid to the
Purchaser at closing, if such payment has been received or Seller shall assign
to Purchaser the rights to such payments.
9.3 Risk of Loss. Prior to closing, all risks of loss or damage by every
casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 Commission. Seller agrees to pay a brokerage
10
<PAGE>
fee to WINDSOR PROPERTIES, pursuant to a separate agreement between Seller and
Brokers. Said brokerage fee shall be deemed earned if, and only if, settlement
occurs hereunder, and shall not be deemed earned even if Purchaser and/or Seller
wrongfully fail(s) to consummate the purchase and sale herein contemplated.
Purchaser shall not be obligated for any brokerage fees to any broker, and
Seller agrees to hold Purchaser harmless in connection with such fees. Seller
and Purchaser represent and warrant to each other that no other brokerage fees
are or shall be owing in connection with this transaction or in any way with
the Apartments and Seller and Purchaser hereby indemnify and hold the other
harmless from any and all claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 Default Defined. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions
and covenants contained herein, however, it shall not be an event of default
for either party to exercise its rights to terminate this contract as contained
in other provisions herein.
11.2 Seller's Default. Upon Seller's default, the Purchaser, at it's
election, may either (1) require specific performance of Seller, or pursue
its other remedies at law or equity , (2) cancel this Agreement and obtain
a prompt return of the deposit, in which case this Agreement shall be
terminated and the parties released from all obligations hereunder, or (3) the
Purchaser may waive such defaults and proceed to settlement. Seller shall
indemnify Purchaser for any reasonable costs incurred by Purchaser if Purchaser
elects to pursue its option (1) noted above, to include reasonable attorney
fees.
11.3 Purchaser's Default. Upon Purchaser's default, this Agreement shall
be terminated and both parties released from all obligations hereunder, and the
deposit shall be retained by the Seller as liquidated damages. Seller shall have
no other remedy against Purchaser in the event of Purchaser's default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement sets forth the entire understanding
between the parties; it supersedes all previous agreements and representations
which are deemed merged herein and may not be modified except in writing.
12.2 Assignment. Purchaser may assign this Agreement without the consent
of Seller.
12.3 Severability. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 Binding Effect. The parties to the Agreement mutually agree that it
shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 Controlling Law. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State set forth in Par. 1.1.
12.6 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear in each counterpart
hereof, and it shall be sufficient that the signature on behalf of both parties
hereto appear on one or more such counterparts. All counterparts shall
collectively constitute a single contract.
12.7 Incorporation by Reference. All of the Exhibits referred to herein
and/or attached hereto shall be deemed to constitute a part of the Agreement.
12.8 Headings. The headings of the Articles and sections hereof are
inserted for convenience only and shall not be deemed to constitute a part of
the Agreement.
12.9 Construction of Contract. Each party hereto have reviewed and
revised (or requested revisions of) this Agreement, and therefore the normal
rule of construction that any ambiguities are to be resolved against a
particular party shall not be applicable in the construction and interpretation
of this Contract or any amendments or exhibits hereto.
ARTICLE XIII
NOTICE
13.1 Notice. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: LEA Company
397 Little Neck Road
3400 Building, Suite 200
Virginia Beach, VA 23452
12
<PAGE>
With a copy to
Seller's Attorneys: Wilks & Alper, P.C.
Suite 700
Town Point Center
150 Boush Street
Norfolk, VA 23510
To Purchaser: S. J. Olander
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
13.2 Delivery of Notice. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered
to a reliable overnight courier. Notices sent in any other manner shall be
deemed given only when actually delivered at the specified address.
ARTICLE XIV
LIKE-KIND EXCHANGE
14.1 Like-Kind Exchange. Seller may wish to effect a tax free exchange
pursuant to Section 1031 of the Internal Revenue Code of 1986 (the ("Tax Code")
in connection with Seller's conveyance of the Property to Purchaser.
Consequently, if prior to Settlement, Seller designates a property or
properties (collectively the "Exchange Property"), Purchaser will use reasonable
efforts to contract to acquire the Exchange Property for use in an exchange with
Seller. Purchaser's obligation to contract to purchase the Exchange Property
is specifically contingent upon (1) the conditions precedent set forth in
paragraph 6.1 being satisfied, (ii) the costs of acquisition (including
apportionments being equal to or less than the Purchase Price (including
apportionments) for the Property, or if in excess of such Purchase Price,
Seller's commitment and agreement to pay such excess in cash (the "Excess")
at the closing of the acquisition of the Exchange Property, (iii) Seller's
approval of the Exchange Property, (iv) Purchaser not becoming subject to any
additional liability in connection with such exchange, (v) Purchaser assigning
the contract to acquire the Exchange Property to a qualified Intermediary of the
excess, if any, of the Purchase Price for the Property plus apportionments
(over the purchase price for the Exchange Property plus acquisition costs and
apportionments). Upon request of Seller, Purchaser will execute an appropriate
escrow agreement deemed necessary by Seller's counsel to obtain for Seller the
tax benefits
13
<PAGE>
allowed under Section 1031 of the Internal Revenue Code of 1986 (Purchaser not
to bear any of such tax benefits), provided that such escrow agreement clearly
limits Purchaser's obligations and liability to the delivery of the proceeds
of the Purchase Price to the qualified Intermediary.
14.2 Hold Harmless. At closing, Seller will deliver to Purchaser an
agreement to hold the Purchaser harmless as to any claims as a result of the
Like-Kind Exchange set forth in paragraph 14.1 and an opinion of counsel as to
the validity of the transaction.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
LEA COMPANY
By: /s/ SIGNATURE ILLEGIBLE
-------------------------------
Its: Managing Partner
------------------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. Olander
-------------------------------
Its: Senior Vice President
------------------------------
14
Exhibit 10.3
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 12th day of July 1996, between
CORNERSTONE REALTY GROUP INC. or its nominee, (hereinafter called "Purchaser")
and HIGH EQUITY XX LIMITED PARTNERSHIP, (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 Sale of Property. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as PACES GLEN APARTMENTS
located in CHARLOTTE, NC with all buildings and improvements located thereon, as
more particularly described in the attached legal description in Exhibit A
including, but not limited to 172 individually heated and air conditioned
apartment units, with all appurtenances, together with all appliances, drapes,
carpeting, shrubbery and all other personal property owned by Seller and used in
connection with the premises, including, the inventory of personal property to
be supplied by Seller and attached hereto as Exhibit B and a building permit or
similar document indicating that the property is zoned for an additional
eighteen (18) units (all such real and personal property hereinafter
collectively referred to as the "Property" unless the context clearly indicates
otherwise).
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 Purchase Price. The total purchase price shall be SEVEN MILLION FOUR
HUNDRED TWENTY FIVE & 00/100 ($7,425,000) as evidenced by cash or cash
equivalent at closing.
2.2 Deposit. $100,000 to be placed in escrow upon execution of this
Agreement. Said deposit shall be placed in escrow with Old Republic Title
Insurance Corporation or its authorized agent as an earnest money deposit which
may be credited against the purchase price or applied as per Article XI below.
ARTICLE III
TITLE MATTERS
3.1 Marketable Title. Seller, shall convey good and marketable title by
Special Warranty Deed, subject only to general taxes for the current year not
yet due and payable and those other matters of record not objected to by
Purchaser and removed by Seller under Section 3.2 below.
(A) Title shall be free from any and all liens or mortgages and Seller
shall be responsible for any prepayment penalties necessary to deliver such free
title.
3.2 Title Defects; Election to Cure. Purchaser shall obtain a commitment
for Title Insurance, (the commitment). If title is not marketable, except as
stated above in the preceding paragraph, Purchaser shall give written notice of
any defects in title to Seller's counsel by July 10, 1996. Seller may, at its
option, elect whether to cure said defects or by written notice to Purchaser
indicate its intention not to cure.
3.3 Election Not to Cure Defects. Should Seller elect not to cure title
defects, this Agreement, at Purchaser's option, shall be void; each party shall
thereupon be released from all obligations hereunder; and all deposits shall be
immediately returned to Purchaser.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following shall be prorated, on a
calendar-month basis, to date of delivery of deed: rents and other income from
the Property; operating expenses (on such service contracts and other
obligations as Purchaser may agree to assume); and general and real property
taxes and personal and business property taxes for the year of closing (based on
the most recent assessment and the most recent levy).
4.2 Closing Costs. Purchaser and Seller shall pay their customary share of
all taxes, recording fees, if any, imposed on the Deed, or any other documents
executed in connection with the transfer of the Property. Purchaser agrees to
pay cost of title insurance. Seller shall pay any prepayment penalty charged by
the holders of any existing notes.
4.3 Allocation of Rents. Rents collected by Seller prior to Closing shall
be prorated as agreed in 4.1 above. Purchaser shall apply rents received after
Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 Prior Lease Concessions. Seller warrants that it has made no future
monetary concessions to any tenant under existing leases and that any reductions
of rent are reflected on the rent roll attached hereto as Exhibit C.
2
<PAGE>
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 Possession. Possession of the Property shall be delivered to Purchaser
at closing, subject to the rights of the tenants under existing leases and
rental agreements.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions Precedent. Seller acknowledges that Purchaser is a public
entity and that it is required to furnish financial statements to the Securities
and Exchange Commission in connection with this acquisition. Seller agrees to
make the information available for Purchaser to audit the last 12 months of
operation of the Property so that a report can be generated that is in
compliance with accounting Regulation S-X of the Securities and Exchange
Commission.
6.2 "Rent Ready". Both Seller and Purchaser have inspected an apartment
unit at the Property and have mutually agreed that said apartment shall be
representative of a "rent ready" unit by which all other units shall be judged
for "rent ready" condition at closing. All vacant apartment units, are to be in
a "rent ready" condition (as defined above), at the time of closing, containing,
but not limited to the following amenities, i.e., carpet, refrigerator, range,
garbage disposal, heating, plumbing and electrical systems.
6.2.1 Condition of Personal Property at Closing. All personal property
included in the sale and all mechanical, electrical, heating, air conditioning,
sewer, water and plumbing systems will be in the same working order at the time
of closing and in the same condition as at the time of the initial inspection by
Purchaser. If Seller fails to make reasonable efforts to conserve the property,
Purchaser shall have the option of waiving such requirement, in writing, and
proceeding to closing, or Purchaser may void this Agreement and obtain a prompt
return of its deposit.
ARTICLE VII
CLOSING
7.1 Closing. Closing will be held on July 19, 1996, provided that either
party may elect to postpone Closing to no later than July 26, 1996, at such
place and at such time of day as the parties may agree.
7.2 Seller's Deliveries. At closing, Seller shall execute and deliver to
Purchaser the Special Warranty Deed referred to in Paragraph 3 hereof and shall
also execute, where necessary, and deliver to Purchaser, the following:
(A) A Bill of Sale, with warranty of title transferring the personal
property (as shown in Schedule B) to Purchaser free of all liens, charges and
encumbrances.
(B) Originals or copies of all signed leases and rental agreements in
effect with tenants of the Property.
(C) All security deposits made by such tenants. Seller will give the
tenants the required notice of such transfer in compliance with the laws of
NORTH CAROLINA.
(D) An affidavit of Seller in such form as will cause the Title Company to
omit from the title insurance policy the exclusion relating to unrecorded
mechanic's and materialmen's liens.
(E) A rent roll, in the form attached hereto as Exhibit C, certified to the
best of Seller's knowledge to be true and correct as of the date of closing
showing the name of, and the amount of monthly rental payable, by each tenant of
the Property, the apartment occupied by the tenant, the date to which rent has
been paid, any advance payment of rent, and the amount of any escrow, or
security deposit of tenant.
(F) An affidavit of Seller that to the best of its information and belief
there are, on the date of closing, no unsatisfied judgments, creditor's claims,
tax liens, or pending bankruptcies involving Seller.
(G) Assignments of all Seller's interest in the following: (1) all
assignable licenses, and permits relating to the operation of the Property, (2)
the leases and rental agreements with tenants of the Property, (3) the existing
Property telephone number and (4) the business and trade name as set forth in
Par. 1.1.
(H) Assignments of all warranties and guarantees to the extent such are
still in effect and provide Purchaser with copies of all such warranties and
guarantees without limitation for all appliances, dishwashers, disposals,
refrigerators, heating and air conditioning units, washers and dryers.
(I) Consent of the Seller's authorized officer to the sale of the Property
and any other approvals required under Seller's articles or by-laws, which may
affect Seller's ability to convey marketable title.
(J) Provide documents for the transfer of the telephone, electric, water
and sewer, and gas utilities, as may be required by the utility, for execution
at closing.
(K) Evidence satisfactory to the title company of the power and authority
of Seller to enter into and consummate this agreement.
(L) Affidavit that Seller has no actual knowledge of the presence of
asbestos and/or any other hazardous material at the Property.
(M) Seller shall provide a satisfactory and valid written termination of
the management agreement executed by the existing management and rental agent
for the Property, without cost to the Purchaser.
(N) A notice letter to all the residents of the apartment complex as to
change of ownership in the form prepared by the Purchaser.
(O) All such other documents as are normally transferred at settlement in
the jurisdiction in which the property is located or are reasonably requested by
Purchaser or its counsel.
7.2A Accounting Letter. After the closing, Seller agrees to delivery to
Purchaser's accountants a representation letter with respect to the 12-month
property operating statements being prepared by Purchaser and audited pursuant
to Section 6.1 of this agreement, which letter will be substantially in the form
attached hereto as Exhibit D, provided that Seller shall be given the
opportunity to review the final form of said financial statements to verify that
they are consistent with the representations given by Seller. Seller's
representations shall survive closing for one year.
7.3 Purchaser's Deliveries. At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price, adjusted for the
prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under leases,
securities, any contracts which may be accepted by the Purchaser and any other
obligations specifically set forth herein.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and delivered by
the Purchaser and is a valid and binding agreement of Purchaser, and
(ii) Purchaser has complete unrestricted power to buy the Property
from the Seller and to execute any documents required to effectuate the
transfer.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations of the Parties. Seller warrants (which warranties shall
not survive settlement unless designated to the contrary) that as of the date of
closing hereof:
(A) That Seller, is the owner in fee simple of the Property and has the
power to convey same.
(B) That Seller is not subject to any other agreements or arrangements,
with the exception of those contained in any existing mortgage documents which
would prevent Seller from selling the Property to Purchaser. This warranty shall
survive for one year following closing.
(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents. This
warranty shall survive for one year following closing.
(D) Seller has no actual knowledge and has not been advised in writing that
it is in default under any lease, rental agreement service or equipment
contract, or mortgage or other encumbrances relating to the Property. This
warranty shall survive for one year the following closing.
(E) Seller has no actual knowledge of any existing or threatened
litigation which relates to or which would affect the Property. This warranty
shall survive for one year following closing.
(F) Seller has no actual knowledge that any part of the Property or the
operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building, code or of any private restriction,
that any governmental authority requires any work to be done on or affecting the
Property, or that any governmental authority has expressed an intent to condemn
or to make special improvements for the benefit of the Property or any part
thereof. This warranty shall survive for one year following closing.
(G) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(H) That to Seller's actual knowledge, the Property was never utilized as a
disposal site for hazardous waste products and will furnish to Purchaser an
affidavit confirming same.
(I) Seller covenants and agrees that, between this date and the date of
closing, Seller shall continue to maintain, operate and manage the Property in a
manner consistent with its prior practices, making every reasonable effort to do
nothing which might damage the reputation of the Property or the relationships
with the tenants. Seller shall not permit the modification, extension or
cancellation of any tenant lease (except in accordance with the terms of such
lease) or any dealing with any tenant other than the ordinary course of managing
the Property, without the prior written consent of Purchaser. If the leases of
any tenants expire before thirty (30) days after the date of closing, Seller
shall, up to the date of closing and without cost to the Purchaser, continue its
normal course of operation with respect to causing tenants to be obtained for
apartments which are unrented.
8.2 Continuation of Representations, Warranties and Covenants to the Date
of Closing. If each of the warranties set forth in this section does not remain
true up to and including the time of closing as to any material matters, this
Agreement, at Purchaser's election, shall be terminated, Seller shall return all
payments made by Purchaser, or Purchaser may elect to close the sale and waive
failure of the warranties.
8.3 Breach of Representations, Warranties and Covenants. Notwithstanding
the provisions of 8.2 above, Seller shall indemnify Purchaser for all reasonable
costs incurred as a result of the failure of any of Seller's representations,
warranties or covenants contained herein to remain true as of the date of
closing.
ARTICLE IX
CONDEMNATION: RISK OF LOSS
9.1 Property Damage. If, prior to closing, any part of the Property is
damaged by fire or other casualty, Seller shall repair such damage before the
date provided herein for closing. If such damage cannot be repaired by such
time, this Agreement may be canceled at the option of the Purchaser. In the
event of cancellation as aforesaid, this Agreement shall become null and void
and the parties shall be released and all payments made shall be returned.
Should Purchaser elect to carry out this Agreement despite such damage Seller
shall assign to Purchaser all insurance proceeds arising from such damage and
will compensate Purchaser for lost rent collections to the extent of rental
interruption insurance proceeds received by Seller and applicable to the period
after Closing (if any). Seller shall promptly notify Purchaser in writing upon
the occurrence of any such damage.
9.2 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any actual
or proposed sale in lieu thereof, the Seller shall give written notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property (any part of the building or more than
5% of the parking area), Purchaser may elect to either (a) terminate this
Agreement, in which event the Deposit shall be immediately returned to Purchaser
and all other rights and obligations of the parties hereunder shall terminate
immediately, or (b) to waive its right to terminate this Agreement and proceed
to closing, in which event all proceeds, awards and other payments arising out
of such condemnation or sale (actual or threatened) shall be paid to the
Purchaser at closing, if such payment has been received or Seller shall assign
to Purchaser the rights to such payments.
9.3 Risk of Loss. Prior to closing, all risks of loss or damage by every
casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 Commission. Purchaser agrees to pay a brokerage fee to FORD WHITLEY
PROPERTIES, pursuant to a separate agreement between Purchaser and Broker. Said
brokerage fee shall be deemed earned if, and only if, settlement occurs
hereunder, and shall not be deemed earned even if Purchaser and/or Seller
wrongfully fail(s) to consummate the purchase and sale herein contemplated.
Seller and Purchaser represent and warrant to each other that no other brokerage
fees are or shall be owing in connection with this transaction or in any way
with the Apartments and Seller and Purchaser hereby indemnify and hold the other
harmless from any and all claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 Default Defined. Default for the purpose of this Agreement shall mean
any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 Seller's Default. Upon Seller's default, the Purchaser, at it's
election, may either (1) require specific performance of Seller, or pursue its
other remedies at law or equity, (2) cancel this Agreement and obtain a prompt
return of the deposit, in which case this Agreement shall be terminated and the
parties released from all obligations hereunder, or (3) the Purchaser may waive
such defaults and proceed to settlement. Seller shall indemnify Purchaser for
any reasonable costs incurred by Purchaser if Purchaser elects to pursue its
option (1) noted above, to include reasonable attorney fees. Under no
circumstances shall Seller's liability exceed $100,000.
11.3 Purchaser's Default. Upon Purchaser's default, this Agreement shall be
terminated and both parties released from all obligations hereunder, and the
deposit shall be retained by the Seller as liquidated damages. Seller shall have
no other remedy against Purchaser in the event of Purchaser's default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement sets forth the entire understanding
between the parties; it supersedes all previous agreements and representations
which are deemed merged herein and may not be modified except in writing.
12.2 Assignment. Purchaser may not assign this Agreement without the
consent of Seller, except to Cornerstone Realty Income Trust, Inc.
12.3 Severability. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 Binding Effect. The parties to the Agreement mutually agree that it
shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 Controlling Law. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State set forth in Par. 1.1.
12.6 Counterparts. To facilitate execution, this Agreement may be executed
in as many counterparts as may be required. It shall not be necessary that the
signature on behalf of both parties hereto appear in each counterpart hereof,
and it shall be sufficient that the signature on behalf of both parties hereto
appear on one or more such counterparts. All counterparts shall collectively
constitute a single contract.
12.7 Incorporation by Reference. All of the Exhibits referred to herein
and/or attached hereto shall be deemed to constitute a part of the Agreement.
12.8 Headings. The headings of the Articles and sections hereof are
inserted for convenience only and shall not be deemed to constitute a part of
the Agreement.
12.9 Construction of Contract. Each party hereto have reviewed and revised
(or requested revisions of ) this Agreement, and therefore the normal rule of
construction that any ambiguities are to be resolved against a particular party
shall not be applicable in the construction and interpretation of this Contract
or any amendments or exhibits hereto.
ARTICLE XIII
NOTICE
13.1 Notice. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: High Equity XX Limited Partnership
High Investors, Ltd.
1853 William Penn Way -- P.O. Box 10008
Lancaster, PA 17605-0008
With a copy to
Seller's Attorneys: Scott H. Spencer, Esq.
Stevens & Lee
One Penn Square, POB 1594
Lancaster, PA 17608-1594
To Purchaser: S.J. Olander
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
-and-
Ted Oliver, Esq.
Manning, Fulton & Skinner
500 UCB Plaza
3605 Glenwood Avenue
Raleigh, NC 27612
13.2 Delivery of Notice. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier. Notices sent in any other manner shall be deemed
given only when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed this day and date first written above.
SELLER:
HIGH EQUITY XX LIMITED PARTNERSHIP
By: HIGH INVESTORS, LTD. G.P.
By: /s/ SIGNATURE ILLEGIBLE
-------------------------------
Its: President and CEO
-------------------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. Olander
-------------------------------
Its: Senior Vice President
-------------------------------
ADDENDUM TO PURCHASE CONTRACT
AUDIT. Seller will make available to purchaser such books, accounts and records
necessary for Purchaser to conduct an audit of the Property's preceding fiscal
year. This audit will be conducted solely at Purchaser's expense for the purpose
of satisfying its requirements as a publicly held entity. Seller agrees to
execute and deliver a disclosure letter prepared by the auditors of Purchaser in
accordance with Section 7.2A of the purchase contract. The terms of this
Paragraph shall survive the Closing for a period of one (1) year from the
Closing Date.
SELLER:
HIGH EQUITY XX LIMITED PARTNERSHIP
By: HIGH INVESTORS, LTD. G.P.
By: /s/ SIGNATURE ILLEGIBLE
-------------------------------
Its: President and CEO
-------------------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. Olander
-------------------------------
Its: Senior Vice President
-------------------------------
Exhibit 10.4
drs. 3
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 30th day of August 1996, between
CORNERSTONE REALTY GROUP INC. or its nominee, (hereinafter called "Purchaser")
and BOYS AND GIRLS CLUB OF PITT COUNTY, INC., a North Carolina Non Profit
Corporation, (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 Sale of Property. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as DOCTORS PARK APARTMENTS
located in GREENVILLE, NC, with all buildings and improvements located thereon,
as more particularly described in the attached legal description in Exhibit A
including, but not limited to 171 individually heated and air conditioned
apartment units, with all appurtenances, together with all appliances, drapes,
carpeting, shrubbery and all other personal property owned by Seller located on
and used in connection with the premises, including, the inventory of personal
property to be supplied by Seller and attached hereto as Exhibit B (all such
real and personal property hereinafter collectively referred to as the
"Property" unless the context clearly indicates otherwise).
1.2 Title of Property. The parties understand that the Property is
currently owned by DOCTORS PARK APARTMENT GROUP, A North Carolina General
Partnership, (hereinafter called the "General Partnership") which has entered
into an agreement with the Seller herein to sell the Property to the Seller
prior to or simultaneously with the transfer of the Property from the Seller to
the Purchaser herein.
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 Purchase Price. The total purchase price shall be FIVE MILLION FOUR
HUNDRED SIXTY TWO THOUSAND NINE HUNDRED FORTY EIGHT ($5,462,948) DOLLARS as
evidenced by cash or immediately available funds at closing.
ARTICLE III
TITLE MATTERS
3.1 Marketable Title. Seller, shall convey good and marketable title by
Limited Warranty Deed, subject only to general taxes for the current year not
yet due and payable and utility easements which do not materially interfere with
the present use of the Property and existing leases on the units.
<PAGE>
(A) Title shall be free from any and all liens or mortgages and Seller
shall be responsible for any prepayment penalties necessary to deliver such free
title.
3.2 Title Defects: Election to Cure. Purchaser shall obtain a commitment
for Title Insurance, (the commitment). If title is not marketable, except as
stated above in the preceding paragraph, Purchaser shall give written notice of
any defects in title to Seller's counsel within fifteen (15) days after
Purchaser's receipt of a title report which report shall include copies of
backup documents relating to any title exceptions, a current survey, a flood
zone certification letter and a Surveyor's Certification letter. Seller may, at
its option, elect whether to cure said defects or by written notice to Purchaser
indicate its intention not to cure.
3.3 Election Not to Cure Defects. Should Seller elect not to cure title
defects, this Agreement, at Purchaser's option, shall be void; each party shall
thereupon be released from all obligations hereunder; and all deposits shall be
immediately returned to Purchaser.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following shall be prorated, on a
calendar-month basis, to date of delivery of deed: rents and other income from
the Property; operating expenses (on such service contracts and other
obligations as Purchaser may agree to assume); and general and real property
taxes and personal and business property taxes for the year of closing (based on
the most recent assessment and the most recent levy). Purchaser shall receive
August rent in the sum of $62,822.
4.2 Closing Costs. Purchaser and Seller shall pay their customary share of
all taxes, recording fees, if any, imposed on the Deed, or any other documents
executed in connection with the transfer of the Property. Purchaser agrees to
pay cost of title insurance. Seller shall pay any prepayment penalty charged by
the holders of any existing notes.
4.3 Allocation of Rents. Rents collected by Seller prior to Closing shall
be prorated as agreed in 4.1 above. Purchaser shall apply rents received after
Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller. It is
agreed that delinquency rent is $3,089.50.
<PAGE>
4.4 Prior Lease Concessions. Seller has made no lease concessions.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 Possession. Possession of the Property shall be delivered to Purchaser
at closing, subject to the rights of the tenants under existing leases and
rental agreements.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions Precedent. Purchaser's obligation to purchase shall be
subject to and contingent upon the satisfaction of the following conditions
present:
(A) Receipt by Purchaser and Seller of an engineering report of
building and site conditions, satisfactory to Purchaser in its sole discretion,
said report to include in part, a description of any hazardous waste sites,
hazardous wastes and/or hazardous materials affecting the property. Purchaser
shall have fifteen (15) days in which to review the reports set forth herein and
exercise its right to reject the Property based thereon or the right hereunder
shall be deemed waived. PURCHASER AND SELLER HAVE RECEIVED THE ENGINEERING
REPORT AND WAIVE THE FIFTEEN-DAY REVIEW PERIOD.
(B) The receipt by Purchaser of Seller documents described in 7.2
below.
(C) On the condition that Sellers representations and warranties
described in Article VIII below remain true and correct.
(D) On the condition that there have been no material or adverse
changes to the property or leases.
(E) Seller acknowledges that Purchaser is a public entity and that it
is required to furnish financial statements to the Securities and Exchange
Commission in connection with this acquisition. Seller agrees to make the
information available for Purchaser to audit the last 12 months of operation of
the Property so that a report can be generated that is in compliance with
accounting Regulation S-X of the Securities and Exchange Commission. Seller
shall have no obligation to provide such information in any specific format.
<PAGE>
(F) Survey which shall show no encroachments onto the Land from any
adjacent property, no encroachments by or from the Land onto adjacent property
and no violation of or encroachments upon any recorded building lines,
restrictions or easements affecting the Property. If the Survey discloses any
such encroachment or violation, Seller shall have thirty (30) days from the date
of delivery of the Survey (with a commensurate extension of the closing date) to
have the Title Insurer issue its endorsement insuring against damage caused by
such encroachment or violation and to provide evidence thereof to Purchaser, and
if Seller fails to or is unable to have the same insured against within such
thirty (30) day period, Purchaser may elect, on or before the Closing Date, to
(i) terminate this Agreement (in which case the Earnest Money shall be returned
to Purchaser) and neither party shall have any further liability or obligation
to the other hereunder, or (ii) accept the property subject to any such
encroachment or violation.
6.2 Inspection. This Agreement shall be further subject to and contingent
upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 Preparation for Inspection. At the execution of this Agreement, to
the extent they are available to Seller at no cost or are in Seller's
possession, Seller shall deliver to Purchaser copies of the following: The
current rent roll for the Property; detailed statements of income and expenses
with respect to the Property for the past two years; the most recent tax bills
for the Property; utility bills for the Property for the twelve (12) months
previous to the date hereof; all contract, mortgages, and other documents
creating liens of security interest on the Property, or any part thereof and all
promissory notes secured thereby; all insurance policies applicable to the
Property to include loss runs for the last five (5) years; Plans and
Specifications for the Property, service contracts, Certificates of Occupancy,
to the extent reasonably available; a copy of the title policy and most recent
survey for the Property. A copy of any environmental or engineering reports on
the Property. All these items shall be certified by Seller to be accurate and
complete to the best of its knowledge and belief.
6.2.4 "Rent Ready". Prior to closing, Seller shall permit Purchaser to
inspect all apartments to satisfy itself that all apartments are rent ready.
6.2.5 Condition of Personal Property at Closing. Except for items listed in
Exhibit D hereof, all personal property included in the sale shall be in good
working order at time of closing.
<PAGE>
ARTICLE VII
CLOSING
7.1 Closing. Closing will be held on or about August __, 1996 at such place
and at such time as the parties may agree.
7.2 Seller's Deliveries. At closing, Seller shall execute and deliver to
Purchaser the Limited Warranty Deed referred to in Paragraph 3.1 hereof and
shall also execute, where necessary, and deliver to Purchaser, the following:
(A) A Bill of Sale, with limited warranty of title transferring the
personal property (as shown in Schedule B) to Purchaser free of all liens,
charges and encumbrances.
(B) Originals or copies of all signed leases and rental agreements in
effect with tenants of the Property.
(C) All security deposits made by such tenants. Purchaser will give
the tenants the required notice of such transfer in compliance with the laws of
North Carolina.
(D) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(E) A rent roll certified by Seller to be true and correct to the best
of its knowledge as of the date of closing showing the name of, and the amount
of monthly rental payable, by each tenant of the Property, the apartment
occupied by the tenant, the date to which rent has been paid, any advance
payment of rent, and the amount of any escrow, or security deposit of tenant.
(F) An affidavit of Seller that to the best of its information and
belief there are, on the date of closing, no unsatisfied judgments, creditor's
claims, tax liens, or pending bankruptcies involving Seller.
(G) Assignments of all Seller's interest in the following: (1) all
assignable licenses, and permits relating to the operation of the Property, (2)
the leases and rental agreements with tenants of the Property, (3) the existing
Property telephone number and (4) the business and trade name as set forth in
Par. 1.1; provided, however, Purchaser is aware and consents to the continued
use of the name of "The Doctors Park Apartment Group" by the partnership which
presently owns the Property.
(H) Assignments of all warranties and guarantees to the extent such
are still in effect and assignable and provide Purchaser with copies of all such
warranties and guarantees for all
<PAGE>
appliances, dishwashers, disposals, refrigerators, heating and air conditioning
units, washers and dryers.
(I) Consent of the Seller's authorized officer to the sale of the
Property and any other approvals required under Seller's articles or by-laws,
which may affect Seller's ability to convey marketable title.
(J) Provide documents for the transfer of the telephone, electric,
water and sewer, and gas utilities, as may be required by the utility, for
execution at closing.
(K) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement, including but not limited to:
(i) An opinion of Seller's counsel, in a form satisfactory to
Purchaser, stating that:
(a) The individual(s) executing the deed and related
documents are duly authorized to do all such acts as are necessary to consummate
this sale, without further consent of any other party.
(b) That the partner or officer can bind the Partnership or
Corporation.
(L) Affidavit that Seller has no actual knowledge of the presence of
asbestos and/or any other hazardous material at the Property.
(M) Seller shall provide a satisfactory and valid written termination
of the management agreement executed by the existing management and rental agent
for the Property, without cost to the Purchaser.
(N) A notice letter to all the residents of the apartment complex as
to change of ownership in the form prepared by the Purchaser.
(O) All such other documents as are normally transferred at settlement
in the jurisdiction in which the property is located or are reasonably requested
by Purchaser or its counsel.
(P) A representation letter as normally required by auditors for a
public company, a copy of which is attached hereto and Exhibit C. This clause
shall survive closing for one year.
(Q) An assignment of any representations and warranties Seller obtains
when it acquires the Property which are assignable.
<PAGE>
7.3 Purchaser's Deliveries. At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price, adjusted for
the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under leases,
securities, any contracts which may be accepted by the Purchaser and any other
obligations specifically set forth herein.
(C) Deliver to the Seller a resolution of the Purchaser and an opinion
of Purchaser's counsel that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate the
transfer.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations of the Parties. Seller warrants (which warranties shall
not survive settlement unless designated to the contrary) that as of the date of
closing hereof, EXCEPT THAT THE SELLER AGREES TO ASSIGN SUCH WARRANTIES THAT IT
HAS RECEIVED AT TIME OF PURCHASE, WHICH WARRANTIES SHALL SURVIVE FOR THE PERIOD
OF TIME SET FORTH THEREIN:
(A) That Seller, is the owner of the Property and has the power to
convey same.
(B) That Seller is not subject to any other agreements or
arrangements, with the exception of those contained in any existing mortgage
documents which would prevent Seller from selling the Property to Purchaser.
This warranty shall survive for one year following closing.
(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents. This
warranty shall survive for one year following closing.
(D) Seller has no actual knowledge and has not been advised in writing
that it is in default under any lease, rental agreement service or equipment
contract, or mortgage or
<PAGE>
other encumbrances relating to the Property.
(E) Seller has no actual knowledge of any patent or latent defect in
the Property or any part thereof.
(F) Seller has no actual knowledge of any existing or threatened
litigation which relates to or which would affect the Property.
(G) To the best of Seller's information and belief, the Property abuts
on and has direct vehicular access to a public road.
(H) To the best of Seller's information and belief, all building and
other improvements at the Property are located entirely within the boundary
lines of the Property.
(I) Seller has no actual knowledge that any part of the Property or
the operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building code or of any private restriction,
that any governmental authority requires any work to be done on or affecting the
Property, or that any governmental authority has expressed an intent to condemn
or to make special improvements for the benefit of the Property or any part
thereof.
(J) That to the best of Seller's information and belief, the drainage
within the project is satisfactory and complies in all respects with all
government regulation.
(K) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(L) That to the best of Seller's information and belief, the Property
was never utilized as a disposal site for hazardous waste products and will
furnish to Purchaser an affidavit affirming such.
(M) Seller has not in any manner taken any steps which might damage
the reputation of the Property or the relationship with tenants, has not
modified, extended or canceled any lease and has, in fact, not dealt with any
tenant.
(N) With respect to the representations and warranties provided
herein, references to the "actual knowledge" of Seller and/or "Seller's
information and beliefs" shall be limited to mean only the knowledge,
information and belief of the individuals who serve on the Executive Committee
of Seller and the individuals who execute this contract on behalf of Seller.
8.2 Continuation of Representations, Warranties and
<PAGE>
Covenants to the Date of Closing. Seller has not acted in any manner which
would affect any of the warranties or representations that it received as
purchaser and assigned to the Purchaser herein.
ARTICLE IX
PROPERTY DAMAGE
9.1 Fire Loss. It is understood that there has been a fire loss in Apt.
D-12 and the Seller shall procure an assignment to the Purchaser of the
insurance proceeds for said damage. Purchaser shall have the right to adjust
said loss and be entitled to all proceeds thereunder.
ARTICLE X
BROKER'S COMMISSION
10.1 Commission. Purchaser agrees to pay a brokerage fee to EDWARD E. LANE
JR., pursuant to a separate agreement between Purchaser and Broker. Said
brokerage fee shall be deemed earned if, and only if, settlement occurs
hereunder, and shall not be deemed earned even if Purchaser and/or Seller
wrongfully fail(s) to consummate the purchase and sale herein contemplated.
Seller and Purchaser represent and warrant to each other that no other brokerage
fees are or shall be owing in connection with this transaction or in any way
with the Apartments and Seller and Purchaser hereby indemnify and hold the other
harmless from any and all claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 Default Defined. Default for the purpose of this Agreement shall mean
any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 Seller's Default. Upon a default by Seller, which is discovered prior
to closing and recording of the deed to the Property, Purchaser, at it's
election, may either (1) require specific performance of Seller, or pursue its
other remedies at law or equity, (2) cancel this Agreement and obtain a prompt
return of the deposit, in which case this Agreement shall be terminated and the
parties released from all obligations hereunder, or (3) the Purchaser may waive
such defaults and proceed to settlement. Upon a default by Seller which is not
discovered until after closing and recording of the deed, Purchaser's sole
remedy shall be a suit for monetary damages. In no event shall Seller be
required to pay more than $10,000 in actual damages.
<PAGE>
11.3 Purchaser's Default. Upon Purchaser's default, and the payment of
$10,000 in liquidated damages by Purchaser to Seller, this Agreement shall be
terminated and both parties released from all obligations hereunder. Seller
shall have no other remedy against Purchaser in the event of Purchaser's
default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement sets forth the entire understanding
between the parties; it supersedes all previous agreements and representations
which are deemed merged herein and may not be modified except in writing.
12.2 Assignment. Purchaser may assign this Agreement without the consent of
Seller.
12.3 Severability. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 Binding Effect. The parties to the Agreement mutually agree that it
shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 Controlling Law. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State set forth in Par. 1.1.
12.6 Counterparts. To facilitate execution, this Agreement may be executed
in as many counterparts as may be required. It shall not be necessary that the
signature on behalf of both parties hereto appear in each counterpart hereof,
and it shall be sufficient that the signature on behalf of both parties hereto
appear on one or more such counterparts. All counterparts shall collectively
constitute a single contract.
12.7 Incorporation by Reference. All of the Exhibits referred to herein
and/or attached hereto shall be deemed to constitute a part of the Agreement.
12.8 Headings. The headings of the Articles and sections hereof are
inserted for convenience only and shall not be deemed to constitute a part of
the Agreement.
12.9 Construction of Contract. Each party hereto have
<PAGE>
reviewed and revised (or requested revisions of) this Agreement, and therefore
the normal rule of construction that any ambiguities are to be resolved against
a particular party shall not be applicable in the construction and
interpretation of this Contract or any amendments or exhibits hereto.
ARTICLE XIII
NOTICE
13.1 Notice. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: Boys And Girls Clubs of Pitt County, Inc.
P.O. Box 20293
Greenville, NC 27858
With a copy to
Seller's Attorneys: H.L. Stephenson, III
Ward & Smith, PA
120 West Fire Tower Road
Greenville, NC 27835
To Purchaser: S. J. Olander
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
and
Ted Oliver, Esq.
Manning, Fulton & Skinner, P.A.
500 UCB Plaza
3605 Glenwood Avenue
Raleigh, NC 27612
13.2 Delivery of Notice. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier. Notices sent in any other manner shall be deemed
given only when actually delivered at the specified address.
<PAGE>
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed this day and date first written above.
SELLER:
BOYS AND GIRLS CLUB OF PITT COUNTY, INC.
BY: /s/ John H. Coff
-------------------
JOHN H. COFF
ITS: ___________________
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
BY: ___________________
ITS: ___________________
Exhibit 10.5
PURCHASE AND SALE AGREEMENT
And JOINT ESCROW INSTRUCTIONS
by and between
PACIFIC MUTUAL LIFE INSURANCE COMPANY
as
"Seller"
and
CORNERSTONE REALTY GROUP, INC.
as
"Buyer"
dated August , 1996
<PAGE>
PURCHASE AND SALE AGREEMENT
And JOINT ESCROW INSTRUCTIONS
By and Between
PACIFIC MUTUAL LIFE INSURANCE COMPANY
and
CORNERSTONE REALTY GROUP, INC.
TABLE OF CONTENTS
ARTICLE I. Definitions 1
ARTICLE II. Agreement of Purchase and Sale 2
ARTICLE III. Conditions to the Close of Escrow 2
ARTICLE IV. Representations, Warranties and Covenants
of Seller and Buyer 4
ARTICLE V. Condemnation and Destruction 6
ARTICLE VI. Action on the Settlement Date 6
ARTICLE VII. Prorations 7
ARTICLE VIII. Costs and Commissions 8
ARTICLE IX. Default by Buyer 8
ARTICLE X. Default by Seller 8
ARTICLE XI. Termination 8
ARTICLE XII. Miscellaneous 9
EXHIBITS
"A" Legal Description
"B" Service Agreements
"C" Rent Schedule
"D" Special Warranty Deed
"E" Assignment and Assumption
"F" General Assignment
"G" Bill of Sale
"H" Transferor's Certificate of Non-Foreign Status
"I" Personal Property Schedule
<PAGE>
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
This Agreement ("Agreement") is made as of August ___, 1996, between
PACIFIC MUTUAL LIFE INSURANCE COMPANY, a California corporation ("Seller"),
and CORNERSTONE REALTY GROUP, INC., a Virginia corporation ("Buyer").
RECITALS:
A. Seller is the owner of that certain improved real property
("Project"), containing approximately 16 acres located at Richmond ("City"),
County of Henrico ("County"), State of Virginia ("State") and more particularly
described in Exhibit "A" attached hereto. The Project is a garden apartment
complex and is commonly known as Hampton Glen Apartments.
B. The Project is zoned for multi-family use and is improved with 232
units containing 112 one-bedrooms, 40 two-bedrooms/one bath, 80 two-bedrooms/two
baths, and one clubhouse, two swimming pools and related improvements.
C. Buyer desires to purchase the Project and the other property, rights
and interests which are hereinafter collectively referred to with the Project
as the "Property" and Seller desires to sell the Property to Buyer.
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the sufficiency of which is hereby acknowledged, Seller
and Buyer hereby agree and instruct Escrow Agent as follows:
ARTICLE I.
Definitions
The terms set forth below shall have the following meanings:
1.1 Broker: First Union Mortgage Corporation
9 South 12th Street
Richmond, Virginia 23219
Telephone No. (804) 343-3310
Telecopier No. (804) 225-8888
Attn: Craige Pelooze
1.2 Earnest Money Deposit: One Hundred Thousand and no/100 Dollars
($100,000).
1.3 Escrow Agent: LeClair Ryan
707 East Main Street - 11th Floor
Richmond, Virginia 23219
Telephone No. (804) 783-2003
Fax No. (804) 783-2294
Attn: Steve Delaney, Esq.
1.4 Improvements means all buildings, fixtures, structures, parking
areas, landscaping and other improvements constructed and located on the Real
Property, including, but not limited to, the improvements described in Recital
B to this Agreement, together will all machinery and mechanical, electrical,
HVAC, plumbing and other utilities systems (other than Personal Property)
used in the operation thereof, but excluding any such items owned by Tenants
in possession, public or private utilities or contractors under contract.
1.5 Leases: All leases, subleases, amendments, extensions and
assignments affecting the occupancy of the Property.
1.6 Opening of Escrow: The date on which a fully executed copy of
this Agreement (or counterparts thereof), together with all Exhibits thereto,
is delivered to Escrow Agent by Buyer and Seller and executed by Escrow Agent
in the space provided.
1.7 Permitted Exceptions: (i) Nondelinquent real property taxes and
special assessments, if any; (ii) utility easements to service the Property
which do not materially interfere with its existing use; (iii) such matters
as Buyer shall have approved in accordance with Section 3.1(b)(iii) below; and
(iv) such matters as may have been disclosed by the "Survey" and approved
by Buyer in accordance with Section 3.1(b)(ii) below.
1.8 Personal Property: All equipment, appliances, tools, machinery,
supplies and other personal property tangible and intangible (including all
logos, trademarks and/or service marks) located at and used in connection with
the operation of the Property, which has not or will not become a trade fixture
under the terms of the Leases. A schedule of all Personal Property is attached
hereto as Exhibit "I".
1.9 Property: The Property shall collectively include the Real
Property, the Improvements, the Personal Property, all of Seller's interest in
the Leases and the Service Agreements.
1
<PAGE>
1.10 Purchase Price: Eleven Million Five Hundred Thousand and No/100
Dollars ($11,500,000).
1.11 Real Property: That certain tract or parcel of land described
in Exhibit "A" attached hereto and by this reference made a part hereof,
together with all easements of access or use benefiting said land, located at
4103 Whitford Terrace, Richmond, Virginia and commonly known as Hampton Glen
Apartments.
1.12 Review Contingency Date: That date which is twenty-one (21) days
from the Opening of Escrow, which shall be September 5th, 1996.
1.13 Service Agreements: All service agreements as itemized in
Exhibit "B" attached.
1.14 Settlement: Disbursement of Seller's proceeds, and delivery of
the Deed in favor of Buyer, in accordance with the terms of this Agreement.
1.15 Settlement Date: On or before the date which is seven (7) days
following the Review Contingency Date, which shall be September 12, 1996 (which
is the date upon which Settlement occurs).
1.16 Title Company: Fidelity National Title Insurance Company
3961-A Stillman Way
Glen Ellen, Virginia 23060
Telephone No. (800) 221-0509
Telecopier No. (804) 273-0318
Attn: Joe Sheppard, Advisory Title Officer
1.17 The following terms are defined in the Article or Section set
forth opposite such terms:
Term Article or Section
Rent Schedule 3.1(a)
Seller's Disclosure Documentation 3.1
Title Report 3.1(b)(i)
Survey 3.1(b)(ii)
Title Documents 3.1(b)(iii)
Buyer's Title Notice 3.1(b)(iii)
Seller's Title Notice 3.1(b)(iii)
Deed 6.2(a)
Owner's Title Policy 6.2(d)
Bill of Sale 6.2(g)
Rentals 7.2
Delinquent Rentals 7.2
ARTICLE II
Agreement of Purchase and Sale
2.1 Subject to the terms and conditions of this Agreement, Seller
agrees to sell the Property to Buyer, and Buyer agrees to purchase the
Property from Seller and to pay the Purchase Price therefor. Within one
business day after the full execution of this Agreement, Buyer will deposit
with Escrow Agent the sum of One Hundred Thousand and No/100 Dollars
($100,000), as the Earnest Money Deposit, together with a fully executed copy
of this Agreement. The Earnest Money Deposit shall be deemed non-refundable
upon Buyer's waiver of satisfaction of all of Buyer's contingencies set forth
in Section 3.1 as of the Review Contingency Date, as set forth in Section 3.1.
The Earnest Money Deposit will be invested by Escrow Agent in interest-bearing
government insured account(s) reasonably acceptable to Buyer and held subject
to the terms of this Agreement. All interest on the Earnest Money Deposit
will accrue to the benefit of Buyer.
2.2 On the day of Settlement, and in no event later than required
to permit the timely Settlement of this Agreement by the Settlement Date,
Buyer will cause the balance of the Purchase Price to be delivered directly
to the Escrow Agent, for the account of Seller, by wire transfer in
immediately available funds, less any credits due to Buyer, plus all sums
necessary to pay Buyer's prorations in connection with this transaction.
On or before Settlement, Seller shall provide Escrow Agent with written
wiring instructions identifying the financial institution, and the name and
number of the account to which Seller's proceeds shall be credited. The
Earnest Money Deposit, together with any accrued interest thereon, will be
credited toward the Purchase Price and disbursed to Seller upon Settlement,
unless refunded to Buyer or forfeited to Seller as hereafter provided.
2.3 The Settlement of the purchase and sale contemplated by this
Agreement shall be held in the area in which the Property is located, during
regular business hours, on or before the Settlement Date. The exact time
and place shall be selected by the Buyer and Seller by mutual agreement. If
no such selection is made, the Settlement shall be held at 1:00 p.m., local
time on the Settlement Date at the office of Escrow Agent, or at such other
time or such other place as may be mutually agreed upon by the parties.
-2-
<PAGE>
ARTICLE III.
Conditions to the Close of Escrow
3.1 Conditions Precedent to Buyer's Obligations. The Close of Escrow
and Buyer's obligations with respect to the transaction contemplated by this
Agreement are subject to the satisfaction, not later than the Review
Contingency Date (unless otherwise provided) of the following conditions, and
the obligations of the parties with respect to such conditions are as follows:
(a) Review and Approval of Documents and Material. Seller shall either
deliver directly to Buyer or shall make available for inspection by Buyer
at the property manager's on-site office during regular business hours, upon
24 hours' notice from Buyer to Seller, those items listed below in Subsections
(i) through (v), to the extent not previously delivered to Buyer prior to the
Opening of Escrow:
(i) A current rent schedule in form and content attached hereto
as Exhibit "C" which shall include all security deposits and all accrued
interest thereon (the "Rent Schedule").
(ii) Copies of the real estate tax bills for the current tax year.
(iii) Operating statements with respect to the Property listing
income and expenses for the most recent twelve months.
(iv) Copies of the utility bills for the most recent twelve months.
(v) Copies of all management and service agreements, warranties,
guarantees, and any other current contracts or agreements pertaining to the
Property, to the extent any of the foregoing items are in Seller's possession.
(vi) If in Seller's possession, copies of engineering reports,
Phase I reports or environmental studies or reports.
Buyer shall have the right to contact such persons or entities, and
review such records and documents relating to the ownership and operation of the
Property as Buyer may reasonably deem appropriate in connection with its due
diligence efforts. Seller will reasonably cooperate with Buyer in arranging
interviews and meetings for Buyer with any such persons or reviewing any such
records and documents including, but not limited to, information maintained by
Seller's property manager. Seller shall reasonably assist and cooperate with
Buyer as may be reasonably necessary to facilitate Buyer's investigation, due
diligence and review as aforesaid. The information supplied to or made available
to Buyer or Buyer's agents by Seller as provided in this Section 3.1 ("Seller's
Disclosure Documentation") is proprietary and shall not be released or disclosed
by Buyer to any other parties without the prior written consent of Seller,
except to Buyer's attorney, accountant, lender and environmental consultants,
who have a legitimate need for access to such information for purposes of
evaluating Buyer's possible purchase of the Property. In the event this
transaction is not closed for any reason, then Buyer will return promptly to
Seller all of Seller's Disclosure Documentation. Buyer shall refrain, and shall
cause its attorneys, agents, representatives and accountants to refrain from
disclosing any such information to any other party; provided, however, that said
obligation of confidentiality shall not apply to disclosures compelled by law,
an order of a court of competent jurisdiction, or a subpoena, in which event
Buyer shall immediately notify Seller of receipt of such notice, order, or
subpoena. Buyer shall defend, indemnify and hold harmless Seller (which
indemnification shall survive the Settlement of this transaction or the
termination or expiration of this Agreement, whichever shall occur) from and
against all loss, damage or expense sustained or incurred by Seller by reason of
any unauthorized disclosure of such information. Buyer will have until the
Review Contingency Date in which to approve the items listed in Section 3.1.
Failure to disapprove any item listed in Section 3.1, by delivery of written
objection to Seller within the time period specified therein, will be deemed to
constitute approval of any or all such items by Buyer, whereupon this Agreement
shall remain in full force and effect.
(b) Title
(i) With ten (10) business days of the date of this Agreement,
Seller shall obtain and furnish to Buyer a Commitment for an ALTA Owner's
Standard Coverage Policy of Title Insurance (hereinafter called the "Title
Report") issued by the Title Company, insurance company licensed to do
business in the State of Virginia, in the form customarily used in the
jurisdiction showing title to the Property vested in Seller and committing
to issue an ALTA Standard Coverage Owner's Policy of Title Insurance, in the
form customarily used in the jurisdiction in which the Property is located,
showing title thereto vested in Buyer, with coverage in the amount of the
Purchase Price, specifying all easements, liens, encumbrances, restrictions,
conditions or covenants with respect to the Property and including legible
copies of all documents referred to as exceptions to title in the Title
Report.
(ii) Within ten (10) business days of the date of this
Agreement, Seller shall obtain and furnish to Buyer and to the Title Company
a current survey of the Property (the "Survey") sufficient to cause Title
Company to remove the standard survey exceptions from the Owner's Title
Policy described in Section 6.2(d). The Survey will be an as-built survey,
prepared by a surveyor registered in the State in which the Property is located.
Buyer shall have a period of five (5) business days following its receipt of the
Survey in which to approve the Survey. If Buyer fails to deliver to the
Seller a written objection to the Survey within the period specified, Buyer
shall be deemed to have waived its Survey requirement and its right to require
the Title Company to remove the standard survey exceptions from the Title Policy
as a condition to the close of this transaction. The inability of Seller to
deliver the Survey to Buyer within the time period set forth herein, despite its
good faith efforts, shall not be deemed to be a default hereunder, but in such
event the Review Contingency Date shall be extended on a day-to-day basis for
each day of such delay, but only in the event Buyer's review period of the
Survey, as set forth herein, shall extend beyond the Review Contingency Date.
3
<PAGE>
(iii) Buyer shall have until ten (10) business days following Buyer's
receipt of the Title Report and copies of all documents noted therein as
exceptions to title, in which to give Seller and Escrow Agent written notice
("Buyer's Title Notice") of Buyer's disapproval or conditional approval of the
legal description or any matters shown in the Title Report and all documents
referred to in the Title Report (collectively the "Title Documents"). The
failure of Buyer to timely give Buyer's Title Notice shall be deemed to
constitute Buyer's approval of the legal description and all Title Documents. If
Buyer timely disapproves or conditionally approves any matters of title shown in
the Title Documents, Seller may elect to eliminate the disapproved or
conditionally approved title matters prior to Settlement Date. Seller shall give
Buyer written notice ("Seller's Title Notice") of those disapproved or
conditionally approved title matters, if any, which Seller shall attempt to
eliminate from the Title Policy and as exceptions to title to the Property. If
Seller does not elect to cure all disapproved title matters, Buyer may elect to
either: (A) terminate this Agreement by written notice to Seller, in accordance
with Article XI herein; or (B) accept title in its then existing condition and
proceed to Settlement as otherwise provided herein. Notwithstanding the
foregoing, if Buyer objects to any lien evidencing a monetary encumbrance (other
than liens for non-delinquent property taxes and assessments), Seller shall
either satisfy, bond off or otherwise remove said monetary encumbrance at or
before settlement pursuant to agreement with the Title Company. Failure of Buyer
to deliver written notice of its election to terminate this Agreement shall
constitute Buyer's election to proceed under class (B) above.
(c) Inspections and Studies. Buyer will have until the Review
Contingency Date to complete, at its own expense, an inspection of the
physical condition of the Property, including verification of current zoning
of the Property, and such structural or soils tests or environmental reports
as Buyer may contract for. Seller shall provide Buyer with all environmental
reports which are in Seller's possession, it being agreed and understood that
Seller does not guarantee accuracy of any such environmental reports. Buyer
will notify Seller in writing, no later than the Review Contingency
Date, of its approval or of any objection to the physical condition of the
Property which Buyer, in its sole discretion, may have as a result of such
inspections. Failure to provide Seller with such written objection on or
before the Review Contingency Date will be deemed to constitute disapproval
by Buyer of the physical condition of the Property, whereupon this Agreement
shall terminate in accordance with Article XI herein, effective upon the
Review Contingency Date. Seller will permit Buyer and its representatives
full access during normal business hours to make such inspections and tests
as Buyer deems necessary to complete its physical review of the Property.
Buyer hereby agrees to defend, indemnify and hold Seller harmless from and
against any damage, loss or claim resulting from any act or omission of
Buyer or Buyer's agents, employees, representatives or consultants
relating to Buyer's said inspection and testing.
3.2 In the event any of the conditions set forth in Article III are
not timely satisfied or waived, for a reason other than the default of
Buyer or Seller under this Agreement:
(a) This Agreement and the rights and obligations of Buyer and Seller
shall terminate, except as otherwise provided herein.
(b) Escrow Agent is hereby instructed to promptly return to Seller and
Buyer all funds (and accrued interest thereon) and documents deposited by them,
respectively, which are held by Escrow Agent or the date of said termination (in
the case of the party otherwise entitled to such funds, however, less the amount
of any cancellation charges required to be paid by such party under Section
3.3).
3.3 In the event this Agreement terminates because of the
nonsatisfaction of any condition for a reason other than the default of Buyer or
Seller under this Agreement, the cancellation charges required to be paid by and
to Escrow Agent and the Title Company shall be borne one-half (1/2) by Seller
and one-half (1/2) by Buyer and all other charges shall be borne by the party
incurring same.
ARTICLE IV.
Representations, Warranties and Covenants of Seller and Buyer
4.1 Seller covenants and agrees with Buyer that, between the date
hereof and the date of Settlement:
(a) Seller shall use good faith reasonable efforts, consistent
with normal and customary practice, to cause the Property to be maintained in
accordance with all applicable laws and in substantially the same manner in
which the Property has been operated during Seller's period of ownership,
reasonable wear and tear excepted, as of the date the same are approved by Buyer
under Section 3.1(c).
(b) If Seller discovers any defect, error or omission in any items
described in Section 3.1, Seller will promptly give Buyer notice with detailed
information of such defect, error or omission, and Buyer shall have the later
of: (i) five (5) business days from receipt of such notice; or (ii) the Review
Contingency Date, to submit written objections thereto or to give Seller notice
of acceptance thereof. Buyer's failure to deliver written objection to Seller
within said period shall be deemed to constitute disapproval of the information
contained in said notice and the effect thereof upon the Property and this
transaction, whereupon this Agreement shall terminate in accordance with Article
XI herein, effective upon the expiration of such time period.
4.2 From and after the Review Contingency Date, Seller will not enter
into any new Lease at the Property or renew, terminate, or amend any existing
Lease except on market terms or terms substantially similar to those reflected
in the Rent Schedule. From and after the Review Contingency Date, Seller shall
not take any action or execute any document which would create a new interest in
the Property or which would affect marketability of title, nor shall Seller
enter into any service or other contract having a material impact on the
Property or its operations which cannot be canceled upon thirty (30) days
notice, without the prior written approval of Buyer. If Buyer does not respond
to Seller's request for approval under the preceding sentence within five (5)
business days from receipt of such request, then Buyer shall be deemed to have
given the requested approval and Seller shall be free to enter into such
contract or agreement.
4
<PAGE>
4.3 Seller will terminate its existing management, leasing and listing
agreements, and such other Service Agreements affecting the Property as Buyer
elects not to assume, if any, for the Property, effective as of the Settlement
Date, and Seller shall pay all expenses of such termination. As to any such
Service Agreement which is terminated by Seller, Seller agrees to indemnify and
hold harmless the Buyer from any claims, causes of action or demands arising
thereunder. A list of the Service Agreements is attached hereto as Exhibit "B".
4.4 Seller represents and warrants on its own behalf, now and as of the
Settlement Date, that:
(a) Seller has the full right, power and authority to sell the
Property to Buyer as provided herein and to carry out Seller's obligations
hereunder, the individuals executing this Agreement on behalf of Seller are
fully authorized to do so and all necessary action has been taken by Seller to
authorize the execution of this Agreement.
(b) To Seller's knowledge, there are no pending or threatened claims,
suits, actions, arbitrations or regulatory, legal, or other proceedings or
investigations affecting the Property or Seller's rights and obligations under
this Agreement. To Seller's knowledge, there is no pending or contemplated
condemnation of the Property, or any part of it. In the event Seller receives
actual notice of any pending or threatened litigation or legal action concerning
the Property following the date of this Agreement, Seller shall promptly notify
Buyer of same, and Buyer shall thereupon have the right to cancel this Agreement
in accordance with Article XI, unless Seller shall bond such matter.
(c) To Seller's knowledge, there are no tenant Leases currently in
force or effect for the Property and no security deposits or other sums due
tenants except as specified on the Rent Schedule attached hereto as Exhibit "C",
and Exhibit "C" lists all Leases and tenancies with respect to the Property or
any part thereof, as of the date hereof.
(d) Seller has received no notice from any insurance company of any
defect in the Property or the Personal Property which would be likely to
increase the cost or cause the cancellation of any insurance policy, and Seller
has no knowledge of any such defects.
(e) Except for the Leases, Service Agreements and Permitted
Exceptions, Seller is not aware of any service contracts, management agreements
or other agreements which are in force and which relate to the operation,
management and/or maintenance of the Property which will survive the purchase
and sale of the Property as set forth in this Agreement or which would
constitute an obligation of Purchaser after the Settlement Date.
(f) Seller will not be in violation of any other contract by virtue of
its execution and performance of this Agreement.
As used in this Section 4.4 herein, Seller's "knowledge" means actual
knowledge of John Mulvihill and David Honerkamp as the real estate investment
officers of the Seller responsible for the monitoring and limited supervision of
the property manager for the Property, without duty to inspect or make any
independent investigation; provided, it is contemplated that such individuals
have reasonably discharged such monitoring and limited supervision of the
property manager in accordance with Seller's customary practices concerning
properties acquired through foreclosure sales, including obtaining all material
information concerning the condition of the Property, the information furnished
to Buyer herein, and the representations and warranties of Seller herein, and
will continue to do so until the Settlement Date.
Notwithstanding anything to the contrary contained in this Agreement, if
Buyer acquires actual knowledge that any representation or warranty of Seller is
not true and correct as of the Settlement Date and shall elect to acquire the
Property notwithstanding such fact, Buyer shall be deemed to have waived such
specific breach of representation and warranty and to have released Seller from
all liability or responsibility in connection therewith, and neither Buyer nor
Buyer's permitted assignees or successors shall be entitled to commence any
action or to recover damages from Seller based upon such specific breach of a
representation and warranty.
The representations and warranties of Seller herein shall survive for one
(1) year following the Settlement Date.
4.5 Seller and Buyer acknowledge and agree that Seller acquired the
Property in foreclosure, and consequently has little, if any, knowledge of the
physical or economic characteristics of the Property. Accordingly, except as
otherwise specifically stated in this Agreement, Seller hereby specifically
disclaims any warranty, guaranty or representation, oral or written, past,
present or future, of, as to, or concerning:
(i) the nature and condition of the Property, including, but not
limited to the water, soil and geology, and the suitability thereof and of the
Property for any and all activities and uses which Buyer may elect to conduct
thereon;
(ii) the nature and extent of any right-of-way, possession, lien,
encumbrance, license, reservation, condition or otherwise;
(iii) the compliance of the Property or its operation with any laws,
ordinances or regulations of any government or other body;
(iv) the quality, nature, adequacy and physical condition of the
Property, including, but not limited to, the structural elements, foundation,
appurtenances, access, landscaping, parking facilities and the electrical,
mechanical, HVAC, plumbing, sewage and utility systems, facilities and
appliances;
(v) the existence, quality, nature, adequacy and physical condition of
utilities serving the Property;
5
<PAGE>
(vi) the zoning or other legal status of the Property or any other
public or private restrictions on the use of the Property;
(vii) the presence of any hazardous substances on, under or about the
Property or the adjoining or neighboring property;
(viii) the quality of any labor and materials used in any Improvements
on the Real Property; and
(ix) the economics of the operation of the Property.
In consideration of Buyer's receiving access to the Property as set forth
in this Article III so that Buyer may conduct such studies, costs,
investigations, inspections and analyses with respect to the Property as Buyer
might desire, Buyer acknowledges and confirms that unless Buyer elects to
terminate this Agreement as provided herein, Buyer shall accept Seller's
conveyance of the Property to Buyer in an "AS-IS" and "WHERE-IS" condition, free
of any warranty by Seller, except as otherwise expressly provided in this
Agreement, and free of any obligation by Seller to perform any repairs or other
improvement work with respect to the Property. Buyer expressly acknowledges
that, in consideration of the agreements of Seller herein, except as otherwise
specified here, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED,
OR ARISING BY OPERATION OF LAW, CONCERNING THE PROPERTY, INCLUDING, BUT IN NO
WAY LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. NOTHING HEREIN SHALL BE DEEMED TO LIMIT,
IMPAIR OR ABROGATE THE REPRESENTATIONS AND WARRANTIES OF SELLER IN SECTION 4.4
HEREIN.
4.6 Buyer represents and warrants now and as of the date of Settlement
that:
(a) If Buyer is a corporation it is duly organized, validly existing
and in good standing under the laws of the state of Virginia.
(b) Buyer has the full right, power and authority to purchase the
Property from Seller as provided herein and to carry out Buyer's obligations
hereunder, and the person or persons executing this Agreement on behalf of Buyer
are fully authorized to do so.
(c) Buyer's purchase of the Property will constitute its certification
that Buyer: (i) has inspected and is familiar with the Property; (ii) has had
the opportunity to have prepared for Buyer's review such soils, engineering,
environmental or hazardous substance reports or such other reports or
inspections relating to the Property as Buyer deemed appropriate; (iii) has
purchased the Property on an "AS IS" and "WHERE-IS" basis, relying solely on
Buyer's own examination and inspection of the Property, and the representations
and warranties of Seller contained herein, including the survival period thereof
in Section 4.7.
4.7 All representations and warranties of Seller and Buyer under this
Article IV shall be true as of the Settlement and will survive the Settlement;
provided, however, that any claim, action, suit or proceeding with respect to
the truth, accuracy or completeness of such representations and warranties must
be commenced, if at all, on or before one (1) year from the date of Settlement.
ARTICLE V
Condemnation And Destruction
5.1 Seller will notify Buyer of any damage or destruction to the Property
as soon as practicable after such occurrence. If, prior to Settlement, all or a
material part of the Property is destroyed by fire or other casualty or is
threatened to be taken or is taken by eminent domain, either Buyer or Seller may
terminate this Agreement by written notice to the other party within ten (10)
business days following Buyer's receipt of written notification of such
occurrence. If neither Buyer nor Seller terminates this Agreement within the
time provided, Buyer will be deemed to have waived the destruction or taking,
and the this transaction will be completed as provided in this Agreement without
reduction in the Purchase Price (except to the extent of the deductible under
Seller's casualty policy and any non-insured portion of the loss) and Buyer
shall be entitled to receive all insurance proceeds and eminent domain awards
applicable to the destruction, damage or taking, other than proceeds and awards
constituting reimbursement to Seller for repair or restoration work to the
Property resulting from such destruction, damage or taking, and performed prior
to Settlement.
5.2 Seller shall, at Settlement and thereafter, execute and deliver to
Buyer all required proofs of loss, and assignments of claims and awards. The
term "material part" as used in this Article V will have the following meanings:
(i) a material part of the Property shall be deemed damaged where the cost of
restoring same to its condition prior to the fire or other casualty causing loss
will exceed the sum of $50,000; (ii) a material part of the Property shall be
deemed taken or threatened to be taken by eminent domain where that portion of
the Property taken or threatened to be taken has caused or will cause a decrease
in the value of the Property of $50,000 or more; (iii) more than five percent
(5%) of the parking area on the Property is taken; or (iv) any taking results or
would result in a violation of the use provisions of applicable zoning laws.
5.3 Seller shall assume all risk of loss to the Property caused by
matters referred to in this Article V prior to the Settlement Date.
6
<PAGE>
ARTICLE VI
Action on the Settlement Date
6.1 Each of the following shall constitute a condition precedent to the
Settlement obligations of Seller:
(a) Seller shall have been paid on the date of Settlement the
Purchase Price (adjusted for credits or debits for all prorations under Article
VII);
(b) Seller shall be provided on the date of Settlement with an
executed duplicate original of the documents listed under subsections (e) and
(f) of Section 6.2 below.
6.2 As a condition to Buyer's obligation hereunder, Buyer will be
provided on the date of Settlement with:
(a) An executed and acknowledged special warranty deed ("Deed") in
the form of Exhibit "D";
(b) Originals (or copies if such originals are not available) of all
executed Leases;
(c) All keys for the Property in the possession or control of Seller
(properly labeled);
(d) An ALTA Standard Coverage Owner's Policy of Title Insurance, in
the form customarily used in the jurisdiction in which the Property is located
(or a proforma copy of the policy to be issued), issued by Title Company and
dated as of the Settlement Date, with coverage in the amount of the Purchase
Price, including the legal description of the Property and showing title vested
in Buyer, subject only to the Permitted Exceptions, together with such
endorsements as Buyer may require pursuant to the terms of Section 8.1 (the
"Owner's Title Policy");
(e) An executed and acknowledged duplicate original of the Assignment
and Assumption of Leases, if any, in the form of Exhibit "E";
(f) An executed duplicate original of the General Assignment in the
form of Exhibit "F";
(g) An original executed bill of sale ("Bill of Sale") for the
Personal Property executed by Seller in favor of Buyer in the form of Exhibit
"G", reciting that such transfer is on an "AS-IS" and "WHERE-IS" basis; and
(h) A certification duly executed by Seller under penalty of perjury
in the form of, and upon the terms set forth in Exhibit "H", setting forth
Seller's address and federal tax identification number and certifying that
Seller is not a foreign entity in accordance with and/or for the purpose of the
provisions of Section 1445 (as may be amended) of the Internal Revenue Code of
1954, as amended, and any regulations promulgated thereunder;
(i) Letters from Seller notifying each of the tenants at the Property
of the change of ownership of the Property, and directing such tenants to make
all payments due under the Leases to such party and at such address as Buyer may
designate;
(j) An updated Rent Schedule, certified to be accurate as of the end
of the last full calendar month prior to the Settlement Date, to Seller's
knowledge, which shall include a list of security deposits and accrued interest
thereon, if any.
6.3 Any property and liability insurance on the Property maintained by
Seller will terminate on the Settlement Date.
Notwithstanding anything herein to the contrary, it is understood
that Buyer will have 21 days to complete its due diligence pursuant to Section
3.1 herein, and 7 days thereafter to complete the Settlement, subject to the
agreement of the Title Company to issue the Owner's Title Policy, subject only
to the Permitted Exceptions, as set forth in Subsection (d) above.
6.4 Seller will deliver possession of the Property to Buyer on the
Settlement Date.
6.5 Seller acknowledges that Buyer is a public entity and is required to
furnish financial statements to the Securities and Exchange Commission in
connection with this transaction. Seller shall use its best efforts to make
available to Buyer all financial statements regarding the Property for the last
12 months of operations, for Seller's use in generating a report that the
Property is in compliance with Accounting Regulation S-X of the Securities and
Exchange Commission. Seller shall have no responsibility of any kind for the
accuracy or completeness of such report or the use of such information. The
financial records made available to Buyer hereunder are the same records as
those prepared for and used by Seller.
6.6 At the Settlement, all units which are or become vacant on or before
seven (7) days prior to the Settlement Date shall be in a "rent ready" condition
as of the Settlement. For purposes of this Section 6.6 "rent ready" shall mean
that all such units shall have been placed in a condition to rent, consistent
with the normal and customary practice of Seller at the Property including,
without limitation, cleaning, repainting and, in the sole judgment of Seller,
recarpeting and/or replacement of appliances and/or fixtures.
6.7 All Personal Property listed in the Schedule of Personal Property
attached hereto as Exhibit "I" and included in the sale of the Property, as well
as all mechanical, electrical, heating, air conditioning, sewer, water and
plumbing systems.
7
<PAGE>
6.8 Seller shall provide Buyer with a certificate from a licensed
pest-control contractor, who is regularly engaged in the business of pest
control and extermination, certifying that the Improvements are free from
infestation by termites or other wood-boring insects. Said certification shall
be dated within ninety (90) days of the Settlement Date and shall bear the name,
contractor's license number and signature of the contractor or person authorized
to sign for the contractor, as well as the date of such inspection; provided, in
the event such inspection reveals any such infestation or related matter, Seller
may elect to proceed to have such corrective work completed prior to the
Settlement Date, if possible, in the judgment of Seller's contractors or
consultants, or to commence such work prior to the Settlement Date and complete
such work promptly following such Settlement Date, without interruption, or, to
notify Buyer of its inability or unwillingness to perform such corrective work.
In the event Buyer receives notice from Seller of its inability or unwillingness
to perform such corrective work, Buyer shall have the election, within five (5)
business days of receipt of such notice from Seller, in which to either: (i)
elect to terminate this Agreement in accordance with Article XI herein,
effective upon Seller's receipt of Buyer's written notice of such election; or
(ii) elect to proceed with the Settlement and to waive any right which Buyer
might otherwise have to the completion of such corrective work.
ARTICLE VII
Prorations
7.1 Subject to the provisions of this Agreement, all rentals,
cost-recovery items and other income, if any, from the Property, real property
taxes and personal property taxes (to the extent applicable), assessments,
improvement bonds, amounts owed or paid under Service Contracts which Buyer has
elected to assume pursuant to this Agreement, and other regular expenses, if
any, affecting the Property shall be paid or shall be prorated as of 11:59 p.m.
(at the site of the Escrow Agent) on the day preceding the Settlement in
accordance with the provisions set forth below. For purposes of calculating
prorations, Buyer shall be deemed to be in title to the Property, and therefore
entitled to the income and responsible for the expenses, for the entire day upon
which the Settlement occurs. Any apportionments and prorations which are not
expressly provided for below shall be made in accordance with customary practice
in the County. Any adjustments in the prorations if and to the extent known and
agreed upon as of the Settlement, shall be paid by Buyer to Seller (if the
prorations result in a net credit to the Seller) or by Seller to Buyer (if the
prorations result in a net credit to the Buyer), by increasing or reducing the
cash to be paid by Buyer at the Settlement. Any such adjustments not determined
or not agreed upon as of the Settlement shall be paid by Buyer to Seller, or by
Seller to Buyer, as the case may be, in cash as soon as practicable following
the Settlement. Buyer and Seller shall use their best efforts to deliver to
Escrow Agent at least three (3) business days prior to the Settlement, a copy of
the schedule of adjustments as agreed upon by Buyer and Seller. Notwithstanding
the foregoing, utilities charges shall not be prorated at the Settlement and
Seller shall arrange for all utilities companies servicing the Property
including, without limitation, water, sewer, gas and electricity, to read the
meters and cause the name of the responsible party for such utilities to be
changed, as of the Settlement, from Seller to Buyer, and to transfer any
utilities deposits from Seller's name to Buyer's name. Seller shall receive an
appropriate credit at the Settlement for any such deposits so transferred to
Buyer's name by the utilities companies. All non-delinquent real estate taxes on
the Property shall be prorated based on the most recent actual current tax bill
which has been received by Seller. If, after the Settlement, the tax proration
at the Settlement is inaccurate based upon receipt of the actual tax bill for
the tax year in which the Settlement occurred, Buyer and Seller shall re-prorate
the real estate taxes following the Settlement.
7.2 Rentals. Subject to the provisions of this Article VII, rentals shall
be prorated as of the Settlement. "Rentals" as used herein includes monthly
rentals under the Leases and all other sums and charges payable by Tenants under
the Leases. Rentals are delinquent ("Delinquent Rentals") when payment thereof
is due on or prior to the Settlement but has not been made by the Settlement.
Delinquent Rentals shall be prorated between Buyer and Seller as of the
Settlement but not until they are actually collected by Buyer. Buyer shall use
reasonable efforts to collect any Delinquent Rentals, which shall not include an
obligation on the part of Buyer to bring any action or proceeding to collect
same. After the Settlement, Seller shall not take any action against an existing
Tenant owing Delinquent Rentals. Seller shall not be entitled to any rentals
which are received from Tenants after the Settlement Date unless such Tenants
are current in their rental obligations for periods occurring from and after the
Settlement. Delinquent Rentals collected by Buyer, net of the costs of
collection (including attorneys' fees), shall be applied first against any
amount currently due and then to amounts most recently overdue. For purposes
hereof, "amounts currently due" shall mean and refer to amounts which would be
due for any month in which such payment is received and also for any month which
is to commence within ten (10) days after receipt of such amounts. Buyer agrees
that any payments due to Seller as a result of collected Delinquent Rentals
shall be payable upon receipt thereof.
7.3 Buyer shall be credited and Seller shall be debited with an amount
equal to all deposits being held on behalf of Tenants as of the Settlement Date
by Seller under the Leases, along with accrued interest thereon, if any.
ARTICLE VIII
Costs and Commissions
8.1 Seller will pay the cost of the Survey as required under Subsection
3.1(b)(ii), its own legal fees, and grantor's tax. Buyer will pay the premium
for the Owner's Title Policy and any extended coverage and any endorsements to
the Owner's Title Policy, requested by Buyer, its own legal fees, all fees and
expenses relating to its inspection and testing of the Property or its review of
the books and records of the Property, and the cost of recording the Deed. All
other closing fees and closing costs including, without limitation, Escrow
Agent's fees and expenses, shall be allocated between Buyer and Seller in
accordance with the customary practice of the County.
8.2 Buyer has agreed to pay a real estate commission to Broker, a
licensed real estate broker in the State of Virginia, in accordance with the
provisions of a separate agreement between Buyer and Broker. Buyer and Seller
8
<PAGE>
each represent to the other that they have not entered into any other agreement
or incurred any other obligation which might result in the obligation to pay a
sales or brokerage commission or finder's fee with respect to this transaction.
Buyer and Seller each agree to indemnify, defend and hold the other harmless
from and against any and all loss, claims, damage, cost or expense (including
attorney's fees and costs) which the other may incur as a result of any claim
made by any person to a right to a sale or brokerage commission or finder's fee
in connection with this transaction to the extent such claim is based on the
actual or alleged acts or omissions of Seller or Buyer, as the case may be. The
obligations of Buyer and Seller under this Section 8.2 shall survive the
Settlement Date.
ARTICLE IX.
Default by Buyer
IN THE EVENT OF A DEFAULT BY BUYER UNDER THE TERMS OF THIS AGREEMENT, AND
BUYER'S FAILURE TO CURE SUCH DEFAULT WITHIN 10 DAYS OF RECEIPT FROM SELLER OF
WRITTEN NOTICE THEREOF, SELLER SHALL HAVE THE RIGHT TO TERMINATE THIS AGREEMENT
BY NOTICE FURNISHED TO BUYER AND TO ESCROW AGENT. BOTH SELLER AND BUYER AGREE
THAT IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO FIX THE ACTUAL DAMAGES
SUFFERED BY SELLER AS THE RESULT OF BUYER'S DEFAULT IN ITS PERFORMANCE OF THIS
AGREEMENT. IN ADDITION, BUYER DESIRES TO HAVE A LIMITATION PUT ON ITS POTENTIAL
LIABILITY TO SELLER IN THE EVENT OF BUYER'S DEFAULT. BY INITIALING THIS ARTICLE,
BOTH PARTIES AGREE THAT THE EARNEST MONEY DEPOSIT CONSTITUTES A REASONABLE
ESTIMATE OF SELLER'S DAMAGES IN SUCH EVENT. SELLER SHALL, AS ITS SOLE REMEDY, IN
ADDITION TO TERMINATION, RETAIN THE EARNEST MONEY DEPOSIT AS LIQUIDATED DAMAGES
IN THE EVENT OF BUYER'S DEFAULT.
CSO DJC AG
------------------ --------------------
Initials of Seller Initials of Buyer
ARTICLE X.
Default by Seller
In the event of a default by Seller under the terms of this Agreement,
Buyer will have the right to either: (i) purchase the Property notwithstanding
such default, whereupon such default shall be deemed waived; or (i) terminate
this Agreement by notice furnished to Seller and to Escrow Agent, whereupon
Buyer will be entitled: (A) to a refund of the Earnest Money Deposit and all
interest accrued thereon held by Escrow; and (B) to pursue an action against
Seller at law for damages; provided, however, Buyer shall have no right of
action against Seller or subsequent owners of the Property at equity, for
specific performance of this Agreement or otherwise, for purposes of asserting a
claim of title to and/or possession of all or any portion of the Property;
provided, in such event, Seller shall reimburse Buyer for its reasonable
out-of-pocket due diligence costs up to the date of Buyer's termination.
ARTICLE XI.
Termination
Should this transaction not close on or before the Settlement Date for
reasons other than a default by Buyer or Seller hereunder, either party may, by
giving notice to the other and to the Escrow Agent, terminate this Agreement.
Upon such termination, Buyer will promptly return to Seller all due diligence
materials provided to Buyer by Seller hereunder, and Buyer will be entitled to
the Earnest Money Deposit held by Escrow Agent unless Buyer is in default
hereunder, whereupon the provisions of Article IX shall apply, and the Earnest
Money Deposit shall be non-refundable.
ARTICLE XII.
Miscellaneous
12.1 All notices, requests, demands or other communications required or
permitted under this Agreement shall be in writing and delivered personally, by
certified mail, return receipt requested, postage prepaid, by telecopy or other
facsimile transmission, or by overnight courier (such as Federal Express),
addressed as follows:
Seller: Pacific Mutual Life Insurance Company
700 Newport Center Drive,
Newport Beach, California 92660
Attention: John C. Mulvihill - REO: 3587
Telephone No: (714) 640-3738
FAX No: (714) 760-9680
Copy to: Pacific Mutual Life Insurance Company
700 Newport Center Drive,
Newport Beach, California 92660
Attn: Joseph E. McKeever, Esq.
Telephone No: (714) 725-6768
FAX No: (714) 640-3706
9
<PAGE>
Buyer: Cornerstone Realty Group, Inc.
306 East Main Street
Richmond, Virginia 23219
Telephone No: (804) 643-1761
FAX No: (804) 782-9302
Copy to: Harry Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut Street
Cedarhurst, New York 11516
Telephone No: (516) 374-3133
FAX No: (516) 374-3490
All Notices in accordance with the terms hereof shall be deemed given upon
actual receipt thereof. All Notices shall be sent by overnight courier or
messenger service, or facsimile transmission to the numbers given above,
provided confirmation of such facsimile transmission is received from the
notified party. Electronic confirmation of facsimile transmissions shall be
sufficient. Either party hereto may change the address or facsimile number for
receiving notices, requests, demands or other communication by notice sent in
accordance with the terms of this Section 12.1.
12.2 Buyer may not assign this Agreement or its rights hereunder without
the prior written consent of Seller, which Seller may withhold in its sole and
absolute discretion; provided, Buyer shall be permitted to assign its
obligations hereunder to Cornerstone Realty Income Trust, Inc., a duly
constituted real estate investment trust, by written notice to Seller, without
Seller's prior consent. Any assignment consented to by Seller hereunder will be
subject to the terms and provisions of this Agreement; provided, however, that
upon such assignment such Assignee shall succeed to all of the rights and
obligations of Buyer hereunder, and agrees to execute all documents and perform
all obligations pursuant to this Agreement. Notwithstanding any assignment of
this Agreement, the Assignor shall not be relieved of its obligations to
complete this transaction and pay the Purchase Price to Seller as provided for
herein.
12.3 Each party agrees to execute any additional documents or supplemental
escrow instructions as may be reasonably necessary to comply with the terms of
this Agreement, provided that such instructions are not in conflict with the
terms hereof and that if a conflict exists, the provisions of this Agreement
shall prevail.
12.4 This Agreement is the entire agreement between Seller and Buyer
pertaining to the sale of the Property and supersedes any prior written or oral
understandings. Any amendment or modification to this Agreement must be in
writing signed by the party to be charged or by its duly authorized agent. This
Agreement will be governed by the laws of the State of Virginia.
12.5 The prevailing party in any litigation, including any appeal,
arising out of this Agreement will be entitled to its reasonable attorney's
fees, costs and expenses incurred in connection with the prosecution or defense
of such action.
12.6 All Exhibits referred to are attached to this Agreement and are
incorporated herein by reference.
12.7 In the event this Agreement is terminated by the default of Buyer or
Seller, any escrow termination fee or charges of Escrow Agent will be borne by
the defaulting party.
12.8 This Agreement may be executed in separate counterparts, each of
which will be deemed an original, and all of which together will constitute one
instrument.
12.9 Seller and Buyer hereby acknowledge and agree that time is strictly
of the essence with respect to each and every term, condition, obligation and
provision hereof and that failure to timely perform any of the terms,
conditions, obligations or provisions hereof by either party shall constitute a
material breach of and a non-curable (but waivable in writing) default under
this Agreement by the party so failing to perform.
12.10 The heading, captions and titles used in this Agreement are for
convenience only and shall not be deemed in any way to limit or amplify the
terms and provisions of this Agreement.
12.11 If any date of significance hereunder falls upon a Saturday, Sunday,
or legal holiday such date will be deemed moved forward to the next day which is
not a Saturday, Sunday, or legal holiday. The terms "working day" or "business
day" shall mean days elapsed exclusive of Saturdays, Sunday, or legal holidays.
12.12 In the event this Agreement is not fully executed by Buyer and
Seller on or before August 20, 1996, this Agreement shall be null and void and
neither party shall have any liability to the other hereunder.
10
<PAGE>
SELLER: BUYER:
PACIFIC MUTUAL LIFE INSURANCE CORNERSTONE REALTY GROUP, INC.
COMPANY, a California corporation a Virginia corporation
By: /s/ C.S. Dillion By: /s/ S. J. Olander
--------------------------- -------------------------
C.S. DILLION
Title: Vice President Title: Senior Vice President
By: /s/ Debra Cunningham By:
--------------------------- -------------------------
DEBRA CUNNINGHAM
Title: Assistant Secretary Title:
-----------------------
Escrow Agent acknowledges receipt of a fully executed copy of this
Agreement, and by its signature hereby accepts and agrees that the provisions of
this Agreement, and any amendment thereto as may be executed by Buyer and
Seller, shall constitute instructions and control the deposit and disposition of
funds by the Escrow Agent hereunder.
ESCROW AGENT:
LeClar Ryan, a Professional Corporation
/s/ SIGNATURE ILLEGIBLE
-------------------
Title: Vice-President
Date: 8/15/96
11
[L.P. MARTIN & COMPANY LETTERHEAD]
Exhibit 23.1
Consent of Independent Auditors'
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We consent to the use of our reports dated June 21, 1996 with respect
to the statements of income and direct operating expenses exclusive of items
not comparable to the proposed future operations of the property Lexington Tower
Apartments for the year ended December 31, 1995, and the three month period
ended March 31, 1996, for inclusion in a form 8K filing with the Securities and
Exchange Commission by Cornerstone Realty Income Trust, Inc., and to the
reference to our firm under the heading "Expert" therein.
Richmond, Virginia
June 21, 1996 /s/ L.P. Martin & Co., P.C.
[L.P. MARTIN & COMPANY LETTERHEAD]
Exhibit 23.3
Consent of Independent Auditors'
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated August 14, 1996 with
respect to the statement of income and direct operating expenses exclusive
of items not comparable to the proposed future operations of the property
Paces Glen Apartments for the twelve month period ended June 30, 1996, for
inclusion in a form 8K filing with the Securities and Exchange Commission by
Conerstone Realty Income Trust, Inc., and to the reference to our firm under
the heading "Expert" therein.
Richmond, Virginia
August 14, 1996 /s/ L.P. Martin & Co., P.C.
[L.P. MARTIN & COMPANY LETTERHEAD]
Exhibit 23.4
Consent of Independent Auditors'
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated August 23, 1996 with
respect to the statement of income and direct operating expenses exclusive
of items not comparable to the proposed future operations of the property
Doctors Park Apartments for the twelve month period ended June 30, 1996, for
inclusion in a form 8K filing with the Securities and Exchange Commission
by Cornerstone Realty Income Trust, Inc., and to the reference to our firm
under the heading "Expert" therein.
Richmond, Virginia
August 23, 1996 /s/ L.P. Martin & Co., P.C.
