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: October 31, 1997
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
<PAGE>
CORNERSTONE REALTY INCOME TRUST, INC.
FORM 8-K
Index
Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report
(Barrington Parc Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Barrington Parc Apartments) *
Note to Historical Statement of
Income and Direct Operating
Expenses (Barrington Parc Apartments)*
b. Independent Auditors' Report
(St. Regis (formerly Sterling Arbor) Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(St. Regis (formerly Sterling Arbor) Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (St. Regis (formerly Sterling Arbor) Apartments)*
c. Independent Auditors' Report
(Remington Place (formerly Sterling Place) Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Remington Place (formerly Sterling Place) Apartments)*
- ----------
* To be filed by amendment.
2
<PAGE>
Note to Historical Statement of Income and Direct Operating
Expenses (Remington Place (formerly Sterling Place)
Apartments)*
d. Pro Forma Statement of Operations for the Nine Months ended
September 30, 1997 (unaudited)*
Pro Forma Balance Sheet as of
September 30, 1997 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1996
(unaudited)*
e. Exhibits
10.1 Purchase Contract for Barrington Parc Apartments
10.2 Purchase Contract for St. Regis (formerly Sterling
Arbor) Apartments
10.3 Purchase Contract for Remington Place (formerly
Sterling Place) Apartments
23.1 Consent of Independent Auditors*
23.2 Consent of Independent Auditors*
23.3 Consent of Independent Auditors*
- ----------
* To be filed by amendment.
3
<PAGE>
Item 2. Acquisition or Disposition of Assets
BARRINGTON PARC APARTMENTS
Norcross, Georgia
On October 31, 1997, Cornerstone Realty Income Trust, Inc. (the "Company")
purchased the Barrington Parc Apartments, a 188-unit apartment complex located
at 1405 Beaver Ruin Road, Norcross, Georgia (the "Property"). Norcross is just
outside Atlanta.
The Company purchased the Property from an affiliate of Winthrop Financial
Associates, which is unaffiliated with the Company. The purchase price was
$7,850,000, all of which was borrowed by the Company under the Company's
unsecured line of credit. Title to the Property was conveyed to the Company by
limited warranty deed.
Location. The Property is located off of Buford Highway in Norcross,
Georgia, within Gwinnett County, just outside Atlanta, Georgia. The following
information concerning the metropolitan Atlanta area is based in part upon
information provided by the greater Atlanta Chamber of Commerce.
The economy of the greater Atlanta area is diverse, and includes as
significant sectors manufacturing, transportation, distribution, retailing,
wholesaling, finance, government, research, education and medicine. More than
80% of the Fortune 500 industrial companies and over 1,800 local manufacturing
firms have operations in the area. Atlanta is the national headquarters of
Coca-Cola, Cable News Network, Delta Air Lines, United Parcel Service, Home
Depot and Holiday Inn Worldwide. The city is also headquarters for the Sixth
District Federal Reserve Bank.
The convention and visitor trade is also one of Atlanta's primary
industries and has an important impact on the overall economy of the city.
Atlanta's hosting of the 1996 Centennial Olympic Games furthered its visibility
as an important city internationally.
Atlanta sits at the junction of three major Interstate Highways (I-20, I-75
and I-85), and I-285 (Perimeter Highway) encircles the city. There are several
airports in the area, but the principal airport is Hartsfield-Atlanta
International Airport, which had over 60,000 flights and over 4.5 million
passengers in 1994. Atlanta also has a rapid rail transit system (known as the
Metropolitan Atlanta Rapid Transit Authority, or "MARTA").
Gwinnett County had the highest population growth rate of any large county
in the United States during the 1980's. From 1980 to 1990, Gwinnett County added
almost 190,000 new residents, and the forecasted population growth for Gwinnett
County from 1990 to 2000 is 142,000.
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<PAGE>
The immediate area surrounding the Property consists of other multi-family
and single-family housing and commercial and retail development. The Property is
proximate to businesses, major shopping, entertainment, schools and churches.
The Property is approximately one mile east of Interstate 85 and six miles from
Interstate 285.
Description of the Property. The Property consists of 188 garden and
townhouse style apartment units in 21 two- and three-story buildings on
approximately 18 acres of land. The Property was built in 1986.
The Company believes that the Property is generally in good condition and
has been well maintained. The Company has budgeted $131,000 for certain
renovations to the Property, including clubhouse renovations, wood and trim
replacement, exterior painting and resealing, and restriping of parking areas.
The Property offers several types of units. The unit mix and rents
currently being charged new tenants are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- -------- ---- ------- ------
<S> <C> <C> <C>
28 One bedroom/one bathroom 700 $600
6 One bedroom/one bathroom 800 620
28 One bedroom/one bathroom 800 635
12 One bedroom/one bathroom townhouse 900 660
(middle)
12 One bedroom/one bathroom townhouse 900 690
(end)
30 Two bedrooms/two bathrooms (split) 1,000 710
30 Two bedrooms/two bathrooms (split) 1,100 760
14 Two bedrooms/two bathrooms 1,000 715
14 Two bedrooms/two bathrooms 1,100 735
14 Two bedrooms/two bathrooms 1,100 755
</TABLE>
The apartments provide a combined total of approximately 176,000 square
feet of net rentable area.
5
<PAGE>
Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased. As an example, a
two-bedroom, two-bath apartment unit (1,100 square feet) rented for $545 in
1992, $560 in 1993, $595 in 1994, $650 in 1995, and $680 in 1996. The average
effective annual rental per square foot at the Property for 1992, 1993, 1994,
1995 and 1996 was $6.56, $6.75, $7.17, $7.83, and $8.19, respectively.
The buildings are wood-frame construction on concrete slabs. Exteriors are
cedar siding. The buildings have pitched roofs covered with asphalt shingles.
Each apartment unit has 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 and individually controlled heating and air-conditioning unit. Each
apartment unit includes full-sized washer/dryer connections, a pantry, a
wood-burning fireplace, a breakfast bar, overhead directional lighting,
mini-blinds and walk-in closets. Each kitchen is equipped with a
refrigerator/freezer with icemaker, electric range and oven, dishwasher and
garbage disposal. The owner of the property supplies cold water, sewer service
and trash removal. The tenants pay for their electricity service, which includes
heating, air-conditioning, cooking, hot water and lights.
The Property has an outdoor swimming pool and jacuzzi, a lighted tennis
court, a sand volleyball court, a laundry facility, a fitness center with
showers, and a car wash area. The Property also has a clubhouse that includes a
fireplace, kitchen, entertainment area and leasing office. There is ample paved
parking for tenants.
There are at least seven apartment properties in the area that compete with
the Property. All offer similar amenities and have rents that generally are
lower when compared with those of the Property. Based on a recent telephone
survey, the Company estimates that occupancy in nearby competing properties now
averages approximately 90 %.
According to information provided by the Seller, physical occupancy at the
Property averaged approximately 94% in 1992, 95% in 1993, 95% in 1994, 95% in
1995, 91% in 1996, and 91% during the first six months of 1997. On October 14,
1997, the Property was 86% occupied.
The tenants are a mix of white-collar and blue-collar workers, students and
retired persons.
For 1996, Gwinnett County specified an assessed value for the Property
equal to $6,800,000. The taxable value is equal to 40% of the assessed value, or
$2,720,000. The tax rate was $0.034450, and the total real estate taxes were
calculated as $93,704.
The basis of the depreciable residential real property portion of the
Property (currently estimated at about 5,440,000) will be depreciated over 27.5
years on a straight-line basis. The
6
<PAGE>
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 Property 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 greater Atlanta, Georgia metropolitan area
will continue to enjoy steady population increase and steady economic
development and that such increase and development will support stable occupancy
rates and reasonable increases in rents at the Property. In particular, the
Company believes that the Property is located in a particularly desirable part
of the Atlanta metropolitan area.
2. Based upon an engineering report and its own inspections, the Company
believes that the Property is in very good condition. The Company also believes
that the Property will benefit from additional renovations to be undertaken by
the Company.
3. The Property has an advantageous location in Gwinnett County, one of the
nation's largest and fastest growing commercial areas.
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 indicative of future operating results.
7
<PAGE>
ST. REGIS (formerly Sterling Arbor) APARTMENTS
Raleigh, North Carolina
On October 31, 1997, the Company purchased the Sterling Arbor Apartments, a
180- unit apartment complex located at 6210 St. Regis Circle, Raleigh (Wake
County), North Carolina (the "Property"). The Company has changed the name of
the Property to the "St. Regis Apartments."
The Company purchased the Property from Mrs. Robert L. Grubb, who is not
affiliated with the Company. The purchase price was $9,800,000. The entire
purchase price was borrowed under the Company's unsecured line of credit and
title to the Property was conveyed to the Company by limited warranty deed.
Location. The Property is located off of Western Boulevard and Farmgate
Road in Raleigh, North Carolina. The following information is based in part on
information provided by the Raleigh Chamber of Commerce.
The Raleigh/Durham Metropolitan Statistical Area is also known as the
Research Triangle, and contains the cities of Raleigh, Durham and Chapel Hill.
It is the second largest metropolitan area in North Carolina, after the
Charlotte metropolitan area.
Raleigh is the capital of North Carolina and is the fastest growing major
city in North Carolina. The population of the city was approximately 150,000 in
1980 and estimated to be approximately 208,000 in 1993.
Research Triangle Park, which is located an approximately 10-minute drive
from the Property, is the largest planned research and development industrial
park in the United States. It was founded in 1958 as a cooperative effort among
Duke University, the University of North Carolina and North Carolina State
University. The Park comprises approximately 6,800 acres and contains over 14
million square feet of industrial space. Among the Park's approximately 60
research-oriented firms are IBM, Glaxo and Northern Telecom.
Raleigh's economy generally is a blend of industry, education and
government. The city's employment stability, strategic location, favorable labor
climate, pro-business attitude and pool of educated workers have helped the area
attract many major businesses and industries. Major industries in the area
include electronics, electrical equipment and machinery, metal working and food
processing.
The Research Triangle is home to Duke University, the University of North
Carolina at Chapel Hill and North Carolina State University.
The immediate area surrounding the Property consists of other multi-family
and single-family housing, and commercial and retail development. The Property
is located just off
8
<PAGE>
Interstate 40 in the northeast portion of Cary, North Carolina. The Property is
proximate to major employment areas of Raleigh, including the Research Triangle,
Cary Towne Center and the downtown central business district. The Property is
also close to shopping, dining, entertainment, schools and churches. The
Property is an approximately 15-minute drive from the Raleigh/Durham
International Airport.
Description of the Property. The Property consists of 180 garden-style
apartment units in eight three-story buildings on approximately 10.4 acres of
land. The Property was built in 1986.
The Company believes that the Property is in good condition and has been
well maintained. The Company has budgeted approximately $135,000 for certain
renovations to the Property, including redecoration of the clubhouse,
replacement of wood siding and trim, and painting.
The Property offers five unit types. The unit mix and rents currently being
charged new tenants are as follows.
<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- -------- ---- ------- ------
<S> <C> <C> <C>
28 One bedroom/one bathroom 641 $610
32 One bedroom/one bathroom 672 620
32 Two bedrooms/one bathroom 864 695
28 Two bedrooms/one bathroom 880 705
60 Two bedrooms/two bathrooms 991 785
</TABLE>
The apartments provide a combined total of approximately 151,000 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 generally increased. As an example, a
two-bedroom, two-bath apartment unit (991 square feet) rented for $590 in 1992,
$620 in 1993, $655 in 1994, $685 in 1995, and $710 in 1996, The average
effective annual rental per square foot at the Property for 1992, 1993, 1994,
1995, and 1996 was $7.51, $7.89, $8.34, $8.72, and $9.04, respectively.
The buildings are wood-frame construction on concrete slabs. The exteriors
are masonite siding and roofs are pitched and covered with asphalt shingles.
9
<PAGE>
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath, as well as a cable television hook-up and
individually controlled heating and air-conditioning unit. Each unit includes a
wood-burning fireplace, full-sized washer/dryer connections, vaulted ceilings,
Palladian windows, walk-in closets, a patio or balcony, and an outside storage
closet. Some units also have skylights. Each kitchen is equipped with a
refrigerator/freezer, electric range and oven, dishwasher and garbage disposal.
The owner of the Property supplies cold water, sewer service and trash removal.
The tenants pay for their electricity service, which includes heat,
air-conditioning, cooking, hot water and lights.
The Property has an outdoor swimming pool with patio area, a lighted tennis
court, a brick barbecue terrace, a fitness center and a laundry room. The
Property also includes a clubhouse with a kitchen, entertainment area and a
leasing office. There is ample paved parking for tenants.
There are at least three apartment properties in the area that compete with
the Property. All offer similar amenities and have rents that generally are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing properties now averages
approximately 93%.
According to information provided by the seller, physical occupancy at the
Property averaged approximately 98% in 1992, 98% in 1993, 99% in 1994, 98% in
1995, 99% in 1996, and 96% during the first six months of 1997. On October 23,
1997, the Property was 92% occupied.
Most of the tenants at the Property currently are professionals. There also
are some blue-collar workers, students and retired persons.
The following table sets forth the 1996 real estate tax information on the
Property.
<TABLE>
<CAPTION>
ASSESSED
JURISDICTION VALUE TAX RATE TAX
------------ ----------- -------- ----------
<S> <C> <C> <C>
Wake County $5,668,093 0.6300 $35,708.99
City of Raleigh 5,668,093 0.5375 30,466.00
Plus residential waste
reduction fee of $16.50 per
unit: 2,970.00
TOTAL: $69,144.99
</TABLE>
10
<PAGE>
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $4,408,138) 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 Raleigh, North Carolina area will enjoy
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. In particular, the Company believes that the
presence of Research Triangle Park and three major universities in the area, and
associated businesses and activities, will have a positive impact on the area
for the indefinite future.
2. The Company already owns several other apartment complexes in Raleigh
and believes that it is knowledgeable and experienced regarding the Raleigh
apartment rental market.
3. Based upon an engineering report and its own inspections, the Company
believes that the Property is in very good condition.
4. The Property is conveniently proximate to major employers and shopping.
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 indicative of future operating results.
11
<PAGE>
REMINGTON PLACE (formerly Sterling Place) APARTMENTS
Raleigh, North Carolina
On October 31, 1997, the Company purchased the Sterling Place Apartments, a
136- unit apartment complex located at 1909 Eyrie Court in Raleigh (Wake
County), North Carolina (the "Property"). The Company has changed the name of
the Property to the "Remington Place Apartments."
The Company purchased the Property from Sterling Apartments LLC, which is
not affiliated with the Company. The purchase price for the Property was
$7,900,000. The entire purchase price of the Property was borrowed under the
Company's unsecured line of credit and title to the Property was conveyed to the
Company by a limited warranty deed.
Location. The Property is located just off of Interstate 40 on Lake Dam
Road in southwest Raleigh, North Carolina, less than a mile from Clarion
Crossing Apartments, a property purchased by the Company in September, 1997. For
information on the Raleigh, North Carolina metropolitan area, see "Sterling
Arbor Apartments," above.
The immediate area surrounding the Property consists of other multi-family
and single-family housing, and commercial and retail development. The Property
is adjacent to Lake Johnson and the city park. The Property is in close
proximity to major employment centers in the area, including the Research
Triangle, Cary Towne Center and the downtown central business district. The
Property is also close to North Carolina State University. There are shopping,
dining, entertainment, schools and churches located near the Property. The
Property is an approximately 15-minute drive from the Raleigh/Durham
International Airport.
Description of the Property. The Property consists of 136 garden-style
apartments in 12 two-and three-story buildings on approximately 13.7 acres of
land. The Property was built in 1985.
The Company believes the Property is in good condition and has been well
maintained. The Company has budgeted approximately $272,000 for renovations to
the Property, including redecoration of the clubhouse, wood replacement and
repainting, and repair of asphalt parking areas.
The Property offers four unit types. The unit mix and rents currently being
charged new tenants are as follows.
12
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- -------- ---- ------- --------
<S> <C> <C> <C>
42 One bedroom/one bathroom 870 $665-685
30 One bedroom/one bathroom 1,005 700-720
40 Two bedrooms/two bathrooms 1,255 820-840
24 Two bedrooms/two bathrooms 1,354 890-900
</TABLE>
The apartments provide a combined total of approximately 149,000 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 generally increased. As an example, a
one-bedroom, one-bath apartment unit (870 square feet) rented for $495 in 1992,
$495 in 1993, $545 in 1994, $565 in 1995, and $603 in 1996. The average
effective annual rental per square foot at the Property for 1992, 1993, 1994,
1995, and 1996 was $6.18, $6.18, $6.81, $7.05, and $7.53, respectively.
The buildings are wood-frame construction on concrete slabs. The exteriors
have T- 111 siding and the roofs are pitched and covered with asphalt shingles.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath, as well as a cable television hook-up and
an individually controlled heating and air-conditioning unit. Each apartment
unit has an Italian tile fireplace, full-sized washer/dryer connections,
built-in bookcases, oversized closets, a sun room, track lighting, beveled
mirrors, a patio or balcony, and a parquet wood foyer. Each kitchen is equipped
with a refrigerator/freezer, gas range and oven, dishwasher and garbage
disposal. The owner of the Property supplies cold water, sewer service and trash
removal. The tenants pay for their electricity service, which includes
air-conditioning and lights, and for their gas services, which includes cooking,
heating and hot water.
The Property has an outdoor swimming pool, a lighted tennis court, a
fitness center, a business center, a playground, and barbecue areas. The
Property has a clubhouse with a kitchen, entertainment area and a management
office. There is ample paved parking for tenants.
There are at least eight apartment properties in the area that compete with
the Property. All offer similar amenities and have rents that generally are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing properties now averages
approximately 96%.
13
<PAGE>
According to information provided by the seller, physical occupancy at the
Property averaged approximately 91% in 1992, 91% in 1993, 91% in 1994, 91% in
1995, 91% in 1996, and 93% during the first six months of 1997. On October 23,
1997, the Property was 97% occupied.
Most of the current tenants at the Property are professionals. There are
also some blue-collar workers and retired persons.
The following table sets forth the 1996 real estate tax information on the
Property.
<TABLE>
<CAPTION>
ASSESSED
JURISDICTION VALUE TAX RATE TAX
------------ ---------- -------- ----------
<S> <C> <C> <C>
Wake County $5,337,353 0.6300 $33,625.32
City of Raleigh 5,337,353 0.5375 28,688.27
Plus residential waste reduction
fee of $16.50 per unit: 2,244.00
TOTAL: $64,557.59
</TABLE>
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $4,385,853) 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 Raleigh, North Carolina area will enjoy
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. In particular, the Company believes that the
presence of Research Triangle Park and three major universities in the area and
associated businesses and activities will have a positive impact on the area for
the indefinite future.
14
<PAGE>
2. The Company already owns several other apartment complexes in Raleigh
and believes that it is knowledgeable and experienced regarding the Raleigh
apartment rental market.
3. Based upon an engineering report and its own inspections, the Company
believes that the Property is in very good condition.
4. The Property is conveniently proximate to major employers and shopping.
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 indicative of future operating results.
15
<PAGE>
ITEM 7.a.
- --------
* 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.
16
<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.
17
<PAGE>
ITEM 7.c.*
- --------
* 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.
18
<PAGE>
ITEM 7.d.*
- --------
* 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.
19
<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: November 17, 1997 By:/s/ Stanley J. Olander, Jr.
---------------------------
Stanley J. Olander, Jr.,
Chief Financial Officer
of Cornerstone Realty
Income Trust, Inc.
20
<PAGE>
EXHIBIT INDEX
Cornerstone Realty Income Trust
Form 8-K dated October 31, 1997
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
10.1 Purchase Contract for Barrington Parc
Apartments
10.2 Purchase Contract for St. Regis
(formerly Sterling Arbor) Apartments
10.3 Purchase Contract for Remington Place
(formerly Sterling Place) Apartments
23.1 Consent of Independent Auditors*
23.2 Consent of Independent Auditors*
23.3 Consent of Independent Auditors*
- --------
* To be filed by amendment.
21
barr.5
9/23
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 25th day of September 1997,
between CORNERSTONE REALTY GROUP INC. OR ITS nominee, (hereinafter called
"Purchaser") and BARRINGTON PARC 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 BARRINGTON PARC APARTMENTS
located in ATLANTA, 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 188 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 SEVEN MILLION
EIGHT HUNDRED FIFTY THOUSAND ($7,850,000) DOLLARS as evidenced by cash or cash
equivalent at closing.
2.2 DEPOSITE. ONE HUNDRED THOUSAND ($100,000) DOLLARS to be placed in
escrow within forty-eight (48) hours after the execution of this Agreement by
both parties. Said deposit shall be placed in escrow with Chicago 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 Limited Warranty Deed in the form attached hereto as EXHIBIT C, subject only
to general taxes for the current fiscal year (as it is the local custom) not yet
due and payable and those matters of record accepted by Purchaser in ACCORDANCE
with paragraphs 3.2 and 3.3 below.
<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 has ordered 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 ten (10) 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
within five (5) days after receipt of Purchaser's objections to title, if any,
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, exercised by written
notice to Seller within five (5) days after receipt of Seller's notice, shall be
void; each party shall thereupon be released from all obligations hereunder
(except those that expressly survive pursuant to the terms of this Agreement);
and all deposits shall be immediately returned to Purchaser.
3.4 TITLE AND SURVEY. Purchaser shall have the obligation to review
the title report and survey as part of its "Inspection Period" described in
Article VI below.
ARTICLE IV
PRORATIONS
4.1 INCOME AND EXPENSE ALLOCATION. The following shall be prorated,
on a calendar-month basis, to the 1st day of the month of the closing as of
12:01 p.m. on the date of closing: rents and other income from the Property;
operating expenses (on such service contracts and other obligations as Purchaser
assumes) ; 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 and Survey. 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
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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. If Seller has committed to give any
future monetary concessions to tenants under existing leases to which Purchaser
would become liable, then Seller shall pay to Purchaser said amount in a lump
sum at closing.
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) Receipt by Purchaser 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 the
Inspection Period (as defined herein) 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.
(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 in all material
respects.
(D) On the condition that there have been no material adverse changes
to the property or to the terms of the 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 in its possession available for Purchaser to audit the last 12
months of
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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.
(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 during the Inspection Period, Purchaser shall
notify Seller and 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, except as stated in Paragraph 6.2.2, 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 contracts; all loss runs dealing with all information of insurance
for the last five (5) years, if available, but no less than three (3) 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. The Seller warrants that all these items were those
actually relied upon by the Seller and were prepared or received in the ordinary
course of business.
6.2.2 INSPECTION OF BOOKS AND RECORDS; ACCESS* Upon execution of this
Agreement and receipt of fully executed copies by both parties or their
attorneys, Purchaser, its employees, agents and contractors shall have thirty
(30) days (the "inspection Period") to enter upon the Property subject to the
rights of the tenants during normal business hours and upon reasonable prior
notice to Seller for the purpose of making physical inspections thereof,
including but not limited to roofs, heating, COOLING, electrical and plumbing
systems, swimming pool, appliances, and
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structural elements of the buildings. In the event any invasive tests shall be
used by the Purchaser, then the Purchaser shall give notice to the Seller for
approval (not to be unreasonably withheld) prior to the commencement of said
testing. In any event, the Purchaser shall be responsible for any actual damages
to the Property as a result thereof and Purchaser shall carry insurance to hold
Seller harmless from any claims as a result of the inspection. Where insurance
does not provide coverage and Purchaser is liable, the Purchaser agrees to hold
Seller harmless over and above insurance. Purchaser shall also be permitted to
review all original leases, expense records, tenant cards and occupancy data
available. 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.
6.2.3 RIGHT OF TERMINATION DURING INSPECTION PERIOD . 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 TERMINATION OF INSPECTION PERIOD. Notwithstanding anything to
the contrary set forth herein, the Inspection Period shall expire thirty (30)
days from the date of full execution of this Agreement by both parties or such
other date as the parties may agree to in writing.
6.2.5 "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.
6.2.6 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
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Purchaser may void this Agreement and obtain a prompt return of its deposit.
ARTICLE VII
CLOSING
7.1 Closing. Closing will be held on or before ten (10) days after the
completion of the Inspection Period, 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 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 Exhibit 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 and cleaning deposits made by such tenants. Seller
will give the tenants the required notice of such transfer in compliance with
the laws of Georgia.
(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 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
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copies of all such warranties and guarantees without limitation for all
appliances, dishwashers, disposals, refrigerators, heating and air conditioning
units, washers and dryers.
(I) Seller's affidavit that it is authorized to execute this Agreement
and to complete the sale without any further action on its behalf.
(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.
(L) 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.
(M) A notice letter to all the residents of the apartment complex as
to change of ownership in the form prepared by the Purchaser and reasonably
acceptable to Seller.
(N) 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.
(0) A representation letter as normally required by auditors for a
public company in the form attached hereto as EXHIBIT E.
(P) Purchaser hereby waives any claim it may have against Seller as a
result of seller's compliance with the above Paragraph 0, and further agrees to
indemnify and hold harmless Seller and its property manager from a claim,
damage, loss or liability to which Seller or its property manager are at any
time subject by any person not a party to this Agreement as a result of Seller's
compliance with this paragraph.
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.
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(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.
(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.
(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.
(E) Seller has no actual knowledge of any existing or threatened
litigation which relates to or which would affect the Property, except for
actions against tenants for rent, none of which having a counterclaim.
(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 an 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.
(G) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1986, as amended (the
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"Code") , and that Seller will furnish to Purchaser prior to closing an
affidavit in form satisfactory to Purchaser confirming the same.
(H) To Seller's knowledge, during the period of Seller's ownership, no
portion of the Property has ever been used by Seller as a landfill or as a dump
to receive garbage, refuse, waste or fill material whether or not hazardous.
Seller, to Seller's knowledge, during the period of Seller's ownership, has not
stored, handled, installed or disposed of any Hazardous Substances (as
hereinafter defined) in, on or about the Property or any other location within
the vicinity of the Property; and, to Seller's knowledge, there are no Hazardous
Substances on the Property. As used in this Agreement, the terms "Hazardous
Substances means asbestos, polychlorinated biphenyl and such materials, waste,
contaminants or other substances defined as toxic, dangerous to health or
otherwise hazardous by cumulative reference to the following sources as amended
from time to time: (i) the Resource and Recovery Act of 1976, 42 USC Section
690l et. seq. ("RCRA"); (ii) the Hazardous Materials Transportation Act, 49 USC
Section 1801, et. seq.; (iii) the Comprehensive Environmental Response
Compensation and Liability Act of 1980, 42 USC Section 9601 et. seq. ("CERCLA");
(iv) applicable laws of the jurisdiction where the Property is located, and (v)
any federal, state or local statues, regulations, ordinances, rules or orders
issued or promulgated under or pursuant to any of those laws or otherwise by
agency or other administrative, regulatory or The term "Hazardous Substances"
does not include usual and customary cleaning and other supplies necessary for
the normal, maintenance and/or occupancy of the Property.
(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 unreasonably withheld or delayed.
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) The representations and warranties of Seller contained in this
Agreement will survive the Closing for a period of one (1) year after the
Closing; and any claim based upon any alleged breach thereof must be alleged (in
writing) within such one year period. Failure to give notice on any alleged
breach within the time period specified herein shall constitute a waiver of any
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such claim. In addition.. and notwithstanding any other provision of this
Agreement, if Purchaser has actual knowledge of any misrepresentation or breach
of Seller on or prior to the Closing, and nevertheless proceeds to close on the
Closing Date, then Purchaser shall be deemed to waive, and hereby waives, any
such misrepresentation and breach.
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.
8.4 Purchaser represents, warrants and agrees that (i) except as, and
solely to the extent, specifically set forth in this Agreement, neither Seller
nor any of the employees, agents or attorneys of Seller make any verbal or
written representations, warranties, promises or guaranties whatsoever to
Purchaser, whether express or implied, of any sort or nature relating to the
condition (physical, financial or otherwise) or operation of the Property, the
access, fitness for any specific use, merchantability, habitability, or the lie
and topography, of all or any portion of the Property, the existence, location
or availability of utility lines for water, sewer, drainage, electricity or any
other utility, the income-producing potential of the Property, the competition
or market of the Property or the actual or projected revenue and expenses of the
Property, the laws, regulations and rules applicable to the Property or the
compliance (or non-compliance) of the Property therewith, any environmental
laws, regulations and rules (or other laws relative to Hazardous Materials)
applicable to the Property or the compliance (or non-compliance) of the Property
therewith, the quantity, quality or condition of the articles of personal
property included in the transactions contemplated hereby, the use or occupancy
of the Property or any part thereof or any other matter or thing affecting or
relating to the Property or the transactions contemplated hereby, and Purchaser
has not relief upon any such representations, warranties, promises or guarantees
or upon any statements made in any informational brochure with respect to the
Property, and (ii) upon the expiration of the Inspection Period and provided
Purchaser does not elect to terminate this Agreement as provided for herein the
Purchaser will have examined the Property, and based upon such examination, will
be familiar with the physical condition thereof, and will have conducted such
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investigations of the financial affairs and management of the Property as
Purchaser considered appropriate, and elected to proceed with the transaction
having made and relied solely on Purchaser's own independent investigation,
inspection, analysis, appraisal, examination and evaluation of the facts and
circumstances except as, and solely to the extent, specifically set forth in
this Agreement.
Except as specifically provided for in this Agreement, Purchaser
agrees to accept the Property "as is" in its present condition, subject to
reasonable use, wear, tear and natural deterioration of the Property between the
date of this Agreement and the 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, the Seller agrees to assign all of its
insurance covering said loss, tender its deductible under its policy as a
closing adjustment, and further compensate Purchaser for lost rent collection to
the extent of the insurance proceeds. Seller shall promptly notify Purchaser in
writing upon the occurrence of any such damage and Purchaser shall have the
right to review the insurance, the damages and other relevant data. The
Purchaser shall, within thirty (30) days, either accept the premises pursuant to
the terms of this paragraph or send a notice of cancellation. In the event of
cancellation, all funds paid by Purchaser under this Agreement shall be returned
to the Purchaser and this Agreement shall become null and void and the parties
shall be released of all obligations hereunder.
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.
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ARTICLE X
BROKER'S COMMISSION
10.1 COMMISSION. Seller agrees to pay a brokerage fee to APARTMENT
REALTY ADVISORS, 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 its
option, may elect (a) to terminate this Agreement whereupon the Title Company
shall return the Earnest Money to Purchaser and Seller shall pay Purchaser
Twenty Five Thousand ($25,000) Dollars under this Agreement as agreed-upon
liquidated damages and not as a penalty, it being otherwise difficult or
impossible to estimate Purchaser's actual damages, and which liquidated damages
shall be in lieu of any other damages or the right to specific performance; or
(b) be entitled to sue Seller for specific performance of this Agreement,
provided, however, Seller shall not be required to expend in excess of Twenty
Five Thousand ($25,000) Dollars under this Agreement to correct any matter
Seller did not deliberately cause, except for monetary liens, including but not
limited to taxes, mortgages, Mechanic's Liens, etc.; or (c) Purchaser may
commence an injunction proceeding to stop conveyance contrary to this Agreement.
Seller shall indemnify Purchaser for any and all expenses incurred if Purchaser
elects to pursue its option under (b) or (c) above, including reasonable
attorneys' 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.
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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 once 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.
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12.10 CONFIDENTIALITY. The parties shall keep confidential the
existence of this Agreement, the transactions described herein, and all
information obtained from the other party both during and subsequent to the
transaction. However, the covenants contained in this paragraph shall not apply
in respect to any information which (a) was already known to either party when
such information was received from the other, (b) was readily available to the
general public at the time of such receipt, (c) subsequently becomes known to
the general public through no fault or omission by the other party, (d) is
subsequently disclosed by a third party which has the bona fide right to make
such disclosure, or (e) is required to be disclosed by law or a governmental
agency. This clause shall survive closing.
12.11 EXHIBITS. The following exhibits are attached to this Agreement
and are incorporated into this Agreement by this reference and made a part
hereof for all purposes:
(a) EXHIBIT A, the legal description of the Land.
(b) EXHIBIT B, list of personal property.
(c) EXHIBIT C, the form of Deed.
(d) EXHIBIT D, the form of the Assignment and Assumption of Personal
Property, Service Contracts, Warranties and Leases.
(e) EXHIBIT E, the form of the Representation Letter.
ARTICLE XIII
NOTICE
13.1 NOTICE. All notices required or permitted to be given under this
Agreement shall be in writing, signed by the party giving the same or its
attorney, 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: Carol J.C. Mills
c/o Winthrop Financial Associates
5 Cambridge Center - 9th Floor
Cambridge, Massachusetts 02142
Fax: (617) 330-7969
With a copy to
Seller's Attorneys: William Post, Esq.
Post & Heymann
100 Jericho Quadrangle
Suite 2140
Jericho, NY 11753
Fax: (516) 433-2777
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
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With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and-
Michael Tighe, Esq.
Callison Tighe Robinson & Hawkins, LLP
1812 Lincoln Street
Columbia, SC 29201
Fax: (803) 256-6431
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,
delivered to a reliable overnight courier or by facsimile transmission (provided
receipt of the notice is confirmed and the original follows by one of the other
methods of delivery described herein). 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:
BARRINGTON PARC LIMITED PARTNERSHIP
By: BARRINGTON PARC CORPORATION
Its General Partner
By: /s/ Carol J.C. Mills
-----------------------
Its: Vice President
-----------------------
Date: 9-24-97
----------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: S.J. Olander
----------------------
its: S.V.P
---------------------
Date: 10-14-97
---------------------
15
st.ar.3
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 28th day of October
1997, between CORNERSTONE REALTY GROUP, INC. or its nominee, (hereinafter called
"Purchaser") and MRS. ROBERT L. GRUBB, (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 STERLING ARBOR
APARTMENTS located in RALEIGH, 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 180 individually heated and air
conditioned apartment units, with all appurtenances, together with all
appliances, drapes, carpeting, shrubbery and all other personal property
(excluding clubhouse and model furnishings, pictures and accessories. However,
Seller agrees to permit Purchaser to use such excluded property until November
19, 1997) 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 THOUSAND ($9,800,000) 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 the Title Company of North Carolina 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 to general TAXES FOR THE CURRENT year
not yet due and payable and utility easements which do not interfere with the
present use of the Property.
<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. Seller shall furnish to
Purchaser evidence of a prior 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 ten (10) 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 the day of the 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 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.
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<PAGE>
4.4 PRIOR LEASE CONCESSIONS. Seller represents that there are
no rent concessions which are not reflected in the actual rent collected as set
forth in the rent list attached hereto as EXHIBIT C.
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) Receipt by Purchaser 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
ten (10) 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.
(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.
(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
3
<PAGE>
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 insurance policies applicable to the Property
to include loss runs for the last two (2) 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, included
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.
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
4
<PAGE>
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 TERMINATION OF INSPECTION PERIOD. Notwithstanding
anything to the contrary set forth herein, the Inspection Period shall expire
twenty-one (21) days from the date of this Agreement or such other date as the
parties may agree to in writing.
6.2.5 "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, which have been vacant for five or more days 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.
6.2.6 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 or about fourteen (14)
days after the completion of the Inspection Period 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 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 shall be provided on site.
5
<PAGE>
(C) INTENTIONALLY OMITTED. There are no security deposits.
(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 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 sole 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, and (3) the
existing Property telephone number. Purchaser acknowledges that Seller is
retaining all rights to the name "Sterling Arbor" or the company name, "Grubb
Management" as well as logos, trademarks and signage associated with that name.
Purchaser agrees to change the name within thirty (30) days.
(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) Evidence satisfactory to Purchaser that all water, sewer,
gas, electric, telephone, and drainage facilities and
6
<PAGE>
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 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.
(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.
(0) 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 as
approved and signed by Seller.
(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 in the form attached hereto as EXHIBIT D. This clause shall
survive closing for six months.
7
<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 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.
8
<PAGE>
(E) INTENTIONALLY OMITTED.
(F) 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.
(G) The Property abuts on and has direct vehicular access to a
public road.
(H) 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 knowledge of the Seller, 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 knowledge, the Property was
never utilized as a disposal site for hazardous waste products and this
representation shall survive for a period of six months.
(M) 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.
9
<PAGE>
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. (A)
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.
(B) In the event that Purchaser shall breach any warranties,
it agrees to indemnify Seller for any reasonable costs and expenses that Seller
may have incurred.
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 to the extent of $50,000 or more,
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 his pro-rata
share as stated in 4.1 of 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
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<PAGE>
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
BERKLEY CAPITOL ADVISORS, pursuant to separate agreement between the parties.
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 (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. Seller shall indemnify Purchaser for any reasonable attorney's FEES
at their normal hourly rate incurred by Purchaser if Purchaser elects to pursue
its option of specific performance noted above and if Purchaser prevails.
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
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herein and nay 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
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may be hereafter specified in writing):
To seller: Mrs. Robert L. Grubb
c/o Gordon Grubb, Esq.
11000 Regency Parkway, Suite
101 Cary, NC 27511
Fax: (919) 461-3939
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
(804) 782-9302
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and-
Ted Oliver, Esq.
Manning, Fulton& Skinner, P.A.
500 UCB Plaza
3605 Glenwood Avenue
Raleigh, NC 27612
Fax: (919) 781-0811
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 or by facsimile transmission. 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
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written above.
SELLER:
MRS. ROBERT L. GRUBB
By: /s/R. Gordan Grubb
------------------
Her: Agent
------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC
By: S.J. Olander
-------------------
its: Senior Vice President
-----------------------
14
st. pl. 3
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 28th day of October
1997, between CORNERSTONE REALTY GROUP, INC. or its nominee, (hereinafter called
"Purchaser") and STERLING APARTMENTS LLC, (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 STERLING PLACE
APARTMENTS located in RALEIGH, 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 136 individually heated and air
conditioned apartment units, with all appurtenances, together with all
appliances, drapes, carpeting, shrubbery and all other personal property
(excluding clubhouse and model furnishings, pictures and accessories. However,
Seller agrees to permit Purchaser to use such excluded property until November
19, 1997) 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 SEVEN
MILLION NINE HUNDRED THOUSAND ($7,900,000) 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 the Title Company of North Carolina 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 to general taxes for the current year
not yet due and payable and utility easements which do not interfere with the
present use of the Property.
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(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. Seller shall furnish to
Purchaser evidence of a prior 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 ten (10) 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 the day of the 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 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.
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4.4 PRIOR LEASE CONCESSIONS. Seller represents that there are
no rent concessions which are not reflected in the actual rent collected as set
forth in the rent list attached hereto as EXHIBIT C.
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) Receipt by Purchaser 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
ten (10) 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.
(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.
(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
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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 insurance policies applicable to the Property
to include loss runs for the last two (2) 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.
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
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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 TERMINATION OF INSPECTION PERIOD. Notwithstanding
anything to the contrary set forth herein, the Inspection Period shall expire
twenty-one (21) days from the date of this Agreement or such other date as the
parties may agree to in writing.
6.2.5 "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, which have been vacant for five or more days 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.
6.2.6 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 or about fourteen (14)
days after the completion of the Inspection Period 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 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 rental agreements in effect with
tenants of the Property shall be provided an site.
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(C) INTENTIONALLY OMITTED. There are no security deposits.
(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 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 sole 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, and (3) the
existing Property telephone number. Purchaser acknowledges that Seller is
retaining all rights to the name "Sterling Place" or the company name "Grubb
Management" as well as logos, trademarks and signage associated with that name.
Purchaser agrees to change the name within thirty (30) days.
(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) Evidence satisfactory to Purchaser that all water, sewer,
gas, electric, telephone, and drainage facilities and
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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 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.
(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 au thorized 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.
(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 as
approved and signed by Seller.
(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 in the form attached hereto as EXHIBIT D. This clause shall
survive closing for six months.
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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.
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(E) INTENTIONALLY OMITTED.
(F) 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.
(G) The Property abuts an and has direct vehicular access to a
public road.
(H) 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 knowledge of the Seller, 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 knowledge, the Property was
never utilized as a disposal site for hazardous waste products and this
representation shall survive for a period of six months.
(M) 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.
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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. (A)
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.
(B) in the event that Purchaser shall breach any warranties,
it agrees to indemnify Seller for any reasonable costs and expenses that Seller
may have incurred.
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 to the extent of $50,000 or more,
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 his pro-rata
share as stated in 4.1 of 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
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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
BERKLEY CAPITOL ADVISORS, pursuant to separate agreement between the parties.
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 (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. Seller shall indemnify Purchaser for any reasonable attorney's fees
at their normal hourly rate incurred by Purchaser if Purchaser elects to pursue
its option of specific performance noted above and if Purchaser prevails.
11.3 PURCHASERS 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
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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
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may be hereafter specified in writing):
To Seller; Sterling Apartments LLC
c/o Gordon Grubb, Esq.
11000 Regency Parkway, Suite 101
Cary, NC 27511
Fax: (919) 461-3939
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and-
Ted Oliver, Esq.
Manning, Fulton & Skinner, P.A.
500 UCB Plaza
3605 Glenwood Avenue
Raleigh, NC 27612
Fax: (919) 781-0811
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 or by facsimile transmission. 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
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written above.
SELLER:
STERLING APARTMENTS LLC, by Grubb Properties, Inc., Manager
By: R. Gordon Grubb
---------------------
its: Vice President
---------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: S.J. Olander
---------------------
its: S.V. P
---------------------
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