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, 1996
CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 0-23954 54-1589139
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 East Main Street
Richmond, Virginia 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
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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
(Greenbrier Apartments)
Historical Statement of Income and
Direct Operating Expenses
(Greenbrier Apartments)
Note to Historical Statement of
Income and Direct Operating
Expenses (Greenbrier Apartments)
b. Independent Auditors' Report
(Deerfield Apartments)
Historical Statement of Income and
Direct Operating Expenses
(Deerfield Apartments)
Note to Historical Statement of
Income and Direct Operating
Expenses (Deerfield Apartments)
c. Independent Auditors' Report
(Franklin Towers Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Franklin Towers Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Franklin Towers Apartments)*
d. Independent Auditors' Report
(The Arbors at Windsor Lake Apartments)
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* To be filed by amendment.
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Historical Statement of Income and
Direct Operating Expenses
(The Arbors at Windsor Lake Apartments)
Note to Historical Statement of
Income and Direct Operating
Expenses (The Arbors at Windsor Lake Apartments)
e. Independent Auditors' Report
(Westchase Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Westchase Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Westchase Apartments)*
f. Pro Forma Statement of Operations for
the Nine Months ended September 30, 1996
(unaudited)*
Pro Forma Balance Sheet as of
September 30, 1996 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1995
(unaudited)*
g. Exhibits
10.1 Purchase Contract for Greenbrier Apartments
10.2 Purchase Contract for Deerfield Apartments
10.3 Purchase Contract for Franklin Towers Apartments
10.4 Purchase Contract for The Arbors at Windsor
Lake Apartments
10.5 Purchase Contract for Westchase Apartments
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
23.3 Consent of Independent Auditors*
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* To be filed by amendment.
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23.4 Consent of Independent Auditors*
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* To be filed by amendment.
<PAGE>
Item 2. Acquisition or Disposition of Assets
GREENBRIER APARTMENTS
Fredericksburg, Virginia
On October 31, 1996, effective October 1, 1996, Cornerstone Realty
Income Trust, Inc. (the "Company") purchased the Greenbrier Apartments, a
258-unit apartment complex having an address of One Greenbrier Drive,
Fredericksburg, Virginia (the "Property").
The seller was unaffiliated with the Company. The purchase price was
$11,099,525. At closing, the entire purchase price was borrowed under the
Company's unsecured line of credit. The Company expects to repay such borrowed
amount with the proceeds from the sale of additional Shares. Title to the
Property was conveyed to the Company by limited warranty deed.
Location. The following information is based in part upon information
provided by the Fredericksburg Chamber of Commerce.
Fredericksburg is located in central Virginia, about halfway between
Richmond, Virginia and Washington, D.C. The City of Fredericksburg, together
with the surrounding Counties of Stafford and Spotsylvania, form a distinct area
of economic development and activity. Interstate 95 runs through the area and
connects Richmond and Washington.
The combined population of the City of Fredericksburg and Stafford and
Spotsylvania Counties was approximately 138,000 in 1990.
The military has a strong presence and plays a key economic role in the
area. The Quantico Marine Corps Reservation occupies approximately 32,000 acres
within the northern portion of Stafford County. Fort A.P. Hill, comprising
approximately 76,000 acres, is a major U.S. Army base in Caroline County, just
outside Spotsylvania County. Dahlgren Navy Base in nearby King George County
employs approximately 3,400 workers.
A significant number of residents in the Fredericksburg area commute to
jobs in Northern Virginia and the District of Columbia using the convenient
access of Interstate 95.
The Property is near the center of the City of Fredericksburg, near the
intersection of Route 3 and Route 1. The Property is near Mary Washington
College and just west of the downtown area. Route 1 and Route 3 provide
convenient access for both north/south and east/west travel. The location of the
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Property in relation to these highways provides convenient access to primary
employment centers in Fredericksburg as well as employment centers in Northern
Virginia and the District of Columbia.
Description of the Property. The Property consists of 258 garden-style
apartments located in 22 three-story buildings on approximately 17.5 acres of
land. The Property was built in two phases. Phase I, consisting of 186 apartment
units, was completed in 1990, and the second phase of 72 apartment units was
completed in 1990.
The Company believes that the Property has generally been well
maintained and is generally in good condition. However, the Company has budgeted
approximately $258,000 for repairs and improvements including upgrading of Phase
I interiors, clubhouse renovation and parking lot repair in Phase I.
The Property offers many different unit types. The unit mix and rents
currently being charged new tenants as of January, 1997 are as follows:
Quantity Type Approximate Monthly Rental
Interior
Square Footage
10 efficiency 432 $430
12 one 657 510
bedroom/one
bath
64 one 739 530
bedroom/one
bath (large)
15 one 782 545
bedroom/one
bath w/den
17 two 837 570
bedrooms/one
bath
18 two 927 585
bedrooms/one
bath (large)
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Quantity Type Approximate Monthly Rental
Interior
Square Footage
35 two 894 590
bedrooms/1.5
baths
15 two 1007 615
bedrooms/1.5
baths w/den
27 two 927 670
bedrooms/two
baths
27 two 927 670
bedrooms/two
baths
9 three 1159 775
bedrooms/two
baths
9 three 1159 800
bedrooms/two
baths
The apartments provide a combined total of approximately 219,000 square
feet of net rentable area.
Leases at the Property are for terms of one year or less. Average
rental rates for the past five years have generally remained the same. As an
example, a two bedroom, one and one-half bath apartment rented for $540 in 1992,
$540 in 1993, $540 in 1994, $540 in 1995, and $550 in 1996. The average
effective annual rental per square foot at the Property for 1992, 1993, 1994,
1995 and 1996 was $8.24, $8.24, $8.24, $8.24 and $8.38 , respectively.
The buildings are comprised of brick and wood siding on concrete slab
foundations with pitched roofs covered with composition shingles over plywood
decking. The 186 apartment units in Phase I, completed in 1970, have, according
to the seller, received substantial capital improvements since 1988 costing
approximately $550,000. The improvements included new roofs and new
refrigerators. Additional renovations made on an as-needed basis included new
tile, new counter tops, new hot water heaters and new heating and air
conditioning units.
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The Property is wall-landscaped and includes an outdoor swimming pool
with deck, grills, laundry facilities in each building, and a clubhouse with a
fitness center and leasing office. There is paved parking for approximately 440
vehicles.
Generally, apartment units have wall-to-wall carpeting in the living
areas and vinyl floors in the kitchen and baths. Some apartment units in Phase I
are available with hardwood floors. Each apartment unit has draperies or
miniblinds and cable television hook-ups. Each kitchen is equipped with a
refrigerator/freezer, range and oven, dishwasher and garbage disposal. The owner
of the Property supplies cold water, sewer service and trash removal. The
tenants pay for gas and electric service, which includes air conditioning,
heating, hot water and lights. Gas is used for heat and hot water in all
apartment units and also for cooking in the Phase I apartment units.
There are at least six apartment properties in the area which compete
with the Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing projects now averages
approximately 93%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 93% in 1992, 94% in 1993, 97% in 1994, and
97% in 1995. Based in part on information provided by the seller, the Company
believes that physical occupancy at the Property averaged 95% in 1996. On
January 1, 1997, the Property was 93% occupied. The tenants are a mix of
white-collar and blue-collar workers, students and retired persons.
The 1996 real estate tax rate applicable to the Property was
approximately $1.160 per $100 of assessed value, and the real estate taxes for
1996 were calculated to be $108,848.60. The assessed value was $9,383,500. The
basis of the depreciable residential real property portion of the Property
(currently estimated at about $8,510,100) will be depreciated over 27.5 years on
a straight line basis. The basis of the personal property portion will be
depreciated in accordance with the modified accelerated cost recovery system of
the Code. Amounts to be spent by the Company on repairs and improvements will be
treated for tax purposes as permitted by the Code based on the nature of the
expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
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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 Fredericksburg, Virginia area will
experience continued strong economic development and steady population increase,
owing in part to its favorable location on Interstate 95, approximately midway
between Richmond and Washington, D.C., and that such development and increase
will support stable occupancy rates and reasonable increases in rents at the
Property.
2. Based upon an engineering report and its own inspections, the
Company believes that the Property is in good condition.
3. The Property is conveniently located and proximate to area 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 necessarily indicative of future
operating results.
DEERFIELD APARTMENTS
Durham, North Carolina
On November 20, 1996, effective the same date, the Company purchased
the Deerfield Apartments, a 204-unit apartment complex having an address of 910
Constitution Drive, Durham, North Carolina ("Property").
The seller was unaffiliated with the Company. The purchase price was
$10,675,000. At closing, the entire purchase price was borrowed on the Company's
unsecured line of credit. The Company expects to repay such borrowed amount with
the proceeds from the sale of Shares. Title to the Property was conveyed to the
Company by limited warranty deed.
Location. The following information is based in part on information
provided by the Durham Chamber of Commerce.
Durham is located in the north central portion of North Carolina,
approximately midway between Atlanta and New York. The Blue Ridge Mountains are
approximately 150 miles to the west and the Atlantic Ocean is approximately 150
miles to the east. In
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1992, Durham had a population of approximately 144,000 and Durham County had a
population of approximately 189,000.
Durham is the home to Duke University and the Duke Medical Center. Duke
University, as well as Research Triangle Park, North Carolina Central University
and Raleigh/Durham International Airport, are all within a 15-minute drive of
the Property. Education and research are principal economic activities in the
area, and there is also some industry.
The Property is located in a well-established area of Durham and the
area is characterized by various retail centers, restaurants and other
businesses. The neighborhood surrounding the Property also contains other
multi-family housing, single-family housing, schools and churches. The Property
has easy access to Interstate 85, which provides convenient access to downtown
Durham and the airport. The Property borders Duke Forest, a preserved area owned
and maintained by Duke University and used for research. Duke Forest offers
walking, jogging and biking trails.
Description of the Property. The Property consists of 204 garden-style
apartments located in 11 two- and three-story buildings on approximately 15
acres of land. The Property was constructed in 1984 and 1985.
The Company believes that the Property has been generally well
maintained and is generally in good condition. However, the Company has budgeted
approximately $406,000 for repairs and improvements, including major parking lot
repair, clubhouse renovation, reconditioning of tennis courts and apartment
interior upgrade.
The Property offers a very wide range of unit types. The unit mix and
rents being charged new tenants as of January, 1997 are as follows:
Quantity Type Approximate Monthly Rental
Interior
Square Footage
22 one 730 $630-$650
bedroom/one
bath, basic
(1st floor)
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Quantity Type Approximate Monthly Rental
Interior
Square Footage
10 one 730 650-670
bedroom/one
bath (1st
floor)
22 one 730 680-700
bedroom/one
bath (2nd
floor)
12 one 730 695-715
bedroom/one
bath (3rd
Floor)
10 one 730 700-720
bedroom/one
bath (2nd
floor top)
10 single 810 750-770
master/pent-
house
19 two 970 740-765
bedroom/two
bath, basic
(1st floor)
5 two 970 750-775
bedroom/two
bath (1st
floor)
7 two 970 760-785
bedroom/two
bath (1st
floor)
1 two 970 770-795
bedroom/two
bath (1st
floor)
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Quantity Type Approximate Monthly Rental
Interior
Square Footage
20 two 970 790-815
bedroom/two
bath (2nd
floor)
2 two 970 800-825
bedroom/two
bath (2nd
floor)
14 two 970 815-840
bedroom/two
bath (3rd
floor)
5 two 970 820-845
bedroom/two
bath (2nd
floor top)
8 two 970 825-850
bedroom/two
bath(3rd
floor)
5 two 970 830-855
bedroom/two
bath(2nd floor
top)
8 twin master, 1066 815-845
basic (1st
floor)
4 twin master, 1066 825-855
FP (1st floor)
8 twin master, 1066 850-880
(2nd floor)
6 twin master, 1066 875-905
(top floor)
6 twin master, 1066 885-915
(top floor)
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The apartments provide a combined total of approximately 181,000 square
feet of net rentable area.
The leases at the Property are 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 rented for $640 in 1992, $675 in 1993, $730 in
1994, $775 in 1995, and $795 in 1996. The average effective annual rental per
square foot at the Property for 1992, 1993, 1994, 1995, and 1996 was $8.31,
$8.76, $9.48, $10.06 and $10.32, respectively.
The buildings are wood frame construction on concrete slabs. The
buildings have pitched roofs covered with asphalt shingles over plywood decking.
Exteriors are vinyl siding.
The Property has an outdoor swimming pool, two lighted tennis courts, a
hot tub and whirlpool, a picnic/grill area, an on-site laundry facility, a
clubhouse with a rental office and lounge, and access to trails through Duke
Forest. There is paved parking for approximately 408 vehicles.
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 an individually controlled heating and air conditioning unit. Each
apartment unit also features washer/dryer connections, mini-blinds, ceiling
fans, an outside storage cabinet, a private screened porch and, in select
apartment units, a wood-burning fireplace. Each kitchen has a
refrigerator/freezer, electric range and oven, dishwasher and garbage disposal.
The owner of the Property supplies cold water, sewer service and trash removal.
Tenants pay for their electricity usage, which includes heat, air conditioning,
cooking, hot water and lights.
There are at least five apartment properties in the area which compete
with the Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing projects now averages
approximately 90%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 98% in 1992, 99% in 1993, 99% in 1994, and
99% in 1995. Based in part on information provided by the seller, physical
occupancy at the Property averaged approximately 91% in 1996. On January 1,
1997, the Property was 88% occupied. The tenants are a mix of white-
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collar workers, students and retired persons. A majority of the current
residents are graduate students at Duke University.
The 1996 real estate tax rate applicable to the Property was
approximately $1.6397 per $100 of assessed value, and the real estate taxes for
1996 were calculated to be $133,676. The assessed value was $8,562,000. The
basis of the depreciable residential real property portion of the Property
(currently estimated at about $8,259,600) 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 Durham, North Carolina area will
experience continued strong economic development and steady population increase,
owing in part to the presence of Duke University, Research Triangle Park and
other educational and research resources, and that such development and increase
will support stable occupancy rates and reasonable increases in rents at the
Property.
2. The Property is conveniently located and proximate to major
employers and shopping.
3. The Company is very familiar with the Durham rental market. The
Company already owns other apartment complexes in the Durham area, which may
provide certain economies and efficiency in operation.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
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FRANKLIN TOWERS APARTMENTS
Richmond, Virginia
On December 31, 1996, effective December 1, 1996, the Company purchased
the Franklin Towers Apartments, a 128-unit high-rise apartment building having
an address of 311 West Franklin Street, Richmond, Virginia ("Property"). The
Property is located across the street from the Trolley Square Apartments owned
by the Company. The Company has renamed the Property the "Trolley Square West
Apartments" and intends to operate the Property together with the original
Trolley Square Apartments as a single apartment complex.
The seller was unaffiliated with the Company. The purchase price for
the Property was $4,242,575. At closing, the entire purchase price was borrowed
under the Company's unsecured line of credit. The Company expects to repay such
borrowed amount with proceeds from the sale of additional Shares. Title to the
Property was conveyed to the Company by limited warranty deed.
Location. The following information is based in part upon information
provided by the Richmond Chamber of Commerce.
The current population of Richmond is approximately 202,000 and the
current population of the Metropolitan Statistical Area including the City of
Richmond is approximately 930,000. Richmond is located centrally within the
Commonwealth of Virginia, approximately midway between Washington, D.C. and
Raleigh, North Carolina.
The greater Richmond area is served by the Richmond International
Airport, and is situated at the intersection of Interstates 95 and 64. In
addition to being the capital of Virginia, Richmond is also home to numerous
Fortune 500 companies. Some of the larger employers in the area are Phillip
Morris, state government, Ethyl Corporation, DuPont, and NationsBank. In
addition, the area is the site of a number of institutions of higher education,
including Virginia Commonwealth University, the Medical College of Virginia, the
University of Richmond, and Virginia State University.
The Property is located in downtown Richmond, Virginia. The immediate
area consists of other multi-family housing, commercial development and retail
development. The Property is in close proximity to Virginia Commonwealth
University, and is near to the two established commercial areas known as
Carytown and Shockoe Slip.
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The Property is close to Virginia's 23-acre Biotechnology Research
Park, which is under development. The Park is being sponsored and master-leased
by Virginia Commonwealth University to provide a common site for public and
private medical-oriented biotechnology research and development facilities.
Phase I, consisting of approximately 100,000 square feet, was recently completed
and is fully leased. The second and third phases are under construction and are
expected to be completed shortly. The facility, which is adjacent to the Medical
College of Virginia campus of Virginia Commonwealth University, is expected to
impact the demand for rental housing in the area. The Property is just a few
blocks from the School of Engineering for Virginia Commonwealth University,
which is currently under construction and expected to begin conducting classes
in the fall of 1997.
The Property is only a few blocks from the Richmond Downtown
Expressway, which provides ready access to Interstates 95 and 64. The Richmond
International Airport is approximately 15 minutes from the Property.
Description of the Property. The Property consists of 128 apartment
units in a single 12-story apartment building in the central business district.
The Property was built in 1963 and 1964.
The Company believes that the Property is generally in good condition.
However, the Company has budgeted approximately $192,000 for various repairs and
improvements, including carpet replacement, replacement of appliances and
countertops and renovation of common areas.
The Property offers five unit types. The unit mix and rents currently
being charged new tenants as of January, 1997 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
64 junior 420 $420
executive
20 one bedroom 630 530
front
20 one bedroom 620 495
side
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Approximate
Interior
Quantity Type Square Footage Monthly Rental
22 one bedroom 635 515
rear
2 penthouse 1100 760
The apartments provide a combined total of approximately 68,000 square
feet of net rentable area. There is also approximately 5,000 square feet of
leasable office area.
Leases at the Property are generally for terms of one year or less. The
average rental rates for the past five years have generally increased gradually.
As an example, a penthouse apartment rented for $462 in 1992, $472 in 1993, $472
in 1994, $492 in 1995, and $567 in 1996. The average effective annual rental per
square foot at the Property for 1992, 1993, 1994, 1995, and 1996 was $8.66,
$8.85, $8.85, $9.22 and $10.63, respectively.
The Property has an outdoor swimming pool and roof deck, 24- hour
security, a conference room, laundry facilities and a laundry/dry cleaning
service. The Property has two parking lots with 108 parking spaces which
currently lease for between $30 and $40 per month.
The building is brick veneer over steel frame with concrete floor
decks. The roof is flat with modified bitumen rubber sheathing. The windows are
single steel frames. The Property's heating and air conditioning system was
completely replaced approximately three years ago.
All apartment units have wall-to-wall carpeting or parquet flooring in
the living area and tile floors in the bath. Each apartment unit has a cable
television hook-up and an individually controlled heating and air conditioning
unit. Each kitchen has a refrigerator/freezer, gas range and oven and garbage
disposal. The two penthouse units also have a dishwasher. The owner of the
Property provides all utilities other than phone and cable service.
There are at least four apartment properties in the area which compete
with the Property. All offer similar amenities and have rents that are generally
comparable to those of the Property. Based on a recent telephone survey,
Cornerstone Management Group, Inc. estimates that occupancy in nearby competing
projects now averages approximately 95%.
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According to information provided by the seller, physical occupancy at
the Property averaged approximately 95% in 1992, 96% in 1993, 96% in 1994, 95%
in 1995, and 95% in 1996. On January 1, 1997, the Property was 93% occupied. The
tenants are a mix of white-collar and blue-collar workers, students and retired
persons. Many of the current tenants have resided at the Property for many
years, and detailed information on them and their status is not available.
The 1996 real estate tax rate applicable to the Property was
approximately $1.475 per $100 of assessed value, and the real estate taxes for
1996 were calculated to be $44,368. The assessed value was $3,008,000. The
parking lot has an assessed value of $218,000 and the 1996 taxes were $3,215.
The basis of the depreciable residential real property portion of the Property
(currently estimated at about $2,368,000) will be depreciated over 27.5 years on
a straight line basis. The basis of the personal property portion will be
depreciated in accordance with the modified accelerated cost recovery system of
the Code. Amounts to be spent by the Company on repairs and improvements will be
treated for tax purposes as permitted by the Code based on the nature of the
expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Company to the relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Richmond, Virginia area will enjoy
continued steady economic development and steady population increase, due to a
diversified economy, and that such development and increase will support stable
occupancy rates and reasonable increases in rents at the Property.
2. The Company believes that operating the Property in conjunction with
the Trolley Square Apartments located across the street and previously acquired
by the Company will provide operating efficiencies.
3. The Property is conveniently located and proximate to major
employers and shopping, as well as the downtown Richmond area.
4. The Company is particularly familiar with the Richmond market since
the Company's principal offices are in Richmond.
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The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
THE ARBORS AT WINDSOR LAKE APARTMENTS
Columbia, South Carolina
On January 14, 1997, effective January 1, 1997, Cornerstone Realty
Income Trust, Inc. ("Company") purchased The Arbors at Windsor Lake Apartments,
a 228-unit apartment complex having an address of 8720 Windsor Lake Boulevard,
Columbia, South Carolina ("Property").
The Seller was unaffiliated with the Company. The purchase price was
$10,875,000. At closing, the entire purchases price was borrowed under the
Company's unsecured line of credit. The Company expects to repay such borrowed
amount with the proceeds from the sale of additional Shares. Title to the
Property was conveyed to the Company by limited warranty deed.
Location. The following information is based in part upon information
provided by the Columbia Chamber of Commerce.
Columbia is the capital of South Carolina and the greater metropolitan
area has a population of approximately 500,000 people. The largest employers in
the area included federal, state and local governments, various financial
services firms and the Army's Fort Jackson.
Columbia is also the site of the University of South Carolina and
various other smaller colleges. As a result of the reputation of the engineering
program at the University of South Carolina, the city has recently become home
to new businesses in various technical areas. Also, the medical school and
teaching hospital at the University make Columbia the state's leader in the
health care industry.
The Property is in the northeast portion of the city and is located in
an established residential area. The neighborhood also includes other
multi-family developments and commercial and retail developments.
The Property is near Interstate 77 and Interstate 20, which provide
convenient access to all locations in the greater Columbia area. Downtown
Columbia is an approximately 15-minute drive from the Property. The Property is
approximately one mile from Fort Jackson.
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Description of the Property. The Property consists of 228 garden-style
apartments located in 11 buildings on approximately 14.5 acres of land. The
buildings are a combination of two and three stories, and the Property was
constructed in 1991.
The Company believes the Property has generally been well maintained
and is generally in good condition. However, the Company has budgeted
approximately $50,000 for repairs and improvements including landscaping, carpet
replacement and clubhouse renovations.
The Property offers six different unit types. The unit mix and rents
being charged new tenants as of January, 1997 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
12 1 bedroom/1 bath 750 $510
56 1 bedroom/1 bath 750 530
(front)
22 2 bedrooms/2 baths 964 615
88 2 bedrooms/2 baths 964 630
(front)
10 3 bedrooms/2 baths 1184 725
40 3 bedrooms/2 baths 1184 740
(front)
The apartments provide a combined total of approximately 216,000 square
feet of net rentable area.
Leases at the Property are for terms of one year or less. Average
rental rates for the past five years have generally increased gradually. As an
example a three bedroom, two bath apartment rented for $710 in 1992, $710 in
1993, $725 in 1994, $725 in 1995, and $735 in 1996. The average effective annual
rental per square foot at the Property for 1992, 1993, 1994, 1995 and 1996 was
$7.55, $7.55, $7.71, $7.71, and $7.81, respectively.
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The buildings are wood frame construction on concrete slabs with a
combination of brick veneer and vinyl siding. Roofs are sloped fiberglass
shingles on plywood.
The Property features an outdoor swimming pool and hot tub, two lighted
tennis courts, a fitness center, a car wash area and vacuum, a playground, 20
covered garages with electronic door openers, 40 extra storage units, a dry
cleaning service and a resident executive center. The Property also has a
clubhouse with a leasing office.
Apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each unit has a cable television hook-up
and an individually controlled heating and air conditioning unit. Each kitchen
has a refrigerator/freezer, electric range and oven, a dishwasher and a garbage
disposal. Each unit also has a full-sized washer/dryer and some units have
vaulted ceilings, lighted ceiling fans, mini blinds and large walk-in closets.
There are natural gas fire places in 187 apartments units. The owner of the
Property pays for cold water and sewer service. The tenants pay for their
electricity and gas service, which includes heating, air conditioning, cooking,
hot water and lights.
There are at least four apartment properties in the area which compete
with the Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing projects now averages
approximately 92%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 85% in 1992, 88% in 1993, 90% in 1994, 94%
in 1995 and 94% in 1996. On January 1, 1997, the Property was 78% occupied. The
tenants are a mix of white-collar workers, military personnel and students.
Approximately 30% of the current residents are employed at Fort Jackson.
The 1996 real estate taxes applicable to the Property were calculated
as assessed value times 6% times 0.3019, and the real estate taxes for 1996 were
calculated to be $120,083. The assessed value was $6,629,300. The basis of the
depreciable residential real property portion of the Property (currently
estimated at about $6,050,100) will be depreciated over 27.5 years on a straight
line basis. The basis of the personal property portion will be depreciated in
accordance with the modified accelerated cost recovery system of the Code.
Amounts to be spent by the Company on repairs and improvements will be
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treated for tax purposes as permitted by the Code based on the nature of the
expenditures.
Before acquisition by the Company, the Property had been in bankruptcy
for over one year. During that period it had been managed by three separate
management companies. The Company believes that inefficient management resulted
in a downturn in occupancy and rental income at the Property during such period.
The Company does not believe that any factors which led to the Property being
placed into bankruptcy will apply to the Company's ownership and operation of
the Property.
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 Columbia, South Carolina area will
experience continued strong economic development and steady population increase,
owing in part to its status as the capital of the state and the presence of the
University of South Carolina, and that such development and increase will
support stable occupancy rates and reasonable increases in rents at the
Property.
2. Based upon an engineering report and its own inspections, the
Company believes that the Property is in good condition.
3. The Property is conveniently located and proximate to area 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 necessarily indicative of future
operating results.
WESTCHASE APARTMENTS
Charleston, South Carolina
On January 15, 1997, effective the same date, Cornerstone Realty Income
Trust, Inc. (the "Company") purchased the Westchase Apartments, a 352-unit
apartment complex having an address of One Westchase Drive, Charleston, South
Carolina (the "Property").
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The Seller was unaffiliated with the Company. The purchase price was
$11,000,000. At closing, the entire purchase price was borrowed under the
Company's unsecured line of credit. The Company expects to repay such borrowed
amount with the proceeds from the sale of additional Shares. Title to the
Property was conveyed to the Company by limited warranty deed.
Location. The following information is based in part upon information
provided by the Charleston Chamber of Commerce.
The Charleston Metropolitan Statistical Area ("MSA") is comprised of
Charleston, Berkeley and Dorchester Counties. The approximate population of the
MSA is 570,000. Charleston County has approximately 330,000 residents,
approximately 85,000 of which are in the city limits.
The principal economic factors in the region are distribution and port
facilities, the tourist industry, the medical community and the military.
The Port of Charleston is the leading container cargo port in the
southeast and on the entire east coast ranks second only to the combined ports
of New York and New Jersey. BMW and NUCOR are two recent examples of companies
that rely on the Port of Charleston.
Tourism is a major factor in the area, with approximately five million
visitors annually. Tourist attractions include the historic district of
Charleston, beaches, golf courses, and restaurants. It is estimated that the
total economic impact of the tourist industry in the region is $1.5 billion
annually, accounting for approximately 34,000 jobs and approximately 14% of the
total work force.
Charleston is the home to the Medical University of South Carolina,
which accounts for approximately 7,500 jobs. A total of approximately 16,000
persons are employed in the region's, 10 hospitals.
The United States Navy employs approximately 7,800 people in the region
in installations such as Charleston Naval Weapons Station, Naval Hospital and
Naval Command, Control and Ocean Surveillance Center in Service Engineering,
East Coast Division. In addition, the Charleston Air Force Base employs over
5,400 people. From 1989 to 1996, Naval employment in the region dropped from 21%
to 3% of total jobs. However, the region experienced a concurrent increase in
jobs in other sectors.
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The overall unemployment rate in the region is currently approximately
5%.
The Property is located in the West Ashley region of Charleston. The
immediate area consists of other multi-family housing, commercial and retail
development and single-family housing. The Property is located near major
shopping centers, schools and churches and is accessible from Interstate 26. The
Property is within a 10-minute drive of the airport and approximately a
15-minute from downtown Charleston. Charleston's largest mall, the Citadel Mall,
is located less than two miles from the Property and has four major anchor
stores and approximately one million square feet of space. The Roper Hospital is
located within one-half mile of the Property and the St. Francis Xavier Hospital
is expected to relocate less than one-half mile from the Property.
Description of the Property. The Property consists of 352 garden-style
apartments located in 23 two-story buildings on approximately 30 acres of land.
The Property was constructed in 1985.
The Company believes that the Property has generally been well
maintained and is generally in good condition. However, the Company has budgeted
approximately $352,000 for repairs and improvements including siding replacement
and repair, painting, carpet replacement, roof replacement and clubhouse
renovations.
The Property offers many different unit types. The unit mix and rents
being charged new tenants as of January, 1997 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
11 Efficiency 407 $425
11 Efficiency LGLRUP 432 425
20 1/1 BWUP 505 445
2 1/1 BWUPSLOC 505 445
20 1/1 WS 505 440
2 1/1 WSSLOC 505 440
20 1/1 BWUP 617 460
2 1/1 BWUPSLOC 617 465
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Approximate
Interior
Quantity Type Square Footage Monthly Rental
25 1/1 BWFPUP 617 475
7 1/1 BWFPUP 617 480
1 1/1 BWFPSLOCUP 617 480
52 1/1 WS 617 455
3 1/1 WSSLOC 617 455
36 2/2 BWWDUP 847 580
8 2/2 BWWDUPSLOC 847 580
36 2/2 BWWDFPUP 847 585
8 2/2 BWWDFPUPSLOC 847 585
72 2/2 WS 847 565
16 2/2 WSSLOC 847 565
LGLR -- Large Living Room WS -- Window Seat
UP -- Upper Level FP -- Fireplace
BW -- Bay Window WD -- Washer/Dryer Connections
SLOC -- Special Location
The apartments provide a combined total of approximately 248,000 square
feet of net rental area.
Leases at the Property are for terms of one year or less. Average
rental rates for the past five years have both increased and decreased. As an
example a two bedroom, two bath apartment rented for $470 in 1992, $475 in 1993,
$440 in 1994, $480 in 1995, and $495 in 1996. The average effective annual
rental per square foot at the Property for 1992, 1993, 1994, 1995 and 1996 was
$7.28, $7.36, $6.82, $7.44, and $7.67, respectively.
The buildings are wood frame construction on concrete slabs. The
buildings have pitched composition shingled roofs. Exteriors are a combination
of brick and horizontal wood siding.
The Property has an outdoor swimming pool with sun deck, whirlpool,
lighted tennis court, sand volleyball court, basketball court, car wash area
with vacuum, three laundry facilities and a scenic lake with fountains. The
Property also includes a clubhouse with a clubroom, entertainment bar,
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conversation area and leasing office. There is paved parking for approximately
616 vehicles.
Apartments units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and baths, as well as cable television hook-ups and
individually controlled heating and air conditioning units. Each unit has a
kitchen passthrough/breakfast bar, pantry, walk-in closets, a linen closet and
mini blinds. Some units also include a bay window with window seats, a wood
burning fire place and washer/dryer connections. Each kitchen is equipped with a
refrigerator/freezer, electric range and oven, dish washer and garbage disposal.
The owner of the Property supplies cold water, sewer service and trash removal.
The tenants pay for their electricity usage, which includes heat, air
conditioning, cooking, hot water and lights.
There are at least six apartment properties in the area which compete
with the Property. All offer similar amenities and generally have rents that are
higher when compared with those of the Property. Based on a recent telephone
survey, the Company estimates that occupancy in nearby competing projects now
averages approximately 94%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 97% in 1992, 93% in 1993, 95% in 1994, 95%
in 1995 and 95% in 1996. On January 1, 1997, the Property was 97% occupied. The
tenants are a mix of white-collar and blue-collar workers, students and retired
persons. Most of the tenants are under the age of 35 and approximately half are
believed to be single.
The 1996 real estate taxes applicable to the Property were calculated
as assessed value times 6% times 0.3219, plus a solid waste tax of $56 per
apartment unit. The real estate taxes for 1996 were calculated to be $178,384.
The assessed value was $9,236,000. The basis of the depreciable residential real
property portion of the Property (currently estimated at about $7,581,000) will
be depreciated over 27.5 years on a straight line basis. The basis of the
personal property portion will be depreciated in accordance with the modified
accelerated cost recovery system of the Code.
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
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the Property for acquisition by the Company included the following:
1. The Company believes that the Charleston, South Carolina area will
experience continued strong economic development and steady population increase,
owing to a strong, diversified economy characterized by at least four major
employment factors (port facilities, tourism, medical facilities and the
military), and that such development and increase will support stable occupancy
rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Company believes that the Property is in good condition.
3. The Property is conveniently located and proximate to area 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 necessarily indicative of future
operating results.
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<PAGE>
[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct
operating expenses exclusive of items not comparable to the proposed future
operations of the property Greenbrier Apartments located in Fredericksburg,
Virginia for the twelve month period ended September 30, 1996. This
statement is the responsibility of the management of Greenbrier Apartments.
Our responsibility is to express an opinion on this statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Cornerstone Realty Income Trust, Inc.) and excludes
material expenses, described in Note 1 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Greenbrier
Apartments (as defined above) for the twelve month period ended September 30,
1996, in conformity with generally accepted accounting principles.
/s/ L. P. Martin & Co., P.C.
Richmond, Virginia
December 20, 1996
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<PAGE>
GREENBRIER APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED SEPTEMBER 30, 1996
INCOME
Rental and Other Income $1,667,576
DIRECT OPERATING EXPENSES
Administrative and Other 133,270
Insurance 19,111
Repairs and Maintenance 274,066
Taxes, Property 111,983
Utilities 94,609
----------
TOTAL DIRECT OPERATING EXPENSES 633,039
----------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $1,034,537
==========
See accompanying note to the financial statement.
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GREENBRIER APARTMENTS
NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED SEPTEMBER 30, 1996
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Greenbrier Apartments is a 258 unit garden style apartment complex located on
17.47 acres in Fredericksburg, Virginia. Living space totals 219,460 square
feet.
The assets comprising the property were owned by Greenbrier Apartment
Associates of Fredericksburg, L.P. during the financial statement period.
Cornerstone Realty Income Trust, Inc. subsequently purchased the property.
In accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable
to those resulting from the proposed future operations of the property.
Excluded expenses are mortgage interest, property depreciation, amortization,
legal fees, accounting fees and management fees.
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[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct
operating expenses exclusive of items not comparable to the proposed future
operations of the property Deerfield Apartments located in Durham, North
Carolina for the twelve month period ended October 31, 1996. This statement
is the responsibility of the management of Deerfield Apartments. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the statement. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Cornerstone Realty Income Trust, Inc.) and excludes
material expenses, described in Note 1 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Deerfield
Apartments (as defined above) for the twelve month period ended October 31,
1996, in conformity with generally accepted accounting principles.
/s/ L. P. Martin & Co., P.C.
Richmond, Virginia
January 3, 1997
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DEERFIELD APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTHS ENDED OCTOBER 31, 1996
INCOME
Rental and Other Income $1,625,451
DIRECT OPERATING EXPENSES
Administrative and Other 111,170
Insurance 35,379
Repairs and Maintenance 207,891
Taxes, Property 133,801
Utilities 67,680
----------
TOTAL DIRECT OPERATING EXPENSES 555,921
----------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $1,069,530
==========
See accompanying note to the financial statement.
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DEERFIELD APARTMENTS
NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTHS ENDED OCTOBER 31, 1996
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Deerfield Apartments is a 204 unit residential garden style apartment complex
located on approximately 15 acres in Durham, North Carolina. Living space
totals 181,112 square feet. A majority of the tenants are students at Duke
University.
During the financial statement period, the assets comprising the property were
owned by Durham Associates, a nonaffiliated partnership. Cornerstone Realty
Income Trust, Inc. purchased the property in November 1996.
In accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable
to those resulting from the proposed future operations of the property.
Excluded expenses are mortgage interest, property depreciation, professional
fees and management fees.
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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.
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ITEM 7.e.*
- --------------------------------
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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ITEM 7.f.*
- --------------------------------
* To be filed by amendment. It is impracticable to include herein the required
pro forma financial information. The required pro forma financial information
will be filed as an amendment to this report as soon as possible, but in no
event more than 60 days after the date of filing of this report.
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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: January 28, 1997 By: /s/ STANLEY J. OLANDER, JR.
___________________________
Stanley J. Olander, Jr.,
Chief Financial Officer
of Cornerstone Realty
Income Trust, Inc.
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EXHIBIT INDEX
Cornerstone Realty Income Trust
Form 8-K dated October 31, 1996
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
10.1 Purchase Contract for
Greenbrier Apartments
10.2 Purchase Contract for Deerfield
Apartments
10.3 Purchase Contract for Franklin
Towers Apartments
10.4 Purchase Contract for The Arbors at Windsor
Lake Apartments
10.5 Purchase Contract for Westchase Apartments
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
23.3 Consent of Independent Auditors*
23.4 Consent of Independent Auditors*
* To be filed by amendment.
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EXHIBIT 10.1
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 18th day of
October 1996, between CORNERSTONE REALTY GROUP, INC. or its nominee,
(hereinafter called "Purchaser") and GREENBRIER APARTMENT ASSOCIATES OF
FREDERICKSBURG, L.P., a Virginia 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
GREENBRIER APARTMENTS located in FREDERICKSBURG, VA, with all buildings and
improvements located thereon, as more particularly described in the attached
legal description in Exhibit A (the "Land") including, but not limited to 258
individually heated and air conditioned apartment units, with all appurtenances
(the "Improvements", the Land and Improvements being sometimes hereinafter
referred to as the "Real Property"), 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 (the "Personal Property"; such Real Property
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
ELEVEN MILLION NINETY NINE THOUSAND FIVE HUNDRED TWENTY FIVE
($11,099,525) DOLLARS as evidenced by cash or cash equivalent at
closing.
2.2 Deposit. $100,000 (the "Earnest Money") 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
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
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<PAGE>
marketable title to the Real Property by General Warranty Deed, subject only 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.
(A) Title shall be free from any and all liens or
mortgages and Seller shall be responsible for any prepayment penalties necessary
to deliver such free title.
3.2 Title Defects; Election to Cure. Purchaser
shall at its sole expense obtain a commitment for Title Insurance (the
"Commitment"). If title is not marketable, except as stated above in the
preceding paragraph, Purchaser shall give written notice of any defects in title
to Seller's counsel within fifteen (15) days after Purchaser's receipt of a
title report which report shall include copies of backup documents relating to
any title exceptions, a current survey, a flood zone certification letter and a
Surveyor's Certification letter. Seller may, at its option, elect whether to
cure said defects or by written notice to Purchaser indicate its intention not
to cure.
3.3 Election Not to Cure Defects. Should Seller elect
not to cure title defects, this Agreement, at Purchaser's option, shall be void;
each party shall thereupon be released from all obligations hereunder; and all
deposits shall be immediately returned to Purchaser.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following
shall be prorated as of 12:01 a.m. on October 1, 1996: rents and other income
from the Property; operating expenses (on such service contracts and other
obligations as Purchaser may agree to assume); all real and personal property
taxes for the year of closing (based on the most recent assessment and the most
recent levy); and all water, sewer and utility charges. Seller shall receive
credit for any utility deposits not released to Seller by the utility companies
holding such deposits and which are assignable.
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;
it being understood that the Seller customarily pays the Grantor's tax under
Section 58.1-802 of the Code of Virginia and Purchaser is responsible for all
other recording fees and taxes. Purchaser agrees to pay cost of title insurance
and any Survey, engineering and environmental reports related to the Property
and obtained by Purchaser. Seller shall pay any prepayment penalty charged by
the holders of any existing notes. Purchaser and Seller shall each be
responsible for their own attorneys fees.
2
<PAGE>
4.3 Allocation of Rents. Rents collected by Seller
prior to Closing shall be prorated to the date of closing as agreed in 4.1
above. Purchaser shall apply rents received after Closing first to payment of
the current rent due to Purchaser, then to delinquent rents due to Purchaser,
and last to rents due to Seller as of the Closing but uncollected prior to
settlement. Purchaser agrees to use its best efforts in good faith to collect
the amount of any rental arrears from tenants and Purchaser agrees to remit
promptly to Seller any such arrears actually paid by such tenants to Purchaser.
Seller shall retain the right to commence legal action against a tenant for any
delinquent rent apportioned to the Seller.
4.4 Prior Lease Concessions. Seller shall pay to
Purchaser, in a lump sum at closing, all future monetary concessions which
Seller has given to tenants under leases existing at the time of closing.
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 fifteen (15) days in which to review the reports set forth
herein and exercise its right to reject the Property based thereon or the right
hereunder shall be deemed waived.
(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.
3
<PAGE>
(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 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 Real 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, mortgages, and other documents
creating liens of security interest on the Property, or any part thereof and all
promissory notes secured thereby; all insurance policies applicable to the
Property to include loss runs for the last five (5) years; Plans and
Specifications for the Property, service contracts, Certificates of Occupancy,
to the extent reasonably available; a copy of the title policy and most recent
survey for the Real Property; copy of any environmental or engineering reports
on the Real 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
4
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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 Agreement 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 right to terminate this Agreement by giving written notice to Seller
before the end of the Inspection Period, and no party hereto shall have any
further liability to any other party hereto, and all deposits shall be returned
to Purchaser.
6.2.4 "Rent Ready". During the "Inspection Period",
both Seller and Purchaser will inspect an apartment unit at the Property and
mutually agree that said apartment shall be representative of a "rent ready"
unit by which all other units shall be judged for "rent ready" condition at
closing. All vacant apartment units, are to be in a "rent ready" condition (as
defined above), at the time of closing, containing, but not limited to the
following amenities, i.e., carpet, refrigerator, range, garbage disposal,
heating, plumbing and electrical systems.
6.2.5 Condition of Personal Property at Closing. All
Personal Property included in the sale and all mechanical, electrical, heating,
air conditioning, sewer, water and plumbing systems will be in the same working
order at the time of closing and in the same condition as at the time of the
initial inspection by Purchaser. If Seller fails to make reasonable efforts to
conserve the Real and Personal 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 seven
(7) days after the completion of the Inspection Period at such place and at such
time as the parties may agree.
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7.2 Seller's Deliveries. At closing, Seller shall
execute and deliver to Purchaser the General Warranty Deed referred to in
Paragraph 3 hereof and shall also execute, where necessary, and deliver to
Purchaser, the following:
(A) A Bill of Sale, with warranty of title
transferring the personal property (as shown in Schedule B) to
Purchaser free of all liens, charges and encumbrances.
(B) Originals or copies of all signed leases and
rental agreements in effect with tenants of the Property.
(C) All security and cleaning deposits made by
such tenants. Seller will give the tenants the required notice of such transfer
in compliance with the laws of VIRGINIA.
(D) An affidavit of Seller in 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,
(3) the existing Property telephone number and (4) the business and trade name
as set forth in Par. 1.1.
6
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(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, if any, without
limitation for all appliances, dishwashers, disposals, refrigerators, heating
and air conditioning units, washers and dryers.
(J) Copies of utility bills or other evidence
satisfactory to Purchaser that all water, sewer, gas, electric, telephone, and
drainage facilities and all other utilities required by law or by the normal use
and operation of the Property are and at the time of closing will be installed
to the property line, are and at the time of closing will be connected pursuant
to valid permits, and are and at the time of closing adequate to service the
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 partner
to the sale of the Property and any other approvals required under Seller's
partnership agreement, 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, except as may be disclosed in the following reports, copies of which
have been delivered to Purchaser:
(i) Lead-Based Paint Investigation dated
September 3, 1996 prepared by Dominion Environmental Group, Inc.
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(ii) Environmental Site Assessment dated
August 29, 1995 prepared by Dominion Environmental Group, Inc., and
(iii) Existing Building Inspection Report
dated August 28, 1995 prepared by PCI Consultants, Inc.
(O) Seller shall provide a satisfactory and valid
written termination of the management agreement executed by the existing
management and rental agent for the Property, without cost to the Purchaser.
(P) A notice letter to all the residents of the
apartment complex as to change of ownership in the form prepared by
the Purchaser.
(Q) All such other documents as are normally
transferred at settlement in the jurisdiction in which the property is located
or are reasonably requested by Purchaser or its counsel.
(R) A representation letter as normally required
by auditors for a public company in the form attached hereto as Exhibit C. This
clause shall survive closing for one year.
7.3 Purchaser's Deliveries. At closing and
contemporaneously with the Seller's compliance with the provisions 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, secury deposits, 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.
8
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ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations of the Parties. Seller warrants
(which warranties shall not survive settlement unless designated to the
contrary) that as of the date of closing hereof:
(A) That Seller, is the owner in fee simple of
the Property and has the power to convey same.
(B) That Seller is not subject to any other
agreements or arrangements, with the exception of those contained in any
existing mortgage documents which would prevent Seller from selling the Property
to Purchaser. This warranty shall survive for one year following closing.
(C) All necessary action has been taken by
Seller to authorize the execution of this Agreement and the performance of the
obligations contemplated hereunder, which are not excluded elsewhere in existing
mortgage documents. This warranty shall survive for one year following closing.
(D) Seller has no actual knowledge and has not
been advised in writing that it is in default under any lease, rental agreement
service or equipment contract, or mortgage or other encumbrances relating to the
Property. This warranty shall survive for one year the following closing.
(E) Seller has no actual knowledge of any
patent or latent defect in the Real Property or any part thereof. This warranty
shall survive for one year following closing.
(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 Real Property abuts on and has direct
vehicular access to a public road.
(H) All building and other improvements at the
Real 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. This warranty shall survive for one year
following closing.
9
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(J) That to Seller's actual knowledge, the
drainage within the project is satisfactory and complies in all respects with
all government regulation. This warranty shall survive for one year following
closing.
(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 Seller's actual knowledge, the
Property was never utilized as a disposal site for hazardous waste products and
will furnish to Purchaser an affidavit confirming same.
(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.
8.2 Continuation of Representations, Warranties and
Covenants to the Date of Closing. If each of the warranties set forth in this
section does not remain true up to and including the time of closing as to any
material matters, this Agreement, at Purchaser's election, shall be terminated,
Seller shall return all payments made by Purchaser, or Purchaser may elect to
close the sale and waive failure of the warranties.
8.3 Breach of Representations, Warranties and
Covenants. Notwithstanding the provisions of 8.2 above, Seller shall indemnify
Purchaser for all reasonable costs incurred as a result of the failure of any of
Seller's representations, warranties or covenants contained herein to remain
true as of the date of closing.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 Property Damage. If, prior to closing, any part of
the Property is damaged by fire or other casualty, Seller shall repair such
damage before the date provided herein for closing. If such damage cannot be
repaired by such time, this Agreement may be canceled at the option of the
Purchaser. In the event of cancellation as aforesaid, this Agreement shall
become null and void and the parties shall be released and all payments made
shall be returned. Should Purchaser elect to carry out this Agreement despite
such damage Seller shall assign to Purchaser all insurance proceeds arising from
such damage and will compensate Purchaser for lost rent collections to the
extent of insurance proceeds received. Seller shall promptly notify Purchaser in
writing upon the
10
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occurrence of any such damage.
9.2 Condemnation. In the event of any actual or
threatened taking, pursuant to the power of eminent domain, all or any part
thereof, or any actual or proposed sale in lieu thereof, the Seller shall give
written notice thereof to the Purchaser promptly after Seller learns or receives
notice thereof. Upon a taking of a material part of the Property (any part of
the building or more than 5% of the parking area), Purchaser may elect to either
(a) terminate this Agreement, in which event the Deposit shall be immediately
returned to Purchaser and all other rights and obligations of the parties
hereunder shall terminate immediately, or (b) to waive its right to terminate
this Agreement and proceed to closing, in which event all proceeds, awards and
other payments arising out of such condemnation or sale (actual or threatened)
shall be paid to the Purchaser at closing, if such payment has been received or
Seller shall assign to Purchaser the rights to such payments.
9.3 Risk of Loss. Prior to closing, all risks of loss
or damage by every casualty shall be borne by the Seller.
ARTICLE X
BROKER
10.1 No Broker. The parties agree that no broker
brought about this transaction. Purchaser and Seller hereby indemnify and hold
each other harmless from any and all claims of any broker or person so claiming.
ARTICLE XI
DEFAULT
11.1 Default Defined. Default for the purpose of this
Agreement shall mean any failure by Seller or Purchaser to fulfill all the
terms, conditions and covenants contained herein, however, it shall not be an
event of default for either party to exercise its rights to terminate this
contract as contained in other provisions herein.
11.2 Seller's Default. Upon Seller's default, the Purchaser,
at it's election, may either (1) require specific performance of Seller, or
pursue its other remedies at law or equity, (2) cancel this Agreement and obtain
a prompt return of the deposit, in which case this Agreement shall be terminated
and the parties released from all obligations hereunder, or (3) the Purchaser
may waive such defaults and proceed to settlement. Seller shall indemnify
Purchaser for any reasonable costs incurred by Purchaser if Purchaser elects to
pursue its option (1) noted above, to include reasonable attorney fees.
11.3 Purchaser's Default. Upon Purchaser's default,
11
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this Agreement shall be terminated and both parties released from all
obligations hereunder, and the deposit shall be retained by the Seller as
liquidated damages. Seller shall have no other remedy against Purchaser in the
event of Purchaser's default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement sets forth the
entire understanding between the parties; it supersedes all previous agreements
and representations which are deemed merged herein and may not be modified
except in writing.
12.2 Assignment. Purchaser may assign this Agreement
without the consent of Seller.
12.3 Severability. If any provision, sentence, phrase or
word of this Agreement or the application thereof to any person or circumstance
shall be held invalid, the remainder of this Agreement or the application of
such provision, sentence, phrase, or word to persons or circumstances, other
than those as to which it is held invalid, shall remain in full force and
effect.
12.4 Binding Effect. The parties to the Agreement
mutually agree that it shall be binding upon and inure to the benefit of their
respective heirs, representatives, successors in interest and assigns.
12.5 Controlling Law. It is the intent of the parties
hereto that all questions with respect to the construction of this Agreement and
the rights and liabilities of the parties shall be determined in accordance with
the provisions of the laws of the State set forth in Par. 1.1.
12.6 Counterparts. To facilitate execution, this Agreement
may be executed in as many counterparts as may be required. It shall not be
necessary that the signature on behalf of both parties hereto appear in each
counterpart hereof, and it shall be sufficient that the signature on behalf of
both parties hereto appear on one or more such counterparts. All counterparts
shall collectively constitute a single contract.
12.7 Incorporation by Reference. All of the Exhibits
referred to herein and/or attached hereto shall be deemed to constitute a part
of the Agreement.
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12.8 Headings. The headings of the Articles and sections
hereof are inserted for convenience only and shall not be deemed to constitute a
part of the Agreement.
12.9 Construction of Contract. Each party hereto have
reviewed and revised (or requested revisions of) this Agreement,
and therefore the normal rule of construction that any ambiguities are to be
resolved against a particular party shall not be applicable in the construction
and interpretation of this Contract or any amendments or exhibits hereto.
ARTICLE XIII
NOTICE
13.1 Notice. All notices required or permitted to be given
under this Agreement shall be in writing and shall be sent or delivered to the
address set forth below (or such other address as may be hereafter specified in
writing):
To Seller: GREENBRIER APARTMENT ASSOCIATES
OF FREDERICKSBURG, L.P.
530 Southlake Boulevard, Suite C
Richmond, VA 23236
With a copy to
Seller's Attorneys: Hugh T. Harrison, II
Williams, Mullen, Christian &
Dobbins, P.C.
P.O. Box 1320
Richmond, VA 23210-1320
To Purchaser: S. J. Olander
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
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13.2 Delivery of Notice. Notices sent either by Registered or Certified Mail,
Return Receipt Requested, or by overnight express mail shall be deemed given
when deposited in the United States Mail, postage prepaid, or delivered to a
reliable overnight courier. Notices sent in any other manner shall be deemed
given only when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused
this Agreement to be executed this day and date first
written above.
SELLER:
GREENBRIER APARTMENT ASSOCIATES OF
FREDERICKSBURG, L.P.
By: The Greenbrier Group, L.P.,
a Virginia Limited Partnership, General Partner
By: /s/ Ronald C. Evans
_______________________
Its: General Partner
______________________
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. Olander
__________________________
Its: Senior Vice President
_________________________
14
EXHIBIT 10.2
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the 14th day of
November, 1996, by and between Cornerstone Realty Group Incorporated, a Virginia
corporation ("Purchaser"), and Durham Associates, an Illinois limited
partnership ("Seller").
W I T N E S S E T H:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell at
the price of TEN MILLION EIGHT HUNDRED SEVENTY FIVE THOUSAND AND NO/100 Dollars
($10,875,000.00) (the "Purchase Price"), that certain property commonly known as
Deerfield Apartments, Durham, North Carolina, legally described on Exhibit A
attached hereto (the "Property") containing 204 units. Included in the Purchase
Price is all of the personal property set forth on Exhibit B attached hereto
(the "Personal Property").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Upon the execution of this Agreement, the sum of ONE HUNDRED FIFTY
THOUSAND AND NO/100 Dollars ($150,000.00) (the "Earnest Money") to be held in
escrow by and in accordance with the provisions of the Escrow Agreement ("Escrow
Agreement") attached hereto as Exhibit C; and
2.2. On the "Closing Date" (hereinafter defined), the balance of the Purchase
Price, adjusted in accordance with the prorations, by federally wired
"immediately available" funds, on or before 12:00 p.m Chicago time.
3. TITLE COMMITMENT AND SURVEY.
3.1. Attached hereto as Exhibit D is a copy of a title commitment for an
owner's standard title insurance policy issued by First American Title Insurance
Company (hereinafter referred to as "Title Insurer") dated September 20, 1996
for the Property (the "Title Commitment"). For purposes of this Agreement,
"Permitted Exceptions" shall mean: (a) the general printed exceptions contained
in the standard title policy to be issued by Title Insurer based on the Title
Commitment; (b) general real estate taxes, association assessments, special
district taxes and related charges not yet due and payable; (c) matters shown on
the "Survey" (hereinafter defined); (d) matters caused by the actions of
Purchaser; and (e) the title exceptions set forth in Schedule B of the Title
Commitment as Numbers 2 through 10 inclusive, to the extent that same effect the
Property. All other exceptions to title shall be referred to as "Unpermitted
Exceptions". The Title Commitment shall be conclusive evidence of good title as
therein shown as to all matters to be insured by the title policy, subject only
to the exceptions therein stated. On the Closing Date, Title Insurer shall
deliver to Purchaser a standard title
<PAGE>
policy in conformance with the previously delivered Title Commitment, subject to
Permitted Exceptions and Unpermitted Exceptions waived by Purchaser (the "Title
Policy"). Purchaser shall pay for all of the costs of the Title Commitment and
Title Policy and the cost of any endorsements to, or extended coverage on, the
Title Policy.
3.2. During the Inspection Period (hereinafter defined), Purchaser shall
receive a survey of the Property prepared by The John R. McAdams Company, Inc.
dated no earlier than October 31, 1996 (the "Survey"). Purchaser shall pay for
the costs of the Survey. Purchaser hereby acknowledges that all matters
disclosed by the Survey which are not specifically objected to by Purchaser
prior to the termination of the Inspection Period are acceptable to Purchaser.
3.3. The obligation of Purchaser to pay various costs set forth in Paragraphs
3:1 and 3.2 shall survive the termination of this Agreement.
4. PAYMENT OF CLOSING COSTS.
4.1. Seller shall pay for the costs of the documentary or transfer stamps to
be paid with reference to the "Deed" (hereinafter defined) and Purchaser shall
pay, in addition to the costs set forth in Paragraphs 3.1 and 3.2, all other
stamps, intangible, recording, sales tax and surtax imposed by law with
reference to any other sale documents delivered in connection with the sale of
the Property to Purchaser and all other charges of the Title Insurer in
connection with this transaction.
4.2. In addition to the costs set forth in Paragraphs 3.1, 3.2 and 4.1, and
excepting Seller's attorney's fees, Purchaser shall pay for all other costs
associated with title insurance, recording and survey.
5. CONDITION OF TITLE.
5.1. If, prior to "Closing" (as hereinafter defined), a date-down to the
Title Commitment discloses any new Unpermitted Exception, Seller shall have
thirty (30) days from the date of the date-down to the Title Commitment, at
Seller's expense, to (i) bond over, cure and/or have any Unpermitted Exceptions
which, in the aggregate, do not exceed $100,000.00 (a "Minor Unpermitted
Exception"), removed from the Title Commitment or to have the Title Insurer
commit to insure against loss or damage that may be occasioned by such
Unpermitted Exceptions, or (ii) have the right, but not the obligation, to bond
over, cure and/or have any Unpermitted Exceptions which, in the aggregate, equal
or exceed $100,000.00, removed from the Title Commitment or to have the Title
Insurer commit to insure against loss or damage that may be occasioned by such
Unpermitted Exceptions. In such event, the time of Closing shall be delayed, if
necessary, to give effect to said aforementioned time periods. If Seller fails
to cure or have said Unpermitted Exception removed or have the Title Insurer
commit to insure as specified above within said thirty (30) day period or if
Seller elects not to exercise its rights under (ii) in the preceding sentence,
Purchaser may terminate this Agreement upon notice to Seller within seven (7)
days after the expiration of said thirty (30) day period provided,
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<PAGE>
however, and notwithstanding anything contained herein to the contrary, if the
Unpermitted Exception which gives rise to Purchaser's right to terminate was
recorded against the Property as a result of the affirmative, willful action of
Seller (and not by any unrelated third party) with the intention to prevent the
sale of the Property in accordance with the terms hereof or if Seller is able to
bond over, cure or remove a Minor Unpermitted Exception for a cost not to exceed
$100,000 or the Title Insurer is willing to insure over a Minor Unpermitted
Exception for a cost not to exceed $100,000 in accordance with the terms hereof
and Seller fails to expend said funds in either case, then Purchaser shall have
the additional rights contained in Paragraph 11 herein. Absent notice from
Purchaser to Seller in accordance with the preceding sentence, Purchaser shall
be deemed to have elected to take title subject to said Unpermitted Exception.
If Purchaser terminates this Agreement in accordance with the terms of this
Paragraph 5.1, this Agreement shall become null and void without further action
of the parties and all Earnest Money theretofore deposited into the escrow by
Purchaser together with any interest accrued thereon, shall be returned to
Purchaser, and neither party shall have any further liability to the other,
except for Purchaser's obligation to indemnify Seller and restore the Property,
as more fully set forth in Paragraph 7.
5.2. Seller agrees to convey fee simple title to the Property to Purchaser by
special warranty deed (the "Deed") in recordable form subject only to the
Permitted Exceptions and any Unpermitted Exceptions waived by Purchaser.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
6.1. Except as provided in the indemnity provisions contained in Paragraph
7.1 of this Agreement, Seller shall bear all risk of loss with respect to the
Property up to the earlier of the dates upon which either possession or title is
transferred to Purchaser in accordance with this Agreement. Notwithstanding the
foregoing, in the event of damage to the Property by fire or other casualty
prior to the Closing Date, repair of which would cost less than or equal to
$100,000.00 (as determined by Seller's insurance adjuster) Purchaser shall not
have the right to terminate its obligations under this Agreement by reason
thereof, but Seller shall have the right to elect to either repair and restore
the Property (in which case the Closing Date shall be extended until completion
of such restoration) or to assign and transfer to Purchaser on the Closing Date
all of Seller's right, title and interest in and to all insurance proceeds paid
or payable to Seller on account of such fire or casualty, and Seller shall pay
to Purchaser at the Closing the amount of Seller's insurance deductible. Within
ten (10) days of such an occurrence, Seller shall notify Purchaser in writing of
any such fire or other casualty and Seller's determination of the cost to repair
the damage caused thereby. In the event of damage to the Property by fire or
other casualty prior to the Closing Date, repair of which would cost in excess
of $100,000.00 (as determined by Seller's insurance adjuster), then this
Agreement may be terminated at the option of Purchaser, which option shall be
exercised, if at all, by Purchaser's written notice thereof to Seller within
seven (7) business days after Purchaser receives written notice of such fire or
other casualty and Seller's determination of the amount of such damages, and
upon the exercise of such option by Purchaser this Agreement shall become null
and void, the Earnest Money deposited by Purchaser shall be returned to
Purchaser
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together with interest thereon, and neither party shall have any further
liability or obligations hereunder. In the event that Purchaser does not
exercise the option set forth in the preceding sentence, the Closing shall take
place on the Closing Date and Seller shall assign and transfer to Purchaser on
the Closing Date all of Seller's right, title and interest in and to all
insurance proceeds paid or payable to Seller on account of the fire or casualty,
and Seller shall pay to Purchaser at the Closing the amount of Seller's
insurance deductible.
6.2. If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated which might result in
the taking of any part of the Property or the taking or closing of any right of
access to the Property, Seller shall immediately, notify Purchaser of such
occurrence. In the event that the taking of any part of the Property shall: (i)
impair access to the Property; (ii) cause any non-compliance with any applicable
law, ordinance, rule or regulation of any federal, state or local authority or
governmental agencies having jurisdiction over the Property or any portion
thereof; or (iii) and adversely impair the use of the Property as it is
currently being operated (hereinafter collectively referred to as a "Material
Event"), Purchaser may:
6.2.1. terminate this Agreement by written notice to Seller, in which event
the Earnest Money deposited by Purchaser, together with interest thereon, shall
be returned to Purchaser and all rights and obligations of the parties hereunder
with respect to the closing of this transaction will cease; or
6.2.2. proceed with the Closing, in which event Seller shall assign to
Purchaser all of Seller's right, title and interest in and to any award made in
connection with such condemnation or eminent domain proceedings.
6.3. Purchaser shall then notify Seller, within seven (7) business days after
Purchaser's receipt of Seller's notice, whether Purchaser elects to exercise its
rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall be delayed, if
necessary, until Purchaser makes such election. If Purchaser fails to make an
election within such seven (7) business day period, Purchaser shall be deemed to
have elected to exercise its rights under Paragraph 6.2.2. If between the date
of this Agreement and the Closing Date, any condemnation or eminent domain
proceedings are initiated which do not constitute a Material Event, Purchaser
shall be required to proceed with the Closing, in which event Seller shall
assign to Purchaser all of Seller's right, title and interest in and to any
award made in connection with such condemnation or eminent domain proceedings.
7. INSPECTION AND AS-IS CONDITION.
7.1. During the period commencing on October 21, 1996 and ending at 5:00 p.m.
Chicago time on November 15, 1996 (said period being herein referred to as the
"Inspection Period"), Purchaser and the agents, engineers, employees,
contractors and surveyors retained by Purchaser may enter upon the Property, at
any reasonable time and upon reasonable prior notice to Seller, to inspect the
Property, including a review of leases located at the Property, and
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to conduct and prepare such studies, tests and surveys as Purchaser may deem
reasonably necessary and appropriate. In connection with Purchaser's review of
the Property, Seller agrees to deliver to Purchaser copies of the current rent
roll for the Property, the most recent tax and insurance bills, utility account
numbers and service contracts.
All of the foregoing tests, investigations and studies to be conducted under
this Paragraph 7.1 by Purchaser shall be at Purchaser's sole cost and expense
and Purchaser shall restore the Property to the condition existing prior to the
performance of such tests or investigations by or on behalf of Purchaser.
Purchaser shall defend, indemnify and hold Seller and any affiliate, parent of
Seller, and all shareholders, employees, officers and directors of Seller or
Seller's affiliate or parent (hereinafter collectively referred to as "Affiliate
of Seller") harmless from any and all liability, cost and expense (including
without limitation, reasonable attorney's fees, court costs and costs of appeal)
suffered or incurred by Seller or Affiliates of Seller for injury to persons or
property caused by Purchaser's investigations and inspection of the Property.
Seller shall notify Purchaser if Seller receives written notice of threatened,
or actually instituted claims, for injury to persons or property caused by
Purchaser's investigations and inspection of the Property. Purchaser shall
undertake its obligation to defend set forth in the preceding sentence using
attorneys selected by Seller, in Seller's sole discretion.
Prior to commencing any such tests, studies and investigations, Purchaser
shall furnish to Seller a certificate of insurance evidencing comprehensive
general public liability insurance insuring the person, firm or entity
performing such tests, studies and investigations and listing Seller and
Purchaser as additional insureds thereunder.
If Purchaser is dissatisfied with the results of the tests, studies or
investigations performed or information received pursuant to this Paragraph 7.1,
Purchaser shall have the right to terminate this Agreement by giving written
notice of such termination to Seller at any time prior to the expiration of the
Inspection Period. If written notice is not received by Seller pursuant to this
Paragraph 7.1 prior to the expiration of the Inspection Period, then the right
of Purchaser to terminate this Agreement pursuant to this Paragraph 7.1 shall be
waived. If Purchaser terminates this Agreement by written notice to Seller prior
to the expiration of the Inspection Period: (i) Purchaser shall promptly deliver
to Seller copies of all studies, reports and other investigations obtained by
Purchaser in connection with its due diligence during the Inspection Period; and
(ii) the Earnest Money deposited by Purchaser shall be immediately paid to
Purchaser, together with any interest earned thereon, and neither Purchaser nor
Seller shall have any right, obligation or liability under this Agreement,
except for Purchaser's obligation to indemnify Seller and restore the Property,
as more fully set forth in this Paragraph 7.1. Notwithstanding anything
contained herein to the contrary, the terms of this Paragraph 7.1, shall survive
the Closing and the delivery of the Deed and termination of this Agreement.
7.2. Purchaser acknowledges and agrees that it will be purchasing the
Property and the Personal Property based solely upon its inspections and
investigations of the Property and the Personal Property, and that Purchaser
will be purchasing the Property and the Personal Property "AS IS" and "WITH ALL
FAULTS", based upon the condition of the Property and the Personal
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Property as of the date of this Agreement, wear and tear and loss by fire or
other casualty or condemnation excepted. Without limiting the foregoing,
Purchaser acknowledges that, except as may otherwise be specifically set forth
elsewhere in this Agreement, neither Seller nor its consultants, brokers or
agents have made any representations or warranties of any kind upon which
Purchaser is relying as to any matters concerning the Property or the Personal
Property, including, but not limited to, the condition of the land or any
improvements comprising the Property, the existence or non-existence of
"Hazardous Materials" (as hereinafter defined), economic projections or market
studies concerning the Property, any development rights, taxes, bonds,
covenants, conditions and restrictions affecting the Property, water or water
rights, topography, drainage, soil, subsoil of the Property, the utilities
serving the Property or any zoning or building laws, rules or regulations or
"Environmental Laws" (hereinafter defined) affecting the Property. Seller makes
no representation or warranty that the Property complies with Title III of the
Americans with Disabilities Act or any fire code or building code. Purchaser
hereby releases Seller and the Affiliates of Seller from any and all liability
in connection with any claims which Purchaser may have against Seller or the
Affiliates of Seller, and Purchaser hereby agrees not to assert any claims for
contribution, cost recovery or otherwise, against Seller or the Affiliates of
Seller, relating directly or indirectly to the existence of asbestos or
Hazardous Materials on, or environmental conditions of, the Property, whether
known or unknown. As used herein, "Environmental Laws" means all federal, state
and local statutes, codes, regulations, rules, ordinances, orders, standards,
permits, licenses, policies and requirements (including consent decrees,
judicial decisions and administrative orders) relating to the protection,
preservation, remediation or conservation of the environment or worker health or
safety, all as amended or reauthorized, or as hereafter amended or reauthorized,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss 9601 et seq., the
Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. ss 6901 et
seq., the Emergency Planning and Community Right-to-Know Act ("Right-to-Know
Act"), 42 U.S.C. ss 11001 et seq., the Clean Air Act ("CAA"), 42 U.S.C. ss
7401 et seq., the Federal Water Pollution Control Act ("Clean Water Act"), 33
U.S.C. ss 1251 et seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C. ss
2601 et seq., the Safe Drinking Water Act ("Safe Drinking Water Act"), 42 U.S.C.
ss 300f et seq., the Atomic Energy Act ("AEA"), 42 U.S.C. ss 2011 et seq., the
Occupational Safety and Health Act ("OSHA"), 29 U.S.C. ss 651 et seq., and the
Hazardous Materials Transportation Act (the "Transportation Act"), 49 U.S.C. ss
1802 et seq. As used herein, "Hazardous Materials" means: (1) "hazardous
substances," as defined by CERCLA; (2) "hazardous wastes," as defined by RCRA;
(3) any radioactive material including, without limitation, any source, special
nuclear or by-product material, as defined by AEA; (4) asbestos in any form or
condition; (5) polychlorinated biphenyls; and (6) any other material, substance
or waste to which liability or standards of conduct may be imposed under any
Environmental Laws. Notwithstanding anything contained herein to the contrary,
Purchaser's obligations, as more fully set forth in this Paragraph 7.2 shall
survive the Closing and the delivery of the Deed and termination of this
Agreement.
Purchaser's Initials /s/ Seller's Initials /s/
--------- ---------
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7.3. Seller has provided to Purchaser certain unaudited historical financial
information regarding the Property relating to certain periods of time in which
Seller owned the Property. Seller and Purchaser hereby acknowledge that such
information has been provided to Purchaser at Purchaser's request solely as
illustrative material. Seller makes no representation or warranty that such
material is complete or accurate or that Purchaser will achieve similar
financial or other results with respect to the operations of the Property, it
being acknowledged by Purchaser that Seller's operation of the Property and
allocations of revenues or expenses may be vastly different than Purchaser may
be able to attain. Purchaser acknowledges that it is a sophisticated and
experienced purchaser of real estate and further that Purchaser has relied upon
its own investigation and inquiry with respect to the operation of the Property
and releases Seller and the Affiliates of Seller from any liability with respect
to such historical information. Notwithstanding anything contained herein to the
contrary, Purchaser's obligations, as more fully set forth in this Paragraph 7.3
shall survive the Closing and the delivery of the Deed and termination of this
Agree:
Purchaser's Initials /s/ Seller's Initials /s/
-------- ---------
7.4. Seller has provided to Purchaser the following existing report: Final
Report: Environmental Site Evaluation Pursuant to FNMA Multifamily Delegated
Underwriting and Servicing (DUS) Transaction, prepared by Environmental Risk
Consultants, Inc., dated August 29, 1990 ("Existing Report"). Seller makes no
representation or warranty concerning the accuracy or completeness of the
Existing Report. Purchaser hereby releases Seller and the Affiliates of Seller
from any liability whatsoever with respect to the Existing Report, or,
including, without limitation, the matters set forth in the Existing Report, and
the accuracy and/or completeness of the Existing Report. Furthermore, Purchaser
acknowledges that it will be purchasing the Property with all faults disclosed
in the Existing Report. Notwithstanding anything contained herein to the
contrary, Purchaser's obligations, as more fully set forth in this Paragraph 7.4
shall survive the Closing and the delivery of the Deeds and termination of this
Agreement.
Purchaser's Initials /s/ Seller's Initials /s/
----------- ----------
8. CLOSING.
The closing of this transaction (the "Closing") shall be on November 20, 1996
(the "Closing Date"), at the office of Title Insurer, Durham, North Carolina at
which time Seller shall deliver possession of the Property to Purchaser. This
transaction shall be closed through an escrow with Title Insurer, in accordance
with the general provisions of the usual and customary form of deed and money
escrow for similar transactions in North Carolina, or at the option of either
party, the Closing shall be a "New York style" closing at which the Purchaser
shall wire the Purchase Price to Title Insurer on the Closing Date and prior to
the release of the Purchase Price to Seller, Purchaser shall receive the Title
Policy or marked up commitment dated the date of the Closing Date. In the event
of a New York style closing, Seller shall
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deliver to Title Insurer any customary affidavit in connection with a New York
style closing. All closing and escrow fees shall be divided equally between the
parties hereto.
9. CLOSING DOCUMENTS.
9.1. On the Closing Date, Seller and Purchaser shall execute and deliver to
one another a joint closing statement. In addition, Purchaser shall deliver to
Seller the balance of the Purchase Price, an assumption of the documents set
forth in Paragraph 9.2.3 and 9.2.4 and such other documents as may be reasonably
required by the Title Insurer in order to consummate the transaction as set
forth in this Agreement.
9.2. On the Closing Date, Seller shall deliver to Purchaser the following:
9.2.1. the Deed (in the form of Exhibit E attached hereto), subject to
Permitted Exceptions and those Unpermitted Exceptions waived by Purchaser;
9.2.2. a bill of sale conveying the Personal Property (in the form of
Exhibit F attached hereto);
9.2.3. assignment and assumption of intangible property (in the form
attached hereto as Exhibit G), including, without limitation, the service
contracts listed in Exhibit H;
9.2.4. an assignment and assumption of leases and security deposits (in
the form attached hereto as Exhibit I;
9.2.5. non-foreign affidavit (in the form of Exhibit J attached
hereto);
9.2.6. original, and/or copies of, leases affecting the Property in
Seller's possession;
9.2.7. all documents and instruments reasonably required by the Title
Insurer to issue the Title Policy;
9.2.8. possession of the Property to Purchaser;
9.2.9. evidence of the termination of the management agreement;
9.2.10. notice to the tenants of the Property of the transfer of title
and assumption by Purchaser of the landlord's obligation under the leases and
the obligation to refund the security deposits (in the form of Exhibit K);
9.2.11. a certified updated rent roll; and
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9.2.12. a standard termite bond.
10. DEFAULT BY PURCHASER. ALL EARNEST MONEY DEPOSITED INTO THE
ESCROW IS TO SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS
OBLIGATIONS AND UNDERTAKINGS UNDER THIS AGREEMENT. IN THE EVENT OF
A DEFAULT OF THE PURCHASER UNDER THE PROVISIONS OF THIS AGREEMENT,
SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND THE INTEREST
THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE
THE PROPERTY AS SET FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE
AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY
PURCHASER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL TO
DETERMINE. THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES
ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES.
Purchaser's Initials /s/ Seller's Initials /s/
-------- --------
11. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF
SELLER'S DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL
EARNEST MONEY TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND
THIS AGREEMENT SHALL THEN BECOME NULL AND VOID AND OF NO EFFECT
AND THE PARTIES SHALL HAVE NO FURTHER LIABILITY TO EACH OTHER AT
LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY
SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN
PARAGRAPH 7 AND PURCHASER'S RIGHT TO RECEIVE FROM SELLER ITS ACTUAL,
DOCUMENTED THIRD PARTY EXPENSES INCURRED IN THE PERFORMANCE OF ITS
DUE DILIGENCE HEREUNDER AND THE PREPARATION OF THIS AGREEMENT, NOT
TO EXCEED $25,000. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE
CONTRARY, IF SELLER'S DEFAULT IS (1) ITS (AND NOT AN UNRELATED THIRD
PARTY'S) AFFIRMATIVE, WILLFUL ACTION WHICH RESULTS IN THE RECORDING
OF AN ENCUMBRANCE AGAINST THE PROPERTY WITH THE INTENTION TO
PREVENT THE SALE OF THE PROPERTY IN ACCORDANCE WITH THE TERMS
HEREOF AND WHICH GIVES RISE TO PURCHASER'S RIGHT TO TERMINATE THIS
AGREEMENT PURSUANT TO PARAGRAPH 5 HEREOF; (II) ITS FAILURE TO EXPEND
UP TO $100,000 IF (A) SELLER IS ABLE TO BOND OVER, CURE OR REMOVE A
MINOR UNPERMITTED EXCEPTION FOR A COST NOT TO EXCEED $100,000 OR (B)
THE TITLE INSURER IS WILLING TO INSURE OVER A MINOR UNPERMITTED
EXCEPTION FOR A COST NOT TO EXCEED $100,000 IN ACCORDANCE WITH THE
TERMS HEREOF OR (III) ITS WILLFUL REFUSAL TO DELIVER THE DEED, THEN
PURCHASER WILL BE ENTITLED TO SUE FOR SPECIFIC PERFORMANCE.
Purchaser's Initials /s/ Seller's Initials /s/
-------- ----------
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12. PRORATIONS.
12.1. Rents (exclusive of delinquent rents, but including prepaid rents);
refundable security deposits (which will be assigned to and assumed by Purchaser
and credited to Purchaser at Closing); water and other utility charges; fuels;
prepaid operating expenses; incentive fees paid pursuant to any laundry
contract; provided, however, such fee shall only be prorated if actually
received by Seller and only to the extent any fee was not used to improve the
laundry facilities at the Property; real and personal property taxes and other
similar items shall be adjusted ratably as of 11:59 p.m. on the Closing Date,
and credited to the balance of the cash due at Closing. Assessments payable in
installments which are due subsequent to the Closing Date shall be paid by
Purchaser. If the amount of any of the items to be prorated is not then
ascertainable, the adjustments thereof shall be on the basis of the most recent
ascertainable data. All prorations will be final except as to delinquent rent
referred to in Paragraph 12.2 below.
12.2. All basic rent paid following the Closing Date by any tenant of the
Property who is indebted under a lease for basic rent for any period prior to
and including the Closing Date shall be deemed a "Post-Closing Receipt" until
such time as all such indebtedness is paid in full. Within ten (10) days
following each receipt by Purchaser of a Post-Closing Receipt, Purchaser shall
pay such Post-Closing Receipt to Seller. Purchaser shall use its best efforts to
collect all amounts which, upon collection, would constitute Post-Closing
Receipts hereunder. Within 120 days after the Closing Date, Purchaser shall
deliver to Seller a reconciliation statement of Post-Closing Receipts through
the first 90 days after the Closing Date. Upon the delivery of the Post-Closing
Receipts reconciliation, Purchaser shall deliver to Seller any Post-Closing
Receipts owing to Seller and not previously delivered to Seller in accordance
with the terms hereof. Seller retains the right to conduct an audit, at
reasonable times and upon reasonable notice, of Purchaser's books and records to
verify the accuracy of the Post-Closing Receipts reconciliation statement and
upon the verification of additional funds owing to Seller, Purchaser shall pay
to Seller said additional Post-Closing Receipts and the cost of performing
Seller's audit. Paragraph 12.2 of this Agreement shall survive the Closing and
the delivery and recording of the deed.
13. RECORDING. Neither this Agree.ment nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph l0 hereof.
14. ASSIGNMENT. The Purchaser shall not have the right to assign its interest in
this Agreement without the prior written consent of the Seller. Any assignment
or transfer of, or attempt to assign or transfer, Purchaser's interest in this
Agreement shall be an act of default hereunder by Purchaser and subject to the
provisions of Paragraph 10 hereof. Notwithstanding the foregoing, Purchaser may
assign its interest in this Agreement without the consent of Seller to
Cornerstone Realty Income Trust, Inc. provided that Purchaser remains liable for
and the assignee assumes the obligations of Purchaser hereunder.
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<PAGE>
15. BROKER. The parties hereto represent and warrant that no broker commission
or finder fee is due and payable in connection with this transaction other than
to CB Commercial Real Estate Group, Inc. (to be paid by Seller). Seller's
commission to CB Commercial Real Estate Group, Inc. shall only be payable out of
the proceeds of the sale of the Property in the event the transaction set forth
herein closes. Purchaser and Seller shall indemnify, defend and hold the other
party hereto harmless from any claim whatsoever (including without limitation,
reasonable attorney's fees, court costs and costs of appeal) from anyone
claiming by or through the indemnifying party any fee, commission or
compensation on account of this Agreement, its negotiation or the sale hereby
contemplated other than to CB Commercial Real Estate Group, Inc. The
indemnifying party shall undertake its obligations set forth in this Paragraph
15 using attorneys selected by the indemnifying party and reasonably acceptable
to the indemnified party. The provisions of this Paragraph l5 will survive the
Closing and delivery of the Deed.
16. REPRESENTATIONS AND WARRANTIES.
16.1. Any reference herein to Seller's knowledge or notice of any matter or
thing shall only mean such knowledge or notice that has actually been received
by Mike Becker (the "Seller's Representative"), and any representation or
warranty of the Seller is based upon those matters of which the Seller's
Representative has actual knowledge. Any knowledge or notice given, had or
received by any of Seller's agents, servants or employees shall not be imputed
to Seller, the general partner or limited partners of Seller, the subpartners of
the general partner or limited partners of Seller or Seller's Representative.
16.2. Subject to the limitations set forth in Paragraph 16.1, Seller hereby
makes the following representations and warranties, which representations and
warranties are made to Seller's knowledge and which shall, subject to Paragraph
16.4, be remade at Closing: (i) Seller has no knowledge of any pending or
threatened litigation, claim, cause of action or administrative proceeding
concerning the Property; (ii) Seller has the power to execute this Agreement and
consummate the transactions contemplated herein; (iii) the rent roll (which
includes a list of actual security deposits) attached hereto as Exhibit L which
Seller will update as of the Closing Date is accurate as of the date set forth
thereon; (iv) Seller has not received written notice from any governmental
agency that the Property is in violation of any government statute or
regulation; (v) except as may be set forth in the Existing Report, Seller has
not received any notice from any governmental authority having jurisdiction over
the Property of any uncured violation of any Environmental Law with respect to
the Property; and (vi) except as may be set forth on the rent roll, Seller has
not delivered any coupons or similar items to any of the tenants at the Property
which would allow any such tenant to remit to the owner of the Property
following the Closing such coupon or similar item in complete or partial
satisfaction of said tenant's monthly rental obligation.
16.3. Purchaser hereby represents and warrants to Seller that Purchaser has
the full right, power and authority to execute this Agreement and consummate the
transactions contemplated herein.
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<PAGE>
16.4. If at any time after the execution of this Agreement, either Purchaser
or Seller become aware of information which makes a representation and warranty
contained in this Agreement to become untrue in any material respect, said party
shall promptly disclose said information to the other party hereto. Provided the
party making the representation or warranty did not take any deliberate actions
to cause the representation or warranty in question to become untrue in any
material respect, said party shall not be in default under this Agreement and
the sole remedy of the other party shall be to terminate this Agreement.
Notwithstanding anything contained herein to the contrary, if the status of any
of the tenancies changes from the date of the rent roll attached hereto and the
date of the rent roll delivered at Closing, provided the change in status is not
caused by a breach of Seller's covenants contained in Article 16 herein, then
Purchaser shall not have the right to terminate this Agreement or make any claim
for a breach of a representation or warranty hereunder involving the rent roll
or tenancies thereunder. Purchaser and Seller are prohibited from making any
claims against the other party hereto after the Closing with respect to any
breaches of the other party's representations and warranties contained in this
Agreement that the claiming party has actual knowledge of prior to the Closing.
16.5. The parties agree that the representations contained herein shall
survive Closing for a period of sixty (60) days (i.e., the claiming party shall
have no right to make any claims against the other party for a breach of a
representation or warranty after the expiration of sixty (60) days immediately
following Closing).
16.6. Seller covenants to operate and manage the Property in the same manner
that it has managed, maintained and operated the Property during the period of
Seller's ownership, subject to reasonable wear and tear and casualty.
17. LIMITATION OF LIABILITY. Neither Seller, norany of its respective
baneficiaries, shareholders, partners, officers, agents or employees, heirs,
successors or assigns shall have any personal liability of any kind or nature
for or by reason of any maker or thing whatsoever under, in connection with,
arising out of or in any way related to this Agreement and the transactions
contemplated herein, and Purchaser hereby waives for itself and anyone who may
claim by, through or under Purchaser any and all rights to sue or recover on
account of any such alleged personal liability.
18. TIME OF ESSENCE. Time is of the essence of this Agreement.
19. NOTICES. Any notice or demand which either party hereto is required or may
desire to give or deliver to or make upon the other party shall be in writing
and may be personally delivered or given or made by overnight courier such as
Federal Express, by facsimile transmission or made by United States registered
or certified mail addressed as follows:
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TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: James E. Mendelson
(708) 317-4360
(708) 317-4462 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: Cornerstone Realty Group Incorporated
306 East Main Street
Richmond, Virginia 23219
Attention: Mr. Gus Remppies and
Mr. Jay Olander
(804) 643-1761
(804) 782-9302 (FAX)
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<PAGE>
and one copy to:
Zuckerbrod & Taubenfeld
575 Chestnut Street
Cedarhurst, New York 11516
Attention: Harry Taubenfeld, Esq.
(516) 374-3133
(516) 374-3490 (FAX)
and one copy to: Manning, Fulton & Skinner, P.A.
3605 Glenwood Avenue, Suite 500
Raleigh, North Carolina 27612
Attention: Ted Oliver, Esq.
(919) 787-8880
(919) 781-0811 (FAX)
subject to the right of either party to designate a different address for itself
by notice similarly given. Any notice or demand so given shall be deemed to be
delivered or made on the next business day if sent by overnight courier, or the
same day as given if sent by facsimile transmission and received by 5:00 p.m.
Chicago time or on the 4th business day after the same is deposited in the
United States Mail as registered or certified matter, addressed as above
provided, with postage thereon fully prepaid. Any such notice, demand or
document not given, delivered or made by registered or certified mail, by
overnight courier or by facsimile transmission as aforesaid shall be deemed to
be given, delivered or made upon receipt of the same by the party to whom the
same is to be given, delivered or made. Copies of all notices shall be served
upon the Escrow Agent.
20. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two (2)
copies of this Agreement and three (3) copies of the Escrow Agreement and
forward them to Seller for execution, accompanied with the Earnest Money payable
to the Escrow Agent set forth in the Escrow Agreement. Seller will forward one
(1) copy of the executed Agreement to Purchaser and will forward the following
to the Escrow Agent:
(A) Earnest Money;
(B) One (1) fully executed copy of this Agreement; and
(C) Three (3) copies of the Escrow Agreement signed by the parties with a
direction to execute two (2) copies of the Escrow Agreement and deliver a fully
executed copy to each of the Purchaser and the Seller.
21. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the state of North Carolina, except that with respect to the retainage
of the Earnest Money as liquidated damages the laws of the State of Illinois
shall govern.
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<PAGE>
22. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
23. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same instrument.
24. CAPTIONS. Paragraph titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or any provision hereof.
25. AUDIT. Seller will make available to Purchaser such books, accounts and
records necessary for Purchaser to conduct an audit of the Property's preceding
fiscal year. This audit will be conducted solely at Purchaser's expense for the
purpose of satisfying its requirements as a publicly held entity. Seller agrees
to execute and deliver a disclosure letter prepared by the auditors of Purchaser
in substantially the form attached hereto as Exhibit M. The terms of this
Paragraph 25 shall survive the Closing for a period of one (1) year from the
Closing Date.
26. LITIGATION COSTS. In the event of any action or proceeding at law or in
equity between Seller and Purchaser to enforce any provision of this Agreement
or to protect or establish any right or remedy of either party hereunder, the
unsuccessful party to such litigation shall pay the prevailing party all
lidgation costs and expenses, including reasonable attorneys' fees incurred
therein by such prevailing party, and if such prevailing party shall recover
judgment in any such action or proceeding, such costs and expenses (including
such attorneys' fees) shall be included in and as a part of such judgment.
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IN WITNESS WHEREOF, the parties hereto have put their hand and seal as
of the date first set forth above.
PURCHASER:
CORNERSTONE REALTY GROUP
INCORPORATED, a Virginia corporation
By: /s/ S. J. Olander
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Name: S. J. Olander
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Its: Senior Vice President
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SELLER:
DURHAM ASSOCIATES, an Illinois limited
partnership
By: Balcor Realty Associates-VI,
an Illinois general partnership,
the general partner
By: The Balcor Company, a Delaware
corporation, a partner
By: /s/ James E. Mendelson
---------------------------
Name: JAMES E. MENDELSON
--------------------------
Its: AUTHORIZED REPRESENTATIVE
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EXHIBIT 10.3
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 10th day of December, 1996,
between CORNERSTONE REALTY GROUP, INC. or its nominee, (hereinafter called
"Purchaser") and CRENSHAW-SINGLETON PROPERTIES, a Virginia General Partnership,
(hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 Sale of Property. Seller agrees to sell and
convey, and Purchaser agrees to purchase, Seller's real property known as
FRANKLIN TOWERS APARTMENTS located in RICHMOND, VA, with all buildings and
improvements located thereon, as more particularly described in the attached
legal description in Exhibit A including, but not limited to 128 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 all of which is currently on the premises, except as set forth
on the attached Exhibit B (all such real and personal property included in the
sale 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
FOUR MILLION TWO HUNDRED FORTY TWO THOUSAND FIVE HUNDRED SEVENTY
FIVE DOLLARS ($4,242,575.00) as evidenced by cash or cash
equivalent at closing.
2.2 Deposit. $100,000.00 to be placed in escrow (fully
refundable together with any accumulated interest in the event that Purchaser
shall reject the property pursuant to their right under Article VI) with
Commonwealth Land Title Insurance Company as an earnest money deposit which may
be credited against the purchase price or applied as per Article XI below.
ARTICLE III
TITLE MATTERS
3.1 Marketable Title. Seller, shall convey good and
marketable title by General Warranty Deed, subject only to general taxes for the
current year not yet due and payable and utility easements which 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. Purchaser shall
obtain a commitment for Title Insurance, (the commitment). If title is not
marketable, except as stated above in the preceding paragraph, Purchaser shall
give written notice of any defects in title to Seller's counsel within the
Inspection Period (defined in Par. 6.2.2). The 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 1st day of the month 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 shall pay to
Purchaser, in a lump sum at closing, all future monetary concessions which
Seller has given to tenants under leases existing at the time of closing.
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 until the end of the Inspection Period 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
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encroachment or violation, Seller shall have thirty (30) days from the date of
delivery of the Survey (with a commensurate extension of the closing date) to
have the Title Insurer issue its endorsement insuring against damage caused by
such encroachment or violation and to provide evidence thereof to Purchaser, and
if Seller fails to or is unable to have the same insured against within such
thirty (30) day period, Purchaser may elect, on or before the Closing Date, to
(i) terminate this Agreement (in which case the Earnest Money shall be returned
to Purchaser) and neither party shall have any further liability or obligation
to the other hereunder, or (ii) accept the property subject to any such
encroachment or violation.
6.2 Inspection. This Agreement shall be further
subject to and contingent upon Purchaser's satisfactory inspection as follows
herein below.
6.2.1 Preparation for Inspection. At the execution of
this Agreement, Seller shall deliver to Purchaser copies of the following: The
current rent roll for the Property; detailed statements of income and expenses
with respect to the Property for the past two years; the most recent tax bills
for the Property; utility bills for the Property for the twelve (12) months
previous to the date hereof; all contracts, or any part thereof and all
promissory notes secured thereby; all insurance policies applicable to the
Property to include loss runs for the last five (5) years if available; 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 30 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,
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with the state of maintenance and repair of the Property or the rents, occupancy
or expenses of the Property, then notwithstanding anything contained herein to
the contrary, Purchaser shall have the right to terminate this Agreement by
giving written notice to Seller before the end of the Inspection Period, and no
party hereto shall have any further liability to any other party hereto, and all
deposits shall be returned to Purchaser.
6.2.4 "Rent Ready". During the "Inspection Period", both
Seller and Purchaser will inspect an apartment unit at the Property and mutually
agree that said apartment shall be representative of a "rent ready" unit by
which all other units shall be judged for "rent ready" condition at closing. All
vacant apartment units, are to be in a "rent ready" condition (as defined
above), at the time of closing, containing, but not limited to the following
amenities, i.e., carpet, refrigerator, range, garbage disposal, heating,
plumbing and electrical systems.
6.2.5 Condition of Personal Property at Closing. All
personal property included in the sale and all mechanical, electrical, heating,
air conditioning, sewer, water and plumbing systems will be in the same working
order at the time of closing and in the same condition as at the time of the
initial inspection by Purchaser. If Seller fails to make reasonable efforts to
conserve the property, Purchaser shall have the option of waiving such
requirement, in writing, and proceeding to closing, or Purchaser may void this
Agreement and obtain a prompt return of its deposit.
ARTICLE VII
CLOSING
7.1 Closing. Closing will be held within 60 days from
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 General Warranty Deed referred to in
Paragraph 3 hereof and shall also execute, where necessary, and deliver to
Purchaser, the following:
(A) A Bill of Sale, with warranty of title
transferring the personal property (as shown in Schedule B) to Purchaser free of
all liens, charges and encumbrances.
(B) Originals or copies of all signed leases and
rental agreements in effect with tenants of the Property.
(C) All security deposits made by such tenants.
Seller will give the tenants the required notice of such transfer in compliance
with the laws of Virginia.
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(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,
(3) the existing Property telephone number and (4) the business and trade name
as set forth in Par. 1.1.
(I) Assignments of all warranties and
guarantees to the extent such are still in effect and provide Purchaser with
copies of all such warranties and guarantees without limitation for all
appliances, dishwashers, disposals, refrigerators, heating and air conditioning
units, washers and dryers.
(J) 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.
(K) 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.
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(L) 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.
(M) Affidavit that Seller has no actual
knowledge of the presence of asbestos and/or any other hazardous material at the
Property.
(N) 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.
(O) A notice letter to all the residents of the
apartment complex as to change of ownership in the form prepared by the
Purchaser.
(P) 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.
(Q) A representation letter as normally required
by auditors for a public company in the form attached hereto as Exhibit C. This
clause shall survive closing for one year.
7.3 Purchaser's Deliveries. At closing and
contemporaneously with the Seller's compliance with the provisions 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,
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executed and delivered by the Purchaser and is a valid and binding agreement of
Purchaser, and
(ii) Purchaser has complete unrestricted
power to buy the Property from the Seller and to execute any documents required
to effectuate the transfer.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations of the Parties. Seller warrants
(which warranties shall not survive settlement unless designated to the
contrary) that as of the date of closing hereof:
(A) That Seller, is the owner in fee simple of
the Property and has the power to convey same.
(B) That Seller is not subject to any other
agreements or arrangements, with the exception of those contained in any
existing mortgage documents which would prevent Seller from selling the Property
to Purchaser. This warranty shall survive for one year following closing.
(C) All necessary action has been taken by
Seller to authorize the execution of this Agreement and the performance of the
obligations contemplated hereunder, which are not excluded elsewhere in existing
mortgage documents. This warranty shall survive for one year following closing.
(D) Seller has no actual knowledge and has not
been advised in writing that it is in default under any lease, rental agreement
service or equipment contract, or mortgage or other encumbrances relating to the
Property. This warranty shall survive for one year the following closing.
(E) Seller has no actual knowledge of any
patent or latent defect in the Property or any part thereof. This warranty
shall survive for one year following closing.
(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.
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(I) a. Seller has no actual knowledge that any
part of the Property or the operation of the Property, is in violation or may
violate any governmental statute, regulation, ordinance or building code or of
any private restriction, that any governmental authority requires any work to be
done on or affecting the Property, or that any governmental authority has
expressed an intent to condemn or to make special improvements for the benefit
of the Property or any part thereof. This paragraph shall apply only to the
period preceding closing.
b. Purchaser acknowledges that it is not
relying on Seller's compliance with the Americans with Disability Act.
(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. This warranty shall survive for one year
following closing.
(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
will furnish to Purchaser an affidavit confirming same.
(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.
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.
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8.3 Breach of Representations, Warranties and
Covenants. Notwithstanding the provisions of 8.2 above, Seller shall indemnify
Purchaser for all reasonable costs incurred as a result of the failure of any of
Seller's representations, warranties or covenants contained herein to remain
true as of the date of closing.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 Property Damage. If, prior to closing, any part of
the Property is damaged by fire or other casualty, Seller shall repair such
damage before the date provided herein for closing. If such damage cannot be
repaired by such time, this Agreement may be canceled at the option of the
Purchaser. In the event of cancellation as aforesaid, this Agreement shall
become null and void and the parties shall be released and all payments made
shall be returned. Should Purchaser elect to carry out this Agreement despite
such damage Seller shall assign to Purchaser all insurance proceeds, and any
deductible, arising from such damage and will compensate Purchaser for lost rent
collections to the extent of insurance proceeds received. Seller shall promptly
notify Purchaser in writing upon the occurrence of any such damage.
9.2 Condemnation. In the event of any actual or
threatened taking, pursuant to the power of eminent domain, all or any part
thereof, or any actual or proposed sale in lieu thereof, the Seller shall give
written notice thereof to the Purchaser promptly after Seller learns or receives
notice thereof. Upon a taking of a material part of the Property (any part of
the building or more than 5% of the parking area), Purchaser may elect to either
(a) terminate this Agreement, in which event the Deposit shall be immediately
returned to Purchaser and all other rights and obligations of the parties
hereunder shall terminate immediately, or (b) to waive its right to terminate
this Agreement and proceed to closing, in which event all proceeds, awards and
other payments arising out of such condemnation or sale (actual or threatened)
shall be paid to the Purchaser at closing, if such payment has been received or
Seller shall assign to Purchaser the rights to such payments.
9.3 Risk of Loss. Prior to closing, all risks of loss
or damage by every casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 Commission. Purchaser agrees to pay a brokerage
fee to First Union Mortgage Corporation, Richmond office, pursuant to a separate
agreement between Purchaser and Broker. Said brokerage fee shall be deemed
earned if, and only if,
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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 shall not be obligated for any brokerage fees to any
broker, and Purchaser agrees to hold Seller 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,
may cancel this Agreement and obtain a prompt return of the deposit. In
addition, the Seller shall pay to the Purchaser $100,000 as liquidated damages,
recognizing that the exact damages are difficult to assess and that there is an
obligation to reimburse Purchaser for its time and expenses., in which case this
Agreement shall be terminated and the parties released from all obligations
hereunder.
11.3 Purchaser's Default. Upon Purchaser's default, this
Agreement shall be terminated and both parties released from all obligations
hereunder, and the deposit shall be retained by the Seller as liquidated
damages. Seller shall have no other remedy against Purchaser in the event of
Purchaser's default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement sets forth the
entire understanding between the parties; it supersedes all previous agreements
and representations which are deemed merged herein and may not be modified
except in writing.
12.2 Assignment. Purchaser may assign this Agreement
without the consent of Seller.
12.3 Severability. If any provision, sentence, phrase or
word of this Agreement or the application thereof to any person or circumstance
shall be held invalid, the remainder of this Agreement or the application of
such provision, sentence, phrase, or word to persons or circumstances, other
than those as to which
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it is held invalid, shall remain in full force and effect.
12.4 Binding Effect. The parties to the Agreement
mutually agree that it shall be binding upon and inure to the benefit of their
respective heirs, representatives, successors in interest and assigns.
12.5 Controlling Law. It is the intent of the parties
hereto that all questions with respect to the construction of this Agreement and
the rights and liabilities of the parties shall be determined in accordance with
the provisions of the laws of the State set forth in Par. 1.1.
12.6 Counterparts. To facilitate execution, this Agreement
may be executed in as many counterparts as may be required. It shall not be
necessary that the signature on behalf of both parties hereto appear in each
counterpart hereof, and it shall be sufficient that the signature on behalf of
both parties hereto appear on one or more such counterparts. All counterparts
shall collectively constitute a single contract.
12.7 Incorporation by Reference. All of the Exhibits
referred to herein and/or attached hereto shall be deemed to constitute a part
of the Agreement.
12.8 Headings. The headings of the Articles and sections
hereof are inserted for convenience only and shall not be deemed to constitute a
part of the Agreement.
12.9 Construction of Contract. Each party hereto have
reviewed and revised (or requested revisions of) this Agreement, and therefore
the normal rule of construction that any ambiguities are to be resolved against
a particular party shall not be applicable in the construction and
interpretation of this Contract or any amendments or exhibits hereto.
ARTICLE XIII
NOTICE
13.1 Notice. All notices required or permitted to be given
under this Agreement shall be in writing and shall be sent or delivered to the
address set forth below (or such other address as may be hereafter specified in
writing):
To Seller: Crenshaw-Singleton Properties
1011 East Main Street
Richmond, CA 23219
With a copy to Seller's Attorneys:
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To Purchaser: Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax No. 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 No. 516-374-3490
Additional copy to: Steve Delaney, Esq.
LeClair Ryan
707 East Main Street - 11th Fl.
Richmond, VA 23219
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 fax. Notices sent in any other
manner shall be deemed given only when actually delivered at the specified
address.
ARTICLE XIV
LIKE-KIND EXCHANGE
14.1 Like-Kind Exchange. Seller may wish to effect a tax
free exchange pursuant to Section 1031 of the Internal Revenue Service Code of
1986 (the "Tax Code") in connection with Seller's Conveyance of the Property to
Purchaser. Consequently, if prior to Settlement, Seller designates a property or
properties (collectively the "Exchange Property"), Purchaser will use reasonable
efforts to contract to acquire the Exchange Property for use in an exchange with
Seller. Purchaser's obligation to contract to purchase the Exchange Property is
specifically contingent upon (1) the conditions precedent set forth in paragraph
6.1 being satisfied, (ii) the costs of acquisition (including apportionments
being equal to or less than the Purchase Price (including apportionments) for
the Property, or if in excess of such Purchase Price, Seller's commitment and
agreement to pay such excess in cash (the "Excess") at the closing of the
acquisition of the Exchange Property, (iii) Seller's approval of the Exchange
Property, (iv) Purchaser not becoming subject to any additional liability in
connection with such exchange, (v) Purchaser assigning the contract to acquire
the Exchange Property to a qualified Intermediary of the excess, if any, of the
Purchase Price for the Property plus apportionments (over the purchase price for
the Exchange Property plus acquisition costs and apportionments). Upon request
of Seller, Purchaser will execute an appropriate escrow agreement
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deemed necessary by Seller's counsel to obtain for Seller the tax benefits
allowed under Section 1031 of the Internal Revenue Code of 1986 (Purchaser not
to bear any such tax benefits), provided that such escrow agreement clearly
limits Purchaser's obligations and liability to the delivery of the proceeds of
the Purchase Price to the qualified Intermediary.
14.2 Hold Harmless. At closing, Seller will deliver to
Purchaser an agreement to hold the Purchaser harmless as to any claims as a
result of the Like-Kind Exchange set forth in paragraph 14.1 and an opinion of
counsel as to the validity of the transaction.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused
this Agreement to be executed this day and date first written above.
SELLER:
CRENSHAW-SINGLETON PROPERTIES
By: /s/ [illegible]
____________________________
Its: Managing Partner
___________________________
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. Olander
____________________________
Its: Senior Vice President
___________________________
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EXHIBIT 10.4
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 13 day of November 1996,
between CORNERSTONE REALTY GROUP, INC., or its nominee (hereinafter called
"Purchaser"), and ROBERT F. ANDERSON, TRUSTEE IN REORGANIZATION FOR WINDSOR
PLANTATION 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, certain real property owned by the bankruptcy estate of
Windsor Plantation Limited Partnership known as THE ARBORS AT WINDSOR LAKE
located in COLUMBIA, SC, with all buildings and improvements located thereon, as
more particularly described in the attached legal description in Exhibit A
including, but not limited to 228 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 TEN MILLION EIGHT
HUNDRED SEVENTY FIVE THOUSAND ($10,875,000) DOLLARS as evidenced by cash or cash
equivalent at closing.
2.2 Deposit. $100,000 to be placed in escrow at the end of the
"Inspection Period" described in Article VI below. Said deposit shall be placed
in escrow with Lawyers Title Insurance Corporation or its authorized agent as an
earnest money deposit which may be credited against the purchase price or
applied as per Article XI below.
ARTICLE III
<PAGE>
TITLE MATTERS
3.1 Marketable Title. Seller shall convey good and marketable title,
free and clear of all liens, subject only 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.
(A) Title shall be free from any and all liens or mortgages and
Seller shall be responsible for any actions necessary to deliver such free
title.
3.2 Sale Free and Clear of Liens. Sale shall be made pursuant to an
order of the Bankruptcy Court, ordering the sale of the property free and clear
of liens, subject to a current survey, a flood zone certification letter and a
Surveyor's Certification letter.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following shall be prorated, on
a calendar-month basis, to the 1st day of the month 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.
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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ARTICLE V
UPSET BID
5.1 Rejection. It is understood that in the event the offer of
Purchaser herein is the first offer accepted by Seller and Purchaser commences
its due diligence, as set forth hereinafter in Article VII, and subsequent
thereto, the Court shall accept an offer of a third party (upset bid) no later
than December 9, 1996, after which no further bids can be accepted then in that
event the Seller shall be obligated to pay Purchaser $25,000 as liquidated
damages, subject to further review by the Bankruptcy Court. The parties
recognize that Purchaser's actual damages are potentially significant and
difficult to quantify.
ARTICLE VI
POSSESSION OF THE PROPERTY
6.1 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 VII
CONDITIONS PRECEDENT TO CLOSING
7.1 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 fifteen
(15) days in which to review the reports set forth herein and exercise its right
to reject the Property based thereon or the right hereunder shall be deemed
waived.
(B) The Purchaser's access to Seller's records and documents as set
forth in 7.2 below.
(C) On the condition that there have been no material or adverse
changes to the property or leases.
(D) 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
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violation of or encroachments upon any recorded building lines, restrictions or
easements affecting the Property. If the Survey discloses any such encroachment
or violation, Seller shall have thirty (30) days from the date of delivery of
the Survey (with a commensurate extension of the closing date) to have the Title
Insurer issue its endorsement insuring against damage caused by such
encroachment or violation and to provide evidence thereof to Purchaser, and if
Seller fails to or is unable to have the same insured against within such thirty
(30) day period, Purchaser may elect, on or before the Closing Date, to (i)
terminate this Agreement (in which case the Earnest Money shall be returned to
Purchaser) and neither party shall have any further liability or obligation to
the other hereunder, or (ii) accept the property subject to any such
encroachment or violation.
7.2 Inspection. This Agreement shall be further subject to and contingent upon
Purchaser's satisfactory inspection as follows herein below.
7.2.1 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; the most recent tax bills for the Property; utility bills for the
Property for the twelve (12) months previous to the date hereof; all contract,
mortgages, and other documents creating liens or security interests on the
Property, or any part thereof and all promissory notes secured thereby; all
insurance policies applicable to the Property to include loss runs for the last
five (5) years; and 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 his knowledge and belief.
Seller agrees to make any and all information relevant to the property which is
in the possession or control of Seller, reasonably available for Purchaser's
review. Purchaser recognizes that Seller is Trustee in Reorganization and
therefore cannot guarantee the accuracy of any financial information generated
prior to his appointment.
7.2.2 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
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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 7. 1(A)
above.
7.2.3 Right of Termination During Inspection Period. Purchaser shall also be
permitted to review all original leases, expense records, tenant cards and
occupancy data available. If Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller before the end of
the Inspection Period.
7.2.4 "Rent Ready". During the "Inspection Period", both Seller and Purchaser
will inspect an apartment unit at the Property and mutually agree that said
apartment shall be representative of a "rent ready" unit by which all other
units shall be judged for "rent ready" condition at closing. All vacant
apartment units, are to be in a "rent ready" condition (as defined above), at
the time of closing, containing, but not limited to the following amenities,
i.e., carpet, refrigerator, range, heating, plumbing and electrical systems.
7.2.5 Condition of Personal Property at Closing. All personal property included
in the sale and all mechanical, electrical, heating, air conditioning, sewer,
water and plumbing systems will be in the same working order at the time of
closing and in the same condition as at the time of the initial inspection by
Purchaser. If Seller fails to make reasonable efforts to conserve the property,
Purchaser shall have the option of waiving such requirement, in writing, and
proceeding to closing, or Purchaser may void this Agreement and obtain a prompt
return of its deposit
ARTICLE VIII
CLOSING
8.1 Closing. Closing will be held on or about JANUARY 5, 1997.
at such place and at such time as the parties may agree.
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8.2 Seller's Deliveries. At closing, Seller shall execute and deliver to
Purchaser the Deed referred in Paragraph 3 hereof and shall also execute, where
necessary, and deliver to Purchaser, the following:
(A) A Bill of Sale, with warranty of title transferring the personal property
(as shown in Schedule B) to Purchaser free of all liens, charges and
encumbrances.
(B) Originals or copies of all signed leases and rental agreements in effect
with tenants of the Property.
(C) All security deposits made by such tenants. Purchaser will give the tenants
the required notice of such transfer in compliance with the laws of SOUTH
CAROLINA.
(D) 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.
(E) 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.
(F) 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 Paragraph
1.1.
(G) 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
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limitation for all appliances, dishwashers, disposals, refrigerators, heating
and air conditioning units, washers and dryers.
(H) Evidence satisfactory to Purchaser that all water, sewer, gas, electric,
telephone, and drainage facilities and all other utilities required by law or by
the normal use and operation of the Property are and at the time of closing will
be installed to the property line, are and at the time of closing will be
connected pursuant to valid permits, and are and at the time of closing adequate
to service the Property and to permit full compliance with all requirements of
law and nominal usage of the Property by the tenants thereof and their licensees
and invitees.
(I) 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.
(J) Affidavit that Seller has no actual knowledge of the presence of asbestos
and/or any other hazardous material at the Property.
(K) 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.
(L) A notice letter to all the residents of the apartment complex as to change
of ownership in the form prepared by the Purchaser.
(M) 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.
(N) An Order of the United States Bankruptcy Court for the District of South
Carolina approving said sale and authorizing the sale of the Property free and
clear of all liens and encumbrances.
8.3 Purchaser's Deliveries. At closing and contemporaneously with the Seller's
compliance with the provisions of Section 8.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price, adjusted for the
prorations herein provided for in Article IV.
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(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 IX
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1 Representations of the Parties. Seller is Trustee in Bankruptcy for Windsor
Plantation Limited Partnership, record owner of the property. The parties
recognize that the sale of said property and this contract, are specifically
made contingent upon the approval by the Bankruptcy Court of this contract,
after notice and an opportunity for hearing to all creditors. Upon such notice,
and approval by the court, the Bankruptcy Court may order said sale free and
clear of all liens and encumbrances, allowing the Trustee to transfer title free
and clear of all encumbrances of any kind whatever. Seller's warranties are
limited to the conditions of sale as approved by the United States Bankruptcy
Court for the District of South Carolina, and those warranties contained in
paragraph 9.2 herein.
9.2 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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ARTICLE X
CONDEMNATION; RISK OF LOSS
10.1 Property Damage. If, prior to closing, any part of the Property is damaged
by fire or other casualty, Seller shall repair such damage before the date
provided herein for closing. If such damage cannot be repaired by such time,
this Agreement may be canceled at the option of the Purchaser. In the event of
cancellation as aforesaid, this Agreement shall become null and void and the
parties shall be released and all payments made shall be returned. Should
Purchaser elect to carry out this Agreement despite such damage Seller shall
assign to Purchaser all insurance proceeds arising from such damage and will
compensate Purchaser for lost rent collections to the extent of insurance
proceeds received. Seller shall promptly notify Purchaser in writing upon the
occurrence of any such damage.
10.2 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.
10.3 Risk of Loss. Prior to closing, all risks of loss or damage by every
casualty shall be borne by the Seller.
ARTICLE XI
BROKER'S COMMISSION
11.1 Commission. Seller agrees to pay a brokerage fee to , and
Purchaser agrees to pay a brokerage fee to Evans, Rivers, pursuant to separate
agreements between the parties. Said payment of Seller's brokerage fee is
subject to appointment of said
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broker by the Bankruptcy Court, and approval of such fees by the Court. Said
brokerage fees shall be deemed earned if, and only if, settlement occurs
hereunder, and shall not be deemed earned even if Purchaser and/or Seller
wrongfully fail(s) to consummate the purchase and sale herein contemplated.
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 XII
DEFAULT
12.1 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.
12.2 Seller's Default. Upon Seller's default, the Purchaser is entitled to
cancel this Agreement and obtain a prompt return of the deposit, in which case
this Agreement shall be terminated and the parties released from all obligations
hereunder, or the Purchaser may waive such defaults and proceed to settlement.
Seller's default shall be defined as Seller's failure to submit this agreement
to the United States Bankruptcy Court for the District of South Carolina,
seeking approval of the same, within 30 days after this agreement is fully
executed.
12.3 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 XIII
MISCELLANEOUS PROVISIONS
13.1 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.
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13.2 Assignment. Purchaser may assign this Agreement without the consent of
Seller.
13.3 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.
13.4 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.
13.5 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 of South Carolina.
13.6 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.
13.7 Incorporation by Reference. All of the Exhibits referred to herein and/or
attached hereto shall be deemed to constitute a part of the Agreement.
13.8 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.
13.9 Construction of Contract. Each party hereto has 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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ARTICLE XIV
NOTICE
14.1 Notice. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: Robert F. Anderson, Trustee
P.O. Box 76
Columbia, SC 29202
With a copy to Dana Wilkinson, Esq.
Seller's Attorneys: Anderson & Associates, P.A.
P.O. Box 76, 208 Candi Lane, Suite B
Columbia, SC 29202
To Purchaser: S. J. Olander
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
With a copy to Harry S. Taubenfeld, Esq.
Purchaser's Attorneys: Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
14.2 Delivery of Notice. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier. Notices sent in any other manner shall be deemed
given only when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
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SELLER:
By:________________________________
Its:_______________________________
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. Olander
--------------------------------
Its: SENIOR VICE PRESIDENT
-------------------------------
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EXHIBIT 10.5
EARNEST MONEY CONTRACT
by and between
CHARLESTON WESTCHASE ASSOCIATES,
A LIMITED PARTNERSHIP,
as Seller
and
CORNERSTONE REALTY GROUP INCORPORATED,
as Purchaser
Premises: Westchase Apartments
Charleston, South Carolina
Date: November 22, 1996
<PAGE>
TABLE OF CONTENTS
Page
Parties 1
ARTICLE I
Property
Section 1.01. Property 1
ARTICLE II
Purchase Price
Section 2.01. Purchase Price 2
Section 2.02. Earnest Money 2
ARTICLE III
Review Items
Section 3.01. Survey 3
Section 3.02. Title Commitment 3
Section 3.03. Other Review Items 3
Section 3.04. Inspection 5
Section 3.05. Insurance 6
Section 3.06. Indemnity 6
ARTICLE IV
Review Period
Section 4.01. Review Period 7
Section 4:02. Purchaser's Notice 7
Section 4.03. Seller's Notice 8
Section 4.04. Termination 8
(i)
ARTICLE V
Good and Indefeasible Title
Page
Section 5.01. Conveyance 8
Section 5.02. Owner Policy 9
ARTICLE VI
Closing
Section 6.01. Closing 10
Section 6.02. Seller's Obligations 10
Section 6.03. Purchaser's Obligations 11
Section 6.04. Possession 12
ARTICLE VII
Closing Adjustments
Section 7.01. General Prorations 12
Section 7.02. Specific Prorations 13
Section 7.03. Transaction Costs 14
Section 7.04. Brokerage Commissions 15
Section 7.05. Survival 15
ARTICLE VIII
Termination and Remedies
Section 8.01. Purchaser's Default 15
Section 8.02. Seller's Default 16
Section 8.03. Survival 16
(ii)
ARTICLE IX
Representations, Warranties and Covenants
Section 9.01. Disclaimer 17
Section 9.02. Seller's Representations 18
Section 9.03. Purchaser's Representations 19
Section 9.04. Discovery 20
Section 9.05. Operating Covenants 21
ARTICLE X
Notices
Section 10.01. Notices 22
ARTICLE XI
Risk of Loss
Section 11.01. Minor Damage 24
Section 11.02. Major Damage 24
Section 11.03. Risk of Loss 25
ARTICLE XII
Miscellaneous
Section 12.01. Entire Agreement 25
Section 12.02. No Recordation 25
Section 12.03. No Rule of Construction 25
Section 12.04. Multiple Counterparts;
Governing Law 25
Section 12.05. Attorneys' Fees 25
Section 12.06. Assignment 26
Section 12.07. Interpretation 26
(iii)
Section 12.08. Exhibits and Schedules 27
Section 12.09. Modifications; Reporting Person 27
Section 12.10. Time of Essence 28
Section 12.11. No Publicity 28
Section 12.12. Partial Invalidity 28
Section 12.13. Facsimile Signatures 28
Section 12.14. Section 1031 Exchange 29
Section 12.15. Investment Committee 29
Section 12.16. Purchasers Investment Committee 29
EXHIBITS
Exhibit A - Legal Description
Exhibit B - form of Deed
Exhibit C - form of Assignment of Leases
Exhibit D - form of Bill of Sale
Exhibit E - form of Closing Memorandum
Exhibit F - form of FIRPTA Affidavit
Exhibit G - form of Tenant Letter
Exhibit H - form of Termite Bond
Exhibit I - form of Representation Letter
Schedule 1 - schedule of Personal Property
Schedule 2 - schedule of Property Contracts
(iv)
EARNEST MONEY CONTRACT
THE STATE OF SOUTH CAROLINA (SECTION)
(SECTION) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF CHARLESTON (SECTION)
THIS EARNEST MONEY CONTRACT (the "Contract") is made and entered into as of this
22nd day of November, 1996 (the "Effective Date") by and between CHARLESTON
WESTCHASE ASSOCIATES, A LIMITED PARTNERSHIP, a South Carolina limited
partnership ("Seller"), whose business address is 7557 Rambler Road, Suite 1200,
Dallas, Texas, 75231 and CORNERSTONE REALTY GROUP INCORPORATED, a Virginia
corporation ("Purchaser"), whose business address is 306 East Main Street,
Richmond, Virginia 23219.
ARTICLE I
Property
Section 1.01. Property. Seller hereby agrees to sell and convey to
Purchaser, and Purchaser hereby agrees to purchase from Seller, upon the terms
and conditions set forth herein, the following properties and assets:
(a) That certain tract of real property located in Charleston
County, South Carolina, more particularly described in Exhibit A attached hereto
and made a part hereof for all purposes, together with all and singular the
rights, privileges, tenements, heriditaments, easements, appendages and
appurtenances pertaining to such real property (all of the foregoing being
hereinafter collectively referred to as the "Real Property").
(b) All improvements, structures and fixtures with respect to
and situated on the Real Property, including without limitation that certain 352
unit apartment complex and related surface parking areas located on the Real
Property, commonly known as the "Westchase Apartments" (all of the foregoing
being hereinafter collectively referred to as the "Improvements").
(c) All of Seller's right, title and interest, if any, in and to
all leases and occupancy agreements and all amendments, modifications and letter
agreements modifying or affecting said leases and occupancy agreements covering
all or any portion of the Real Property and/or the Improvements (the
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"Leases"), and all contract rights, licenses, condemnation proceeds or awards
now pending or hereafter made with respect to the Real Property and/or the
Improvements and all other intangible rights which are owned by Seller, if any,
and which are appurtenant to the Real Property and/or the Improvements,
including all right, title and interest of Seller, if any, in and to the name
"Westchase Apartments" (all of the foregoing being hereinafter collectively
referred to as the "Intangible Property").
(d) All equipment, machinery, appliances, furniture,
furnishings, heating, ventilation and air conditioning systems and equipment and
all other tangible personal property now owned by Seller, if any, and situated
on the Real Property and used or to be used in connection therewith or with the
Improvements as listed on Schedule 1 attached hereto (all of the foregoing being
hereinafter collectively referred to as the "Personal Property").
All of the foregoing items purchased under this Contract shall be hereinafter
sometimes referred to collectively as the "Property".
ARTICLE II
Purchase Price
Section 2.01. Purchase Price. The purchase price ("Purchase Price") to
be paid by Purchaser to Seller shall be ELEVEN MILLION AND NO/100 DOLLARS
($11,000,000.00). The Purchase Price shall be paid by Purchaser to Seller at the
Closing (as hereinafter defined) in cash or immediately available wire
transferred funds.
Section 2.02. Earnest Money. On or before the second (2nd) business day
following the Effective Date, Purchaser shall deposit the amount of ONE HUNDRED
THOUSAND AND NO/100 DOLLARS ($100,000.00) as earnest money hereunder (such
amount, together with all interest accrued thereon, is collectively referred to
as the "Earnest Money Deposit"), with Lawyers Title Insurance Company (the
"Title Company") whose business address is c/o Eastern Title Agency, Inc., 1812
Lincoln Street, 2nd Floor, Columbia, South Carolina 29201 Attention: Michael W.
Tighe. The Earnest Money Deposit shall, at the option of Purchaser, be in the
form of cash, certified check, cashier's check or other immediately available
funds. The Title Company shall hold The Earnest Money Deposit in an
interest-bearing
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account at a bank designated by Seller, with all interest being paid to
Purchaser or Seller, as the case may be, in accordance with the terms of this
Contract. At the Closing, the Earnest Money Deposit shall be applied toward the
Purchase Price, but otherwise the Earnest Money Deposit shall be held by the
Title Company, returned to Purchaser, or delivered to Seller, in accordance with
the terms of this Contract.
ARTICLE III
Review Items
Section 3.01. Survey. Seller agrees to deliver, within ten (10) days
from the Effective Date, one (1) print of Seller's most recent survey of the
Property. Purchaser has the right, at Purchaser's expense, to obtain a new or
recertified survey of the Property (the "Survey"). Purchaser may instruct the
surveyor to (a) locate all easements, rights-of-way and building lines on the
Real Property (identified by recording data, if applicable); (b) show the
location and size of all Improvements on the Real Property and streets, roads
and utility lines on or immediately adjacent to the Real Property; (c) reflect
any encroachments and protrusions; (d) certify, if applicable, that no portion
of the Real Property lies within the 100 year flood plain or within a flood
prone area; (e) include an appropriate metes and bounds description of the Real
Property; and (f) include a certification by the surveyor to Seller, Purchaser
and the Title Company in form reasonably satisfactory to Purchaser and the Title
Company. Subject to approval of the Survey by Seller. Purchaser and the Title
Company, the metes and bounds description of the Real Property contained in the
Survey, if applicable, shall be the description of the Real Property used in the
Deed (as hereinafter defined).
Section 3.02. Title Commitment. Seller agrees to deliver, within ten
(10) days from the Effective Date, to Purchaser a current commitment for an ALTA
Owner's Policy of Title Insurance issued by the Title Company (the "Title
Commitment"), which sets forth the state of title of the Property and all
exceptions, including easements, restrictions, rights-of-way, covenants,
reservations or other conditions or matters affecting the Property which would
appear in an owner's policy of title insurance, together with legible copies of
such easements, restrictions, rights-of-way, covenants, reservations or other
matters.
Section 3.03. Other Review Items. In addition to the Survey and the
Title Commitment, Seller will, to the extent available to and currently in
Seller's possession, make available to Purchaser the following:
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(a) Copies of any hazardous materials reports in Seller's
possession prepared for Seller during the thirty (30) months preceding the
Effective Date. By providing copies of hazardous materials reports to Purchaser,
Seller is not making any representations or warranties, implied or otherwise, as
to the accuracy of the factual information provided or the conclusions formed by
the consultants who prepared the hazardous materials reports. Further, Seller is
making no representations or warranties as to the skill and care taken by the
consultant in preparing the hazardous materials reports. Seller will not be
responsible for conditions or consequences arising from relevant facts that were
concealed, withheld, or not fully disclosed by the consultant, any regulatory or
governmental agency, or from persons interviewed as part of the preparation of
the hazardous materials report. Purchaser also acknowledges that the facts and
conditions referenced in the hazardous materials report may change over time and
the conclusions and recommendations set forth therein are applicable only to the
facts and conditions as described in the hazardous materials report. Purchaser
should use good faith efforts in determining whether the hazardous materials
reports are accurate.
(b) Operating statements for the Property in the format
customarily prepared for Seller for the calendar year prior to the Effective
Date and the most recently available interim period, including, without
limitation, records of income, expenses, and capital expenditures.
(c) Copies of all management, service, maintenance and other
contracts in force with respect to the Property (collectively, the "Property
Contracts") as listed on Schedule 2 attached hereto.
(d) Copies of all Leases and other occupancy agreements in force
with respect to the Property.
(e) Copies of the ad valorem and personal property tax
statements covering the Property for the current tax year (if available) and the
tax year immediately preceding the Effective Date.
(f) An original rent roll for the Property for the month
preceding the Effective Date in the format customarily prepared for Seller and
showing tenant names, vacant premises, expiration dates of all Leases, and a
current schedule of rent for each lease.
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(g) A current schedule of all refundable security and other
tenant deposits paid by tenants at the Property under existing Leases.
(h) Copies of all insurance loss claims relating to the Property
for the thirty (30) months preceding the Effective Date.
(i) Seller has been advised by Purchaser that Purchaser is a
public entity and that it is required to furnish statements to the Securities
and Exchange Commission in connection with this acquisition. In the event
Purchaser closes and purchases the Property, Seller agrees to make the
information described in Section 3.03(a)-(h) above available for Purchaser to
audit the last twelve (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. This Section 3.03(i) shall survive Closing.
Seller will instruct Seller's property manager to cooperate fully with Purchaser
with respect to the foregoing review items subject to the provisions of this
Section 3.03. Notwithstanding the foregoing, Purchaser shall have no right to
inspect (i) any internal memoranda or reports prepared by or on behalf of Seller
which Seller deems confidential, nor (ii) any appraisals of the Property
prepared by or on behalf of Seller. SUBJECT TO SECTION 9.02 HEREOF, PURCHASER
ACKNOWLEDGES AND AGREES THAT ANY AND ALL REPORTS, AGREEMENTS, LEASES AND OTHER
INFORMATION DELIVERED OR OTHERWISE MADE AVAILABLE TO PURCHASER UNDER THIS
CONTRACT OR OTHERWISE HAVE BEEN DELIVERED AND MADE AVAILABLE BY OR ON SELLER'S
BEHALF WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, BY
SELLER - IT BEING AGREED THAT SELLER DOES NOT VERIFY THE ACCURACY THEREOF. In
the event this Contract shall terminate for any or no reason, Purchaser agrees
to return to Seller, no later than two (2) days after request, all documents and
other materials delivered to Purchaser hereunder.
Section 3.04. Inspection. Purchaser shall have the right, upon
reasonable notice to Seller, subject to the rights of tenants in possession, if
any, pursuant to the Leases, to conduct on-site physical inspections of the
Property (including, without limitation, termite inspections and environmental
assessments) during the Review Period (hereinafter defined), including, without
limitation, the right to enter and inspect all portions of the Property and all
of Seller's books and records at the Property relating solely to the property.
Seller hereby directs the manager of the Property to reasonably cooperate with
Purchaser in the exercise of Purchaser's inspection rights, subject to the terms
of this
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Contract. A representative of Seller shall have the right to be present during
any physical tests, inspections and investigations at or about the Property.
Purchaser has no right to make any alterations to the Property without Seller's
prior written consent. Purchaser shall, at Purchaser's sole expense, promptly
fill and compact any holes and otherwise restore any damage to the Property
caused as a result of any test, inspection or investigation by or on Purchaser's
behalf. Any soil, waste or materials removed during any environmental testing
must be properly disposed of by Purchaser at Purchaser's sole cost, even though
Purchaser may elect to terminate the Contract. Purchaser shall not permit any
liens or encumbrances to arise against the Property in connection with or as a
result of such inspections, studies or investigations. The foregoing obligations
shall survive the termination of this Contract.
Section 3.05. Insurance. Purchaser has furnished Seller with evidence
acceptable to Seller that Purchaser maintains public liability insurance with
limits of at least $1,000,000 for bodily or personal injury or death, property
damage insurance in an amount of at least $500,000, and contractual liability
insurance with respect to Purchaser's indemnification obligations under Section
3.06(c) with respect to damage to the Property and/or injury to persons or
property. Purchaser agrees to maintain such insurance policies in effect for a
period of at least six (6) months following the earlier to occur of the Closing
or the date of termination of this Contract.
Section 3.06. Indemnity. Purchaser shall (a) hold any and all materials
delivered to Purchaser under this Contract in confidence subject to the terms
hereof; (b) not unreasonably interfere with the operation of the Property, or
the business conducted by any tenant of the Property during any testing,
inspection or investigation performed with respect to the Property; and (c)
indemnify, protect, defend and hold Seller, its partners and their respective
officers, directors, trustees, employees, agents, affiliates, successors and
assigns harmless from and against any and all loss (including, without
limitation, damage to the Property or injury to persons or property), cost,
claim, liability or expense (including, without limitation, reasonable
attorneys' fees) arising or resulting, directly or indirectly, from any
unauthorized disclosure, test, investigation, inspection or contact made by
Purchaser, or anyone acting on behalf of Purchaser, pursuant to this Contract,
or otherwise. Seller agrees to promptly notify Purchaser of any claims as soon
as they are made. Notwithstanding anything to the contrary contained herein, the
provisions of this Section shall survive the termination of
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this Contract by either Purchaser or Seller, and/or the Closing and delivery of
the Deed for a period of six (6) months following Closing. For purposes of this
Section 3.06, unauthorized disclosure shall be a disclosure of proprietary and
confidential information by Purchaser regarding the Property to a person or
entity other than Purchaser's lending sources, investors, third parties
performing Purchaser's due diligence review, and Purchaser's accountants,
investment advisors and attorneys.
ARTICLE IV
Review Period
Section 4.01. Review Period. Purchaser shall have from the date of this
Contract until 12:00 noon Dallas, Texas time, on the twenty first (21st) day
following the Effective Date (the "Review Period") to review the Survey, the
Title Commitment, and the items delivered by Seller to Purchaser under Section
3.03, and to conduct physical, mechanical, environmental and other inspections
of the Property.
Section 4.02. Purchaser's Notice. If for any reason Purchaser, in its
sole and absolute discretion, is not satisfied with the condition of the
Property or any portion thereof, or any matter in or pertaining to the items
delivered or to be delivered by Seller to Purchaser pursuant to Article III of
this Contract, or any other fact or situation with respect to the Property, then
in such event Purchaser shall have the right to terminate this Contract by
giving Seller written notice thereof (the "Purchaser's Notice"), and this
Contract shall be immediately terminated upon Purchaser's delivery of the
Purchaser's Notice to Seller and (except as otherwise provided below) the
Earnest Money Deposit shall be returned to Purchaser, as Purchaser's sole and
exclusive remedy. The Purchaser's Notice need not set forth the reason for such
termination; provided, however, that if Purchaser, in its sole and absolute
discretion, desires to give Seller an opportunity to cure Purchaser's
dissatisfaction before Purchaser terminates this Contract, then Purchaser may
state such intention in the Purchaser's Notice and shall set forth in reasonable
detail the basis for any such dissatisfaction, in which event this Contract
shall not be immediately terminated and Seller shall have the right, but not the
obligation, to cure Purchaser's dissatisfaction or reduce the Purchase Price as
set forth in Section 4.03 below. In the event Purchaser fails to deliver the
Purchaser's Notice on or before the expiration of the Review Period then this
Contract shall be immediately terminated and the Earnest Money Deposit shall be
returned to Purchaser, as Purchaser's sale and exclusive remedy.
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Section 4.03. Seller's Notice. If Purchaser states in the Purchaser's
Notice its intention to give Seller an opportunity to cure Purchaser's
dissatisfaction before Purchaser terminates this Contract and includes therein
the basis for Purchaser's dissatisfaction, then Seller shall have the right, but
not the obligation, by delivery of written notice (the "Seller's Notice") to
Purchaser within five (5) business days after Seller's receipt of the
Purchaser's Notice, to elect either to (i) cure any such matter to the
reasonable satisfaction of Purchaser at Seller's sole cost and expense, (ii)
proceed to Closing, and reduce the Purchase Price by an amount equal to the cost
to Purchaser of any such cure, or (iii) terminate the Contract. In the event
Seller fails to deliver the Seller's Notice within such five (5) business day
period, Seller shall be deemed to have waived Seller's rights to cure; the
Earnest Money Deposit shall be returned to Purchaser, as Purchaser's sole and
exclusive remedy; and this Contract shall be deemed terminated. If Seller
delivers a Seller's Notice, Seller and Purchaser agree in good faith to
reasonably determine, within five (5) business days after delivery of the
Seller's Notice, the method, timing, cost and means to cure any such
objectionable item, or the cost to Purchaser of any such cure, as the case may
be. In the event Seller and Purchaser are unable, after the exercise of good
faith efforts, to agree in writing on the curative action required or the amount
to be reduced from the Purchase Price as a credit for the cost to cure, as the
case may be, within such five (5) business day period, then, this Contract shall
be deemed automatically terminated, and the Earnest Money Deposit shall be
returned to Purchaser, as Purchaser's sole and exclusive remedy.
Section 4.04. Termination. In the event that Purchaser elects to
terminate this Contract in accordance with, and subject to the terms of this
Article IV, the parties hereto shall be relieved of all liabilities and
obligations hereunder (expressly, excluding, however, Purchaser's indemnity of
Seller under Section 3.06 which shall survive any termination of this Contract
by either party hereto) and the Earnest Money Deposit shall be refunded fully
and promptly to Purchaser as Purchaser's sole and exclusive remedy.
ARTICLE V
Good and Indefeasible Title
Section 5.01. Conveyance. At the Closing, Seller shall convey title to
the Real Property and the Improvements to Purchaser by the Deed, free and clear
of any and all deeds of
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trust, mortgages or other liens or indebtedness, encumbrances, conditions,
easements, rights-of-way, assessments and restrictions, except for the following
(collectively, the "Permitted Exceptions"):
(a) Real estate taxes and assessments for the year in which the
Closing occurs and subsequent years not yet due and payable.
(b) All easements, restrictions, rights-of-way, party wall
agreements, encroachments, covenants, reservations, agreements, licenses,
conditions and other matters affecting all or any portion of the Property to the
extent (i) reflected on Schedule B to the Title Commitment and approved or
deemed approved by Purchaser; (ii) reflected on the Survey and approved or
deemed approved by Purchaser; and/or (iii) created by or consented and agreed to
in writing by Purchaser prior to or at the Closing.
(c) All building restrictions, zoning regulations and other
laws, rules and regulations, now or hereafter in effect, to the extent adopted
by any municipal, governmental or other public authority and applicable to all
or any portion of the Property.
(d) The rights of tenants in possession as tenants only under
the Leases.
Section 5.02. Owner Policy. At the Closing, Seller shall, at Purchaser's
sole cost and expense, purchase an Owner Policy of Title Insurance (the "Owner
Policy"), in the standard ALTA form, issued by the Title Company in Purchaser's
favor in an amount equal to the Purchase Price, insuring Purchaser's fee simple
title to the Property subject only to the Permitted Exceptions, and the standard
printed exceptions; provided, however, (a) the exception for restrictive
covenants shall, as applicable, be deleted or shall list only those restrictive
covenants as may be Permitted Exceptions; (b) any exception for parties in
possession of the Real Property or the Improvements shall be limited to the
rights of tenants in possession, as tenants only, pursuant to unrecorded
leases; and (c) there shall be no general exception for visible and apparent
easements, roads and highways or any other matters which would be disclosed by a
current survey of the Property.
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ARTICLE VI
Closing
Section 6.01. Closing. The purchase and sale of the Property (the
"Closing") shall be held at the offices of the Title Company or at such other
place as shall be agreed upon by Seller and Purchaser, and shall occur, subject
to satisfaction of all conditions precedent set forth in this Contract, at 9:00
a.m. Dallas, Texas time on January 15, 1997, or such earlier date as may be
mutually agreeable to Seller and Purchaser (the "Closing Date").
Section 6.02. Seller's Obligations. At the Closing, Seller shall execute
and deliver to Purchaser, and/or cause the execution and delivery by all parties
other than Purchaser of, the following:
(a) That certain special warranty deed (the Deed") in the form
attached hereto as Exhibit B and made a part hereof for all purposes, or as
approved by the Title Company.
(b) That certain assignment of leases (the "Assignment of
Leases") in the form attached hereto as Exhibit C and made a part hereof for all
purposes.
(c) That certain blanket conveyance, bill of sale and assignment
("Bill of Sale") in the form attached hereto as Exhibit D and made a part hereof
for all purposes.
(d) That certain closing memorandum and indemnification
agreement (the "Closing Memorandum") in the form attached hereto as Exhibit E
and made a part hereof for all purposes.
(e) That certain affidavit (the "FIRPTA Affidavit") in the form
attached hereto as Exhibit F and made a part hereof for all purposes.
(f) That certain tenant notification letter (the "Tenant
Letter") in the form attached hereto as Exhibit G and made a part hereof for all
purposes.
(g) All keys to all locks on the Property and, to the extent in
Seller's possession, original counterparts of all Leases, Property Contracts and
other documents included within the Property. The items referred to in this
clause (g) may be delivered at the Property rather than at the Closing.
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(h) A current rent roll in the form described in Section 3.03(f)
certified by Seller as being true, correct and complete in all material respects
as of the date thereof.
(i) The Owner Policy, provided that the Title Company may
deliver the Owner Policy to Purchaser following the Closing in accordance with
the Title Company's customary practices.
(j) The termite bond set forth on Exhibit H attached hereto.
(k) Appropriate evidence of Seller's authority to consummate the
transactions contemplated by this Contract.
(1) 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.
(m) Seller shall provide a termination of management agreement
executed by Seller and Paragon Residential Services, Inc., without cost to
Purchaser.
(n) Such other documents as are normally transferred at Closing
in South Carolina or are reasonably requested by Purchaser or its counsel.
(o) A representation letter as normally required by auditors of
a public company in the form attached hereto as Exhibit I executed by Seller.
This clause shall survive Closing for one year.
Section 6.03. Purchaser's Obligations. At the Closing, Purchaser shall
deliver the balance of the Purchase Price (the Earnest Money Deposit being
applied thereto) to Seller by wire transfer of immediately available funds, and
shall execute and deliver to Seller, and/or cause the execution and delivery by
all parties other than Seller of, the following:
(a) The Assignment of Leases.
(b) The Bill of Sale.
(c) The Closing Memorandum.
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(d) The Tenant Letter.
(e) Appropriate evidence of Purchaser's authority to consummate
the transactions contemplated by this Contract.
(f) Such other documents as are normally transferred at Closing
in South Carolina or are reasonably requested by Seller or its counsel.
Section 6.04. Possession. Possession of the Property shall be delivered
by Seller to Purchaser at the Closing, subject to the Permitted Exceptions.
ARTICLE VII
Closing Adjustments
Section 7.01. General Prorations. The following shall be apportioned at
the Closing:
(a) rents, if any, as and when collected (the term "rents" as
used in this Contract including all rent and other payments due and payable
under any Lease) and all other revenue from the Property;
(b) taxes and other assessments (including personal property
taxes on the Personal Property), on the basis customarily followed in the
locality of the Property, any apportionment of real estate taxes to be made with
respect to a tax year for which either the tax rate or assessed valuation or
both have not yet been fixed, to be upon the basis of the tax rate and/or
assessed valuation last fixed; provided that the parties hereto agree that to
the extent the actual taxes for the current year differ from the amount so
apportioned at the Closing, the parties hereto will make all necessary
adjustments by appropriate payments between themselves following the Closing,
and this provision shall survive delivery of the Deed;
(c) payments under any service and/or other contracts that are
not otherwise terminated at or prior to Closing;
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(d) gas, electricity and other utility charges, if any, to be
apportioned on the basis of meter readings on the day immediately prior tO the
Closing; and
(e) other operating expenses of the Property incurred during the
month in which the Closing occurs, including, without limitation, costs due and
payable by Seller under, or with respect to, any Lease of all or any portion of
the Property.
In making such apportionments, Purchaser shall be entitled to rents and other
income paid with respect to the day of the Closing, and Purchaser shall be
responsible for taxes and other expenses incurred with respect to the day of the
Closing. All such apportionments shall be subject to post-closing adjustments as
necessary to reflect later relevant information not available at the Closing and
to correct any errors made at the Closing with respect to such apportionments;
provided, however, that such apportionments shall in any event (i.e., regardless
of whether later relevant information becomes available or errors are
discovered) be deemed final and not subject to further post-closing adjustment
on the sixtieth (60th) day following the Closing Date. Seller and Purchaser
agree that, except as otherwise set forth herein, all costs and expenses
actually incurred in connection with the ownership, operation, leasing, repair,
maintenance or management of the Property shall, to the extent attributable to
the period prior to the Closing Date, be the sole responsibility of Seller, and
shall, to the extent attributable to the period from and after the Closing Date,
be the sole responsibility of Purchaser.
Section 7.02. Specific Prorations. Anything hereinabove contained to the
contrary notwithstanding:
(a) Seller and Purchaser agree that all rents received after the
Closing shall be applied first to any rent unpaid for the month of the Closing,
then to current rentals, if any, in the order of their maturity, and then to
delinquent rentals in inverse order of maturity (i.e., to be applied to the most
recent delinquent rental first, and so on, until the oldest delinquent rental
has been paid), and Purchaser shall promptly deliver to Seller any such
delinquent rentals received after the Closing which remain to be applied to rent
obligations which accrued prior to the Closing. Purchaser has no obligation to
collect any past due rents owed Seller as of the Closing Date. Seller may, at
Seller's option, institute an action to
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collect any delinquent rentals after the Closing from tenants who are no longer
in occupancy at the Closing, but not otherwise.
(b) At the Closing, Seller shall credit to the account of
Purchaser against the Purchase Price any security and other tenant deposits paid
by tenants at the Property under then existing Leases, including interest
thereon as required by South Carolina law, less any security deposits previously
applied by Seller to rents or other charges accruing pursuant to the Leases.
(c) As to gas, electricity and other utility charges, Seller may
elect to pay one or more of said items accrued to the date hereinabove fixed for
apportionment directly to the person or entity entitled thereunto and to the
extent Seller so elects, such item shall not be apportioned hereunder, and
Seller's obligation to pay such item directly in such case shall survive the
Closing.
(d) At the Closing, Seller shall receive a credit from
Purchaser equal to one-half the prepayment fee or premium required to prepay
the $4,440,000 Prudential loan which currently encumbers the Property; provided,
however, that the aforesaid credit to Seller shall not exceed S150,000.
(e) At the Closing, Purchaser shall receive a credit from Seller
in an amount equal to $500 for each apartment unit which is not "rent ready" as
required by Section 9.05(e); provided, however, such aggregate credit shall not
exceed $5,000.
Section 7.03. Transaction Costs. With the exception of (a) any fees or
real estate commissions (which are subject to and governed by the provisions of
Section 7.04); (b) all attorneys' fees and expenses, if any, of counsel to
Purchaser (which shall be borne by Purchaser); (c) any inspection or other cost
incurred by Purchaser (which shall be borne by Purchaser); (d) all attorneys'
fees and expenses of counsel to Seller (which shall be borne by Seller); (e) the
cost of an update of the Survey (which shall be borne by Purchaser); (f) the
cost of the Owner Policy (which shall be borne by Purchaser); and (g) the cost
of any recording fee under Chapter 14 of Title 12, South Carolina Code of Laws
(which shall be borne by Seller), all other transaction costs actually incurred,
including, without limitation, any
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escrow and other charges of the Title Company, and recording fees shall be
apportioned in accordance with local custom in the State of South Carolina.
Section 7.04. Brokerage Commissions. Seller agrees to pay to Gables
Residential Trust ("Broker") a real estate commission equal to one and
one-quarter percent (1.25%) of the purchase price if, and only if, the Closing
occurs in accordance with this Contract, but not otherwise. Except for Broker,
Seller and Purchaser acknowledge and agree that neither has dealt with any other
real estate broker, agent or salesman, and any other fees or real estate
commissions occasioned by the execution and/or consummation of this Contract
shall be the sole responsibility of the party contracting therefor, and such
party agrees to indemnify and hold harmless the other party for any and all
losses or expenses attributable to such other fees or real estate commissions.
By its signature hereto, Broker represents to Seller and Purchaser that such
broker has not entered into any arrangement with any other party whereby such
other party is entitled to any commission or finder's fee in connection with
this transaction, and such broker agrees that should any claim be made for
brokerage commissions or finder's fees by any other party claiming by, through
or on account of any acts of such broker or its representatives, such broker
shall hold Purchaser and Seller free and harmless from and against any and all
loss, cost, damage and expense in connection therewith. In the event the
transaction envisioned hereby fails to close for any reason, including without
limitation either party's default, neither party shall have any obligation for
the payment to Broker or any other person of any commission or similar type fee
hereunder, or otherwise. Purchaser has been and is hereby advised that
Purchaser should have the abstract covering the Property examined by an attorney
of Purchaser's selection or Purchaser should be furnished with a policy of title
insurance.
Section 7.05. Survival. The terms of this Article shall survive the
Closing and delivery of the Deed or, if applicable, the earlier termination of
this Contract.
ARTICLE VIII
Termination and Remedies
Section 8.01. Purchaser's Default. In the event that Purchaser should
fail to consummate this Contract for any reason, except Seller's default or the
permitted termination of this Contract by Purchaser or Seller as herein
expressly
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provided, Seller shall be entitled, as Seller's sole and exclusive remedy, to
terminate this Contract and receive the Earnest Money Deposit and Seller's
acceptance (by negotiation, deposit or otherwise) of the Earnest Money Deposit
shall conclusively operate to terminate this Contract and release and fully
discharge Seller and Purchaser from any and all liability hereunder (expressly
excluding, however, Purchaser's indemnity of Seller under Section 3.06 which
shall survive termination of this Contract by either party). Seller and
Purchaser acknowledge and agree that delivery of the Earnest Money Deposit shall
be deemed liquidated damages for Purchaser's breach of this Contract, it being
further agreed that the actual damages to Seller in the event of such breach are
impractical to ascertain and the amount of the Earnest Money Deposit is a
reasonable estimate thereof. Prior to delivery of the Earnest Money to Seller,
Seller shall give Purchaser seventy-two hours prior notice of same.
Section 8.02. Seller's Default. In the event that Seller should fail to
consummate this Contract for any reason, except Purchaser's default or the
permitted termination of this Contract by either Seller or Purchaser as herein
expressly provided, Purchaser shall be entitled, as Purchaser's sole and
exclusive remedies, to either (a) the return of the Earnest Money Deposit and
Purchaser's acceptance (by negotiation, deposit or otherwise) of the Earnest
Money Deposit shall conclusively operate to terminate this Contract and release
and fully discharge Seller and Purchaser from any and all liability hereunder
(expressly excluding, however, Purchaser's indemnity of Seller under Section
3.06 which shall survive any termination of this Contract by either party
hereto); or (b) enforce specific performance of Seller's obligations hereunder,
subject, however, to all conditions and termination rights set forth herein and
Purchaser shall be entitled to all costs or expenses (including reasonable
attorneys' fees) incurred by Purchaser in pursuing its remedy under this Section
8.02(b). Purchaser shall have no right to sue for or seek, whether at law, in
equity or otherwise, any monetary award or judgment and/or any consequential,
incidental or other damages against Seller, any officer, trustee, director,
employee or agent of Seller, or their respective successors and assigns all of
which are hereby knowingly, voluntarily and intentionally waived, released and
discharged by Purchaser.
Section 8.03. Survival. The terms of this Article shall survive the
Closing and delivery of the Deed or, if applicable, the earlier termination of
this Contract.
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ARTICLE IX
Representations. Warranties and Covenants
Section 9.01. Disclaimer. PURCHASER AGREES THAT PURCHASER IS BEING
AFFORDED THE RIGHT TO PERFORM EXAMINATIONS AND INVESTIGATIONS OF THE PROPERTY
PRIOR TO THE EXPIRATION OF THE REVIEW PERIOD, INCLUDING, WITHOUT LIMITATION,
EXAMINATION AND INVESTIGATION FOR THE PRESENCE OF ASBESTOS, PCB EMISSIONS,
CLEANING SOLVENTS (E.G., PCE), UNDERGROUND STORAGE TANKS AND HAZARDOUS WASTES ON
ALL OR ANY PORTION OF THE PROPERTY, AND FOR THE PROPERTY'S COMPLIANCE WITH ANY
AND ALL HANDICAPPED ACCESSIBILITY LAWS, RULES AND REGULATIONS (E.G., AMERICANS
WITH DISABILITIES ACT OF 1990, OR ANY OTHER LAW, RULE OR REGULATION). PURCHASER
WILL RELY SOLELY UPON SUCH EXAMINATIONS AND INVESTIGATIONS IN PURCHASING THE
PROPERTY. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, AND EXCEPT AS
PROVIDED IN SECTION 9.02, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT PURCHASER
IS ACQUIRING THE PROPERTY "AS IS" AND "WHERE IS", AND WITH ALL FAULTS AND THAT,
EXCEPT AS SET FORTH IN SECTION 9.02 AND THE DOCUMENTS TO BE DELIVERED AT THE
CLOSING, SELLER HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATIONS OR
WARRANTIES, STATUTORY, EXPRESSED OR IMPLIED, WITH RESPECT TO THE QUALITY,
PHYSICAL CONDITION, EXPENSES, VALUE OF THE PROPERTY OR IMPROVEMENTS THEREON,
HANDICAPPED ACCESSIBILITY LAW COMPLIANCE, PRESENCE/ABSENCE OF HAZARDOUS
MATERIALS, ELECTROMAGNETIC FIELD EXPOSURE LEVELS OR ANY OTHER MATTER OR THING
AFFECTING OR RELATED TO THE PROPERTY OR THIS CONTRACT (INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF HABITABILITY, WARRANTIES OF MERCHANTABILITY AND/OR OF
FITNESS FOR A PARTICULAR PURPOSE), WHICH MIGHT BE PERTINENT IN CONSIDERING THE
MAKING OF THE PURCHASE OF THE PROPERTY OR THE ENTERING INTO OF THIS CONTACT, AND
PURCHASER DOES HEREBY RELEASE AND FOREVER DISCHARGE SELLER, ITS OFFICERS,
TRUSTEES, DIRECTORS, AND THEIR RESPECTIVE AGENTS, EMPLOYEES, SUCCESSORS AND
ASSIGNS FROM ANY AND ALL CLAIM, OBLIGATION AND LIABILITY (WHETHER BASED IN TORT,
UNDER CONTRACT OR OTHERWISE) ATTRIBUTABLE, IN WHOLE OR IN PART, TO ANY SUCH
REPRESENTATION, EXCEPT FOR THOSE PROVIDED IN SECTION 9.02 AND THE DOCUMENTS TO
BE DELIVERED AT THE CLOSING, AND/OR ALLEGED REPRESENTATION, AND FURTHER
PURCHASER DOES HEREBY EXPRESSLY ACKNOWLEDGE THAT, EXCEPT AS SET FORTH IN SECTION
9.02 AND THE DOCUMENTS TO BE DELIVERED AT THE CLOSING, NO SUCH REPRESENTATIONS
HAVE BEEN MADE. SELLER IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY WARRANTIES,
EITHER EXPRESSED OR IMPLIED, GUARANTEES, PROMISES, STATEMENTS, REPRESENTATIONS
OR INFORMATION PERTAINING TO THE PROPERTY MADE OR FURNISHED BY BROKER, OR ANY
AGENT, BROKER, EMPLOYEE, SERVANT OR OTHER PERSON REPRESENTING OR PURPORTING TO
REPRESENT SELLER. PURCHASER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES
SELLER FROM ANY AND ALL CLAIMS, DEMANDS AND CAUSES OF ACTION THAT PURCHASER MAY
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HAVE AGAINST SELLER WITH RESPECT TO ANY COSTS, LOSSES, EXPENSES OR OTHER
LIABILITIES INCURRED IN CONNECTION WITH PROPERTY, INCLUDING, WITHOUT LIMITATION,
ANY RIGHT OF CONTRIBUTION, INDEMNITY OR REIMBURSEMENT PROVIDED UNDER THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980,
THE RESOURCE CONSERVATION AND RECOVERY ACT OR ANY OTHER FEDERAL, STATE OR LOCAL
ENVIRONMENTAL LAW, RULE OR REGULATION. THE TERMS OF THIS SECTION 9.01 SHALL BE
DEEMED INCORPORATED INTO EACH DOCUMENT EXECUTED BY SELLER AT THE CLOSING
REGARDLESS OF WHETHER A SPECIFIC REFERENCE TO THIS SECTION IS MADE THEREIN.
FURTHER, THE TERMS OF THIS SECTION 9.01 SHALL SURVIVE THE TERMINATION OF THIS
CONTRACT AND/OR THE CLOSING AND DELIVERY OF THE DEED. NOTHING CONTAINED IN THIS
SECTION 9.01 SHALL LIMIT OR IMPAIR THE SPECIAL WARRANTY OF TITLE SET FORTH IN
THE DEED, EXCEPT WHERE OTHERWISE AGREED UPON.
Section 9.02. Seller's Representations. Seller hereby represents and
warrants to Purchaser as follows:
(a) Seller has all requisite power and authority to carry on its
business as now conducted.
(b) Seller has the capacity and complete authority to enter into
and perform this Contract, and no consent, approval or other action by any other
person or entity (other than the persons signing this Contract on behalf of
Seller) will be needed thereafter to authorize Seller's execution and
performance of this Contract. The execution and performance of this Contract is
not prohibited by, and does not constitute a default under, any agreement to
which Seller is a party or by which Seller is bound.
(c) Seller is not a "foreign person", "foreign partnership", nor a
"foreign corporation" as those terms are defined in Section 7701 of the Internal
Revenue Code of 1986, as amended.
(d) To Seller's knowledge, there is no pending litigation filed
with respect to the Property.
(e) To Seller's knowledge, Seller has not received written notice
from any governmental authority reflecting eminent domain or condemnation
proceedings covering the Property.
(f) To Seller's knowledge, Seller has not received written notice
from any governmental
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authority that the Property is currently in violation of any zoning, building,
fire or health statute, ordinance or regulation.
(g) To Seller's knowledge, Seller has not received written notice
from any governmental, or regulatory authority reflecting an existing
environmental hazard on the Property.
(h) To Seller's knowledge, the items delivered to Purchaser under
Section 3.03(b), (c), (d), (e), (f), (g) and (h) are true and correct in all
material respects.
(i) The Personal Property is owned by Seller free and clear of any
liens or encumbrances subject to the Permitted Exceptions.
(j) To the best of Seller's knowledge, there are no unsatisfied
judgments or pending bankruptcies against Seller with respect to the Property.
References to the "knowledge" of Seller above shall refer only to the
actual knowledge (as opposed to constructive, deemed or imputed knowledge) of
Brenda Meetze and shall not be construed, by imputation or otherwise, to refer
to the knowledge of Seller, or any affiliate of Seller, to any property manager,
or to any officer, agent, manager, representative or employee of Seller or any
affiliate thereof or to impose upon Brenda Meetze any duty to investigate the
matter to which such actual knowledge, or the absence thereof, pertains. Seller
represents that Brenda Meetze is a Vice President of Paragon Residential
Services, Inc., the current manager of the Property.
Section 9.03. Purchaser's Representations. Purchaser hereby represents
and warrants to Seller as follows:
(a) Purchaser is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Virginia, has duly qualified
to conduct business in the State of South Carolina, and has all requisite power
and authority to carry on its business as now conducted.
(b) Purchaser has the capacity and complete authority to enter
into and perform this Contract, and no consent, approval or other action by any
person or entity (other than the person signing this Contract on
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behalf of Purchaser) will be needed thereafter to authorize Purchaser's
execution and performance of this Contract. The execution and performance of
this Contract is not prohibited by, and does not constitute a default under, any
agreement to which Purchaser is a party or by which Purchaser and its assets may
be bound.
(c) Purchaser has knowledge and experience in financial and
business matters that enables it to analyze the merits and risks of the
transactions contemplated hereby, and Purchaser is not in a significantly
disparate bargaining position with respect to Seller or such transaction.
Section 9.04. Discovery. In the event that either Seller or Purchaser
discovers, prior to or at the Closing, that any representation or warranty of
the other party under this Article IX is false, misleading or inaccurate in any
material respect, the discovering party may, at its option, terminate this
Contract and the parties hereto shall be relieved of all liabilities and
obligations hereunder (expressly excluding, however, Purchaser's indemnity of
Seller under Section 3.06 which shall survive any termination of this Contract
by either party hereto) and (a) if Purchaser discovers that a representation or
warranty made by Seller under Section 9.02 is materially false, misleading or
inaccurate, Purchaser shall have the right to pursue its rights and remedies
under Section 8.02 of this Contract, but (b) if Seller discovers that a
representation or warranty made by Purchaser under Section 9.03 materially
false, misleading or inaccurate, Seller shall be entitled to pursue its remedies
under Section 8.01 of this Contract. Neither Seller nor Purchaser shall have the
right to rely on any representation or warranty of the other party set forth
herein, in any document delivered at the Closing, or otherwise, to the extent
that the relying party, on the Closing Date, knows that such representation or
warranty is false, misleading or inaccurate. Representations and warranties
under this Article IX shall fully survive the Closing and the delivery of the
Deed, but to the extent that neither Seller nor Purchaser has made any claim as
to the breach of any such representation or warranty within six (6) months after
the Closing Date, such representations and warranties will terminate and be of
no further force and effect. In the event Purchaser discovers after the Closing
that any representation or warranty is false, misleading or inaccurate in any
material respect, Purchaser shall have no right to request a rescission of this
Contract for failure of a condition precedent nor to otherwise pursue an action
against
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<PAGE>
Seller for punitive, treble or other damages, if any, incurred by Purchaser as a
result thereof, but Purchaser shall otherwise be entitled to pursue an action
against Seller for actual damages incurred by Purchaser, if any, as a result
thereof.
Section 9.05. Operating Covenants. Seller agrees to operate and maintain
or cause to be operated and maintained the Property prior to the Closing in a
prudent and reasonable manner consistent with its current operating procedures.
In connection with the foregoing, Seller covenants for so long as this Contract
remains in effect as follows:
(a) Seller shall not create nor permit to exist any lien,
encumbrance or charge on the Real Property or the Improvements, other than liens
or encumbrances either noted in the Title Commitment or those which shall be
released at Closing at Seller's expense; provided, however, Seller shall have
the right to contest any such liens and encumbrances so long as a bond is posted
by Seller and/or other procedures reasonably acceptable to the Title Company and
Purchaser, so as to permit the Title Company to issue the Owner Policy without
exception to any such lien or encumbrance, and in such event Purchaser shall
have no right to terminate this Contract as a result of any such lien or
encumbrance.
(b) Seller shall neither transfer nor remove any Personal Property
or fixtures from the Property subsequent to the date hereof, except in the
ordinary course of business or for purposes of replacement thereof, in which
case such replacements shall be promptly installed prior to Closing and shall be
reasonably comparable in quantity and quality to the item(s) being replaced.
(c) Seller shall conduct its leasing activities substantially
consistent with its normal, customary and ordinary leasing practice. Seller
covenants to Purchaser that there are no authorized rent concessions with
respect to the Leases except as set forth in the Rent Roll or the Leases.
(d) Seller shall keep the Property insured at all times prior to
the Closing under Seller's existing blanket-type insurance policy.
(e) All vacant apartment units at Closing, other than apartment
units vacated within five (5) days prior to Closing, will be "rent ready".
Seller and Purchaser agree that during the Review Period, both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree that
said apartment
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unit shall be representative of a "rent ready" unit by which all other units
shall be judged for "rent ready" condition at Closing. In the event Seller and
Purchaser can not mutually agree prior to expiration of the Review Period as to
a representative apartment for purposes of defining "rent ready", either party
shall have the right to terminate the Contract upon notice to the other and upon
such event, the Contract shall terminate and the Earnest Money shall be returned
to Purchaser, as Purchaser's sole and exclusive remedy.
Notwithstanding the foregoing, Seller has no obligation, express or implied, to
make or otherwise pay for any capital improvements to all or any portion of the
Property, including, without limitation, any parking lot repairs, painting,
handicapped accessibility modifications, Personal Property repair or
replacement, roof repair or replacement or any deferred maintenance item;
provided, however, Seller will perform all of Seller's routine maintenance
obligations.
ARTICLE X
Notices
Section 10.01. Notices. Any notice, demand or other communication which
may or is required to be given under this Contract shall be in writing and shall
be: (a) personally delivered; (b) transmitted by United States postage prepaid
mail, registered or certified mail, return receipt requested; (c) transmitted by
reputable overnight courier service, such as Federal Express; or (d) transmitted
by legible facsimile (with answer back confirmation) to Purchaser and Seller as
listed below. Except as otherwise specified herein, all notices and other
communications shall be deemed to have been duly given on (i) the date of
receipt if delivered personally, (ii) two (2) calendar days after the date of
posting if transmitted by registered or certified mail, return receipt
requested, (iii) the first (1st) business day after the date of deposit, if
transmitted by reputable overnight courier service, or (iv) the date of
transmission with confirmed answer back if transmitted by facsimile, whichever
shall first occur. A notice or other communication not given as herein provided
shall only be deemed given if and when such notice or communication and any
specified copies are actually received in writing by the party and all other
persons to whom they are required or permitted to be given. Purchaser and Seller
may change its address for purposes hereof by notice given to the other parties
in accordance with the provisions of this Section, but such notice
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<PAGE>
shall not be deemed to have been duly given unless and until it is actually
received by the other parties. Notices hereunder shall be directed as follows:
If to Purchaser: Cornerstone Realty Group Incorporated
306 East Main Street
Richmond, Virginia 23219
Attention: Gus G. Remppies
Telecopy: (804) 782-9302
with copies at the
the same time to: Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, New York 11516
Attention: Harry S. Taubenfeld
Telecopy: (516) 374-3490
and
Callison Tighe Robinson & Hawkins, LLP
1812 Lincoln Street, 2nd Floor
Columbia, South Carolina 29201
Attn: Michael W. Tighe
Telecopy: (803) 256-6431
If to Seller: Charleston Westchase Associates,
A Limited Partnership
7557 Rambler Road,
Suite 1200
Dallas, Texas 75231
Attention: John Berry
Telecopy: (214) 891-2065
with copies at
the same time to: Stutzman & Bromberg,
A Professional Corporation
2323 Bryan Street, Suite 2200
Dallas, Texas 75201
Attention: Aguinaldo Valdez
Telecopy: (214) 969-4999
and
Paragon Residential Services, Inc.
7557 Rambler Road,
Suite 1200
Dallas, Texas 75231
Attention: Lynn T. Caldwell
Telecopy: (214) 891-2065.
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ARTICLE XI
Risk of Loss
Section 11.01. Minor Damage. In the event of "minor" loss or damage
(being defined for the purpose of this Contract as damage to the Property which
is such that the Property could be repaired or restored, in the opinion of an
architect reasonably satisfactory to both Seller and Purchaser, to a condition
substantially identical to that of the Property immediately prior to the event
of damage at a cost equal to or less than $250,000.000), this Contract shall
continue in full force and effect and Seller shall assign all of Seller's right,
title and interest to any claims and proceeds Seller may have with respect to
any casualty insurance policies, including, rental interruption insurance
proceeds, or condemnation awards relating to the Property and Purchaser shall
receive a credit against the Purchase Price in an amount equal to the deductible
under any such insurance policy to the extent such deductible is applicable to
any such minor loss or damage, but not otherwise.
Section 11.02. Major Damage. In the event of a "major" loss or damage
(being defined as any loss or damage which is not "minor" as defined hereinabove
or a condemnation not minor and of a portion of the Property whereby five
percent (5%) or more of the parking spaces on the Property are lost), Purchaser
shall have the option of either: (a) terminating this Contract by written notice
to Seller, in which event the Earnest Money Deposit shall, to the extent
delivered to the Title Company, be returned to Purchaser as Purchaser's sole and
exclusive remedy, and Seller and Purchaser shall be released from any and all
liability hereunder (expressly excluding, however, Purchaser's indemnity of
Seller under Section 3.06 which shall survive any termination of this Contract
by either party hereto); or (b) proceeding with the Closing, provided Seller
shall assign all of Seller's right, title and interest to any claims and
proceeds Seller may have with respect to any casualty insurance policies,
including, rental interruption insurance proceeds, or condemnation awards
relating to the Property and Purchaser shall receive a credit against the
Purchase Price in an amount equal to the deductible under any such insurance
policy to the extent such deductible is applicable to any such major loss or
damage, but not otherwise. Seller agrees to furnish Purchaser written notice of
any such damage or loss, including any claims adjuster's estimate, within ten
(10) days after the occurrence of any such damage or loss. In the event
Purchaser fails to deliver written notice to Seller of Purchaser's election
hereunder, within ten (10) days after Purchaser's receipt of
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<PAGE>
written notice from Seller of the occurrence of a "major" loss or damage,
Purchaser shall be deemed to have elected the option set forth under
subparagraph (a) of this Section.
Section 11.03. Risk of Loss. Prior to Closing, full risk of loss with
respect to the Property shall remain with Seller. Upon the Closing, full risk of
loss with respect to the Property shall pass to Purchaser. There shall be no
reduction in the Purchase Price as a result of any loss or damage except as
expressly set forth in Section 11.01 or Section 11.02.
ARTICLE XII
Miscellaneous
Section 12.01. Entire Agreement. This Contract constitutes the entire
agreement between the parties hereto and supersedes any prior understanding or
written or oral agreements between the parties concerning the Property.
Section 12.02. No Recordation. Neither this Contract nor any memorandum
of the terms hereof shall be recorded or otherwise placed of public record and
any breach of this covenant shall, unless the party not placing same of record
is otherwise in default hereunder, entitle the party not placing same of record
to pursue its rights and remedies under Article VIII.
Section 12.03. No Rule of Construction. This Contract has been drafted
by both Seller and Purchaser and no rule of construction shall be invoked
against either party with respect to the authorship hereof or of any of the
documents to be delivered by the respective parties at the Closing.
Section 12.04. Multiple Counterparts; Governing Law. This Contract may
be executed in multiple counterparts each of which shall be deemed an original
but together shall constitute one and the same instrument, and shall be
construed and interpreted under the laws of the State of South Carolina and all
obligations of the parties created hereunder are performable in Charleston
County, South Carolina.
Section 12.05. Attorneys' Fees. In the event of any litigation or other
proceeding brought by either party hereunder, the prevailing party shall be
entitled to recover its reasonable attorneys' fees and costs of suit, and in
addition to the foregoing, the non-prevailing party shall, if the dispute
involves the return of the Earnest Money Deposit,
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<PAGE>
be solely obligated, without contribution, to pay all reasonable attorneys'
fees, costs and expenses incurred by, or asserted against, the Title Company.
Section 12.06. Assignment. Purchaser may not assign, without the consent
of Seller, any of Purchaser's rights and obligations under this Contract, but
Purchaser may assign this Contract, without Seller's consent, to Cornerstone
Realty Income Trust, Inc. or an entity controlled by one or more of Purchaser's
affiliates and/or any of Purchaser's principals. Except as provided in the
preceding sentence, Purchaser has no right to assign this Contract and no
interest held, directly or indirectly, in Purchaser may be sold, transferred or
otherwise conveyed without in each instance the prior written consent of Seller.
No such assignment, however, shall release or otherwise relieve Purchaser from
its obligations hereunder and under the documents to be executed at the Closing.
This Contract and all rights hereunder shall inure to and be binding upon the
respective heirs, executors, successors and permitted assigns of Seller and
Purchaser.
Section 12.07. Interpretation. This Contract shall, unless otherwise
specified herein, be subject to the following rules of interpretation: (a) the
singular includes the plural and the plural the singular; (b) words importing
any gender include the other genders; (c) references to persons or entities
include their permitted successors and assigns; (d) words and terms which
include a number of constituent parts, things or elements, including the terms
Improvements, Permitted Exceptions, Personal Property, Intangible Property and
Property, shall be construed as referring separately to each constituent part,
thing or element thereof, as well as to all of such constituent parts, things or
elements as a whole; (e) references to statutes are to be construed as including
all rules and regulations adopted pursuant to the statute referred to and all
statutory provisions consolidating, amending or replacing the statute referred
to; (f) references to agreements and other contractual instruments shall be
deemed to include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms; (g) the words "approve" or
"consent" or "agree" or derivations or said words or words of similar import
mean, unless otherwise expressly provided herein or therein, the prior approval,
consent, or agreement in writing of the person holding the right to approve,
consent, or agree with respect to the matter in question, and the words
"require" or "judgment" or "satisfy" or derivations of said words or words of
similar import mean the requirement, judgment or satisfaction of the person who
may make a requirement or exercise judgment or who must be satisfied, which
approval, consent, agreement, requirement,
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<PAGE>
judgment or satisfaction shall, unless otherwise expressly provided herein or
therein, be in the reasonable discretion of the person holding the right to
approve, consent or agree or who may make a requirement or judgment or who must
be satisfied; (h) the words "include" or "including" or words of similar import
shall be deemed to be followed by the words "without limitation"; (i) the words
"hereto" or "hereby" or "herein" or "hereof" or "hereunder," or words of
similar import, refer to this Contract in its entirety; (j) references to
sections, articles, paragraphs or clauses are to the sections, articles,
paragraphs or clauses of this Contract; and (k) numberings and headings of
sections, articles, paragraphs and clauses are inserted as a matter of
convenience only and shall not affect the construction of this Contract.
Section 12.08. Exhibits and Schedules. The following exhibits and
schedules attached hereto shall be deemed to be an integral part of this
Contract and are hereby incorporated for all purposes:
Exhibit A - legal description of the Real Property
Exhibit B - form of Deed
Exhibit C - form of Assignment of Leases
Exhibit D - form of Bill of Sale
Exhibit E - form of Closing Memorandum
Exhibit F - form of FIRPTA Affidavit
Exhibit G - form of Tenant Letter
Exhibit H - form of Termite Bond
Exhibit I - form of Representation Letter
Schedule 1 - list of Personal Property
Schedule 2 - list of Property Contracts
Section 12.09. Modifications; Reporting Person. This Contract cannot be
changed orally, and no executory agreement shall be effective to waive, change,
modify or discharge it in whole or in part unless such executory agreement is in
writing and is signed by the parties against whom enforcement of any waiver,
change, modification or discharge is sought. Neither Broker nor the Title
Company shall be necessary signatories to any such written agreement. Purchaser
and Seller hereby
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<PAGE>
designate the Title Company as the "reporting person" pursuant to the
provisions of Section 6045(e) of the Internal Revenue Code, as amended.
Section 12.10. Time of Essence. Time is of the essence to both Seller
and Purchaser in the performance of this Contract, and they have agreed that
strict compliance by both of them is required as to any date and/or time set out
herein, including, without limitation, the dates and times set forth in Article
IV of this Contract. If the final day of any period of time set out in any
provision of this Contract falls upon a Saturday, Sunday or a holiday observed
by federally insured banks in the State of South Carolina or by the United
States Postal Service, then and in such event, the time of such period shall be
extended to the next day which is not a Saturday, Sunday or holiday. Unless
otherwise specified, in computing any period of time described in this Contract,
the day of the act or event after which the designated period of time begins to
run is not to be included and the last day of the period so computed is to be
included, unless such last day is a Saturday, Sunday or holiday in which event
the period shall run until the end of the next day which is neither a Saturday,
Sunday or holiday. Notwithstanding the foregoing, Purchaser shall have a
one-time right to extend the Closing Date for up to thirty (30) days upon five
(5) days prior written notice to Seller.
Section 12.11. No Publicity. Purchaser agrees that, prior to divulging
the transactions described in this Contract or publicizing them in any way, it
will secure the prior written consent of Seller; provided that the foregoing
does not require Seller's consent to any disclosures by Purchaser to Purchaser's
lenders, equity owners, attorneys and other advisors.
Section 12.12. Partial Invalidity. If any term, provision, condition or
covenant of this Contract or the application thereof to any party or
circumstance shall, to any extent, be held invalid or unenforceable, the
remainder of this Contract, or the application of such term, provision,
condition or covenant to persons or circumstances other than those as to whom or
which it is held invalid or unenforceable shall not be affected thereby, and
each term and provision of this Contract shall be valid and enforceable to the
fullest extent permitted by law, and said invalid or unenforceable term,
provision, condition or covenant shall be substituted by a term, provision,
condition or covenant as near in substance as may be valid and enforceable.
Section 12.13. Facsimile Signatures. The parties hereto hereby agree
that facsimile signatures by any party shall be fully binding upon and
enforceable against such party.
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<PAGE>
Section 12.14. Section 1031 Exchange. Purchaser agrees to cooperate with
Seller in effecting a (Section) 1031 exchange, including executing documents
required by the exchange trustee or intermediary, provided, however, such
cooperation shall be at no cost or liability to Purchaser. Seller agrees to hold
Purchaser harmless from any claims resulting from said (Section) 1031 exchange,
including reasonable attorneys' fees. This Section 12.14 shall survive Closing.
Section 12.15. Seller's Investment Committee. Notwithstanding anything
to the contrary contained herein, this Contract and Seller's obligation under
this Contract are expressly conditioned upon obtaining the consent and approval
of this Contract and the transactions contemplated hereby by Seller's Investment
Committee and Seller's Board of Directors. Seller agrees to obtain such approval
within ten (10) days of the Effective Date.
Section 12.16. Purchaser's Investment Committee. Notwithstanding
anything to the contrary contained herein, this Contract and Purchaser's
obligation under this Contract are expressly conditioned upon obtaining the
consent and approval of this Contract and the transactions contemplated hereby
by Purchaser's Board of Directors. Purchaser agrees to obtain such approval
prior to the expiration of the Review Period.
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<PAGE>
IN WITNESS WHEREOF, this Contract has been executed by Purchaser and
Seller on the dates written below.
SELLER:
CHARLESTON WESTCHASE ASSOCIATES,
A LIMITED PARTNERSHIP,
a South Carolina limited partnership
By: Paragon Group L.P.,
a Delaware limited partnership
By: Paragon Group
GP Holdings, Inc.,
a Delaware corporation
By: ___________________________
Name: _________________________
Title: ________________________
PURCHASER:
CORNERSTONE REALTY GROUP INCORPORATED,
a Virginia corporation
By: /s/ S. J. Olander
-------------------------------
Name: S. J. Olander
Title: Senior Vice President
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EXHIBIT 23.1
[L.P. MARTIN & COMPANY LETTERHEAD]
Consent of Independent Auditors'
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated December 20, 1996 with respect
to the statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Greenbrier
Apartments for the twelve month period ended September 30, 1996, for inclusion
in a form 8K filing with the Securities and Exchange Commission by Cornerstone
Realty Income Trust, Inc.
/s/ L.P. Martin & Co., P.C.
Richmond, Virginia
January 28, 1997
EXHIBIT 23.2
[L. P. MARTIN & COMPANY LETTERHEAD]
Consent of Independent Auditors'
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated January 3, 1997 with respect
to the statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Deerfield
Apartments for the twelve month period ended October 31, 1996, for inclusion
in a form 8-K filing with the Securities and Exchange Commission by Cornerstone
Realty Income Trust, Inc.
/s/ L. P. Martin & Co., P.C.
Richmond, Virginia
January 28, 1997
