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: May 14, 1997
CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 0-23954 54-1589139
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 East Main Street
Richmond, Virginia 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
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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
(Charleston Place Apartments)
Historical Statement of Income and
Direct Operating Expenses
(Charleston Place Apartments)
Note to Historical Statement of
Income and Direct Operating
Expenses (Charleston Place Apartments)
b. Independent Auditors' Report
(Dunwoody Springs Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Dunwoody Springs Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Dunwoody Springs Apartments)*
c. Pro Forma Statement of Operations for
the Six Months ended June 30, 1997
(unaudited)*
Pro Forma Balance Sheet as of
June 30, 1997 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1996
(unaudited)*
* To be filed by amendment.
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d. Exhibits
10.1 Purchase Contract for Charleston Place Apartments
10.2 Purchase Contract for Dunwoody Springs Apartments
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors*
* To be filed by amendment.
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Item 2. Acquisition or Disposition of Assets
CHARLESTON PLACE APARTMENTS
Charlotte, North Carolina
On May 14, 1997, the Company purchased the Summit Charleston
Apartments, a 214-unit apartment complex located at 1700 Charleston Place Lane,
Charlotte, North Carolina (the "Property"). The Company has renamed the Property
the "Charleston Place Apartments."
The Company purchased the Property from a seller unaffiliated with the
Company and its affiliates. The purchase price was $9,475,000, all of which was
borrowed by the Company under the Company's unsecured line of credit. Title to
the Property was conveyed to the Company by limited warranty deed.
Location. The Property is located in the southeastern part of
Charlotte, North Carolina, within Mecklenburg County. The following information
is based in part upon information provided by the greater Charlotte Chamber of
Commerce.
Based in part upon its fast rate of growth and a diversified economy,
Charlotte has in recent years come to national attention as an attractive
location for business and residential growth. According to the August 1995, Site
Selection magazine, Charlotte's corporate popularity ranked second nationally
only to Dallas during the period between 1990 and 1994, being the site of 474
significant new and expanded facilities.
Charlotte has developed into a major financial, distribution and
transportation center, with a metropolitan population of approximately 1.3
million and a population of approximately 5.6 million within a 100-mile radius.
Charlotte's growth is also attributable to its favorable year-round climate, a
moderate cost of living, excellent quality of life, educated work force,
probusiness political climate, extensive transportation network, and strategic
geographic location.
According to the Charlotte Chamber of Commerce, during the first six
months of 1995, approximately 530 firms announced new or expanded businesses
which will provide approximately 6,200 new jobs in the area. Charlotte is home
to major offices of more than 225 of the Fortune 500 industrial firms and
approximately 300 of the Fortune 500 service firms.
Charlotte is the leading financial center of the Southeast, serving as
corporate headquarters to NationsBank and First Union, with assets of
approximately $170 billion and $124 billion, respectively. The growth of
Charlotte's banking and financial communities has had a positive effect on the
growth of its
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supporting industries, such as insurance, accounting, legal
services, and real estate.
The city of Charlotte is located near the border of North Carolina and
South Carolina within Mecklenburg County. It is located at the intersection of
Interstates 77 and 85, the major north/south and each/west thoroughfares in the
region, which provide convenient access to all other regional areas.
The Property is located on Monroe Road adjacent to McAlpine Greenway
Park. The immediate area surrounding the Property consists of commercial and
retail development, other multi-family housing, and single family housing. The
Property is in close proximity to several major employment centers, including
the McAlpine Business Center, Crownpoint Business Center, Matthews Township and
the Charlotte central business district. The Property has ready access to
shopping, dining and entertainment and to the Charlotte/Douglass International
Airport.
Description of the Property. The Property consists of 214 garden style
apartment units in 11 two- and three-story buildings on approximately 15 acres
of land. The Property was built in 1986.
The Company believes that the Property is generally in very good
condition and has been well maintained. The Company has budgeted approximately
$107,000 for certain improvements, including renovation of the clubhouse and
painting.
The Property offers five unit types. The unit mix and rents currently
being charged new tenants are as follows:
Approximate
Interior Square Monthly
Quantity Type Footage Rental
- -------- ---- ------- ------
31 One bedroom/one bath 550 $530-$560
31 One bedroom/one bath 650 550-580
31 One bedroom/one bath 710 600-635
31 One bedroom/one
bath/den 815 660-690
90 Two bedrooms/two 977 690-750
baths
The variation in monthly rental among units is based upon floor level
and amenities such as washer/dryer connections,
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fireplace, picture windows, vaulted ceilings and built-in
shelving.
The apartments provide a combined total of approximately 172,000 square
feet of net rentable area.
Leases at the Property are generally for terms of one year or less.
Average rental rates for the past five years have generally increased. As an
example, a one-bedroom, one-bath apartment unit (710 square feet) rented for
$385 in 1992, $441 in 1993, $505 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 $6.04, $6.91, $7.92, $8.47 and $8.62, respectively.
The buildings are wood-frame construction on concrete slabs. Exteriors
are a combination of brick veneer and vinyl siding. The buildings have pitched
roofs covered with gabled fiberglass shingles over pre-engineered roof trusses.
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 includes miniblinds, vertical blinds, pantry and linen space
and outside storage. Each kitchen has a refrigerator/freezer with icemaker,
electric range and oven, microwave, dishwasher and garbage disposal. The owner
of the Property supplies cold water, sewer service and trash removal. The
tenants pay for their electricity, which includes air conditioning, heating,
cooking, hot water and lights.
The Property has an outdoor swimming pool, a lighted tennis court, an
exercise/fitness center overlooking the swimming pool, a sand volleyball court,
two gazebos with gas grills and picnic areas, a laundry room, and a car care
area. The Property also has winding walkways with access to McAlpine Greenway
Park. The Property has a large clubhouse/leasing office with an entertainment
area, fully-equipped kitchen, library and fireplace. There is ample paved
parking for tenants.
There are at least five apartment properties in the area that compete
with the Property. All offer similar amenities and have rents that generally are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing properties now averages
approximately 92%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 92% in 1992, 94% in 1993, 94% in 1994, 95%
in 1995 and 94% in 1996. On May 5, 1997, the Property was 93% occupied.
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Most of the tenants at the Property are white-collar workers.
The combined 1996 real estate tax rate imposed on the Property by the
City of Charlotte and Mecklenburg County was $1.2550. The assessed value was
$6,215,720. The taxes were calculated as $85,069 (including a solid waste tax of
$7,062).
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $5,238,890) 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 Charlotte, North Carolina area will
experience continued strong economic development and steady population increase,
and that such development and increase will support stable occupancy rates and
reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Company believes that the Property is in very good condition.
3. The Property is conveniently located and proximate to major
employers and shopping.
4. The Company is very familiar with the Charlotte rental market. The
Company already owns several other apartment complexes in the Charlotte area,
which may provide certain economies and efficiency in operation.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be indicative of future operating
results.
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DUNWOODY SPRINGS APARTMENTS
Dunwoody, Georgia
On July 25, 1997, the Company purchased the Dunwoody Springs
Apartments, a 350-unit apartment complex located at 8800 Dunwoody Place,
Dunwoody, Georgia (the "Property").
The Company purchased the Property from a seller unaffiliated with the
Company and its affiliates. The purchase price was $15,200,000, all of which was
borrowed by the Company under the Company's unsecured line of credit. Title to
the Property was conveyed to the Company by limited warranty deed.
Location. The Property is in Dunwoody, Fulton County, just north of
Atlanta, Georgia. The following information is based in part upon information
provided by the greater Atlanta Chamber of Commerce.
The economy of the greater Atlanta area is diverse, and includes as
significant sectors manufacturing, transportation, distribution, retailing,
wholesaling, finance, government, research, education and medicine. More than
80% of the Fortune 500 industrial companies and over 1,800 local manufacturing
firms have operations in the area. Atlanta is the national headquarters of
Coca-Cola, Cable News Network, Delta Air Lines, United Parcel Service, Home
Depot and Holiday Inn Worldwide. The city is also headquarters for the Sixth
District Federal Reserve Bank.
The convention and visitor trade is also one of Atlanta's primary
industries and has an important impact on the overall economy of the city.
Atlanta's hosting of the 1996 Centennial Olympic Games furthered its visibility
as an important city internationally.
Atlanta sits at the junction of three major Interstate Highways (I-20,
I-75 and I-85), and I-285 (Perimeter Highway) encircles the city. There are
several airports in the area, but the principal airport is Hartsfield-Atlanta
International Airport, which had over 60,000 flights and over 4.5 million
passengers in 1994. Atlanta also has a rapid rail transit system (known as the
Metropolitan Atlanta Rapid Transit Authority, or "MARTA").
Fulton County is the most densely developed and populated county in the
metropolitan Atlanta area. With nearly 40% of the total number of jobs in the
greater metropolitan area, the county also has the largest employment base, with
downtown, midtown, Buckhead and Perimeter Center office districts all located in
Fulton County.
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The 1996 population of Fulton County was approximately 745,000. The
Atlanta Regional Commission projects that Fulton County's population will reach
approximately 773,500 by 2005, and the County's current employment base of
approximately 616,000 is projected to increase by approximately 8,000 jobs
annually over the next ten years. Since 1980, county-wide employment has
increased by an average of approximately 11,000 jobs per year.
The Property is located on Dunwoody Place off of Northridge Road. The
immediate area surrounding the Property consists of other multi-family and
single-family housing, and commercial and retail development. The Property is
located at the apex of metropolitan Atlanta's largest and fastest growing
commercial area, the Perimeter Center/Georgia Highway 400 corridor. The Property
is near businesses, major shopping, entertainment, schools and churches.
The Property is located approximately 16 miles from the Atlanta central
business district, approximately five miles north of Interstate 285 and less
than one mile from both Georgia Highway 400 and Roswell Road.
Description of the Property. The Property consists of 350 garden and
loft style apartment units in 25 two- and three-story buildings on approximately
33 acres of land. The Property was built in 1981.
The Company believes that the Property is generally in very good
condition and has been well maintained. According to the seller, since October
of 1993, the seller has completed approximately $432,000 in capital
improvements, including installation of new appliances, roof repairs, paving,
concrete repairs, floor covering installation, window treatments and HVAC repair
and replacements. In addition, the exterior of the Property was painted in March
1997, which included exterior wood replacement where necessary. The Company has
budgeted $612,500 for additional renovations to the Property, including
construction of a clubhouse, re-siding of the entire Property and appliance
replacements.
The Property offers eight unit types. The unit mix and rents currently
being charged new tenants are as follows:
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Approximate
Interior Monthly
Quantity Type Square Footage Rental
-------- ---- -------------- ------
56 One bedroom/one bath 544 $545
(executive)
60 One bedroom/one bath 776 600
(screened porch)
68 One bedroom/one bath 972 645
(loft)
80 One bedroom/one bath 1,000 655
(sun room)
20 Two bedrooms/two 1,121 740
baths (roommate,
screened porch)
28 Two bedrooms/two 1,254 770
baths (screened
porch)
24 Two bedrooms/two 1,308 830
baths (den)
14 Two bedrooms/two 1,400 890
baths (sun room)
The apartments provide a combined total of approximately 331,600 square
feet of net rentable area.
Leases at the Property are generally for terms of one year or less.
Average rental rates for the past five years have both increased and decreased.
As an example, a one-bedroom, one-bath apartment unit (972 square feet) rented
for $519 in 1992, $573 in 1993, $584 in 1994, $540 in 1995 and $625 in 1996. The
average effective annual rental per square foot at the Property for 1992, 1993,
1994, 1995 and 1996 was $6.71, $7.40, $7.54, $6.97 and $8.07, respectively.
The buildings are wood-frame construction on concrete slabs, and the
exteriors are painted hardboard batten-style siding. Roofs are pitched and
covered with composition shingles and have metal gutters and downspouts.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually controlled utilities. Each apartment unit, other than
the smallest one-bedroom unit, has individually metered utilities. The owner of
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the property supplies cold water, sewer service and trash removal. Each tenant
is responsible for his or her own electricity usage, which includes air
conditioning and lights, and each tenant also pays for gas usage that provides
heat and hot water, except that the owner of the Property is responsible for gas
usage in the smallest one-bedroom apartment units, which are in four buildings,
each of which is served by one central gas-fired boiler that provides hot water.
Each unit, except the smallest one-bedroom unit, includes washer/dryer
connections for full-sized appliances, mini and vertical blinds and a patio or
balcony. There is a wood-burning fireplace in 241 apartment units and certain
units include built-in bookshelves, a screened porch or sun room. Each kitchen
is equipped with a refrigerator/freezer with icemaker, gas range and oven,
dishwasher and garbage disposal.
The Property has two swimming pools, a sun-deck with dressing rooms and
showers, a pool-side cabana, two lighted tennis courts, a park area with gazebo,
picnic tables and gas grills, a fitness center, a laundry facility and a car
wash area. There is ample paved parking for tenants.
There are at least seven apartment properties in the area that compete
with the Property. All offer similar amenities and have rents that generally are
comparable when compared with those of the Property. Based on a recent telephone
survey, the Company estimates that occupancy in nearby competing properties now
averages approximately 90%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 93% in 1992, 94% in 1993, 95% in 1994, 94%
in 1995, and 96% in 1996. On July 21, 1997, the Property was 95% occupied.
As of July 1997, approximately 80% of the Property's tenants were
single, with an average age of approximately 23. Tenants consist principally of
service-level and mid-management level employees of local businesses, including
MCI and Coca-Cola. The average household income is approximately $32,000.
For 1996, Fulton County specified an assessed value for the Property
equal to $11,797,800. The taxable value is equal to 40% of the assessed value,
or $4,719,120. The tax rate was $0.04028, and the total real estate taxes were
calculated as $190,086.
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $8,970,500) 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 Property on repairs and
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improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Company to be relevant in evaluating the Property for
acquisition by the Company included the following.
1. The Company believes that the greater Atlanta, Georgia metropolitan
area will continue to enjoy steady population increase and steady economic
development and that such increase and development will support stable occupancy
rates and reasonable increases in rents at the Property. In particular, the
Company believes that the Property is located in a particularly desirable part
of the Atlanta metropolitan area.
2. Based upon an engineering report and its own inspections, the
Company believes that the Property is in very good condition. The Company
particularly believes that the Property benefited from a significant renovation
completed by the former owner in 1993, and will similarly benefit from
additional renovations to be undertaken by the Company.
3. The Property has an advantageous location near the
Perimeter Center/Georgia Highway 400 corridor, Atlanta's largest and fastest
growing commercial area.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be indicative of future operating
results.
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ITEM 7.a.
[L.P. MARTIN & COMPANY LETTERHEAD]
L.P. MARTIN & COMPANY
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTANTS
4132 INNSLAKE DRIVE
GLEN ALLEN, VA 23060
PHONE: (804) 346-2626
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 Summit Charleston Apartments located in Charlotte,
North Carolina for the twelve month period ended April 30, 1997. This
statement is the responsibility of the management of Summit Charleston
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 2 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 Summit
Charleston Apartments (as defined above) for the twelve month period
ended April 30, 1997, in conformity with generally accepted accounting
principles.
/s/ L.P. Martin & Co., P.C.
Richmond, Virginia
July 18, 1997
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SUMMIT CHARLESTON 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 APRIL 30, 1997
INCOME
- ------
Rental and Other Income $1,429,893
----------
DIRECT OPERATING EXPENSES
- -------------------------
Administrative and Other 194,849
Insurance 16,121
Repairs and Maintenance 201,408
Taxes, Property 77,178
Utilities 56,563
--------
TOTAL DIRECT OPERATING EXPENSES 546,119
-------
Operating income exclusive of items not
comparable to the proposed future
operations of the property $ 883,774
==========
See accompanying notes to the financial statement.
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SUMMIT CHARLESTON APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED APRIL 30, 1997
NOTE 1 - ORGANIZATION
- ---------------------
Summit Charleston Apartments is a 214 unit garden style apartment complex
located on 14.95 acres in Charlotte, North Carolina. The assets comprising the
property were owned by an entity unaffiliated with Cornerstone Realty Income
Trust, Inc. during the financial statement period. Cornerstone Realty Income
Trust, Inc. subsequently purchased the property.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. 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,
professional fees and management fees.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
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ITEM 7.b.*
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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ITEM 7.c.*
* 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: August 7, 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 May 14, 1997
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
10.1 Purchase Contract for
Charleston Place Apartments
Apartments
10.2 Purchase Contract for
Dunwoody Springs Apartments
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors*
* To be filed by amendment.
Exhibit 10.1
FIRST MODIFICATION TO PURCHASE CONTRACT
This Modification to Purchase Contract ("Modification") is made and
entered into this 17th day of April 1997 between Cornerstone Realty Group, Inc.
("Purchaser") and Summit Properties Partnership, L.P. d/b/a Summit Properties
Partnership, Limited Partnership ("Seller").
WHEREAS, Purchaser and Seller entered into an Agreement of Sale dated
the 17th day of April 1997 ("Agreement"); and
WHEREAS, Purchaser and Seller now desire to modify and amend the
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:
1. All terms not specifically defined herein shall have the same meaning
as ascribed to them in the Agreement.
2. Par. 7.1, Closing, is hereby deleted and replaced with the following:
"Closing will be held no later than thirty (30) days after the
completion of the Inspection Period at such place and at such time as the
parties may agree. In the event that Seller cannot transfer title on the date
set forth herein, solely as a result of the failure of the current mortgage
holder to timely permit such transfer, then Purchaser shall have the option as
its sole remedy to either extend the closing date or terminate this Agreement
and Seller shall return the deposit to the Purchaser."
3. Par. 7.2(H) is hereby amended to add to the existing paragraph the
following:
"provided, the right to use the name "Summit" and any logos, trade
marks, service marks or brochures or marketing information containing any of the
foregoing shall not be included within the Property and will not be transferred
to Purchaser. Purchaser covenants and agrees not to use in any manner the name
"Summit"; provided, however, Seller shall provide Purchaser the period expiring
thirty (30) days following Closing within which to remove any existing signage
bearing the name "Summit" from the Property and to provide for the replacement
of brochures and marketing information bearing the name "Summit" with those
prepared by Purchaser which shall not bear the name "Summit". If any
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signage, brochures, marketing information or otherwise bearing the name "Summit"
shall not have been removed or remain in use following the expiration of such
thirty (30) day period, Seller shall be permitted to enter upon the Property
following prior notice (but without unreasonable disruption to the business of
Purchaser thereon or to tenants of the Property) to remove such signage,
brochures, marketing information or otherwise bearing the name "Summit".
4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
5. In the event there is any conflict in the terms of this Modification
and the terms of the Agreement, the terms of this Modification shall govern.
6. This Modification may be executed in separate counterparts, each of
which shall be deemed an original and all of which taken together will
constitute one agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the date first above written.
CORNERSTONE REALTY GROUP, INC.
a Virginia Corporation
By: /s/ S. J. Olander
---------------------
Name: S. J. Olander
Its: Senior Vice President
SUMMIT PROPERTIES PARTNERSHIP, L.P.
d/b/a SUMMIT PROPERTIES PARTNERSHIP,
LIMITED PARTNERSHIP
By: SUMMIT PROPERTIES REAL ESTATE INC.
By: /s/ Michael G. Malone
---------------------
Name: Michael G. Malone
Its: Vice President
<PAGE>
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 17th day of April 1997,
between CORNERSTONE REALTY GROUP INC. or its nominee, (hereinafter called
"Purchaser") and SUMMIT PROPERTIES PARTNERSHIP, L.P., a Delaware limited
partnership, d/b/a SUMMIT PROPERTIES PARTNERSHIP, 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 SUMMIT CHARLESTON APARTMENTS
located in CHARLOTTE, NC, with all buildings and improvements located thereon,
as more particularly described in the attached legal description in Exhibit A
including, but not limited to 214 individually heated and air conditioned
apartment units, with all appurtenances, together with all appliances, drapes,
carpeting, shrubbery and all other personal property used in connection with the
premises, including, the inventory of personal property to be supplied by Seller
and attached hereto as Exhibit B (all such real and personal property
hereinafter collectively referred to as the "Property" unless the context
clearly indicates otherwise).
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 Purchase Price. The total purchase price shall be NINE MILLION FOUR
HUNDRED SEVENTY FIVE THOUSAND ($9,475,000) DOLLARS as evidenced by cash or cash
equivalent at closing.
2.2 Deposit. ONE HUNDRED THOUSAND ($100,000) DOLLARS payable as follows:
(i) FIFTY THOUSAND ($50,000) DOLLARS upon the execution of this
Agreement by both parties, and
(ii) FIFTY THOUSAND ($50,000) DOLLARS at the end of the
"Inspection Period" described in Article VI below.
Said ONE HUNDRED THOUSAND ($100,000) DOLLARS deposit shall be placed in escrow
with TitleCompany of North Carolina or its authorized agent as an earnest money
deposit which may be credited against the purchase price or applied as per
Article XI below.
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ARTICLE III
TITLE MATTERS
3.1 Marketable Title. (A) Seller, shall convey good and marketable title
by Special Warranty Deed, subject only to general taxes for the current year not
yet due and payable and utility easements and other matters of record which do
not interfere with the present use of the Property, or which are not objected to
by Purchaser pursuant to Section 3.2.
(B) Title shall be free from any and all liens or mortgages and
Seller shall be responsible for any prepayment penalties necessary to deliver
such free title.
3.2 Title Defects; Election to Cure. Seller shall furnish to Purchaser 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 earlier of the end
of the Inspection Period or fifteen (15) days after Purchaser's receipt of the
Commitment 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. The Commitment shall be furnished without cost to Purchaser, except and
unless Purchaser obtains a policy.
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.
3.4 Notwithstanding anything to the contrary set forth herein, Purchaser
shall be required to object to any matters or conditions relating to the
Property, including, without limitation, those matters or conditions described
in Section 3.2, 6.1(A), 6.1(F), 6.1(G) and 6.2, on or prior to the period which
expires thirty (30) days from the date of this Agreement (the "Inspection
Period") or such right, and any right of Purchaser to terminate hereunder with
respect to such matters or conditions existing as of the expiration of the
Inspection Period shall be deemed waived.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following shall be prorated to
the day of the closing: rents and other income from the Property; operating
expenses (on such service contracts and other obligations as Purchaser may agree
to assume);
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and general and real property taxes and personal and business property taxes, if
any, 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, including search and examination fees,
and the cost of its inspections, audit, reports, surveys and other due diligence
review. Seller shall pay any prepayment penalty charged by the holders of any
existing notes.
4.3 Allocation of Rents. Rents collected by Seller prior to closing
shall be prorated as agreed in 4.1 above. Purchaser shall apply rents received
after Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 Prior Lease Concessions. Seller 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 may during the
Inspection Period review the reports set forth herein and exercise its right to
reject the Property based thereon or the right hereunder shall be deemed waived.
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(B) The receipt by Purchaser of Seller documents described in 7.2
below.
(C) On the condition that Sellers representations and warranties
described in Article VIII below remain true and correct.
(D) On the condition that there have been no material or adverse
changes to the Property or leases.
(E) Seller acknowledges that Purchaser is a public entity and that
it is required to furnish financial statements to the Securities and Exchange
Commission in connection with this acquisition. Seller agrees to make the
information available for Purchaser to audit the last 12 months of operation of
the Property so that a report can be generated that is in compliance with
accounting Regulation S-X of the Securities and Exchange Commission.
(F) Survey which shall show no encroachments onto the Land from
any adjacent property, no encroachments by or from the Land onto adjacent
property and no violation of or encroachments upon any recorded building lines,
restrictions or easements affecting the Property. If the Survey discloses any
such encroachment or violation, Seller shall have thirty (30) days from the date
of Purchaser's objections prior to the end of the Inspection Period as to any
such matters disclosed on 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, other than any indeminification
obligations set forth herein, or (ii) accept the property subject to any such
encroachment or violation.
(G) 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.
6.2 Inspection. This Agreement shall be further subject to and
contingent upon Purchaser's satisfactory inspection as follows herein below.
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6.2.1 Preparation for Inspection. At the execution of this Agreement,
Seller shall deliver to Purchaser copies of the following: The current rent roll
for the Property; detailed statements of income and expenses with respect to the
Property for the past two years; the most recent tax bills for the Property;
utility bills for the Property for the twelve (12) months previous to the date
hereof; all insurance policies applicable to the Property to include loss runs
for the last five (5) years; Plans and Specifications for the Property, service
contracts, Certificates of Occupancy, to the extent reasonably available; a copy
of the title policy and most recent survey for the Property. A copy of any
environmental or engineering reports on the property. All documents delivered by
Seller shall be certified as being actual records of the Seller or reports that
were received in the due course of business and relied upon.
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 be permitted 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. It is agreed that unless the parties
specifically extend any dates herein, this Paragraph is subject to the terms and
conditions of Paragraph 3.4.
6.2.3 Indemnification. Purchaser agrees to indemnify and hold Seller
harmless from any damages, liability, loss, cost, expense, causes of action and
liens arising from Purchaser's inspection of the Property. Purchaser shall
restore any damages caused by any tests, studies or inspections performed by or
on behalf of Purchaser. This indemnification obligation shall survive closing or
the termination of this Agreement.
6.2.4 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, other than any indemnification obligations set forth
herein, and all deposits shall be returned to Purchaser.
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6.2.5 "Rent Ready". During the "Inspection Period", both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree that
said apartment shall be representative of a "rent ready" unit by which all
other units shall be judged for "rent ready" condition at closing; provided,
however, Purchaser and Seller agree that "rent ready" shall be determined based
on the general operating condition of the unit and habitability thereof and not
as to the quality or age of fixtures or finish. All apartment units vacant or
vacated at least five (5) days prior to closing shall 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, to the extent the same are
provided by Seller in such unit or units as part of Seller's standard rent
package. However, for any units vacated prior to closing for less than five (5)
days, which are not in a "rent ready" condition, Seller shall give to Purchaser
an allowance in the amount of $200 per Unit, which is to compensate for cleaning
and painting. In the event that there is additional damage (carpet needs
replacement and/or missing equipment), to any Units vacated prior to closing for
less than five (5) days, the parties shall agree to a proper compensation as to
the damage to such Units and Purchaser shall be entitled to a credit against the
Purchase Price in the amount of the agreed upon compensation at closing.
6.2.6 Condition of Personal Property at Closing. All personal property
included in the sale and all mechanical, electrical, heating, air conditioning,
sewer, water and plumbing systems will be in the same working order at the time
of closing and in the same condition as at the time of the expiration of the
Inspection Period. 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 no later than thirty (30) days after
the completion of the Inspection Period at such place and at such time as the
parties may agree. In the event that Seller cannot transfer title on the date
set forth herein, Purchaser shall have the option to extend the closing date or
terminate this Agreement and Seller shall return the deposit to the Purchaser.
7.2 Seller's Deliveries. At closing, Seller shall execute and deliver to
Purchaser the Special Warranty Deed referred to in Paragraph 3 hereof and shall
also execute, where necessary, and deliver to Purchaser, the following:
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(A) Bill of Sale, with warranty of title transferring the personal
property (as shown in Schedule B) to Purchaser free of all liens, charges and
encumbrances.
(B) Originals or copies of all signed leases and rental agreements
in effect with tenants of the Property.
(C) All security deposits made by such tenants. Seller will give
the tenants the required notice of such transfer in compliance with the laws of
North Carolina.
(D) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(E) A rent roll 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 to Purchaser's satisfaction, a report
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 report shall be dated within 30 days from
the Effective Date of this Agreement 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, subject to
the following sentence, proceed to have any corrective work completed prior to
closing. Seller's obligation to undertake any corrective work shall be limited
to its expenditure of out-of-pocket costs and expenses not exceeding $5,000,
and, if such costs are reasonably estimated by the contractor preparing the
report to exceed $5,000, Seller shall not be obligated to undertake any such
corrective work and Purchaser may, if Seller elects not to undertake such work,
terminate this Agreement or proceed to settlement and have $5,000 deducted from
Seller's proceeds; provided, however, if Seller undertakes such work,
Purchaser's offset right shall be reduced by the actual out of-pocket costs and
expenses paid or incurred by Seller up to and including $5,000. If Purchaser
elects to close, Purchaser shall be responsible for all costs related to such
corrective work in excess of $5,000. Seller shall promptly return Purchaser's
deposit upon such termination.
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(H) Assignments of all Seller's interest in the following: (1) all
assignable licenses, and permits relating to the operation of the Property, (2)
the leases and rental agreements with tenants of the Property, and (3) the
existing Property telephone number.
(I) Assignments of all warranties and guarantees to the extent
such are still in effect and are assignable 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) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement, including but not limited to:
(i) An opinion of Seller's counsel, in a form satisfactory to
Purchaser, stating that:
(a) The individual(s) executing the deed and related
documents are duly authorized to do all such acts as are necessary to consummate
this sale, without further consent of any other party.
(b) That the partner or officer can bind the Partnership
or Corporation.
(L) Seller shall provide a satisfactory and valid written
termination of the management agreement executed by the existing management and
rental agent for the Property, without cost to the Purchaser.
(M) A notice letter to all the residents of the apartment complex
as to change of ownership in the form prepared by the Purchaser.
(N) All such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Purchaser or its counsel.
(O) 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.
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(A) Pay to Seller the cash portion of the purchase price, adjusted
for the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under leases,
securities, any contracts which may be accepted by the Purchaser and any other
obligations specifically set forth herein.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate the
transfer.
(D) Purchaser shall procure all the documents necessary for the
transfer of the telephone, electric, water and sewer, and gas utilities, as may
be required by the utility, for execution at closing. Seller agrees to cooperate
with the Purchaser in order to accomplish said 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
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other encumbrances relating to the Property. This warranty shall survive for one
year the following closing.
(E) Seller has no actual knowledge of any existing or threatened
litigation which relates to or which would affect the Property. This warranty
shall survive for one year following closing.
(F) Seller has received no written notice that any part of the
Property or the operation of the Property, is in violation or may violate any
governmental statute, regulation, ordinance or building code or of any private
restriction, that any governmental authority requires any work to be done on or
affecting the Property, or that any governmental authority has expressed an
intent to condemn or to make special improvements for the benefit of the
Property or any part thereof. This warranty shall survive for one year following
closing.
(G) That Seller is not a "foreign person" within the meaning of
the Internal Revenue Code, as amended (the "Code"), and that Seller will furnish
to Purchaser prior to closing an affidavit in form satisfactory to Purchaser
confirming the same.
(H) 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.
(I) If, after the date of this Agreement and on or prior to
closing, Seller first obtains knowledge or first receives notice of a fact,
matter or circumstance, which fact, matter or circumstance is not attributable
to any action or inaction of Seller or its agents or representatives, which
causes any of Seller's representations or warranties made in this Section to be
inaccurate, Seller shall submit written notice thereof to Purchaser (a
"Disclosure Memorandum") specifying in reasonable detail the fact, matter or
circumstance causing such inaccuracy. Seller agrees to disclose any such
inaccuracy in good faith as soon as possible and Seller shall not knowingly fail
to promptly disclose to Purchaser any such inaccuracy. In the event that Seller
shall deliver to Purchaser a Disclosure Memorandum pursuant to this Section,
then Purchaser shall have the option by written notice to Seller within seven
(7) days following Purchaser's receipt of such
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Disclosure Memorandum (and closing shall be deemed to be postponed to
accommodate such seven (7) day period) to (i) elect to terminate this Agreement,
or (ii) elect not to terminate this Agreement in which case Seller shall be
relieved of any representation, warranty or indemnification obligation with
respect to such fact, matter or circumstance giving rise to such inaccuracy,
subject to any mutual agreement with respect to such fact, matter of
circumstance. For purposes of this Section 8.1, the term "to Seller's knowledge"
or like terms shall not include any knowledge imputed to Seller and shall mean
only the actual knowledge of Raymond V. Jones and Michael G. Malone
(collectively, "Seller's Representatives"). For purposes of this Section 8.1 any
reference to Seller's receipt of notice shall not include any notice imputed to
Seller and shall mean only actual written notice received by either or both of
Seller's Representatives.
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, and Purchaser
shall be entitled to the return of the Deposit, 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 correct, where possible, and if breach
is as a result of Purchaser's action or failure to act where reasonably
required, and Purchaser elects to terminate this Agreement, then in that event
Seller shall indemnify Purchaser for all reasonable costs incurred (up to a
maximum of $15,000) 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 any time prior to closing any portion of the
Property is destroyed or damaged by fire or any other casualty whatsoever,
Seller shall give notice thereof to Purchaser within one (1) business day after
Seller becomes aware of such casualty, but in any event prior to Closing. The
rights and obligations of the parties by reason of such destruction or damage
shall be as follows:
(a) If the cost of repair and restoration of such destruction or
damage shall be $200,000 or less, Seller shall repair such damage as promptly as
is reasonably possible, restoring the damaged Property at least to its condition
immediately prior to such damage; and in such event, Purchaser may elect to
defer closing until such repair is made to Purchaser's reasonable satisfaction
or accept the proceeds of Seller's insurance plus
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deductible and loss of rent reimbursement for the period after closing.
(b) If the cost of repair and restoration of such destruction or
damage, as agreed to by Purchaser and Seller, shall exceed $200,000, Purchaser
may elect to terminate this Agreement; and if Purchaser does not elect to
terminate this Agreement, closing shall occur as scheduled, whereupon Seller
shall pay to Purchaser, at closing, all insurance proceeds payable for such
damage, plus an amount equal to any deductible and reimbursement for loss of
rent for the period after closing and the sale shall be closed without Seller's
repairing such damage. In the event Purchaser elects to terminate this
Agreement, this Agreement shall be rendered null and void, the deposit shall be
returned, and the parties shall have no further obligations or liabilities
hereunder, other than any indemnification obligations set forth herein.
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 less than TWO HUNDRED THOUSAND
($200,000) DOLLARS, or any part of the building or more than 5% of the parking
area or where reduction of parking shall violate the current zoning
requirements, 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,
other than any indemnification obligations set forth herein, or (b) to waive its
right to terminate this Agreement and proceed to closing, in which event all
proceeds, awards and other payments arising out of such condemnation or sale
(actual or threatened) shall be paid to the Purchaser at closing, if such
payment has been received or Seller shall assign to Purchaser the rights to such
payments.
9.3 Risk of Loss. Prior to closing, all risks of loss or damage by every
casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 Commission. Seller agrees to pay a brokerage fee to DICKINSON,
LOGAN, TODD & BARBER, INC., pursuant to a separate agreement between Seller and
Brokers. Said brokerage fee shall be deemed earned if, and only if, settlement
occurs hereunder, and shall not be deemed earned even if Purchaser and/or Seller
wrongfully fail(s) to consummate the purchase and sale herein contemplated.
Purchaser shall not be obligated for any brokerage fees to any broker, and
Seller agrees to hold Purchaser harmless in connection with such fees. Seller
and Purchaser
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represent and warrant to each other that no other brokerage fees are or shall be
owing in connection with this transaction or in any way with the Apartments and
Seller and Purchaser hereby indemnify and hold the other harmless from any and
all claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 Default Defined. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 Seller's Default. Upon Seller's default, the Purchaser, at it's
election, may, as its sole remedy, either (1) require specific performance of
Seller, (2) cancel this Agreement and obtain a prompt return of the deposit, in
which case this Agreement shall be terminated and the parties released from all
obligations hereunder, or (3) the Purchaser may waive such defaults and proceed
to settlement. Seller shall indemnify Purchaser for any reasonable costs
incurred by Purchaser if Purchaser elects to pursue its option (1) noted above,
to include reasonable attorney fees.
11.3 Purchaser's Default. Upon Purchaser's default, this Agreement shall
be terminated and both parties released from all obligations hereunder, and the
deposit shall be retained by the Seller as liquidated damages. Seller shall have
no other remedy against Purchaser in the event of Purchaser's default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement sets forth the entire
understanding between the parties; it supersedes all previous agreements and
representations which are deemed merged herein and may not be modified except in
writing.
12.2 Assignment. Purchaser may assign this Agreement without the consent
of Seller.
12.3 Severability. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 Binding Effect. The parties to the Agreement
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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: SUMMIT PROPERTIES PARTNERSHIP, L.P.
212 S. Tryon Street - Suite 500
Charlotte, NC 28281
Attention: Michael G. Malone, Esq.
Fax: (704) 333-8340
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With a copy to
Seller's Attorneys: KENNEDY COVINGTON LOBDELL
HICKMAN, L.L.P.
NationsBank Corporate Center
Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
Attention: David H. Jones, Esq.
Fax: (704) 331-7598
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and-
Ted Oliver, Esq.
Manning, Fulton & Skinner
500 UCB Plaza
3605 Glenwood Avenue
Raleigh, NC 27612
Fax: (919) 781-0811
13.2 Delivery of Notice. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier or by 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 Sction 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.
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
15
<PAGE>
14.1.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
SUMMIT PROPERTIES PARTNERSHIP, L.P.,
d/b/a SUMMIT PROPERTIES PARTNERSHIP, LIMITED PARTNERSHIP
By: SUMMIT PROPERTIES INC.,
d/b/a SUMMIT PROPERTIES REAL ESTATE INC.
By: /s/ Michael G. Malone
---------------------
Its: Vice President
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. Olander
-----------------
Its: Vice President
16
Exhibit 10.2
THIS FIRST AMENDMENT TO AGREEMENT OF SALE AND
PURCHASE (this "Amendment") made as of the 17th day of July, 1997 by and
between TGM Realty Partners II L.P. ("Seller") and Cornerstone Realty Income
Trust, Inc. ("Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS:
A. The parties hereto entered into an Agreement of Sale and
Purchase dated as of the date hereof (the "Original Agreement"), providing for
the conveyance by Seller and the purchase by Purchaser of certain premises known
as Dunwoody Springs Apartments, Fulton County, Georgia, as more particularly
described in the Original Agreement; and
B. The parties are desirous of amending the Original
Agreement pursuant to the terms and conditions hereinafter set forth.
NOW, THEREFORE, it is agreed as follows:
1. The following is hereby added to the Original Agreement
as new Article XVI:
"XVI.
GEORGIA TAX WITHHOLDING
16.1 Seller and Purchaser hereby agree that:
<PAGE>
(a) On or before the Closing, Seller shall deliver to
Purchaser Georgia Department of Revenue Form IT-AFF2, and Purchaser,
in compliance with O.C.G.A. Section 48-7-128, shall at Closing
withhold three (3%) percent of the "Net Taxable Gain" indicated in
such form.
(b) At the Closing, Purchaser shall cause the amount to be
withheld pursuant to paragraph (a) of this Section 16.1, together
with a report of the sale of the Property in the form of Georgia
Department of Revenue Form G-2-RP, to be submitted to the Georgia
Department of Revenue at P.O. Box 38459, Atlanta, Georgia 30334, with
a copy of such check and report given simultaneously to Seller and to
Alan Linder.
(c) The provisions of this Section 16.1 shall survive the
Closing."
2. All capitalized terms used in this Amendment which are not
defined herein shall have the meanings ascribed thereto in the Original
Agreement.
3. Whenever the term "Agreement" is used in the Original Agreement,
such term shall mean and refer to the terms, covenants and provisions of the
Original Agreement as modified by this Amendment.
4. Except as modified by this Amendment, the Original Agreement and
all covenants, agreements, terms and conditions thereof shall remain in full
force and effect and hereby are in all respects ratified and confirmed.
5. The covenants, agreements, terms and conditions contained in this
Amendment shall bind and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
-2-
<PAGE>
6. This Amendment may be executed in any number of counterparts,
each of which shall, when executed, be deemed to be an original and all of which
shall be deemed to be one and the same instrument. In addition, the parties may
execute separate signature pages, and such signature pages (and/or signature
pages which have been detached from one or more duplicate original copies of
this Amendment) may be combined and attached to one or more copies of this
Amendment so that such copies shall contain the signatures of all the parties
hereto.
7. Each party hereto may rely upon a fax (telecopy) of a counterpart
of this Amendment executed by the other party hereto that is delivered to such
party or its counsel, or any photocopy thereof.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be signed as of the date first above written.
TGM REALTY PARTNERS II L.P.
By: TGM Associates L.P., general partner
By: TJG Holdings, Inc., general partner
By: /s/
-----------------------------
Name: illegible
Title: President
CORNERSTONE REALTY INCOME TRUST, INC.
By: /s/ S.J. Olander
-------------------------
Name: S.J. Olander
Title: S.V.P.
Consented and Agreed to:
CHICAGO TITLE INSURANCE COMPANY
By: Eastern Title Agency, Inc.,
authorized agent
By: /s/ Michael W. Tighe
------------------------
Name: Michael W. Tighe
Title: President
-4-
<PAGE>
AGREEMENT OF SALE
AND PURCHASE
-----------------
By and Between
TGM REALTY PARTNERS II L.P.
Seller
and
CORNERSTONE REALTY INCOME TRUST, INC:
Purchaser
PREMISES:
Dunwoody Springs Apartments, Fulton County, Georgia
<PAGE>
INDEX
-----
ARTICLE PAGE
- ------- ----
I. INCLUSIONS IN SALE............................................1
II. PURCHASE PRICE................................................2
III. INSPECTION PERIOD.............................................3
IV. REPRESENTATIONS, WARRANTIES AND COVENANTS.....................9
V. CLOSING ADJUSTMENTS..........................................11
VI. CLOSING......................................................13
VII. CLOSING DOCUMENTS............................................14
VIII. CLOSING COSTS................................................16
IX. COMMISSIONS..................................................17
X. RISK OF LOSS.................................................18
XI. TERMINATION AND REMEDIES.....................................20
XII. ESCROW.......................................................23
XIII. NOTICES......................................................25
XIV. MISCELLANEOUS................................................26
XV. POST-CLOSING AUDIT...........................................29
-i-
<PAGE>
INDEX
-----
EXHIBIT
- -------
A Description of Land
B Deed
C Assignment of Leases
D Bill of Sale and Assignment
E Assignment of Contracts
F Post-Closing Adjustment Letter
G FIRPTA Certificate
H Tenant Notice letter
I Contracts
J Personal Property
K Rent Roll
L Representation Letter
-ii-
<PAGE>
THIS AGREEMENT OF SALE AND PURCHASE ("Agreement") is made as of
the 17th day of July, 1997 by and between TGM REALTY PARTNERS II L.P.
("Seller"), having an office at c/o TGM Associates L.P., 650 Fifth Avenue, New
York, New York 10019, and CORNERSTONE REALTY INCOME TRUST, INC. ("Purchaser"),
having an office at 5417 Albemarle Road, Suite 100, Charlotte, North Carolina
28212.
W I T N E S S E T H:
- - - - - - - - - -
Seller hereby agrees to sell to Purchaser and Purchaser hereby
agrees to purchase from Seller, upon the terms and conditions contained in this
Agreement, the "Property" (as such term is defined in Section 1.1 hereof).
NOW THEREFORE, in consideration of the premises and of the
mutual covenants and agreements hereinafter set forth, and subject to the terms
and conditions hereof, Seller and Purchaser hereby covenant and agree as
follows:
I.
INCLUSIONS IN SALE
------------------
1.1. There shall be included in this sale all of the
following (collectively, the "Property"):
1.1.1. That certain parcel of real property (the "Land") known
as Dunwoody Springs Apartments, Fulton County, Georgia and as more
particularly described on Exhibit A annexed hereto and made a part
hereof, together with all rights and appurtenances pertaining
thereto, including, without limitation, any and all rights of Seller
in and to all roads, alleys, easements, streets and ways adjacent to
the Land, rights of ingress and egress thereto, any strips and gores
within or bounding the Land and in profits or rights or appurtenances
pertaining to the Land.
1.1.2. The buildings and all other improvements, structures
and fixtures placed, constructed or installed on the Land, which
buildings contain 350 apartments (of which one is currently used as
an office), whether or not rent is
<PAGE>
being collected from such apartments (collectively, the
"Improvements").
1.1.3. All of Seller's interest as landlord in and to all
leases (collectively, the "Leases") covering space situate at or within
the Land and Improvements.
1.1.4. Any and all rights of Seller in and to contractual
rights with respect to the operation, maintenance, repair and
improvement of the Land and Improvements, including service and
maintenance agreements (collectively, the "Contracts").
1.1.5. Any and all rights of Seller in and to tangible
personal property, excluding Seller's computer equipment and related
software, placed or installed on or about the Land or Improvements and
used as part of or in connection with the Land and Improvements
(collectively, the "Personal Property").
1.1.6. Any and all right of Seller to the use of the trade
name "Dunwoody Springs Apartments."
II.
PURCHASE PRICE
--------------
2.1. The purchase price (the "Purchase Price") for
the Property shall be FIFTEEN MILLION TWO HUNDRED THOUSAND and
00/100 ($15,200,000.00) DOLLARS, payable as set forth below:
2.1.1. Earnest money in the amount of ONE HUNDRED THOUSAND
and 00/100 ($100,000.00) DOLLARS (said sum, together with all interest
accrued thereon, is herein called the "Earnest Money") shall be
delivered by Purchaser to Chicago Title Insurance Company (the "Title
Company" or "Escrow Agent") by wire transfer simultaneously with
Purchaser's execution of this Agreement.
2.1.2. The balance of the Purchase Price shall be paid by wire
transfer to the Title Company for disbursement at Closing. The Earnest
Money shall be applied at Closing to the balance of the Purchase Price
due on such date. The Title Company shall notify Alan Linder at his
address set forth in Section 13.1 hereof promptly after the Title
Company receives the Earnest Money. If Purchaser fails to timely
deliver the Earnest Money to the Title Company, then, at Seller's
election, to be exercised by written notice given to Purchaser at any
time until the Earnest Money is so delivered to the Title Company, this
Agreement may be terminated, in which event Seller and Purchaser shall
have no further liability or obligation to each other hereunder.
2.1.3. The Title Company shall hold the Earnest
Money in escrow pursuant to the provisions of Article XII hereof.
-2-
<PAGE>
III.
INSPECTION PERIOD
-----------------
3.1. (a) For the period (the "Inspection Period") commencing
on the date hereof and ending on the date which is twenty-one (21) days after
the date hereof (such date is herein referred to as the "Inspection Period
Expiration Date"), Purchaser shall have the right to enter upon the Property to
have performed a physical, mechanical and environmental inspection of the
Property, as Purchaser deems necessary to determine the physical condition of
the Property. In no event, however, shall Purchaser be entitled to alter the
physical condition of the Property during the Inspection Period in any manner
whatsoever. Purchaser agrees that it shall not unreasonably interfere with
tenants in performing its inspection. Purchaser hereby agrees to indemnify
Seller and to hold Seller and Seller's agents and employees harmless from and
against any and all losses, costs, damages, claims or liabilities including, but
not limited to, mechanics' and materialmen's liens and attorneys' fees, arising
out of or in connection with Purchaser's access to or entry upon the Property
prior to the Closing, which indemnity and hold harmless shall, notwithstanding
anything contained herein to the contrary, survive the Closing or the earlier
termination of this Agreement. Purchaser shall provide Seller with telephonic
notice at least two (2) Business Days prior to each entry upon the Property, and
Seller shall have a right to have a representative present during each such
entry. Prior to Purchaser's first entry onto the Property, Purchaser shall
provide Seller with a certificate of insurance evidencing that Purchaser is
insured for public liability and property damage for at least $1,000,000. During
the Inspection Period, Seller shall cooperate with Purchaser in its inspection
of the Property, including, but not limited to, making available to Purchaser at
the Property such information, materials and documents relating to the Property
as
-3-
<PAGE>
Purchaser may reasonably request (including without limitation Purchaser's
Contract, Lease and rent payment files, but specifically excluding internal
memoranda and other items prepared by employees or agents of Seller for Seller's
internal use). If Purchaser shall find such inspection to be unsatisfactory for
any reason whatsoever, Purchaser shall have the right, at its option, to be
exercised not later than the Inspection Period Expiration Date, to terminate
this Agreement, and, upon such termination, the Earnest Money shall be refunded
to Purchaser, other than $100 which shall be paid to Seller as consideration for
the aforementioned twenty-one (21) day Inspection Period, and thereupon the
parties hereto shall have no further liabilities one to the other (other than
those that are expressly stated to survive the termination of this Agreement).
Purchaser's failure to timely exercise its right to terminate this Agreement
pursuant to the provisions of the immediately preceding sentence shall be deemed
to constitute Purchaser's waiver of its right to terminate this Agreement for
any reason whatsoever except as otherwise set forth in this Agreement.
(b) Except for the representations and warranties made by
Seller in this Agreement, (i) Seller makes no representation or warranty as to
the truth, accuracy or completeness of any materials, data or information
delivered by Seller to Purchaser in connection with the transaction which is the
subject of this Agreement, and (ii) Purchaser acknowledges and agrees that all
materials, data and information delivered by Seller to Purchaser in connection
with the transaction which is the subject of this Agreement are provided to
Purchaser as a convenience only and that any reliance on or use of such
materials, data or information by Purchaser shall be at the sole risk of
Purchaser; provided, however, that Seller represents to Purchaser that Steven C.
Macy, Executive Vice President of TJG Holdings, Inc., has no actual knowledge,
without any duty of inquiry, of any
-4-
<PAGE>
material errors in any such materials, data or information that
was prepared by Seller.
(c) Purchaser acknowledges that all information in respect of
the Property furnished or to be furnished by Seller to Purchaser has been or
will be so furnished on the condition that Purchaser maintain the
confidentiality thereof. Accordingly, Purchaser shall, and shall cause its
directors, officers, agents, employees and representatives to hold in strict
confidence and not disclose to any other party, without the prior written
consent of Seller, until the Closing shall have been consummated, any of the
information in respect of the Property delivered by Seller to Purchaser or any
of its directors, officers, agents, employees, representatives or employees. If
the Closing does not occur and this Agreement is terminated, Purchaser shall
promptly return to Seller all copies of all such information without retaining
any copy thereof or extract therefrom. Notwithstanding anything to the contrary
hereinabove set forth, Purchaser may disclose such information (i) on a
need-to-know basis to its employees or members of professional firms serving it
in connection with this transaction and (ii) as any governmental agency may
require in order to comply with applicable laws or regulations. Seller hereby
gives Purchaser permission to obtain a similar pledge of confidentiality from
the Broker (as defined in Section 9.1 hereof).
3.2. Promptly after the date hereof, Purchaser shall order a title
commitment with respect to the Land (the "Title Commitment") from the Title
Company. Purchaser shall direct the Title Company to deliver the Title
Commitment together with copies of all items and documents referred to therein
and all amendments to the Title Commitment to Seller's attorney simultaneously
with its delivery thereof to Purchaser's attorney. Purchaser shall have until
the earlier to occur of (i) the date which is ten (10) days after its or its
attorney's receipt of the
-5-
<PAGE>
Title Report, or (ii) the Inspection Period Expiration Date (the earlier of such
dates is herein called the "Title Disapproval Date") to examine the condition of
title and the terms and provisions of all said items and documents and to
approve or disapprove the same. If Purchaser shall disapprove the condition of
title, such disapproval shall be set forth, if at all, in a notice (the "Title
Disapproval Notice") given to Seller and the Title Company not later than the
Title Disapproval Date stating with specificity in what respect the condition of
title to the Property is disapproved by Purchaser (all such disapproved title
matters set forth in a timely delivered Disapproval Notice are herein called
"Title Objections"). Except as objected to in a timely delivered Title
Disapproval Notice, Purchaser shall be deemed to have approved of the condition
of title to the Property in all respects. At any time after Purchaser's
delivery of a Title Disapproval Notice, Seller may deliver a notice (a "Title
Disapproval Response Notice") to Purchaser that Seller will not cure or
eliminate any one or more Title Objections set forth in the Title Disapproval
Notice (each, a "Seller Objected to Title Objection"). Purchaser shall have
until the date which is ten (10) days after the date of the Title Disapproval
Response Notice in which to elect to terminate this Agreement by delivering a
written notice of such termination to Seller, and upon such termination, the
Earnest Money shall be refunded to Purchaser, other than $100 which shall be
paid to Seller as consideration for the Inspection Period, and
thereupon the parties shall have no further liabilities one to the other (other
than those that are expressly stated to survive the termination of this
Agreement). Purchaser's failure to timely terminate this Agreement pursuant to
the provisions of the immediately preceding sentence shall constitute
Purchaser's approval of each Seller Objected to Title Objection ("Purchaser's
Title Waiver"). Seller shall have until the Closing in which to cure or
eliminate all
-6-
<PAGE>
Title Objections set forth in a Title Disapproval Notice, provided that Seller
may, by notice to Purchaser, adjourn the Closing for up to thirty (30) days in
order to cure or eliminate any Title Objections. If any Title Objection which is
not a Seller Objected to Title Objection is not cured or eliminated by the
Closing, then, as Purchaser's sole remedy therefor, Purchaser shall have the
right to elect to terminate this Agreement by delivering a written notice of
such termination to Seller on the Closing Date (as defined in Section 6.1
hereof), and upon such termination, the Earnest Money shall be refunded to
Purchaser, other than $100 which shall be paid to Seller as consideration for
the Inspection Period, and thereupon the parties shall have no further
liabilities one to the other (other than those that are expressly stated to
survive the termination of this Agreement). Notwithstanding anything contained
herein to the contrary, Seller shall have no obligation to take any action or
expend any money to remove any Title Objections; provided, however, that
notwithstanding the foregoing, Seller shall be obligated to remove any mortgage
or other security interest entered into by Seller which affects the Property.
For purposes of the immediately foregoing sentence, a monetary exception to
title (i.e., any exception to title that can be cured by the payment of a sum of
money) shall be deemed to have been removed if the Title Company insures same
against collection out of or enforcement against the Property.
3.3. (a) Purchaser acknowledges that it has made or shall,
prior to the Inspection Period Expiration Date, make its own analysis and
evaluation of the income potential and profits and expenses of the Property as
well as the physical condition, layout, leases, footage, rents, income, expenses
and operation of the Property, and that, except as set forth in Section 4.1
hereof, Seller has not made and does not make any representations as to any of
the foregoing or any other matter or thing affecting
-7-
<PAGE>
or related to the Property or to this Agreement, including, but not limited to,
environmental matters (including but not limited to the presence of lead-based
paint and/or lead-based paint hazards) and zoning, and that neither party is
relying upon any statement or representation made by the other not embodied in
this Agreement. Purchaser hereby expressly acknowledges that no such
representation has been made and agrees to take the Property "as is", in
substantially its present condition, subject to all latent and patent defects
and to ordinary use, wear, tear and natural deterioration and subject to
casualty and condemnation as more particularly set forth in Article X hereof.
Purchaser hereby expressly acknowledges that the Purchase Price was negotiated
by and between Seller and Purchaser in reliance upon the provisions of the
preceding sentence. Seller is not liable or bound in any manner by any verbal or
written statements, representations, real estate "set-ups" or information
pertaining to the Property or its physical condition, layout, leases, footage,
rents, income, expenses, operation or any other matter or thing furnished by any
agent, employee, servant, or any other person, unless specifically set forth in
this Agreement. Purchaser acknowledges that the foregoing provisions of this
paragraph constitute a material inducement for Seller entering into this
Agreement. The provisions of this paragraph shall survive the Closing.
(b) Purchaser acknowledges that it is being given the
opportunity to conduct its own environmental investigation of the Property,
Purchaser agrees (i) to take the Property subject to all environmental
conditions affecting the Property (including but not limited to any lead-based
paint and/or lead-based paint hazards), and (ii) not to assert any claim against
Seller at any time based on the environmental condition of the Property. The
provisions of this Section shall survive the Closing.
-8-
<PAGE>
IV.
Representations, Warranties and Covenants
4.1. Seller hereby makes the following
representations and warranties:
4.1.1. Seller is not a "foreign person" as such term is defined
in Section 1445 (f) (3) of the Internal Revenue Code of 1996, as amended
(the "Code").
4.1.2. Seller has the full right, power and authority to sell
and convey the Property to Purchaser as provided herein and to carry out
its obligations hereunder. The consummation by Seller of the transaction
which is the subject of this Agreement will not conflict with or result
in a breach of any of the terms of any agreement or instrument to which
Seller is a party or by which Seller is bound or constitute a default
thereunder; the Board of Directors of Seller's general partner's
corporate general partner has authorized and approved of the execution
and delivery of this Agreement, the transaction which is the subject of
this Agreement, and all documents to be executed and delivered by Seller
at the Closing; and each person executing and delivering this Agreement
and all documents to be executed and delivered by Seller at the Closing
represents and warrants to Purchaser that he has due and proper
authority to execute and deliver same.
4.1.3. To the extent of Seller's actual knowledge, no
condemnation or eminent domain proceedings are pending against the
Property.
4.1.4. Except as set forth in the Phase I Environmental Site
Assessments prepared by S.T. Hudson Engineers, Inc. and dated June 7,
1993 and May, 1996 (no day specified), a copy of which Purchaser hereby
acknowledges having received, Seller has no actual knowledge of any
Hazardous Materials existing on the Property. For purposes of this
Agreement, "Hazardous Materials" means toxic materials, toxic
substances, pollutants, contaminants, hazardous waste or hazardous
substances (as those terms are defined in any federal, state or local
environmental laws or regulations affecting the Land or Improvements),
except for (a) chemicals and fluids used in the maintenance and
operation of any swimming pools on the Property, (b) any pesticides,
fluids, cleaners and other materials which are ordinarily and
customarily utilized in the maintenance, repair and operation of an
apartment project, and (c) any cleaners, fluids, chemicals and other
materials which may be located within the apartment units.
4.1.5 No residential Lease has a stated term exceeding one
year (except that any such term may expire on the last day of the
calendar month in which the first anniversary of the date of the
commencement of such term occurs).
4.1.6. Exhibit I annexed hereto lists all currently existing
Contracts.
4.1.7. Seller owns all of the Personal Property listed on
Exhibit J annexed.
-9-
<PAGE>
4.1.8. Seller has no actual knowledge of any existing
litigation which relates to or which would affect the property.
4.1.9. Except as may be set forth in each Lease, Seller has not
forgiven or made a concession regarding the respective Tenant's
obligation to pay the rent first due under such Lease on or after the
date of this Agreement.
4.1.10. Seller has no actual knowledge of (a) any material error
in the rent roll annexed hereto as Exhibit K, or (b) any Lease other
than with the parties listed on Exhibit K annexed hereto or (with
respect to any Contract that may be characterized as a Lease) Exhibit I
annexed hereto.
4.1.11. Seller has no actual knowledge of any written notice
given by a Tenant to Seller in which the Tenant has expressly alleged a
breach or default by Seller of its obligations as landlord under such
Tenant's Lease if such breach or default has not been cured.
The provisions of Sections 4.1.1 and 4.1.2 hereof shall survive the Closing for
an indefinite period, and the provisions of Section 4.1.9 hereof shall survive
the Closing for a period of twelve (12) months. As used in this Agreement, the
"knowledge" of Seller means solely the knowledge of Steven C. Macy, Executive
Vice President of TJG Holdings, Inc., without any duty of inquiry.
4.2. Purchaser hereby represents and warrants to Seller that
(i) Purchaser has the full right, power and authority to purchase and acquire
the Property from Seller as provided herein and to carry out its obligations
hereunder, (ii) the consummation by Purchaser of transaction which is the
subject of this Agreement will not conflict with or result in a breach of any of
the terms of any agreement or instrument to which Purchaser is a party or by
which Purchaser is bound or constitute a default thereunder, (iii) subject to
Purchaser's inspection of the Property pursuant to Article III hereof, the Board
of Directors of Purchaser has authorized and approved of the execution and
delivery of this Agreement and all documents to be executed and delivered by
Purchaser at the Closing, and (iv) to the best of Purchaser's knowledge,
Purchaser is required to file a Form 8-K report with the Securities and Exchange
Commission
-10-
<PAGE>
("S.E.C.") on account of this transaction under Rule 3-05 of S.E.C. Regulation
SX. Each person executing and delivering this Agreement and all documents to be
executed and delivered by Purchaser at the Closing represents and warrants to
Seller that he has due and proper authority to execute and deliver same. The
provisions of this Section 4.2 shall survive the Closing for an indefinite
period, except that the representation made by Purchaser in clause (iv) of the
first sentence of this Section 4.2 shall survive only until the date that
Purchaser files such Form 8-K with the S.E.C.
4.3. Seller agrees that between the date hereof and the
Closing Date or the earlier termination of this Agreement, Seller will:
(a) continue to operate the Property as heretofore
operated;
(b) place apartments which become vacant into rentable
condition ready for occupancy, including, to the extent
generally installed in other apartments in the Improvements,
carpet, refrigerator, range, heating, plumbing and electrical
systems and garbage disposal, provided that with respect to
any apartments which become vacant within five (5) Business
Days prior to the Closing Date ("Newly Vacated Apartments")
that Seller does not place into rentable condition ready for
occupancy, Seller's sole obligation shall be to give
Purchaser a $500 credit at Closing against the balance of the
Purchase Price for each such apartment, and provided further
that for each Newly Vacated Apartment that has suffered
unrepaired damage beyond normal wear and tear (other than
fire or other casualty covered by Article X hereof), Seller
shall at Closing turn over to Purchaser (or give Purchaser a
credit against the balance of the Purchase Price equal to)
such portion of the respective former Tenant's security
deposit to the extent that (i) Seller is not obliged to
return such security deposit to such Tenant and (ii) there
are no rent arrearages to which such security deposit may be
applied; and
(c) not enter into Leases for terms of less than one
month or more than one year.
V.
CLOSING ADJUSTMENTS
5.1. The following are to be prorated or adjusted (as
appropriate), if feasible, at the Closing, as of 11:59 P.M.
-11-
<PAGE>
on the day immediately preceding the Closing (the Adjustment Date"):
5.1.1. Rents, as and when collected. If as of the Adjustment
Date any tenant is in arrears in the payment of rent, rents received from such
tenant after the Closing shall be applied in the following order of priority:
(a) first, to the month in which the Closing occurs; (b) then, to any month or
months following the month in which the Closing occurs; and (c) then, provided
such tenant is otherwise current in its rent, to the period prior to the month
immediately preceding the month in which the Closing occurs; and (i) if
Purchaser receives said past due rents, Seller's aforesaid share thereof shall
be remitted by Purchaser to Seller, and (ii) if Seller receives such past due
rents, Purchaser's aforesaid share thereof shall be promptly remitted by Seller
to Purchaser.
5.1.2. Real estate and personal property taxes, if any, on the
basis of the fiscal year for which assessed. If the Closing shall occur before
the tax rate of assessment is fixed for the fiscal year in which the Closing
occurs, then the apportionment of such real estate and personal property taxes
at the Closing shall be upon the basis of the tax rate and/or assessment, as
applicable, for the next preceding year applied to the latest assessed
valuation. Final adjustment will be made upon determination of the actual tax
amount, and payment shall be promptly made by the party owing same based on such
proration.
5.1.3. Water and sewer charges on the basis of the most recent
bills available, and the unfixed charges based thereon for the intervening
period shall be apportioned on the basis of such last reading. Upon the taking
of a subsequent actual reading, such apportionment shall be readjusted and
Seller or Purchaser, as the case may be, will promptly deliver to the other the
amount determined to be so due upon such readjustment. Notwithstanding the
foregoing, Seller shall make reasonable efforts to obtain a current reading and
related bill immediately prior to the Closing Date.
5.1.4. Amounts paid or payable in respect of any Contracts
assigned to Purchaser pursuant to the Assignment of Contracts (as such term is
defined in Section 7.1.4 hereof), including but not limited to any up-front
"bonus" payments made in consideration of entering into any Contract other than
for reimbursement to Seller of expenses or expenditures incurred by Seller
(which up-front "bonus" payments, if any, shall be prorated based upon the
unexpired term of the Contract).
5.1.5. Fuel, if any, based on a fuel company letter based upon
a reading made by Seller's supplier (reasonably adjusted to the quantity present
on the Adjustment Date). The value thereof shall be calculated at Seller's last
cost (including sales tax).
5.1.6. Purchaser shall receive a credit against the Purchase
Price in an amount equal to all tenant security deposits to which tenants are
entitled pursuant to the Leases which are assigned to purchaser at the Closing.
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5.1.7. Brokerage commissions with respect to leasing of space
at the Property and tenant improvement work shall be paid as follows: All such
commissions and tenant improvement work owed with respect to Leases and/or
extensions of Leases executed (i) before the Closing shall be paid by Seller,
and (ii) after the Closing shall be paid, as and when due, by Purchaser,
provided that for any tenant improvement work not performed and paid for by
Seller with respect to Leases first executed on or after the date that is five
(5) Business Days before the Closing Date, Seller's sole obligation shall be to
give Purchaser a $500 credit at Closing against the balance of the Purchase
Price for each such apartment, which $500 shall constitute a single aggregate
credit for both such cost of tenant improvement work and the cost of placing any
such apartment into rentable condition ready for occupancy if such apartment had
also been a Newly Vacated Apartment.
5.1.8. Except as set forth in this Agreement, the customs of
the county in which the Property is located shall govern prorations.
5.2. If such prorations result in payment due Purchaser, then
the portion of the Purchase Price payable at Closing shall be reduced by such
sum.
5.3. If such prorations result in a payment due Seller, then
the same shall be paid to the Seller in addition to the Purchase Price payable
at Closing.
5.4. The parties hereto shall endeavor to prepare a schedule
of prorations no less than five (5) days prior to Closing.
5.5. The parties hereto shall correct any errors in
prorations as soon after the Closing as amounts are finally determined. The
parties hereto shall enter into the post-closing adjustment letter at the
Closing in the form of Exhibit F annexed hereto (the "Post-Closing Adjustment
Letter").
5.6. The provisions of this Article shall survive the
Closing.
VI.
CLOSING
6.1. The Closing of the transaction which is the subject of
this Agreement (the "Closing") shall be held commencing at 9:30 A.M. on the date
(the "Closing Date") which is
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seven (7) days after the Inspection Period Expiration Date, provided that if
such seventh (7th) day (or any other day to which the Closing may be adjourned
by any party having a right hereunder to adjourn the Closing) is not the first
day of a calendar month (or the first Business Day [as defined in Section 14.15
hereof] thereafter if such first day is not a Business Day), then, at Seller's
option if Seller's lender shall not agree to waive prepayment charges or related
expenses, or if Seller's lender otherwise requires the Closing to occur on the
first day of a calendar month, the Closing Date shall be the next immediately
following first day of a calendar month (or the first Business Day thereafter if
such first day is not a Business Day). Notwithstanding the foregoing, if the
holder of the deed of trust or mortgage which encumbers the Property cannot or
is unwilling, for any reason whatsoever, to remove said deed of trust or
mortgage from record as of the date scheduled for Closing as set forth above,
then Seller may, by written notice given to Purchaser, adjourn the Closing Date
for up to thirty (30) days following the date scheduled for the Closing as set
forth in the immediately preceding sentence. The Closing shall be held at the
offices of the Title Company at Eastern Title Agency, Inc., c/o Michael W.
Tighe, Esq., Callison Tighe Robinson & Hawkins, LLP, 1812 Lincoln Street,
Columbia, South Carolina 29201.
VII.
CLOSING DOCUMENTS
7.1. At the Closing, Seller shall cause to be delivered to
the Title Company the following documents and instruments:
7.1.1. A limited warranty deed (the "Deed") in the form of
Exhibit B annexed hereto.
7.1.2. An assignment of the Leases (the "Assignment of Leases")
in the form of Exhibit C annexed hereto.
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7.1.3. A bill of sale and assignment (the "Bill of Sale and
Assignment") in the form of Exhibit D annexed hereto.
7.1.4. An assignment of the Contracts (the "Assignment of
Contracts") in the form of Exhibit E annexed hereto.
7.1.5. The Post-Closing Adjustment Letter in the form of
Exhibit F annexed hereto.
7.1.6. The certificate in the form of Exhibit G annexed hereto
(the "FIRPTA Certificate").
7.1.7. A letter to each tenant in the form of Exhibit H annexed
hereto (the "Tenant Notice Letters"), which letters shall be delivered to each
of the tenants by Purchaser promptly after the Closing. Purchaser hereby
indemnifies and holds Seller harmless from and against all loss, cost and
expense incurred by Seller as a result of Purchaser's failure to so deliver the
Tenant Notice Letters to each tenant promptly after the Closing, which indemnity
shall survive the Closing.
7.1.8. A closing statement to be prepared by the Title Company
and agreed upon by Seller and Purchaser (the "Closing Statement").
7.1.9. A rent roll dated within three (3) days of the Closing
Date, certified by Seller to be true and correct in all material respects as of
its date to the extent of Seller's actual knowledge.
7.1.10. An affidavit from Seller as to facts within Seller's
knowledge in such form as will cause the Title Company to omit from Purchaser's
title insurance policy any exception for unrecorded mechanic's and materialman's
liens.
7.1.11. Such other affidavits from Seller as to facts within
Seller's knowledge relevant to the determination by the Title Company as to the
condition of title to the Property and that Seller is not the subject of a
pending bankruptcy proceeding.
7.1.12. If the form thereof is provided by Purchaser, as
assignment of Seller's interest, if any, in the telephone numbers for the
Property.
7.1.13. Any other instruments specifically referred to in this
Agreement.
7.2 On the Closing Date, Seller shall, to the extent now or
hereafter in Seller's possession, deliver to Purchaser at the on-site management
office all Contracts, Leases, warranties and guarantees for fixtures, equipment
and appliances and other items, if any, used by Seller in the operation of the
Property. The foregoing shall not include internal memoranda and
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other items prepared by employees or agents of Seller with respect to the
Property for Seller's internal use.
7.3. At the Closing, Purchaser shall cause to be delivered
the following documents and instruments:
7.3.1. Funds payable to the Title Company representing the cash
payment due in accordance with Section 2.1.2 hereof and any other sums payable
by Purchaser at the Closing under any provisions of this Agreement.
7.3.2. To Seller, the Post-Closing Adjustment Letter,
Assignment of Leases, Assignment of Contracts, Tenant Notice Letters and Closing
Statement.
7.3.3. To the Title Company, evidence acceptable to the Title
Company authorizing the consummation by Purchaser of the transaction which is
the subject of this Agreement and the execution and delivery of documents by
Purchaser.
7.3.4. Any other instruments specifically referred to in this
Agreement.
7.4. At the Closing, Seller and Purchaser shall cause to be
delivered to the Title Company such other instruments and documents as may be
necessary and appropriate in order to complete the Closing of the transaction
which is the subject of this Agreement.
VIII.
CLOSING COSTS
8.1. At or prior to the Closing, Purchaser shall pay the
premium and any other charges for the Title Report and resulting title policy,
the cost of any survey obtained by Purchaser and the cost of all other title
searches. Purchaser shall also pay the premium and all other charges in
connection with any endorsements to the Title Report or resulting title policy
and any lender's title policy obtained by Purchaser. At the Closing, Seller
shall pay all transfer taxes, stamp taxes, deed taxes or similar impositions
payable in connection with the transaction which is the subject of this
Agreement. The Title Company's fees as escrow agent, which the Title Company
agrees shall not exceed $200, shall be borne equally by Seller and
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Purchaser; provided, however, if the transaction which is the subject of this
Agreement is terminated by (i) Purchaser on or prior to the Inspection Period
Expiration Date, Purchaser shall pay all of the Title Company's fees as escrow
agent, or (ii) either Seller or Purchaser as a result of its default hereunder,
the defaulting party shall pay all of the Title Company's fees as escrow agent.
Seller shall pay all expenses charged by the Title Company for sending wire
transfers with respect to sums to be paid by Seller pursuant to this Agreement
or at the request of Seller. Purchaser shall pay all expenses charged by the
Title Company for sending wire transfers with respect to sums to be paid by
Purchaser pursuant to this Agreement or at the request of Purchaser. All other
escrow and closing costs shall be allocated to and paid by Seller and Purchaser
in accordance with the manner in which such costs are customarily borne by such
parties in sales of similar property in the county in which the Property is
located; provided, however, that each party shall pay its own attorneys' fees.
IX.
COMMISSIONS
9.1 Seller does hereby agree to pay the brokerage commission
to The Apartment Group, Inc. ("Broker") in accordance with the terms of a
separate agreement, and Seller shall indemnify and hold Purchaser harmless from
any and all real estate brokerage commissions, claims for such commissions or
similar fees, including attorneys' fees incurred in any lawsuit regarding such
commissions or fees (collectively, "Brokerage Claims") arising out of contracts
executed by activities engaged in by Seller.
9.2. Purchaser shall indemnify and hold Seller harmless from
any and all Brokerage Claims arising out of contracts executed by or activities
engaged in by Purchaser,
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except for any commissions payable to or Brokerage Claims made by the Broker
which shall be paid by Seller.
9.3. Each party hereto, as indemnitee, shall give the other
party hereto, as indemnitor, prompt notice of any Brokerage Claim that is the
subject of the indemnity in this Article IX in order to give such indemnitor an
opportunity to defend against such Brokerage Claim with counsel reasonably
acceptable to such indemnitee.
9.3. The provisions of this Article shall survive the
Closing or the earlier termination of this Agreement for a period of one year.
X.
RISK OF LOSS
10.1. The risk of loss or damage to the Property by fire or
other casualty, until the time of the delivery of the Deed as herein provided,
is assumed by Seller but without any obligation or liability by Seller to repair
the same, except Seller, at Seller's sole option, shall have the right to repair
or replace such loss or damage to the Property. If loss or damage to the
Property occurs and if Seller elects to make such repair or replacement, this
Agreement shall continue in full force and effect and Seller shall be entitled
to a reasonable adjournment of the Closing Date, not to exceed ninety (90) days.
If Seller does not elect to repair or replace any such loss or damage, then the
following shall control:
10.1.1. If the Property is damaged by fire or other casualty,
and the damage, loss or destruction shall cost not more than
$250,000.00 to repair, as mutually agreed upon by Seller and
Purchaser, Purchaser shall close the transaction which is the subject
of this Agreement with a credit against the Purchase Price in an
amount equal to the cost of repairing such damage as mutually agreed
upon by Seller and Purchaser; or
10.1.2. If the Property is damaged by fire or other
casualty and the damage, loss or destruction shall cost more than
$250,000.00 to repair, as mutually agreed upon by Seller and
Purchaser, then either (i) Seller may terminate
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this Agreement, in which event, the Earnest Money shall be promptly
returned to Purchaser, and thereupon, this Agreement shall be
terminated, and the parties hereto shall be relieved of all further
obligations and liability under this Agreement (other than those that
are expressly stated to survive the termination of this Agreement),
or (ii) if Seller does not elect to terminate this Agreement,
Purchaser shall elect one of the following:
(A) of declaring this Agreement terminated, in which
event the Earnest Money shall be returned to Purchaser, and upon
such payment, this Agreement shall be null and void and the
parties hereto shall be relieved and released of and from any
further liability with respect to each other (other than those
that are expressly stated to survive the termination of this
Agreement); or
(B) of accepting the Deed upon payment in full of the
Purchase Price and without any abatement of the Purchase Price
by reason of such loss or damage, together with (i) payment of
the amount of any insurance proceeds to the extent actually
collected by Seller in connection with such fire or other
casualty, less the amount of the actual expenses incurred by
Seller in collecting such proceeds and in making repairs to the
Property occasioned by such fire or other casualty, (ii) payment
of the amount of any insurance deductible applicable to such
fire or other casualty, (iii) an assignment (without warranty or
recourse to Seller) of Seller's rights to any payments to be
made subsequent to the Closing Date under any hazard insurance
policy or policies in effect with respect to the Property, and
(iv) an assignment (without warranty or recourse to Seller) of
Seller's rights to any payments with respect to rents due
subsequent to the Closing Date under any rental insurance policy
in effect with respect to the Property; provided, however, that
in no event shall Purchaser be entitled to receive any business
interruption or rental loss insurance proceeds, if any,
allocable to the period through the Closing Date, which proceeds
shall be retained by Seller.
10.2. If prior to the Closing all or any part of the Property
is taken by condemnation or a taking in lieu thereof, the following shall apply:
10.2.1. If a material part of the Property is taken, Purchaser,
by written notice to Seller (effective only if delivered within ten (10)
days after Purchaser receives notice of such taking), may elect to
terminate this Agreement. If Purchaser shall so elect, the Earnest Money
shall be returned to Purchaser, and upon such payment, this Agreement shall
be null and void and the paries hereto shall be relieved and released of
and from any further liability hereunder and with respect to each other
(other than those that are expressly stated to survive the termination of
this Agreement).
10.2.2. If a minor or immaterial part of the Property is taken,
or in the event of a change of legal grade,
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neither party shall have any right to terminate this Agreement and title
shall nonetheless close in accordance with this Agreement without any
abatement of the Purchase Price or any liability or obligation on the part
of Seller by reason of such taking; provided, however, that Seller shall,
at the Closing (i) give Purchaser a credit against the Purchase Price in
the amount of any award or other proceeds of such taking to the extent
actually collected by Seller as a result of such taking, less the amount of
the actual expenses incurred by Seller in collecting such award or other
proceeds and in making repairs to the Property occasioned by such taking,
and (ii) deliver to Purchaser an assignment (without warranty or recourse
to Seller) of Seller's right to any such award or other proceeds which may
be payable subsequent to the Closing Date as a result of such taking.
10.2.3. The term "material part", as distinguished from a "minor
or immaterial part", as used herein shall mean a portion of the Property
(a) having a value (based upon an appraisal by an appraiser acceptable to
Seller, subject to Purchaser's approval, which shall not be unreasonably
withheld or delayed) in excess of $25,000.00 or (b) containing five (5%)
percent or more of the total number of parking spaces within the Property
on the date of this Agreement.
Seller shall promptly give Purchaser copies of all documents and correspondence
received or given by Seller in connection with any condemnation or taking in
eminent domain affecting all or any portion of the Property.
XI.
TERMINATION AND REMEDIES
11.1. If (a) any of Seller's representations and warranties
set forth in this Agreement (other than in Section 4.1.11 hereof) are not true
(except to a de minimis extent) on the Closing Date as to any material matters
(except for changes to facts [other than with respect to Sections 4.1.1 and
4.1.2 hereof] between the date of this Agreement and the Closing Date that do
not constitute a breach of Section 4.3 hereof), or (b) Seller's representation
set forth in Section 4.1.11 hereof is not true (except to a de minimis extent)
on the date of this Agreement as to any material matter, then Purchaser may, as
Purchaser's sole and exclusive right and remedy therefor, terminate this
Agreement by giving Seller written notice of such
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election, in which event Purchaser shall be entitled to the return of the
Earnest Money, provided that if Purchaser fails so to elect to terminate this
Agreement, then, effective upon Closing, Purchaser shall be deemed to have
irrevocably waived all rights and remedies for any and all misrepresentations or
breaches of warranty of which Purchaser has knowledge on the Closing Date.
Notwithstanding the provisions of the immediately preceding sentence to the
contrary, if Purchaser terminates this Agreement solely because of any Seller's
representations or warranties set forth in Sections 4.1.1 or 4.1.2 hereof are
not true on the Closing Date, then Seller shall reimburse Purchaser for all
reasonable out-of-pocket costs and expenses incurred by Purchaser that are
payable to persons other than Purchaser or Purchaser's officers or employees in
Purchaser's inspection of the Property pursuant to Article III of this
Agreement, promptly after Purchaser shall have delivered to Seller copies of all
reports and other information obtained by Purchaser regarding the Property. If
(other than with respect to representations or warranties) Seller defaults under
this Agreement and fails to close the transaction which is the subject of this
Agreement in accordance with the provisions of this Agreement for any reason
except the permitted termination hereof by Seller in accordance with the express
provisions hereof, Purchaser may, as its sole and exclusive rights and remedies
therefor, either (A) terminate this Agreement by giving Seller written notice of
such election, in which event Purchaser shall be entitled to the return of the
Earnest Money, or (B) require Seller to close the transaction which is the
subject of this Agreement, including the right to enforce the sale of the
Property by maintaining an action for specific performance (with legal fees
being covered by Section 14.12 hereof), it being agreed that the exercise of
such remedies shall constitute a release of Seller from all obligations
hereunder other than those that are the subject of any such
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action for specific performance, and, upon termination of this Agreement or
consummation of the Closing, Purchaser expressly waives the right to maintain
any other actions for specific performance or to recover any damages against
Seller as a result of Seller's default hereunder. The remedies set forth in this
Section shall be the exclusive remedies available to Purchaser for Seller's
failure to close the transaction which is the subject of this Agreement in
accordance with the provisions of this Agreement.
11.2. Purchaser recognizes that the Property will be removed
by Seller from the market during the existence of this Agreement and that if the
purchase and sale which is the subject of this Agreement is not consummated
because of Purchaser's default, Seller shall be entitled to compensation for
such detriment. Seller and Purchaser acknowledge that it is extremely difficult
and impractical to ascertain the extent of the detriment, and to avoid this
problem, Seller and Purchaser agree that if the purchase and sale which is the
subject of this Agreement is not consummated as a result of Purchaser's default
under this Agreement, Seller shall be entitled to receive the Earnest Money from
Title Company as liquidated damages, which amount represents a bona fide good
faith estimate of damages that Seller would suffer in such event. The parties
agree that the sum stated above as liquidated damages shall be the sole and
exclusive relief to which Seller might otherwise be entitled, Seller hereby
specifically waiving any and all rights which it may have to damages or specific
performance as a result of Purchaser's default under this Agreement.
Notwithstanding the foregoing, the provisions of this Section 11.2 shall not
limit Purchaser's liability of Seller's remedies with respect to the indemnities
made by Purchaser in Sections 3.1(a) and 9.2 hereof that are specifically stated
herein to survive the termination of this Agreement.
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XII.
ESCROW
12.1. The parties hereto have mutually requested that the
Escrow Agent act as escrow agent for the purpose of holding the Earnest Money in
accordance with the terms of this Agreement. The Earnest Money shall be held by
the Escrow Agent until the earlier of (y) the Closing, or (z) such time as
Seller or Purchaser may be entitled to the Earnest Money in accordance with this
Agreement, at which time the Escrow Agent shall remit the Earnest Money to the
party entitled thereto in accordance with this Agreement.
12.2. The Earnest Money shall be deposited by the Escrow Agent
in an interest bearing account with First-Citizens Bank and Trust Company of
South Carolina.
12.3. The Earnest Money shall be released or delivered to the
party entitled thereto pursuant to this Agreement with reasonable promptness
after the Escrow Agent shall have received notice:
(a) from Seller and Purchaser authorizing release of the
Earnest Money; or
(b) from Seller authorizing the return of the Earnest Money to
Purchaser; or
(c) of the occurrence of either of the following events:
(i) the Closing, at which time the Earnest Money shall
be paid to Seller and applied to the Purchase
Price; or
(ii) the receipt by the Escrow Agent of a written notice
from either Seller or Purchaser stating that an event
has occurred under this Agreement entitling the party
delivering such notice to the Earnest Money, whereupon
the Escrow Agent shall deliver written notice (the
"Default Notice") thereof to the other party and,
unless such other
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party shall have delivered a written notice of
objection to the Escrow Agent within ten (10) days
following receipt by such other party of the Default
Notice, the Escrow Agent shall deliver the Earnest
Money to the party initially requesting the Earnest
Money.
12.4. It is agreed that the duties of the Escrow Agent are
only such as are herein specifically provided, being purely ministerial in
nature, and that the Escrow Agent shall incur no liability whatsoever except for
its willful misconduct or negligence so long as the Escrow Agent has acted in
good faith. The Escrow Agent shall have no responsibility for the genuineness or
validity of any document or other time deposited with the Escrow Agent, and
shall be fully protected in acting in accordance with any written instructions
given to the Escrow Agent hereunder and believed by the Escrow Agent to have
been signed by the proper parties.
12.5. Upon the satisfaction of the mutual obligations of the
parties hereunder, the Title Company shall record all appropriate instruments
delivered to it at the Closing.
12.6. The Title Company hereby agrees to serve as the "real
estate reporting person" (as such term is defined in Section 6045(e) of the
Code). This Agreement shall constitute a designation agreement, the name and
address of the transferor and transferee of the transaction contemplated hereby
as well as the name and address of the Escrow Agent appear in Section 13.1
hereof, and Seller, Purchaser and the Escrow Agent agree to retain a copy of
this Agreement for a period for four (4) years following the end of the calendar
year in which the Closing occurs. The provisions of this Section shall survive
the Closing.
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12.7. The Escrow Agent, by its execution of this Agreement,
acknowledges receipt of the Earnest Money.
12.8. The Escrow Agent's fees with respect to this transaction
(other than its premium for issuing the Title Policy) shall not exceed $200.
XIII.
NOTICES
13.1. Except as otherwise provided in this Agreement, any and
all notices, elections, demands, requests and responses thereto permitted or
required to be given under this Agreement shall be in writing, signed by the
party giving the same or by its attorneys, and shall be deemed to have been
properly given and shall be deemed effective upon being (i) personally
delivered, or (ii) delivered to an express overnight delivery service with
receipt for delivery, or (iii) deposited in the United States mail, postage
prepaid, certified with return receipt requested, or (iv) transmitted by
facsimile, provided that such facsimile transmission is confirmed within one
Business Day thereafter in the manner set forth in either clause (i), (ii) or
(iii) of this sentence, to the other party at the address of such other party
set forth below or at such other address within the continental United States as
such other party may designate by notice specifically designated as a notice of
change of address and given in accordance herewith; provided, however, that the
time period in which a response to any such notice, election, demand or request
must be given shall commence on the date of receipt thereof. Personal delivery
to a party or to any officer, partner, member, agent or employee of such party
at said address shall constitute receipt. Rejection or other refusal to accept
or inability to deliver because of changed address of which no notice has been
received shall also
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constitute receipt. Any such notice, election, demand, request
or response shall be addressed as follows:
IF TO SELLER:
TGM Realty Partners II L.P.
c/o TGM Associates L.P.
650 Fifth Avenue
New York, N.Y. 10019
Attn: Thomas Gochberg
Facsimile No.: (212) 399-6310
with a copy to be given simultaneouly to:
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, N.Y. 10017-2590
Attn: Alan E. Linder, Esq.
Facsimile No.: (212) 682-5729
IF TO PURCHASER:
Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, Virginia 23219
Attn: Gus Remppies
Facsimile No.: (804) 782-9302
with a copy to be given simultaneously to:
Zuckerbrod & Taubenfeld
575 Chestnut Street
Cedarhurst, New York 11516
Attn: Harry Taubenfeld, Esq.
Facsimile No.: (516) 374-3490
and with a copy to be given simutaneously to:
Michael W. Tighe, Esq.
Callison Tighe Robinson & Hawkins, LLP
1812 Lincoln Street
Columbia, South Carolina 29201
Facsimile No.: (803) 256-6431
IF TO THE TITLE COMPANY OR ESCROW AGENT:
Chicago Title Insurance Company
c/o Eastern Title Agency, Inc.
1812 Lincoln Street
Columbia, South Carolina 29201
Attention: Michael W. Tighe, Esq.
Facsimile No.: (803) 256-6431
XIV.
MISCELLANEOUS
14.1. This Agreement and the Exhibits attached hereto contain the
entire agreement between the parties with respect to the subject matter hereof,
and no promise,
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representation, warranty or covenant not included in this Agreement
or such Exhibits has been or is relied upon by either party.
14.2. This Agreement cannot be changed, modified,
discharged or terminated by any oral agreement or any other
agreement and there cannot be any waiver of the warranties,
represenations and covenants expressly contained in this Agreement
unless the same is in writing and signed by the party against
whom enforcement of the change, modification, discharge,
termination or waiver is sought.
14.3. The Article and Exhibit headings herein are
for convenience only, and are not to be used in determining the meaning
of this Agreement or any part hereof.
14.4. This Agreement and its interpretation and enforcement
shall be goverened by the laws of the State of Georgia.
14.5. No assignment of Purchaser's interest hereunder
is permitted and any such prohibited assignment shall not be valid
or binding on Seller unless Seller shall expressly consent thereto
in writing.
14.6. This Agreement shall be binding on, and the benefits
hereof shall inure to, the successors and permitted assigns of the
parties hereto.
14.7. If any term or provision of this Agreement, or any part of such
term or provision, or the application thereof to any person or circumstance
shall to any extent be held invalid or unenforceable, the remainder of this
Agreement or the application of such term or provision or remainder thereof to
persons or circumstances other than those as to which it is held invalid and
unenforceable shall not be affected thereby and each term and provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
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<PAGE>
14.8. All Exhibits which are annexed to this Agreement are part of
this Agreement and are incorporated herein by reference.
14.9. The provisions of this Agreement are for the sole benefit
of the parties to this Agreement and their permitted successors and assigns
and shall not give rise to any rights by or on behalf of anyone other
than such parties.
14.10. This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party
causing this Agreement to be drafted.
14.11. This Agreement may be executed in any number of counterparts,
each of which shall, when executed, be deemed to be an original and all of
which shall be deemed to be one and the same instrument.
14.12. Notwithstanding anything contained herein to the contrary,
including but not limited to Sections 11.1 and 11.2 hereof, if any litigation
arises under this Agreement, the prevailing party (which term shall
mean the party which obtains substantially all of the relief sought by
such party) shall be entitled to recover, as a part of its judgment, reasonable
attorneys' fees, court costs and expert witness fees.
14.13. Time shall be of the essence with respect to all dates
and time periods specified in this Agreement, provided that (in addition
to any other right that either party may have hereunder to adjourn the Closing)
either party hereto may, by written notice given to the other no later than ten
(10) days before the Closing Date, adjourn the Closing for no more than thirty
(30) days, subject always to Section 6.1 hereof, and provided further that
Purchaser may not request such adjournment unless Purchaser deposits an
additional $50,000 with Escrow Agent as an addition to the Earnest Money
simultaneously with or before Purchaser's such notice of adjournment, in
which event such additional $50,000 and all interest earned thereon
shall be
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<PAGE>
deemed to constitute part of the Earnest Money for all purposes of this
Agreement.
14.14. Seller shall be authorized to fill in the date of this Agreement
on page 1 hereof as of the date of Seller's execution of this Agreement.
14.15. If the date for performance of any act pursuant to this
Agreement is not a Business Day, then such act shall be performed on the
next succeeding Business Day. The term "Business Day" as used in this
Agreement shall mean all days, except Saturdays, Sundays and all days
observed by the Federal Government or the State of Georgia as legal
holidays.
14.16. Except as expressly provided otherwise in this Agreement, none
of the representations or warranties made in this Agreement by Seller or
Purchaser shall survive the Closing or the termination of this Agreement.
XV.
POST-CLOSING AUDIT
15.1. After the Closing, Seller shall permit Purchaser's accountants,
L.P. Martin & Company, P.C. (the "Auditors") to conduct, at Purchaser's sole
cost and expense, an audit of Seller's books and records regarding the Property,
provided that such audit shall be completed by the date (the "Audit Completion
Date") that is the earlier of (a) three (3) months after the Closing Date or (b)
the date Purchaser files such Form 8-K with the S.E.C. Such audit shall be
conducted during Seller's normal business hours where such books and records are
located, and Seller may require that a representative of Seller be present
during all related inspections of such books and records.
15.2. When requested by the Auditors by written notice received by
Seller on or before the Audit Completion Date, Seller shall execute and give the
Auditors a letter in the form
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<PAGE>
of Exhibit L annexed hereto, dated as of the Closing Date (the "Audit
Representation Letter"), which shall set forth any exceptions to the
representations in such Audit Representation Letter then known by Seller.
15.3. Purchaser hereby acknowledges and agrees that Purchaser has
requested both the right to conduct such audit and Seller's delivery of the
Audit Representation Letter to the Auditors as an accommodation to Purchaser
solely to enable Purchaser to file such Form 8-K report on account of this
transaction and not for the purpose of investigating Seller's compliance
with this Agreement or the accuracy of the representations made by Seller
herein or of any information regarding the Property. Accordingly, Purchaser
hereby irrevocably agrees that neither Purchaser nor any assignee, agent,
representative or designee of Purchaser shall make any allegation, demand
or claim or commence any legal or administrative action against Seller or any
of Seller's direct or indirect owners, directors, officers, employees, agents,
accountants, attorneys or other representatives on account (directly or
indirectly) of any information disclosed, turned over, revealed, discovered
or obtained directly or indirectly in, by or in connection with such audit
or the Audit Representation Letter. Purchaser also hereby irrevocably agrees
that the Audit Representation Letter is solely for the benefit of and
enforceable by the Auditors and is not for the benefit of or enforceable
by Purchaser or any other person or entity. Purchaser hereby acknowledges
that Seller has agreed to such audit and the giving of the Audit Representation
Letter in reliance upon Purchaser's agreements contained in this Section 15.3.
15.4. The provisions of this Article XV shall survive the Closing only
until the Audit Completion Date, provided that the provisions of Section 15.3
hereof shall survive
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<PAGE>
the Closing for an indefinite period.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date set forth above.
TGM REALTY PARTNERS II L.P., Seller
By: TGM Associates L.P., general partner
By: /s/ SIGNATURE ILLEGIBLE
-----------------------------------
Name:
Title: President
CORNERSTONE REALTY INCOME TRUST, INC.
Purchaser
By: /s/ S.J. Olander
----------------------------------
Name: S.J. Olander
Title: S.V.P.
Consented and Agreed to:
CHICAGO TITLE INSURANCE COMPANY
By: Eastern Title Agency, Inc.,
authorized agent
By: /s/ Michael W. Tighe
------------------------
Name: Michael W. Tighe
Title: President
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Exhibit 23.1
[L.P. MARTIN & COMPANY LETTERHEAD]
L.P. MARTIN & COMPANY
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTANTS
4132 INNSLAKE DRIVE
GLEN ALLEN, VA 23060
PHONE: (804) 346-2626
Consent of Independent Auditors'
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated July 18, 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 Summit Charleston
Apartments for the twelve month period ended April 30, 1997, 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
July 18, 1997
