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: August 12, 1998
CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 1-12875 54-1589139
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
<PAGE>
CORNERSTONE REALTY INCOME TRUST, INC.
FORM 8-K
Index
Page Number
Item 2. Acquisition or Disposition of Assets 4
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report 9
(Spring Lake Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Spring Lake Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Spring Lake Apartments)*
b. Pro Forma Statement of Operations for 10
the Six Months ended June 30, 1998
(unaudited)*
Pro Forma Balance Sheet as of
June 30, 1998 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1997
(unaudited)*
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* To be filed by amendment.
2
<PAGE>
c. Exhibits
10.1 Purchase Contract for Spring Lake Apartments
23.1 Consent of Independent Auditors*
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* To be filed by amendment.
3
<PAGE>
Item 2. Acquisition or Disposition of Assets
SPRING LAKE APARTMENTS
Morrow, Georgia
On August 12, 1998, Cornerstone Realty Income Trust, Inc. (the
"Company") purchased the Spring Lake Apartments, a 188-unit apartment complex
located at 7000 Southlake Parkway, Morrow (outside of Atlanta), Georgia (the
"Property").
The Company purchased the Property from Morrow Apartments, Inc., a
Georgia corporation which is not affiliated with the Company or its affiliates.
The purchase price was $9,000,000. The Company borrowed $8 million under its
unsecured line of credit and paid the balance from cash on hand. Title to the
Property was conveyed to the Company by limited warranty deed.
Location. The Property is in Morrow, Clayton County, south of Atlanta,
Georgia. The following information is based in part upon information provided by
the greater Atlanta Chamber of Commerce.
The greater Atlanta metropolitan area has a population in excess of
three million persons. The economy of the area is diverse, and includes as
significant sectors services, manufacturing, transportation, distribution,
retailing, wholesaling, finance, insurance, real estate, government, research,
education and medicine. More than 80% of the Fortune 500 companies and over
1,800 local manufacturing firms have operations in the area. Atlanta is the
national headquarters of Coca-Cola, BellSouth, Turner Broadcasting System, Delta
Air Lines, Georgia-Pacific, Home Depot, Cox Enterprises and United Parcel
Service. In addition, IBM and AT&T have consolidated their southern operations
in Atlanta. The city is also headquarters for the Sixth District Federal Reserve
Bank.
The Company believes that the diversity of the metropolitan area's
economy makes the area less susceptible to cyclical business swings. The
metropolitan area's current unemployment rate is approximately 3%, which is
lower than the overall Georgia unemployment rate of approximately 3.8% and the
national unemployment average of 4.7%. For three consecutive years, Atlanta has
led the nation in new job growth.
The convention and visitor trade is also one of Atlanta's primary
economic advantages and has an important impact on the overall economy of the
city. Atlanta's hospitality industry employs over 80,000 persons. Currently,
Atlanta ranks behind only New York, Chicago and Dallas in convention attendance.
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Atlanta's hosting of the 1996 Centennial Olympic Games furthered its visibility
as an important city internationally.
Atlanta sits at the junction of five major Interstate Highways (I-20,
I-75, I-85, I-285 and I-675). There are several airports in the area, but the
principal airport is HartsfieldAtlanta 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").
Institutions of higher education in the Atlanta metropolitan area
include Kennesaw State University, Emory University, Georgia Institute of
Technology, and Georgia State University. The University of Georgia in Athens is
within approximately 50 miles.
Atlanta has at least 25 hospitals with 100 beds or more. The area
offers a full array of performing arts, including symphony, ballet and opera,
and has major league baseball, basketball and football franchises.
The Property is located on the east side of Southlake Parkway
approximately one-quarter mile east of Jonesboro Road (Highway 54). Clayton
County, in which the Property is located, is approximately 15 miles south of
Atlanta's central business district. Hartsfield-Atlanta International Airport is
located in Clayton County and is one of the region's most significant economic
assets and employers.
The neighborhood in which the Property is located consists of other
multi-family housing, single-family housing, commercial and retail development.
The Property is located near businesses, major shopping, entertainment, schools
and churches. The property is approximately one mile from Interstate 75 and
approximately four miles south of Interstate 285, which encircles Atlanta.
Description of the Property. The Property consists of 188 garden-style
apartment units in 23 two-story buildings on approximately 28 acres. The
Property includes a lake occupying approximately eight acres. The Property was
built in 1986.
The Company believes that the Property has been well maintained and is
in good condition. However, the Company has budgeted approximately $506,000 for
additional renovations to the Property, including clubhouse renovations,
breezeway repairs, wood replacement, re-flashing and re-caulking of windows,
additional landscaping, and interior upgrades.
The Property offers nine unit types. The unit mix and rents being
charged new tenants as of August 1998 are as follows:
5
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
APPROXIMATE
INTERIOR MONTHLY
QUANTITY TYPE SQUARE FOOTAGE RENTAL
-------- ---- -------------- ------
16 One bedroom, one 696 $560
bathroom
w/screened porch
16 One bedroom, one 696 570
bathroom
w/screened porch, FP
8 One bedroom, one 771 580
bathroom
w/screened porch, FP
16 One bedroom, one 842 590
bathroom
w/sunroom
16 One bedroom, one 842 600
bathroom
w/sunroom, FP
48 Two bedrooms, two 1,158 685
bathrooms w/sunroom
36 Two bedrooms, two 1,158 700
bathrooms w/sunroom,
FP
8 Two bedrooms, two 1,158 700
bathrooms w/sunroom
(lake view)
24 Two bedrooms, two 1,158 715
bathrooms w/sunroom,
FP (lake view)
</TABLE>
The apartments provide a combined total of approximately 190,000 square
feet of net rentable area.
Leases at the Property are generally for terms of one year or less.
Average rental rates for the past five years have generally increased. As an
example, a two-bedroom, two-bathroom apartment unit (1,158 square feet) rented
for $537 in 1993, $547 in 1994, $560 in 1995, $583 in 1996 and $623 in 1997. The
average effective annual rental per square foot at the Property for 1993, 1994,
1995, 1996 and 1997 was $6.06, $6.17, $6.32, $6.58 and $7.03, respectively.
6
<PAGE>
The buildings are wood-frame construction on concrete slabs, and the
exteriors are covered with horizontal vinyl siding. Roofs are pitched with
composition shingles on plywood decking and there are metal gutters and
downspouts throughout the Property. According to the seller, roofs on 13 of the
buildings were replaced in the past three years.
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. The
owner of the property supplies cold water, sewer service and trash removal. Each
resident is responsible for his or her own electricity usage, which includes air
conditioning and lights, and each resident also pays for gas usage, which
provides for heat, hot water and cooking.
Each unit includes washer/dryer connections for full-sized appliances,
horizontal and vertical blinds and a screened porch or sunroom. Some units have
a wood-burning fireplace. Each kitchen is equipped with a refrigerator/freezer
with icemaker, gas range and oven, dishwasher and garbage disposal.
The Property has an outdoor swimming pool, a lighted tennis court, a
lake of approximately eight acres in size with a walking trail and picnic
pavilion, two basketball courts, a sand volley ball court, a playground, a
laundry facility and three car wash areas. Eight of the 23 buildings are
situated around the lake. The Property also includes a clubhouse with a
fireplace, kitchen and leasing office. There is ample paved parking for tenants.
There are at least eight apartment properties in the area that compete
with the Property. All offer similar amenities and have rents that generally are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing properties now averages
approximately 95%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 93% in 1993, 95% in 1994, 96% in 1995, 97%
in 1996, and 94% in 1997. On August 6, 1998, the Property was 97% occupied.
The tenants at the Property are a mix of white-collar and blue-collar
workers, students and retired persons.
For 1997, Morrow County specified an assessed value for the Property
equal to $7,896,000. The taxable value is equal to 40% of the assessed value, or
$3,158,400. The tax rate was $2.798, and the total real estate taxes were
calculated as $88,372.
7
<PAGE>
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $8,113,883) 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 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
believes that the Property has an amenity package that may give it a competitive
advantage, including the presence of an eight-acre lake that affords a lake view
for many apartment units.
3. The Property is located near major employment centers, including
particularly Hartsfield-Atlanta International Airport.
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.
8
<PAGE>
ITEM 7.a.*
- ---------------------------
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
9
<PAGE>
ITEM 7.b.*
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* 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.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cornerstone Realty Income Trust, Inc.
Date: August 26, 1998 By:/s/ Stanley J. Olander, Jr.
-------------------------------
Stanley J. Olander, Jr.,
Chief Financial Officer
of Cornerstone Realty
Income Trust, Inc.
11
<PAGE>
EXHIBIT INDEX
Cornerstone Realty Income Trust
Form 8-K dated August 12, 1998
Exhibit Number Exhibit Page Number
- ------------- ------- -----------
10.1 Purchase Contract for
Spring Lake Apartments
23.1 Consent of Independent Auditors*
- ---------------------------
* To be filed by amendment.
12
REAL ESTATE SALES CONTRACT
By and Between
MORROW APARTMENTS INC.,
as Seller
and
CORNERSTONE REALTY GROUP, INC.,
as Purchaser
Dated as of July 30, 1998
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not a part of the Real Estate Sales Contract and
is for convenience only. The captions herein are of no legal effect and do not
vary the meaning or legal effect of any part of the Real Estate Sales Contract.
Page
PARTIES ........................................................ 1
PREAMBLES ...................................................... 1
Section 1. Agreement of Purchase and Sale ...................... 1
Section 2. Earnest Money ....................................... 1
Section 3. Purchase Price ...................................... 2
Section 4. Operating Documents ................................. 2
Section 5. Survey .............................................. 3
Section 6. Title ............................................... 4
Section 7. Property Inspection ................................. 4
Section 8. Representations and Warranties ...................... 5
Section 9. Representations and Warranties of Purchaser ......... 6
Section 10. Seller's Obligations Pending Closing ............... 7
Section 11. Closing Date and Place ............................. 8
Section 13. Possession ......................................... 10
Section 14. Settlement Costs and Adjustments ................... 10
Section 15. Casualty or Condemnation ........................... 11
Section 16. Seller's Remedy .................................... 12
Section 17. Purchaser's Remedies ............................... 12
Section 18. Real Estate Commissions ............................ 12
Section 19. Escrow Agent ....................................... 13
Section 20. Time Period ........................................ 13
Section 21. Notices ............................................ 13
Section 22. Assignment of Purchaser's Interest ................. 14
Section 23. Survival ........................................... 15
Section 24. As-Is Sale ......................................... 15
Section 25. Construction ....................................... 15
Section 26. Persons Bound ...................................... 15
Section 27. Modification Amendment ............................. 15
Section 28. Effective Date ..................................... 15
Section 29. Offer by Purchaser ................................. 15
Section 30. Attorney's Fees .................................... 15
Section 31. Counterparts ....................................... 16
Section 32. Agreement Not to be Recorded ....................... 16
Section 33. Waiver ............................................. 16
Section 34. Captions ........................................... 16
Section 35. Pronouns ........................................... 16
Section 36. Severability ....................................... 16
Section 37. Exhibits ........................................... 16
Section 38. Use of the Word "Herein". .......................... 16
i
<PAGE>
Section 39. Third Parties ...................................... 16
Section 40. Confidentiality .................................... 16
Section 41. Jury Waiver ........................................ 17
TESTIMONIUM .................................................... 18
SIGNATURES ..................................................... 18
EXHIBIT A LEGAL DESCRIPTION OF LAND
EXHIBIT B INVENTORY OF PERSONAL PROPERTY
EXHIBIT C LIST OF SERVICE CONTRACTS
EXHIBIT D RENT ROLL
EXHIBIT E PERMITTED EXCEPTIONS
EXHIBIT F QUITCLAIM DEED
EXHIBIT G BILL OF SALE
EXHIBIT H ASSIGNMENT OF LANDLORD'S INTEREST IN LEASES,
SECURITY AND OTHER DEPOSITS
EXHIBIT I GENERAL ASSIGNMENT
EXHIBIT J TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS
EXHIBIT K REPRESENTATION LETTER
EXHIBIT L CERTIFICATION REGARDING REPRESENTATIONS AND
WARRANTIES
EXHIBIT M LEAD BASED DISCLOSURE STATEMENT
ii
<PAGE>
REAL ESTATE SALES CONTRACT
THIS REAL ESTATE SALES CONTRACT ("this Agreement") is made and entered into
this__ day of July, 1998 by and between MORROW APARTMENTS, INC., a Georgia
corporation (hereinafter called "Seller"), and CORNERSTONE REALTY GROUP, INC., a
Virginia corporation (hereinafter called "Purchaser").
W I T N E S S E T H:
In consideration of their mutual promises and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, Seller
and Purchaser hereby agree as follows:
SECTION 1. AGREEMENT OF PURCHASE AND SALE. Seller hereby agrees to sell to
Purchaser, and Purchaser hereby agrees to purchase from Seller, upon and subject
to the provisions of this Agreement, all of Seller's right, title, and interest
in the following (hereinafter collectively called, the "Property") commonly
known as Spring Lake Apartments:
(a) 188 individually heated and air conditioned apartment units, with
all appurtenances, together with all appliances, drapes, carpeting,
shrubbery and all other personal property used in connection therewith;
(b) the land (hereinafter called the "Land") located in Land Lot 82 of
the 12th District of Clayton County, Georgia , as were particularly
described in Exhibit "A" attached hereto and by this reference incorporated
herein;
(c) all buildings, improvements and fixtures located as the Land
(hereinafter collectively called the "Improvements");
(d) to the extent not otherwise set forth in clause (a) above, all
furniture, goods, appliances , equipment, supplies and other personal
property (including, without limitation, tenant leases and the personal
property listed on Exhibit "B" attached hereto and made a part hereof owned
by Seller located on or used in connection with the Land or the
Improvements, hereinafter collectively called the "Personality");
(e) any trade or business name (hereinafter collectively called the
"Trade Name"), including, without limitation, the name "Spring Lake
Apartments," used in connection with the operation of the business
conducted by Seller at the Land; and
(f) all easements, appurtenances, rights, privileges, reservations,
tenements and hereditaments belonging or pertaining to any of the
foregoing.
SECTION 2. EARNEST MONEY. Within one (1) day after the Effective Date (as
hereinafter defined), Purchaser will deposit Two Hundred Fifty Thousand and
no/100 Dollars ($250,000) in cash, certified check or by wire transfer with
Specialized Title Services, Inc. (hereinafter called "Escrow Agent") in Atlanta
Georgia, said sum (together with any additions thereto, hereinafter called the
"Earnest Money") to be held in trust on the terms herein set forth for the
mutual benefit of the parties hereto. The Earnest Money will be invested by
Escrow Agent in a money market fund or a federally-insured interest-bearing
account. Interest on the Earnest Money shall be reported to Purchaser's taxpayer
identification number that Purchaser agrees to provide to Escrow Agent and shall
belong to the party entitled to payment of the
<PAGE>
Earnest Money. As used herein the term "Refund" means that the Earnest Money,
with interest, shall be returned to Purchaser except for the $100.00 which
Escrow Agent shall deliver to Seller as consideration for Seller's entering into
this Agreement.
SECTION 3. PURCHASE PRICE. The Purchase Price for the Property (hereinafter
called the "Purchase Price") shall be Nine Million and no/100 dollars
($9,000,000). The Purchase Price will be paid on the Closing Date (as
hereinafter defined) in cash or its equivalent (which is immediately available
to Seller in Atlanta, Georgia), against which the Earnest Money received by
Seller and any prorations, reimbursements or credits under Section 14 hereof
shall be adjusted, which funds shall be paid to Seller prior to noon (eastern
time) on the Closing Date.
SECTION 4. OPERATING DOCUMENTS.
(a) Purchaser acknowledges that Seller has provided Purchaser with or
has made available to Purchaser at the Property or will provide to
Purchaser on or before the Effective Date the following items (hereinafter
collectively called the "Operating Documents"):
(i) Copies of any written leases and other written rental
agreements affecting the Property, including amendments thereto;
(ii) a copy of the ad valorem real property tax bills for the
last three (3) years for the Property;
(iii) copies of all contracts and agreements relating to the
operation of the Property (hereinafter collectively called the
"Service Contracts")listed in Exhibit "C" attached hereto and by this
reference incorporated herein;
(iv) copies of all casualty, liability and other insurance
policies relating to the Property;
(v) a schedule of all personal property owned by Seller and used
in the operation of the Property;
(vi) a current rent roll (hereinafter called the "Rent Roll") for
the Property attached hereto as Exhibit "D" showing the name of each
lessee (and sublessee, if any), the current rent and reimbursable
expenses payable, and the calculations of such amounts, security
deposits, the approximate square footage occupied, and provisions, if
any, for future rental increases or renewal, or purchase or lease
options, and delinquency reports for the last three (3) months;
(vii) a termite bond or similar documentation relating to the
Property;
(viii) copies of all utility bills for the most recent twelve
(12) months; and
(ix) any and all other written items relating to Seller's
operation and maintenance of the Property requested by Purchaser.
2
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(b) Seller acknowledges that Purchaser is a public entity and is
required to complete and submit to the Securities and Exchange Commission
an audit with respect to its acquisition of the Property in compliance with
Regulation S-X. To the extent possible, and to the extent not otherwise
included as part of the operating Documents, Seller agrees to make
available to Purchaser and its agents in accordance with clause (a) above
compiled operating statements and general ledgers with respect to the
Property for the last twelve (12) months (hereinafter collectively called
the "Operating Statements"), which Operating Statements shall constitute
part of the Operating Documents , as defined in, and for purposes of, this
Agreement, together with any other written materials relating to Seller's
operation of the Property in Seller's possession (the "Additional
Materials"). Seller's acknowledgement contained in this subparagraph and
Purchaser's obligations with respect to Regulation S-X shall in no event
extend the Inspection Period or otherwise affect any of the terms and
conditions and/or obligations (if any) of Seller with respect to this
Agreement;
(c) Notwithstanding the foregoing contained in clause (b) above,
Seller agrees to provide upon written request from Purchaser any Additional
Materials not delivered to Purchaser as a part of the Operating Documents
for a period of sixty (60) days after the Date of Closing, and Purchaser
and Seller acknowledge and agree that Seller's covenant contained in this
clause (c) has been agreed to merely as an accommodation to Purchaser in
order for Purchaser to comply with Regulation S-X and Purchaser shall have
no obligation whatsoever to prepare or cause to be prepared any materials
relating to the Property. Seller's obligation contained in this clause (c)
is only to deliver any Additional Materials in the possession and not
delivered as a part of the Operating Documents and, except with respect to
such delivery, Purchaser (and any parties claiming by or through Purchaser)
shall have no other rights or recourse whatsoever against Seller or any
other party for any breach of or noncompliance with respect to this
covenant or Purchaser's failure to comply with Regulation S-X.
SECTION 5. SURVEY. On or prior to five (5) business days from the Effective
Date, Seller will deliver a copy of the survey (hereinafter called the "Survey")
of the Property last revised January 3, 1997 and prepared by Watts & Browning
Engineers. Purchaser shall have the right to enter into the property until
August 7, 1998 to have said Survey updated (hereinafter called the "Updated
Survey") at Purchaser's expense. Purchaser agrees to indemnify and hold Seller
harmless from any damages sustained by or asserted against Seller resulting from
the exercise by Purchaser or its representatives of the rights granted in this
Section, which agreement shall survive Closing or the earlier termination
hereof. If the Updated Survey shows matters affecting marketability of title to
the Property not shown on the Survey, Purchaser may object thereto on or before
August 7, 1998 and shall provide five (5) copies of the Updated Survey to
Seller. If Purchaser timely furnishes such statement, Seller shall have until
three (3) days after receipt thereof in which to indicate to Purchaser which of
such matters Seller will cure. Except for those items Seller expressly agrees to
cure, Seller shall have no duty or obligation whatsoever to cure any matters
raised in such notice. If there are items Seller declines to cure, within two
(2) days after receipt by Purchaser of Seller's response to Purchaser's notice,
Purchaser shall deliver notice to Seller in which Purchaser elects, with respect
to such items, either to:
(a) accept the Property with such matters as Sellers declines to cure
(which shall be deemed Permitted Exception, as hereinafter defined ) with
no change in the terms hereof; or
(b) decline to accept the Property with such matters.
3
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If Purchaser shall decline to accept the Property pursuant to option (y) , or if
Purchaser fails timely to give a notice of election, then, except as expressly
provided herein, this Agreement shall be null and void and Escrow Agent shall
make a Refund, whereupon, except as expressly set forth herein, the parties
hereto shall have no further rights, duties, obligations or liabilities to one
another hereunder.
SECTION 6. TITLE. Within five (5) business days of the Effective Date,
Seller shall deliver to Purchaser a copy of the existing title insurance policy
insuring The United Bank of Kuwait ("UBK"), as mortgagee, with an effective date
of March 27, 1997 (hereinafter called the "Title Policy"), together with copies
of all documents appearing as exceptions to title, except for such security
documents which will be satisfied at Closing (as hereinafter defined). Purchaser
shall have until August 7, 1998 to review title to the Property and in which to
deliver to Seller a written statement of any and all matters adversely affecting
marketability of title to the Property other than (a) ad valorem taxes for the
current year not yet due and payable, (b) rights of tenants in possession, as
tenants only under written occupancy leases and (c) any matters listed in
Exhibit "E" attached hereto and by this reference incorporated herein
(hereinafter called the "Permitted Exceptions"). Provided that Purchaser with
reasonable promptness notifies Seller after obtaining actual knowledge thereof,
Purchaser will have the same right at or before Closing to object to any title
matters first arising after August 7, 1998, and the rights and responses
provided herein for Purchaser's original statement of objections shall apply
(with the Closing Date being extended, if necessary, to permit response periods
to run). If Purchaser timely furnishes the aforesaid written statement and
enclosures, Seller shall have until three (3) days after receipt thereof in
which to indicate to Purchaser which of the non-Permitted Exceptions raised by
Purchaser which Seller will cure. Except for those items Seller expressly elects
to cure and except for any exceptions arising from Seller's intentional acts
subsequent to the effective date of the title commitment, Seller shall have no
duty or obligation whatsoever to cure any title defect; provided, however, that
Seller agrees to pay at Closing, using funds provided by Purchaser, the existing
first mortgage (hereinafter called the "First Mortgage") on the Property made to
Seller by UBK. If there are any items (other than the First Mortgage) Seller
declines to cure, within two (2) days after receipt by Purchaser of Seller's
response to Purchaser's notice Purchaser shall deliver notice to Seller in which
Purchaser elects, with respect to such items, either to :
(i) accept the Property with such matters as Seller declines to cure
(which shall be deemed Permitted Exceptions) with no change in the terms
hereof; or
(ii) decline to accept the Property with such matters.
If Purchaser shall decline to accept the Property pursuant to option (y), or if
Purchaser fails timely to give a notice of election, then, except as expressly
provided herein, this Agreement shall be null and void and Escrow Agent shall
make a Refund, whereupon, except as expressly set forth herein, the parties
hereto shall have no further rights, duties, obligations or liabilities to one
another hereunder.
SECTION 7. PROPERTY INSPECTION.
(a) Purchaser and Purchaser's agents or contractors shall have the
right until July 30, 1998 (hereafter the "Inspection Period") to enter the
Property during reasonable business hours and to review the Operating
Documents and inspect the Property, upon twenty-four (24) hours written
notice to Seller; provided, however, that Purchaser and Purchaser's agents
or contractors shall have until August 5, 1998 to review structural
components relating to the Improvements. Purchaser and Purchaser's agents
agree not to interfere with tenants of the Property, but Purchaser will
have the right to "walk" apartment units, provided that Seller and its
property manager shall have the right to be present during the inspection.
Purchaser agrees to indemnify
4
<PAGE>
and hold Seller harmless from any damages sustained by or asserted against
Seller resulting from the exercise by Purchaser or its representatives of
the rights granted in this Section, which agreement shall survive Closing
or the earlier termination hereof. Upon three (3) business days prior
notice, Seller agrees that all Operating Documents shall be available for
Purchaser's inspection. In the event that Purchaser does not terminate this
Agreement by written notice delivered to Seller on or before the expiration
of the Inspection Period, then the Earnest Money shall become
non-refundable to Purchaser, except as expressly provided in the Agreement.
(b) 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 in which case Escrow Agent shall make a Refund, no
party hereto shall have any further liability to any party hereto and
Purchaser shall promptly return any and all third party reports in the
possession of Purchaser and supplied by Seller and relating to Seller
and/or Purchaser to Seller. Failure timely to notify Seller of termination
of this Agreement under this subparagraph (b) shall constitute a waiver of
the condition contained in this subparagraph and the acceptance of the
Property as suitable for Purchaser's purposes.
(c) Notwithstanding clause (b) above, if Purchaser is not satisfied,
in its sole and absolute discretion, (i) with the matters set forth on and
relating to the Title Policy and /or the Survey, Purchaser shall have the
right to terminate this Agreement by giving written notice to Seller on or
before August 7, 1998, and (ii) with respect to its review of the
structural components relating to the Improvements as contemplated pursuant
to Section 7(a) hereof, Purchaser shall have the right to terminate this
Agreement by giving written notice to Seller on or before August 5, 1998,
in either case Escrow Agent shall make a Refund, no party hereto shall have
any further liability to any party hereto and Purchaser shall promptly
return the Title Policy and the Survey to Seller.
SECTION 8. REPRESENTATIONS AND WARRANTIES.
(a) As of the Effective Date (unless a different date is specified),
Seller represents and warrants to Purchaser that to the best of Seller's
actual knowledge, which for purposes herein shall be defined as actual
knowledge of Michael P. Orscheln:
(i) The Rent Roll is complete and accurate in all material
respects as of June 25, 1998;
(ii) The Operating Statements are complete and accurate in all
material respects for the periods covered thereby;
(iii) There exist no written notices of default under any lease
affecting the Property, mortgage or other encumbrance relating to the
Property or Service Contract which have not been cured;
(iv) Seller has received no written notice of any actual or
threatened action, litigation, rezoning, condemnation or proceeding by
any person, entity or governmental agency which would materially
affect the Property;
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(v) Seller has received no written notice of any governmental
assessments concerning the Property which are unpaid;
(vi) Seller has received no written notice and has no actual
knowledge of any existing violation of law, municipal or county
ordinances or codes, or other legal requirements with respect to the
Property;
(vii) Seller has been duly organized and is validly existing as a
corporation under the laws of the State of Georgia and has full right
and authority to enter into this Agreement and to consummate or cause
to be consummated the sale contemplated herein;
(viii) The list of Service Contracts attached as Exhibit "C" is
true, correct, and complete in all material respects;
(ix) Seller is not subject to any other agreements or
arrangements, with the exception of those contained in any existing
mortgage documents relating to the property, which would prevent
Seller from selling the Property to Purchaser;
(x) 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 relating to the property; and
(xi) Seller holds fee simple title to the Property, subject to
the Permitted Exceptions.
(b) Purchaser will promptly notify Seller of any facts that it
contends causes any of Seller's representations or warranties in this
Agreement to be untrue, and Seller will have fifteen (15) calendar days
after notice to cure the same ( with the Inspection Period to be extended
if such occurs prior to expiration of the Inspection Period and the Closing
being extended, if necessary, to accommodate such cure period ). If a
representation or warranty made by Seller (other than any warranties made
in Seller's Documents) is untrue in any material respect on the Closing
Date, this Agreement may be terminated by Purchaser by giving written
notice thereof to Seller in which case Escrow Agent shall make a Refund, or
Purchaser may elect to Close and waive the failure of any such
representation and warranty. Failure to timely notify Seller of termination
of this Agreement under the immediately proceeding sentence shall
constitute a waiver of the condition contained in this clause (b) and the
acceptance of the Property as suitable for Purchaser's purposes; provided,
however, that Purchaser's sole rights and remedies (if any) with respect
thereto after Closing shall be subject only to the following:
(i) Any claims made by Purchaser with respect to any breached
representation or warranty must be made within six (6) months after
the Closing Date, and shall be based solely upon the alleged untruth
of the representation or warranty in question on the Closing Date; and
(ii) No recovery shall be had on any such claim if,
notwithstanding the inaccuracy of the representation or warranty in
question, Purchaser knew of its inaccuracy at or before Closing,
whether by disclosure of Seller or otherwise.
SECTION 9. REPRESENTATIONS AND WARRANTIES OF PURCHASER. As of the
Effective Date, unless a different date is specified, Purchaser warrants and
represents to Seller as follows:
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(a) Purchaser is a duly formed and validly existing corporation
organized under the laws of the Commonwealth of Virginia, and is and will
continue to be qualified under the laws of the Commonwealth of Virginia and
the State of Georgia to conduct business therein on the Effective Date and
on the Closing Date;
(b) Purchaser has the full legal right, power, authority and financial
ability to execute and deliver this Agreement and all of Purchaser's
Documents (as hereinafter defined), to consummate the transactions
contemplated hereby and to perform its obligations hereunder and under all
of Purchaser's Documents;
(c) This Agreement and Purchaser's Documents do not and will not
contravene any provision of the organizational documents of Purchaser, any
judgment, order, decree, writ or injunction issued against Purchaser, or
any provision of any laws applicable to Purchaser. The consummation of the
transactions contemplated hereby will not result in a breach or constitute
a default or event of default by Purchaser under any agreement to which
Purchaser or any of its assets are subject or bound and will not result in
a violation of any laws applicable to Purchaser; and
(d) There are no pending actions, suits, proceedings or investigations
to which Purchaser is a party before any court or other governmental
authority which may have an adverse impact on the transactions contemplated
hereby.
SECTION 10. SELLER'S OBLIGATIONS PENDING CLOSING. Between the Effective
Date and the Closing Date (or termination of this Agreement), Seller shall:
(a) Use all reasonable efforts as may be necessary to effect the
transactions contemplated by this Agreement, provided, however, that Seller
shall in no event expend an amount in excess of $50,000 with respect to any
such efforts;
(b) Maintain the Property in the same manner as is presently done,
subject to normal wear and tear, casualty, condemnation and matters
unreported by tenants;
(c) Maintain existing insurance coverage or its equivalent in force
with respect to the Property;
(d) Not convey or voluntarily encumber the property or any portion
thereof or interest therein, except in the normal course of business;
(e) Not enter into any tenant lease with a term of less than six (6)
months or more than twelve (12) months, all of which leases will be on
Seller's current standard form lease and at not less than the current rents
charged an the Property for a similar unit;
(f) Not enter into any contract that is not cancelable upon thirty
(30) days notice that will be an obligation affecting the Property or any
part thereof subsequent to the Closing Date without Purchaser's prior
written consent, which Purchaser agrees not to unreasonably withhold, delay
or condition;
(g) At Closing, provide to Purchaser any and all vacant apartment
units in a "rent ready" condition; and
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(h) Notwithstanding anything to the contrary contained in this
Agreement, Seller reserves the right, but is not obligated to, institute
summary proceedings against tenants or terminate the Leases as a result of
a default by tenants therein prior to the Closing Date. The removal of the
defaulting tenants whether by summary proceedings or otherwise prior to the
Closing Date shall not give rise to any claim on the part of the Purchaser.
Further, Purchaser agrees that it shall not be grounds for Purchaser's
refusal to close this transaction that a tenant may be a holdover tenant or
in default under its Lease on the Closing Date and Purchaser shall accept
title subject to such holding over or default without credit against, or
reduction of, the Purchase Price.
SECTION 11. CLOSING DATE AND PLACE. The closing (hereinafter called the
"Closing") of the transactions contemplated hereby shall take place at 10:00
a.m., Atlanta, Georgia time, at the offices of Kutak Rock, Suite 2100, 225
Peachtree Street, N.E., Atlanta, Georgia 30303 on the earlier to occur
(hereinafter called the "Closing Date") of (a) August 12, 1998, or (b) a date
agreed to in writing by Seller and Purchaser.
SECTION 12. CONVEYANCE.
(a) At the Closing, Seller will convey the Property subject only to
the Permitted Exceptions and deliver to Purchaser the following documents
(hereinafter collectively called the "Seller's Documents"), all of which
shall be duly executed, sealed, witnessed and notarized where required:
(i) Limited Warranty Deed (hereinafter called the "Deed") in the
form attached hereto as Exhibit "F";
(ii) Counterpart of the Bill of Sale (hereinafter called the
"Bill of Sale") in the form attached hereto as Exhibit "G";
(iii) Counterpart of an assigment of all leases affecting the
Property, together with any security or other deposits pertaining
thereto, in the form attached hereto as Exhibit "H" (hereinafter
called the "Assigment of Leases");
(iv) Counterpart of an assignment of all Service Contracts and
all assignable warranties and guarantees from any contractors,
subcontractors, suppliers, manufacturers or distributors relating to
the Property, if any, in the form attached hereto as Exhibit "I"
(hereinafter called the "General Assignment");
(v) An updated 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, and the amount of any escrow, or security deposit of tenant;
(vi) To the extent possessed by Seller the original of all
assigned leases, Service Contracts and any assignable licenses and
permits for the Property;
(vii) A notice addressed to tenants at the Property advising them
of the sale and transfer of their leases and security and other
deposits, if any, and instructing the tenants with respect to
subsequent rent payments;
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(viii) A certificate establishing that Seller is not a "foreign
person" for withholding purposes under the Internal Revenue Code of
1986, as amended in the form attached hereto as Exhibit "J"
(hereinafter called the "Transfer Certificate");
(ix) Either payment of the withholding tax imposed by O.C.G.A.
sections 48-7-128, or establishment of an exemption from payment
thereof;
(x) A lien waiver from broker sufficient to dissolve any broker's
lien rights under Georgia law;
(xi) An affidavit sufficient to cause Purchaser's title insurer
to remove standard printed exceptions in its title policy for
mechanic's liens, broker's liens and rights of parties in possession
other than tenants, but Seller shall have no obligation to deliver an
affidavit on these subject which is untrue;
(xii) If the Updated Survey has a legal description different
than that contained in Exhibit "A", a quitclaim deed based on the
Updated Survey;
(xiii) A closing statement (the "Closing Statement");
(xiv) Evidence of the authority and existence of Seller to convey
the Property reasonably satisfactory to Purchaser's title insurer;
(xv) A termination of Seller's management contract for the
Property;
(xvi) To the extent required, documents for the transfer of the
telephone, electric, water and sewer and gas utilities, as may be
required by the applicable utility, for execution at Closing;
(xvii) A certificte (in the form attached hereto as "Exhibit L")
recertifying that the representations and warrants contained in
Section 8 of this Agreement are true and correct in all material
respects at Closing;
(xviii) A lead base disclosure statement (in the form attached
hereto as "Exhibit M") (the "Disclosure Statement"); and
(xix) A representation letter in the form attached hereto as
"Exhibit K".
(b) At Closing, Purchaser will deliver to Seller the following
(hereinafter collectively called the "Purchaser Documents") all of which
shall be duly executed, sealed, witnessed and notarized where required:
(i) The cash portion of the Purchase Price, as adjusted by any
credit for Earnest Money or other adjustments to which Purchaser is
entitled hereunder, together with any other funds Purchaser is
obligated to pay hereunder;
(ii) A copy of a resolution of Purchaser certified by the
secretary by of Purchaser to be in force and unmodified as of the
Closing Date, authorizing the transactions contemplated herein, the
execution and delivery of all documents required
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to effectuate such, and designating the Senior Vice President of
Purchaser who is authorized to execute and deliver such documents on
behalf of Purchaser;
(iii) Counterpart of the Bill of Sale;
(iv) Counterpart of the Assignment of Leases;
(v) Counterpart of the General Assignment;
(vi) Counterpart of the Closing Statement; and
(vii) Counterpart of the Disclosure Statement.
(c) At Closing, Escrow Agent will deliver to (i) Seller, the Earnest
Money, which will be credited against the Purchase Price, and (ii)
Purchaser, interest on the Earnest Money.
SECTION 13. POSSESSION. Seller agrees to give possession of the Property to
Purchaser on the Closing Date, subject to the Permitted Exceptions.
SECTION 14. SETTLEMENT COSTS AND ADJUSTMENTS.
(a) Each party shall be reponsible for its attorneys' fees and other
costs incurred by it in connection with this Agreement and the transactions
contemplated hereby. Purchaser shall be responsible for the costs of any
audits, tests, surveys or inspections of the Property which it desires to
make, recording costs, intangible tax on any security instrument, title
insurance premiums and one-half of any title company escrow or investment
fees with respect to the Earnest Money. Seller shall pay all costs
associated with satisfying any mortgages that encumber the Property, the
transfer tax on the Deed, the title examination fee and one-half of any
title company escrow or investment fees with respect to the Earnest Money.
(b) The following items shall be prorated between Seller and Purchaser
as of 11:59 p.m. on the date before the Closing Date, and adjusted against
the Purchase Price:
(i) Prepaid rents under assigned leases and other prepaid income
or revenues from the Property and all laundry and miscellaneous
income;
(ii) All general real estate, personal property and sanitary
taxes which are liens upon the Property for the year of Closing shall
be prorated on the basis of the most recent ascertainable tax bill.
All assessments affecting the Property for the year of Closing shall
be prorated as the basis of the most recent ascertainable bill for
such assessments. Such taxes and/or assessments shall be adjusted, if
necessary, when the actual tax bills or bills regarding assessments
(as the case may be) for the period covered by the proration shall
become available, and the appropriate payment or credit shall be made
between the Purchaser and Seller within ten (10) calendar days after
demand;l and
(iii) All operating expenses for or pertaining to the Property,
not including management fees, utilities, termite bond and Service
Contracts; provided, however, that Seller shall attempt to have
readings of utility meters made as of the Closing Date and to cause
utilities to render final bills to Seller, which Seller shall pay at
Closing if bills
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have been rendered. Notwithstanding the foregoing, Seller will be
responsible for all expenses for the Property attributable to the
period prior to Closing, and Purchaser will be responsible for said
expenses attributable to the period after Closing, no capital expenses
will be prorated, Seller will pay for any prepayment fees, recording
costs and other costs incurred by Seller in connection with
satisfaction of any mortgage or other title matters it agrees to cure
and, to the extent bills for expenses for which Seller is responsible
have not been received by Closing, Seller will pay such bills directly
or reimburse Purchaser within ten (10) days after demand (accompanied
by a copy of the bill in question).
(c) Seller shall pay to Purchaser at Closing by check acceptable to
Purchaser the amount of any and all refundable deposits (and not previously
applied pursuant to a right to do so) made by tenants of the Property under
existing leases, including, without limitation, security and other
deposits, and any future rental concessions provided to tenants.
(d) Notwithstanding anything contained herein to the contrary, rent in
arrears for months prior to the Closing Date shall not be prorated. Seller
shall not have the right to sue current tenants for delinquent rents, but
Purchaser will use reasonable efforts to collect same. Rents received after
the Closing Date shall first be applied to rentals due owing after the
Closing Date through the date received or, if for a month subsequent to
receipt, the month intended (if all rent for prior months subsequent to
closing has been paid ) and then to rents due prior to the Closing Date.
Promptly upon request of Seller, after Closing, Purchaser shall deliver to
Seller a report setting forth the status of its collection of delinquent
rents as of sixty (60)calendar days after Closing. The terms of this
subparagraph (d) shall survive the Closing.
SECTION 15. CASUALTY OR CONDEMNATION. If on or before the Closing Date all
or any part of the Property is destroyed or damaged by fire or any other cause,
or if eminent domain proceedings are instituted, or a notice of condemnation is
given, with respect to all or a portion of the Property, Seller shall promptly
notify Purchaser thereof. If such damage or destruction is repaired at the sole
cost and expense of Seller prior to Closing to the same condition existing prior
to such damage or destruction, or if such damage or destruction does not exceed
$100,000 (as determied by Seller's insurer in its reasonable discretion) and
such damage or destruction is fully covered by Seller's insurance (provided,
that if such damage or destruction is not fully covered by Seller's insurance
Seller may, at its option, pay or credit Purchaser in any amount equal to the
shortfall, in which event such damage or destruction will be deemed fully
covered by Seller's insurance), or if the value of any land taken or to be taken
does not eceed $100,000 or does not in Purchaser's reasonable judgment
constitute a material part of the Property or does not adversely affect the
existing zoning with respect to the Property , Purchaser shall be bound to
purchase the Property without reduction in the Purchase Price. In the event of
(a) damage to or destruction of all or any part of the Property of $100,000 or
more and Seller fails to repair such damage or destruction as provided herein,
or (b) the institution or giving of notice of eminent domain proceedings with
respect to all or any part of the Property the value of which exceeds $100,000,
Purchaser or Seller shall have the right to terminate this Agreement by giving
written notice to the other on or before the Closing Date and in the event
Purchaser or Seller excercises such right to terminate this Agreement, the
Escrow Agent shall make a Refund, whereupon no party hereto shall have
rights,obligations or liabilities hereunder. In the event of any unrepaired
damage or eminent domain proceedings which would permit termination hereunder
and neither party elects to terminate, or if Purchaser is required to proceed
permit termination hereunder , the Deed shall be subject to any such eminent
domain proceeding, such taking shall be deemed a Permitted Exxception, and
Seller shall deliver to Purchaser on the Closing Date an assignment in a form
reasonably satisfactory to Purchaser of all of Seller's right, title and
interest in and to any eminent
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domain, award or insurance claim (including rental insurance except for any
rental insurance proceeds attributable to the period prior to Closing), and any
deductible with respect thereto, to the extent not previously applied to
restoration of the Property, but the Purchase Price shall not be affected by any
such condemnation, damage or destruction (although in the event of a casualty,
Purchaser will receive a credit against the Purchase Price equal to any
deductible on Seller's casualty insurance).
SECTION 16. SELLER'S REMEDY. The parties acknowledge that it is impossible
to ascertain Seller's damages in the event of default by Purchaser hereunder.
Accordingly, the parties agree that if Purchaser defaults in performing under
this Agreement, Escrow Agent shall pay to Seller the Earnest Money and interest
thereon, not as a penalty, but for full liquidation of damages, Seller and
Purchaser acknowledging and agreeing that it is difficult or impossible to
determine the actual damages Seller would suffer from Purchaser's breach hereof
and that the agreed upon liquidated damages are not punitive or penalties and
are just, fair and reasonable, all in accordance with O.C.G.A.section13-6-7,
as amended, and Seller shall have no further remedies hereunder.
SECTION 17. PURCHASER'S REMEDIES. In the event that Seller defaults in
performing under this Agreement or should any of Seller's warranties or
representations be untrue in any material respect (and not be corrected within
any applicable cure period), if no other remedy therefor is specified herein,
Purchaser shall elect either of the following as Purchaser's sole and exclusive
remedy for such breach:
(a) terminate this Agreement by written notice delivered to Seller on
or before the Closing Date, in which case Escrow Agent shall make a Refund
whereupon Purchaser shall have not further rights or remedies with respect
to Seller or this Agreement; or;
(b) seek specific performance of this Agreement against Seller, in
which case Purchaser shall be deemed to have accepted Seller's title to the
Property (except for title matters Seller has expressly agrred to cure) and
to have waived any action for damages against Seller by reason of such
breach.
Closing by Purchaser shall conclusively be deemed a waiver of any
breach of representation or warranty of which Purchaser has knowledge, or
of any default or of any unfulfilled condition of Closing, except such
matters which Seller has expressly agreed to cure after having received
written notice from Purchaser.
SECTION 18. REAL ESTATE COMMISSIONS. If, and only if, the sale of the
Property shall be completed and closed in accordance with the terms of this
Agreement, at Closing, Seller shall pay The Apartment Group (hereinafter called
"Seller's Broker") a commission of $217,500.00 based on the Purchase Price of
$9,000,000. Seller covenants and represents to Purchaser that Seller's Broker is
the only party claiming by, through or under Seller entitled to be paid a
finder's fee, cooperation fee, commission or other brokerage-type fee or similar
compensation in connection with this Agreement and the transactions contemplated
hereby ("Brokerage Compensation"),and that Seller has not had any dealings or
agreements with any other individual or entity in connection therewith.
Purchaser covenant and represents to Seller that Seller's Broker is the only
party with whom Purchaser has dealt and there is no other party entitled to be
paid Broker's Compensation, and that Purchaser has not had any dealings or
agreements with any other individual or entitiy in connection therewith. If any
person or entity other than Seller's Broker shall assert a claim to such a fee
or compensation against either Seller or Purchaser on account of alleged
employment as a finder, consultant or broker, then the party to this Agreement
by, through or under whom the person or entity claims such employment shall
indemnify, defend and hold harmless the other party against and from any and all
such claims and all costs, expenses and liabilities
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incurred in connection with such claim or any action or proceeding brought
thereon, including, without limitation, attorneys' fees. Seller's Broker agrees
that without the prior written consent of Seller and Purchaser, Seller's Broker
they will not make or permit to be made, or permit those acting by, through or
under them to make, any press release, tombstone or other advertisement or other
announcement, or disseminate any information to third parties, relative to this
transaction.
SECTION 19. ESCROW AGENT. Escrow Agent hereby accepts its designation as
Escrow Agent hereunder, acknowledges receipt of the full amount of Earnest
Money, and agrees to hold and disburse the Earnest Money as herein provided.
Escrow A gent shall not be liable for any acts taken in good faith, shall only
be liable for its willful default or action, or gross negligence, and may, in
its sole discretion, rely on good faith upon the written notices,
communications, orders or instructions given by any party hereto. In the event
of a dispute between Purchaser and Seller under this Agreement sufficient in the
discretion of Escrow Agent to justify its doing so. Escrow Agent shall be
entitled to tender into the registry or custody of any court of competent
jurisdiction the Earnest Money, and all other money or property in its hands
under the terms of this Agreement, together with such legal proceedings as it
deems appropriate, and thereupon be discharged from all further duties under
this Agreement. Seller and Purchaser hereby agree to indemnify and hold harmless
Escrow Agent against any and all losses, claims, damages, liabilities and
expenses, including, without limitation, reasonable costs of investigation and
counsel fees and disbursements which may be incurred by Escrow Agent in
connection with its acceptance of this appointment as Escrow Agent or the
performance of its duties hereunder, including, without limitation, any
litigation arising from this Agreement or involving the subject matter hereof;
provided, however, that if the matter in question arises from the negligence or
willful act of Escrow Agent, then Escrow Agent shall bear all such losses,
claims, damages, and expenses. In the event Escrow Agent places in the registry
or custody of any court of competent jurisdiction the Earnest Money, it shall
request that said funds be placed in intersest bearing form for the benefit of
the party entitled thereto, and such interest will be paid to the party entitled
to receive the Earnest Money.
SECTION 20. TIME PERIOD. Time is of the essence in this Agreement;
provided, however, that if the time within which any action, consent, approval
or other activity contemplated, expires on a Saturday, Sunday, or a national
bank holiday, such time period shall automatically be deemed extended to the
first day after the shceduled termination of such time period which is not a
Saturday, Sunday or national bank holiday.
SECTION 21. NOTICES. All notices required or permitted to be given
hereunder shall be in writing , delivered in person or sent by reputable
overnight carrier for next business day delivery or by facsimile (for which
receipt has been confirmed by the sender pursuant to the facsimile machine's
confirmation software), and shall be effective on receipt. Notice shall be
directed as follows:
To Seller: Morrow Apartments, Inc.
c/o United Gulf Management, Inc.
176 Federal Street
Boston, MA 02110
Attention: Mr. Michael P. Orscheln,
Vice President of Real Estate
Telephone: (617) 261-4922
Facsimile: (617) 261-4924
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with a copy to: c/o Berkeley Investments, Inc.
101 Federal Street
Boston MA 12110
Attention: Mr. P.J. Yeatman
Telephone: (617) 439-0088
Facsimile: (617) 439-4449
with a copy to: Michael A. Kazamias, Esq.
Kutak Rock
Suite 2100
225 Peachtree Street, NE
Atlanta, GA 20303-1731
Telephone: (404) 222-4617
Facsimile: (404) 222-4654
To Purchaser: Cornerstone Realty Group, Inc.
306 East Main Street
Richmond, VA 23219
Attention: Mr. Gus Remppies
Telephone: (804) 643-1761
Facsimile: (804) 782-9302
with a copy to: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut Street
Cedarhurst, NY 11516
Telephone: (516) 374-3133
Facsimile: (516) 374-3490
and to: Michael W. Tighe, Esq.
Callison Tighe Robinson & Hawkins, LLP
2nd Floor
1812 Lincoln Street
Columbia, SC 29201
Telephone: (803) 256-2371
Facsimile: (803) 256-6431
To Escrow Agent: Specialized Title Services, Inc.
Suite 300
Building 2
7000 Peachtree Dunwoody Road
Atlanta, GA 30328
Attention: Mr. George Calloway
Telephone: (770) 394-7000
Facsimile: (770) 698-2028
SECTION 22. ASSIGNMENT OF PURCHASER'S INTEREST. Until Closing or the
earlier termination of this Agreement Seller shall not assign its right, title
or interest in and to the Property. Purchaser may not assign its right, title or
interest in and to this Agreement without the prior written consent of Seller.
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Notwithstanding the foregoing Purchaser may, without the consent of Seller,
assign this Agreement to an entity under control or under common control of
Purchaser; provided that no such assignment is effective as to Seller until
Seller has received a fully executed copy thereof which conforms to the
requirements to this Section. Any such assignment shall expressly state that
Purchaser is not relieved of liability hereunder and that the transferee
expressly assumes Purchaser's obligations hereunder.
SECTION 23. SURVIVAL. Expect as expressly stated herein the
represe4ntations and warranties made herein shall not survive the Closing of the
transactions contemplated hereby and shall be merged into the Deed.
SECTION 24. AS-IS SALE. Purchaser expressly acknowledges that Purchaser has
had and will have an opportunity to evaluate the Property and to make full
inquiry of Seller as to all matters deemed relevant by Purchaser in evaluating
the Property. Purchaser expressly acknowledges that the Property is being
purchased "as is" and "with all faults," latent and patent. Purchaser
acknowledges that Seller has not duty, responsibility or obligation whatsoever
to volunteer to Purchaser information about the Property, except for
information, representations and warranties specficially provided for herein.
Without limiting the generality of the foregoing, expect as expressly asset
forth herein or in any Seller Document, Seller has not and will not, and hereby
expressly disclaims any warranties whatsoever, express or implied, with respect
or relating to the Property, including without limitation, merchantability,
habitability or fitness for the purposes of the Property or any part thereof.
Purchaser expressly acknowledges that it is not authorized to rely, has not
relied, and will not rely on any representation, statement or warranty of
Seller, or of any agent or representative of Seller, not expressly set forth
herein. This Section will survive Closing.
SECTION 25. CONSTRUCTION. This Agreement shall be governed by, interpreted,
construed and enforced in accordance with the laws of the State of Georgia.
Seller and Purchaser acknowledge that they have both participated in the
drafting of this Agreement and that neither Seller nor Purchaser shall be
entitled to the benefit of the legal principle that a document is to be
construed against the person drafting it.
SECTION 26. PERSONS BOUND. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
SECTION 27. MODIFICATION AMENDMENT. This Agreement contains the entire
agreement of the parties. supersedes all prior negotiations and agreements
between the parties and may not be modified or amended except by a writing
executed by Seller and Purchaser.
SECTION 28. EFFECTIVE DATE. For purposes of this Agreement, the "Effective
Date" shall mean the date on which this Agreement is fully executed, which shall
be the later of the date Seller and Purchaser execute this Agreement.
SECTION 29. OFFER BY PURCHASER. This Agreement is an offer by Purchaser to
Seller, and is irrevocable by Purchaser until three (3) business days after
received by Seller. Seller must accept by causing this Agreement to be executed
and delivering to Purchaser a counterpart executed by Seller and Broker within
three (3) days after execution by Purchaser.
SECTION 30. ATTORNEY'S FEES. In the event either party hereto shall default
in the performance of any of the terms and conditions of this Agreement, the
prevailing party shall be entitled to recover all costs, charges and expenses of
enforcement, including reasonable attorney's actually incurred and
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paralegal fees, which reasonable fees shall include attorney's and paralegal
fees incurred in any trial or appellate proceedings.
SECTION 31. COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original but all of which shall
constitute one and the same Agreement.
SECTION 32. AGREEMENT NOT TO BE RECORDED. This Agreement shall not be
recored in the public records; provided, however, that if Seller defaults
hereunder in accordance with the terms herewith, Purchaser shall be able to
record this Agreement or a memorandum thereof in the public records solely as a
means of maintaingin its right, fi any, to specific performance hereunder.
Except as aforesaid, any attempts to record this instrument by or on behalf of
Purchaser shall, at Seller's option, cause all of the effect of enforcement of
any of its terms to become null and void, and same shall not constitute
constructive notice of its existence or constitute a cloud on title.
SECTION 33. WAIVER. Except as otherwise provided herein, the failure of
Seller or Purchaser to insist upon or enforce any of their respective rights
hereunder shall not constitute a waiver thereof.
SECTION 34. CAPTIONS. The captions used herein have been included for
convenience of reference only and shall not be deemed to vary the content of
this Agreement or limit the provisions or scope of any section or paragraph
hereof.
SECTION 35. PRONOUNS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular, or plural as the
identity of the person or entity may require.
SECTION 36. SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but in the event that any provision of this Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
SECTION 37. EXHIBITS. All of the Exhibits annexed hereto are incorporated
herein by reference and form a part of this Agreement.
SECTION 38. USE OF THE WORD "HEREIN". Use of the word "herein," "hereunder"
and any other words of similar import refer to this Agreement as a whole and not
to any particular article, section or other paragraph of this Agreement unless
specifically noted otherwise in this Agreement.
SECTION 39. THIRD PARTIES. This Agreement shall not be deemed to confer in
favor of any third parties any rights whatsoever as third-party beneficiaries,
the parties hereto intending by the provisions hereof to confer no such benefits
or status.
SECTION 40. CONFIDENTIALITY. Purchaser and Seller expressly acknowledge and
agree that this Agreement, all Operating Documents, financial information
regarding Purchaser and any documents and information exchanged between
Purchaser and Seller shall be confidential in nature and shall be kept in strict
confidence. Purchaser and Seller agree that such confidential materials shall
only be transmitted to Purchaser's and Seller's representatives and their
respective lenders who need to know the information in the materials for the
purpose of evaluating the Property or to prepare to close the transactions
contemplated hereby. Purchaser and Seller, for the benefit of each other, hereby
agree prior to the Closing Date, they will not release or cause or permit to be
released any press notices, publicity (oral
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or written) or advertising promotion relating to, or otherwise announce or
disclose or cause or permit to be announced or disclosed, in any manner
whatsover, the terms, conditions, or substance of this Agreement or the
transactions contemplated herein, without first obtaining the written consent of
the other party hereto. In the event that this transaction fails to close, then
upon the termination of this Agreement, Purchaser agrees to return to Seller all
of the Operating Documents described in Section 4 hereof.
SECTION 41. JURY WAIVER. PURCHASER AND SELLER DO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THEIR RIGHT TO A TRAIL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, OR UNDER OR IN CONNECTION WITH
THIS AGREEMENT, THE DOCUMENTS DELIVERED BY PURCHASER AT CLOSING OR SELLER AT
CLOSING, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ANY ACTIONS OF EITHER PARTY ARISING OUT OF OR RELATED IN ANY
MANNER WITH THIS AGREEMENT OR THE PROPERTY (INCLUDING WITHOUT LIMITATION, ANY
ACTION TO RESCIND OR CANCEL THIS AGREEMENT AND ANY CLAIMS OR DEFENSES ASSERTING
THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE).
THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO THIS
AGREEMENT AND THE DOCUMENTS DELIVERED BY EITHER PARTY AT CLOSING AND SHALL
SURVIVE THE CLOSING OR TERMINATION OF THIS AGREEMENT.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
executed under seal as of the dates written below:
SELLER:
MORROW APARTMENTS, INC., a
Georgia corporation
By
--------------------------------------
Name
------------------------------------
Title
-----------------------------------
[Corporate Seal]
Date of Execution: July __, 1998
[Signatures continued on following page]
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[Signature page to Real Estate Sales Contract]
PURCHASER:
CORNERSTONE REALTY INCOME TRUST,
INC., a Virginia corporation
By /s/ S.J. Olander
--------------------------------------
S.J. Olander
Senior Vice President
[Corporate Seal]
Date of Execution: July 30, 1998
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The terms set forth in Section 18 of the preceding Agreement are hereby
acknowledged and agreed to. For and in consideration of the agreements contained
in Section 18 of the preceding Agreement and of other good and valuable
consideration, the undersigned hereby indemnifies and agrees to defend and hold
harmless Seller and Purchaser from and against any loss, cost, damage, or
expense sustained by or asserted against Seller or Purchaser, relating in any
way to any claim by any person or entity claiming by, through or under the
undersigned as a finder, consultant, broker or co-broker with respect to the
transactions contemplated by the foregoing Agreement, and waives any lien rights
it may have with respect to the transactions contemplated hereby.
BROKER:
THE APARTMENT GROUP
By
--------------------------------------
Name
------------------------------------
Title
-----------------------------------
Date: July __, 1998
The undersigned Escrow Agent hereby acknowledges receipt of the Earnest
Money referred to in Section 2 of the preceding Agreement and agrees to the
terms set forth in Section 19 thereof.
ESCROW AGENT:
SPECIALIZED TITLE SERVICE, INC.
By
-------------------------------------
Name
-----------------------------------
Title
-----------------------------------
Date: July __, 1998
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