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: January 15, 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
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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
(Stone Point (formerly Sterling Point)
Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Stone Point (formerly Sterling Point)
Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Stone Point (formerly
Sterling Point) Apartments)*
b. Pro Forma Statement of Operations for the
Twelve Months ended December 31, 1997 (unaudited)*
Pro Forma Balance Sheet as of
December 31, 1997 (unaudited)*
c. Exhibits
10.1 Purchase Contract for Stone Point
(formerly Sterling Point) Apartments
23.1 Consent of Independent Auditors*
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* To be filed by amendment.
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Item 2. Acquisition or Disposition of Assets
STONE POINT (formerly Sterling Point)APARTMENTS
Charlotte, North Carolina
On January 15, 1998, Cornerstone Realty Income Trust, Inc. (the "Company")
purchased the Sterling Point Apartments (the "Property"), consisting of 192
apartment units located at 10900 Point South Drive, Charlotte, North Carolina.
The Company has renamed the Property the "Stone Point Apartments."
The seller, Sterling Apartments, LLC, was unaffiliated with the Company.
The purchase price was $9,700,000, which was paid in its entirety with funds
borrowed by the Company under its unsecured line of credit. Title to the
Property was conveyed to the Company by limited warranty deed.
LOCATION. The following information is based in part upon information
provided by the 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,
pro-business 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. The growth of Charlotte's
banking and financial communities has had a positive effect on the growth of its
supporting industries,
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such as insurance, accounting, legal services, and real estate. Another recent
aspect of Charlotte's development is as the location of professional basketball
and football franchises known as the Charlotte Hornets and the Carolina
Panthers, respectively.
The city of Charlotte is located near the border of North Carolina and
South Carolina within Mecklenburg County. It is located at the intersection of
Interstates 77 and 85, the major north/south and east/west thoroughfares in the
region, which provide convenient access to all other regional areas.
The Property is located in Mecklenburg County, in the southwestern portion
of the Charlotte metropolitan area. The Property is located at the intersection
of Carowinds Boulevard and State Highway 49. The immediate area surrounding the
Property consists of other multi-family and single-family housing, commercial
development and retail development. The Property is an approximately ten-minute
drive to Lake Wylie. The Property is an approximately five-minute drive from
Interstates 77 and 485. The Charlotte central business district is an
approximately 25-minute drive from the Property and Charlotte/Douglas
International Airport is an approximately 15-minute drive from the Property via
Interstate 77.
DESCRIPTION OF THE PROPERTY. The Property was built in 1986 and comprises
192 garden-style apartments in 16 two-story buildings on approximately 20 acres
of land. The Property offers three unit types. The unit mix and rents currently
being charged to new tenants are as follows.
APPROXIMATE
INTERIOR MONTHLY
QUANTITY TYPE SQUARE FOOTAGE RENTAL
64 One bedroom, one 715 $560
bathroom
64 Two bedrooms, two 832 645
bathrooms
64 Two bedrooms, two 997 675
bathrooms
The units at the Property provide for a combined total of approximately
163,000 square feet of net rentable area.
The Property has an outdoor swimming pool, two tennis courts, a
playground, a fitness center, laundry facilities and a business center. The
Property has a clubhouse which includes an
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entertainment area, kitchenette, conference room and leasing office. There is
ample paved parking for tenants.
The Company believes that the Property has generally been well maintained
and is in good condition. According to the seller, the seller expended
approximately $260,000 in capital improvements beginning in January 1996. The
improvements included construction of an addition to the clubhouse housing a
fitness center, a new laundry facility, exterior painting, installation of the
playground, carpet replacement in approximately 60% of the apartment units,
vinyl floor replacement in approximately 50% of the apartment units, and new
light fixtures and mirrors in some of the apartment units. The Company has
budgeted $96,000 for additional renovations and improvements. These improvements
are expected to include redecoration of the clubhouse, exterior painting with
wood replacement as necessary, and new signs for the Property.
Leases at the Property are for terms of one year or less. Generally, rental
rates for the past five years have increased. As an example, a two-bedroom,
two-bathroom (997 square feet) apartment rented for $520 in 1993, $530 in 1994,
$550 in 1995, $603 in 1996 and $620 in 1997. The average effective annual rental
per square foot at the Property for 1993, 1994, 1995, 1996 and 1997 was $6.84,
$6.97, $7.23, $7.93, and $8.15, respectively.
The buildings are wood-frame construction on concrete slabs with pitched
roofs covered with asphalt shingles. The exteriors are masonite hardboard
siding.
All apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and an individually controlled heating and air conditioning unit. Each
apartment unit includes miniblinds, exterior storage, a wrap-around porch,
walk-in closets and washer/dryer connections. Each kitchen is equipped with a
refrigerator/freezer, electric range and oven, dishwasher and garbage disposal.
The owner of the Property supplies cold water, sewer service and trash removal.
The tenants are responsible for electricity, which includes heating, air
conditioning, hot water, cooking and lights.
There are at least five apartment properties in the area that compete with
the Property. The other properties that will compete with the Property offer
similar amenities and generally have rents that are comparable to those of the
Property. Based on a recent telephone survey, the Company estimates that
occupancy in nearby competing projects now averages approximately 93%.
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According to information provided by the seller, physical occupancy at the
Property averaged approximately 99% in 1993, 99% in 1994, 99% in 1995, 94% in
1996 and 96% in 1997. On January 6, 1998, the Property was 95% occupied. The
tenants of the Property are a mix of blue-collar and white-collar workers and
retired persons.
The following table sets forth 1997 real estate tax information for the
Property.
ASSET VALUE TAX TAX
RATE
Land $856,830.00 $1.2550 $10,753.22
Buildings 5,997,320.00 1.2550 75,266.37
Other features 76,060.00 1.2550 954.55
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Total $6,930,210.00 $86,974.14
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Solid Waste Fee: $6,369.00
TOTAL TAX: $93,343.14
==========
The basis of the depreciable residential real property portion of the
Property (currently estimated at about 6,073,380) 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.
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2. Based upon an engineering report and its own inspections, the Company
believes that the Property is in generally sound condition. In addition, the
Company believes that the completion of its planned capital improvements will
permit additional increases in rental rates.
3. The Property is conveniently located and proximate to major employers
and shopping.
4. The Company is very familiar with the Charlotte rental market. The
Company already owns other apartment complexes in the Charlotte area, which may
provide certain economies and efficiency in operation.
The Company is not aware of any material adverse factors relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be necessarily indicative of future operating
results.
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ITEM 7.a.*
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* 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.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.
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cornerstone Realty Income Trust, Inc.
Date: January 29, 1998 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 January 15, 1998
Exhibit Number Exhibit Page Number
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10.1 Purchase Contract for
Stone Point (formerly
Sterling Point) Apartments
23.1 Consent of Independent Auditors*
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* To be filed by amendment.
Exhibit 10.1
PURCHASE CONTRACT
-----------------
THIS AGREEMENT made and entered into this _ day of January 1998,
between CORNERSTONE REALTY GROUP, INC. or its nominee, (hereinafter called
"Purchaser") and STERLING APARTMENTS, LLC, (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 SALE OF PROPERTY. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as STERLING POINT 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 192 individually heated and air conditioned
apartment units, with all appurtenances, together with all appliances, drapes,
carpeting, shrubbery and all other personal property (excluding clubhouse and
model furnishings, pictures and accessories. However, Seller agrees to permit
Purchaser to use such excluded property for a period of thirty (30) days after
closing) 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
SEVEN HUNDRED THOUSAND ($9,700,000) DOLLARS as evidenced by cash or cash
equivalent at closing.
2.2 DEPOSIT. $100,000 to be placed in escrow at the end of the
"Inspection Period" described in Article VI below. Said deposit shall be placed
in escrow with the Title Company of North Carolina or its authorized agent as an
earnest money deposit which may be credited against the purchase price or
applied as per Article XI below.
ARTICLE III
TITLE MATTERS
3.1 MARKETABLE TITLE. Seller, shall convey good and marketable title by
Special Warranty Deed in the form attached hereto as EXHIBIT C, subject to
general taxes for the current year not yet due and payable and utility easements
which do not
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interfere with the present use of the Property.
(A) Title shall be free from any and all liens or mortgages and Seller
shall be responsible for any prepayment penalties necessary to deliver such free
title.
3.2 TITLE DEFECTS; ELECTION TO CURE. Seller shall furnish to Purchaser
evidence of a prior commitment for Title Insurance, (the commitment). If title
is not marketable, except as stated above in the preceding paragraph Purchaser
shall give written notice of any defects in title to Seller's counsel within ten
(10) days after Purchaser's receipt of a title report which report shall include
copies of backup documents relating to any title exceptions, a current survey, a
flood zone certification letter and a Surveyor's Certification letter. Seller
may, at its option, elect whether to cure said defects or by written notice to
Purchaser indicate its intention not to cure.
3.3 ELECTION NOT TO CURE DEFECTS. Should Seller elect not to cure title
defects, this Agreement, at Purchaser's option, shall be void; each party shall
thereupon be released from all obligations hereunder; and all deposits shall be
immediately returned to Purchaser.
ARTICLE IV
PRORATIONS
4.1 INCOME AND EXPENSE ALLOCATIONS. The following shall be prorated, on
a calendar-month basis, to the day of the closing: rents and other income from
the Property; operating expenses (on such service contracts and other
obligations as Purchaser may agree to assume); and general and real property
taxes and personal and business property taxes for the year of closing (based on
the most recent assessment and the most recent levy).
4.2 CLOSING COSTS. Purchaser and Seller shall pay their customary share
of all taxes, recording fees, if any, imposed on the Deed, or any other
documents executed in connection with the transfer of the Property. Purchaser
agrees to pay cost of title insurance. Seller shall pay any prepayment penalty
charged by the holders of any existing notes.
4.3 ALLOCATION OF RENTS. Rents collected by Seller prior to Closing
shall be prorated as agreed in 4.1 above. Purchaser shall apply rents received
after Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant
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for any delinquent rent apportioned to the Seller.
4.4 PRIOR LEASE CONCESSIONS. Seller represents that there are no rent
concessions which are not reflected in the actual rent collected as set forth in
the rent list attached hereto as EXHIBIT D.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 POSSESSION. Possession of the Property shall be delivered to
Purchaser at closing, subject to the rights of the tenants under existing leases
and rental agreements.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT. Purchaser's obligation to purchase shall be
subject to and contingent upon the satisfaction of the following conditions
precedent:
(A) Receipt by Purchaser of an engineering report of building
and site conditions, satisfactory to Purchaser in its sole discretion, said
report to include in part, a description of any hazardous waste sites, hazardous
wastes and/or hazardous materials affecting the property. Purchaser shall have
ten (10) days in which to review the reports set forth herein and exercise its
right to reject the Property based thereon or the right hereunder shall be
deemed waived.
(B) The receipt by Purchaser of Seller documents described in
7.2 below.
(C) On the condition that Sellers representations and
warranties described in Article VIII below remain true and correct.
(D) On the condition that there have been no material or
adverse changes to the property or leases.
(E) Seller acknowledges that Purchaser is a public entity and
that it is required to furnish financial statements to the Securities and
Exchange Commission in connection with this acquisition. Seller agrees to make
the information available for Purchaser to audit the last 12 months of operation
of the Property so that a report can be generated that is in compliance with
accounting Regulation S-X of the Securities and Exchange Commission.
(F) Survey which shall show no encroachments onto the Land
from any adjacent property, no encroachments by or from the Land onto adjacent
property and no violation of or encroachments upon any recorded building lines,
restrictions or
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easements affecting the Property. If the Survey discloses any such encroachment
or violation, Seller shall have thirty (30) days from the date of delivery of
the Survey (with a commensurate extension of the closing date) to have the Title
Insurer issue its endorsement insuring against damage caused by such
encroachment or violation and to provide evidence thereof to Purchaser, and if
Seller fails to or is unable to have the same insured against within such thirty
(30) day period, Purchaser may elect, on or before the Closing Date, to (i)
terminate this Agreement (in which case the Earnest Money shall be returned to
Purchaser) and neither party shall have any further liability or obligation to
the other hereunder, or (ii) accept the property subject to any such
encroachment or violation.
6.2 INSPECTION. This Agreement shall be further subject to and
contingent upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 PREPARATION FOR INSPECTION. At the execution of this Agreement,
Seller shall deliver to Purchaser copies of the following: The current rent roll
for the Property; detailed statements of income and expenses with respect to the
Property for the past two years; the most recent tax bills for the Property;
utility bills for the Property for the twelve (12) months previous to the date
hereof; all insurance policies applicable to the Property to include loss runs
for the last two (2) years; Plans and Specifications for the Property, service
contracts, Certificates of occupancy, to the extent reasonably available; a copy
of the title policy and most recent survey for the Property. A copy of any
environmental or engineering reports on the property. All these items shall be
certified by Seller to be accurate and complete to the best of its knowledge and
belief.
6.2.2 INSPECTION OF BOOKS AND RECORDS; ACCESS. Upon receipt by
Purchaser of all documents requested in the paragraph above, Purchaser, its
employees, agents and contractors shall have until January 13, 1998 (the
"Inspection Period") to enter upon the Property subject to the rights of the
tenants during normal business hours for the purpose of making physical
inspections thereof, including but not limited to roofs, heating, cooling,
electrical and plumbing systems, swimming pool, appliances, and structural
elements of the buildings. Upon the conclusion of the Inspection Period this
contract shall be deemed to be a firm agreement of purchase and sale binding the
parties hereto, except as it may be terminated by other provisions and
conditions contained herein, including but not limited to the condition imposed
by Paragraph 6.1(A) above.
6.2.3 RIGHT OF TERMINATION DURING INSPECTION PERIOD. Purchaser shall
also be permitted to review all original leases, expense records, tenant cards
and occupancy data available. if Purchaser is not satisfied, in its sole and
exclusive discretion,
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with the state of maintenance and repair of the Property or the rents, occupancy
or expenses of the Property, then notwithstanding anything contained herein to
the contrary, Purchaser shall have the right to terminate this Agreement by
giving written notice to Seller before the end of the Inspection Period, and no
party hereto shall have any further liability to any other hereto, and all
deposits shall be returned to Purchaser.
6.2.4 TERMINATION OF INSPECTION PERIOD. Notwithstanding anything to the
contrary set forth herein, the Inspection Period shall expire on January 13,
1998, or on such other date as the parties may agree to in writing.
6.2.5 "RENT READY". During the RR "Inspection Period", both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree that
said apartment shall be representative of a "rent ready" unit by which all other
units shall be judged for "rent ready" condition at closing. All vacant
apartment units, which have been vacant for five or more days are to be in a
"rent ready" condition (as defined above), at the time of closing, containing,
but not limited to the following amenities, i.e., carpet, refrigerator, range,
garbage disposal, heating, plumbing and electrical systems.
6.2.6 CONDITION OF PERSONAL PROPERTY AT CLOSING. All personal property
included in the sale and all mechanical, electrical, heating, air conditioning,
sewer, water and plumbing systems will be in the same working order at the time
of closing and in the same condition as at the time of the initial inspection by
Purchaser. If Seller fails to make reasonable efforts to conserve the property,
Purchaser shall have the option of waiving such requirement, in writing, and
proceeding to closing, or Purchaser may void this Agreement and obtain a prompt
return of its deposit.
ARTICLE VII
CLOSING
7.1 CLOSING. Closing will be held on or before two (2) days after the
completion of the Inspection Period at such place and at such time as the
parties may agree.
7.2 SELLER'S DELIVERIES. At closing, Seller shall execute and deliver
to Purchaser the Special Warranty Deed referred to in Paragraph 3 hereof and
shall also execute, where necessary, and deliver to Purchaser, the following:
(A) A Bill of Sale, with warranty of title transferring the
personal property (as shown in Schedule B) to Purchaser free of all liens,
charges and encumbrances.
(B) Originals or copies of all signed leases and rental agreements
in effect with tenants of the Property shall be
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provided on site.
(C) INTENTIONALLY OMITTED. There are no security deposits.
(D) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(E) A rent roll certified by Seller to be true and correct as of
the date of closing showing the name of, and the amount of monthly rental
payable, by each tenant of the Property, the apartment occupied by the tenant,
the date to which rent has been paid, any advance payment of rent, and the
amount of any escrow, or security deposit of tenant.
(F) An affidavit of Seller that to the best of its information and
belief there are, on the date of closing, no unsatisfied judgments, creditor's
claims, tax liens, or pending bankruptcies involving Seller.
(G) Seller shall provide, a certificate from a licensed
extermination contractor, who is regularly engaged in the business of pest
control, that all buildings are free from any termite or other wood-boring
insect infestation. Said certificate shall be dated within 90 days of closing,
bearing the Contractor's name, contractors license number, the signature of the
party authorized to sign for the Contractor and the date of the inspection.
Should damage exist, Seller shall proceed to have any corrective work completed
prior to closing or Purchaser, at its option, may either proceed to settlement
and have such sums required for repairs deducted from Seller's proceeds, or may
in its sole discretion terminate this Agreement. Seller shall promptly return
Purchaser's deposit upon such termination.
(H) Assignments of all Seller's interest in the following: (1) all
assignable licenses, and permits relating to the operation of the Property, (2)
the leases and rental agreements with tenants of the Property, and (3) the
existing Property telephone number. Purchaser acknowledges that Seller is
retaining all rights to the name "Sterling Point" or the company name "Grubb
Management" as well as logos, trademarks and signage associated with that name.
Purchaser agrees to change the name within thirty (30) days.
(I) Assignments of all warranties and guarantees to the extent such
are still in effect and provide Purchaser with copies of all such warranties and
guarantees without limitation for all appliances, dishwashers, disposals,
refrigerators, heating and air conditioning units, washers and dryers.
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(J) Evidence satisfactory to Purchaser that all water, sewer, gas,
electric, telephone, and drainage facilities and all other utilities required by
law or by the normal use and operation of the Property are and at the time of
closing will be installed to the property line, are and at the time of closing
will be connected pursuant to valid permits, and are and at the time of closing
adequate to service the Property and to permit full compliance with all
requirements of law and normal usage of the Property by the tenants thereof and
their licensees and invitees.
(K) Consent of the Seller's authorized officer to the sale of the
Property and any other approvals required under Seller's articles or by-laws,
which may affect seller's ability to convey marketable title.
(L) Provide documents for the transfer of the telephone, electric,
water and sewer, and gas utilities, as may be required by the utility, for
execution at closing.
(M) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement, including but not limited to:
(i) An opinion of Seller's counsel, in a form satisfactory
to Purchaser, stating that:
(a) The individual(s) executing the deed and related
documents are duly authorized to do all such acts as are necessary to consummate
this sale, without further consent of any other party.
(b) That the partner or officer can bind the
Partnership or Corporation.
(N) Affidavit that Seller has no actual knowledge of the presence
of asbestos and/or any other hazardous material at the Property.
(O) Seller shall provide a satisfactory and valid written
termination of the management agreement executed by the existing management and
rental agent for the Property, without cost to the Purchaser.
(P) A notice letter to all the residents of the apartment complex
as to change of ownership in the form prepared by the Purchaser as approved and
signed by Seller.
(Q) All such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Purchaser or its counsel.
(R) A representation letter as normally required by auditors for a
public company in the form attached hereto as
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EXHIBIT F. This clause shall survive closing for six months.
7.3 PURCHASER'S DELIVERIES. At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price,
adjusted for the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under
leases, securities, any contracts which may be accepted by the Purchaser and any
other obligations specifically set forth herein.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate the
transfer.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 REPRESENTATIONS OF THE PARTIES. Seller warrants (which warranties
shall not survive settlement unless designated to the contrary) that as of the
date of closing hereof:
(A) That Seller, is the owner in fee simple of the Property and
has the power to convey same.
(B) That Seller is not subject to any other agreements or
arrangements, with the exception of those contained in any existing mortgage
documents which would prevent Seller from selling the Property to Purchaser.
This warranty shall survive for one year following closing.
(C) All necessary action has been taken by Seller to authorize
the execution of this Agreement and the performance of the obligations
contemplated hereunder, which are not excluded elsewhere in existing mortgage
documents. This warranty shall survive for one year following closing.
(D) Seller has no actual knowledge and has not been advised in
writing that it is in default under any lease, rental agreement service or
equipment contract, or mortgage or other encumbrances relating to the Property.
This warranty shall
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survive for one year 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) The Property abuts on and has direct vehicular access to a
public road.
(G) All building and other improvements at the Property are
located entirely within the boundary lines of the Property.
(H) Seller has no actual knowledge that any part of the Property
or the operation of the Property, is in violation or may violate any
governmental statute, regulation, ordinance or building code or of any private
restriction, that any governmental authority requires any work to be done on or
affecting the Property, or that any governmental authority has expressed an
intent to condemn or to make special improvements for the benefit of the
Property or any part thereof.
(I) That to the best knowledge of the Seller, the drainage within
the project is satisfactory and complies in all respects with all government
regulation.
(J) That Seller is not a "foreign person" within the meaning of
the Internal Revenue Code of 1954, as amended (the "Code") , and that Seller
will furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(K) That to the best of Seller's knowledge, the Property was
never utilized as a disposal site for hazardous waste products and this
representation shall survive for a period of six months.
(L) Seller covenants and agrees that, between this date and the
date of closing, Seller shall continue to maintain, operate and manage the
Property in a manner consistent with its prior practices, making every
reasonable effort to do nothing which might damage the reputation of the
Property or the relationships with the tenants. Seller shall not permit the
modification, extension or cancellation of any tenant lease (except in
accordance with the terms of such lease) or any dealing with any tenant other
than the ordinary course of managing the Property, without the prior written
consent of Purchaser. If the leases of any tenants expire before thirty (30)
days after the date of closing, Seller shall, up to the date of closing and
without cost to the Purchaser, continue its normal course of operation with
respect to causing tenants to be obtained for apartments which are unrented.
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8.2 CONTINUATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS TO THE
DATE OF CLOSING. If each of the warranties set forth in this section does not
remain true up to and including the time of closing as to any material matters,
this Agreement, at Purchaser's election, shall be terminated, Seller shall
return all payments made by Purchaser, or Purchaser may elect to close the sale
and waive failure of the warranties.
8.3 BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
(A) Notwithstanding the provisions of 8.2 above, Seller shall
indemnify Purchaser for all reasonable costs incurred as a result of the failure
of any of Seller's representations, warranties or covenants contained herein to
remain true as of the date of closing.
(B) In the event that Purchaser shall breach any warranties, it
agrees to indemnify Seller for any reasonable costs and expenses that Seller may
have incurred.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 PROPERTY DAMAGE. If, prior to closing, any part of the Property
is damaged by fire or other casualty to the extent of $50,000 or more, Seller
shall repair such damage before the date provided herein for closing. If such
damage cannot be repaired by such time, this Agreement may be canceled at the
option of the Purchaser. In the event of cancellation as aforesaid, this
Agreement shall become null and void and the parties shall be released and all
payments made shall be returned. Should Purchaser elect to carry out this
Agreement despite such damage Seller shall assign to Purchaser all insurance
proceeds arising from such damage and will compensate Purchaser for his pro-rata
share as stated in 4.1 of lost rent collections to the extent of insurance
proceeds received. Seller shall promptly notify Purchaser in writing upon the
occurrence of any such damage.
9.2 CONDEMNATION. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any actual
or proposed sale in lieu thereof, the Seller shall give written notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property (any part of the building or more than
5% of the parking area) , Purchaser may elect to either (a) terminate this
Agreement, in which event the Deposit shall be immediately returned to Purchaser
and all other rights and obligations of the parties hereunder shall terminate
immediately, or (b) to waive its right to terminate this Agreement and proceed
to closing, in which event all proceeds, awards and other payments arising out
of such condemnation or sale (actual or threatened) shall be paid to the
Purchaser at closing, if such payment has been received or Seller shall assign
to Purchaser the rights to such
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payments.
9.3 RISK OF LOSS. Prior to closing, all risks of loss or damage by
every casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 COMMISSION. Seller agrees to pay a brokerage fee to BERKLEY
CAPITOL ADVISORS, pursuant to separate agreement between the parties. Said
brokerage fee shall be deemed earned if, and only if, settlement occurs
hereunder, and shall not be deemed earned even if Purchaser and/or Seller
wrongfully fail(s) to consummate the purchase and sale herein contemplated.
Seller and Purchaser represent and warrant to each other that no other brokerage
fees are or shall be owing in connection with this transaction or in any way
with the Apartments and Seller and Purchaser hereby indemnify and hold the other
harmless from any and all claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 DEFAULT DEFINED. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 SELLER'S DEFAULT. Upon seller's default, the Purchaser, at it's
election, may either (1) require specific performance of Seller, or (2) cancel
this Agreement and obtain a prompt return of the deposit, in which case this
Agreement shall be terminated and the parties released from all obligations
hereunder. Seller shall indemnify Purchaser for any reasonable attorney's fees
at their normal hourly rate incurred by Purchaser if Purchaser elects to pursue
its option of specific performance noted above and if Purchaser prevails.
11.3 PURCHASER'S DEFAULT. Upon Purchaser's default, this Agreement
shall be terminated and both parties released from all obligations hereunder,
and the deposit shall be retained by the Seller as liquidated damages. Seller
shall have no other remedy against Purchaser in the event of Purchaser's
default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between the parties; it supersedes all previous agreements and
representations which are deemed merged
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herein and may not be modified except in writing.
12.2 ASSIGNMENT. Purchaser may assign this Agreement without the
consent of Seller.
12.3 SEVERABILITY. If any provision, sentence phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 BINDING EFFECT. The parties to the Agreement mutually agree that
it shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 CONTROLLING LAW. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State set forth in Par. 1.1.
12.6 COUNTERPARTS. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear in each counterpart
hereof, and it shall be sufficient that the signature on behalf of both parties
hereto appear on one or more such counterparts. All counterparts shall
collectively constitute a single contract.
12.7 INCORPORATION BY REFERENCE. All of the Exhibits referred to
herein and/or attached hereto shall be deemed to constitute a part of the
Agreement.
12.8 HEADINGS. The headings of the Articles and sections hereof are
inserted for convenience only and shall not be deemed to constitute a part of
the Agreement.
12.9 CONSTRUCTION OF CONTRACT. Each party hereto have reviewed and
revised (or requested revisions of) this Agreement, and therefore the normal
rule of construction that any ambiguities are to be resolved against a
particular party shall not be applicable in the construction and interpretation
of this Contract or any amendments or exhibits hereto.
12.10 EXHIBITS. The following exhibits are attached to this Agreement
and are incorporated into this Agreement by this reference and made a part
hereof for all purposes:
(a) EXHIBIT A, the legal description of the Land.
(b) EXHIBIT B, list of personal property.
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(c) EXHIBIT C, the form of Deed.
(d) EXHIBIT D, rent list
(d) EXHIBIT E, the form of the Assignment and Assumption of
Personal Property, Service Contracts, Warranties and
Leases.
(e) EXHIBIT F, the form of Representation Letter.
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: Sterling Apartments, LLC
c/o Gordon Grubb, Esq.
11000 Regency Parkway, Suite 101
Cary, NC 27511
Fax: (919) 461-3939
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and-
Ted Oliver, Esq.
Manning, Fulton & Skinner, P.A.
500 UCB Plaza
3605 Glenwood Avenue
Raleigh, NC 27612
Fax: (919) 781-0811
13.2 DELIVERY OF NOTICE. Notices sent either by Registered or
Certified Mail, Return Receipt Requested, or by overnight express mail shall be
deemed given when deposited in the United States Mail, postage prepaid, or
delivered to a reliable
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overnight courier or by facsimile transmission. Notices sent in any other manner
shall be deemed given only when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
STERLING APARTMENTS, LLC,
Grubb Properties, Inc., Manager
By: /s/ R. Gordon Grubb
---------------------------------------
Its: Vice President
--------------------------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ Stanley J. Olander, Jr.
---------------------------------------
Its:
--------------------------------------
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EXHIBIT A
BEGINNING at a set "PK" Nail located in the centerline of the
right-of-way of York Road (N.C. Highway 49, currently a 100 ft. right-of-way),
said point being located South 59-15-13 West 222.99 ft. from the point of
intersection of the centerline of the right-of-way of York Road and the
centerline of the right-of-way of John Price Road (currently a 60 ft.
right-of-way) and running from said point of Beginning along the westerly and
northerly lines of the property of Orion Development Corporation (now or
formerly) as described in deed recorded in Book 5338, Page 484 of the
Mecklenburg County Public Registry North 45-42-18 West 408.41 ft. To a found 1"
pipe and South 44-17-42 West 209.57 ft. To an existing iron rod located in the
northwesterly margin of the property of Gretta L. Neely (now or formerly) as
described in deed recorded in Book 7428, Page 776 of the Mecklenburg County
Public Registry; thence, along the northeasterly line of the Neely property
North 45-40-29 West 382.48 ft. To an existing iron rod located in the easterly
line of the property of Steele Creek Partnership (now or formerly) as described
in deed recorded in Book 5732, Page 247 of the Mecklenburg County Public
Registry; thence, along the easterly line of the Steele Creek Partnership
Property and the easterly line of the property of York Ridge Apartments
Associates (now or formerly) as described in deed recorded in Book 7843, Page
106 of the Mecklenburg County Public Registry North 06-35-17 West 649,66 ft. to
a found concrete monument having grid coordinates N=504,343.752 and
E=1,413,664.771 and being located North 07-38-13 East 1647.959 ft. (Ground)
1,647,713 ft. (Grid) from NCGS Monument "Moss" having grid coordinates
N-502,710.6542 and E=1,413,445.797, combined grid factor = 0.99985065; thence
along southerly line of Lots 4, 3, 2 and 1 as shown in map recorded in Map Book
24, Page 820 of the Mecklenburg County Public Registry the following two courses
and distances: (1) North 84-41-12 East 341.53 ft. To a found 1" pipe and (2)
North 58-33-36 East 490.37 ft. To a set "PK" nail located in the centerline of
the right-of-way of John Price Road; thence along the centerline of the
right-of-way of John Price Road the following 14 courses and distances: (1)
South 00-09-19 East 42.94 ft. to a point, (2) South 03-13-28 East 49.98 ft. to a
point, (3) South 06-30-28 East 50.00 ft. to a point, (4) South 09-37-28 East
26.00 ft. to a point, (5) South 12-02-12 East 58.69 ft. to a point, (6) South
16-19-46 East 51.52 ft. To a point, (7) South 20-58-24 East 81.38 ft. to a
point, (8) South 22-09-34 East 350.00 ft. to a point, (9) South 18-48-44 East
50.00 ft. to a point, (10) South 13-52-17 East 50.03 ft. to a point, (11) South
08-48-53 East 49.98 ft. to a point, (12) South 03-50-17 East 49.98 ft. to a
point, (13) South 01-30-39 West 27.21 ft, to a point, and (14) South 03-23-34
West 324.32 ft. to a point marking the point of intersection of the centerline
of the right-of-way of John Price Road with the centerline of the right-of-way
of York Road; thence along the centerline of the right-of-way of York Road South
59-15-13 West 229.99 ft. to a set "PK" nail being the point and place of
BEGINNING, containing approximately 19.675 acres as shown on survey entitled
South Point Apartments prepared by Delta Land Services, Inc. dated October 17,
1995 reference to which is hereby made for a more particular description.
