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: June 4, 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
Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report
(The Timbers Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(The Timbers Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (The Timbers Apartments)*
b. Pro Forma Statement of Operations for
the Year ended December 31, 1997
(unaudited)
Pro Forma Statement of Operations for
the Three Months Ended March 31, 1998
(unaudited)
Pro Forma Balance Sheet as of March 31, 1998
(unaudited)
c. Exhibits
10.1 Purchase Contract for The Timbers Apartments
23.1 Consent of Independent Auditors*
- - ----------------------------
* To be filed by amendment.
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<PAGE>
Item 2. Acquisition or Disposition of Assets
THE TIMBERS APARTMENTS
Raleigh, North Carolina
On June 4, 1998, CRIT-NC, LLC (together with its parent, Cornerstone Realty
Income Trust, Inc., the "Company") purchased The Timbers Apartments, a 176-unit
apartment complex having an address of 5900 Timbercreek Lane, Raleigh (Wake
County), North Carolina (the "Property").
The seller, Raleigh Timbers Associates, Limited, was unaffiliated with the
Company. The purchase price was $8,100,000, which the Company paid entirely from
cash on hand. Title to the Property was conveyed to the Company by limited
warranty deed.
Location. The Property is located on Timbercreek Lane just off Highway 70,
a major four-lane, east-west connector, in the northwest section of Raleigh, at
the intersection of Millbrook Road and Pleasant Valley Road.
The following information is based in part on information provided by the
Raleigh Chamber of Commerce. The Raleigh/Durham Metropolitan Statistical Area is
also known as the Research Triangle, and contains the cities of Raleigh, Durham
and Chapel Hill. It is the second largest metropolitan area in North Carolina,
after the Charlotte metropolitan area.
Raleigh is the capital of North Carolina and is the fastest growing major
city in North Carolina. The population of the city was approximately 150,000 in
1980 and estimated to be approximately 208,000 in 1993.
Research Triangle Park is the largest planned research and development
industrial park in the United States. It was founded in 1958 as a cooperative
effort among Duke University, the University of North Carolina and North
Carolina State University. The Park comprises approximately 6,800 acres and
contains over 14 million square feet of industrial space. Among the Park's
approximately 60 research-oriented firms are IBM, Glaxo and Northern Telecom.
Raleigh's economy generally is a blend of industry, education and
government. The city's employment stability, strategic location, favorable labor
climate, pro-business attitude and pool of educated workers have helped the area
attract many major businesses and industries. Major industries in the area
include electronics, electrical equipment and machinery, metal working and food
processing.
The Research Triangle is home to Duke University, the University of North
Carolina at Chapel Hill and North Carolina State University.
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The immediate area surrounding the Property consists of other multi-family
housing, commercial and retail development and single-family housing. The
Property is close to the Townridge Shopping Center, the Pleasant Valley
Promenade Shopping Center and the Crabtree Valley Mall. There are numerous
restaurants, schools and churches nearby. The Property is convenient to
Raleigh's major employment centers, including the Research Triangle, Cary Towne
Center and the downtown central business district. The Property is an
approximately 15-minute drive from the Raleigh/Durham International Airport.
Description of the Property. The Property consists of 176 garden-style
apartments located in 12 two-story buildings on approximately 17 acres of land.
The Property was constructed in 1983.
The Company believes that the Property has generally been well maintained
and is generally in good condition. However, the Company has budgeted
approximately $220,000 for repairs and improvements, including clubhouse
renovations, painting and repairs to the retaining walls.
The Property offers many different unit types. The unit mix and rents being
charged new tenants as of June 1998 are as follows:
<TABLE>
<CAPTION>
Approximate Interior Monthly
Quantity Type Square Footage Rental
<S> <C> <C>
40 One bedroom, one bathroom 617 $530
(window seat)
20 One bedroom, one bathroom 617 545
(bay window, up)
20 One bedroom, one bathroom 617 550
(bay window, fireplace, up)
4 One bedroom, one bathroom 766 640
(window seat, fireplace, deluxe)
4 One bedroom, one bathroom 766 650
(bay window, fireplace, deluxe, up)
20 Two bedrooms, two bathrooms 847 665
(bay window, up)
4 Two bedrooms, two bathrooms 847 670
(window seat)
36 Two bedrooms, two bathrooms 847 675
(window seat, w/d connections)
20 Two bedrooms, two bathrooms 847 685
(bay window, fireplace, w/d connections, up)
4 Two bedrooms, two bathrooms 984 755
(window seat, fireplace, w/d connections, deluxe)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
4 Two bedrooms, two bathrooms 984 765
(bay window, fireplace, w/d connections, deluxe, up)
</TABLE>
The apartments provide a combined total of approximately 131,000 square
feet of net rentable area.
Leases at the Property are for terms of one year or less. Average rental
rates for the past five years have generally increased. As an example, a
two-bedroom, two-bathroom apartment unit (847 square feet) rented for $435 in
1993, $485 in 1994, $535 in 1995, $555 in 1996, and $605 in 1997. The average
effective annual rental per square foot at the Property for 1993, 1994, 1995,
1996 and 1997 was $6.45, $7.19, $7.94, $8.23 and $8.97, respectively.
The buildings are wood frame construction on concrete slabs. The exteriors
are brick veneer and cedar shake siding and the roofs are pitched and covered
with composition shingles.
The Property has an outdoor swimming pool with a fountain and water
volleyball, a lighted tennis court, and a laundry room. There is also a
clubhouse that includes a kitchen, entertainment area and a leasing/management
office. There is ample paved parking.
Apartment units have wall-to-wall carpeting in the living areas and vinyl
floors in the kitchen and baths. Each apartment unit has a cable television
hook-up and individually controlled heating and air conditioning unit. Each unit
type is available with a window seat, bay window and a fireplace, and certain
two-bedroom units are available with washer/dryer connections. All of the
downstairs units (88 units) include window seats and all of the upstairs units
(88 units) include bay windows. There are 56 units that have a fireplace and 64
units that have washer/dryer connections. All of the units have walk-in closets,
a pantry, a linen closet, mini and vertical blinds, a deck or patio and outside
storage. Each kitchen is equipped with a refrigerator/freezer, electric range
and oven, dishwasher and garbage disposal. The owner of the Property supplies
cold water, sewer service and trash removal. The tenants pay for their
electricity usage, which includes heat, air conditioning, cooking, hot water and
lights.
There are at least six apartment properties in the area that compete with
the Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing projects averaged
approximately 94% on May 31, 1998.
According to information provided by the seller, physical occupancy at the
Property averaged approximately 95% in 1993, 96% in 1994, 95% in 1995, 93% in
1996 and 94% in 1997. On May 28, 1998, the Property was 93% occupied. The
tenants are a mix of white-collar and blue-collar workers, students and retired
persons.
The 1997 real estate taxes applicable to the Property were calculated as
assessed value of $5,067,990 multiplied by a tax rate of $1.1675, for total real
estate taxes of $59,168.78. Wake County also imposed a recycling fee of $16.50
per apartment unit, for a total of $2,904. The
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<PAGE>
basis of the depreciable residential real property portion of the Property
(currently estimated at about $ 6,161,027) 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 a modified accelerated cost recovery system of
the Internal Revenue Code of 1986, as amended.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Raleigh, North Carolina area will enjoy
continued economic development and steady population increase, and that such
development and increase will support stable occupancy rates and reasonable
increases in rents at the Property. In particular, the Company believes that the
presence of Research Triangle Park and three major universities in the area, and
associated businesses and activities, will have a positive impact on the area
for the indefinite future.
2. The Company already owns several other apartment complexes in Raleigh
and believes that it is knowledgeable and experienced regarding the Raleigh
apartment rental market.
3. Based upon an engineering report and its own inspections, the Company
believes that the Property is in very good condition.
4. The Property is conveniently proximate to major employers and shopping.
The Company is not aware of any material adverse factors relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be indicative of future operating results.
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<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.
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<PAGE>
ITEM 7.b.*
- - --------------------------------
* 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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<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: June 17, 1998 By: /s/ Stanley J. Olander, Jr.
------------------------------
Stanley J. Olander, Jr.,
Chief Financial Officer
of Cornerstone Realty
Income Trust, Inc.
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<PAGE>
EXHIBIT INDEX
Cornerstone Realty Income Trust, Inc.
Form 8-K dated June 4, 1998
Exhibit Number Exhibit
- - -------------- -------
10.1 Purchase Contract for
The Timbers Apartments
23.1 Consent of Independent Auditors*
- - ----------------------------
* To be filed by amendment.
EXHIBIT 10.1
STATE OF NORTH CAROLINA: FIRST AMENDMENT TO
PURCHASE CONTRACT
COUNTY OF WAKE:
THIS FIRST AMENDMENT TO PURCHASE CONTRACT is entered into this 15 day of
April, 1998 between Cornerstone Realty Group, Inc. or its nominees,
("Purchaser") and Raleigh Timbers Associates, Limited, a North Carolina limited
partnership ("Seller").
W I T N E S S E T H
WHEREAS, Purchaser and Seller entered into that Contract of Purchase and
Sale dated March 25, 1998 (herein "Contract"): and
WHEREAS, Purchaser and Seller wish to make certain additional changes to
the terms of the Contract.
NOW THEREFORE, in consideration of the sum of TEN DOLLARS ($10.00) and
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties agree as follows.
1. The Inspection Period referred to in Paragraph 6.2.2 of the Contract
shall be extended through April 22, 1998 ("Extended Inspection Period"). The
Extended Inspection Period shall be for the purpose of permitting Purchaser to
satisfy itself as to matters of survey. Purchaser shall deposit ONE HUNDRED
THOUSAND DOLLARS ($100,000.00) with The Title Company of North Carolina, Inc, in
Raleigh, North Carolina on April 15, 1998 as the earnest money deposit provided
for in Paragraph 2.2 of the Contract. Should Purchaser not be satisfied with
matters of survey, Purchaser shall have the right to terminate the Contract by
giving written notice to Seller before the end of the Extended Inspection
Period, and no party hereto shall have any further liability to any other party
hereto, and all deposits shall be returned to Purchaser. If Purchaser does not
terminate this Contract during the Extended Inspection Period, this Contract
shall be deemed to be a firm agreement of purchase and sale binding the parties
hereto under the conditions set out in Paragraph 6.2.2 of the Contract.
2. Closing as set out in Paragraph 7.1 of the Contract shall occur no later
than April 29, 1998. Should closing not occur on or prior to April 29, 1998.
Purchaser shall deposit FOUR HUNDRED THOUSAND DOLLARS ($400,000.00) ("Additional
Deposit") with the title company of North Carolina by April 29, 1998, and the
closing date shall be extended to a date on or prior to June 15, 1998. The
Additional Deposit shall be treated in the same manner as the earnest money
deposit referred to in Paragraph 2.2, but shall not be refundable to Purchaser.
3. If there is a conflict between the terms of the Contract and this
Amendment, the terms of this Amendment shall control. Except as herein modified,
all terms and provisions of the Contract are hereby ratified and confirmed and
shall remain in full force and effect the parties hereto do ratify and affirm
the provisions thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereunto, intending to be legally bound, and
with the signatories representing they are empowered to bind their principals,
have set their respective hands and seals on the day and year hereinafter first
written.
SELLER:
Raleigh Timbers Associates, Limited
By: Raleigh Timbers Company, Ltd.
General Partner
By: /s/ James T. Cobb
--------------------------
James T. Cobb
Its: Managing General Partner
PURCHASER:
Cornerstone Realty Group, Inc.
By: /s/ Gus G. Remppies
--------------------------
Its: V. P. Acquisitions
--------------------------
<PAGE>
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 23rd day of March 1998,
between CORNERSTONE REALTY GROUP INC. or its nominee, (hereinafter called
"Purchaser") and RALEIGH TIMBERS ASSOCIATES, LIMITED, a North Carolina limited
partnership, (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 SALE OF PROPERTY. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as THE TIMBERS APARTMENTS
located in RALEIGH, NC, with all buildings and improvements located thereon, as
more particularly described in the attached legal description in EXHIBIT A
including, but not limited to 176 individually heated and air conditioned
apartment units, with all appurtenances, together with all appliances, drapes,
carpeting, shrubbery and all other personal property used in connection with the
premises, including, the inventory of personal property to be supplied by Seller
and attached hereto as EXHIBIT B (all such real and personal property
hereinafter collectively referred to as the "Property" unless the context
clearly indicates otherwise).
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 PURCHASE PRICE. The total purchase price shall be EIGHT MILLION ONE
HUNDRED THOUSAND ($8,100,000) DOLLARS as evidenced by cash or cash equivalent at
closing.
2.2 DEPOSIT. ONE HUNDRED THOUSAND ($100,000) DOLLARS 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, Inc.
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 only to
general taxes for the current year not yet due and payable, utility easements
which do not interfere with the present use of the Property, and such other
<PAGE>
matters as may be approved (or deemed approved) by Purchaser.
(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. During the Inspection Period,
Purchaser shall obtain at its expense a commitment for Title Insurance (the
commitment). If title is not marketable, except as stated above in the preceding
paragraph, during the Inspection Period Purchaser shall give written notice of
any defects in title to Seller's counsel within fifteen (15) days after
Purchaser's receipt of a title report which report shall include copies of
backup documents relating to any title exceptions, a current survey, a flood
zone certification letter and a Surveyor's Certification letter. Seller may, at
its option, elect whether to cure said defects or by written notice to Purchaser
indicate its intention not to cure. Any matters of record as of the Effective
Date, and not objected to by Purchaser during the Inspection Period, shall be
deemed approved by Purchaser.
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 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
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<PAGE>
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 PRIOR LEASE CONCESSIONS. If Seller has committed to give any future
monetary concessions to tenants under existing leases to which Purchaser would
become liable, then Seller shall pay to Purchaser said amount in a lump sum at
closing.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 POSSESSION. Possession of the Property shall be delivered to
Purchaser at closing, subject to the rights of the tenants under existing leases
and rental agreements.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT. Purchaser's obligation to purchase shall be
subject to and contingent upon the satisfaction of the following conditions
precedent:
(A) Receipt by Purchaser of an engineering report of building and site
conditions, satisfactory to Purchaser in its sole discretion, said report to
include in part, a description of any hazardous waste sites, hazardous wastes
and/or hazardous materials affecting the property. During the Inspection Period,
Purchaser shall 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 Seller's representations and warranties
described in Article VIII below remain true and correct in all material
respects.
(D) On the condition that there have been no material 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.
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(F) Receipt by Purchaser of a Survey which shall show no encroachments
onto the Land from any adjacent property, no encroachments by or from the Land
onto adjacent property and no violation of or encroachments upon any recorded
building lines, restrictions or easements affecting the Property. If the survey
discloses any such encroachment or violation, seller shall have thirty (30) days
from the date of delivery of the survey (with a commensurate extension of the
closing date) to have the Title Insurer issue its endorsement insuring against
damage caused by such encroachment or violation and to provide evidence thereof
to Purchaser, and if Seller fails to or is unable to have the same insured
against within such thirty (30) day period, Purchaser may elect, on or before
the Closing Date, to (i) terminate this Agreement (in which case the Earnest
Money shall be returned to Purchaser) and neither party shall have any further
liability or obligation to the other hereunder, or (ii) accept the 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,
during the Inspection Period defined 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 contract, mortgages, and other documents creating liens of security
interest on the Property, or any part thereof and all promissory notes secured
thereby; all insurance policies applicable to the Property to include loss runs
for the last five (5) years; Plans and Specifications for the Property, service
contracts, Certificates of Occupancy, to the extent reasonably available; a copy
of the title policy and most recent survey for the Property. seller also shall
deliver, to the extent any such items are in Seller's possession, 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. Purchaser, its
employees, agents and contractors shall have 21 days from the date of complete
execution of this Agreement (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. Purchaser shall also be
permitted to review all original leases, expense records, tenant cards and
occupancy data
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available. Upon the conclusion of the Inspection Period this contract shall be
deemed to be a firm agreement of purchase and sale binding the parties hereto,
except as it may be terminated by other provisions and conditions contained
herein, including but not limited to the condition imposed by Paragraph 6.1(A)
above. Purchaser shall indemnify, defend, and hold Seller harmless from and
against any claims or liabilities resulting from Purchaser's exercise of is
rights of entry, and shall, to the extent practical, report any damage to the
property caused by its tests.
6.2.3 RIGHT OF TERMINATION DURING INSPECTION PERIOD. If Purchaser is
not satisfied, in its sole and exclusive discretion, with the state of
maintenance and repair of the Property or the rents, occupancy or expenses of
the Property, then notwithstanding anything contained herein to the contrary,
Purchaser shall have the right to terminate this Agreement by giving written
notice to Seller before the end of the Inspection Period, and no party hereto
shall have any further liability to any other party hereto, and all deposits
shall be returned to Purchaser.
6.2.4 TERMINATION OF INSPECTION PERIOD. Notwithstanding anything to the
contrary set forth herein, the Inspection Period shall expire twenty-one (21)
days from the date of this Agreement or such other date as the parties may agree
to in writing.
6.2.5 "RENT READY". During the "Inspection Period", both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree that
said apartment shall be representative of a "rent ready" unit by which all other
units shall be judged for "rent ready" condition at closing. All vacant
apartment units, which have been vacant for a period longer than five (5)
business 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. it there are any apartments that are not "rent ready", Seller shall
reimburse Purchaser the amount of Four Hundred ($400) Dollars per vacant unit
for the reasonable cost of restoring said apartments.
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.
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ARTICLE VII
CLOSING
7.1 CLOSING. Closing will be held on or about seven (7) days after the
completion of the Inspection Period, at such place and at such time as the
parties may agree. However, each party shall be entitled to one (1) adjournment
of the Closing not more than seven (7) days beyond the seven (7) day period
specified above, time being of the essence.
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 Exhibit B) to Purchaser free of all liens,
charges and encumbrances.
(B) Originals or copies of all signed leases and rental agreements
in effect with tenants of the Property.
(C) All security and cleaning deposits made by such tenants.
Seller will give the tenants the required notice of such transfer in compliance
with the laws of NORTH CAROLINA.
(D) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(E) A rent roll certified by Seller to be true and correct as of
the date of closing showing the name of, and the amount of monthly rental
payable, by each tenant of the Property, the apartment occupied by the tenant,
the date to which rent has been paid, any advance payment of rent, and the
amount of any escrow, or security deposit of tenant.
(F) An affidavit of Seller that to the best of its information and
belief there are, on the date of closing, no unsatisfied judgments, creditor's
claims, tax liens, or pending bankruptcies involving Seller.
(G) Seller shall provide, 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 may in its
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sole discretion terminate this Agreement. Seller shall promptly return
Purchaser's deposit upon such termination.
(H) Assignments of all Seller's interest in the following: (1)
all assignable licenses, and permits relating to the operation of the Property,
(2) the leases and rental agreements with tenants of the Property, (3) the
existing Property telephone number and (4) the business and trade name as set
forth in Par. 1.1, and (5) any service contracts being assumed by Purchaser.
(I) Assignments of all warranties and guarantees to the extent
such are still in effect and provide Purchaser with copies of all such
warranties and guarantees without limitation for all appliances, dishwashers,
disposals, refrigerators, heating and air conditioning units, washers and
dryers.
(J) Consent of the Seller's authorized partner to the sale of the
Property and any other approvals required under Seller's partnership agreement,
which may affect Seller's ability to convey marketable title.
(K) Seller shall assign the telephone number to the Purchaser.
(L) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement, including but not limited to:
(i) An opinion of Seller's counsel, in a form satisfactory to
Purchaser, stating that:
(a) The individual(s) executing the deed and related
documents are duly authorized to do all such acts as are necessary to consummate
this sale, without further consent of any other party.
(b) That the partner or officer can bind Seller.
(M) Affidavit that Seller has no actual knowledge of the presence
of asbestos and/or any other hazardous material at the Property, which shall
survive the closing for a period of ninety (90) days.
(N) Seller shall provide a satisfactory and valid written
termination of the management agreement executed by the existing management and
rental agent for the Property, without cost to the Purchaser.
(O) A notice letter to all the residents of the apartment complex
as to change of ownership in the form prepared by the Purchaser.
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(P) All such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Purchaser or its counsel.
(Q) A representation letter as normally required by auditors for a
public company in the form attached hereto as EXHIBIT E. This clause shall
survive closing for ninety (90) days.
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 six months 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
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survive for six months following closing.
(D) Seller has no actual knowledge and has not been
advised in writing that it is in default under any lease, rental agreement
service or equipment contract, or mortgage or other encumbrances relating to the
Property. This warranty shall survive for six months following closing.
(E) Seller has no actual knowledge of any patent or
latent defect in the Property or any part thereof. This warranty shall survive
for six months following closing.
(F) Seller has no actual knowledge of any existing or
threatened litigation which relates to or which would affect the Property. This
warranty shall survive for six months following closing.
(G) Seller has no actual knowledge that any part of the
Property or the operation of the Property, is in violation or may violate any
governmental statute, regulation, ordinance or building code or of any private
restriction, that any governmental authority requires any work to be done on or
affecting the Property, or that any governmental authority has expressed an
intent to condemn or to make special improvements for the benefit of the
Property or any part thereof. This warranty shall survive for six months
following closing.
(H) That to the best knowledge of the Seller, the
drainage within the project is satisfactory and complies in all respects with
all government regulation. This warranty shall survive for six months following
closing.
(I) 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.
(J) That to the best of Seller's actual knowledge,
without inquiry, the Property was never utilized as a disposal site for
hazardous waste products.
(K) 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
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shall, up to the date of closing and without cost to the Purchaser, continue its
normal course of operation with respect to causing tenants to be obtained for
apartments which are unrented.
8.2 CONTINUATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS TO THE
DATE OF CLOSING. If each of the warranties set forth in this section does not
remain true up to and including the time of closing as to any material matters,
this Agreement, at Purchaser's election, shall be terminated, Seller shall
return all payments made by Purchaser, or Purchaser may elect to close the sale
and waive failure of the warranties.
8.3 BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Notwithstanding the provisions of 8.2 above, Seller shall indemnify Purchaser
for all reasonable costs incurred, not to exceed $25,000, as a result of the
failure of any of Seller's representations, warranties or covenants contained
herein to remain true as of the date of closing.
8.4 LIMITATION OF REPRESENTATIONS AND WARRANTIES. It is expressly
understood and agreed by the parties that the foregoing representations and
warranties, when qualified with the phrase "Seller has no knowledge" or "to the
best of Seller's knowledge," are limited to the actual knowledge of James T.
Cobb, the managing general partner of the general partner of Seller, without
reliance or environmental audits or other investigations or inquiries. If any or
the foregoing representations and warranties is of a material nature and is not
true in any material respect when made, or when re-certified at Closing,
Purchaser may consider such material misrepresentation to be a default under
this Agreement, entitling Purchaser to pursue the remedies set forth in Article
XI. If any of the foregoing representations and warranties is true of the
Effective Date, but is not true its of the Date of Closing as a result of a
matter, circumstance or event beyond the reasonable control or Seller, Purchaser
shall not he entitled to consider the untruth of the representation or warranty
as an event of default under this Agreement, but instead Purchaser may, at its
election and as its sole remedy, terminate this Agreement by delivery of written
notice to Seller, and in that event the Escrow Agent shall return the Deposit to
Purchaser If Purchaser discovers after Closing that any representation and
warranty made by Seller that is of a material nature is not true in any material
respect, Purchaser shall have the right to pursue any available remedy against
Seller, including the recovery of damages; provided, however, that Seller's
liability to Purchaser for damages after the Date of Closing shall be limited to
$50,000.00 in the aggregate for all such claims. The preceding sentence shall
survive the Closing for a period of ninety days, at which point Purchaser shall
have no further remedies.
Except as expressly set forth in this Agreement, the Business is being
sold and conveyed to Purchaser "as is" and "with all faults." Except as
expressly set forth in this Agreement, Seller has not made, does not make, and
hereby disclaims any and all express or implied representations and warranties
regarding or relating to: the condition of the Property; their suitability for
any particular purpose; the susceptibility to flooding of the Property; the
value or marketability or the Property; the layout or leasable square footage of
the Property; the projected income or expenses of the Property for periods after
the Date of Closing; the zoning classification, or use and occupancy
restrictions, applicable to the Property; the current manner of operation of the
Property; the compliance of the Property with environmental laws, and laws and
regulations relating to hazardous substances, toxic wastes and underground
storage tanks; and all matters affecting or relating to the Property. Purchaser
acknowledges that, except as expressly set forth in this Agreement, no such
representations or warranties, express or implied, have been made by Seller, or
by any other person representing or purporting to represent Seller.
By proceeding with the acquisition of the Property following the
Inspection Period, Purchaser confirms that it has investigated all of the
matters set forth in this Section 8.3 to its satisfaction, and is acquiring the
Property in "as is" condition, subject to the provisions of Article IX. In
agreeing to purchase the Property "as is" and without representation or
warranty, express or implied, except as expressly set forth in this Agreement,
Purchaser acknowledges and represents that it has factored the "as is" condition
of the Property into the price it has hereby agreed to pay for the Property.
Given the age of the Property, Purchaser acknowledges that materials proscribed
by current environmental laws and regulations could be present on the Property.
From and after the Date of Closing, Purchaser agrees to waive any and all
claims, demands, causes of action and other liabilities of or against Seller
with respect to the condition of the Property, except for claims arising from
the breach of a representation or warranty by Seller that are made by Purchaser
in a timely manner, as provided in Section 8. 1. The terms and covenants of this
Section 8.3 shall survive the closing.
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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 in an amount not greater than TWO HUNDRED
THOUSAND ($200,000) DOLLARS, Purchaser agrees to accept the Property with an
assignment of: (i) the insurance proceeds, (ii) any deductible, and (iii) rent
loss insurance proceeds. Seller shall repair such damage before the date
provided herein for Closing. In the event that the damage as a result of fire or
other casualty cannot be reasonably repaired by such time, this Agreement may be
canceled at the option of the Purchaser. In the event of cancellation as
aforesaid, this Agreement shall become null and void and the parties shall be
released and all payments made shall be returned. Should Purchaser elect to
carry out this Agreement despite such damage Seller shall assign to Purchaser
all insurance proceeds and any deductible arising from such damage and will
compensate Purchaser for lost rent collections to the extent of insurance
proceeds received. Seller shall promptly notify Purchaser in writing upon the
occurrence of any such damage.
9.2 CONDEMNATION. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any actual
or proposed sale in lieu thereof, the Seller shall give written notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property greater than TWO HUNDRED THOUSAND
($200,000) DOLLARS or any part of the building or more than 5% of the parking
area, Purchaser may elect to either (a)
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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) 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. If
payment has not as yet been received, but an amount has been agreed upon, Seller
shall assign the claim to Purchaser.
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 BERKELEY
CAPITAL ADVISORS, pursuant to a separate agreement between Seller and Brokers.
Said brokerage fee shall be deemed earned if, and only if, settlement occurs
hereunder, and shall not be deemed earned even if Purchaser and/or Seller
wrongfully fail(s) to consummate the purchase and sale herein contemplated.
Purchaser shall not be obligated for any brokerage fees to any broker, and
Seller agrees to hold Purchaser harmless in connection with such fees. Seller
and Purchaser represent and warrant to each other that no other brokerage fees
are or shall be owing in connection with this transaction or in any way with the
Apartments and Seller and Purchaser hereby indemnify and hold the other harmless
from any and all claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 DEFAULT DEFINED. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 SELLER'S DEFAULT. Upon Seller's default, the Purchaser, at it's
election, may either (1) require specific performance of Seller, (2) cancel this
Agreement and obtain a prompt return of the deposit, in which case this
Agreement shall be terminated and the parties released from all obligations
hereunder, or (3) the Purchaser may waive such defaults and proceed to
settlement. Seller shall indemnify Purchaser for any reasonable out-of-pocket
expenses incurred in investigating the Property, not to exceed Twenty Five
Thousand ($25,000) Dollars if Purchaser elects to pursue its options (1) and (2)
noted above.
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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. Such
amount and terms are agreed upon by and between Seller and Purchaser as
liquidated damages, due to the difficulty and inconvenience of ascertaining and
measuring actual damages, and the uncertainty thereof, and the payment of the
deposit and the terms provided herein shall constitute full satisfaction of
Purchaser's obligations under this Agreement. Such amount is agreed upon by and
between Seller and Purchaser as a reasonable estimate of just compensation for
the harm caused by Purchaser's default. Seller shall have no other remedy
against Purchaser in the event of Purchaser's default. The foregoing liquidated
damage claim shall not apply to a breach of Purchaser's indemnity under Section
6.2.2.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between the parties; it supersedes all previous agreements and
representations which are deemed merged herein and may not be modified except in
writing.
12.2 ASSIGNMENT. Purchaser may assign this Agreement without the
consent of Seller to an entity owned or controlled by Purchaser; any other
assignment to this Agreement by Purchaser shall require the prior 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
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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 CONFIDENTIALITY. The parties shall keep confidential the
existence of this Agreement, the transactions described herein, and all
information obtained from the other party both during and subsequent to the
transaction. However, the covenants contained in this paragraph shall not apply
in respect to any information which (a) was already known to either party when
such information was received from the other, (b) was readily available to the
general public at the time of such receipt, (c) subsequently becomes known to
the general public through no fault or omission by the other party, (d) is
subsequently disclosed by a third party which has the bona fide right to make
such disclosure, or (e) is required to be disclosed by law or a governmental
agency. This clause shall survive closing.
12.11 EXHIBITS. The following exhibits are attached to this Agreement
and are incorporated into this Agreement by this reference and made a part
hereof for all purposes:
(a) EXHIBIT A, the legal description of the Land.
(b) EXHIBIT B, list of personal property.
(c) EXHIBIT C, the form of Deed.
(d) EXHIBIT D, the form of the Assignment and Assumption of
Personal Property, Service Contracts, Warranties and Leases.
(e) EXHIBIT E, the form of the Representation Letter.
ARTICLE XIII
NOTICE
13.1 Notice. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as
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may be hereafter specified in writing):
To Seller: Raleigh Timbers Associates, Limited
c/o CTJ Real Estate, Inc.
212 South Tryon Street, Suite 1350
Charlotte, NC 28202
Attention: James T. Cobb
With a copy to
Seller's Attorneys: Brent A. Torstrick, Esq.
Robinson, Bradshaw & Hinson
101 North Tryon Street, Suite 1900
Charlotte, NC 28246
Fax: (704) 378-4000
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and-
Ted Oliver, Esq.
Manning, Fulton & Skinner
500 UCB Plaza
3605 Glenwood Avenue
Raleigh, NC 27612
Fax: (919) 781-OB11
13.2 DELIVERY OF NOTICE. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, delivered to a
reliable overnight courier or by facsimile transmission. Notices sent in any
other manner shall be deemed given only when actually delivered at the specified
address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first
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written above.
SELLER:
RALEIGH TIMBERS ASSOCIATES, LIMITED
BY: RALEIGH TIMBERS COMPANY, LTD.
GENERAL PARTNER
BY: /s/ James T. Cobb
-------------------------------
James T. Cobb
Its: Managing General Partner
-------------------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
BY: /s/ Gus G. Remppies
--------------------------------
Its: Vice President Acquisitions
-------------------------------
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