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: March 31, 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 office)
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
(Hampton Pointe Apartments)
Historical Statement of Income and Direct Operating Expenses
(Hampton Pointe Apartments)
Note to Historical Statement of Income and Direct Operating
Expenses (Hampton Pointe Apartments)
b. Independent Auditors' Report (Pinnacle Ridge (formerly Edgewood
Knoll) Apartments)
Historical Statement of Income and Direct Operating Expenses
(Pinnacle Ridge (formerly Edgewood Knoll) Apartments)
Note to Historical Statement of Income and Direct Operating
Expenses (Pinnacle Ridge (formerly Edgewood Knoll) Apartments)
c. Pro Forma Statement of Operations for the Year Ended December 31,
1997 (unaudited)
Pro Forma Statement of Operations for the Quarter Ended March 31,
1998 (unaudited)
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d. Exhibits
10.1 Purchase Contract for Hampton Pointe Apartments
10.2 Purchase Contract for Pinnacle Ridge (formerly Edgewood Knoll)
Apartments
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
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<PAGE>
Item 2. Acquisition or Disposition of Assets
HAMPTON POINTE APARTMENTS
Charleston, South Carolina
On March 31, 1998, Cornerstone Realty Income Trust, Inc. (together with its
subsidiary, CRIT-NC, LLC, the "Company") purchased the Hampton Pointe
Apartments, a 304-unit apartment complex having an address of 1916 Sam
Rittenberg Boulevard, Charleston, South Carolina (the "Property").
The seller, Hampton Pointe Properties, was affiliated with the Company. The
purchase price was $12,225,000. At closing, the entire purchase price was
borrowed under the Company's 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 Charleston Chamber of Commerce.
The Charleston Metropolitan Statistical Area ("MSA") is comprised of
Charleston, Berkeley and Dorchester Counties. The approximate population of the
MSA is 570,000. Charleston County has approximately 330,000 residents,
approximately 85,000 of which are in the city limits.
The principal economic factors in the region are distribution and port
facilities, tourism, medical services and the military.
The Port of Charleston is the leading container cargo port in the southeast
and on the entire east coast ranks second only to the combined ports of New York
and New Jersey. BMW and NUCOR are two recent examples of companies that rely on
the Port of Charleston.
Tourism is a major factor in the area, with approximately five million
visitors annually. Tourist attractions include the historic district of
Charleston, beaches, golf courses, and restaurants. It is estimated that the
total economic impact of the tourist industry in the region is approximately
$1.5 billion annually, accounting for approximately 34,000 jobs and
approximately 14% of the total work force.
Charleston is the home to the Medical University of South Carolina, which
accounts for approximately 7,500 jobs. A total of approximately 16,000 persons
are employed in the region's 10 hospitals and medical facilities.
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The United States Navy employs approximately 7,800 people in the region in
installations such as Charleston Naval Weapons Station, Naval Hospital and Naval
Command, Control and Ocean Surveillance Center in Service Engineering, East
Coast Division. In addition, the Charleston Air Force Base employs over 5,400
people. From 1989 to 1996, naval employment in the region dropped from 21% to 3%
of total jobs. However, the region experienced a concurrent increase in jobs in
other sectors.
The overall unemployment rate in the region is currently approximately 5%.
The Property is listed in the West Ashley region of Charleston. The
immediate area consists of other multi-family housing, commercial and retail
development and single-family housing. The Property is located near major
shopping centers, schools and churches and is accessible from Interstate 26 and
Mark Clark Expressway. Charleston's largest mall, the Citadel Mall, is located
less than one mile from the Property and has four major anchor stores and
approximately one million square feet of space. The Property is an approximately
15-minute drive from the College of Charleston, downtown Charleston, the airport
and the beach.
DESCRIPTION OF THE PROPERTY. The Property consists of 304 garden-style
apartments located in 19 two-story buildings on approximately 20 acres of land.
The Property was constructed in 1986.
The Company believes that the Property has generally been well maintained
and is generally in good condition. However, the Company has budgeted
approximately $912,000 for repairs and improvements including clubhouse
renovation, re-siding of all building exteriors and window replacement.
The Property offers four different unit types. The unit mix and rents being
charged new tenants as of June 1998 are as follows:
APPROXIMATE
INTERIOR MONTHLY
QUANTITY TYPE SQUARE FOOTAGE RENTAL
- ---------- ----------------------------- ---------------- --------
64 One bedroom, one bathroom 750 $510
64 One bedroom, one bathroom 900 560
-5-
<PAGE>
APPROXIMATE
INTERIOR MONTHLY
QUANTITY TYPE SQUARE FOOTAGE RENTAL
- ---------- ----------------------------- ---------------- --------
88 Two bedrooms, two bathrooms 1,175 650
88 Two bedrooms, two bathrooms 1,200 675
The apartments provide a combined total of approximately 314,000 square
feet of net rentable area.
Leases at the Property are for terms of one year or less. Average rental
rates for the past five years have generally remained constant or increased. As
an example, a two-bedroom, two-bathroom apartment (1,175 square feet) rented for
$585 in 1993, $585 in 1994, $585 in 1995, $600 in 1996, and $650 in 1997. The
average effective annual rental per square foot at the Property for 1993, 1994,
1995, 1996 and 1997 was $6.39, $6.39, $6.39, $6.55, and $7.10, respectively.
The buildings are wood frame construction on concrete slabs. The buildings
have pitched roofs with asphalt shingles. Exteriors are cedar lap siding.
The Property has two outdoor swimming pools, a Jacuzzi, two lighted tennis
courts, a sand volleyball court, a fitness center, a putting green, picnic
areas, a car wash area with vacuum, and a laundry facility. The Property also
has a large clubhouse with an entertainment area, kitchenette and leasing
office. There is ample paved parking.
Apartments units have wall-to-wall carpeting in the living areas and vinyl
floors in the kitchen and baths, as well as cable television hook-ups and
individually controlled heating and air conditioning units. Each unit has
miniblinds, walk-in closets, full-sized washer/dryer connections, a wood-burning
fireplace and a sun room or patio. 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 air conditioning,
cooking and lights, and for gas usage, which includes heat and hot water.
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
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Property. Based on a recent telephone survey, the Company estimates that
occupancy in nearby competing projects averaged approximately 96% at May 31,
1998. One of the competing properties, Westchase Apartments, is also owned by
the Company.
According to information provided by the seller, physical occupancy at the
Property averaged approximately 72% in 1993, 73% in 1994, 85% in 1995, 95% in
1996 and 98% in 1997. On May 31, 1998, the Property was 98% 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 times 6% times $0.3181, plus a solid waste tax of $63 per
apartment unit. The real estate taxes for 1997 were calculated to be $158,576.
The assessed value was $8,699,800. The basis of the depreciable residential real
property portion of the Property (currently estimated at about $10,973,281) will
be depreciated over 27.5 years on a straight line basis. The basis of the
personal property portion will be depreciated in accordance with the modified
accelerated cost recovery system of the Code.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
MATERIAL FACTORS CONSIDERED IN ASSESSING THE PROPERTY. The factors
considered by the Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Charleston, South Carolina area will
experience continued strong economic development and steady population increase,
owing to a strong, diversified economy characterized by at least four major
employment factors (port facilities, tourism, medical facilities and the
military), and that such dvelopment and increase will support stable occupancy
rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the Company
believes that the Property is in good condition.
3. The Property is conveniently located and proximate to area employers
and shopping.
4. The Company is familiar with the Charleston, South Carolina market.
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<PAGE>
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.
PINNACLE RIDGE (formerly Edgewood Knoll) APARTMENTS
Asheville, North Carolina
On March 31, 1998, the Company purchased the Edgewood Knoll Apartments,
a 168-unit apartment complex having an address of 600 Merrimon Avenue,
Asheville, North Carolina (the "Property"). The Company purchased the Property
from a seller (R.B.R. & S.T., a North Carolina limited partnership) which was
unaffiliated with the Company. The purchase price was $5,750,000, all of which
was borrowed on an interim basis under the Company's unsecured line of credit.
Title to the Property was conveyed to the Company by limited warranty deed. The
Company has changed the name of the Property to "Pinnacle Ridge Apartments."
LOCATION. The following information is based in part upon information
provided by the Asheville Chamber of Commerce.
The Property is located in North Carolina, in the City of Asheville and
Buncombe County, which collectively have a population of approximately 250,000.
Asheville is located approximately 115 miles from Charlotte, North Carolina, and
65 miles from Greenville, South Carolina.
The City of Asheville and Buncombe County are represented by a number
of nationally recognized companies and organizations in the health care,
education and manufacturing sectors. Some of the major employers in the area
include Champion International (a manufacturer of paper and paperboard), GE
Lighting Systems, Westinghouse Electric and ITT Automotive. In addition,
Memorial Mission Hospital and St. Joseph Hospital are major area employers.
The major highways serving the area are Interstates 40, 26 and 240. The
Asheville Regional Airport is centrally located within the metropolitan area and
is approximately 20 miles from the Property. Also, Asheville is home to the
University of North Carolina at Asheville, with an enrollment of approximately
3,200 students.
The property is located on Merrimon Avenue, in the north section of
Asheville, within the city limits. The area
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surrounding the Property is well-developed, with various retail centers as well
as single-family residences. The Property is located approximately two miles
from the city's central business district, and is convenient to employment
centers, shops and restaurants located there. The Property is also near two
major shopping centers, Asheville Mall and Biltmore Square Mall.
DESCRIPTION OF THE PROPERTY. The Property consists of 168 garden-style
and townhouse-style apartments in 25 two-story buildings and one two-story house
located on approximately 17 acres of land. The Property was constructed in 1951.
The Company believes that the Property is generally in good condition.
However, approximately $336,000 has been budgeted by the Company for repairs and
improvements, including construction of an outdoor swimming pool, conversion of
the two-story Victorian house on site (which currently contains two apartment
units) into a clubhouse, exterior painting and siding replacement, landscaping
and interior upgrades.
The Property offers six unit types. The unit mix and rents currently
being charged new tenants as of June 1998 are as follows:
<TABLE>
<CAPTION>
APPROXIMATE INTERIOR MONTHLY
QUANTITY* TYPE SQUARE FOOTAGE RENTAL
- ----------- ----------------------------------- ---------------------- --------
<S> <C> <C> <C>
8 One bedroom, one bathroom 760 $500
4 One bedroom, one bathroom (TH) 760 515
62 Two bedrooms, one bathroom 816 540
74 Two bedrooms, one bathroom (TH) 912 550
12 Three bedrooms, one bathroom (TH) 1,038 615
6 Three bedrooms, two bathrooms 1,200 630
</TABLE>
* At the time of purchase by the Company, the Property included a
two-story house with two apartment units. As indicated above, the
Company expects to convert the two-story house into a clubhouse, and
these two apartment units will cease to exist.
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<PAGE>
The apartments provide a combined total of approximately 147,000 square
feet of net rentable area
Currently, the Property does not have standard common-area amenities,
although, as noted above, the Company plans to construct a swimming pool at the
Property and to convert an existing two-story house into a clubhouse and amenity
center.
Leases at the Property generally are for terms of one year or less.
Average rental rates for the past five years have generally been constant or
increasing. As an example, a two-bedroom, one-bathroom apartment unit (816
square feet) rented for $350 in 1993, $375 in 1994, $375 in 1995, $375 in 1996,
and $480 in 1997. The average effective annual rental per square foot at the
Property for 1993, 1994, 1995, 1996, and 1997 was $4.84, $5.18, $5.18, $5.18,
and $6.63, respectively.
The buildings are wood frame construction over crawl spaces. Exteriors
have brick veneer and a combination of painted hardboard lap siding, painted
cementitious-type siding and painted T-111 siding. There are sloped gabled roofs
covered with asphalt shingles.
All apartment units have hardwood floors in the living areas, and tile
floors in the kitchen and baths. Each apartment unit has a cable television
hook-up and an individually controlled heating and air conditioning unit. Each
apartment unit also has miniblinds and full-sized 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 pay for their gas usage, which
includes heat (in all units) and hot water in garden units, and for their
electricity usage, which includes air-conditioning, cooking, lights and hot
water in townhouse units.
There are at least three apartment properties in the area that compete
with the Property. All offer similar amenities and have rents that are generally
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing projects averaged
approximately 91% at May 31, 1998.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 90% in 1993, 90% in 1994, 75% in 1995, 70%
in 1996, and 80% in 1997. On May 31, 1998, the Property was 90% occupied. The
current residents at the Property are employed in a variety of white-collar and
blue-
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collar jobs, and there are also student residents and retired persons.
The 1997 real estate tax rate applicable to the Property was $1.51 per $100
of assessed value, and the real estate taxes for 1997 were calculated to be
$44,208. The assessed value was $2,927,700. The basis of the depreciable
residential real property portion of the Property (currently estimated at about
$4,187,566) 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 Asheville, 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.
2. Based upon an engineering report and its own inspections, the
Company believes that the Property is generally in sound condition.
3. The Property is conveniently located and proximate to major
employers and shopping.
4. The Company is familiar with the Asheville, North Carolina
rental market.
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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INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Hampton Pointe Apartments located in Charleston, South Carolina for
the twelve month period ended February 28, 1998. This statement is the
responsibility of the management of Hampton Pointe Apartments. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Cornerstone Realty Income Trust, Inc.) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Hampton Pointe
Apartments (as defined above) for the twelve month period ended February 28,
1998, in conformity with generally accepted accounting principles.
/s/ L.P. Martin & Co., P.C.
-----------------------------
Richmond, Virginia
April 8, 1998
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<PAGE>
HAMPTON POINTE APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998
INCOME
Rental and Other Income $ 1,980,245
DIRECT OPERATING EXPENSES
Administrative and Other 150,195
Insurance 50,061
Repairs and Maintenance 323,067
Taxes, Property 169,434
Utilities 156,652
TOTAL DIRECT OPERATING EXPENSES 849,409
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 1,130,836
==========
See accompanying notes to the financial statement.
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<PAGE>
HAMPTON POINTE APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998
NOTE 1 - ORGANIZATION
Hampton Pointe Apartments is a 304 unit garden style apartment complex located
on 20.25 acres in Charleston, South Carolina. The assets comprising the property
were owned by Hampton Pointe Properties, A Limited Partnership, an entity
unaffiliated with Cornerstone Realty Income Trust, Inc., during the financial
statement period. Cornerstone Realty Income Trust, Inc. purchased the property
on March 31, 1998.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation, amortization,
professional fees and management fees.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
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ITEM 7.b.
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<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Edgewood Knoll Apartments located in Asheville, North Carolina for
the twelve month period ended February 28, 1998. This statement is the
responsibility of the management of Edgewood Knoll Apartments. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Cornerstone Realty Income Trust, Inc.) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Edgewood Knoll
Apartments (as defined above) for the twelve month period ended February 28,
1998, in conformity with generally accepted accounting principles.
/s/ L.P. Martin & Co., P.C.
----------------------------
Richmond, Virginia
April 8, 1998
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<PAGE>
EDGEWOOD KNOLL APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998
INCOME
Rental and Other Income $ 859,763
------------
DIRECT OPERATING EXPENSES
Administrative and Other 13,727
Insurance 17,434
Repairs and Maintenance 217,092
Taxes, Property 44,208
Utilities 61,894
------------
TOTAL DIRECT OPERATING EXPENSES 354,355
------------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 505,408
============
See accompanying notes to the financial statement.
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<PAGE>
EDGEWOOD KNOLL APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998
NOTE 1 - ORGANIZATION
Edgewood Knoll Apartments is a 168 unit garden and townhouse style apartment
complex located on approximately 17.02 acres in Asheville, North Carolina. The
assets comprising the property were owned by R. B. R. and S. T., a North
Carolina Limited Partnership, an entity unaffiliated with Cornerstone Realty
Income Trust, Inc., during the financial statement period. Cornerstone Realty
Income Trust, Inc. purchased the property on March 31, 1998.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest and property depreciation.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
NOTE 3 - RELATED PARTY TRANSACTIONS
During the financial statement period, the property had no employees. General
maintenance and repair work was performed by individuals who worked solely at
this property but who were employees of an affiliate of the owner. The property
was billed for the payroll and associated burden at the affiliate's cost which
totaled $86,688.
The affiliate also employed a staff which performed grounds maintenance for this
and other projects. The affiliate billed each project for a systematic
allocation of their employee payroll and burden as well as specific materials
and supplies purchased for the various properties. The amount billed to Edgewood
Knoll Apartments for the grounds services totaled $44,641 during the financial
statement period.
(Continued)
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EDGEWOOD KNOLL APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued)
The affiliate also billed the project $6,240 during the financial statement
period for use of a maintenance truck. No formal lease exists.
Each of the above amounts is included in repairs and maintenance on the
statement of income and direct operating expenses.
Administrative and other expense is below what would generally be expected for a
project of this size for the following reasons. All administrative functions of
the property, including accounting and management services and those services
which would generally be performed by a resident manager and assistants, were
performed by the owner affiliate. The affiliate's employees performed these and
other duties for several projects. Because the affiliate and the various
properties had common owners, no attempt was made to allocate employee costs and
other costs to Edgewood Knoll Apartments and the other properties. At this
point, any attempt to allocate cost to the property would be arbitrary.
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ITEM 7.c.
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<PAGE>
PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
The Unaudited Pro Forma Statement of Operations for the year ended December 31,
1997 is presented as if 11 of the 13 Property acquisitions during 1997 and the 3
Property acquisitions during 1998 had occurred on January 1, 1997. The Unaudited
Pro Forma Statement of Operations assumes the Company qualifying as a REIT,
distributing at least 95% of its taxable income, and, therefore, incurred no
federal income tax liability for the period presented. In the opinion of
management, all adjustments necessary to reflect the effects of these
transactions have been made.
The Unaudited Pro Forma Statement of Operations is presented for comparative
purposes only and is not necessarily indicative of what the actual results of
the Company would have been for the year ended December 31, 1997 if the
acquisitions had occurred at the beginning of the period presented, nor does it
purport to be indicative of the results of operations in future periods. The
Unaudited Pro Forma Statement of Operations should be read in conjunction with,
and is qualified in its entirety by, the Company's respective historical
financial statements and notes thereto.
<TABLE>
<CAPTION>
Historical Pro Forma
Statement of 1997 Pro Forma Before 1998
Operations Acquisitions Adjustments Acquisitions
------------------------------------------------------ ------------------
<S> <C> <C> <C> <C>
Date of Acquisitions - -
Revenues from rental properties $71,970,624 $8,176,747 - $80,147,371
Rental expenses:
Property and maintenance 19,494,692 2,524,622 - 22,019,314
Taxes and insurance 6,075,991 608,815 - 6,684,806
Property management 1,769,272 - - 1,769,272
General and administrative 1,351,667 - - 1,351,667
Amortization and other depreciation 56,075 - - 56,075
Depreciation of rental property 15,163,593 - 1,514,811 (A) 16,678,404
Other 1,200,669 - - 1,200,669
Management contract termination 402,907 - - 402,907
---------------------------------------------------- ------------------
45,514,866 3,133,437 1,514,811 50,163,114
Income before interest income (expense) 26,455,758 5,043,310 (1,514,811) 29,984,257
Interest income 331,114 - - 331,114
Interest expense (7,561,319) - (2,411,653)(B) (9,972,972)
---------------------------------------------------- ------------------
Net Income $19,225,553 $5,043,310 ($3,926,464) $20,342,399
Net income per share $0.59
======
Wgt. avg. number of shares outstanding 32,617,823 2,041,544 (C) 34,659,367
=========== ============
<CAPTION>
Edgewood Hampton
Stone Point Knoll Point
Pro Forma Pro Forma Pro Forma Pro Forma Total
Adjustments Adjustments Adjustments Adjustments Pro Forma
----------------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C>
Date of Acquisitions 1/15/98 3/31/98 3/31/98 -
Revenues from rental properties $ 1,346,251 $859,763 $1,980,245 - $84,333,630
Rental expenses:
Property and maintenance 379,698 292,713 629,914 - 23,321,639
Taxes and insurance 99,704 61,642 219,495 - 7,065,647
Property management - - - - 1,769,272
General and administrative - - - - 1,351,667
Amortization and other depreciation - - - - 56,075
Depreciation of rental property - - - 849,291 (A) 17,527,695
Other - - 1,200,669
Management contract termination - - - - 402,907
----------------------------------------------------------------- ------------
479,402 354,355 849,409 849,291 52,695,571
Income before interest income (expense) 866,849 505,408 1,130,836 (849,291) 31,638,059
Interest income - - - - 331,114
Interest expense - - - (2,186,843)(B) (12,159,815)
----------------------------------------------------------------- ------------
Net Income $866,849 $505,408 $1,130,836 ($3,036,134) $19,809,358
Net income per share $0.57
=====
Wgt. avg. number of shares outstanding 34,659,367
==========
</TABLE>
(A) Represents the depreciation expense of the properties acquired based on the
purchase price, excluding amounts allocated to land, for the period of time not
owned by the Company. The weighted average life of the property depreciated was
27.5 years.
(B) Represents the interest expense for the properties purchased with the
Company's unsecured line of credit or other unsecured financing. Total purchase
price of $63,851,388 for 1997 acquisitions (8 properties) and total purchase
price of $27,656,150 for 1998 acquisitions (3 properties) for the period in
which properties were not owned for the year ended December 31, 1997. Interest
was computed based on interest rates under the Company's line of credit in
effect at the time of the respective acquisition.
(C) Represents additional common shares used to purchase Ashley Run, Carlyle,
Charleston Place and a portion of Dunwoody based upon purchase prices of
$18,000,000 $11,580,000, $9,475,000 and $10,560,312 (total purchase price of
Dunwoody was $15,200,000), respectively and common shares issued in April, 1997
with net proceeds of $9.5875 per share to the Company.
-22-
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
1997 (UNAUDITED)
The following schedule provides detail of 1997 acquisitions by property included
in the Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1997.
<TABLE>
<CAPTION>
Westchase Paces Arbor Paces Forest Ashley Run
Pro Forma Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments Adjustments
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Date of Acquisition 1/15/97 3/1/97 3/1/97 4/30/97
Property operations
Revenues from rental properties $166,656 $128,993 $154,702 $916,820
Rental expenses:
Property management 54,436 35,902 37,110 246,537
Taxes and insurance 16,024 8,094 9,108 69,240
General and administrative - - - -
Amortization - - - -
Depreciation of rental property - - - -
Other - - - -
----------------------------------------------------------------------
70,460 43,996 46,218 315,777
Income before interest income (expense) 96,196 84,997 108,484 601,043
Interest income - - - -
Interest expense - - - -
----------------------------------------------------------------------
Net Income $96,196 $84,997 $108,484 $601,043
======================================================================
<CAPTION>
Charleston Dunwoody Clarion
Carlyle Club Place Springs Crossing
Pro Forma Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments Adjustments
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Date of Acquisition 4/30/97 5/13/97 7/25/97 9/30/97
Property operations
Revenues from rental properties $637,842 $536,210 $1,437,230 $1,141,473
Rental expenses:
Property management 205,723 169,807 451,935 442,582
Taxes and insurance 46,970 34,987 144,766 59,664
General and administrative - - - -
Amortization - - - -
Depreciation of rental property - - - -
Other - - - -
--------------------------------------------------------------------------
252,693 204,794 596,701 502,246
Income before interest income (expense) 385,149 331,416 840,529 639,227
Interest income - - - -
Interest expense - - - -
--------------------------------------------------------------------------
Net Income $385,149 $331,416 $840,529 $639,227
==========================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Remington
St. Regis Place Stone Brooke 1997
Pro Forma Pro Forma Pro Forma Acquisition
Adjustments Adjustments Adjustments Adjustments
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Date of Acquisition 10/31/97 10/31/97 10/31/97
Property operations
Revenues from rental properties $1,100,453 $918,833 $1,037,535 $8,176,747
Rental expenses: -
Property management 294,153 262,938 323,499 2,524,622
Taxes and insurance 64,195 60,505 95,262 608,815
General and administrative - - - -
Amortization - - - -
Depreciation of rental property - - - -
Other - - - -
--------------------------------------------------------------------
358,348 323,443 418,761 3,133,437
Income before interest income (expense) 742,105 595,390 618,774 5,043,310
Interest income - - - -
Interest expense - - - -
--------------------------------------------------------------------
Net Income $742,105 $595,390 $618,774 $5,043,310
====================================================================
</TABLE>
-23-
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
The Unaudited Pro Forma Statement of Operations for the three month period ended
March 31, 1998 is presented as if the 3 Property acquisitions made during 1998
had occurred on January 1, 1998. The Unaudited Pro Forma Statement of Operations
assumes the Company qualifying as a REIT, distributing at least 95% of its
taxable income, and, therefore, incurred no federal income tax liability for the
period presented. In the opinion of management, all adjustments necessary to
reflect the effects of these transactions have been made.
The Unaudited Pro Forma Statement of Operations is presented for comparative
purposes only and is not necessarily indicative of what the actual results of
the Company would have been for the period ended March 31, 1998 if the
acquisitions had occurred at the beginning of the period presented, nor does it
purport to be indicative of the results of operations in future periods. The
Unaudited Pro Forma Statement of Operations should be read in conjunction with,
and is qualified in its entirety by, the Company's respective historical
financial statements and notes thereto.
<TABLE>
<CAPTION>
Stone Pinnacle
Historical Point Ridge
Statement of Pro Forma Pro Forma
Operations Adjustments Adjustments
--------------------------------------------------------
<S> <C> <C> <C>
Date of Acquisitions - 1/15/98 3/31/98
Rental and other income $20,962,469 $ 56,094 $214,941
Rental expenses:
Property and maintenance 5,499,525 15,821 73,178
Taxes and insurance 1,523,849 4,154 15,411
Property management 512,319 - -
General and administrative 356,339 - -
Amortization and other depreciation 16,138 - -
Depreciation of rental property 4,683,384 - -
Other 406,959 - -
-------------------------------------------------------------
12,998,513 19,975 88,589
Income before interest income (expense) 7,963,956 36,119 126,352
Interest income 93,010 - -
Interest expense (2,820,918) - -
--------------------------------------------------------
Net Income $5,236,048 $36,119 $126,352
Net income per share $0.15
======
Wgt. avg. number of shares outstanding 35,701,334
===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Hampton
Pointe 1998
Pro Forma Pro Forma Total
Adjustments Adjustments Pro Forma
-------------------------------------------- --------------
<S> <C> <C> <C>
Date of Acquisitions 3/31/98 -
Rental and other income $495,061 - $21,728,565
-
Rental expenses:
Property and maintenance 157,479 - 5,746,003
Taxes and insurance 54,874 - 1,598,288
Property management - - 512,319
General and administrative - - 356,339
Amortization and other depreciation - - 16,138
Depreciation of rental property - 147,656 (A) 4,831,040
Other - - 406,959
--------------------------------------- -----------------
212,353 147,656 13,467,086
Income before interest income (expense) 282,708 (147,656) 8,261,479
Interest income - - 93,010
Interest expense - (409,092) (B) (3,230,010)
-------------------------------------------- --------------
Net Income $282,708 ($556,748) $5,124,479
Net income per share $0.14
==========
Wgt. avg. number of shares outstanding 35,701,334
==========
</TABLE>
(A) Represents the depreciation expense of the properties acquired based on the
purchase price, excluding amounts allocated to land, for the period of time not
owned by the Company. The weighted average life of the property depreciated was
27.5 years.
(B) Represents the interest expense for the 3 Properties for the period in which
the properties were not owned for the three month period ended March 31, 1998,
interest was computed based on interest rates under the Company's line of credit
in effect at the time of the respective acquisition.
-24-
<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 11, 1998 By: /s/ Stanley J. Olander, Jr.
--------------------------------
Stanley J. Olander, Jr.,
Chief Financial Officer Of
Cornerstone Realty Income
Trust, Inc.
-25-
<PAGE>
EXHIBIT INDEX
Cornerstone Realty Income Trust, Inc.
Form 8-K dated March 31, 1998
Exhibit Number Exhibit
10.1 Purchase Contract for Hampton Point Apartments
10.2 Purchase Contract for Pinnacle Ridge (formerly
Edgewood Knoll) Apartments
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
-16-
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 9th day of March 1998, between
CORNERSTONE REALTY GROUP, INC. or its nominee, (hereinafter called "Purchaser")
and HAMPTON POINTE PROPERTIES, A 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 HAMPTON POINTE APARTMENTS
located in CHARLESTON, SC, with all buildings and improvements located thereon,
as more particularly described in the attached legal description in EXHIBIT A
including, but not limited to 304 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 TWELVE MILLION TWO
HUNDRED TWENTY FIVE THOUSAND ($12,225,000) DOLLARS payable as follows:
2.2 DEPOSIT. ONE HUNDRED THOUSAND ($100,000) DOLLARS to be placed in escrow
simultaneously with the execution and delivery of this Agreement. Said deposit
shall be placed in escrow with Chicago Title Insurance Corporation or its
authorized agent (the "Escrow Agent") as an earnest money deposit which may be
credited against the purchase price or applied as per Article XI below.
2.2 BALANCE. Balance at Closing as evidenced by cash or cash equivalent, a
portion of which will be held in escrow pursuant to the Escrow Agreement (as
defined below) for the purpose of prepaying the Bonds currently a lien on the
Property.
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 the
matters approved by Purchaser
<PAGE>
during the Inspection Period, the tenant leases being for not more than one (1)
year and for no other purpose than residential, general taxes for the current
year not yet due and payable and utility easements which do not interfere with
the present use of the Property.
(A) Title shall be free from any and all liens or mortgages, except
for the liens and mortgages securing the South Carolina Housing Bonds as further
described hereinafter and which Bonds shall be redeemed in accordance with the
Escrow Agreement, a copy of which is annexed hereto as EXHIBIT D.
3.2 TITLE DEFECTS; ELECTION TO CURE. Purchaser shall at its cost obtain a
commitment for Title Insurance, (the "Commitment"). If title is not marketable,
except as stated above in the preceding paragraph, Purchaser shall give written
notice of any defects in title to Seller's counsel prior to the expiration of
the Inspection Period. The title 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, the cost of which shall be borne
solely by Purchaser. 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 date 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. Seller shall pay the recording fees 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 represents that the South Carolina
State Housing Finance and Development Authority (the "Issuer") issued Rental
Housing Revenue Bonds (Hampton Pointe Apartments Project) 1995 in the principal
amount of $7,370,000 (the "Bonds"), the proceeds of which were loaned to Seller
in connection with the acquisition and construction of the Property. Seller
2
<PAGE>
further represents that (a) Branch Banking and Trust Company ("BB&T") is the
corporate fiduciary under the Trust Indenture, dated as of June 1, 1996, between
the Issuer and BB&T with respect to the Bonds, (b) The Bank of New York ("BNY")
has issued a letter of credit to secure the Bonds pursuant to the Amended and
Reinstated Letter of Credit and Reimbursement Agreement, dated as of June 1,
1996, between Seller and BNY, and (c) BNY is also the remarketing agent of the
Bonds under the Remarketing Agreement, dated as of June 1, 1996, between Seller
and BNY. Seller shall be responsible for paying the face amount of the Bonds,
plus accrued but unpaid interest thereon as of the Closing Date (collectively,
"Seller's Bond Costs"). Purchaser shall be responsible for paying interest on
the Bonds (but not any default interest) from the date of Closing through the
date upon which the Bonds are actually redeemed, plus all fees and costs payable
to the Issuer, BB&T and BNY (collectively, the "Bond Parties") from the date of
Closing through the date upon which the Bonds are actually redeemed
(collectively, "Purchaser's Bond Costs").
4.3 ALLOCATION OF RENTS. Rents collected by Seller prior to Closing shall
be prorated as agreed in 4.1 above. Purchaser shall apply rents received after
Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 PRIOR LEASE CONCESSIONS. 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
3
<PAGE>
sole discretion, said report to include in part, a description of any hazardous
waste sites, hazardous wastes and/or hazardous materials affecting the property.
Purchaser shall have fifteen (15) days, but no later than the termination of the
Inspection Period in which to review the reports set forth herein and exercise
its right to reject the Property based thereon or the right hereunder shall be
deemed waived.
(B) The receipt by Purchaser of Seller documents described in 7.2
below.
(C) On the condition that Sellers representations and warranties
described in Article VIII below remain true and correct 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 (at Purchaser's expense) 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 to the extent such information is in Seller's possession or
control.
(F) Survey which shall show no encroachments onto the Land from
any adjacent property, no encroachments by or from the Land onto adjacent
property and no violation of or encroachments upon any recorded building lines,
restrictions or easements affecting the Property. If the Survey discloses any
such encroachment or violation, Seller shall have thirty (30) days from the date
of delivery of the Survey (with a commensurate extension of the closing date) to
have the Title Insurer issue its endorsement insuring against damage caused by
such encroachment or violation and to provide evidence thereof to Purchaser, and
if Seller fails to or is unable to have the same insured against within such
thirty (30) day period, Purchaser may elect, on or before the Closing Date, to
(i) terminate this Agreement (in which case the Earnest Money shall be returned
to Purchaser) and neither party shall have any further liability or obligation
to the other hereunder, or (ii) accept the property subject to any such
encroachment or violation. Nothing to the contrary herein contained, the
obligations herein shall be completed during the Inspection Period.
6.2 INSPECTION. This Agreement shall be further subject to and contingent
upon Purchaser's satisfactory inspection as follows herein below.
4
<PAGE>
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; 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. Purchaser, its employees,
agents and contractors shall have 17 days from the date on which this Agreement
is executed (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. However, the Seller agrees to deliver all
documents pursuant to this Agreement within forty-eight (48) hours after the
execution of this Agreement. Purchaser shall also be permitted to review all
original leases, expense records, tenant cards and occupancy data 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 Paragraphs 8.2, 9.1, 9.2, 11.2 or
11.3.
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, except as set forth in Paragraph
6.2.7 below 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 seventeen (17)
days from the date that this Agreement is executed or such other date as the
parties may agree to in writing.
5
<PAGE>
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, 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, normal wear and tear excepted. A default of this Paragraph shall be
considered a default under Paragraph 11.2.
6.2.7 PURCHASER'S INDEMNITY. Purchaser shall indemnify, defend and hold
harmless Seller, and its agents, employees and representatives, from and against
any and all losses, costs, liabilities, claims, damages or expenses (including,
without limitation, reasonable attorney's fees and costs, if litigated) arising
out of any inspection of, or access to, the Property by Purchaser or its agents,
employees or representatives. Purchaser, at its sole cost and expense, shall
promptly restore the Property to its condition immediately prior to the
performance of such investigation by Purchaser pursuant to this Paragraph 6.2
and shall repair any and all damage caused by Purchaser or its agents, employees
or representatives. Seller shall give sufficient notice to Purchaser of any
claims for damages and will permit Purchaser to make any repairs, etc. required.
In the event that Purchaser has defaulted as defined in Paragraph 11.3, then
Purchaser agrees that (a) Seller shall have the right to use the escrow funds to
restore the Property if Purchaser shall fail to comply with this Section 6.2.7,
and (b) the indemnity contained in this Paragraph 6.2.7 shall survive any
termination of this Agreement for a period of ninety (90) days notwithstanding
anything set forth herein to the contrary.
6.3 BONDS DOCUMENTS. Seller agrees to provide Purchaser with all
documentation dealing with the Bonds.
ARTICLE VII
CLOSING
7.1 CLOSING. Closing shall be within seven (7) days from the end of the
Inspection Period. At Closing, Seller's Bond Costs and Purchaser's Bond Costs
will be deposited in escrow with Escrow Agent pursuant to the terms of the
Escrow Agreement. Upon closing, Seller will notify the Bond Parties of Seller's
intent to redeem the Bonds. The parties acknowledge that the bond documents
6
<PAGE>
allow for up to forty-five (45) days after notification for the Bonds to be
redeemed. It is further understood that the Bonds must be redeemed on an
interest payment date (the first of every month). Purchaser understands and
agrees that it shall take title to the Property subject to the security
documents held by BNY, the Issuer, which instruments will be released subsequent
to the Bonds being redeemed.
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, in the form attached hereto as EXHIBIT E, with
warranty of title only 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 SOUTH 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.
(H) Assignments of all Seller's interest in the following: (1) all
assignable licenses, and permits relating to
7
<PAGE>
the operation of the Property, (2) the leases and rental agreements with tenants
of the Property, (3) the existing Property telephone number and (4) the business
and trade name as set forth in Par. 1.1.
(I) Assignments of all warranties and guarantees to the extent such
are still in effect and provide purchaser with copies of all such warranties and
guarantees without limitation for all appliances, dishwashers, disposals,
refrigerators, heating and air conditioning units, washers and dryers.
(J) Consent of the Seller's authorized officer to the sale of the
Property and any other approvals required under Seller's articles or by-laws,
which may affect Seller's ability to convey marketable title.
(K) Provide documents for the transfer of the telephone, electric,
water and sewer, and gas utilities, as may be required by the utility, for
execution at closing.
(L) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement, including but not limited to:
(i) A certificate from General Partner in Seller stating that:
(a) The individual(s) executing the deed and related
documents are duly authorized to do all such acts as are necessary to consummate
this sale, without further consent of any other party.
(b) That the partner or officer can bind the Partnership or
Corporation.
(M) Affidavit that Seller has no actual knowledge of the presence of
asbestos and/or any other hazardous material at the Property.
(N) Seller shall provide a satisfactory and valid written termination
of the management agreement executed by the existing management and rental agent
for the Property, without cost to the Purchaser.
(O) A notice letter to all the residents of the apartment complex as
to change of ownership in the form prepared by the Purchaser and reasonably
acceptable to Seller.
(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
8
<PAGE>
by auditors for a public company in the form attached hereto as EXHIBIT F. This
clause shall survive closing for one year.
(R) A Consent and Escrow Agreement among Seller, Purchaser, Escrow
Agent and the Bond Parties with respect to the redemption of the Bonds, the form
and substance of which will be agreed to by the respective parties prior to the
expiration of the Inspection Period or any extension thereof (the "Escrow
Agreement").
(S) An Estoppel Certificate from the lending institution indicating
the exact balance due and the fact that the Bonds are not in default.
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 to be escrowed subject to the
Escrow Agreement set forth in Paragraph 7.1.
(B) Execute and deliver an assumption of obligations under leases,
securities, any contracts, a list of which is annexed hereto as EXHIBIT G and
which has been accepted by the Purchaser, and any other obligations specifically
set forth herein.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate the
transfer.
(D) Execute and deliver the Escrow Agreement and the Purchaser's Bond
Costs.
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
9
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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 or documents relating to the Bonds 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 material default under any lease, rental agreement service or
equipment contract, or mortgage or other encumbrances relating to the Property.
This warranty shall survive for one year following closing.
(E) Seller has no other actual knowledge of any patent or latent
defect in the Property or any part thereof, except for a possible manufacturing
defect in the polybutelene pipes. The Seller is currently a party to a
litigation against the manufacturer, which rights it will assign to the
Purchaser. This warranty shall survive for one year following closing.
(F) Seller has no actual knowledge of any existing or threatened
litigation which relates to or which would affect the Property, except for a
tenant's water damage claim in Apt. 713. This warranty shall survive for one
year following closing.
(G) The Property abuts on and has direct vehicular access to a public
road.
(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. This warranty shall survive for one year following closing.
(I) That to the best knowledge of the Seller, the drainage within the
project complies in all respects with all government regulation. This warranty
shall survive for one year following closing.
(J) That Seller is not a "foreign person" within
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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 will furnish to
Purchaser an affidavit confirming same.
(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 procuring or
attempting to procure tenants for apartments which are unrented.
(M) For purposes of this Agreement, whenever the phrase "to Seller's
knowledge", "to the best of Seller's knowledge" or words of similar import are
used, such phrase shall be deemed to refer to the actual knowledge of HANK
YUNES, KATE CORRIPIO, and CINDY AUSTIN, without inquiry or investigation unless
otherwise specified. Knowledge first acquired by Seller post-closing shall not
be included within the definition of Seller's knowledge.
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 for a period of one year following
Closing 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, to the extent such warranties,
representations or covenants survive Closing.
11
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ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 PRORERTY DAMAGE. If, prior to Closing, any part of the Property is
damaged by fire or other casualty:
(A) In an amount not greater than TWO HUNDRED FIFTY THOUSAND
($250,000) DOLLARS, Purchaser agrees to accept the Property with an assignment
of: (i) the insurance proceeds, (ii) any deductible, and (iii) rent loss
insurance proceeds. However, Seller shall have the option to repair such damage
before the date provided herein for closing.
(B) In an amount over TWO HUNDRED FIFTY THOUSAND ($250,000) DOLLARS
and such damage 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, of all or any part thereof, or any actual or
proposed sale in lieu thereof, the Seller shall give written notice thereof to
the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property (any part of the building or more than
5% of the parking area) , Purchaser may elect to either (a) terminate this
Agreement, in which event the Deposit shall be immediately returned to Purchaser
and all other rights and obligations of the parties hereunder shall terminate
immediately, or (b) to waive its right to terminate this Agreement and proceed
to closing, in which event all proceeds, awards and other payments arising out
of such condemnation or sale (actual or threatened) shall be paid to the
Purchaser at closing, if such payment has been received or Seller shall assign
to Purchaser the rights to such payments.
9.3 RISK OF LOSS. Prior to closing, all risks of loss or damage by every
casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 COMMISSION. Purchaser agrees to pay a brokerage fee to GABLES
RESIDENTIAL BROKERAGE SERVICES equal to three (3%) percent of the Purchase
Price, pursuant to a separate
12
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agreement. However, at the request of Seller, Purchaser shall pay one half (1/2)
of such real estate commission directly to the outside broker or co-broker of
GABLES RESIDENTIAL BROKERAGE SERVICES, as designated by the Seller. 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 other 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 its
election, may as its sole and exclusive remedy either (1) require specific
performance of Seller, (2) cancel this Agreement and obtain a prompt return of
the deposit, in which case this Agreement shall be terminated and the parties
released from all obligations hereunder, or (3) the Purchaser may waive such
defaults and proceed to settlement. Seller shall indemnify Purchaser for any
reasonable costs incurred by Purchaser if Purchaser elects to pursue its option
(1) noted above, to include reasonable attorney fees.
11.3 PURCHASER'S DEFAULT. Upon Purchaser's default, this Agreement shall be
terminated and both parties released from all obligations hereunder, and the
deposit shall be retained by the Seller as liquidated damages. Seller shall have
no other remedy against Purchaser in the event of Purchaser's default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 ENTIRE AGREEMENT. This Agreement sets forth the entire understanding
between the parties; it supersedes all previous agreements and representations
which are deemed merged herein and may not be modified except in writing.
12.2 ASSIGNMENT. Purchaser may assign this Agreement
13
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without the consent of Seller to CORNERSTONE REALTY INCOME TRUST, INC.
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 EXHIBITS. The following exhibits are attached to this Agreement and
are incorporated into this Agreement by the reference and made a part hereof for
all purposes:
EXHIBIT A, legal description of the Land
EXHIBIT B, list of personal property
EXHIBIT C, form of Deed
EXHIBIT D, Escrow Agreement
EXHIBIT E, form of the Assignment and Assumption of Personal Property,
Service Contracts, Warranties and Leases
EXHIBIT F, form of Representation Letter
EXHIBIT G, list of contracts
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
14
<PAGE>
or any amendments or exhibits hereto.
ARTICLE XIII
NOTICE
13.1 NOTICE. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: Mr. Donald A. Sands
D.A. Sands & Company
18743 Long Lake Drive
Boca Raton, FL 33496-1908
Fax: (561) 883-3235
With a copy to
Seller's Attorneys: Larry Diamond, Esq.
Ackerman Link & Sartory P.A.
222 Lakeview Avenue - Suite 1330
West Palm Beach, FL 33401
Fax: (561) 838-5305
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-
Michael W. Tighe, Esq.
Callison Tighe Robinson & Hawkins, LLP
1812 Lincoln Street
Columbia, SC 29201
Fax: (803) 256-6431
13.2 DELIVERY OF NOTICE. Notices sent either by
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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. Any counsel designated above or any
replacement counsel which may be designated by Purchaser or Seller or both, by
written notice to the other party, is hereby authorized to give notices
hereunder on behalf of its respective client.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed this day and date first written above.
SELLER:
HAMPTON POINTE PROPERTIES, A LIMITED PARTNERSHIP
By: D.A. SANDS & COMPANY INC., GENERAL PARTNER
By:
------------------------------------
Donald A. Sands
Its: President
-----------------------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By:/s/ S.J. Olander
-----------------------------------
S.J. Olander
Its: Senior Vice President
------------------------------------
16
<PAGE>
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. Any counsel designated above or any
replacement counsel which may be designated by Purchaser or Seller or both, by
written notice to the other party, is hereby authorized to give notices
hereunder on behalf of its respective client.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed this day and date first written above.
SELLER:
HAMPTON POINTE PROPERTIES, A LIMITED PARTNERSHIP
By: D.A. SANDS & COMPANY INC., GENERAL PARTNER
By: /s/ Donald A. Sands
----------------------------------
Donald A. Sands
Its: President
----------------------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By:
----------------------------------
S.J. Olander
Its: Senior Vice President
----------------------------------
16
FIRST MODIFICATION TO PURCHASE CONTRACT
(EDGEWOOD KNOLL APARTMENTS)
---------------------------
This First Modification to Purchase Contract ( "Modification") is made and
entered into this 6th day of March 1998 between R.B.R. & S.T. , North Carolina
Limited Partnership ("SELLER") and CORNERSTONE REALTY GROUP, INC. ("Purchaser").
WHEREAS, Purchaser and Seller entered into a Purchase Contract on the 20th
day of January 1998 ("Agreement"); and
WHEREAS, Purchaser and Seller by letter dated February 18, 1998 modified
the Agreement to the extent that Purchaser's time to complete its Inspection
Period was extended to March 6, 1998, and
WHEREAS, Purchaser and Seller now desire to further modify and amend the
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:
1. All terms not specifically defined herein shall have the same meaning ae
ascribed to them in the Agreement.
2. The parties agree that the Purchaser has obtained an engineering report
in accordance with the provisions of Article VI, Paragraph 6.1(A) and said
engineering report disclosed contamination with friable asbestos containing
material as described in the attached letter from Titan Atlantic Group to
Cornerstone Realty Income Trust dated March 4, 1998, and that there are 11 oil
tanks buried in-ground. During the Inspection Period, Seller shall have a right
to receive an estimate from a bona fide licensed abatement contractor to perform
the abatement work required under state/Federal law and to adjust the cost by a
reduction of the Purchase Price. Purchaser agrees to accept Fifty Thousand
($50,000) Dollars or such other lesser amount as shall be agreed upon subsequent
to Sellers submitting a bid from the licensed abatement contractor.
3. ARTICLE 11, Paragraph 2.2 DEPOSIT is hereby amended to increase the
deposit to be placed in escrow within twenty-four (24) hours (except if a
Saturday or Sunday) of the execution of the Agreement by both parties to ONE
HUNDRED SEVENTY FIVE THOUSAND ($175,000) DOLLARS. 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. In the event that the Agreement is terminated
as a result of the notice prior to the termination of the Inspection Period, the
Escrow Agent shall return the deposit to the Purchaser and this Agreement shall
be null and
<PAGE>
void pursuant to the terms of the Agreement
4. ARTICLE VI, Paragraph 6.2.2 INSPECTION OF BOOKS AND RECORDS; ACCESS, as
first amended by letter of February 18, 1998 is hereby further amended to extend
Purchaser's time to complete its Inspection Period to March 13, 1998. It being
understood that the only items remaining to be completed during the Inspection
Period are those dealing with the title and the Survey and this extension is
limited to those two items, and the Purchaser may not terminate the Agreement
for any other reason other than provided for in the Contract without forfeiting
the Escrow deposit.
5. ARTICLE VII, Paragraph 7.1 CLOSING is hereby amended to close on or
about March 30, 1998.
6. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
7. In the event there is any conflict in the terms of this Modification and
the terms of the Agreement, the terms of this Modification shall govern.
8. This Modification may be executed in separate counterparts, each of
which shall be deemed an original and all of which taken together will
constitute one agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Modification on the date first above written.
SELLER:
R.B.R. & S.T., a North Carolina Limited
Partnership
ASHEVILLE MALL, INC., Its General Partner
BY: /s/ Thomas W. Coleman
--------------------------------------
Thomas W. Coleman
Its Vice President
PURCHASER;
CORNERSTONE REALTY GROUP, INC.
By: /s/ S.J. Olander
---------------------------------------
S.J. Olander
Its: Senior Vice President
<PAGE>
PURCHASE CONTRACT
-----------------
THIS AGREEMENT made and entered into this 20th day of January 1998, between
CORNERSTONE REALTY GROUP INC. or its nominee, (hereinafter called "Purchaser")
and R.B.R. & S.T., 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 EDGEWOOD KNOLL APARTMENTS
located in ASHEVILLE, NC, with all buildings and improvements located thereon,
as more particularly described in a legal description to be provided during the
"Inspection Period" described in Article VI below and corrected, if needed, upon
receipt of the Survey, including, but not limited to one house, two apartments
in a converted home dwelling and 164 individually heated apartment units, with
all appurtenances, together with all appliances, window treatments, shrubbery
and all other personal property, used in connection with the premises,
including, the inventory of personal property to be supplied by Seller
consisting of all personal property of the Seller which is located upon the real
property and used exclusively in the operation of the business upon the real
property 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 FIVE MILLION SEVEN
HUNDRED FIFTY THOUSAND ($5,750,000) 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 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
<PAGE>
year not yet due and payable and utility easements which do not interfere with
the present use of the Property.
(A) Title shall be free from any and all liens or mortgages and Seller
shall be responsible for any prepayment penalties necessary to deliver such free
title.
3.2 TITLE DEFECTS; ELECTION TO CURE. Purchaser shall procure a commitment
for Title Insurance, ("the Commitment"). If title is not marketable, except as
stated above in the preceding paragraph, Purchaser shall give written notice of
any defects in title to Seller's counsel within fifteen (15) days after
Purchaser's receipt of a title report which report shall include copies of
backup documents relating to any title exceptions, a current survey, a flood
zone certification letter and a Surveyor's Certification letter within the
Inspection Period. Seller may, at its option, elect whether to cure said defects
or by written notice to Purchaser indicate its intention not to cure. In no
event shall Seller be required to cure any defect which would require action
other than the payment of a money sum.
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. Such notice of Purchaser's election to
terminate shall be given within three (3) business days of Purchaser's receipt
of Seller's notice that it has elected not to cure a title defect. Purchaser, at
its option, may take the Property subject to any such title defects.
ARTICLE IV
PRORATIONS
4.1 INCOME AND EXPENSE ALLOCATIONS. The following shall be prorated, on a
calendar-month basis, to the date 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. Notwithstanding the above, Seller shall pay any
prepayment penalty charged by the holders of any existing notes and any transfer
taxes due at Closing.
4.3 ALLOCATION OF RENTS. Rents collected by Seller prior to Closing shall
be prorated as agreed in 4.1 above.
2
<PAGE>
Purchaser shall apply rents received after Closing first to Payment of the
current rent due to Purchaser, then to delinquent rents due to Purchaser, and
last to rents due to Seller as of the Closing but uncollected prior to
settlement. Purchaser agrees to use its best efforts in good faith to collect
the amount of any rental arrears from tenants and Purchaser agrees to remit
promptly to Seller any such arrears actually paid by such tenants to Purchaser.
Seller shall retain the right to commence legal action against a tenant for any
delinquent rent apportioned to the Seller.
4.4 PRIOR LEASE CONCESSIONS. 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 and which shall
have been procured by Purchaser, said report to include in part, a description
of any hazardous waste sites, hazardous wastes and/or hazardous materials
affecting the property. Purchaser shall have fifteen (15) days in which to
review the reports set forth herein and exercise its right to reject the
Property based thereon during the Inspection Period 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 materially 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
3
<PAGE>
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 any accounting Regulation of the Securities
and Exchange Commission.
(F) The Survey shall be acquired by and at the expense of the
Purchaser. Survey 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 upon any recorded building lines, restrictions or easements
affecting the Property. If the Survey discloses any such encroachment or
violation, Seller shall have at its option thirty (30) days from the date of
delivery of the Survey to Seller (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 documents: The current
rent roll for the Property; a detailed statement of income and expenses with
respect to the Property for the period January 1, 1996 through October 31, 1997,
however, if available, Seller shall make books and records available for
November and December 1997; the tax bill for the Property for the calendar year
1997; utility bills for the Property for the period November 1, 1996 through
October 31, 1997 however, if available, Seller shall make books and records
available for November and December 1997; any contract, mortgages, and other
documents in the possession of the Seller which create a lien or security
interest on the Property, or any part thereof and all promissory notes secured
thereby; all insurance policies applicable to the Property including loss runs
for the calendar years 1995, 1996 and 1997; all service contracts, Certificates
of occupancy in the possession of or readily available to the Seller; and a copy
of any environmental or engineering reports on the Property in the possession of
or readily available to the Seller. All these documents shall be accompanied by
a certification by Seller stating that they are accurate and complete to the
best of its knowledge and belief as of the date of delivery.
6.2.2 INSPECTION OF BOOKS AND RECORDS; ACCESS. Upon
4
<PAGE>
receipt by Purchaser of all documents requested in the paragraph above,
Purchaser, its employees, agents and contractors shall have 30 days (the
"Inspection Period") to enter upon the Property subject to the rights of the
tenants during normal business hours for the purpose of making physical
inspections thereof, including but not limited to roofs, heating, cooling,
electrical and plumbing systems, appliances, and structural elements of the
buildings. Purchaser shall also be permitted to review all original leases,
expense records, tenant cards and occupancy data 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.
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.
6.2.4 TERMINATION OF INSPECTION PERIOD. Notwithstanding anything to the
contrary set forth herein, the Inspection Period shall expire thirty (30) 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 apartment units
vacant for seven (7) days prior to Closing, 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., 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.
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ARTICLE VII
CLOSING
7.1 CLOSING. The Closing will be held on February 3, 1998 effective as
regards prorations to 12:01 a.m., February 1, 1998, or at the election of the
Purchaser, the Closing will be held on February 27, 1998 effective as regards
prorations to 11:59 p.m, February 28, 1998. The Closing shall occur at a time
and place in Asheville, North Carolina, suitable to both parties. The Purchaser
shall give and the Seller shall have received written notification of
Purchaser's election of the Closing Date no later than 5:00 p.m. January 28,
1998. The Closing Date shall not otherwise be extended except by mutual written
agreement of the parties.
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 necessaryl and deliver to Purchaser, the following:
(A) A Bill of Sale, with warranty of title transferring the personal
property (as shown in Schedule B) to Purchaser free of all liens, charges and
encumbrances.
(B) Originals or copies of all signed leases and rental agreements in
effect with tenants of the Property.
(C) All security and cleaning deposits made by such tenants. Seller
will deliver to Purchaser at Closing a notice letter addressed to each tenant as
is 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
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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, Purchaser
shall notify Seller within three (3) business days that such damage is
unacceptable to it at which time Seller may elect to either terminate this
Agreement or shall proceed to have any corrective work completed prior to
Closing. Should Seller not correct damage prior to Closing, Purchaser, at its
option, may either proceed to settlement or may 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
Paragraph 1.1.
(I) An assignment of all warranties and guaranties to the extent that such
are still in ef fect with copies of all such warranties and guaranties to the
extent that such are in the possession of or readily available to the Seller and
shall include without limitation all appliances, dishwashers, disposals,
refrigerators, heating and air conditioning units.
(J) Consent of the Seller's authorized officer to the sale of the Property
and any other approvals required under Seller's articles or by-laws, which may
affect Seller's ability to convey marketable title.
(K) Provide documents for the transfer of all utilities consisting of a
listing of account numbers pertaining to telephone, electric, water, sewer, and
gas. Purchaser shall have opened an account with each utility provider prior to
Closing such that all utility accounts may be transferred 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 the Partnership or
Corporation.
(M) Affidavit that Seller has no actual knowledge
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of the presence of any asbestos and/or any other hazardous material at the
Property other than as shown in a "Phase I" inspection and asbestos report to be
made by the Purchaser during the Inspection Period.
(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 as in part referred to in Paragraph 7.2 (c) to all the
residents of the apartment complex as to change of ownership in the form
prepared by the Purchaser.
(P) All such other documents as are normally transferred at settlement in
the jurisdiction in which the property is located or are reasonably requested by
Purchaser or its counsel.
(Q) A representation letter as normally required by auditors for a public
company in the form attached hereto as EXHIBIT E. Purchaser shall use its best
efforts to complete the audit prior to Closing. 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 in the form attached hereto as EXHIBIT
D.
(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.
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ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8. 1 REPRESENTATIONS OF THE PARTIES. Seller warrants (which warranties
shall not survive settlement unless designated to the contrary) that as of the
date of Closing hereof:
(A) That Seller, is the owner in fee simple of the Property and has
the power to convey same.
(B) That Seller is not subject to any other agreements or
arrangements, with the exception of those contained in any existing mortgage
documents which would prevent Seller from selling the Property to Purchaser.
This warranty shall survive for ninety (90) days 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.
(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.
(E) As of the date of this Agreement, Seller has no actual knowledge
of any patent or latent defect in the Property or any part thereof.
(F) Seller has no actual knowledge of any existing or threat of
litigation which relates to or which would affect the Property.
(G) The Property abuts on and has direct vehicular access to a public
road.
(H) All building and other improvements at the Property are located
entirely within the boundary lines of the Property.
(I) Seller has received no notice that any part of the Property or the
operation of the Property, is in violation of 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.
(J) Seller has received no notice that the
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drainage within the project is not satisfactory and does not comply in all
respects with all government regulations.
(K) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code") , and that Seller will
furnish to Purchaser prior to Closing an affidavit in form satisfactory to
Purchaser confirming the same.
(L) That to the best of Seller's knowledge, the Property was never
utilized as a disposal site for hazardous waste products and will furnish to
Purchaser an affidavit confirming same.
(M) Seller covenants and agrees that, between this date and the date
of closing, Seller shall continue to maintain, operate and manage the Property
in a manner consistent with its prior practices, making every reasonable effort
to do nothing which might damage the reputation of the Property or the
relationships with the tenants. Seller shall not permit the modification,
extension or cancellation of any tenant lease (except in accordance with the
terms of such lease) or any dealing with any tenant other than the ordinary
course of managing the Property, without the prior written consent of Purchaser.
If the leases of any tenants expire before thirty (30) days after the date of
Closing, Seller shall, up to the date of Closing and without cost to the
Purchaser, continue its normal course of operation with respect to causing
tenants to be obtained for apartments which are unrented.
8.2 CONTINUATION OF REPRESENTATIONS, WARRANTIES AND Covenants TO THE DATE
OF CLOSING . If each of the warranties set forth in this section does not remain
true up to and including the time of Closing as to any material matters, this
Agreement, at Purchaser's election, shall be terminated, Seller shall return all
deposits made by Purchaser, or Purchaser may elect to close the sale and waive
failure of the warranties.
8.3 BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Notwithstanding
the provisions of 8.2 above, Seller shall indemnify Purchaser for all reasonable
costs incurred as a result of the failure of any of Seller's representations,
warranties or covenants contained herein to remain true as of the date of
Closing. However, between the date hereof and the Closing, should Seller become
aware of an act or event which would cause a breach of representations,
warranties or covenants, Seller must notify Purchaser of same at its most
reasonable opportunity, after which Paragraph 8.3 shall not apply.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 PROPERTY DAMAGE. If, prior to Closing, any part of the Property is
damaged by fire or other casualty, Seller shall repair such damage before the
date provided herein for Closing. If
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such damage cannot be repaired by such time, Seller shall so notify Purchaser
and deliver to it simultaneously therewith a statement of the damages to the
Property and an estimate for the repairs and this Agreement may be canceled at
the option of the Purchaser with such notice to be given within f ive (5)
business days of the notification of its inability to timely repair. 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 shali give written notice thereof to
the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property (any part of the building or more than
5% of the parking area) , Purchaser may elect to either (a) terminate this
Agreement, in which event the Deposit shall be immediately returned to Purchaser
and all other rights and obligations of the parties hereunder shall terminate
immediately, or (b) to waive its right to terminate this Agreement and proceed
to Closing, in which event all proceeds, awards and other payments arising out
of such condemnation or sale (actual or threatened) shall be paid to the
Purchaser at Closing, if such payment has been received or Seller shall assign
to Purchaser the rights to such payments. If there is no notice prior to
Closing, then this clause shall not survive.
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 TESSIER
ASSOCIATES, pursuant to a separate agreement between Seller and Broker. 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.
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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, except as set forth in Paragraph 8.3, however, it
shall not be an event of default for either party to exercise its rights to
terminate this contract as contained in other provisions herein.
11.2 SELLER'S DEFAULT. Upon Seller's default, the Purchaser, at it's
election, may either (1) require specific performance of Seller, or pursue its
other remedies at law or equity, (2) cancel this Agreement and obtain a prompt
return of the deposit, in which case this Agreement shall be terminated and the
parties released from all obligations hereunder, or (3) the Purchaser may waive
such defaults and proceed to settlement. Seller shall indemnify Purchaser for
any reasonable costs incurred by Purchaser if Purchaser elects to pursue its
option (1) noted above, to include reasonable attorney fees associated with
litigation to force Seller to perform and only 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 herein and may not be modified except in writing.
12.2 ASSIGNMENT. Purchaser may assign this Agreement without the consent of
Seller to CORNERSTONE REALTY INCOME TRUST, INC.
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
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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 CONFIDENTIALITY. The parties shall use their best efforts to 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. (see Paragraph 1.1)
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(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. To be
provided during the Inspection Period.
(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 may be hereafter specified in writing):
To Seller: R.B.R. & S.T.
c/o R.L. Coleman & Co.
1000 Centrepark Drive
P.O. Box 1636
Asheville, NC 28802-1636
With a copy to
Seller's Attorneys:
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St. , P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
-and-
Ted Oliver, Esq.
Manning, Fulton & Skinner
500 UCB Plaza
3605 Glenwood Avenue
Raleigh, NC 27612
Fax: (919) 781-0811
13.2 DELIVERY OF NOTICE. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, 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:
R.B.R. & S.T., A North Carolina Limited Partnership
ASHEVILLE MALL, INC., its General Partner
By: /s/ Richard L. Coleman, Jr.
----------------------------------------
Richard L. Coleman, Jr.
----------------------------------------
Its: President
---------------------------------------
PURCHASER:
CORNERSTONX REALTY GROUP, INC.
By: /s/ S.J. Olander
---------------------------------------
Its:
Senior Vice President
--------------------------------------
15
Consent of Independent Auditors'
--------------------------------
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated April 8, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Hampton Pointe
apartments for the twelve month period ended February 28, 1998, for inclusion in
a filing by Cornerstone Realty Income Trust, Inc. on form 8-K and for
incorporation by reference into the following registration statements of
Cornerstone Realty Income Trust, Inc.
Registration Statement Number Description
333-24871 Form S-8, pertaining to the Company's
1992 Non-Employee Directors Stock
Option Plan, Special Non-Employee
Directors Stock Option Plan, and
Non-Employee Directors Fees Plan
333-24875 Form S-8, pertaining to the Company's 1992
Incentive Plan
333-34441 Form S-3, Shelf Registration Statement,
pertaining to the registration of $200 million
of Common Stock, Preferred Stock and
Debt Securities
333-19187 Form S-3, pertaining to the Company's
Dividend Reinvestment and Share Purchase
Plan
/s/ L.P. Martin & Co., P.C.
----------------------------
Richmond, Virginia
June 11, 1998
Consent of Independent Auditors'
--------------------------------
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated April 8, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Edgewood Knoll
apartments for the twelve month period ended February 28, 1998, for inclusion in
a filing by Cornerstone Realty Income Trust, Inc. on form 8-K and for
incorporation by reference into the following registration statements of
Cornerstone Realty Income Trust, Inc.
Registration Statement Number Description
333-24871 Form S-8, pertaining to the Company's
1992 Non-Employee Directors Stock
Option Plan, Special Non-Employee
Directors Stock Option Plan, and
Non-Employee Directors Fees Plan
333-24875 Form S-8, pertaining to the Company's 1992
Incentive Plan
333-34441 Form S-3, Shelf Registration Statement,
pertaining to the registration of $200 million
of Common Stock, Preferred Stock and
Debt Securities
333-19187 Form S-3, pertaining to the Company's
Dividend Reinvestment and Share Purchase
Plan
/s/ L.P. Martin & Co., P.C.
----------------------------
Richmond, Virginia
June 11, 1998
