<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-19891
SCHULER HOMES, INC.
(Exact name of registrant as specified in its charter)
Delaware 99-0293125
(State or jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
828 Fort Street Mall, Suite 400
Honolulu, Hawaii 96813-4321
(Address of principal executive offices)(Zip code)
(808) 521-5661
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock October 31, 1996
--------------------- ----------------
$.01 par value 20,100,177
<PAGE>
SCHULER HOMES, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Accountants' Review Report.......................... 3
Consolidated Balance Sheets - September 30, 1996 and
December 31, 1995......................................... 4
Consolidated Statements of Income - Three and nine months
ended September 30, 1996 and 1995......................... 5
Consolidated Statements of Cash Flows - Nine
months ended September 30, 1996 and 1995.................. 6
Notes to Consolidated Financial Statements...................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................... 10
PART II. OTHER INFORMATION............................................... 19
SIGNATURES............................................................... 20
2
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Stockholders
Schuler Homes, Inc.
We have reviewed the accompanying interim consolidated balance sheet of Schuler
Homes, Inc. as of September 30, 1996, and the related consolidated statements of
income for the three-month and nine-month periods ended September 30, 1996 and
1995, and the consolidated statements of cash flows for the nine-month periods
ended September 30, 1996 and 1995. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying interim consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles. See Note 1.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Schuler Homes, Inc. as of December
31, 1995, and the related consolidated statements of income, stockholders'
equity, and cash flows for the year then ended (not presented herein) and in our
report dated March 11, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of December 31, 1995, is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
ERNST & YOUNG LLP
Honolulu, Hawaii
November 6, 1996
3
<PAGE>
SCHULER HOMES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September December
30,1996 31, 1995
--------- --------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents....................... $ 488,000 $ 6,147,000
Receivables..................................... 778,000 960,000
Prepaid income taxes............................ 1,828,000 557,000
Amount due from affiliate (Note 5).............. 27,000 25,000
Real estate inventories (Note 3)................ 245,230,000 246,478,000
Investments in unconsolidated joint ventures.... 11,302,000 11,390,000
Deposits........................................ 160,000 1,001,000
Deferred offering costs......................... 1,456,000 1,628,000
Notes receivables (Note 2)...................... 2,803,000 1,329,000
Deferred income taxes (Note 6).................. 8,295,000 1,818,000
Other assets.................................... 1,238,000 1,009,000
------------ ------------
Total assets.................................... $273,605,000 $272,342,000
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable................................ $ 573,000 $ 1,013,000
Accrued expenses................................ 3,557,000 3,197,000
Notes payable to bank (Note 4).................. 54,765,000 36,781,000
6-1/2% convertible subordinated debentures
due 2003....................................... 57,500,000 57,500,000
------------- ------------
Total liabilities............................... 116,395,000 98,491,000
Commitments and contingencies (Notes 4 and 7)
Stockholders' equity :
Common stock, $.01 par value; 30,000,000
shares authorized; 20,874,177 shares
issued at September 30, 1996 and
December 31, 1995.......................... 209,000 209,000
Additional paid-in capital.................. 93,096,000 93,096,000
Retained earnings........................... 68,905,000 80,546,000
Treasury stock, at cost; 774,000 shares at
September 30, 1996 (Note 9)................ (5,000,000) --
------------ ------------
Total stockholders' equity...................... 157,210,000 173,851,000
------------ ------------
Total liabilities and stockholders' equity...... $273,605,000 $272,342,000
------------ ------------
</TABLE>
See accompanying notes.
4
<PAGE>
SCHULER HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Residential real estate sales......................... $21,953,000 $29,975,000 $ 71,738,000 $93,356,000
Cost and expense
Residential real estate sales..................... 18,122,000 22,567,000 58,345,000 68,997,000
Inventory impairment loss (Note 3)................ -- -- 23,910,000 --
Selling and commissions........................... 2,042,000 1,998,000 5,848,000 5,353,000
General and administrative........................ 1,061,000 1,019,000 3,088,000 3,010,000
----------- ----------- ----------- -----------
Total costs and expenses...................... 21,225,000 25,584,000 91,191,000 77,360,000
Income from unconsolidated joint ventures............. 14,000 221,000 114,000 879,000
----------- ----------- ----------- -----------
Operating income (loss)............................... 742,000 4,612,000 (19,339,000) 16,875,000
Other income.......................................... 45,000 127,000 246,000 345,000
----------- ----------- ----------- -----------
Income (loss) before provision for income taxes.... 787,000 4,739,000 (19,093,000) 17,220,000
Provision (credit) for income taxes................... 302,000 1,848,000 (7,452,000) 6,714,000
----------- ----------- ----------- -----------
Net income (loss).................................. $ 485,000 $ 2,891,000 $(11,641,000) $10,506,000
----------- ----------- ----------- -----------
Net income (loss) per share:
Primary............................................... $ 0.02 $ 0.14 $ (0.56) $ 0.51
----------- ----------- ----------- -----------
Fully diluted...................................... $ 0.02 $ 0.14 $ (0.56) $ 0.49
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes.
5
<PAGE>
SCHULER HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1996 1995
---- ----
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................................................... $(11,641,000) $10,506,000
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization expense................................ 142,000 96,000
Income from unconsolidated joint venture (undistributed)............. (144,000) (970,000)
Sales financed by Company............................................ (86,000) (127,000)
Principal payments of notes receivable............................... 130,000 318,000
Changes in assets and liabilities:
Decrease in receivables......................................... 182,000 40,391,000
(Increase) in prepaid income taxes............................... (1,271,000) (612,000)
(Increase) decrease in deposits.................................. 841,000 (911,000)
(Increase) decrease in real estate inventories................... 1,465,000 (28,828,000)
(Increase) in other assets....................................... (332,000) (25,000)
(Decrease) in accounts payable................................... (440,000) (42,000)
(Decrease) in accrued expenses................................... (1,375,000) (2,699,000)
(Decrease) in contract restructuring cost payable................ -- (7,979,000)
Change in deferred income taxes.................................. (6,477,000) 3,198,000
------------ -----------
Net cash provided by (used in) operating activities.................. (19,006,000) 12,316,000
INVESTING ACTIVITIES
Investments in unconsolidated joint ventures......................... -- (157,000)
Advances to unconsolidated joint venture............................. (3,765,000) (216,000)
Repayments of advances to unconsolidated joint venture............... 3,882,000 240,000
Capital distributions from unconsolidated joint venture.............. 115,000 259,000
Purchase of furniture, fixtures, and equipment....................... (39,000) (136,000)
------------ -----------
Net cash provided by (used in) investing activities.............. 193,000 (10,000)
FINANCING ACTIVITIES
Principal payments on note payable to other.......................... -- (14,583,000)
Proceeds from bank borrowings........................................ 97,158,000 89,810,000
Principal payments on bank borrowings................................ (79,174,000) (89,219,000)
Advances to affiliate................................................ (89,000) (85,000)
Repayment of advances to affiliate................................... 87,000 95,000
Net decrease in deferred offering costs.............................. 172,000 172,000
Reacquisition of the Company's common stock.......................... (5,000,000) --
------------ -----------
Net cash provided by (used in) financing activities.............. 13,154,000 (13,810,000)
------------ -----------
(Decrease) in cash................................................... (5,659,000) (1,504,000)
Cash and cash equivalents (restricted) at beginning of period........ 6,147,000 7,855,000
------------ -----------
Cash and cash equivalents (restricted) at end of period.............. $ 488,000 $ 6,351,000
------------ -----------
</TABLE>
6
<PAGE>
SCHULER HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. General
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included.
These financial statements should be read in conjunction with the Notes to
Consolidated Financial Statements for the year ended December 31, 1995
contained in the Company's 1995 annual report on Form 10-K.
Certain amounts in the consolidated statements of income for the three and
nine months ended September 30, 1995 have been reclassified to conform to
the 1996 presentation.
The Company has experienced, and expects to continue to experience,
significant variability in quarterly sales and net income. The results of
any interim period are not necessarily indicative of the results that can
be expected for the entire year.
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 assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
In June 1996, the Company formed Schuler Homes of California, Inc., a
wholly-owned California corporation, for the development and sale of homes
in California. In August 1996, the Company formed Schuler Homes of
Washington, Inc., a wholly-owned Washington corporation, for the
development and sale of homes in the state of Washington. In October 1996,
the Company formed Schuler Homes of Oregon, Inc., a wholly-owned Oregon
corporation, for the development and sales of homes in Oregon.
2. Notes Receivable
Notes receivable consist primarily of notes receivable on seller financed
sales of residential units and residential lots. The notes provide for
terms and conditions similar to those offered by financial institutions and
are collateralized by the residential units and residential lots sold.
Certain of the notes are collateralized by second mortgages relating to
homebuyers who purchased homes as part of the Company's "zero-down" sales
program. Revenue and profit recognition on such transactions are deferred
until the down payment requirement for revenue and profit recognition is
met. Revenue and gross profit deferred on such transactions during the
three month period ended September 30, 1996 was $5,499,000 and $772,000,
respectively. Cumulative revenue and gross profit deferred on such
transactions as of September 30, 1996 are $8,661,000 and $1,236,000,
respectively. Cash of $6,619,000 was received from buyers' third party
lenders in connection with "zero-down" sales during the nine months ended
September 30, 1996.
3. Real Estate Inventories
During the fourth quarter of 1995, the Company changed its method of
accounting for the carrying amount of its real estate inventories by
adopting FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." Under
the new standard, inventories which are substantially completed are
carried at the lower of cost or fair value less cost to sell. Fair
value is determined by applying a risk adjusted discount rate to
estimates of future cash flows, resulting in a lower value than under
the net realizable value method previously required. In addition,
land held for future development or inventories under current
development are adjusted to fair value, only if an impairment to
their value is indicated.
7
<PAGE>
The estimates of future cash flows require significant judgment relating to
the level of sales prices, rate of new home sales, amount of marketing
costs and price discounts needed in order to stimulate sales, rate of
increase in the cost of building materials and labor, introduction of
building code modifications, and level of consumer confidence in Hawaii's
economy, among other items. Accordingly, there exists at any date, a
reasonable possibility that changes in estimates will occur in subsequent
periods.
Approximately $89,604,000 of total inventory at September 30, 1996
represents completed inventory. The remaining inventory represents
construction in progress and land held for future development.
4. Notes Payable to Bank
At September 30, 1996, $55,235,000 of the Company's line of credit is
unused, of which $700,000 is restricted as to withdrawal for project
expenses and $209,000 is restricted as to withdrawal for outstanding but
unused letters of credit.
In March 1996, the Company executed a new Credit Agreement, which replaced
the $50,000,000 line of credit with a $110,000,000 unsecured revolving line
of credit facility on March 29, 1996. The facility expires on July 1, 1998
and includes an option for the lenders to extend the term for an additional
year. The Company can select an interest rate of either LIBOR (1, 2, 3 or
6 month term) plus 1.75% or prime for each borrowing. If the Company's
leverage ratio, as defined, exceeds 1 to 1, the interest rate increases to
LIBOR plus 2.25% and prime plus 0.50%. In October 1996, the Company
entered into an interest rate swap to pay a LIBOR rate of 5.89% (fixed for
5 years) on $30,000,000, while receiving in return an interest payment at a
floating one-month LIBOR rate. However, if the one-month LIBOR rate resets
at or above 8%, the swap reverses for that payment period and no interest
payments are exchanged. The Company's ability to draw upon its line of
credit is dependent upon meeting certain financial ratios and covenants.
As of September 30, 1996, the Company met such financial ratios and
covenants.
The Company paid interest (relating to notes payable to bank and the
convertible subordinated debentures) of approximately $2,996,000 during the
quarter ended September 30, 1996. Interest incurred and capitalized to
real estate inventories during the quarter ended September 30, 1996 was
approximately $2,036,000. The difference between the amount of interest
paid and the amount capitalized is comprised of accrued interest payable at
June 30, 1996, which was paid during the quarter.
5. Related Party Transactions
The Company charged $27,000 for the quarter ended September 30, 1996 to
James K. Schuler & Associates, Inc. (an affiliate) under the management
agreement entered into between the Company and James K. Schuler &
Associates, Inc., pursuant to which certain management and administrative
personnel of the Company will perform certain functions for James K.
Schuler & Associates, Inc., to be reimbursed by James K. Schuler &
Associates, Inc. At September 30, 1996, the $27,000 was included in Amount
Due From Affiliate. Subsequent to September 30, 1996, the receivable was
paid in full.
6. Income Taxes
During the three months ended September 30, 1996, the Company paid income
taxes of $25,000.
The primary component of the Company's deferred income taxes at September
30, 1996 is a result of inventory impairment losses recognized for
financial reporting purposes during periods prior to their deduction for
tax purposes.
8
<PAGE>
7. Commitments and Contingencies
The Company is from time to time involved in routine litigation or
threatened litigation arising in the ordinary course of its business. Such
matters, if decided adversely to the Company, would not, in the opinion of
management, have a material adverse effect on the financial condition of
the Company.
In April 1996, the Company was served with a lawsuit by owners of units
and the Association of Owners of Fairway Village at Waikele, who seek to
have a class of all owners certified. The complaint alleges material
construction defects and deficiencies, misrepresentation regarding the cost
of insurance, breach of covenant of good faith and fair dealing, among
other allegations. The complaint does not specify an amount of damages,
but includes a claim for punitive damages, among other claims. The Company
is currently evaluating the merits of the complaint. If this lawsuit were
decided adversely to the Company, it could have a material adverse effect
on the Company's business, financial condition and operating results.
At September 30, 1996, the Company had under contract to purchase for
approximately $8,514,000, land for future residential development.
8. Net Income Per Share
Primary earnings per share for the quarter and nine-month period ended
September 30, 1996 were computed using the weighted average number of
common shares outstanding during the periods of 20,495,780 and 20,745,088,
respectively. Primary earnings per share for the quarter and nine-month
period ended September 30, 1995 were computed using the weighted average
number of common shares outstanding during the periods of 20,874,177.
Fully diluted earnings per share for the quarter and nine-month period
ended September 30, 1995 were computed by adding to net income the interest
charges of $288,000 and $899,000 (net of related income taxes),
respectively, applicable to convertible subordinated debentures, and
dividing by 23,508,167, which represents the weighted average number of
shares assuming conversion of all convertible subordinated debentures. The
computation for the three and nine months ended September 30, 1996 resulted
in amounts less than the primary net income (loss) per share. Accordingly,
the primary net income (loss) per share is also presented as the fully
diluted net income (loss) per share.
9. Treasury Stock
In May 1996, the Company adopted a stock repurchase program to reacquire
up to an aggregate of $5,000,000 of its outstanding common stock through
December 31, 1996. During the quarterly period ended September 30, 1996,
the Company completed its repurchase of 774,000 shares at a cost of
$5,000,000.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for historical information contained herein, the matters discussed
in this report contain forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those risks discussed herein,
and other risks detailed in the Company's Annual Report on Form 10-K and other
documents filed by the Company with the Securities and Exchange Commission from
time to time.
OVERVIEW
For the quarter ended September 30, 1996, the Company recorded sales of
residential real estate of $21.9 million as compared to sales of $30 million
during the 1995 third quarter. During the 1996 third quarter, the Company
posted net income of $485,000, compared to net income of $3.0 million during the
1995 third quarter.
For the first nine months of 1996, the Company reported sales of
residential real estate of $71.7 million, a decrease from sales of $93.4 million
during the first nine months of 1995. Net loss was $11.6 million or $0.56 per
share during the nine months ended September 30, 1996, which included the impact
of a FASB Statement No. 121 non-cash charge taken earlier this year, as compared
to net income of $10.5 million or $0.49 per share during the same period in the
prior year. Excluding the impact of the FASB Statement No. 121 charge, the
results of operations for the nine months ended September 30, 1996 were net
income of $2.9 million or $0.14 per share.
The financial results for the third quarter of 1996 as compared to the
third quarter of 1995 reflect a higher cost of residential real estate sold as a
percentage of sales. Cost of residential real estate sold as a percentage of
sales increased to 82.5% in the third quarter of 1996 from 75.3% in the third
quarter of 1995, approximately half of the increase being attributable to an
increased level of price discounts to homebuyers, with the remainder
attributable to higher construction and inventory carrying costs. Sales and
marketing costs represented approximately 9.3% and 6.7% of sales during the
third quarters of 1996 and 1995, respectively. The Company anticipates that
this increased level of costs will continue to affect its operating results
throughout the balance of 1996 and in 1997.
During the first quarter of 1996, the rate of new home sales experienced by
the Company improved over the sales rate experienced during the latter part of
1995. However, during the second and third quarters of 1996, the Company
experienced a decline in the rate of new home sales contracts entered into, as
compared to the first quarter of 1996. The Company believes that financial
results in 1996 have been and will continue to be adversely affected by fewer
closings of homes sales, lower revenues and continued pressure on margins as
compared to the Company's 1995 financial results. In particular, as a result of
the slow home sales rates experienced in the third quarter of 1996, the Company
believes that the number of home sales closed, revenues and net income for the
fourth quarter of 1996 will be below the levels achieved in the third quarter of
1996.
10
<PAGE>
The following table sets forth, for the periods indicated, the
percentage of the Company's sales represented by each income statement line
item presented. Certain amounts in the consolidated statement of income for
the three and nine months ended September 30, 1995 have been reclassified to
conform to the 1996 presentation.
<TABLE>
<CAPTION>
Percentage Change
Three months ended in Dollar Amounts
Sept 30, From
1996 1995 1995 to 1996
---- ---- -----------------
<S> <C> <C> <C>
Residential real estate sales 100.0% 100.0% (26.8)%
Costs and expenses
Residential real estate sales 82.5 75.3 (19.7)
Selling and commissions 9.3 6.7 2.2
General and administrative 4.9 3.4 4.1
----- -----
Total costs and expenses 96.7 85.4 (17.0)
Income from unconsolidated joint ventures 0.1 0.7 (93.7)
----- -----
Operating income 3.4 15.3 (83.9)
Other income 0.2 0.4 (64.6)
----- -----
Income before provision for income taxes 3.6 15.7 (83.4)
Provision for income taxes 1.4 6.0 (83.7)
----- -----
Net income 2.2% 9.7% (83.2)
----- -----
</TABLE>
<TABLE>
<CAPTION>
Percentage Change
Nine months ended in Dollar Amounts
Sept 30, From
1996 1995 1995 to 1996
---- ---- -----------------
<S> <C> <C> <C>
Residential real estate sales 100.0% 100.0% (23.2)%
Costs and expenses
Residential real estate sales 81.3 73.9 (15.4)
Inventory impairment loss 33.3 5.8 N/A
Selling and commissions 8.2 -- 9.2
General and administrative 4.3 3.2 2.6
----- -----
Total costs and expenses 127.1 82.9 17.9
Income from unconsolidated joint ventures 0.2 0.9 (87.0)
----- -----
Operating income (loss) (26.9) 18.0 (214.6)
Other income 0.3 0.4 (28.7)
----- -----
Income (loss) before provision for income taxes (26.6) 18.4 (210.9)
Provision (credit) for income taxes (10.4) 7.2 (211.0)
----- -----
Net income (loss) (16.2)% 11.2% (210.8)
----- -----
</TABLE>
11
<PAGE>
RESULTS OF OPERATIONS
SALES OF RESIDENTIAL REAL ESTATE
The Company's sales of residential real estate (revenues) for the quarter
ended September 30, 1996 were approximately $21.9 million as compared to
approximately $30 million during the quarter ended September 30, 1995. This
represents a decrease of approximately $8.1 million or 26.8%.
This decrease in revenues is attributable to a decreased number of home
sales closed for which revenues and profits were recognized. Including joint
venture project closings, the Company closed a total of 129 sales during the
quarter ended September 30, 1996, compared to the closing of 145 sales during
the quarter ended September 30, 1995, respectively. Excluding joint venture
projects, the closings of 93 units at an average sales price of $236,000 were
included in revenues recognized during the quarter ended September 30, 1996, as
compared to 127 closings at an average sales price of $236,000 during the
quarter ended September 30, 1995. In the third quarter of 1996, revenue and
profit recognition on 25 homes sold pursuant to the Company's "zero-down" sales
program was deferred until the down payment requirement for revenue and profit
recognition is met. Revenue and gross profit deferred on such transactions
during the three month period ended September 30, 1996 was $5.5 million and $0.8
million, respectively.
The Company's notes receivable increased by $1.1 million during the third
quarter of 1996 primarily as a result of second mortgages provided by the
Company to homebuyers who purchased homes as part of the Company's "zero-down"
sales program. To the extent the Company provides financing to purchasers of
its homes and residential lots, it becomes subject to the risks inherent with
such practices, including possible defaults by the purchasers. At September 30,
1996, the Company had approximately $2.8 million of customer financing
outstanding from 54 buyers.
The Company's sales of residential real estate (revenues) were $71.7
million for the nine months ended September 30, 1996 compared to $93.4 million
during the same period in 1995. Excluding joint venture projects, included in
revenues for the first nine months of 1996 were 304 closings at an average sales
price of $236,000 compared to 399 closings at an average sales price of $234,000
in the first nine months of 1995. Revenue and gross profit deferred on 42 homes
sold during the nine months ended September 30, 1996, pursuant to the Company's
"zero-down" sales program was $8.7 million and $1.2 million, respectively.
The average sales price of homes closed during the third quarter and first
nine months of 1996 is reflective of increased sales price discounts allowed in
order to stimulate home sales activity, offset by the different mix of projects
in which closings occurred, as compared to the third quarter and first nine
months of 1995.
During the first quarter of 1996, the rate of new home sales experienced
by the Company improved over the sales rate experienced during the latter part
of 1995. However, during the second and third quarters of 1996, the Company
experienced a decline in the rate of new home sales contracts entered into, as
compared to the first quarter of 1996. The Company believes that its financial
results in 1996 have been and will continue to be adversely affected by fewer
closings of homes sales, lower revenues and continued pressure on margins as
compared to the Company's 1995 financial results. In particular, as a result of
the slow home sales rates experienced in the third quarter of 1996, the Company
believes that the number of home sales closed, revenues and net income for the
fourth quarter of 1996 will be below the levels achieved in the third quarter of
1996. The Company's historical financial performance is not necessarily a
meaningful indicator of future results and, in general, the Company's financial
results will vary from development to development.
12
<PAGE>
Hawaii's real estate market continues to face challenges as a result of
Hawaii's economic environment. Hawaii's economy is recovering slowly. While
tourism is showing some strength, the construction industry remains depressed
and according to the U.S. Bureau of Labor Statistics, Honolulu reported an
estimated 1.3% decline in jobs this past June compared to a year earlier. As a
result, the Company anticipates continued pressure on margins and new home sales
rates in Hawaii. In addition, increases in mortgage rates impact the
homebuyer's ability to qualify for mortgage loans, which could adversely affect
demand for new homes. Increases in mortgage rates may also reduce the sales
price ceilings established on homes which are subject to governmentally imposed
affordable housing requirements. The affordable prices are generally determined
at a price at which a purchaser earning up to 140% of the local median income is
able to satisfy specified mortgage criteria.
COSTS AND EXPENSES - RESIDENTIAL REAL ESTATE SALES
Cost of residential real estate sales represents the acquisition and
development costs for a particular phase of a project attributable to the homes
sold in that phase. Acquisition and development costs primarily include land
acquisition costs, sitework and construction payments to contractors,
engineering and architectural costs, loan fees, interest and other indirect
costs attributable to development and project management activities and
miscellaneous construction costs.
Cost of residential real estate sales decreased to approximately $18.1
million during the quarter ended September 30, 1996 from approximately $22.5
million during the same period in 1995, representing a decrease of approximately
$4.4 million or 19.7%. This decrease in the third quarter of 1996 as compared
to the third quarter of 1995 is the result of a lower number of closings of home
sales, offset in part by a higher cost of residential real estate sales as a
percentage of sales.
Cost of residential real estate sales as a percentage of sales increased to
82.5% in the third quarter of 1996 from 75.3% in the third quarter of 1995,
approximately half of the increase being attributable to an increased level of
price discounts to homebuyers, with the remainder attributable to higher
construction and inventory carrying costs. The Company anticipates this
increased level of costs will continue to affect its operating results in future
periods and no assurances can be given that costs will not increase to even
greater levels than reached in the past.
The cost of residential real estate sold decreased from approximately $69
million during the nine months ended September 30, 1995 to approximately $58.3
million during the same period in 1996, representing a decrease of approximately
$10.7 million or 15.4%. The decrease reflects the lower number of sales closed,
partially offset by a higher cost of the units closed as a percentage of sales.
The cost of residential real estate sold as a percentage of sales increased
from 73.9% for the nine months ended September 30, 1995 to 81.3% for the nine
months ended September 30, 1996. The increase in the cost of residential real
estate sold as a percentage of sales was primarily due to the same factors
mentioned above, which caused the increase in the cost of residential real
estate sold as a percentage of sales from the third quarter of 1995 to the third
quarter of 1996.
Total interest incurred during each of the quarters ended September 30,
1996 and 1995 was approximately $2.0 million and $1.5 million, respectively.
Substantially all amounts incurred were capitalized to development projects.
Interest capitalized to projects is expensed through cost of residential real
estate sales as sales are closed and revenue is recognized in the particular
project.
13
<PAGE>
Average debt outstanding was approximately $116.8 million and $83.6
million during the third quarters of 1996 and 1995, respectively. The
Company's average interest rate on its debt for the quarters ended September
30, 1996 and 1995 was approximately 7.0%. The Company's notes payable bear
interest based on prime or LIBOR. Changes in the prime or LIBOR rates will
affect the amount of interest being capitalized to inventory and subsequently
expensed through cost of residential real estate sales as sales are closed
and revenue is recognized.
COSTS AND EXPENSES - INVENTORY IMPAIRMENT LOSS
During the fourth quarter of 1995, the Company changed its method of
accounting for the carrying amount of its real estate inventories by adopting
FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of." Under the new standard, inventories
which are substantially completed are carried at the lower of cost or fair value
less cost to sell. Fair value is determined by applying a risk adjusted
discount rate to estimates of future cash flows, resulting in a lower value than
under the net realizable value method previously required. In addition, land
held for future development or inventories under current development are
adjusted to fair value, only if an impairment to their value is indicated.
The estimates of future cash flows require significant judgment relating to
the level of sales prices, rate of new home sales, amount of marketing costs and
price discounts needed in order to stimulate sales, rate of increase in the cost
of building materials and labor, introduction of building code modifications,
and level of consumer confidence in Hawaii's economy, among other items.
Accordingly, there exists at any date, a reasonable possibility that changes in
estimates will occur in subsequent periods.
The financial results for the nine months ended September 30, 1996 included
a non-cash charge pursuant to FASB Statement No. 121 in the second quarter of
1996. The FASB Statement No. 121 non-cash charge had a net after-tax impact of
$14.6 million or $0.70 per share in the second quarter of 1996. The second
quarter 1996 charge related principally to the Company's completed inventories
at June 30, 1996. While the Company has been working to reduce completed
inventories in its projects, the current real estate environment and other
factors dictated that the Company adopt a more conservative outlook with respect
to the future performance of its currently completed inventories.
The Company's completed inventories increased during 1996 primarily due to
the substantial completion of the second high-rise building at the Company's
Country Club Village project located in Salt Lake on Oahu. The Company has
postponed the construction of the third and last high-rise building in order to
reduce completed inventories in this project in the future.
COST AND EXPENSES - SELLING AND COMMISSIONS
Sales and marketing costs represented approximately 9.3% and 6.7% of sales
of residential real estate during the quarters ended September 30, 1996 and
1995, respectively. Such costs represented approximately 8.2% and 5.8% of
residential real estate sales during the nine months ended September 30, 1996
and 1995, respectively. The increase is a result of increases in sales
incentives offered to buyers, and general increases in sales and marketing
costs, specifically relating to higher commissions and advertising costs
incurred as a percentage of sales.
14
<PAGE>
COSTS AND EXPENSES - GENERAL AND ADMINISTRATIVE
General and administrative expense includes salaries, office and other
administrative costs. Indirect costs attributable to specific projects are
capitalized and deducted as part of cost of residential real estate sales.
General and administrative expenses increased by $42,000 or 4.1% during the
third quarter of 1996 and by $78,000 or 2.6% during the first nine months of
1996 as compared to the same periods in 1995 primarily due to a reduction in
overhead costs capitalized as indirect project costs resulting from a reduction
in new construction in progress in 1996 as compared to 1995. As a percentage of
sales, general and administrative expense increased from 3.4% during the quarter
ended September 30, 1995 to 4.8% during the quarter ended September 30, 1996,
which reflects the lower number of sales closed during the 1996 third quarter,
as compared to the same period in 1995. As a percentage of sales, general and
administrative expense increased from 3.2% during the first nine months of 1995
to 4.3% during the first nine months of 1996, which reflects the lower number of
sales closed during the first nine months of 1996, as compared to the first nine
months of 1995.
INCOME FROM UNCONSOLIDATED JOINT VENTURES
Income from unconsolidated joint ventures primarily represents the
Company's 50% interest in the operations of Waiakoa Estates Subdivision Joint
Venture and Iao Partners, the joint ventures developing the Waiakoa Kai Estates
and Iao Parkside projects, respectively. The decrease in this income during the
first nine months of 1995 to the same period in 1996 is primarily the result of
the closing of fewer homes during the first nine months of 1996 as compared to
the comparable period in 1995, the deferral of profit on three sales under a
"zero-down" sales program, and lower profit margins realized for the Iao
Parkside project during the first nine months of 1996 as compared to the first
nine months of 1995, due to increases in construction and sales and marketing
costs.
OTHER INCOME
Other income is primarily composed of interest income earned on cash
balances and notes receivable. The decrease in other income from $127,000 in
the third quarter of 1995 to $45,000 in the third quarter of 1996 is primarily
due to lower cash balances in the third quarter of 1996, as compared to the
third quarter of 1995.
PROVISION (CREDIT) FOR INCOME TAXES
The Company's effective income tax rate for the third quarters of 1996 and
1995 was approximately 39%.
VARIABILITY OF RESULTS
The Company has experienced, and expects to continue to experience,
significant variability in sales and net income. For example, the Company's
sales of residential real estate for the first and second quarters of 1996 were
$20.0 million and $29.8 million, respectively, while net income for the 1996
first quarter was $948,000 and net loss for the 1996 second quarter was $13.1
million (net of a $14.6 million after-tax charge relating to FASB Statement No.
121). In addition, the Company's sales of residential real estate for each of
the four quarters ended December 31, 1995, ranged from approximately $26.8
million to $39.5 million and for each of the four quarters ended December 31,
1994, ranged from approximately $36.0 million to $80.8 million. The Company's
net income (loss) for each of the four quarters ended December 31, 1995, ranged
from a loss of approximately $3.1 million (after giving effect to a $5.7 million
after-tax charge relating to FASB Statement No. 121 in the fourth quarter of
1995) to net income of $4.7 million and for each of the four quarters ended
December 31, 1994, net income ranged from approximately $6.3 million to $8.9
million. Factors that contribute to variability of the Company's results
include: (i) the timing of home closings, a substantial
15
<PAGE>
portion of which historically have occurred in the last month of each quarter;
(ii) the Company's ability to continue to acquire additional land on favorable
terms for future developments; (iii) the condition of Hawaii's real estate
market and Hawaii's economy in general; (iv) the cyclical nature of the
homebuilding industry and changes in prevailing interest rates; (v) cost of
material and labor; and (vi) delays in construction schedules caused by timing
of inspections and approval by regulatory agencies, including zoning approvals
and receipt of entitlements, the timing of completion of necessary public
infrastructure, the timing of utility hookups and adverse weather conditions.
The Company's historical financial performance is not necessarily a meaningful
indicator of future results and, in general, the Company's financial results
will vary from development to development.
The Company continues to consider its possible expansion into selected
residential housing markets of the United States mainland and into certain
foreign countries and into other homebuilding related industries. The Company
has and would consider the acquisition of or joint venture with an existing
company, as well as its own acquisition and development of homebuilding projects
in certain areas, in order to facilitate its possible expansion. In June 1996,
the Company formed Schuler Homes of California, Inc., a wholly-owned California
corporation, for the development and sale of homes in California. In August
1996, the Company formed Schuler Homes of Washington, Inc., a wholly-owned
Washington corporation for the development and sale of homes in the state of
Washington. In October 1996, the Company formed Schuler Homes of Oregon, Inc., a
wholly-owned Oregon corporation, for the development and sales of homes in
Oregon. In recent months, the Company committed to the purchase of several
parcels of land in California and Washington for an aggregate of approximately
$8.5 million. The Company has no experience in the development of homes in
California, Washington or Oregon. Accordingly, no assurances can be given that
the Company will be able to successfully establish operations in California,
Washington, Oregon or elsewhere outside of its existing Hawaiian markets or that
such expansion will not adversely affect its results of operations.
BACKLOG
The Company's homes are generally offered for sale in advance of their
construction upon applicable regulatory approval and sold pursuant to standard
sales contracts. The Company's standard sales contract may be cancelled by the
buyer at any time prior to closing. The Company does not recognize revenues on
homes covered by such contracts until the sales are closed. Homes covered by
such sales contracts are considered by the Company as its backlog.
The following table sets forth the Company's backlog (for both homes and
residential lots) at September 30, 1996 and 1995.
September 30, 1996 September 30, 1995
------------------ ------------------
Aggregate Aggregate
Number Sales Value Number Sales Value
------- ----------- ------ ----------
Homes......... 114 $26,550,000 204 $49,960,000
Lots.......... 7 1,079,000 11 1,917,000
--- ----------- --- -----------
121 $27,629,000 215 $51,877,000
16
<PAGE>
The Company has observed an increase in its historical cancellation rates,
which the Company believes to be attributable to uncertainty of prospective
homebuyers as to, and to their general lack of confidence in, the Hawaiian
economy. The Company's historical cancellation experience (which prior to 1995
had been nominal) may not be indicative of cancellations in future periods.
The average sales prices of the homes comprising backlog at September 30,
1996 and 1995 were $233,000 and $245,000, respectively. Due to the ability of
buyers to cancel their sales contracts, no assurances can be given that homes or
residential lots in backlog will result in actual closings. Backlog data
includes all of the backlog of Waiakoa Estates Subdivision Joint Venture and Iao
Partners, the Company's two joint ventures developing the Waiakoa Kai Estates
and Iao Parkside projects, respectively.
LIQUIDITY AND CAPITAL RESOURCES
In March 1996, the Company executed a new Credit Agreement, which
replaces the $50 million line of credit with a $110 million unsecured
revolving line of credit facility on March 29, 1996. The lenders include
First Hawaiian Bank (arranger and agent), Bank of Hawaii, Bank of America,
Bank of Boston, and National Bank of Detroit. The facility expires on July
1, 1998 and includes an option for the lenders to extend the term for an
additional year. The Company can select an interest rate of either LIBOR (1,
2, 3 or 6 month term) plus 1.75% or prime for each borrowing. If the
Company's leverage ratio, as defined, exceeds 1 to 1, the interest rate
increases to LIBOR plus 2.25% and prime plus 0.50%. In October 1996, the
Company entered into an interest rate swap with Bank of America to pay a
LIBOR rate of 5.89% (fixed for 5 years) on $30 million, while receiving in
return an interest payment at a floating one-month LIBOR rate. However, if
the one-month LIBOR rate resets at or above 8%, the swap reverses for that
payment period and no interest payments are exchanged. The Company's ability
to draw upon its line of credit is dependent upon meeting certain financial
ratios and covenants. At October 31, 1996, the Company had bank notes
payable of approximately $50.3 million.
Companies in the homebuilding industry are generally highly leveraged and
require significant up-front expenditures. Accordingly, the Company incurs
substantial indebtedness to finance its homebuilding and development
activities. At September 30, 1996, the Company had bank notes payable of
approximately $54.8 million. Peak outstanding debt, including bank
borrowings and the Convertible Subordinated Debentures, during the quarter
ended September 30, 1996 was $120 million. In order to service these
obligations and fund its ongoing operations, the Company has used proceeds
from its initial public offering, the offering of convertible subordinated
debentures, secondary offering of common stock, cash flow from operations,
its available bank credit facilities and financing by the seller of land
purchased. The Company's business and earnings are substantially dependent
on its ability to obtain debt financing on acceptable terms. Previously, all
of the Company's bank borrowings had been from First Hawaiian Bank. With the
establishment of the new $110 million facility in March 1996, the Company has
expanded its banking relationships to include four major banks in addition to
First Hawaiian Bank. Although the Company has in the past been able to
obtain credit facilities on acceptable terms and believes virtually all of
its currently planned construction projects will be funded by a combination
of cash flow from operations and bank or other financing, no assurance can be
given that it will be able to obtain such bank or other debt financing or
that any such financing will be on terms acceptable to the Company. Further,
the availability of borrowed funds to homebuilders, especially for land
acquisition and construction financing, has been severely restricted and in
some cases eliminated entirely. In compliance with federal guidelines,
certain lenders are now requiring increased equity commitments by borrowers
in connection with both new loans and the extension of existing loans.
During the first nine months of 1996, the Company advanced $3.7 million to
Iao Partners, a joint venture in which the Company has a 50% interest, for the
development of the Iao Parkside project. During the period, the Company was
repaid $3.8 million, as the closing of home sales occurred.
The Company currently has commitments to purchase several parcels of land
for approximately $8.5 million. The Company expects to utilize a combination of
cash flow from operations and bank financing to purchase the land parcels. The
Company intends to consummate the purchase of the land parcels in late 1996 or
early 1997. However, no assurances can be given that the purchase will be
completed or that the land under purchase option will be acquired.
17
<PAGE>
The Company believes that cash flow from operations, and
borrowings under its credit facilities will provide adequate cash to fund the
Company's operations at least through 1996.
Certain of the Company's currently planned projects, as well as future
projects, are anticipated to be longer term in nature than those developed in
the past by the Company. The increased length of such projects further
exposes the Company to the risks inherent in the homebuilding industry,
including reductions in the value of land inventory.
The Company currently has under construction a 193-unit project in
Ewa, Oahu, called KulaLei. The Company plans to develop this project as a
wholly-owned project, and not through Iao Partners, an existing joint
venture, as had been anticipated earlier.
In May 1996, the Company adopted a stock repurchase program to reacquire
up to an aggregate of $5 million of its outstanding common stock through
December 31, 1996. In September 1996, the Company completed its repurchase
of 774,000 shares at a cost of $5 million.
18
<PAGE>
SCHULER HOMES, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is from time to time involved in routine litigation or
threatened litigation arising in the ordinary course of its business.
Such matters, if decided adversely to the Company, would not, in the
opinion of management, have a material adverse effect on the financial
condition of the Company.
In April 1996, the Company was served with a lawsuit by owners of
units and the Association of Owners of Fairway Village at Waikele,
who seek to have a class of all owners certified. The complaint
alleges material construction defects and deficiencies,
misrepresentation regarding the cost of insurance, breach of
covenant of good faith and fair dealing, among other allegations.
The complaint does not specify an amount of damages, but includes
a claim for punitive damages, among other claims. The Company is
currently evaluating the merits of the complaint. If this lawsuit
were decided adversely to the Company, it could have a material
adverse effect on the Company's business, financial condition and
operating results.
Items 2 through 5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit Number Document Description
-------------- --------------------
10.1 Real Estate Purchase Agreement between
Schuler Homes of California, Inc. and Frank
J.Andrews, Jr. dated August 20, 1996.
10.2 Option Agreement between Schuler Homes of
California, Inc. and Frank J. Andrews, Jr.
dated August 20, 1996.
10.3 Real Estate Purchase and Sale Agreement
between the Company and Coop Family Limited
Partnership, dated September 20, 1996.
27.1 Financial Data Schedule
(b) Reports on Form 8-K. There were no reports on Form 8-K for the
quarter ended September 30, 1996.
19
<PAGE>
SCHULER HOMES, INC.
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 thereto duly authorized.
SCHULER HOMES, INC.
Date: November 7, 1996 By: /s/ James K. Schuler
--------------------
James K. Schuler
Chairman of the Board,
President and Chief Executive Officer
(principal executive officer)
Date: November 7, 1996 By: /s/ Pamela S. Jones
-------------------
Pamela S. Jones
Senior Vice President of Finance,
Chief Financial Officer and Director
(principal financial officer)
Date: November 7, 1996 By: /s/ Douglas M. Tonokawa
-----------------------
Douglas M. Tonokawa
Vice President of Finance,
Chief Accounting Officer
(principal accounting officer)
20
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT DESCRIPTION
10.1 Real Estate Purchase Agreement between Schuler Homes of
California, Inc. and Frank J.Andrews, Jr., dated August 20,
1996.
10.2 Option Agreement between Schuler Homes of California, Inc.
and Frank J. Andrews, Jr. dated August 20, 1996.
10.3 Real Estate Purchase and Sale Agreement between the Company
and Coop Family Limited Partnership, dated September 20, 1996.
27.1 Financial Data Schedule
<PAGE>
Exhibit 10.1
RIVER VIEW POINT PURCHASE AGREEMENT
(Table of Contents)
RECITALS.......................................................... 1
1. DEFINITIONS........................................... 1
1.1 "Agreement"...................................... 1
"City................................................. 1
"Construction Contract"............................... 1
"Development Agreement"............................... 2
"Option".............................................. 2
"Project"............................................. 2
"Subject Property".................................... 2
"Tentative Map"....................................... 2
"Tentative Map Conditions"............................ 2
2. PURCHASE AND SALE..................................... 2
3. PRICE................................................. 2
3.1 COMPUTATION OF PRICE............................. 2
3.2 PAYMENT OF PRICE................................. 4
4.0 Escrow........................................... 4
4.1 ................................................. 4
4.2 Seller's Closing Documents....................... 4
4.3 Costs of Escrow.................................. 4
4.4 Documents to be Delivered Outside of Escrow...... 4
5. LIQUIDATED DAMAGES.................................... 4
6.0 CONDITION OF TITLE.................................... 5
6.1 Preliminary Title Report......................... 5
6.2 Condition of Title at Close...................... 5
6.3 Reservation of Mineral Rights.................... 5
6.4 Effect of Development Agreement.................. 5
7.0 POSSESSION............................................ 6
8.0 REPRESENTATION AND WARRANTIES OF SELLER............... 6
8.1 ................................................. 6
8.3 ................................................. 6
8.4 ................................................. 6
8.5 ................................................. 7
8.6 ................................................. 7
<PAGE>
9.0 REPRESENTATIONS AND WARRANTIES OF BUYER............... 7
10.0 LOSS BY CONDEMNATION OR DESTRUCTION................... 7
11.0 ARBITRATION; AGREEMENT ENFORCEMENT.................... 7
12.0 TIME - CONDITIONS PRECEDENT TO CLOSE.................. 8
12.1.................................................. 8
12.2.................................................. 8
12.3.................................................. 8
12.4 Force Majeure.................................... 8
13.0 DEVELOPMENT AGREEMENT................................. 9
14.0 NOTICES............................................... 9
15.0 BROKERS AND FINDERS................................... 9
16.0 ASSIGNMENT............................................10
17.0 CONTINUATION AND SURVIVAL OF RIGHTS AND OBLIGATIONS...10
18.0 RETURN OF DOCUMENTS AND FUNDS UPON TERMINATION........10
18.1 RETURN OF DUCUMENTS..............................10
18.2 NO EFFECT ON RIGHTS OF PARTIES...................10
18.3 PAYMENT OF TERMINATION FEE.......................10
20.0 GENERAL PROVISIONS....................................10
20.1 MERGER...........................................10
20.2 AMENDMENTS AND TERMINATION.......................11
20.3 GOVERNING LAW....................................11
20.4 SEVERABILITY.....................................11
20.5 ATTORNEYS FEES...................................11
<PAGE>
20.6 CAPTIONS.........................................11
20.7 COUNTERPARTS.....................................11
20.8 TIME.............................................11
20.9 FURTHER AGREEMENTS...............................11
20.10 CONSTRUCTION....................................11
<PAGE>
EXHIBIT 10.1
REAL ESTATE PURCHASE AGREEMENT
(River View Point)
THIS REAL ESTATE PURCHASE AGREEMENT is between Frank J. Andrews, Jr.,
herein referred to as "Seller," and Schuler Homes of California, Inc., a
California corporation referred to herein as "Buyer," and is dated and
effective this 20th day of August, 1996.
RECITALS
A. Seller is the owner of an Option to purchase certain real property
located as described in Exhibit A, attached hereunder and incorporated by
this reference. The real property is located within the boundaries of the
River View Point Vested Tentative Map ("Tentative Map") for the City of Rio
Vista, California (the "Subdivision"). The Subdivision is also the subject
of a Development Agreement between the City of Rio Vista and Seller.
Included within the Subdivision is an area of approximately 15 acres
designated by the Tentative Map for 75 lots within the Subdivision ("Subject
Property").
B. Buyer desires to purchase the Subject Property from Seller, and
Seller desires to sell the Subject Property to Buyer, on the terms and
conditions set forth herein.
THE PARTIES THEREFORE AGREE AS FOLLOWS:
1. DEFINITIONS. Unless the context otherwise requires, the terms defined in
this Section 1 shall, for the purposes of this Agreement, have the following
meanings:
1.1 "Agreement" shall mean this Real Estate Purchase Agreement.
1.2 "Assessment District" Means City of Rio Vista Assessment District
96-1 (River View Point), the initial resolution for which was approved by the
Rio Vista City Council on June 20, 1996.
1.3 "City" means the City of Rio Vista.
1.4 "Closing Date" means the date Buyer takes title to the Subject
Property pursuant to the Agreement.
1.5 "Construction Contract" means the Construction Contract of even date
herewith between Solano Construction Co., Inc. as the "Contractor" and Buyer
and the "Owner".
<PAGE>
1.6 "Development Agreement" shall mean the Development Agreement for the
River View Point project between Seller and the City of Rio Vista, approved
by the City of Rio Vista on ___________________ by Ordinance # _____________.
1.7 "Option" means the first Amended and Restated Option Agreement between
the City as Optionor and Seller as Optionee.
1.8 "Project" means the entire River View Point Project as defined by the
Development Agreement.
1.9 "Subject Property" means the area approximately 15 acres in size and
containing 75 lots as designated by the River View Point Vested Tentative
Map, as shown on the map attached hereto as Exhibit B and incorporated herein
by this reference:
1.10 "Tentative Map" shall mean the Vested Tentative map for the River
View Point Project, approved by the Rio Vista City Council by its
Resolution 95-01.
1.11 "Tentative Map Conditions" shall mean the conditions for approval of
the Tentative Map attached hereto as Exhibit C and incorporated herein by
this reference.
2. PURCHASE AND SALE. Seller agrees to sell, and Buyer agrees to
purchase, the Subject Property on the terms and conditions set forth herein.
3. PRICE.
3.1 COMPUTATION OF PRICE. The purchase price for the Subject Property
will be $3,000,000 ($40,000 dollars times 75 lots), less:
(a) The amount of a fixed price construction contract for all
improvements necessary to finish the 75 lots located in the Subject Property,
including, without limitation:
(i) all on-site improvements necessary to finish the lots
including grading, paving, utilities, water, sewer and drainage, and the cost
of any required landscaping of public property included in Subject Property
and the cost of improving the park site in the subdivision, but excluding all
fencing except to the extent that more than standard wooden street fencing is
needed to meet sound attenuation requirements imposed by the Tentative Map
conditions.
(ii) Any off-site improvements required to be constructed in
connection with the 75 lots which are NOT included within the scope of work
of the River
<PAGE>
View Point Assessment District.
The construction contractor and construction contract will be mutually
acceptable to the parties. It is anticipated that Solano Construction Co.,
Inc. will likely be selected.
(b) The lien of any assessment applied to the 75 lots by reason of
the Assessment District.
(c) $10,174 per lot. This amount will be reduced by any credits
against impact fees applicable to these lots for improvements funded by the
Assessment District pursuant to Section 4.19 of the Development Agreement,
representing the impact fees applicable to the Subject Property pursuant to
Exhibit B of the Development Agreement.
(d) An amount equal to 75 times the per square foot school impact fee
applicable to the Subject Property under Section 4.18 of the Development
Agreement as of the date of close of escrow, times the greater of 1480 square
feet or the actual average "assessable space" (as defined by Section 4.18 of the
Development Agreement) of the units to be constructed on the Subject Property as
certified by Buyer at close of escrow. If the actual average assessable space
for the units is less than certified by Buyer, Buyer will pay Seller a makeup
payment equal to 110% of the difference between the amount of the deduction from
the purchase price taken pursuant to this Subsection (d) and the correct amount,
plus interest on that amount at the rate of 10% per annum from close of escrow
to the date of payment. The makeup payment will be made no later than the first
date on which the actual assessable space of the units can be calculated.
(e) The cost of preparing and recording a Final Subdivision Map and
related improvement plans for the Subject Property by an engineering firm
mutually agreeable to the parties, to the extent these costs are not included
in the Construction Contract.
(f) The cost of any payment or performance bonds provided for in
this Agreement.
It is the intent of the parties that the deductions from the purchase
price in Subsections (a) through (f) represent Buyer's cost of improving the
lots located in the Subject Property. The cost of building offsite
improvements required under the tentative map as shown on Exhibit D of the
Tentative Map, including the cost of building the portions of Roads "A", "B"
and "C" required under said Exhibit D, are allocated to Seller. Seller shall
keep the right to PG & E reimbursements for utility construction and to any
other credits, reimbursements, or savings which relate to the construction of
site improvements or off-site improvements on or in relation to the Subject
Property and which have not been accounted for in the computation of the
Purchase Price as of close of escrow. Such credits, reimbursements and
savings shall be collected outside of escrow by seller. Buyer, at no cost to
itself, will cooperate with seller's efforts to account
<PAGE>
for and collect these moneys.
3.2 PAYMENT OF PRICE. The purchase price shall be payable as follows:
(a) Deposit in escrow of $50,000 made concurrently with execution
of this Agreement, to be held in accordance with Section 12.1 below. At
close of escrow, the Buyer's deposit of $50,000 shall be applied to the
purchase price and any interest accrued on the deposit shall be credited to
Buyer's closing costs.
(b) The balance of the purchase price will be paid in cash at close
of escrow.
4.0 Escrow.
4.1 Escrow Holder. The Escrow Holder will be First American Title
Guaranty Company ("Escrow Holder").
4.2 Seller's Closing Documents. Not later than 48 days following
execution of this Agreement, Buyer and Seller shall deliver to the Escrow
Holder their escrow instructions conforming to this Agreement. Seller shall
deposit the Grant Deed not later than five days prior to close of escrow.
Buyer shall deposit the purchase price at least 24 hours prior to close of
escrow.
4.3 Costs of Escrow. Buyer will pay the cost of the CLTA title
insurance policy and escrow fees. Seller will pay the transfer tax.
4.4 Documents to be Delivered Outside of Escrow. Buyer acknowledges
receipt from Seller of copies of the Development Agreement, Tentative Map,
the resolutions of approval for the Tentative Map, including conditions of
the Tentative Map, and the Phase 1 toxic study conducted by Penn
Environmental. Copies of any other permits, reports, engineering material or
similar materials which become available to Seller prior to close of escrow
will be delivered to Buyer prior to close.
5. LIQUIDATED DAMAGES.
BUYER AND SELLER AGREE THAT SELLER'S ECONOMIC DETRIMENT RESULTING FROM
THE REMOVAL OF THE SUBJECT PROPERTY FROM THE REAL ESTATE MARKET, AND FOR
ENTERING INTO OTHER AGREEMENTS IN ANTICIPATION OF PERFORMANCE BY SELLER,
WOULD BE EXTREMELY DIFFICULT TO ASCERTAIN. BUYER AND SELLER FURTHER AGREE
THAT A REASONABLE ESTIMATE OF THE ECONOMIC DETRIMENT CAUSED BY A DEFAULT BY
BUYER WOULD BE THE AMOUNT OF THE DEPOSIT REQUIRED TO BE MADE BY BUYER UNDER
THIS AGREEMENT. ACCORDINGLY, IF BUYER DEFAULTS UPON ITS OBLIGATIONS
HEREUNDER, THEN SELLER MAY TERMINATE THIS AGREEMENT AT ITS OPTION BY
PROVIDING A WRITTEN
<PAGE>
NOTICE OF TERMINATION TO BUYER, AND SELLER SHALL THEREUPON ACCEPT FROM BUYER,
AS THE TOTAL DAMAGES DUE HEREUNDER, THE DEPOSIT REQUIRED TO BE MADE BY BUYER,
PROVIDED THAT NO PRIOR NOTICE OF A BREACH WILL BE REQUIRED TO BE GIVEN BY
SELLER TO BUYER OF A BREACH RESULTING FROM THE FAILURE TO MAKE THE DEPOSIT OF
THE BALANCE OF THE PURCHASE PRICE REQUIRED UNDER SECTION 4.2.
INITIALS: BUYER: /s/ MSM SELLER: /s/ FA
----------------------- ----------------------
6.0 CONDITION OF TITLE.
6.1 Preliminary Title Report. Seller has provided to Buyer a current
CLTA preliminary Title Report on the Subdivision, as well as a copy of the
Preliminary Title Report referred to in the Option Agreement.
6.2 Condition of Title at Close. Buyer will take title to the Subject
Property subject to the Tentative Map, Development Agreement, and any general
and special taxes for the fiscal year 1996/97, prorated to close of escrow,
the lien of assessment of the Rio Vista Assessment District 96-1 (River View
Point), and such other easements, rights of way, and restrictions of record
which City is allowed to convey to Seller under Section 8.3 of the Option
Agreement.
6.3 Reservation of Mineral Rights. The parties acknowledge that the
deed conveying the Subject Property to Buyer will be subject to the ownership
by third parties of mineral rights below a depth of 500 feet.
6.4 Effect of Development Agreement. The parties acknowledge that the
condition of the Tentative Map and the Development Agreement impose certain
obligations on the "Owner" as that term is defined therein. Neither this
Agreement, nor Buyer's status as an assignee of a portion of the property
subject to the Development Agreement shall be deemed to limit Seller's right
to apply for amendments of the Development Agreement which do not create an
economic burden on Buyer or homeowners within the Subject Property.
Amendments of the Development Agreement or Tentative Map allowing moderate
increases in the allowable density within the Subdivision (excluding the
Subject Property) are specifically deemed not to create an economic burden to
Buyer or Buyer's homeowners. At least 10 days prior to applying for
Development Agreement Amendment, seller will submit its proposed amendment to
Buyer for a good faith determination of whether it would create an economic
burden.
7.0 POSSESSION.
Possession of the Subject Property shall be delivered to Buyer at the
close of escrow, provided, that to the extent that Seller has such rights
under the Option, Buyer and its employees, agents, representatives, and other
invitees shall be entitled to enter upon the Subject Property at all
reasonable times and to conduct all reasonable tests
<PAGE>
thereon. Buyer shall not allow any liens to attach to the Subject Property
with respect to any such activity, and Buyer hereby agrees to defend,
indemnify, and hold Seller and the owners of the Subject Property harmless
from any personal injury or property damage sustained by any party, including
Seller, in the course of such activity, except to the extent caused by the
sole negligence of Seller, or the Owners of the Subject Property, or their
employees, agents, representatives, or invitees.
8.0 REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents and warrants to Buyer as follows:
8.1 Binding Obligations of Seller. This Agreement and all of the other
documents to be executed by Seller and delivered in connection with this
transaction will be duly authorized, executed, and delivered by Seller, and
will constitute valid, legal, and binding obligations of Seller, and will not
violate any provisions of any agreements to which Seller is a party.
8.2 Disclosure of proceedings. To the best of Seller's knowledge,
except as have been disclosed in writing to Buyer, there are no condemnation
proceedings, utility moratoriums, zoning or land use proceedings, or other
proceedings of any kind, either instituted or threatened to be instituted,
which would hinder Buyer in developing the Subject Property as contemplated
by the Tentative Map and this Agreement.
8.3 Disclosure of Conditions. To the best of Seller's knowledge, there
are no conditions, other than those disclosed to Buyer in writing, which any
governmental or quasi-governmental entities are considering as conditions to
be imposed upon the permits and approvals for the development of the real
property or upon its utilities hook-ups, which would hinder Buyer in
developing the Subject Property as a residential development.
8.4 Limitations on development. Except as disclosed to Buyer in
writing, Seller knows of no facts, nor has its misrepresented or failed to
disclose any facts relating to matters which would hinder Buyer's ability to
develop the Subject Property as contemplated by the Tentative Map and this
Agreement. The parties acknowledge that the Subject Property includes more
than one of the phases identified in the Tentative Map and that a minor
amendment of the Tentative Map may therefore be required to identify the
Subject Property as a single first phase of the Subdivision.
8.5 "As Is" transaction. Buyer acknowledges that as of close of
escrow, Seller will not have possession of the Subject Property. Buyer
therefore will take the property "as is" except with respect to the express
representatives and warranties contained herein.
8.6 City purchase from state. Forty two acres of the subdivision are
owned by the State Reclamation Board and are under contract to be purchased
by the City from
<PAGE>
the State. Seller shall not be liable to Buyer for damages arising out of
or related to the inability of the City to acquire the subject property from
the State pursuant to the contract between the City and the States.
9.0 REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer (and the persons executing this Agreement on behalf of Buyer)
represents and warrants to Seller that all of the documents to be executed by
Buyer and delivered in connection with this transaction will be duly
authorized, executed and delivered by Buyer and will constitute valid, legal,
and binding obligations of Buyer, and will not violate any provisions of any
agreements to which Buyer is a party.
10.0 LOSS BY CONDEMNATION OR DESTRUCTION.
In the event that condemnation proceedings of any nature are commenced
against the Subject Property or any portion thereof prior to the closing date
or in the event that the subject Property or any portion thereof is destroyed
or materially damaged prior to the closing date, Buyer shall have the right
to terminate this Agreement at its option by providing a written notice of
termination to Seller. If Buyer elects to proceed with the purchase and to
accept the Subject Property in its then condition, all insurance proceeds,
condemnation awards and other compensation payable to Seller by reason of
such condemnation, damage or destruction, shall be paid directly to Buyer.
11.0 ARBITRATION; AGREEMENT ENFORCEMENT.
Any dispute or action to interpret or enforce any term or provision of
this Agreement shall be submitted to binding arbitration, and any party
hereto shall be entitled to petition a court of appropriate jurisdiction to
order the matter submitted to binding arbitration, to appoint a single
arbitrator and to confirm the decision of the arbitrator. The arbitration
proceeding shall be conducted in Solano County. The prevailing party or
parties in any such proceeding shall be entitled to recover as costs their
attorney's fees, court fees, court costs, and reasonable investigative and
discovery costs, as determined by the arbitrator in such matters, together
with the cost of the Arbitrator. The parties shall have the right to take
depositions and to obtain discovery regarding the matter in arbitration
pursuant to Section 1283.05 of the California Code of Civil Procedure.
12.0 TIME - CONDITIONS PRECEDENT TO CLOSE.
12.1 Initial Review Period. Buyer shall have 45 days from execution of
the agreement to conduct geological studies, review zoning and other local
ordinances affecting development of the Project, and conduct economic,
marketing and any other studies relating to the development of the Subject
Property which it deems appropriate.
<PAGE>
If, within said 45 day period Buyer decides for any reason that it does not
wish to proceed with this transaction, then it may deliver written notice to
Seller so stating, and this Agreement shall terminate and shall be of no
further force and effect. Immediately following termination, the deposit
paid into escrow by Buyer, together with any interest accrued thereon, shall
be returned to Buyer. If Buyer does not elect to terminate this Agreement
within the 45 day initial review period, the deposit and any interest therein
shall be applied to the purchase price pursuant to section 3.2(a). If escrow
fails to close as a result of the fault of Buyer, the deposit will be
payable to Seller as liquidated damages pursuant to Section 5, above.
12.2 Additional Documents. Not less than forty eight days following
the execution of this Agreement, Seller and Buyer shall each execute and
deliver to each other and deposit in Escrow such Escrow Instructions and
other instruments and documents as are reasonably required to close the
escrow in accordance with the terms, covenants and conditions of this
Agreement.
12.3 Prorations. All income, all real property taxes and all expenses
relating to the ownership of the Subject Property shall be prorated on the
basis of a 365-day year as of 12:01 a.m. on the Closing Date.
12.4 Force Majeure. This agreement shall terminate and shall be of no
further force or effect and Buyer's deposit hereunder shall be refunded if
any of the following events occur:
(i) If City fails to acquire the Subject Property from the
State of California within the time required by its existing agreement with
the State, with any extensions.
(ii) If the City Council of Rio Vista votes not to form or
fails to form the Assessment District before the last day to close escrow
hereunder.
(iii) The refusal of City to amend the phasing plan of the
Tentative Map to designate the Subject Property as Phase 1.
(iv) In the event of any act or occurrence not the fault of
Seller which renders Seller's performance hereunder impossible or infeasible.
13. DEVELOPMENT AGREEMENT.
The parties acknowledge that prior to the closing date, the City of Rio
Vista must agree to the assignment of the Development Agreement to Buyer to
the extent it relates to the Subject Property.
14.0 NOTICES.
Unless otherwise provided herein, any notice required or permitted to be
given
<PAGE>
under this Agreement shall be in writing, and shall be deemed given when
personally delivered or when deposited in the United States mail, certified
or Express Mail, postage prepaid, return-receipt requested, addressed as
follows:
If to Seller: Andrews, Lando & Associates
1107 Kentucky Street
Fairfield, California 94533
With copy to: Robert E. Lando
3411 Kenwood Court
Fairfield, California 94533
If to Buyer: Schuler Homes of California, Inc.
Attn: Michael McKissick
1250 Pine Street, Suite 302
Walnut Creek, California 94596
or to such other address as either party may from time to time specify in
writing to the other.
15.0 BROKERS AND FINDERS.
Seller has retained Gary Archer of Archer and Ficklin as its real
estate broker in this transaction. The parties are aware of no other
licensed real estate brokers or other persons who can claim a right to a
commission or finder's fee resulting from the sale and purchase contemplated
in this Agreement. In the event that any broker or finder perfects a claim
for a commission or finder's fee based upon any such contact, dealings or
communication, the party through whom the broker or finder makes its claim
shall be responsible for said commission or fee and all costs and expenses
(including reasonable attorneys' fees) incurred by the other party in
defending against the claim.
16.0 ASSIGNMENT.
Seller and Buyer shall be entitled to assign their respective interests
under this Agreement in whole or in part at any time, but if the assignment
is made prior to close of escrow, it may be made only with the prior written
consent of the other party, which consent shall not be unreasonably withheld,
except that Buyer, without the written consent of Seller, may assign its
rights and delegate its obligations, to a limited partnership in which Buyer
is a general partner, or to a corporation in which Buyer owns 50% or more of
the outstanding stock.
17.0 CONTINUATION AND SURVIVAL OF RIGHTS AND OBLIGATIONS.
All representations, warranties, covenants, conditions, and other
obligations of the parties shall survive the transfer of title to the
property.
<PAGE>
18.0 RETURN OF DOCUMENTS AND FUNDS UPON TERMINATION.
18.1 RETURN OF DOCUMENTS. Except as otherwise expressly provided in
this Agreement, in the event the Escrow is cancelled and terminated for any
reason, Buyer shall within 10 calendar days following such termination (or
sooner, as otherwise specified in this Agreement), deliver to Seller all
documents and materials, if any, relating to the Subject Property previously
delivered to Buyer by Seller and Escrow Holder shall deliver all documents
and materials deposited by Seller then in Escrow Holder's possession to
Seller. Escrow holder shall deliver to Buyer all documents, materials and
funds deposited by Buyer to which Buyer is entitled pursuant to the terms of
this Agreement, then in Escrow Holder's possession.
18.2 NO EFFECT ON RIGHTS OF PARTIES. The return of documents and
monies set forth above shall not affect the right of either party to seek
such remedies as such party may have with respect to the enforcement of this
Agreement.
18.3 PAYMENT OF TERMINATION FEE. To the extent that Escrow holder may
condition its delivery hereinabove provided upon payment by the party
requesting delivery of a reasonable termination fee, any termination fee
shall be paid (or reimbursed) by the defaulting party, or paid by Buyer if
neither party is then in default.
20.0 GENERAL PROVISIONS.
20.1 MERGER. This Agreement contains all of the agreements,
representations, and warranties between Buyer and Seller, and supersedes any
and all prior agreements, representations, and warranties, whether written or
oral.
20.2 AMENDMENTS AND TERMINATION. Except as otherwise provided herein,
this Agreement may be amended, modified, or terminated only by a written
instrument executed by Buyer and Seller.
20.3 GOVERNING LAW. This Agreements shall be governed by and construed
in accordance with the laws of the State of California.
20.4 SEVERABILITY. In the event that any provision of this Agreement
is found to be invalid or unenforceable, the remainder of this Agreement
shall continue in full force and effect.
20.5 ATTORNEYS FEES. In the event that any action is brought to
enforce or interpret any of the terms, covenants, or conditions of this
Agreement, the losing party shall pay to the prevailing party the cost of
such legal action, including without limitation, all reasonable attorneys'
fees and court costs.
20.6 CAPTIONS. The captions used in this Agreement are inserted for
convenience only and shall not be used to determine the intent of the
operative
<PAGE>
provisions.
20.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which shall be taken together and deemed to be one
instrument.
20.8 TIME. Time is of the essence under this Agreement.
20.9 FURTHER AGREEMENTS. The parties agree to cooperate with each
other and to carry out and to execute any documents reasonably necessary to
carry out the proposed intent of this Agreement.
20.10 CONSTRUCTION. The parties agree that each party and its counsel
have reviewed the Agreement and any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not apply in
the interpretation of this Agreement.
WHEREFORE, the parties have executed this Agreement on the day and year
first set forth above.
BUYER: SELLER:
Schuler Homes of California, Inc.
By: /s/ MICHAEL S. MCKISSICK By: /s/ FRANK J. ANDREWS, JR.
------------------------------- -----------------------------
Michael S. McKissick Frank J. Andrews, Jr.
Vice President and General Manager
<PAGE>
EXHIBIT 10.2
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.0 Grant of Option; Increments. . . . . . . . . . . . . . . . . . . . . . 1
1.1 Option Increments . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Defining the Option Increments. . . . . . . . . . . . . . . . . . 1
2.0 Commencement of Option . . . . . . . . . . . . . . . . . . . . . . . . 2
3.0 Option Consideration . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 First Option Increment. . . . . . . . . . . . . . . . . . . . . . 2
3.2 Subsequent Option Increments. . . . . . . . . . . . . . . . . . . 2
4.0 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1 Computation of Price. . . . . . . . . . . . . . . . . . . . . . . 2
4.2 Escalator . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.0 Term of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.2 Initial Increment . . . . . . . . . . . . . . . . . . . . . . . . 4
5.3 Option Term for Subsequent Option Increments. . . . . . . . . . . 4
5.4 Earlier Expiration. . . . . . . . . . . . . . . . . . . . . . . . 4
6.0 Intentionally Left Blank . . . . . . . . . . . . . . . . . . . . . . . 5
7.0 Exercise of Option . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.1 Preliminary Notice. . . . . . . . . . . . . . . . . . . . . . . . 5
7.2 Fifteen Day Notice. . . . . . . . . . . . . . . . . . . . . . . . 5
7.3 Final Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.0 Payment of Purchase Price; Escrow. . . . . . . . . . . . . . . . . . . 6
8.1 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.2 Escrow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.3 Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9.0 Condition of Title . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9.1 Condition of Title at Close . . . . . . . . . . . . . . . . . . . 6
9.2 Reservation of Mineral Rights . . . . . . . . . . . . . . . . . . 6
9.3 Effect of Development Agreement . . . . . . . . . . . . . . . . . 6
10.0 POSSESSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11.0 Representations and Warranties of Owner. . . . . . . . . . . . . . . . 7
11.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11.3 Limitation on Utilities. . . . . . . . . . . . . . . . . . . . . 7
11.4 Limitation on Development. . . . . . . . . . . . . . . . . . . . 7
11.5 As Is. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12.0 Representations and Warranties of Buyer. . . . . . . . . . . . . . . . 8
13.0 Arbitration; Agreement Enforcement . . . . . . . . . . . . . . . . . . 8
14.0 Development Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 8
15.0 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
16.0 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . . 9
17.0 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
18.0 Continuation and Survival of Rights and Obligations. . . . . . . . . . 9
19.0 Return of Documents and Funds Upon Termination . . . . . . . . . . . . 9
19.1 Return of Documents. . . . . . . . . . . . . . . . . . . . . . . 9
19.3 Payment of Termination Fee . . . . . . . . . . . . . . . . . . .10
20.0 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . .10
20.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
20.2 Amendments and Termination . . . . . . . . . . . . . . . . . . .10
20.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . .10
20.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . .10
20.5 Attorneys Fees . . . . . . . . . . . . . . . . . . . . . . . . .10
20.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
20.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .10
20.8 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
20.9 Further Agreements . . . . . . . . . . . . . . . . . . . . . . .10
20.10 Construction . . . . . . . . . . . . . . . . . . . . . . . . . .11
20.11 Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . .11
<PAGE>
OPTION AGREEMENT
(River View Point)
This Option Agreement (the "Agreement") is made this 20th day of August,
1996 (the "Effective Date"), and is between Frank J. Andrews, Jr. ("Owner") and
Schuler Homes of California, a California corporation ("Buyer").
RECITALS
A. Owner is the Optionee under a First Amended and Restated Option
Agreement ("City Option") between Owner and the City of Rio Vista ("City") as
the optionor. The City Option grants to Owner an option to purchase 57 acres
located within the City of Rio Vista more particularly described in Exhibit A
attached hereto and incorporated herein by this reference ("Option Parcel").
Approximately 42 acres of the Option Parcel is part of a larger parcel (the
"State Parcel") the City has contracted to purchase from the State of
California.
B. By a real estate Purchase Agreement ("Purchase Agreement") between
Owner and Buyer of even date herewith, Buyer has contracted to purchase from
Owner a 15 acre portion ("Purchase Parcel") of the Option Parcel.
C. The Option Parcel is subject to a Vested Tentative Map ("Tentative
Map") which provides for 290 lots to be located on the Option Parcel, and the
Purchase Parcel is designated by the Tentative Map to contain 75 of the 290
lots.
D. The parties desire that Buyer receive an option to purchase all of the
land within the Option Parcel which is not included in the Purchase Parcel ("the
Property") on the terms and conditions hereinafter set forth.
The parties therefore agree:
1.0 Grant of Option; Increments. Owner hereby grants to Optionee the right and
option to purchase the Property on the terms and conditions set forth herein.
1.1 Option Increments. The Property shall be divided into four separate
areas ("Option Increments"), each containing 53 or 54 lots, which shall, in
the aggregate, contain all of the Property.
1.2 Defining the Option Increments. The parties acknowledge that the
<PAGE>
configuration of the Purchase Parcel will require an amendment of the phasing
plan of the Tentative Map. The size and shape of the four Option Increments
will be defined in that Tentative Map amendment.
2.0 Commencement of Option. The option term shall commence on the Effective
Date.
3.0 Option Consideration.
3.1 First Option Increment. The consideration for the option for the
Option Increments is the execution by Buyer of the Purchase Agreement and the
acquisition of the purchase parcel from Owner by Buyer pursuant to the Purchase
Agreement.
3.2 Subsequent Option Increments. Additional consideration for the option
for each of the second, third and fourth Option Increments shall be the purchase
by Owner from Buyer of the prior Option Increments in accordance with the terms
of this Agreement.
4.0 Purchase Price.
4.1 Computation of Price. Subject to escalation pursuant to Section 4.2
below, the purchase price for each Option Increment will be an amount equal to
$40,000 times the number of lots in that increment, less:
(a) the amount of a fixed price construction contract for all
improvements necessary to finish the lots located within the Option Increment,
including, without limitation:
(i) all on-site improvements necessary to finish the lots
including grading, paving, utilities, water, sewer and drainage, and the cost of
any required landscaping of public property included in the Option Increment,
excluding permit or fencing.
(ii) Any off-site improvements required to be constructed in
connection with the Option Increments which are not included within the scope of
work of the River View Point Assessment District.
The construction contractor and construction contract will be mutually
acceptable to the parties. It is anticipated that Solano Construction Co., Inc.
will likely be selected, and that the construction contract will likely be
similar in form to that used in connection with the construction of improvements
on the Purchase Parcel.
<PAGE>
(b) The lien of any assessment against to the lots located on the
Option Increment by reason of the Assessment District.
(c) The amount of fees applicable to the lots on the Option Increment
pursuant to Exhibit B of the Development Agreement between Owner and the City of
Rio Vista affecting the Property ("Development Agreement") reduced by any
credits against such fees applicable to the lots for improvements funded by the
Assessment District pursuant to Section 4.19 of the Development Agreement.
(d) An amount equal to the number of the lots in the Option Increment
times the per square foot school impact fee applicable to the Option Parcel
under Section 4.18 of the Development Agreement as of the date of close of
escrow on the Option Increment, times the greater of 1480 square feet or the
actual average "assessable space "(as defined by Section 4.18 of the Development
Agreement) of the units to be constructed on the Option Increment as certified
by Buyer at close of escrow. If the actual assessable space for the units is
less than certified by Buyer, Buyer will pay Seller a makeup payment equal to
110% of the difference between the amount of the deduction from the purchase
price taken pursuant to this Subsection (d) and the correct amount, plus
interest on that amount at the rate of 10% per annum from close of escrow to
the date of payment. The makeup payment will be made no later than the first
date on which the actual assessable space of the units can be calculated.
(e) The cost of preparing and recording a final subdivision map and
related improvement plans for the Option Increment by an engineering firm
mutually agreeable to the parties, to the extent that these costs are not
included in the Construction Contract.
(f) The cost of any payment or performance bond provided for in this
Agreement required to create finished lots on the Option Increment.
It is the intent of the parties that the deductions from the purchase price
in Subsections (a) through (f) represent Buyer's cost of improving the lots
located on the Option Increment. Seller shall keep the right to PG & E
reimbursements for utility construction and to any other credits, reimbursements
or savings which relate to the construction of site improvements or off-site on
or in relation to Option Increment and which have not been accounted for in the
computation of the Purchase Price as of close of escrow.
4.2 Escalator.
(a) The purchase price, as calculated by Section 4.1, for the first
Option Increment will be increased by an amount (if positive) equal to the
number of lots in that Option Increment times 31% of the amount by which the
aggregate gross
5
<PAGE>
sales price of dwelling units on the Purchase Parcel have exceeded an amount
equal to the number of homes on those lots sold, times $137,000.
(b) The purchase price for each subsequent Option Increment will be
increased by an amount (if positive) equal to the number of lots in that Option
Increment times 31% of the amount by which the aggregate gross sales price of
dwelling units on lots sold in the prior Option Increment, times $137,000.
(c) The per lot purchase price for each of the third and fourth
Option Increments shall be increased to an amount equal to the greater of the
amount determined pursuant to Subsection (b) above or 103% of per lot price for
the prior Option Increment.
(d) As used herein, the term "gross sales price" of a dwelling unit
on a lot is the sum of (i) the sales price of the unit as reflected by the
transfer tax described on the deed for that unit, increased by the amount of any
assessment against the lot resulting from the Assessment District 96-1 or other
assessment or special taxing district other then a landscaping and lighting
district or maintenance district.
5.0 Term of Option.
5.1 Unless terminated earlier pursuant to the provisions of Section 5.4
below, the term of the Option shall be as follows:
5.2 Initial Increment. The option term for the initial Option Increment
shall commence on the Effective Date and shall terminate at 12:01 a.m. on the
183rd day following close of escrow on the acquisition of the Purchase Parcel by
Buyer from Owner.
5.3 Option Term for Subsequent Option Increments. The term for the second
Option Increment shall expire at 12:01 a.m. on the first anniversary of the last
day of the option term for the First Option Increment. The option term for the
third Option Increment shall expire on the second anniversary of the last day of
the option term for the First Option Increment, and the option term for the
Fourth Option Increment shall expire on the third anniversary of the last day of
the option term for the first Option Increment.
5.4 Earlier Expiration. This Option Agreement shall terminate, and shall
be of no further effect upon the occurrence of any of the following:
(i) The failure of City to convey title to the Option Parcel to
Owner.
<PAGE>
(ii) A material breach by Buyer under the Purchase Agreement or
the failure of Buyer to acquire title to the Purchase Parcel pursuant to the
provisions of the Purchase Agreement for any reason other than the default of
Owner.
(iii) The failure of Buyer to exercise its option to acquire
any Option Increment prior to the expiration of the option term for that Option
Increment or the failure of Buyer to acquire any Option Increment pursuant to
the terms of this Agreement prior to the expiration of the option term for that
Option Increment for any reason other than the default of Owner.
6.0 Intentionally Left Blank.
7.0 Exercise of Option.
The exercise of an option for any Option Increment shall consist of three
separate notices. Failure to give any notice in the manner or within the time
specified by this Section 7.0 shall result in the termination of this Agreement
and all options contained herein.
7.1 Preliminary Notice. Not less than 90 days prior to the expiration of
the option term for any Option Increment, Buyer shall give to Seller a
Preliminary Notice of Buyer's intention to acquire the Option Increment in
accordance with the terms of this Agreement. The giving of the Preliminary
Notice shall not contractually bind Buyer to acquire the Option Increment, but
shall communicate its good faith intent to purchase the Option Increment, and
will enable the parties to begin the process of negotiating construction
contracts, computing the credits and deductions required to calculate the
purchase price, and taking other actions necessary and appropriate to close
escrow for the Option Increment within the option term.
7.2 Fifteen Day Notice. Not less than fifteen days prior to the
expiration of the term for the Option Increment, Buyer will give written notice
to Owner of its binding exercise of the Option Increment. The fifteen day
notice will:
(i) Specify a date for close of escrow, which shall be no earlier
than 10 days following the notice and no later than the last working day of the
option term.
(ii) Specify the amount of the construction contract and other
deductions and offsets used to compute the purchase price for the Option
Increment pursuant to the provisions of Section 4.0 of this Agreement, describe
the gross aggregate sales price of units on lots in the Purchase Parcel and of
units or lots in any prior subsequent Option Increments acquired hereunder, and
all other matters necessary or deemed appropriate by Buyer calculating the
purchase price for the Option Increment. To the extent possible, Buyer will
enclose its worksheets and
<PAGE>
backup material used in making these calculations.
In the event of any disagreement between Buyer and Owner
concerning Buyer's calculations, they will meet and confer and use their best
efforts to resolve such disagreements in good faith prior to close of escrow.
7.3 Final Notice. Not later than two days prior to the date for close of
escrow specified by Buyer in the fifteen day notice, Buyer shall deposit in
escrow escrow instructions consistent with this Agreement and shall deposit the
purchase price for the Option Increment. Concurrently with such deposit, Buyer
will deliver to Seller a copy of Buyer's escrow instructions and a written
confirmation of the cash deposit in escrow.
8.0 Payment of Purchase Price; Escrow.
8.1 Payment. The purchase price for each Option Increment will be payable
in cash at close of escrow.
8.2 Escrow. The Escrow Holder for the acquisition of each Option
Increment will be First American Title Guaranty Company at its office on Boynton
Avenue in Fairfield.
8.3 Costs. All costs of escrow, including the cost of Buyer's CLTA title
insurance policy, will be paid for by Buyer. Owner will pay any transfer tax.
9.0 Condition of Title.
9.1 Condition of Title at Close. Buyer will take title to each Option
Increment subject to the Tentative Map, Development Agreement, and any
general and special taxes for the fiscal year in which escrow will close,
prorated to close of escrow, the lien of assessment of the Rio Vista
Assessment District 96-1 (River View Point), and such other easements,
rights of way, and restrictions of records which City is allowed to convey to
Seller under Section 8.3 of the City Option.
9.2 Reservation of Mineral Rights. The parties acknowledge that the deed
conveying each Option Increment to Buyer will be subject to the ownership by
third parties of mineral rights below a depth of 500 feet.
9.3 Effect of Development Agreement. The parties acknowledge that the
conditions of the Tentative Map and the Development Agreement impose certain
obligations on the "Owner" as that term is defined therein. Neither this
Agreement, nor Buyer's status as an assignee of a portion of the property
subject to the Development Agreement shall be deemed to limit Owner's right to
apply for amendments of the Development Agreement which do not create an
economic burden on Buyer or
<PAGE>
homeowners within any Option Increment. Amendments of the Development Agreement
or Tentative Map allowing increases in the allowable density within the
Subdivision (excluding any Option Increment for which a preliminary notice has
been given) are specifically deemed not to create an economic burden to Buyer or
Buyer's homeowners.
10.0 POSSESSION. Possession of each Option Increment shall be delivered to
Buyer at the close of escrow, provided, that to the extent that Buyer and its
employees, agents, representatives, and other invitees shall be entitled to
enter upon the Property at all reasonable times and to conduct all reasonable
tests thereon. Buyer shall not allow any liens to attach to the Property with
respect to any such activity, and Buyer hereby agrees to defend, indemnify, and
hold Owner harmless from any personal injury or property damage sustained by any
party, including Owner, in the course of such activity, except to the extent
caused by the sole negligence of Owner, or his employees, agents,
representatives, or invitees.
11.0 Representations and Warranties of Owner. Owner hereby represents and
warrants to Buyer as follows:
11.1 This Agreement and all of the other documents to be executed by
Owner and delivered in connection with this transaction will be duly
authorized, executed, and delivered by Owner, and will constitute valid,
legal, and binding obligations of Owner, and will not violate any provisions
of any agreements to which Owner is a party.
11.2 To the best of Owner's knowledge, except as have been disclosed
in writing to Buyer there are no condemnation proceedings, utility
moratoriums, zoning or land use proceedings, or other proceedings of any
kind, either instituted or threatened to be instituted, which would hinder
Buyer in developing the Property as contemplated by the Tentative Map and
this Agreement.
11.3 Limitation on Utilities. To the best of Owner's knowledge,
there are no conditions, other than those disclosed to Buyer in writing,
which any governmental or quasi-governmental entities are considering as
conditions to be imposed upon the permits and approvals for the development
of the real property or upon its utilities hook-ups, which would hinder Buyer
in developing the Property as a residential development.
11.4 Limitation on Development. Except as disclosed to Buyer in
writing, Owner knows of no facts, nor has its misrepresented or failed to
disclose any facts relating to matters which would hinder Buyer's ability to
develop the Property as contemplated by the Tentative Map and this Agreement.
The parties acknowledge that the Property includes more than one of the
phases identified in the Tentative Map and that a minor amendment of the
Tentative Map may therefore be required to identify the
<PAGE>
Property as a single first phase of the Subdivision.
11.5 As Is. Buyer will take title to each Option Increment "as is"
except with respect to the express representatives and warranties contained
herein.
12.0 Representations and Warranties of Buyer. Buyer (and the persons
executing this Agreement on behalf of Buyer) represent and warrants to Owner
that all of the documents to be executed by Buyer and delivered in connection
with this transaction will be duly authorized, and when executed and
delivered by Buyer will constitute valid, legal, and binding obligations of
Buyer, and will not violate any provisions of any agreements to which Buyer
is a party.
13.0 Arbitration; Agreement Enforcement. Any dispute or action to
interpret or enforce any term or provision of this Agreement shall be
submitted to binding arbitration, and any party hereto shall be entitled to
petition a court of appropriate jurisdiction to order the matter submitted to
binding arbitration, to appoint a single arbitrator and to confirm the
decision of the arbitrator. The arbitration proceeding shall be conducted in
Solano County. The prevailing party or parties in any such proceeding shall
be entitled to recover as costs their attorney's fees, court fees, court
costs, and reasonable investigative and discovery costs, as determined by the
arbitrator in such matters, together with the cost of the Arbitrator.
14.0 Development Agreement. The parties acknowledge that prior to the
closing date for any Option Increment, the City of Rio Vista must agree to
the assignment of the Development Agreement to Buyer to the extent it relates
to the Option Increment.
15.0 Notices. Unless otherwise provided herein, any notice required or
permitted to be given under this Agreement shall be in writing, and shall be
deemed given when personally delivered or when deposited in the United States
mail, certified or Express Mail, postage prepaid, return-receipt requested,
addressed as follows:
If to Seller: Andrews, Lando & Associates
1107 Kentucky Street
Fairfield, California 94533
With copy to: Robert E. Lando
3411 Kenwood Court
Fairfield, California 94533
If to Buyer: Schuler Homes of California, Inc.
C/O Michael McKissick
1250 Pine Street, Suite 302
Walnut Creek, California 94596
<PAGE>
or to such other address as either party may from time to time specify in
writing to the other.
16.0 Brokers and Finders. Seller has retained Gary Archer of Archer and
Ficklin as its real estate broker in this transaction. The parties are aware
of no other licensed real estate brokers or other persons who can claim a
right to a commission or finder's fee resulting from the sale and purchase
contemplated in this Agreement. In the event that any broker or finder
perfects a claim for a commission or finder's fee based upon any such
contact, dealings or communication, the party through whom the broker or
finder makes its claim shall be responsible for said commission or fee and
all costs and expenses (including reasonable attorneys' fees) incurred by the
other party in defending against the claim.
17.0 Assignment. Owner and Buyer shall be entitled to assign their
respective interests under this Agreement in whole or in part at any time,
but if the assignment is made prior to close of escrow for any increment, it
may be made only with the prior written consent of the other party, which
consent shall not be unreasonably withheld, except that Buyer, without the
written consent of Owner, may assign its rights and delegate its obligations,
to a limited partnership in which Buyer is a general partner, or to a
corporation in which Buyer owns 50% or more of the outstanding stock. Buyer
may not assign its rights under this Agreement to individual Option
Increments prior to close of escrow for such Option Increments, (other than
the last Option Increment).
18.0 Continuation and Survival of Rights and Obligations. All
representations, warranties, covenants, conditions, and other obligations of
the parties shall survive the transfer of title to the property.
19.0 Return of Documents and Funds Upon Termination.
19.1 Return of Documents. Except as otherwise expressly provided in
this Agreement, in the event this Agreement is cancelled or terminated for
any reason, Buyer shall, within 10 calendar days following such termination
(or sooner, as otherwise specified in this Agreement), deliver to Owner all
documents and materials, if any, relating to the Property previously
delivered to Buyer by Owner and Escrow Holder shall deliver all documents and
materials deposited by Seller then in Escrow Holder's possession to Seller.
Escrow holder shall deliver to Buyer all documents, materials and funds
deposited by Buyer to which Buyer is entitled pursuant to the terms of this
Agreement which are then in Escrow Holder's possession.
<PAGE>
19.2 No Effect on Rights of Parties. The return of documents and
monies set forth above shall not affect the right of either party to seek
such remedies as such party may have with respect to the enforcement of this
Agreement.
19.3 Payment of Termination Fee. To the extent that Escrow holder
may condition its delivery hereinabove provided upon payment by the party
requesting delivery of a reasonable termination fee, any termination fee
shall be paid (or reimbursed) by the defaulting party, or paid by Buyer if
neither party is then in default.
20.0 General Provisions.
20.1 Merger. This Agreement contains all of the agreements,
representations, and warranties between Buyer and Seller relating to the
Property, and supersedes any and all prior agreements, representations, and
warranties, whether written or oral.
20.2 Amendments and Termination. Except as otherwise provided
herein, this Agreement may be amended, modified, or terminated only by a
written instrument executed by Buyer and Seller.
20.3 Governing Law. This Agreements shall be governed by and
construed in accordance with the laws of the State of California.
20.4 Severability. In the event that any provision of this
Agreement is found to be invalid or unenforceable, the remainder of this
Agreement shall continue in full force and effect.
20.5 Attorneys Fees. In the event that any action is brought to
enforce or interpret any of the terms, covenants, or conditions of this
Agreement, the losing party shall pay to the prevailing party the cost of
such legal action, including without limitation, all reasonable attorneys'
fees and court costs.
20.6 Captions. The captions used in this Agreement are inserted for
convenience only and shall not be used to determine the intent of the
operative provisions.
20.7 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall be taken together and deemed to be one
instrument.
20.8 Time. Time is of the essence under this Agreement.
20.9 Further Agreements. The parties agree to cooperate with each
other and to carry out and to execute any documents reasonably necessary to
carry out the proposed intent of this Agreement.
<PAGE>
20.10 Construction. The parties agree that each party and its
counsel have reviewed the Agreement and any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not apply in the interpretation of this Agreement.
20.11 Memorandum. Concurrently with Buyer's acquisition of title to
the Purchase Parcel, Buyer may cause to be recorded the Memorandum of Option
attached as Exhibit B and included herein by this reference. In the event of
the termination of this Agreement, Buyer will forthwith deliver to Owner a
Quit Claim Deed of the Property executed by Buyer in recordable form.
WHEREFORE, the parties have executed this Agreement on the day and year
first set forth above.
BUYER: OWNER:
Schuler Homes of California, Inc.
By: /s/ MICHAEL S. MCKISSICK /s/ FRANK J. ANDREWS, JR.
------------------------ -------------------------
Michael S. McKissick Frank J. Andrews, Jr.
President and General Manager
<PAGE>
EXHIBIT 10.3
LAND FORM
REAL ESTATE PURCHASE & SALE AGREEMENT
THIS CONTRACT CONTROLS THE TERMS OF THE SALE OF REAL PROPERTY
(Please read carefully before signing)
No. 9258
VANCOUVER , Washington ___________________, 1996
Received from SCHULER HOMES, INC. (Buyer) the sum of $ 50,000 in the form of
cash of $ ___________, checks for $ 50,000, note for $ ____________, which a has
been deposited with / / Selling Broker (Broker shall deposit any earnest money
check only after mutual acceptance), /X/ or SEE ADDENDUM as earnest money and
as a credit to Buyer on the closing of the following described real estate,
which Buyer agrees to buy and Seller agrees to sell, located in CLARK, County,
Washington, commonly known as SEE EXHIBIT X ATTACHED AND ADDENDUM. (Buyer and
Seller authorize Broker(s) to insert, correct or attach the above legal
description prior to the date of closing.)
1. PURCHASE PRICE: The total price is THREE MILLION AND FOURTEEN THOUSAND AND
NO/100 Dollars ($ 3,014,000.00), payable as follows:
TEN THOUSAND DOLLARS OF THE ABOVE-REFERENCED EARNEST MONEY DEPOSIT SHALL BE
PLACED INTO ESCROW TO BE CREATED HEREUNDER WITHIN SEVEN (7) DAYS OF MUTUAL
ACCEPTANCE HEREIN, ADDITIONAL TERMS OF SALE, AND THE PAYMENT OF THE BALANCE OF
THE EARNEST MONEY AND THE PURCHASE PRICE, SHALL BE SET FORTH IN THE ADDENDUM
ATTACHED HERETO AND BY THIS REFERENCE MADE A PART OF THIS AGREEMENT.
2. BUYER'S REPRESENTATION: Buyer represents that Buyer has sufficient funds
available to close this sale in accordance with this Agreement, and is not
relying on any contingent source of funds unless otherwise set forth in this
Agreement. Contingencies and continuing Marketing Addendum, if required, are
attached / /.
3. TITLE: Unless otherwise specified in this Agreement, title to the property
shall be marketable at closing. Rights, reservations, covenants, conditions and
restrictions, presently of record, easements and encroachments, not materially
affecting the value of the property or unduly interfering with Buyer's intended
use of the property, shall not cause the title to be considered unmarketable.
Buyer shall conclusively be deemed to have accepted the condition of the title
unless Listing Broker receives notice of Buyer's objections within 10 days
(7 days if not filled in) after the preliminary commitment for title insurance
is received by or made available to Buyer. Encumbrances to be discharged by
Seller shall be paid by Seller on or before closing.
4. TITLE INSURANCE: Seller authorizes closing agent, at Seller's expense, to
apply for a standard form owner's policy of title insurance, to be issued by
CHICAGO TITLE Title Insurance Company. The title policy shall contain no
exceptions other than those contained in said standard form and those not
inconsistent with this Agreement. If title is not so insurable and cannot be
made so insurable prior to closing, Buyer may elect either to waive such
encumbrances or defects, or to terminate this Agreement and receive a refund of
the earnest money. Buyer acknowledges that a standard form of title insurance
does not insure the location of boundaries and that an extended form of
insurance is available at additional costs to Buyer.
5. CONVEYANCE: (a) If this Agreement provides for conveying fee title, title
shall be conveyed by statutory warranty deed free of encumbrances and defects
except those included in this Agreement or otherwise acceptable to Buyer. (b)
If this Agreement provides for a sale by a real estate contract, Seller and
Buyer agree to execute a real estate contract for the balance of the purchase
price on Real Estate Contract form / / LPB-44 / / LPB-45 / / Other. A copy of
the contract from is attached and made a part of this Agreement. Title shall be
conveyed by statutory warranty fulfillment deed upon payment in full. (c) If
the property is subject to an existing contract, mortgage, deed of trust or
other encumbrance which Seller is to continue to pay, Seller agrees to continue
to pay in accordance with the terms of that agreement. If Seller should default
under any of the terms of that agreement, Buyer shall have the right to make any
payments necessary to remove the default. Any payment so made, shall be applied
to the payments next falling due on the contract between Seller and Buyer. (d)
If this Agreement provides for the sale and transfer of vendee's interest under
an existing real estate contract, Seller shall covey Seller's interest by an
assignment of contract and deed sufficient in form to convey after acquired
title.
<PAGE>
6. OTHER ITEMS: The following items are included at no additional cost: SEE
ADDENDUM. The following items are not included: Crops / / are / / are not
included in the sale.
7. UTILITIES: Seller represents to the best of Sellers' knowledge that the
property is served by the following: /X/ public/community/private water system,
/ / irrigation system /X/ public sewer, / / septic system, / / other. Seller
further represents to the best of Seller's knowledge that (1) the sewage system
serving the property is in apparent working order, (2) the Seller has no
knowledge of any needed repairs for the sewage system, (3) the sewage system
will be in good working order at the time of closing, (4) during the Seller's
term of ownership the private well serving the property has provided an adequate
supply of household water meeting the State Department of Social and Health
Services purity standards, if required, and (5) continued use of the well is
authorized by a governmental permit or other established and existing water
right, if required. In addition to the above, there is available to the
property line: /X/ gas mains, /X/ electricity, /X/ telephone, /X/ cable tv,
/ / irrigation system. Shares in electric and/or water companies or
associations, if any, / / are / / not included in this sale.
8. PROPERTY CONDITION: Seller represents to the best of Seller's knowledge
that Seller is not aware of any material facts adversely affecting the property,
except NONE
9. CLOSING: This sale shall be closed within ten (10) days after satisfaction
or waiver of all contingencies, but in any event not sooner than _________,
19__, nor later than SEE ADDENDUM, 19__, by / / a qualified closing agent of
Buyer's choice or / / ______________. "Closing" means the date on which all
documents are recorded and the sale proceeds are available for disbursement to
Seller. Buyer and Seller shall deposit with closing agent all documents and
monies required to complete this sale in accordance with this agreement.
SELLER ( JEC ) ( GC ) BUYER ( AW ) ( )
----------------------------------- ---------------------
Please initial Please initial
<PAGE>
LAND FORM No.9258
10. CLOSING COSTS AND PRORATIONS: Seller and Buyer shall each pay customary
escrow fees. Seller shall pay real estate excise tax. Taxes for the current
year, homeowner's association dues, rent, interest, and water and other utility
charges constituting liens shall be prorated as of closing.
11. POSSESSION: Buyer shall be entitled to possession: /X/ on closing; within
_____ calendar days after closing; and Seller agrees to pay Buyer $ ____________
for each day of possession beyond closing: / / other _____________.
Broker is not responsible for the collection of rent.
12. ASSIGNMENT: Buyer's rights under this Agreement may not be assigned by
Buyer without Seller's prior written consent, which consent shall not be
unreasonably withheld.
13. AGENCY DISCLOSURE: At the signing of this Agreement the Selling Agent JIM
SCHLATTER/STAN WILEY, INC. (insert name of selling licensee and the company name
as licensed) represented the BUYER (insert Seller, Buyer, or both Seller and
Buyer). The Listing Agent JIM SCHLATTER/STAN WILEY, INC. (insert name of
listing licensee and company name as licensed) represented the SELLER
(insert Seller, or both Seller and Buyer). Each party signing this Agreement
confirms that prior oral and/or written disclosure of agency was provided to
him/her in this transaction.
14. BUYER'S USE OF PROPERTY: Notwithstanding any provisions to the contrary
contained in this Agreement or addenda, the Seller and the agents make no
representation, expressed or implied, regarding the suitability of the property
for development or future use due to changes in government regulations. Buyer
has made full and complete study of the property to Buyer's sole satisfaction
and accepts the property as is.
15. FACSIMILE TRANSMISSION: Facsimile transmission of any signed original
document and retransmission of any signed facsimile transmission shall be the
same a transmission of an original document. At the request of either party or
the Closing Agent, the parties will confirm facsimile transmitted signatures by
signing an original document.
16. NON-MERGER: The terms of this Agreement shall not merge in but shall
survive closing of this transaction.
17. FIRPTA COMPLIANCE: This sale may be subject to the withholding and
reporting requirements of the Foreign Investment in Real Property Tax Act
(FIRPTA), unless Seller furnishes to Buyer an affidavit of non-foreign status.
Seller and Buyer agree to comply with FIRPTA, if applicable. Seller /X/ is / /
is not a U.S. Citizen. Buyer / / is / / is not a U.S. Citizen.
18. NOTICES: Unless otherwise specified in this Agreement, any and all notices
required to be given under this Agreement must be given in writing. Notices to
Seller must be signed by at least one Buyer and shall be deemed to be given when
actually received by or at the residence of Seller, or by or at the office of
the Listing Broker. Notices to Buyer must be signed by at least one Seller and
shall be deemed to be given when actually received by or at the residence of
Buyer, or by or at the office of Selling Broker. Both parties must keep Brokers
advised of their whereabouts. Brokers have no responsibility for notices beyond
calling the party or delivering the notice to the party's last known address.
19. COMPUTATION OF TIME: Unless otherwise expressly specified herein, any
period of time specified in this Agreement shall expire at 9:00 p.m. of the last
calendar day of the specified period of time, unless the last day is Saturday,
Sunday, or a legal holiday, as prescribed in RCW 1.16.050, in which event the
specified period of time shall expire at 9:00 p.m. of the next business day.
Any specified period of seven (7) days or less shall include business days only.
20. DEFAULT/TERMINATION: If this Agreement is terminated for any reason, any
costs authorized under this Agreement to be advanced from the earnest money
deposit shall be deducted before the remaining earnest money is refunded to
Buyer or forfeited to Seller. If a dispute should arise regarding the
disbursement of any earnest money, the party holding the earnest money may
interplead the funds into court. Furthermore, if either Buyer or Seller
defaults, the non-defaulting party may seek specific performance or damages, and
the Seller may, under some circumstances retain the earnest money as liquidated
damages. However, the Seller's remedy shall be limited as follows if the
paragraph below has been initialed by both parties:
In the event the Buyer fails, without legal excuse, to complete the
purchase of the Property, the earnest money deposit made by the Buyer
shall be forfeited to the Seller as the sole and exclusive remedy
available to the Seller for such failure. Furthermore, if the earnest
money deposited exceeds five percent (5%) of the sale price, Seller
may retain as liquidated damages and as Seller's sole remedy earnest
money equaling only 5% of the purchase price; any additional earnest
money may be refunded to Buyer. Buyer ______ ______ Seller _____
______
If the earnest money is forfeited as liquidated damages, said money shall be
divided equally between Seller and Broker(s), not to exceed the agreed
commission.
<PAGE>
21. GENERAL PROVISIONS: Time is of the essence. There are no verbal agreements
which modify this Agreement. This Agreement constitutes the full understanding
between Seller and Buyer. Buyer has personally observed the property and has
reached Buyer's own conclusion as to the adequacy and acceptability of the
property based upon such personal inspection. Unless otherwise expressly
specified herein, square footage, dimensions, and/or boundaries used in
marketing the property are understood to be approximations and are not intended
to be relied upon to determine the fitness or value of the property.
22. LEGAL AND TAX IMPLICATIONS: This Agreement affects your legal rights and
obligations and will have tax implications. Agents are not permitted to give
legal advice or tax advice. If you have any questions regarding this Agreement
and the addendums, attachments, or other related documents, you should consult
an attorney or tax advisor. Further, if a dispute arises regarding this
transaction, the prevailing party(ies) (i.e. Buyer, Seller, or Broker) shall
recover costs and reasonable attorney's fees, including those for appeals.
23. OFFER TO PURCHASE: Buyer offers to purchase the property in its present "as
is" condition, on the above terms and conditions. Seller shall have until 9:00
p.m. on ___________, 19__ to accept this offer, unless sooner withdrawn.
Acceptance by Seller shall not be effective until a signed copy hereof is
actually received by or at the office of the Selling Broker. If this offer is
not so accepted, it shall lapse and the earnest money shall be refunded to
Buyer.
STAN WILEY, INC. SCHULER HOMES, INC.
- --------------------------------- -------------------------------------
SELLING BROKER BUYER
/s/ Jim Schlatter /s/ by Allen West, V.P. & Gen Mgr.
- --------------------------------- -------------------------------------
By (Signature) BUYER Jim Schuler, President
828 Fort Street Mall - 4th Floor, Honolulu, Hawaii 96813
- --------------------------------------------------------------------------------
Buyer's Address (City, State, Zip) Buyer's Phone (Home/Work)
24. ACCEPTANCE OR COUNTEROFFER: On this date, SEPTEMBER __, 1996, Seller
agrees to sell the property on the terms and conditions set forth in this
Agreement and further agrees to pay a commission according to the terms of the
listing agreement. If the selling Broker is not the Listing Broker, the Seller
agrees to pay the selling Broker 4% of the purchase price or $3,014,000, and
the remainder of the commission under the terms of the listing agreement shall
be paid to the Listing Broker. Seller assigns to Broker(s) a portion of the
sales proceeds equal to the commission, and irrevocably authorizes and instructs
the closing agent to disburse the commission directly to Broker(s) at closing.
Seller acknowledges receipt of a copy of this Agreement signed by both parties.
If Seller has made a counteroffer hereon or attached hereto, Buyer shall have
until 5:00 p.m. on SEPTEMBER 20, 1996, to accept the counteroffer, unless
sooner withdrawn. Acceptance shall not be effective until signed copy hereof is
actually received by or at the office of Listing Broker. If the counteroffer is
not accepted, it shall lapse and the earnest money shall be refunded to Buyer.
STAN WILEY, INC. REAL ESTATE COOP FAMILY LIMITED PARTNERSHIP
- --------------------------------- -------------------------------------
LISTING BROKER SELLER
/s/ Jim Schlatter /s/ John E. Coop, Jr. 9/19/96
- --------------------------------- -------------------------------------
By (Signature) SELLER
/s/ Gordon M. Coop 9/19/96
- --------------------------------- -------------------------------------
Listing Number Seller's Name Printed
8812 NE 11 Street Vancouver, WA 98664
- --------------------------------------------------------------------------------
Seller's Address (City, State Zip) Seller's Phone (Home/Work)
25. RECEIPT: On this date: SEPTEMBER 20, 1996, Buyer acknowledges receipt or a
copy of this Agreement signed by both parties. If Seller has made a
counteroffer, Buyer accepts the Counteroffer.
/s/ Allen West V.P. & Gen Mgr.
- --------------------------------- -------------------------------------
Buyer SCHULER HOMES, INC.
<PAGE>
EXHIBIT 10.3
September 18, 1996
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
1. TERMS OF SALE:
A. PRICE:
The purchase price for the 25 finished single family lots in the
Village at Cedar Ridge Subdivision and the additional 90 unfinished and unbuilt
single family lots shall be Three Million Fourteen Thousand Dollars
($3,014,000). $984,000 of the purchase price is attributable to the 25 finished
lots, and $2,030,000 of the purchase price is attributable to the 90 unfinished
lots. The property of the 90 unfinished lots will also include the property
depicted in Exhibit ZZZ.
B. CLOSINGS:
The property will be conveyed in two closings. The "First Closing"
shall include the conveyance of the 25 finished lots in Phase I and Phase IA for
$984,000 in cash. The "Second Closing" shall include the conveyance of the 90
unfinished lots in Phase II for $2,030,000 in cash.
C. EARNEST MONEY/DOWN PAYMENT:
The cash earnest money deposit shall be $50,000, with $10,000 to be
deposited within 7 days of mutual execution of this Agreement. The remaining
$40,000 shall be deposited on or before the completion of the 30-day feasibility
period.
The entire $50,000 earnest money deposit shall become nonrefundable to
Buyer upon completion of the 30-day feasibility period. One-half of the
earnest money deposit shall apply to the purchase price paid at the First
Closing and the remaining one half shall apply to the purchase price paid at the
Second Closing. Each one-half of the earnest money shall be disbursed to Seller
at the respective closing, or such earlier date after the feasibility period
that Buyer is in default or fails to close. All earnest money will be deposited
in an interest bearing account with Chicago Title Insurance Company. Interest
on earnest money shall accrue from the date of
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
deposit for the benefit of Buyer through the end of the Feasibility Period, and
thereafter for the benefit of the Seller.
2. FEASIBILITY STUDY:
This Real Estate Purchase and Sale Agreement, the contract resulting from
the Seller's acceptance hereof, and the closing of the escrow to be created
thereunder, are expressly contingent upon the following:
Within 30 days of execution hereof by both Buyer and Seller, Buyer shall
complete a feasibility study for developing the property. The study shall
include a complete review of the property and the proposed project thereon.
Buyer's decision to continue or to terminate this Agreement shall be final and
entirely within Buyer's sole discretion. Buyer's election to continue this
Agreement must be in writing, accompanied by the check for the remaining $40,000
of earnest money, delivered to Chicago Title, Cascade Park Office on or before
the expiration of the 30-day feasibility period and deposited in the interest
bearing account described in Section 1, above. Should Buyer not approve the
Feasibility Study within the time frames stipulated herein, then Buyer shall
have the right to void the transaction by giving written notice of termination
to Seller or its agents on or before such 30th day whereupon all earnest money
paid and accrued interest shall be refunded to Buyer and this Agreement shall be
of no further binding effect. If no notice of acceptance or rejection is
received, the condition shall be deemed failed, and this Agreement shall be
deemed terminated and of no further binding effect whereupon all earnest money
paid and accrued interest shall be refunded to Buyer. Buyer and Seller may not
void or terminate the transaction as to one portion of the property and not as
to another; acceptance or rejection of the property must be as to the entirety
of the property described in Exhibit X.
The Feasibility Study shall be completed at Buyer's expense provided Buyer
shall have access to the subject property for purposes including but not limited
to surveys, environmental and hazardous substance analyses, engineering and
wetland reports for the subject property. Within seven days of mutual
acceptance of this Agreement, Seller shall deliver to Buyer's agent copies of
all studies, reports, surveys, engineering, etc. completed for the subdivision,
and copies of the organizational documents of the homeowners association, and
make available for review all Architectural Review Committee decisions,
findings, correspondence, and all other Architectural Review Committee
Documents, and make available for review all correspondence and all other
documents received or prepared by the homeowners association. If pursuant to
the feasibility
2
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
study Buyer elects not to purchase the property Buyer shall return to Seller
within 7 days the entire work file, including any copies made by Buyer and any
originals and copies delivered to Buyer. The information previously delivered
and to be delivered shall be treated by Buyer as confidential and shall not be
disclosed to third parties until the second closing has occurred except under
these conditions of confidentiality to Buyer's agents, contractors and
architects. Buyer's feasibility contingencies, as contained herein, are
intended for the sole benefit of Buyer.
Seller agrees to provide Buyer access to said property and documents,
provided Buyer agrees to hold Seller harmless from any liability arising
therefrom and that upon completion of the feasibility period, Buyer will return
the property to its condition preceding inspection. Buyer warrants that Buyer
will act in a prudent and diligent manner in removing the contingencies outlined
above.
Notwithstanding the provisions of Section 3, Title, and Section 4, Title
Insurance, of the printed Land Form attached to this Agreement, Seller shall
present the preliminary title report and copies of all exceptions listed therein
within ten days after mutual execution of this Agreement or as soon thereafter
as possible. Buyer shall have ten days from receipt of such items to accept or
reject the status of title and such exceptions in its sole discretion, and shall
notify Seller in writing prior to the expiration of such period whether it
accepts such title and exceptions or waives them, or whether it rejects such
title or exception and is electing to terminate the Agreement, in which event
all earnest money and interest thereon will be returned to Buyer. Failure to
give notice will be deemed acceptance of title and exceptions.
3. CLOSING:
The two closings described herein shall occur in the Cascade Park Office of
Chicago Title Insurance Company. The First Closing shall close within 30 days
after completion of the Feasibility Study period. The second closing shall be
(i) within 60 days after completion of the 30 day Feasibility Study period, or
(ii) within seven days after City's approval of engineering as more fully
described in Section 9, appropriate for the construction of Phase II described
in the attached Exhibit Y, whichever is later. Seller will have no
responsibility for updating or further revising such engineering after the
Second Closing. Further the lot line adjustments by Seller and recording of
easements will occur on or before, and are a condition precedent for the benefit
of both parties to, the Second Closing.
3
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
4. SELLER'S COVENANTS:
Seller covenants that from the effective date of this Agreement through the
date of both closings, Seller shall not encumber nor permit encumbrance of the
property without Buyer's prior written consent, nor shall Seller place or cause
to be placed any exception to title beyond those existing on the date of this
Agreement, except that Seller may renew or replace Seller's existing financing
prior to closing provided it is released as an encumbrance at the appropriate
closings. The parties agree that from the effective date of this Agreement
through the date of the First Closing, Seller must complete and record the final
platting of Phase 1A, and may sell or contract to sell lots as set forth in
Section 8, below. Furthermore, from the effective date of this Agreement
through the date of the closings, Seller shall not allow waste of the subject
property. Seller is not prohibited from consummating the transaction
contemplated in this Agreement by any law, regulation, instrument or judgment
and there are not contracts or other obligations outstanding for the exchange or
transfer of the property or any portion thereof, except for a remaining
obligation to Allan Crombie, which will be paid and discharged at the First
Closing.
5. PLATTING OF THE LAND:
Seller and Buyer agree to join in any proceedings and in the execution of
any forms, petitions, plats, dedications, easements or any other procedures
which may be necessary or advisable in connection with the final platting of
Phase 1A and Phase II, without further expense to Seller as to Phase II, and
without expense to Buyer as to Phase 1A and except that (i) no final platting of
Phase II will occur until after the Second Closing, and (ii) modification of the
preliminary plat or conditions thereof for Phase II may be applied for only
after the Second Closing. Buyer or its agents may, at anytime during the term
of this Agreement, enter upon the property for purposes customarily allowed in
study or preparation of land for platting, providing Buyer shall indemnify and
hold Seller harmless from any liens that may arise because of Buyer's work in
the real property, and shall immediately return the land to its original
condition after such work, and shall give Seller at least 48 hours advanced
notice of any work to be performed on the property.
6. AG DEFERRAL TAX:
4
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
Any and all AG or forest, open space or similarly deferred tax or
assessment due on the subject property, if any, shall be paid at closing by
Seller. Payments of other real property taxes and assessments shall be prorated
at the respective closing.
7. ADDITIONAL LOTS:
At Buyer's option to be exercised by written notice to Seller at or before
the time of each of the two closings but in any event not to be exercised later
than November 20, 1996, Buyer may purchase, for a purchase price of $42,800
each, any additional, finished single family lots in Phase I in the Village at
Cedar Ridge subdivision other than (i) those lots which Seller has sold to or
reserved for third parties by earnest money agreement, reservations or otherwise
or (ii) lots which Seller has decided to hold for sale or otherwise retain. The
closing of any sale under this section will be completed at either of the two
closings set forth above and in any event not later than November 30, 1996.
This option will be void, even if exercised, and no closing of such a lot may
occur if Buyer is in default under this Agreement or if this Agreement
terminates for any reason including failure of a condition to performance. In
addition no closing of a lot under this section may occur except simultaneous
with or following the completion of the First Closing.
8. SALE OF LOTS:
Buyer agrees that Seller may at Seller's option sell up to five of the
finished single family lots in Phase I identified in the attached Exhibit X
during the 30-day feasibility period only. This option does not include the
right to sell to parties related to Seller, including partners, shareholders in
partners, family members of partners, or component related companies of Seller.
If any of these lots hereby sold to Buyer are sold by Seller as evidenced by
earnest money agreement at any time prior to the expiration of the 30 day
feasibility period, the total purchase price and the amount to be paid at the
First Closing shall be reduced by $42,800 per lot sold.
9. ENGINEERING:
Seller will obtain prior to the Second Closing the City's approval of the
additional engineering drawings, plans and specifications required for 33
unfinished lots in Phase II mutually agreed to by Seller and Buyer and described
on the attached Exhibit Y. This obligation shall include the obligation to
complete the engineering drawing and plans and specifications to Seller's and
Buyer's mutual agreement and obtain the City's approval of the same, for the
selected 33 unfinished lots. The engineering shall be sufficient to satisfy the
requirements of the City of
5
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
Vancouver to complete construction of the selected 33 lots in Phase II of the
Project. Seller shall pay for these engineering services but will not be
required to pay for or obtain permits or fees for the grading, engineering or
improvements, to conduct grading or construction of the engineered improvements,
to do additional engineering after city approval or commencement of construction
nor to obtain final platting. Seller will have no responsibility for updating
or further revising such engineering after the Second Closing. The lot line
adjustments described in Section 12 and the easements and other agreement
described in Section 13, will be completed prior and are a condition precedent
for the benefit of both parties to the Second Closing.
10. WESTERN BOUNDARY CORRECTION:
The boundary corrections for the west side of preliminary Lots 3, 4, 5, and
6 of Phase II will result in a correction 13 feet of depth from the depiction of
the preliminary plat. The calculations and lot dimensions will be corrected by
the Seller at Seller's expense and submitted to Buyer as soon as completed but
no later than the expiration of the Feasibility Period. See attached
Exhibit ZZ.
11. COMMISSION:
The real estate commission to be paid to Stan Wiley, Inc. by Seller at each
closing shall be 4% of the total sales price for the property sold in that
closing. Buyer represents and warrants that it has not retained a broker or
salesperson. The parties agree that Seller has engaged in the services of a
commercial real estate brokers in this transaction, and Seller agrees to pay and
be solely responsible for all commissions due and owing to said broker. Seller
further agrees to indemnify, defend, and hold the Buyer harmless from any
damages, liabilities, costs or expenses, including reasonable attorney fees,
arising from or related to any such claim or proceeding brought through Seller
for payment of any brokerage commission or fee based upon the transactions
contemplated by this Agreement, except as may arise from the actions of Buyer.
12. BOUNDARY DESCRIPTION:
The Second Closing, of the 90 preliminarily approved lots in Phase II, will
be by a boundary legal description of the entire parcel being sold including
unimproved open spaces and undedicated roadways, but excluding the commercial
parcel, multifamily parcel and homestead
6
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
parcel as depicted on the attached Exhibit Z. Prior to the Second Closing,
Seller will at Seller's expense complete three lot line adjustments to make the
homestead parcel, the multifamily parcel and the commercial parcel into legal
parcels as depicted on the attached Exhibit Z and complete a boundary adjustment
on the westerly boundary at no expense to Buyer. These parcels will not be sold
to Buyer and will not be encumbered to secure Buyer's financing. Buyer will
cooperate with Seller in completing the lot line adjustments and boundary
changes. The remaining parcel to be sold will be one contiguous parcel for
which preliminary plat approval for 90 lots has been obtained. The lot line
adjustments to create the multifamily, commercial and homestead parcels will not
affect the size, shape or number of lots and open space that is represented on
the preliminary corrections plat approved. At the Second Closing, the title
policy will include an endorsement at Seller's expense, if available, that there
is no gap between the three parcels retained by Seller and the property conveyed
to Buyer.
13. EASEMENTS:
At or prior to the Second Closing, Seller and Buyer will execute and record
perpetual, nonexclusive easements, appurtenant to and benefiting the homestead
parcel, the commercial parcel and the multifamily parcel (as dominant parcels),
for the purpose of providing sanitary sewer, storm sewer, water, electrical and
gas service, and vehicular access to these parcels including proposed 11th
Street, 87th Place, 87th Avenue and 15th Street. The easements will describe
the property sold hereby as the servient parcel, and the Seller's right to use
or construct and use sanitary sewer, storm sewer, and water, electrical and gas
and roadway where applicable, will locate such easements within proposed
roadways of Phase II and future phases and will allow for reasonable location to
facilitate platting or construction. If easements are required by Buyer or
Seller across Phase I or IA, these easements will be executed and recorded at
the First Closing. The property conveyed to Buyer will be conveyed subject to
the easements. The easements shall be located within the proposed streets of
Phase II and future phases of the project in a manner mutually acceptable to
Seller and Buyer and shall provide that:
(a) Buyer will at Buyer's expense complete the installation of sanitary
sewer, storm sewer, and water, connecting such systems of the Project
including main lines, swales, etc., to the boundaries of the
commercial parcel, and complete the improvements to 15th Street and
87th Place, described in 13(c), within nine months after the Second
Closing. Buyer will at Buyer's expense complete the sanitary sewer,
water, and storm water, connecting such systems of this Project
including main lines, swales, etc., to the boundary of the multifamily
parcel within
7
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
24 months after the Second Closing. Buyer will, at Seller's expense,
install the stubouts from the adjacent water and sanitary sewer lines
in the street to the commercial and multifamily parcels at the time
the applicable adjoining roadway is constructed pursuant to this
Section 13(a), 13(c) or 13(i). Buyer will, at SELLER'S expense, stub
out sewer and water connections to the two lots comprising the
homestead site from the lines being installed to serve the multifamily
parcel within 24 months after the Second Closing, or by such earlier
date as Buyer may install roadway in 11th Street as set forth in
Section 13(i). Buyer's performance of obligations under Section 13(a)
and 13(c) may be delayed by reason of, but only to the extent of the
delay caused by, acts of God, extreme weather, unavailability of
materials, strikes and labor unrest, civil disturbance, and national
emergency, or building moratorium. Buyer will dedicate such completed
lines to the City and Seller will promptly release easements to the
extent of such dedication.
(b) The easements shall be of sufficient width for construction,
maintenance and replacement.
(c) The location, sizing and capacity of the lines shall be sufficient,
when combined with other projected loads, to accommodate at least 62
apartment units on the multifamily parcel, and 5,000 square feet of
commercial retail space and eight apartments on the commercial parcel.
Sizes will be determined by an agreement of Seller's and Buyer's
engineers and City as part of future phase improvement plans and shown
as future improvements. Buyer will construct at its expense 87th
Place adjacent to the commercial parcel including its intersection
with 15th Street, and NE 15th Street between 87th Place and 87th
Avenue, to the full widths shown on the preliminary plats of 1994.
Seller is negotiating for an agreement with adjoining landowners for
the improvement of 15th Street between 87th Place and 87th Avenue,
including the intersection of 15th Street with 87th Avenue. Buyer
shall review this agreement during this Feasibility Period and will
accept or reject the agreement at that time; it is understood that if
negotiations will continue after the Feasibility Period Seller will
keep Buyer continuously apprised of changes on a timely basis and
consult with Buyer prior to negotiations, and Seller will accept an
agreement prior to the Second Closing only with the consent of Buyer
which consent will not be unreasonably delayed or withheld. The
execution of such an agreement is not a condition to Buyer's
performance under this Agreement. Following the Second Closing Buyer
will be substituted for Seller in the
8
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
negotiations and conclude such negotiations. If an agreement has been
concluded by the Second Closing, at the Second Closing Buyer will
assume and be responsible for the proportional payment and performance
which Seller would otherwise owe for that improvement. The
installation of the roadway and performance by Buyer of that
agreement, if any, which completes the improvements described above
within the time frames set forth in Section 13(a), together with
posting of the bond or letter of credit under 13(h), would satisfy
Buyer's obligation to improve 15th Street.
(d) That the easements are superior to any deed of trust, mortgage or
declaration placed upon the subject property.
(e) That Seller, its successor and assigns will not be charged late comers
fees or other charges by Buyer, its successors or assigns. Seller
will pay connection charges charged by the City of Vancouver upon hook
up of the commercial parcel, multifamily parcel, and homestead parcel,
and any systems development charge specifically assessed to the
commercial parcel, multifamily parcel or homestead parcel by the City
of Vancouver, and any other fees normally and routinely assessed for
development by the City.
(f) The roadway easements, including without limitation those in 15th
Street and 11th Street, will provide that if the roadway is dedicated
to the City, allowing reasonable access to the street for the
homestead, commercial and multifamily parcels, then immediately upon
completion of construction including applicable utilities under
Section 13(a), the Seller will release its roadway easement as to the
areas so dedicated. At the Second Closing, Seller agrees to deposit
with Chicago Title in escrow deeds dedicating the roadways of NE 87th
Place and 11th Street, respectively, to the City with instructions
that the respective deed be delivered to the City if Buyer completes
improvements to 11th Street or NE 87th Place and 15th Street to the
87th Avenue intersection, respectively, including utilities as set
forth in Section 13(a), 13(c) or 13(i), respectively, and City accepts
such improvements.
(g) Notwithstanding the provisions of Section 13(c), if Buyer fails to
construct the infrastructure within the time frame(s) set forth above,
Seller may do so, at Buyer's expense, and Buyer will reimburse such
expense, including reasonable
9
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
engineering and survey expense, construction costs and system
development charges, latecomers fees, impact fees, if any, and
permitting fees. If Buyer fails to construct the infrastructure
within the time frames set forth above, Seller will provide the Buyer
with the opportunity to obtain bids for the work with 45 days advanced
notice after engineering plans are complete and approved by the City
for construction, and the work will be awarded by Seller to the lowest
priced, qualified bidder. A qualified bidder shall be a licensed,
bonded and insured bidder who is capable of meeting project
requirements in a timely manner and of good reputation in Clark County
for completion of projects of this scale with good workmanship and in
a timely manner.
(h) Prior to or at the Second Closing, Buyer will provide a letter of
credit or performance bond from a source reasonably acceptable to
Seller in the amount of $100,000 to assure Buyer's performance of its
obligations under Section 13(a), (c) and (g). The letter of credit or
performance bond will be returned or released when the work is
completed and accepted by the City of Vancouver and constructed in
accordance with the terms of this Agreement. This dollar figure is
not intended to limit the scope of Buyer's obligation. Fifty percent
(50%) of the letter of credit or performance bond shall be released
upon completion and dedication of the improvements in Phase II. The
balance of the letter of credit or performance bond shall be released
upon completion and recording of dedication of sanitary sewer and
storm sewer to the multifamily parcel.
(i) At the Second Closing Seller will create and record nonexclusive
easements for vehicular access for the benefit of Phase II across
those portions of the commercial parcel, multifamily parcel and
homestead parcel which are within NE 11th Street, NE 15th Street, 87th
Place or 87th Avenue as shown on the preliminary plats of 1994. These
easements will include the applicable obligations of Buyer to improve
set forth in Section 13(a), 13(c) and 13(g). Seller will construct NE
11th Street along the frontage of the multifamily parcel to full width
as shown on the preliminary plats of 1994 within 24 months after the
Second Closing, and cooperate in dedication of that roadway to the
City. Seller's performance under this Section 13(i) may be delayed
by, but only to the extent of the delay caused by acts of God, strikes
and labor unrest, civil disturbance, extreme weather, national
emergency or unavailability of material. To assure completion of
construction of NE 11th Street, at the Second Closing Seller will
provide a performance bond or
10
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
letter of credit from a source acceptable to Buyer in the amount of
$60,000 to assure Seller's performance of its obligations under this
Section 13(i). The letter of credit or performance bond will be
returned or released when the work is completed and accepted by the
City of Vancouver and constructed in accordance with the terms of this
Agreement. This dollar figure is not intended to limit the scope of
Seller's obligation. If Seller fails to construct the infrastructure
within the time frame set forth above, or if Buyer elects to construct
such infrastructure in connection with construction of infrastructure
for Phase II, or if Buyer elects to construct prior to the time Seller
is required to do so, Buyer may notify Seller and construct such
infrastructure at Seller's expense, and Seller will reimburse such
expense, including reasonable engineering and survey expense,
construction costs and systems development charges, latecomers fees,
impact fees, if any, and permitting fees. If Buyer so elects to
complete the work at any time, Buyer will provide Seller with the
opportunity to obtain bids for the work with 45 days advanced notice
after engineering plans are complete and approved by the City for
construction, and the work will be awarded by the Buyer to the lowest
price, qualified bidder . A qualified bidder shall be a licensed,
bonded and insured bidder who is capable of meeting project
requirements in a timely manner, and of good reputation in Clark
County for completion of projects of this scale with good workmanship
and in a timely manner. Seller will dedicate the roadway immediately
upon completion of such work including applicable utilities in
accordance with the terms of this Agreement and acceptance by the
City.
(j) The preliminary plats for the Village at Cedar Ridge include open
space as common areas within Phase I, Phase II and future phases.
Seller has retained for occupants of constructed or to be constructed,
residential dwellings (including single family homes, apartments,
townhouses or condominium units) on the multifamily parcel, commercial
parcel and homestead parcel an easement, on a parcel by parcel basis,
to use such common areas regardless whether such properties are
annexed to the existing CC&Rs, which easement or agreement for
easement at the election of Seller may be recorded at the First
Closing. The easement will provide that the owner of the parcel, for
each particular constructed dwelling, must pay an annual use fee equal
to one hundred percent (100%) of the regular annual assessment(s)
(which may be charged in monthly installments if so charged to other
owners), but not special or irregular assessments, charged by the
homeowners association(s) from time to time to a homeowner residing in
the
11
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
phase(s) in which the common area(s) is or are located. The retained
easements will provide that they can be voluntarily abandoned on a
parcel basis at any time, or terminated for lack of payment within a
reasonable period.
14. OUT BUILDINGS:
Seller shall at Seller's expense remove the four out buildings including
foundations on the property within three months following the Second Closing.
Any out buildings which obstruct imminent construction of infrastructure for
future phases will be removed by Seller upon 30 days prior written notice.
Seller shall also remove any and all debris, equipment, and trash from the out
buildings or from the demolition and removal of the out buildings within three
months following the Second Closing so as to leave such areas in a natural
condition to the reasonable satisfaction of Buyer. Seller will indemnify,
defend, and hold harmless Buyer, its successors and assigns from any claims or
damage for personal injury or death arising from the presence of the out
buildings, and from liens or other claims, including personal injury, death or
damages, arising from removal and Seller shall confirm this indemnity in writing
at the Second Closing.
15. CONTROL:
Seller has no obligation to Buyer to make improvements to open spaces in
Phase I. Upon the First Closing, Buyer assumes responsibility for the
subdivision including responsibilities as the Declarant and an owner under the
CC&Rs, architectural guidelines, homeowners association, and for open spaces in
Phase I and Phase II. This section will specifically survive the closings. The
remaining obligations to improve the open spaces in Phase I and future phases
shall be only those required by the City's approval of the preliminary plat or
final plat and those other improvements and commitments committed to by Seller
to third party purchasers, but only to the extent that Seller has disclosed such
commitments in writing to Buyer prior to the end of the Feasibility Period.
Reciprocal easements and amendments to the Declaration of CC&Rs necessary to
develop the second and subsequent phases of the subdivision will be recorded at
the First Closing so that if for any reason the purchase of the unfinished lots
does not close, the Seller, its successors and assigns may at its election
develop the unfinished lots, retain full control as Declarant of the Project,
including control of the homeowners association and Architectural Review
Committee, and annex property to the subdivision and CC&Rs. If for any reason
the Second Closing does not occur, then at Seller's option, the control as
Declarant of the Project, including without limitation, control of the
homeowners association and Archtechtural Review Committee and the right to annex
property to the subdivision and CC&Rs, shall revert to Seller
12
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
upon notice to Buyer.
16. ENVIRONMENTAL:
John Coop Sr. farmed the Property from 1947 to 1990. Coop Family Limited
Partnership came into control of the Property upon the death of John Coop Sr. in
1991. Prior to that time Gordon Coop and John Coop Jr. were not involved in the
day to day operations of the Property as a farm. Gordon Coop and John Coop Jr.
represent to Seller that since acquiring control of the Property in 1991, they
have developed no cognitive, actual knowledge of
(i) the presence of any "Hazardous Substance" as that term is
defined under both federal and state laws, on or under the Property
except those that may have been used in the ordinary course of
business of farming or in household uses; or
(ii) any known spills, releases or discharges or disposal of
Hazardous Substances occurring on or above ground on the Property
other than those that may have occurred in the ordinary course of
farming or in connection with household uses; or
(iii) any underground storage tanks on the Property; or
(iv) the receipt by Seller, John Coop Jr. or Gordon Coop of any
written notices by federal or state agencies relating to Hazardous
Substances on the Property.
Seller and Gordon Coop and John Coop Jr. make no warranty or guarantee
regarding the foregoing matters, or the condition of the Property as to such
matters or other matters relating to Hazardous Substances, and further make no
express or implied representation, warranty or guaranty of any kind regarding
the presence of, or spills, releases, discharges or disposals of Hazardous
Substances on other property or of any contamination in the groundwater on,
under or about the Property. Buyer may not rely on the foregoing
representations to limit the scope of its environmental review or review for
Hazardous Substances under Section 3, above.
17. INDEMNITY RELATING TO CONTROL:
13
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
Buyer, its successors and assigns shall indemnify, defend and hold harmless
Seller, any partners, directors or officers of Seller or its component entities,
and its or their successors and assigns from any claim, injury or damage claimed
by owners of property in Phase I or IA arising in any manner from decisions of
the Architectural Review Committee occurring after the First Closing or from
breaches of the Buyer/Declarant under the Declaration of CC&Rs or Design
Guidelines after the First Closing. Seller, its successors and assigns shall
indemnify, defend and hold harmless Buyer, its directors and officers and its or
their successors and assigns form any claim, injury or damage claimed by owners
of property in Phase I or IA arising in any manner from decisions of the
Architectural Review Committee occurring prior to the First Closing or from
breaches of the Seller/Declarant under the Declaration of CC&Rs or Design
Guidelines occurring prior to the First Closing. Should Buyer elect not to
annex Phase II or future phases or any portion thereof to the existing
Declaration of CC&Rs of Phase I or IA, Buyer, its successors and assigns agree
to indemnify, defend and hold harmless Seller, any partners, directors or
officers of Seller or its component entities, and its or their successors and
assigns from any claims from third party purchasers of lots within the
Subdivision based on the election not to so annex. These indemnities shall
survive the closings.
18. CONDITION:
Seller's performance under this Agreement is expressly conditioned, to and
including the thirtieth day of the Feasibility Period, upon Seller's reasonable
satisfaction with terms of the easements and other documents provided for, in
Sections 13 and 15 of this Addendum. If Seller terminates this Agreement,
including following acceptance by Buyer, as a result of the failure of this
condition, Seller will release any then nonrefundable earnest money and interest
then held in escrow. Seller will give notice to Buyer prior to the thirtieth
day of the Feasibility Period of its election that the condition is either
satisfied or waived, or if not satisfied then that the Agreement is terminated.
19. WELL:
Until such time as use must cease due to construction, Seller may continue
to exclusively use the well currently serving the homestead parcel. The parties
will execute a nonrecorded easement at the Second Closing to confirm this use
wherein Seller is responsible for the operation of the well, which shall include
the obligation of Seller to indemnify, defend and hold Buyer
14
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
harmless from any claim or damage arising from such use. In the event the well
or its line to the homestead parcel obstructs imminent construction of
infrastructure for a future phase, upon 30 days prior written notice in no event
prior to three months after the Second Closing Seller will cease use of the
well, and promptly and diligently complete proper abandonment of the well, and
release easements for access to and use of the well.
20. PREPARATIONS:
The representations of Section 7 of the printed form of this Agreement
apply only to the 25 finished lots in Phase I and Phase IA. Each party will
bear its own attorney's fees in negotiating, reviewing and preparing the
documentation required by Sections 13 and other portions of this Agreement, or
otherwise required to close the transactions described in this Agreement.
21. ACCEPTANCE:
Buyer shall have until 5:00 p.m. PDT, September 20, 1996 to accept this
Offer, unless sooner withdrawn by Seller. Acceptance of this Offer shall not be
effective until a signed copy of this Offer is actually received by or at the
office of the Selling Broker. If this Offer is not so accepted, without
modification, this Offer by Seller shall terminate at 5:00 p.m. PDT, September
20, 1996.
22. REPRESENTATIONS:
A. Seller has previously granted to Buyer the right to inspect and make
investigations in connection with the Property and shall continue to permit
Buyer to make its independent inspection and investigation of the Property prior
to the Closing Date. SELLER ENCOURAGES BUYER TO HAVE THE REAL PROPERTY CLOSELY
INSPECTED.
B. Seller represents and warrants to Buyer that (i) the lots sold to
Buyer in Phase I and Phase IA conform to and have been constructed in accordance
with all zoning and subdivision requirements of the City of Vancouver, the terms
and conditions of the City's preliminary and final approvals of subdivision of
such lots, and the survey and storm drainage conceptual plan dated May 2, 1994
performed by MacKay & Sposito; (ii) subdivision improvements including roads,
water, sanitary sewer, storm sewer, gas, electricity, CATV and telephone in
Phases I and IA conform to the engineering plans and specifications approved by
the City and the appropriate
15
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
utility company; and (iii) the preliminary plat for 90 lots in Phase II was
approved in 1994 by the City; and (iv) sanitary sewer, storm sewer, water,
electricity, and gas are available at a boundary of Phase II.
C. Except as specifically set forth in this Agreement IN SECTION 4 AND
SECTION 22B OF THIS ADDENDUM AND IN SECTION 7 OF THE PREPRINTED FORM AS MODIFIED
BY THIS ADDENDUM AND EXCEPT FOR OBLIGATIONS OF SELLER EXPRESSLY SET FORTH IN
THIS AGREEMENT, no warranties, guarantees or representations have been or are
being made by Seller concerning the boundaries and acreage of the property, any
tests, inspections or examinations of the Property or its financial and
operating records, any governmental permits or approvals obtained or to be
obtained in connection with Buyer's use of the Property, the suitability of the
Property for Buyer's intended use, the availability of utilities and services,
the applicable zoning, subdivision, building, housing and other ordinances,
restrictions, laws, and regulations affecting the Property, or other matters.
Except as otherwise specifically set forth in this Agreement IN SECTION 4 AND
SECTION 22B OF THIS ADDENDUM AND SECTION 7 OF THE PREPRINTED FORM AS MODIFIED BY
THIS ADDENDUM, and except for obligations of Seller expressly set forth in this
Agreement Buyer accepts the land, and improvements and all other aspects of the
Property in their present condition, AS IS, without any representations or
warranties by Seller, expressed or implied. In particular, but without
limitation, Buyer has made its own independent analysis of the environmental
condition of the Property, including matters relating to Hazardous Substances,
and without warranty, guarantee or indemnity by Seller or John Coop Jr. or
Gordon Coop, and no representation of any of them herein relating to such
matters. NO AGENT, INDEPENDENT CONTRACTOR, REAL ESTATE AGENT OR EMPLOYEE OF
SELLER IS AUTHORIZED TO MAKE ANY REPRESENTATION OR WARRANTY CONCERNING THE REAL
PROPERTY.
COOP FAMILY LIMITED PARTNERSHIP
By Coop Properties, Inc.
9/19/96 /s/ John E. Coop, Jr.
- ------------ ---------------------------------------------
Date John E. Coop, Jr., President
9/19/96 /s/ Gordon M. Coop
- ------------ ---------------------------------------------
Date Gordon M. Coop, Secretary
16
<PAGE>
ADDENDUM
TO THE PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SCHULER HOMES, INC. AS BUYER
AND
COOP FAMILY LIMITED PARTNERSHIP AS SELLER
ACCEPTED AND AGREED TO:
SCHULER HOMES, INC.
By /s/ Allen West Date 9/20/96
-------------------------------------- -----------------
Its: VP & Gen Mgr
-----------------------------------
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED IN THE
COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 488,000
<SECURITIES> 0
<RECEIVABLES> 778,000
<ALLOWANCES> 0
<INVENTORY> 245,230,000
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 273,605,000
<CURRENT-LIABILITIES> 0
<BONDS> 57,500,000
0
0
<COMMON> 209,000
<OTHER-SE> 93,096,000
<TOTAL-LIABILITY-AND-EQUITY> 273,605,000
<SALES> 21,953,000
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 21,225,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 787,000
<INCOME-TAX> 302,000
<INCOME-CONTINUING> 485,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 485,000
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
