SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
May 15, 1998
HOME PROPERTIES OF NEW YORK, INC.
(Exact name of Registrant as specified in its Charter)
MARYLAND 1-13136 16-1455126
(State or other jurisdiction (Commission file number) (I.R.S. Employer
of incorporation or organization Identification
Number)
850 CLINTON SQUARE
ROCHESTER, NEW YORK 14604
(Address of principal executive offices)
Registrant's telephone number, including area code: (716) 546-4900
Not applicable
(Former name or former address, if changed since last report)
Consecutive No. Page 1 of
Exhibit Index at Page
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
CURRENT REPORT
ON FORM 8-K
Item 5. Other Events.
PROPOSED ACQUISITION.
Home Properties of New York, L.P. (the "Operating Partnership"), a New York
limited partnership has entered into agreements to purchase 17 apartment
communities containing 4,002 apartment units (the "Acquisition Portfolio") and
related facilities for $155 million in cash.
The properties are located in New Jersey (2,363 units), Maine (596 units), New
York (327 units), Pennsylvania (310 units), Ohio (242 units) and Michigan (164
units). A schedule listing the location of the properties, the number of
units, the allocation of the purchase price and the current owners are attached
as a schedule to an exhibit to this filing.
COMMITMENT LETTER.
The Operating Partnership has received and accepted a Commitment Letter from
CIBC, Inc. for a $155,000,000 loan that could be used to finance the purchase
of the Acquisition Portfolio.
Item 7. Financial Statements and Exhibits.
a. Financial Statements of the business acquired:
Audited statement of revenues and certain expenses of the
Acquisition Portfolio for the year ended December 31, 1997.
b. Pro Forma Financial Information:
Pro forma condensed balance sheet of the Company as of March 31,
1998 and related notes (unaudited).
Pro forma condensed statement of operations of the Company for the
three months ended March 31, 1998 and for the year ended December
31, 1997 (unaudited).
c. Exhibits:
Exhibit 5.1 - Form of Purchase and Sale Agreement with schedule
setting forth material details in which documents differ from form.
Exhibit 5.2 - Commitment letter from CIBC, Inc.
Exhibit 23.0 - Consent of Coopers and Lybrand, L.L.P.
<PAGE>
The Acquisition Portfolio
_____
Statement of Revenues and Certain Expenses
December 31, 1997
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
Home Properties of New York, Inc.
We have audited the accompanying statement of revenues and certain
expenses, as defined in Note 1, of The Acquisition Portfolio for the year
ended December 31, 1997. The statement of revenues and certain expenses is
the responsibility of The Acquisition Portfolio's management. Our
responsibility is to express an opinion on the statement of revenues and
certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of revenues and
certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the statement of revenues and certain expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statement
of revenues and certain expenses. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared
for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not
intended to be a complete presentation of The Acquisition Portfolio's
revenues and expenses.
In our opinion, the statement of revenues and certain expenses referred to
above presents fairly, in all material respects, the revenues and certain
expenses, as defined in Note 1, of The Acquisition Portfolio for the year
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Rochester, New York
May 15, 1998
<PAGE>
The Acquisition Portfolio
Statement of Revenues and Certain Expenses
(In Thousands)
Period January 1 Year Ended
through March 31, December 31, 1997
1998 (unaudited)
----------------- -----------------
Revenues:
Rental income $ 7,327 $ 28,317
Other income 231 780
------------- --------------
7,558 59,097
------------- --------------
Certain expenses:
Property operating and
maintenance 2,564 9,370
Real estate taxes 864 3,372
------------- ---------------
3,428 12,742
------------- ---------------
Revenues in excess of certain
expenses $ 4,130 $ 16,355
============= ==============
The accompanying note is an integral part of the financial statement.
<PAGE>
1. Basis of Presentation and Summary of Significant Accounting
Policies
Business
The accompanying statement of revenues and certain expenses includes
the operations (see "Basis of Presentation" below) of The Acquisition
Portfolio, 17 residential properties owned and managed by common
parties not related to Home Properties of New York, Inc.
(the "Company").
On May 14, 1998, the Company, through its subsidiary Home Properties
of New York, L.P., entered into an agreement to acquire 100% of the
real estate of The Acquisition Portfolio, 4,002 apartment units located
in 17 communities. The properties are primarily located in suburban
markets of New Jersey, with other properties located in suburban
markets of Pennsylvania, Maine, Michigan and Ohio.
Basis of Presentation
The accompanying financial statement is not representative of the
actual operations of The Acquisition Portfolio for the period
shown. As required by the Securities and Exchange Commission
Regulation S-X, Rule 3-14, certain expenses have been excluded
which may not be comparable to the proposed future operations of
The Acquisition Portfolio. Expenses excluded relate to property
management fees, interest expense, depreciation and amortization
expense and other expenses not directly related to the future
operations of The Acquisition Portfolio. The Company is not aware
of any material factors relating to The Acquisition Portfolio that
would cause the reported financial information not to be necessarily
indicative of future operating results.
Revenue Recognition
Rental income attributable to residential leases is recorded when
due from residents. Leases are generally for terms of one year.
Interim Unaudited Financial Statement
The accompanying interim unaudited statement of revenues and certain
expenses for the period from January 1 through March 31, 1998 has been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission described above. The results of operations of
such interim period are not necessarily indicative of the results for
the full year.
Use of Estimates in the Preparation of Financial Statements
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.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(Unaudited, In Thousands)
This unaudited pro forma Condensed Consolidated Balance Sheet is presented as
if the Company had purchased the Acquisition Portfolio on March 31, 1998. This
unaudited pro forma Condensed Consolidated Balance Sheet should be read in
conjunction with the Statement of Revenues and Certain Expenses of the
Acquisition Portfolio and note thereto included elsewhere herein. In
management's opinion, all adjustments necessary to reflect the purchase of the
Acquisition Portfolio have been made.
<TABLE>
<CAPTION>
Home
Properties of
New York, Acquisition Pro Forma Company
Inc. (A) Portfolio (B) Adjustm.(C) Pro Forma
------------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Real Estate, net $548,169 $11,832 $143,168(D) $703,169
Cash and cash equivalents 13,332 13,332
Other assets 56,589 56,589
-------- ------- --------- --------
Total assets $618,090 $11,832 $143,168 $773,090
======== ======== ========= ========
LIABILITIES
Mortgage notes payable $217,376 $ $ $217,376
Line of credit 22,250 54,984 77,234
Other liabilities 15,936 15,936
-------- --------- --------- --------
Total liabilities 255,562 54,984 310,546
-------- --------- --------- --------
Minority interest 187,841 187,841
-------- --------- --------- --------
STOCKHOLDERS' EQUITY
Common Stock 104 40(E) 144
Additional paid-in capital 200,759 99,976(E) 300,735
Accumulated deficit (21,302) 11,832 (11,832)(F) (21,302)
Treasury stock, at cost (426) (426)
Officer and Director notes for
stock purchases (4,448) (4,448)
--------- -------- -------- --------
Total stockholders' equity 174,687 11,832 88,184 274,703
--------- -------- -------- --------
Total liabilities and
stockholders' equity $618,090 $11,832 $143,168 $773,090
========= ========= ======== ========
</TABLE>
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(Unaudited, In Thousands)
(A) Reflects the Company's historical consolidated balance sheet as of March
31, 1998 as reported on form 10-Q.
(B) Reflects the Acquisition Portfolio historical balance sheet as of March
31, 1998 for the assets proposed to be acquired by the Company.
(C) The pro forma adjustments reflect the proposed purchase of the Acquisition
Portfolio for $155,000. The purchase price will be allocated $26,040 to
land, $4,009 to appliances and equipment and $124,951 to building.
The appliances and equipment have an estimated useful life of ten years
and the building has an estimated useful life of thirty-five years.
(D) Reflects the excess of the proposed cash purchase price of $155,000 over
the historical seller's cost basis of $11,832.
(E) Reflects the proposed issuance of 4,000 shares of common stock at a price
of $26.60, less underwriting expenses.
(F) Represents historical seller's capital account zeroed out.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited, In Thousands, Except Share and Per Share Data)
The unaudited pro forma Consolidated Statement of Operations for the three
months ended March 31, 1998 and for the year ended December 31, 1997 is
presented as if the proposed acquisitions of the Acquisition Portfolio had
occurred on January 1, 1997. The unaudited pro forma Consolidated Statement of
Operations should be read in conjunction with the Statements of Revenues and
Certain Expenses of the Acquisition Portfolio and notes thereto included
elsewhere herein. In management's opinion, all adjustments necessary to
reflect the effects of the proposed purchase of the Acquisition Portfolio have
been made.
The unaudited pro forma Consolidated Statement of Operations is not necessarily
indicative of what the actual results of operations would have been assuming
the transactions had occurred as of the beginning of the period presented, nor
does it purport to represent the results of operations for future periods.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1998
--------------------------------------------------------------------------------
Home Properties of New
York, Inc. Acquisition Pro forma Company
Historical (A) Portfolio (B) Adjustments Pro Forma
--------------------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
REVENUES
Rental Income $25,094 $7,327 $ $32,421
Property other income 502 231 733
Other income 1,177 1,177
------- ------ -------- -------
Total revenues 26,773 7,558 34,331
------- ------ -------- -------
Expenses:
Operating and maintenance 12,140 3,428 15,568
General and administrative 1,209 227(C) 1,436
Interest 4,398 935(D) 5,333
Depreciation. & Amortization. 4,079 1,000(E) 5,079
------ ------ -----
Total Expenses 21,826 3,428 2,162 27,416
------ ------ -----
Income before minority interest $4,947 $4,130 ($2,162) 6,915
======= ====== ======
Minority interest of Unit holders 3,038
------
Net income $3,877
======
Net income per share - Basic $0.40
======
Diluted $0.39
======
Weighted average number of shares
outstanding:
- Basic 9,702,975
=========
- Diluted 9,900,451
=========
</TABLE>
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited, In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
Home Properties of Acquisition Pro forma Company
New York, Inc. (A) Portfolio (B) Adjmt Pro- Forma
------------------ ------------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rental income $64,002 $28,317 $92,319
Property other income 2,222 780 3,002
Other income 3,473 3,473
------ ------ -------- -------
Total revenues 69,697 29,097 98,794
------ ------ -------- -------
Expenses:
Operating and Maintenance 31,317 12,742 44,059
General and administrative 2,255 873 (C) 3,128
Interest 11,967 3,739 (D) 15,706
Depr. & Amort. 11,200 4,000 (E) 15,200
------ ------ -------- -------
Total expenses 56,739 12,742 8,612 78,093
------ ------ -------- -------
Income before loss on disposition of
property, minority interest and
extraordinary item 12,958 $16,355 ($8,612) $20,701
Loss on disposition of property 1,283 1,283
------ ------- ------ ------
Net income before minority interest and
extraordinary item $11,675 $16,355 ($8,612) 19,418
======= ======= ========
Minority interest 7,049
------
Income before extraordinary item 12,369
Extraordinary item (1,037)
------
Net Income $11,332
=======
Basic earnings per share data:
Income before extraordinary item $1.67
Extraordinary item ($0.14)
-------
Net Income $1.53
======
Diluted earnings per share data:
Income before extraordinary item $1.64
Extraordinary item ($0.14)
-----
Net Income ($1.50)
Weighted Average Number of shares ======
outstanding:
- Basic 7,415,888
=========
- Diluted 7,558,167
=========
</TABLE>
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited, In Thousands)
(A) Reflects the historical consolidated statement of operations for the
Company for the three months ended March 31, 1998 and the historical
consolidated statement of operations for the Company for the year
ended December 31, 1997.
(B) Reflects the historical revenues and certain expenses of the Acquisition
Portfolio which was not owned by the Company for the three months ended
March 31, 1998 and for the year ended December 31, 1997.
(C) Reflects additional general and administrative expenses.
(D) Reflects the increase related to debt borrowed to finance the proposed
acquisition. The interest is calculated at 6.80% and amounts to $227
and $873 for the three months ended March 31, 1998 and for the year
ended December 31, 1997, respectively.
The historical consolidated statement of operations for the Company for
the year ended December 31, 1997 needs twelve months worth of interest
on the loan associated with the proposed acquisition.
(E) Reflects depreciation and amortization related to the acquisition. See
Notes C on page 8 for further information on useful lives of these assets.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOME PROPERTIES OF NEW YORK, INC.
(Registrant)
Date: May 22, 1998
By: /S/ DAVID P. GARDNER
---------------------------
David P. Gardner
Vice President
Chief Financial Officer and
Treasurer
Date: May 22, 1998
By: /S/ NORMAN LEENHOUTS
--------------------------
Norman Leenhouts
Chairman of the Board of Directors
Co-Chief Executive Officer and Director
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
EXHIBIT INDEX
LOCATION
EXHIBIT 5.1
Form of Purchase and Sale Agreement with
schedule setting forth material details in which
document differs from form Pages ___ to __
EXHIBIT 5.2
Commitment Letter from CIBC, Inc. Pages ___ to __
EXHIBIT 23.0
Consent of Coopers & Lybrand, L.L.P. Pages ___ to ___
<PAGE>
EXHIBIT 5.1
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement"), made as of
the 13th day of May, 1998 by and between HOME PROPERTIES OF NEW YORK,
L.P., a New York limited partnership, having its principal office at
850 Clinton Square, Rochester, New York 14604, (the "Partnership");
and (SELLER), a ( ) (the "Seller"),
having its principal office at __________________________________.
W I T N E S S E T H:
WHEREAS, the Seller owns a certain apartment complex and
adjacent land located in the ______________________ in the State of
__________, all as more particularly described on EXHIBIT A;
WHEREAS, the Seller wishes to sell the Property to the
Partnership;
WHEREAS, Partnership desires to acquire the Property upon
the happening of certain events;
NOW, THEREFORE for and in consideration of the mutual
covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency whereof being hereby
acknowledged and intending to be legally bound hereby, the parties
agree as follows:
1. REAL PROPERTY DESCRIPTION. The Real Property to be
transferred by the Seller consists of an apartment complex commonly
known as _____________ Apartments, which includes ____ apartments
(the " Project"), located in __________, __________, on land more
particularly described on EXHIBIT A attached hereto, together and
including all buildings and other improvements thereon, including but
not limited to, the ____ apartment units, and all rights of Seller,
if any, in and to any and all streets, roads, highways, alleys,
driveways, easements and rights-of-way appurtenant thereto (the
foregoing are hereafter collectively referred to as the "Property").
2. OTHER ITEMS. The following items now or at the Closing
(hereinafter defined) in or on the Property , which are the property
of the Seller (as distinguished from the property of a tenant) and
are located at or used in connection with the Property, are included
in this Agreement and shall become the property of the Partnership at
Closing:
A. all heating, air-conditioning, plumbing and lighting
fixtures,
B. ranges, refrigerators, dishwashers and disposals,
C. water heaters,
D. any and all pools and pool equipment, bathroom
fixtures, wall-to-wall carpeting, traverse rods, exhaust fans, hoods,
signs, screens, maintenance building, fences, carpeting and runners,
cabinets, mirrors, shelving, ceiling fans, mail boxes, office
furniture and equipment, including but not limited to computers,
clubhouse facilities, and any and all related equipment in connection
with the Property, and
E any fixtures appurtenant to the Property and any
other furniture or equipment used in connection with the operation
and maintenance of the Property, including but not limited to any
vehicles (hereinafter with the items listed in A-D above,
collectively, the "Other Items").
The Other Items will be acquired by the Partnership free and
clear of all liens and encumbrances.
3. CONSIDERATION AND MANNER OF PAYMENT; DEPOSIT.
A. The purchase price for the Property shall be
$__________ the "Purchase Price") which shall be payable by the
Partnership at Closing (as hereinafter defined) by official bank
check payable directly to Seller's order drawn on a New York
Clearinghouse Bank or, at Seller's option, by wire transfer to an
account designated by Seller.
B. Upon execution of this Agreement by both parties,
the Partnership shall deposit the sum of $1,000,000 (the "Initial
Deposit") by check with Orloff, Lowenbach, Stifelman & Siegel, P.A.
(the "Escrow Agent") as a deposit under this Agreement and under the
agreements relating to the Affiliated Properties (as hereinafter
defined). Upon expiration of the Due Diligence Period (as
hereinafter defined) and provided the Partnership has not exercised
its right to terminate this Agreement, the Partnership shall deposit
the sum of $1,000,000 (the "Additional Deposit") by check with the
Escrow Agent as an additional deposit under this Agreement and under
the agreements relating to the Affiliated Properties. The Initial
Deposit and the Additional Deposit, shall be hereinafter be referred
to as the "Deposit". The Deposit shall be held and disbursed as
provided in the Escrow Agreement attached hereto as EXHIBIT B. The
Deposit shall be returned to the Partnership: (I) in the event the
Partnership consummates the transaction contemplated hereby; (ii)
upon termination of this Agreement by the Partnership as expressly
permitted hereunder;(iii) upon Seller's default, including but not
limited to a failure of a condition described in Section 16 of this
Agreement caused by the Seller. In the event the Partnership
defaults on its obligations hereunder, including but not limited to a
failure of a condition described in Section 16 of this Agreement
caused by the Partnership, the Deposit shall be paid to the Seller
as liquidated damages and not as penalty. The Partnership and the
Seller each acknowledges that the Deposit is a fair and reasonable
measure of the Seller's damages in the event of the Partnership's
default. The Partnership and Seller each waives any right to claim
that the Deposit is not a fair and reasonable measure of damages in
the event the Partnership defaults. In consideration for such
waivers, the Partnership and the Seller each agrees not to institute
any legal proceedings to challenge the Deposit as a fair and
reasonable measure of such damages. If, despite the agreement in the
previous sentence, either party institutes such litigation, the
instituting party shall pay the costs and expenses of the other party
in such litigation, including reasonable attorneys' fees, regardless
of the outcome thereof. Any and all sums deposited hereunder shall
be applied or refunded as provided herein. (All references to
"Deposit" shall be deemed to include all accrued interest thereon).
4. ADJUSTMENTS AT CLOSING. The following shall be
adjusted and prorated between the Seller and the Partnership at
Closing as if the Partnership was the owner of the Property as of the
Closing Date:
A. All ad valorem real estate taxes with respect to
the Property for the calendar year or other applicable tax period in
which the Closing is consummated. If the amount of such taxes is not
known at Closing, proration of such taxes will be made upon the basis
of the previous year's or other most recent applicable tax period
taxes. In such event, the Seller and Partnership agree to re-
prorate/adjust the taxes between themselves after the Closing, based
upon the full amount of the actual taxes for the Property when the
amount of the actual taxes is known.
B. water charges.
C. sewer charges.
D. fuel, electricity and other utilities.
E. All tenant security deposits (and interest thereon
if required by law or contract to be earned thereon) (the "Security
Deposits") shall be transferred or credited to Partnership at
Closing. At Closing, Partnership shall assume Seller's obligations
related to Security Deposits to the extent they are properly credited
and transferred to Partnership. Partnership agrees that it will
indemnify, defend, hold Seller harmless and will indemnify Seller
against all demands, claims, losses, costs, damages, expenses or
liabilities, including, but not limited to, attorneys' fees, arising
out of or in connection with the transfer or disposition of such
Security Deposits.
F. charges under the service contracts assumed by
Partnership (the "Service Contracts").
G. laundry income.
H. any other charges incurred with respect to the
Property which the Partnership or the Sellers are obligated to pay.
I. salaries and benefits of employees employed by the
Seller at the Property and remaining in the employment of the
Partnership after Closing.
J. Rents.
(1) All rent payments collected as of the Closing
Date for the month of Closing shall be prorated as between the
parties as of the Closing Date. Any other rent collected by the
Seller prior to the Closing for rental periods subsequent to Closing
shall be paid to the Partnership at Closing.
(2) All rent collected after Closing for any
period prior to Closing shall belong to Seller and, if paid to
Partnership, Partnership shall promptly send such rent to the Seller.
All rent collected after Closing shall be applied first to current
rent payments due and owing and then to pay any arrearages (in
inverse order/most recent arrearages paid first). Seller shall have
the right to pursue payment of rent due for any period prior to the
Closing, including by means of legal action against tenants or former
tenants, provided that after the Closing, the Seller shall have no
right to terminate leases or cause the eviction of tenants.
(3) All rent collected by Partnership or the
Seller for rental periods after the Closing shall belong to
Partnership and, if paid to the Seller, the Seller shall promptly
send such rent to Partnership.
Any error in the calculation of adjustments shall be
corrected subsequent to Closing with appropriate credits to be given
based upon corrected adjustments.
5. COSTS. Partnership shall pay all recording fees,
Partnership's attorneys' fees, the costs of obtaining any survey,
title commitment and title policy and all other costs and expenses
incidental to or in connection with closing this transaction
customarily paid for by the transferee of similar property. The
Seller shall pay Seller's attorneys' fees, any applicable transfer
and recordation taxes and all other costs and expenses incidental to
or in connection with closing this transaction customarily paid for
by the transferor of similar property.
6. EVIDENCE OF TITLE. Seller has furnished to the
Partnership a copy of the most recent title policy relating to the
Property along with the most recent instrument survey of the Property
in Seller's possession.
7. CLOSING DOCUMENTS.
A. At the time of Closing, the Seller shall deliver
to Partnership the following.
(1) A bargain and sale deed with covenants against
grantor's acts in the form provided for under the laws of the state
where the Property is located (the "Deed"). Such Deed shall convey
the Property to Partnership subject to: (i) all leases identified in
the Rent Roll (hereinafter defined); (ii) ad valorem real estate
taxes and the lien of municipal utility charges for the current year
and subsequent years which are not yet due and payable; and (iii)
easements, covenants, restrictions, agreements and/or reservations of
record, so long as they do not interfere in any material respect with
the use of the Property as a rental apartment complex; (iv) private,
public and utility easements and roads and highways, so long as they
do not interfere in any material respect with the use of the Property
as a rental apartment complex; and (v) and any other exceptions not
objected to or waived by Partnership under Section 9B (collectively
items (i) - (v) the "Permitted Exceptions").
(2) A Bill of Sale in the form attached hereto as
EXHIBIT C.
(3) A current rent roll ("Rent Roll") certified,
as of the date of Closing, which shall include a correct list of all
tenants, all rental obligations of each tenant with respect to the
Property and all security deposits along with a copy of all leases
with such tenants which are in the possession of Seller and which
have not been delivered to the Partnership prior to Closing.
(4) An Assignment of Leases, Security Deposits and
Service Contracts in the form attached hereto as EXHIBIT D (the
"Assignment") along with a copy of all contracts so assigned. In
lieu of an assignment of the security deposits, the Seller may
provide Partnership with a credit at Closing for all security held by
Seller (including any accrued interest, if required by law or
contract to be earned thereon) with respect to all leases encumbering
the Property.
(5) A certificate of title and any other
documentation necessary to transfer title to any vehicles.
(6) Seller's affidavit stating Seller's federal
taxpayer identification number and certifying that Seller is not a
foreign person, corporation, partnership, trust or estate as defined
in the Internal Revenue Code and Regulations thereunder pursuant to
the Foreign Investment in Real Property Tax Act of 1980.
(7) Copies of the personnel files of all employees
employed at the Property and remaining in the employment of the
Partnership after the Closing.
(8) A termination of any management agreements
relating to the Property.
(9) A Closing Statement detailing the adjustments
made at Closing.
(10) Any additional funds, documents and or
instruments as may be necessary for the proper performance by the
Seller of its obligations contemplated by this Agreement.
B. At the time of Closing, Partnership shall
deliver to Seller the following.
(1) The Assignment.
(2) Evidence of organization, existence and
authority of Partnership and the authority of each person executing
documents on behalf of Partnership each, reasonably satisfactory to
Seller.
(3) The Purchase Price and such cash as may be
required of Partnership to pay closing costs or charges properly
allocable to Partnership.
(4) A Closing Statement detailing the adjustments
made at Closing.
(5) Any additional funds, documents and or
instruments as may be necessary for the proper performance by
Partnership of its obligations contemplated by this Agreement.
8. INSPECTION. For a period of fourteen (14) calendar
days after the date of this Agreement (the "Due Diligence Period"),
the Seller agrees that the Partnership and its authorized
representatives shall have the right and privilege to enter upon the
Property and the Seller's offices, upon reasonable notice, during
regular business hours, for the purpose of gathering such information
and conducting such environmental and engineering studies or other
tests and reviews as Partnership may deem appropriate and necessary,
including but not limited to a review of the Seller's books and
records pertaining to the Property and the Other Items, matters
relating to zoning compliance and compliance by the Property and the
Other Items with other applicable governmental regulations, the
markets in which the Property operates, any service or other
contracts relating to the Property, the tax assessment on the
Property and on comparable properties and such other matters as
Partnership shall deem reasonably necessary or appropriate in
connection with the Property and the Other Items. All such
inspections, studies, tests and reviews shall be at Partnership's
sole expense. The Partnership agrees to provide the Seller with a
copy of all Phase I and other environmental reports received by the
Partnership in the course of its investigation. Seller agrees to
cooperate with Partnership by making available to Partnership such
records, plans, drawings or other data as may be in Seller's
possession or control relating to the Property and its operation. In
addition, promptly upon execution of this Agreement by all of the
parties, the Partnership will order a commitment (the "Title
Commitment") for an ALTA owner's policy from a nationally recognized
title insurer (the "Title Company"). Partnership hereby agrees to
indemnify, defend and hold Seller, Seller's tenants, agents,
employees, partners, trustees, officers and the Property harmless
from and against all claims, losses, costs, damages, expenses or
liabilities, including, but not limited to, mechanic's and
materialmen's liens and attorneys' fees arising out of or in
connection with Partnership's access to or entry upon the Property.
If any inspection or test disturbs the Property, Partnership will
restore the Property, at Partnership's own cost and expense, to the
same condition as existed prior to any inspection or test. The
Partnership agrees that its rights under this Section 8 shall be
subject to the rights of the residents at the Property and that it
will use its reasonable efforts to minimize any disruption to those
residents. Partnership shall have the right to terminate this
Agreement if it determines that it does not wish to purchase the
Property as a result of its findings during the Due Diligence Period
and notifies the Seller in writing of such decision within the Due
Diligence Period (the "Termination Notice"). In such event, this
Agreement shall terminate and neither party shall have any further
claims, rights, liabilities or obligations under or with respect to
this Agreement, except Partnership shall have the right to the return
of its Deposit and the obligations set forth in Section 8, 12 and 26
herein shall survive any such termination. Partnership's failure to
deliver the Termination Notice within the Due Diligence Period shall
be deemed to be a waiver by Partnership of its right to terminate
this Agreement as provided in this Section 8.
9. TITLE; TITLE EXAMINATION; OBJECTIONS TO TITLE.
A. Seller shall convey to the Partnership
good and marketable title to the Property by Deed, subject only to
the Permitted Exceptions. Title to all Other Items purchased herein,
if any, shall be conveyed to Partnership by bill of sale, free and
clear of all security interests, liens and encumbrances, but subject
to any Permitted Exceptions.
B. Within ten (10) business days after
Partnership's receipt of the Title Commitment Partnership shall
deliver to Seller a statement of defects, encumbrances or objections
to title or survey matters (a "Statement of Title Defects"). If
Partnership fails to deliver a Statement of Title Defects within such
time period as aforesaid or by June 6, 1998, whichever is earlier,
such failure shall be deemed to be a waiver of any such defects,
encumbrances or objections to title and Seller shall convey title in
accordance with this Agreement. Upon receipt of Partnership's
Statement of Title Defects, Seller shall have five (5) business days
to determine whether it wishes to attempt to cure any matters shown
on such statement. If Seller is unable or unwilling to cure or
attempt to cure any such matters, Seller shall give notice to
Partnership within such five (5) day period, but if no such notice is
given, Seller shall be deemed to be unwilling to cure any such
defects. If Seller does not agree to attempt such cure, Partnership
shall have ten (10) days after the expiration of the foregoing five
(5) business day period to terminate this Agreement, in which case it
shall have the right to the return of the Deposit, or to give Seller
notice that it has elected to take title to the Property subject to
the defects of title without abatement of the Purchase Price. If no
notice is given by the Partnership within the ten (10) day period,
the Partnership shall be deemed to have terminated this Agreement.
10. CLOSING DATE. Unless this Agreement is terminated as
provided herein, the Closing shall occur on or before June 23, 1998
(the "Closing" or "Closing Date") at the office of the Seller's
attorneys. Notwithstanding the above, the Partnership shall have the
right to extend the Closing and the Closing Date to and including
July 31, 1998 provided that the Partnership provides the Seller with
written notice of the extension on or before June 23, 1998.
11. POSSESSION. Partnership shall have possession and
occupancy of the Property from and after the date of delivery of the
Deed subject only to the Permitted Exceptions and such matters as
shall have been waived by the Partnership and to the rights of
tenants shown on the Rent Roll delivered to Partnership at Closing
pursuant to Section 7A (3).
12. BROKER'S COMMISSION. The Seller and Partnership each
represent to the other that there are no fees or commissions due as
a result of their employment of any Broker. The Seller and
Partnership each agree to indemnify the other for any and all claims
and expenses, including legal fees, if any other fees or commission
is determined to be due by reason of the employment of any broker by
the indemnifying party. This representation and indemnity shall
survive the Closing.
13. RISK OF LOSS. If prior to the Closing the Property or
any portion thereof is destroyed or damaged or if the Property or
any material portion thereof shall is subjected to a BONA FIDE threat
of condemnation or becomes the subject of any proceedings, judicial,
administrative or otherwise, with respect to the taking by eminent
domain or condemnation, Seller shall notify Partnership thereof
within a reasonable time after receipt of actual notice thereof by
Seller, but in any event prior to Closing. In such event this
Agreement shall remain in full force and effect with no adjustment of
the Purchase Price and upon the Closing, Seller shall assign,
transfer and set over to Partnership all of the right, title and
interest of Seller in and to any awards that have been or that may
thereafter be made for such taking, and Seller shall assign, transfer
and set over to Partnership any insurance proceeds that may have been
or that may thereafter be made for such damage or destruction giving
Partnership a credit at Closing for any deductible under such
policies. In such event, Seller shall have no additional obligation
if such insurance proceeds or condemnation awards are insufficient to
repair such damage. Seller hereby agrees that it shall keep all
insurance policies presently existing which relate to the Property in
effect through the Closing Date.
14. CONDITIONS PRECEDENT TO PARTNERSHIP'S OBLIGATION TO
CLOSE. It shall be a condition to the Partnership's obligation to
close that:
A. The Partnership has not exercised its right to
terminate this Agreement as provided in Section 8;
B. There shall be at Closing ____ apartment units in
which are all in compliance in all material respects with federal,
state, county and local laws, ordinances, rules and regulations;
C. During the Due Diligence Period, the Partnership
shall obtain the approval of the Board of Directors (the "Board") of
its general partner - Home Properties of New York, Inc. - to the
acquisition of the Property on the terms and conditions described
herein; and
D. On the Closing Date the Title Company is prepared
to issue a title policy insuring the Partnership's fee interest in
the Property subject only to the Permitted Exceptions.
It is understood that the contingencies set forth in this
Section 14 are for Partnership's benefit and may be waived by
Partnership at any time. If the above contingencies are not
satisfied or waived by the Partnership, the Partnership shall have
the right to terminate this Agreement by written notice to the
Seller. In the event of such a termination, neither party shall have
any further claims, rights, liabilities or obligations under or with
respect to this Agreement, except Partnership shall have the right to
the return of its Deposit and the obligations set forth in Sections
8,12 and 26 herein shall survive any such termination.
15. CONSENT ORDERS. Seller is party to a Consent Order
(the "Consent Order") in the Matter of United States of America v.
Chandler Associates, et al., Civil Action No. 97-3114(AMW), entered
by the United District Court for the District New Jersey. A copy of
the Consent Order has been furnished to Buyer. Seller has also
agreed to the form of a Supplemental Consent Order in the same matter
which will be entered prior to Closing, a copy of which has also been
furnished to Buyer. Buyer agrees that from and after the Closing,
until the expiration of the Consent Orders on June 30, 2000, Buyer
shall perform all of the obligations under the Consent Orders to be
performed by the Defendants named therein. Seller warrants and
represents to Buyer that all the obligations under the Consent Orders
to be performed by the Defendants named therein have been fully
performed to date; and shall continue to be fully performed up to and
including the Closing Date. Buyer agrees to indemnify and hold
harmless Seller and the Defendants named in the Consent Orders from
and on account of any and all liability, costs and expenses,
including reasonable attorneys fees, arising out of Buyer's failure
to perform its obligations under this Section 15. Seller agrees to
indemnify and hold harmless Buyer from an account of any and all
liability, costs and expenses, including reasonable attorneys' fees,
arising out of Seller's breach of the warranty and representation
regarding performance on or prior to the Closing Date of the
Defendants' obligations under the Consent Orders contained in this
Section 15.
16. CONDITIONS TO THE PARTIES' OBLIGATIONS TO CLOSE. In
addition to all other conditions set forth herein, the obligation of
Seller, on the one hand, and Partnership, on the other hand, to
consummate the transactions contemplated hereunder shall be
contingent upon the following:
A. As of the Closing Date, the other party shall have
performed its material obligations hereunder and all deliveries to be
made at Closing have been tendered and the representations and
warranties of the other party shall be true and correct;
B. There shall exist no pending or threatened actions,
suits, arbitrations, claims, attachments, proceedings, assignments
for the benefit of creditors, insolvency, bankruptcy, reorganization
or other proceedings, against the other party that would materially
and adversely affect the other party's ability to perform its
obligations under this Agreement; and
C. There shall exist no pending or threatened action,
suit or proceeding with respect to the other party before or by any
court or administrative agency which seeks to restrain or prohibit,
or to obtain damages or a discovery order with respect to, this
Agreement or the consummation of the transactions contemplated
hereby.
D. On the Closing Date, the Partnership shall acquire
all of the properties described on the attached Schedule 1 (the
"Affiliated Properties"); provided, however, that if the only reason
a Closing for one or more of the Affiliated Properties (a "Deferred
Property") cannot occur on the Closing Date is the failure to obtain
the certificate of occupancy or similar approval referred to in
Paragraph O of Section 17, the other Closings will take place on the
Closing Date, and the Closing for each Deferred Property will take
place one week after the certificate of occupancy or similar approval
for such Deferred Property is obtained.
17. REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller
makes the following representations and warranties to Partnership as
of the date hereof and as of Closing:
A. To the best of Seller's knowledge, Seller has no
liability or obligation of any nature which in any way affects or is
related to the Property or the Other Items whether now due or to
become due, absolute, contingent or otherwise, including liabilities
for taxes (or any interest or penalties thereto) other than disclosed
in this Agreement, including the Schedules hereto.
B. To the best of Seller's knowledge, there is no
litigation, proceeding or investigation pending, or to the knowledge
of Seller threatened, against or affecting Seller that might affect
or relate to the validity of this Agreement, any action taken or to
be taken pursuant hereto, or the Property, the Other Items or any
part or the operation thereof, not fully covered by insurance
(except for applicable deductibles) or any proceeding to which Seller
is a party pending for the increase or decrease of the assessed
valuation of all or a portion of the Property.
C. To the best of Seller's knowledge, Seller has
complied in all material respects with and is not in default in any
material respects under, or in violation in any material respects of,
or received any notice that the Seller, the Property or the Other
Items may be in violation in any material respect of, any law,
ordinance, rule, regulation or code or condition in any approval or
permit pursuant thereto (including without limitation, any zoning,
sign, environmental, labor, safety, health or price or wage control,
ordinance, rule, regulation or order of) applicable to the ownership,
development, operation or maintenance of the Property or the Other
Items.
D. There are no written leases affecting the Property
with a term greater than one (1) year.
E. To the best of Seller's knowledge, there is no
pending condemnation of the Property, or any part thereof, or of any
plans for improvements which might result in a special assessment
against the Property.
F. Seller has not received any written notice or
request from any insurance company, Board of Fire Underwriters (or
organization exercising functions similar thereto) requesting the
performance of any work or alteration in respect of the Property or
the Other Items.
G. Security deposits held by Seller will be correctly
identified by Seller as of Closing with respect to the Property.
H. There are no Service Contracts with respect to the
Property or the Other Items which will continue in effect after the
Closing except as set forth on SCHEDULE "2" attached hereto.
I. [INTENTIONALLY OMITTED]
J. Until Closing, Seller shall continue to fulfill all
of its obligations under the terms of the Leases encumbering the
Property, and under the Service Contracts, and Seller shall operate,
maintain and repair at Seller's expense, all landscaping, buildings,
fixtures and facilities, in accordance with normally accepted
business principles, and Seller shall continue to operate the
Property in a commercially reasonable manner.
K. The Rent Roll to be given by Seller to Buyer at
Closing will be true and correct. The rent roll attached hereto as
SCHEDULE "3" is true and correct as of the date of shown thereon and
indicates all apartment units which are the subject of Section 8
contracts.
L. [INTENTIONALLY OMITTED]
M. This Agreement has been duly authorized, executed
and delivered and constitutes a legal and binding obligation of
Seller, enforceable in accordance with its terms, except as may be
limited by bankruptcy and other laws affecting
creditors' rights generally.
N. Neither the entry into this Agreement, nor the
carrying out of the transactions contemplated herein has resulted or
will result in any violation of, or be in conflict with, or result in
the creation of, any mortgage, lien, encumbrance or charge (other
than those contemplated hereby) upon any of the properties or assets
of Seller pursuant to, or constitute a default under, any certificate
of incorporation, by-law, partnership agreement, or mortgage,
indenture, contract, agreement, instrument, franchise, permit,
judgment, decree, order, statute, rule or regulation applicable to
Seller or the Property.
O. To the best of Seller's knowledge, no consent or
approval by, or authorization of, or filing, registration or
qualification with, any federal, state or local governmental
authority, bureau, department or agency, or any corporation, person
or other entity is required as of the Closing either for the
execution, delivery or performance of this Agreement by Seller, or
in connection with the consummation by Seller of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations, filings, registrations or qualifications as have been
obtained by Seller as of the date hereof and disclosed and accepted
by Buyer, and except for a resale certificate of occupancy or similar
approvals. Seller agrees to apply for such approval promptly after
execution of this Agreement. At Closing, the Partnership will
reimburse Seller for the costs of such application and the reasonable
costs of any repairs or alterations required to be made to the
Property in order to obtain such approval.
The representations and warranties of Seller contained in
this Agreement, the statements in any Exhibit or Schedules attached
to this Agreement, or other instruments furnished to Buyer at or
prior to Closing pursuant to this Agreement, or in connection with
the transactions contemplated by Seller pursuant to this Agreement,
do not contain any untrue statements of a material fact, or fail to
state a material fact necessary to make it not misleading.
The representations and warranties contained herein shall
survive delivery and recording of the deed and shall not merge
therein.
Seller acknowledges that each of the representations made by
it in this paragraph 17 and elsewhere in this Agreement is material
to the Partnership hereunder. As to any representation or warranty
set forth herein, Seller shall indemnify, defend and hold the
Partnership safe and harmless from and against any and all loss,
damage, claim, counterclaim, cause of action, cost or expense,
including, without limitation, reasonable attorneys' fees and
disbursements at both trial and appellate levels, suffered, paid or
incurred by, or assessed against the Partnership, directly or
indirectly, whether foreseen or unforeseen, and whether for personal
injury or death or for property damage or otherwise by reason of
Seller's material breach of any warranty or obligation under this
Agreement or if any representation of Seller in this Agreement is
wholly or partially untrue in any material respect. Notwithstanding
the above, Seller shall have no liability for any untrue or incorrect
representation or warranty of Seller unless and until the aggregate
amount of Partnership's monetary damages arising out of all such
breaches shall exceed Fifty Thousand Dollars ($50,000), and Seller
shall be liable only for the excess over Fifty Thousand Dollars
($50,000).
Irrespective of anything to the contrary contained herein,
the representations and warranties of Seller shall expire and be of
no further effect upon the expiration of 6 months after Closing.
This expiration shall not apply to any breach of warranty or
representation which arises out of fraud or an intentional material
misrepresentation.
For purposes of this Agreement, "to Seller's knowledge", "to
the knowledge of Seller", "to the best knowledge of Seller" (or words
of similar meaning) shall mean to the actual knowledge of Wilson R.
Kaplen, and the knowledge of no other person shall be attributed to
or be deemed the knowledge of Seller.
18. REPRESENTATIONS AND WARRANTIES OF PARTNERSHIP.
Partnership represents and warrants to the Seller as of the date
hereof and as of the Closing:
A. Partnership is and will be as of the date of
Closing duly organized, validly existing and in good standing under
the laws of the State of New York and has all the requisite power and
authority to enter into and carry out this Agreement according to its
terms.
B. To the best of its knowledge, there is no
litigation, proceeding or investigation pending, or to the knowledge
of Partnership threatened, against or affecting Partnership or the
partners of Partnership that might affect or relate to the validity
of this Agreement or any action taken or to be taken pursuant hereto,
or that might have a material adverse effect on the business or
operations of the Partnership.
C. Subject to the receipt of the approval of the
Board, this Agreement has been duly authorized, executed and
delivered and constitutes a legal and binding obligation of the
Partnership, enforceable in accordance with its terms, except as may
be limited by bankruptcy and other laws affecting creditors' rights
generally.
D. The Partnership has the financial ability to
perform its obligations to purchase the Property as provided in this
Agreement.
The representations and warranties of the Partnership
contained in this Agreement, the statements in any Exhibit or
Schedules attached to this Agreement, or other instruments furnished
to Seller at or prior to Closing pursuant to this Agreement, or in
connection with the transactions contemplated pursuant to this
Agreement, do not contain any untrue statements or a material fact,
or fail to state a material fact necessary to make it not misleading.
The representations and warranties contained herein shall
survive delivery of the assignment of the Deed and shall merge
therein.
The Partnership acknowledges that each of the
representations made by it in this paragraph 18 and elsewhere in this
Agreement is material to the Seller hereunder. As to any
representation or warranty set forth herein, the Partnership shall
indemnify, defend and hold the Seller safe and harmless from and
against any and all loss, damage, claim, counterclaim, cause of
action, cost or expense, including, without limitation, reasonable
attorneys' fees and disbursements at both trial and appellate levels,
suffered, paid or incurred by, or asserted against the Seller,
directly or indirectly, whether foreseen or unforeseen, and whether
for personal injury or death or for property damage or otherwise by
reason of the Partnership's material breach of any warranty or
obligation under this Agreement or if any representation of the
Partnership in this Agreement is wholly or partially untrue in any
material respect. Notwithstanding the above, Partnership shall have
no liability for any untrue or incorrect representation or warranty
of Partnership unless and until the aggregate amount of Seller's
monetary damages arising out of all such breaches shall exceed Fifty
Thousand Dollars ($50,000), and the Partnership shall be liable only
for the excess over Fifty Thousand Dollars ($50,000).
Irrespective of anything to the contrary contained herein
the representations and warranties of the Partnership shall expire
and be of no further effect upon the expiration of 6 months after
Closing. This expiration shall not apply to any breach of warranty
or representation which arises out of an intentional material
misrepresentation made by the Partnership.
19. ENVIRONMENTAL CERTIFICATION. By acceptance of this
Agreement, Seller represents, warrants, and certifies to the
Partnership that Seller has no knowledge of any violation, and has
received no notice of any violation of any applicable Environmental
Laws (below defined) with respect to the Property and the current use
of the Property. To the best of Seller's knowledge, Seller has not,
used, generated, stored, dumped, released, buried, dispersed or
emitted any Hazardous Substance on the Property, except for Hazardous
Substances stored and disposed of in the ordinary course of operating
the Property, all of which were stored, used and disposed of in
accordance with all applicable laws. There are no underground tanks
on the Property except as set forth on Schedule 4. "Environmental
Laws" shall mean all federal, state and local environmental, health,
chemical use, safety and sanitation laws, statutes, ordinances and
codes relating to the protection of the environment and/or governing
the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of any Hazardous Substance and the
rules, regulations, and orders with respect thereto. "Hazardous
Substance" means, without limitation, any flammable, explosive or
radioactive material, polychlorinated biphenyl, petroleum or
petroleum product, methane, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials, as defined in the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended (42 U.S.C. Sections 9601, ET SEQ.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C. Appendix Sections
1801, ET SEQ.), the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 6901, et seq.), the Toxic Substances
Control Act, as amended (15 U.S.C. Sections 2601, et seq.), or any
other Environmental Law and the regulations promulgated thereunder
applicable on the effective date of this Agreement. From the date of
acceptance hereof to and including the date of Closing, Seller shall
immediately provide the Partnership with a copy of any notice,
citation, complaint or other directive from any person, entity or
governmental authority whereby Seller's compliance with Environmental
Laws is called into question, and immediately notify the Partnership
of any new information or other developments which could tend to
supplement or modify the information contained herein in any material
respects. If there is any lead paint and/or asbestos found at the
Property, then the Partnership agrees that the Seller shall have no
obligation to the Partnership to remediate the lead paint and/or
asbestos and if the Partnership does not exercise its right to
terminate this Agreement as provided in Section 8 hereof and acquires
the Property, then the Partnership shall assume any obligation to
remediate the lead paint and/or asbestos.
20. ASSIGNMENT. This Agreement, and all or any portion of
the rights of Partnership hereunder, may not be assigned by
Partnership without the prior written consent of the Seller, which
may be granted or withheld in its sole discretion. Notwithstanding
the above, the Partnership may assign its rights under this Agreement
to an entity in which the Partnership holds no less than 98% of the
equity interests without the Seller's consent. No such assignment
shall relieve the Partnership of any of its obligations under this
Agreement.
21. NOTICE. All notices given pursuant to any provisions
of this Agreement shall be in writing and shall be effective upon
receipt and then only if delivered personally, or sent by registered
or certified mail, postage prepaid or sent by a national over-night
carrier, or by telecopy with confirmation of receipt to the addresses
set forth below:
To the Seller:
Copy to: Frank L. Stifelman, Esq.
Orloff, Lowenbach, Stifelman & Siegel, P.A.
101 Eisenhower Parkway
Roseland, NJ 07068-1082
-and-
Michael H. Forman, Esq.
Cole, Schotz, Meisel, Forman & Leonard, P.A.
25 Main Street
Hackensack, New Jersey 07601
To Partnership: HOME PROPERTIES OF NEW YORK, L.P.
Attn: Norman Leenhouts, Chairman
850 Clinton Square
Rochester, New York 14604
Telecopy No.: (716) 546-5433
22. PLANS. The Seller agrees to provide Partnership with
all plans and architectural drawings in Seller's possession for the
improvements completed at the Property, including, without
limitation, all "as-built" plans in Seller's possession and the
Seller further agree that they will endeavor to turn over the same to
Partnership at the Property during the Due Diligence Period.
23. APPLICABLE LAW. This Agreement shall be construed and
governed in accordance with the laws of the State where the Property
is located.
24. ENTIRE AGREEMENT. This Agreement shall constitute the
entire agreement between the parties, and any and all prior
understandings or agreements, whether written or oral, are hereby
merged into this Agreement. This Agreement cannot be modified except
by a written instrument signed by the parties hereto.
25. BINDING AGREEMENT. This Agreement shall not be binding
or effective until properly executed by Partnership and the Seller.
26. CONFIDENTIALITY. By execution of this Agreement and
except as otherwise provided herein, prior to the Closing, or if the
Closing does not occur, the Seller and Partnership agree to keep any
and all information with respect to the transactions contemplated by
this Agreement strictly confidential, and will not disclose any such
information, without the other's prior written consent, unless such
disclosure is required by law or judicial process. The Partnership
may disclose the existence of this Agreement to the extent necessary
to conduct its due diligence with respect to the Property or as may
be required or appropriate under applicable securities laws including
but not limited to as may be necessary or appropriate to raise
equity. If the Closing does not occur, each of the parties agrees to
return to the other party any confidential information pertaining to
the Property or the other party that it has received from the other
party.
27. FINANCIAL INFORMATION. Prior to and after the Closing,
the Seller will provide a signed representation letter as prescribed
by Generally Accepted Auditing Standards as promulgated by the
Auditing Standards Division of the American Institute of Public
Accountants in substantially the form attached hereto as Exhibit E.
The representation is required to enable an Independent Public
Accountant to render an opinion on such financial statements. Seller
will provide access by the Partnership's representatives, to all
financial and other information relating to the Property as is
sufficient to enable them to prepare audited financial statements, at
the Partnership's expense, in conformity with Regulation S-X of the
Securities and Exchange Commission (the "Commission") and any
registration statement, report or disclosure statement required to be
filed with the Commission.
28. RECORDATION. Neither Party may record this Purchase and
Sale Agreement; and any recordation shall render the contract void at
the option of the non-recording party. Also, neither party may file
a lis pendens against the Property.
29. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which shall be deemed
to be an original as against any party whose signature appears
thereon, and all of which shall together constitute one and the same
instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected thereon as the
signatories.
IN WITNESS WHEREOF, the parties hereto have caused this
Instrument to be executed as of the day and date first above written.
HOME PROPERTIES OF NEW YORK, L.P. (SELLER)
By: Home Properties of New York, Inc.
General Partner
By: /s/ Norman Leenhouts By:
Title: Chairman Title:
<PAGE>
LIST OF EXHIBITS
EXHIBIT A Legal Description
EXHIBIT B Escrow Agreement
EXHIBIT C Bill of Sale
EXHIBIT D Assignment
EXHIBIT E Form of Representation Letter
LIST OF SCHEDULES
Schedule 1 List of Affiliated Properties
Schedule 2 Service Contracts
Schedule 3 Rent Roll
Schedule 4 USTs
<PAGE>
PORTFOLIO INFORMATION
NAME AND LOCATION # OF PRICE SELLING ENTITY
UNITS
Cherry Hill Club 164 $4,536,000 The Kaplen
Apartments, Foundation
Inkster, MI
Mill Co. Gardens, 96 $2,037,000 The Kaplen
So. Portland, ME Foundation
Beechwood Gardens, 160 $3,900,000 Beechwood Gardens
Philadelphia, PA
Payne Hill 150 $4,500,000 Payne Hill
Gardens, Gardens
Payne Hill, PA
So. Portland 500 $15,927,000 South Portland
Assoc., Associates
So. Portland, ME
Weston Gardens, 242 $5,550,000 The Kaplen
Columbus, OH Foundation
Lakeview 106 $5,174,000 The Kaplen
Apartments, Foundation
Leonia, NJ
Mountainside 227 $8,414,000 The Kaplen
Apartments, Foundation
Garnerville, NY
Oak Manor 77 $4,717,000 The Kaplen
Apartments, Foundation
Ridgewood, NJ
Patricia 100 $4,782,000 The Kaplen
Apartments, Foundation
Peekskill, NY
Wayne Village, 275 $14,783,000 The Kaplen
Wayne, NJ Foundation
East Hill Gardens, 33 $1,787,000 East Hill Gardens
Tenafly, NJ
Windsor Realty, 67 $3,693,000 Windsor Realty
Woodridge, NJ Co.
Leland Gardens, 256 $7,065,000 Leland Gardens
Plainfield, NJ
Pleasantview 1,142 $53,371,000 Piscataway
Apartments, Associates
Piscataway, NJ
Pleasure Bay 270 $7,813,000 Pleasure Bay
Apartments, Long Apartments
Branch, NJ
The Towers, 137 $6,751,000 The Towers
Pasaic, NJ Apartments
Office and $200,000
Equipment
TOTAL UNITS/PRICE 4002 $155,000,000
EXHIBIT 5.2
CIBC INC.
425 Lexington Avenue
New York, New York 10017
May 14, 1998
Home Properties of New York, L.P.
850 Clinton Square
Rochester, New York 14604-1730
Attention: Ms. Amy Tait
Re: Senior Credit Facility in an amount not to
exceed $155,000,000 to Various Entities to
be Controlled by Home Properties of New
York, L.P.
Ladies and Gentlemen:
Home Properties of New York, L.P. (the "Company") has
requested that CIBC Inc. or its affiliates (the "Lender") provide
a senior credit facility (the "Loan") to the Company and its
subsidiaries, if any (collectively, the "Borrower") in a
principal amount not to exceed $155,000,000. The proceeds of the
Loan will be used to provide 100% financing for the acquisition
of certain multi-family residential properties and the
improvements thereon (collectively, the "Property"). The Lender
is pleased to advise you that it is willing to provide the
Borrower a $155,000,000 bridge loan, substantially on the terms
and conditions set forth in the General Outline of Terms and
Conditions attached hereto as Exhibit A and the Additional
Requirements for Closing set forth on Exhibit B attached hereto
(collectively, the "Term Sheets"). The Lender's commitment to
provide the Loan is subject in all respects to the satisfaction
of the terms and conditions contained in this commitment letter
and in the Term Sheets.
The Company acknowledges that this commitment letter
and the Term Sheets are intended as an outline only and do not
purport to summarize all of the conditions, covenants,
representations, warranties and other provisions which would be
contained in definitive legal documentation for the Loan. The
terms and conditions of the Loan will be further developed and
added to during the course of the Lender's due diligence and the
preparation and negotiation of the loan documents. The loan
documents for the Loan will include, in addition to the
provisions that are summarized in this commitment letter and the
Term Sheets, provisions that, in the opinion of the Lender, are
customary or typical for this type of financing transaction and
other provisions that the Lender may determine to be appropriate
in the context of the proposed transaction. Such definitive
legal documentation shall be in form and substance satisfactory
to the Lender.
By its execution hereof and its acceptance of the
commitment contained herein, the Company agrees to indemnify and
hold harmless the Lender and each of its assignees, their
affiliates and their respective directors, members, officers,
employees and agents (each, an "Indemnified Party") from and
against any and all expenses, losses, claims, damages and
liabilities arising out of, or in any manner related to, this
commitment letter, and the commitment made herein. The Lender
shall not be responsible or liable to the Company or any other
person for any special, indirect, consequential, incidental or
punitive damages that may be alleged as a result of this
commitment letter.
The Company agrees (i) to pay to the Lender a $193,750
stand-by commitment fee (the "Standby Fee"), payable upon the
execution and delivery by the Company of this commitment letter,
which Standby Fee shall be fully earned upon the execution
hereof by Borrower and shall be non-refundable (whether or not
the Loan closes, unless the failure to close arises from Lender's
willful breach of its obligations hereunder), and (ii) to pay all
reasonable out-of-pocket expenses related to the Loan within five
(5) days after a demand therefor by Lender but in no event later
than the Closing of the Loan. Lender's out-of-pocket expenses
will include, but not be limited to, fees and disbursements of
Lender's outside counsel (which shall be Schulte Roth & Zabel
LLP) and auditors, Lender's expenses and the fees of all third
parties relating to the due diligence review to be undertaken by
Lender and its third party consultants, title insurance costs,
insurance review costs, the costs of environmental reports,
structural engineering reports and other incidental actual out-of-
pocket expenses to third parties. If the Closing does not occur
for any reason whatsoever, other than a willful breach by the
Lender of its obligations under this commitment letter, the
Standby Fee will be retained by the Lender as full liquidated
damages, but such liquidated damages shall not waive Lender's
right to obtain reimbursement of its out-of-pocket costs and
expenses referenced in subclause (ii) of this paragraph. The
obligations of the Company under this paragraph, and the
immediately preceding paragraph, shall remain effective whether
or not definitive documentation is executed and notwithstanding
any termination of this commitment letter.
The Lender's commitment to provide the Loan is subject
to (i) the satisfaction of the conditions set forth in the Term
Sheets, as determined by the Lender in its sole discretion, and
(ii) the satisfaction of the Lender at all times prior to and
including the date on which the transactions referred to
hereunder close that there has not occurred or become known to
the Company or the Lender any material adverse change with
respect to the condition, financial or otherwise, operations,
assets, liabilities or prospects of any Borrower as determined by
the Lender in its sole discretion (a "Material Adverse Change").
If at any time the Lender shall determine (in its sole and
absolute discretion) that either the Company will be unable to
fulfill a condition set forth in this letter or in the Term
Sheets, or any Material Adverse Change has occurred, the Lender
may terminate this letter by giving notice thereof to the Company
(subject to the obligation of the Company to pay all fees, costs,
expenses and other payment obligations expressly assumed by the
Company hereunder, which shall survive the termination of this
letter).
The Company represents and warrants that (i) all
written information and other materials concerning the Borrower
and its affiliates (collectively, the "Information") which has
been, or is hereafter, made available by, or on behalf of, the
Company is, or when delivered will be, when considered as a
whole, complete and correct in all material respects and does
not, or will not when delivered, contain any untrue statement of
material fact or omit to state a material fact necessary in order
to make the statements contained therein not misleading in light
of the circumstances under which such statement has been made,
and (ii) to the extent that any such Information contains
projections, such projections were prepared in good faith on the
basis of (A) assumptions, methods and tests stated therein which
are believed by the Company to be reasonable, and (B) information
believed by the Company to have been accurate based upon the
information available to the Company at the time such projections
were furnished to the Lender.
This commitment letter is delivered to you upon the
condition that, prior to your acceptance of this commitment
letter, neither the existence of this commitment letter, nor any
of its contents, shall be disclosed by you, except as may be
compelled to be disclosed in a judicial or administrative
proceeding, as otherwise required by law, or on a confidential
and "need to know" basis, to your directors, officers, employees,
advisors and agents. The Company agrees that it will consult
with the Lender prior to the making of any filing required by law
in which reference is made to the Lender or the commitment
contained herein. The Company acknowledges that Lender has the
right to sell co-lender and/or or assign the Loan or sell co-
lender and/or participation interests therein.
The offer made by the Lender in this letter shall
remain in effect until 5:00 p.m. (New York City time) on May 15,
1998, at which time it will expire unless prior thereto the
Lender has received (i) a copy (including a faxed copy) of this
commitment letter signed by the Company, accepting this
commitment letter, and (ii) the Standby Fee in funds immediately
available. Any obligation of the Lender hereunder shall expire
at 5:00 p.m. (New York City time) on August 11, 1998, unless on
or prior to such date, definitive documentation shall have been
executed and delivered by all parties, in form and substance
satisfactory to the Lender (it being understood that the
Company's obligations to pay all amounts in respect of
indemnification and expenses shall survive the termination of
this letter).
Should the terms and conditions of the commitment
contained herein meet with your approval, please indicate your
acceptance by signing and returning a copy of this letter to the
Lender and paying in immediately available funds to the Lender
the Standby Fee referred to above.
This commitment letter, including the attached Term
Sheets, (i) supersedes all prior discussions, agreements,
commitments, arrangements, negotiations or understandings,
whether oral or written, of the parties with respect thereto,
(ii) shall be governed by the law of the State of New York,
without giving effect to the conflict of laws provisions thereof,
(iii) shall be binding upon the parties and their respective
successors and assigns, (iv) may not be relied upon or enforced
by any other person or entity, and (v) may be signed in multiple
counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same instrument.
If this commitment letter becomes the subject of a dispute, each
of the parties hereto hereby waives trail by jury. This
commitment letter may be amended, modified or waived only in a
writing signed by the parties hereto.
Very truly yours,
CIBC INC.
By: /s/ Keith Oglesbee
------------------
Name: Keith Oglesbee
Title: Authorized Signatory
Agreed and accepted on this
15th day of May, 1998.
HOME PROPERTIES OF NEW YORK, L.P.
By: Home Properties of New York, Inc.,
its general partner
By: /s/Amy L. Tait
Name: Amy L. Tait
Title: Executive Vice President
HOME PROPERTIES OF NEW YORK, INC.
By: /s/ Amy L. Tait
Name: Amy L. Tait
Title: Executive Vice President
<PAGE>
EXHIBIT A
General Outline of Terms and Conditions
This General Outline of Terms and Conditions is part of the
Commitment Letter, dated May 8, 1998 (the "Commitment Letter"),
addressed to Home Properties of New York, L.P. by CIBC Inc. and
is subject to the terms and conditions of the Commitment Letter.
Capitalized terms used herein shall have the meanings set forth
in the Commitment Letter unless otherwise defined herein.
Borrower: Home Properties of New York, L.P.
Guarantor: Home Properties of New York, Inc. will provide
guarantees of all of Borrower's obligations under
the loan documents.
Lender: CIBC Inc. ("Lender")
Facility: A $155,000,000 short-term credit facility (the
"Facility"), which will be a senior obligation of
the Borrower, subject to the terms described
below.
Term: 364 days after the initial drawdown of the
Facility.
Availability: The Borrower will be allowed to draw down the
Facility in one funding at any time within 90 days
of executing Lender's commitment for the Facility,
subject to the terms and conditions outlined
herein.
Purpose: To finance 100% of the acquisition costs related
to a portfolio (the "Acquisition Portfolio") of
multifamily apartment buildings containing 4,009
units as more particularly shown on Schedule 1
attached hereto and made a part hereof.
Interest Rate: Interest on the Facility will accrue at Borrower's
choice of LIBOR + 165 basis points or Lender's
Base Rate + 65 basis points. LIBOR options are
available for periods up to six (6) months, but in
no event later than the maturity date of the
Facility. Lender's Base Rate is defined as the
higher of Lender's U.S. Prime Rate or the Federal
Funds Rate plus 100 basis points. Interest will
be based upon actual days elapsed, with a 360 day
year in the case of LIBOR borrowings and a 365 day
year in the case of Base Rate borrowings. The
Facility documents will also contain increased
cost protection for the Lender in accordance with
Lender's standard loan documentation.
Debt Service
Payments: The Borrower will pay interest monthly in arrears,
along with principal amortization payments of
$4,000,000 per month.
Standby Fee: The Borrower will pay Lender a standby fee of 12.5
basis points ($193,750) upon execution of Lender's
commitment for the Facility. The Standby Fee will
be deemed earned by Lender whether or not the
Facility closes.
Upfront Fee: Upon closing the Facility and the only draw upon
the Facility, the Borrower will pay Lender an
Upfront Fee of 37.5 basis points on the amount of
the Facility that is drawn.
Exit Fee: If the Facility is drawn, Borrower will pay 25
basis points on the amount that is drawn, payable
upon the earlier of the (a) maturity date of the
Facility or (b) date on which all or any portion
of the Acquisition Portfolio is sold or
refinanced. In the event that any Properties are
sold or refinanced in separate transactions, the
Exit Fee will be prorated and paid as the assets
are sold or refinanced. If, during the term of
the Facility, Borrower issues equity through a
public offering (an "Offering"), the proceeds of
which are used to repay all or a portion of the
Facility, and CIBC is a managing underwriter of
the Offering, then, should any management and
syndication fees earned by CIBC in such Offering
exceed any Exit Fees due and payable, such Exit
Fees shall be waived.
In the event that the Facility is not drawn
because the Borrower:
(x) does not close on the purchase of the
Acquisition Portfolio, then (i) no Exit
Fee will be payable if the Borrower
terminates the purchase contract within 30
days of the date hereof; (ii) 12.5 basis
points will be payable if the Borrower
terminates the purchase contract within 60
days of the date hereof; and (iii) 25
basis points will be payable if the
Borrower terminates the purchase contract
more than 60 days after the date hereof;
(y) issues equity through an Offering,
the proceeds of which are used to acquire
the Acquisition Portfolio, and CIBC is a
managing underwriter of the Offering,
then, should any management and
syndication fees earned by CIBC in such
Offering exceed any Exit Fees due and
payable, such Exit Fees shall be waived;
provided, however, that under such
circumstances (i) no Exit Fee will be
payable if the Offering occurs within 30
days of the date hereof; (ii) 12.5 basis
points will be payable if the Offering
occurs within 60 days of the date hereof;
and (iii) 25 basis points will be payable
if the Offering occurs more than 60 days
after the date hereof; or
(z) obtains a loan for the Acquisition
Portfolio in lieu of the Facility (an
"Alternate Loan") or issues equity through
an Offering and CIBC is not a managing
underwriter of the Offering, then the
Borrower will pay an Exit Fee of 25 basis
points on the maximum amount of the
Facility provided for herein, which amount
shall be payable immediately upon closing
the Alternate Loan or the initial sales
pursuant to the Offering, as applicable.
Security: The Facility will be unsecured.
Notwithstanding the foregoing, at the closing
of the Facility the Borrower will provide,
and at any time following an Event of Default
or Borrower's failure to repay the Facility
in full prior to the date which is six (6)
months after the closing of the Facility,
Lender at its option shall be entitled to
record, negative pledges against each of the
properties (the "Properties") comprising a
portion of the Acquisition Portfolio and
execute fee mortgages, assignments of leases
and rents, UCC financing statements with
respect to each of the Properties and other
customary security documents (collectively,
the "Mortgages") with respect to each of the
Properties for the benefit of Lender. The
Mortgages will be held by Lender and will
only be recorded in the event that the
Borrower defaults on the Facility or fails to
fully repay the Facility prior to the date
that is six (6) months after the closing of
the Facility. In any such event, the
Borrower will (a) be responsible for all
charges and taxes related to the recording of
the Mortgages and the cost of title insurance
policies insuring the Mortgages and Lender's
interest in the Properties, and (b) make an
additional principal amortization payment
sufficient to reduce the loan balance to
$124,000,000 (80% of the purchase price for
the Acquisition Portfolio). In lieu of
making the additional principal paydown
referred to in the preceding sentence, the
Borrower may provide Mortgages on additional
properties (the "Conditional Collateral")
whose Gross Asset Value when combined with
the purchase price of the Acquisition
Portfolio, is sufficient to produce a ratio
of outstanding Facility loan balance to Gross
Asset Value of 80%. The Acquisition
Portfolio and the Conditional Collateral will
consist of a pool of completed unencumbered
multifamily assets which are wholly-owned by
the Borrower, free from all title defects and
material structural defects, at least 80%
occupied, managed by the Borrower or an
affiliate, and free from all Hazardous
Materials and otherwise acceptable to the
Lender in its sole and absolute discretion.
Gross Asset Value is defined as (x) for those
properties owned by the Borrower for more
than one year, the aggregate Adjusted NOI of
the properties comprising the Conditional
Collateral divided by a capitalization rate
of 9.5%, and (y) for those properties owned
by the Borrower for less than one year, the
purchase price paid by the Borrower.
Adjusted NOI is defined as the total revenues
less the sum of operating expenses and a
capital improvement reserve of $350 per unit.
Financial
Covenants: (a) Maximum ratio of Total Debt to Total
Value of 60%. Total Debt is defined as
the aggregate sums of the outstanding
indebtedness of the Borrower and any
consolidated subsidiaries, as of the most
recently ended fiscal quarter, including
any contingent recourse obligations of the
Borrower and any nonrecourse debt with
respect to any of their properties. The
contingent recourse obligations will
exclude completion guarantees of
construction loans and Low Income Housing
Tax Credit Program guarantees. Total
Value is defined as the sum of (i) the
aggregate Adjusted NOI for the immediately
preceding four (4) fiscal quarters for
those completed properties that have been
owned by the Borrower for at least one
year, divided by a cap rate of 9.5%, (ii)
the acquisition cost of those completed
properties that have been owned by the
Borrower for less than one year, (iii)
unrestricted cash and marketable
securities, (iv) EBITDA from the
Borrower's wholly-owned management and
development subsidiaries capitalized at
20%, (v) land and construction in progress
at 50% of book value, (vi) mortgages
receivable from affiliates at 75% of book
value, (vii) the Borrower's share of joint
venture interests at the lower of cost or
Adjusted NOI capitalized at 9.5%, and
(viii) earnest money deposits made by
Borrower in connection with purchase
contracts. Those items described in
(iii), (v), (vi), and (viii), along with
the carrying cost of joint venture
interests described in (vii) above shall
be based upon the information contained in
the Borrower's certified balance sheet for
the most recently ended fiscal quarter.
The EBITDA and Adjusted NOI referred to in
(iv) and (vii) above shall be based on the
preceding four (4) fiscal quarters.
(b) Maximum Ratio of Secured Debt to Total Value of
50%.
"Secured Debt" is defined as the outstanding
indebtedness of the Borrower and any
consolidated subsidiaries (other than the
Facility), as of the most recently ended
fiscal quarter, whether recourse or non-
recourse, but only to the extent same is
secured by some form of collateral,
including, without limitation, interests
in real property, stock, partnership
interests and letters of credit.
(c) Maximum Recourse Secured Debt (including
contingent recourse obligations) of 35% of Total Value.
(d) Minimum Ratio of Adjusted EBITDA to Interest
Expense of 2.15x, where Adjusted EBITDA is equal to
EBITDA less a reserve of $350 per unit for each apartment
unit owned by the Borrower.
(e) Minimum Ratio of Adjusted NOI from Unencumbered
Properties to Interest Expense on Unsecured Debt of
1.65x. Unencumbered Properties will consist of a
pool of completed unencumbered multifamily assets
which are wholly-owned by the Borrower, free
from all title defects and material structural
defects, at least 80% occupied, managed by the
Borrower or an affiliate, and free from all Hazardous
Materials.
(f) Minimum Fixed Charge Coverage Ratio of 1.8x. For
purposes of calculating this ratio, the Borrower's
$4,000,000 monthly amortization payment under the
Facility will be excluded.
(g) Minimum Equity Value equal to 85% of Equity Value
at the closing of the Facility, plus 85% of New
Equity Proceeds following closing of the Facility.
Equity Value will be determined by subtracting Total
Debt from Total Value.
(h) Maximum Dividend Payout Ratio of 90% of FFO and
110% of FAD.
(i) Minimum Value of Unencumbered Assets to Unsecured
Debt equal to 1.20x. The Unencumbered Assets used for
this test will consist of no less than 15 properties.
(j) Investment in Land and Development properties will
not exceed 10% of Total Value.
(k) Investment in Joint Venture Interests will not
exceed 10% of Total Value.
(l) Investment in completed real estate other than
Residential Properties will not exceed 5% of Total Value.
Other Covenants: (a) Home Properties of New York, Inc. to
remain a NYSE-listed company and an IRS
qualified REIT. No Borrower or Guarantor
will permit any material change to its
Articles of Incorporation, By-Laws or
partnership agreement as the case may be,
without Lender's consent. The Borrower
will not be considered a "publicly-traded
partnership" within the meaning of Section
7704 of the Code, or to the extent that
the Borrower is classified as a "publicly-
traded partnership," the Borrower will
meet the gross income requirements set
forth in Section 7704(c)(2) of the Code.
(b) Borrower will maintain its legal existence and its
properties in accordance with acceptable standards,
will keep its assets insured, will pay real estate
taxes and other assessments charged against the
properties when due and will comply with applicable
laws and regulations, including environmental laws.
(c) Borrower to maintain and allow for the inspection
of books and records, at times selected (with
reasonable notice) by Lender, and to allow for discussion
of business and operations (all subject to mutually
agreeable confidentiality provisions).
(d) Borrower to comply with applicable laws and
regulatory standards.
(e) Borrower to provide certain notices, including
with respect to litigation, material adverse events and
defaults.
Mandatory Prepayment
Event: (a) Borrower is involved with a merger,
unless Borrower is the surviving entity.
(b) Borrower or any of its subsidiaries
no longer provides property management and
leasing services on 80% of the total
number of wholly-owned multifamily
properties.
Release Prices: Upon each sale or refinance of a Property,
the applicable Release Price set forth on
Schedule I attached hereto shall be due and
payable to Lender.
Events of Default: (a) Failure to pay principal on the
Facility within three (3) days after the
date when due, including, without
limitation, payments due upon a sale or
refinance of any of the Properties or
failure to pay interest on the Facility
within five (5) days after the date when
due.
(b) Violation of any covenants following expiration of
cure periods.
(c) Material inaccuracy of any representation or
warranty.
(d) Default on any recourse debt obligations of the
Borrower in excess of $10,000,000.
(e) Judgment defaults in excess of $10,000,000 that
remain unremedied or unstayed for a period of 30 days.
(f) Any of the Properties become subject to any
mortgage, lien (statutory or otherwise), pledge,
negative pledge, hypothecation, security interest,
charge or other preference or encumbrance of
any kind (including, without limitation any agreement
to give any of the foregoing), beyond that which
have been approved by Lender at the time of the
closing of the Facility.
Reporting Requirements: The Borrower will provide the following information:
a) GAAP basis quarterly consolidated balance sheets,
consolidated statements of income and shareholders
equity and consolidated changes in financial condition
within 45 days of the closing date of each fiscal
quarter, except the fourth quarter.
b) Annual audited consolidated financial statements
bearing an unqualified opinion within 90 days of
the year end closing date.
c) Such financial information on the Borrower and the
individual real estate properties owned by the Borrower
as Lender shall reasonably request.
d) When requested by Lender, quarterly operating
statements and occupancy status reports for the
Unencumbered Assets.
e) Quarterly certification of no default from a senior
officer with respect to the Facility, along with
appropriate calculations demonstrating compliance
with the financial covenants.
f) A copy of each Borrower filing with the Securities and
Exchange Commission within five (5) days of such filing,
as well as all correspondence distributed to Borrower's
shareholders.
g) Notice of any material default under any of Borrower's
obligations.
h) Notification of any asset acquisition or asset sale by
the Borrower in excess of $50,000,000 or any sale or
refinancing of any of the Properties.
i) Such other information as Lender may reasonably request.
Conditions Precedent
to Closing: (a) Execution and delivery of Loan
Agreement, Guaranty, Mortgage, Assignment
of Rents and Leases, Environmental
Indemnity Agreements, UCC Financing
Statements and other appropriate
collateral documents, and such other
agreements, documents, instruments,
opinions and certificates as the Lender
shall deem necessary or appropriate, all
in form and substance satisfactory to
Lender.
(b) Closing by the Borrower on the Acquisition
Portfolio concurrent with the closing of the Facility.
(c) Evidence that the Borrower is in compliance with
all covenants for the Facility, all representations
and warranties are true and correct, and no default
or Event of Default has occurred and is continuing.
(d) Lender will be satisfied with the results of its
due diligence with respect to the Acquisition
Portfolio, including, without limitation, the
status of title, surveys and the other requirements
set forth on Exhibit B, it being understood and
agreed that Lender will endeavor to respond on or
before the date set forth in the contract of sale
for the Acquisition Portfolio as the expiration date
of Borrower's right to terminate such contract,
provided that Borrower shall have timely delivered to
Lender, as and when Borrower shall have received
same, the due diligence materials required by Lender
for its examination of the Properties, but in no event
shall Lender incur any liability whatsoever to Borrower
or any other party for its failure to so respond.
With respect to the physical condition of the
Properties, Lender acknowledges that, due to the age
of the improvements on the Properties, certain deferred
maintenance will need to be undertaken and, so long as
such deferred maintenance does not exceed $8,000,000
in the aggregate or presents issues relating to life
safety, Lender shall not unreasonably withhold
its approval of the Properties based on the physical
condition of the improvements located thereon
Properties.
(e) Payment of all reasonable third-party costs
incurred by Lender in connection with the Facility.
Borrower will be obligated to pay Lender's expenses
regardless of whether the Facility closes, unless
the failure to close is due to a willful default by
Lender.
(f) No material adverse change in the business,
assets, operation, prospects or condition (financial\
or otherwise) of the Borrower has occurred.
(g) Absence of any criminal claims or uninsured civil
claims or litigation where the amount in controversy
equals or exceeds $5,000,000.
Assignments and
Participations: Lender may grant assignments or
participations in all or any portion of its
loans or commitments under the Facility.
<PAGE>
EXHIBIT B
ADDITIONAL REQUIREMENTS FOR CLOSING
1. Property and Liability Insurance:
---------------------------------
Property and liability insurance in form and substance
reasonably satisfactory to Lender.
2. Flood Insurance:
---------------
If required, flood insurance in form and substance
reasonably satisfactory to Lender.
3. Title and Title Insurance:
-------------------------
Borrower shall procure and deliver to Lender a pro forma of
an ALTA title insurance policy with respect to each of the
Properties, with any endorsements Lender may require,
showing the title company's willingness to insure Lender, in
an amount at least equal to the amount of the Facility,
which policy shall provide that Lender's security instrument
constitutes a first lien or charge upon each of the
Properties subject only to such items as shall have been
approved in writing by Lender and its attorneys. In lieu of
the foregoing pro forma policies, Borrower may deliver to
Lender the Borrower's owner's title insurance policies,
together with an agreement by the Borrower's title insurer
and agreeing to issue ALTA mortgagee title insurance
policies in favor of Lender in respect of such Mortgages and
listing the endorsements that would be issued in connection
with such policies. Such policy shall be issued by a
company acceptable to Lender and show a state of title
satisfactory to Lender and its attorneys. Borrower shall
also procure and deliver to Lender additional evidence as to
the condition of the title to the Properties and related
personal property, which shall be good and marketable, and
free and clear of all defects, liens, encumbrances, security
interests, restrictions and easements which Lender has not
approved in writing; such evidence shall specifically
include, without limitation, the following:
i. Certified copies of all documents affecting
the title to the Properties.
ii. Evidence that ingress to and egress from the
Properties is by public road or by a deeded right-
of-way easement which is included as part of the
Properties and insured by the title policy.
iii. Descriptions of all easements, servitudes and
other agreements, if any, regarding the mutual use
and/or maintenance of the access roads, parking
garage, recreation areas, party walls, or
otherwise in any way affecting or appurtenant to
the Properties; all appurtenant easements or
servitudes shall be insured by the title policy.
iv. Evidence that all utilities serving the
Properties are located in the public right of way
abutting the Properties and connected to the
Properties without passing over other property or
are within a deeded right of way easement which is
included as part of the Properties and insured by
the title policy.
v. Evidence that no flowage easements and no
drainage easements (except those established by a
recorded subdivision plat or otherwise created by
a recorded instrument) are located on or necessary
for the Properties.
Lender shall also receive U.C.C./litigation/tax lien searches
against such parties as Lender may require showing that all
personal property used in connection with the operation of the
Properties and is free from all liens, claims and encumbrances,
and that neither Borrower nor the Properties are subject to any
pending material litigation (other than the Pleasant View consent
orders previously revealed to Lender) or tax liens; such searches
shall be updated as of the Closing date.
4. Survey:
------
Borrower shall provide Lender an ALTA as-built survey of the
Properties certified to Lender and the issuer of the title
policy by a registered Land Surveyor, dated not more than
one month prior to the Closing.
5. Taxes and Assessments.
---------------------
Borrower shall furnish evidence that all installments of
general real estate taxes, special taxes or assessments,
service charges, water and sewer charges, private
maintenance charges, and other prior lien charges by
whatever name called, then due and payable, have been paid
in full as of the Closing or Lender shall require that same
be paid from the Loan proceeds at Closing.
6. Compliance with Zoning and Other Laws:
--------------------------------------
Borrower shall furnish evidence that the Properties and the
use thereof comply with all laws, ordinances, rules and
regulations of all governmental authorities having
jurisdiction over the Properties and/or the use thereof and
that there is no action or proceeding pending before any
court, quasi-judicial body or administrative agency relating
to the validity of the proposed or actual use of the
Properties, or that all rights to appeal any decision
rendered in any such action or proceeding have expired.
Borrower shall furnish such evidence of zoning
classification and zoning compliance as Lender or its
attorneys may require.
7. Borrowing Entity:
----------------
Borrower shall furnish, if Borrower is a corporation,
partnership or other entity, all appropriate papers
evidencing Borrower's capacity and good standing, and the
qualification of signers to execute the Loan Documents and
to engage in any transaction or business in connection with
which the Loan is made, which shall include certified copies
of all documents relating to the organization and formation
of Borrower and of the entities, if any, which are general
partners of Borrower. Each subsidiary of Borrower which is
to hold title to any of the Properties shall be wholly-owned
by Borrower.
8. Opinion of Borrower's Counsel:
-----------------------------
Borrower shall furnish Lender with an opinion of an attorney
retained by Borrower and acceptable to Lender and in form
acceptable to Lender. Said opinion must be acceptable to
Lender and shall cover, among other things, the following
matters:
(a) the due authorization, execution, validity, binding
effect and enforceability of the Loan documents in
accordance with their terms,
(b) that the Loan complies with applicable usury laws,
(c) the due organization, valid legal existence and good
standing of Borrower and any entity which is a
controlling stockholder, general partner or member of
Borrower,
(d) the existence of, or the nonexistence of, any
requirement for any consent of any governmental
authority in connection with the execution, delivery or
performance of the Loan Documents,
(e) the fact that the Loan documents and the execution
thereof and the performance of the obligations
thereunder do not conflict with or violate any
applicable laws, and
(f) such other matters incident to the transactions
contemplated by this Commitment as Lender may request.
9. Occupancy Certification; Permits:
--------------------------------
Prior to Closing, to the extent the same are issued and
available, Borrower shall furnish unqualified, final
Certificate(s) of Occupancy and other permits or licenses
required for the operation and use of the Properties, issued
by the appropriate governmental authority.
10. Engineer's Report:
-----------------
Prior to Closing, Lender shall receive reports from
Borrower's in-house construction engineers satisfactory in
form and content to Lender. Said reports shall comment on
the structural soundness of the Properties, seismic
resistance, quality and remaining economic life of the roof,
HVAC and improvements. Any environmental hazards found must
also be detailed (e.g.: asbestos, hazardous materials).
Such reports shall also verify that the Improvements have
been completed to the state of substantial completion in
accordance with the final plans and specifications approved
by the appropriate governmental authority, and the
Properties, and the Improvements constructed thereon,
satisfy all applicable building, zoning and environmental
laws, ordinances, rules and regulations applicable to the
Properties (including ADA compliance).
11. Environmental Assessment:
-------------------------
Prior to Closing, Lender shall receive an environmental
assessment satisfactory to Lender by a qualified
environmental consultant satisfactory to Lender, evidencing,
without limitation, (a) the absence of any materials, waste,
or substances defined or classified as hazardous or toxic,
or as similarly described, under any applicable federal,
state or municipal law, regulation or ordinance
(collectively "Hazardous Substances"), (b) the absence of
any contamination of any part of the Properties by any
Hazardous Substances, and (c) the absence of any violation
of any environmental laws or regulations; provided, however,
that in the event such assessments disclose the existence of
asbestos and/or lead-based paint, the same shall be
acceptable to Lender if Borrower adopts an Operations and
Maintenance Plan (or other plan of remediation) in form and
substance satisfactory to Lender.
12. Intentionally deleted prior to execution.
-----------------------------------------
13. Leases:
-------
If required by Lender, Lender shall be provided Borrower's
standard form lease (certified by Borrower to be a complete
and correct copy thereof), and copies of all non-residential
leases in effect with respect to the Properties and the
personal property and a schedule (certified by Borrower to
be complete and correct) setting forth the rents, prepaid
rentals and security deposits, other guarantees or evidence
of security or guarantee paid or given in connection
therewith, expiration dates, extension options and all other
information pertaining to such leases as Lender shall
require. The Loan Documents shall provide that upon a
demand therefor by Lender, the Borrower shall provide copies
of all leases with respect to the Properties.
14. Borrower's Financial Condition:
------------------------------
Borrower shall furnish all information required by Lender
concerning Borrower's (and its general partners) financial
condition, including audited or certified financial
statements satisfactory to Lender. Lender shall be
entitled, at Borrower's expense, to obtain credit reports on
said entities and individuals satisfactory to Lender.
15. Personal Property Inventory:
---------------------------
The Loan Documents shall provide that upon a demand therefor
by Lender, the Borrower shall furnish an inventory of all
personal property owned by Borrower with respect to the
Properties. Such inventory shall include a detailed
description of the personal property, including make, model,
and serial numbers where applicable, and shall be certified
by Borrower as complete and correct.
16. Payment of Costs by Borrower:
-----------------------------
Borrower shall furnish evidence that Borrower has paid all
Closing costs, title insurance premiums, title insurance
company charges, survey costs, recording fees and taxes,
appraisal fees and expenses, architect/engineer inspection
fees and expenses, fees and expenses of Lender's counsel,
and all other costs and expenses incurred by Borrower in
complying with the provisions of this Commitment and by
Lender in connection with the evaluation, preparation,
Closing and disbursement of the Loan.
17. Evidence of Separate Taxation:
-----------------------------
Borrower shall provide evidence satisfactory to Lender that
the Land constitutes one or more tax lots separate from any
other real property and that the Properties are assessed
with respect to ad valorem taxes separately from all other
property.
18. Management Agreement and Service Contracts:
-------------------------------------------
Prior to Pre-closing, the identity of the manager of the
Properties and a copy of the management agreement, if any,
shall be submitted to and approved by Lender (certified by
Borrower to be complete and correct). Lender shall require
that the management services of any affiliate of Borrower or
any third-party manager be pursuant to the terms of a
written management agreement. The management fee throughout
the term of the Loan shall be no greater than that approved
by Lender and used by Lender in its underwriting of the
Loan. Borrower shall cause the manager to execute a consent
to the assignment of the management agreement to Lender and,
in the event that the manager is an affiliate of Borrower, a
subordination of its management fee to the Loan, as
additional collateral for the Loan. Borrower shall also
provide copies of all other contracts relating to the
Properties (certified by Borrower to be complete and
correct).
/s/ALT
Borrower's Initials
<PAGE>
Exhibit 23.0
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
on Forms S-3 (Nos. 333-37437, 333-37229, 333-30835, 333-13723, 333-43303,
333-46243, 333-2672, 333-2674, 333-49781 and 333-52601) and on Forms S-8
(Nos. 333-05705 and 333-12551) filed by Home Properties of New York, Inc.
of our report dated May 15, 1998, on our audit of The Acquisition Portfolio
for the year ended December 31, 1997, which report is included in the
accompanying Form 8-K. We also consent to the reference to our firm under
the caption "Experts".
/s/ Coopers & Lybrand, L.L.P.
Rochester, New York
May 22, 1998
