UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-10831
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
(Exact Name of Registrant as Specified in Its Charter)
California 94-2744492
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Registrant's telephone number)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No___
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 120-2 of the Exchange Act). Yes _____ No __X__
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
June 30, December 31,
2004 2003
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 3,665 $ 2,417
Receivables and deposits 788 404
Restricted escrows 816 922
Other assets 1,676 999
Investment in affiliated partnerships (Note D) 1,067 992
Investment properties:
Land 20,365 22,780
Buildings and related personal property 92,740 100,078
113,105 122,858
Less: Accumulated depreciation (25,383) (23,194)
87,722 99,664
$ 95,734 $105,398
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 574 $ 211
Tenant security deposit liabilities 891 964
Accrued property taxes 492 564
Other liabilities 1,340 1,499
Due to affiliates (Note C) 349 255
Mortgage notes payable 66,699 75,195
70,345 78,688
Partners' Capital
General partner 133 128
Limited partners (199,043.2 units issued and
outstanding) 25,256 26,582
25,389 26,710
$ 95,734 $105,398
Note: The consolidated balance sheet at December 31, 2003 has been derived from
the audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Revenues: (Restated) (Restated)
Rental income $ 5,302 $ 3,466 $10,657 $ 6,892
Other income 556 299 1,050 571
Casualty (loss) gain (26) 25 (26) 25
Total revenues 5,832 3,790 11,681 7,488
Expenses:
Operating 3,014 1,630 5,702 3,360
General and administrative 222 269 485 527
Depreciation 1,318 916 2,671 1,842
Interest 1,168 785 2,308 1,564
Property taxes 423 258 866 468
Total expenses 6,145 3,858 12,032 7,761
Loss from continuing operations (313) (68) (351) (273)
(Loss) income from discontinued
operations (Notes A and E) (449) 36 (1,100) 68
Gain on sale of discontinued
operations (Note E) 283 -- 1,716 --
Gain on foreclosure of real
estate (Note B) 156 -- 156 --
Equity in income from investment
(Note D) 17 -- 75 350
Net (loss) income $ (306) $ (32) $ 496 $ 145
Net (loss) income allocated to general
Partner (1%) $ (3) $ -- $ 5 $ 1
Net (loss) income allocated to limited
partners (99%) (303) (32) 491 144
$ (306) $ (32) $ 496 $ 145
Per limited partnership unit:
Loss from continuing operations (1.56) (.34) (1.74) (1.36)
(Loss) income from discontinued
operations (2.23) .18 (5.47) 0.34
Gain on sale of discontinued operations 1.41 -- 8.54 --
Gain on foreclosure of real estate 0.77 -- 0.77 --
Equity in income from investment 0.09 -- 0.37 1.74
Net (loss) income per limited
partnership unit $ (1.52) $ (.16) $ 2.47 $ 0.72
Distributions per limited partnership
Unit $ 9.13 $ 1.75 $ 9.13 $ 11.74
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 200,342.0 $ 1 $200,342 $200,343
Partners' capital at
December 31, 2003 199,043.2 $ 128 $ 26,582 $ 26,710
Distributions to partners -- -- (1,817) (1,817)
Net income for the six months
ended June 30, 2004 -- 5 491 496
Partners' capital at
June 30, 2004 199,043.2 $ 133 $ 25,256 $ 25,389
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2004 2003
Cash flows from operating activities:
Net income $ 496 $ 145
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,808 2,029
Amortization of loan costs, lease commissions and
mortgage premiums (121) (30)
Casualty loss (gain) 26 (25)
Equity in income of investment (75) (350)
Gain on sale of discontinued operations (1,716) --
Loss on early extinguishment of debt 1,161 --
Gain on foreclosure of real estate (156) --
Change in accounts:
Receivables and deposits (373) 158
Other assets (738) (684)
Accounts payable 17 88
Tenant security deposit liabilities (73) (1)
Accrued property taxes (72) (57)
Other liabilities (159) (484)
Due to affiliates 94 --
Net cash provided by operating activities 1,119 789
Cash flows from investing activities:
Net proceeds from sale of discontinued operations 12,589 --
Net receipts from (deposits to) restricted escrows 106 (36)
Property improvements and replacements (1,461) (737)
Insurance proceeds received 42 73
Receipts on Master Loan 156 15
Distributions from affiliated partnerships -- 258
Net cash provided by (used in) investing activities 11,432 (427)
Cash flows from financing activities:
Distributions to partners (1,817) (2,343)
Payments on mortgage notes payable (854) (554)
Repayment of mortgage note payable (7,099) --
Prepayment penalties (1,527) --
Lease commissions, paid (6) (38)
Advances from general partner -- 32
Repayment of advances from general partner -- (32)
Net cash used in financing activities (11,303) (2,935)
Net increase (decrease) in cash and cash equivalents 1,248 (2,573)
Cash and cash equivalents at beginning of period 2,417 3,175
Cash and cash equivalents at end of period $ 3,665 $ 602
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,676 $ 2,040
Supplemental disclosure of non-cash activity:
Property improvements and replacements in accounts
payable $ 222 $ --
Insurance proceeds in accounts receivable $ 11 $ --
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Institutional Properties (the "Partnership" or "Registrant") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. (the "General
Partner"), which is ultimately owned by Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and six
month periods ended June 30, 2004 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 2004. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 2003.
As a result of the sales of Silverado Apartments and Tates Creek Village
Apartments to third parties during the six months ended June 30, 2004 and in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", the
accompanying consolidated statements of operations for the three and six months
ended June 30, 2003 have been restated as of January 1, 2003 to reflect the
operations of Silverado Apartments and Tates Creek Village Apartments as income
from discontinued operations of approximately $36,000 and $68,000 for the three
and six months ended June 30, 2003, respectively, including revenues of
approximately $691,000 and $1,365,000, respectively.
Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information" established standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also established standards
for related disclosures about products and services, geographic areas, and major
customers. (See "Note F" for detailed disclosure of the Partnership's segments).
Note B - Net Investment in Master Loan
The Partnership was initially formed for the benefit of its limited partners to
lend funds to Consolidated Capital Equity Partners ("CCEP"), a California
general partnership. The general partner of CCEP is an affiliate of the General
Partner. The Partnership loaned funds to CCEP subject to a nonrecourse note with
a participation interest (the "Master Loan"). The loans were made to, and the
real properties that secured the Master Loan were purchased and owned by, CCEP.
The Master Loan matured in November 2000. The General Partner had been
negotiating with CCEP with respect to its options which included foreclosing on
the properties which collateralized the Master Loan or extending the terms of
the Master Loan. The General Partner decided to foreclose on the properties that
collateralized the Master Loan. The General Partner began the process of
foreclosure or executing deeds in lieu of foreclosure during 2002 on all the
properties in CCEP. During August 2002, the General Partner executed deeds in
lieu of foreclosure on four of the active properties of CCEP. In addition, one
of the properties held by CCEP was sold in December 2002. On November 10, 2003
the Partnership acquired the remaining four properties held by CCEP through a
foreclosure sale. As the deeds were executed, title in the properties previously
owned by CCEP was transferred to the Partnership, subject to the existing liens
on such properties, including the first mortgage loans. As a result, during the
years ended December 2003 and 2002, the Partnership assumed responsibility for
the operations of such properties. The results of operations of the four
properties foreclosed on in 2002 are reflected in the accompanying consolidated
statements of operations for the three and six months ended June 30, 2004 and
2003. The results of operations for the four properties foreclosed on in
November 2003 are included in the three and six months ended June 30, 2004.
Prior to the acquisition of the four remaining properties held by CCEP at a
foreclosure sale in 2003, the principal balance of the Master Loan due to the
Partnership totaled approximately $14,144,000 at December 31, 2002. This amount
represented the fair market value of the remaining properties held by CCEP at
December 31, 2002, less the net liabilities owed by the properties. Interest,
calculated on the accrual basis, due to the Partnership pursuant to the terms of
the Master Loan Agreement, but not recognized in the income statements due to
the impairment of the loan, totaled approximately $881,000 for the six months
ended June 30, 2003. Interest income was recognized on the cash basis as
required by SFAS 114.
During the six months ended June 30, 2004, the Partnership received
approximately $156,000 from CCEP as the final payment on the Master Loan. During
the six months ended June 30, 2003, the Partnership received approximately
$15,000 from escrows released by the mortgage lender of Society Park which was
sold during 2002 as principal payments on the Master Loan from CCEP. No advances
were made by the Partnership to CCEP on the Master Loan during the six months
ended June 30, 2003 or 2004.
Note C - Related Party Transactions
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
Affiliates of the General Partner are entitled to receive 5% of gross receipts
from the Partnership's properties for providing property management services.
The Partnership paid to such affiliates approximately $634,000 and $453,000 for
the six months ended June 30, 2004 and 2003, respectively, which is included in
operating expenses and (loss) income from discontinued operations.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $465,000 and $248,000 for the
six months ended June 30, 2004 and 2003, respectively which is included in
general and administrative expenses and investment properties. Included in these
amounts are fees related to construction management services provided by an
affiliate of the General Partner of approximately $88,000 and $23,000 for the
six months ended June 30, 2004 and 2003, respectively. The construction
management fees are calculated based on a percentage of current year additions
to investment properties.
In connection with the sale of Silverado Apartments on March 31, 2004 (see "Note
E"), the General Partner earned a disposition fee of approximately $333,000. The
fee is included in gain on sale of discontinued operations and was paid during
the six months ended June 30, 2004. In connection with the sale of Tates Creek
Village Apartments on June 28, 2004 the General Partner earned a disposition fee
of approximately $349,000. The fee is included in gain on sale of discontinued
operations and due to affiliates.
The Partnership insures its properties up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers' compensation, property casualty and vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the General
Partner. During the six months ended June 30, 2004 and 2003, the Partnership was
charged by AIMCO and its affiliates approximately $190,000 and $212,000,
respectively, for insurance coverage and fees associated with policy claims
administration.
Note D - Investment in Affiliated Partnerships
Ownership Investment Balance
Partnership Type of Ownership Percentage June 30, 2004
(in thousands)
Consolidated Capital Non-controlling
Growth Fund General Partner 0.40% $ 13
Consolidated Capital Non-controlling
Properties III General Partner 1.85% 27
Consolidated Capital Non-controlling
Properties IV General Partner 1.85% 1,027
$1,067
These investments were assumed during the foreclosure of investment properties
from CCEP (see "Note B") and are accounted for on the equity method of
accounting. Distributions from the affiliated partnerships are accounted for as
a reduction of the investment balance until the investment balance is reduced to
zero. When the investment balance has been reduced to zero, subsequent
distributions received are recognized as income in the accompanying statements
of operations. During the six months ended June 30, 2004, the Partnership
recognized approximately $75,000 in equity in income from investment primarily
related to the sale of a property in Consolidated Capital Properties IV. There
was no distribution associated with this sale. During the six months ended June
30, 2003, the Partnership received approximately $258,000 in distributions from
two of the investments. Approximately $243,000 of the distribution related to
the sale of a property in Consolidated Capital Growth Fund. Of this amount,
approximately $236,000 was recognized as equity in income from investment once
the investment balance allocated to that property had been reduced to zero. The
Partnership also recognized equity in income from investment of approximately
$114,000 related to the sale of a property in Consolidated Capital Properties
IV. There was no distribution associated with this sale.
Note E - Sale of Investment Property
On March 31, 2004, the Partnership sold Silverado Apartments, located in El
Paso, Texas, to a third party for $6,650,000. After payment of closing costs,
the net sales proceeds received by the Partnership were approximately
$6,169,000. The Partnership used a portion of the proceeds to repay the mortgage
encumbering the property of approximately $3,248,000. The sale resulted in a
gain on sale of investment property of approximately $1,510,000 during the six
months ended June 30, 2004. In addition, the Partnership recorded a loss on
early extinguishment of debt of approximately $685,000 as a result of prepayment
penalties paid partially offset by the write off of the unamortized mortgage
premium which is included in loss from discontinued operations. Pursuant to the
Partnership Agreement and in conjunction with the sale, a disposition fee of
approximately $333,000 was earned by and paid to the General Partner during the
six months ended June 30, 2004. Included in (loss) income from discontinued
operations for the three months ended June 30, 2004 and 2003 are results of the
property's operations of approximately $(23,000) and $11,000, respectively,
including revenues of approximately $1,000 and $347,000, respectively. Included
in (loss) income from discontinued operations for the six months ended June 30,
2004 and 2003 are results of the property's operations of approximately
$(672,000) and $35,000, respectively, including revenues of approximately
$339,000 and $688,000, respectively.
On June 28, 2004, the Partnership sold Tates Creek Village Apartments, located
in Lexington, Kentucky, to a third party for $6,980,000. After payment and
accrual of closing costs, the net sales proceeds received by the Partnership
were approximately $6,420,000. The Partnership used a portion of the proceeds to
repay the mortgage encumbering the property of approximately $3,851,000. The
sale resulted in a gain on sale of investment property of approximately $206,000
during the six months ended June 30, 2004. In addition, the Partnership recorded
a loss on early extinguishment of debt of approximately $476,000 as a result of
prepayment penalties paid, partially offset by the write off of the unamortized
mortgage premium which is included in loss from discontinued operations.
Pursuant to the Partnership Agreement and in conjunction with the sale, a
disposition fee of approximately $349,000 was earned by the General Partner
which was accrued and is included in due to affiliates. The fee was paid
subsequent to June 30, 2004. Included in (loss) income from discontinued
operations for the three months ended June 30, 2004 and 2003 are results of the
property's operations of approximately $(426,000) and $25,000, respectively,
including revenues of approximately $345,000 and $344,000, respectively.
Included in (loss) income from discontinued operations for the six months ended
June 30, 2004 and 2003 are results of the property's operations of approximately
$(428,000) and $33,000, respectively, including revenues of approximately
$704,000 and $677,000, respectively.
Note F - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership has two reportable segments:
residential properties and commercial property. The Partnership's property
segments consist of seven apartment complexes one each in North Carolina,
Colorado and Kansas, four in Florida and one multiple use facility consisting of
apartment units and commercial space in Pennsylvania. The Partnership rents
apartment units to tenants for terms that are typically less than twelve months.
The commercial property leases space to various medical offices, career service
facilities, and retail shops at terms ranging from month to month to six years.
Measurement of segment profit and loss: The Partnership evaluates performance
based on segment profit (loss) before depreciation. The accounting policies of
the reportable segments are the same as those described in the summary of
significant accounting policies.
Factors management used to identify the enterprise's reportable segment: The
Partnership's reportable segments are business units (investment properties)
that offer different products and services. The reportable segments are each
managed separately because they provide distinct services with different types
of products and customers.
Segment information for the three and six months ended June 30, 2004 and 2003 is
shown in the tables below (in thousands). The "Other" Column includes
partnership administration related items and income and expense not allocated to
reportable segments.
For the three months ended
June 30, 2004 Residential Commercial Other Totals
Rental income $ 4,935 $ 367 $ -- $ 5,302
Other income 534 21 1 556
Casualty loss (26) -- -- (26)
Equity in income of investment -- -- 17 17
Interest expense 1,109 55 4 1,168
Depreciation 1,246 72 -- 1,318
General and administrative expenses -- -- 222 222
Gain on sale of investment 283 -- -- 283
Loss from discontinued operations (449) -- -- (449)
Gain on foreclosure of real estate 156 -- -- 156
Segment profit (loss) 35 (133) (208) (306)
For the six months ended
June 30, 2004 Residential Commercial Other Totals
Rental income $ 9,946 $ 711 $ -- $10,657
Other income 996 52 2 1,050
Casualty loss (26) -- -- (26)
Equity in income of investment -- -- 75 75
Interest expense 2,193 111 4 2,308
Depreciation 2,540 131 -- 2,671
General and administrative expense -- -- 485 485
Gain on sale of investment 1,716 -- -- 1,716
Loss from discontinued operations (1,100) -- -- (1,100)
Gain on foreclosure of real estate 156 -- -- 156
Segment profit (loss) 1,247 (339) (412) 496
Total assets 90,438 1,620 3,676 95,734
Capital expenditures 1,117 566 -- 1,683
For the three months ended
June 30, 2003 Residential Commercial Other Totals
(restated)
Rental income $ 3,223 $ 243 $ -- $ 3,466
Other income 270 29 -- 299
Casualty gain 25 -- -- 25
Income from discontinued
operations 36 -- -- 36
Interest expense 729 56 -- 785
Depreciation 874 42 -- 916
General and administrative expense -- -- 269 269
Segment profit (loss) 391 (154) (269) (32)
For the six months ended
June 30, 2003 Residential Commercial Other Totals
(restated)
Rental income $ 6,391 $ 501 $ -- $ 6,892
Other income 515 56 -- 571
Casualty gain 25 -- -- 25
Equity in income of investment -- -- 350 350
Income from discontinued
operations 68 -- -- 68
Interest expense 1,452 112 -- 1,564
Depreciation 1,758 84 -- 1,842
General and administrative expense -- -- 527 527
Segment profit (loss) 628 (306) (177) 145
Total assets 63,855 881 15,318 80,054
Capital expenditures 682 55 -- 737
Note G - Casualty (Loss) Gain
During the six months ended June 30, 2004, there was a casualty loss of
approximately $26,000 recorded at Regency Oaks Apartments related to a fire that
damaged four apartment units. The loss was the result of the write off of net
fixed assets of approximately $79,000, net of the receipt of insurance proceeds
of approximately $42,000 and a receivable for an additional $11,000 of insurance
proceeds.
During the six months ended June 30, 2003, there was a casualty gain of
approximately $25,000 recorded at The Sterling Apartment Homes related to an
electrical fire that damaged two units. This gain was the result of the receipt
of insurance proceeds of approximately $73,000, net of the write off of net
fixed assets of approximately $48,000.
Note H - Subsequent Distribution
Subsequent to June 30, 2004, the Partnership declared and paid a distribution to
the limited partners of approximately $2,315,000 (approximately $11.63 per
limited partnership unit). Approximately $2,276,000 (approximately $11.43 per
limited partnership unit) related to the sale of Tates Creek Village Apartments
on June 28, 2004 and the sale of Silverado Apartments on March 31, 2004, and
approximately $39,000, (approximately $0.20 per limited partnership unit)
related to operations.
Note I - Contingencies
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities that were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, during the third quarter of 2001, a
complaint (the "Heller action") was filed against the same defendants that are
named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or
about August 6, 2001, plaintiffs filed a first amended complaint. The Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the General Partner has also agreed to make at least
one round of tender offers to purchase all of the partnership interests in the
Partnerships within one year of final approval, if it is granted, and to provide
partners with the independent appraisals at the time of these tenders. The
proposed settlement also provided for the limitation of the allowable costs
which the General Partner or its affiliates will charge the Partnerships in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation. On April 11, 2003, notice was distributed to limited
partners providing the details of the proposed settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety.
On January 28, 2004, Objector filed his opening brief in his pending appeal. On
April 23, 2004, the General Partner and its affiliates filed a response brief in
support of the settlement and the judgment thereto. Plaintiffs have also filed a
brief in support of the settlement. On June 4, 2004, Objector filed a reply to
the briefs submitted by the General Partner and Plaintiffs. No hearing has been
scheduled in the matter.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner,
was served with a complaint in the United States District Court, District of
Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor
Standards Act ("FLSA") by failing to pay maintenance workers overtime for all
hours worked in excess of forty per week. On March 5, 2004 Plaintiffs filed an
amended complaint also naming NHP Management Company, which is also an affiliate
of the General Partner. The complaint is styled as a Collective Action under the
FLSA and seeks to certify state subclasses in California, Maryland, and the
District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties
L.P. failed to compensate maintenance workers for time that they were required
to be "on-call". Additionally, the complaint alleges AIMCO Properties L.P.
failed to comply with the FLSA in compensating maintenance workers for time that
they worked in responding to a call while "on-call". The defendants have filed
an answer to the amended complaint denying the substantive allegations. Some
discovery has taken place and settlement negotiations continue. Although the
outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe
that the ultimate outcome will have a material adverse effect on its financial
condition or results of operations taken as a whole. Similarly, the General
Partner does not believe that the ultimate outcome will have a material adverse
effect on the Partnership's financial condition or results of operations taken
as a whole.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment properties that are not of a routine
nature arising in the ordinary course of business.
As previously disclosed, the Central Regional Office of the United States
Securities and Exchange Commission is conducting an investigation relating to
certain matters. AIMCO believes the areas of investigation include AIMCO's
miscalculated monthly net rental income figures in third quarter 2003,
forecasted guidance, accounts payable, rent concessions, vendor rebates, and
capitalization of expenses and payroll. AIMCO is cooperating fully. AIMCO does
not believe that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations taken as a whole.
Similarly, the General Partner does not believe that the ultimate outcome will
have a material adverse effect on the Partnership's consolidated financial
condition or results of operations taken as a whole.
ITEM 2. Management's Discussion and Analysis Of Financial Condition and
Results of Operations
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment properties consist of eight properties. The
Sterling is a multiple-use facility which consists of an apartment complex and
commercial space. The following table sets forth the average occupancy of the
properties for the six months ended June 30, 2004 and 2003:
Average Occupancy
Property 2004 2003
The Loft Apartments (3) 83% 80%
Raleigh, North Carolina
The Sterling Apartment Homes 94% 92%
The Sterling Commerce Center (1) 78% 55%
Philadelphia, Pennsylvania
The Knolls Apartments (2) 79% 83%
Colorado Springs, Colorado
Indian Creek Village Apartments (2) 86% 91%
Overland Park, Kansas
Plantation Gardens Apartments (2) 88% 92%
Plantation, Florida
Palm Lake Apartments 93% 92%
Tampa, Florida
The Dunes Apartments (3) 94% 90%
Indian Harbor, Florida
Regency Oaks Apartments 93% 95%
Fern Park, Florida
(1) The General Partner attributes the low occupancy in 2003 at The Sterling
Commerce Center to the loss of a major tenant in late December 2001.
During the fourth quarter of 2003, a new tenant signed a lease and
occupied a large portion of the vacant space.
(2) The General Partner attributes the decrease in occupancy at The Knolls,
Indian Creek Village and Plantation Gardens Apartments to the competitive
market of the apartment industry in the properties' locations.
(3) The General Partner attributes the increase in occupancy at The Loft
Apartments and The Dunes Apartments to an increase in marketing outreach
and promotions.
The Partnership's financial results are dependent upon a number of factors
including the ability to attract and maintain tenants at the investment
properties, interest rates on mortgage loans, costs incurred to operate the
investment properties, general economic conditions and weather. As part of the
ongoing business plan of the Partnership, the General Partner monitors the
rental market environment of its investment properties to assess the feasibility
of increasing rents, maintaining or increasing occupancy levels and protecting
the Partnership from increases in expenses. As part of this plan, the General
Partner attempts to protect the Partnership from the burden of inflation-related
increases in expenses by increasing rents and maintaining a high overall
occupancy level. However, the General Partner may use rental concessions and
rental rate reductions to offset softening market conditions, accordingly, there
is no guarantee that the General Partner will be able to sustain such a plan.
Further, a number of factors which are outside the control of the Partnership
such as the local economic climate and weather can adversely or positively
impact the Partnership's financial results.
Results of Operations
The Partnership's net (loss) income for the three and six months ended June 30,
2004 was approximately ($306,000) and $496,000 compared to net (loss) income of
approximately ($32,000) and $145,000 for the corresponding periods in 2003. The
increase in net loss for the three months ended June 30, 2004 as compared to the
three months ended June 30, 2003 is due to the loss from continuing operations
partially offset by an increase in equity in income from investment. The
increase in net income for the six months ended June 30, 2004 is largely due to
the sale of Silverado and Tates Creek Apartments during the six months ended
June 30, 2004.
On March 31, 2004, the Partnership sold Silverado Apartments, located in El
Paso, Texas, to a third party for $6,650,000. After payment of closing costs,
the net sales proceeds received by the Partnership were approximately
$6,169,000. The Partnership used a portion of the proceeds to repay the mortgage
encumbering the property of approximately $3,248,000. The sale resulted in a
gain on sale of investment property of approximately $1,510,000 during the six
months ended June 30, 2004. In addition, the Partnership recorded a loss on
early extinguishment of debt of approximately $685,000 as a result of prepayment
penalties paid partially offset by the write off of the unamortized mortgage
premium which is included in loss from discontinued operations. Pursuant to the
Partnership Agreement and in conjunction with the sale, a disposition fee of
approximately $333,000 was earned by and paid to the General Partner during the
six months ended June 30, 2004.
On June 28, 2004, the Partnership sold Tates Creek Village Apartments, located
in Lexington, Kentucky, to a third party for $6,980,000. After payment and
accrual of closing costs, the net sales proceeds received by the Partnership
were approximately $6,420,000. The Partnership used a portion of the proceeds to
repay the mortgage encumbering the property of approximately $3,851,000. The
sale resulted in a gain on sale of investment property of approximately $206,000
during the six months ended June 30, 2004. In addition, the Partnership recorded
a loss on early extinguishment of debt of approximately $476,000 as a result of
prepayment penalties paid partially offset by the write off of the unamortized
mortgage premium which is included in loss from discontinued operations.
Pursuant to the Partnership Agreement and in conjunction with the sale, a
disposition fee of approximately $349,000 was earned by the General Partner
which was accrued and is included in due to affiliates. The fee was paid
subsequent to June 30, 2004.
As a result of the sales of Silverado Apartments and Tates Creek Village
Apartments to third parties during the six months ended June 30, 2004 and in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", the
accompanying consolidated statements of operations for the three and six months
ended June 30, 2003 have been restated as of January 1, 2003 to reflect the
operations of Silverado Apartments and Tates Creek Village Apartments as income
from discontinued operations of approximately $68,000 for the six months ended
June 30, 2003, including revenues of approximately $1,365,000. For the three
months ended June 30, 2003 income from discontinued operations was approximately
$36,000, including revenues of approximately $691,000.
The increase in equity in income from investment for the three months ended June
30, 2004 is due to the recognition of the Partnership's share of distributions
received and recognized as earnings from affiliated partnerships in excess of
investment balance during the three months ended June 30, 2004. The Partnership
assumed investments in three affiliated partnerships during the foreclosure of
investment properties from CCEP as discussed below. These investments are
accounted for on the equity method of accounting. Distributions from the
affiliated partnerships are accounted for as a reduction of the investment
balance until the investment balance is reduced to zero. When the investment
balance has been reduced to zero, subsequent distributions received are
recognized as income in the accompanying statements of operations. During the
six months ended June 30, 2004, the Partnership recognized approximately $75,000
in equity in income from investment primarily related to the sale of a property
in Consolidated Capital Properties IV. There was no distribution associated with
this sale. During the six months ended June 30, 2003, the Partnership received
approximately $258,000 in distributions from two of the investments.
Approximately $243,000 of the distribution related to the sale of a property in
Consolidated Capital Growth Fund. Of this amount, approximately $236,000 was
recognized as equity in income from investment once the investment balance
allocated to that property had been reduced to zero. The Partnership also
recognized equity in income from investment of approximately $114,000 related to
the sale of a property in Consolidated Capital Properties IV. There was no
distribution associated with this sale.
The Partnership recognized a loss from continuing operations for the three and
six months ended June 30, 2004 of approximately $313,000 and $351,000 compared
to approximately $68,000 and $273,000 for the corresponding periods in 2003. The
increase in loss from continuing operations for the three and six months ended
June 30, 2004, is due to an increase in total expenses partially offset by an
increase in total revenues. The increase in total expenses and total revenues is
largely due to the acquisition at a foreclosure sale of four properties
(Plantation Gardens, Palm Lake, The Dunes and Regency Oaks Apartments) during
November 2003. These properties were sold at a foreclosure sale due to CCEP's
inability to repay the Master Loan and accrued interest. The Master Loan matured
in November 2000. The General Partner had been negotiating with CCEP with
respect to its options which included foreclosing on the properties which
collateralized the Master Loan or extending the terms of the Master Loan. The
General Partner decided to foreclose on the properties that collateralized the
Master Loan. The General Partner began the process of foreclosure or executing
deeds in lieu of foreclosure during 2002 on all the properties in CCEP. The
foreclosure process on the above four properties held by CCEP was completed
during the fourth quarter of 2003. As the deeds were executed, title in the
properties previously owned by CCEP were transferred to the Partnership, subject
to the existing liens on such properties, including the first mortgage loans. As
a result, the Partnership assumed responsibility for the operations of such
properties during the fourth quarter of 2003. During the three months ended June
30, 2004 the Partnership recognized a gain on foreclosure of real estate of
approximately $156,000. The gain on the foreclosure was primarily the result of
CCEP's remaining funds being sent to the Partnership. The remaining funds were
primarily a refund of reimbursement of accountable administrative expenses from
an affiliate of the General Partner.
For the three and six months ended June 30, 2004, the four properties foreclosed
in 2003 had income of approximately $54,000 and $185,000, respectively, which
includes revenues of approximately $2,042,000 and $4,114,000, respectively.
Exclusive of the items related to the operations of the properties foreclosed in
2003, the Partnership recognized a net loss from continuing operations,
including equity in income from investment, for the three and six months ended
June 30, 2004 of approximately $342,000 and $462,000 compared to a net loss from
continuing operations of approximately $68,000 for the three months ended June
30, 2003 and net income of $77,000 for the six months ended June 30, 2003. The
increase in net loss from continuing operations for the three months ended June
30, 2004 as compared to the three months ended June 30, 2003 is primarily due to
an increase in total expenses and a slight decrease in total revenues. The
decrease in net income from continuing operations for the six months ended June
30, 2004 as compared to the six months ended June 30, 2003 is primarily due to a
decrease in equity in income from investment and an increase in total expenses,
partially offset by an increase in total revenues.
Total expenses, exclusive of the properties foreclosed in 2003, increased during
the six months ended June 30, 2004 primarily due to increases in operating and
property tax expenses partially offset by decreases in interest, depreciation
and general and administrative expenses. Total expenses increased for the three
months ended June 30, 2004 due to an increase in operating expenses partially
offset by decreases in interest and general and administrative expenses.
Operating expenses increased during the three and six months ended June 30, 2004
primarily due to an increase in property expenses. Property expenses increased
primarily due to an increase in utility expenses at The Sterling Commerce
Center, The Sterling Apartment Homes, The Knolls Apartments and Indian Creek
Apartments, an increase in salaries and other related benefits at The Knolls
Apartments partially offset by a decrease in salaries and other related benefits
at The Sterling Apartment Homes. Property tax expense increased during the six
months ended June 30, 2004 primarily due to the timing of the receipt of the tax
bills at Indian Creek Village Apartments. Interest expense decreased due to
principal payments made on the mortgage notes encumbering the Partnership's
properties. Depreciation expense decreased during the six months ended June 30,
2004 primarily due to assets becoming fully depreciated at The Sterling
Apartment Homes.
General and administrative expenses decreased for the three and six months
periods ended June 30, 2004 and 2003 primarily due to the timing of the payment
of a business privilege tax paid to the city of Philadelphia during the six
months ended June 30, 2003 and reduced legal fees associated with the
foreclosures of the properties held by CCEP during 2003 partially offset by
increases in the costs of services included in the management reimbursements to
the General Partner as allowed under the Partnership Agreement. Also included in
general and administrative expenses for the three and six month periods ended
June 30, 2004 and 2003 are costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement.
The increase in total revenues, exclusive of the properties foreclosed in 2003,
during the six months ended June 30, 2004 as compared to the six months ended
June 30, 2003 is primarily due to an increase in rental income partially offset
by a casualty gain at The Sterling Apartment Homes during the six months ended
June 30, 2003. Rental income increased primarily due to increases in occupancy
at The Sterling Apartment Homes and Commerce Center, and The Loft Apartments, an
increase in rental rates at The Sterling Apartment Homes, and a decrease in bad
debt expense at The Sterling Commerce Center and Indian Creek Village Apartments
partially offset by a decrease in rental rates at The Sterling Commerce Center,
Indian Creek Village, The Loft and The Knolls Apartments and a decrease in
occupancy at Indian Creek Village, and The Knolls Apartments.
During the six months ended June 30, 2004, there was a casualty loss of
approximately $26,000 recorded at Regency Oaks Apartments related to a fire that
damaged four apartment units. The loss was the result of the write off of net
fixed assets of approximately $79,000, net of the receipt of insurance proceeds
of approximately $42,000 and a receivable for an additional $11,000 of insurance
proceeds.
During the six months ended June 30, 2003, there was a casualty gain of
approximately $25,000 recorded at The Sterling Apartment Homes related to an
electrical fire that damaged two units. This gain was the result of the receipt
of insurance proceeds of approximately $73,000, net of the write off of net
fixed assets of approximately $48,000.
Liquidity and Capital Resources
At June 30, 2004, the Partnership had cash and cash equivalents of approximately
$3,665,000 compared to approximately $602,000 at June 30, 2003. Cash and cash
equivalents increased approximately $1,248,000 since December 31, 2003 due to
approximately $11,432,000 and $1,119,000 of cash provided by investing and
operating activities, respectively, partially offset by approximately
$11,303,000 of cash used in financing activities. Cash provided by investing
activities consisted of proceeds from the sale of Silverado and Tates Creek
Village Apartments, insurance proceeds received, receipts on the Master Loan and
withdrawals from escrow accounts maintained by the mortgage lenders, partially
offset by property improvements and replacements. Cash used in financing
activities consisted of principal payments made on the mortgages encumbering the
Partnership's properties, repayment of the mortgage notes payable as a result of
the sale of Silverado and Tates Creek Village Apartments, prepayment penalties
paid, distributions to partners and lease commissions paid. The Partnership
invests its working capital reserves in interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The General Partner monitors
developments in the area of legal and regulatory compliance. For example, the
Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures
with regard to governance, disclosure, audit and other areas. In light of these
changes, the Partnership expects that it will incur higher expenses related to
compliance, including increased legal and audit fees. Capital improvements
planned for each of the Partnership's properties are detailed below.
The Loft Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $60,000 of capital improvements at The Loft Apartments, consisting
primarily of floor covering replacements and fitness equipment upgrades. These
improvements were funded from operating cash flow. The Partnership evaluates the
capital improvement needs of the property during the year and currently expects
to complete an additional $41,000 in capital improvements during the remainder
of 2004. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
The Sterling Apartment Homes and Commerce Center
During the six months ended June 30, 2004, the Partnership completed
approximately $898,000 of capital improvements at The Sterling Apartment Homes
and Commerce Center, consisting primarily of tenant improvements, floor covering
replacements, interior decorating and heating upgrades. These improvements were
funded from operating cash flow and replacement reserves. The Partnership
evaluates the capital improvement needs of the property during the year and
currently expects to complete an additional $2,263,000 in capital improvements
during the remainder of 2004. Additional improvements may be considered and will
depend on the physical condition of the property as well as replacement reserves
and anticipated cash flow generated by the property.
The Knolls Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $132,000 of capital improvements at The Knolls Apartments
consisting primarily of floor covering and appliance replacements, and other
building improvements. These improvements were funded from operating cash flow.
The Partnership evaluates the capital improvement needs of the property during
the year and currently expects to complete an additional $12,000 in capital
improvements during the remainder of 2004. Additional improvements may be
considered and will depend on the physical condition of the property as well as
anticipated cash flow generated by the property.
Indian Creek Village Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $90,000 of capital improvements at Indian Creek Village Apartments
consisting primarily of floor covering replacements and parking lot resurfacing.
These improvements were funded from operating cash flow. The Partnership
evaluates the capital improvement needs of the property during the year and
currently expects to complete an additional $61,000 in capital improvements
during the remainder of 2004. Additional improvements may be considered and will
depend on the physical condition of the property as well as anticipated cash
flow generated by the property.
Plantation Gardens Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $93,000 of capital improvements at Plantation Gardens Apartments
consisting primarily of floor covering and appliance replacements and parking
area resurfacing. These improvements were funded from operating cash flow. The
Partnership evaluates the capital improvement needs of the property during the
year and currently expects to complete an additional $112,000 in capital
improvements during the remainder of 2004. Additional improvements may be
considered and will depend on the physical condition of the property as well as
anticipated cash flow generated by the property.
Palm Lake Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $77,000 of capital improvements at Palm Lake Apartments consisting
primarily of roof replacement, structural improvements and floor covering
replacements. These improvements were funded from operating cash flow. The
Partnership evaluates the capital improvement needs of the property during the
year and currently expects to complete an additional $214,000 in capital
improvements during the remainder of 2004. Additional improvements may be
considered and will depend on the physical condition of the property as well as
anticipated cash flow generated by the property.
The Dunes Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $59,000 of capital improvements at The Dunes Apartments consisting
primarily of floor covering replacements. These improvements were funded from
operating cash flow. The Partnership evaluates the capital improvement needs of
the property during the year and currently expects to complete an additional
$51,000 in capital improvements during the remainder of 2004. Additional
improvements may be considered and will depend on the physical condition of the
property as well as anticipated cash flow generated by the property.
Regency Oaks Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $238,000 of capital improvements at Regency Oaks Apartments
consisting primarily of floor covering, air conditioning unit and appliance
replacements, structural improvements and reconstruction of damages caused by a
fire at the property. These improvements were funded from operating cash flow
and insurance proceeds. The Partnership evaluates the capital improvement needs
of the property during the year and currently expects to complete an additional
$290,000 in capital improvements during the remainder of 2004. Additional
improvements may be considered and will depend on the physical condition of the
property as well as anticipated cash flow generated by the property.
Silverado Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $8,000 of capital improvements at Silverado Apartments, consisting
primarily of floor covering replacements. These improvements were funded from
operating cash flow. The property was sold to a third party on March 31, 2004.
Tates Creek Village Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $28,000 of capital improvements at Tates Creek Village Apartments
consisting primarily of floor covering replacements. These improvements were
funded from operating cash flow. The property was sold to a third party on June
28, 2004.
The additional capital improvements at the Partnership's properties will be made
only to the extent of cash available from operations and Partnership reserves.
To the extent that such budgeted capital improvements are completed, the
Partnership's distributable cash flow, if any, may be adversely affected at
least in the short term.
The Partnership's assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering the Partnership's properties of approximately
$66,669,000 requires monthly payments of principal and interest and balloon
payments of approximately $3,903,000, $19,975,000 and $31,040,000 during 2005,
2008 and 2010, respectively. The General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity dates. If the
properties cannot be refinanced or sold for a sufficient amount, the Partnership
may risk losing such properties through foreclosure.
The Partnership distributed the following amounts during the six months ended
June 30, 2004 and 2003 (in thousands, except per unit data):
Six Months Per Limited Six Months Per Limited
Ended Partnership Ended Partnership
June 30, 2004 Unit June 30, 2003 Unit
Operations $ -- $ -- $ 712 $ 3.55
Sale (1) -- -- 1,631 8.19
Sale (2) 1,817 9.13 -- --
$1,817 $ 9.13 $2,343 $11.74
(1) From the sale of Society Park Apartments owned by CCEP and received as a
principal payment on the Master Loan.
(2) From the sale of Silverado Apartments
Subsequent to June 30, 2004, the Partnership declared and paid a distribution to
the limited partners of approximately $2,315,000 (approximately $11.63 per
limited partnership unit). Approximately $2,276,000 (approximately $11.43 per
limited partnership unit) related to the sale of Tates Creek Village Apartments
on June 28, 2004 and the sale of Silverado Apartments on March 31, 2004 and
approximately $39,000, (approximately $0.20 per limited partnership unit)
related to operations.
The Partnership's cash available for distribution is reviewed on a monthly
basis. Future cash distributions will depend on the levels of net cash generated
from operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. There can be no assurance that
the Partnership will generate sufficient funds from operations, after planned
capital improvement expenditures, to permit further distributions to its
partners during the remainder of 2004 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 138,183.20 limited partnership units
(the "Units") in the Partnership representing 69.42% of the outstanding Units at
June 30, 2004. A number of these Units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will acquire additional Units in exchange for cash or a combination of cash and
units in AIMCO Properties, L.P., the operating partnership of AIMCO, either
through private purchases or tender offers. Pursuant to the Partnership
Agreement, unitholders holding a majority of the Units are entitled to take
action with respect to a variety of matters that would include, but are not
limited to, voting on certain amendments to the Partnership Agreement and voting
to remove the General Partner. As a result of its ownership of 69.42% of the
outstanding Units, AIMCO and its affiliates are in a position to control all
such voting decisions with respect to the Partnership. Although the General
Partner owes fiduciary duties to the limited partners of the Partnership, the
General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As
a result, the duties of the General Partner, as general partner, to the
Partnership and its limited partners may come into conflict with the duties of
the General Partner to AIMCO, its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the Partnership
to make estimates and assumptions. The Partnership believes that of its
significant accounting policies, the following may involve a higher degree of
judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost less accumulated depreciation, unless
considered impaired. The investment properties foreclosed upon in the third
quarter of 2002 and fourth quarter of 2003 were recorded at fair market value at
the time of the foreclosure. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include, but are not limited
to, changes in national, regional and local economic climate; local conditions,
such as an oversupply of multifamily properties; competition from other
available multifamily property owners and changes in market rental rates. Any
adverse changes in these factors could cause impairment of the Partnership's
assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned. The
Partnership evaluates all accounts receivable from residents and establishes an
allowance, after the application of security deposits, for accounts greater than
30 days past due on current tenants and all receivables due from former tenants.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area. Any
concessions given at the inception of the lease are amortized over the life of
the lease.
The Partnership leases certain commercial space to tenants under various lease
terms. The leases are accounted for as operating leases in accordance with SFAS
No. 13, "Accounting for Leases". Some of the leases contain stated rental
increases during their term. For leases with fixed rental increases, rents are
recognized on a straight-line basis over the terms of the leases. For all other
leases, minimum rents are recognized over the terms of the leases.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership is exposed to market risks from adverse changes in interest
rates. In this regard, changes in U.S. interest rates affect the interest earned
on the Partnership's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Partnership does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for its
borrowing activities used to maintain liquidity and fund business operations. To
mitigate the impact of fluctuations in U.S. interest rates, the Partnership
maintains its debt as fixed rate in nature by borrowing on a long-term basis.
Based on interest rates at June 30, 2004, a 100 point increase or decrease in
market interest rates would not have a material impact on the Partnership.
The following table summarizes the Partnership's debt obligations at June 30,
2004. The interest rates represent the weighted-average rates. The fair value of
the debt obligations approximated the recorded value as of June 30, 2004.
Principal Amount by Expected Maturity
Fixed Rate Debt
Long-term Average Interest
Debt Rate 8.06%
(in thousands)
2004 $ 777
2005 5,604
2006 1,750
2007 1,887
2008 21,900
Thereafter 32,984
Total $ 64,902
ITEM 4. Controls and Procedures
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the General Partner, who are the equivalent of the Partnership's principal
executive officer and principal financial officer, respectively, has evaluated
the effectiveness of the Partnership's disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report. Based on such evaluation, the principal executive
officer and principal financial officer of the General Partner, who are the
equivalent of the Partnership's principal executive officer and principal
financial officer, respectively, have concluded that, as of the end of such
period, the Partnership's disclosure controls and procedures are effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities that were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, during the third quarter of 2001, a
complaint (the "Heller action") was filed against the same defendants that are
named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or
about August 6, 2001, plaintiffs filed a first amended complaint. The Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the General Partner has also agreed to make at least
one round of tender offers to purchase all of the partnership interests in the
Partnerships within one year of final approval, if it is granted, and to provide
partners with the independent appraisals at the time of these tenders. The
proposed settlement also provided for the limitation of the allowable costs
which the General Partner or its affiliates will charge the Partnerships in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation. On April 11, 2003, notice was distributed to limited
partners providing the details of the proposed settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety.
On January 28, 2004, Objector filed his opening brief in his pending appeal. On
April 23, 2004, the General Partner and its affiliates filed a response brief in
support of the settlement and the judgment thereto. Plaintiffs have also filed a
brief in support of the settlement. On June 4, 2004, Objector filed a reply to
the briefs submitted by the General Partner and Plaintiffs. No hearing has been
scheduled in the matter.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner,
was served with a complaint in the United States District Court, District of
Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor
Standards Act ("FLSA") by failing to pay maintenance workers overtime for all
hours worked in excess of forty per week. On March 5, 2004 Plaintiffs filed an
amended complaint also naming NHP Management Company, which is also an affiliate
of the General Partner. The complaint is styled as a Collective Action under the
FLSA and seeks to certify state subclasses in California, Maryland, and the
District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties
L.P. failed to compensate maintenance workers for time that they were required
to be "on-call". Additionally, the complaint alleges AIMCO Properties L.P.
failed to comply with the FLSA in compensating maintenance workers for time that
they worked in responding to a call while "on-call". The defendants have filed
an answer to the amended complaint denying the substantive allegations. Some
discovery has taken place and settlement negotiations continue. Although the
outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe
that the ultimate outcome will have a material adverse effect on its financial
condition or results of operations taken as a whole. Similarly, the General
Partner does not believe that the ultimate outcome will have a material adverse
effect on the Partnership's financial condition or results of operations taken
as a whole.
ITEM 6. Exhibits and Reports on Form 8-K
a) Exhibits:
See Exhibit Index Attached.
b) Reports on Form 8-K filed during the quarter ended June 30,
2004:
None.
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.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: August 16, 2004
EXHIBIT INDEX
S-K Reference Document Description
3 Certificates of Limited Partnership, as amended to date.
(Incorporated by reference to the Annual Report on Form
10-K for the year ended December 31, 1991 ("1991 Annual
Report")).
10.1 Amended Loan Agreement dated November 15, 1990 (the "Effective
Date"), by and between the Partnership and EP (Incorporated by
reference to the Annual Report of Form 10-K for the year ended
December 31, 1990 ("1990 Annual Report")).
10.2 Assumption Agreement as of the Effective Date, by and between
EP and CCEP (Incorporated by reference to the 1990 Annual
Report).
10.3 Assignment of Claims as of the Effective Date, by and between
the Partnership and EP (Incorporated by reference to the 1990
Annual Report).
10.5 Bill of Sale and Assignment dated October 23, 1990, by and
between CCEP and ConCap Services Company (Incorporated by
reference to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1990).
10.20 Mortgage and Security Agreement between Kennedy Boulevard
Associates I, L.P., and Lehman Brothers Holdings, Inc.,
dated August 25, 1998, securing The Sterling Apartment Home
and Commerce Center filed in Form 10-Q for the quarter
ended September 30, 1998.
10.21 Repair Escrow Agreement between Kennedy Boulevard
Associates I, L.P., and Lehman Brothers Holdings, Inc.,
dated August 25, 1998, securing The Sterling Apartment Home
and Commerce Center filed in Form 10-Q for the quarter
ended September 30, 1998.
10.22 Replacement Reserve and Security Agreement between Kennedy
Boulevard Associates I, L.P., and Lehman Brothers Holdings,
Inc., dated August 25, 1998, securing The Sterling
Apartment Home and Commerce Center filed in Form 10-Q for
the quarter ended September 30, 1998.
10.23 Third Amendment to the Limited Partnership Agreement filed as
Exhibit 10.23 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2001 and incorporated herein
by reference.
10.24 Fourth Amendment to the Limited Partnership Agreement filed as
Exhibit 10.24 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2001 and incorporated herein
by reference.
10.28 Form of Amended Order Setting Foreclosure Sale Date pursuant
to amending the foreclosure date filed on September 25, 2003
(Schedules and supplemental materials to this exhibit filed
herewith have been omitted but will be provided to the
Securities and Exchange Commission upon request).*
10.29 Form of Certificate of Sale as to Property "1" pursuant to
sale of Palm Lake Apartments to CCIP Palm Lake, L.L.C.
filed October 28, 2003.*
10.30 Form of Certificate of Sale as to Property "2" pursuant to
sale of Regency Oaks Apartments to CCIP Regency Oaks,
L.L.C. filed October 28, 2003.*
10.31 Form of Certificate of Sale as to Property "3" pursuant to
sale of The Dunes Apartments (formerly known as Society Park
East Apartments) to CCIP Society Park East, L.L.C.
filed October 28, 2003.*
10.32 Form of Certificate of Sale as to Property "4" pursuant to
sale of Plantation Gardens Apartments to CCIP Plantation
Gardens, L.L.C. filed October 28, 2003.
10.33 Purchase and Sale contract between Consolidated Capital Equity
Partner, LP, a California limited partnership and Cash
Investments of El Paso, LLC, a Texas limited liability company
dated December 8, 2003.
10.34 Assignment of purchase and sale contract between Consolidated
Capital Equity Partners, LP, a California limited partnership
and CCIP Silverado, LP, a Delaware limited partnership dated
December 8, 2003.
10.35 Reinstatement and first amendment to purchase and sale
contract by and between CCIP Silverado, LP, a Delaware limited
partnership, assignee of Consolidated Capital Equity Partners,
LP, a California limited liability partnership, and Cash
Investments of El Paso, LLC, a Texas limited liability company
and EPT San Mateo Apartments, LP, a Texas limited liability
partnership, assignee of original purchaser dated February 6,
2004.
10.36** Purchase and Sale contract between CCIP Tates Creek Village,
LLC, a Delaware limited liability company and Tates Creek
Investments, LLC, a Michigan limited liability company dated
April 13, 2004 for the sale of Tates Creek Village Apartments.
10.37** Amendment of purchase and sale contract between CCIP Tates
Creek Village, LLC and Tates Creek Investments, LLC, dated May
27, 2004.
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
*Filed as exhibits 10.28 through 10.31 in the Registrant's
Quarterly Form 10-Q for the quarter ended September 30, 2003
incorporated herein by reference.
**Schedules and supplemental materials to the exhibit filed
herewith have been omitted but will be provided to the
Securities and Exchange Commission upon request.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Consolidated Capital
Institutional Properties;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 16, 2004
/s/Martha L. Long
Martha L. Long
Senior Vice President of ConCap
Equities, Inc., equivalent of the
chief executive officer of the
Partnership
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Consolidated Capital
Institutional Properties;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 16, 2004
/s/Stephen B. Waters
Stephen B. Waters
Vice President of ConCap
Equities, Inc., equivalent of
the chief financial officer of
the Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Consolidated Capital
Institutional Properties (the "Partnership"), for the quarterly period ended
June 30, 2004 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), Martha L. Long, as the equivalent of the chief executive
officer of the Partnership, and Stephen B. Waters, as the equivalent of the
chief financial officer of the Partnership, each hereby certifies, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Martha L. Long
Name: Martha L. Long
Date: August 16, 2004
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: August 16, 2004
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Exhibit 10.36
PURCHASE AND SALE CONTRACT
BETWEEN
CCIP TATES CREEK VILLAGE, L.L.C.,
a Delaware limited liability company
AS SELLER
AND
TATES CREEK INVESTMENTS, LLC, a Michigan limited liability company
AS PURCHASER
TATES CREEK VILLAGE
Page(s)
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINED TERMS...................................................1
ARTICLE 2 PURCHASE AND SALE, PURCHASE PRICE & DEPOSIT.....................6
2.1 Purchase and Sale...............................................6
2.2 Purchase Price and Deposit......................................6
2.3 Escrow Provisions Regarding Deposit.............................7
ARTICLE 3 FEASIBILITY PERIOD..............................................8
3.1 Feasibility Period..............................................8
3.2 Expiration of Feasibility Period................................9
3.3 Conduct of Investigation........................................9
3.4 Purchaser Indemnification......................................10
3.5 Property Materials.............................................10
3.6 Property Contracts.............................................12
ARTICLE 4 TITLE..........................................................12
4.1 Title Documents................................................12
4.2 Survey.........................................................13
4.3 Objection and Response Process.................................13
4.4 Permitted Exceptions...........................................13
4.5 Existing Deed of Trust.........................................14
ARTICLE 5 CLOSING........................................................14
5.1 Closing Date...................................................14
5.2 Seller Closing Deliveries......................................15
5.3 Purchaser Closing Deliveries...................................15
5.4 Closing Prorations and Adjustments.............................16
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER.........20
6.1 Seller's Representations.......................................20
6.2 AS-IS..........................................................21
6.3 Survival of Seller's Representations...........................22
6.4 Definition of Seller's Knowledge...............................22
6.5 Representations And Warranties Of Purchaser....................23
6.6 Survival of Purchaser's Representations........................24
6.7 Definition of Purchaser's Knowledge............................24
ARTICLE 7 OPERATION OF THE PROPERTY......................................24
7.1 Leases and Property Contracts..................................24
7.2 General Operation of Property..................................25
7.3 Liens..........................................................25
ARTICLE 8 CONDITIONS PRECEDENT TO CLOSING................................25
8.1 Purchaser's Conditions to Closing..............................25
8.2 Seller's Conditions to Closing.................................26
ARTICLE 9 BROKERAGE......................................................26
9.1 Indemnity......................................................26
9.2 Broker Commission..............................................27
9.3 Broker Page....................................................27
ARTICLE 10 DEFAULTS AND REMEDIES..........................................27
10.1 Purchaser Default..............................................27
10.2 Seller Default.................................................28
ARTICLE 11 RISK OF LOSS OR CASUALTY.......................................28
11.1 Major Damage...................................................28
11.2 Minor Damage...................................................29
11.3 Repairs........................................................29
ARTICLE 12 EMINENT DOMAIN.................................................29
12.1 Eminent Domain.................................................29
ARTICLE 13 MISCELLANEOUS..................................................30
13.1 Binding Effect of Contract.....................................30
13.2 Exhibits And Schedules.........................................30
13.3 Assignability..................................................30
13.4 Binding Effect.................................................30
13.5 Captions.......................................................30
13.6 Number And Gender Of Words.....................................30
13.7 Notices........................................................30
13.8 Governing Law And Venue........................................32
13.9 Entire Agreement...............................................32
13.10 Amendments.....................................................32
13.11 Severability...................................................33
13.12 Multiple Counterparts/Facsimile Signatures.....................33
13.13 Construction...................................................33
13.14 Confidentiality................................................33
13.15 Time Of The Essence............................................33
13.16 Waiver.........................................................33
13.17 Attorneys Fees.................................................33
13.18 Time Periods...................................................34
13.19 1031 Exchange..................................................34
13.20 No Personal Liability of Officers, Trustees or Directors
of Seller's Partners...........................................34
13.21 No Exclusive Negotiations......................................34
13.22 ADA Disclosure.................................................35
13.23 No Recording...................................................35
13.24 Relationship of Parties........................................35
13.25 Dispute Resolution.............................................35
13.26 AIMCO Marks....................................................36
13.27 Non-Solicitation of Employees..................................36
13.28 Survival.......................................................36
13.29 Multiple Purchasers............................................36
ARTICLE 14 LEAD-BASED PAINT DISCLOSURE....................................37
14.1 Disclosure.....................................................37
14.2 Consent Agreement..............................................37
PURCHASE AND SALE CONTRACT
THIS PURCHASE AND SALE CONTRACT (this "Contract") is entered into as of
the 13th day of April, 2004 (the "Effective Date") by and between CCIP TATES
CREEK VILLAGE, L.L.C., a Delaware limited liability company, having an address
at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237
("Seller") and TATES CREEK INVESTMENTS, LLC, a Michigan limited liability
company, having a principal address at 1025 East Maple Road, Suite 230,
Birmingham, Michigan 48009 ("Purchaser").
NOW, THEREFORE, in consideration of mutual covenants set forth herein,
Seller and Purchaser hereby agree as follows:
RECITALS
A.....Seller owns the real estate located in Fayette County, Kentucky, as
more particularly described in Exhibit A attached hereto and made a part hereof,
and the improvements thereon, commonly known as "Tates Creek Village".
B.....Purchaser desires to purchase, and Seller desires to sell, such
land, improvements and certain associated property, on the terms and conditions
set forth below.
ARTICLE 1...
DEFINED TERMS
1.1 Unless otherwise defined herein, any term with its initial letter
capitalized in this Contract shall have the meaning set forth in this ARTICLE 1.
1.1.1 "ADA" shall have the meaning set forth in Section 13.22.
1.1.2 "Additional Deposit" shall have the meaning set forth in Section 2.2.2.
1.1.3 "AIMCO" shall have the meaning set forth in Section 14.2.
1.1.4 "AIMCO Marks" means all words, phrases, slogans, materials, software,
proprietary systems, trade secrets, proprietary information and lists, and other
intellectual property owned or used by Seller, the Property Manager, or AIMCO
and used in the marketing, operation or use of the Property (or in the
marketing, operation or use of any other properties managed by the Property
Manager or owned by AIMCO or an affiliate of either Property Manager or AIMCO),
subject to the terms set forth in Section 3.5.4 and Section 13.26.
1.1.5 "Broker" shall have the meaning set forth in Section 9.1.
1.1.6 "Business Day" means any day other than a Saturday or Sunday or Federal
holiday or legal holiday in the States of Colorado, Texas, or Kentucky, or any
day on which Lender is not open for business.
1.1.7 "Closing" means the consummation of the purchase and sale and related
transactions contemplated by this Contract in accordance with the terms and
conditions of this Contract.
1.1.8 "Closing Date" means the date on which date the Closing of the conveyance
of the Property is required to be held pursuant to Section 5.1.
1.1.9 "Code" shall have the meaning set forth in Section 2.3.6.
1.1.10......"Consent Contract" shall have the meaning set forth in
Section 14.2.
1.1.11......"Consultants" shall have the meaning set forth in Section 3.1.
1.1.12......"Damage Notice" shall have the meaning set forth in Section 11.1.
1.1.13......"Deed" shall have the meaning set forth in Section 5.2.1.
1.1.14......"Deed of Trust" shall have the meaning set forth in Section 4.5.
1.1.15......"Deposit" means, to the extent actually deposited by Purchaser with
Escrow Agent, the Initial Deposit and the Additional Deposit.
1.1.16......"Escrow Agent" shall have the meaning set forth in Section 2.2.1.
1.1.17......"Excluded Permits" means those Permits which, under applicable law,
are nontransferable and such other Permits, if any, as may be designated as
Excluded Permits on Schedule 1.1.17.
1.1.18......"Existing Survey" shall have the meaning set forth in Section 4.2.
1.1.19......"Feasibility Period" shall have the meaning set forth in
Section 3.1.
1.1.20......"FHA" shall have the meaning set forth in Section 13.22.
1.1.21......"Final Response Deadline" shall have the meaning set forth in
Section 4.3.
1.1.22......"Fixtures and Tangible Personal Property" means all fixtures,
furniture, furnishings, fittings, equipment, machinery, apparatus, appliances
and other articles of tangible personal property located on the Land or in the
Improvements as of the Effective Date and used or usable in connection with the
occupation or operation of all or any part of the Property, but only to the
extent transferable. The term "Fixtures and Tangible Personal Property" does not
include (a) equipment leased by Seller and the interest of Seller in any
equipment provided to the Property for use, but not owned or leased by Seller,
unless the equipment is covered by a Property Contract which is assigned to
Purchaser at Closing, or (b) property owned or leased by any Tenant or guest,
employee or other person furnishing goods or services to the Property, or (c)
property and equipment owned by Seller, which in the ordinary course of business
of the Property is not used exclusively for the business, operation or
management of the Property, or (d) the property and equipment, if any, expressly
identified in Schedule 1.1.22. During the Feasibility Period, Seller shall
assemble a schedule of Fixtures and Tangible Personal Property, excluding unit
interior fixtures and appliances, certified to Seller's knowledge to be the list
of such Fixtures and Tangible Personal Property to be transferred to Purchaser
at the Closing.
1.1.23......"General Assignment" shall have the meaning set forth in
Section 5.2.3.
1.1.24......"Good Funds" shall have the meaning set forth in Section 2.2.1.
1.1.25......"Improvements" means all buildings and improvements located on
the Land taken "as is."
1.1.26......"Initial Deposit" shall have the meaning set forth in
Section 2.2.1.
1.1.27......"Land" means all of those certain tracts of land located in the
State of Kentucky described on Exhibit A, and all rights, privileges and
appurtenances pertaining thereto.
1.1.28......"Lease(s)" means the interest of Seller in and to all leases,
subleases and other occupancy contracts, whether or not of record, which provide
for the use or occupancy of space or facilities on or relating to the Property
and which are in force as of the Closing Date for the applicable Property.
1.1.29......"Leases Assignment" shall have the meaning set forth in
Section 5.2.4.
1.1.30......"Lender" means Federal Home Loan Mortgage Corporation, assignee
of GMAC Commercial Mortgage Corporation.
1.1.31......"Lender Fees" shall mean all fees and expenses (including, without
limitation, all prepayment penalties and pay-off fees) imposed or charged by
Lender or its counsel in connection with the Loan Payoff, and, to the extent
that the Loan Payoff occurs on a date other than as permitted under the Note and
Deed of Trust, any amounts of interest charged by Lender for the period from the
Closing Date to the permitted prepayment date, the amount of the Lender Fees to
be determined as of the Closing Date.
1.1.32......"Loan" means the indebtedness owing to Lender evidenced by the Note.
1.1.33......"Loan Payoff" shall have the meaning set forth in Section 5.4.7.
1.1.34......"Losses" shall have the meaning set forth in Section 3.4.1.
1.1.35......"Materials" shall have the meaning set forth in Section 3.5.
1.1.36......"Miscellaneous Property Assets" means all contract rights, leases,
concessions, warranties, plans, drawings and other items of intangible personal
property relating to the ownership or operation of the Property and owned by
Seller, excluding, however, (a) receivables, (b) Property Contracts, (c) Leases,
(d) Permits, (e) cash or other funds, whether in petty cash or house "banks," or
on deposit in bank accounts or in transit for deposit, (f) refunds, rebates or
other claims, or any interest thereon, for periods or events occurring prior to
the Closing Date, (g) utility and similar deposits, (h) insurance or other
prepaid items, (i) Seller's proprietary books and records, or (j) any right,
title or interest in or to the AIMCO Marks. The term "Miscellaneous Property
Assets" also shall include all of Seller's rights, if any, in and to the name
"TATES CREEK VILLAGE" as it relates solely to use in connection with the
Property (and not with respect to any other property owned or managed by Seller,
Property Manager, AIMCO, or their respective affiliates), and the existing
telephone number for the Property (to the extent transferable and at Purchaser's
sole cost and expense).
1.1.37......"Note" means that certain Note in the original principal amount of
$4,225,000.00, dated as of September 28, 2000, executed by Seller and payable to
the order of Lender.
1.1.38......"Objection Deadline" shall have the meaning set forth in
Section 4.3.
1.1.39......"Objection Notice" shall have the meaning set forth in
Section 4.3.
1.1.40......"Objections" shall have the meaning set forth in Section 4.3.
1.1.41......"Permits" means all licenses and permits granted by any governmental
authority having jurisdiction over the Property owned by Seller and required in
order to own and operate the Property.
1.1.42......"Permitted Exceptions" shall have the meaning set forth in Section
4.4.
1.1.43......"Property" means (a) the Land and Improvements and all rights of
Seller, if any, in and to all of the easements, rights, privileges, and
appurtenances belonging or in any way appertaining to the Land and Improvements,
(b) the right, if any and only to the extent transferable, of Seller in the
Property Contracts, Leases, Permits (other than Excluded Permits), and the
Fixtures and Tangible Personal Property, and (c) the Miscellaneous Property
Assets owned by Seller which are located on the Property and used in its
operation.
1.1.44......"Property Contracts" means all contracts, agreements, equipment
leases, purchase orders, maintenance, service, or utility contracts and similar
contracts, excluding Leases, which relate to the ownership, maintenance,
construction or repair and/or operation of the Property, but only to the extent
the assignment of such contract to Purchaser is permitted pursuant to the
express terms of such contract, and not including (a) any national contracts
entered into by Seller, Property Manager, or AIMCO with respect to the Property
(i) which terminate automatically upon transfer of the Property by Seller, or
(ii) which Seller, in Seller's sole discretion, elects to terminate with respect
to the Property effective as of the Closing Date, or (b) any property management
contract for the Property.
1.1.45......"Property Contracts Notice" shall have the meaning set forth in
Section 3.6.
1.1.46......"Property Manager" means the current property manager of the
Property.
1.1.47......"Proration Schedule" shall have the meaning set forth in
Section 5.4.1.
1.1.48......"Purchase Price" means the consideration to be paid by Purchaser to
Seller for the purchase of the Property pursuant to Section 2.2.
1.1.49......"Purchaser's Representations" shall have the meaning set forth in
Section 6.5.
1.1.50......"Records Disposal Notice" shall have the meaning set forth in
Section 5.4.13.
1.1.51......"Records Hold Period" shall have the meaning set forth in Section
5.4.13.
1.1.52......"Regional Property Manager" shall have the meaning set forth in
Section 6.4.
1.1.53......Intentionally omitted.
1.1.54......"Report" shall have the meaning set forth in Section 14.2.
1.1.55......"Required Assignment Consent" shall have the meaning set forth in
Section 3.6.
1.1.56......"Response Deadline" shall have the meaning set forth in
Section 4.3.
1.1.57......"Response Notice" shall have the meaning set forth in Section 4.3.
1.1.58......"Seller's Indemnified Parties" shall have the meaning set forth
in Section 3.4.1.
1.1.59......"Seller's Property-Related Files and Records" shall have the meaning
set forth in Section 5.4.12.
1.1.60......"Seller's Representations" shall have the meaning set forth in
Section 6.1.
1.1.61......"Survey" shall have the meaning ascribed thereto in Section 4.2.
1.1.62......"Survival Period" shall have the meaning set forth in Section 6.3.
1.1.63......"Survival Provisions" shall have the meaning set forth in Section
13.28.
1.1.64......"Tenant" means any person or entity entitled to occupy any portion
of the Property under a Lease.
1.1.65......"Tenant Deposits" means all security deposits, prepaid rentals,
cleaning fees and other refundable deposits and fees collected from Tenants,
plus any interest accrued thereon, paid by Tenants to Seller pursuant to the
Leases. Tenant Deposits shall not include any non-refundable deposits or fees
paid by Tenants to Seller, either pursuant to the Leases or otherwise other than
prepaid rentals applicable to periods after the Closing Date.
1.1.66......"Tenant Security Deposit Balance" shall have the meaning set forth
in Section 5.4.6.2.
1.1.67......"Terminated Contracts" shall have the meaning set forth in Section
3.6.
1.1.68......"Testing" shall have the meaning set forth in Section 14.2.
1.1.69......"Third-Party Reports" means any reports, studies or other
information prepared or compiled for Purchaser by any Consultant or other
third-party in connection with Purchaser's investigation of the Property.
1.1.70......"Title Commitment" shall have the meaning ascribed thereto in
Section 4.1.
1.1.71......"Title Documents" shall have the meaning set forth in Section 4.1.
1.1.72......"Title Insurer" shall have the meaning set forth in Section 2.2.1.
1.1.73......"Title Policy" shall have the meaning set forth in Section 4.1.
1.1.74......"Uncollected Rents" shall have the meaning set forth in Section
5.4.6.1.
1.1.75......Intentionally omitted.
1.1.76......"Vendor Terminations" shall have the meaning set forth in Section
5.2.5.
ARTICLE 2...
PURCHASE AND SALE, PURCHASE PRICE & DEPOSIT 2.1 Purchase and
Sale. Seller agrees to sell and convey the Property to Purchaser and Purchaser
agrees to purchase the Property from Seller, all in accordance with the terms
and conditions set forth in this Contract.
2.2 Purchase Price and Deposit. The total purchase price ("Purchase Price") for
the Property shall be an amount equal to Six Million Nine Hundred and Eighty
Thousand and No/100 Dollars ($6,980,000.00) less the Lender Fees which amount
shall be paid by Purchaser, as follows:
2.2.1 On the Effective Date, Purchaser shall deliver to Stewart Title Guaranty
Company, c/o Wendy Howell, National Commercial Closing Specialist, 1980 Post Oak
Boulevard, Suite 610, Houston, TX 77056, 800-729-1906 ("Escrow Agent" or "Title
Insurer") an initial deposit (the "Initial Deposit") of $69,800.00 by wire
transfer of immediately available funds ("Good Funds"). The Initial Deposit
shall be held and disbursed in accordance with the escrow provisions set forth
in Section 2.3.
2.2.2 On the day that the Feasibility Period expires, Purchaser shall deliver to
Escrow Agent an additional deposit (the "Additional Deposit") of $69,800.00 by
wire transfer of Good Funds. The Additional Deposit shall be held and disbursed
in accordance with the escrow provisions set forth in Section 2.3.
2.2.3 Intentionally Omitted.
2.2.4 The balance of the Purchase Price for the Property shall be paid to and
received by Escrow Agent by wire transfer of Good Funds no later than 11:00 a.m.
(in the time zone in which Escrow Agent is located) on the Closing Date (or such
earlier time as required by Seller's lender).
2.3 Escrow Provisions Regarding Deposit.
2.3.1 Escrow Agent shall hold the Deposit and make delivery of the Deposit to
the party entitled thereto under the terms of this Contract. Escrow Agent shall
invest the Deposit in such short-term, high-grade securities, interest-bearing
bank accounts, money market funds or accounts, bank certificates of deposit or
bank repurchase contracts as Escrow Agent, in its discretion, deems suitable,
and all interest and income thereon shall become part of the Deposit and shall
be remitted to the party entitled to the Deposit pursuant to this Contract.
2.3.2 Escrow Agent shall hold the Deposit until the earlier occurrence of (i)
the Closing Date, at which time the Deposit shall be applied against the
Purchase Price, or (ii) the date on which Escrow Agent shall be authorized to
disburse the Deposit as set forth in Section 2.3.3. The tax identification
numbers of the parties shall be furnished to Escrow Agent upon request.
2.3.3 If the Deposit has not been released earlier in accordance with Section
2.3.2, and either party makes a written demand upon Escrow Agent for payment of
the Deposit, Escrow Agent shall give written notice to the other party of such
demand. If Escrow Agent does not receive a written objection from the other
party to the proposed payment within 5 Business Days after the giving of such
notice, Escrow Agent is hereby authorized to make such payment (subject to
Purchaser's obligation under Section 3.5.2 to return all Third-Party Reports and
information and Materials provided to Purchaser upon the return of the Deposit
to Purchaser). If Escrow Agent does receive such written objection within such
5-Business Day period, Escrow Agent shall continue to hold such amount until
otherwise directed by written instructions from the parties to this Contract or
a final judgment or arbitrator's decision. However, Escrow Agent shall have the
right at any time to deposit the Deposit and interest thereon, if any, with a
court of competent jurisdiction in the state in which the Property is located.
Escrow Agent shall give written notice of such deposit to Seller and Purchaser.
Upon such deposit, Escrow Agent shall be relieved and discharged of all further
obligations and responsibilities hereunder.
2.3.4 The parties acknowledge that Escrow Agent is acting solely as a
stakeholder at their request and for their convenience, that Escrow Agent shall
not be deemed to be the agent of either of the parties for any act or omission
on its part unless taken or suffered in bad faith in willful disregard of this
Contract or involving gross negligence. Seller and Purchaser jointly and
severally shall indemnify and hold Escrow Agent harmless from and against all
costs, claims and expenses, including reasonable attorney's fees, incurred in
connection with the performance of Escrow Agent's duties hereunder, except with
respect to actions or omissions taken or suffered by Escrow Agent in bad faith,
in willful disregard of this Contract or involving gross negligence on the part
of the Escrow Agent, or failure to perform its duties under Section 2.3.6.
2.3.5 The parties shall deliver to Escrow Agent an executed copy of this
Contract, which shall constitute the sole instructions to Escrow Agent. Escrow
Agent shall execute the signature page for Escrow Agent attached hereto with
respect to the provisions of this Section 2.3; provided, however, that (a)
Escrow Agent's signature hereon shall not be a prerequisite to the binding
nature of this Contract on Purchaser and Seller (other than the obligation to
make the Deposit which need not be made until Escrow Agent has signed this
Contract and delivered a copy of the signature page to Purchaser), and the same
shall become fully effective upon execution by Purchaser and Seller, and (b) the
signature of Escrow Agent will not be necessary to amend any provision of this
Contract other than this Section 2.3.
2.3.6 Escrow Agent, as the person responsible for closing the transaction within
the meaning of Section 6045(e)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"), shall file all necessary information, reports, returns,
and statements regarding the transaction required by the Code including, but not
limited to, the tax reports required pursuant to Section 6045 of the Code.
Further, Escrow Agent agrees to indemnify and hold Purchaser, Seller, and their
respective attorneys and brokers harmless from and against any Losses resulting
from Escrow Agent's failure to file the reports Escrow Agent is required to file
pursuant to this section.
2.3.7 The provisions of this Section 2.3 shall survive the termination of this
Contract, and if not so terminated, the Closing and delivery of the Deed to
Purchaser.
ARTICLE 3
FEASIBILITY PERIOD
3.1 Feasibility Period. The period from the Effective Date to and including the
date which is 45 days after the Effective Date shall be the "Feasibility
Period". Subject to the terms of Section 3.3 and 3.4 and the right of Tenants
under the Leases, Purchaser, and its agents, contractors, engineers, surveyors,
attorneys, and employees (collectively, "Consultants") shall have the right from
time to time to enter onto the Property:
3.1.1 To conduct and make any and all customary studies, tests, examinations,
inquiries, and inspections, or investigations (collectively, the "Inspections")
of or concerning the Property (including, without limitation, engineering and
feasibility studies, evaluation of drainage and flood plain, soil tests for
bearing capacity and percolation and surveys, including topographical surveys);
3.1.2 To make inquiries of Seller (and Seller agrees to respond in a timely
manner) and to confirm any and all matters which Purchaser may reasonably desire
to confirm with respect to the Property;
3.1.3 To ascertain and confirm the suitability of the Property for
Purchaser's intended use of the Property; and
3.1.4 To review the Materials, Leases, Property Contracts and other documents
and instruments related to the Property at Purchaser's sole cost and expense.
3.2 Expiration of Feasibility Period. If the results of any of the matters
referred to in Section 3.1 appear unsatisfactory to Purchaser for any reason or
if Purchaser elects not to proceed with the transaction contemplated by this
Contract for any other reason, or for no reason whatsoever, in Purchaser's sole
and absolute discretion, then Purchaser shall have the right to terminate this
Contract by giving written notice to that effect to Seller and Escrow Agent on
or before 5:00 p.m. (in the time zone in which the Escrow Agent is located) on
the date of expiration of the Feasibility Period. If Purchaser exercises such
right to terminate, this Contract shall terminate and be of no further force and
effect, subject to and except for Purchaser's liability pursuant to Section 3.3
and any other provision of this Contract which survives such termination, and
Escrow Agent shall forthwith return the Initial Deposit to Purchaser (subject to
Purchaser's obligation under Section 3.5.2 to return all Third-Party Reports and
information and Materials provided to Purchaser upon the return of the Initial
Deposit). If Purchaser fails to provide Seller with written notice of
termination prior to the expiration of the Feasibility Period in strict
accordance with the notice provisions of this Contract, Purchaser's right to
terminate under this Section 3.2 shall be permanently waived and this Contract
shall remain in full force and effect, the Deposit (including both the Initial
Deposit and, when delivered in accordance with Section 2.2.2, the Additional
Deposit) shall be non-refundable (except as provided in Section 8.1), and
Purchaser's obligation to purchase the Property shall be non-contingent and
unconditional except only for satisfaction of the conditions expressly stated in
Section 8.1.
3.3 Conduct of Investigation. Prior to the Closing, Purchaser shall not permit
any mechanic's or materialmen's liens or any other liens to attach to the
Property by reason of the performance of any work or the purchase of any
materials by Purchaser or any other party in connection with any Inspections
conducted by or for Purchaser. Purchaser shall give notice to Seller a
reasonable time prior to entry onto the Property and shall permit Seller to have
a representative present during all Inspections conducted at the Property.
Purchaser shall use its best efforts to conduct and shall cause its Consultants
to conduct any and all Inspections in such a manner as to avoid any unnecessary
disruption or disturbance of Tenants' occupancy of the Property. All information
made available by Seller to Purchaser in accordance with this Contract or
obtained by Purchaser in the course of its Inspections shall be treated as
confidential information by Purchaser, and, prior to the purchase of the
Property by Purchaser, Purchaser shall use its best efforts to prevent its
Consultants from divulging such information to any unrelated third parties
except as reasonably necessary to third parties engaged by Purchaser for the
limited purpose of analyzing and investigating such information for the purpose
of consummating the transaction contemplated by this Contract. The provisions of
this Section 3.3 shall survive the termination of this Contract, and if not so
terminated shall survive (except for the confidentiality provisions of this
Section 3.3) the Closing and delivery of the Deed to Purchaser.
3.4 Purchaser Indemnification.
3.4.1 Purchaser shall indemnify, hold harmless and, if requested by Seller (in
Seller's sole discretion), defend (with counsel approved by Seller) Seller,
together with Seller's affiliates, parent and subsidiary entities, successors,
assigns, partners, managers, members, employees, officers, directors, trustees,
shareholders, counsel, representatives, agents, Property Manager, Regional
Property Manager, and AIMCO (collectively, including Seller, "Seller's
Indemnified Parties"), from and against any and all damages, mechanics' liens,
liabilities, losses, demands, actions, causes of action, claims, costs and
expenses (including reasonable attorneys' fees, including appeals)
(collectively, "Losses") arising from or related to Purchaser's or its
Consultant's entry onto the Property, and any Inspections performed by Purchaser
with respect to the Property prior to the Closing Date.
3.4.2 Notwithstanding anything in this Contract to the contrary, Seller shall
have the right, without limitation, to disapprove any unreasonably intrusive
entries, surveys, tests (including, without limitation, a Phase II environmental
study of the Property), investigations and other matters that in Seller's
reasonable judgment could result in any injury to the Property or breach of any
contract, or expose Seller to any Losses or violation of applicable law, or
otherwise adversely affect the Property or Seller's interest therein. Purchaser
shall use best efforts to minimize disruption to Tenants in connection with
Purchaser's or its Consultants' activities pursuant to this Section. No consent
by the Seller to any such activity shall be deemed to constitute a waiver by
Seller or assumption of liability or risk by Seller. Purchaser hereby agrees to
restore, at Purchaser's sole cost and expense, the Property to the same
condition existing immediately prior to Purchaser's exercise of its rights
pursuant to this Article 3. Purchaser shall maintain and cause its third party
consultants to maintain (a) casualty insurance and comprehensive public
liability insurance with coverages of not less than $1,000,000.00 for injury or
death to any one person and $3,000,000.00 for injury or death to more than one
person and $1,000,000.00 with respect to property damage, by water or otherwise,
and (b) worker's compensation insurance for all of their respective employees in
accordance with the law of the state in which the Property is located. Purchaser
shall deliver proof of the insurance coverage required pursuant to this Section
3.4.2 to Seller (in the form of a certificate of insurance) prior to the earlier
to occur of (i) Purchaser's or Purchaser's Consultants' entry onto the Property,
or (ii) the expiration of 5 days after the Effective Date. The provisions of
this Section 3.4 shall survive the termination of this Contract, and if not so
terminated, the Closing and delivery of the Deed to Purchaser.
3.5 Property Materials.
3.5.1 Within 10 days after the Effective Date, and to the extent the same exist
and are in Seller's possession or reasonable control (subject to Section 3.5.2),
Seller agrees to make the documents set forth on Schedule 3.5 (the "Materials")
available at the Property for review and copying by Purchaser at Purchaser's
sole cost and expense. In the alternative, at Seller's option and within the
foregoing 10-day period, Seller may deliver some or all of the Materials to
Purchaser, or make the same available to Purchaser on a secure web site
(Purchaser agrees that any item to be delivered by Seller under this Contract
shall be deemed delivered to the extent available to Purchaser on such secured
web site). To the extent that Purchaser determines that any of the Materials
have not been made available or delivered to Purchaser pursuant to this Section
3.5.1, Purchaser shall notify Seller and Seller shall use commercially
reasonable efforts to deliver the same to Purchaser within 5 Business Days after
such notification is received by Seller. In the event Seller has failed to
deliver or make available to Purchaser the Materials within the 10 day period,
upon receipt of written notice from Purchaser, the Feasibility Period shall be
extended for a period of time equal to the number of days from the required
delivery date of each such item to the actual date of delivery of all such
items; provided, however, that under no circumstances will the Feasibility
Period be extended by more than 5 days hereunder and Purchaser's sole remedy
will be to terminate this Contract pursuant to Section 3.2.
3.5.2 In providing such information and Materials to Purchaser, other than
Seller's Representations, Seller makes no representation or warranty, express,
written, oral, statutory, or implied, and all such representations and
warranties are hereby expressly excluded and disclaimed. Any information and
Materials provided by Seller to Purchaser under the terms of this Contract is
for informational purposes only and, together with all Third-Party Reports,
shall be returned by Purchaser to Seller within 5 days after the return of the
Deposit to Purchaser (if Purchaser is otherwise entitled to such Deposit
pursuant to the terms of this Contract) if this Contract is terminated for any
reason. Purchaser shall not in any way be entitled to rely upon the accuracy of
such information and Materials. Purchaser recognizes and agrees that the
Materials and other documents and information delivered or made available by
Seller pursuant to this Contract may not be complete or constitute all of such
documents which are in Seller's possession or control, but are those that are
readily available to Seller after reasonable inquiry to ascertain their
availability. Purchaser understands that, although Seller will use commercially
reasonable efforts to locate and make available the Materials and other
documents required to be delivered or made available by Seller pursuant to this
Contract, Purchaser will not rely exclusively on such Materials or other
documents as being a complete and accurate source of information with respect to
the Property, and will rely on its own Inspections and Consultants with respect
to all matters which it deems relevant to its decision to acquire, own and
operate the Property.
3.5.3 In addition to the items set forth on Schedule 3.5, no later than 10 days
after the Effective Date, Seller shall deliver to Purchaser (or otherwise make
available to Purchaser as provided under Section 3.5.1) a rent roll for the
Property listing the move-in date, monthly base rent payable, lease expiration
date and unapplied security deposit for each Lease (the "Rent Roll"). The Rent
Roll shall be a part of the Materials for all purposes under this Contract and
Seller makes no representations or warranties regarding the Rent Roll other than
the express representation set forth in Section 6.1.7. Seller shall update the
Rent Roll in accordance with Section 5.2.10.
3.5.4 No later than 25 days after the Effective Date Purchaser shall provide to
Seller a list identifying AIMCO Marks likely to be retained by Seller in
accordance with the terms set forth in this Contract. On or prior to the
expiration of the Feasibility Period Seller shall indicate which AIMCO Marks set
forth on the listing provided by Purchaser (if any) will require removal by
Purchaser after Closing at Purchaser's sole cost and expense. Notwithstanding
the foregoing, Seller hereby reserves the right to remove any such AIMCO Marks
identified for removal prior to Closing, at Seller's sole cost and expense.
Nothing contained in this Section 3.5.4 or in Purchaser's proposed listing of
AIMCO Marks shall be deemed to be a waiver of Seller's rights with respect to
the AIMCO Marks, as more particularly described in this Contract.
3.5.5 The provisions of this Section 3.5 shall survive the Closing and delivery
of the Deed to Purchaser.
3.6 Property Contracts. On or before the expiration of the Feasibility Period,
Purchaser may deliver written notice to Seller (the "Property Contracts Notice")
specifying any Property Contracts with respect to which Purchaser desires to
have Seller deliver notices of termination at the Closing (the "Terminated
Contracts"); provided that (a) the effective date of such termination after
Closing shall be subject to the express terms of such Terminated Contracts,
(and, to the extent that the effective date of termination of any Terminated
Contract is after the Closing Date, Purchaser shall be deemed to have assumed
all of Seller's obligations under such Terminated Contract as of the Closing
Date), (b) if any such Property Contract cannot by its terms be terminated, it
shall be assumed by Purchaser and not be a Terminated Contract, and (c) to the
extent that any such Terminated Contract requires payment of a penalty or
premium for cancellation, Purchaser shall be solely responsible for the payment
of any such cancellation fees or penalties. If Purchaser fails to deliver the
Property Contracts Notice on or before the expiration of the Feasibility Period,
there shall be no Terminated Contracts and Purchaser shall assume all Property
Contracts at the Closing. To the extent that any Property Contract to be assumed
by Purchaser(including any Property Contracts that, because of advance notice
requirements, will be temporarily assumed by Purchaser pending the effective
date of termination after the Closing Date) is assignable but requires the
applicable vendor to consent to the assignment or assumption of the Property
Contract by Seller to Purchaser, then, prior to the Closing, Purchaser shall be
responsible for obtaining from each applicable vendor a consent (each a
"Required Assignment Consent") to the assignment of the Property Contract by
Seller to Purchaser (and the assumption by Purchaser of all obligations under
such Property Contract), Purchaser shall indemnify, hold harmless and, if
requested by Seller (in Seller's sole discretion), defend (with counsel approved
by Seller) Seller's Indemnified Parties from and against any and all Losses
arising from or related to Purchaser's failure to obtain any Required Assignment
Consent. Seller shall deliver to Purchaser at least ten (10) days prior to the
expiration of the Feasibility Period, a list certified to Seller's knowledge, of
all Property Contracts in existence relating to the ownership and operation of
the Property.
ARTICLE 4
TITLE
4.1 Title Documents. Within 10 calendar days after the Effective Date, Seller
shall cause to be delivered to Purchaser a standard form commitment for title
insurance ("Title Commitment") for the Property in an amount equal to the
Purchase Price from Title Insurer for an owner's title insurance policy (the
"Title Policy") on the most recent standard American Land Title Association
form, together with legible copies of all instruments identified as exceptions
therein (together with the Title Commitment, referred to herein as the "Title
Documents"). Seller shall be responsible only for payment of the basic premium
for the Title Policy. Purchaser shall be solely responsible for payment of all
other costs relating to procurement of the Title Commitment, the Title Policy,
and any requested endorsements.
4.2 Survey. Within 3 Business Days after the Effective Date, Seller shall
deliver to Purchaser or make available at the Property the existing survey of
the Property dated as of November 13, 2002 prepared by Endris Engineering (the
"Existing Survey"). Purchaser acknowledges and agrees that delivery of the
Existing Survey is subject to Section 3.5.2. To the extent that Purchaser
desires that a new survey of the Property be prepared (or that the Existing
Survey be updated), Purchaser shall request the same in writing to Seller no
later than 5 Business Days after the delivery of the Existing Survey, in which
event Seller shall order such new or updated survey (together with the Existing
Survey, referred to herein as the Survey) from the surveyor who prepared
Existing Survey (or from such other surveyor as Seller determines in its
reasonable discretion). Purchaser shall be solely responsible for the cost and
expense of the preparation of any new or updated survey requested pursuant to
the terms of this Section 4.2.
4.3 Objection and Response Process. On or before the date which is 35 days after
the Effective Date (the "Objection Deadline"), Purchaser shall give written
notice (the "Objection Notice") to the attorneys for Seller of any matter set
forth in the Title Documents or the Survey to which Purchaser objects (the
"Objections"). If Purchaser fails to tender an Objection Notice on or before the
Objection Deadline, Purchaser shall be deemed to have approved and irrevocably
waived any objections to any matters covered by the Title Documents and the
Survey. On or before 40 days after the Effective Date (the "Response Deadline"),
Seller may, in Seller's sole discretion, give Purchaser notice (the "Response
Notice") of those Objections which Seller is willing to cure, if any. Seller
shall be entitled to reasonable adjournments of the Closing Date to cure the
Objections (which adjournments shall not exceed 30 days). If Seller fails to
deliver a Response Notice by the Response Deadline, Seller shall be deemed to
have elected not to cure or otherwise resolve any matter set forth in the
Objection Notice. If Purchaser is dissatisfied with the Response Notice,
Purchaser may, as its exclusive remedy, elect by written notice given to Seller
on or before 45 days after the Effective Date (the "Final Response Deadline")
either (a) to accept the Title Documents and Survey with resolution, if any, of
the Objections as set forth in the Response Notice (or if no Response Notice is
tendered, without any resolution of the Objections) and without any reduction or
abatement of the Purchase Price, or (b) to terminate this Contract, in which
event the Deposit shall be returned to Purchaser (subject to Purchaser's
obligation under Section 3.5.2 to return all Third-Party Reports and information
and Materials provided to Purchaser upon the return of the Deposit). If
Purchaser fails to give notice to terminate this Contract on or before the Final
Response Deadline, Purchaser shall be deemed to have elected to approve and
irrevocably waived any objections to any matters covered by the Title Documents
and the Survey, subject only to resolution, if any, of the Objections as set
forth in the Response Notice (or if no Response Notice is tendered, without any
resolution of the Objections).
4.4 Permitted Exceptions. The Deed delivered pursuant to this Contract shall be
subject to the following, all of which shall be deemed "Permitted Exceptions":
4.4.1 All matters shown in the Title Documents and the Survey, other than (a)
those Objections, if any, which Seller has agreed to cure pursuant to the
Response Notice under Section 4.3, (b) mechanics' liens and taxes due and
payable with respect to the period preceding Closing, (c) the standard exception
regarding the rights of parties in possession which shall be limited to those
parties in possession pursuant to the Leases, and (d) the standard exception
pertaining to taxes which shall be limited to taxes and assessments payable in
the year in which the Closing occurs and subsequent taxes and assessments;
4.4.2 All Leases;
4.4.3 Intentionally Omitted;
4.4.4 Applicable zoning and governmental regulations and ordinances;
4.4.5 Any defects in or objections to title to the Property, or title
exceptions or encumbrances, arising by, through or under Purchaser; and
4.4.6 The terms and conditions of this Contract.
4.5 Existing Deed of Trust. It is understood and agreed that, whether or not
Purchaser gives an Objection Notice with respect thereto, any deeds of trust
and/or mortgages (including any and all mortgages which secure the Note) against
the Property (whether one or more, the "Deed of Trust") shall not be deemed
Permitted Exceptions, whether Purchaser gives written notice of such or not, and
shall be paid off, satisfied, discharged and/or cured by Seller at Closing,
provided that the Lender Fees due in connection with the Loan Payoff shall be
paid by Purchaser, to the extent such Lender Fees do not exceed the Purchase
Price. In no event shall Purchaser be liable for any Lender Fees asserted to be
payable to Lender after the Closing (for which Purchaser did not receive a
credit against the Purchase Price at Closing).
ARTICLE 5
CLOSING
5.1 Closing Date. The Closing shall occur 30 days following the expiration of
the Feasibility Period (the "Closing Date") through an escrow with Escrow Agent,
whereby the Seller, Purchaser and their attorneys need not be physically present
at the Closing and may deliver documents by overnight air courier or other
means. Notwithstanding the foregoing to the contrary, Seller shall have the
option, by delivering written notice to Purchaser at least 4 days prior to the
originally scheduled Closing Date, to extend the Closing Date to the last
Business Day of the month in which the Closing Date otherwise would occur
pursuant to the preceding sentence, or to such other date (either in the same
month or the next) not to exceed 30 days as Seller reasonably determines is
desirable in connection with the Loan Payoff. Further, the Closing Date may be
extended without penalty at the option of Seller to a date not later than 30
days following the Closing Date specified in the first sentence of this
paragraph above (or, if applicable, as extended by Seller pursuant to the second
sentence of this paragraph) to satisfy a condition to be satisfied by Seller, or
such later date as is mutually acceptable to Seller and Purchaser. Provided that
Purchaser is not in default under the terms of this Contract, Purchaser shall be
permitted a one-time 30-day extension of the originally scheduled Closing Date
specified in the first sentence of this Section 5.1 to accommodate the
requirements of Purchaser's lender by (i) delivering written notice to Seller no
later than 5 days prior to the scheduled Closing Date, and (ii) simultaneously
with such notice to Seller, delivering to Escrow Agent the amount of
$139,600.00, which amount when received by Escrow Agent shall be added to the
Deposit hereunder, shall be non-refundable (except as otherwise expressly
provided herein with respect to the Deposit), and shall be held, credited and
disbursed in the same manner as provided hereunder with respect to the Deposit.
5.2 Seller Closing Deliveries. No later than 1 Business Day prior to the Closing
Date, Seller shall deliver to Escrow Agent, each of the following items:
5.2.1 Special Warranty Deed (the "Deed") in the form attached as Exhibit B to
Purchaser, subject to the Permitted Exceptions.
5.2.2 A Bill of Sale in the form attached as Exhibit C.
5.2.3 A General Assignment in the form attached as Exhibit D (the "General
Assignment").
5.2.4 An Assignment of Leases and Security Deposits in the form attached as
Exhibit E (the "Leases Assignment").
5.2.5 A letter in the form attached hereto as Exhibit F prepared by Purchaser
and countersigned by Seller to each of the vendors under the Terminated
Contracts informing them of the termination of such Terminated Contract as of
the Closing Date (subject to any delay in the effectiveness of such termination
pursuant to the express terms of each applicable Terminated Contract) (the
"Vendor Terminations"). Seller hereby agrees that within 5 Business Days of the
Closing Date Purchaser may contact the Property Manager and the Regional
Property Manager (who shall reasonably cooperate with Purchaser's request) to
obtain the information necessary to fill in the blanks on the form attached
hereto as Exhibit F for each of the vendors under the Terminated Contracts
5.2.6 A closing statement executed by Seller.
5.2.7 A title affidavit or at Seller's option an indemnity, as applicable, in
the customary form reasonably acceptable to Seller to enable Title Insurer to
delete the standard exceptions to the title insurance policy set forth in this
Contract (other than matters constituting any Permitted Exceptions and matters
which are to be completed or performed post-Closing) to be issued pursuant to
the Title Commitment.
5.2.8 A certification of Seller's non-foreign status pursuant to Section 1445 of
the Internal Revenue Code of 1986, as amended.
5.2.9 Resolutions, certificates of good standing, and such other organizational
documents as Title Insurer shall reasonably require evidencing Seller's
authority to consummate this transaction.
5.2.10 An updated Rent Roll in Seller's standard form; provided, however, that
the content of such Rent Roll shall in no event expand or modify the conditions
to Purchaser's obligation to close as specified under Section 8.1.
5.3 Purchaser Closing Deliveries. No later than 1 Business Day prior to the
Closing Date (except for the balance of the Purchase Price which is to be
delivered at the time specified in Section 2.2.4), Purchaser shall deliver to
the Escrow Agent (for disbursement to Seller upon the Closing) the following
items with respect to the Property being conveyed at such Closing:
5.3.1 The full Purchase Price (with credit for the Deposit), plus or minus the
adjustments or prorations required by this Contract.
5.3.2 A title affidavit or at Purchaser's option an indemnity, pertaining to
Purchaser's activity on the Property prior to Closing, in the customary form
reasonably acceptable to Purchaser to enable Title Insurer to delete the
standard exceptions to the title insurance policy set forth in this Contract
(other than matters constituting any Permitted Exceptions and matters which are
to be completed or performed post-Closing) to be issued pursuant to the Title
Commitment; provided that such affidavit does not subject Purchaser to any
greater liability, or impose any additional obligations, other than as set forth
in this Contract.
5.3.3 Any declaration or other statement which may be required to be submitted
to the local assessor with respect to the terms of the sale of the Property.
5.3.4 A closing statement executed by Purchaser.
5.3.5 A countersigned counterpart of the General Assignment.
5.3.6 A countersigned counterpart of the Leases Assignment.
5.3.7 Notification letters to all Tenants prepared and executed by Purchaser in
the form attached hereto as Exhibit G.
5.3.8 The Vendor Terminations (Purchaser shall be solely responsible for
identifying each of the Terminated Contracts (subject to the terms and
conditions of Section 3.6) and addressing and preparing each of the Vendor
Terminations for execution by Purchaser and Seller).
5.3.9 Any cancellation fees or penalties due to any vendor under any Terminated
Contract as a result of the termination thereof.
5.3.10 Resolutions, certificates of good standing, and such other organizational
documents as Title Insurer shall reasonably require evidencing Purchaser's
authority to consummate this transaction.
5.3.11 Intentionally Omitted.
5.3.12 The Lender Fees (subject to reduction from the Purchase Price in
accordance with Section 2.2).
5.4 Closing Prorations and Adjustments.
5.4.1 General. All normal and customarily proratable items, including, without
limitation, collected rents, operating expenses, personal property taxes, other
operating expenses and fees, shall be prorated as of the Closing Date, Seller
being charged or credited, as appropriate, for all of same attributable to the
period up to the Closing Date (and credited for any amounts paid by Seller
attributable to the period on or after the Closing Date, if assumed by
Purchaser) and Purchaser being responsible for, and credited or charged, as the
case may be, for all of same attributable to the period on and after the Closing
Date. Seller shall prepare a proration schedule (the "Proration Schedule") of
the adjustments described in this Section 5.4 prior to Closing. Such adjustments
shall be paid by Purchaser to Seller (if the prorations result in a net credit
to Seller) or by Seller to Purchaser (if the prorations result in a net credit
to Purchaser), by increasing or reducing the cash to be paid by Purchaser at
Closing.
5.4.2 Operating Expenses. All of the operating, maintenance, taxes (other than
real estate taxes, such as rental taxes), and other expenses incurred in
operating the Property that Seller customarily pays, and any other costs
incurred in the ordinary course of business for the management and operation of
the Property, shall be prorated on an accrual basis. Seller shall pay all such
expenses that accrue prior to Closing and Purchaser shall pay all such expenses
that accrue from and after the Closing Date.
5.4.3 Utilities. The final readings and final billings for utilities will be
made if possible as of the Closing Date, in which case Seller shall pay all such
bills as of the Closing Date and no proration shall be made at the Closing with
respect to utility bills. Otherwise, a proration shall be made based upon the
parties' reasonable good faith estimate and a readjustment made within 30 days
after the Closing, if necessary. Seller shall be entitled to the return of any
deposit(s) posted by it with any utility company, and Seller shall notify each
utility company serving the Property to terminate Seller's account, effective as
of noon on the Closing Date.
5.4.4 Real Estate Taxes. Any real estate ad valorem or similar taxes for the
Property, or any installment of assessments payable in installments which
installment is payable in the calendar year of Closing, shall be prorated to the
date of Closing, based upon actual days involved. The proration of real property
taxes or installments of assessments shall be based upon the assessed valuation
and tax rate figures (assuming payment at the earliest time to allow for the
maximum possible discount) for the year in which the Closing occurs to the
extent the same are available; provided, that in the event that actual figures
(whether for the assessed value of the Property or for the tax rate) for the
year of Closing are not available at the Closing Date, the proration shall be
made using figures from the preceding year (assuming payment at the earliest
time to allow for the maximum possible discount). The proration of real property
taxes or installments of assessments shall be final and not subject to
re-adjustment after Closing.
5.4.5 Property Contracts. Purchaser shall assume at Closing the obligations
under the Property Contracts assumed by Purchaser, subject to proration of
operating expenses under Section 5.4.2.
5.4.6 Leases.
5.4.6.1 All collected rent (whether fixed monthly rentals, additional rentals,
escalation rentals, retroactive rentals, operating cost pass-throughs or other
sums and charges payable by Tenants under the Leases), income and expenses from
any portion of the Property shall be prorated as of the Closing Date (prorated
for any partial month). Purchaser shall receive all collected rent and income
attributable to dates from and after the Closing Date. Seller shall receive all
collected rent and income attributable to dates prior to the Closing Date.
Notwithstanding the foregoing, no prorations shall be made in relation to either
(a) non-delinquent rents which have not been collected as of the Closing Date,
or (b) delinquent rents existing, if any, as of the Closing Date (the foregoing
(a) and (b) referred to herein as the "Uncollected Rents"). In adjusting for
Uncollected Rents, no adjustments shall be made in Seller's favor for rents
which have accrued and are unpaid as of the Closing, but Purchaser shall pay
Seller such accrued Uncollected Rents as and when collected by Purchaser after
first applying any collected rent to current and delinquent rent for periods
after the Closing. Purchaser agrees to bill Tenants of the Property for all
Uncollected Rents and to take reasonable actions to collect Uncollected Rents.
After the Closing, Seller shall continue to have the right, but not the
obligation, in its own name, to demand payment of and to collect Uncollected
Rents owed to Seller by any Tenant, which right shall include, without
limitation, the right to continue or commence legal actions or proceedings
against any Tenant and the delivery of the Leases Assignment shall not
constitute a waiver by Seller of such right. Purchaser agrees to cooperate with
Seller in connection with all efforts by Seller to collect such Uncollected
Rents and to take all steps, whether before or after the Closing Date, as may be
necessary to carry out the intention of the foregoing, including, without
limitation, the delivery to Seller, within 7 days after a written request, of
any relevant books and records (including, without limitation, rent statements,
receipted bills and copies of tenant checks used in payment of such rent), the
execution of any and all consents or other documents, and the undertaking of any
act reasonably necessary for the collection of such Uncollected Rents by Seller;
provided, however, that Purchaser's obligation to cooperate with Seller pursuant
to this sentence shall not obligate Purchaser to terminate any Tenant lease with
an existing Tenant or to sue or evict any existing Tenant from the Property.
5.4.6.2 At Closing, Purchaser shall receive a credit against the Purchase Price
in an amount equal to the received and unapplied balance of all cash (or cash
equivalent) Tenant Deposits, including, but not limited to, security, damage or
other refundable deposits or required to be paid by any of the Tenants to secure
their respective obligations under the Leases, together, in all cases, with any
interest payable to the Tenants thereunder as may be required by their
respective Tenant Lease or state law (the "Tenant Security Deposit Balance").
Any cash (or cash equivalents) held by Seller which constitute the Tenant
Security Deposit Balance shall be retained by Seller in exchange for the
foregoing credit against the Purchase Price and shall not be transferred by
Seller pursuant to this Contract (or any of the documents delivered at Closing),
but the obligation with respect to the Tenant Security Deposit Balance
nonetheless shall be assumed by Purchaser. The Tenant Security Deposit Balance
shall not include any non-refundable deposits or fees paid by Tenants to Seller,
either pursuant to the Leases or otherwise.
5.4.6.3 With respect to operating expenses, taxes, utility charges, other
operating cost pass-throughs, retroactive rental escalations, sums or charges
payable by Tenants under the Tenant Leases, to the extent that Seller has
received as of the Closing payments allocable to periods subsequent to Closing,
the same shall be properly prorated with an adjustment in favor of Purchaser,
and Purchaser shall reserve a credit therefor at Closing. With respect to any
payments received by Purchaser after the Closing allocable to Seller prior to
Closing, Purchaser shall promptly pay the same to Seller.
5.4.7 Existing Loan. On the Closing Date, Seller shall pay (which payment may be
made by Seller out of the proceeds of the Purchase Price) the outstanding
principal balance of the Note, together with all interest accrued under the Note
prior to the Closing Date (the "Loan Payoff"). Purchaser shall pay all Lender
Fees (subject to reduction from the Purchase Price in accordance with Section
2.2). Seller shall cause any existing reserves, impounds and other accounts
maintained in connection with the Loan to be released in Good Funds to Seller at
the Closing unless credited by Lender against the amount due from Seller under
the Note.
5.4.8 Insurance. No proration shall be made in relation to insurance premiums
and insurance policies will not be assigned to Purchaser.
5.4.9 Employees. All of Seller's and Seller's manager's on-site employees shall
have their employment at the Property terminated as of the Closing Date.
5.4.10 Closing Costs. Purchaser shall pay the cost of recording any instruments
required to discharge any liens or encumbrances against the Property, any
premiums or fees required to be paid by Purchaser with respect to the Title
Policy pursuant to Section 4.1, and one-half of the customary closing costs of
the Escrow Agent and any and all costs for the preparation of a new survey or to
update the Existing Survey. Seller shall pay transfer tax and the base premium
for the Title Policy to the extent required by Section 4.1, and one-half of the
customary closing costs of the Escrow Agent.
5.4.11 Intentionally Omitted.
5.4.12 Survival. The provisions of this Section 5.4 shall survive the
Closing and delivery of the Deed to Purchaser.
5.4.13 Possession. Possession of the Property, subject to the Leases, Property
Contracts which are not identified as Terminated Contracts during the
Feasibility Period (subject to the limitations of Section 3.6), and Permitted
Exceptions, shall be delivered to Purchaser at the Closing upon release from
escrow of all items to be delivered by Purchaser pursuant to Section 5.3,
including, without limitation, the Purchase Price. To the extent reasonably
available to Seller, originals (or if not available, copies) of the Leases and
Property Contracts, lease files, warranties, guaranties, operating manuals, keys
to the property, and Seller's books and records (other than proprietary
information) (collectively, "Seller's Property-Related Files and Records")
regarding the Property shall be made available to Purchaser at the Property
after the Closing. Purchaser agrees, for a period of not less than 2 years after
the Closing ("Records Hold Period"), to (a) provide and allow Seller reasonable
access to Seller's Property Related Files and Records for purposes of inspection
and copying thereof, and (b) reasonably maintain and preserve Seller's
Property-Related Files and Records; provided, however, to the extent Purchaser
rekeys the Property after Closing, Purchaser will not be required to maintain
and preserve the existing keys to the Property. Notwithstanding the foregoing
provisions regarding the Records Hold Period, if at any time Purchaser desires
to dispose of Seller's Property Related Files and Records, Purchaser must first
provide Seller prior written notice (the "Records Disposal Notice"), and
Purchaser shall within 30 days after providing Seller with the Records Disposal
Notice forward to Seller, at Purchaser's sole cost and expense, either originals
or copies of Seller's Property Related Files and Records applicable to the
period of Seller's ownership of the Property along with Purchaser's disclaimer
of all right, title and interest in and to such Seller's Property Related Files
and Records. Purchaser agrees (i) to include the covenants of this Section
5.4.12 pertaining to Seller's Property-Related Files and Records in any
management contract for the Property (and to bind the manager thereunder to such
covenants), and (ii) to bind any future purchaser of the Property to the
covenants of this Section 5.4.13 pertaining to Seller's Property-Related Files
and Records. Purchaser shall indemnify, hold harmless and, if requested by
Seller (in Seller's sole discretion), defend (with counsel approved by Seller)
Seller's Indemnified Parties from and against any and all Losses arising from or
related to Purchaser's failure to comply with the provisions of this Section
5.4.13.
5.4.14 Post Closing Adjustments. In general, and except as provided in this
Contract or the Closing Documents, Seller shall be entitled to all income, and
shall pay all expenses, relating to the operation of the Property for the period
prior to the Closing Date and Purchaser shall be entitled to all income, and
shall pay all expenses, relating to the operation of the Property for the period
commencing on and after the Closing Date. Purchaser or Seller may request that
Purchaser and Seller undertake to re-adjust any item on the Proration Schedule
(or any item omitted therefrom) in accordance with the provisions of Section 5.4
of this Contract; provided, however, that neither party shall have any
obligation to re-adjust any items (a) after the expiration of 60 days after
Closing, or (b) subject to such 60-day period, unless such items exceed
$5,000.00 in magnitude (either individually or in the aggregate). The provisions
of this Section 5.6 shall survive the Closing and delivery of the Deed to
Purchaser.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER
6.1 Seller's Representations. Except, in all cases, for any fact, information or
condition disclosed in the Title Documents, the Permitted Exceptions, the
Property Contracts, or the Materials, or which is otherwise known by Purchaser
prior to the Closing, Seller represents and warrants to Purchaser the following
(collectively, the "Seller's Representations") as of the Effective Date and as
of the Closing Date (provided that Purchaser's remedies if any such Seller's
Representations are untrue as of the Closing Date are limited to those set forth
in Section 8.1):
6.1.1 Seller is duly organized, validly existing and in good standing under the
laws of the state of its formation set forth in the initial paragraph of this
Contract; and has or at the Closing shall have the entity power and authority to
sell and convey the Property and to execute the documents to be executed by
Seller and prior to the Closing will have taken as applicable, all corporate,
partnership, limited liability company or equivalent entity actions required for
the execution and delivery of this Contract, and the consummation of the
transactions contemplated by this Contract. The compliance with or fulfillment
of the terms and conditions hereof will not conflict with, or result in a breach
of, the terms, conditions or provisions of, or constitute a default under, any
contract to which Seller is a party or by which Seller is otherwise bound, which
conflict, breach or default would have a material adverse affect on Seller's
ability to consummate the transaction contemplated by this Contract or on the
Property. This Contract is a valid, binding and enforceable agreement against
Seller in accordance with its terms;
6.1.2 Other than the Leases, the Property is not subject to any written lease
executed by Seller or, to Seller's knowledge, any other possessory interests of
any person;
6.1.3 Seller is not a "foreign person," as that term is used and defined in the
Internal Revenue Code, Section 1445, as amended;
6.1.4 Except for any actions by Seller to evict Tenants under the Leases, to
Seller's knowledge, there are no actions, proceedings, litigation or
governmental investigations or condemnation actions either pending or threatened
against the Property;
6.1.5 To Seller's knowledge, Seller has not received any written notice from a
governmental agency of, and there is not any uncured material violations of any
federal, state, county or municipal law, ordinance, order, regulation or
requirement affecting the Property; and
6.1.6 To Seller's knowledge, Seller has not received any written notice of, and
there is not any uncured material default by Seller under any of the Property
Contracts that will not be terminated on the Closing Date.
6.1.7 To the knowledge of Seller, the Rent Roll (as updated pursuant to Section
5.2.11) is accurate in all material respects.
6.1.8 To Seller's knowledge: (A) no hazardous or toxic materials or other
substances regulated by applicable federal or state environmental laws are
stored by Seller on, in or under the Property in quantities which violate
applicable laws governing such materials or substances, and (B) the Property is
not used by Seller for the storage, treatment, generation or manufacture of any
hazardous or toxic materials or other substances in a manner which would
constitute a violation of applicable federal or state environmental laws.
6.2 AS-IS. Except for Seller's Representations, the Property is expressly
purchased and sold "AS IS," "WHERE IS," and "WITH ALL FAULTS." The Purchase
Price and the terms and conditions set forth herein are the result of
arm's-length bargaining between entities familiar with transactions of this
kind, and said price, terms and conditions reflect the fact that Purchaser shall
have the benefit of, and except for Seller's Representations is not relying
upon, any information provided by Seller or Broker or statements,
representations or warranties, express or implied, made by or enforceable
directly against Seller or Broker, including, without limitation, any relating
to the value of the Property, the physical or environmental condition of the
Property, any state, federal, county or local law, ordinance, order or permit;
or the suitability, compliance or lack of compliance of the Property with any
regulation, or any other attribute or matter of or relating to the Property
(other than any covenants of title contained in the Deed conveying the Property
and Seller's Representations). Except for Seller's Representations, Purchaser
agrees that Seller shall not be responsible or liable to Purchaser for any
defects, errors or omissions, or on account of any conditions affecting the
Property. Purchaser, its successors and assigns, and anyone claiming by, through
or under Purchaser, hereby fully releases Seller's Indemnified Parties from, and
irrevocably waives its right to maintain, any and all claims and causes of
action that it or they may now have or hereafter acquire against Seller's
Indemnified Parties with respect to any and all Losses arising from or related
to any defects, errors, omissions or other conditions affecting the Property.
Purchaser represents and warrants that, as of the last day of the Feasibility
Period and as of the Closing Date, it shall have reviewed and conducted such
independent analyses, studies (including, without limitation, environmental
studies and analyses concerning the presence of lead, asbestos, PCBs and radon
in and about the Property), reports, investigations and inspections as it deems
appropriate in connection with the Property. If Seller provides or has provided
any documents, summaries, opinions or work product of consultants, surveyors,
architects, engineers, title companies, governmental authorities or any other
person or entity with respect to the Property, including, without limitation,
the offering prepared by Broker, Purchaser and Seller agree that Seller has done
so or shall do so only for the convenience of both parties, Purchaser shall not
rely thereon and the reliance by Purchaser upon any such documents, summaries,
opinions or work product shall not create or give rise to any liability of or
against Seller's Indemnified Parties. Purchaser shall rely upon any title
insurance obtained by Purchaser and the Deed provided by Seller with respect to
title to the Property. Except for Seller's Representations, Purchaser
acknowledges and agrees that no representation has been made and no
responsibility is assumed by Seller with respect to current and future
applicable zoning or building code requirements or the compliance of the
Property with any other laws, rules, ordinances or regulations, the financial
earning capacity or expense history of the Property, the continuation of
contracts, continued occupancy levels of the Property, or any part thereof, or
the continued occupancy by tenants of any Leases or, without limiting any of the
foregoing, occupancy at Closing. Prior to Closing, Seller shall have the right,
but not the obligation, to enforce its rights against any and all Property
occupants, guests or tenants. Purchaser agrees that the departure or removal,
prior to Closing, of any of such guests, occupants or tenants shall not be the
basis for, nor shall it give rise to, any claim on the part of Purchaser, nor
shall it affect the obligations of Purchaser under this Contract in any manner
whatsoever; and Purchaser shall close title and accept delivery of the Deed with
or without such tenants in possession and without any allowance or reduction in
the Purchase Price under this Contract. Purchaser hereby releases Seller from
any and all claims and liabilities relating to the foregoing matters. The
provisions of this Section 6.2 shall survive the Closing and delivery of the
Deed to Purchaser.
6.3 Survival of Seller's Representations. Seller and Purchaser agree that
Seller's Representations shall survive Closing for a period of 12 months (the
"Survival Period"). Seller shall have no liability after the Survival Period
with respect to Seller's Representations contained herein except to the extent
that Purchaser has filed a lawsuit against Seller during the Survival Period for
breach of any of Seller's Representations. Under no circumstances shall Seller
be liable to Purchaser for more than $100,000 in any individual instance or in
the aggregate for all breaches of Seller's Representations, nor shall Purchaser
be entitled to bring any claim for a breach of Seller's Representations unless
the claim for damage (either in the aggregate or as to any individual claim) by
Purchaser exceeds $5,000. In the event that Seller breaches any representation
contained in Section 6.1 and Purchaser had knowledge of such breach prior to the
Closing Date or such breach is disclosed in the Title Documents, the Permitted
Exceptions, the Property Contracts, or the Materials, then Purchaser shall be
deemed to have waived any right of recovery, and Seller shall not have any
liability in connection therewith.
6.4 Definition of Seller's Knowledge. Any representations and warranties made
"to the knowledge of Seller" shall not be deemed to imply any duty of inquiry.
For purposes of this Contract, the term Seller's "knowledge" shall mean and
refer only to actual knowledge of the Designated Representative of the Seller
and shall not be construed to refer to the knowledge of any other partner,
officer, director, agent, employee or representative of the Seller, or any
affiliate of the Seller, or to impose upon such Designated Representative any
duty to investigate the matter to which such actual knowledge or the absence
thereof pertains, or to impose upon such Designated Representative any
individual personal liability. As used herein, the term Designated
Representative shall refer to Mindy Daugherty who is the Regional Property
Manager handling this Property (the "Regional Property Manager") and Michelle
Harvey, the current Property Manager handling this Property (the "Property
Manager").
6.5 Representations And Warranties Of Purchaser. For the purpose of inducing
Seller to enter into this Contract and to consummate the sale and purchase of
the Property in accordance herewith, Purchaser represents and warrants to Seller
the following as of the Effective Date and as of the Closing Date:
6.5.1 Purchaser is a limited liability company duly organized, validly existing
and in good standing under the laws of Michigan.
6.5.2 Purchaser, acting through any of its or their duly empowered and
authorized officers or members, has all necessary entity power and authority to
own and use its properties and to transact the business in which it is engaged,
and has full power and authority to enter into this Contract, to execute and
deliver the documents and instruments required of Purchaser herein, and to
perform its obligations hereunder; and no consent of any of Purchaser's
partners, directors, officers or members are required to so empower or authorize
Purchaser. The compliance with or fulfillment of the terms and conditions hereof
will not conflict with, or result in a breach of, the terms, conditions or
provisions of, or constitute a default under, any contract to which Purchaser is
a party or by which Purchaser is otherwise bound, which conflict, breach or
default would have a material adverse affect on Purchaser's ability to
consummate the transaction contemplated by this Contract. This Contract is a
valid, binding and enforceable agreement against Purchaser in accordance with
its terms.
6.5.3 No pending or, to the knowledge of Purchaser, threatened litigation exists
which if determined adversely would restrain the consummation of the
transactions contemplated by this Contract or would declare illegal, invalid or
non-binding any of Purchaser's obligations or covenants to Seller.
6.5.4 Other than Seller's Representations, Purchaser has not relied on any
representation or warranty made by Seller or any representative of Seller
(including, without limitation, Broker) in connection with this Contract and the
acquisition of the Property.
6.5.5 The Broker and its affiliates do not as of the Effective Date, and will
not at the Closing, have any direct or indirect legal, beneficial, economic or
voting interest in Purchaser (or in an assignee of Purchaser, which pursuant to
Section 13.3, acquires the Property at the Closing), nor has Purchaser or any
affiliate of Purchaser granted (as of the Effective Date or the Closing Date)
the Broker or any of its affiliates any right or option to acquire any direct or
indirect legal, beneficial, economic or voting interest in Purchaser. In
confirming the representation and warranty made in the foregoing sentence,
Seller reserves the right, in its sole and absolute discretion, to conduct an
audit to review the future tax returns of Purchaser and any assignee.
Notwithstanding the foregoing, Purchaser hereby represents and warrants that
Purchaser's broker, Hendricks & Partners (as more particularly described in
Article 9 herein), shall make all the required disclosures and take any other
action required by law concerning the fact that Mr. Paul Dietz with Hendricks &
Partners is (a) a principal of the entity acquiring the Property, and (b)
affiliated with the broker for Purchaser.
The provisions of this Section 6.5 shall survive the Closing and delivery
of the Deed to Purchaser.
6.6 Survival of Purchaser's Representations. Seller and Purchaser agree that
Purchaser's Representations shall survive Closing for a period of 12 months (the
"Survival Period"). Purchaser shall have no liability after the Survival Period
with respect to Purchaser's Representations contained herein except to the
extent that Seller has filed a lawsuit against Seller during the Survival Period
for breach of any of Purchaser's Representations. Under no circumstances shall
Purchaser be liable to Seller for more than $100,000 in excess of the Deposit in
any individual instance or in the aggregate for all breaches of Purchaser's
Representations, nor shall Seller be entitled to bring any claim for a breach of
Purchaser's Representations unless the claim for damage (either in the aggregate
or as to any individual claim) by Seller exceeds $5,000. In the event that
Purchaser breaches any representation contained in Section 6.5 and Seller had
knowledge of such breach prior to the Closing Date, then Seller shall be deemed
to have waived any right of recovery, and Purchaser shall not have any liability
in connection therewith.
6.7 Definition of Purchaser's Knowledge. Any representations and warranties made
"to the knowledge of Purchaser" shall not be deemed to imply any duty of
inquiry. For purposes of this Contract, the term Purchaser's "knowledge" shall
mean and refer only to actual knowledge of the Designated Representative of the
Purchaser and shall not be construed to refer to the knowledge of any other
partner, officer, director, agent, employee or representative of the Purchaser,
or any affiliate of the Purchaser, or to impose upon such Designated
Representative any duty to investigate the matter to which such actual knowledge
or the absence thereof pertains, or to impose upon such Designated
Representative any individual personal liability. As used herein, the term
Designated Representative shall refer to Brian Dietz, who is President of the
manager of Purchaser's managing member.
ARTICLE 7
OPERATION OF THE PROPERTY
7.1 Leases and Property Contracts. During the period of time from the Effective
Date to the Closing Date, but only in the ordinary course of business Seller may
enter into new Property Contracts, new Leases, renew existing Leases or modify,
terminate or accept the surrender or forfeiture of any of the Leases, modify any
Property Contracts, or institute and prosecute any available remedies for
default under any Lease or Property Contract without first obtaining the written
consent of Purchaser; provided, however, Seller agrees that any such new
Property Contracts or any new or renewed Leases shall not have a term in excess
of 1 year (or such longer period of time for which such Property Contracts or
Leases are entered into by Seller in the ordinary course of its operation of the
Property) without the prior written consent of Purchaser, which consent shall
not be unreasonably withheld, conditioned or delayed.
7.2 General Operation of Property. Except as specifically set forth in this
Article 7, Seller shall operate the Property after the Effective Date in the
ordinary course of business, and except as necessary in the Seller's sole
discretion to address (a) any life or safety issue at the Property or (b) any
other matter which in Seller's reasonable discretion materially adversely
affecting the use, operation or value of the Property, Seller will not make any
material alterations to the Property or remove any material Fixtures and
Tangible Personal Property without the prior written consent of Purchaser which
consent shall not be unreasonably withheld, denied or delayed. Seller hereby
agrees that Seller shall deliver the Property at Closing in the same general
physical condition existing at the time when Purchaser completes its Inspections
at the expiration of the Feasibility Period, general wear and tear excepted.
7.3 Liens. Other than utility easements and temporary construction easements
granted by Seller in the ordinary course of business, Seller covenants that it
will not voluntarily create or cause any lien or encumbrance to attach to the
Property between the Effective Date and the Closing Date (other than Leases and
Property Contracts as provided in Section 7.1) unless Purchaser approves such
lien or encumbrance, which approval shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, Seller hereby agrees that Seller shall
not grant any such utility easement(s) and temporary construction easements
which materially interfere with the continued operations of the Property. If
Purchaser approves any such subsequent lien or encumbrance, the same shall be
deemed a Permitted Encumbrance for all purposes hereunder.
ARTICLE 8
CONDITIONS PRECEDENT TO CLOSING
8.1 Purchaser's Conditions to Closing. Purchaser's obligation to close
under this Contract, shall be subject to and conditioned upon the fulfillment
of each and all of the following conditions precedent:
8.1.1 All of the documents required to be delivered by Seller to Purchaser at
the Closing pursuant to the terms and conditions hereof shall have been
delivered;
8.1.2 Each of the representations, warranties and covenants of Seller contained
herein shall be true in all material respects as of the Closing Date;
8.1.3 Seller shall have complied with, fulfilled and performed in all material
respects each of the covenants, terms and conditions to be complied with,
fulfilled or performed by Seller hereunder as of the Closing Date; and
8.1.4 Neither Seller nor Seller's general partner shall be a debtor in any
bankruptcy proceeding nor shall have been in the last 6 months a debtor in any
bankruptcy proceeding.
Notwithstanding anything to the contrary, there are no other conditions on
Purchaser's obligation to Close except as expressly set forth in this Section
8.1. If any condition set forth in Sections 8.1.1, 8.1.3 or 8.1.4 is not met,
Purchaser may (a) waive any of the foregoing conditions and proceed to Closing
on the Closing Date with no offset or deduction from the Purchase Price, or (b)
if such failure constitutes a default by Seller, exercise any of its remedies
pursuant to Section 10.2. If the condition set forth in Section 8.1.2 is not
met, Purchaser may, as its sole and exclusive remedy, (i) notify Seller of
Purchaser's election to terminate this Contract and receive a return of the
Deposit from the Escrow Agent, or (ii) waive such condition and proceed to
Closing on the Closing Date with no offset or deduction from the Purchase Price.
8.2 Seller's Conditions to Closing. Without limiting any of the rights of Seller
elsewhere provided for in this Contract, Seller's obligation to close with
respect to conveyance of the Property under this Contract shall be subject to
and conditioned upon the fulfillment of each and all of the following conditions
precedent:
8.2.1 All of the documents and funds required to be delivered by Purchaser to
Seller at the Closing pursuant to the terms and conditions hereof shall have
been delivered;
8.2.2 Each of the representations, warranties and covenants of Purchaser
contained herein shall be true in all material respects as of the Closing Date;
8.2.3 Purchaser shall have complied with, fulfilled and performed in all
material respects each of the covenants, terms and conditions to be complied
with, fulfilled or performed by Purchaser hereunder as of the Closing Date; and
8.2.4 Intentionally Omitted.
If any of the foregoing conditions to Seller's obligation to close with
respect to conveyance of the Property under this Contract are not met, Seller
may (a) waive any of the foregoing conditions and proceed to Closing on the
Closing Date, or (b) terminate this Contract, and, if such failure constitutes a
default by Purchaser, exercise any of its remedies under Section 10.1.
ARTICLE 9
BROKERAGE
9.1 Indemnity. Seller represents and warrants to Purchaser that it has not dealt
with any broker in connection with this Contract and Purchaser represents and
warrants to Seller that it has dealt only with Mr. Richard Vidrio and Mr. Todd
Stofflet of Hendricks & Partners, Purchaser's broker (the "Broker") in
connection with this Contract. Purchaser represents and warrants to Seller that
other than Purchaser's dealings with Broker, it has not utilized the services of
any other real estate broker, sales person or finder in connection with this
Contract, and Seller represents and warrants to Purchaser that it has not
utilized the services of any real estate broker, sales person or finder in
connection with this Contract, and each party agrees to indemnify, hold
harmless, and, if requested in the sole and absolute discretion of the
indemnitee, defend (with counsel approved by the indemnitee) the other party
from and against all Losses relating to brokerage commissions and finder's fees
arising from or attributable to the acts or omissions of the indemnifying party.
The provisions of this Section 9.1 shall survive the termination of this
Contract, and if not so terminated, the Closing and delivery of the Deed to
Purchaser.
9.2 Broker Commission. Purchaser agrees to pay Broker a commission according to
the terms of a separate contract. Broker shall not be deemed a party or third
party beneficiary of this Contract.
9.3 Broker Page. As a condition to Purchaser's obligation to pay the commission
pursuant to Section 9.2, Broker shall execute the signature page for Broker
attached hereto solely for purposes of confirming the matters set forth therein;
provided, however, that (a) Broker's signature hereon shall not be a
prerequisite to the binding nature of this Contract on Purchaser and Seller, and
the same shall become fully effective upon execution by Purchaser and Seller,
and (b) the signature of Broker will not be necessary to amend any provision of
this Contract.
9.4 Disclosure of Affiliation with Purchaser. Notwithstanding anything to the
contrary contained herein, Purchaser and Seller acknowledge that Mr. Paul Dietz
with Hendricks & Partners has an affiliation to the purchasing entity as a
principal in the entity acquiring the Property, and that except for Mr. Paul
Dietz, no other affiliate, employee or broker of Hendricks & Partners, as of the
Effective Date, and as of the Closing, will have any direct or indirect legal,
beneficial, economic or voting interest in Purchaser (or in an assignee of
Purchaser, which pursuant to Section 13.3, acquires the Property at the
Closing).
ARTICLE 10
DEFAULTS AND REMEDIES
10.1 Purchaser Default. If Purchaser defaults in its obligations hereunder to
(a) deliver the Initial Deposit or Additional Deposit, (or any other deposit or
payment required of Purchaser hereunder), (b) deliver to the Seller the
deliveries specified under Section 5.3 on the date required thereunder, or (c)
deliver the Purchase Price at the time required by Section 2.2.4 and close on
the purchase of the Property on the Closing Date, then, immediately and without
notice or cure, Purchaser shall forfeit the Deposit, and the Escrow Agent shall
deliver the Deposit to Seller, and neither party shall be obligated to proceed
with the purchase and sale of the Property. If, Purchaser defaults in any of its
other representations, warranties or obligations under this Contract, and such
default continues for more than 10 days after written notice from Seller, then
Purchaser shall forfeit the Deposit, and the Escrow Agent shall deliver the
Deposit to Seller, and neither party shall be obligated to proceed with the
purchase and sale of the Property. The Deposit is liquidated damages and
recourse to the Deposit is, except for Purchaser's indemnity and confidentiality
obligations hereunder, Seller's sole and exclusive remedy for Purchaser's
failure to perform its obligation to purchase the Property or breach of a
representation or warranty. Seller expressly waives the remedies of specific
performance and additional damages for such default by Purchaser. SELLER AND
PURCHASER ACKNOWLEDGE THAT SELLER'S DAMAGES WOULD BE DIFFICULT TO DETERMINE, AND
THAT THE DEPOSIT IS A REASONABLE ESTIMATE OF SELLER'S DAMAGES RESULTING FROM A
DEFAULT BY PURCHASER IN ITS OBLIGATION TO PURCHASE THE PROPERTY. SELLER AND
PURCHASER FURTHER AGREE THAT THIS SECTION 10.1 IS INTENDED TO AND DOES LIQUIDATE
THE AMOUNT OF DAMAGES DUE SELLER, AND SHALL BE SELLER'S EXCLUSIVE REMEDY AGAINST
PURCHASER, BOTH AT LAW AND IN EQUITY, ARISING FROM OR RELATED TO A BREACH BY
PURCHASER OF ITS OBLIGATION TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS
CONTRACT, OTHER THAN WITH RESPECT TO PURCHASER'S INDEMNITY AND CONFIDENTIALITY
OBLIGATIONS HEREUNDER.
10.2 Seller Default. If Seller, prior to the Closing, defaults in its
representations, warranties, covenants, or obligations under this Contract,
including to sell the Property as required by this Contract and such default
continues for more than 10 days after written notice from Purchaser, then, at
Purchaser's election and as Purchaser's sole and exclusive remedy, either (A)
this Contract shall terminate, and all payments and things of value, including
the Deposit, provided by Purchaser hereunder shall be returned to Purchaser
(subject to Purchaser's obligation under Section 3.5.2 to return all Third-Party
Reports and information and Materials provided to Purchaser upon the return of
the Deposit), and Purchaser may recover, as its sole recoverable damages (but
without limiting its right to receive a refund of the Deposit), its direct and
actual out-of-pocket expenses and costs (documented by paid invoices to third
parties) in connection with this transaction, which damages shall not exceed
$50,000 in aggregate, or (B) Purchaser may seek specific performance of Seller's
obligation to deliver the Deed pursuant to this Contract (but not damages, other
than its direct and actual out-of-pocket expenses and costs as documented by
paid invoices or other evidence of payment to third parties; provided, however,
Seller shall not be responsible for more than $25,000 of such out-of-pocket
expenses and costs) incurred as a result of the delay in the Closing resulting
from Seller's breach. Purchaser agrees that it shall promptly deliver to Seller
an assignment of all of Purchaser's right, title and interest in and to
(together with possession of) all plans, studies, surveys, reports, and other
materials paid for with the out-of-pocket expenses reimbursed by Seller pursuant
to the foregoing sentence. SELLER AND PURCHASER FURTHER AGREE THAT THIS SECTION
10.2 IS INTENDED TO AND DOES LIMIT THE AMOUNT OF DAMAGES DUE PURCHASER AND THE
REMEDIES AVAILABLE TO PURCHASER, AND SHALL BE PURCHASER'S EXCLUSIVE REMEDY
AGAINST SELLER, BOTH AT LAW AND IN EQUITY ARISING FROM OR RELATED TO A BREACH BY
SELLER OF ITS REPRESENTATIONS, WARRANTIES, OR COVENANTS OR ITS OBLIGATION TO
CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS CONTRACT. UNDER NO
CIRCUMSTANCES MAY PURCHASER SEEK OR BE ENTITLED TO RECOVER ANY SPECIAL,
CONSEQUENTIAL, PUNITIVE, SPECULATIVE OR INDIRECT DAMAGES, ALL OF WHICH PURCHASER
SPECIFICALLY WAIVES, FROM SELLER FOR ANY BREACH BY SELLER, OF ITS
REPRESENTATIONS, WARRANTIES OR COVENANTS OR ITS OBLIGATIONS UNDER THIS CONTRACT.
PURCHASER SPECIFICALLY WAIVES THE RIGHT TO FILE ANY LIS PENDENS OR ANY LIEN
AGAINST THE PROPERTY UNLESS AND UNTIL IT HAS IRREVOCABLY ELECTED TO SEEK
SPECIFIC PERFORMANCE OF THIS CONTRACT AND HAS FILED AN ACTION SEEKING SUCH
REMEDY.
ARTICLE 11
RISK OF LOSS OR CASUALTY
11.1 Major Damage. In the event that the Property is damaged or destroyed by
fire or other casualty prior to Closing, and the cost of repair is more than
$300,000, then Seller shall have no obligation to repair such damage or
destruction and shall notify Purchaser in writing of such damage or destruction
(the "Damage Notice"). Within 10 days after Purchaser's receipt of the Damage
Notice, Purchaser may elect at its option to terminate this Contract by
delivering written notice to Seller. In the event Purchaser fails to terminate
this Contract within the foregoing 10-day period, this transaction shall be
closed in accordance with the terms of this Contract for the full Purchase Price
notwithstanding any such damage or destruction and Purchaser shall receive all
insurance proceeds pertaining thereto (plus a credit against the Purchase Price
in the amount of any deductible or self insured amounts payable by Seller in
connection therewith) at Closing.
11.2 Minor Damage. In the event that the Property is damaged or destroyed by
fire or other casualty prior to the Closing, and the cost of repair is less than
$300,000, this transaction shall be closed in accordance with the terms of this
Contract, notwithstanding the damage or destruction; provided, however, Seller
shall make such repairs to the extent of any recovery from insurance carried on
the Property if they can be reasonably effected before the Closing. Subject to
Section 11.3, if Seller is unable to effect such repairs, then Purchaser shall
receive all insurance proceeds pertaining thereto (plus a credit against the
Purchase Price in the amount of any deductible payable by Seller in connection
therewith) at Closing.
11.3 Repairs. To the extent that Seller elects to commence any repair,
replacement or restoration of the Property prior to Closing, then Seller shall
be entitled to receive and apply available insurance proceeds to any portion of
such repair, replacement or restoration completed or installed prior to Closing,
with Purchaser being responsible for completion of such repair, replacement or
restoration after Closing from the balance of any available insurance proceeds.
The provisions of this Section 11.3 shall survive the Closing and delivery of
the Deed to Purchaser.
ARTICLE 12
EMINENT DOMAIN
12.1 Eminent Domain. In the event that, at the time of Closing, any material
part of the Property is (or previously has been) acquired, or is about to be
acquired, by any governmental agency by the powers of eminent domain or transfer
in lieu thereof (or in the event that at such time there is any notice of any
such acquisition or intent to acquire by any such governmental agency),
Purchaser shall have the right, at Purchaser's option, to terminate this
Contract by giving written notice within 10 days after Purchaser's receipt from
Seller of notice of the occurrence of such event, and if Purchaser so terminates
this Contract shall recover the Deposit hereunder (subject to Purchaser's
obligation under Section 3.5.2 to return all Third-Party Reports and information
and Materials provided to Purchaser as a pre-condition to the return of the
Deposit). If Purchaser fails to terminate this Contract within such 10-day
period, this transaction shall be closed in accordance with the terms of this
Contract for the full Purchase Price and Purchaser shall receive the full
benefit of any condemnation award. It is expressly agreed between the parties
hereto that this section shall in no way apply to customary dedications for
public purposes which may be necessary for the development of the Property.
ARTICLE 13
MISCELLANEOUS
13.1 Binding Effect of Contract. This Contract shall not be binding on either
party until executed by both Purchaser and Seller. As provided in Section 2.3.5
and Section 9.3 above, neither the Escrow Agent's nor the Broker's execution of
this Contract shall be a pre-requisite to its effectiveness.
13.2 Exhibits And Schedules. All Exhibits and Schedules, whether or not annexed
hereto, are a part of this Contract for all purposes.
13.3 Assignability. This Contract is not assignable by Purchaser or Seller
(other than any assignment in connection with a 1031 exchange pursuant to
Section 13.19), without first obtaining the prior written approval of the other,
except that Purchaser may assign this Contract to one or more entities so long
as (a) Purchaser is an affiliate of the purchasing entity(ies), (b) Purchaser is
not released from its liability hereunder, and (c) Seller is promptly notified
thereof, but in no event later than 10 days prior to Closing. As used herein, an
affiliate is a person or entity controlled by, under common control with, or
controlling another person or entity.
13.4 Binding Effect. Subject to Section 13.3, this Contract shall be binding
upon and inure to the benefit of Seller and Purchaser, and their respective
successors, heirs and permitted assigns.
13.5 Captions. The captions, headings, and arrangements used in this Contract
are for convenience only and do not in any way affect, limit, amplify, or modify
the terms and provisions hereof.
13.6 Number And Gender Of Words. Whenever herein the singular number is used,
the same shall include the plural where appropriate, and words of any gender
shall include each other gender where appropriate.
13.7 Notices. All notices, demands, requests and other communications required
or permitted hereunder shall be in writing, and shall be (a) personally
delivered with a written receipt of delivery; (b) sent by a nationally
recognized overnight delivery service requiring a written acknowledgement of
receipt or providing a certification of delivery or attempted delivery; (c) sent
by certified or registered mail, return receipt requested, or (d) sent by
confirmed facsimile transmission with an original copy thereof transmitted to
the recipient by one of the means described in subsections (a) through (c) no
later than 3 Business Days thereafter. All notices shall be deemed effective
when actually delivered as documented in a delivery receipt; provided, however,
that if the notice was sent by overnight courier or mail as aforesaid and is
affirmatively refused or cannot be delivered during customary business hours by
reason of the absence of a signatory to acknowledge receipt, or by reason of a
change of address with respect to which the addressor did not have either
knowledge or written notice delivered in accordance with this paragraph, then
the first attempted delivery shall be deemed to constitute delivery. Each party
shall be entitled to change its address for notices from time to time by
delivering to the other party notice thereof in the manner herein provided for
the delivery of notices. All notices shall be sent to the addressee at its
address set forth following its name below:
To Purchaser:
TATES CREEK INVESTMENTS, LLC
c/o Dietz Holdings LLC
1025 East Maple Road, Suite 230
Birmingham, MI 48009
Attention: Mr. Brian Dietz
Telephone: 248 341-3999
Facsimile: 248 646-3744
and a copy to:
Mark Krysinski, Esq.
Jaffe, Raitt, Heuer and Weiss, P.C.
One Woodward Avenue, Suite 2400
Detroit, MI 48226
Telephone 313 964-8398
Facsimile 313 961-8358
To Seller:
c/o AIMCO
4582 South Ulster Street Parkway, Suite 1100
Denver, Colorado 80237
Attention: Mr. Patrick Slavin
Telephone: 303-691-4340
Facsimile: 303-300-3282
And:
c/o AIMCO
4582 South Ulster Street Parkway, Suite 1100
Denver, Colorado 80237
Attention: Mr. Harry Alcock
Telephone: 303-691-4344
Facsimile: 303-300-3282
with copy to:
Chad Asarch, Esq.
Vice President and Assistant General Counsel
AIMCO
4582 South Ulster Street Parkway, Suite 1100
Denver, Colorado 80237
Telephone: 303 691-4303
Facsimile: 303 300-3297
and a copy to:
Loeb & Loeb LLP
10100 Santa Monica Boulevard, Suite 2200
Los Angeles, California 90067
Attention: Karen N. Higgins, Esq.
and Loretta Thompson, Esq.
Facsimile: 310-282-2200
Any notice required hereunder to be delivered to the Escrow Agent shall be
delivered in accordance with above provisions as follows:
Stewart Title Guaranty Company
1980 Post Oak Boulevard, Suite 610
Houston, Texas 77056
Attention: Wendy Howell, National Commercial Closing Specialist
Telephone: 800-729-1906
Unless specifically required to be delivered to the Escrow Agent pursuant
to the terms of this Contract, no notice hereunder must be delivered to the
Escrow Agent in order to be effective so long as it is delivered to the other
party in accordance with the above provisions.
13.8 Governing Law And Venue. The laws of the State of Kentucky shall govern the
validity, construction, enforcement, and interpretation of this Contract, unless
otherwise specified herein except for the conflict of laws provisions thereof.
Subject to Section 13.25, all claims, disputes and other matters in question
arising out of or relating to this Contract, or the breach thereof, shall be
decided by proceedings instituted and litigated in a court of competent
jurisdiction in the state in which the Property is situated, and the parties
hereto expressly consent to the venue and jurisdiction of such court.
13.9 Entire Agreement. This Contract embodies the entire Contract between the
parties hereto concerning the subject matter hereof and supersedes all prior
conversations, proposals, negotiations, understandings and Contracts, whether
written or oral.
13.10 Amendments. This Contract shall not be amended, altered, changed,
modified, supplemented or rescinded in any manner except by a written contract
executed by all of the parties; provided, however, that, (a) as provided in
Section 2.3.5 above, the signature of the Escrow Agent shall not be required as
to any amendment of this Contract other than an amendment of Section 2.3, and
(b) as provided in Section 9.3 above, the signature of the Broker shall not be
required as to any amendment of this Contract
13.11 Severability. In the event that any part of this Contract shall be held to
be invalid or unenforceable by a court of competent jurisdiction, such provision
shall be reformed, and enforced to the maximum extent permitted by law. If such
provision cannot be reformed, it shall be severed from this Contract and the
remaining portions of this Contract shall be valid and enforceable.
13.12 Multiple Counterparts/Facsimile Signatures. This Contract may be executed
in a number of identical counterparts. This Contract may be executed by
facsimile signatures which shall be binding on the parties hereto, with original
signatures to be delivered as soon as reasonably practical thereafter.
13.13 Construction. No provision of this Contract shall be construed in favor
of, or against, any particular party by reason of any presumption with respect
to the drafting of this Contract; both parties, being represented by counsel,
having fully participated in the negotiation of this instrument.
13.14 Confidentiality. Purchaser shall not disclose the terms and conditions
contained in this Contract and shall keep the same confidential, provided that
Purchaser may disclose the terms and conditions of this Contract (a) as required
by law, (b) to consummate the terms of this Contract, or any financing relating
thereto, or (c) to Purchaser's or Seller's lenders, attorneys and accountants.
Any information and Materials provided by Seller to Purchaser hereunder are
confidential and Purchaser shall be prohibited from making such information
public to any other person or entity other than its agents and legal
representatives, without Seller's prior written authorization, which may be
granted or denied in Seller's sole discretion. Notwithstanding the provisions of
Section 13.9, Purchaser agrees that the covenants, restrictions and agreements
of Purchaser contained in any confidentiality agreement executed by Purchaser
prior to the Effective Date shall survive the execution of this Contract and
shall not be superceded hereby.
13.15 Time Of The Essence. It is expressly agreed by the parties hereto that
time is of the essence with respect to this Contract.
13.16 Waiver. No delay or omission to exercise any right or power accruing upon
any default, omission, or failure of performance hereunder shall impair any
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. No waiver, amendment, release, or modification of this Contract shall
be established by conduct, custom, or course of dealing and all waivers must be
in writing and signed by the waiving party.
13.17 Attorneys Fees. In the event either party hereto commences litigation or
arbitration against the other to enforce its rights hereunder, the prevailing
party in such litigation shall be entitled to recover from the other party its
reasonable attorneys' fees and expenses incidental to such litigation and
arbitration, including the cost of in-house counsel and any appeals.
13.18 Time Periods. Should the last day of a time period fall on a weekend or
legal holiday, the next Business Day thereafter shall be considered the end of
the time period.
13.19 1031 Exchange. Seller and Purchaser acknowledge and agree that the
purchase and sale of the Property may be part of a tax-free exchange under
Section 1031 of the Code for either Purchaser or Seller. Each party hereby
agrees to take all reasonable steps on or before the Closing Date to facilitate
such exchange if requested by the other party, provided that (a) no party making
such accommodation shall be required to acquire any substitute property, (b)
such exchange shall not affect the representations, warranties, liabilities and
obligations of the parties to each other under this Contract, (c) no party
making such accommodation shall incur any additional cost, expense or liability
in connection with such exchange (other than expenses of reviewing and executing
documents required in connection with such exchange), and (d) no dates in this
Contract will be extended as a result thereof. Notwithstanding anything to the
contrary contained in the foregoing, if Seller so elects to close the transfer
of the Property as an exchange, then (i) Seller, at its sole option, may
delegate its obligations to transfer the Property under this Contract, and may
assign its rights to receive the Purchase Price from Purchaser, to a deferred
exchange intermediary (an "Intermediary") or to an exchange accommodation
titleholder, as the case may be; (ii) such delegation and assignment shall in no
way reduce, modify or otherwise affect the obligations of Seller pursuant to
this Contract; (iii) Seller shall remain fully liable for its obligations under
this Contract as if such delegation and assignment shall not have taken place;
(iv) Intermediary or exchange accommodation titleholder, as the case may be,
shall have no liability to Purchaser; and (v) the closing of the transfer of the
Property to Purchaser shall be undertaken by direct deed from Seller (or, if
applicable, from other affiliates of Seller whom Seller will cause to execute
such deeds) to Purchaser or to exchange accommodation titleholder, as the case
may be. Notwithstanding anything to the contrary contained in the foregoing, if
Purchaser so elects to close the acquisition of the Property as an exchange,
then (i) Purchaser, at its sole option, may delegate its obligations to acquire
the Property under this Contract, and may assign its rights to receive the
Property from Seller, to an Intermediary or to an exchange accommodation
titleholder, as the case may be; (ii) such delegation and assignment shall in no
way reduce, modify or otherwise affect the obligations of Purchaser pursuant to
this Contract; (iii) Purchaser shall remain fully liable for its obligations
under this Contract as if such delegation and assignment shall not have taken
place; (iv) Intermediary or exchange accommodation titleholder, as the case may
be, shall have no liability to Seller; and (v) the closing of the acquisition of
the Property by Purchaser or the exchange accommodation titleholder, as the case
may be, shall be undertaken by direct deed from Seller (or, if applicable, from
other affiliates of Seller whom Seller will cause to execute such deeds) to
Purchaser (or to exchange accommodation titleholder, as the case may be).
13.20 No Personal Liability of Officers, Trustees or Directors of Seller's
Partners. Purchaser acknowledges that this Contract is entered into by Seller
which is a Delaware limited liability company, and Purchaser agrees that none of
Seller's Indemnified Parties shall have any personal liability under this
Contract or any document executed in connection with the transactions
contemplated by this Contract.
13.21 No Exclusive Negotiations. Seller shall have the right, at all times prior
to the expiration of the Feasibility Period, to solicit backup offers and enter
into discussions, negotiations, or any other communications concerning or
related to the sale of the Property with any third-party; provided, however,
that such communications are subject to the terms of this Contract, and that
Seller shall not enter into any contract or binding Contract with a third-party
for the sale of the Property unless such Contract is contingent on the
termination of this Contract without the Property having been conveyed to
Purchaser.
13.22 ADA Disclosure. Purchaser acknowledges that the Property may be subject to
the federal Americans With Disabilities Act (the "ADA"), and the federal Fair
Housing Act (the "FHA"). The ADA which requires, among other matters, that
tenants and/or owners of "public accommodations" remove barriers in order to
make the Property accessible to disabled persons and provide auxiliary aids and
services for hearing, vision or speech impaired persons. Seller makes no
warranty, representation or guarantee of any type or kind with respect to the
Property's compliance with the ADA or the FHA (or any similar state or local
law), and Seller expressly disclaims any such representation.
13.23 No Recording. Purchaser shall not cause or allow this Contract or any
contract or other document related hereto, nor any memorandum or other evidence
hereof, to be recorded or become a public record without Seller's prior written
consent, which consent may be withheld at Seller's sole discretion. If the
Purchaser records this Contract or any other memorandum or evidence thereof,
Purchaser shall be in default of its obligations under this Contract. Purchaser
hereby appoints the Seller as Purchaser's attorney-in-fact to prepare and record
any documents necessary to effect the nullification and release of the Contract
or other memorandum or evidence thereof from the public records. This
appointment shall be coupled with an interest and irrevocable.
13.24 Relationship of Parties. Purchaser and Seller acknowledge and agree that
the relationship established between the parties pursuant to this Contract is
only that of a seller and a purchaser of property. Neither Purchaser nor Seller
is, nor shall either hold itself out to be, the agent, employee, joint venturer
or partner of the other party.
13.25 Dispute Resolution. Any controversy, dispute, or claim of any nature
arising out of, in connection with, or in relation to the interpretation,
performance, enforcement or breach of this Contract (and any closing document
executed in connection herewith), including any claim based on contract, tort or
statute, shall be resolved at the written request of any party to this Contract
by binding arbitration. The arbitration shall be administered in accordance with
the then current Commercial Arbitration Rules of the American Arbitration
Association. Any matter to be settled by arbitration shall be submitted to the
American Arbitration Association in the state in which the Property is located.
The parties shall attempt to designate one arbitrator from the American
Arbitration Association. If they are unable to do so within 30 days after
written demand therefor, then the American Arbitration Association shall
designate an arbitrator. The arbitration shall be final and binding, and
enforceable in any court of competent jurisdiction. The arbitrator shall award
attorneys' fees (including those of in-house counsel) and costs to the
prevailing party and charge the cost of arbitration to the party which is not
the prevailing party. Notwithstanding anything herein to the contrary, this
Section 13.25 shall not prevent Purchaser or Seller from seeking and obtaining
equitable relief on a temporary or permanent basis, including, without
limitation, a temporary restraining order, a preliminary or permanent injunction
or similar equitable relief, from a court of competent jurisdiction located in
the state in which the Property is located (to which all parties hereto consent
to venue and jurisdiction) by instituting a legal action or other court
proceeding in order to protect or enforce the rights of such party under this
Contract or to prevent irreparable harm and injury. The court's jurisdiction
over any such equitable matter, however, shall be expressly limited only to the
temporary, preliminary, or permanent equitable relief sought; all other claims
initiated under this Contract between the parties hereto shall be determined
through final and binding arbitration in accordance with this Section 13.25.
13.26 AIMCO Marks. In accordance with the provisions set forth in Section 3.5.4
regarding AIMCO Marks, Purchaser agrees that Seller, the Property Manager or
AIMCO, or their respective affiliates, are the sole owners of all right, title
and interest in and to the AIMCO Marks (or have the right to use such AIMCO
Marks pursuant to license agreements with third parties) and that no right,
title or interest in or to the AIMCO Marks is granted, transferred, assigned or
conveyed as a result of this Contract. Purchaser further agrees that Purchaser
will not use the AIMCO Marks for any purpose.
13.27 Non-Solicitation of Employees. Purchaser acknowledges and agrees that,
without the express written consent of Seller, neither Purchaser nor any of
Purchaser's employees, affiliates or agents shall, at any time, solicit any of
Seller's affiliates' employees located at any property within a 100 mile radius
of the Property owned by such affiliates for potential employment. Seller
acknowledges that Purchaser shall not be permitted to solicit Seller's employees
located at the Property until after the expiration of the Feasibility Period,
and Seller shall have no obligation to provide Purchaser with any information
and employee benefits with respect to the any of Seller's employees located at
the Property until after the expiration of the Feasibility Period. Any
information requested by Purchaser pursuant to the foregoing sentence shall be
made in writing to Seller and Seller shall use all commercially reasonable
efforts to deliver or make available to Purchaser such information within 10
days of receipt of notice thereof.
13.28 Survival. Except for (a) all of the provisions of this Article 13 (other
than Section 13.19, 13.21 and 13.23), and (b) any provision of this Contract
which expressly states that it shall so survive, and (c) any payment obligation
of Purchaser under this Contract (the foregoing (a), (b) and (c) referred to
herein as the "Survival Provisions"), none of the terms and provisions of this
Contract shall survive the termination of this Contract, and, if the Contract is
not so terminated, all of the terms and provisions of this Contract (other than
the Survival Provisions) shall be merged into the Closing documents and shall
not survive Closing.
13.29 Multiple Purchasers. As used in this Contract, the term "Purchaser" means
all entities acquiring any interest in the Property at the Closing, including,
without limitation, any assignee(s) of the original Purchaser pursuant to
Section 13.3 of this Contract. In the event that "Purchaser" has any obligations
or makes any covenants, representations or warranties under this Agreement, the
same shall be made jointly and severally by all entities being a Purchaser
hereunder. In the event that Seller receives notice from any entity being a
Purchaser hereunder, the same shall be deemed to constitute notice from all
entities being a Purchaser hereunder. In the event that any entity being a
Purchaser hereunder takes any action, breaches any obligation or otherwise acts
pursuant to the terms of this Contract, the same shall be deemed to be the
action of the other entity(ies) being a Purchaser hereunder and the action of
"Purchaser" under this Contract. In the event that Seller is required to give
notice or take action with respect to Purchaser under this Contract, notice to
any entity being a Purchaser hereunder or action with respect to any entity
being a Purchaser hereunder shall be a notice or action to all entities being a
Purchaser hereunder. In the event that any entity being a Purchaser hereunder
desires to bring an action or arbitration against Seller, such action must be
joined by all entities being a Purchaser hereunder in order to be effective. In
the event that there is any agreement by Seller to pay any amount pursuant to
this Contract to Purchaser under any circumstance, that amount shall be deemed
maximum aggregate amount to be paid to all parties being a Purchaser hereunder
and not an amount that can be paid to each party being a Purchaser hereunder. In
the event that Seller is required to return the Initial Deposit, Additional
Deposit or other amounts to Purchaser, Seller shall return the same to any
entity being a Purchaser hereunder and, upon such return, shall have no further
liability to any other entity being a Purchaser hereunder for such amount. The
foregoing provisions also shall apply to any documents, including, without
limitation, the General Assignment and Assumption and the Assignment and
Assumption of Leases and Security Deposits, executed in connection with this
Contract and the transaction(s) contemplated hereby.
ARTICLE 14
LEAD-BASED PAINT DISCLOSURE
14.1 Disclosure. Seller and Purchaser hereby acknowledge delivery of the Lead
Based Paint Disclosure attached as Exhibit H hereto. The provisions of this
Section 14.1 shall survive the Closing and delivery of the Deed to Purchaser.
14.2 Consent Agreement. Testing (the "Testing") has been performed at the
Property with respect to lead-based paint. Law Engineering and Environmental
Services, Inc. performed the Testing and reported its findings in the Lead-Based
Paint Risk Assessment Report dated May 12, 2003, a copy of which has been
delivered to Purchaser (the "Report"). The Report discloses and identifies the
presence of lead-based paint components and lead-based paint hazards on the
Property, using the Federal Lead Standards and states that the Property is free
of (a) dust lead hazards and (b) soil lead hazards. By execution hereof,
Purchaser acknowledges receipt of a copy of the Report, the Lead-Based Paint
Disclosure Statement attached hereto as Exhibit H, and acknowledges receipt of
that certain Consent Agreement (the "Consent Agreement") by and among the United
States Environmental Protection Agency (executed December 19, 2001), the United
States Department of Housing and Urban Development (executed January 2, 2002),
and Apartment Investment and Management Company ("AIMCO") (executed December 18,
2001). Purchaser acknowledges and agrees that (1) after Closing, the Purchaser
and the Property shall be subject to the Consent Agreement and the provisions
contained herein related thereto and (2) that Purchaser shall not be deemed to
be a third party beneficiary to the Consent Agreement. The provisions of this
Section 14.2 shall survive the termination of this Contract, and if not so
terminated, the Closing and delivery of the Deed to Purchaser. Purchaser and
Seller hereby agree and acknowledge that after the Closing, (a) Seller and the
Property shall remain subject to the Consent Agreement and the provisions
contained therein and related thereto, and (b) the Testing has been performed by
Seller and Purchaser's only ongoing obligations after the Closing shall be those
related to maintaining the subject Property in accordance with relevant laws
concerning lead-based paint.
NOW, THEREFORE, the parties hereto have executed this Contract as of the
date first set forth above.
Seller:
CCIP TATES CREEK VILLAGE, L.L.C.,
a Delaware limited liability company
By: Consolidated Capital Institutional
Properties, L.P., a California
limited partnership, its sole member
By: ConCap Equities, Inc.,
a Delaware corporation
its general partner
By:/s/Brian J. Bornhorst
Name: Brian J. Bornhorts
Its: Vice President
Purchaser:
TATES CREEK INVESTMENTS, LLc,
a Michigan limited liability company
By: Dietz Holdings, LLC,
a Michigan limited liability
company,
its sole member
By: Dietz Management Company,
a Michigan corporation,
its managing member
By:/s/Brian M. Dietz,
President
Brian M. Dietz, President
ESCROW AGENT SIGNATURE PAGE
The undersigned executes the Contract to which this signature page is
attached for the purpose of agreeing to the provisions of Section 2.3 of the
Contract, and hereby establishes April 13, 2004 as the date of opening of escrow
and designates 02161187 as the escrow number assigned to this escrow.
ESCROW AGENT:
STEWART TITLE GUARANTY COMPANY
By: /s/Wendy Howell
Name: Wendy Howell
Title: National Commercial Closing
Specialist
BROKER SIGNATURE PAGE
The undersigned Broker hereby executes this Broker Signature Page solely
to confirm the following: (a) Broker represents only the Purchaser in the
transaction described in the Contract to which this signature page is attached,
(b) Broker acknowledges that the only compensation due to Broker in connection
with the transaction described in the Contract to which this signature page is
attached is as set forth in a separate agreement between Purchaser and Broker
payable at the Closing, and (c) Broker represents and warrants to Seller
(subject to Purchaser's representation and warranty as set forth in Section
6.5.5 of the Contract and the disclosure set forth in Section 9.4 of the
Contract) that Broker and its affiliates (i) has not and will not receive any
other compensation (cash or otherwise) from or on behalf of Seller or any
affiliate thereof in connection with the transaction, (ii) do not, and will not
at the Closing, have any direct or indirect legal, beneficial, economic or
voting interest in Purchaser (or in an assignee of Purchaser, which pursuant to
Section 13.3 of the Contract, acquires the Property at the Closing), (iii) nor
has Purchaser granted (as of the Effective Date or the Closing Date) the Broker
or any of its affiliates any right or option to acquire any direct or indirect
legal, beneficial, economic or voting interest in Purchaser.
Broker:
HENDRICKS & PARTNERS
By: /s/Rick Vidrio
Name: Rick Vidrio
Title: Associate Partner
By: /s/Todd Stofflet
Name: Todd Stofflet
Title: Senior Investment Advisor
Exhibit 10.37
AMENDMENT OF PURCHASE AND SALE CONTRACT
(Tates Creek Village Apartments, Kentucky)
THIS AMENDMENT OF PURCHASE AND SALE CONTRACT ("Amendment") is entered into
as of the 27th day of May, 2004 (the "Effective Date") by and between CCIP TATES
CREEK VILLAGE, L.L.C., a Delaware limited liability company, having a principal
address at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237
("Seller") and TATES CREEK INVESTMENTS, LLC, a Michigan limited liability
company, having a principal address at 1025 East Maple Road, Suite 230,
Birmingham, Michigan 48009 ("Purchaser").
RECITALS
A. Seller and Purchaser entered into a Purchase and Sale Contract dated as of
April 13, 2004, (the "Contract"), pursuant to which Seller agreed to sell to
Purchaser, and Purchaser agreed to buy from Seller the Property (as defined in
the Contract).
B. Pursuant to the Contract, Purchaser delivered to Escrow Agent an earnest
money deposit of $69,800.00 (the "Initial Deposit"), which Initial Deposit
continues to be held by Escrow Agent.
C. Seller and Purchaser desire to modify the Contract pursuant to the terms set
forth below.
D. All capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Contract.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
Seller and Purchaser agree as follows:
AGREEMENTS
1. Closing Credit. Provided that Purchaser complies with its obligations under
the Contract, Purchaser shall receive a credit in the amount of $175,000.00 (the
"Credit") against the Purchase Price at Closing. 2. Additional Deposit.
Concurrently with the execution of this Amendment, Purchaser shall deliver the
Additional Deposit of $69,800.00 to Escrow Agent, which together with the
Initial Deposit shall be held, credited and disbursed in the manner provided for
in the Contract with respect to the Deposit. 3. Waiver of Feasibility Period
Contingencies. Purchaser hereby acknowledges that the Feasibility Period has
expired, and that all contingencies relating to the Feasibility Period have been
satisfied or waived by Purchaser as of the Effective Date of this Amendment.
Additionally, Purchaser hereby acknowledges and agrees that all contingencies
relating to Purchaser's review of the Title Commitment and Survey, as more
particularly set forth in Section 4.1, Section 4.2 and Section 4.3 of the
Contract, have been waived by Purchaser as of the Effective Date of this
Amendment.
4. Effectiveness of Contract. Except as modified by this Amendment, all the
terms of the Contract shall remain unchanged and in full force and effect.
5. Counterparts. This Amendment may be executed in counterparts, and all
counterparts together shall be construed as one document.
6. Telecopied Signatures. A counterpart of this Amendment signed by one party to
this Amendment and telecopied to the other party to this Amendment or its
counsel (i) shall have the same effect as an original signed counterpart of this
Amendment, and (ii) shall be conclusive proof, admissible in judicial
proceedings, of such party's execution of this Amendment.
[Remaining Page Left Intentionally Blank]
IN WITNESS WHEREOF, Seller and Purchaser have entered into this Amendment
of Purchase and Sale Contract as of the date first above stated.
Seller:
CCIP TATES CREEK VILLAGE, L.L.C.,
a Delaware limited liability company
By: Consolidated Capital Institutional
Properties, L.P., a California
limited partnership, its sole member
By: ConCap Equities, Inc.,
a Delaware corporation
its general partner
By:/s/ Brian J. Bornhorst
Name: Brian J. Bornhorst
Its: Vice President
Purchaser:
TATES CREEK INVESTMENTS, LLc,
a Michigan limited liability company
By: Dietz Holdings, LLC,
a Michigan limited liability
company,
its sole member
By: Dietz Management Company,
a Michigan corporation,
its managing member
By: /s/Brian M. Dietz,
President
Brian M. Dietz, President