AGREEMENT OF PURCHASE AND
SALE
THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement") is made and
entered into as of the 31st day of August, 2007 (the "Effective
Date"), by and among RIVER FOREST PROPERTIES, LLC, a Virginia
limited liability company ("River Forest"), PRINCETON PROPERTIES,
INC., a Virginia corpration ("Princeton" and, together with River
Forest, "Seller"), ASSOCIATED ESTATES REALTY CORPORATION, an Ohio
corporation ("Purchaser"), and FIRST AMERICAN TITLE INSURANCE
COMPANY, an escrow agent ("Escrow Agent").
PRELIMINARY
STATEMENTS
A.
River Forest is the owner of that certain apartment project known
as "River Forest" consisting of 240 apartment units and all
amenities which are a part thereof located on the southern line of
Branders Creek Drive in Chesterfield County, Virginia on that real
property described in Exhibit A attached hereto and by
this reference made a part hereof, together with:
(i) all easements, appurtenances and hereditaments
appertaining thereto and including all of River Forest’s
rights, if any, in and to any alleys, ways, easements and rights of
way abutting or adjoining said real property; (ii) all the
buildings, improvements, structures, plants and appurtenances
situated on said real property; (iii) all fixtures, furniture,
equipment (including all maintenance equipment and all office
equipment located in the clubhouse building), appliances, signs,
plumbing, machinery, personal property and facilities and supplies
which are owned by River Forest and which are attached to or
appurtenant to or used in connection with said real property
(specifically excluding property owned by residential tenants);
(iv) all plans, specifications, guarantees and warranties; and
(v) all leases including the rents, issues and profits thereof
and all refundable security deposits or escrow deposits held by
River Forest thereunder (collectively, the "River Forest
Property");
B.
River Forest obtained a loan (the "Loan") in the original principal
amount of $19,181,500.00 with respect to the River Forest Property
from Highland Mortgage Company (now Capmark Bank) (the "Lender")
and insured by the United States Department of Housing and Urban
Development ("HUD") under Section 221(d)(4) of the National Housing
Act;
C. The
Loan is evidenced and secured by the documents and its set forth on
Schedule 1 to this Agreement (collectively, the "Loan
Documents");
D.
Princeton, an affiliate of River Forest, is the owner of that
certain parcel of land located adjacent to the River Forest
Apartments described as Parcel II in Exhibit A attached
hereto and by this reference made a part hereof, together with all
easements, appurtenances and hereditaments appertaining thereto and
including all of Princeton’s rights, if any, in and to any
alleys, ways, easements and rights of way abutting or adjoining
said real property (the "River Forest Expansion Parcel" and,
together with the River Forest Property, the
"Property");
E.
Seller desires to sell the Property and River Forest desires to
assign the Loan to Purchaser and Purchaser desires to purchase the
Property from Seller and assume the Loan from River Forest, on and
subject to the terms and conditions of this Agreement;
F.
Seller’s affiliate, Belvedere Properties, LLC, a Virginia
limited liability company ("Seller Affiliate"), is the owner of
that certain apartment project known as "The Belvedere" consisting
of 296 apartment units and all amenities which are a part thereof
located at the intersection of Robious and Cranbeck Roads in
Chesterfield County, Virginia (the "Other Property");
and
G.
Pursuant to that certain Agreement of Purchase and Sale (the "Other
Agreement"), dated as of the same date as this Agreement, among
Seller Affiliate and Purchaser, Seller Affiliate has agreed to sell
to Purchaser, and Purchaser has agreed to purchase from Seller
Affiliate, the Other Property.
THEREFORE, in consideration of Ten
and No/100 Dollars ($10.00) in hand paid, the mutual covenants
herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereby covenant and agree as follows:
1.
Agreement to Sell and to Purchase .
(a)
Seller agrees to sell and Purchaser agrees to purchase the Property
upon the terms and conditions hereinafter set forth.
(b)
Subject to Purchaser’s rights with respect to the
Investigation Period (as hereinafter defined), Purchaser
acknowledges and understands that Seller is selling the Property
and the Purchaser is buying the Property in its "AS-IS, WHERE-IS,
WITH ALL FAULTS" physical condition, including all existing
environmental conditions, with no rights of set-off or reduction in
the Purchase Price (as hereinafter defined) unless and except as
expressly provided herein to the contrary, and except for the
representations and warranties set forth in this Agreement and the
closing documents executed in connection with the consummation of
the transactions contemplated by this Agreement, the sale of the
Property by Seller to Purchaser shall be without representation or
warranty of any nature or kind with respect to the physical
condition of the Property, whether express, implied, statutory or
otherwise, including without limitation the warranties of use,
merchantability or fitness for a particular purpose, and Seller
does hereby disclaim and renounce any such representations or
warranties.
2.
Earnest Money . Purchaser shall deposit in escrow with the
Escrow Agent within two (2) business days of the execution hereof,
Six Hundred Fifty Thousand Dollars ($650,000) (such deposit
together with any interest that may be earned these prior to
Closing, being hereinafter called the "Initial Deposit"). If
Purchaser does not elect to terminate this Agreement during the
Investigation Period (as hereinafter defined), prior to the
expiration of the Investigation Period, Purchaser shall deliver to
Escrow Agent an additional deposit in the amount of Three Hundred
Thousand Dollars ($300,000) (the "Additional Deposit"). The
Initial Deposit and the Additional Deposit are sometimes
individually or collectively referred to as the "Earnest
Money". The Earnest Money shall be deposited in an interest
bearing account using Purchaser’s tax identification number
which shall be provided to Escrow Agent. The Earnest Money
shall be applied against the cash portion of the purchase price at
Closing (as hereinafter defined) or refunded in full to Purchaser
as hereinafter provided in Paragraph 15. If Purchaser
does not notify Seller prior to the expiration of the Investigation
Period that Purchaser elects to terminate this Agreement, the
Initial Deposit shall be non-refundable for any reason other than
(i) a default by Seller, (ii) in the event any condition
to Purchaser’s obligations under this Agreement is not
satisfied as provided herein, or (iii) as otherwise
specifically provided herein. If Purchaser does not notify
Seller prior to the expiration of the Investigation Period that
Purchaser elects to terminate this Agreement and Purchaser fails to
make the Additional Deposit as required, Purchaser shall be in
default of this Agreement and Seller shall have the right to
terminate this Agreement and retain the Initial Deposit as provided
in Paragraph 8.
3.
Purchase Price . The purchase price for the Property (the
"Purchase Price") shall be Thirty Two Million Eight Hundred
Thousand Dollars ($32,800,000), payable at Closing as
follows:
(a)
Purchaser shall receive a credit against the Purchase Price in the
amount of the outstanding principal balance of the Loan, all
accrued and unpaid interest on the Loan and all other fees, costs
and expenses owing by River Forest under the Loan Documents for
periods prior to the Closing Date except for any fees, costs and
expenses to be paid by Purchaser in connection with the assumption
of the Loan;
(b)
Purchaser shall receive a credit against the Purchase Price in the
amount of the Earnest Money;
(c)
The balance of the Purchase Price as adjusted by the closing
prorations hereinafter provided at Paragraph 4 shall be paid in
cash at Closing by wire transfer of funds to Escrow Agent’s
account for payment to Seller; and
(d)
Prior to Closing, Purchaser and Seller shall, acting in good faith,
agree upon a reasonable allocation of the Purchase Price between
the River Forest Property and the River Forest Expansion
Parcel.
4.
Closing Prorations . All items described below shall
be prorated as of the date of Closing (the "Closing Date") and, as
hereinafter provided, shall increase or decrease the cash portion
of the Purchase Price payable pursuant to Paragraph 3(c) of this
Agreement.
(a)
Taxes . All state, county and municipal ad valorem and
other property taxes and similar charges with respect to the
Property for the year in which the Closing is consummated will be
prorated based on the current year’s tax bill or, if such
bill has not been issued as of the Closing Date, then taxes shall
be prorated at Closing based on the prior year’s tax bill and
said amount of taxes prorated shall be adjusted between the parties
upon receipt of the tax bill for the year in which the Closing is
consummated. Seller shall pay at or prior to Closing all special
assessments and charges against the Property which are either due
or declared prior to the Closing Date. Any refund or credit
attributable to the overpayment of taxes and assessments payable
for the year in which Closing occurs, less any attorneys’
fees or costs payable in with respect of such taxes and assessments
shall be allocated between Seller and Purchaser based upon their
respective periods of ownership.
(b)
Income . All rental and other income from the
Property, including but not limited to prepaid rent, late charges,
and other charges to tenants, shall be prorated based on rents
actually collected. All unpaid rent relating to periods prior
to the Closing Date shall be paid to Seller as and when received by
Purchaser after Closing and shall not be prorated at Closing;
provided, that any rent received after Closing shall be applied
first to the current rent due, then to past due rents accrued after
Closing and then to past due rent accrued prior to Closing.
Purchaser shall include all such unpaid rent in its normal billing
and shall use commercially reasonable, good faith efforts to
collect such unpaid rent after the Closing Date. Purchaser
may not waive any delinquent rents nor modify a Lease so as to
reduce or otherwise affect amounts owed thereunder for any period
in which Seller is entitled to receive a share of charges or
amounts without first obtaining Seller’s written consent,
which consent may be given or withheld in Seller’s sole and
absolute discretion. If Purchaser fails to collect any unpaid
rents accrued prior to Closing within ninety (90) days after
Closing, Seller shall have the right to independently pursue
collection of amounts to which Seller is entitled; provided, that
Seller shall be expressly prohibited from bringing any action to
evict any tenant from its leased premises at the
Property.
(c)
Deposits and Escrows .
(1)
Seller shall, at no expense to Purchaser, transfer to Purchaser by
credit against the Purchase Price at Closing all refundable
security deposits and other escrow deposits relating to the
Property, including such deposits and fees as to leases that are in
default but have not been terminated as of the Closing Date, and
all interest charges required by law to be accrued
thereon.
(2)
All real estate tax escrows, insurance escrows and other escrows
maintained by Lender under the Loan Documents shall be transferred
to Purchaser, and Seller shall be given credit for the amount of
such funds and any unearned mortgage insurance premiums at
Closing.
(d)
Utilities . Utilities not payable by tenants of the Property
shall either be (i) prorated as of Closing, or
(ii) transferred into Purchaser’s name as of Closing,
with Seller to be responsible for payment of all charges accrued
prior to such transfer and Purchaser to be responsible for payment
of all charges accruing after such transfer.
(e)
Service Contracts and Equipment Leases . A list of all
service contracts and equipment leases relating to the operation
and management of the Property is attached hereto as
Exhibit B as a part hereof (the "Contracts").
Except as noted in Exhibit B , Purchaser shall not be
obligated to assume responsibility for or to pay any sums due at
Closing attributable to the Contracts unless Purchaser elects
during the Investigation Period by written notice to Seller to
assume such Contracts at Closing, in either of which events, such
Contracts shall be assigned to and assumed by Purchaser at
Closing. Seller agrees, at Seller’s expense, to cancel
all Contracts which are not to be assumed by Purchaser as of the
Closing Date. All prepayments made or payments due under any
of the Contracts to be assigned to Purchaser shall be prorated as
of the Closing Date.
(f)
Adjustments . In the event that accurate proration and
other adjustments cannot be made at Closing because current bills
are not obtainable (as, for example, in the case of utility bills),
the parties shall prorate on the best available information,
subject to adjustment upon receipt of the final bill. Seller
shall attempt to have utility meters read on the Closing Date so as
to accurately determine the proration of current utility
bills. Adjustments shall be made after Closing if any closing
prorations are based on inaccurate information.
5.
Title .
(a) At
Closing, Seller shall convey to Purchaser, good and marketable fee
simple title to the Property by one or more special warranty deeds
from River Forest and Princeton, as applicable (the "Deed") in form
consistent with standard Virginia practice (and otherwise approved
by Seller and Purchaser), subject only to the Permitted
Encumbrances (defined below) and any other matters of record as of
the date of Purchaser’s examinations of title to the extent
applicable to the Property and any matters which could be
discovered by a survey of the Property other than such matters to
which Purchaser has objected and which Seller has agreement or is
obligated to correct as provided herein. Purchaser agrees to
accept title to the Property subject to the Permitted Encumbrances
and such additional matters as may be approved by Purchaser, in its
sole and absolute discretion, prior to Closing.
(b)
During the Investigation Period, Purchaser shall, at its cost,
obtain (i) an owner’s title insurance commitment (the
"Title Commitment") in the full amount of the Purchase Price to be
issued by the Escrow Agent (the "Title Insurer"), insuring the
title to the Property, and (ii) a current survey (references
herein to the plat of survey shall be deemed to refer to such plat)
of the Property (the "Survey"). It shall be a condition to
Purchaser’s obligations hereunder that Seller shall have
delivered all documents required to be delivered by Seller
hereunder which are required by the Title Insurer to issue an
owner’s title insurance policy pursuant to the Title
Commitment (the "Title Policy").
(c)
During the Investigation Period, Purchaser shall review title to
the Property as disclosed by the Title Commitment and the Survey,
and satisfy itself as to the availability from the Title Insurer of
the Title Policy and all requested endorsement to such Title
Policy. Purchaser shall notify Seller of any objections to matters
disclosed by the Title Commitment and the Survey within five (5)
days after receipt of the Title Commitment and the
Survey.
(d)
Seller shall have no obligation to remove or cure title objections,
except for (1) liens of an ascertainable amount (but expressly
excluding the liens evidenced by the Loan Documents), which liens
Seller shall cause to be released at the Closing or affirmatively
insured over by the Title Company, and (2) any exceptions or
encumbrances to title, other than those provided for herein, which
are created by Seller after the date of this Agreement without
Purchaser’s consent. In addition, Seller shall provide
the Title Insurer with one or more customary ALTA statements,
personal undertakings or owner’s affidavits (each, an
"Owner’s Affidavit"), in form and substance reasonably
acceptable to Seller, which will permit the Title Insurer to remove
the standard "mechanics lien" and "GAP" exceptions from the Title
Policy.
(e)
Subject to Purchaser’s approval as described below, Seller
shall have the right to grant, prior to Closing, or to except and
reserve from the conveyance of the River Forest Apartments and the
River Forest Expansion Parcel at Closing such easements as may be
required to (i) construct a stormwater basin within the
portion of the River Forest Apartments property described on
Exhibit E attached hereto as a part hereof, and
(ii) extend sanitary sewer from the sanitary sewer line
located on the River Forest Apartments to serve the properties
located west and north of the River Forest Expansion Parcel
(together, the "Easements"). Plats showing the proposed
locations of the Easements shall be provided to Purchaser during
the first fifteen (15) days of the Investigation Period.
Prior to the expiration of the Investigation Period, Purchaser and
Seller shall use good faith efforts to agree between themselves and
any other parties to the Easements upon the terms and conditions of
the Easements, it being acknowledged by both Seller and Purchaser
that the Easements must also be acceptable to Chesterfield County
and, to the extent they affect the River Forest Apartments, the
Lender and HUD. Seller agrees that Purchaser shall have the
opportunity to participate in any negotiations with Chesterfield
County, the Lender and/or HUD, as applicable, with respect to
the terms and conditions of the Easements. In the event
Seller and Purchaser have not reached agreement on the Easements
prior to the expiration of the Investigation Period, Purchaser and
Seller shall continue to use good faith efforts to agree upon the
terms and conditions of the Easements, and it shall be a condition
precedent to each party’s obligations to proceed to Closing
pursuant to this Agreement that Purchaser and Seller have approved
the final form of the Easements, such approval not to be
unreasonably withheld, conditioned or delayed.
(f)
In connection with the development of other properties owned by
Princeton adjacent to the River Forest Apartments and the River
Forest Expansion Parcel ("Seller’s Retained Property") and
the development of the River Forest Expansion Parcel, each party
agrees to consider the request of any other party, in good faith
and without charge, to grant easements for public utilities and
storm drainage necessary for the development of the requesting
party’s property, including, without limitation, easements
for extension of water, sanitary sewer, storm drainage, gas,
electricity, cable and telephone service but excluding easements
for drainage basins or "BMP" facilities. The exact location and
terms shall be subject to the prior written approval of the owner
of the affected property, which approval shall not be unreasonably
delayed or withheld provided such easement will not adversely
affect the reasonable use of such party’s property or affect
any building site or driveway and the location of any such
easements is approved by Chesterfield County, as applicable, the
party requesting such easements and the owner of the property to be
burdened by such easements.
For purposes of this Agreement, the
following terms shall have the following meanings:
(1)
"Permitted Exceptions" shall mean: (i) any exception arising
out of an act of Purchaser or its representatives, agents,
employees or independent contractors; (ii) zoning and
subdivision ordinances and regulations; (iii) the specific
exceptions in the Title Commitment that the Title Insurer has not
agreed to insure over or remove from the Title Commitment as of the
end of the Investigation Period and that Seller is not required to
remove as provided herein; (iv) items shown on the Survey
which have not been removed (or which Seller has not agreed to
remove) as of the end of the Investigation Period; (v) real
estate taxes not yet due and payable; (vi) the Loan Documents;
and (vii) the Easements and any easements mutually agreed upon
by Purchaser and Seller pursuant to
subparagraph 5(f).
(2)
"Leases" shall mean the leases which are listed on the rent roll
attached hereto as Exhibit C , together with such
additional leases or modifications as may be added and excluding
any leases which may be terminated in the ordinary course of
Seller’s business between the date of this Agreement and the
date of Closing and the rights of tenants under such leases, as
occupancy tenants only, and without any right of first refusal or
purchase options.
(3)
"Permitted Encumbrances" shall mean a collective reference to the
Leases
and Permitted Exceptions.
6.
Access . Upon reasonable prior notice, Seller shall provide
Purchaser and its agents, servants, employees and assigns
reasonable access, during Seller’s normal business hours, to
all documentation, agreements, books, records, and other
information in the possession of Seller pertaining to the
ownership, use, rental or operations of the Property, including but
not limited to, financial records, tax assessments, bills and
leases, and Purchaser shall have the right to make copies of such
non-confidential documents as Purchaser shall reasonably specify at
Purchaser’s sole expense. Furthermore, Seller hereby
grants to Purchaser and its agents, servants, employees, assigns
and independent contractors reasonable access to enter upon the
Property, upon forty-eight (48) hours advance notice and at
reasonable times during Seller’s normal business hours, for
the purpose of inspecting the condition of the Property, surveying
the Property and undertaking any physical inspections that
Purchaser deems appropriate under this Agreement; provided,
however, that such inspections shall be coordinated with Seller and
Purchaser shall minimize any disruptions to the operation of the
Property and the occupancy of the Property by tenants.
Purchaser shall be responsible for all costs incurred by Purchaser
in connection with its inspections and evaluation of the Property,
shall repair any damage caused by Purchaser and its agents and
shall indemnify and hold Seller harmless from and against any and
all claims, demands, actions, losses, costs, damages, liabilities
and expenses (including without limitation reasonable
attorneys’ fees) incurred or sustained by Seller by reason of
or arising from the exercise by Purchaser of the rights and
privileges granted in this Paragraph 6, but only to the extent
incurred or sustained as a result of damage to the Property and
injury to persons. The foregoing indemnity obligations shall
expressly survive Closing or any termination of this
Agreement.
7.
Investigation Period .
(a)
For the period beginning with the Effective Date and extending
through 5:00 p.m. on the thirtieth (30th) day following the
Effective Date (the "Investigation Period"), Purchaser shall have
the right to terminate this Agreement as provided in Paragraph 15
if Purchaser determines, in its sole and absolute discretion, not
to purchase the Property. If no notice of termination is given by
Purchaser prior to the expiration of the Investigation Period,
Purchaser and Seller shall proceed toward Closing in accordance
with the other terms of this Agreement, including Purchaser’s
delivery of the Additional Deposit in accordance with Paragraph
2.
(b)
Seller shall cooperate with Purchaser in connection with its
evaluation of the Property. Seller has provided Purchaser on or
before the Effective Date with copies of the documents and
instruments set forth in Schedule 2 (collectively, the
"Property Information") to the extent in Seller’s possession
or control. In addition to the Property Information and the
Loan Documents, Seller shall provide Purchaser with copies of such
other reports, studies, leases (other than copies of each
individual tenant lease) and other documents in Seller’s
possession or control related to the Property as Purchaser shall
reasonably request. Purchaser shall have no obligation to pay
Seller for any of such reports, studies or other documents provided
by Seller to Purchaser, all of which shall be provided at no cost
to Purchaser. Purchaser agrees that it will preserve the
confidentiality of all such documents provided by Seller; that it
will not divulge the existence or contents of any such documents to
any persons, except to its attorneys, advisors, consultants,
lenders and others employed by Purchaser to assist it in the
purchase of the Property, each of whom shall likewise observe and
preserve such confidentiality, subject to any obligation on the
part of such person to disclose or deliver such information
pursuant to court order or as required pursuant to applicable laws.
The foregoing confidentiality obligations shall survive any
termination of this Agreement but shall terminate at Closing in the
event Closing occurs hereunder.
(c) In
the event that this Agreement is terminated without completion of
the transaction contemplated herein, Purchaser shall return to
Seller all documents provided to Purchaser pursuant to this
Agreement, and shall additionally provide to Seller copies of all
third party studies or reports obtained by Purchaser pertaining to
the Property during the course of its investigations and
inspections, it being understood that Seller shall have no right to
rely on any such reports without the consent of the person or
persons preparing such studies and reports. The foregoing
obligations shall survive any termination of this Agreement, but
shall terminate at Closing in the event that Closing occurs
hereunder.
8.
Purchaser’s Default; Liquidated Damages . If,
prior to Closing, Purchaser defaults in performing its obligations
under this Agreement, Seller’s sole remedy for such default
shall be to give the Escrow Agent and Purchaser prompt written
notice of such default and the Escrow Agent shall, after giving the
parties five (5) working days’ notice thereof (if Purchaser
fails to cure such default within that time), pay over to Seller
the Earnest Money as full and complete liquidated damages
hereunder. Thereafter, Purchaser shall have no further
obligations hereunder to Seller or any others, including but not
limited to the Escrow Agent, brokers, realtors and agents.
Notwithstanding the foregoing, in the event of a dispute regarding
Seller’s right to payment of the Earnest Money, Escrow Agent
continues to hold the Earnest Money subject to the provisions of
Paragraph 28.
9.
Closing; Closing Deliveries and Closing Conditions . The
consummation of the transaction described herein ("Closing") will
be held at the offices of the Title Insurer or such other location
mutually agreed upon by Purchaser and Seller on the later of
(i) ten (10) days after Purchaser’s receipt of written a
approval by the Lender and HUD of the transfer of the Property to
Purchaser and the assumption of the Loan by Purchaser, or
(ii) fifteen (15) days after the expiration of the
Investigation Period (the "Closing Date"). At Closing,
Purchaser shall pay to Seller the outstanding balance of the
Purchase Price provided for in Paragraph 3(c) hereof, the Escrow
Agent shall pay to Seller the Earnest Money, and Seller shall give
Purchaser possession and occupancy of the Property subject only to
the Permitted Encumbrances. Any eminent domain awards, proceeds
from sale under threat or exercise of the power of eminent domain
and insurance proceeds which are to be paid or are payable to
Purchaser pursuant to Paragraph 11 hereof, shall be paid or
assigned to Purchaser at Closing.
Seller agrees that Purchaser is permitted to
download lease, tenant and other property information from
Seller’s on-site competes within seven (7) business days of
Closing, after which time Seller and its agents shall have the
right to enter upon the Property to remove any of Seller’s
confidential information not related to the operation of the
Property, to remove Seller’s management software, and to
disconnect or terminate any links to Seller’s server and/or
database from such on-site computers. The terms of the immediately
preceding sentence shall survive Closing.
Furthermore, Seller shall, at Seller’s
sole cost and expense, transfer or deliver to Purchaser at Closing
(or at such other time hereinafter set forth) the deposits,
escrows, affidavits, certificates, instruments and other matters
hereinafter described, each instrument to be executed on behalf of
Seller by its duly authorized officer and to be in form to be
approved by counsel for Seller and Purchaser:
(a)
The Deed and the Easements (the Easements shall also be executed by
Purchaser at Closing, as applicable).
(b) An
assignment and assumption agreement, in form and substance
acce
