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 BELVEDERE PROPERTIES,
LLC, a Virginia limited liability company (“Seller”);
ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation
(“Purchaser”); and FIRST AMERICAN TITLE INSURANCE
COMPANY, as escrow agent (“Escrow Agent”)
PRELIMINARY
STATEMENTS
A.
Seller 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 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 Seller’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
Seller and which are attached to or appurtenant to or used in
connection with said real property (specifically excluding property
owned by residential tenants), provided that Seller shall only
quitclaim its right, title and interest in and to the property
identification sign located at the corner of Robious Road and
Belvedere Vista Lane; (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 Seller thereunder (collectively, the
“Property”);
B.
Seller obtained a loan (the “Loan”) in the original
principal amount of $26,525,100.00 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 instruments set
forth on Schedule 1 to this Agreement (collectively, the
“Loan Documents”);
D.
Seller desires to sell the Property and assign the Loan to
Purchaser and Purchaser desires to purchase the Property and assume
the Loan from Seller, on and subject to the terms and conditions of
this Agreement;
E.
Seller’s affiliate, River Forest Properties, LLC a Virginia
limited liability company (“River Forest”), is the
owner of that certain apartment project 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 Parkway in Chesterfield County, Virginia (the
“River Forest Apartments”);
F.
Seller’s affiliate, Princeton Properties, Inc., a Virginia
corporation (“Princeton” and together with River
Forest, collectively “Seller Affiliate”) is the owner
of that certain parcel of land located adjacent to the River Forest
Apartments (the “River Forest Expansion Parcel” and,
together with the River Forest Apartments, collectively, 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 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,
Eight Hundred Thousand Dollars ($800,000) (such deposit together
with any interest that may be earned thereon 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 Four Hundred
Thousand Dollars ($400,000) (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 Forty Four Million Two
Hundred Thousand Dollars ($44,200,000), 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 Seller 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; and
(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.
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 prorations 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 special warranty deed (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
agreed 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 which are created by Seller after the date of
this Agreement without Purchaser’s consent. In addition,
Seller shall provide the Title Insurer with a customary ALTA
statements, personal undertakings or owner’s affidavit (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)
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 time end
of the Investigation Period; (v) real estate taxes not yet due and
payable; and (vi) the Loan Documents.
(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 5:00p.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.
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(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 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 computers 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.
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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;
(b)
An assignment and assumption agreement, in form and substance
acceptable to Seller and Purchaser, pursuant to which Seller shall
transfer to Purchaser (i) all rights in, to and under the Leases,
(ii) any unexpired warranties and guaranties in effect with respect
to such portions of the Property, (iii) the Contracts which are to
be assigned by each such party to Purchaser as provided herein, and
(vi) all prorated items and adjustments described in Paragraph 4
above which are to be paid, transferred, applied or credited to
Purchaser at or as of Closing, as applicable. Such assignment and
assumption agreements shall also be executed by Purchaser at
Closing to effect Purchaser’s assumption of all applicable
obligations.
(c)
A bill of sale from Seller, in form and substance acceptable to
Seller and Purchaser conveying, with a warranty of title but
without warranties as to the condition thereof, all personal
property, equipment, signage and fixtures owned by it and located
at or used in connection with the Property, other than property
owned by tenants under the Leases, subject only to the applicable
Permitted Encumbrances and conveying, without warranty of title,
all of Seller’s right, title and interest to the name
“Belvedere Apartments”, provided that Seller
shall only quitclaim its right, title and interest in and to
the property identification sign located at the corner of Robious
Road and Belvedere Vista Lane.
(d)
An updated rent roll for the Property, dated not more than three
(3) days prior to the Closing Date, certified by Seller to be true,
accurate and complete as of such date.
(e)
The Owner’s Affidavit.
(f)
All documents required from Seller by the Lender or by HUD for the
transfer to Purchaser of the Property subject to
