UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 26, 2005
REAL ESTATE ASSOCIATES LIMITED VII
(Exact name of registrant as specified in its charter)
California 0-13810 95-3290316
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation File Number) Identification Number)
55 Beattie Place
Post Office Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 8.01 Other Events
Real Estate Associates Limited VII (the "Registrant") owns a 98.99% limited
partnership interest in Warren Heights Apartments, Ltd., an Ohio limited
partnership ("Warren Heights"). The Registrant is obligated under certain
non-recourse notes (the "Notes") in the aggregate principal amount of
approximately $520,000, which bear interest at 9.5% per annum and are payable to
an affiliate of Renewal Housing Associates, LLC, a Delaware limited liability
company that is not affiliated with the Registrant. The Notes matured on
December 31, 1999. As of August 31, 2005 accrued interest on the Notes was
approximately $1,015,000. The Notes and related accrued interest are
collateralized by the Registrant's investment in Warren Heights. On September
15, 2005, Warren Heights entered into a contract with Renewal Housing
Associates, LLC, (the "Purchaser") dated August 26, 2005 to sell its 88 unit
apartment investment property to the Purchaser for approximately $1,170,000. The
Registrant expects to receive approximately $127,000 from the transaction and
complete satisfaction of the non-recourse notes payable and related accrued
interest due to the affiliate of the Purchaser. The foregoing are estimates, and
there can be no assurance that these estimates will prove accurate.
The closing is expected to occur on or before July 31, 2006. The Purchaser has
the right to extend the closing for three periods of 30 days by delivering
written notice to the Seller at least five business days prior to the expected
closing date. The closing is also subject to approval by the Department of
Housing and Urban Development.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
The following exhibit is filed with this report:
10.2 Agreement of Sale and Purchase, by and between Warren Heights Apartments,
Ltd., an Ohio limited partnership and Renewal Housing Associates, LLC, a
Delaware limited liability company.
SIGNATURE
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 hereunto duly authorized.
REAL ESTATE ASSOCIATES LIMITED VII
By: National Partnership Investments Corp.
Corporate General Partner
By: /s/Brian S. Shuman
Brian S. Shuman
Senior Vice President and Chief Financial
Officer
Date: September 20, 2005
EXHIBIT 10.2
AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT OF SALE AND PURCHASE (this "Agreement") is hereby entered
into effective as of the 26th day of August, 2005 (the "Effective Date") by and
between Warren Heights Apartments, Ltd., an Ohio limited partnership (the
"Seller"), having an office at c/o National Partnership Investments Corp., 6100
Center Drive, Suite 800, Los Angeles, California 90045, and Renewal Housing
Associates, LLC, a Delaware limited liability company (or its designee, referred
to as the "Purchaser"), having an office at c/o The Orlean Company, 23875
Commerce Park Road, Suite 140, Beachwood, Ohio 44122.
WITNESSETH:
WHEREAS, Seller is the owner of a certain 88-unit apartment project
commonly known as Warren Heights II, located on real property more particularly
described below (the "Real Property"); and
WHEREAS, Seller agrees to sell to Purchaser and Purchaser agrees to
purchase from Seller, upon the terms and conditions set forth in this Agreement,
the Property (as such term is defined in Section 1.1 hereof).
NOW, THEREFORE, in consideration of the premises and other mutual
covenants and agreements hereinafter set forth, the receipt and sufficiency of
which are hereby acknowledged, and subject to the terms and conditions of this
Agreement, Seller and Purchaser hereby covenant and agree as follows:
I.
INCLUSIONS IN SALE
1.1 There shall be included in this sale all of the following
(collectively, the "Property"):
1.1.1 The parcel or parcels of real property described on Exhibit A, attached
hereto and made a part hereof (collectively, the "Land"), together with
all rights and appurtenances pertaining thereto, including, without
limitation, any and all rights of Seller in and to all: oil, gas and other
minerals, air and development rights, roads, alleys, easements, streets
and ways adjacent to the Land, rights of ingress and egress thereto, any
strips and gores within or bounding the Land, profits or rights or
appurtenances pertaining to the Land, and all goodwill, intellectual
property, licenses, and permits owned by Seller and used in connection
with the Real Property.
1.1.2 The buildings and all other improvements, structures and fixtures placed,
constructed or installed on the Land (collectively, the "Improvements").
1.1.3 All right, title and interest of Seller in and to all leases, licenses and
other occupancy agreements (individually, a "Lease", collectively, the
"Leases") covering space situated at or within the Land and Improvements
and any claim or right to claim against a tenant or occupant
(individually, a "Tenant", collectively, the "Tenants") under any Lease
and all security deposits actually held by the landlord or its agent, or,
in addition thereto, those deposits required to be paid by Tenants as set
forth in the Leases.
1.1.4 All of Seller's rights in and to all contractual rights and intangibles
with respect to the operation, maintenance, repair and improvement of the
Land and Improvements, including service and maintenance agreements,
construction, material and labor contracts, utility agreements and other
contractual arrangements, all to the extent determined by the provisions
of this Agreement to be acceptable to Purchaser (collectively, the
"Contracts") and warranties of any contractor, manufacturer or materialman
with respect to the Real Property.
1.1.5 Excluding personal property owned by Tenants, but including all equipment,
furnishings, fixtures, supplies, and other tangible personal property
owned by Seller (collectively, the "Personal Property") placed or
installed on or about the Land or Improvements now or prior to "Closing"
(as such term is defined below in this Agreement) and used as part of or
in connection with the Land or Improvements.
1.1.6 All of Seller's interest in the right to the use of the trade name "Warren
Heights II" in connection with the Real Property, and all logos, if any,
associated therewith (collectively, the "Trade Name").
1.1.7 All residual receipts and escrows for replacement reserves, tax reserves,
insurance reserves, mortgage insurance reserves and/or operating reserves
relating to the Real Property (the "Property Accounts").
1.1.8 All rights to any award made or to be made, or settlement in lieu thereof,
or any other payment made or to be made for damage or loss to the Land or
Improvements by reason of any insured property loss, condemnation, eminent
domain, exercise of police power or change of grade of any street.
1.1.9 Any and all (i) warranties, guaranties, indemnities, housing assistance
payment agreements, subsidies and support agreements (whether governmental
or otherwise) relating to the foregoing (the "Subsidies"), and (ii)
licenses, permits or similar documents.
II.
PURCHASE PRICE
2.1 The purchase price (the "Purchase Price") for the Property shall be
$1,170,224.00, subject to prorations as provided for herein, payable as set
forth in the balance of this Article II.
2.1.1 In the event that Purchaser elects to exercise its option, as set forth
below in this Agreement, to assume the HUD Loan Documents, there shall be
credited toward the Purchase Price at Closing the balance owed, as of the
date of Closing, under the HUD Mortgage, or, in the event that Purchaser
elects to exercise its option to prepay the indebtedness evidenced by the
HUD Loan Documents, Purchaser shall pay or cause to be paid to the lender
under the HUD Loan Documents the balance owed, as of the Closing, under
the HUD Mortgage including, without limitation, accrued but unpaid
interest thereunder.
2.1.2 $127,050 shall be paid, at Purchaser's option, by wire transfer, bank,
official or certified check, or any combination thereof, to Haverfield
Title Agency, Inc. (the "Title Company") for disbursement to Seller at
Closing.
2.1.3 The balance of the Purchase Price shall be applied in complete
satisfaction of the following:
(a) the Non-Negotiable Purchase Money Promissory Note Secured by Personal
Property, dated as of June 29, 1984, in the original principal amount of
$322,538 made by Real Estate Associates Limited VII to Arthur Orlean, as agent
for The Orlean Company;
(b) the Non-Negotiable Purchase Money Promissory Note Secured by Personal
Property, dated as of June 29, 1984, in the original principal amount of
$119,462 made by Real Estate Associates Limited VII to Abel-Bishop and Clarke
Realty Company, as trustee for those persons and entities described on Schedule
A thereto; and
(c) the Non-Negotiable Purchase Money Promissory Note Secured by Personal
Property, dated as of June 29, 1984, in the original principal amount of $78,000
made by Real Estate Associates Limited VII to Arthur Orlean, as agent for The
Orlean Company (collectively, the "Soft Notes").
2.2 The Purchase Price shall be allocated among the Land and Improvements and
the Personal Property as reasonably determined by the parties.
III.
TITLE AND SURVEY MATTERS; HUD APPROVALS; COVENANTS
3.1 Purchaser shall, at its sole cost and expense, cause the Title Company to
issue to Purchaser a title insurance commitment for the Property in the amount
of the Purchase Price (the "Title Report") and copies of all exceptions noted
therein on or before the date that is thirty (30) days after the Effective Date.
Purchaser shall, if Purchaser desires, have Seller's existing survey updated, if
one exists, or have a new survey of the Property made (as applicable, the
"Survey"). Purchaser shall have sixty (60) days after its receipt of the Title
Report and Survey (the applicable date is referred to herein as the "Title
Waiver Date") to examine the condition of the title and to approve or disapprove
the same. If Purchaser shall disapprove the condition of the title such
disapproval shall be set forth in one or more notices (each, a "Title
Disapproval Notice") given to Seller not later than the Title Waiver Date
stating that the condition of title to the Property, any of the terms,
provisions or the contents of said items and documents are disapproved by
Purchaser. Notwithstanding the foregoing, Purchaser may deliver one or more
additional Title Disapproval Notices after the Title Waiver Date if, at any time
after the Title Waiver Date, Purchaser receives an amendment to the Title Report
previously delivered to it by the Title Company containing any exception not set
forth in a Title Report previously delivered to it, provided that any such
additional Title Disapproval Notice shall be given, if at all, within five (5)
days after Purchaser receives such amendment. Seller shall have until the date
which is ten (10) business days after the date of the applicable Title
Disapproval Notice (the "Title Cure Expiration Date") in which to cure or
eliminate or agree to cure or eliminate all items which Purchaser disapproves in
the applicable Title Disapproval Notice, and to furnish evidence satisfactory to
Purchaser and the Title Company that all such items have been cured or
eliminated or that arrangements have been made with the Title Company and any
parties in interest to cure or eliminate the same at or prior to the Closing. If
such evidence is not received by Purchaser and the Title Company on or before
the Title Cure Expiration Date or if at Closing there are any additional
exceptions to title of which the Title Company has not theretofore provided to
Purchaser (all exceptions to title set forth in any and all Title Disapproval
Notices and all such additional exceptions to title are herein called
"Non-Permitted Exceptions") and Seller is unable or unwilling to cure or
eliminate such items, then Purchaser shall either waive the Non-Permitted
Exceptions, or terminate this Agreement, in which event neither party hereto
shall have any further rights or obligations hereunder except those that by
their express terms survive termination of this Agreement.
3.2 Purchaser agrees to use all reasonable efforts to submit to HUD Purchaser's
application for all required HUD approvals and consents, on terms and conditions
satisfactory to Purchaser, as Purchaser deems necessary and sufficient
(collectively, the "HUD Approvals") as soon as reasonably practicable after the
Effective Date and to diligently pursue the issuance thereof. Seller, at no
cost, expense or liability to Seller, agrees to cooperate with Purchaser in the
preparation and submission of such materials, documentation, and information as
is required in order to obtain the HUD Approvals.
3.3 Not later than five (5) days after the Effective Date, Seller shall give
notice to HUD of its intent to prepay the HUD Note (defined below) as required
by and in accordance with Section 219(b)(3) of the Departments of Veteran
Affairs and Housing and Urban Development, and Independent Agencies
Appropriations Act, 1999, if applicable. Such notice shall not be binding on
Purchaser. Purchaser shall have the option to elect to consummate the
transaction described in this Agreement by either: (i) a "transfer of physical
assets" and corresponding assumption of the HUD Note (the "HUD Note"), Mortgage
(the "HUD Mortgage"), Regulatory Agreement, and all other security agreements
related thereto (collectively, the "HUD Loan Documents") on the Property; or
(ii) a prepayment of the HUD Loan Documents using cash or other financing. As
soon as is reasonably practicable, Purchaser shall notify Seller of Purchaser's
election of alternatives (i) or (ii) in the preceding sentence. Seller shall not
be obligated to prepay the HUD Note until the Closing Date and then only from
the proceeds of the Purchase Price. If the aforesaid Section 219(b)(3) is
applicable, Purchaser agrees that it will not increase the rent charges for any
dwelling unit on the Property during the 60-day period beginning upon such
prepayment of the HUD Note. In the event Purchaser elects a prepayment of the
HUD Loan Documents, Seller shall take all necessary and sufficient actions
relative to the lender(s) such that said HUD Loan Documents can be paid in full
at Closing.
3.4 Commencing on the Effective Date of this Agreement and ending on the earlier
of the termination of this Agreement or the closing of the transactions
contemplated hereby, Seller covenants and agrees to furnish to Purchaser, to the
extent such information is in Seller's possession or control, and to the extent
not already in the possession of Purchaser, such information, materials and
documents as Purchaser may reasonably request.
IV.
REPRESENTATIONS. WARRANTIES AND COVENANTS
4.1 In addition to the representations, warranties and covenants contained
elsewhere in this Agreement, Seller hereby makes to Purchaser the following
representations, warranties and covenants which Seller represents as true and
correct in all material respects and not materially misleading as of the date
hereof, and which shall be true in all material respects and not materially
misleading as of the Closing Date, and shall survive the Closing for the period
of time set forth after each Section below, provided, however, that the
representations, warranties and covenants set forth below shall not apply to any
fact, occurrence or situation known by Purchaser to exist prior to the time such
representation, warranty or covenant is made:
4.1.1 There is no litigation, condemnation proceeding, or bankruptcy proceeding
pending or, to the best of Seller's knowledge, threatened against Seller
or the Property that could materially and adversely affect Purchaser or
the Property upon or subsequent to the Closing. One (1) year.
4.1.2 Seller has no tradenames, trademarks or copyrights used in connection with
or applicable to the Property, other than the Trade Name. One (1) year.
4.1.3 Each person executing and delivering this Agreement and all documents to
be executed and delivered by Seller at the Closing represents and warrants
to Purchaser that he or she has due and proper authority to execute and
deliver the same. Seller has the full right, power and authority to sell
and convey the Property to Purchaser as provided herein and to carry out
its obligations hereunder. The consummation by Seller of the transaction
that is the subject of this Agreement will not conflict with or result in
a breach of any of the terms of any agreement or instrument to which
Seller is a party or by which Seller is bound or constitute a default
thereunder, and Seller has received all requisite approvals, except the
requisite approvals from HUD, necessary to enable Seller to consummate the
transaction that is the subject of this Agreement. No other party has any
right to purchase the Property, or any part thereof. Notwithstanding
anything in this Section 4.1.3 to the contrary, Seller shall obtain all
authorizations as represented above within ten (10) business days after
the Effective Date of this Agreement.
4.1.4 All Personal Property is, and as of the Closing will be, owned by Seller
free from encumbrances or liens. One (1) year.
4.1.5 To the best of Seller's knowledge, all books and records kept with respect
to the Property are true and accurate and not materially misleading. One
(1) year.
4.1.6 Seller has received no notice, and Seller has no actual knowledge, except
for matters set forth in any existing environmental reports delivered by
Seller to Purchaser, of any storage, treatment, generation, discharge,
transportation or disposal of industrial, toxic or hazardous substances or
solid or hazardous waste at or onto the Property, other than those
allowable under applicable federal, state and/or local environmental laws
and regulations (collectively "Environmental Laws) or allowable under
applicable Environmental Law permits. One (1) year.
4.1.7 Seller shall give Purchaser written notice if Seller becomes aware of any
event, action, fact or circumstances that would have constituted a breach
of any of Seller's representations and warranties under this Agreement if
Seller had had such awareness when it made the same, or at any time
thereafter ("Warranty Notice"). Such Warranty Notice shall be given as
soon as reasonably practicable after Seller becomes aware of any such
event, action, fact or circumstance that would have constituted a breach
of any of Seller's representations and warranties, but in no event shall
such Warranty Notice be given more than five (5) days after Seller becomes
aware of such event, action, fact or circumstance. If Purchaser receives a
Warranty Notice, Purchaser shall have the option, in its sole discretion,
to (i) terminate this Agreement, and neither party hereto shall have any
further rights or obligations hereunder except those that by their express
terms survive termination of this Agreement; or (ii) accept the matter
disclosed by the Warranty Notice and proceed to Closing under this
Agreement. Purchaser shall have thirty (30) days after receipt of each
Warranty Notice to exercise such option.
4.1.8 Seller has not dealt with a broker in connection with this Agreement and
no broker negotiated this Agreement or is entitled to any commission in
connection herewith. Seller agrees to indemnify, defend and hold
Purchaser, and its respective agents and employees harmless from and
against all claims, demands, actions, liabilities, damages, costs and
expenses (including, attorneys' fees) arising from either (i) a claim for
a fee or commission made by any broker claiming to have acted by or on
behalf of Seller in connection with this Agreement, or (ii) a claim of, or
right to, lien under the Statutes of Ohio relating to real estate broker
liens with respect to any such broker retained by Seller. Seller's
obligations in this subsection 4.1.8 shall survive Closing.
Purchaser is not relying on any warranty or representation
whatsoever other than as is expressly set forth in this Agreement.
Purchaser shall accept the Property "AS IS" and in its condition on the
date of Closing, subject only to the express provisions of this Agreement.
Purchaser further acknowledges that Purchaser is currently managing the
Property and has conducted an independent inspection and investigation of
the physical condition of all portions of the Property and that, in
proceeding with the acquisition of the Property, Purchaser is doing so
based upon such independent inspections and investigations and the
representations and warranties made in this Agreement.
4.2 In addition to the representations, warranties and covenants contained
elsewhere in this Agreement, Purchaser hereby makes to Seller the following
representations, warranties and covenants which Purchaser represents as true and
correct in all material respects and not materially misleading as of the date
hereof, and which shall be true in all material respects and not materially
misleading as of the Closing Date, and shall survive the Closing for the period
of time set forth after each Section below:
4.2.1 There is no litigation pending or, to the best of Purchaser's knowledge,
threatened against Purchaser that could materially and adversely affect
Purchaser's ability to perform its obligations hereunder. One (1) year.
4.2.2 Each person executing and delivering this Agreement and all documents to
be executed and delivered by Purchaser at the Closing represents and
warrants to Seller that he or she has due and proper authority to execute
and deliver the same. Purchaser has the full right, power and authority to
purchase the Property from Seller as provided herein and to carry out its
obligations hereunder. The consummation by Purchaser of the transaction
that is the subject of this Agreement will not conflict with or result in
a breach of any of the terms of any agreement or instrument to which
Purchaser is a party or by which Purchaser is bound or constitute a
default thereunder.
4.2.3 Purchaser has not dealt with a broker in connection with this Agreement
and no broker negotiated this Agreement or is entitled to any commission
in connection herewith. Purchaser agrees to indemnify, defend and hold
Seller, and its respective agents and employees harmless from and against
all claims, demands, actions, liabilities, damages, costs and expenses
(including, attorneys' fees) arising from either (i) a claim for a fee or
commission made by any broker claiming to have acted by or on behalf of
Purchaser in connection with this Agreement, or (ii) a claim of, or right
to, lien under the Statutes of Ohio relating to real estate broker liens
with respect to any such broker retained by Purchaser. Purchaser's
obligations in this subsection 4.2.3 shall survive Closing.
4.2.4 Purchaser owns the Soft Note, free and clear of all liens, rights,
commitments, or restrictions.
4.3 For purposes of the representations and warranties made by Seller in Section
4.1 hereof, the words "to the best of Seller's knowledge" shall mean to the
knowledge of Michael Hornbrook and Donald Cappeart.
V.
OPERATIONS PRIOR TO CLOSING
5.1 Seller agrees that between the date hereof and the Closing Date, Seller or
its agents shall:
5.1.1 Continue to operate, or instruct its property manager to continue to
operate, the Property as heretofore operated and in accordance with
Seller's customary practices at the time of the Effective Date.
5.1.2 Perform, or instruct its property manager to perform, required maintenance
and replacements in accordance with past practice and perform repairs or
replacements to any broken, defective or disfunctioning portions of the
Property as the relevant condition occurs, and, subject to the parties'
agreements in Article XI below, deliver the Property at Closing in
substantially the same condition as existed on the Effective Date,
reasonable wear and tear and any additional impairment of physical
condition which would not cost in excess of Ten Thousand Dollars
($10,000.00) to repair being excepted.
5.1.3 Pay, or cause its property manager to pay, in the normal course of
business and, in any event, prior to Closing, sums due for work, materials
or services furnished or otherwise incurred in the ownership and operation
of the Property up to the Closing Date and pay, or cause it property
manager to pay, all amounts due under the HUD Loan Documents as such
amounts become due and otherwise continue to comply in all material
respects with the HUD Loan Documents.
5.1.4 Neither sell, grant or transfer, nor permit the sale, grant or transfer
of, any interest in the Property.
5.1.5 Comply in all material respects with all governmental requirements
applicable to the Property.
5.1.6 Promptly advise Purchaser of any litigation or governmental proceeding to
which Seller becomes a party affecting the Property. It shall be a
condition precedent to Purchaser's obligation to accept title, that there
shall be no such litigation or proceeding pending at Closing having a
potential, material, adverse effect upon the Property or Seller's ability
to convey the Property to Purchaser, in the reasonable judgment of
Purchaser. Provided, however, that the preceding sentence shall not apply
if Purchaser, as manager of the Property, is deemed to be the sole cause
of such litigation or governmental proceeding.
5.1.7 Not permit any alteration, structural modification or additions to the
Property, except in the nature of ordinary maintenance, repair, or
replacement without Purchaser's consent, which consent shall not be
unreasonably withheld, conditioned, or delayed.
5.1.8 Not create (or agree to create) any exception to or covenant, restriction,
easement or other lien on or affecting the Property without Purchaser's
consent, which consent shall not be unreasonably withheld.
5.1.9 Not remove from the Improvements any Personal Property unless the same is
replaced by Personal Property of a like kind and of equal or higher value.
VI.
CLOSING ADJUSTMENTS
6.1 The following are to be prorated or adjusted (as appropriate), if
feasible, at the Closing, as of 11:59 P.M. on the day immediately preceding
the Closing (the "Adjustment Date"):
6.1.1 Rents, as and when collected. If as of the Adjustment Date there are rents
owed by Tenants for the month in which the Closing occurs, then the first
monies received from said Tenant or Tenants shall be received on account
of or in payment of rents due for the month including the Closing Date and
(i) if Purchaser receives past due rents, Seller's aforesaid share thereof
shall be promptly remitted by Purchaser to Seller, and (ii) if Seller
receives such past due rents, Purchaser's aforesaid share thereof shall be
promptly remitted by Seller to Purchaser. With respect to any arrearages
for periods prior to the month in which the Closing occurs, Purchaser
shall pay such arrearages to Seller as and when collected from the monies
received from such Tenant provided such Tenant is otherwise current in its
rent. With respect to rents for any period subsequent to the Closing that
may be received by Seller, Seller shall promptly remit such rents to
Purchaser. For purposes of this Section 6.1.1, the term "rents" shall
include any sums paid or payable to Seller pursuant to either a Lease or
Contract and the term "tenant" shall include the Tenant as well as the
service provider pursuant to such Lease or Contract.
6.1.2 Real estate taxes and assessments, including penalties and interest, shall
be prorated as follows: Seller shall pay all real estate taxes and
assessments which became due and payable prior to the Closing; at the
Closing, the parties shall prorate taxes and assessments becoming due and
payable on and after the Closing based on the taxes that are a lien for
the year of the Closing, even if such taxes and assessments are not yet
due and payable. All prorations shall be based upon the most recent
available tax rates, assessments and valuations.
6.1.3 Tax and utility company deposits, if any, and if assignable and assigned.
6.1.4 Electric, gas, water and sewer charges on the basis of a reading effective
as of the Adjustment Date.
6.1.5 Amounts paid or payable in respect of any Contracts assigned to Purchaser
pursuant to the Assignment of Contracts.
6.1.6 At Purchaser's option, Seller shall either pay to Purchaser at Closing or
Purchaser shall receive a credit against the cash portion of the Purchase
Price an amount equal to all Tenant security deposits and accrued
interest, if any, to which Tenants are entitled pursuant to the Leases or
law which are to be assigned to Purchaser at the Closing.
6.1.7 In the event of Purchaser's election of alternative (i) under Section 3.3,
Seller shall assign and transfer to Purchaser all Property Accounts,
provided however, if Seller is not permitted to assign the residual
receipts account or reserves for replacements account on terms
satisfactory to Purchaser in Purchaser's sole discretion, Purchaser shall
receive a credit against the cash portion of the Purchase Price in the
amount(s) of the balance(s) of such accounts and Seller shall retain all
right, title and interest in and to such accounts. In the event of
Purchaser's election of alternative (ii) under Section 3.3, Purchaser
shall receive a credit against the cash portion of the Purchase Price in
an amount equal to the balance of the reserve for replacements account and
residual receipts account, and Seller shall retain its entire right, title
and interest in and to all the Property Accounts. In the event Purchaser
takes assignment of escrow accounts for taxes, insurance and mortgage
insurance, such amounts shall offset amounts otherwise owing from Seller
to Purchaser pursuant to the prorations of taxes, insurance and mortgage
insurance provided for in Article VI and if the amounts in such escrow
accounts for taxes, insurance and mortgage insurance are in excess of such
prorations, such excess amount shall be paid by Purchaser in cash at
Closing as provided in Section 6.2.
6.2 If such prorations result in a payment due Purchaser, then the cash portion
of the Purchase Price payable at Closing shall be reduced by such sum. If such
prorations result in a payment due Seller, then the same shall be paid to Seller
in addition to the cash portion of the Purchase Price payable at Closing. The
parties hereto shall endeavor to prepare a schedule of prorations no less than
two (2) days prior to Closing. The parties hereto shall correct any errors in
prorations as soon after the Closing as amounts are finally determined.
VII.
CLOSING
7.1 The closing of the transaction that is the subject of this Agreement (the
"Closing") shall occur on or before the date that is thirty (30) days after the
date upon which all conditions to closing are satisfied, including, without
limitation, the issuance by HUD of all HUD Approvals (the "Closing Date"). The
Closing shall be held at the offices of Baker & Hostetler LLP, or at such other
location as may be mutually agreed upon between the parties.
7.2 If the Closing has not occurred on or before July 31, 2006 (the "Termination
Date"), this Agreement may be terminated by either party (provided, however,
that the right to terminate this Agreement under this clause shall not be
available to any party whose failure to fulfill any obligation of this Agreement
has been the cause of, or resulted in, the failure of the transaction
contemplated by this Agreement to have occurred on or before the aforesaid
date). In the event of termination of this Agreement by either party pursuant to
this Section 7.2, notice thereof shall forthwith be given to the non-terminating
party, and this Agreement shall terminate without any further action by any of
the parties hereto, except as otherwise provided herein. If this Agreement is
terminated as provided herein, no party hereto shall have any liability or
further obligation to any other party to this Agreement, except as provided
herein and except that any termination shall be without prejudice to the rights
of any party hereto arising out of a breach by the other party of any covenant
or agreement contained in this Agreement.
7.3 Notwithstanding anything in Section 7.2 to the contrary, Purchaser may
elect, at its sole option, to extend the Termination Date for not more than
three (3) extension periods of thirty (30) calendar days each and shall provide
written notice to Seller of its election(s) to so extend the Termination Date on
or before the date that is five (5) business days prior to the previously
scheduled Termination Date (as the same may have been extended pursuant to this
section).
VIII.
CLOSING DOCUMENTS
8.1 At the Closing, Seller shall cause to be delivered to Purchaser the
following documents and instruments, and any other items specified in this
Agreement, duly executed and acknowledged, in recordable form where applicable,
and dated as of the Closing Date:
8.1.1 A limited or special warranty deed (the "Deed") in form reasonably agreed
to by the parties.
8.1.2 An assignment of the Leases (the "Assignment of Leases") in form
reasonably agreed to by the parties.
8.1.3 A bill of sale (the "Bill of Sale") in form reasonably agreed to by the
parties, which shall convey and assign all Personal Property.
8.1.4 An assignment of the Contracts (the "Assignment of Contracts") in form
reasonably agreed to by the parties.
8.1.5 An Assignment and Assumption of the Housing Assistance Payment Contract
(the "Assignment of HAP Contract") in form reasonably agreed to by the
parties.
8.1.6 A non-foreign affidavit dated as of the Closing Date and in form and
substance required under the Treasury Regulations issued pursuant to
Section 1445 of the Internal Revenue Code so that Buyer is exempt from
withholding any portion of the Purchase Price hereunder (the "FIRPTA
Certificate").
8.1.7 A letter to each Tenant in form reasonably agreed to by the parties, which
letter shall be delivered to the Tenants by Purchaser (the "Tenant Notice
Letter").
8.1.8 All plans, specifications, mechanical, electrical and plumbing layouts,
operating manuals, purchase orders, brochures, marketing materials,
advertisements, Tenant lease files, and other files and records utilized
in connection with the operation and maintenance of the Property which are
in the possession or under the control of Seller, its employees,
contractors, subcontractors, or agents, but which are not in the
possession or under the control of Purchaser.
8.1.9 Affidavits and certificates, in forms reasonably acceptable to the
parties, as to facts within the knowledge of Seller relevant to the
determination by the Title Company as to the condition of title or the due
performance by Seller of its obligations under this Agreement, and in all
events to the extent required by the Title Company for it to issue the
Title Policy without taking exception to the so-called "gap" or "standard"
exclusions.
8.1.10 A certificate stating that the representations and warranties of Seller
contained in this Agreement are true and correct in all material respects,
and not materially misleading, in all material respects as of the date of
Closing (with appropriate modifications of those representations and
warranties made in Section 4.1 hereof to reflect any changes resulting
from actions made in compliance with Section 5.1 hereof) or identifying
any representation or warranty that is not, or no longer is, true and
correct in all material respects, and not materially misleading, and
explaining the state of facts giving rise to the change.
8.1.11 A Closing Statement to be prepared and agreed upon by the parties hereto.
8.1.12 Any other instruments specifically referred to in this Agreement or
necessary to carry out Seller's obligations under its provisions.
8.2 At the Closing, Purchaser or its assignee shall cause to be delivered to the
Title Company the following documents and instruments:
8.2.1 Funds payable to the Title Company representing the cash portion of the
Purchase Price due in accordance with this Agreement and any other sums
payable by Purchaser at the Closing under any provision of this Agreement.
8.2.2 Any other instruments specifically referred to in this Agreement or
necessary to carry out Purchaser's obligations under its provisions.
8.2.3 The Assignment of Leases.
8.2.4 The Assignment of Contracts.
8.2.5 The Assignment of HAP Contract.
8.2.6 A certificate stating that the representations and warranties of Purchaser
contained in this Agreement are true and correct in all material respects,
and not materially misleading, in all material respects as of the date of
Closing or identifying any representation or warranty that is not, or no
longer is, true and correct in all material respects, and not materially
misleading, and explaining the state of facts giving rise to the change.
8.3 At the Closing, Seller and Purchaser shall cause to be delivered such other
instruments and documents as may be required by law in order to complete the
Closing of the transaction which is the subject of this Agreement.
IX.
CONDITIONS TO CLOSING
9.1 It shall be a condition to Purchaser's obligations to close this transaction
that:
9.1.1 Purchaser shall have received all HUD Approvals in form and substance
satisfactory to Purchaser in its sole and absolute discretion.
9.1.2 The Title Company shall be ready, willing and able to deliver to Purchaser
an ALTA owner's title insurance policy with extended coverage (the "Title
Policy"), which Title Policy shall (i) be effective and enforceable as of
the Closing, (ii) insure Purchaser in the full amount of the Purchase
Price, (iii) not contain any Non-Permitted Exceptions (except to the
extent that such Non-Permitted Exceptions are waived by Purchaser pursuant
to Section 3.1 hereof), and (iv) provide that its effective date and time
is the date and time of recording of the Deed.
9.1.3 Possession of the Property, in accordance with this Agreement, shall be
delivered to Purchaser.
9.1.4 All of Seller's representations and warranties provided in this Agreement
shall be true in all material respects and not materially misleading as of
the Closing Date.
9.1.5 Seller shall have duly performed, in all material respects, all covenants
and other obligations to be performed by it under this Agreement.
9.1.6 Purchaser shall have obtained financing for the acquisition on terms
satisfactory to Purchaser in its sole discretion and shall have obtained
all necessary consents and approvals in respect of such financing
including, without limitation, approvals from bond authority and approvals
with respect to tax credit allocations.
9.1.7 Seller shall have made all closing deliveries required by Section 8.1 of
this Agreement.
9.2 It shall be a condition to Seller's obligations to close this transaction
that:
9.2.1 All of Purchaser's representations and warranties provided in this
Agreement shall be true in all material respects and not materially
misleading as of the Closing Date.
9.2.2 Purchaser shall have made all closing deliveries required by Section 8.2
of this Agreement.
X.
COSTS
10.1 It is the intent of the parties hereto that the amount payable to Seller
set forth in Section 2.1.2 shall be an absolutely net return to Seller (and in
no event will the absolute net return to Seller exceed the amount set forth in
Section 2.1.2) and will not be subject to reduction for any costs and expenses
relating to the transactions contemplated hereby. As such, all costs and
expenses related to the transactions contemplated hereby shall be borne by
Purchaser; provided, however, that if the transaction which is the subject of
this Agreement is terminated by either Seller or Purchaser as a result of the
other party's default hereunder, the defaulting party shall pay all of the Title
Company's fees as escrow agent, if any.
XI.
RISK OF LOSS
11.1 The risk of loss or damage to the Property by fire, earthquake, or other
casualty shall be borne by Seller until the Closing Date. If damage, loss or
destruction of the Property or any part thereof, by fire, earthquake, or other
casualty, occurs prior to the Closing, Seller shall promptly notify Purchaser of
such damage, loss or destruction.
11.2 If the Property is damaged by fire, earthquake, or other casualty, and the
damage, loss or destruction shall cost less than One Hundred Thousand and 00/100
Dollars ($100,000.00) to repair, based upon the determination of a contractor
acceptable to Seller and Purchaser, which shall not be unreasonably withheld or
delayed, then Purchaser shall close the transaction which is the subject of this
Agreement with a credit against the cash portion of the Purchase Price in an
amount equal to the amount of the applicable insurance deductibles, and Seller
shall assign to Purchaser: (a) Seller's rights to any payments which may be
payable subsequent to the Closing Date under any applicable hazard or other
insurance policy or policies in effect with respect to the Property and to all
of Seller's rights and interests in and to the corresponding claims, and (b)
Seller's rights to payments with respect to rents due subsequent to the Closing
Date under any rental insurance policy or policies with respect to the Property;
provided, however, Purchaser shall have the right, as its sole remedy (except as
to such obligations as are expressly set forth in this Agreement as surviving a
termination thereof), to elect to terminate this Agreement if, as a result of
such damage by fire, earthquake, or other casualty: (i) the Property may not, as
a matter of applicable law, be rebuilt as it currently exists, or (ii) access to
the Property from a publicly dedicated street is prevented; or (iii) Purchaser
determines that available insurance proceeds will not be adequate to cover all
damages; and if Purchaser so elects, this Agreement shall be terminated and the
parties hereto shall be relieved of all further obligations and liability under
this Agreement, other than those that are expressly stated to survive the
termination of this Agreement. Purchaser shall make its determination whether to
terminate this Agreement as permitted under this Section 11.2 on or before the
date that is the later of: (x) sixty (60) days after the fire, earthquake, or
other casualty; or (y) fifteen (15) business days after Seller delivers to
Purchaser both the contractor's determination of the cost to repair the damage
and the insurer's proposed amount of insurance proceeds to be made available
therefore.
11.3 If the Property is damaged by fire, earthquake, or other casualty and the
damage, loss or destruction shall cost One Hundred Thousand and 00/100 Dollars
($100,000.00) or more to repair, based upon the determination of a contractor
acceptable to Seller and Purchaser, which approval shall not be unreasonably
withheld or delayed, then Seller shall, promptly after Purchaser's request
therefor, deliver to Purchaser a copy of each of the applicable insurance
policies covering such fire, earthquake, or other casualty, and Purchaser shall,
as its sole remedy (except as to such obligations as are expressly set forth in
this Agreement as surviving a termination thereof), elect one of the following
options:
11.3.1 To terminate this Agreement, in which event the parties hereto shall be
relieved of all further obligations and liability under this Agreement
(other than those that are expressly stated to survive the termination of
this Agreement); or
11.3.2 To proceed with the Closing and receive (i) a credit against the cash
balance of the Purchase Price payable at Closing to the extent of payments
received by or on behalf of Seller prior to the Closing Date under any
applicable hazard or other insurance policy or policies in effect with
respect to the Property, (ii) an assignment of Seller's rights to any
payments which may be payable subsequent to the Closing Date under any
applicable hazard or other insurance policy or policies in effect with
respect to the Property and to all of Seller's rights and interests in and
to the corresponding claims, (iii) an assignment of Seller's rights to
payments with respect to rents due subsequent to the Closing Date under
any rental insurance policy or policies with respect to the Property, and
(iv) a credit against the cash balance of the Purchase Price payable at
the Closing in an amount equal to the aggregate amount of the deductibles
with respect to all such hazard insurance policies. If Purchaser elects to
exercise the option set forth in this Section 11.3.2 hereof, then prior to
the Closing, Purchaser and Seller shall cooperate to adjust, compromise
and settle with the insurance company(s) with respect to the insurance
policies.
11.3.3 Purchaser shall make its determination whether to terminate this
Agreement as permitted under this Section 11.3 on or before the date that
is the later of: (x) sixty (60) days after the fire, earthquake, or other
casualty; or (y) fifteen (15) business days after Seller delivers to
Purchaser both the contractor's determination of the cost to repair the
damage and the insurer's proposed amount of insurance proceeds to be made
available therefore.
11.4 If, prior to Closing, any governmental authority or other entity having
condemnation authority shall institute an eminent domain proceeding or take any
steps preliminary thereto (including the giving of any direct or indirect notice
of intent to institute such proceedings) with regard to the Land or
Improvements, and the same is not dismissed in a final determination for which
all appeal periods have passed on or before ten (10) days prior to the Closing
Date set forth in this Agreement, then Seller shall promptly notify Purchaser
thereof and Purchaser shall, as its sole remedy (except as to such obligations
as are expressly set forth in this Agreement as surviving a termination
thereof), be entitled to terminate this Agreement in which event, the provisions
of Section 11.3.1 hereof shall be applicable.
XII.
TERMINATION AND REMEDIES
12.1 In the event of Seller's failure to perform any of its obligations
hereunder or if any of the representations and warranties made herein by Seller
are untrue, in any material respects, or materially misleading (each event
referred to in the foregoing provisions of this sentence is herein sometimes
called a "Seller Default"), Purchaser shall have the right: (i) to terminate
this Agreement by giving notice thereof to Seller; and (ii) to sue Seller for
specific performance of its obligations under this Agreement; and/or (iii) to
exercise any and all other remedies available to Purchaser under this Agreement,
at law, or in equity. All of Purchaser's rights and remedies shall be cumulative
and nonexclusive. The provisions of this Section shall survive the Closing.
12.2 If the purchase and sale which is the subject of this Agreement is not
consummated solely as a result of Purchaser's default under this Agreement,
Purchaser, for itself and its successors and assigns, will forbear from the
exercise of its remedies under the Soft Notes and any agreements, instruments,
mortgages or other documents securing the indebtedness evidenced thereby on
account of any payment default thereunder for a period ending on the date that
is five (5) years after the stated maturity date of the Soft Notes. Such remedy
shall be the sole and exclusive relief to which Seller might otherwise be
entitled, as a result of Purchaser's default under this Agreement, Seller hereby
specifically waiving any and all rights which it may have to damages or specific
performance as a result of Purchaser's default under this Agreement.
XIII.
[INTENTIONALLY LEFT BLANK]
XIV.
NOTICES
14.1 Any and all notices, elections, demands, requests, approvals and responses
thereto permitted or required to be given under this Agreement shall be in
writing, signed by the party giving the same or by its attorneys, and shall be
deemed to have been properly given and shall be deemed effective upon being (i)
personally delivered, or (ii) delivered to an overnight delivery service with
receipt for delivery, or (iii) deposited in the United States mail, postage
prepaid, certified with return receipt requested, or (iv) transmitted by
facsimile, provided that such facsimile transmission is confirmed within one (1)
business day thereafter in the manner set forth in either clause (i), (ii) or
(iii) of this sentence, to the other party at the address of such other party
set forth below or at such other address within the continental United States as
such other party may designate by notice specifically designated as a notice of
change of address and given in accordance herewith; provided, however, that the
time period in which a response to any such notice, election, demand or request
must be given shall commence on the date of receipt thereof. Personal delivery
to a party or to any officer, partner, member, agent or employee of such party,
at said address shall constitute receipt. Rejection or other refusal to accept
or inability to deliver because of changed address of which no notice has been
received shall also constitute receipt. Any such notice, election, demand,
request or response shall be addressed as follows:
IF TO SELLER: c/o National Partnership Investments Corp.
6100 Center Drive
Suite 800
Los Angeles, California 90045
Attention: Michael Hornbrook
Phone No.: (310) 926-4896
with a copy to be given simultaneously to:
Resch Polster Alpert & Berger LLP
10390 Santa Monica Blvd., 4th Floor
Los Angeles, California 90025
Attention: Peter H. Alpert
Phone No.: 310-788-7575
Facsimile No.: 310-522-3209
IF TO PURCHASER: c/o The Orlean Company
23875 Commerce Park Road
Suite 140
Beachwood, Ohio 44122
Attention: David Orlean
Phone No.: 216-514-4994
Facsimile No.: 216-514-5154
with a copy to be given simultaneously to:
David J. Strauss, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114
Phone No.: 216-621-0200
Facsimile No.: 216-696-0740
IF TO THE TITLE COMPANY:
Haverfield Title Agency, Inc.
21851 Center Ridge Road
Rocky River, Ohio 44116
Attention: John M. McDermott
Phone No.: 440-356-1650
Facsimile No.: 440-356-0591
XV.
MISCELLANEOUS
15.1 This Agreement and the Exhibits attached hereto contain the entire
agreement between the parties with respect to the subject matter hereof, and no
promise, representation, warranty or covenant not included in this Agreement or
such Exhibits has been or is relied upon by either party. This Agreement shall
supercede all other agreements, written or oral, pertaining to the matters
described herein.
15.2 The Article and Exhibit headings herein are for convenience only, and are
not to be used in determining the meaning of this Agreement or any part hereof.
15.3 This Agreement and its interpretation and enforcement shall be governed by
the laws of the State of Ohio.
15.4 This Agreement shall be binding on, and the benefits hereof shall inure to,
the successors and assigns of the parties hereto.
15.5 If any term or provision of this Agreement, or any part of such term or
provision, or the application thereof to any person or circumstance shall to any
extent be held invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision or remainder thereof to persons or
circumstances other than those as to which it is held invalid and unenforceable
shall not be affected thereby and each term and provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
15.6 All Exhibits which are attached to this Agreement are part of this
Agreement and are incorporated herein by reference.
15.7 The provisions of this Agreement are for the sole benefit of the parties to
this Agreement and their successors and assigns and shall not give rise to any
rights by or on behalf of anyone other than such parties.
15.8 This Agreement shall be construed without regard to any presumption or
other rule requiring construction against the party causing this Agreement to be
drafted.
15.9 This Agreement may be executed in any number of counterparts, each of which
shall, when executed, be deemed to be an original and all of which shall be
deemed to be one and the same instrument.
15.10 Seller will, whenever and as often as it shall be reasonably requested so
to do by Purchaser, and Purchaser will, whenever and as often as it shall be
reasonably requested so to do by Seller, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, any and all conveyances,
assignments, correction instruments and all other instruments and documents as
may be reasonably necessary in order to complete the transaction which is the
subject of this Agreement and to carry out the intent and purposes of this
Agreement. All such instruments and documents shall be satisfactory to the
respective attorneys for Purchaser and Seller. The provisions of this Section
shall survive the Closing.
15.11 If the date for performance of any act pursuant to this Agreement is not a
business day, then such act shall be performed on the next succeeding business
day. The term "business day" shall mean all days, except Saturdays, Sundays and
all days observed by the Federal Government as legal holidays.
15.12 Limited Forbearance. Commencing on the Effective Date and ending on the
earlier of the termination of this Agreement or the closing of the transactions
contemplated hereby, Purchaser, for itself and its successors and assigns,
hereby agrees to forbear from the exercise of its remedies under the Soft Notes
and any agreements, instruments, mortgages or other documents securing the
indebtedness evidenced thereby on account of any existing events of default
thereunder. The forbearance provided for herein shall be effective only during
the forbearance period provided for in this Section 15.12 and shall
automatically terminate and cease to be of force and effect, and Purchaser may
exercise all of its rights and remedies as may be available under the Soft Notes
and related documents and under applicable law, upon the termination of the
forbearance period.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date set forth above.
SELLER:
WARREN HEIGHTS APARTMENTS, LTD.
By: National Partnership Investment Corp.
By: /s/Michael J. Hornbrook
Name: Michael J. Hornbrook
Title: Senior Vice President
PURCHASER:
RENEWAL HOUSING ASSOCIATES, LLC
By: /s/David W. Curtis
Name: David W. Curtis
Title: Vice President
TITLE COMPANY:
Haverfield Title Agency, Inc.
By: /s/ John M. McDermott
John M. McDermott, Vice President