Contract
Exhibit 10.9
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
This
Property Management Agreement is made and entered into as of this 3rd day
of December, 2009, by and between BR SPRINGHOUSE, LLC, a
Delaware limited liability company, having an office at c/o Bluerock Real
Estate, L.L.C., 000 Xxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, XX 00000 (the “Owner”) and HAWTHORNE RESIDENTIAL PARTNERS, LLC,
a North Carolina limited liability company, having an office at 000
Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 (the "Manager").
RECITALS:
A. Owner
is the owner of the Property, which is commonly known as Springhouse at
Newport Apartments
having 432
units and located at 000 Xxxxxxxxxxx Xxx, Xxxxxxx Xxxx, Xxxxxxxx
00000.
B. Owner
desires to engage Manager as an independent contractor to rent, lease,
operate
and manage the Property on the terms and conditions set forth below and Manager
desires
to accept such engagement.
NOW,
THEREFORE, in consideration of the premises, mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Owner and Manager agree as
follows:
1
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
Part I: BASIC
DATA
The
following defined terms shall have the meaning set forth below:
“Property
Name”
|
Springhouse
at Newport Apartments
|
“Number
of Units”
|
432
|
“Commencement
Date”
|
12/3/09
|
“Initial
Term”
|
24
months [per Sec. 6.1]
|
“Budget
Due Date”
|
30
days prior to start of Fiscal Year
|
“Management
Fee Percentage’
|
4.00%
|
“Incentive
Management Fee”
|
N/A
|
“New
Construction Fee”
|
5%
for Capital Projects in excess of $10,000
|
“Capital
Event Fee”
|
N/A
|
“Payroll
Handling Fee”
|
$12-see
5.5
|
“Renovation/Capital
Projects/Insurance Restoration Fee”
|
N/
A
|
‘Lender”
|
CWCapital/Xxxxxxx
Mac
|
Manager’s
Notice Address”
|
|
Hawthorne
Residential Partners, LLC
|
|
000
Xxxxxxxxxx Xxxx
|
|
Xxxxxxxxx,
XX 2820
|
|
“Owner’s
Notice Address”
|
|
c/o
Bluerock Real Estate, L.L.C.
|
|
000
Xxxxx Xxx-00xx
Xxxxx
|
|
Xxx
Xxxx, XX 00000
|
2
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
Part
II - STANDARD TERMS
1.
Appointment and General Provisions
1.1 Management
Duties and Authority
Subject
to the provisions of this Agreement and at the direction of Owner, Manager shall
manage, administer the operations of, and lease the Property on behalf of Owner
in a manner consistent with the standard of maintenance generally applied from
time to time during the Term to other similarly-situated residential apartment
properties of similar age, class, and appearance ("Comparable Properties"), in
good order and repair, and in a manner consistent with the Budget and the
Financing Documents and in a manner intended to maximize the cash flow from the
Property, subject to and within the Budgets approved by Owner as provided
herein. Subject to the provisions hereof, and subject to the approved Budgets,
Manager shall provide all services reasonably necessary, proper, desirable and
appropriate for the successful management and operation of the Property,
including, but not limited to the duties and services specified in this
Agreement.
1.2 Independent
Contractor
Except as
otherwise herein provided (including, by way of illustration, Manager's
execution of Contracts pursuant to Section 2.4(C)), Manager's relationship to
Owner hereunder is that of an independent contractor, and neither Manager nor
Owner shall represent to any other person that Manager's relationship to Owner
hereunder is other than that of an independent contractor. All persons employed
by Manager or any Affiliates of Manager in connection with the operation and
maintenance of the Property shall be employees solely of Manager or its
Affiliates and not of Owner and all arrangements with such employees are solely
the concern of Manager. For purposes hereof, "Affiliate" shall mean as to
any person any other person that directly or indirectly controls, is controlled
by, or is under common control with such first person. For the purposes of this
Agreement, a person shall be deemed to control another person if such person
possesses, directly or indirectly, the power to direct or cause the direction of
the management, policies and/or decision making of such other person, whether
through the ownership of voting securities, by contract or
otherwise.
1.3 Indemnification.
(A)
|
Manager
shall indemnify, defend and hold harmless Owner, and its direct and
indirect, members, partners, directors, officers, managers, employees,
agents and Affiliates (each, an “Owner Indemnified Party”)
from and against any and all claims, actions, suits, proceedings,
losses, damages, liabilities, costs and expenses, including reasonable
attorneys' fees and disbursements (“Damages”) (including
Damages relating to violations of Legal Requirements), arising out or
resulting from the acts or omissions of Manager and its Affiliates,
directors, officers, employees, contractors, subcontractors and agents,
which constitute gross negligence, fraud, malfeasance, breach of fiduciary
duty, willful, reckless or criminal misconduct, a breach of this
Agreement, or any actions of Manager (or its Affiliates) beyond the scope
of the authority conferred upon
Manager
|
3
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
|
hereunder.
Manager shall have the right to defend, and shall defend, at its expense
and by counsel of its own choosing (subject to Owner's approval of such
counsel, not to be unreasonably withheld, conditioned or delayed), against
any claim or liability to which the indemnity agreement set forth in this
Section 1.3(A) would apply. Notwithstanding the foregoing, if (i) Manager
has failed or refused to diligently defend the action, or has failed or
refuses to indemnify and hold harmless Owner and any Owner Indemnified
Party after written notice to Manager, (ii) an Event of Default exists on
the part of Manager, (iii) Owner or any Owner Indemnified Party to be
defended hereunder reasonably determines that a conflict of interest
exists, or (iv) Owner reasonably determines that Manager is insufficiently
liquid or creditworthy to adequately defend or pay the amount of any
Damages when due, Owner (or such Owner Indemnified Party) may, in its sole
and absolute discretion, engage its own attorney and other professionals
to defend or assist it with respect to such matters, and, at the option of
Owner (or such Owner Indemnified Party), its attorney shall control the
resolution of such matters. Manager shall not have the authority to settle
any claim or liability that is the subject of the indemnification
agreement provided for in this Section 1.3(A) without first obtaining
Owner's prior written consent, such consent not to be unreasonably
withheld. Manager or Owner, as applicable, shall regularly apprise the
other of the status of all
proceedings.
|
(B)
|
Owner
shall indemnify, defend (through attorneys selected by Owner) and hold
harmless Manager and its partners, members, stockholders, managers,
directors, officers, employees and agents (each a “Manager Indemnified Party”)
from and against any and all Damages arising out of or resulting
from the acts or omissions of Owner and its directors, officers,
employees, contractors, subcontractors and agents, which constitute fraud,
malfeasance, breach of fiduciary duty, willful, reckless or criminal
misconduct, or a breach of this Agreement. Owner shall have the right to
defend, and shall defend, at its expense and by counsel of its own
choosing against any claim or liability to which the indemnity agreement
set forth in this Section 1.3(B) would apply. Any settlement of any such
claim or liability by Owner shall be subject to the reasonable approval of
Manager. Notwithstanding the foregoing, if (i) Owner has failed or refused
to diligently defend the action, or has failed or refused to indemnify and
hold harmless Manager and any Manager Indemnified Party after written
notice to Owner, (ii) an Event of Default exists on the part of Owner,
(iii) Manager or any Manager Indemnified Party to be defended hereunder
reasonably determines that a conflict of interest exists, or (iv) Manager
reasonably determines that Owner is insufficiently liquid or creditworthy
to adequately defend or pay the amount of any Damages when due, then
Manager (or such Manager Indemnified Party) may, with the prior, written
consent of Owner with such consent not to be unreasonably withheld, engage
its own attorney and other professionals to defend or assist it with
respect to such matters. Owner or Manager, as applicable, shall regularly
apprise the other of the status of all such legal
proceedings.
|
(C) The
provisions of this Section 1.3 shall survive the expiration or termination of
this Agreement.
4
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
2. Management
Duties and Authority
2.1 Property Management Generally
|
(A) |
Manager
shall, at the expense of Owner, manage, operate and care for the Property
in a manner consistent with the standard of maintenance and repair of
Comparable Properties, in accordance with the approved Budgets and the
terms of any Financing Documents, to the extent that Owner has
communicated such terms in writing to Manager, and do all things
necessary, desirable or appropriate therefore or customarily performed by
managing agents of Comparable Properties. Without limiting the generality
of the foregoing, Manager shall (subject to any applicable law, covenant
or restriction):
|
|
(i) |
advertise
the Property, displaying signs thereon, and rent the Property including
the authority to negotiate, execute, extend, and renew leases in the
Owner's name;
|
|
(ii) |
implement
approved Budgets;
|
|
(iii) |
make
and renew all contracts (“Contracts”) for water,
sanitary and storm sewer, drainage, electricity, steam, gas, telephone,
fuel, cleaning, garbage removal,
pest control and other utilities and all other services necessary or
appropriate for
the management and operation of the
Property in accordance
with the Budgets unless otherwise provided
herein;
|
|
(iv) |
purchase
all supplies and equipment necessary or appropriate for the management and
operation of the Property in accordance with the Budgets unless otherwise
provided herein;
|
|
(v) |
if
appropriate, or directed to do so by Owner, contract a qualified, local
real estate property tax consultant of the Manager's choice to monitor the
real estate tax assessments of the Property and the reasonableness thereof
in comparison with the assessments of Comparable Properties; consult with,
and make recommendations to, Owner concerning the real estate tax
assessments of the Property and, at the expense of Owner, authorize the
designated real estate tax consultant to take such action with respect
thereto as Owner may direct;
|
|
(vi) |
make
or cause to be made all ordinary and extraordinary repairs, decorations
and alterations of the Property at Owner's expense, subject to the limits
of the Budgets as set forth in Section
2.6(F).
|
2.2 Management
Employees
(A)
|
Manager
shall employ capable personnel for the proper on-site maintenance and
operation of the Property in accordance with the terms of this Agreement.
Such on-site personnel shall be employees of Manager and all matters
pertaining to
|
5
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
|
such personnel, including their employment, supervision, compensation,
promotion and discharge, shall be the responsibility of
Manager.
|
(B)
|
Manager
shall be reimbursed for all of the gross salary or wages, including,
without limitation, reasonable bonuses, reasonable vacation pay, payroll
taxes, insurance, worker's compensation, and Manager's standard sick pay,
and other reasonable benefits and payroll burdens of Manager's employees
required to properly, adequately, safely and economically manage, operate
and maintain the Property but excluding any of Manager's management,
account and office personnel who supervise and direct Manager's on-site
employees. The number of the on-site employees and amounts of their
compensation may be adjusted annually, as may be reflected in the Budget
approved by Owner. Manager is hereby authorized to reimburse itself the
payroll expense as defined in this Section 2.2(B) from the Operating
Account no more than three (3) business days prior to each actual payroll
date.
|
(C)
|
Manager
shall fully comply with all Legal Requirements relating to worker's
compensation, social security, unemployment insurance, wages, hours,
working conditions and other matters pertaining to Manager's personnel.
Manager shall indemnify, defend and hold harmless Owner and any Owner
Indemnified Party from and against any and all Damages relating to
Manager's failure to comply with this Section 2.2(C), and Manager's
obligations to indemnify, defend and hold harmless under this Section
2.2(C) shall survive the termination or expiration of this
Agreement.
|
(D)
|
Manager
shall be solely responsible for its personnel in the event of the
termination of this
Agreement.
|
2.3 Rent
Collection and Services with Respect to Leases
(A)
|
Manager
shall perform any duties and exercise any rights conferred upon the Owner,
as landlord, under all leases covering the
Property.
|
(B)
|
Manager
shall use commercially reasonable efforts to collect all rentals and other
charges and amounts due or to become due under all leases covering the
Property (“Leases”).
|
(C)
|
Manager
may institute judicial actions and proceedings as may be reasonably
necessary to recover rents and other sums due the Owner from the
Property's tenants (“Tenants”) or to evict
tenants and regain possession, including the authority, in the Manager's
reasonable discretion, to settle, compromise and release any and all such
judicial actions and
proceedings.
|
2.4 Services
with Respect to Contracts
(A)
|
Manager
shall, at the expense of the Owner, make contracts for terms no longer
than (1) year for advertising, electric, gas, oil, water, telephone,
rubbish hauling,
|
6
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
|
vermin
extermination, janitorial services, landscaping maintenance and other
maintenance services for the Property as Manager shall reasonably
determine to be advisable, unless otherwise provided herein. These
obligations are cumulative with respect to any such similar obligations
set forth in Section 2.1(A)(iii) above and any contracts pursuant to this
Section 2.4(A) shall be included in the defined term “Contracts” as used
herein.
|
(B)
|
Unless
otherwise provided herein, Manager shall, at the expense of Owner, in
accordance with the approved Budgets, duly and punctually pay and perform
on behalf of Owner all of Owner's obligations under the Contracts and use
its good faith efforts to enforce, preserve and keep unimpaired the rights
of Owner and the obligations of other parties under the
Contracts.
|
(C)
|
All
Contracts and purchases made hereunder at the expense of Owner (whether or
not specifically requiring the approval of Owner pursuant hereto) shall be
made in the name of the Property and shall be executed by Manager solely
as Owner's agent, and Property shall retain title to all such property so
purchased on behalf of and at the expense of Owner. Manager shall use
commercially reasonable efforts to ensure that all Contracts made
hereunder contain a provision satisfactory to Owner limiting the liability
of Owner thereunder to the Property substantially similar to the
following:
|
|
"Notwithstanding
any provision to the contrary herein, [Contractor/Vendor] shall look
solely to the estate and property of Owner in and to the Property in the
event of any claim against Owner arising out of or in connection with this
Agreement or the relationship of Owner and [Contractor/Vendor].
[Contractor/Vendor] further agrees that the liability of Owner arising out
of or in connection with this Agreement, and the relationship of Owner and
[Contractor/Vendor], shall be limited to such estate and property of Owner
in and to the Property. No properties or assets of Owner other than the
estate and property of Owner in and to the Property and no property owned
by any partner or member of Owner shall be subject to judgment, levy,
execution or other judicial enforcement or collection procedures arising
out of or in connection with this Agreement or any other business
relationship of Owner and
[Contractor/Vendor]."
|
(D)
|
All
Contracts made with any Affiliate of Manager must be approved by Owner in
writing,
such approval not to be unreasonably withheld, conditioned or delayed,
provided
that it shall be deemed reasonable for Owner to withhold its approval to
any
proposed Affiliate Contract if such Contract shall not be at competitive
market
terms and rates and the amount charged thereunder is more than would be
charged
by an independent third
party.
|
(E)
|
Subject
to1
the provisions hereof, Manager may elect to have the routine maintenance,
repair, cleaning, landscaping and other services with respect to the Property
performed by employees of Manager and the reasonable costs of performing
such services shall be at the expense of Owner; provided, however,
in
|
7
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
any
event, such costs shall not exceed the costs that would have been incurred by
Owner had such services been provided by unrelated third parties, and shall be
incurred in accordance with the approved Budget.
2.5 Services
with Respect to Legal Requirements and Insurance Requirements
(A)
|
Each
of Manager and Owner shall promptly notify the other upon receiving any
notice with respect to any Legal Requirement or Insurance Requirement (as
defined below) (and furnish a copy of the notice received by it with its
notice to the other party) or upon learning of any default, event of
default or condition which, with the giving of notice or the passage of
time, or both, might constitute a default or event of default by Owner
under any Legal Requirement or Insurance Requirement. In the event of any
such notice, condition, default or event of default, Manager shall consult
with Owner concerning the action to be taken with respect thereto and, at
the expense of Owner, shall take such action with respect thereto as Owner
shall reasonably direct. As used herein, “Legal Requirements”
shall mean, with respect to the Property, all federal, state, county,
municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of
governmental authorities affecting the Property or any part thereof, or
the construction, use, alteration or operation thereof, or any part
thereof, whether now or hereafter enacted and in force, and all permits,
licenses and authorizations and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Borrower, at any time in force
affecting the Property or any part thereof, including, without limitation,
any which may (a) require repairs, modifications or alterations in or to
the Property or any part thereof, or (b) in any way limit the use and
enjoyment thereof.
|
(B)
|
As
long as the failure to promptly comply with any notice concerning any
Legal Requirement or Insurance Requirement shall not subject Manager to
any liability, Owner may stay Manager's remedial action with respect to
such notice by instituting, or directing Manager to institute, appropriate
legal or other proceedings to contest such notice, all at Owner's sole
expense. In the event Owner directs Manager to institute such proceedings
to contest such notice, Manager is hereby authorized to prepare, execute
and file all applications and other documents required for such
proceedings on Owner's behalf and in Owner's name. Manager shall promptly
furnish to Owner copies of all such applications and other documents
prepared, executed or filed by
Manager.
|
(C)
|
Manager
may appear in or commence legal or other proceedings on behalf of Owner in
Owner's name only upon the direction of Owner, it being understood that
Owner will pay any costs and fees, including, without limitation,
attorneys' fees, in connection therewith. However, Manager may appear in
or commence legal or other proceedings relative to the performance by
Manager of its duties and obligations hereunder, on its own behalf and at
its own expense at any time without the direction of Owner, provided that
the same shall result in no cost or liability to Owner. Manager shall
promptly notify Owner if it appears in any
such
|
8
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
proceedings on its
own behalf and promptly furnish copies of any documents it files in connection
with any such proceedings.
2.6 Records
and Reports
(A)
|
Software and Chart of
Accounts. Manager will prepare rent rolls and monthly operating
statements for the Property using Manager's selected property management
and accounting software using the Manager's Chart of
Accounts.
|
(B)
|
Monthly Close
Out. Monthly financial statements for the Property shall be closed
or "cut-off on the 24th
of each month. In the event, the 24th
falls on a weekend, the Property shall close on the Friday prior to the
24th.
|
(C)
|
Distribution of Cash
Flows. Manager shall remit to Owner the net cash flow generated
from operating and investing and financing activities for the previous
month as specified in Exhibit B in
accordance with wire transfer instructions provided by
Owner.
|
(D)
|
Budgets. Not
later than thirty (30) days from the date hereof and not later than sixty
(60) days prior to the beginning of each fiscal year (same to be
determined by Owner), Manager shall submit to Owner for its approval a
proposed annual budget (each a “Budget” and
collectively, “Budgets”) for the
Property for the ensuing Fiscal Year setting forth on a monthly basis
Manager's good faith estimates of gross revenues, Operating Expenses and
Debt Service for
the Property for such Fiscal Year, and the recommended Capital
Expenditures and extraordinary expenses for such Fiscal Year, in all
instances described in reasonable detail or with such additional detail as
Owner may reasonably request.
|
(E)
|
Budget
Approval. Owner shall approve, disapprove or comment on the
proposed annual
and revised Budgets within thirty (30) days after Owner's receipt of such
Budget.
Owner may approve, disapprove or modify any Budget in whole or in part.
Until such Budget has been approved, Manager shall work diligently to
address
and resolve Owner's reasonable objectives, until the Budget is fully approved
by
Owner.
|
(F)
|
Operation Within
Budget. Manager shall use, manage and operate the Property strictly
in accordance with the then current approved Budget, provided that, without
Owner's prior approval, Manager may (i) exceed any pre-approved category
or line item of the approved Budget for a Fiscal Year by up to $10,000;
(ii)
incur expenses in excess of the approved Budget in the event of an
emergency requiring
immediate action to" avoid - Imminent personal injury or imminent material
property damage, provided that Manager notifies Owner as to such emergency,
the actions taken to address it and the costs of such emergency promptly
after the occurrence of the same; (iii) incur expenses to comply with
Legal
Requirements; and (iv) incur expenses necessary to satisfy Tenant's right
of quiet
enjoyment pursuant to a Lease. If a Budget is disapproved by Owner in
whole
or in part, or not approved prior to the commencement of the
ensuing
|
9
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
|
Fiscal
Year, Manager shall continue to manage and operate the Property pursuant
to the prior Fiscal Year's approved Budget or the previously approved
Budget for the current Fiscal Year (except for non-recurring expenditures
and capital expenditures) until Manager and Owner can resolve their
differences; provided, however, Manager shall be authorized to pay, as an
expense of the Property, third party costs outside the control of Manager,
such as, without limitation, taxes and utilities. Manager has the
authority to expend funds as provided in Section 2.8 in accordance with
the provisions of the current approved Budget and in accordance with the
provisions of this Section 2.6(F), provided that Manager shall not be
required in any event to expend its own funds if there are insufficient
funds available for Manager to perform its obligations hereunder.
Manager's failure to manage the Property in the manner required herein
shall be excused if Manager is prevented from doing so due to Owner's
failure or refusal to approve a Budget or to make available funds
sufficient for Manager to perform its obligations
hereunder.
|
(G)
|
Books and
Records. Manager shall maintain, at Manager's premises, in a manner
customary and consistent with generally accepted accounting principles,
accounting records based on Owner's fiscal year
end.
|
|
(i) |
Depreciation
and amortization expense are not to be recorded. Manager will make
available to Owner or Owner's auditors or tax preparers general ledger and
invoice details necessary for the preparation of depreciation and
amortization schedules.
|
|
(ii) |
Owner
shall at all times retain title to the information constituting such
books, records and accounts. Manager shall, during the Term, retain such
books, records (records to include copies of all Leases and Contracts and
other written instruments affecting the Property) and accounts and
maintain same at all times in reasonable condition for proper audit and in
accordance with the requirements of the Financing Documents while same
remain in effect. Upon termination, Manager shall, at the expense of
Owner, deliver such books and records to Owner. Any and all computer
programs, software and hardware not the property of Owner and utilized by
Manager to maintain such books, records and accounts shall in all events
remain the property of
Manager.
|
|
(iii) |
Upon
reasonable prior notice to Manager, Owner or its appointed representatives
may, at Owner's expense, inspect, audit and copy such books, records and
accounts during regular business hours or during such other time as
Manager may reasonably direct on a periodic or continuing basis by
accountants retained by Owner, or other representatives of Owner, and
Manager shall cooperate in good faith in connection with the same. For
purposes hereof, Owner's appointed representatives may include, without
limitation, Lender and its employees or authorized agents (and any advance
notice requirement contained herein shall not apply if same not provided
by the terms of the Financing
Documents).
|
10
Property Management
Agreement for Springfaouse at Newport Apartments, Newport News,
Virginia
|
(iv) |
Upon
commencement of this Agreement, Owner shall coordinate with previous owner
or manager the delivery of such reports and data as requested by Manager
for the accurate set up of the Property's books and records on the
Manager's property management and accounting
system.
|
|
(v) |
In
the event this Agreement is terminated, the Manager shall deliver such
books, records and accounts of the Property to Owner at Owner's expense.
Manager acknowledges that Lender may require Owner (by written demand
after an event of default has occurred under the Financing Documents) to
deliver to Lender all books and records relating to the Property or its
operation, and under such circumstances the Manager shall promptly deliver
such books, records and accounts of the Property to Owner at Owner's
expense. Manager shall deliver a final accounting within thirty (30) days
after the last day of the calendar month in which such termination
occurs.
|
|
(H)
|
Monthly/Quarterly
Reports. Manager shall furnish to Owner monthly reports for the
Property, which reports shall be prepared showing monthly and year to date
activity and which shall be furnished (without notice or demand by Owner)
as specified in Exhibit A. To
the extent the Financing Documents require monthly reports that differ
from those specified in Exhibit A.
Manager shall be required to produce and furnish to Owner such
Lender-required monthly reports in addition to the monthly reports
specified in Exhibit A. To
the extent the Financing Documents require quarterly reports, Manager
shall furnish to Owner quarterly reports for the Property containing such
information as is required pursuant to such Financing Documents. An
officer of Manager shall certify in writing that each report furnished by
Manager to Owner in accordance with this Section 2.6 (including those that
will be furnished by Owner to Lender in accordance with the requirements
of the Financing Documents) is complete and
accurate.
|
(I) Annual
Reports.
(i)
|
Manager
shall cooperate in good faith with Owner's accountants in the preparation
of a year-end statement of continuing operation of the Property, including
a balance sheet and related statements of income and cash flows, and any other Properly-level reports required by
the terms of the Financing Documents, all of which shall be
furnished not later than forty-five (45) days after the end of each Fiscal
Year.
|
(ii)
|
All such annual reports shall be
prepared on an accrual basis, and, at Owner's option and expense,
may be audited by a national firm of
independent certified public accountants selected by Owner ("Accountant" or "Auditor" as context requires). Owner
shall be responsible for arranging for such audit, and Manager shall
cooperate in good faith with Owner's Accountant or Auditor in the
preparation of Owner's audited financial statements. A draft of the
Auditor's report for
|
11
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
each Fiscal Year
shall be submitted to Owner for approval by Owner before finalization of the
same.
(J) Tax Matters
Reporting.
(i)
|
Manager
shall cooperate in good faith and at Owner's expense with Owner's (or
Owner's appointed Agent) accountants and cooperate in the preparation of
Owner's tax return including, but not limited to, supplying necessary
information for preparation of such tax return. The cost of preparation
and filing of the tax return will be borne by
Owner.
|
(ii)
|
As
reasonably requested by Owner, Manager shall complete all tax-related
surveys and questionnaires which Owner may reasonably
require.
|
(iii)
|
Manager
shall prepare at Owner's expense all state and local personal property and
other tax returns, as required by law, which are not prepared by Owner's
accountant.
|
2.7 Bank
Accounts.
(A)
|
Manager
shall establish and maintain an operating account (the “Operating Account”) in
the name of Owner for the Property for the collection of rents and other
receipts of the Property and an interest-bearing account for tenant
security deposits as required by law or by the terms of the Financing
Documents (the “Security
Deposit Account”).
|
(B)
|
The
Operating Account and the Security Deposit Account shall be maintained in
the name of Owner at an FDIC-insured financial institution selected by the
Manager (the "Depository"). All
funds deposited in such accounts or otherwise held by or in the name of
Manager for the account of Owner shall be held by Manager in trust and
Manager shall have no equitable interest therein and they shall not be
commingled with Manager's other funds. Manager shall in no event have any
liability in the event that the Depository should fail, go into
receivership or conservatorship or if such funds are otherwise not
available for reasons beyond Manager's reasonable control. Manager shall
indemnify and hold harmless Owner from and against any and all Damages
occurring by reason of any unauthorized application by Manager or its
directors, officers, employees, agents or representatives of any such
funds held for the account of Owner, it being agreed that all expenditures
made by Manager in a reasonable and good faith belief that same are
authorized hereunder shall not be subject to said
indemnity.
|
(C)
|
Sweep
accounts (if required by Lender) will be maintained-in the name of the
Owner in conjunction with the Operating Account in the event the monthly
balance of the Operating Account exceeds
$250,000.
|
(D)
|
Manager
shall ensure that tenant security deposits are deposited promptly in the
Security Deposit Account, as required by applicable law or by the terms of
the Financing Documents. As needed, Manager shall withdraw such
amounts from
|
12
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
the
Security Deposit Account as are necessary to (i) repay a security deposit (or
portion thereof) to a Tenant as required pursuant to the terms of such Tenant's
Lease; and (ii) cause the transfer of a forfeited tenant security deposit (or
portion thereof) to the Operating Account. Manager will prepare and maintain an
itemization of all deposits and withdrawals of the Security Deposit Account,
together with a reference to applicable apartment unit and description of an
application of said funds.
(E)
|
Upon
commencement of this Agreement, Owner shall cause to be delivered to
Manager a listing showing the current Tenants of the Property who
previously made security deposits under existing Leases of the Property
and will deliver the total amount of these security deposits via wire
transfer to the Security Deposit Account established by the Manager for
the Property.
|
2.8 Payment
of Expenses and Capital Expenditures
(A)
|
Manager
shall pay all expenses of operating the Property from the Operating
Account in such amounts as are necessary to
pay:
|
(i)
|
operating
expenses actually due and owing for such period (“Operating
Expenses”);
|
(ii) Mortgage
interest expense and principal payments (“Debt
Service”);
(iii) Lender
required reserves and escrows ("Lender
Reserves");
(iv) Management
Fees; and
(v)
|
Actual
capital expenditures for such period ("Capital Expenditures").
At the discretion of Owner and subject to any Lender requirements,
Capital Expenditures may be required to be approved by Owner and/or Lender
prior to payment or be funded separately by Owner or from Lender Reserves.
If such an election is made, Capital Expenditures are to be requested
based on actual expenditures and supported by actual invoices and other
documentation required by the Financing Documents. If and when a
requisition is made, the Manager must provide the
following:
|
(i) an
itemization by category of all types of Capital Expenditures;
(ii)
|
within
each Capital Expenditure type, there shall be a one-line summary by type
of improvement of the amount(s) previously spent, the amount of the
current request and the estimated amount to complete the
project;
|
(iii)
|
a
comparison to the original, approved Budget with an explanation for
material variances; and
|
13
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
(iv)
|
supporting documentation,
such as invoices and other documentation required by the Financing
Documents.
|
(B)
|
If
the funds on deposit in the Operating Account are insufficient or
projected to be insufficient
to cover the amounts necessary to pay the Operating Expenses, Debt Service,
Lender Reserves or Capital Expenditures for such
month,
|
(i)
|
Manager
shall promptly notify Owner, and Owner shall promptly make up such
negative cash flow by depositing an amount equal to the deficit in the
Operating Account. In such cases, Manager may, but shall not be obligated
to, advance Manager's own funds on behalf of Owner; and, if Manager makes
any such advance from Manager's own funds, Owner shall, within five (5)
days of written demand by Manager, reimburse Manager for any such advance
plus interest thereon at the rate per annum publicly announced by the
Depository as its base or prime rate from the date of such advance to, but
not including, the date of such
reimbursement.
|
(ii)
|
Until
such time as additional Owner funding (if required) has been received,
Manager shall prioritize payments from the Operating Account based on the
following order of priority: (1) Operating Expenses that are necessary to
maintain the operation of the Property, including but not necessarily
limited to utility costs, water and sewer charges (that could become a
lien on the Property), assessments or other charges (that could become a
lien on the Property) and Manager's costs for property-level employees
(i.e., wages, payroll handling fee, taxes, insurance, workers compensation
and other benefits for on-site employees as set forth in Section 2.2(B);
(2) third party debt service payments, including Lender Reserves; (3)
insurance premiums, if not included in Lender's Reserves; (4) Management
Fees; (5) real estate taxes, if not included in Lender's Reserves; (6)
personal property taxes; and (7) other bills and charges of third parties
related to the Property or the operation thereof with the oldest charges
being paid first.
|
(C)
|
Subject
to subparagraphs (a) through (c) below, Owner shall reimburse Manager
for
all actual, out of pocket expenses incurred and paid by Manager in
connection
with
the management and operation of the Property pursuant to the Budget approved
by Owner. Such expenses shall include but not be limited to Budgeted:
salary
and wages, payroll taxes, insurance, workers' compensation,
payroll handling
fee and other benefits for Manager's1
employees working on the Property;
advertising expenses; court costs; attorney's fees; office supplies; long
distance
phone calls; postage; computer fees; overnight courier expense; and
expenses
related to training on-site personnel. Such expenses shall not include
without
prior consent of Owner (except as specifically provided herein or in the
Schedules
attached
hereto):
|
14
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
(a)
|
the
cost of salary 'and wages, payroll taxes, insurance, workers compensation
and other benefits of Manager's management, accounting and office
personnel unless this personnel is filling a temporary vacancy of an
approved, budgeted on-site
position;
|
(b)
|
travel
expenses by Manager's management, accounting and office personnel unless
this personnel is filling a temporary vacancy of an approved, budgeted
on-site position; and
|
(c)
|
costs
of providing the reports and documents to be provided pursuant to the
provisions hereof, other than the costs and expenses incurred by Manager's
on site staff and the Auditor's services
hereunder.
|
2.9 Services
with Respect to Financing.
(A)
|
Manager
shall, at the expense of Owner, in accordance with the approved Budgets
unless otherwise provided herein, duly and punctually pay and perform on
behalf of Owner all of those Owner's obligations so requested by Owner for
any Property acquisition financing (or any refinancing thereof) (“Financing”) and shall
use its commercially reasonable efforts to comply with all of the terms
and provisions of any documents executed and delivered by Owner relating
to a Financing (collectively, the "Financing
Documents").
|
(B)
|
Each
of Manager and Owner shall promptly notify the other upon learning of any
default, or event of default or event which, with the giving of notice or
the passage of time or both, might constitute a default or an event of
default under any Financing Document. Manager shall consult with Owner
concerning the action to be taken with respect thereto and, at the expense
of Owner, take such action as Owner shall
direct.
|
(C)
|
Without
the consent of Owner, Manager (i) shall not modify, or in any way alter,
the provisions of any Financing Documents and (ii) shall not take any
action, or omit to take any action, or give any notice, the taking,
omission or giving of which might result in the occurrence of a default by
Owner under any Financing Documents to the extent such terms and
provisions are provided by Owner to Manager in
writing.
|
(D)
|
Each
of Manager and Owner shall promptly notify the other upon receiving any
notice under any Financing Documents (and furnish a copy of the notice
received by it with its notice to the other party) of any default, event
of default or condition which, with the giving of notice or the passage of
time or both, might result in a default or event of default by Owner under
any Financing Documents. Manager shall consult with Owner concerning the
action to be taken with respect thereto and, at the expense of Owner,
shall take such reasonable action as Owner shall
direct.
|
15
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
(E)
|
Upon
written request by Owner, Manager shall prepare all information, schedules
and reports necessary to calculate and/or support the covenants in any
Financing Documents encumbering the Property or as are otherwise required
to be provided by Owner under such Financing Documents, including, but not
limited to, preparing rent rolls, delivering historic income and expense
data for Financings, and providing debt covenant compliance information
including, but not limited to, rent rolls, annual budgets, audited
financial statements and debt service coverage ratio
calculations.
|
2.10 Notification of Sale or Financing
Transaction.
Notwithstanding
anything to the contrary set forth in this Agreement, it shall be a material
covenant of Owner under this Agreement that Owner deliver a written notice to
Manager promptly upon becoming aware that any person is offering or otherwise
marketing the Property for sale or offering the property as collateral in
connection with or arising from any Financing, Owner's failure to comply with
the foregoing covenant shall constitute a material default under this Agreement,
entitling Manager to terminate this Agreement upon not less than 30 days' notice
to Owner.
3. Services
with Respect to Property Sales and Post Sale-Closing
With
respect to any potential sale of the Property, the Manager shall cooperate in
good faith with Owner during the due diligence process and, as necessary,
perform the following duties and obligations during and after the sale
process:
(i)
|
Prepare
current rent rolls, historic income and expense data and such other
materials necessary to offer the Property for
sale.
|
(ii)
|
Process
information requests as reasonably requested by Owner, or due diligence
requests of potential buyers, including providing access to Lease files,
financial statements, service contracts, and supporting billing and
disbursement documentation.
|
(iii)
|
Prepare
and provide schedules and support for closing adjustments, including
revenue and expense prorations and, if necessary, reconciliations of
estimated billed recoverable expenses versus actual
expenses.
|
(iv)
|
Prepare
final accounting for the sale of the Property and, as necessary,
participate in the fieldwork and preparation of the financial statements
or audited financial statements to be prepared by the Auditor,
including, but not limited to, providing access to the Property's books
and records and having qualified personnel available during normal
business hours to answer any questions which may arise during the
fieldwork.
|
(v)
|
Prepare
the final expense and recoverable expense reconciliations relating to the
proration of revenues and expenses for the sale of the
Property.
|
16
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
(vi)
|
Process
any invoices, if applicable and as approved by Owner, for payments made
relating to property expenses for a period not to exceed sixty (60) days
after the sale date.
|
(vii)
|
Prepare,
upon the request of Owner, a final schedule of distributions to be
made.
|
(viii)
|
After
processing property disbursements and distributions, Manager shall close
all bank accounts for which it has
authorization.
|
(ix)
|
Aid
in the preparation of any buyer (or its lender) required third party
reports.
|
(x)
|
Aid
in site visits and/or due diligence requests of buyers (or their
lenders).
|
Post-closing
duties and obligations may span a period not to exceed sixty (60) days. The
monthly Management Fee covering the post-closing period shall be the greater of
50% of the previous 12 month average Management Fee or $ 1,500 paid monthly for
such 60 days.
4. Insurance
4.1 Owner’s
Insurance
Owner
shall maintain in full force and effect with respect to the Property and any
personal property of Owner located at the Property and used in connection
therewith, insurance policies satisfactory to Owner (or as required under any
Financing Documents) issued by insurance companies having an A.M. Best General
Policyholder's Service rating of not less than "A-,Vin" (or otherwise
satisfactory to Owner), which are licensed, or approved to do business, in the
state in which the Property is located and which are otherwise satisfactory to
Owner. Manager shall obtain same at Owner's expense, subject to the review and
acceptance of all coverage by Owner. All policies maintained by or for the
benefit of Owner shall provide the following
coverages: .
(A)
|
"All
Risk" property damage insurance including, without limitation, fire,
flood, sprinkler leakage, water damage and earthquake coverage, if
applicable and available at commercially reasonable rates, in an amount
and with an agreed amount endorsement equal to the lesser of (i) an amount
sufficient to prevent Owner from becoming a co-insurer in any loss under
the policy or (ii) equal to the replacement cost of the Property, and a
deductible reasonably approved by Owner. The policies of insurance carried
in accordance with this Section 4.1(A) shall contain (y) a replacement
cost endorsement without deduction for depreciation or obsolescence and
(z) a waiver of subrogation clause, all in form reasonably satisfactory to
Owner and Lender;
|
(B)
|
Rental
value insurance on the Property, if applicable, with a minimum twelve (12)
month indemnity period;
|
17
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
(C)
|
Business
Interruption Insurance, if applicable, on an eighty percent (80%) Gross
Earnings Form, with a minimum twelve (12) month indemnity period and
including ordinary payroll
coverages;
|
(D)
|
Commercial
General and Excess Liability Insurance, written on an occurrence basis,
including blanket contractual liability, products and completed operations
and personal injury coverage with a combined single limit for any one
occurrence of $5,000,000 or such higher limit as Owner may from time to
time reasonably request. Such requirement may be satisfied by a layering
of Commercial General Liability, Umbrella and Excess Liability policies,
but in no event will the liability insurance be written for an amount less
than $5,000,000 combined single limit for bodily injury and property
damage liability.
|
(E)
|
Boiler
and Machinery Breakdown Direct Damage Insurance and third party liability
coverage (if not covered under the Commercial General Liability Policy)
with
full comprehensive coverage on a repair and replacement basis for all HVAC
equipment,
electrical equipment, boilers and machinery which form a part of the Property
including Business Interruption Coverage for Loss of Rental Income in
connection
therewith in accordance with Section 4.1(C)
hereof;
|
(F)
|
During
the course of any construction or repair of Improvements or during the
course
of Restoration on the Property (other man Tenant leasehold Improvements),
Builder's Risk Insurance on a completed value basis and on a non-reporting
form against "all risks of physical loss," including flood (if available
at commercially reasonable rates), earthquake (if available at commercially
reasonable rates), collapse and transit coverage (if available at commercially
reasonable rates), during construction of such Improvements or Restoration,
with deductibles reasonably satisfactory to Owner, covering the replacement
cost value of work performed and the equipment, supplies and materials
furnished (unless such equipment, supplies and materials are required to
be
insured by contractors or vendors) and rent loss insurance for a period
not less than
twelve (12) months in an amount reasonably satisfactory to Owner. Such
policy
of insurance shall contain a permission to occupy upon completion of work
or occupancy" endorsement, a waiver of coinsurance or an agreed amount
endorsement
and an agreement by the insurer that following a loss, the insurer will
pay to the insured (i) the full value of the loss (less the deductible),
provided that
Owner is required to or elects to rebuild or (ii) the actual cash value of
the loss
in the event Owner is not required to or does not elect to rebuild;
and
|
(G)
|
Such
other insurance with respect to the Property, in such amounts as Owner (or
any
Lender in connection with a Financing) from time to time may require
against such
other insurable hazards which at the time are commonly insured against for
Comparable
Properties.
|
Manager
shall submit all insurance policies it obtains on behalf of Owner pursuant to
this Section 4.1 for Owner's and Lender's, if applicable, review and approval.
Manager will obtain and maintain all insurance coverages referenced in this
Section 4.1 so as to be in
18
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
|
compliance
with Financing Document requirements (in the event of any conflict between
the provisions set forth in this Section 4.1 and the insurance
requirements imposed under the Financing Documents, the insurance
requirements imposed under the Financing Documents shall govern and
control).
|
4.2 Manager's
Insurance
Manager
shall, at the expense of Manager, maintain in full force and effect insurance
policies with respect to^ the employees of Manager in form reasonably
satisfactory to Owner (or as required under any Financing Documents) and issued
by insurance companies having: an A.M. Best General Policyholder's Service
rating of not less than "A-,VTII" which are licensed in the state in which the
Property is located and which are otherwise reasonably satisfactory to Owner.
Such policies shall provide the following coverage:
(A)
|
Worker's
compensation and employer's liability insurance subject to the statutory
limits of the state in which the Property is located. Manager shall
provide Owner with a certificate evidencing such
coverage.
|
(B)
|
Comprehensive
automobile liability insurance covering owned, non-owned, and hired
vehicles in an amount not less than $1,000,000 combined single limit for
bodily injury and property damage. Such requirements may be satisfied by
layering of comprehensive automobile liability, umbrella and excess
liability policies.
|
(C)
|
Fidelity
bond and computer crime insurance with an annual limit of a minimum of
$1,000,000 for each director, officer, employee or agent of Manager
associated with the management of the Property including the handling of
receipts and disbursements.
|
(D)
|
Commercial
general and umbrella liability insurance, written on an occurrence -
basis, in an amount not less than $1,000,000 and $10,000,000,
respectively. Such umbrella liability insurance shall apply in excess of
the commercial general liability insurance and the insurance required in
Sections 4.2(a) and 4.2(b).
|
(E)
|
Professional
liability insurance with an annual limit not less than $1,000,000 per
occurrence
and in the aggregate with an extended period of indemnity. Such insurance
policy shall survive the termination or expiration of this Agreement for
a
minimum period of two (2) years following the expiration or termination of
this Agreement.
|
Manager
will obtain and maintain all insurance coverages referenced in this Section 4.2
so as to be in compliance with Financing Document requirements (in the event of
any conflict between the provisions set forth in this Section 4.2 and the
insurance requirements imposed under the Financing Documents, the insurance
requirements imposed under the Financing Documents shall govern and
control).
19
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
4.3 Blanket
Insurance
Subject
to Owner's (and Lender's, if applicable) prior consent, Manager may effect any
coverage required under this Article 4 under a blanket insurance policy
reasonably satisfactory to Owner, provided that (i) any such policy of blanket
insurance either shall specify therein, or the insurer under such policy shall
certify to Owner, (a) the maximum amount of the total insurance afforded by the
blanket policy allocated to the Property and (b) any sublimits in such blanket
policy applicable to the Property, which amounts shall not be less than the
amounts required pursuant to this Article 4; (ii) any such policy of blanket
insurance shall comply in all respects with the other provisions of this Article
4; (iii) the protection
afforded under any policy of blanket insurance hereunder shall be no less than
that which would have been afforded under a separate policy or policies relating
only to the Property, and (iv) the coverages under such blanket policies
otherwise conform in all respect to the insurance requirements imposed by the
Financing Documents.
4.4 Policies
(A)
|
The
insurance maintained under Section 4.1 shall name Owner as the Insured and
Manager, Lender and such other affiliated parties as additional insureds
as their interests may appear. Such insurance may also be extended to name
other persons as Owner may specify or as Lender may require, from time to
time, as additional insureds as their interests may
appear.
|
(B)
|
The
insurance maintained under Section 4.2 shall name Manager as the insured
thereunder. The insurance maintained under Section 4.2(B) and (D) shall
name Owner, Lender and such other persons as Owner may specify or as
Lender may require, from time to time, as additional insureds as their
interests might appear.
|
(C)
|
All
insurance maintained under this Article 4 shall provide that (i) no
cancellation or reduction thereof shall be effective until at least thirty
(30) days after receipt by Owner, Lender and Manager of written notice
thereof and (ii) all losses shall be payable notwithstanding any act or
negligence of any Tenant (or its guests or invitees) or Manager or its
partners, directors, officers, employees or agents which might, absent
such agreement, result in a forfeiture of all or part of such insurance
payment and notwithstanding (a) the occupation or use of the Property for
purposes more hazardous than permitted by the terms of such policy, or (b)
any foreclosure or other action or proceeding taken pursuant to the
provision of any mortgage with respect to the Property or (c) any change
in title or ownership of the Property. As used herein, the term “Insurance Requirements”
shall mean the terms and conditions of the insurance policies
required to be obtained and maintained by Manager under this Article 4 and
the insurance requirements of the Financing
Documents.
|
(D)
|
Manager
shall furnish to Owner and Lender, upon request, certificates of insurance
or other evidence satisfactory to Owner of the renewal thereof, and
evidence satisfactory to Owner and Lender of payment of the premiums
therefor.
|
20
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
|
Upon
Owner's request, Manager shall deliver a copy of each policy certified to
be a true copy by the insurer or insurance broker with respect to such
policy.
|
(E)
|
Manager
shall also cooperate with Owner in procuring and maintaining Law/Ordinance
Insurance for Zoning/Parking issues, as and where required by Lender or
Owner.
|
4.5 Payment
of Premiums by Owner
If
Manager fails to maintain the insurance required to be maintained under this
Article 4 or fails to deliver evidence of insurance, Owner may, but shall not be
obligated to, obtain such insurance and pay the premiums therefore and in the
case of the insurance described in Section 4.2 or the duplication of any other
insurance described in Article 4, Manager shall, on demand, reimburse Owner for
all actual sums advanced and reasonable expenses incurred in connection
therewith.
4.6 Claims
In the
event of a loss related to the Property under any of the insurance policies
described in Sections 4.1 and 4.2(B), (C) and (D), Manager shall, if Manager has
knowledge of the loss, promptly after learning of same, file a claim on behalf
of Owner (and any other party that is also named insured) and use commercially
reasonable efforts to diligently monitor such claim on behalf of such insured
party and cooperate in good faith with any appointed representatives,
consultants and adjusters retained by or on behalf of the insurance companies'
interests. Manager shall also notify Lender of such loss to the extent notice is
required under any Financing Documents.
4.7 Subrogation [Intentionally
Deleted]
5. Manager's
Compensation
5.1 Management
Fees
(A)
|
Owner
shall pay Manager, and Manager shall accept, as compensation for Manager's
management services during the Term a fee on a monthly basis in an amount
equal to four percent (4%) of Gross Receipts actually collected by Manager
during that month (the “Management Fee”).
Notwithstanding the foregoing, Manager acknowledges that the Financing
Documents may impose limitations on Owner's ability to pay such Management
Fee under certain enumerated conditions, with Owner not to be considered
in default of this Agreement should the full Management Fee not be paid to
Manager when such conditions
exist.
|
(B)
|
The
Management Fee for any month shall be estimated and paid as an Operating
Expense on the 10th day of the month to which it relates. Reconciliation
and true up of the Management Fee estimate will be calculated as part of
the month end close out and will be paid as an Operating Expense on the
10th
day of the
|
21
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
following month. Subject to Section 2.8(B) and (C),
Manager is hereby authorized to pay itself the Management Fee from the Operating
Account.
(C)
|
For
the purposes of this Section 5.1, the term “Gross Receipts” shall
mean all amounts actually collected as rents or other charges for use or
occupancy of space or facilities in the Property, including furniture
rental, forfeited security deposits, pet fees, non-refundable application
fees, decorating fees, late charges, collections from residents for water,
sewer, electric, gas, oil and trash, royalties received for laundry
equipment/services, cable/telephone/Internet services, insurance proceeds
received as business loss compensation (to the extent Lender allows same
to be collected by Owner), and all other miscellaneous income with respect
to the Property, but excluding other receipts, such as interest or
investment income, tenant security deposits (unless and until forfeited),
insurance proceeds received as replacement cost, tax refunds, condemnation
awards, dividends on insurance policies and proceeds of any other capital
event or sale of the Property or related personal property (or any portion
thereof).
|
(D)
|
Manager
shall pay to BR Springhouse Managing Member, LLC ("Managing Member LLC")
an "Oversight Fee"
of one percent (1%) payable from the Management Fee earned each month as
defined above (for the avoidance of doubt the amount re-allowed to
Managing Member LLC will be the equivalent of 25% of the Management Fee,
so that Managing Member LLC has been re-allowed 1% of the monthly Gross
Receipts and Manager has been compensated 3% of the monthly Gross
Receipts).
|
5.2 Construction
Management Fees
Five
Percent (5%) of the cost of any capital project exceeding $10,000 (which items
have been approved by Owner and have been itemized in the approved Budget) but
not including regular recurring interior capital replacements such as carpet,
floor vinyl and appliance replacements. Additionally, if the services of a
capital projects manager is required and has been approved by Owner, such
capital projects manager will charge to the Property $40.00 per hour for time
worked plus travel time, travel expenses and accommodations
expenses.
5.3 Renovation/Capital
Projects/Insurance Rehabilitation Fees
Not Applicable.
5.4 For Capital Event (Refinance, Sale,
etc.)
Not
applicable.
5.5 Payroll
Handling Fee
$12.00
per employee per payroll period.
22
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
5.6 Training
As
approved in advance in writing by Owner, Manager will charge the Property for
the direct costs of travel and accommodations for Manager's on-site personnel
for attendance at required training and corporate conference
events,
6. Term
6.1 Term
The term
shall commence as of the date hereof and shall expire on the second (2nd)
anniversary of the date hereof (the "Initial Term")* unless
extended or sooner terminated as hereinafter provided.
6.2 Extension
After the
expiration of the Initial Term, subject to termination under Section 6.3, the
term of this Agreement ("Term")
shall be automatically extended on an annual basis unless terminated by
Owner or Manager by written notice to the other party given not less than thirty
(30) days' prior to the end of the Initial Term or the then current Term, as
applicable.
6.3 Termination
(A)
|
In
the event of the sale of all or substantially all of Owner's interest in
the Property (including any sale by agreement, foreclosure or otherwise),
this Agreement shall terminate upon the consummation of such
sale.
|
(B)
|
If
any one or more of the following events (each an "Event of Default")
shall occur and be
continuing:
|
(i)
|
if
Manager shall assign this Agreement or delegate its duties hereunder
without the prior written consent of
Owner;
|
(ii)
|
if
any material license, permit or qualification held by Manager and
necessary for the performance of its duties or services hereunder shall be
terminated or suspended, and such termination or suspension, as the case
may be, is not reversed within fifteen (15) days following notice thereof
by the applicable licensing authority or
Owner;
|
(iii)
|
if
Manager or any of its Affiliates or any of their directors, partners,
officers agents, representatives, contractors or employees shall
misappropriate any funds of Owner or otherwise be guilty of gross
negligence, willful misconduct, bad faith, fraud, malfeasance, breach of
fiduciary duty, or criminal misconduct in connection with Manager's duties
hereunder;
|
23
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
(iv)
|
if
Manager or Owner shall fail to pay any amount payable to the other party
under this Agreement when due and such default shall continue for ten (10)
days after notice thereof to the defaulting
party;
|
(v)
|
(a)
if Manager or Owner shall fail to comply with any provision of this
Agreement (other than those described in Section 6.3(B)(i) through (iv)
and (vi) through (viii)) and such default shall continue for ten (10) days
after notice of such default is given by Owner to Manager; or (b) if such
default cannot reasonably be cured within such ten (10) day period, if
Manager or Owner shall fail to commence the curing of such default within
such ten (10) day period (and to notify the other party within such ten
(10) day period that Manager or Owner has commenced such cure and will
prosecute such cure diligently and complete the same, which notice shall
specify Manager's or Owner's estimate of the time period within which such
cure will be completed) or, thereafter, shall fail to prosecute such cure
diligently and complete the same within sixty (60) days; or (c) if, after
the ten (10) day period described in clause (a) of this Section 6.3(B)(v),
the other party is subject to any criminal liability or unbonded civil
liability, the Property is subject to any unbonded Lien or the
non-defaulting party or the Property is subject to any material risk of
loss by reason of the defaulting party's failure to comply with such
provision of this Agreement;
|
(vi)
|
if
Manager shall fail to follow any lawful direction of Owner or Lender with
respect to the Property which direction complies with this Agreement and
such default shall continue for three (3) Business Days after notice of
such default is given by Owner to
Manager;
|
(vii)
|
(a)
if Manager or Owner shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself
or its debts under any bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidation, custodian or other similar official of its
or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or (b) if an involuntary case or
other proceeding shall be commenced against Manager or Owner seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency, reorganization or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidate, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty
(60) days; or (c) if an order for relief shall be entered against
Manager or Owner under
any
|
24
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
bankruptcy,
insolvency, reorganization or other similar law now or hereafter in
effect;
(viii)
|
if
there shall be a dissolution or termination of the corporate existence of
Manager or Owner by merger, consolidation or otherwise;
or
|
(ix)
|
if
(a) Manager shall fail to provide Owner with any report required under
Section 2.6 hereof and same causes Owner to be in default under the terms
of the Financing Documents or (b) if fraud or any material
misrepresentation or material omission by Manager in connection with any
report required under Section 2.6 hereof leads to a corresponding
declaration of a default by Owner under the terms of the Financing
Documents, or (c) if Manager fails to deliver the books, records and
accounts of the Property to Owner when required to do pursuant to Section
2.6(G)(v) above.
|
then,
while any such Event of Default shall be continuing, the non-defaulting party
shall have the right to terminate this Agreement by notice to the defaulting
party and to exercise any and all other rights and remedies available under this
Agreement and at law or in equity. Notwithstanding anything to the contrary
contained herein while any such Event of Default shall be continuing beyond any
applicable cure period, the non-defaulting party may, at its option, elect to
terminate this Agreement. In the case of an Event of Default specified in
Paragraph 6.3(B)(ix)(a) or (c), the Manager shall be responsible for
reimbursement of any personal liability incurred by Owner, or the guarantors of
the Financing, under the Financing Documents relating
thereto.
(C)
|
Notwithstanding
anything to the contrary contained herein, Owner shall have the right to
terminate this Agreement upon thirty (30) days' prior notice' to the
Manager, with or without
cause.
|
(D)
|
Notwithstanding
anything to the contrary contained herein, Manager shall have the right to
terminate this Agreement upon sixty (60) days' prior notice to the Owner,
with or without cause.
|
(E)
|
In
the case of an Event of Default under Sections 6.3 (B) (vii) (a) or (c),
the notice of
termination shall be deemed to have been given upon the occurrence of such
Event
of Default.
|
(F)
|
Following
the expiration or termination of this Agreement, Manager shall cooperate
in good faith with Owner and Owner's agents, employees and representatives
(and Lender and its representatives, where applicable) to effectuate
an orderly transition in connection with the management and/or operation
of the Property. Following the expiration or termination of this Agreement,
Manager shall promptly deliver to Owner (or such other party as is designated
by any Lender) (i) all books, records, leases, agreements, and other documents
and instruments in Manager's possession or control relating to
the
|
25
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
Property,
or the management or operation thereof, (ii) the unused inventory of all
supplies, materials, tools and equipment owned by Owner and used in connection
with the management and/or operation of the Property, and (hi) all keys to any
locks on the Property and security codes then in the possession of Manager,
together with any plans and specifications pertaining to the Property then in
the possession of Manager. The provisions of this Section 6.3(F) shall survive
the expiration or termination of this Agreement.
7. Miscellaneous
7.1 Notices
All
notices, requests, permissions, waivers and other communications (individually
and collectively, a “Notice”) to either party
hereunder shall be in writing and, unless otherwise specified herein, shall be
delivered by hand, facsimile, United States registered or certified mail, return
receipt requested, United States Express Mail, Federal Express, Airborne Express
or any other national overnight express delivery service (in each case postage
or delivery charges paid by the party giving such communication) addressed to
the party to whom such communication is given at its address or facsimile number
set forth in Part I.
Unless
otherwise specified herein, each such Notice addressed and given as set forth
above shall be effective (i) the date of receipt of such Notice, or attempted
delivery of such Notice if receipt is refused; and (ii) if sent by mail as
aforesaid, the date which is seventy-two (72) hours after such Notice is
deposited in the mail, postage prepaid as aforesaid. Owner or Manager may change
its address under this Section 7.1 by delivering Notice to the other party
provided that no such address shall be located outside of the United States of
America. . -.
7.2 Representations
and Warranties
(A)
|
Manager
represents and warrants to Owner that (i) Manager is a limited
liability company
duly organized and validly existing and in good standing under the laws of
the State
of North Carolina and has all requisite power and authority to
carry on its business as now conducted and to execute, deliver and perform
its obligations under this Agreement; (ii) the execution, delivery and
performance by Manager of this Agreement are within its power, have been
authorized by all necessary corporate action and do not contravene any
provision of its operating agreement or certificate of formation; (iii)
this Agreement has been duly executed and delivered by Manager; (iv) this
Agreement is a valid and binding obligation of Manager; (v) the execution,
delivery and performance by Manager of this Agreement does not conflict
with or result in a breach of any of the provisions of, or constitute a
default under, any bond, note or other evidence of indebtedness,
indenture, mortgage, deed of trust, loan agreement or similar instrument,
any Lease or any other material agreement or contract by which Manager, or
its activities or the Property, is bound or any applicable law or order,
rule or regulation of any court or governmental authority having
jurisdiction over Manager, its activities or the Property; and (vii) to
Manager's knowledge, no order, permission, consent, approval, license
(other than those already held
by
|
26
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
Manager),
authorization, registration or filing by or with any governmental authority
having jurisdiction over Manager, its activities or the Property is required for
the execution, delivery or performance by Manager of this
Agreement.
(B)
|
Owner
represents and warrants to Manager that (i) Owner is duly organized and
validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to carry on its
business as now conducted and to execute, deliver and perform its
obligations under this Agreement; (ii) the execution, delivery and
performance by Owner of this Agreement are within its power, have been
authorized by all necessary corporate action and do not contravene any
provision of its operating agreement or certificate of formation; (iii)
this Agreement has been duly executed and delivered by Owner; (iv) this
Agreement is a valid and binding obligation of Owner; (v) the execution,
delivery and performance by Owner of this Agreement do not conflict with
or.result in a breach of any of the provisions of, or constitute a default
under, any bond, note or other evidence of indebtedness, indenture,
mortgage, deed of trust, loan agreement or similar instrument, any Lease
or any other material agreement or contract by which Owner, or its
activities or the Property is bound or any applicable law or order, rule
or regulation of any court or governmental authority having jurisdiction
over Owner, its activities or the Property; and (vii) to Owner's
knowledge, no order, permission, consent, approval, license (other than
those already held by Owner), authorization, registration or filing by or
with any governmental authority having jurisdiction over Owner, its
activities or the Property is required for the execution, delivery or
performance by Owner of this
Agreement.
|
7.3 No
Partnership, etc.
Nothing
in this Agreement shall be construed as making Owner or Manager partners, joint
ventures or members of a joint enterprise or as creating between Owner and
Manager any employer employee relationship.
7.4 Severability
If any
provision of this Agreement or the application thereof to any person or
circumstances shall be held invalid, or unenforceable, the other provisions of
this Agreement or the application of such provision to other persons or
circumstances shall not be effected thereby but shall continue to be valid and
enforceable to the fullest extent permitted under applicable
law.
7.5 Modification
Except as
specified herein, no provision of this Agreement shall be modified, waived or
terminated except by an instrument in writing signed by the party against whom
such modification, waiver or termination is to be enforced.
27
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
7.6 Successors
and Assigns
(A)
|
This
Agreement shall be binding upon and inure to the benefit of Manager and
Owner and their respective successors and permitted assigns, and all
references in this Agreement to "Manager" and "Owner" shall include
the respective successors and permitted assigns of such
parties.
|
(B)
|
Notwithstanding
anything to the contrary contained herein, Manager shall not assign this
Agreement or delegate its duties and obligations hereunder without the
prior written consent of Owner, which consent may be granted or withheld
in the sole and absolute discretion of Owner, and without the prior
written consent of Lender should such consent be required pursuant to the
terms of the Financing
Documents.
|
7.7 Limitation
of Liability
Notwithstanding
anything to the contrary, if Manager shall recover any judgment against Owner in
connection with this Agreement, Manager shall look solely to Owner's interest in
the Property for the collection or enforcement of any such judgment, and no
other assets of Owner shall be subject to levy, execution or other process for
the satisfaction or enforcement of such judgment, and neither Owner nor any
person having an interest in Owner shall be liable for any deficiency. Manager's
employees, officers, directors, members and shareholders shall not be personally
liable for any of Manager's liabilities arising under this
Agreement.
7.8 Governing
Law
This
Agreement shall be governed by and construed in accordance with the laws of the
State in which the Property is located, without regard to principles of
conflicts of laws. Manager and Owner, after consulting or having had the
opportunity to consult with counsel, knowingly, voluntarily and intentionally
waive any right they may have to a trial by jury in any action brought with
respect to this Agreement or any of the transactions contemplated by this
Agreement or any course of conduct, dealing, statements (whether oral or
written) or actions of any party to this Agreement. Manager and Owner shall not
seek to consolidate, by counterclaim or otherwise, any such action in which a
jury trial has been waived with any other action in which a jury trial cannot be
or has not been waived. These provisions shall not be deemed to have been
modified in any respect or relinquished by either party except by a written
instrument executed by such party.
7.9 Counterparts
This
Agreement maybe signed in any number of counterparts, each of which shall be
deemed to be an original, with the same effect as if the signatures thereto and
hereto were on the same instrument.
28
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
7.10 Exclusive
Benefit
Neither
this Agreement nor any provision hereof nor any service, relationship or other
matter alluded to herein shall inure to the benefit of any third party (except a
successor or assign of Owner and its mortgagees, if any), to any trustee in
bankruptcy, to any assignee for the benefit of creditors, to any receiver by
reason of insolvency, to any other fiduciary or officer representing a bankrupt
or insolvent estate of either party, or to the creditors or claimants in such an
estate. Without limiting the generality of the foregoing sentence, it is
specifically understood and agreed that insolvency or bankruptcy of either party
hereto shall, at the option of the other party, void all rights of such
insolvent or bankrupt party hereunder (or as many of such rights as the other
party shall elect to void) except to receive any moneys which are due to the
insolvent or bankrupt party.
7.11 Attorneys'
Fees
If either
party hereto shall obtain a judgment against the other party in connection with
a dispute arising under or in connection with this Agreement (whether in an
action or through arbitration), such party shall be entitled to recover its
court (or arbitration) costs, and reasonable attorneys' fees and disbursements
incurred in connection therewith and in any appeal or enforcement proceeding
thereafter, in addition to all other recoverable costs. Similarly, should either
party hereto be made a party to, or otherwise is required to participate to
protects its interests hereunder in, any proceeding described in Section
6.3(B)(vii) involving the other party hereto, then such party shall be entitled
to recover its court costs, and reasonable attorneys' fees and disbursements
incurred in connection therewith and in any appeal or enforcement proceeding
thereafter, in addition to all other recoverable costs.
7.12 Nondiscrimination
Manager
hereby agrees, warrants and assures that no person shall be excluded from
participation in, be denied benefits of, or be otherwise subjected to
discrimination in the performance of this Agreement or in the employment
practices of Manager on the grounds of disability, age, race, color, religion,
sex, national origin, or any other classification protected by Federal or state
constitutional or statutory law. Manager shall, upon request, show proof of such
nondiscrimination and shall post in conspicuous places, available to all
employees and applicants, notices of nondiscrimination as required by any
applicable Federal or state constitutional or statutory law.
[SIGNATURES ON FOLLOWING
PAGE]
29
Property
Management Agreement for Sprmghouse at Newport Apartments, Newport News,
Virginia
IN
WITNESS WHEREOF, Owner and Manager have executed and delivered this Agreement as
of the date first above written.
Owner:
|
||
BR
SPRINGHOUSE. LLC
|
||
By:
|
BR
SPRINGHOUSE KB, LLC,
a
Delaware limited liability company,
its
Manager
|
|
By:
__________________
|
||
|
Name:
_________________
|
|
Title:
_________________
|
||
Manager:
|
||
HAWTHORNE
RESIDENTIAL PARTNERS. LLC
|
||
By:
|
/s/
Xxxxxx X.
Xxxxxxxxxx
|
|
Name:
Xxxxxx X.
Xxxxxxxxxx
|
||
Title:
Managing Member
|
||
MANAGING
MEMBER LLC (as to Section 5.1 (D)):
|
||
BR
SPRINGHOUSE MANAGING MEMBER, LLC
|
||
By:
|
BLUEROCK
REAL ESTATE, L.L.C.,
a
Delaware limited liability company,
its
Manager
|
|
Jordan
X. Xxxxx
President
|
30
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
IN
WITNESS WHEREOF, Owner and Manager have executed and delivered this Agreement as
of the date first above written.
OWNER:
|
|||
BR
SPRINGHOUSE, LLC,
a
Delaware limited liability company
|
|||
By:
|
BR
SPRINGHOUSE KB, LLC,
a
Delaware limited liability company,
its
Manager
|
||
By:
|
|||
/s/ Jordan X. Xxxxx | |||
Jordan
X. Xxxxx
President
|
|||
MANAGER:
|
|||
HAWTHORNE
RESIDENTIAL PARTNERS, LLC,
a
North Carolina limited liability company
|
|||
By:
|
|||
Name
|
|||
|
|||
Title: | |||
|
|||
MANAGING MEMBER LLC (as to Section 5.1
(D)):
|
|||
BR
SPRINGHOUSE MANAGING MEMBER, LLC, a Delaware limited liability
company
|
|||
By:
|
BLUEROCK
SPECIAL OPPORTUNITY +
INCOME
FUND, LLC,
a
Delaware limited liability company,
its
Manager
|
||
By:
|
BLUEROCK
REAL ESTATE, L.L.C.,
a
Delaware limited liability company,
its
Manager
|
||
/s/
Jordan X. Xxxxx
|
|||
Jordan
X. Xxxxx
President
|
30
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
Exhibit
A
Monthly
Reporting Package Due Date: 15th of each
month
Delivery
Method: Electronic
Monthly
Reporting Package Table of Contents
(1) Balance
Sheet
(2) Month-to-Date
and Year-to-Date Budget Comparison Report;
(3) 13 Month
Rolling Profit and Loss Statement;
(4) Statement
of Cash Flows;
(5) Comparative
Balance Sheet showing current month and prior month balances; .
(6) General
Ledger for the current month;
(7) Variance
Report with narrative explanations of all material variances (*i.e, those exceeding the lesser of five
percent (5%) or $1,000 of an individual Budget category of income or expense
(actual compared to Budget) for the reporting period on a monthly and Fiscal
Year to date basis;
(8) Rent Roll
as of month end close out;
(9) Aged
Accounts Receivable Summary (i.e. Tenant Delinquent Report);
(10) Accounts
Receivable activity statement itemizing for the reporting period the opening
rents receivable balance, the collected and billed rents, the closing rents
receivable balance and any advanced rent and security deposit
balances;
(11) Monthly
Management Fee Calculation and Fiscal Year to date
reconciliation;
(12) Aged
Payables schedule;
(13) Market
Survey detailing leasing activity at the Property, the competitive environment
vacancy rate for the relevant market in which the Property is locate for the
current month.
(14) Narrative/Executive
Summary reporting (i) general operations and performance; (ii) marketing/leasing
activity: (iii) monthly site activity; (iv) capital improvements in progress;
(v) pending marketing and management plans for upcoming month and
quarter
Each of
the above-described monthly reports shall be prepared, where applicable, on an
accrual
basis of
accounting or on such other basis set forth in Section
2.6(G).
31
Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia
Exhibit
B
Monthly
Cash Flow Distribution Calculation:
Distributable Funds Worksheet
As
of____________
|
||||
Operating
Cash Balance (as__________ of)
|
||||
Security
Deposit (MM Acct) Cash Balance Excess Cash
|
||||
Self-Managed
Repair Escrow
|
||||
Insurance
Capital Reserve 2009
|
-
|
|||
Franchise
tax 2009
|
||||
Security
Deposit Liability
|
||||
Excess
Cash Available
|
$
|
-
|
||
Total
Cash Available
|
-
|
|||
Reserve
for Utilities
|
-
|
|||
Reserve
for Payroll
|
||||
Reserve
for Outstanding Checks
|
||||
Reserve
for Vendor Payables
|
||||
Tax
Escrow shortage
|
||||
Transfer
to/(from) Parent
|
||||
Total
Reserves
|
$
|
-
|
||
Excess
Cash
|
-
|
|||
Working
Capital Cushion
|
||||
Distributable
Funds
|
$
|
-
|
||
32