-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eiqo4aQKhgY6Ljo1Na0Ky0HeeUl+dJuSXJlY2lBU7SryB10h9VuMrvw2mUkcGMiS 2OI8yyHzBf1FYA9l0+sNwQ== 0000726995-98-000003.txt : 19980402 0000726995-98-000003.hdr.sgml : 19980402 ACCESSION NUMBER: 0000726995-98-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLUSTER HOUSING PROPERTIES CENTRAL INDEX KEY: 0000726995 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 042817478 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-13556 FILM NUMBER: 98584326 BUSINESS ADDRESS: STREET 1: 57 RIVER ST CITY: WELLESLEY HILLS STATE: MA ZIP: 02181 BUSINESS PHONE: 6172370544 MAIL ADDRESS: STREET 1: 57 RIVER STREET CITY: WELLESLEY HILLS STATE: MA ZIP: 02181 FORMER COMPANY: FORMER CONFORMED NAME: BERRY & BOYLE CLUSTER HOUSING PROPERTIES DATE OF NAME CHANGE: 19920703 10-K 1 10K FOR THE YEAR ENDED DECEMBER 31, 1997 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to ________________ Commission File No. 0-13556 Cluster Housing Properties (A California Limited Partnership) (formerly Berry and Boyle Cluster Housing Properties) (Exact name of registrant as specified in its charter) California 04-2817478 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5110 Langdale Way, Colorado Springs CO 80906 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (719) 527-0544 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interests Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 and 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Aggregate market value of voting securities held by non-affiliates: Not applicable, since securities are not actively traded on any exchange. Documents incorporated by reference: None The Exhibit Index is located on page F-20 PART I ITEM 1. BUSINESS This form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. Cluster Housing Properties (the "Partnership"), formerly Berry and Boyle Cluster Housing Properties, is a California limited partnership formed on August 8, 1983. The General Partners are Stephen B. Boyle and GP L'Auberge Communities, L.P., a California limited partnership, formerly Berry and Boyle Management. The primary business of the Partnership is to operate and ultimately dispose of a diversified portfolio of income-producing residential real properties directly or through its joint venture interest in joint venturers which own such properties. The Partnership currently owns one property, Pinecliff, having sold two of its properties during 1997. Descriptions of such properties are included below in "Item 2. Properties" as well as in note 5 of Notes to Consolidated Financial Statements included in this report and incorporated herein by reference thereto. As further discussed in Item 2 below and in Note 9 of the Notes to the Consolidated Financial Statements, after taking into consideration such factors as the price to be realized, the possible risks of continued ownership and the anticipated advantages to be gained for the partners, the General Partners determined during 1997 that it would be in the best interests of the Partnership and the partners to dissolve the Partnership and liquidate its assets in 1998 (the "Dissolution"). Under the provisions of the Partnership's Partnership Agreement, the Dissolution of the Partnership requires the consent of a majority in interest of the limited partners. In March 1998, the General Partners requested the consent of the limited partners to the Dissolution pursuant to a Consent Solicitation Statement first mailed to the limited partners on or about March 18, 1998. Such consents will be solicited until April 15, 1998, which date may be extended by the General Partners until not later than June 1, 1998. The property owned by the Partnership is under contract to be sold to a purchaser unaffiliated with the General Partners. Net proceeds from the sales will not be reinvested by the Partnership, but will be distributed to the partners so that the Partnership will, in effect, be self-liquidating. The Partnership sold the Villas Sin Vacas and Villa Antigua properties during 1997 (see Item 2. Properties and Note 5 of Notes to Consolidated Financial Statements) and distributed the net proceeds from such sales. In addition, the Partnership has entered into a Purchase and Sales Agreement to sell the Partnership's remaining property, Pinecliff, to an unaffiliated third party (see Note 9 of Notes to Consolidated Financial Statements). Proceeds from the sale will not be reinvested by the Partnership, but will be distributed to the partners, so that the Partnership will, in effect, be self-liquidating. On-site management of the Partnership's property, Pinecliff, is currently provided by an affiliate of the General Partners. The terms of such property management services between the Partnership and property manager are embodied in a written management agreement. Property management fees equal 4% of the gross revenues from the property, plus reimbursement for allocable expenses. The property manager is responsible for on-site operations and maintenance, generation and collection of rental income and payment of operating expenses. The difference between rental income and expenses related to operations, including items such as local taxes and assessments, utilities, insurance premiums, maintenance, repairs and improvements (and reserves therefor), bookkeeping and payroll expenses, legal and accounting fees, property management fees and other expenses incurred, constitute the properties' operating cash flow. The Partnership's administrative expenses are paid out of the Partnership's share of such cash flow from the various properties. The success of the Partnership will depend upon factors which are difficult to predict and many of which are beyond the control of the Partnership. Such factors include, among others, general economic and real estate market conditions, both on a national basis and in those areas where the Partnership's investments are located, competitive factors, the availability and cost of borrowed funds, real estate tax rates, federal and state income tax laws, operating expenses (including maintenance and insurance), energy costs, government regulations, and potential liability under and changes in environmental and other laws, as well as the successful management of the properties. The Partnership's investment in real estate is also subject to certain additional risks including, but not limited to, (i) competition from existing and future projects held by other owners in the areas of the Partnership's property, (ii) possible reduction in rental income due to an inability to maintain high occupancy levels, (iii) adverse changes in mortgage interest rates, (iv) possible adverse changes in general economic conditions and adverse local conditions, such as competitive overbuilding, or a decrease in employment or adverse changes in real estate zoning laws, (v) the possible future adoption of rent control legislation which would not permit the full amount of increased costs to be passed on to tenants in the form of rent increases, and (vi) other circumstances over which the Partnership may have little or no control. The Partnership's investment is subject to competition in the rental, lease and sale of similar types of properties in the locality in which the Partnership's real property investment is located. Furthermore, the General Partners of the Partnership are affiliated with other partnerships owning similar properties in the vicinity in which the Partnership's property is located. The Partnership considers itself to be engaged in only one industry segment, real estate investment. ITEM 2. PROPERTIES In 1997, the Partnership owned and operated three properties: (1) Villas at Sin Vacas, a 72-unit multifamily rental property in Tucson, Arizona, which was sold in November 1997; (2) L'Auberge Pinecliff, formerly Autumn Ridge ("Pinecliff"), a 96-unit multifamily rental property in Colorado Springs, Colorado, subject to first mortgage financing in the original principal amount of $3,072,739; and, (3) Villa Antigua, an 88-unit multifamily rental property in Scottsdale, Arizona, which was sold in October 1997. The ownership of each property was formerly structured as a Joint Venture in which the Partnership owned a majority interest. With regard to the termination of the Joint Ventures and the sales of properties, see Note 5 of Notes to Consolidated Financial Statements. Villas at Sin Vacas On October 25, 1985, the Partnership acquired a majority joint venture interest in the Sin Vacas Joint Venture, which owned and operated Villas Sin Vacas. The Partnership contributed $2,520,954 to the Sin Vacas Joint Venture which was used to repay a portion of the construction loan on the property. The balance of the construction loan was repaid through the proceeds of a $2,575,000 permanent loan from a third party lender. In accordance with the terms of the Partnership Agreement, the Partnership paid an acquisition fee of $250,000 to GP L'Auberge Communities, L.P. for its services in structuring and negotiating the acquisition. The Partnership also incurred acquisition expenses relating to the acquisition which totaled $168,686. On November 25, 1997, Villas Sin Vacas was sold pursuant to the terms of a Sale Agreement and Escrow Instruction dated May 6, 1997, as amended. Villas Sin Vacas was sold to Villas Sin Vacas Townhome Ventures Limited Partnership, an Arizona Limited Partnership unaffiliated with the Partnership. The net selling price for Villas Sin Vacas was $4,952,091 subject to certain customary adjustments. The Partnership repaid first mortgage financing in the amount of $2,396,000 at closing utilizing a portion of proceeds from the sale. The Partnership recorded a gain on sale of approximately $975,000. Pinecliff On July 16, 1986, the Partnership assigned its right to acquire Pinecliff, the Autumn Ridge Joint Venture, which acquired the property for a purchase price of $7,320,760. The Partnership simultaneously contributed to the Autumn Ridge Joint Venture an amount equal to the total purchase price less the proceeds of a $3,300,000 permanent loan. In accordance with the terms of the Partnership Agreement, the Partnership paid an acquisition fee of $400,000 to GP L'Auberge Communities, L.P. for its services in structuring and negotiating this acquisition. The Partnership also incurred acquisition expenses relating to the acquisition which totaled $97,475. As of January 27, 1998, the property was 87% occupied, compared to 86% approximately one year ago. At December 31, 1997 and 1996, the market rents for the various unit types were as follows: Market Rents December 31, Unit Type ........................................... 1997 1996 - ------------------------------------------------------------ ------ ------ One bedroom one bath ....................................... $ 930 $ 921 Two bedroom two bath ....................................... 1,155 1,125 As discussed in Note 9 of the Notes to the Consolidated Financial Statements, on January 15, 1998, the Partnership entered into a purchase and sale agreement (the "Agreement") to sell Pinecliff to an unaffiliated third party. The selling price for Pinecliff is approximately $6,700,000. The Agreement is subject to completion of customary due diligence to the satisfaction of the purchaser, and the purchaser obtaining a financing commitment on commercially reasonable terms and conditions. The Partnership expects to consummate this sale in the second quarter of 1998. The sale is contingent on the consent of the Limited partners to the dissolution. If closing of the sale were to occur, any proceeds from sale will be allocated to the Partners in accordance with the terms of the Partnership Agreement and the Partnership will be liquidated. Villa Antigua On June 11, 1987, the Partnership acquired a majority joint venture interest in the Villa Antigua Joint Venture which owned and operated Villa Antigua. The Partnership contributed $2,494,677 to the Villa Antigua Joint Venture which was used to repay a portion of the construction loan on the property. The balance of the construction loan was repaid through the proceeds of a $3,200,000 permanent loan from a third party lender. In accordance with the terms of the Partnership Agreement, the Partnership paid an acquisition fee of $350,000 to GP L'Auberge Communities, L.P. for its services in structuring and negotiating the acquisition. The Partnership also incurred acquisition expenses relating to the acquisition which totaled $31,729. On October 10, 1997, Villa Antigua was sold pursuant to the terms of a Sale Agreement and Escrow Instructions dated May 6, 1997, as amended. Villa Antigua was sold to Villa Sin Antigua Condominium Ventures Limited Partnership, an Arizona Limited Partnership unaffiliated with the Partnership. The net selling price for Villa Antigua was $6,141,526 subject to certain customary adjustments. The Partnership repaid first mortgage financing in the amount of $3,010,362 at closing utilizing a portion of proceeds from the sale. The Partnership recorded a gain on sale of approximately $1,307,000. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Partnership or of which any of the properties is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of 1997. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The transfer of Units is subject to certain limitations contained in the Partnership Agreement. There is no public market for the Units and it is not anticipated that any such public market will develop. The number of holders of Units as of December 31, 1997 was 1,903. Distributions are made to the Partners on a quarterly basis based upon Net Cash from Operations, as calculated under Section 10 of the Partnership Agreement. Total cash distributions to the Limited Partners for 1997 and 1996, as well as the Distributions from Proceeds of Sale were paid as follows: Date of Quarter Ended ................................ Payment Amount - ---------------------------------------------- ----------------- ---------- March 31, 1996 .............................. May 15, 1996 $ 97,263 June 30, 1996 ............................... August 15, 1996 $ 97,263 September 30, 1996 .......................... December 11, 1996 $ 97,263 December 31, 1996 ........................... February 28, 1997 $ 97,263 March 31, 1997 .............................. May 15, 1997 $ 97,263 June 30, 1997 ............................... August 15, 1997 $ 97,263 September 30, 1997 .......................... $ 0 December 31, 1997 ........................... December 31, 1997 $5,349,465 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data of the Partnership and consolidated subsidiaries has been derived from consolidated financial statements audited by Coopers & Lybrand, L.L.P., whose reports for the periods ended December 31, 1997, 1996 and 1995 are included elsewhere in the Form 10K and should be read in conjunction with the full consolidated financial statements of the Partnership including the Notes thereto. Year Ended --------------------------------------------------------------------- 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 Rental income $2,255,625 $2,615,350 $2,725,119 $2,572,947 $2,391,911 Net income (loss) $2,009,610 ($167,778) $309,115 $260,976 $141,982 Net income (loss) allocated to Partners: Limited Partners - Per Unit- Basic and diluted: Aggregate 32,421 Units $59.52 ($5.12) $9.06 $7.65 $4.16 General Partners $79,805 ($1,678) $15,456 $13,049 $7,099 Cash distributions to Partners: Limited Partners: Weighted average per Unit $174.00 $12.00 $15.50 $17.75 $9.50 General Partners $15,358 $20,476 $26,449 $30,288 $16,211 Total assets $6,383,338 $15,644,667 $16,274,801 $16,587,271 $17,032,336 Long term obligations $3,058,800 $8,559,930 $8,695,278 $8,818,891 $8,931,713 Long term obligations become due in 1998. The Partnership intends to sell the property or refinance this note prior to the due date.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements including those concerning the General Partners' expectations regarding future financial performance and future events. These forward-looking statements involve significant risks and uncertainties, including those described herein. Actual results may differ materially from those anticipated by such forward-looking statements. Liquidity; Capital Resources In connection with its capitalization, the Partnership admitted investors who purchased a total of 32,421 Units aggregating $16,210,500. These offering proceeds, net of organizational and offering costs of $2,431,575, provided $13,778,925 of net proceeds to be used for the purchase of income-producing residential properties, including related fees and expenses, and working capital reserves. The Partnership expended $10,410,263 to (i) acquire its joint venture interests in the Sin Vacas Joint Venture, the Villa Antigua Joint Venture, and the Autumn Ridge Joint Venture, (ii) to pay acquisition expenses, including acquisition fees to one of the General Partners, and (iii) to pay certain costs associated with the refinancing of the Pinecliff permanent loan. The Partnership distributed $1,731,681 to the Limited Partners as a return of capital resulting from construction cost savings with respect to the Sin Vacas, Pinecliff and Villa Antigua projects and other excess offering proceeds. The remaining net proceeds of $1,636,981 were used to establish initial working capital reserves. These reserves have been used periodically to enable the Partnership to meet its various financial obligations including contributions to the various Joint Ventures that may be required. Cumulatively through December 31, 1997, $513,611 was contributed to the Joint Ventures for this purpose. In addition to the proceeds generated from the public offering, the Partnership utilized external sources of financing at the joint venture level to purchase properties. The Partnership Agreement limits the aggregate mortgage indebtedness which may be incurred in connection with the acquisition of Partnership properties to 80% of the purchase price of such properties. The working capital reserves of the Partnership consist of cash and cash equivalents and short-term investments. Together these amounts provide the Partnership with the necessary liquidity to carry on its day-to-day operations and to make necessary contributions to the various Joint Ventures. In 1997, the aggregate net decrease in working capital reserves was $644,275. This decrease resulted primarily from cash provided by operations of $60,516 and proceeds from the sale of property of $11,093,617, offset by distributions to partners of $5,656,612 and $5,501,130 of principal payments on mortgage notes payable, $490,710 of fixed asset additions, $131,413 funds held in escrow in connection with the sale of the properties and $21,025 for loan refinancing costs. In 1996, the aggregate net increase in working capital reserves was $585,466. This increase resulted primarily from cash provided by operations of $349,757 and maturities of short-term investments of $1,043,580 offset by $281,346 of fixed asset additions, distributions to partners of $389,052 and $135,348 of principal payments on mortgage notes payable. On October 10, 1997, Villa Antigua was sold pursuant to the terms of a Sale Agreement and Escrow Instructions dated May 6, 1997, as amended. Villa Antigua was sold to Villa Sin Antigua Condominium Ventures Limited Partnership, an Arizona Limited Partnership unaffiliated with the Partnership. The net selling price for Villa Antigua was $6,141,526 subject to certain customary adjustments. The Partnership repaid first mortgage financing in the amount of $3,010,362 at closing utilizing a portion of proceeds from the sale. The Partnership recorded a gain on sale of approximately $1,307,000. On November 25, 1997, Villas Sin Vacas was sold pursuant to the terms of a Sale Agreement and Escrow Instructions dated May 6, 1997, as amended. Villas Sin Vacas was sold to Villas Sin Vacas Townhome Ventures Limited Partnership, an Arizona Limited Partnership unaffiliated with the Partnership. The net selling price for Villas Sin Vacas was $4,952,091 subject to certain customary adjustments. The Partnership repaid first mortgage financing in the amount of $2,396,000 at closing utilizing a portion of proceeds from the sale. The Partnership recorded a gain on sale of approximately $975,000. With regard to a certain balloon payment on existing first mortgage debt (see Note 6 of the Notes to Consolidated Financial Statements) on the Partnership's property which is due and payable in 1998, the General Partners anticipate repaying the loan utilizing a portion of the sales proceeds from the pending sale of the property. See Item 2 above. In the event the pending sale is not consummated, the General Partners will seek to renegotiate this mortgage note with its existing lender or seek new sources of financing for this property. To date, the General Partners have neither sought to extend or renegotiate the existing mortgage debt nor have they sought new financing for the property and there can be no assurance that they would be successful in doing so. The General Partners believe that existing cash flow from the property will be sufficient to support a level of borrowing that is at least equal to the amount outstanding as of December 31, 1997. If the general economic climate for real estate in this location were to deteriorate resulting in an increase in interest rates for mortgage financing or a reduction in the availability of real estate mortgage financing or a decline in the market values of real estate it may affect the Partnership's ability to complete this refinancing. See also projected 1998 operating results. In the event that Pinecliff is not sold pursuant to the Purchase Agreement, the Partnership would continue to operate the property until a substitute sale could be negotiated and consummated. The Partnership's ability to generate cash adequate to meet its needs is dependent primarily on the successful operation of its real estate investment. Such ability may also be dependent upon the future availability of bank borrowings, and upon the future refinancing and sale of the Partnership's real estate investment and the collection of any mortgage receivable which may result from such a sale. These sources of liquidity will be used by the Partnership for payment of expenses related to real estate operation, debt service and professional and management fees and expenses. Net Cash From Operations and Net Proceeds, if any, as defined in the Partnership Agreement, will then be available for distribution to the Partners in accordance with Section 10 of the Partnership Agreement. The General Partners believe that the current working capital reserves together with projected cash flow for 1998 are adequate to meet the Partnership's operating cash needs in the coming year if the Partnership is required to continue to own and operate its property assuming the existing mortgage debt can be extended, renegotiated or refinanced. Results of Operations For the year ended December 31, 1997, the Partnership's operating results were comprised of its share of the income and expenses from the Villas Sin Vacas (through date of sale), Pinecliff and Villa Antigua properties (through date of sale), as well as Partnership level interest income earned on short-term investments, reduced by administrative expenses. A summary of these operating results (unaudited) appears below: Sin Villa Investment Consolidated Vacas Pinecliff Antigua Partnership Total Total revenue $1,617,267 $952,750 $1,973,680 $73,177 $4,616,874 Expenses: General and administrative - - - 227,785 227,785 Operations 364,115 469,256 370,078 - 1,203,449 Depreciation and 126,222 200,626 98,092 - 424,940 Amortization Interest 220,852 284,112 246,126 - 751,090 ------------ -------------- --------------- ------------ -------------- 711,189 953,994 714,296 227,785 2,607,264 ------------ -------------- --------------- ------------ -------------- ------------ -------------- --------------- ------------ -------------- Net income (loss) $906,078 ($1,244) $1,259,384 ($154,608) $2,009,610 ============ ============== =============== ============ ============== For the year ended December 31, 1996, the Partnership's operating results were comprised of its share of the income and expenses from the Sin Vacas, Autumn Ridge and Villa Antigua Joint Ventures, as well as partnership level interest income earned on short term investments, reduced by administrative expenses. A summary of these operating results (unaudited) appears below: Sin Villa Investment Consolidated Vacas Pinecliff Antigua Total Total Total revenue $694,550 $1,022,283 $901,463 $53,445 $2,671,741 Expenses: General and administrative 1,686 - 259 381,328 383,273 Operations 410,622 437,646 363,192 26,368 1,237,828 Depreciation and 126,677 181,804 122,636 - 431,117 amortization Interest 223,411 286,313 277,577 - 787,301 ------------- -------------- -------------- ------------- ------------- 762,396 905,763 763,664 407,696 2,839,519 ------------- -------------- -------------- -------------- ------------ Net income (loss) ($67,846) $116,520 $137,799 ($354,251) ($167,778) ============= ============== ============== ============= ============= For the year ended December 31, 1995, the Partnership's operating results were comprised of its share of the income and expenses from the Sin Vacas, Autumn Ridge and Villa Antigua Joint Ventures, as well as partnership level interest income earned on short term investments, reduced by administrative expenses. A summary of these operating results (unaudited) appears below: Sin Villa Investment Consolidated Vacas Pinecliff Antigua Total Total Total revenue $755,680 $1,041,402 $930,236 $81,023 $2,808,341 Expenses: General and administrative 7,200 7,244 7,200 183,245 204,889 Operations 353,533 420,726 310,611 - 1,084,870 Depreciation and 118,909 173,174 118,217 - 410,300 amortization Interest 226,761 290,606 281,800 - 799,167 ------------- -------------- -------------- ------------- ------------- 706,403 891,750 717,828 183,245 2,499,226 ------------- -------------- -------------- ------------ ------------ Net income (loss) $49,277 $149,652 $212,408 ($102,222) $309,115 ============= ============== ============== ============= =============
Comparison of 1997 and 1996 Operating Results: Total revenue increased by $1,945,133 or 73%, primarily due to gains recorded on the sale of Villas Sin Vacas and Villa Antigua on November 25, 1997 and October 10, 1997, respectively. The total gain on both sales was approximately $2,300,000. Operating expenses decreased by $34,379 or 3% primarily due to the sale of those properties, as such reflecting only a portion of the years expenses in 1997. This was offset by one-time costs of preparing the properties for disposition, including an increase in repairs and maintenance of $77,779. General and administrative expenses have decreased by $155,488 or 41%, of which $73,775 was due to the Evans Withycombe termination fee in 1996. A contributing factor to the additional reduction of $81,713 was due to the re-stabilization of costs associated with Partnership administrative, financial and investor services functions following the office relocation to Colorado Springs, Colorado. Comparison of 1996 and 1995 Operating Results: In accordance with its dispositions strategy, the Partnership incurred one time costs associated with the Evans Withycombe termination ($73,775), the Highland termination (($7,718) and their related legal costs. (Refer to Note 5 of Notes to Consolidated Financial Statements.) In addition, the Partnership incurred one-time costs associated with its property interior and exterior refurbishment program, the change in on-site management following the Evans Withycombe termination, the outsourcing of much of the Partnership's administration work to an administrative agent and the relocation of the remaining administration, financial and investor services functions to a more cost efficient location in Colorado Springs, Colorado. Consequently, competitive pressures and disposition-related activities led to rental operating expenses (including advertising, promotion, apartment locator and concession costs) to increase by $152,958 or 14% over the prior year and total general and administrative expenses of the Partnership increased $178,384 (87%) over the prior year. Fixed asset purchases increased $281,346 from $141,735 in the prior year and consisted of such items as carpet, appliances, equipment for fitness and business centers facilities, and remodeling features. As a result of the factors described above, distributions to partners decreased $119,446, or 23%, from $528,974 in 1995 to $409,528 in 1996. Projected 1998 Operating Results: As further discussed in Item 2 above and in Note 9 of the Notes to the Consolidated Financial Statements, the property owned by the Partnership is under contract to be sold to a purchaser unaffiliated with the General Partners. Under the terms of the Purchase Agreement, it is anticipated that the closing would occur during the second quarter of 1998. If the sale does occur as anticipated, the Partnership will likely be liquidated in 1998. Although there can be no assurance the Partnership will dispose of its property during 1998 pursuant to the Purchase Agreement or otherwise, if the Dissolution is approved by the Limited Partners, the Partnership will continue to seek to dispose of its property. In the event that the Partnership were to dispose of its property during 1998, operating results of the Partnership would vary significantly from those achieved in prior periods. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Appendix A to this Report. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Partnership is a limited partnership and, as such, has no executive officers or directors. The General Partners of the Partnership are Stephen B, Boyle and GP L'Auberge Communities, L.P., a California limited partnership, of which L'Auberge Communities Inc. (formerly known as Berry and Boyle Inc.) ("L'Auberge") is the general partner. Individual General Partners Stephen B. Boyle, age 57, is President, Executive Officer and Director of L'Auberge Communities, Inc. and a general partner and co-founder of LP L'Auberge Communities, a California Limited Partnership (formerly Berry and Boyle), a limited partnership formed in 1983 to provide funds to various affiliated general partners of real estate limited partnerships, one of which is GP L'Auberge Communities, L.P. In September 1995, with the consent of Limited Partners holding a majority of the outstanding Units, as well as the consent of the mortgage lenders for the Partnership's three properties, Richard G. Berry resigned as a general partner of the Partnership. GP L'Auberge Communities, L.P. GP L'Auberge Communities, L.P. was formed in 1983 for the purpose of acting as a general partner in partnerships formed to invest directly or indirectly in real property. L'Auberge is the sole general partner of GP L'Auberge Communities, L.P. The following sets forth certain biographical information with respect to the executive officers and directors of L'Auberge other than Stephen B. Boyle who is discussed above. There are no familial relationships between or among any officer or director and any other officer or director. Name Position Stephen B. Boyle President, Executive Officer and Director Earl C. Robertson Executive Vice President and Chief Financial Officer Donna Popke Vice President and Secretary Earl C. Robertson, age 50, has been Executive Vice President of L'Auberge since April 1995 and its Chief Financial Officer of L'Auberge since May 1996. Mr. Robertson joined L'Auberge in April 1995 as Executive Vice President. Prior to joining L'Auberge, Mr. Robertson had over 20 years experience as a senior development officer, partner and consultant in several prominent real estate development companies, including Potomac Investment Associates, a developer of planned golf course communities nationwide, where he was employed from 1989 to June 1993. He also served as a consultant to Potomac Sports Properties from July 1993 to April 1995. Mr. Robertson was also a key member of the management team that developed the nationally acclaimed Inn at the Market in Seattle. Donna Popke, age 38, has been Vice President of L'Auberge since November 1995. Ms. Popke joined L'Auberge in June 1994 as Accounting Manager. Prior to joining L'Auberge, Ms. Popke was Accounting Manager for David R. Sellon & Company, a Colorado Springs land development company, from August 1989 to June 1994 and for Intermec of the Rockies from September 1985 to July 1989. ITEM 11. EXECUTIVE COMPENSATION None of the General Partners or any of their officers or directors received any compensation from the Partnership. See Item 13 below with respect to a description of certain transactions of the General Partners and their affiliates with the Partnership. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of March 21, 1998, no person of record owned or was known by the General Partners to own beneficially more than 5% of the Partnership's outstanding Units. Neither of the General Partners nor any of their directors and officers owns Units. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During the year ended December 31, 1997, the Partnership paid or accrued remuneration to the General Partners or their affiliates as set forth below. In addition to the information provided herein, certain transactions are described in notes 7 and 8 in the Notes to Financial Statements appearing in Appendix A, which are included in this report and are incorporated herein by reference thereto. Net Cash from Operations distributed in 1997 to the General Partners ...................... $15,358 Allocation of Income to the General Partners ....................... $79,805 Property management fees paid to an affiliate of the General Partners ........................... $87,724 Reimbursements to General Partners ............. $64,209 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1,2 See Page F-2 3 See Exhibit Index contained herein (b) Reports on Form 8-K The Partnership reported the sale of Villa Antigua on Form 8-K filed October 23, 1997 and the sale of Villa Sin Vacas on Form 8-K filed December 8, 1997. (c) See Exhibit Index contained herein (d) See Page F-2. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CLUSTER HOUSING PROPERTIES By: GP L'Auberge Communities, L.P., a California Limited Partnership, General Partner By: L'Auberge Communities, Inc., its General Partner By: __/s/ Earl C. Robertson_________________________________ Earl C. Robertson, Executive Vice President and Chief Financial Officer Date: March 26, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date __/s/ Stephen B. Boyle________ Director, President and March 26, 1998 STEPHEN B. BOYLE Principal Executive Officer of L'Auberge Communities, Inc. __/s/ Earl C. Robertson_____ Executive Vice President and March 26, 1998 EARL C. ROBERTSON Principal Financial Officer of L'Auberge Communities, Inc. F-8 APPENDIX A CLUSTER HOUSING PROPERTIES (A California Limited Partnership) AND SUBSIDIARIES --------- CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION For the Years Ended December 31, 1997 and December 31, 1996 CLUSTER HOUSING PROPERTIES (A California Limited Partnership) AND SUBSIDIARIES --------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Accountants F-3 Consolidated Balance Sheets at December 31, 1997 and 1996 F-4 Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995 F-5 Consolidated Statements of Partners' Equity (Deficit) for the years ended December 31, 1997, 1996 and 1995 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 F-7 -- F-8 Notes to Consolidated Financial Statements F-9 -- F-19 All Schedules are omitted, as they are not applicable, not required, or the information is provided in the financial statements or the notes thereto. Report of Independent Accountants To the Partners of Cluster Housing Properties (a California Limited Partnership): We have audited the accompanying consolidated balance sheets of Cluster Housing Properties (a California Limited Partnership) and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partners of the Partnership, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cluster Housing Properties (a California Limited Partnership) and subsidiaries as of December 31, 1997 and 1996 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. As discussed in Note 9, the General Partners of the Partnership have entered into a sales agreement to sell the remaining property of the Partnership. If closing of this sale were to occur, any proceeds from sale will be allocated to the Partners in accordance with the terms of the Partnership Agreement and the Partnership will likely be liquidated. Coopers & Lybrand, L.L.P. Denver, Colorado February 27, 1998 CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1997 and 1996 --------------- ASSETS 1997 1996 ------------ ------------ Assets held for sale/Property, at cost (Notes 3, 9) Land ......................................................................... $ 1,242,061 $ 3,677,028 Buildings and improvements ................................................... 6,063,055 14,067,757 Equipment, furnishings and fixtures .......................................... 642,239 1,576,836 ------------ ------------ 7,947,355 19,321,621 Less accumulated depreciation ................................................ (2,152,207) (4,810,314) ------------ ------------ 5,795,148 14,511,307 Cash and cash equivalents ...................................................... 421,580 1,065,855 Real estate tax escrows ........................................................ 24,037 41,632 Deposits and prepaid expenses .................................................. 133,285 3,818 Accounts receivable ............................................................ 1,400 2,605 Deferred expenses, net of accumulated amortization of $205,147 and $175,041 ........................................ 7,888 19,450 ------------ ------------ Total assets .......................................................... $ 6,383,338 $ 15,644,667 ============ ============ LIABILITIES AND PARTNERS' EQUITY (DEFICIT) Mortgage notes payable ......................................................... $ 3,058,800 $ 8,559,930 Accounts payable ............................................................... 83,637 115,410 Accrued expenses ............................................................... 131,588 195,794 Due to affiliates (Note 8) ..................................................... 16,076 8,975 Rents received in advance ...................................................... 1,984 4,538 Tenant security deposits ....................................................... 33,555 55,320 ------------ ------------ Total liabilities ..................................................... 3,325,640 8,939,967 General Partners' deficit ...................................................... (127,847) (192,294) Limited Partners' equity ....................................................... 3,185,545 6,896,994 ------------ ------------ Total liabilities and partners' equity ................................. $ 6,383,338 $ 15,644,667 ============ ============ CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 1997, 1996, and 1995 ------------- 1997 1996 1995 ----------- ----------- ----------- Revenue: Rental income ............................................................... $ 2,255,625 $ 2,615,350 $ 2,725,119 Interest income ............................................................. 79,666 56,391 83,222 Gain from sale of properties ................................................ 2,281,583 -- -- ----------- ----------- ----------- Total Revenue .................................................................. 4,616,874 2,671,741 2,808,341 Expenses: Operations .................................................................. 1,203,449 1,237,828 1,084,870 Interest expense ............................................................ 751,090 787,301 799,167 Depreciation and amortization ............................................... 424,940 431,117 410,300 General and administrative .................................................. 227,785 383,273 204,889 ----------- ----------- ----------- Total Expenses ................................................................. 2,607,264 2,839,519 2,499,226 ----------- ----------- ----------- Net income (loss) .............................................................. $ 2,009,610 ($ 167,778) $ 309,115 =========== =========== =========== Net income (loss) allocated to: General Partners ............................................................. $ 79,805 ($ 1,678) $ 15,456 Basic and diluted per unit Net income (loss) allocated to Investor Limited Partner interest: 32,421 units issued ..................................................... $ 59.52 ($ 5.12) $ 9.06 CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT) For the years ended December 31, 1997, 1996, and 1995 ------------- Investor Total General Limited Partners' Partners Partners Equity Balance at December 31, 1994 (159,147) 7,669,907 7,510,760 Cash distributions (26,449) (502,525) (528,974) Net income 15,456 293,659 309,115 -------------- --------------- --------------- Balance at December 31, 1995 ($170,140) $7,461,041 $7,290,901 Minority interest - (8,895) (8,895) absorbed Cash distributions (20,476) (389,052) (409,528) Net loss (1,678) (166,100) (167,778) -------------- --------------- --------------- Balance at December 31, 1996 (192,294) 6,896,994 6,704,700 Cash distributions (15,358) (5,641,254) (5,656,612) Net income 79,805 1,929,805 2,009,610 -------------- --------------- --------------- Balance at December 31, 1997 ($127,847) $3,185,545 $3,057,698 ============== =============== =============== CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended December 31, 1997, 1996, 1995 ------------- Cash flows from operating activities: ............... 1997 1996 1995 ------------ ------------ ------------ Interest received ................................. $ 79,666 $ 80,257 $ 82,408 Cash received from rental income .................. 2,231,306 2,607,383 2,716,163 General and administrative expenses ............... (243,185) (370,245) (201,143) Operations expense ................................ (1,235,265) (1,179,822) (1,039,036) Interest paid ..................................... (772,006) (787,816) (799,636) ------------ ------------ ------------ Net cash provided by operating activities ........... 60,516 349,757 758,756 Cash flows from investing activities: Proceeds from sale of properties .................. 11,093,617 -- -- Capital improvements .............................. (490,710) (281,346) (148,127) Deposit with escrow agent ......................... (131,413) -- -- Cash received from short-term investments ......... -- 1,043,580 327,298 ------------ ------------ ------------ Net cash provided by investing activities ........... 10,471,494 762,234 179,171 Cash flows from financing activities: Distributions to partners ......................... (5,656,612) (389,052) (528,974) Deposits .......................................... 2,482 (2,125) (358) Cash paid for loan refinancing .................... (21,025) -- -- Principal payments on mortgage notes payable ...... (5,501,130) (135,348) (123,613) ------------ ------------ ------------ Net cash used by financing activities ............... (11,176,285) (526,525) (652,945) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents (644,275) 585,466 284,982 Cash and cash equivalents at beginning of the period 1,065,855 480,389 195,407 ------------ ------------ ------------ Cash and cash equivalents at end of the period ...... $ 421,580 $ 1,065,855 $ 480,389 ============ ============ ============ Non cash financing activities: Accrual of distributions to partners ............. $ 0 $ 20,476 $ 0 CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended December 31, 1997, 1996, 1995 ------------- Reconciliation of net income (loss) to net cash provided by operating activities: 1997 1996 1995 ----------- ----------- ----------- Net income (loss) .............................................................. $ 2,009,610 ($ 167,778) $ 309,115 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization ................................................ 424,940 431,117 410,300 Gain from sale of property ................................................... (2,281,583) -- -- Change in assets and liabilities net of effects of investing and financing activities: Decrease in real estate tax escrows ........................................ 17,595 2,423 7,750 Decrease in deposits and prepaid expenses .................................. 1,946 -- 2,033 (Increase) decrease in accounts receivable ................................. 1,205 21,951 (1,445) (Decrease) increase in accounts payable and accrued expenses ............... (95,979) 84,185 35,871 (Decrease) increase in due to affiliates ................................... 7,101 (14,198) 4,088 Decrease in rent received in advance ....................................... (2,554) (5,957) (3,526) Decrease in tenant security deposits ....................................... (21,765) (1,986) (5,430) ----------- ----------- ----------- Net cash provided by operating activities ...................................... $ 60,516 $ 349,757 $ 758,756 ============ =========== ===========
CLUSTER HOUSING PROPERTIES (A California Limited Partnership) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ---------- 1. Organization of Partnership: Cluster Housing Properties (a California Limited Partnership) (the "Partnership"), formerly Berry and Boyle Cluster Housing Properties, was formed on August 8, 1983. The Partnership issued all of the General Partnership Interests to three General Partners in exchange for capital contributions aggregating $2,000. Stephen B. Boyle and GP L'Auberge Communities, L.P., (a California Limited Partnership), formerly Berry and Boyle Management, are the General Partners. In September, 1995, with the consent of Limited Partners holding a majority of the outstanding Units, as well as the consent of the mortgage lenders for the Partnership's three properties, Richard G. Berry resigned as a general partner of the Partnership. A total of 2,000 individual Limited Partners owning 32,421 units have contributed $16,210,500 of capital to the Partnership. At December 31, 1997, the total number of Limited Partners was 1,903. Except under certain limited circumstances, as defined in the Partnership Agreement, the General Partners are not required to make any additional capital contributions. The General Partners or their affiliates will receive various fees for services and reimbursement for various organizational and selling costs incurred on behalf of the Partnership. The Partnership will continue until December 31, 2010, unless terminated earlier by the sale of all, or substantially all, of the assets of the Partnership, or otherwise in accordance with the provisions of Section 16 of the Partnership Agreement (See Note 9.) 2. Significant Accounting Policies: A. Basis of Presentation The consolidated financial statements include the accounts of the Partnership and its subsidiaries: Sin Vacas Joint Venture (Sin Vacas), Autumn Ridge Joint Venture (Autumn Ridge) and Villa Antigua Joint Venture (Villa Antigua). All intercompany accounts and transactions have been eliminated in consolidation. The Partnership follows the accrual basis of accounting. Refer to Note 5 regarding the termination of the Joint Ventures and the sale of Villas Sin Vacas and Villa Antigua. B. Cash and Cash Equivalents The Partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value. It is the Partnership's policy to invest cash in income-producing temporary cash investments. The Partnership mitigates any potential risk from such concentration of credit by placing investments with high quality financial institutions. C. Significant Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. D. Depreciation Depreciation is provided for by the use of the straight-line method over estimated useful lives as follows: Buildings and improvements 39-40 years Equipment, furnishings and fixtures 5-15 years E. Deferred Expenses Costs of obtaining or extending mortgages on the properties are being amortized over the mortgage term using the straight-line method, which approximates the effective interest method. Fees paid to certain of the property developers were amortized over the term of the services provided using the straight-line method. Any unamortized costs remaining at the date of a refinancing are expensed in the year of refinancing. F. Income Taxes The Partnership is not liable for Federal or state income taxes because Partnership income or loss is allocated to the Partners for income tax purposes. If the Partnership's tax returns are examined by the Internal Revenue Service or state taxing authority and such an examination results in a change in Partnership taxable income (loss), such change will be reported to the Partners. G. Rental Income Leases require the payment of rent in advance; however, rental income is recorded as earned. H. Long-Lived Assets In 1996, the Partnership adopted Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets to be Disposed of." SFAS 121 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. The adoption of SFAS 121 had no effect on reported results in 1996. As further discussed in Note 9, for the year ended December 31, 1997, the Partnership recorded the assets at the lower of carrying value or net realizable value and has included these amounts as Assets Held for Sale. For the years ended December 31, 1997 and 1996, permanent impairment conditions did not exist at any of the Partnership's properties. I. Reclassification Certain items in the financial statements for the years ended December 31, 1996 and 1995 have been reclassified to conform to the 1997 presentation. J. New Accounting Standards In 1997, the Partnership adopted Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share." This accounting standard specifies new computation, presentation, and disclosure requirements for earnings per share to be applied retroactively. Among other things, SFAS 128 requires presentation of basic and diluted earnings per share on the face of the income statement. The computation of basic and diluted earnings per share was based on income available to the Limited Partners divided by the weighted average number of units outstanding during the period. The Partnership has no dilutive type securities. The adoption of SFAS 128 had no effect on the per unit results previously reported. 3. Assets held for sale: Assets held for sale consisted of the following at December 31, 1997: Initial Cost Costs Capitalized Gross Amount At Which Carried to Subsequent to Acquisition at Close of Partnership Period ---------------------------------- ------------------------- ---------------------------------- ------- ---------- Buildings Equipment Buildings Equipment Buildings Equipment Property and Furniture and Furniture and Furniture Accum. Description Land Improvements & Fixtures Land Imprvments & Fixtures Land Improvements & Fixtures Depre. Total - ------------------------------------------------- -------------------------- ---------------------------------- ------- ---------- Pinecliff, a 96-unit residential rental complex located in Colo. Springs, Colorado $1,242,061 $5,981,166 $380,288 - $81,889 $261,951 $1,242,061 $6,063,055 $642,239 ($2,152,207) $5,795,148 ---------------------------------- --------------------------- -------------------------------- ----------- ---------- $1,242,061 $5,981,166 $380,288 - $81,889 $261,951 $1,242,061 $6,063,055 $642,239 ($2,152,207) $5,795,148 =================================== ========================== =============================== ============ ========== Pinecliff is encumbered by a nonrecourse mortgage note payable (see Note 6). Villas at Sin Vacas and Villa Antigua were sold in 1997. The changes in total real estate assets for the years ended The change in accumulated depreciation for the December 31, 1997, 1996, and 1995 are as follows: years ended December 31, 1997, 1996, and 1995 are as follows: 1997 1996 1995 1997 1996 1995 ----- ----- ----- ----- ----- ---- Balance, beginning of year $19,321,621 $19,040,329 $18,892,202 Bal., beg. of year $4,810,314 $4,418,093 $4,046,690 Additions during the period: Improvements $490,710 $281,292 $148,127 Depr for the period $394,834 $392,221 $371,403 Deductions during the period: Sale of Sin Vacas ($5,593,045) - - Disposition of Sin Vacas ($1,615,565) - - Sale of Villa Antigua ($6,271,931) - - Disposition of Villa Antigua ($1,437,376) - - ========================================== =========================================== Balance at end of $7,947,355 $19,321,621 $19,040,329 Bal. at end of year $2,152,207 $4,810,314 $4,418,093 year ========================================== ===========================================
4. Cash and Cash Equivalents: Cash and cash equivalents at December 31, 1997 and 1996 consisted of the following: 1997 1996 ---------- ---------- Cash on hand .......... $ 132,330 $ 854,769 Certificate of deposits -- 211,086 Money market accounts . 289,250 - ---------- ---------- $ 421,580 $1,065,855 5. Joint Venture and Property Acquisitions: The Partnership has invested in three properties located in Scottsdale and Tucson, Arizona and Colorado Springs, Colorado. The success of the Partnership will depend upon factors which are difficult to predict including general economic and real estate market conditions, both on a national basis and in the areas where the Partnership's investments are located. The Partnership holds a majority interest in these properties and controls the operations of the joint ventures. Villas Sin Vacas On October 25, 1985, the Partnership acquired a majority interest in the Sin Vacas Joint Venture, which owns and operates the Villas at Sin Vacas, a 72-unit residential property located in Tucson, Arizona. Since the Partnership owns a majority interest in the Sin Vacas Joint Venture, the accounts and operations of the Sin Vacas Joint Venture have been consolidated into the Partnership. The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a Phoenix based residential development, construction and management firm. EWI is also the developer of the Villas Sin Vacas property. The Partnership made initial cash payments in the form of capital contributions totaling $2,458,507 and funded $398,949 of property acquisition costs which were treated as a capital contribution to the joint venture. Since completion of construction, the Partnership has made additional contributions totaling $275,167. At December 31, 1997, the total capital contributions and acquisition costs incurred were $2,713,937 and $418,686, respectively. JANUARY 1, 1996 THROUGH MAY 13, 1996 Net cash from operations (as defined in the joint venture agreement) was to be distributed as available to each joint venture partner quarterly as follows: First, to the Partnership, an amount equal to 8.75% per annum, noncumulative (computed daily on a simple noncompounded basis from the date of completion funding) of the Partnership's capital investment, as defined in the joint venture agreement; Second, the balance 70% to the Partnership and 30% to the co-venturer. All losses from operations and depreciation for the Sin Vacas Joint Venture were allocated 99% to the Partnership and 1% to the co-venturer. All profits from operations, to the extent of cash distributions were allocated to the Partnership and co-venturer in the same proportion as the cash distribution. Any remaining profits are allocated 70% to the Partnership and 30% to the co-venturer. In the case of certain capital transactions and distributions as defined in the joint venture agreement, the allocation of related profits, losses and cash distributions, if any, would be different than as described above and would be effected by the relative balances in the individual partners' capital accounts. For the years ended December 31, 1997, 1996 and 1995 the Sin Vacas Joint Venture had net income, including gain on sale of $906,078, net loss of $67,846 and net income of $49,277, respectively. Villa Antigua On June 11, 1987, the Partnership acquired a majority interest in the Villa Antigua Joint Venture, which owns and operates Villa Antigua, an 88-unit residential property located in Scottsdale, Arizona. Since the Partnership owns a majority interest in the Villa Antigua Joint Venture, the accounts and operations of the Villa Antigua Joint Venture have been consolidated into the Partnership. The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a Phoenix based residential development, construction and management firm. EWI is also the developer of the Villa Antigua property. The Partnership made initial cash payments in the form of capital contributions totaling $2,494,677 and funded $381,729 of property acquisition costs which were treated as a capital contribution to the Villa Antigua Joint Venture. Since completion of construction, the Partnership has made additional contributions totaling $85,440. At December 31, 1997, the total capital contributions and acquisition costs incurred were $2,580,117 and $381,729, respectively. JANUARY 1, 1996 THROUGH MAY 13, 1996 Net cash from operations (as defined in the joint venture agreement) was to be distributed as available to each joint venture partner quarterly as follows: First, to the Partnership, an amount equal to 10% per annum, noncumulative (computed daily on a simple noncompounded basis from the date of completion funding) of the Partnership's adjusted capital investment, as defined in the joint venture agreement; Second, the balance 70% to the Partnership and 30% to the co-venturer. All losses from operations and depreciation for the Villa Antigua Joint Venture were allocated 99% to the Partnership and 1% to the co-venturer. All profits from operations, to the extent of cash distributions, were allocated to the Partnership and co-venturer in the same proportion as the cash distributions; however, if for any taxable year there are no cash distributions, profits are allocated 99% to the Partnership and 1% to the co-venturer. In the case of certain capital transactions and distributions as defined in the joint venture agreement, the allocation of related profits, losses and cash distributions, if any, would be different than as described above and would be affected by the relative balances in the individual partners' capital accounts. The Villa Antigua Joint Venture had net income including gain on sale of $1,259,384, and net income of $137,799 and $212,408 for the years ended December 31, 1997, 1996 and 1995, respectively. Sin Vacas and Villa Antigua MAY 14, 1996 THROUGH DECEMBER 31, 1997 On May 14, 1996, the Partnership and certain affiliates consummated an agreement with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI") which separated the interests of EWI and the Partnership, thus affording the Partnership greater flexibility in the operation and disposition of the properties. In consideration of a payment by the Partnership to EWI of $73,775 and delivery of certain mutual releases, EWI (i) relinquished its contract to manage Sin Vacas and Villa Antigua and its option to exercise its rights of first refusal with regard to the sale of those properties and (ii) assigned all of its interest in the Sin Vacas Joint Venture and the Villa Antigua Joint Venture to the Partnership (while preserving the economic interests of the venturer in these Joint Ventures), which resulted in the dissolution of the Sin Vacas Joint Venture and the Villa Antigua Joint Venture. EWI may still share in the cash flow distributions or proceeds from sale of the properties if certain performance levels are met. On November 25, 1997, Villa Sin Vacas was sold pursuant to the terms of a Sale Agreement and escrow Instructions (the "Agreement") dated May 6, 1997, as amended. Villas Sin Vacas was sold to Villas Sin Vacas Townhome Ventures Limited Partnership, an Arizona Limited Partnership unaffiliated with the Partnership, the assignee of Capital Management Systems, Inc., a Pennsylvania Corporation. The net selling price for Villas Sin Vacas was $4,952,091 subject to certain customary adjustments. The Partnership repaid first mortgage financing in the amount of $2,396,000 at closing utilizing a portion of proceeds from the sale. The Partnership recorded a gain on sale of approximately $975,000. On October 10, 1997, Villa Antigua was sold pursuant to the terms of a Sale Agreement and escrow Instructions (the "Agreement") dated May 6, 1997, as amended. Villa Antigua was sold to Villa Sin Antigua Condominium Ventures Limited Partnership, an Arizona Limited Partnership unaffiliated with the Partnership, the assignee of Capital Management Systems, Inc., a Pennsylvania Corporation. The net selling price for Villa Antigua was $6,141,526 subject to certain customary adjustments. The Partnership repaid first mortgage financing in the amount of $3,010,362 at closing utilizing a portion of proceeds from the sale. The Partnership recorded a gain on sale of approximately $1,307,000. Pinecliff On July 16, 1986, the Partnership acquired Pinecliff (formerly Autumn Ridge), a 96-unit residential property located in Colorado Springs, Colorado and simultaneously contributed the property to the Autumn Ridge Joint Venture comprised of the Partnership and an affiliate of the property developer. Since the Partnership owns a majority interest in the Autumn Ridge Joint Venture, the accounts and operations of the Autumn Ridge Joint Venture have been consolidated into the Partnership. The co-venture partner was Highland Properties, Inc. ("Highland") a Colorado based residential development,construction and management firm. Highland developed the property known as L'Auberge Pinecliff. The Partnership made initial cash payments in the form of capital contributions totaling $3,819,397 and funded $546,576 of property acquisition costs which were treated as a capital contribution to the Autumn Ridge Joint Venture. Since completion of construction, the Partnership has made additional contributions totaling $318,811. December 31, 1997 the total capital contributions and acquisition costs incurred were $4,192,309 and $497,475, respectively. JANUARY 1, 1996 THROUGH JULY 2, 1996: Net cash from operations (as defined in the joint venture agreement) was to be distributed as available to each joint venture partner quarterly as follows: First, to the Partnership, an amount equal to 8% per annum, noncumulative (computed daily on a simple noncompounded basis from the date of completion funding) of the Partnership's capital investment, as defined in the joint venture agreement; Second, the balance 82% to the Partnership and 18% to the co-venturer. All losses from operations and depreciation for the Autumn Ridge Joint Venture were allocated 100% to the Partnership. All profits from operations, to the extent of cash distributions, were allocated to the Partnership and co-venturer in the same proportion as the cash distribution. Any remaining profits are allocated 82% to the Partnership and 18% to the co-venturer. In the case of certain capital transactions and distributions as defined in the joint venture agreement, the allocation of related profits, losses and cash distributions, if any, would be different than as described above and would be affected by the relative balances in the individual partners' capital accounts. JULY 3, 1996 THROUGH DECEMBER 31, 1996 On July 3, 1996, the Partnership and certain affiliates consummated an agreement with Highland Properties, Inc. ("Highland") which separated the interests of Highland and the Partnership, thus affording the Partnership greater flexibility in the operation and disposition of the property. In consideration of a payment by the Partnership to Highland totaling $7,718, and delivery of certain mutual releases, Highland (i) relinquished its option to exercise its rights of first refusal with regard to the sale of the property and (ii) assigned all of its interest in the L'Auberge Pinecliff Joint Venture to the Partnership, (while preserving the economic interests of the venturer in these Joint Ventures), which resulted in the dissolution of the L'Auberge Pinecliff Joint Venture. Highland may still share in the cash flow distributions or proceeds from sale of the properties if certain performance levels are met. The Sin Vacas Joint Venture, the Autumn Ridge Joint Venture and the Villa Antigua Joint Venture are sometimes collectively referred to as the "Joint Ventures". These joint ventures were effectively terminated on December 31, 1996. The Partnership has eliminated various minority interests related to these joint ventures, as such, the Partnership owned 100% of the underlying assets as of December 31, 1996. For the years ended December 31, 1997, 1996 and 1995 the Autumn Ridge Joint Venture had net loss of $1,244 and net income of $116,520 and $149,652, respectively. 6. Mortgage Notes Payable: All of the property owned by the Partnership is pledged as collateral for the nonrecourse mortgage notes payable outstanding at December 31, 1997 and 1996 which consisted of the following: 1997 1996 ---------- ---------- Villas at Sin Vacas $ 0 $2,428,851 Pinecliff ......... 3,058,800 3,112,702 Villa Antigua ..... 0 3,018,377 ---------- ---------- $3,058,800 $8,559,930 ========== ========== Sin Vacas and Villa Antigua The original maturity date for these notes was July 15, 1997. On July 10, 1997 the lender extended the terms of these mortgage notes for a period of one year. The monthly principal and interest payments for Sin Vacas and Villa Antigua of $21,830 and $27,128, respectively, and the fixed interest rate of 9.125% for each remained unchanged. The terms of the agreement provided for a prepayment schedule of 0.5% of the outstanding loan balance if the notes were paid prior to 60 days before the maturity date. As discussed in Note 5, during 1997 the Partnership sold Sin Vacas and Villa Antigua. In connection with this sale, the outstanding mortgage debt for the properties was paid off. The Partnership incurred prepayment penalty fees of $11,952 and $14,898, respectively, for Sin Vacas and Villa Antigua, which amounts are included in interest expense in the Consolidated Statement of Operations for the year ended December 31, 1997. Pinecliff The original maturity date for these notes was July 15, 1997. On July 10, 1997, the lender extended the terms of the mortgage note for a period of one year. Under the modification agreement, the monthly principal and interest payment of $27,976 and the original interest rate of 9.125% remained unchanged. The terms of the agreement provide for a prepayment penalty of 0.5% of the outstanding loan amount in the event the note is paid prior to 60 days before it becomes due. The balance of the note will be due on July 15, 1998. As discussed in Note 9, the Partnership entered into a Sale Agreement for this property with an unaffiliated third party. The estimated sales price is sufficient to cover the mortgage note balance. However, there can be no assurance that the sale of the property will occur. In the event that the sale of Pinecliff does not occur, the Partnership will seek new sources of financing for the property on a long-term basis or seek to renegotiate the mortgage note with its existing lender. If the general economic climate for real estate in this location were to deteriorate resulting in an increase in interest rates for mortgage refinancing or a reduction in the availability of real estate mortgage financing or a decline in the market values of real estate, it may affect the Partnership's ability to complete the refinancing or sell the property. As discussed in Note 9, the Partnership entered into a Sale Agreement for this property with an unaffiliated third party. The estimated sales price is sufficient to cover the mortgage note balance. However, there can be no assurance that the sale of the property will occur. Interest included in Accrued expenses in the Consolidated Balance Sheets at December 31, 1997 and 1996 consisted of the following: 1997 1996 ------- ------- Villas at Sin Vacas $ 0 $ 9,235 Pinecliff ......... $11,630 11,835 Villa Antigua ..... 0 11,476 ------- ------- $11,630 $32,546 ======= ======= The principal balance of the mortgage notes payable appearing on the consolidated balance sheets at December 31, 1997 and 1996 approximates the fair value of such notes. 7. Partners' Equity: Under the terms of the Partnership Agreement profits are allocated 95% to the Limited Partners and 5% to the General Partners; losses are allocated 99% to the Limited Partners and 1% to the General Partners. Cash distributions to the partners are governed by the Partnership Agreement and are made, to the extent available, 95% to the Limited Partners and 5% to the General Partners. Gain from the sale of properties is to be allocated as defined in the Partnership Agreement. The net proceeds on the sale of both Villas Sin Vacas and Villa Antigua of $5.3 million were allocated as follows. The Limited Partners received 100% of the cash distribution from sale. The total gain on sale of both Villas Sin Vacas and Villa Antigua of $2.3 million was allocated as follows. The General Partner received a gain on sale allocation of approximately $70,000 and the Limited Partners received a gain on sale allocation of approximately $2.2 million. These distributions/allocations were in accordance with the terms of the Partnership Agreement. 8. Related-Party Transactions: L'Auberge Communities, Inc. is a General Partner of L'Auberge Communities, which owns a 99% interest in GP L'Auberge Communities, L.P. (formerly Berry and Boyle Management). Due to affiliates at December 31, 1997 and 1996 consisted of reimbursable costs payable to L'Auberge Communities, Inc., an affiliate of the General Partners, in the amounts of $16,076 and $8,975, respectively. For the years ended December 31, 1997, 1996 and 1995, general and administrative expenses included $64,209, $82,881 and $84,643, respectively, of salary reimbursements paid to the General Partners for certain administrative and accounting personnel who perform services for the Partnership. The officers and principal shareholders of EWI, the developer of the Villas at Sin Vacas and Villa Antigua properties and an affiliate of the co-venturers of those joint ventures, together hold a two and one half percent cumulative profit or partnership voting interest in LP L'Auberge Communities, a California Limited Partnership, formerly Berry and Boyle, which is the principal limited partner of GP L'Auberge Communities, L.P. During the years ended December 31, 1996 and 1995, EWI received property management fees of $32,475 and $84,187, respectively. These fees were 5% of rental revenue in each time period. In addition, for the years ended December 31, 1997, 1996 and 1995, $87,724, $64,954 and $51,715, respectively, of property management fees were paid or accrued to Residential Services - L'Auberge, an affiliate of the General Partners. These fees were 4% of rental revenue in 1997 and 1996 and 5% of rental revenue in 1995. Villa Antigua reimbursed $35,885 and $34,707, respectively, for its proportionate share of the 1996 and 1995 real estate taxes to Villa Antigua Phase II, which is an affiliate of the General Partners. For the year ended December 31, 1997, real estate taxes were settled as part of the closing of the sale. 9. Assets held for Sale During the fourth quarter of 1997, the General Partners of the Partnership committed to a plan to dispose of Pinecliff in Colorado Springs, Colorado. On January 15, 1998, the Partnership entered into a Sale Agreement (the "Agreement") to sell Pinecliff to an unaffiliated third party. The selling price for Pinecliff is approximately $6,700,000. The Agreement is subject to completion of customary due diligence to the satisfaction of the purchaser, and the purchaser obtaining a financing commitment on commercially reasonable terms and conditions. The Partnership expects to consummate this sale in 1998. Under certain conditions, the sale is contingent upon the approval by the Limited Partners. As it is the intent of the General Partners to pursue the sale of this property, the Partnership has recorded the assets at the lower of carrying value or net realizable value and has included these amounts as Assets Held for Sale on the Consolidated Balance Sheets at December 31, 1997. In accordance with SFAS 121, the Partnership has stopped depreciating these assets effective January 1, 1998. If closing of the sale were to occur, any proceeds from sale will be allocated to the Partners in accordance with the terms of the Partnership Agreement and the Partnership will likely be liquidated. CASABELLA ASSOCIATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, INFORMATION WITH RESPECT TO THE YEARS ENDED DECEMBER 31, 1996 AND 1995 IS UNAUDITED -------------- CASABELLA ASSOCIATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, INFORMATION WITH RESPECT TO THE YEARS ENDED DECEMBER 31, 1996 AND 1995 IS UNAUDITED 1. Organization of Partnership Casabella Associates, a general partnership (the "Partnership") was formed on July 1, 1998. Development Partners (A Massachusetts Limited Partnership), ("DPI"), formerly Berry and Boyle Development Partners, and Development Partners II (A Massachusetts Limited Partnership), ("DPII"), formerly Berry and Boyle Development Partners II, and Development Partners III (A Massachusetts Limited Partnership), ("DPIII"), formerly Berry and Boyle Development Partners III are the General Partners. DPI, DPII and DPIII own an 8.5%, 38.3%, and 53.2% interest, respectively in the Partnership. Casabella Associates was formed to acquire a majority interest in the Casabella Joint Venture, which owns Casabella, a 154-unit residential property, located in Scottsdale, Arizona. Since the Partnership owns a majority interest in Casabella Joint Venture, the accounts and operations of Casabella Joint Venture have been consolidated into the Partnership. The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a Phoenix based residential development, construction and management firm. EWI also developed the property known as Casabella. The Partnership will continue until December 31, 2018, unless earlier terminated by the sale of all or substantially all of the assets of the Partnership, or as otherwise provided in the Partnership Agreement (See Note 9). 2. Significant Accounting Policies A. Basis of Presentation The consolidated financial statements include the accounts of the Partnership and its subsidiary Casabella Joint Venture. All intercompany accounts and transactions have been eliminated in consolidation. The Partnership follows the accrual basis of accounting. Refer to Note 5 regarding the termination of the Casabella Joint Venture. B. Cash and Cash Equivalents The Partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value. It is the Partnership's policy to invest cash in income-producing temporary cash investments. The Partnership mitigates any potential risk from such concentration of credit by placing investments with high quality financial institutions. C. Significant Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. D. Depreciation Depreciation is provided for by the use of the straight-line method over the estimated useful lives as follows: Buildings and improvements 39-40 years Equipment, furnishings and fixtures 5-15 years E. Deferred Expenses Costs of obtaining or extending the mortgage on Casabella are being amortized over the mortgage term using the straight-line method, which approximates the effective interest method. Any unamortized costs remaining at the date of refinancing are expensed in the year of refinancing. F. Income Taxes The Partnership is not liable for Federal or state income taxes because Partnership income or loss is allocated to the Partners for income tax purposes. If the Partnership's tax returns are examined by the Internal Revenue Service or state taxing authority and such an examination results in a change in Partnership taxable income (loss), such change will be reported to the Partners. G. Rental Income Leases require the payment of rent in advance, however, rental income is recorded as earned. H. Reclassification Certain items in the financial statements for the years ended December 31, 1996 and 1995 have been reclassified to conform to the 1997 presentation. I. Long-Lived Assets In 1996, the Partnership adopted Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and Assets to be Disposed of." SFAS 121 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. The adoption of SFAS 121 had no effect on reported results in 1996. As further discussed in Note 9, for the year ended December 31, 1997 the Partnership recorded its property at the lower of carrying value or net realizable value and has included these amounts as Assets Held for Sale. For the years ended December 31, 1997 and 1996, permanent impairment conditions did not exist at the Partnership's property. Note 3 Depreciation 4. Cash and cash equivalents Cash and cash equivalents December 31, 1997 and 1996 consisted of the following: 1997 1996 -------- -------- Cash on hand .......... $ 49,163 $ 46,194 Money market accounts . 33,769 -- Certificates of Deposit ______- 208,201 -------- $ 82,932 $254,395 ======== ======== 5. Joint Venture and Property Acquisitions At December 31, 1997, DPI, DPII and DPIII had contributed $400,000, $1,800,000 and $2,500,000, respectively, to the Partnership. Of the total contributions, $3,845,154 was used to purchase the majority interest in the Casabella Joint Venture and $500,000 was used to fund an escrow account maintained by the permanent lender. In addition to the $4,700,000 of cash contributions referred to above, DPI, DPII and DPIII collectively incurred $280,930 of acquisition costs which have been recorded as additional capital contributions to Casabella Associates. The Partnership has invested in a single property located in Scottsdale, Arizona. The success of the Partnership will depend upon factors which are difficult to predict including general economic and real estate market conditions, both on a national basis and in the area where the Partnership's investment is located. PRIOR TO MAY 13, 1996: Net cash from operations of the Casabella Joint Venture, to the extent available, shall be distributed not less often than quarterly with respect to each fiscal year, as follows: (A) First, to Associates, an amount equal to a 10.6% per annum (computed on a simple noncompounded daily basis from the date of the closing) of their capital investment; (B) Second, the balance 70% to Associates and 30% to the property developer. All losses from operations and depreciation for the Casabella Joint Venture were allocated 99.5% to Associates and 0.5% to the property developer. All profits from operations of the Casabella Joint Venture were allocated in accordance with distributions of net cash from operations; provided, however, that if any fiscal year has no distributable net cash from operations, profits will be allocated 99.5% to Associates and 0.5% to the property developer. In the case of certain capital transactions and distributions as defined in the Casabella joint venture agreement, the allocation of related profits, losses and cash distributions, if any, would be different than as described above and would be affected by the relative balance in the individual partners' capital accounts. MAY 14, 1996 THROUGH DECEMBER 31, 1997: On May 14, 1996, the Partnership and certain affiliates consummated an agreement with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI") which separated the interests of EWI and the Partnership, thus affording the Partnership greater flexibility in the operation and disposition of Casabella. In consideration of a total 5. Joint Venture and Property Acquisitions, continued payment by DPI, DPII, and DPIII of $71,009 to EWI and delivery of certain mutual releases, EWI (i) relinquished its contract to manage Casabella and its option to exercise its rights to first refusal with regard to the sale of the property and (ii) assigned all of its interest in the Casabella Joint Venture to the Partnership (while preserving the economic interest of the venture in these Joint Ventures), which resulted in the dissolution of the Casabella Joint Venture. EWI may still share in the cash flow distributions or the proceeds from sale of the properties if certain performance levels are met. 6. Mortgage Note Payable All of the property owned by the Partnership is pledged as collateral for the nonrecourse mortgage note payable pertaining to Casabella in the original principal amount of $7,320,000. The original maturity date for this note was July 15, 1997. On July 10, 1997 the lender extended the terms of the mortgage note for a period of one year. Under the modification agreement, monthly principal and interest payments of $61,887 and a fixed interest rate of 9.125% remain unchanged. The terms of the agreement provide for a pre-payment penalty of 0.5% of the outstanding loan amount in the event the note is paid prior to 60 days before the note becomes due. The balance of the note will be due on July 15, 1998. As discussed in Note 9, the Partnership entered into a Sales Agreement for Casabella. The estimated sales price is sufficient to cover the mortgage loan balance. However, there can be no assurance that the sale of the property will occur. In the event the sale of the property does not occur, the Partnership will seek new sources of financing for the property on a long-term basis or seek to renegotiate the mortgage note with its existing lender. If the general economic climate for real estate in these respective locations were to deteriorate resulting in an increase in interest rates for mortgage financing or a reduction in the availability of real estate mortgage financing or a decline in the market values of real estate it may affect the Partnership's ability to complete the refinancing or sell the property. Accrued interest included in accounts payable and accrued expenses on the Balance Sheet of the Consolidated Financial Statements at December 31, 1997 and 1996, consisted of $25,727 and $26,180, respectively. The principal balance of the mortgage note payable appearing on the consolidated balance sheets approximates the fair value of such note at December 31, 1997 and 1996. 7. Partners' Equity Cash distributions and allocations of income and loss from Casabella Associates are governed by the partnership agreement and are generally based on the ratio of capital contributed by each of the joint venture partners, DPI, DPII and DPIII. In the case of certain events as defined in the Partnership Agreement, such as the sale of an investment property or an interest in a joint venture partnership, the allocation of the related profits, losses, and distributions, if any, would be different than described above. 8. Related Party Transactions L'Auberge Communities, Inc.(formerly Berry and Boyle, Inc.) is a General Partner of L'Auberge Communities, which owns a 99% interest in GP L'Auberge Communities, L.P. (formerly Berry and Boyle Management). The officers and principal shareholders of Evans Withycombe, Inc., the developer of Casabella, together hold a two and one half percent cumulative profit or partnership voting interest in LP L'Auberge Communities, formerly Berry and Boyle, an affiliate of the General Partners. During the years ended December 31, 1996 and 1995, property management fees of $37,735 and $78,663, respectively, were paid to Evans Withycombe, Inc. This represents 5% of the rental revenues. During the years ended December 31, 1997 and 1996, property management fees of $59,244 and $6,612, respectively, were paid to Residential Services-L'Auberge, an affiliate of the General Partner. This represents 4% of the rental revenues. 9. Asset Held for Sale During the fourth quarter of 1997, the General Partners of the Partnership committed to a plan to dispose of Casabella in Scottsdale, Arizona. On February 4, 1998, the Partnership entered into a Sales Agreement (the "Agreement") to sell Casabella to an unaffiliated third party. The selling price for Casabella is approximately $11,700,000. The Agreement is subject to completion of customary due diligence to the satisfaction of the purchaser, and the purchaser obtaining a financing commitment for the purchase of the property on commercially reasonable terms and conditions. The Partnership expects to consummate this sale in 1998. As it is the intent of the General Partners to pursue the sale of this Property, the Partnership has recorded the assets at the lower of carrying value or net realizable value and has included these amounts as Assets held for Sale on the Consolidated Balance Sheets at December 31, 1997. In accordance with SFAS 121, the Partnership has stopped depreciating these assets effective January 1, 1998. If closing of the sale were to occur, any proceeds from the sale will be allocated to the Partners in accordance with the terms of the Partnership Agreement and the Partnership will likely be liquidated. CASABELLA ASSOCIATES FINANCIAL STATEMENTS for the years ended December 31, 1997, 1996, and 1995 CASABELLA ASSOCIATES CONSOLIDATED BALANCE SHEETS December 31, 1997 and 1996 1997 1996 (unaudited) ASSETS Assets held for sale/Property, at cost (Notes 3, 9) Land $2,809,851 $2,809,851 Buildings and improvements 7,648,060 7,648,060 Equipment, furnishings and fixtures 1,122,596 995,909 ------------- ------------ 11,580,507 11,453,820 Less accumulated depreciation (2,228,967) (1,996,504) ------------- ------------ 9,351,540 9,457,316 Cash and cash equivalents 82,932 254,395 Accounts and interest receivable 5,907 3,015 Real estate tax escrow and prepaid 25,821 24,268 expenses Deposits 1,950 1,950 Deferred expenses, net of accumulated amortization of $123,914 and 13,927 11,212 $100,918 ------------- ------------ Total assets $9,482,077 $9,752,156 ============= ============ LIABILITIES AND PARTNERS' EQUITY Mortgage note payable 6,766,437 $6,885,673 Accounts payable and accrued expenses 144,493 173,500 Due to affiliates (Note 8) 2,195 646 Tenant security deposits 23,090 24,834 Rents received in advance 3,507 - ------------- ------------ Total liabilities 6,936,215 7,088,160 Partners' equity 2,545,862 2,663,996 ------------- ------------ Total liabilities and $9,482,077 $9,752,156 partners' equity ============= ============ CASABELLA ASSOCIATES CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 1997, 1996 and 1995 1997 1996 1995 (unaudited) (unaudited) Revenue: Rental income $1,507,910 $1,361,622 $1,579,782 Interest Income 8,651 30,226 44,533 ------------- ------------- ------------ $1,516,561 $1,391,848 $1,624,315 Expenses: Operating Expenses 747,479 665,878 561,516 Interest 625,459 633,360 642,857 Depreciation and amortization 255,643 266,730 375,234 General and administrative 6,114 6,223 10,200 ------------- ------------- ------------ 1,634,695 1,572,191 1,589,807 ------------- ------------- ------------ Net loss (118,134) (180,343) $34,508 ============= ============= ============ Net income (loss) allocated to: General Partners ($118,134) ($180,343) $34,508 CASABELLA ASSOCIATES CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY For the years ended December 31, 1997, 1996 and 1995 Total Partners' Equity Balance at December 31, 1994 3,464,618 (unaudited) Cash distributions (184,000) Net income 34,508 ------------- Balance at December 31, 1995 3,315,126 (unaudited) Cash distributions (470,787) Net loss (180,343) ------------- Balance at December 31, 1996 2,663,996 (unaudited) Cash distributions - Net loss (118,134) ------------- Balance at December 31, 1997 $2,545,862 ============= CASABELLA ASSOCIATES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 1997, 1996 and 1995 1997 1996 1995 (unaudited) (unaudited) Cash flows from operating activities: Interest received $11,666 $41,626 $42,047 Cash received from rents 1,502,659 1,356,103 1,579,281 Administrative expenses (7,472) (11,916) (18,901) Rental operations expenses (780,586) (577,518) (549,753) Interest paid (625,912) (633,774) (643,235) ------------- ------------- ------------ Net cash provided by operating 100,355 174,521 409,439 activities Cash flows from investing activities: Capital Improvements (126,687) (156,015) (47,771) Cash received from short-term investments - 581,813 107,147 ------------- ------------- ------------ Net cash provided (used) by investing (126,687) 425,798 59,376 activities Cash flows from financing activities: Distributions to partners - (470,787) (184,000) Payments on mortgage note payable (119,236) (108,873) (99,414) Cash paid for deposits - (1,950) - Cash paid for loan refinancing (25,895) - - ------------- ------------- ------------ Net cash provided (used) by financing (145,131) (581,610) (283,414) activities ------------- ------------- ------------ Net increase (decrease) in cash and cash (171,463) 18,709 185,401 equivalents Cash and cash equivalents at beginning of 254,395 235,686 50,285 year ------------- ------------- ------------ Cash and cash equivalents at end of $82,932 $254,395 $235,686 year ============= ============= ============ CASABELLA ASSOCIATES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 1997, 1996 and 1995 Reconciliation of net income (loss) to net cash provided by operating activities: 1997 1996 1995 (unaudited) (unaudited) Net income (loss) ($118,134) ($180,343) $34,508 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 255,643 266,730 375,234 Change in assets and liabilities net of effects from investing and financing activities: (Increase) decrease in accounts and (2,892) 11,400 (2,486) interest receivable (Increase) decrease in real estate tax (1,553) (583) 3,748 escrow and prepaid expenses (Decrease) increase in accounts payable and accrued expenses (29,007) 82,150 8,515 (Decrease) increase in due to 1,549 686 (9,579) affiliates (Decrease) increase in rents received in (3,507) 3,507 (101) advance Decrease in tenant security (1,744) (9,026) (400) deposits ------------- ------------- ------------ Net cash provided by operating $100,355 $174,521 $409,439 activities ============= ============= ============
F-21 EXHIBIT INDEX Exhibit No. (4)(a)(1) Amended and Restated Certificate and Agreement of Limited Partnership (included in Partnership's Registration Statement No. 2-86262, declared effective on March 22, 1984 (the "Registration Statement") and incorporated herein by reference). (4)(a)(2) Seventeenth Amendment to Amended and Restated Certificate and Agreement of Limited Partnership dated May 31, 1990 (included as an exhibit to the Partnership's Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference). (4)(b) Subscription Agreement (included as an Exhibit in the Registration Statement and incorporated herein by reference). (10)(a) Property management agreement between Autumn Ridge Joint Venture and Berry and Boyle Residential Services.(included as an exhibit to the Partnership's Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference). (10)(b) Property management agreement regarding Sin Vacas between Cluster Housing Properties and L'Auberge Communities Inc. dated May 15, 1996. (10)(c) Property management agreement regarding Villa Antigua between Cluster Housing Properties and L'Auberge Communities Inc. dated November 30, 1996. (10)(d) Documents pertaining to the permanent loan refinancing for the Sin Vacas Joint Venture (included as an exhibit to the Partnership's Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by reference). (10)(e) Documents pertaining to the permanent loan refinancing for the Autumn Ridge Joint Venture (included as an exhibit to the Partnership's Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by reference). (10)(f) Documents pertaining to the permanent loan refinancing for the Villa Antigua Joint Venture (included as an exhibit to the Partnership's Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by reference). (10)(g) First Amendment to Joint Venture Agreement of L'Auberge Pinecliff Joint Venture and Related Assignment of Joint Venture Interest. (10)(h) Agreement regarding Villa Sin Vacas Joint Venture (10)(i) Agreement regarding Villa Antigua Joint Venture (10)(j) Purchase and Sale Agreement and Escrow Instructions between Cluster Housing Properties and DRA Advisors, Inc. related to the sale of Pinecliff dated January 15, 1998. (27) Financial Data Schedule EX-10.(J) 2 EXHIBITS PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS [L'Auberge Pinecliff] BETWEEN CLUSTER HOUSING PROPERTIES, A CALIFORNIA LIMITED PARTNERSHIP, as Seller, AND DRA ADVISORS, INC., a Delaware corporation, as Purchaser TABLE OF CONTENTS Paragraph/Topic Page Recitals 1 Section 1. Definitions.................................................... 2 Section 2. Purchase and Sale.............................................. 4 Section 3. Purchase Price................................................. 4 Section 4. Closing........................................................ 6 Section 5. Conditions to Closing........................................... 9 Section 6. Title and Survey............................................... 12 Section 7. Representations and Warranties................................. 13 Section 8. Purchaser's Acceptance of Property As-Is....................... 18 Section 9. Seller's Covenants............................................. 18 Section 10. Prorations.................................................... 19 Section 11. Transfer Taxes; Title Charges; Other Closing Costs and Escrow Cancellation.................. 22 Section 12. Risk of Loss.................................................. 23 Section 13. Condemnation.................................................. 24 Section 14. Default....................................................... 25 Section 15. Notices....................................................... 26 Section 16. Time of Essence............................................... 27 Section 17. Termination of Agreement...................................... 27 Section 18. Governing Law; Jurisdiction; Venue............................ 27 Section 19. Counterparts and Facsimile Signatures......................... 28 Section 20. Captions...................................................... 28 Section 21. Assignability................................................. 28 Section 22. Binding Effect................................................ 29 Section 23. Modifications; Waiver......................................... 29 Section 24. Entire Agreement.............................................. 29 Section 25. Partial Invalidity; Further Assurances........................ 29 Section 26. Survival...................................................... 29 Section 27. No Third-Party Rights......................................... 30 Section 28. Attorneys' Fees............................................... 30 Section 29. Broker........................................................ 30 Section 30. Opening of Escrow............................................. 30 Section 31. Exhibits...................................................... 31 Section 32. Form of Title Policy.......................................... 31 Section 33. No Partnership or Other Liability............................. 31 Section 34. General Provisions Regarding Title Company.................... 31 Section 35. Limited Partners' Consent......................................32 Section 36. Limited Prohibition on Negotiations............................33 LIST OF EXHIBITS .........A -- Legal Description .........B -- Diagram of the Property and Improvements .........C -- Schedule of Personal Property .........D -- Form of Special Warranty Deed .........E -- Form of Bill of Sale .........F -- Form of Assignment of Leases .........G -- Assignment of Tradename and Trademark Rights .........H -- Form of Assignment of Intangible Property .........I -- Form of Tenant Letters .........J -- Certificate of Rent Roll .........K -- Form of Non-Foreign Affidavit .........L -- Form of Affidavit of Value LA980570.053 PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS L'Auberge Pinecliff Apartments This Purchase and Sale Agreement and Escrow Instructions (Agreement) is entered into as of January __, 1998 (Effective Date), by and between Cluster Housing Properties, A California Limited Partnership (Seller), and DRA Advisors, Inc., a Delaware corporation or its assignee (Purchaser), with reference to the following: Recitals A........Seller is the owner of: (1)......the land (Real Property) in Colorado Springs (the City), Colorado, and located at 515 Autumn Crest Circle. The Real Property is more particularly described in Exhibit A and generally depicted on Exhibit B attached hereto and incorporated herein by this reference and is commonly known as L'Auberge Pinecliff Apartments; (2)......all structures, buildings, improvements and fixtures on the Real Property (collectively, Improvements), including without limitation an apartment complex consisting of 96 units (the Units) situated in eighteen (18) buildings (the Complex) together with all equipment, appliances, and amenities used in connection with the Complex; (3)......certain personal property on the Real Property or the Improvements or personal property used primarily in connection with the operation and maintenance of the Real Property or the Improvements, more particularly described in Exhibit C attached hereto and incorporated herein by this reference (Personal Property); (4)......all of Seller's interest in all leases and other agreements, if any, to occupy all or any portion on the Units, as amended from time to time (such leases and agreements being sometimes collectively referred to in this Agreement as Leases); (5)......all of Seller's interest, if any, in mineral, water and irrigation rights, if any, running with or otherwise pertaining to the Real Property; and, (6)......all intangible property used in connection with the Real Property, the Improvements or the Personal Property, including but not limited to the trade name Pinecliff and related trademarks and associated good will (collectively the Tradename) used in connection with the Real Property or the Improvements (but not any tradename utilizing the term "L'Auberge"); plans and specifications in possession, custody or control of Seller or its property manager that were prepared in connection with the construction of the Improvements; all hereditaments, privileges, tenements and appurtenances pertaining to the Real Property; all Seller's rights to open or proposed highways, streets, roads, avenues, alleys, easements, strips, gores and rights-of-way in any way affecting the Real Property; all currently effective and transferable licenses, permits and warranties for the Real Property, the Improvements and the Personal Property; and all written contracts and guarantees running in favor of Seller in effect at Closing as approved by Purchaser that relate in any way to the Property (Contracts) (collectively, Intangible Property). The Real Property, the Improvements, the Personal Property, the Leases and the Intangible Property are sometimes collectively referred to in this Agreement as the Property. B........Purchaser desires to purchase the Property from Seller, and Seller desires to sell the Property to Purchaser, on the terms and conditions set forth in this Agreement. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: Section 1. Definitions. As used in this Agreement, the following terms shall be defined in Section 1: Additional Earnest Money is defined in Section 3(b). Agreement is defined in the preamble. Approved Exceptions is defined in Section 6(b). Business Day means a calendar day on which banks in Denver, Colorado shall be open to transact business (other than by automated teller or similar equipment). City is defined in Recital A(1). Closing is defined in Section 4(a). Closing Date is defined in Section 4(a). Code is defined in Section 5(a)(viii). Complex is defined in Recital A(2). Contracts is defined in Recital A(6). Court is defined in Section 5(a)(1). Disapproval Notice is defined in Section 6(b). Disapproved Exceptions is defined in Section 6(b). Due Diligence Period is defined in Section 5(a). Effective Date is defined in the preamble. Earnest Money is defined in Section 3(b). Escrow is defined in Section 4(a). Improvements is defined in Recital A(2). Initial Earnest Money is defined in Section 3(a). Intangible Property is defined in Recital A(6). Leases is defined in Recital A(4). Loss Threshold is defined in Section 12(a). Opening of Escrow is defined in Section 30. Personal Property is defined in Recital A(3). Preliminary Report is defined in Section 6(a). Property is defined in Recital A. Purchase Price is defined in Section 3. Purchase Transaction is defined in Section 2. Purchaser is defined in the preamble. Purchaser's Event of Default is defined in Section 14(a). Real Property is defined in Recital A(1). Seller is defined in the preamble. Seller's actual knowledge is defined in Section 7(a). Seller's Broker is defined in Section 29. Seller's Disclosure Documentation is defined in Section 5(a)(ii). Seller's Event of Default is defined in Section 14(b). Studies is defined in Section 5(a)(i). Survey is defined in Section 6(c). Survival Items is defined in Section 5(a). Tenants is defined in Section 4(b). Tenant Letters is defined in Section 4(c)(vi). Title Company is defined in Section 3(a). Title Policy is defined in Section 6(b). Tradename is defined in Recital A(6). Unit is defined in Recital A(2). Section 2. Purchase and Sale. In consideration of the mutual covenants contained in this Agreement, Seller agrees to sell the Property to Purchaser, and Purchaser agrees to purchase the Property from Seller, on the terms and conditions hereinafter set forth (the Purchase Transaction). Section 3. Purchase Price. The purchase price for the Property shall be Six Million Seven Hundred Thousand and No/100 Dollars ($6,700,000.00) (Purchase Price). The Purchase Price shall be payable as follows: (a) The sum of Sixty-Seven Thousand and No/100 Dollars ($67,000.00) shall be tendered to Seller in the form of Purchaser's check or wire transfer made payable to Chicago Title Insurance Company (Title Company), simultaneously with Purchaser's delivery of fully executed originals of this Agreement to Title Company in triplicate, as earnest money (Initial Earnest Money). The Initial Earnest Money shall be applied to the Purchase Price at Closing or paid to Seller or Purchaser, as applicable, upon cancellation of this Agreement as provided in this Agreement. Upon execution of this Agreement by Seller, the Initial Earnest Money shall be deposited with and held by Title Company in accordance with this Agreement. Any interest on the Earnest Money shall belong to Purchaser and shall be applied to the Purchase Price in accordance with Section 3(c), unless the Purchase Transaction fails to close or is terminated because of a Purchaser's Event of Default (as defined below). Purchaser shall concurrently with its deposit of the Initial Earnest Money furnish its Federal Taxpayer Identification No. to Title Company. (b) Within two (2) Business Days after satisfaction or waiver, in writing, of the conditions precedent in Section 5(a), Purchaser shall in each case tender to Seller the sum of Sixty-Seven Thousand and No/100 Dollars ($67,000.00) in the form of Purchaser's check or wire transfer made payable to Title Company (Additional Earnest Money). The Initial Earnest Money and the Additional Earnest Money (collectively, Earnest Money) shall be invested by Title Company in a federally insured, daily interest-bearing account as directed by Purchaser, and all interest shall become part of the Earnest Money. As long as the conditions precedent in Section 5(a) shall have been satisfied or otherwise waived, in writing, by Purchaser and Seller does not default in the performance of its obligations under this Agreement, the Earnest Money shall be applied against the Purchase Price at the Closing or, if a Purchaser's Event of Default exists under this Agreement, immediately disbursed to Seller pursuant to Section 14 as Seller's agreed and total liquidated damages, it being acknowledged and agreed by Purchaser and Seller that it would be extremely difficult or impossible to determine Seller's exact damages. If a Seller's Event of Default exists under this Agreement and Purchaser elects to terminate this Agreement, the Earnest Money together with accrued interest thereon shall be immediately released to Purchaser. (c) On or before the Closing Date, Purchaser shall deposit with Title Company, in immediately available funds in addition to the Earnest Money, the sum necessary to make the total consideration equal to the Purchase Price, plus or minus prorations and closing costs, in accordance with this Agreement, which funds are to be held in escrow by Title Company until cancellation of this Agreement as provided in this Agreement or paid to Seller at the Closing. Section 4. Closing. (a) The purchase and sale of the Property (Closing) shall be consummated through an escrow established by the Title Company (Escrow) that shall close at Title Company's office by 5:00 p.m. MST on the date (Closing Date) that is thirty (30) days after the expiration of the Due Diligence Period (as defined below), unless such date is extended pursuant to this Agreement or otherwise by written agreement signed by the parties. (b) Prior to or at the Closing, Purchaser shall pay the Purchase Price into the Escrow, Purchaser and Seller shall execute and deliver into Escrow all necessary documents and Seller shall deliver marketable fee title and possession of the Property to Purchaser free and clear of all tenants or occupants other than the tenants of the Units under the Leases (Tenants). (c) On or before the Closing Date, Seller shall deliver into Escrow the following documents and things: (i) a Special Warranty Deed, in recordable form and properly executed and acknowledged on behalf of Seller, conveying to Purchaser the Real Property and the Improvements in fee simple, in substantially the form attached hereto as Exhibit D and incorporated herein by this reference; (ii) a Bill of Sale executed by Seller transferring to Purchaser the Personal Property, with a warranty of title only. No warranty of condition or fitness for any use or purpose will be made. The Bill of Sale shall be substantially in the form attached hereto as Exhibit E and incorporated herein by this reference; (iii) a duly executed Assignment of Leases that assigns and transfers to Purchaser, as of the Closing, all of Seller's interests under the Leases and that contains an assumption by Purchaser of Seller's obligations under the Leases, including without limitation obligations relating to security deposits. The Assignment of Leases shall be substantially in the form attached hereto as Exhibit F and incorporated herein by this reference; (iv) a duly executed Assignment of Tradename and Trademark Rights that assigns and transfers all of Seller's interest in the Tradename. The Assignment of Tradename and Trademark Rights shall be substantially in the form attached hereto as Exhibit G and incorporated by reference; (v) a duly executed and acknowledged Assignment of Intangible Property that assigns and transfers to Purchaser as of the Closing all of Seller's interests to the Intangible Property and the Contracts substantially in the form attached hereto as Exhibit H and incorporated herein by this reference; (vi) a form of letter to Tenants (Tenant Letters) at the Real Property and Improvements that instruct the Tenants, after the Closing Date, to pay rent to Purchaser and to recognize Purchaser as the new lessor under their respective Leases substantially in the form attached hereto as Exhibit I attached hereto and incorporated by reference; (vii) originals or, if originals are not available, complete copies, of all Leases in the possession of Seller or its property manager, together with a Certificate of Rent Roll substantially in the form of Exhibit J attached hereto and incorporated herein by this reference dated as of the Closing Date; (viii) Seller's affidavit that Seller is not a foreign person within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended (the Code) substantially in the form attached hereto as Exhibit K and incorporated by reference as prescribed by Treas. Reg. 1.1445-2(b). If Seller does not timely furnish the Non-Foreign Affidavit, Purchaser may withhold (or direct Title Company to withhold) from the Purchase Price an amount equal to the amount required to be so withheld pursuant to Section 1445(a) of the Code, and such withheld funds shall be deposited with the Internal Revenue Service as required by Section 1445(a) and the regulations promulgated thereunder. The amount withheld, if any, shall nevertheless be deemed to be part of the Purchase Price paid to Seller; (ix) a duly executed and acknowledged Affidavit of Value substantially in the form attached hereto as Exhibit L and incorporated by reference; and (x) termination notices that terminate, as of the Closing Date, all of the management, service and leasing contracts for the Improvements as selected by Purchaser in accordance with this Agreement; (xi) delivery by Seller to Purchaser at Closing of the security deposits under the Leases that have not been applied in the form of a credit in favor of Purchaser against the Purchase Price; (xii) delivery by Seller to Purchaser at Closing of a complete list of the names, addresses and telephone numbers of all contractors, subcontractors and materials suppliers known to Seller or Property Manager and who worked on or supplied materials in regard to the Improvements within the last twelve (12) months prior to Closing; (xiii) Seller, at Seller's cost and prior to Closing, paying in full all real estate commissions which may be due from Seller in regard to the Leases, including any commission due in regard to any of the Leases which commissions shall be due and payable on or before Closing or within three (3) months after Closing. In this regard, Seller shall deposit with Title Company, for delivery to Purchaser at Closing, written documentation signed by the applicable real estate brokers that such commissions, if any, to be paid by Seller have been paid in full; (xiv) Seller, at Seller's cost, completing by Closing all improvements, if any, to the Units required under the respective Leases; and (xv) current estoppel from the applicable homeowner's association (if any) as to (A) the amount of current assessments, (B) the date through which such assessments are paid and (C) the absence of any default on the part of Seller under the documents creating such homeowner's association. If the foregoing conditions have not been satisfied by the specified date or Closing, as the case may be, then Purchaser shall have the right, at Purchaser's sole option, exercisable by written notice to Seller and Title Company but subject to Seller's right to satisfy any such condition identified in writing by Purchaser within five (5) Business Days following Seller's receipt of such written notice, to cancel this Agreement, whereupon the Earnest Money plus interest shall be paid immediately by Title Company to Purchaser and, subject to the provisions of Section 14 and except for any Survival Items (as defined below), neither Purchaser nor Seller shall have any further liability or obligation under this Agreement. Section 5. Conditions to Closing. In addition to the other conditions to the completion of the Purchase Transaction, Seller and Purchaser agree that the Closing is subject to the satisfaction, approval or waiver, in writing, by Purchaser, in Purchaser's sole discretion, of the following conditions contained in this Section 5: (a) Purchaser's due diligence conditions shall be the following: (i) the conduct and approval of any inspection, investigation and approval, deemed necessary by Purchaser in Purchaser's sole discretion and at Purchaser's sole cost and expense, of any physical, structural, geological and environmental or other condition of the Property (including without limitation the availability of access, utility services, zoning, environmental risks, engineering and soil conditions) deemed necessary by Purchaser to determine the feasibility of acquiring the Property (collectively, the Studies). In the event Purchaser withdraws from the Purchase Transaction for any reason whatsoever (other than a Seller's Event of Default) to the extent permitted by the respective third party provider, Purchaser shall immediately deliver to Seller each and all of the Studies prepared or undertaken by or for the benefit of Purchaser in connection therewith. The Studies shall include, but not be limited to, Purchaser's right to: (i) review and approve the Survey (as defined below), the Leases and the Contracts; and (ii) meet and confer with Seller's property manager. For the purpose of conducting physical inspections by Purchaser, Seller agrees to provide full and complete access to the Property at reasonable times, upon not less than two (2) Business Days' notice to Seller or to Seller's property manager, up to and including the Closing Date. Purchaser shall conduct such inspections in a nondisruptive manner as to the Tenants and in compliance with any applicable legal requirements and shall in no event conduct destructive testing of the Real Property and the Improvements without Seller's prior written consent, which consent may be granted or withheld in Seller's sole discretion; provided, however, that for such purpose customary Phase I environmental investigation (including lead paint sampling and soil borings) shall not be deemed "destructive testing." Purchaser agrees to defend, indemnify and hold Seller, Seller's agents and employees, and the Property harmless from and against any losses, costs, damages, claims or liabilities, including but not limited to mechanics' and materialmen's liens, personal injury or death, property damage and attorneys' fees and costs, arising from or otherwise relating to Purchaser's entry upon the Property for the aforementioned purposes under this subsection. Purchaser shall immediately repair any damage caused by such inspection and shall restore the Real Property and the Improvements to their condition prior to such testing. Purchaser's indemnity, hold harmless and repair obligations under this Section shall survive the termination or expiration of this Agreement or the Closing, as applicable, for a period of twelve (12) months after which Purchaser's obligations shall automatically terminate unless prior to the end of the twelve-month period, Seller shall have brought suit against Purchaser in the El Paso County, Colorado Superior Court or the United States District Court for the District of Colorado located in Denver, Colorado (either, the Court) to enforce Purchaser's indemnity, hold harmless and repair obligations. (ii) subject to Seller's delivery obligations under Section 5(b), inspection and approval, in Purchaser's sole discretion, of all documents relating to the Property that are in the possession of Seller or its property manager or under their custody or control (collectively, Seller's Disclosure Documentation), all of which shall be made available at all reasonable times after Opening of Escrow to Purchaser at the Property for Purchaser's inspection and copying at Purchaser's sole cost and expense. The information made available to Purchaser by Seller under this subsection shall not be released or otherwise disclosed by Purchaser to any third parties other than to Purchaser's attorneys, accountants or in-house property evaluation personnel or to any prospective assignee or partner of, or lender to, Purchaser in connection with the Purchase Transaction. If the Purchase Transaction does not close for any reason, Purchaser and Purchaser's agents, representatives, attorneys and accountants shall refrain from disclosing such information to any third party whatsoever. Purchaser shall defend, indemnify and hold Seller harmless (which indemnification shall survive the termination or expiration of this Agreement) for all loss, damage or expense incurred by Seller because of any unauthorized disclosure of such information by Purchaser or Purchaser's attorneys, accountants or in-house property evaluation personnel; provided, however, that Purchaser's indemnity and hold harmless obligations shall only exist for a period of twelve (12) months after the effective date of such termination or expiration after which Purchaser's obligations shall automatically terminate unless prior to the end of the twelve-month period, Seller shall have brought suit against Purchaser in the Court to enforce Purchaser's indemnity and hold harmless obligations. During the period commencing with the Opening of Escrow (as defined below) and ending at 5:00 p.m. (MST) on the thirtieth (30th) day thereafter (Due Diligence Period), Purchaser shall have the right to examine and investigate to Purchaser's sole satisfaction the physical, financial and legal status of the Property and the Seller's Disclosure Documentation; provided, however, that in the event Purchaser is despite good faith efforts unable to obtain any studies, reports of inspections to be prepared for Purchaser by third parties within such thirty-day period, Purchaser shall be entitled to extend the Due Diligence Period for up to fifteen (15) additional days upon delivery of written notice to Seller setting forth the basis for such extension. In the event Purchaser notifies Seller in writing within the Due Diligence Period that Purchaser is terminating this Agreement for any reason or for no reason, this Agreement shall terminate at the end of the final day of the Due Diligence Period. Upon termination of this Agreement, the Earnest Money, together with accrued interest thereon, shall be immediately refunded to Purchaser by Title Company, both Seller and Purchaser shall be released from all further obligations under this Agreement (excluding the indemnity, hold harmless and repair obligations of Purchaser under Section 5(a)) and neither Seller nor Purchaser shall be subject to a claim by the other for damages of any kind, except for Purchaser's indemnity, hold harmless and repair obligations provided in Section 5(a) of this Agreement and in other indemnity provisions of this Agreement, if any (a Survival Item). In the event Purchaser fails to notify Seller in writing within the Due Diligence Period that Purchaser is terminating this Agreement for any reason or for no reason, each of such conditions shall conclusively be deemed to have been satisfied. (b) Seller agrees to make available and to cause its property manager to make available at the Property to Purchaser or Purchaser's agents or employees all information requested by Purchaser in writing that is in the possession, custody or control of Seller or its property manager relating to the leasing, operating, maintenance, construction, repair, zoning, platting, engineering, soil tests, water tests, environmental tests, construction, master planning, architectural drawings and like matters regarding the Property as part of Seller's Disclosure Documentation. (c) Seller's representations and warranties contained in this Agreement shall be true and correct in all material respects as of the Closing, and Seller shall have performed each and every obligation to be performed by Seller under this Agreement prior to or at the Closing. Section 6. Title and Survey. (a) Within seven (7) Business Days following the Opening of Escrow, Seller shall cause Title Company to deliver to Purchaser a current title insurance commitment from Title Company covering the Property, together with full and legible copies of all supporting documents (collectively, Preliminary Report). The Preliminary Report is to be preliminary to the extended coverage owner's policy of title insurance to be issued to Purchaser by Title Company insuring Purchaser's fee simple title to the Property in the amount of the Purchase Price (the Title Policy). Seller shall pay only the premium for a standard owner's policy in the amount of the Purchase Price with the Purchaser to pay all additional costs in regard to extended coverage, if elected by Purchaser, and for all endorsements, if any, required by Purchaser. (b) In addition to the contingencies set forth in Section 5, Purchaser shall have to the end of the Due Diligence Period to disapprove, in writing, any exceptions to title shown on the Preliminary Report or reflected on the Survey (as defined below) (collectively, Disapproved Exceptions) and to provide Seller and Title Company with notice of disapproval in writing describing the defect with reasonable particularity (Disapproval Notice). In the event Purchaser fails to deliver a Disapproval Notice to Seller and Title Company within the Due Diligence Period, all such exceptions to title shall be deemed to have been approved. Within ten (10) Business Days after Seller's receipt of the Disapproval Notice, if any, Seller shall notify Purchaser whether Seller does or does not intend to remove the Disapproved Exceptions. Seller shall remove all monetary liens and all other encumbrances created by Seller after the Effective Date that shall not have been approved in writing by Purchaser. If Seller notifies Purchaser in writing within such ten-day period that Seller intends to eliminate some or all of the Disapproved Exceptions, Seller shall do so prior to or at the Closing. If Seller fails to notify Purchaser in writing within such ten-day period that Seller intends to eliminate all of the Disapproved Exceptions or if Seller elects to eliminate some but not all of the Disapproved Exceptions, Purchaser may, by notifying Seller and Title Company within five (5) Business Days after Purchaser's receipt of Seller's notice to Purchaser, elect either to terminate this Agreement or to take title to the Property subject to the Disapproved Exceptions that Seller has not undertaken to remove. Purchaser's failure to notify Seller and Title Company of Purchaser's election to terminate this Agreement within such five Business Day period shall be deemed an election to take title to the Property subject to the Disapproved Exceptions that Seller has not undertaken to remove. Seller shall cause the Title Company to issue the Title Policy at the Close of Escrow insuring marketable fee title to the Real Property in Purchaser in the amount of the Purchase Price, subject only to the following matters (collectively, Approved Exceptions): (i) a lien for current real property taxes or general or special assessments not then delinquent; (ii) matters affecting title to the Property not disapproved by Purchaser in accordance with this Section 6(b); and (iii) matters affecting title to the Property created by or with the consent of Purchaser. (c) Seller, at Seller's sole cost, shall deliver to Purchaser and Title Company on or before 5:00 p.m. MST on the tenth Business Day (10th) day after Opening of Escrow, a certified ALTA survey of the Property (the Survey) to be completed by a surveyor licensed in the State of Colorado, whereupon the legal description in the Survey shall control over the description in Exhibit A to the extent they may be inconsistent. The Survey shall set forth the legal description and boundaries of the Property and all easements, encroachments and Improvements thereon and shall comply with all requirements of Title Company in regard to Title Company's issuance of the Title Policy. Section 7. Representations and Warranties. (a) As used herein, "Seller's actual knowledge" shall mean the actual knowledge of Stephen B. Boyle, the president of the corporate general partner of the general partner of Seller, without any duty of inquiry except inquiry of the on-site property manager. Seller represents and warrants to Purchaser, as of the Effective Date and again as of the Closing Date, as follows: (i) that to Seller's actual knowledge, Seller has received no notice from any governmental authority of (A) any existing or threatened zoning, building, fire or health code violations or violations of other governmental regulations concerning the Property or the operation of the Property that has not previously been corrected or (B) any existing or threatened condemnation of the Property or any part of the Property. Seller further covenants that if Seller should receive any such notice prior to the Closing Date, Seller will provide Purchaser with copies of the notice promptly following the receipt thereof by Seller. As an additional condition precedent to Closing, Seller agrees to use reasonable efforts to correct any matters disclosed in any such notice on or before Closing; provided, however, that Seller need not expend more than an aggregate amount of Twenty-Five Thousand Dollars ($25,000) for such corrections. If any such matter(s) cannot be corrected by Seller by Closing, Seller shall give Purchaser a credit at Closing for the amount reasonably estimated by Seller and Purchaser required to correct the matter(s), but in no event more than Twenty-Five Thousand Dollars ($25,000). If the estimated cost to correct the matter(s) is greater than Twenty-Five Thousand Dollars ($25,000) and Seller, by written notice to Purchaser, elects not to correct the matter(s) prior to Closing, Purchaser may deliver written notice of termination of this Agreement to Seller and Title Company whereupon this Agreement shall terminate and the Earnest Money shall be immediately returned to Purchaser, unless Purchaser, in Purchaser's sole discretion, elects in writing to pay the excess required to correct the matter(s); (ii) that to Seller's actual knowledge, no legal actions are existing or threatened against the Property, nor are there any violations of building codes or other statutes affecting the use, operation, occupancy and enjoyment of the Property; (iii) that to Seller's actual knowledge, there exist no violations of any statutes, ordinances, regulations or administrative or judicial orders or holdings, whether or not appearing in public records, with respect to the Improvements or the Property, and the present use of the Property complies with existing zoning laws and ordinances; (iv) that to Seller's actual knowledge, Seller has received no notices from insurers of defects in the Improvements which have not been corrected; (v) that to Seller's actual knowledge, there exist no continuing, pending or threatened public improvements that would result in a tax assessment or other similar charge being levied or assessed against the Property; (vi) that Seller has disclosed to Purchaser all information, records and studies for the Property in the possession, custody or control of Seller or its property manager concerning hazardous, toxic or governmentally regulated materials that are or have been stored, handled, disposed of or released on the Property; (vii) that no leases or other agreements for occupancy are in effect for the Property except for the Leases as described on the rent roll attached hereto as Exhibit J; (viii) that to Seller's actual knowledge, all mechanical, electrical, structural and plumbing systems for the Property are in good operating condition; (ix) that there exist no (A) agreements or arrangements pursuant to which goods, services, water, equipment, labor, supplies or any other items are being or will be furnished to the Property, except for the Contracts or as relate to the other Intangible Property or to standard arrangements for utility services; (B) agreements other than the Leases whereby any person or entity holds any right, license or privilege to possess or use the Property; and (C) licenses, franchises or permits issued or required for the ownership of the Property; (x) that to Seller's actual knowledge, there exist no agreements or understandings relating to the Property, except for this Agreement and the agreements (if any) shown as exceptions to the title to the Property; (xi) the Purchase Transaction will not in any material respect violate any other agreements to which Seller is a party; (xii) prior to Closing or any earlier termination of this Agreement, Seller will not enter into or execute any employment, management or service contract with respect to the Property without Purchaser's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, unless such contract so entered by Seller shall provide that such contract can be terminated by Seller, or Seller's successor, at any time without penalty, upon not more than thirty (30) days' prior written notice to the other party thereto. When any such contracts are fully executed, Seller shall deliver a copy thereof to Purchaser; (xiii) no default of Seller exists under any of the Contracts and, to Seller's actual knowledge, no default of the other parties exists under any of the Contracts. Between the Effective Date and the Closing Date, or any earlier termination of this Agreement, Seller, without Purchaser's prior written consent which consent shall not be unreasonably withheld, conditioned or delayed, shall not amend, modify in any material respect (such as increasing or decreasing the term or monetary obligations thereunder) or terminate, or agree to amend, modify or terminate, any Contract or Lease or waive any substantial right thereunder; (xiv) except as expressly provided otherwise in Section 35 below, no consent of any third party is required in order for Seller to enter into this Agreement and perform Seller's obligation hereunder. Without limiting the generality of the foregoing, no consent of any third party is required in order for Seller to assign the Contracts to Purchaser; (xv) except for any item to be prorated at Closing in accordance with this Agreement, all bills or other charges, costs or expenses arising out of or in connection with or resulting from Seller's construction, use, ownership, or operation of the Property up to Closing shall be paid in full by Seller on or before Closing; (xvi) all general real estate taxes, assessments and personal property taxes that have become due with respect to the Property (except for those that will be prorated at Closing in accordance with this Agreement) have been paid or will be so paid by Seller prior to Closing; (xvii) between the Effective Date and later of the Closing Date or any earlier termination of this Agreement, Seller shall not execute or enter into any new lease of any part of the Improvements, except in the normal course of business using Seller's standard form of lease and adhering to Seller's standard rental schedule; (xviii) except in the ordinary course of business or as required by a governmental agency, Seller shall not place or permit to be placed on any portion of the Real Property any new improvements of any kind or remove or permit any improvements to be removed from the Real Property without the prior written consent of Purchaser, which consent may be granted or withheld for any reason; (xix) Seller shall not restrict, rezone, file or modify any development plan or zoning plan or establish or participate in the establishment of any improvements district with respect to all or any portion of the Real Property without Purchaser's prior written consent, which consent may be granted or withheld for any reason; and, (xx) without Purchaser's prior written consent, which may be granted or withheld for any reason, Seller shall not, by voluntary or intentional act or omission to act, further cause or create any easement, encumbrance, or mechanic's or materialmen's liens, and/or similar liens or encumbrances to arise or to be imposed upon the Property or any portion thereof. (b) If Seller learns of anything that would make the representations and warranties set forth above untrue in any material respect following the expiration of the Due Diligence Period and prior to the Closing, Seller shall immediately notify Purchaser in writing. Upon written notice to Seller and Title Company within five (5) Business Days following receipt of Seller's notice, Purchaser shall be entitled to (i) terminate this Agreement if Purchaser reasonably concludes that the Property will be adversely affected in any material respect by such untrue representation or warranty, in which case Purchaser shall be entitled to an immediate return of the Earnest Money together with accrued interest thereon and reimbursement of Purchaser's reasonable out-of-pocket expenses actually paid to third parties in connection with Purchaser's due diligence investigation and documented to Seller's reasonable satisfaction (such reimbursement, however, in no event to exceed Nineteen Thousand Dollars ($19,000.00) in the aggregate) or (ii) allow Seller a reasonable period (not to exceed an additional ten (10) Business Days) within which to cure such untrue representation or warranty. After such disposition of the Earnest Money, the Escrow shall be canceled and neither party shall have any rights or responsibilities to the other except as otherwise expressly provided by this Agreement. (c) Each of the parties represents and warrants to the other that each of the persons executing this Agreement on behalf of the warranting party is authorized to do so; that the execution, delivery and performance of this Agreement will not conflict with, or result in a breach or other violation of, any contract, agreement or instrument to which Purchaser or Seller, as the case may be, is a party; and that upon execution, this Agreement shall be a valid obligation of, binding upon and enforceable against Purchaser or Seller, as the case may be. (d) All representations made in this Agreement by Seller shall survive the execution and delivery of this Agreement or the cancellation of this Agreement or Closing, as applicable. Seller shall and does hereby indemnify and hold Purchaser harmless from and against any loss, damage, liability and expense, together with all court costs and attorneys' fees which Purchaser may incur, by reason of any third party claims asserted against Purchaser and based upon any material misrepresentation by Seller or any material breach of any of Seller's warranties; provided, however, that Seller's representations and indemnity obligations under this Section 7 shall survive for six (6) months after cancellation of this Agreement or Closing, as applicable, whereupon Seller's obligations shall terminate automatically unless Purchaser shall have commenced an action thereon against Seller in the Court within such period; provided, however, that Seller's liability with respect to any action commenced within the fourth (4th), fifth (5th) or sixth (6th) months of such period shall be limited to Fifty Thousand Dollars ($50,000.00) in the aggregate. Section 8. Purchaser's Acceptance of Property As-Is. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN AND/OR IN THE DOCUMENTS TO BE DELIVERED AT CLOSING, PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING WITHOUT LIMITATION THE WATER, SOIL AND GEOLOGY, AND ANY IMPROVEMENTS CONSTRUCTED THEREON, (B) THE INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREON, (D) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY, (E) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, OR (F) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY. EXCEPT FOR THOSE ITEMS OF SELLER'S DISCLOSURE DOCUMENTATION THAT HAVE BEEN PREPARED BY SELLER, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED TO PURCHASER WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER'S DISCLOSURE DOCUMENTATION OR IN THE DOCUMENTS TO BE DELIVERED AT CLOSING, SELLER IS NOT AND SHALL NOT BE LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN AND/OR IN THE DOCUMENTS TO BE DELIVERED AT CLOSING, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS," "WHERE IS" AND "WITH ALL FAULTS" CONDITION AND BASIS. Section 9. Seller's Covenants. From and after the Effective Date until Closing, and so long as this Agreement remains in effect, Seller shall: (a) except as otherwise provided in Section 7(a), maintain, manage and operate the Property substantially in accordance with the established practices of Seller and its property manager; (b) comply with all applicable covenants, conditions and other restrictions of record, including those relating to a homeowner's association (if any); (c) maintain the Property in its present condition, ordinary wear and tear and casualty loss excepted; (d) maintain all casualty, liability and hazard insurance currently in force for the Property; (e) except as otherwise provided in Section 7(a), operate, manage and enter into contracts for the Property and maintain present services and sufficient supplies and equipment for the operation and maintenance of the Property, all in the same manner as that done by Seller and its property manager prior to the Effective Date; provided, however, that Seller shall not enter into any service contract that cannot be terminated within thirty (30) days following notice to the vendor; and (f) continue to enter into Leases in the ordinary course of Seller's business in accordance with the standards of Section 7(a)(xvii). If Seller enters into leases or grants concessions in violation of this Section 9, Purchaser may either waive the violation or, as Purchaser's sole remedy, terminate this Agreement and require the return of the Earnest Money together with accrued interest thereon. Section 10. Prorations. The following adjustments to the Purchase Price shall be made between Seller and Purchaser: (a) The following items, as applicable, shall be prorated between Purchaser and Seller on a per diem basis as of the Closing Date: (i) all nondelinquent real estate taxes, installments of general and special assessments, homeowner's association dues, if any, and fire protection service charges, if any, due and payable in the calendar year in which Closing occurs, based upon the most recent information available to Seller. If Closing shall occur before the tax rate or assessment for the current year is fixed, the initial proration of such taxes or assessments shall be based upon the latest available information. Thereafter, when the actual tax rate for such current year becomes known, Seller and Purchaser shall, outside of escrow and after Closing, re-prorate any such taxes or assessments to the extent that the actual rate thereof was different than the rate used for prorations made at Closing and shall pay, one to the other, any adjustment due as a result of such re-proration; (ii) current rents, advance rentals, nonrefundable deposits and other charges, if any, payable by Tenants under the Leases; and (iii) all charges for fuel, water, sewer, electricity and other utility services furnished to the Property which are not metered to Tenants. Seller, to the extent the same is obtainable, shall furnish meter readings for such utilities through the close of business on the day prior to the Closing. If any such meter readings are not so obtainable, then Seller shall provide meter readings as of a date not more than thirty (30) days prior to the Closing Date, and the proration of utility charges shall initially be based upon such prior reading. Upon the taking of actual meter readings first after Closing, such proration shall be readjusted outside of escrow after Closing and Seller or Purchaser, as the case may be, shall promptly pay to the other the amount determined to be so due upon such readjustment. (b) All other items of accrued or prepaid income and expense, except delinquent rents, shall be prorated as of the Closing Date, on the basis of the most recent ascertainable amounts of or other reliable information for each item of income and expense. Seller and Purchaser shall duly cooperate with each other and the Title Company in making prorations, adjustments and credits pursuant to this Section 10 and shall, as requested by the Title Company, furnish to the Title Company such information as is in the possession of or obtainable by them to assist in making such prorations, adjustments or credits. In the event, for any reason beyond the reasonable control of the parties hereto, information necessary to calculate any proration, adjustment or credit for any item required to be prorated, adjusted or credited under this Section 10 is not available prior to Closing, then such items shall be prorated, adjusted or credited outside of escrow after Closing as soon as such information is available, and Seller and Purchaser shall duly cooperate with each other in regard thereto and shall pay, one to the other, any amounts which may be owing as a result of any such subsequent proration, adjustment or credit. In the event, at any time within six (6) months after Closing, errors shall be discovered in any prorations, adjustments or credits made pursuant to this Section 10, Seller and Purchaser shall correct such errors and shall pay, one to the other, any sums owning as a result of such correction. (c) For purposes of all prorations provided for in this Agreement, Seller shall be responsible for all days up to the Closing Date, and Purchaser shall be responsible for all days including and after the Closing Date. Except as otherwise expressly provided in this Agreement, all prorations shall be final. (d) Security deposits, including cleaning and pet deposits and prepaid rent and any interest thereon, shall be credited to Purchaser at Closing. (e) If on the Closing Date any Tenant is delinquent in the payment of rent, including any additional rent billed but unpaid at the time of Closing, the delinquent rent shall remain the property of Seller and be paid to Seller if, as and when collected by Purchaser out of the funds received by Purchaser from such Tenant, and no proration of such delinquent rent shall be made at Closing. For a period of one hundred eighty (180) days after Closing, Purchaser shall diligently attempt to collect and shall remit to Seller any such delinquent rents owing to Seller; provided, however, that (i) Purchaser shall be required only to periodically send bills to the Tenant(s) owing such delinquent rent and shall not be required to commence any litigation or undertake any other collection efforts in regard thereto; and (ii) in the event Purchaser collects rent from a person who owes rent for any period of time after Closing and for a period of time prior to Closing, all amounts collected from such person shall be applied first to the amount of rents owing by such person for the period of time after Closing shall be retained by Purchaser and only the excess, if any, shall be remitted to Seller. (f) Contemporaneously with the Closing, Seller shall deliver to Purchaser at the offices of Seller's property manager all originals (including computer discs and tapes) of books and records of accounts, contracts, leases, leasing correspondence, receipts for deposits, bills and other papers that pertain to the Property, together with all advertising materials, booklets, keys and other items, if any, used in the Property's operation, provided that Seller, at Seller's cost, may retain a copy of the foregoing items for tax reporting purposes. For a period of two (2) years after the Closing and solely for the purposes of Section 10, Seller, upon at least five (5) days' prior written request to Purchaser and at Seller's sole cost and expense, shall have the right to inspect the books and records for the Property located at the office of Purchaser and/or Purchaser's property manager to verify that Purchaser is remitting to Seller the proper amounts according to this Agreement and for any other purpose related to Seller's prior ownership of the Property. (g) The cost of any tenant improvements paid or incurred by Seller for Leases approved by Purchaser and executed after the date of this Agreement shall be paid in full by Seller at or before Closing. Seller shall supply to Purchaser and Title Company paid invoices and final lien waivers for all such tenant improvement work to the extent performed on or prior to the Closing Date. Any provision of this Agreement to the contrary notwithstanding, after the Effective Date, Seller shall not undertake any tenant improvement work on any Unit without the prior written consent of Purchaser, such consent not to be unreasonably withheld, conditioned or delayed. Section 11. Transfer Taxes; Title Charges; Other Closing Costs and Escrow Cancellation. (a) Seller and Purchaser agree to execute any real estate transfer declarations required by the state, county or municipality in which the Real Property is located. Seller shall pay: (i) one-half of the escrow charges of Title Company; (ii) one-half of the cost of recording the instruments of conveyance; (iii) the cost of the Survey; and (iv) the portion of the premium charged for the Title Policy attributable to standard coverage. Purchaser shall pay all other costs of consummating this transaction, including without limitation the premium for the Title Policy in excess of standard coverage and for any endorsements required by Purchaser, all transfer taxes and other fees (if any) assessed by any governmental authority against the Real Property because of this sale and transfer, all sales and transfer taxes or other fees assessed by any governmental authority against the Personal Property (if any) and the cost of any municipal deed or transfer taxes (if any). The parties shall each pay their own attorneys' fees in regard to the negotiation and documentation of the Purchase Transaction. (b) If the Escrow fails to close because of a Seller's Event of Default, Seller shall be liable for the cancellation charge, if any, of Title Company. If the Escrow fails to close because of a Purchaser's Event of Default, Purchaser shall be liable for the cancellation charge, if any, of Title Company. If the Escrow fails to close for any other reason, Seller and Purchaser shall each be liable for one-half of the cancellation charge, if any, of Title Company. Section 12. Risk of Loss. (a) Except as provided in any indemnity provisions of this Agreement, Seller shall bear all risk of loss for the Property up to the Closing. (b) The foregoing to the contrary notwithstanding, if the Property is damaged by fire or other casualty prior to the Closing Date and is insured under one or more fire or casualty insurance policies maintained by Seller, and if Seller determines, in Seller's reasonable good faith discretion, that repair of the Property would cost less than Two Hundred Fifty Thousand Dollars ($250,000.00) (Loss Threshold), Purchaser shall not have the right to terminate this Agreement and Seller, in Seller's sole discretion, may elect either: (i) to repair and restore the Property to its condition immediately preceding the fire or casualty if such repair and restoration can be substantially completed within thirty (30) days following the date originally scheduled as the Closing Date; or (ii) to proceed to close this Purchase Transaction without reduction in the Purchase Price provided that, as a condition precedent thereto and in a form acceptable to Purchaser in Purchaser's reasonable discretion, Seller assigns and transfers to Purchaser on the Closing Date all of Seller's right, title and interest in and to the insurance proceeds paid or payable to Seller under the policy or policies covering the damage and pays to Purchaser the amount of Seller's deductible under the insurance policy or policies. (c) However, if the Property is damaged by fire or other casualty prior to the Closing Date and is insured under one or more fire or casualty insurance policies maintained by Seller, and if Seller determines, in Seller's reasonable good faith discretion, that the repair of the damage would cost an amount equal to or in excess of the Loss Threshold, Purchaser, in Purchaser's sole discretion, may elect either: (i) to terminate this Agreement and have the Title Company immediately return the Earnest Money together with accrued interest thereon to Purchaser; or (ii) to proceed to close this Purchase Transaction, without reduction in the Purchase Price, and, as a condition precedent thereto and in a form acceptable to Purchaser in Purchaser's reasonable discretion, have Seller assign and transfer to Purchaser on the Closing Date all of Seller's right, title and interest in and to the insurance proceeds paid or payable to Seller under the policy or policies covering the damage and pay to Purchaser the amount of Seller's deductible under the insurance policy or policies. (d) Immediately after Seller obtains notice of any fire or casualty, Seller shall notify Purchaser thereof in writing, including Seller's reasonable determination of the repair cost; provided, however, that in the event Purchaser shall in good faith dispute the repair cost so determined by Seller, Purchaser shall immediately notify Seller of such dispute, in which event Seller shall as soon as practicable obtain three (3) bids to repair such damage from reputable contractors licensed in the State of Colorado and furnish copies thereof to Purchaser. The average of the two bids that are the closest to each other shall be determinative as to whether the Loss Threshold shall have been exceeded. If the repair cost so determined exceeds the Loss Threshold, Purchaser shall notify Seller in writing within fifteen (15) Business Days after Purchaser's receipt of Seller's notice whether Purchaser elects to terminate this Agreement in accordance with this Section 12. Closing shall be delayed, if necessary, to allow Purchaser to make such election. If Purchaser fails to notify Seller of Purchaser's election within such fifteen-day period, Purchaser shall be deemed to have elected to perform its obligations under this Agreement. Section 13. Condemnation. (a) If, between the Effective Date and the Closing Date, any condemnation or eminent domain proceedings are commenced or threatened that might result in the taking of all or any material part of the Real Property or the Improvements or the taking or closing of any access right to the Property, Purchaser, in Purchaser's sole discretion, may either: (i) terminate this Agreement by written notice to Seller and have the Title Company return the Earnest Money together with accrued interest thereon; or (ii) proceed with the Closing and, as a condition precedent thereto and in a form acceptable to Purchaser, in Purchaser's sole discretion, have Seller assign to Purchaser all of Seller's right, title and interest in and to any award made or to be made for the condemnation or eminent domain action. (b) Immediately after Seller obtains notice of the commencement or the threatened commencement of eminent domain or condemnation proceedings, Seller shall notify Purchaser in writing. Purchaser shall then notify Seller, within fifteen (15) Business Days after Purchaser's receipt of Seller's notice, whether Purchaser elects to terminate this Agreement in accordance with Section 13(a)(i). Closing shall be delayed, if necessary, to allow Purchaser to make such election. If Purchaser fails to make the election within such fifteen-day period, Purchaser shall be deemed to have elected to terminate this Agreement. Section 14. Default. (a) Purchaser shall be in default under this Agreement (a Purchaser's Event of Default) if any of the following events shall occur: (i) Purchaser fails to close the Escrow on the date scheduled therefor as provided in this Agreement; (ii) Purchaser shall fail to pay any monies due in accordance with this Agreement (other than the obligations referenced in Subparagraph (i)) by 5:00 p.m. MST on the stated due date; or (iii) Purchaser shall fail to fully and timely perform any of Purchaser's obligations (other than the monetary obligations referenced in Subparagraphs (i) and (ii)) arising under this Agreement by 5:00 p.m. MST on the fifth (5th) Business Day after Purchaser's receipt of written notice from Seller specifying Purchaser's nonperformance. (b) Seller shall be in default under this Agreement (a Seller's Event of Default) if: (i)Seller fails to close the Escrow on the date scheduled therefor as provided in this Agreement; or, (ii) Seller shall fail to fully and timely perform any of Seller's obligations arising under this Agreement (other than the obligations referenced in Subparagraph (i)) and such failure shall continue past 5:00 p.m. MST on the fifth (5th) Business Day after Seller's receipt of written notice from Purchaser specifying Seller's nonperformance. (c) If a Seller's Event of Default shall exist, Purchaser, at Purchaser's sole option and as Purchaser's sole remedies, may (i) cancel this Agreement by written notice to Seller and Title Company whereupon the Earnest Money plus interest thereon and reimbursement of Purchaser's reasonable out-of-pocket expenses actually paid to third parties in connection with Purchaser's due diligence investigation and documented to Seller's reasonable satisfaction (such reimbursement, however, in no event to exceed Nineteen Thousand Dollars ($19,000.00) in the aggregate) shall be paid immediately by Title Company to Purchaser and, except as otherwise provided in this Agreement as to any Survival Item, neither Purchaser nor Seller shall have any further liability or obligation hereunder; or, (ii) seek specific performance against Seller by delivering the Purchase Price into the Escrow; provided, however, that as conditions precedent to such action for specific performance: [a] no uncured Purchaser's Event of Default shall exist and no event shall have occurred which with the passage of time or with notice, or both, could become a Purchaser's Event of Default; and [b] Purchaser shall not seek to amend the Purchase Price in such action, in which event the Closing shall be automatically extended as necessary. (d) If a Purchaser's Event of Default shall exist, as Seller's sole remedy (in lieu of any other legal or equitable remedies against Purchaser which Seller expressly waives except as hereinafter provided otherwise) Seller shall be entitled to retain the Earnest Money only in accordance with Section 3(b) as Seller's agreed and total liquidated damages unless Purchaser objects to, fails to cooperate with or otherwise opposes Seller's withdrawal of such Earnest Money out of the Escrow, in which event Seller shall have all of the remedies otherwise available to Seller at law or in equity. Section 15. Notices. All notices under this Agreement shall be in writing and sent by: (a) certified or registered mail, postage prepaid and return receipt requested, in which case notice shall be deemed delivered at the earlier of actual receipt or three (3) Business Days after deposit in the United States Mail, (b) by a nationally recognized overnight courier, in which case notice shall be deemed delivered one (1) Business Day after deposit with that courier, or (c) telecopy or similar means, if a copy of the notice is also sent by United States certified mail, in which case notice shall be deemed delivered on the date of confirmed receipt, as follows: If to Seller: c/o L'Auberge Communities Inc. 14988 North 78th Way, Suite 211 Scottsdale, Arizona 85260 Attention: Stephen B. Boyle Facsimile No.: (602) 607-9773 With a copy to: Hughes Hubbard & Reed LLP 350 South Grand Avenue, Suite 3600 Los Angeles, California 90071-3442 Attention: George A. Furst, Esq. Facsimile No.: (213) 613-2950 If to Purchaser: DRA Advisors, Inc. 1180 Avenue of the Americas, 18th Floor New York, New York 10036 Attention: Francis X. Tarsey Facsimile No.: (212) 764-3571 With a copy to: Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019 Attention: Russel T. Hamilton, Esq. Facsimile No.: (212) 259-6333 The addresses above may be changed by written notice to the other party; provided, however, that no notice of a change of address shall be effective until actual receipt of the notice by the addressee thereof. Copies of notices are for informational purposes only, and a failure to give or receive copies of any notice shall not be deemed a failure to give notice. Section 16. Time of Essence. Time is of the essence in this Agreement and the performance of each and every obligation hereunder, except that Purchaser shall have a one-time right to extend the Closing Date for five (5) Business Days upon prior written notice delivered to Seller not less than five (5) Business Days prior to the originally scheduled Closing Date. However, if this Agreement requires any act to be done or action to be taken on a date which is a Saturday, Sunday or legal holiday, such act or action shall be deemed to have been validly done or taken if done or taken on the next succeeding day which is not a Saturday, Sunday or legal holiday. Section 17. Termination of Agreement. If triplicate fully executed originals of this Agreement have not been delivered by Purchaser to Seller by 5:00 p.m. MST on January 27, 1998, for immediate deposit by Purchaser with Title Company along with the Initial Earnest Money, this Agreement shall automatically be deemed revoked and null and void. Section 18. Governing Law; Jurisdiction; Venue. This Agreement shall be governed by and construed in accordance with Colorado law. In regard to any litigation which may arise in regard to this Agreement, the parties shall and do hereby submit to the sole jurisdiction of and the parties hereby agree that the sole proper venue shall be in the Court. Section 19. Counterparts and Facsimile Signatures. (a) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (b) The execution of this Agreement by the parties may be evidenced by facsimile signatures with originals to be immediately distributed thereafter albeit the Agreement may be deemed binding upon transmittal of the facsimiles. Section 20. Captions. The captions in this Agreement are inserted for convenience of reference only and in no way define, describe or limit the scope or intent of this Agreement or any of its provisions. Section 21. Assignability. (a) Purchaser shall not have the right to assign this Agreement or any of Purchaser's rights under this Agreement prior to Closing to any person or entity (other than an entity controlling, controlled by, or under common control with Purchaser) without the prior written consent of Seller, which consent may be granted or withheld in Seller's sole discretion. In the event of such an assignment: (i) such assignee shall assume Purchaser's duties and obligations under this Agreement by delivering to Seller and Title Company duplicate originals of an assumption agreement in form and substance reasonably acceptable to Seller, (ii) Purchaser shall not be released from any of its obligations under this Agreement, (iii) Seller shall not incur any additional expense because of such assignment and (iv) such assignment shall not delay the Closing. (b) Seller shall not have the right or authority to assign this Agreement or any of Seller's rights under this Agreement prior to Closing to any person or entity without the prior written consent of Purchaser, which consent may be granted or withheld in Purchaser's sole discretion. In the event Purchaser consents to such an assignment, (i) such consent may be conditioned upon the assignee's assumption of Seller's duties and obligations under this Agreement by delivery to Purchaser and Title Company of duplicate originals of an assumption agreement in form and substance reasonably acceptable to Purchaser, (ii) Seller shall not be released from any of its obligations under this Agreement, (iii) Purchaser shall not incur any additional expense because of such assignment and (iv) such assignment shall not delay the Closing. Section 22. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective legal representatives, successors, heirs and permitted assigns, subject to the provisions of Section 21 hereof. Section 23. Modifications; Waiver. No waiver, modification, amendment, discharge or other change of this Agreement shall be valid unless it is in writing and signed by the party against which the enforcement of the modification, waiver, amendment, discharge or other change is sought. Section 24. Entire Agreement. This Agreement and the exhibits attached hereto contain the entire agreement between the parties relating to the Purchase Transaction. All prior or contemporaneous letters of intent (including but not limited to that certain non-binding letter of intent, agreements, understandings, representations or statements, whether oral or written, with respect to the subject matter hereof are superseded hereby. Section 25. Partial Invalidity; Further Assurances. If any provision of this Agreement shall be determined by any court to be invalid, illegal or unenforceable to any extent, the remainder of this Agreement shall not be affected and this Agreement shall be construed as if the invalid, illegal or unenforceable provision had never been contained in this Agreement. Prior to and after the Closing, the parties hereto agree to take such action and execute, acknowledge, file and record any additional documents reasonably necessary to effectuate the terms and provisions of this Agreement. Section 26. Survival. Except as expressly provided in this Agreement to the contrary, all representations, warranties, covenants, agreements and other obligations of Seller and Purchaser in this Agreement shall not survive the Closing of the Purchase Transaction. Section 27. No Third-Party Rights. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties to this Agreement and their respective successors and permitted assigns, any rights or remedies. Section 28. Attorneys' Fees. If any legal action or any other proceeding, including without limitation an action for declaratory relief, is brought to enforce this Agreement or any rights or obligations hereunder or because of a dispute, breach, default or misrepresentation in connection with this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees and other costs incurred in that action or proceeding (including without limitation any appeal or post-judgment enforcement proceedings), in addition to any other relief to which that party may be entitled. "Prevailing party" shall include the party determined to be the prevailing party by the Court. Section 29. Broker. Seller and Purchaser each represent and warrant to the other that it has not had any dealings with any broker, finder or other party concerning Purchaser's purchase of the Property, except Amercon Realty Services, Inc. (Seller's Broker). Seller agrees to pay at Closing a commission to Seller's Broker pursuant to a separate agreement between Seller and Seller's Broker, a copy of which shall be deposited in escrow on or before Closing if Seller's Broker is to be paid through escrow at Closing. Seller and Purchaser each agree to defend, indemnify and hold the other harmless from and against any such all loss, liability, damage, cost or expense, including without limitation reasonable attorneys' fees, incurred by the other as a result of any claim arising out of the acts of the indemnifying party, or others on that party's behalf, for a commission, finder's fee or similar compensation made by any broker (including Seller's Broker), finder or any person who claims to have dealt with the indemnifying party. The representations, warranties and covenants contained in this Section 29 shall survive the Closing or termination of this Agreement. Section 30. Opening of Escrow. The term "Opening of Escrow" shall mean the date of delivery to Title Company of triplicate fully executed originals of this Agreement by Seller and Purchaser together with the delivery by Purchaser to Title Company of the Initial Earnest Money. Section 31. Exhibits. The following exhibits have been attached to this Agreement and incorporated herein by reference: Exhibit A -- Legal Description Exhibit B -- Diagram of the Property and Improvements Exhibit C -- Schedule of Personal Property Exhibit D -- Form of Special Warranty Deed Exhibit E -- Form of Bill of Sale Exhibit F -- Form of Assignment of Leases Exhibit G -- Assignment of Tradename and Trademark Rights Exhibit H -- Form of Assignment of Intangible Property Exhibit I -- Form of Tenant Letters Exhibit J -- Certificate of Rent Roll Exhibit K -- Form of Non-Foreign Affidavit Exhibit L -- Form of Affidavit of Value Section 32. Form of Title Policy. The Title Policy to be issued by Title Company shall be Title Company's most current form. A specimen of the Title Policy is to be delivered to Purchaser within thirty (30) days following the delivery of the Preliminary Report to the parties. The Policy is to include, among other things, the following endorsements which are also to be delivered to Purchaser at Purchaser's cost: (i) a survey endorsement to the effect that the insured legal description and the legal description in the Survey describe one and the same property; (ii) if necessary, a patent endorsement; (iii) if necessary, a contiguity endorsement and (iv) if necessary, an endorsement insuring against archaic deed restrictions. Section 33. No Partnership or Other Liability. Any and all provisions, implications, or interpretations of or from this Agreement to the contrary notwithstanding, no partnership, joint venture or other relationship is created, implied or acknowledged between or among the parties. Section 34. General Provisions Regarding Title Company. (a) Title Company will make all adjustments and/or prorations on the basis of the actual number of days in a month, and by credit and/or debit to the respective accounts of Seller and Purchaser in the Escrow. (b) For purposes of the instructions to Title Company, the expression "Closing" shall mean the date on which the Deed is recorded. (c) Title Company shall: (i) make disbursements by wire transfer of federal funds; (ii) mail instruments to the addresses of the parties shown above, unless Title Company is instructed otherwise; and (iii) wire funds to Seller by wire transfer as directed by Seller. (d) No change of instructions shall be of any effect on Title Company unless given in writing by all of the parties hereto. In the event conflicting demands are made or conflicting notices served upon Title Company with respect to the Escrow, the parties expressly agree that Title Company shall have the absolute right at Title Company's election to do either or both of the following: (i) withhold and stop all further proceedings in, and performance of, the Escrow; or (ii) file a suit in interpleader and obtain an order from the Court requiring the parties to interplead and litigate in the Court their several claims and rights among themselves. In the event such interpleader suit is brought, Title Company shall ipso facto be fully released and discharged from all obligations to further perform any and all duties or obligations imposed upon Title Company in the Escrow, and the parties jointly and severally agree to pay all reasonable costs, expenses and reasonable attorneys' fees expended or incurred by Title Company, the amount thereof to be fixed and a judgment therefor entered by the Court in such suit. (e) Except for Title Company's negligence, fraud, willful misconduct or breach of contract, Title Company shall not be held liable for the identity, authority or rights of any person executing any document deposited in the Escrow, or for failure by Seller or Purchaser to comply with any of the provisions of any agreement, contract or other instrument deposited in the Escrow, and Title Company's duties hereunder shall be limited to the safekeeping of such money, instruments or other documents received by Title Company as escrow holder and to the disposition of same in accordance with the written instructions accepted by Title Company in the Escrow. (f) It is agreed by the parties to this Agreement that so far as Title Company's rights and liabilities are concerned, this transaction is an escrow and not any other legal relation. Section 35. Limited Partners' Consent. Notwithstanding anything contained herein to the contrary, the obligations of Seller hereunder are subject to and conditioned upon the procurement of the consent of a majority in interest of the limited partners of Seller to the Purchase Transaction. Seller shall use diligent efforts to obtain such consent. If Seller shall not have received such consent within sixty (60) days after the Opening of Escrow and provided evidence thereof to Purchaser, Purchaser may upon written notice to Seller terminate this Agreement whereupon the Earnest Money plus interest thereon and (provided that Purchaser shall have elected or be deemed to have elected to purchase the Property at or prior to the expiration of the Due Diligence Period) reimbursement of Purchaser's reasonable out-of-pocket expenses actually paid to third parties in connection with Purchaser's due diligence investigation and documented to Seller's reasonable satisfaction (such reimbursement, however, in no event to exceed Nineteen Thousand Dollars ($19,000.00) in the aggregate) shall be paid immediately by Title Company to Purchaser, and except as otherwise provided in this Agreement as to any Survival Item, neither Purchaser nor Seller shall have any further liability or obligation hereunder. Section 36. Limited Prohibition on Negotiations Seller agrees to refrain from actively marketing the Property, submitting due diligence packages for the Property to any third parties, soliciting offers for the Property or accepting any offers as backup offers for the Property during the Due Diligence Period, and to cease all discussions and negotiations with any third parties for the sale of the Property or any interest therein following the expiration or earlier termination of the Due Diligence Period during the term of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date. "PURCHASER" DRA ADVISORS, INC., a Delaware corporation By: /s/ Francis X. Tansey__________________ Name: Francis X. Tansey Title: President "SELLER" CLUSTER HOUSING PROPERTIES, A CALIFORNIA LIMITED PARTNERSHIP By: GP L'Auberge Communities, L.P., a California limited partnership, a general partner By: L'Auberge Communities Inc., a California corporation its general partner By: /s/ Stephen B. Boyle_____________ Name: Stephen B. Boyle Title: President TITLE COMPANY'S ACCEPTANCE The foregoing fully executed Agreement together with the Initial Earnest Money is accepted by the undersigned this _____ day of January, 1998, which for the purposes of this Agreement shall be deemed to be the date of "Opening of Escrow". CHICAGO TITLE INSURANCE COMPANY, a Delaware corporation By: /s/ Tiffany Olmstead__________ Name: Tiffany Olmstead Its: Escrow Officer EX-27 3 FDS --
5 year Dec-31-1996 Dec-31-1996 1,065,855 0 2,605 0 0 0 19,321,621 (4,810,314) 15,644,667 380,037 0 0 0 0 6,704,700 15,644,667 0 2,671,741 0 0 2,052,218 0 787,301 0 0 0 0 0 0 (167,778) 0 0
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