MANAGEMENT AGREEMENT (Tamarlane)
Exhibit 10.1
(Tamarlane)
THIS MANAGEMENT AGREEMENT (this “Agreement”), is made
and entered into this 13 day of July, 2008 (the “Effective Date”), by
and between RESOURCE REAL ESTATE MANAGEMENT, LLC, a Delaware limited liability
company (“RREM”) and RESOURCE
REAL ESTATE MANAGEMENT, INC., a Delaware corporation (“Manager”).
RRE Tamarlane Holdings, LLC (“Owner”) owns that
certain multifamily apartment building known as the Tamarlane Apartments
consisting of 115 apartment units and the common elements appurtenant thereto
located in Portland, Maine (the "Project").
Owner has engaged RREM pursuant to that
certain Asset Management Agreement of even date herewith to manage the Project
(as same may be amended, restated, modified or supplemented, the “Asset Management
Agreement”); pursuant to which, Owner has given RREM full authority to
act on its behalf. RREM desires to subcontract with and employ
Manager for the operation, direction, management and supervision of the Project,
as outlined below and Manager desires to assume such duties upon the terms and
conditions set forth in this Agreement.
ARTICLE
I
The following terms shall have the
following meanings when used in this Agreement:
1.02.
Intentionally
Omitted.
1.03.
Depository. An
FDIC insured bank designated by RREM.
1.04. Depository
Account. A trust fund
account for the benefit of Owner established and maintained in an FDIC insured
or guaranteed account.
1.08
Incentive
Management Fee. The Incentive
Management Fee defined in Section 3.02 below.
1.9
Management
Fee. The Management Fee is defined in Section 3.01
below.
1.10
Project
Personnel. Those persons employed by Manager with RREM’s prior
approval to carry out Manager’s obligations under this Agreement (including, but
not limited to, a Project Manager, Assistant Manager, Maintenance Supervisor,
maintenance personnel, and other personnel necessary to the operation and
maintenance of the Project as specified in the Budget).
1.12. Working
Capital Reserve. Twenty Thousand
Dollars ($20,000) of Working Capital reserve shall be maintained by Manager in
the Disbursement Account during the term hereof, used in connection with the
operation of the Project in accordance with the terms hereof and restored per
the terms of Sections 4.03 hereof.
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ARTICLE
II
2.01.
Appointment
of Manager. For and in
consideration of the compensation hereinafter provided, Manager shall, and RREM
hereby grants to Manager the right to, supervise and direct the leasing,
management and operation of the Project. All services performed by
Manager under this Agreement shall be performed as an independent contractor of
RREM. All obligations or expenses incurred hereunder, for the benefit
of the Project and all purchases of or contracts for sales or services in bulk
or volume that Manager may obtain for discount or convenience in connection with
its operation of other apartment projects, shall be for the account of, on
behalf of, and at the expense of RREM (reasonably allocated between all
benefited projects) except as otherwise specifically provided
herein. RREM shall not be obligated to reimburse Manager for expenses
for: (i) office equipment or office supplies of Manager (unless incurred solely
for the Project), (ii) any overhead expenses of Manager incurred with respect to
any offices located at any place other than on the Project, (iii) costs relating
to accounting services performed hereunder, (iv) for any salaries of employees
of Manager not accounted for in the approved Budget and its supporting payroll
schedule, or (v) any travel expenses of employees of Manager in supervising the
on-site Project Personnel and the operation of the Project, unless approved in
advance in writing by RREM.
2.02.
General
Operation. Subject to the
limitations imposed by the Budget from time to time, Manager shall operate the
Project in the same manner as is customary and usual in operation of comparable
facilities, and shall provide such services as are customarily provided by
operators of high quality projects of comparable class and standing consistent
with the Project’s facilities.
In addition to the other obligations
of Manager set forth herein, Manager shall render the following services and
perform the following duties for Owner in connection with the Project in a
commercially diligent and efficient manner: (a) maintain businesslike
relations with tenants whose service requests shall be received, considered,
recorded and acted upon in systematic fashion in order to show the action taken
with respect to each; (b) collect all monthly rentals due from tenants and rent
from users of recreational facilities in the Project, if any; (c) request,
demand, collect, and receive any and all charges or rents which become due to
Owner, and at Owner’s expense and RREM’s direction, coordinate and oversee such
legal action as may be necessary or desirable to collect rent and/or evict
tenants delinquent in payment of monthly rental or other charges (security
deposits, late charges, etc.) as more particularly described in Section 2.09
below; (d) prepare or cause to be prepared for execution by the Owner
(and/or RREM, as applicable) all forms, reports and returns, if any, required to
be filed by or on behalf of the Owner under applicable federal, state or local
laws and any other requirements relating to the employment of personnel
(anything contained herein to the contrary notwithstanding, however, Manager
shall not be obligated to prepare any of Owner’s or RREM’s state or federal
income tax returns; (e) use all reasonable efforts at all times
during the term of this Agreement to operate and maintain the Project according
to the highest standards achievable consistent with the operation of comparable
quality units; (f) advertise when necessary, within the constraints of the
Budget, the availability of units for rental and display “for rent” or other
similar signs upon the Project, it being understood that Manager may install one
or more signs on or about the Project stating that the Project is under
management of Manager and may use, in a tasteful manner, Manager’s name and logo
in any display advertising of the Project; (g) sign, renew and cancel tenant
leases for the Project as agent for
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owner, in
compliance with standards established by RREM and approved by Owner, on the
lease form provided by Manager, and on terms based upon criteria approved from
time to time by Owner and based upon Manager’s recommendations.
It is understood and agreed, however,
that Manager shall not, and does not, provide security services to the
Project. Should RREM choose to do so, RREM may direct that Manager,
on Owner’s behalf, to separately contract with a non-affiliated company (a
“Security
Company”) providing alarm systems, patrol and similar services (“Security
Services”). Manager shall have no duty to supervise or control
performance of Security Services for any Security Company but Manager shall, if
requested by RREM, evaluate and report its findings to RREM, as
directed. Without limiting the provisions of Section 6.03 of this
Agreement, RREM shall indemnify, defend, protect and hold Manager harmless for,
from and against any loss, liability, cost, expense, damage claim or cause of
action, including, without limitation, attorneys’ fees, court costs and other
litigation expenses and costs, arising from any personal injury, loss of
property or other matter occurring on or about the Project, relating to the acts
or omissions of a Security Company, any claimed inadequacy of Security Services,
the failure to provide Security Services or any other matter relating to the
security of the Project. The indemnification obligations of RREM in
this Section 2.02 shall survive the expiration or earlier termination of this
Agreement.
(a) Manager
will submit to Owner for Owner’s approval, an initial capital and operating
budget (the “Initial
Budget”) for the first fiscal year (or partial fiscal year as
appropriate) on or before March 31, 2008. Manager shall submit to
RREM for Owner’s approval no later than sixty (60) days prior to the beginning
of each successive Fiscal Year the Budget for the ensuing Fiscal
Year. Manager shall provide RREM with such information regarding the
Budget as may be, from time to time, reasonably requested by
RREM. Upon receipt of the Budget from Manager, RREM shall promptly
deliver the Budget to Owner. Owner shall approve or object to the
Budget. Manager may proceed under the terms of the proposed Budget
for items that are not objected to and may take any action with respect to items
not approved if the expenditure is (i) less than Two Thousand Five Hundred
Dollars ($2,500) or (ii) is, in the Manager’s reasonable judgment, required to
avoid personal injury, significant property damage, a default under any loan
encumbering the Project, a violation of applicable law or the suspension of a
service (collectively, “Emergency
Expenditure”). In the event that the items that are objected
to are operational expenditures (but not including real estate taxes, insurance,
utilities and similar items that cannot be controlled by Manager), as opposed to
capital expenditures, Manager shall be entitled to oversee and supervise the
operation of the Project using the prior year’s budget until the approval is
obtained. If the Budget is not approved, upon the request of RREM,
Manager will prepare and deliver to RREM, a revised Budget for the Fiscal
Year.
(b) Together
with submission of the annual Budget, Manager shall submit to RREM for approval
by Owner an operating plan for the general operation of the Project for the
subsequent Fiscal Year, including a proposed list of improvements to the
Project, general insurance plan, marketing plan and plan for the general
operation and maintenance of the Project (the “Operating
Plan”). Upon the request of RREM, Manager will prepare and
deliver to RREM, a revised Operating Plan for the Fiscal Year.
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(c) In
the event there shall be a substantial discrepancy between the actual results of
operations for any month and the estimated results of operations for such month
as set forth in the Budget or the Operating Plan, Manager shall, upon request,
furnish to RREM within Fifteen (15) days after the expiration of such month a
written explanation as to why the discrepancy occurred. If
substantial variations have occurred or are anticipated by Manager during the
course of any Fiscal Year, Manager, upon RREM’s reasonable request, shall
prepare and submit to RREM a revised Budget and/or Operating Plan covering the
remainder of the Fiscal Year.
RREM shall immediately reimburse Manager each pay period for the total aggregate
compensation, including salary, and other related costs and fringe benefits,
payable with respect to the Project Personnel who shall be accounted for in the
approved Budget and supporting payroll schedule, any temporary employees working
at the Project, the Project’s proportionate share of all costs relating to
roving maintenance and similar personnel, but only to the extent reflected in
the approved Budget. The term “fringe benefits” as used herein shall
mean and include the employer’s contribution of F.I.C.A., unemployment
compensation and other employment taxes, worker’s compensation, group life and
accident and health insurance premiums, 401K contributions, performance bonuses,
and disability and other similar benefits paid or payable by the Manager to its
employees in other apartment projects operated by Manager, but only to the
extent reflected in the approved Budget.
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and
approval, together with Manager’s recommendation with respect
thereto. Manager shall continually inspect the Project and ensure
that all contract specifications are being properly administered, and conduct
periodic complete walk-throughs of the Project with specific Customary Service
providers as often as reasonably necessary. Manager shall use
reasonable efforts to purchase all goods, supplies or services at the lowest
cost reasonably available from reputable sources in the metropolitan area where
the Project is located. In making any contract or purchase, Manager
shall use reasonable efforts to obtain favorable discounts for Owner and all
discounts, rebates or commissions under any contract or purchase order made
hereunder shall inure to the benefit of Owner. Manager shall make
payments under any such contract or purchase order to enable Owner to take
advantage of any such discount if Owner and/or RREM provides sufficient funds
therefor.
(a) Manager
shall make or install, or cause to be made and installed at Owner’s expense and
in the name of Owner, all necessary or desirable repairs, interior and exterior
cleaning, painting and decorating, plumbing, alterations, replacements,
improvements and other normal maintenance and repair work on and to the Project
as are customarily made by Manager in the operation of first-class apartment
projects; provided that no unbudgeted expenditure may be made for such purposes
without the prior approval of RREM, except emergency repairs involving manifest
danger to life or property, or when necessary to avoid criminal or civil
liability, or for the safety of the tenants, or to avoid the suspension of any
necessary service to the Project, may be made by the Manager without prior
approval and irrespective of the cost limitations imposed by Section 2.03(a),
provided that in each such instance, Manager shall, before causing any such
emergency repair to be made, use reasonable efforts under the circumstances to
notify RREM of that repair. All such work shall be performed by
Project Personnel unless it is not reasonable for them to do so due to the
expertise, time constraints, or other considerations involved, and/or because
having them do so is more expensive.
(b) In
accordance with the terms of the approved Budget or upon written demand and/or
approval (except in the case of emergency) of RREM, from time to time during the
term hereof Manager shall, at Owner’s expense, make all required capital
improvements, replacements or repairs to the Project. Subject to
obtaining RREM’s prior written approval in regard to sums necessary to cover
costs of unbudgeted capital improvements, Manager shall first use any excess
funds in the Depository Account that are not committed to operating expenses,
and then shall use funds furnished by Owner for that purpose. The
award of a contract for a capital improvement exceeding $5,000 in cost shall be
approved by RREM.
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regulations
and requirements of any federal, state or municipal government having
jurisdiction respecting the use or manner of use of the Project or the
maintenance or operation thereof.
ARTICLE
III
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ARTICLE
IV
(b) A “Disbursement Account” shall
also be established to pay the normal and reasonable expenses incident to the
operation and maintenance of the Project. The Disbursement Account
shall be under the signatory control of the Manager.
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ARTICLE
V
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ARTICLE
VI
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limited
to attorneys’ fees, court costs and other litigation expenses and costs arising
out of or in connection with the ownership, maintenance or operation of the
Project or this Agreement, except to the extent arising directly from the gross
negligence or willful misconduct of Manager (collectively “Claims”), including
but not limited to Claims involving security services as to which Manager is
acting under the express or implied directions of RREM, and the loss of use of
property following and resulting from damage or
destruction. Owner’s Liability Insurance (as defined in Section 8.01
below) will be required to cover all actions of Manager where the Owner’s
insurer agrees to provide Owner and Manager a defense (whether or not such
defense is provided with a reservation of rights by the insurer) in accordance
with the terms of such insurance policy. The indemnification by RREM
contained in this Section 6.03 is in addition to any other indemnification
obligations of RREM contained in this Agreement.
ARTICLE
VII
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such
termination, Manager shall not be relieved of any liability arising as a result
of Manager’s default and the resulting termination of this
Agreement.
7.05. Expiration
of Term. Upon the expiration of the Term hereof pursuant to
Section 1.12 hereof, or the earlier termination hereof pursuant to either of
Section 7.02 or 7.04, Manager shall deliver to RREM all funds, including tenant
security deposits, books and records of Owner then in the possession or control
of Manager, save and except such sums that are due and owing to Manager
hereunder. Within thirty (30) days following expiration or
termination, Manager shall deliver to Owner a final accounting, in writing, with
respect to the operations of the Project. This provision shall
survive the expiration or earlier termination of this Management
Agreement.
7.06 Termination
of Asset Management Agreement. Notwithstanding
anything to the contrary contained herein, unless the holder of the mortgage on
the Property otherwise determines to keep this Management Agreement in effect,
this Management Agreement shall automatically terminate upon Manager receiving
written notification from RREM or Owner that Owner has terminated the Asset
Management Agreement. Upon such termination, the parties hereto shall
have no further obligation to the other, unless otherwise specifically set forth
herein.
ARTICLE
VIII
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If the
Owner's Liability Insurance has a deductible, or similar clause, Owner shall be
responsible for paying any losses that are not covered by the Owner's Liability
Insurance because of said deductible or similar clause.
(a) Workers’
Compensation Insurance complying with the laws of the State in which the work is
to be performed covering all its employees whether or not working at or in
connection with the Project, as a Project expense under Section 2.04
above;
(b) Employers’
Liability Insurance with minimum liability limits of $1,000,000 Bodily Injury by
Accident per accident, $1,000,000 Bodily Injury by Disease per person and
$1,000,000 Bodily Injury by Disease policy limit, at Manager’s expense as part
of its overhead;
(c) Commercial
General Liability Insurance with minimum limits of $1,000,000 Combined Single
Limit for Bodily Injury and Property Damage each occurrence/$2,000,000 General
Aggregate, at Manager’s expense as part of its overhead;
(d) Automobile
Liability Insurance covering non-owned and hired automobile equipment with
minimum limit of $1,000,000 for injury or death of any one person, for any
occurrence and property damage, at Manager’s expense as part of its overhead;
and
(e) Employees
Dishonesty Insurance as described in Section 4.04 above, at Manager’s expense as
part of its overhead.
Insurers
providing the coverage to Owner and Manager described in this Article VIII shall
have a Best’s rating of A-VII or better. RREM reserves the right to
approve the insurer’s form and content of Manager’s insurance
policies. All policies will contain severability of interest
provisions. Within thirty (30) days of the date of this Agreement,
RREM shall provide Manager with Certificates of Insurance evidencing Owner’s
insurance. Such certificates will be endorsed to provide thirty (30)
days prior written notice to the insured and all additional insureds of any
material change or cancellation of coverage.
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respect
to any claims that are insured under such policy. All insurance
relating to the Project shall be only for the benefit of the party securing said
insurance and all others named as insureds. Owner and Manager hereby
release each other from all rights of recovery under or through subrogation or
otherwise for any and all losses and damages to the extent of such insurance
coverage and agree that no insurer shall have a right to recover any amounts
paid with respect to any claim against Owner or Manager by subrogation,
assignment or otherwise.
(a) Manager
shall not knowingly place or cause to be placed on, in, under or around the
Project, any Hazardous Substances (as defined below). Manager shall take all
commercially reasonable steps to cause any tenants who do same to remove such
Hazardous Substances in a timely manner. Without limiting the
provisions of Section 6.03 of this Agreement, RREM agrees to defend, indemnify,
and hold harmless Manager and its partners, officers, employees and agents, for,
from and against any and all actions, administrative proceedings, causes of
action, charges, claims, commissions, costs, damages, decrees, demands, duties,
expenses, fees, fines, judgments, liabilities, losses, obligations, orders,
penalties, recourses, remedies, responsibilities, rights, suits and undertakings
of every nature and kind whatsoever, including, but not limited to, attorneys'
fees, court costs and other litigation expenses and costs, from the presence of
Hazardous Substances on, under or about the Project, except to the extent that
the Hazardous Substances are present as a result of the gross negligence or
willful misconduct of Manager or the breach of Manager’s obligations pursuant to
the first sentence of this Section 8.06. Without limiting the generality of the
foregoing, the indemnification provided by this paragraph specifically shall
cover costs incurred in connection with any investigation of site conditions or
any remediation, removal or restoration work required by any federal, state or
local governmental agency because of the presence of Hazardous Substances in,
on, under or about the Project, except to the extent that the Hazardous
Substances are present as a result of the gross negligence or willful misconduct
of Manager or the breach of Manager’s obligations pursuant to the first sentence
of this Section 8.06. For purposes of this section, “Hazardous
Substances” shall mean (i) all substances defined as hazardous materials,
hazardous wastes, hazardous substances, or extremely hazardous waste under any
federal, state, or local law or regulation, and (ii) mold, mold contamination,
mold spores, bacterial contaminants and/or any and all substances or materials
related thereto. The indemnification obligation of RREM in this
Section 8.06 shall survive the expiration or earlier termination of this
Agreement.
(b) Without
limiting the indemnifications set forth in Section 8.06(a) above, RREM and
Manager further agree that RREM is solely responsible for any and all conditions
at the Project that could give rise to bodily injury or property damage claims
stemming from the presence of mold, mold contamination, mold spores, bacterial
contaminants and/or any and all substances or materials related
thereto. Manager shall endeavor to inform RREM of the availability
and cost of insurance to cover any and all conditions at the Project that could
give rise to bodily injury or property damage claims stemming from the presence
of mold, mold contamination, mold spores,
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bacterial
contaminants and/or any and all substances or materials related thereto, but the
decision of whether or not to purchase insurance relating to such risk is solely
that of the RREM, and Manager shall have no obligation or liability whatsoever
therefor. RREM’s or Owner’s failure to purchase or consider insurance
alternatives for such risk shall not in any manner alter Manager’s obligations
or liabilities hereunder.
ARTICLE
IX
9.01. Governing
Law. This Agreement
shall be governed by and construed and interpreted in accordance with the laws
of the State of Maine.
9.05. Modification;
Termination. This Agreement
terminates any and all prior management agreements among RREM and Manager,
related to the Project, and any amendment, modification, termination or release
of this Agreement may be affected only by a written instrument executed by
Manager and RREM.
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9.07.
Total
Agreement. This Agreement is
a total and complete integration of any and all agreements existing among
Manager and RREM and supersedes any prior oral or written agreements, promises
or representations between them.
[SIGNATURES
CONTAINED ON FOLLOWING PAGE]
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ADDRESS RREM
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RESOURCE
REAL ESTATE MANAGEMENT, LLC
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One
Crescent Drive
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By:
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| Suite 203 | Name | ||
| Navy Yard Corporate Center | Title | ||
| Xxxxxxxxxxxx, XX 00000 | |||
ADDRESS MANAGER
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RESOURCE
REAL ESTATE MANAGEMENT, LLC
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00000
XXX Xxxxxxx
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By:
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| Xxxxx 000 | Xxxx | ||
| Xxxxx, XX 00000 | Title | ||
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Exhibit
A
Manager
must provide the following by the 15th day
of every calendar month:
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Operating
Statements on a Accrual basis in both traditional P&L format (to GAAP
Net Income) and RAI Real Estate format (to NOI, Net Cash Flow, and Ending
Cash), showing MTD and YTD in Actual/Budget/Variance column
format
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·
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Accrual
basis variance analysis, with tenant-level detail for income, TI, and
leasing expenses
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·
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Check
Register for the current month
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·
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VOID
Check register
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Balance
Sheets on Accrual basis
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·
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Rent
Roll and Vacancy reports
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Aged
Accounts Receivable trial balance
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·
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Security
Deposit detail ledger
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·
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General
Ledger reports on a Accrual basis
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·
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All
above information in no more than three (3) hardcopies, with financial
statements in a electronic format
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Copy
of Bank Statement(s) and
reconciliation(s)
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·
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Copies
of invoices for individual capital expenditures exceeding
$5,000
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Ending
trial balance on accrual basis
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·
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Net
activity trial balance on accrual
basis
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In
addition to the monthly requirements (above), the Manager must provide the
following by the 15th day
of every calendar month following each calendar quarter end:
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·
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QTD
Operating Statements in Actual/Budget/Variance column
forma
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