ASSET MANAGEMENT AGREEMENT
Exhibit 10.6
Tamarlane
This
ASSET MANAGEMENT AGREEMENT (this “Agreement”) is dated
as of this 13 day of July, 2008, between RRE TAMARLANE HOLDINGS, LLC, a Delaware
limited liability company (the “Owner”), and RESOURCE
REAL ESTATE MANAGEMENT, LLC, a Delaware limited liability company (the “Manager”), with
reference to the following facts:
RECITALS
A. Owner
is the owner of a 115-unit multifamily project (the “Property”) commonly
known as the Tamarlane Apartments located in Portland, Maine.
B. The
Property is subject to a loan (the “Loan”) secured by a
non-recourse mortgage (the “Mortgage”) in favor
of Capmark Finance, Inc. (together with its successors and assigns, the
“Lender”; and the Mortgage and other documents, agreements and instruments
evidencing, securing or delivered to the Lender in connection with the Loan are
collectively referred to herein as the “Loan
Documents”).
C. The
Owner desires to engage the Manager to (i) oversee and supervise the Property,
and (ii) oversee the day-to-day management of the Property. The
Manager may engage a local property manager, which may be an affiliate of the
Manager or a third party, which can further subcontract some or all of these
responsibilities, to directly manage, lease, operate and maintain the Property
on a day-to-day basis.
1. Exclusive Agency;
Term. Owner hereby designates Manager to serve as the
"Property Manager" of the Property. Manager shall have the exclusive
right and duty to rent, lease, operate and manage Property. The term
of this Agreement shall be for the period of one year beginning on the date
hereof, and thereafter the Agreement shall automatically renew for annual
periods unless on or before the sixtieth (60th) day
prior to the then expiration date of the term hereof, either party hereto shall
notify the other in writing of its intention to terminate this Agreement in
which case this Agreement shall terminate as of the end of the then current
term. Notwithstanding anything to the contrary, Owner may terminate
this Agreement without cause by giving Manager thirty (30) days notice in
writing.
Upon termination of this Agreement,
Manager shall turn over to Owner all books and records and all leases and
contracts pertaining to the Property.
Notwithstanding anything to the
contrary herein, Manager may subcontract with a local property manager to act as
property manager for the Property.
2. Manager’s
Obligations. Manager and Owner acknowledge that Manager may
from time to time hereafter act as Manager for competing commercial projects and
is to use its best efforts to locate tenants and manage the Property on a basis
which is competitive with other
projects
it may hereafter manage in the Portland, Maine area. Manager accepts
the obligations and provisions of this Agreement and agrees:
(a) Due
Diligence. To use due diligence in the management of the
Property and performance of all duties and obligations of Manager in a
first-rate manner for the period and upon the terms herein provided, and agrees
to furnish or cause to be furnished the services of its organization for the
complete management of the Property, including but not limited to the renting,
operating, and care of the Property and negotiation of leases related
thereto.
(b) Vacancies. To
advise Owner periodically as to vacant space and in reasonable detail as to the
physical condition of the Property, and of its competitive position with other
apartment complexes in the Portland, Maine region.
(c) Separate
Fund. To deposit all receipts collected from the Property in a
trust account in a bank approved by Owner and insured by the Federal Deposit
Insurance Corporation, separate from Manager's personal account and to pay
expenses pursuant to an operating budget approved by Owner and to pay the
balance of such receipts pursuant to the instruments, documents and agreements
evidencing the loan from Lender to Owner. However, Manager will
not be held liable in the event of bankruptcy or failure of a
depository.
(d) Negotiations with Utility
Companies. To negotiate with utility companies for competitive
treatment with other projects in the respective area, if
applicable.
(e) Operating Budget and
Marketing. To prepare on an annual basis for Owner, if
appropriate, annual operating budgets for the Property and a marketing
plan.
(f) Approval of
Owner. Anything herein to the contrary notwithstanding, the
following decisions and actions of Manager shall be subject to the prior
approval of Owner: Determination of the amount and type of insurance
coverage and the company issuing the same; Independent certified accountants;
Settlements with insurance companies or condemning authorities involving amounts
in excess of $5,000 and the granting of any easements.
(g) Inspection. To
make periodic inspections of all space at the Property, in order to observe the
maintenance and condition thereof. Owner shall reimburse Manager for
all travel expenses incurred in connection with such inspections or any other
business related to the management of the Property.
(h) Personal Property
Inventory. To maintain an inventory of all personal property
located on the Property.
3. Owner
hereby gives Manager the following authority and powers. Owner agrees
to assume the expenses in connection therewith and Manager agrees to assume and
undertake the following responsibilities:
(a) Rent
Collection. To collect rents due or to become due; to serve in
the name of the Owner such notices as are deemed necessary by Manager to
institute and prosecute
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actions,
to evict tenants and to recover possession of said premises; from time to time
to make rules and regulations pertaining to tenants and to enforce the same and
all other lease provisions; to advise Owner of tenant complaints and steps taken
to remedy the same; to xxx and recover rents and other sums due; and, when
expedient, to settle, compromise and release such actions or suits or reinstate
such tenancies.
(b) Repairs To cause the
Property to be maintained in a first-rate operating condition and to assure that
all equipment is kept in working order and that all service and maintenance
contracts are in force; to make or cause to be made and to supervise preventive
maintenance and repairs and alterations and to decorate on said premises; to
protect the Property from storms upon public warning; and to purchase supplies
at a reasonable price and pay all bills. Manager shall advise Owner
of any violations of building codes and governmental regulations and shall
consult with Owner as to actions to be taken pertaining
thereto. Notwithstanding anything herein to the contrary, Manager
shall not, without prior authority from Owner, make, cause to be made, contract
for, or agree to any one expenditure for repair the total cost of which will
exceed $5,000. This restriction shall apply to the total cost of any
such repair even though undertaken on a partial completion or other basis, where
individual statements or vouchers would not exceed such sum, but where the
entire expenditures would, when the repair work is completed, exceed such
sum.
(c) Employees. On
behalf of Owner, and subject to Owner's direction and approval, on the basis of
a job description and salary schedule, to train and supervise the work of and to
investigate, hire, pay and discharge employees and independent contractors
working on or on behalf of the Property, the cost of whose salaries and benefits
shall be borne by Owner. Manager agrees to use due care and
businesslike prudence in the hiring of such employees and independent
contractors.
(d) Insurance. To
advise Owner as to insurance requirements and coverage and, if requested by
Owner, to procure such insurance coverage as Owner shall
request. Manager shall promptly investigate and report to Owner all
accidents or claims for damage and shall cooperate with Owner in filing any
claims or defending any suits in connection therewith. Owner shall
maintain workmen's compensation insurance on personnel employed under paragraph
3(c) and shall also maintain such public liability and other insurance as may be
required by law or this Agreement. Owner authorizes Manager to
prepare for filing by Owner in the name of Owner, all federal, state and local
tax reports relating to the Property. Owner reserves the right to
prepare any of such reports itself and shall advise Manager from time to time of
its decision to do so.
(e) Compliance with Laws,
Regulations. To be responsible for compliance with all
federal, state and local government laws, ordinances, rules, orders and
regulations pertaining to hiring, payment of wages, job conditions, social
security, taxes and withholdings; to prepare and file all forms, returns or
reports required by law; and to supervise and be responsible for all other
aspects of employee relations.
(f) Service
Contracts. To make, at a competitive price, on arm's length
and commercially reasonable terms, and enforce contracts for electricity, gas,
water, telephone,
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rubbish
hauling, security, pest control, landscaping, and other services or such of them
as Manager shall deem advisable and to be responsible for having such services
rendered when needed and performed in an efficient and proper
manner. Owner shall assume the obligations of any contract so entered
into at the termination of this Agreement.
(g) Professional
Personnel. To retain, subject to Owner's approval and at
Owner's expense, accountants, attorneys and other professional advisors and
consultants and to authorize such persons to act on behalf of Owner in regard to
activities connected with the Property and Owner's duties with respect
thereto.
(h) Real Estate
Assessments. To determine the fairness of all real estate tax
assessments and to make timely recommendations as to appropriate action and,
with Owner's approval, to take such action (including any appeals) at Owner's
cost, in timely fashion; and to advise Owner of the dates all taxes are due, to
cause timely payment to be made of such taxes out of Owner's funds and to give
Owner prompt notice of any need for additional funds.
(i) Monthly
Statements. To maintain an adequate system of office records,
books and accounts with respect to Manager's functions and services hereunder in
accordance with generally accepted accounting principles and practices and to
permit examination by or on behalf of Owner, and to render monthly statements of
receipts, expenses and charges including a schedule of accounts receivable and
payable which shall be sufficiently detailed to reflect fairly the operations of
the Property and upon request of Owner shall include a reconciled bank statement
as of the end of each month, and to remit to Owner, on a monthly basis, receipts
less disbursements. In the event the disbursements shall be in excess
of the rents collected by Manager, Owner hereby agrees to pay such excess
promptly upon demand of Manager, subject to the provisions of paragraph 8
hereof.
4. Tax
Payments. Manager is hereby instructed and authorized to pay
property taxes, employee taxes and special assessments from Owner's funds to the
extent available from rental revenues received, except that, with the consent of
Owner, Manager shall not pay any taxes or assessments which Manager recommends
that Owner not pay and except further that Manager shall not pay any taxes or
assessments which Owner directs Manager to contest or refrain from
paying. Owner reserves the right to pay any of any such taxes
directly and shall notify Manager of its decision to do so from time to
time.
5. Manager's Authority to
Act. Manager represents to Owner that it has obtained or will
obtain and will keep in full force and effect during the term hereof any
licenses, permits or other governmental consents required of Manager in order
that Manager may fully perform its duties and obligations
hereunder.
6. Manager's
Compensation. Subject to the terms of Section 16 below,
Owner shall pay Manager for its services in performing its asset management
responsibilities with respect to the Property in accordance with the terms of
this Agreement, an annual asset management fee, payable monthly, equal to five
percent (5%) of the Gross Revenue from the Property (the “"Compensation"). Any
management fee due to any sub-property manager shall be paid by deducting such
amount from the Compensation. As used herein, "Gross Revenue" shall
mean the
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entire
amount of all revenue, determined on an accrual basis, from (a) tenant rentals
collected pursuant to tenant leases of apartment units, for each month during
the term hereof; provided that there shall be excluded from tenant rentals any
tenant security deposits (except as provided below); (b) cleaning, tenant
security and damage deposits forfeited by tenants in such period; (c) laundry
and vending machines income; (d) any and all other receipts from the operation
of the Property received and relating to the period in question; (e) proceeds
from rental interruption insurance, but not any other insurance proceeds or
proceeds from third-party damage claims, and (f) any other sums and charges
collected in connection with termination of the tenant leases. Gross
Revenue does not include the proceeds of (i) any sale, exchange, refinancing,
condemnation, or other disposition of all or any part of the Property, (ii) any
loans to Owner whether or not secured by all or any part of the Property, (iii)
any capital expenditures or funds deposited to cover costs of operations made by
Owner, and (iv) any insurance policy (other than rental interruption insurance
or proceeds from third-party damage claims). Such compensation shall
be in addition to all costs and expenses for which Manager is to be reimbursed
related to Manager's performance of the obligations set forth in Section 3(a)
through 3(i) of this Management Agreement. Any or all of the
Compensation may be accrued until the sale of the
Property. Notwithstanding the foregoing, Owner shall also be
responsible for paying any construction management fees that Manager is
obligated to pay to any sub-property mangers for the Property.
7. Notices. Any
statement, notice, recommendation, request, demand, consent, or approval under
this Agreement shall be in writing and deemed delivered (a) if to Manager, when
delivered to Manager by personal receipted delivery, by United States certified
mail/return receipt requested, or by a recognized overnight courier properly
addressed to Manager (as set forth below), and, (b) if to Owner, when delivered
to Owner by personal receipted delivery, by United States certified mail/return
receipt requested, or by a recognized overnight courier properly addressed to
Owner (as set forth below). Either party may, by written notice,
designate a different address.
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To
Owner:
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RRE
Tamarlane Holdings, LLC
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c/o
RCP Tamarlane Manager, LLC
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Xxx
Xxxxxxxx Xxxxx, Xxxxx 000
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Xxxx
Xxxx Xxxxxxxxx Center
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Xxxxxxxxxxxx,
XX 00000
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Attn: Xxxxx
Xxxxxx
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To
Manager:
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Resource
Real Estate Management, LLC.
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Xxx
Xxxxxxxx Xxxxx, Xxxxx 000
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Xxxx
Xxxx Xxxxxxxxx Center
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Xxxxxxxxxxxx,
XX 00000
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Attn: Xxxx
Xxxxxxx
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8. Indemnity. Owner
shall (1) indemnify Manager and save Manager harmless from and against claims,
losses, expenses or liabilities by reason of any cause whatsoever either in and
about the Property or elsewhere resulting from Manager carrying out the
provisions of this Agreement or acting under the direction of Owner, unless such
damages or injuries result from the negligence or willful misconduct of Manager
or its employees; (2) reimburse Manager on
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demand
for any monies which Manager is required to pay out for any reason whatsoever,
either in connection with or as an expense in defense of any claim, civil or
criminal action, proceeding, charge or prosecution made, instituted or
maintained against Manager or Owner, jointly or severally, resulting from
Manager carrying out the provisions of this Agreement, or which affects or is
due to the condition or use of the Property except for any of the aforesaid
resulting from the negligence and/or willful misconduct of Manager or its
employees; and (3) defend promptly and diligently, at Owner's sole expense, any
claim, action or proceeding brought against Manager, or Manager and Owner
jointly or severally, arising out of or in connection with any of the foregoing;
and to hold harmless and fully indemnify Manager from any judgment, loss or
settlement on account thereof, except for any claim, action or proceeding
resulting from the negligence or willful misconduct of Manager or its employees
or agents. It is expressly understood and agreed that the foregoing
provisions of this paragraph shall survive the termination of this
Agreement. As used in this paragraph, Manager shall be deemed to
include Manager’s officers, directors, shareholders and employees.
9. Insurance. Owner
shall include in each of its fire and extended coverage insurance policies
covering the Property a waiver of the insured's right of subrogation against
Manager. Owner shall list Manager as an additional insured, but not a
party to whom any loss shall be payable, in any policy of general liability
insurance in connection with the Property. Owner shall furnish
Manager with a copy of any such policy within thirty (30) days of assumption by
Manager of its duties hereunder. It is further understood and agreed
that thirty (30) days written notice be given Manager in the event of
cancellation or reduction in coverage of said policies.
10. Defaults. The
occurrence of any one or more of the following acts or events with respect to
either party, which act or event shall continue for 15 days after written notice
from the other party, shall be a violation of this Agreement which shall entitle
the other party to immediately terminate this Agreement by notice to such
defaulting party, whereupon, after giving of such notice, this Agreement shall
terminate without further liability on the part of either party (except Owner's
obligation to pay to Manager its Compensation and reimbursement of expenses
incurred by Manager, for which documentation has been submitted, up to the date
of termination) and Manager shall forthwith turn over all books, records, leases
and contracts relating to the property to Owner: (1) an admission in
writing by either party of its inability to pay its debts generally as they
become due; (2) the filing by or against either party (and if against either
party, if the same is not withdrawn, discharged or otherwise terminated within
sixty (60) days), of a petition in bankruptcy for reorganization or to take
advantage of an insolvency statute; (3) an assignment for the benefit of either
party's creditors; (4) a consent by either party to the appointment of a
receiver of itself or of the whole or any substantial part of its property; or
(5) the failure to comply with any of the terms and/or conditions contained in
this Agreement.
11. Independent
Contractor. Notwithstanding anything herein to the contrary,
the relationship of Manager (and any and all employees or persons utilized) and
Owner shall be that of independent contractor and in no event shall the
relationship between Owner and Manager be deemed to be that of
employer-employee, joint venture or partnership.
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Northing in this
Agreement or in any other instrument shall cause Manager in any way to be
construed as a partner, joint venturer or associated in any way with Owner in
the ownership of the Property or subject Manager to any obligation, loss, charge
or expense connected with or arising from the ownership of said Property or part
thereof.
12. Miscellaneous.
(a) Each
provision of this Agreement is intended to be severable. If any term
or provision hereof shall be determined by a court of competent jurisdiction to
be illegal or invalid for any reason whatsoever, such provision shall be severed
from this Agreement and shall not affect the validity of the remainder of this
Agreement.
(b) In
the event either of the parties to this Agreement shall institute any action or
proceeding against the other party relating to this Agreement, the unsuccessful
party in such action or proceeding shall reimburse the successful party for its
disbursements incurred in connection therewith and for its reasonable attorney’s
fees. If not paid when due, any unpaid amounts due under this
Agreement shall accrue interest at a rate of one percent (1%) per month, or the
maximum interest rate as then permitted by applicable law, if
lesser.
(c) No
consent or waiver, express or implied, by either party hereto of any breach or
default by the other party in the performance by the other of its obligations
hereunder shall be valid unless in writing, and no such consent or waiver shall
be deemed or construed to be a consent or waiver to or of any other breach or
default in the performance by such other party of the same or any other
obligations of such party hereunder. Failure on the part of either
party to give notice of any act or failure to act of the other party or to
declare the other party in default, regardless of how long such failure
continues, shall not constitute a waiver by such party of its rights
hereunder. The granting of any consent or approval in any one
instance by or on behalf of Owner shall not be construed to waive or limit the
need for such consent in any other or subsequent instance.
(d) The
venue of any action or proceeding brought by either party against the other
arising out of this Agreement shall, to the extent legally permissible, be in
Philadelphia, Pennsylvania.
(e) Owner
and Manager agree that the Property will be offered for lease in compliance with
all applicable federal, state, and local anti-discrimination laws and
regulations.
(f) Owner
agrees (i) that Manager shall have no responsibility or liability to any person
or entity (including any governmental authority) arising out of the presence of
any adverse physical or environmental conditions affecting the Property
including, but not limited to (a) structural, mechanical, and soil conditions,
and (b) the presence and location of asbestos, if any, PCB transformers, if any,
and other hazardous substances or underground storage tanks on or about the
Property, (unless the condition is caused by Manager, its agents or employees),
or out of any non-disclosure thereof by Manager pursuant to Owner’s
requirements, and (ii) to indemnify expenses made or incurred by lessees,
leasing prospects and/or others claiming damage or loss as and hold harmless
Manager from and against all claims, damages, liabilities and
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a result
of (A) the presence of any such physical or environmental conditions; (B)
Owner’s failure to disclose same to Manager; and/or (C) any requirement of Owner
which has the effect of prohibiting Manager from disclosing to any leasing
prospect the existence of any such physical or environmental
conditions affecting the Property where the failure to make such disclosure
gives rise to a claim of liability for damage or loss by such lessee or leasing
prospect, provided the indemnity under the preceding clause (A) shall not apply
to any claim asserted against Manager arising out of Manager’s failure to
disclose any such matter to a leasing prospect where the matter at issue was in
fact disclosed by Owner to Manager Agent and where Owner authorized Manager to
disclose such matter to such leasing prospect, but Manager, nevertheless, failed
to make such disclosure to such leasing prospect.
(g) This
Agreement embodies the entire agreement between Owner and Manager as to the
subject matter herein contained and any amendment, modification or supplement to
this Agreement must be in writing and signed by all of the parties
hereto.
(h) This
Agreement shall be binding upon the successors and assigns of Manager and Owner,
and shall be governed by the law of the Commonwealth of
Pennsylvania.
(i) Captions
and paragraph headings used herein are for convenience only and are not part of
this Agreement and shall not be used in construing it.
(j) The
invalidity of any provision of this Agreement shall not effect the validity of
the remaining provisions hereof.
(k) This
Agreement may be executed in one or more counterparts, all of which, taken
together, shall constitute a complete original Agreement.
16. Lender
Provisions. For so long as the Loan is held by Federal Home
Loan Mortgage Corporation, the following provisions shall apply to the “Excess
Management Fee” which is the portion of the Compensation in excess of the “Base
Management Fee” of three percent (3%).
(a) Owner
shall not pay, and Manager shall neither receive nor collect, the Excess
Management Fee for any given month until all operating expenses of the Property
for such month (including the Base Management Fee) and monthly principal and
interest payments, imposition deposits, reserves, and all other required items
or charges due under any of the Loan Documents have been paid in
full.
(b) After
Manager has notice of or acquires actual knowledge (a "Default Notice") of an
"Event of Default" under the Mortgage, Manager will not be entitled to receive
payment of the Excess Management Fee.
(c) If
payment of the Excess Management Fee is included with payment of the Base
Management Fee, after a Default Notice, Manager will be entitled to retain only
the Base Management Fee.
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(d) If
Manager receives payment of the Excess Management Fee after the Default Notice,
it agrees that such payment will be received and held in trust for Lender, to be
applied to amounts due under or secured by the Mortgage.
(e) Nothing
in this Section is intended to suggest that this Agreement is not otherwise
fully subject and subordinate to the Mortgage.
The Owner and Manager understand that
the Lender is relying on the terms of this Agreement, including without
limitation this Section, in making the Loan, and no material modification of
this Agreement may be made without the prior written consent of the
Lender.
[SIGNATURES
CONTAINED ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, each party has
caused its duly authorized representatives to execute and deliver this Asset
Management Agreement as of the date first above written.
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RRE
TAMARLANE HOLDINGS, LLC, a Delaware
limited
liability company
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By: RCP
Tamarlane Manager, LLC, its manager
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By:
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Name:
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Title:
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| MANAGER: | |||
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RESOURCE
REAL ESTATE MANAGEMENT, LLC, a
Delaware
limited liablity company
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By:
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Name:
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Title:
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