ASSET MANAGEMENT AGREEMENT
Foxcroft
This
ASSET MANAGEMENT AGREEMENT (this “Agreement”) is dated
as of this 29th day of January, 2008, among RRE FOXCROFT HOLDINGS, LLC, a
Delaware limited liability company (“Owner”), FOXCROFT
NORTH OWNERS ASSOCIATION, a Maine non-profit corporation, FOXCROFT SOUTH OWNERS
ASSOCIATION, a Maine non-profit corporation (together, the “Association”), 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 all of the condominium units and
common elements of the Foxcroft North Condominium and the Foxcroft South
Condominium, which Owner operates through the Association as a 104-unit
multifamily project (the “Property”) commonly
known as the Foxcroft Apartments located in Scarborough, 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 and the Association desire 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. The Association 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, the Association 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 the Association 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 the Association 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 greater 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 the Association 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 greater Portland, Maine
region.
(c)
Separate
Fund. To deposit all receipts collected from the Property in a
trust account in a bank approved by the Association 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 the Association 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 the Association,
if appropriate, annual operating budgets for the Property and a marketing
plan.
(f)
Approval of the
Association. Anything herein to the contrary notwithstanding,
the following decisions and actions of Manager shall be subject to the prior
approval of the Association: 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, to observe maintenance
and condition. 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.
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3.
Owner and the Association hereby give 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 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 the
Association 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
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 supervise
preventive maintenance and repairs and alterations and to do decorating on said
premises; to protect the Property from storms upon public warning so to do; and
to purchase supplies at a reasonable price and pay all bills. Manager
shall advise the Association of any violations of building codes and
governmental regulations and shall consult with the Association as to actions to
be taken pertaining thereto. Notwithstanding anything herein to the
contrary, Manager shall not, without prior authority from the Association, 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 the Association, and subject to the Association'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 the Association as to insurance requirements and coverage and, if
requested by the Association, to procure such insurance coverage as the
Association shall request. Manager shall promptly investigate and
report to the Association all accidents or claims for damage and shall cooperate
with the Association 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. The Association authorizes Manager to prepare for filing
by Owner in the name of Owner, all federal, state and local tax reports relating
to the Property. The Association 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.
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(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, 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 the Association'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 the Association's approval, to take such action (including any appeals) at
Owner's cost, in timely fashion; and to advise the Association 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 the Association 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 the Association, 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 the Association 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
the Association, 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 the Association 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 the Association 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.
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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 Receipts from the Property (the “"Compensation"). Any
management fee due to any sub-property manager shall be paid by deducting such
amount from the Property Management Fee. As used herein, "Gross
Rents" shall mean the total rental income from the Property. 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 (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 or the Association, when
delivered to Owner or the Association by personal receipted delivery, by United
States certified mail/return receipt requested, or by a recognized overnight
courier properly addressed to Owner and the Association (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
Foxcroft Holdings, LLC
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c/o RCP
Foxcroft Manager, LLC
Xxx
Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx
Xxxxxxxxx Center
Philadelphia,
PA 19112
Attn: Xxxxx
Xxxxxx
To
the
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Association:
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Foxcroft
North Owners Association
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Foxcroft
South Owners Association
Xxx
Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx
Xxxxxxxxx Center
Xxxxxxxxxxxx,
XX 00000
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
Xxxx Xxxx
Xxxxxxxxx Center
Xxxxxxxxxxxx,
XX 00000
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 or the
Association, unless such damages or injuries result from the negligence or
willful misconduct of Manager or its employees; (2) reimburse Manager on 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 or the Association, 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; and (3) defend
promptly and diligently, at Owner's sole expense, any claim, action or
proceeding brought against Manager, or Manager and Owner or the Association
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) a default under or breach of 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 or the Association shall be that of independent contractor and in no event
shall the relationship between Owner or the Association on the one hand and
Manager on the other be deemed to be that of employer-employee, joint venture or
partnership.
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Nothing
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 or
the Association in the ownership of the Project or subject Manager to any
obligation, loss, charge or expense connected with or arising from the ownership
of said Project 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 or the
Association 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)
The Association 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)
The Association 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 or the Association’s requirements, and (ii) to
indemnify and hold harmless Manager from and against all claims, damages,
liabilities and expenses made or incurred by lessees, leasing prospects and/or
others claiming damage or loss as a result of (A) the presence of any such
physical or environmental conditions; (B) Owner’s or the Association’s failure
to disclose same to Manager; and/or (C) any requirement of Owner or the
Association 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 or the Association to Manager Agent and where Owner or
the Association authorized Manager to disclose such matter to such leasing
prospect, but Manager, nevertheless, failed to make such disclosure to such
leasing prospect.
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(g)
This Agreement embodies the entire agreement
between Owner, the Association 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, Owner and the Association, and shall be
governed by the law of the Commonwealth of Pennsylvania.
(i)
Captions. 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)
Severability. The
invalidity of any provision of this Agreement shall not effect the validity of
the remaining provisions hereof.
(k)
Counterparts. 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.
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(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.
(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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OWNER:
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RRE
FOXCROFT HOLDINGS, LLC, a Delaware limited liability
company
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By:
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RCP
Foxcroft Manager, LLC, its manager
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By:
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Name:
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Title:
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ASSOCIATION:
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FOXCROFT
NORTH OWNERS ASSOCIATION, a Maine non-profit
corporation
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By:
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Name:
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Title:
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FOXCROFT
SOUTH OWNERS ASSOCIATION, a Maine non-profit
corporation
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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 liability
company
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By:
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Name:
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Title:
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