SCHEDULE AND FORM OF
PROPERTY MANAGEMENT AGREEMENTS
BETWEEN
XXXXXXXXXX REALTY GROUP, INC.,
AND
DIVERSIFIED INVESTMENT & MANAGEMENT CORPORATION
On February 6, 2006, Xxxxxxxxxx Realty Group, Inc. ("Xxxxxxxxxx")
entered into property management contracts with Diversified Investment &
Management Corporation for the following properties:
1. Xxxx Oaks Apartment Complex located at 0000 Xxxx Xxxxxxxx
Xxxx, Xxxxxx, Xxxxx; the fair market value used in section 2.1 of the
agreement is Three Million Seven Hundred Twenty Thousand Dollars
($3,720,000).
2. Ashdale Gardens Apartment Complex located at 0000 Xxxxxxx
Xxxxx, Xxxxxx, Xxxxx; the fair market value used in section 2.1 of the
agreement is Two Million Ninety Thousand Dollars ($2,090,000).
3. London Square Apartment Complex located at 0000 Xxxx Xxxx
Xxxxxx, Xxxxxx Xxxxx; the fair market value used in section 2.1 of the
agreement is is Three Million Three Hundred Thousand Dollars
($3,300,000).
A form of the Property Management Contract follows:
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SCHEDULE AND FORM OF PROPERTY MANAGEMENT CONTRACT/[____________] APARTMENTS
PROPERTY MANAGEMENT CONTRACT
FOR
[______________] APARTMENTS
AUSTIN, TEXAS
THIS PROPERTY MANAGEMENT CONTRACT (hereinafter "Contact") is made
effective this 7th day of July 2005 by and between XXXXXXXXXX REALTY GROUP,
INC., a Nevada Corporation (hereinafter "Owner"), having principal place of
business at 000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000, and DIVERSIFIED INVESTMENT & MANAGEMENT CORPORATION
(hereinafter "Manager"), a duly organized California corporation, having is
principal place of business at 000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000 and its Regional Office located at 0000 Xxxxxx
Xxxxx, Xxxxxx, Xxxxx.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, Owner and Manager agree as follows:
1. Appointment of Manager. Owner hereby appoints Manager as the
exclusive representative of Owner to manage and operate the [________] Apartment
Complex (hereinafter "Property"), owned by Owner and located at
[______________], City of Austin, County of Xxxxxx, State of Texas.
2. Compensation of Manager. The fees set forth in subsection 2.1 below
shall not apply to any Owner who, on the effective date, has Two Hundred Fifty
Million Dollars ($250,000,000) or more in real estate asset currently under
management with Manager.
2.1 Owner shall pay to Manager, prior to the close of the
calendar year within which this Contract becomes effective, a fee based upon the
following rate scale:
Fair Market Value Start-Up Fees
----------------- -------------
Start-Ups $ 00.0
$0 - $10,000,000 $10,000.00 per million
Over $10,000,000 $ 1,000.00 per million
The fair market value of this Property is [_____________] ($[_________]) and the
start-up fee is Zero Dollars ($0.0).
2.2 Manager shall receive a management fee of three percent
(3%) of all income generated from the Property, together with reimbursement for
all payroll and third party ependitures. In the event Manager employs a
cooperating broker to rent part or all of the Property, the fee of Manager shall
be increased to cover the fee of the cooperating broker to the extent of the
participation of the cooperating broker in such activity, but in no event, shall
the total fee be more than six percent (6%) of the gross rent to be derived from
the Property, unless otherwise previously approved by Owner.
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3. Payments to Owner. Manager shall remit to Owner, at monthly
intervals, the check of Manager for the net amount due Owner. A sum to be
determined by Manager, with the approval of Owner, shall be retained by Manager
for the account of Owner as a reserve for the payment of secured indebtedness,
including, but not limited to, taxes, licenses, insurance, repairs, and other
expenses that my be anticipated, but are not due at the time of the remittance
to Owner.
4. Authority and Powers of Manager. Owner hereby grants Manager the
following authority and powers and agrees to assume the expenses in connection
therewith:
4.1 Manager shall use due diligence to attract and retain
lessees of the Property.
4.2 Manager shall take reasonable steps to collect all rent
due, or enforce collection thereof, and shall perform all reasonable acts on
behalf and for the protection of Owner in the collection of such amounts.
4.3 Manager shall:
(a) sign, renew, and/or cancel eases for such
space or units;
(b) collect rents due or to become due and give
receipts therefore;
(c) terminate tenancies and sign and serve in
the name of Owner such notices as are
appropriate;
(d) institute and prosecute action;
(e) evict tenants and recover possession of
space or units;
(f) xxx for and recover, in the name of Owner,
rents and other sums due; and
(g) when expedient, with Owner's prior approval,
settle, compromise, and release such actions
or suits or reinstate such tenancies.
4.4 Manager shall manage the Property according to sound
commercial practices.
4.5 Manger, acting in Owner's name, shall take such actions as
may be necessary to enforce all warranties given in connection with construction
of the Property or with manufacture items included therein. Owner shall furnish
all necessary documents pursuant to the enforcement of these warranties.
4.6 Manager shall employ, direct, control, and discharge all
persons performing regular services on the premises. All such persons shall be
employees of Manager.
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4.7 Manager shall advertise the availability for rental of
space or units of the Property and to display "for rent" or "for lease" signs
thereon.
4.8 Manager, in its own name, shall make contracts for
electricity, gas, fuel, water, telephone, window cleaning, trash or rubbish
hauling, and other services or such of them as Manager shall deem advisable.
Manager agrees that all purchase and service contracts will be entered into at
the most favorable prices and terms available and that such prices and terms
shall unsure solely for the benefit of Owner. Manager shall be under a duty to
secure for the credit to Owner any discount, commissions, or rebated obtainable
as a result of such contracts.
4.9 Subject to the prior written approval of Owner, Manager
may (a) establish tenant qualifications; (b) determine the dollar amount of
security deposits and the dollar amount of cleaning deposition; (c) approve
credit standing; and (d) determine the form of rental agreement to be executed
by tenants.
4.10 Manager shall maintain and repair the Property in
accordance with sound management practices and local codes. Such maintenance and
repair shall include, without limitation, cleaning, painting, decorating,
plumbing, carpentry, grounds care, and such other maintenance and repair work as
may be necessary, subject to any limitation imposed by Owner in addition to
those contained herein.
4.11 Incident to such maintenance and repair, the following
provisions will apply:
(a) Special attention will be given to
preventative maintenance. To the greatest
extent feasible, the services of regular
maintenance employees will be used.
(b) Subject to Owner's prior approval, Manager
will contract with qualified independent
contractors for the maintenance and repair
of air conditioning systems and for
extraordinary repairs beyond the capability
of regular maintenance employees.
(c) Manager will systematically and promptly
receive and investigate all service requests
from tenants, take such actions thereon as
may be justified, and keep records of same.
Emergency requests will be received and
services on an around-the-clock basis.
Complaints of a serious nature will be
reported to Owner after investigation.
(d) Manager is authorized to purchase all
materials, equipment, tools, appliances,
supplies, and services necessary for proper
maintenance and repair.
4.12 Notwithstanding any of the foregoing provisions, the
prior approval of Owner will be required for any expenditure that exceeds Ten
Thousand Dollars ($10,000) in any one instance for labor, materials, or
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otherwise in connection with the maintenance and repair of the Property, except
for recurring expenses within the limits of the operation budget or emergency
repairs involving manifest danger to persons or property, or expenses required
to avoid suspension of any necessary service to the Property. In the latter
event, Manager will inform Owner of the facts as promptly as possible.
4.13 Manager shall obtain contracts materials, supplies,
utilities, and services on the most advantageous terms to the Property, and is
authorized to solicit bids, either forma or informal, for those items that can
be obtained from more than on source. Manager will secure and credit to Owner
all discounts, rebates, or commissions obtainable with respect to purchases,
service contracts, and all other transactions on Owner's behalf.
4.14 Manager will take such actions as may be necessary to
comply promptly with any and all governmental orders or other requirements
affecting the Property, whether imposed by federal, state, county, or local
authority. Nevertheless, Manager shall take no such action so long as Owner is
contesting or has affirmed its intention to contest any such order or
requirement. Manager will notify Owner in writing of all notices of such orders
or other requirement within forty-eight (48) hours from the time of their
receipt.
4.15 Manager xxxx xxxxxxx, at its own expense, a fidelity bond
in the principal sum of One Million Dollars ($1,000,000) to protect Owner
against misapplication of income from the Property by Manager or any employee of
Manager. The terms and conditions of the bond, and the surety thereon, will be
subject to approval of Owner.
4.16 From the rental proceeds, Manager shall (a) pay for
advertising; (b) pay all common area utility, repair, maintenance, and service
bills; (c) pay salaries of persons employed at the Property; (d) purchase
supplies; and (e) cause to be made and pay for such maintenance, repairs, and
alteration as may be required for proper operation of the Property.
4.17 Manager shall service all loans and mortgages on the
Property, pay all applicable real estate and personal property taxes, licenses,
fees, and payroll taxes, and maintain payroll records and make all necessary
returns required by law.
4.18 Manager shall, at all times during the term hereof,
maintain a real estate broker's license in conformity with the laws of the State
of Texas.
4.19 Maintenance of an occupancy rate of not less than
ninety-five percent (95%).
4.20 Development of janitorial schedules and the supervision
of janitorial personnel to insure proper cleanliness and maintenance of,
including, but not limited to, common areas, sidewalks, parking lots, and
grounds.
4.21 Writing or taking work or service requests for minor
repairs and maintenance of, including, but not limited to, units, commons areas,
structures, and grounds.
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4.22 Assignment of such work orders to maintenance personnel
with follow-up sufficient to insure proper cleanliness and maintenance to the
Property.
4.23 Frequent inspection of grounds, parking lots and areas,
common areas, and apartments for proper cleanliness and maintenance of the
Property.
4.24 Keep in inventory of all capital and non-capital items of
personal property that have a value of one dollar ($1) or more. Such listing
shall include description, model and serial numbers where applicable, value,
condition, and location on the Property.
4.25 Establish and maintain a bookkeeping system on an accrual
basis that includes a journal, ledger, and rent roll control systems. Such
system should be adjusted to the needs of a certified public accountant for the
yearly audits.
5. Records and Reports. Manager shall be responsible for records and
reports as follows:
5.1 Manager shall establish and maintain a comprehensive
system of records, books, and accounts in a manner satisfactory to Owner. All
records, books, and accounts will be subject examination at reasonable hours by
any authorized representative of Owner.
5.2 With respect to each fiscal year ending during the term of
this Contract, Manager will cause an annual financial report to be prepared by a
certified public accountant or other person acceptable to Owner, based upon the
preparer's examination of the books and records of Owner and manager. This
report will be prepared in accordance with the directives of Owner, will be
certified by the preparer and the Manager, and will be submitted to Owner within
forty-five (45) days after the end of the fiscal year. Compensation for the
preparer's services will be paid out of the rental income as an expense of the
Property
5.3 Manager shall prepare a quarterly report comparing actual
and budgeted fires for receipts and disbursements and will submit each such
report to Owner with thirty (30) days after the end of the quarter covered.
5.4 Manager shall furnish such information (including
occupancy reports) as may be requested by Owner from time to time with respect
to the financial, physical, or operational condition of the Property.
5.5 By the eleventh (11th) day of each month, Manager shall
furnish Owner with an itemized list of all delinquent accounts, including, but
not limited to, rental accounts, as of the tenth (10th) day of each month.
5.6 By the fifth (5th) day of each month, Manager will furnish
Owner with (a) statement of receipts and disbursements during the previous
month; (b) a schedule of accounts receivable and payable; and (c) reconciled
bank statement for the rental income account as of the end of the previous
month.
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5.7 Except as otherwise provide for in this Contract, all
bookkeeping, clerical, and other management overhead expenses (including, but
not limited to, costs of office supplies and equipment, data processing service,
postage, facsimiles, transportation for managerial personnel, and telephone
services) will be borne by Manager out of its own pocket and will not be treated
as Property expenses.
5.8 Manager shall furnish Owner and Owner's certified public
accountant(s) with a monthly profit and loss statement, a monthly vacancy
report, and a monthly rental delinquency report showing delinquencies in
payment, listed tenant by tenant. Manager shall also furnish Owner with an
annual profit and loss statement at the end of each fiscal year the term of this
Contract, which reports will be certified by Manager's independent certified
public accountant(s).
6. Accounting and Accounts. Any and all accounting requirements are to
be performed by Manager as follows:
6.1 Accounting Statements. Manager shall maintain books of
account of all receipts and disbursements incurred in management of the
Property, which records shall be open to inspection by Owner, or his/its agent,
at all reasonable times. Manager shall render monthly statement so Owner showing
all receipts and disbursements.
6.2 Bank Accounts. Manager shall establish and maintain in a
financial institution, which is insured by the Federal Deposit Insurance
Corporation, a separate account for the deposit of rental income. Manager shall
have the authority to draw on this account for any payments that Manager must
make to discharge any liabilities or obligations incurred pursuant to this
Contract and for the payment of the fee of Manager. All such payments shall be
subject to the limitations of this Contract.
6.3 Bank Deposits. Manager shall establish in a Texas
financial institution, which is insured by the Federal Deposit Insurance
Corporation, a separate account bearing interest at money market rates for the
deposit of any security required of tenants.
7. Insurance and Taxes.
7.1 Owner shall inform Manager of insurance to be carried with
respect to the Property and its operations. Manager shall cause such insurance
to be procured and kept in effect at all times. Manager shall pay premiums out
of the rental income from the Property, and the premiums will be treated as
operating expenses. All insurance will be placed with such companies, on such
conditions, in such amounts, and with such beneficial interests appearing
thereon, as shall be acceptable to Owner, and shall be otherwise inconformity
with the mortgage or deed of trust encumbering the Property. It is provided,
however, that such insurance will include public liability coverage with Manager
designated as an insured, in amounts acceptable to Manager, as well as Owner.
7.2 Manager will investigate and furnish Owner with full
reports as to all accidents, claims, and potential claims for damage relating to
the Property, and will cooperate with Owner's insurers in connection therewith.
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7.3 Manager, as Owner's broker, will survey, recommend and, on
the approval of the recommendations, place agreed upon insurance coverage for
the property. As the insurance broker, manager will be responsible for offering
Owner insurance coverage normally available for the Property involved, with
reliable companies, as well as expediting loss adjustments and maintaining
records of insurance requirements of tenants. In addition, Manager will act on
behalf of Owner in attempting to conclude claims or disputes with insurance
companies. An engineering inspection for the safety and protection of Owner's
Property shall be arranged whenever possible with the insurance carrier, at to
cost to Owner. Owner agrees to consider all reasonable recommendations as a
result of the inspection to minimize both the cost of insurance and the
possibility of bodily injury, property damage, and loss of rental income.
7.4 Manager shall be responsible for maintaining workers'
compensation insurance and fidelity bonds covering its personnel who are engage
in the operation of the Property. Manger shall at all times on behalf of Owner
maintain public liability insurance in the minimum amount of One Million Dollars
($1,000,000) for any single occurrence of bodily injury or property damage.
7.5 Manager shall pay real property taxes and other taxes
levied and assessed against the Property. Manager shall withhold from gross
revenues an amount equal to the estimated annual taxes and pay such taxes from
this reserve prior to delinquency.
8. Pass-Through Expenses. Manager shall make timely payment of all
taxes, insurance, repairs, and maintenance, together with all common area
utilities and other expenses and shall maintain true and accurate books and
records relating to all items disbursed. Manager shall, as soon as permissible
pursuant to each lease, pass-through all expenses, which are reimbursable by
said tenant pursuant to said tenant's lease. In addition to the pass-through
expense items, Manager shall pass-through to tenant, to the extent permitted by
said tenant's lease, all general and administrative expenses of Manager which
are reimbursable by tenant pursuant to tenant's lease. To the extent an expense
cannot be passed through, Xxxxxxxxxx shall timely reimburse Manager.
9. No Encumbrances. Manager shall not execute or file for record any
instrument that imposes a restriction on selling, leasing, or occupying the
Property.
10. Reimbursement of Manager. Owner shall reimburse Manager for the
amount of any charges paid by Manager and required for proper operation of the
Property, if necessary funds are not available to Manager from revenues received
for the Property, or are not otherwise made available by Owner.
11. Indemnification of Owner. Subject to the limitation set forth
below, Manager shall indemnify Owner against all liability of any nature
whatsoever in connection with management and operation of the Property, and
against all liability for injury or death of employees, or any other persons,
resulting directly for the management and operation of the Property. This
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section shall not impose any obligation on manager to indemnify Owner against
the willful misconduct or negligent acts or omissions of Owner or the Manger(s)
or employees of Owner.
12. Subordination and Attornment.
12.1 Without the necessity of any additional document being
executed by Manager for the purpose of effecting a subordination and at the
election of Owner or any beneficiary under a deed of trust with a lien on the
building containing the Leased Premises, this Lease shall be subject and
subordinate at all times to the lien of any deed of trust which may now exist or
hereafter be executed in any amount for which said building is security. Manager
covenants and agrees to execute and deliver, upon demand by Owner and in the
form requested by Owner, any additional documents evidencing the priority or
subordination of this Lease with respect to any such deed of trust.
12.2 In the event that any deed of trust is foreclosed or a
conveyance in lieu of foreclosure is made for any reason, Manager, at the option
of the successor-in-interest to Owner, shall, notwithstanding any prior
subordination of this Lease, attorn to and become the Manager of such
successor-in-interest; provided, however, that in the event of such attornment,
either Manager or Owner's successor in interest shall have the right, but not
the obligation, to terminate this contract upon thirty (30) days written notice
to the other party.
13. Liens.
13.1 Manager agrees to keep all of the Leased Premises and
every part thereof and all buildings and other improvements within which the
same are located free and clear of and from any and all mechanic's,
materialmen's and other liens for work or labor done, services performed,
materials, appliances, transportation or power contributed, used or furnished to
be used in or about the Leased Premises to or on the order of Manager, and
Manager shall promptly and fully pay and discharge any and all claims upon which
any such lien may or could be based within ten (10) days after learning of the
existence thereof and Manager shall save and hold Owner and all of the Leased
Premises and all buildings and improvements within which the same are contained
free and harmless of and from any and all such liens and claims of liens and
suits or other proceedings arising out of materials or services furnished to or
on the order of Manager. Manager agrees to give Owner written notice not less
than ten (10) days in advance of the commencement of any construction,
alteration, addition, improvement, installation or repair costing in excess of
One Thousand Dollars ($1,000.00) in order that Owner may post appropriate
notices of Owner's non-responsibility, and, further, to secure, at Manager's
sole cost and expense, a bond indemnifying and releasing Owner and the Leased
Premises from the effect of all aforesaid liens, with corporate surety, and in
form satisfactory to Owner.
14. Terms and Termination. The term of the Contract shall commence on
the effective date as set forth on page one (1) and shall end on December 31,
2010, unless sooner terminated by Owner. Termination of this Contract may be
effected at any time by Owner with a thirty (30) day prior written notice. If
the underlying Property is sold or transferred to another entity which is owned
or controlled by Owner, this Contract shall continue and shall inure to the
benefit of said new Owner. Except as provided in Section 12, this Contract shall
terminate if the Property is sold to an unrelated party.
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15. Notice. Any notice required by this Contract shall be delivered by
certified mail, addressed to Owner at 000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000,
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, and addressed to Manager at 000 Xxxxxx
Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000.
16. Attorney's Fees. In the event of any suit, controversy, claim, or
dispute between Owner and Manager arising out of or relating to performance or
breach of this Contract, the prevailing party shall be entitled to recover
reasonable expenses, attorneys' fees, and costs.
17. Entirety; Alteration; Binding Effect. This Contract is entire. The
parties may not alter, amend, or modify it except by an instrument in writing,
executed by both Owner and Manager. It includes all representations of every
kind and nature made by either party to the other, and shall be binding on the
successors and assigns of the parties.
OWNER:
XXXXXXXXXX REALTY GROUP, INC.
By:_________________________________
Xx. Xxxxxx Xxxxxx
President
MANAGER:
DIVERSIFIED INVESTMENT & MANAGEMENT CORPORATION
By:_________________________________
Xxxxx X. Xxxxx, Esq.
Its: Vice President
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