Exhibit 10.40

 

PROPERTY MANAGEMENT AGREEMENT

 

This PROPERTY MANAGEMENT AGREEMENT (the “Agreement”), entered into as of this
29th day of March, 2012, by Bell BR Waterford Crossing JV, LLC, a Delaware
limited liability company (“Owner”) and Bell Partners Inc., a North Carolina
corporation (“Manager”).

 

IN CONSIDERATION of the mutual covenants and promises each to the other made
herein, the Owner does hereby engage Manager exclusively as an independent
contractor, and the Manager does hereby accept the engagement, to rent, lease,
operate, repair and manage the property more particularly described below (the
“Project”) upon the following terms and conditions.

 

THE PROJECT: That certain apartment property located in the City of
Hendersonville, State of Tennessee and being known to consist of 252
multi-family units and more particularly described as:

 

  Project Name: Grove at Waterford Crossing   Street Address: 101 Spade Leaf
Blvd.   City, State, Zip Code: Hendersonville, TN _______

 

SECTION 1: DEFINITIONS

 

1.01 TERM

The term of this Agreement shall commence on the later of the date above or the
date Owner acquires the Project and shall, subject to the provisions hereof,
terminate twelve months thereafter (the “Term”). This Agreement will
automatically renew on a year to year basis thereafter until and unless
terminated in accordance with the terms hereof and each renewal period shall,
from and after its commencement, constitute part of the Term.

 

1.02 FEES

 

The management fee (“Base Management Fee”) payable each month by Owner to
Manager hereunder shall be an amount equal to three and one-half percent (3.5%)
of the Gross Receipts from the Project.

 

Yieldstar. Owner agrees to deploy Yield Management (the process of balancing
supply and demand to price apartments to maximize rental revenue) at the
Project. Manager will provide pricing authority support services in exchange for
cost-offset compensation of ($.70) per unit per month. Licensing fees and
software costs to run Yield Management software shall be paid by Owner to
Yieldstar as a normal operating expense at a cost of a one-time licensing fee
and a monthly user fee at the then prevailing Yieldstar rate. Yield Management
pricing authority support services provided by Manager shall include daily
monitoring of apartment pricing, quarterly reporting and bi-weekly conference
calls with site staff. The Manager will review pricing recommendations and shall
have final authority for making pricing decisions concerning the Project.
Manager will be responsible for set-up and maintenance of the Yield Management
software.

 

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Ops Technology. Owner agrees to deploy Ops Technology (enables suppliers and
service providers to present targeted pre-negotiated catalog pricing, receive
orders electronically, and insert electronic invoices into the Manager’s payment
processing system) at the Project. Manager will provide oversight of the
e-procurement and invoicing management platform at a cost (all paid to the
service provider and not to Manager) of a one-time licensing fee, monthly use
fee and a per paper invoice processing fee at the then prevailing Ops Technology
rate. Licensing, user and invoice processing costs shall be paid by the Owner as
a normal operating expense.

 

All of the fees referred to above shall be collectively referred to herein as
“Management Fees.”

 

In the event Manager negotiates video (cable), data (internet), voice (phone)
and laundry agreements on behalf of the Owner and such agreement provides for
the payment to Owner of an upfront or “door” fee payment then, Manager shall be
paid 10% of such payment in return for its services in negotiating the contract.

 

If additional services not outlined herein are required by the Owner or Manager,
Owner shall pay Manager for such additional services under the terms and
conditions to be agreed upon by the parties. Manager shall be under no
obligation to provide such additional services unless and until the parties have
entered into a written agreement reflecting the terms and conditions thereof.

  

1.03 DEPOSITORY

An FDIC insured bank located in the United States of America, designated by
Manager and approved by Owner.

 

1.04 FISCAL YEAR

The year beginning January 1st and ending December 31st.

 

1.05 BUDGET

A composite of (i) an operations Budget, which shall be an estimate of receipts
and expenditures for the operation of the Project during a Fiscal Year,
including a schedule of expected apartment rentals (excluding security deposits)
for the period stated therein and a schedule of expected special repairs and
maintenance projects, (ii) a capital Budget, which shall be an estimate of
capital replacements, substitutions of, and additions to, the Project for the
Fiscal Year.

 

1.06 GROSS RECEIPTS

The entire amount of all receipts, determined on a cash basis, from (a) tenant
rentals, parking rent and other charges collected pursuant to tenant leases for
each month during the term hereof; provided, however, 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) tenant reimbursements for utilities (gas, electric, water
and sewer); (d) video (cable), data (internet), local or long-distance services
(voice), laundry and vending machine income and other ancillary revenue
generated as a percentage of gross receipts; (e) any and all receipts from the
operation of the Project received and relating to such period; (f) proceeds from
rental interruption insurance; and (g) any other sums and charges collected in
connection with termination of the tenant leases (collectively, the “Gross
Receipts”). Gross Receipts do not include the proceeds of (i) any sale,
exchange, refinancing, condemnation, or other disposition of all or any part of
the Project, (ii) any loans to the Owner whether or not secured by all or any
part of the Project, (iii) any capital contributions to the Owner, (iv) any
insurance (other than rental interruption insurance) maintained with regard to
the Project, or (v) proceeds of casualty insurance or damage claims as a result
of damage or loss to the Project.

 

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1.07 PROJECT EMPLOYEES

Those persons employed by Manager on-site as a management staff; e.g., senior
manager, manager, assistant managers, leasing agents, maintenance personnel,
courtesy officers, and other personnel necessary to be directly employed by the
Manager in order to maintain and operate the Project.

 

SECTION 2: DUTIES AND RIGHTS OF MANAGER

 

2.01 APPOINTMENT OF MANAGER

During the term of this Agreement, Manager agrees, for and in consideration of
the compensation provided in Section 1.02, and Owner hereby grants to Manager
the sole and exclusive right, to supervise and direct the leasing, management,
repair, maintenance and operation of the Project as per the authority granted
herein. All services performed by Manager under this Agreement shall be done as
an independent contractor of Owner. All obligations or expenses incurred
hereunder, including the pro rata portion used in connection with, or for the
benefit of the Project for all purchases, contracts, sales or services in bulk
or volume which Manager may obtain for discount or convenience in connection
thereof shall be for the account of, on behalf of, and at the expense of, Owner
except as otherwise specifically provided. Owner shall be obligated to reimburse
Manager for all reasonable expenses of Manager incurred specifically for the
Project.

 

2.02 GENERAL OPERATION

Manager shall operate the Project in the same manner as is customary and usual
in the operation of comparable facilities, and shall provide such services as
are customarily provided by operators of apartment projects of comparable class
and standing consistent with the Project's facilities, subject, however, in all
events to the limitations of the Budget. 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 a timely, faithful, diligent and
efficient manner: (a) coordinate the plans of tenants for moving their personal
effects into the Project or out of it, with a view toward scheduling such
movements so that there shall be a minimum of inconvenience to other tenants;
(b) maintain businesslike relations with tenants whose service requests shall be
received, considered and recorded in systematic fashion in order to show the
action taken with respect to each; (c) use its commercially reasonable efforts
to collect all monthly rents due from tenants and rent for users or lessees of
other non-dwelling facilities in the Project, if any; request, demand, collect,
receive and receipt for any and all charges or rents which become due to Owner,
and at Owner's expense, take such legal action as may be necessary or desirable
to evict tenants delinquent in payment of monthly rental or other charges
(security deposits, late charges, etc.); (d) prepare or cause to be prepared for
execution and filing by the Manager as an independent contractor all forms,
reports and returns required by all federal, state or local laws in connection
with the unemployment insurance, workers' compensation insurance, disability
benefits, Social Security and other similar taxes now in effect or hereafter
imposed, and also any other requirements relating to the employment of
personnel; (e) advertise when necessary, at Owner's expense and approval, the
availability for rental for the Project units using commercially reasonable
business strategies in connection with the use of promotional materials , market
outreach efforts, internet and web-based marketing 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 same is under
management of Manager and may use in a tasteful manner Manager's name and logo
in any display advertising which may be done on behalf of the Project; (f)
re-name the Project and replace the signs at the Project at Owner's expense and
with Owner’s approval, using commercially reasonable business strategies; and
(g) sign, renew and cancel tenant leases for the Project, write apartment leases
for terms and on terms approved by Owner (or on a month to month basis following
the expiration of the initial term of a tenant lease) to bona fide individuals
based upon Manager's recommendations. Manager shall exercise its commercially
reasonable efforts to include the Project in signage advertising rentals
available to be placed at the Project during any lease-up period.
Notwithstanding anything herein to the contrary, in the event the Project name
contains the trade names and/or trademarks “Bell Partners” or “Bell”
(collectively, the “Bell Brand Rights”), Owner shall not be entitled to any
right, title or interest of Manager in the Bell Brand Rights. Owner, at its
cost, shall immediately cease using any Bell Brand Right and shall replace all
signage that contains a Bell Brand Right within thirty (30) days after the
termination of this Agreement.

 

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It is understood and agreed that Manager is not in the business of, and will not
be providing alarm systems, guards, patrols and/or similar services (the
“Security Services”) to the Project. Owner may direct Manager, on the Owner’s
behalf, to separately contract with a company providing Security Services.

 

2.03 BUDGET

(a) Attached hereto as Exhibit A is the Budget approved by the Owner for the
stated portion of the current Fiscal Year. For subsequent Fiscal Years, Manager
shall submit the Budget for the ensuing Fiscal Year for Owner's approval no
later than ninety (90) days prior to the beginning of each successive Fiscal
Year. The Budget shall be reasonably approved by Owner prior to December 31. In
the event Owner disapproves the Budget, in whole or in part, Owner will provide
edits for the Manager to make as may be reasonably practicable. Until a complete
new Budget is approved, Manager shall operate on the Budget or part thereof
which is approved and the disapproved items shall be governed by the like item
approved for the prior Fiscal Year, with the exception of expenses for personnel
which may be reasonably increased based on existing competitive conditions
unless the increase for personnel is the item that is being disputed, in which
case expenses for personnel will not be increased. The Budget shall reflect the
schedule of monthly rents proposed for the new Fiscal Year. It shall also
constitute a major control under which Manager shall operate the Project, and
Manager shall make all reasonable efforts to ensure there are no substantial
variances therefrom except for any variations which are in compliance with this
Section and Section 2.07(a). Consequently, no expenses may be incurred or
commitments made by Manager in connection with the maintenance and operation of
the Project which exceed the amounts allocated to any particular operating
expense category (i.e. Payroll/Landscape / Security / Redecorating / Maintenance
/ Marketing / Administrative / Capital) in the Budget for any month by more than
the lesser of (x) $5,000 or (y) ten percent (10%); provided, however, that the
foregoing limitation with respect to incurring any expense not covered by the
Budget shall not apply to expenses relating to taxes, insurance or utilities.
Manager makes no guaranty, warranty or representation whatsoever in connection
with the Budgets or the operational results of owning the Project, such being
intended as estimates only. Manager will use its commercially reasonable efforts
to develop the Budget and manage the Project in accordance with the Budget.

 

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(b) In the event there shall be a substantial variance of greater than 10%
between the actual results of operations for any month and the estimated results
of operations for such month as set forth in the Budget, Manager shall furnish
to Owner, within fifteen (15) days after the expiration of such month, a written
explanation as to reasons for such variance. If substantial variances have
occurred or are anticipated by Manager during the remainder of any Fiscal Year,
Manager shall prepare and submit to Owner a revised Budget covering the
remainder of the Fiscal Year with an explanation for the revision which revised
Budget shall be subject to Owner’s approval, which shall not be unreasonably
withheld, conditioned or delayed.

 

2.04 PROJECT EMPLOYEES AND OTHER PERSONNEL

(a) Manager shall hire, employ, instruct, pay, promote, direct, discharge and
supervise the work of the Project employees and shall supervise, through the
Project employees, the firing, promotion, discharge and work of all other
operating and service employees performing services in, for or about the
Project, all in the name of Manager. All training and training-related travel
and accommodations are a normal operating expense and shall be budgeted and paid
monthly as a Project expense. Manager shall be solely responsible for legal
compliance concerning the foregoing activities and shall indemnify and hold
harmless Owner from employee claims and violations of law by Manager in respect
to employment matters. As some of the Project employees may be required to
reside at the Project and be available on a full-time basis in order to perform
properly the duties of his/her employment, it is further understood and agreed
that to the extent contemplated in the Budget or with Owner’s prior written
approval, the Project employees (including spouses or significant others and
dependent children), in addition to salary and fringe benefits, may receive up
to a 20% discount, or rental concession on the normal rental rates for any unit
such employee is required to occupy.

 

(b) At all times, the Project employees shall at all times be deemed solely
employees of Manager. Owner shall reimburse Manager bi-weekly for the total
aggregate compensation, including salary and fringe benefits, payable with
respect to the Project employees and any temporary employees performing duties
at the Project. The term “fringe” benefits, as used herein, shall mean and
include the employee's and employer’s contribution of FICA, unemployment
compensation and other employment taxes, workers' compensation, group life,
accident and health insurance premiums, disability, vacation, holiday, and sick
leave, 401(k) contributions and other similar benefits paid or payable to
employees on other projects operated by Manager. Any 401(k) employee or employer
contributions forfeited by the employee remain with the plan. The cost of such
Project employees shall be outlined and approved in the Budget. The
compensation, payroll taxes, employee benefits, insurance, payroll and
administrative costs of such employees shall be considered a normal operating
expense and shall be paid as a Project expense, as provided and to the extent
permitted in the Budget.

 

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2.05 CONTRACTS AND SUPPLIES 

Subject to the Budget the Manager shall, in the name of and on behalf of Owner
and at Owner's expense, consummate arrangements with unrelated third party
concessionaires, licensees, tenants or other intended users of the facilities of
the Project, shall enter into contracts for furnishing to the Project
electricity, gas, water, steam, telephone, cleaning, vermin exterminators,
furnace and air-conditioning maintenance, security protection, pest control,
landscaping, solid waste removal and any other utilities, services and
concessions which are provided in connection with the maintenance and operation
of apartment projects which are comparable to the Project and in accordance with
standards comparable to those prevailing in other comparable apartment projects,
and shall place purchase orders for such equipment, tools, appliances, materials
and supplies as are reflected in the Budget and necessary to maintain the
Project. Manager will make a reasonable attempt to make all contracts cancelable
without penalty with no more than (30) days written notice.

 

In the event that utility or power companies require a surety bond or other form
of security in order to provide utilities, electrical or other services to the
Project, the Manager is authorized to obtain such bond at Owner’s sole expense.
Manager may, in its sole discretion, elect to guarantee, indemnify, defend and
hold harmless those parties supplying such bonds or other form of security (the
“Surety”) for any premiums, liabilities, losses, costs, damages, attorney fees
and other expenses, including interest, which the Surety may sustain or incur by
reason of, or in connection with, the issuance, renewal or continuation of such
bonds or other form of security. In such event, Owner will reimburse and
indemnify Manager pursuant to Section 6.03 with regard to the same.

 

2.06 MANAGER'S SERVICES

In the performance of its duties under this Agreement, it is agreed that Manager
may enter into any contract on behalf of Owner with subsidiaries and affiliates
of Manager for the furnishing of supplies and services to the Project, including
but not limited to the purchasing of furniture, operating equipment, operating
supplies, maintenance and landscaping services, and advertising, provided,
however, that the net cost of such supplies and services to Owner is competitive
with such similar services or supplies customarily used in the industry, whose
services or supplies are reasonably available to the industry and whose services
or supplies are reasonably available to the Project.

 

2.07 ALTERATIONS, REPAIRS AND MAINTENANCE

(a) To the extent adequate funds are made available to Manager by Owner, 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 apartment projects or are
required by any lease; provided, however, that no unbudgeted expenditures in
excess of the lesser of 10% or $5,000 may be made for such purposes without the
consent of the Owner. Manager may make emergency repairs involving manifest
danger to life or property which are immediately necessary for the preservation
of the safety of the Project, or for the safety of the tenants, or are required
to avoid the suspension of any necessary service to the Project, in which event
such reasonable expenditures may be made by the Manager without prior approval
and irrespective of the cost limitations imposed by this Section 2.07, provided
that Owner or its successor in interest is notified in a timely manner and
thereafter given written notice of such situation and such costs incurred.

 

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(b) In accordance with the terms of the Budget, by Manager’s recommendation or
upon Owner demand and/or approval (except in the case of emergency), Manager
shall, at Owner's expense, from time to time during the term hereof, make all
required capital replacements or repairs to the Project (“Capital Project”). For
any Capital Projects, including but not limited to Project improvements,
rehab/renovation projects, and fire restoration, that cost more than $10,000 on
an individual basis, Owner shall pay Manager a Construction Management Fee equal
to 5% of the total cost of the completed work, including both hard and soft
costs.

 

2.08 LICENSES AND PERMITS

Manager shall, in a timely manner, apply for, and thereafter use commercially
reasonable efforts to obtain and maintain in the name and at the expense of
Owner all licenses and permits (including deposits and bonds) required of Owner
or Manager in connection with the management and operation of the Project. Owner
agrees to execute and deliver any and all applications and other documents and
to otherwise cooperate to the fullest extent with Manager in applying for,
obtaining and maintaining such licenses and permits.

 

2.09 COMPLIANCE WITH LAWS

Manager, at Owner's expense, shall use its commercially reasonable efforts to
cause all acts and duties to be done in and about the Project to comply with all
laws, regulations and requirements of any federal, state, regional, county or
municipal government, having jurisdiction respecting the use or manner of use of
the Project or the maintenance, alteration or operation thereof.

 

Owner shall use its commercially reasonable efforts to cause all acts and duties
to be done in and about the Project to comply with all laws, regulations and
requirements of any federal, state, regional, county or municipal government
having jurisdiction over the use or manner of use of the Project or the
maintenance, alteration or operation thereof.

 

2.10 LEGAL PROCEEDINGS

Manager shall institute, in its own name or in the name of Owner, but in any
event at the expense of Owner, any and all legal actions or proceedings which
Manager deems reasonable to collect charges, rent or other income from the
Project, or to dispossess tenants or other persons in possession, or to cancel
or terminate any lease, license or concessions agreement for the breach thereof,
or default thereunder by any tenant, licensee or concessionaire. Any legal
proceedings for which the costs are reasonably expected to exceed the amounts
budgeted in the Budget shall require the approval of the Owner.

 

2.11 DEBTS OF OWNER

In the performance of its duties as Manager, Manager shall act solely as the
representative of the Owner. All debts and liabilities to third persons incurred
by Manager in the course of its operation and management of the Project shall be
the debts and liabilities of the Owner only, and Manager shall not be liable for
any such debts or liabilities.

 

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SECTION 3: MANAGEMENT FEES

 

3.01 MANAGEMENT FEE

The Owner shall pay to Manager, during the term hereof, the Management Fees for
the previous month on or before the tenth (10th) day of each subsequent month;
provided, however that with respect to the Management Fee due for the last month
of the term hereof, such Management Fee shall be payable on the last day of such
month. Manager shall have the right to withdraw the monthly Management Fee from
the Operating Account established by Manager.

 

3.02 PLACE OF PAYMENT

All sums payable by Owner to Manager hereunder shall be payable to Manager at
300 N. Greene Street, Suite 1000, Greensboro, NC 27401, unless the Manager
shall, from time to time, specify a different address in writing.

 

SECTION 4: PROCEDURE FOR HANDLING RECEIPTS AND OPERATING CAPITAL

 

4.01 BANK DEPOSITS

All monies received by Manager for or on behalf of Owner shall be deposited by
Manager with the Depository. Manager shall maintain separate accounts for such
funds consistent with the system of accounting of the Project. All funds on
deposit shall be managed by Manager subject to the terms hereof. All monies of
Owner held by Manager pursuant to the terms hereof shall be held by Manager in
trust for the benefit of Owner to be held and disbursed as herein provided and
shall not, unless Owner otherwise has agreed or directed, be commingled with the
funds of any other project or person, including Manager or any affiliate of
Manager. In no event shall Manager be responsible for any loss to amounts on
deposit caused by the insolvency or other similar event or occurrence with
respect to the Depository.

 

4.02 SECURITY DEPOSIT ACCOUNT

Manager shall comply with all applicable laws with respect to security deposits
paid by tenants. All security deposit funds held by Manager shall at all times
be the property of Owner, subject to all applicable laws with respect thereto.
Upon commencement of this Agreement, the Owner authorizes the Manager to make
withdrawals therefrom for the purpose of returning them as required by the lease
or by existing law.

 

4.02A OPERATING ACCOUNT

Manager shall deposit all Gross Receipts from the operations of the Project into
an Operating Account, on which both Manager and Owner shall be signatories and
pay the normal operating expenses of the Project, including Manager’s fees, debt
and taxes as directed.

 

4.03 DISBURSEMENT OF DEPOSITS

Manager shall disburse and pay all funds on deposit on behalf of and in the name
of Owner, in such amounts and at such times as the same are required in
connection with the ownership, maintenance and operation of the Project on
account of all taxes, assessments and charges of every kind imposed by any
governmental authority having jurisdiction over the Project, and all costs and
expenses of maintaining, operating and supervising the operation of the Project,
including, but not limited to, the Management Fees due hereunder, salaries,
fringe benefits and expenses of the Project employees, insurance premiums, debt
service, legal and accounting fees and the cost and expense of utilities,
services, marketing, advertising and concessions. To the extent there are
insufficient funds to pay all of such costs and expenses, Manager shall pay such
of the foregoing items in the order and manner selected by Manager. Nothing in
this Agreement shall require the Manager to advance money on the Owner’s behalf.

 

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4.04 AUTHORIZED SIGNATURES

Any persons from time to time designated by Manager and agreed to in writing by
Owner shall be authorized signatories on all bank accounts established by
Manager hereunder and shall have authority to make disbursements from such
accounts to the extent permitted in this Section 4. Funds may be withdrawn from
all bank accounts established by Manager, in accordance with this Section 4,
only upon the signature of an individual who has been granted that authority by
Owner. Owner may at any time and at Owner's sole discretion direct Manager to
withdraw funds and make disbursements from such accounts, except all persons who
are authorized signatories or who in any way handle funds for the Project shall
be bonded or covered by dishonesty insurance in the minimum amount of $100,000
per employee. At the beginning of each year and as new persons shall be
designated authorized signatories, Manager shall provide Owner with evidence of
such bonding. Any expenses relating to such bond for on-site employees and for
off-site employees shall be borne by Manager.

 

SECTION 5: ACCOUNTING

 

5.01 BOOKS AND RECORDS

Manager, on behalf of the Owner, shall keep all books and accounts pertaining to
the Project in accordance with Generally Accepted Accounting Principles in the
US. The cutoff date of the accounting period shall be the last day of each
calendar month. Manager, on behalf of Owner, shall also supervise and direct the
keeping of a comprehensive system of office records, books and accounts
pertaining to the Project. Such records shall be subject to examination, at the
office where they are maintained, by Owner or its authorized agents, attorneys
and accountant at all reasonable business hours and upon reasonable, advance
notice to Manager.

 

5.02 PERIODIC STATEMENTS

(a) On or before ten (10) days following the end of each calendar month, Manager
shall deliver or cause to be delivered to Owner its standard list of financial
reports customarily provided to owners of properties it manages and such other
items as set forth on Exhibit B. This list is subject to change from time to
time by Owner or Manager provided Manager shall not substantively decrease the
quality of the information provided.

 

(b) Within fifteen (15) days after the end of such Fiscal Year, Manager will
deliver to the Owner, an income and expense statement as of Fiscal Year end, and
the results of operation of the Project during the preceding Fiscal Year
(anything contained herein to the contrary notwithstanding, however, Manager
shall not be obligated to prepare any of Owner's state or federal income tax
returns).

 

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(c) In the event that Owner or Owner's Mortgagee(s) requires an audit, the
Manager shall cooperate with the auditors in a timely manner to complete the
audit engagement. Also, Manager shall cooperate in a reasonable manner at the
request of any indirect owner of Owner and shall work in good faith with its
designated representatives, accountants or auditors to enable compliance with
its public reporting, attestation, certification and other requirements under
applicable securities laws and regulations, including for testing internal
controls and procedures.

 

(d) Owner may request and Manager shall provide when available such monthly,
quarterly and/or annual leasing and management reports that relate to the
operations of the Project as Manager customarily provides the owners of
properties it manages.

 

5.03 EXPENSES

All costs and expenses incurred in connection with the preparation of any
statements, budgets, schedules, computations and other reports required under
this Section 5, or under any other provisions of this Agreement, shall be borne
by the Manager. Any costs and expenses incurred in connection with the
preparation of any statement or report not described in Exhibit B, as from time
to time modified, shall be borne by Owner.

 

SECTION 6: GENERAL COVENANTS OF OWNER AND MANAGER

 

6.01 OPERATING EXPENSES

The Owner shall be solely liable for the costs and expenses of maintaining and
operating the Project that have been incurred by Owner or Manager in accordance
with the terms of this Agreement, and shall pay, or Manager shall pay on Owner's
behalf, all such costs and expenses, including, without limitation, the salaries
of all Project employees; provided, however, the Owner shall have no direct
obligations to Project employees for salaries and fringe benefits as all Project
employees are employed solely by Manager and not by Owner. Owner covenants to
pay all sums for operating expenses (including the fees due Manager hereunder)
in excess of Gross Receipts required to operate the Project upon written notice
and demand from Manager within fifteen (15) days after receipt of written
notice. Nothing in this Agreement shall require Manager to advance funds on
Owner’s behalf, however if funds are advanced by Manager in the operation, or
management of the Project, these funds will be reimbursed by the Owner within
thirty (30) days of submitting itemized invoices to the Owner. Owner further
recognizes that the Project may be operated in conjunction with other projects
and that costs may be allocated or shared between such projects on a more
efficient and less expensive method of operation. In such regard, Owner consents
to the allocation of costs and/or the sharing of any expenses in an effort to
save costs and operate the Project in a more efficient manner to be allocated in
a manner not prejudicial to Owner, provided that all such allocations are
undertaken on the basis reflected in the Budget.

 

6.02 OWNER'S RIGHT OF INSPECTION AND REVIEW

Owner and Owner's accountants, attorneys and agents have the right to enter upon
any part of the Project at any reasonable time during the Term of this Agreement
for the purpose of examining or inspecting the Project or examining or making
copies of books and records of the Project. Any inspection shall be done with as
little disruption to the business of the Project as possible. Books and records
of the Project shall be kept, as of the commencement date, at the Project or at
the location where any central accounting and bookkeeping services are performed
by Manager but at all times shall be the property of Owner.

 

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6.03 INDEMNIFICATION AND HOLD HARMLESS BY OWNER

Except for the gross negligence or willful misconduct of Manager (excluding any
such gross negligence or willful misconduct undertaken in connection with
actions or policies which have been approved or required by Owner), Owner shall
be obligated, whether named as a defendant or not, to indemnify, hold harmless,
and defend Manager (and Manager's partners, directors, shareholders, officers,
employees, and agents), with counsel reasonably satisfactory to Manager, from
and against any and all liabilities, claims, causes of action, suits, losses,
demands and expenses whatsoever including, but not limited to attorneys' fees,
paralegal expenses and costs arising out of or in the connection with the
ownership, maintenance or operation of the Project or this Agreement or the
performance of Manager's agreements hereunder (collectively “Claims”), including
but not limited to, Claims involving the operation and maintenance of the
Security Services, matters in which Manager is acting under the express or
implied directions of Owner, and the loss of use of property following and
resulting from damage or destruction. In all cases, Owner's Liability Insurance,
as defined in Section 8.02 below, will be required to cover all actions of
Manager such that 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). The indemnification by Owner contained in this Section 6.03 is in
addition to any other indemnification obligations of Owner contained in this
Agreement, and is not limited by or to Owner's Liability Insurance. It is the
intent of the parties hereto, however, to look first to Owner’s Liability
Insurance with respect to all Claims hereunder.

 

6.04 INDEMNIFICATION BY MANAGER

Manager shall indemnify Owner from and against all Claims for bodily injury and
property damage which (i) arise out of or are a result of the gross negligence
or willful misconduct of Manager except where attributable to actions or
policies approved or required by Owner and (ii) result in liability to Owner,
including but not limited to, liability to Owner as a result of a final
adjudication or judgment on the merits by a court or arbitration proceeding and
liability to Owner as a result of a good faith settlement by Owner of such
Claims. Manager shall have no obligation to furnish Owner with a defense or with
counsel to defend any Claims which may be asserted or made against Owner,
regardless of the nature of the allegations. If, however, any such Claims result
in liability to Owner, Manager shall reimburse Owner for any attorneys' fees and
costs actually and reasonably incurred by Owner to defend the portion or
portions of such Claims against Owner which arise out of or are a result of the
gross negligence or willful misconduct of Manager (except actions or policies
approved or required by Owner).

 

6.05 SURVIVAL AND SCOPE OF INDEMNITY OBLIGATIONS

The indemnification and hold harmless obligations of the parties in the Sections
6.03 and 6.04 shall survive the expiration or earlier termination of this
Agreement. The foregoing notwithstanding, the indemnification by Owner of
Manager and its affiliates hereunder shall be solely with respect to the
performance of the Manager’s activities in its capacity as property manager
under this Agreement and nothing herein should be construed as limiting
Manager’s and its affiliates’ liability under, or acting as an indemnity of
Manager and its affiliates for any liability such parties might have under, any
other agreements, including under any guaranties provided by such parties in
connection with any financing secured by the Project or any organizational
documents related to the Owner.

 

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SECTION 7: DEFAULTS AND TERMINATION RIGHTS

 

7.01 DEFAULT BY MANAGER

Manager shall be deemed to be in default hereunder in the event Manager shall
fail to keep, observe or perform any material covenant, agreement, term or
provision of this Agreement to be kept, observed or performed by Manager, and
such default shall continue for a period of, in the case of any default which
can be cured by the payment of a liquidated sum of money, ten (10) days and, in
the case of all other defaults, thirty (30) days after notice thereof by Owner
to Manager.

 

7.02 REMEDIES OF OWNER

Upon the occurrence of an event of default by Manager as specified in Section
7.01 hereof (any one or more, a “for cause” event of default) , Owner shall have
the right to pursue any remedy it may have at law or in equity (provided that in
no event shall Manager ever be liable to Owner for, and Owner hereby waives all
rights to receive, punitive, consequential or exemplary damages), it being
expressly understood that although Owner has no further obligation to pay any
fee due hereunder, Manager shall remain liable for any losses suffered as a
result of Manager's default and the resulting termination of this Agreement.
Upon such termination, Manager shall deliver to Owner any funds, books and
records of Owner then in the possession or control of Manager and all accounts
established by Manager for security deposits.

 

7.03 DEFAULTS BY OWNER

Owner shall be deemed to be in default hereunder in the event Owner shall fail
to keep, observe or perform any material covenant, agreement, term or provision
of this Agreement to be kept, observed or performed by Owner, and such default
shall continue for a period of, in the case of any default which can be cured by
the payment of a liquidated sum of money, ten (10) days and, in the case of all
other defaults, thirty (30) days after notice thereof by Manager to Owner.

 

7.04 REMEDIES OF MANAGER

Upon the occurrence of an event of default by Owner as specified in Section 7.03
hereof, Manager shall be entitled to terminate this Agreement, and upon any such
termination by Manager pursuant to this Section 7.04, Manager shall have the
right to pursue any remedy it may have at law or in equity (provided that in no
event shall Owner ever be liable to Manager for, and Manager hereby waives all
rights to receive, punitive, consequential or exemplary damages), except that
Owner shall continue to be obligated to pay and perform all of its obligations
which have accrued as of the date of termination and provided further that the
Management Fee payable under Section 3.01 shall continue to be paid.

 

7.05 EXPIRATION OF TERM

Upon the expiration of the Term hereof pursuant to Section 1.01 hereof, unless
sooner terminated pursuant to Sections 7.02, 7.04, 7.06 or 9.09, Manager shall
deliver to Owner all funds, including tenant security deposits, books and
records of Owner then in possession or control of Manager, save and except such
sums as are then due and owing to Manager hereunder. In addition, within sixty
(60) days following expiration or termination of this Agreement, Manager shall
deliver to Owner a final accounting, in writing, with respect to the operations
of the Project, which delivery obligation shall survive termination.

 

12

 

 

7.06 TERMINATION WITHOUT CAUSE

This Agreement shall be terminable by either party without cause upon thirty
(30) days prior written notice to the other. .

  

7.07 EFFECT OF TERMINATION

Upon termination of this Agreement for any reason, neither the Owner, nor the
Manager have any further rights or obligations under this Agreement other than
obligations accrued prior to the termination or by the express terms surviving
this Agreement.

 

SECTION 8: INSURANCE AND INDEMNIFICATION

 

8.01 PROPERTY INSURANCE

Owner shall cause to be placed and kept in force property damage insurance in
the amount of the full replacement cost of the Project, and such other property
insurance as Owner may elect, at Owner's expense. Owner shall furnish to Manager
appropriate endorsements and certificates of insurance.

 

8.02 OWNER'S LIABILITY INSURANCE

During the Term of this Agreement, Owner, at Owner's expense, shall carry and
maintain primary and non-contributory commercial general liability insurance and
blanket contractual liability insurance on an “occurrence” basis, naming Manager
as an additional insured (through endorsements in form and substance
satisfactory to Manager), with limits of not less than Three Million Dollars
($3,000,000.00) per occurrence (the “Owner's Liability Insurance”). The Owner's
Liability Insurance shall include coverage for losses arising from the
ownership, management, and operation of the Project.

 

Owner shall provide to Manager a Certificate of Insurance evidencing such
coverage from an insurance carrier with an A.M. Best Rating of A VIII or higher
reflecting that the Owner's Liability Insurance is effective in accordance with
this section and that the Owner's Liability Insurance will not be canceled
without at least thirty (30) days prior written notice to Manager.

 

8.03 MANAGER'S LIABILITY INSURANCE

During the Term of this Agreement, Manager, at Manager's expense, shall carry
and maintain commercial general liability insurance in the amount of $1 million
per occurrence and $2 million in the aggregate for the benefit of Manager (the
“Manager's Liability Insurance”).

 

8.04 OWNER'S LIABILITY INSURANCE SHALL BE PRIMARY

In connection with claims by third parties, as between Owner's Liability
Insurance and Manager's Liability Insurance, Owner's Liability Insurance shall
for all purposes be deemed the primary and non-contributory coverage. No claim
shall be made by Owner or its insurance company under or with respect to any
insurance maintained by Manager except in the event such claim is caused solely
by gross negligence (except actions or policies specifically approved or
required by Owner) or willful misconduct (except actions or policies
specifically approved or required by Owner) on the part of Manager or Manager's
employees.

 

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8.05 RENTER’S INSURANCE

If at the direction of the Owner, Manager implements a renter’s insurance
program at the Project whether it is a limited liability, or limited liability
and personal contents coverage policy, any such policy held by the resident
shall not remove, replace, reduce, or in any way modify the parties’
indemnification obligations herein or the requirements of Owner or Manager to
provide insurance and indemnification in accordance with Sections 6 and 8.
Manager agrees to use best efforts to insure compliance on the part of Project
residents. Manager assumes no responsibility, liability or reduction in payment
of its Management Fee as a result of any expense incurred by Owner, including
but not limited to payment by Owner of any insurance deductible amount, caused
by the failure of a resident to have renter’s insurance in place. This exclusion
of liability on Manager’s part applies whether the resident failed to procure
renter’s insurance at the time of initial lease signing, at the time the
resident’s renter’s insurance policy came up for renewal, or at any other time.

 

8.06 VENDOR INSURANCE COMPLIANCE

At no cost to the Owner, Owner agrees to utilize a Vendor Compliance Management
Services Company to establish and manage vendor’s insurance agreeable to Owner
and Manager and approved by Manager.  Utilizing such a company to manage vendor
Liability Insurance Certificates and provide related services shall not remove,
replace, reduce, or in any way modify the parties’ indemnification obligations
herein or the requirements of Owner or Manager to provide insurance and
indemnification in accordance with Sections 6 and 8. Manager assumes no
responsibility, liability or reduction in payment of its Management Fee, for
property loss, personal injury (including death) or denial of claims based on
the status of a vendor’s policy whether its policy is amended, changed or
lapsed. Further, Manager assumes no responsibility for the Vendor Compliance
Management Services Company beyond that required under this Agreement.

 

8.07 WAIVER OF SUBROGATION

Each insurance policy maintained by Owner or by Manager with respect to the
Project shall contain a waiver of subrogation clause, so that no insurers shall
have any claim over or against Owner or Manager, as the case may be, by way of
subrogation or otherwise, with 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.
Notwithstanding any contrary provision of this Agreement, Owner and Manager
hereby release each other from and waive all rights of recovery and claims under
or through subrogation or otherwise for any and all losses and damages to
property to the extent caused by a peril insured or insurable under the policies
of insurance required to be maintained under this Agreement by the waiving party
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.

 

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8.08 HANDLING CLAIMS

Manager shall report within a reasonable amount of time to Owner all accidents
and claims of which it is aware for damage and injury relating to the ownership,
operation, and maintenance of the Project and any damage or destruction to the
Project coming to the attention of Manager and will assist Owner in Owner's
attempts to comply with all reporting and cooperation provisions in all
applicable policies. Manager is authorized to settle on Owner's behalf any and
all claims against property insurers not in excess of $1,500, which includes
authority for the execution of proof of loss, the adjustment of losses, signing
of receipts, and the collection of money. If the claim is greater than $1,500,
Manager shall act only with the prior written approval of Owner.

 

8.09 AUTOMOBILE INSURANCE.

Manager, at its expense which is not reimbursable, shall carry and maintain
business auto liability insurance covering owned, non-owned and hired vehicles
with a limit of not less than $1,000,000 per accident.

 

8.10 WORKERS' COMPENSATION INSURANCE

Manager shall cause to be placed and kept in force workers' compensation
insurance in compliance with all applicable federal, state, and local laws and
regulations covering all employees of Manager and employer liability insurance
with a limit of at least $12 million and Manager shall furnish Owner
certificates of same. Owner shall reimburse Manager for its expense on the basis
of Manager's current workers' compensation rates, the payroll of the Project,
and Manager's current premium discounts. This will include any increased expense
derived from subsequent audits. In the event subsequent audits result in an
increase in Manager's Workers' Compensation costs, then Owner shall reimburse
Manager for the increased amount.

 

8.11 DISHONESTY INSURANCE

Manager, at its expense which is not reimbursable, shall furnish employee
dishonesty insurance with limits of at least $1,000,000 per loss and in an
amount sufficient to cover all employees (whether on-site or off-site) employed
by Manager who shall be responsible for handling any moneys belonging to Owner
that come under custody or control of Manager.

 

8.12 ENVIRONMENTAL INDEMNIFICATION

Owner agrees to defend, indemnify, and hold harmless Manager and Manager's
partners, directors, shareholders, officers, employees and agents, against and
from 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 and
litigation expenses, from the presence of Hazardous Substances (as defined
below) on, under or about the Project. Without limiting the generality of the
foregoing, the indemnification provided by this paragraph shall specifically
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 gross negligence, criminal activity, or
any willful misconduct of Manager or its employees. For purposes of this
section, “Hazardous Substances” shall mean all substances defined as hazardous
materials, hazardous wastes, hazardous substances, or extremely hazardous waste
under any federal, state or local law or regulation. The foregoing
notwithstanding, the indemnification by Owner of Manager and its affiliates
hereunder with respect to Hazardous Materials shall be solely with respect to
the performance of the Manager’s activities in its capacity as property manager
and nothing herein should be construed as limiting Manager’s and its affiliates’
liability under, or acting as an indemnity of Manager and its affiliates for any
liability such parties might have under, any other agreements with respect to
Hazardous Materials, including under any guaranties provided by such parties in
connection with any financing secured by the Project or any organizational
documents related to the Owner.

 

15

 

  

SECTION 9: MISCELLANEOUS PROVISIONS

 

9.01 GOVERNING LAW

This Agreement shall be governed by and construed and interpreted in accordance
with the laws of the State where the Project is located. Manager represents
that, to the extent required, it has qualified to do business in the State where
the Project is located in connection with all actions based on or arising out of
this Agreement.

 

9.02 NOTICES

All notices, demands, requests or other communications required or permitted to
be given hereunder must be sent by (i) personal delivery, (ii) FedEx or a
similar nationally recognized overnight courier service, or (iii) certified
mail, return receipt requested. Any such notice, request, demand, tender or
other communication shall be deemed to have been duly given: (a) if served in
person, when served; (b) if by overnight courier, on the first Business Day
after delivery to the courier; or (c) if by certified mail, return receipt
requested, upon receipt. Rejection or other refusal to accept, or inability to
deliver because of changed address or facsimile number of which no notice was
given, shall be deemed to be receipt of such notice, request, demand, tender or
other communication. Any party hereto may at any time by giving ten (10) days
written notice to the other party hereto designate any other address in
substitution of the foregoing address to which such notice or communication
shall be given.

 

OWNER: c/o Bluerock Real Estate, L.L.C.   70 East 55th Street, 9th Floor   New
York, New York 10022   Attention:  R. Ramin Kamfar       with a copy to:      
c/o Bluerock Real Estate, L.L.C.   70 East 55th Street, 9th Floor   New York,
New York 10022   Attention:  Michael Konig, Esq.

 

MANAGER: Chief Operating Officer   Bell Partners Inc.   300 N. Greene Street,
Suite 1000   Greensboro, NC  27401

 

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9.03 SEVERABILITY

If any term, covenant or condition of this Agreement or the application thereof
to any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Agreement or such other documents, or the application of
such term, covenant or condition to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby, and
each term, covenant or condition of this Agreement or such other documents shall
be valid and shall be enforced to the fullest extent permitted by law.

 

9.04 NO JOINT VENTURE OR PARTNERSHIP

Owner and Manager hereby agree that nothing contained herein or in any document
executed in connection herewith shall be construed as making Manager and Owner
joint venturers or partners. In no event shall Manager have any obligation or
liability whatsoever with respect to any debts, obligations or liabilities of
Owner or vice versa, except as set forth herein or as set forth in any separate
agreement signed by Manager.

 

9.05 MODIFICATION TERMINATION

This Agreement terminates any and all prior management agreements between Owner
and Manager relating to the Project, and any amendment, modification,
termination or release hereof may be effected only by a written document
executed by Manager and Owner.

 

9.06 ATTORNEYS' FEES

Should either party be required to employ an attorney or attorneys to enforce
any of the provisions hereof or to protect its interest in any manner arising
under this Agreement, or to recover damages for the breach of this Agreement,
the non-prevailing party in any actions (the finality of which is not legally
contested) agrees to pay to the prevailing party all reasonable costs, damages
and expenses, including attorneys' fees expended or incurred in connection
therewith. Each party is responsible for its own appellate fees and costs, if
any.

 

9.07 TOTAL AGREEMENT

This Agreement is a total and complete integration of any and all undertakings
existing between Manager and Owner and supersedes any prior oral or written
agreements, promises or representations between them regarding the subject
matter hereof.

 

9.08 APPROVALS AND CONSENTS

If any provision hereof requires the approval or consent of Owner or Manager to
any act or omission, such approval or consent shall not be unreasonably withheld
or delayed.

 

9.09 CASUALTY

In the event that the Project, or any portion thereof, is substantially or
totally damaged or destroyed by fire, tornado, windstorm, flood or other
casualty during the term of this Agreement, Manager or Owner may terminate this
Agreement upon giving the other party written notice of termination on or before
the date which is thirty (30) days after the date of such casualty. In the event
of termination pursuant to this Section 9.09, neither party hereto shall have
any further liability hereunder.

 

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9.10 SPECIAL AGREEMENTS

Notwithstanding Manager’s review of and recommendations in respect to capital
repairs and replacements for the Project, Owner acknowledges that Manager is not
an architect or engineer, and that all capital repairs, replacements and other
construction in the Project will be designed and performed by independent
architects, engineers and contractors. Accordingly, Manager does not guarantee
or warrant that the construction documents for such work will comply with
applicable law or will be free from errors or omissions, nor that any such work
will be free from defects, and Manager will have no liability therefor. In the
event of such errors, omissions, or defects, Manager will use reasonable efforts
to cooperate in any action Owner desires to bring against such parties.
Notwithstanding any contrary provision hereof, Owner agrees that no partner,
agent, director, member, officer, shareholder, or affiliate of Manager shall be
personally liable to Owner or anyone claiming by, through or under Owner, by
reason of any default by Manager under this Agreement, any obligation of Manager
to Owner, or for any amount that may become due to Owner by Manager under the
terms of this Agreement otherwise. Notwithstanding any contrary provision
hereof, Manager agrees that no partner, agent, director, member, manager,
officer, shareholder, or affiliate of Owner shall be personally liable to
Manager or anyone claiming by, through or under Manager, by reason of any
default by Owner under this Agreement, any obligation of Owner to Manager, or
for any amount that may become due to Manager by Owner under the terms of this
Agreement otherwise. The foregoing notwithstanding nothing herein shall be
construed as limiting the personal liability of Owner, its partners, agents,
directors, members, managers, officers, shareholders or affiliates under any
separate agreement between such party and Manager or anyone claiming by, through
or under Manager.

 

9.11 COMPETITIVE PROJECTS

Manager may, individually or with others, provide management services in regard
to and possess an interest in any other projects and ventures of every nature
and description, including, but not limited to, the ownership, financing,
leasing, operation, management, brokerage, development and sale of real property
and apartment projects other than the Project, whether or not such other
ventures or projects are competitive with the Project, and Owner shall not have
any right to the income or profits derived therefrom.

 

9.12 SUCCESSORS AND ASSIGNS

This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their permitted successors and assigns. Either Manager or
Owner may assign this Agreement upon obtaining the other party's prior written
consent, provided that no consent shall be required for assignment to any
mortgagee of Owner in connection with any financing procured by Owner and
secured by the Project.

 

9.13 WAIVER OF JURY TRIAL.

Owner and Manager hereby knowingly, voluntarily and intentionally, to the extent
permitted by law, waive the right to a trial by jury in respect of any
litigation based on, arising out of, under or in connection with this Agreement
or any documents contemplated to be executed in connection herewith or any
course of conduct, course of dealings, statements (whether oral or written) or
actions of either party arising out of or related in any manner to the Project
(including, without limitation, any action to rescind or cancel this Agreement
or any claims or defenses asserting that this Agreement was fraudulently induced
or is otherwise void or voidable). This waiver is a material inducement for the
Owner to enter into and accept this Agreement. Owner and Manager agree that
should issues arise that would have required litigation; they mutually agree to
resolve them via arbitration.

 

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SECTION 10: SIGNATURES

 

IN WITNESS WHEREOF, the parties hereto have executed this Management Agreement
as of the day and year first above written.

 

MANAGER: BELL PARTNERS INC.

 

  By: /s/ Jonathan D. Bell             Name: Jonathan D. Bell             Title:
President  

 

OWNER: BELL BR WATERFORD CROSSING JV, LLC, a Delaware limited liability company

 

  By: BR WATERFORD JV MEMBER, LLC, a Delaware limited liability company, its
co-manager

 

  By: Bluerock Special Opportunity + Income Fund, LLC, a co-manager

 

By:         Bluerock Real Estate, L.L.C., a Delaware limited liability company,
its manager

 

  By: /s/ Jordan Ruddy     Name:   Jordan Ruddy     Title:   President  

 

  By: Bluerock Special Opportunity + Income Fund II, LLC, a co-manager

 

By:         BR SOIF II Manager, LLC, a Delaware limited liability company, its
manager

 

  By: /s/ Jordan Ruddy     Name:   Jordan Ruddy     Title:   President  

 

BELL HNW NASHVILLE PORTFOLIO, LLC,

a NC limited liability company

 

By:Bell Partners Inc., a North Carolina corporation, its Manager

 

  By: /s/ Jonathan D. Bell     Name:   Jonathan D. Bell  

  Title: President  

 

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EXHIBIT “A”

2012 BUDGET

 

[image_013.jpg] 

 

 

 

 

[image_014.jpg] 

 

 

 

 

 

[image_015.jpg] 

 

 

 

 

 

 

[image_016.jpg] 

 

 

 

 

 

[image_017.jpg] 

 

 

 

 

 

 [image_018.jpg]

 

 

 

 

 

[image_019.jpg]

 

 

 

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EXHIBIT B

MONTHLY REPORTS

 

1.Balance Sheet, including monthly comparison and comparison to year end (if
applicable)

2.Budget Comparison, including month-to-date and year-to-date variances-
Detailed Income Statement, including prior 12 months

3.Profit and loss statement compared to budget with narrative for any large
fluctuations compared to budget

4.Trial Balance that includes mapping of the accounts to the financial
statements

5.Account reconciliations for each balance sheet account within the trial
balance. — Detailed support for each account reconciliation including the
following:

a.Detail Accounts Payable Aging Listing — 0-30 days, 31-60 days, 61-90 days and
over 90 days

b.Detail Accounts Receivable Delinquency Aging Report - 0-30 days, 31-60 days,
61- 90 days, over 90 days and prepayments

c.Fixed asset roll-forward and support (invoices and checks) for any new
acquisition/additions and/or support for any disposals to fixed assets.
Purchases will be accounted for using Bluerock's capitalization policy.

6.Security Deposit Activity

7.Mortgage Statement

8.Monthly Management Fee Calculation

9.Monthly Distribution Calculation

10.General Ledger, with description and balance detail

11.Monthly Check Register including copies of all checks disbursed and copies of
cancelled checks.

12.Market Survey, including property comparison, trends, and concessions

13.Rent Roll

14.Monthly Reporting and evidence of withdrawal, if any, of any Operating
Reserve Account and Capital Expense Reserve Account, including, but not limited
to, any calculations evidencing shortfalls payable and calculations regarding
the 60 day maintenance (as defined in Section 4.04 of the Agreement)

15.Variance Report, including the following:

a.Cap Ex Summary and Commentary

b.Monthly Income/Expense Variance with notes

c.Yearly Income/Expense Variance with notes

d.Occupancy Commentary

e.Market/Competition Commentary

f.Rent Movement/Concessions Commentary

g.Crime Commentary

h.Staffing Commentary

i.Operating Summary, with leasing and traffic reporting -Other reasonable
reporting, as requested (e.g. Renovation/Rehab report).

 

[1]         Budget Comparison shall include (1) an unaudited income and expense
statement showing the results of operation of the Project for the preceding
calendar month and the Fiscal Year to-dale; (ii) a comparison of monthly line
item actual income and expenses with the monthly line item income and expenses
projected in the Budget. The balance sheet will show the cash balances for
reserves and operating accounts as of the cut-off date for such month.

  

21