Document:

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AGREEMENT OF PURCHASE AND SALE

            THIS
AGREEMENT OF PURCHASE AND SALE (this "Agreement") is made and entered
into as of the 31st day of August, 2007 (the "Effective Date"), by
and among RIVER FOREST PROPERTIES, LLC, a Virginia limited liability company
("River Forest"), PRINCETON PROPERTIES, INC., a Virginia corpration
("Princeton" and, together with River Forest, "Seller"),
ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation
("Purchaser"), and FIRST AMERICAN TITLE INSURANCE COMPANY, an escrow
agent ("Escrow Agent").

PRELIMINARY STATEMENTS

A.        River Forest is the owner of that certain apartment project
known as "River Forest" consisting of 240 apartment units and all
amenities which are a part thereof located on the southern line of Branders
Creek Drive in Chesterfield County, Virginia on that real property described in
Exhibit A attached hereto and by this reference made a part hereof,
together with:  (i) all easements, appurtenances and hereditaments
appertaining thereto and including all of River Forest’s rights, if any, in and
to any alleys, ways, easements and rights of way abutting or adjoining said
real property; (ii) all the buildings, improvements, structures, plants
and appurtenances situated on said real property; (iii) all fixtures,
furniture, equipment (including all maintenance equipment and all office
equipment located in the clubhouse building), appliances, signs, plumbing,
machinery, personal property and facilities and supplies which are owned by
River Forest and which are attached to or appurtenant to or used in connection
with said real property (specifically excluding property owned by residential
tenants); (iv) all plans, specifications, guarantees and warranties; and
(v) all leases including the rents, issues and profits thereof and all
refundable security deposits or escrow deposits held by River Forest thereunder
(collectively, the "River Forest Property");

B.         River Forest obtained a loan (the "Loan") in the
original principal amount of $19,181,500.00 with respect to the River Forest Property
from Highland Mortgage Company (now Capmark Bank) (the "Lender") and
insured by the United States Department of Housing and Urban Development ("HUD")
under Section 221(d)(4) of the National Housing Act;

C.        The Loan is evidenced and secured by the documents and its set
forth on Schedule 1 to this Agreement (collectively, the "Loan
Documents");

D.        Princeton, an affiliate of River Forest, is the owner of that
certain parcel of land located adjacent to the River Forest Apartments
described as Parcel II in Exhibit A attached hereto and by this
reference made a part hereof, together with all easements, appurtenances and
hereditaments appertaining thereto and including all of Princeton’s rights, if
any, in and to any alleys, ways, easements and rights of way abutting or
adjoining said real property (the "River Forest Expansion Parcel"
and, together with the River Forest Property, the "Property");

E.         Seller desires to sell the Property and River Forest desires
to assign the Loan to Purchaser and Purchaser desires to purchase the Property
from Seller and assume the Loan from River Forest, on and subject to the terms
and conditions of this Agreement;

	

  

F.         Seller’s affiliate, Belvedere Properties, LLC, a Virginia
limited liability company ("Seller Affiliate"), is the owner of that
certain apartment project known as "The Belvedere" consisting of 296
apartment units and all amenities which are a part thereof located at the
intersection of Robious and Cranbeck Roads in Chesterfield County, Virginia
(the "Other Property"); and

G.        Pursuant to that certain Agreement of Purchase and Sale (the "Other
Agreement"), dated as of the same date as this Agreement, among Seller
Affiliate and Purchaser, Seller Affiliate has agreed to sell to Purchaser, and
Purchaser has agreed to purchase from Seller Affiliate, the Other Property.

THEREFORE, in consideration of Ten and No/100 Dollars ($10.00) in hand
paid, the mutual covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby covenant and agree as follows:

1.         Agreement to Sell and to Purchase.

(a)        Seller agrees to sell and Purchaser agrees to purchase the
Property upon the terms and conditions hereinafter set forth.

(b)        Subject to Purchaser’s rights with respect to the
Investigation Period (as hereinafter defined), Purchaser acknowledges and
understands that Seller is selling the Property and the Purchaser is buying the
Property in its "AS-IS, WHERE-IS, WITH ALL FAULTS" physical
condition, including all existing environmental conditions, with no rights of
set-off or reduction in the Purchase Price (as hereinafter defined) unless and
except as expressly provided herein to the contrary, and except for the
representations and warranties set forth in this Agreement and the closing
documents executed in connection with the consummation of the transactions
contemplated by this Agreement, the sale of the Property by Seller to Purchaser
shall be without representation or warranty of any nature or kind with respect
to the physical condition of the Property, whether express, implied, statutory
or otherwise, including without limitation the warranties of use,
merchantability or fitness for a particular purpose, and Seller does hereby
disclaim and renounce any such representations or warranties.

	

  

2.         Earnest Money. Purchaser shall deposit in escrow with
the Escrow Agent within two (2) business days of the execution hereof, Six
Hundred Fifty Thousand Dollars ($650,000) (such deposit together with any
interest that may be earned these prior to Closing, being hereinafter called
the "Initial Deposit").  If Purchaser does not elect to terminate
this Agreement during the Investigation Period (as hereinafter defined), prior
to the expiration of the Investigation Period, Purchaser shall deliver to
Escrow Agent an additional deposit in the amount of Three Hundred Thousand
Dollars ($300,000) (the "Additional Deposit").  The Initial Deposit
and the Additional Deposit are sometimes individually or collectively referred
to as the "Earnest Money".  The Earnest Money shall be deposited in
an interest bearing account using Purchaser’s tax identification number which
shall be provided to Escrow Agent.  The Earnest Money shall be applied against
the cash portion of the purchase price at Closing (as hereinafter defined) or
refunded in full to Purchaser as hereinafter provided in Paragraph 15.  If
Purchaser does not notify Seller prior to the expiration of the Investigation
Period that Purchaser elects to terminate this Agreement, the Initial Deposit
shall be non-refundable for any reason other than (i) a default by Seller,
(ii) in the event any condition to Purchaser’s obligations under this
Agreement is not satisfied as provided herein, or (iii) as otherwise
specifically provided herein.  If Purchaser does not notify Seller prior to the
expiration of the Investigation Period that Purchaser elects to terminate this
Agreement and Purchaser fails to make the Additional Deposit as required,
Purchaser shall be in default of this Agreement and Seller shall have the right
to terminate this Agreement and retain the Initial Deposit as provided in
Paragraph 8.

3.         Purchase Price. The purchase price for the Property
(the "Purchase Price") shall be Thirty Two Million Eight Hundred
Thousand Dollars ($32,800,000), payable at Closing as follows:

(a)        Purchaser shall receive a credit against the Purchase Price in
the amount of the outstanding principal balance of the Loan, all accrued and
unpaid interest on the Loan and all other fees, costs and expenses owing by
River Forest under the Loan Documents for periods prior to the Closing Date
except for any fees, costs and expenses to be paid by Purchaser in connection
with the assumption of the Loan;

(b)        Purchaser shall receive a credit against the Purchase Price in
the amount of the Earnest Money;

(c)        The balance of the Purchase Price as adjusted by the closing
prorations hereinafter provided at Paragraph 4 shall be paid in cash at Closing
by wire transfer of funds to Escrow Agent’s account for payment to Seller; and

(d)        Prior to Closing, Purchaser and Seller shall, acting in good faith,
agree upon a reasonable allocation of the Purchase Price between the River
Forest Property and the River Forest Expansion Parcel.

4.         Closing Prorations.  All items described below shall be
prorated as of the date of Closing (the "Closing Date") and, as
hereinafter provided, shall increase or decrease the cash portion of the
Purchase Price payable pursuant to Paragraph 3(c) of this Agreement.

(a)        Taxes.  All state, county and municipal ad valorem and
other property taxes and similar charges with respect to the Property for the
year in which the Closing is consummated will be prorated based on the current
year’s tax bill or, if such bill has not been issued as of the Closing Date, then
taxes shall be prorated at Closing based on the prior year’s tax bill and said
amount of taxes prorated shall be adjusted between the parties upon receipt of
the tax bill for the year in which the Closing is consummated. Seller shall pay
at or prior to Closing all special assessments and charges against the Property
which are either due or declared prior to the Closing Date. Any refund or
credit attributable to the overpayment of taxes and assessments payable for the
year in which Closing occurs, less any attorneys’ fees or costs payable in with
respect of such taxes and assessments shall be allocated between Seller and
Purchaser based upon their respective periods of ownership.

	

  

(b)        Income.  All rental and other income from the Property,
including but not limited to prepaid rent, late charges, and other charges to
tenants, shall be prorated based on rents actually collected.  All unpaid rent
relating to periods prior to the Closing Date shall be paid to Seller as and
when received by Purchaser after Closing and shall not be prorated at Closing;
provided, that any rent received after Closing shall be applied first to the
current rent due, then to past due rents accrued after Closing and then to past
due rent accrued prior to Closing.  Purchaser shall include all such unpaid
rent in its normal billing and shall use commercially reasonable, good faith
efforts to collect such unpaid rent after the Closing Date.  Purchaser may not
waive any delinquent rents nor modify a Lease so as to reduce or otherwise
affect amounts owed thereunder for any period in which Seller is entitled to
receive a share of charges or amounts without first obtaining Seller’s written
consent, which consent may be given or withheld in Seller’s sole and absolute
discretion.  If Purchaser fails to collect any unpaid rents accrued prior to
Closing within ninety (90) days after Closing, Seller shall have the right to
independently pursue collection of amounts to which Seller is entitled;
provided, that Seller shall be expressly prohibited from bringing any action to
evict any tenant from its leased premises at the Property.

(c)        Deposits and Escrows.

(1)        Seller shall, at no expense to Purchaser, transfer to
Purchaser by credit against the Purchase Price at Closing all refundable
security deposits and other escrow deposits relating to the Property, including
such deposits and fees as to leases that are in default but have not been
terminated as of the Closing Date, and all interest charges required by law to
be accrued thereon.

(2)        All real estate tax escrows, insurance escrows and other
escrows maintained by Lender under the Loan Documents shall be transferred to
Purchaser, and Seller shall be given credit for the amount of such funds and
any unearned mortgage insurance premiums at Closing.

(d)        Utilities. Utilities not payable by tenants of the
Property shall either be (i) prorated as of Closing, or
(ii) transferred into Purchaser’s name as of Closing, with Seller to be
responsible for payment of all charges accrued prior to such transfer and Purchaser
to be responsible for payment of all charges accruing after such transfer.

(e)        Service Contracts and Equipment Leases.  A list of all
service contracts and equipment leases relating to the operation and management
of the Property is attached hereto as Exhibit B as a part hereof
(the "Contracts").  Except as noted in Exhibit B,
Purchaser shall not be obligated to assume responsibility for or to pay any
sums due at Closing attributable to the Contracts unless Purchaser elects
during the Investigation Period by written notice to Seller to assume such
Contracts at Closing, in either of which events, such Contracts shall be
assigned to and assumed by Purchaser at Closing.  Seller agrees, at Seller’s
expense, to cancel all Contracts which are not to be assumed by Purchaser as of
the Closing Date.  All prepayments made or payments due under any of the
Contracts to be assigned to Purchaser shall be prorated as of the Closing Date.

	

  

(f)         Adjustments.  In the event that accurate proration and
other adjustments cannot be made at Closing because current bills are not
obtainable (as, for example, in the case of utility bills), the parties shall
prorate on the best available information, subject to adjustment upon receipt
of the final bill.  Seller shall attempt to have utility meters read on the
Closing Date so as to accurately determine the proration of current utility
bills.  Adjustments shall be made after Closing if any closing prorations are
based on inaccurate information.

5.         Title.

(a)        At Closing, Seller shall convey to Purchaser, good and
marketable fee simple title to the Property by one or more special warranty
deeds from River Forest and Princeton, as applicable (the "Deed") in
form consistent with standard Virginia practice (and otherwise approved by
Seller and Purchaser), subject only to the Permitted Encumbrances (defined
below) and any other matters of record as of the date of Purchaser’s
examinations of title to the extent applicable to the Property and any matters
which could be discovered by a survey of the Property other than such matters
to which Purchaser has objected and which Seller has agreement or is obligated
to correct as provided herein.  Purchaser agrees to accept title to the
Property subject to the Permitted Encumbrances and such additional matters as
may be approved by Purchaser, in its sole and absolute discretion, prior to
Closing.

(b)        During the Investigation Period, Purchaser shall, at its cost,
obtain (i) an owner’s title insurance commitment (the "Title
Commitment") in the full amount of the Purchase Price to be issued by the
Escrow Agent (the "Title Insurer"), insuring the title to the
Property, and (ii) a current survey (references herein to the plat of
survey shall be deemed to refer to such plat) of the Property (the "Survey"). 
It shall be a condition to Purchaser’s obligations hereunder that Seller shall
have delivered all documents required to be delivered by Seller hereunder which
are required by the Title Insurer to issue an owner’s title insurance policy
pursuant to the Title Commitment (the "Title Policy").

(c)        During the Investigation Period, Purchaser shall review title
to the Property as disclosed by the Title Commitment and the Survey, and
satisfy itself as to the availability from the Title Insurer of the Title
Policy and all requested endorsement to such Title Policy. Purchaser shall
notify Seller of any objections to matters disclosed by the Title Commitment
and the Survey within five (5) days after receipt of the Title Commitment and
the Survey.

(d)        Seller shall have no obligation to remove or cure title
objections, except for (1) liens of an ascertainable amount (but expressly
excluding the liens evidenced by the Loan Documents), which liens Seller shall
cause to be released at the Closing or affirmatively insured over by the Title
Company, and (2) any exceptions or encumbrances to title, other than those
provided for herein, which are created by Seller after the date of this
Agreement without Purchaser’s consent.  In addition, Seller shall provide the
Title Insurer with one or more customary ALTA statements, personal undertakings
or owner’s affidavits (each, an "Owner’s Affidavit"), in form and
substance reasonably acceptable to Seller, which will permit the Title Insurer
to remove the standard "mechanics lien" and "GAP" exceptions
from the Title Policy.

	

  

(e)        Subject to Purchaser’s approval as described below, Seller
shall have the right to grant, prior to Closing, or to except and reserve from
the conveyance of the River Forest Apartments and the River Forest Expansion
Parcel at Closing such easements as may be required to (i) construct a
stormwater basin within the portion of the River Forest Apartments property
described on Exhibit E attached hereto as a part hereof, and
(ii) extend sanitary sewer from the sanitary sewer line located on the
River Forest Apartments to serve the properties located west and north of the
River Forest Expansion Parcel (together, the "Easements").  Plats
showing the proposed locations of the Easements shall be provided to Purchaser
during the first fifteen (15) days of the Investigation Period.  Prior to the
expiration of the Investigation Period, Purchaser and Seller shall use good
faith efforts to agree between themselves and any other parties to the
Easements upon the terms and conditions of the Easements, it being acknowledged
by both Seller and Purchaser that the Easements must also be acceptable to
Chesterfield County and, to the extent they affect the River Forest Apartments,
the Lender and HUD.  Seller agrees that Purchaser shall have the opportunity to
participate in any negotiations with Chesterfield County,  the Lender and/or
HUD, as applicable, with respect to the terms and conditions of the Easements. 
In the event Seller and Purchaser have not reached agreement on the Easements
prior to the expiration of the Investigation Period, Purchaser and Seller shall
continue to use good faith efforts to agree upon the terms and conditions of
the Easements, and it shall be a condition precedent to each party’s
obligations to proceed to Closing pursuant to this Agreement that Purchaser and
Seller have approved the final form of the Easements, such approval not to be
unreasonably withheld, conditioned or delayed.

(f)         In connection with the development of other properties owned
by Princeton adjacent to the River Forest Apartments and the River Forest
Expansion Parcel ("Seller’s Retained Property") and the development
of the River Forest Expansion Parcel, each party agrees to consider the request
of any other party, in good faith and without charge, to grant easements for
public utilities and storm drainage necessary for the development of the
requesting party’s property, including, without limitation, easements for
extension of water, sanitary sewer, storm drainage, gas, electricity, cable and
telephone service but excluding easements for drainage basins or "BMP"
facilities. The exact location and terms shall be subject to the prior written
approval of the owner of the affected property, which approval shall not be
unreasonably delayed or withheld provided such easement will not adversely
affect the reasonable use of such party’s property or affect any building site or
driveway and the location of any such easements is approved by Chesterfield
County, as applicable, the party requesting such easements and the owner of the
property to be burdened by such easements.

For purposes of this Agreement, the following terms shall have the
following meanings:

(1)        "Permitted Exceptions" shall mean: (i) any
exception arising out of an act of Purchaser or its representatives, agents,
employees or independent contractors; (ii) zoning and subdivision
ordinances and regulations; (iii) the specific exceptions in the Title
Commitment that the Title Insurer has not agreed to insure over or remove from
the Title Commitment as of the end of the Investigation Period and that Seller
is not required to remove as provided herein; (iv) items shown on the
Survey which have not been removed (or which Seller has not agreed to remove)
as of the end of the Investigation Period; (v) real estate taxes not yet
due and payable; (vi) the Loan Documents; and (vii) the Easements and
any easements mutually agreed upon by Purchaser and Seller pursuant to
subparagraph 5(f).

(2)        "Leases" shall mean the leases which are listed on
the rent roll attached hereto as Exhibit C, together with such
additional leases or modifications as may be added and excluding any leases
which may be terminated in the ordinary course of Seller’s business between the
date of this Agreement and the date of Closing and the rights of tenants under
such leases, as occupancy tenants only, and without any right of first refusal
or purchase options.

	

  

(3)        "Permitted Encumbrances" shall mean a collective
reference to the Leases

and Permitted Exceptions.

6.         Access. Upon reasonable prior notice, Seller shall
provide Purchaser and its agents, servants, employees and assigns reasonable
access, during Seller’s normal business hours, to all documentation,
agreements, books, records, and other information in the possession of Seller
pertaining to the ownership, use, rental or operations of the Property,
including but not limited to, financial records, tax assessments, bills and
leases, and Purchaser shall have the right to make copies of such
non-confidential documents as Purchaser shall reasonably specify at Purchaser’s
sole expense.  Furthermore, Seller hereby grants to Purchaser and its agents,
servants, employees, assigns and independent contractors reasonable access to
enter upon the Property, upon forty-eight (48) hours advance notice and at reasonable
times during Seller’s normal business hours, for the purpose of inspecting the
condition of the Property, surveying the Property and undertaking any physical
inspections that Purchaser deems appropriate under this Agreement; provided,
however, that such inspections shall be coordinated with Seller and Purchaser
shall minimize any disruptions to the operation of the Property and the
occupancy of the Property by tenants.  Purchaser shall be responsible for all
costs incurred by Purchaser in connection with its inspections and evaluation
of the Property, shall repair any damage caused by Purchaser and its agents and
shall indemnify and hold Seller harmless from and against any and all claims,
demands, actions, losses, costs, damages, liabilities and expenses (including
without limitation reasonable attorneys’ fees) incurred or sustained by Seller
by reason of or arising from the exercise by Purchaser of the rights and
privileges granted in this Paragraph 6, but only to the extent incurred or
sustained as a result of damage to the Property and injury to persons.  The
foregoing indemnity obligations shall expressly survive Closing or any
termination of this Agreement.

7.         Investigation Period.

(a)        For the period beginning with the Effective Date and extending
through 5:00 p.m. on the thirtieth (30th) day following the Effective Date (the
"Investigation Period"), Purchaser shall have the right to terminate
this Agreement as provided in Paragraph 15 if Purchaser determines, in its sole
and absolute discretion, not to purchase the Property. If no notice of
termination is given by Purchaser prior to the expiration of the Investigation
Period, Purchaser and Seller shall proceed toward Closing in accordance with
the other terms of this Agreement, including Purchaser’s delivery of the
Additional Deposit in accordance with Paragraph 2.

	

  

(b)        Seller shall cooperate with Purchaser in connection with its
evaluation of the Property. Seller has provided Purchaser on or before the
Effective Date with copies of the  documents and instruments set forth in Schedule 2
(collectively, the "Property Information") to the extent in Seller’s
possession or control.  In addition to the Property Information and the Loan
Documents, Seller shall provide Purchaser with copies of such other reports,
studies, leases (other than copies of each individual tenant lease) and other
documents in Seller’s possession or control related to the Property as
Purchaser shall reasonably request.  Purchaser shall have no obligation to pay
Seller for any of such reports, studies or other documents provided by Seller to
Purchaser, all of which shall be provided at no cost to Purchaser.  Purchaser
agrees that it will preserve the confidentiality of all such documents provided
by Seller; that it will not divulge the existence or contents of any such
documents to any persons, except to its attorneys, advisors, consultants,
lenders and others employed by Purchaser to assist it in the purchase of the Property,
each of whom shall likewise observe and preserve such confidentiality, subject
to any obligation on the part of such person to disclose or deliver such
information pursuant to court order or as required pursuant to applicable laws.
The foregoing confidentiality obligations shall survive any termination of this
Agreement but shall terminate at Closing in the event Closing occurs hereunder.

(c)        In the event that this Agreement is terminated without
completion of the transaction contemplated herein, Purchaser shall return to
Seller all documents provided to Purchaser pursuant to this Agreement, and
shall additionally provide to Seller copies of all third party studies or
reports obtained by Purchaser pertaining to the Property during the course of
its investigations and inspections, it being understood that Seller shall have
no right to rely on any such reports without the consent of the person or
persons preparing such studies and reports.  The foregoing obligations shall
survive any termination of this Agreement, but shall terminate at Closing in
the event that Closing occurs hereunder.

8.         Purchaser’s Default; Liquidated Damages.  If, prior to
Closing, Purchaser defaults in performing its obligations under this Agreement,
Seller’s sole remedy for such default shall be to give the Escrow Agent and
Purchaser prompt written notice of such default and the Escrow Agent shall,
after giving the parties five (5) working days’ notice thereof (if Purchaser
fails to cure such default within that time), pay over to Seller the Earnest
Money as full and complete liquidated damages hereunder.  Thereafter, Purchaser
shall have no further obligations hereunder to Seller or any others, including
but not limited to the Escrow Agent, brokers, realtors and agents. 
Notwithstanding the foregoing, in the event of a dispute regarding Seller’s
right to payment of the Earnest Money, Escrow Agent continues to hold the
Earnest Money subject to the provisions of Paragraph 28.

9.         Closing; Closing Deliveries and Closing Conditions. The
consummation of the transaction described herein ("Closing") will be
held at the offices of the Title Insurer or such other location mutually agreed
upon by Purchaser and Seller on the later of (i) ten (10) days after
Purchaser’s receipt of written a approval by the Lender and HUD of the transfer
of the Property to Purchaser and the assumption of the Loan by Purchaser, or
(ii) fifteen (15) days after the expiration of the Investigation Period
(the "Closing Date").  At Closing, Purchaser shall pay to Seller the
outstanding balance of the Purchase Price provided for in Paragraph 3(c)
hereof, the Escrow Agent shall pay to Seller the Earnest Money, and Seller
shall give Purchaser possession and occupancy of the Property subject only to
the Permitted Encumbrances. Any eminent domain awards, proceeds from sale under
threat or exercise of the power of eminent domain and insurance proceeds which
are to be paid or are payable to Purchaser pursuant to Paragraph 11 hereof, shall
be paid or assigned to Purchaser at Closing.

Seller agrees
that Purchaser is permitted to download lease, tenant and other property
information from Seller’s on-site competes within seven (7) business days of
Closing, after which time Seller and its agents shall have the right to enter
upon the Property to remove any of Seller’s confidential information not related
to the operation of the Property, to remove Seller’s management software, and
to disconnect or terminate any links to Seller’s server and/or database from
such on-site computers. The terms of the immediately preceding sentence shall
survive Closing.

	

  

Furthermore,
Seller shall, at Seller’s sole cost and expense, transfer or deliver to
Purchaser at Closing (or at such other time hereinafter set forth) the
deposits, escrows, affidavits, certificates, instruments and other matters
hereinafter described, each instrument to be executed on behalf of Seller by
its duly authorized officer and to be in form to be approved by counsel for
Seller and Purchaser:

(a)        The Deed and the Easements (the Easements shall also be
executed by Purchaser at Closing, as applicable).

(b)        An assignment and assumption agreement, in form and substance
acceptable to Seller and Purchaser, pursuant to which Seller shall transfer to
Purchaser (i) all rights in, to and under the Leases, (ii) any
unexpired warranties and guaranties in effect with respect to such portions of
the Property, (iii) the Contracts which are to be assigned by each such
party to Purchaser as provided herein, and (vi) all prorated items and
adjustments described in Paragraph 4 above which are to be paid, transferred, applied
or credited to Purchaser at or as of Closing, as applicable.  Such assignment
and assumption agreements shall also be executed by Purchaser at Closing to
effect Purchaser’s assumption of all applicable obligations.

(c)        A bill of sale from Seller, in form and substance acceptable
to Seller and Purchaser conveying, with a warranty of title but without
warranties as to the condition thereof, all personal property, equipment,
signage and fixtures owned by it and located at or used in connection with the Property,
other than property owned by tenants under the Leases, subject only to the
applicable Permitted Encumbrances and conveying, without warranty of title, all
of Seller’s right, title and interest to the name "River Forest Apartments".

(d)        An updated rent roll for the Property, dated not more than
three (3) days prior to the Closing Date, certified by Seller to be true,
accurate and complete as of such date.

(e)        The Owner’s Affidavit.

(f)         All documents required from Seller by the Lender or by HUD
for the transfer to Purchaser of the Property subject to the Loan Documents in
accordance with applicable HUD regulations and requirements and the Loan
Documents.  Purchaser shall also execute all documents required from Purchaser
by the Lender or by HUD in accordance with applicable HUD regulations and
requirements and the Loan Documents.

(g)        Originals or copies (if originals are unavailable) of all
plans, specifications, manuals, warranties, and guarantees in Seller’s
possession relating to the Property.

(h)        An affidavit stating that all representations and warranties
of Seller set forth in this Agreement remain true and correct, executed and
sworn on behalf of Seller on and as of the Closing Date.

(i)         All deposits and escrows provided for in Paragraph 4(c) of
this Agreement.

(j)         Certificates of non-foreign status, information required for
Purchaser’s compliance with 1099S regulations, and such affidavits and
certifications required from or typically provided by sellers for real estate
transactions in the Commonwealth of Virginia from Seller.

	

  

(k)        All other documents reasonably necessary or appropriate to
complete the transaction contemplated by this Agreement.

(l)         Evidence that any property management agreement for the
Property has been terminated by Seller at no cost, liability or expense to
Purchaser.

9A.      Conditions to Closing.

(a)        Purchaser’s obligation under this rent to acquire the Property
is subject to the fulfillment at or prior to the Closing Date of the following
conditions:

(1)        Seller shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Closing Date.

(2)        The Title Insurer is in a position to and will issue to
Purchaser the Title Policy subject only to the Permitted Exceptions.

(3)        Each and every representation and warranty made by Seller in
this Agreement shall be true and correct in every material respect both as of
the date when made and as of the Closing Date.

(4)        All other conditions to Purchaser’s obligation to close set
forth in other provisions of this Agreement have been satisfied, including
without limitation those set forth in Paragraph 21 of this Agreement.

(5)        Purchaser shall have reasonably approved, in form and
substance, the Easements pursuant to Paragraph 5(c) of this Agreement.

If any condition specified in this Paragraph 9A.(a) is not timely
satisfied or waived by Purchaser, Purchaser shall have the right to terminate
this Agreement, in which event, unless such condition has not been satisfied by
reason of a default by Purchaser of its obligations hereunder, the Earnest
Money (or so much thereof as has been deposited) shall be returned to 
Purchaser and no party shall have any further rights, duties, obligations or
liabilities under this Agreement except as specifically set forth herein; provided,
that termination of this Agreement shall not be Purchaser’s sole remedy if
Seller defaults; it being specifically understood and agreed that nothing in
this Paragraph 9A.(a) shall relieve Seller from liability for any breach
of this Agreement and that the provisions of Paragraph 15(b) of this
Agreement shall govern and control in the event of a default by Seller
hereunder.

(b)        Seller’s obligation under this Agreement to sell the Property
is subject to the fulfillment at or prior to the Closing Date of the following
conditions:

(1)        Purchaser shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Closing Date.

(2)        HUD and Lender shall have consented to the sale of the
Property to Purchaser and consented to the assumption of the Loan by Purchaser.

	

  

(3)        Seller shall have reasonably approved, in form and substance,
the Easements pursuant to Paragraph 5(e) of this Agreement.

If any condition specified in this Paragraph 9A.(b) is not timely
satisfied or waived by Seller, Seller shall have the right to terminate this
Agreement, in which event, unless such condition has not been satisfied by
reason of default by Seller of its obligations hereunder, the Earnest Money
shall be paid to Seller and no party shall have any further rights, duties,
obligations or liabilities under this Agreement except as specifically set
forth herein.

Purchaser acknowledges and agrees that the documents
to be delivered by Seller hereunder shall, where applicable, be executed and
delivered only by River Forest or Princeton, as applicable.

10.       Other Costs.  Seller agrees to pay at Closing the
Virginia grantor’s tax required for recordation of the Deed, all costs incurred
by Seller in connection with the Transfer Approval Application (as defined
herein) and one-half (1/2) of any escrow fee for the Closing. Purchaser agrees
to pay at Closing the Virginia grantee’s tax, the costs and premium for the
Title Commitment and the Title Policy, including any endorsements to the Title
Policy, the cost of any updated survey obtained by Purchaser, all costs
associated with the transfer and assumption of the Loan and the Loan Documents
(other than the costs to be paid by Seller as provided herein) including any
assumption fee required to be paid to Lender pursuant to the Loan Documents)
and ones-half (1/2) of any escrow fee for the Closing.  Subject to Paragraph 30,
each party shall pay its own attorney’s fees, regardless of whether Closing
occurs and all other costs incurred by such party in connection with the
transactions contemplated by this Agreement

11.       Damage or Condemnation.

(a)        Seller represents that to its knowledge there are no
condemnation or eminent domain proceedings pending or threatened against or
affecting the Property or any portion thereof.  Risk of loss to the Property
(i) resulting from any such proceeding which is commenced prior to Closing, and
(ii) due to any cause, including but not limited to fire, other casualty and
acts of God, shall remain on Seller until Closing.

	

  

(b)        Prior to Closing, if all or part of the Property shall be
destroyed or damaged by casualty, and there is more than $2,000,000 damage,
destruction or loss, Seller shall so notify Purchaser, and Purchaser may elect
either to (i) terminate this Agreement as provided in Paragraph 15 hereof,
or (ii) not terminate this Agreement and proceed to Closing as provided in
Paragraphs 9 and 15 hereof.  If Purchaser elects to close pursuant to (ii)
above, then at Closing Seller shall assign, transfer and set over to Purchaser,
subject to all rights of the Lender and/or HUD therein under the Loan
Documents, all of such Seller’s right, title and interest in and to any
insurance proceeds (including payment of any deductible) and claims that have
been or may thereafter be made for any such damage.  If the damage or loss from
casualty is less than $2,000,000, then Seller shall assign, transfer and convey
to Purchaser all of such Seller’s right, title and interest in and to all condemnation
and insurance awards arising therefrom, subject to all rights of the Lender
and/or HUD therein under the Loan Documents.  Seller shall be responsible to
obtain any consent required by the insurer in connection with any such
assignment and Purchaser’s obligation to close shall be conditioned upon such
consent as well as Lender’s and HUD’s agreement to make such insurance proceeds
or condemnation awards available to Purchaser for restoration of the Property. 
If this Agreement is not terminated as a result of any such casualty, Seller
shall be entitled to utilize such insurance or condemnation awards (to the
extent permitted by the Lender and/or HUD therein under the Loan Documents) to
commence repair of such damage prior to Closing with the unexpended proceeds to
be transferred to Purchaser at Closing, and in either event this Agreement
shall be closed pursuant to the terms hereof.  Seller shall be responsible to
obtain any consent required by the insurer in connection with any such
assignment and Purchaser’s obligation to close shall be conditioned upon such
consent as well as Lender’s and HUD’s agreement to make such insurance proceeds
or condemnation awards available to Purchaser for restoration of the Property.
Seller shall be responsible for payment of any deductible under the applicable
insurance policy and if Seller does not provide Purchaser with written evidence
that any such deductible has been paid prior to the Closing, then Purchaser
shall receive a credit against the Purchase Price in the amount of any such
unpaid deductible.

(c)        Prior to Closing, if all or any part of the Property
materially affecting the use or operation thereof shall be taken under the
power of eminent domain or other proceeding, Seller shall so notify Purchaser,
and Purser may elect either to (i) terminate this Agreement as provided in
Paragraph 15 hereof, or (ii) not terminate this Agreement and proceed to
Closing as provided in Paragraphs 9 and 15 hereof.  If there is a taking of a
portion of the Property which does not, in Purchaser’s sole discretion,
materially affect the use or operation thereof, Purchaser shall be required to
proceed to Closing. If Purchaser elects to close as provided above, then at
Closing Seller shall assign, transfer and set over to Purchaser, subject to all
rights of the Lender and/or HUD therein under the Loan Documents, all of such
Seller’s right, title and interest in and to any eminent domain awards.

12.       Representations and Warranties.  As a material
inducement to Purchaser’s entering into this Agreement, Seller, or the specific
entities constituting Seller, as applicable, hereby represents, warrants and
covenants that the following matters are true as of the date of  this
Agreement, which shall survive Closing and remain in effect for a period one
(1) year thereafter:

(a)        Laws.  Seller has received no notice from any applicable
governmental authorities of any alleged violations by or at the Property of any
applicable city, county, state and United State laws, ordinances, codes, rules
and regulations.

(b)        Contracts.  On or prior to the Effective Date, Seller
shall provide Purchaser with copies of all of the Contracts, which copies shall
be true, complete and correct in all material respects. The Contracts are the
only Contracts in effect regarding the Property.

(c)        No Defaults.  Seller is in compliance with the Loan
Documents, the Leases and the Contracts.  Seller has not received any notice of
default under the Loan Documents which has not been cured or waived by Lender.

	

  

(d)        Conflicts.  Except for the required consents of the
Lender and HUD, neither the execution of this Agreement by Seller nor the
Closing of the transactions contemplated hereby by Seller will
(i) conflict with, or result in a breach of, the terms, conditions or
provisions of, or constitute a default under, any agreement or instrument to
which Seller is a party, or by which it may be bound, or (ii) result in
the creation of any material lien, charge or encumbrance upon the Property,
except as permitted hereby in respect of the Loan Documents.

(e)        Leases.  No tenant leases, other than the Leases listed
in the rent roll attached as Exhibit C, affect the Property. To
Seller’s knowledge, all information contained in Exhibit C is true,
correct and complete in all material respects as of the date hereof.  All
Leases are in substantially the form attached hereto as part of Exhibit D
except for the units at River Forest leased to the United States Government for
occupancy by employees of Fort Lee and except for addenda which provide for
rent credits to managers of the Property, employees of Seller or Seller’s
management company involved in the leasing or maintenance of the Property and
police officers who provide limited off-duty services in connection with their
residency, all of which is reflected in the attached rent roll. Purchaser
agrees that Seller shall have the right to extend such rent credits to any such
managers and employees who will not become managers or employees of Purchaser
for a period through the end of the second full month after Closing.

(f)         Status of the Leases. To the knowledge of Seller all of
the Leases are, as of the date of this Agreement, valid and in full force and
effect, and free of any known claims for reduction, deduction, or set-off
against rent, or any other claims against Seller or any managing agent of
Seller, unless and except as otherwise indicted in the rent roll attached
hereto as Exhibit C.  No rents or Leases have been assigned,
pledged or otherwise encumbered by Seller except as additional collateral for
the Loan. Seller has received no payments of rent under the Leases more than
thirty-one days prior to the due dates thereof.

(g)        Commissions. There are no broker’s or agent’s
commissions or fees owed with respect to the Leases.

(h)        Litigation.  Seller knows of no litigation or
governmental or other proceeding or

investigation pending or threatened against or relating to the Property or
Seller, including without limitation condemnation or eminent domain
proceedings.

(i)         Property Information.  All operating statements and,
to Seller’s knowledge, other Property Information provided or to be provided by
Seller to Purchaser are or shall be correct and complete in all material
respects and such operating statements present fairly the results of operations
of the Property for the periods indicated.

(j)         Authority of Seller.  River Forest is a limited
liability company, duly organized and validly existing under the laws of the
Commonwealth of Virginia.  Princeton is a corporation duly formed and validly
existing under the laws of the Commonwealth of Virginia.  Seller has full power
and authority to enter into this Agreement and to sell the Property in
accordance with the terms and conditions hereof.

	

  

(k)        Environmental Conditions.  To Seller’s knowledge,
(i) the Property does not contain any "Hazardous Materials" (as
defined below) in violation of applicable "Environmental Laws" (as
defined below), and (ii) the Property is not subject to federal, state or
local regulations or liability because of the presence of stored, leaked,
spilled or disposed petroleum products, waste materials or debris, underground
storage tanks, "PCB’s" or PCB items (as defined in 40 C.F.R. §
761.3), "asbestos" (as defined in 40 C.F.R. § 763.63), or the past or
present accumulation, treatment, storage, disposal, spillage or leakage of any
Hazardous Materials.  As used in this Paragraph 12(k), the term "Hazardous
Materials" shall mean any hazardous wastes, hazardous substances,
hazardous materials, toxic substances, hazardous air pollutants or toxic
pollutants, as those terms are defined in Environmental Laws; the term "Environmental
Laws" shall mean the Resource Conservation and Recovery Act (42 U.S.C.A.
§§ 6901 et seq.) and the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C.A. §§ 9601 et seq.) any
amendments thereto and any regulations promulgated pursuant thereto.

(l)         Loan Documents. To Seller’s knowledge, the copies of
the Loan Documents provided by Seller to Purchaser are true, correct and
complete.  Purchaser acknowledges that the listing of the Loan Documents as set
forth on Schedule 1 may not include documents relating to the
construction of the improvements which Seller represents are no longer of any
force or effect.

(m)       Condemnation. Seller has received no notices of any
condemnation or eminent domain proceedings pending or threatened against the
Property or any part thereof.

13.       Operation of the Property.  Between the date hereof and
Closing:

(a)        Seller will not enter into any contract (other than new
Leases) that will be an obligation affecting the Property subsequent to the
Closing Date except for contacts entered into in the ordinary course of
business that are terminable without cause and without payment of a penalty on
not more than 30 days’ notice.

(b)        Seller will not remove any personal property from the Property
except as may be required for necessary repair or replacement, and in the event
of such replacement, the  replacement shall be of materially equal or better
quality and quantity as existed as of the time of its removal.

(c)        Seller will maintain casualty insurance of a level and type
consistent with the insurance maintained by Seller prior to the execution of
this Agreement with respect to the Property.

(d)        Seller shall not do anything, nor authorize anything to be
done, which would adversely affect the condition of title as shown on the Title
Commitment without the prior consent of Purchaser which consent shall not be
unreasonably withheld, conditioned or delayed.

(e)        Seller will maintain and operate the Property in accordance
with first class apartment management practices for the Richmond, Virginia
area.

(f)         Seller agrees that no new leases will be entered into with
any new or existing tenants unless such leases (i) have a lease term (including
renewals and extensions) of no longer than one year, (ii) provide for rent
at rates consistent with the rents reflected in the current rent roll, and
(iii) are pursuant to the form of lease attached hereto as part of Exhibit D.

	

  

(g)        Seller shall make all payments due on the Loan or as otherwise
required pursuant to the Loan Documents, pay all operating expenses through the
Closing Date and otherwise duly observe and perform its obligations under the
Loan Documents, the Leases and the Contracts. Upon request, Seller shall keep
Purchaser reasonably informed as to the status of leasing prior to the Closing
Date and shall deliver to Purchaser copies of all new Leases.

(h)        Seller shall restore all units that become vacant at least
five (5) days prior to the Closing to "rent-ready" condition in
accordance with Seller’s customary practice and procedure for the Property.
Purchaser and Seller shall inspect each of such vacant units prior to the
Closing to confirm that they are in "rent ready" condition. To the extent
any of such units is not in "rent ready" condition as of the date of
Closing, Purchaser shall be entitled to a credit in the amount of the costs, as
Purchaser and Seller agree, acting reasonably, are necessary in order to pay
for the cost of restoring such vacant units to "rent ready"
condition.

(i)         At Closing, Seller shall cause any property management
agreement for the Property to be terminated, at no cost, liability or expense
to Purchaser.

(j)         Seller and Purchaser shall each use its respective good faith
efforts to negotiate mutually acceptable Easements pursuant to the terms and
conditions of subparagraph 5(e) of this Agreement.

14.       Commission.  Each of Seller and Purchaser represents to
the other that there are no amounts due any realtor, broker, agent, finder or
other person in connection with this transaction other than Cushman &
Wakefield.  Seller shall be responsible for any commission which may be due and
payable to Cushman & Wakefield pursuant to separate agreement between
Seller and Cushman & Wakefield. Each of Seller and Purchaser covenants that
it will indemnify and hold the other harmless from and against any and all
liabilities and expenses in  connection with any claim or claims of any other
realtor, broker, agent, finder or other person arising out of its participation
in this transaction, including, without limitation, attorneys’ fees.

15.       Termination; Specific Performance.

(a)        If Purchaser elects to terminate this Agreement pursuant to
Paragraph 5, Paragraph 7, Paragraph 11 or Paragraph 21
hereof, then, in any such event, the Escrow Agent forthwith shall return the
Earnest Money in full to Purchaser and the parties hereto shall have no further
obligations or liabilities hereunder except for the obligations of the parties
which specifically survive the termination of this Agreement.  In addition, if
Purchaser does not elect to terminate this Agreement pursuant to Paragraph 7,
but Purchaser does elect to terminate the Other Agreement pursuant to the
corresponding Paragraph 7 of such Other Agreement (an "Other Agreement
Termination Notice"), then Seller shall have the one-time right, to be
exercised within five (5) business days following Purchaser’s deliver of such
Other Agreement Termination Notice, to terminate this Agreement by written
notice to Purchaser and, in such event, the Escrow Agent forthwith shall return
the Earnest Money in full to Purchaser and the parties hereto shall have no
further obligations or liabilities hereunder except for the obligations of the
parties which specifically survive the termination of this Agreement.

	

  

(b)        If Seller defaults in the performance of any of its
obligations hereunder, then, in such event, Purchaser shall have the right to
exercise any one of the following remedies, as its sole and exclusive remedies: 
(a) to terminate this Agreement, after having given five (5) days written
notice to Seller and Escrow Agent (and Seller has failed to cure such breach or
default within that period of time), whereupon the Earnest Money shall
immediately be refunded/returned to Purchaser and neither Seller nor Purchaser
shall have any further rights or duties under this Agreement, except for the
indemnities of the parties which specifically survive the termination of this
Agreement; or (b) seek to enforce specific performance of this Agreement
(with the costs and expenses of any such action being paid to the prevailing
party by the non-prevailing party).  Notwithstanding the foregoing to the
contrary, in the event specific performance is not reasonably available because
of any affirmative act or acts of Seller or any act or acts of any person or
entity affiliated with Seller who colludes with Seller so as to render specific
performance not reasonably available, then Purchaser shall have the right to
terminate this Agreement, whereupon it shall become entitled to receive (or
seek, as the case may be): (i) the immediate return of the Earnest Money,
and (ii) actual direct (but not indirect or consequential) damages against
Seller.

16.       Assignment. Purchaser may, without Seller’s consent,
assign this Agreement and all of its rights hereunder to a single-purpose
entity to be formed by Purchaser in compliance with applicable HUD
requirements, which entity shall acquire title to the Property at Closing and
of which entity Purchaser or an affiliate of Purchaser shall be a principal.
Otherwise, Purchaser shall have no right to assign this Agreement and its
rights hereunder to any other entity or individual unless approved by Seller in
its sole discretion.  Notwithstanding any of the foregoing, however, in the
event of any assignment of this Agreement by Purchaser, whether with or without
the written consent of Seller, Purchaser shall remain jointly and severally
liable with such assignee for all obligations and liabilities hereunder
subject, in all events, to the provisions of Paragraph 8.

17.       Waiver. The failure of either party to exercise any
right hereunder, or to insist upon strict compliance by the other party, shall
not constitute a waiver of that party’s right to demand strict compliance with
the terms and conditions of this Agreement.

	

  

18.       Notices.  Any notices, requests, or other communications
required or permitted to be given hereunder shall be in writing and shall be either
(i) delivered by hand, (ii) mailed by United States certified or
registered mail, return receipt requested, postage prepaid, (iii) sent by
overnight delivery service (e.g., Federal Express, Airborne, etc.), or
(iv) sent by facsimile (with the original being sent by one of the other
permitted means or by regular United States mail) and addressed to each party
at the applicable address set forth herein. Any such notice, request, or other
communication shall be considered given or delivered, as the case may be, on
the date of hand delivery (if delivered by hand), on the third (3rd) day
following deposit in the United States mail (if sent by United States
registered mail), on the next business day following deposit with an overnight delivery
service with instructions to deliver on the next day or on the next business day
(if sent by overnight delivery service), or on the day sent by facsimile (if
sent by facsimile, provided the original is sent by one of the other permitted
means as provided herein in this Paragraph or by regular United States mail). 
However, the time period within which a response to any notice or request must
be given, if any, shall commence to run from the date of actual receipt of such
notice, request, or other communication by the addressee thereof. Rejection or
other refusal to accept or inability to deliver because of a changed address of
which no notice was given shall be deemed to be receipt of the notice, request,
or other communication. By giving at least ten (10) days prior written notice
thereof, any party hereto may, from time to time and at any time, change its
mailing address hereunder.

If to Purchaser:

Associated Estates Realty
Corporation

1 AEC Parkway

Richmond Heights, Ohio 44143

Attention: Martin A. Fishman

Fax:  (216) 797-8719

With a copy to:

Greenberg Traurig LLP

77 West Wacker Drive, Suite 2500

Chicago, Illinois 60601

Attention: Michael T. Fishman

Fax: (312) 456-8435

If to Seller:

Bogese, L.C.

113 South 12th Street

Richmond, Virginia 23219

Attention: Michael Bogese, Jr.

Fax: (804) 644-4086

With a copy to:

Troutman Sanders LLP

1001 Haxall Point

Richmond, Virginia 23219

Attention:  Edward B. Kidd

Fax: (804) 698-6000

If to Escrow Agent:

First
American Title Insurance Company

30 N.
LaSalle Street, Suite 300

Chicago,
Illinois 60602

Attention:
Jim McIntosh

Fax: (312) 553-0480

19.       Survival. All of Seller’s and Purchaser’s covenants,
agreements, representations and warranties contained in Paragraphs 4, 6, 7, 12,
14, 20 and 21 of this Agreement shall survive Closing and not merge into the
Deed or any other documents delivered hereunder. All other covenants,
agreements, representations and warranties contained in this Agreement shall
terminate upon Closing,

	

  

20.       Indemnification. Seller hereby agrees to indemnify and
hold harmless Purchaser and its successors and assigns from and against any and
all claims, costs, penalties, damages, losses, liabilities and expenses
(including reasonable attorneys’ fees) arising before or after Closing
(i) as a result of any property damage or injuries to persons,. including
death, caused by any occurrence as to the Property prior to Closing, or
(ii) as a direct and proximate consequence of any breach by Seller of any
of its representations, warranties or obligations set forth herein or in any
other document or instrument delivered by Seller pursuant hereto.  Purchaser
agrees to indemnify and hold harmless Seller and its successors and assigns
from and against any all claims, costs, penalties, damages, losses, liabilities
and expenses (including reasonable attorneys’ fees) arising (i) after
Closing as a result of any property damage or injuries to persons, including
death, caused by any occurrence as to the Property after Closing, or
(ii) before or after Closing as a direct and proximate consequence of any
breach by Purchaser of any of its obligations set forth herein or in any other
document or instrument delivered by Purchaser pursuant hereto.

21.       Approval of Transfers by HUD and Lender.

(a)        Purchaser’s obligation to purchase the Property and proceed to
the Closing is further subject to the condition precedent that the Lender and
HUD shall have approved the sale of the River Forest Property to Purchaser and
consented to the assumption of the Loan by Purchaser (i) without
modification of the Loan Documents, (ii) without any requirement that
would result in material increase in any replacement reserves or mortgage
escrow accounts, and (iii) without any obligation to fund additional
repairs or capital expenditures which exceed a normal expense to Purchaser and
are materially different from or substantively in excess of those, if any,
identified by Purchaser in connection with its due diligence examination of the
Property. Seller shall cause Lender to deliver to Purchaser no more than ten
(10) days prior to Closing Lender’s written confirmation of the amount of outstanding
principal, interest and any other amounts and deposits accrued and payable
under the Loan Documents together with written confirmation that the Loan is in
full force and effect and that to its knowledge Seller is not in default of any
of the provisions of the Loan Documents. No transfer of any interest in the
Property under this Agreement shall be effective prior to such HUD approval. 
Purchaser will not take possession of the Property nor assume any benefits of
Property ownership prior to such approval by HUD.

	

  

(b)        Purchaser shall submit an application for approval of the
transfer and assumption to HUD (the "Transfer Approval Application"),
using commercially reasonable efforts to insure that the Transfer Approval
Application is complete and in material compliance with all applicable
requirements, within two (2) business days after (i) approval of the draft
Transfer Approval Application by Seller as provided herein, and
(ii) Seller’s delivery of any documents required to be provided by Seller
and Lender as part of the Transfer Approval Applications (after completion of
any corrections required to conform to the applicable requirements after
Purchaser’s review thereof) and shall diligently pursue in good faith approval
of the Transfer Approval Application at Purchaser’s sole expense (except as
otherwise expressly provided in Paragraphs 21(a) and 22(d) of this
Agreement and except for legal and other accounting fees incurred by Seller in
providing the information and documentation Seller is required to provide in
connection with the Transfer Approval Application). Purchaser shall promptly
forward to HUD and the Lender such documents required to correct any
deficiencies in the Transfer Approval Application as may be identified by HUD
or the Lender. Seller shall cooperate with Purchaser in connection with such
applications including providing all information and documents within Seller’s possession
or control as maybe reasonably required on a timely basis. Purchaser shall provide
Seller with (i) an itemization of any information or documents required from
Seller for the Transfer Approval Application within ten (10) days after the
Effective Date, and (ii) a copy of its proposed Transfer Approval
Application within ten (10) days after the expiration of the Investigation
Period and prior to its submittal to HUD and the Lender. If, notwithstanding
Purchaser’s diligent and good faith efforts, the Transfer Approval Application
is not approved within one hundred eighty (180) days after submittal of the
Transfer Approval Application, either party may terminate this Agreement by
written notice to the other party and the Escrow Agent, in which event the
Earnest Money will be refunded to Purchaser.

(c)        In connection with Purchaser’s assumption of the Loan,
Purchaser and Seller acknowledge that there are certain escrow deposits (i.e.
tax, insurance, MIP, replacement reserves, etc.) being held by the Lender or
HUD in connection with the Property. Purchaser and Seller acknowledge and agree
that, at Closing, all such escrows shall be transferred to Purchaser with the
Property, but that Seller shall be entitled to a credit for the amounts held in
such escrow deposits, subject to the other provisions of this Agreement
regarding proration of real estate taxes and other expenses. Seller shall also
be entitled to a credit for any paid MIP.

(d)        Within 45 working days after the Closing Date, Seller at its
sole cost and expense, shall furnish to HUD audited financial statements for
the Property covering the period from the date of Seller’s last audited report
to the Closing Date in accordance with HUD’s final approval process
requirements.

(e)        Purchaser acknowledges that HUD requires completion of the "previous
participation" requirement as part of the Transfer Approval Application
and therefore agrees to initiate any applications, submittals and/or
registrations required to satisfy the "previous participation"
requirements of the Transfer Approval Application in sufficient time to permit
the timely preparation and submittal of the Transfer Approval Application
pursuant to the terms and timelines set forth in this Agreement.

22.       Miscellaneous. The section headings and captions
contained herein are for reference purposes only and shall not in any way
affect the meaning and interpretation of the terms of this Agreement. All
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties hereto shall be determined in accordance with the
applicable provisions of the laws of the Commonwealth of Virginia.  This
Agreement may be executed in any number of duplicate originals or counterparts,
all of which shall constitute a single agreement. Any duplicate original on
which the signatures of both parties shall appear shall be deemed an original
of this Agreement.  Any number of counterparts on which the signatures of both
parties shall appear shall constitute a duplicate original. This Agreement
constitutes the entire agreement of the parties regarding the Property, and there
are no outstanding agreements between the parties hereto other than those set
out in this Agreement.  This Agreement may not be modified, changed or amended
except by a written instrument executed by all of the parties hereto. In the
absence of a specific provision to the contrary, the party upon whom an
obligation is imposed hereunder shall perform the obligation at its expense. As
used herein the singular shall include the plural, the plural the singular and
the use of any gender shall be applicable to all genders. Time shall be of the
essence as to all matters provided for in this Agreement.

	

  

23.       Binding Effect. This Agreement shall be fully binding on
and enforceable against, all parties hereto and their respective heirs,
administrators, successors and permitted assigns.

24.       Entire Agreement. This Agreement contains the entire
agreement between the parties relating to the Property and supersedes all prior
and contemporaneous negotiations, understandings and agreements, written or
oral, between the parties. This Agreement shall not be amended or modified, and
no waiver of any provision hereof shall be effective, unless set forth in a
written instrument authorized and executed with the same formality as this
Agreement.

25.       Severability. The provisions of this Agreement are
severable, and if any term, clause, or provision of this Agreement or the
application thereof to any person or circumstances is to any extent adjudicated
and declared to be illegal, invalid, or unenforceable under present or future
laws in effect during the term hereof, it is the intention of the parties
hereto that the remainder of this Agreement, and the application of such term,
clause or provision to persons or  circumstances other than those to which it is
held illegal, invalid or unenforceable, shall not be affected thereby.

26.       Days. If the final day of any period of time set out in
any provision of this Agreement or any action, is required to be performed, or
if any notice, consent or other communication is to be given on a Saturday;
Sunday or holiday recognized by the Commonwealth of Virginia or the State of
Ohio for its employees, then in such case, such period shall be deemed extended
to the next day which is not a Saturday, Sunday or holiday recognized by the
Commonwealth of Virginia or the State of Ohio. All references to any specified
number of days contained herein shall be deemed to refer to calendar days
unless a reference to business days is expressly provided.

27.       Presumptions. No presumption shall be created in favor
of or against any of the parties to this Agreement with respect to the
interpretation of any term or provision of this Agreement due to the fact that
this Agreement was prepared by or on behalf of one of the parties hereto.

28.       Escrow Agent.

(a)        Escrow Agent joins in this Agreement to agree to accept and
hold the Initial Deposit and the Additional Deposit in accordance with the
terms of this Agreement.

(b)        Purchaser and Seller agree that in performing any of its
duties under this Agreement, Escrow Agent shall not be liable for any loss,
costs or damage which it may incur as a result of serving as Escrow Agent
hereunder, except for any loss, costs or damage arising out of the willful
misconduct of Escrow Agent. Accordingly, Escrow Agent shall not incur any
liability with respect to any action taken or omitted to be taken in good faith
upon reliance upon any document, including any written notice of instruction
provided for in this Agreement, not only as to its due execution and validity
and effectiveness of its provisions, but also to the truth and accuracy of any
information contained therein, which Escrow Agent shall in good faith believe
to be genuine, to have been signed or presented by a proper person or persons
and to conform with the provisions of this Agreement.

	

  

(c)        In the event of a dispute between any of the parties hereto,
sufficient in the discretion of Escrow Agent to justify its doing so, Escrow
Agent shall be entitled to tender unto the registry or custody of any court of
competent jurisdiction all money held by it under the terms of this Agreement,
together with such legal pleadings as it deems appropriate and thereupon be
discharged from further responsibility under this Agreement.

29.       Tax Deferred Exchange. Purchaser and Seller each
acknowledge that the other may desire that this transaction be a part of a
tax-deferred transaction under the Internal Revenue Code. Purchaser and Seller
agree to cooperate with each other in order to permit this transaction to
qualify for tax deferral under the Internal Revenue Code provided that such
cooperation shall not prejudice any of the rights of Purchaser or Seller under
this Agreement. Purchaser and Seller each specifically agrees that the rights
of either party to this Agreement may be assigned to a Qualified Intermediary
in connection with any such exchange without the consent of the other party.
The cooperating party shall not be required to (i) incur any additional
cost or expense in connection with any such exchange, including, without
limitation, attorneys’ fees, (ii) enter into any agreement other than an
agreement which is fully non-recourse to such party, or (iii) take title
to any property as a part of any such transaction; and the exchanging party
shall indemnify and hold the cooperating party harmless with respect to all
costs, expenses, losses or liabilities of any nature arising out of any such
transaction including, without limitation, attorneys’ fees.

30.       Attorneys’ Fees.  In the event of any action or
proceeding brought by either party against the other under this Agreement, the
prevailing party shall be entitled to recover all costs and expenses including its
attorneys’ fees in such action or proceeding in such amount as the court may
adjudge reasonable. The prevailing party shall be determined by the court based
upon an assessment of which party’s major arguments made or positions taken in
the proceedings could fairly be said to have prevailed over the other party’s
major arguments or positions on major disputed issues in the court’s decision. 
If the party which shall have commenced or instituted the actions, suit or
proceeding shall dismiss or discontinue it without the concurrence of the other
party, such other party shall be deemed the prevailing party.

31.       Other Agreement.  Unless Purchaser elects to terminate
the Other Agreement pursuant to an Other Agreement Termination Notice and
Seller does not timely elect to terminate this Agreement pursuant to the
requirements of Paragraph 15 of this Agreement, Seller’s obligation to sell the
Property and proceed to the Closing is conditioned upon the concurrent closing
of the transactions contemplated by the Other Agreement and a default by
Purchaser in connection with closing under the Other Agreement shall be a
default by Purchaser under this Agreement; provided, that if the closing of the
transactions contemplated by the Other Agreement do not occur by reason of
(i) a default by Seller Affiliate under the Other Agreement, (ii) the
failure of any condition precedent to Purchaser’s obligation to proceed to the
closing of the transactions contemplated by the Other Agreement, or
(iii) termination of the Other Agreement in accordance with the terms
thereof as a result of a casualty or condemnation, then the condition for
concurrent closings shall be waived and Seller shall be obligated to proceed with
the Closing of the transactions contemplated by this Agreement.

	

  

	
  [SIGNATURES ON FOLLOWING PAGES]  

  

 

IN WITNESS WHEREOF, the parties have caused this
instrument to be executed for and in their respective names by their duly
authorized officials and agree to be bound hereby as of the day and year first
above stated.

SELLER:

RIVER FOREST PROPERTIES, LLC

By:       /s/ Michael J.
Bogese, Jr.

Name:  Michael J. Bogese, Jr.

Title:     Manager

PRINCETON PROPERTIES, INC.

By:       /s/ Michael J.
Bogese, Jr.          

 Name:  Michael J. Bogese, Jr.              

 Title:     President                                 
 

PURCHASER:

ASSOCIATED ESTATES REALTY CORPORATION

By:                                                      

 Name:  Martin
A. Fishman

Title:  Vice President

ESCROW AGENT:

FIRST AMERICAN TITLE INSURANCE COMPANY

By:       /s/ James W. McIntosh

 Name:  James W. McIntosh                 

 Title:     V.P.                                        
 

IN WITNESS WHEREOF, the parties have caused this
instrument to be executed for and in their respective names by their duly
authorized officials and agree to be bound hereby as of the day and year first
above stated.

 

SELLER:

RIVER FOREST PROPERTIES, LLC

By:                                                      

 Name:                                                 

 Title:                                                    
 

PRINCETON PROPERTIES, INC.

By:                                                      

 Name:                                                 

 Title:                                                    
 

PURCHASER:

ASSOCIATED ESTATES REALTY CORPORATION

By:       /s/
Martin A. Fishman              

 Name:  Martin
A. Fishman

Title:  Vice President

ESCROW AGENT:

FIRST AMERICAN TITLE INSURANCE COMPANY

By:                                                      

 Name:                                                 

Title:belpurch

AGREEMENT OF PURCHASE AND SALE

THIS AGREEMENT OF PURCHASE AND SALE (this “Agreement”) is
made and entered into as of the 31st day of August, 2007 (the “Effective
Date”), by and among BELVEDERE PROPERTIES, LLC, a Virginia limited liability
company (“Seller”); ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation
(“Purchaser”); and FIRST AMERICAN TITLE INSURANCE COMPANY, as escrow agent
(“Escrow Agent”)

PRELIMINARY STATEMENTS

A.        Seller is the
owner of that certain apartment project known as “The Belvedere” consisting of
296 apartment units and all amenities which are a part thereof located at the
intersection of Robious and Cranbeck Roads in Chesterfield County, Virginia on
that real property described in Exhibit A attached hereto and by this
reference made a part hereof, together with: (i) all easements, appurtenances
and hereditaments appertaining thereto and including all of Seller’s rights, if
any, in and to any alleys, ways, easements and rights of way abutting or
adjoining said real property; (ii) all the buildings, improvements, structures,
plants and appurtenances situated on said real property; (iii) all fixtures,
furniture, equipment (including all maintenance equipment and all office
equipment located in the clubhouse building), appliances, signs, plumbing,
machinery, personal property and facilities and supplies which are owned by
Seller and which are attached to or appurtenant to or used in connection with
said real property (specifically excluding property owned by residential
tenants), provided that Seller shall only quitclaim its right, title and
interest in and to the property identification sign located at the corner of
Robious Road and Belvedere Vista Lane; (iv) all plans, specifications,
guarantees and warranties; and (v) all leases including the rents, issues and
profits thereof and all refundable security deposits or escrow deposits held by
Seller thereunder (collectively, the “Property”);

B.         Seller
obtained a loan (the “Loan”) in the original principal amount of $26,525,100.00
from Highland Mortgage Company (now Capmark Bank) (the “Lender”) and insured by
the United States Department of Housing and Urban Development (“HUD”) under
Section 221(d)(4) of the National Housing Act;

C.        The Loan is
evidenced and secured by the documents and instruments set forth on Schedule
1 to this Agreement (collectively, the “Loan Documents”);

D.        Seller desires
to sell the Property and assign the Loan to Purchaser and Purchaser desires to purchase
the Property and assume the Loan from Seller, on and subject to the terms and
conditions of this Agreement;

E.         Seller’s
affiliate, River Forest Properties, LLC a Virginia limited liability company
(“River Forest”), is the owner of that certain apartment project apartment
project known as “River Forest” consisting of 240 apartment units and all
amenities which are a part thereof located on the southern line of Branders
Creek Parkway in Chesterfield County, Virginia (the “River Forest Apartments”);

F.         Seller’s
affiliate, Princeton Properties, Inc., a Virginia corporation (“Princeton” and together
with River Forest, collectively “Seller Affiliate”) is the owner of that certain
parcel of land located adjacent to the River Forest Apartments (the “River
Forest Expansion Parcel” and, together with the River Forest Apartments, collectively,
the “Other Property”); and

G.        Pursuant to
that certain Agreement of Purchase and Sale (the “Other Agreement”), dated as
of the same date as this Agreement, among Seller Affiliate and Purchaser,
Seller Affiliate has agreed to sell to Purchaser, and Purchaser has agreed to purchase
from Seller Affiliate, the Other Property.

THEREFORE, in consideration of Ten and No/100 Dollars
($10.00) in hand paid, the mutual covenants herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby covenant and agree as follows:

1.                 
Agreement to Sell and to Purchase.

(a)               
Seller agrees to sell and Purchaser agrees to purchase the Property upon
the terms and conditions hereinafter set forth.

(b)              
Subject to Purchaser’s rights with respect to the Investigation Period
(as hereinafter defined), Purchaser acknowledges and understands that Seller is
selling the Property and the Purchaser is buying the Property in its “AS-IS,
WHERE-IS, WITH ALL FAULTS” physical condition, including all existing
environmental conditions, with no rights of set-off or reduction in the
Purchase Price (as hereinafter defined) unless and except as expressly provided
herein to the contrary, and except for the representations and warranties set
forth in this Agreement and the closing documents executed in connection with
the consummation of the transactions contemplated by this Agreement, the sale
of the Property by Seller to Purchaser shall be without representation or
warranty of any nature or kind with respect to the physical condition of the
Property, whether express, implied, statutory or otherwise, including without
limitation warranties of use, merchantability or fitness for a particular
purpose, and Seller does hereby disclaim and renounce any such representations
or warranties.

 2

2.                 
Earnest Money. Purchaser shall deposit in escrow with the Escrow
Agent within two (2) business days of the execution hereof, Eight Hundred
Thousand Dollars ($800,000) (such deposit together with any interest that may be
earned thereon prior to Closing, being hereinafter called the “Initial
Deposit”). If Purchaser does not elect to terminate this Agreement during the
Investigation Period (as hereinafter defined), prior to the expiration of the
Investigation Period, Purchaser shall deliver to Escrow Agent an additional
deposit in the amount of Four Hundred Thousand Dollars ($400,000) (the
“Additional Deposit”). The Initial Deposit and the Additional Deposit are
sometimes individually or collectively referred to as the “Earnest Money”. The
Earnest Money shall be deposited in an interest bearing account using
Purchaser’s tax identification number which shall be provided to Escrow Agent
The Earnest Money shall be applied against the cash portion of the purchase
price at Closing (as hereinafter defined) or refunded in full to Purchaser as
hereinafter provided in Paragraph 15. If Purchaser does not notify Seller prior
to the expiration of the Investigation Period that Purchaser elects to
terminate this Agreement, the Initial Deposit shall be non refundable for any
reason other than (i) a default by Seller, (ii) in the event any condition to
Purchaser’s obligations under this Agreement is not satisfied as provided
herein, or (iii) as otherwise specifically provided herein. If Purchaser does
not notify Seller prior to the expiration of the Investigation Period that
Purchaser elects to terminate this Agreement and Purchaser fails to make the
Additional Deposit as required, Purchaser shall be in default of this Agreement
and Seller shall have the right to terminate this Agreement and retain the
Initial Deposit as provided in Paragraph 8.

3.                 
Purchase Price. The purchase price for the Property (the
“Purchase Price”) shall be Forty Four Million Two Hundred Thousand Dollars ($44,200,000),
payable at Closing as follows:

(a)               
Purchaser shall receive a credit against the Purchase Price in the
amount of the outstanding principal balance of the Loan, all accrued and unpaid
interest on the Loan and all other fees, costs and expenses owing by Seller
under the Loan Documents for periods prior to the Closing Date except for any
fees, costs and expenses to be paid by Purchaser in connection with the
assumption of the Loan;

(b)              
Purchaser shall receive a credit against the Purchase Price in the amount
of the Earnest Money; and

(c)               
The balance of the Purchase Price as adjusted by the closing prorations
hereinafter provided at Paragraph 4 shall be paid in cash at Closing by wire
transfer of funds to Escrow Agent’s account for payment to Seller.

4.                 
Closing Prorations. All items described below shall be
prorated as of the date of Closing (the “Closing Date”) and, as hereinafter
provided, shall increase or decrease the cash portion of the Purchase Price
payable pursuant to Paragraph 3(c) of this Agreement.

(a)               
Taxes. All state, county and municipal ad valorem and other
property taxes and similar charges with respect to the Property for the year in
which the Closing is consummated will be prorated based on the current year’s tax
bill or, if such bill has not been issued as of the Closing Date, then taxes shall
be prorated at Closing based on the prior year’s tax bill and said amount of
taxes prorated shall be adjusted between the parties upon receipt of the tax
bill for the year in which the Closing is consummated. Seller shall pay at or prior
to Closing all special assessments and charges against the Property which are
either due or declared prior to the Closing Date. Any refund or credit
attributable to the overpayment of taxes and assessments payable for the year in
which Closing occurs, less any attorneys’ fees or costs payable in with respect
of such taxes and assessments shall be allocated between Seller and Purchaser
based upon their respective periods of ownership.

3

(b)              
Income. All rental and other income from the Property, including
but not limited to prepaid rent, late charges, and other charges to tenants,
shall be prorated based on rents actually collected. All unpaid rent relating
to periods prior to the Closing Date shall be paid to Seller as and when
received by Purchaser after Closing and shall not be prorated at Closing;
provided, that any rent received after Closing shall be applied first to the
current rent due, then to past due rents accrued after Closing and then to past
due rent accrued prior to Closing. Purchaser shall include all such unpaid rent
in its normal billing and shall use commercially reasonable, good faith efforts
to collect such unpaid rent after the Closing Date. Purchaser may not waive any
delinquent rents nor modify a Lease so as to reduce or otherwise affect amounts
owed thereunder for any period in which Seller is entitled to receive a share
of charges or amounts without first obtaining Seller’s written consent, which
consent may be given or withheld in Seller’s sole and absolute discretion. If
Purchaser fails to collect any unpaid rents accrued prior to Closing within
ninety (90) days after Closing, Seller shall have the right to independently
pursue collection of amounts to which Seller is entitled; provided, that Seller
shall be expressly prohibited from bringing any action to evict any tenant from
its leased premises at the Property.

(c)               
Deposits and Escrows.

(1)              
Seller shall, at no expense to Purchaser, transfer to Purchaser by
credit against the Purchase Price at Closing all refundable security deposits
and other escrow deposits relating to the Property, including such deposits and
fees as to leases that are in default but have not been terminated as of the
Closing Date, and all interest charges required by law to be accrued thereon.

(2)              
All real estate tax escrows, insurance escrows and other escrows
maintained by Lender under the Loan Documents shall be transferred to
Purchaser, and Seller shall be given credit for the amount of such funds and
any unearned mortgage insurance premiums at Closing.

(d)              
Utilities. Utilities not payable by tenants of the Property shall
either be (i) prorated as of Closing, or (ii) transferred into Purchaser’s name
as of Closing, with Seller to be responsible for payment of all charges accrued
prior to such transfer and Purchaser to be responsible for payment of all
charges accruing after such transfer.

(e)               
Service Contracts and Equipment Leases. A list of all service
contracts and equipment leases relating to the operation and management of the
Property is attached hereto as Exhibit B as a part hereof (the
“Contracts”). Except as noted in Exhibit B, Purchaser shall not be
obligated to assume responsibility for or to pay any sums due at Closing
attributable to the Contracts unless Purchaser elects during the Investigation
Period by written notice to Seller to assume such Contracts at Closing, in
either of which events, such Contracts shall be assigned to and assumed by
Purchaser at Closing. Seller agrees, at Seller’s expense, to cancel all
Contracts which are not to be assumed by Purchaser as of the Closing Date. All
prepayments made or payments due under any of the Contracts to be assigned to
Purchaser shall be prorated as of the Closing Date.

(f)                
Adjustments. In the event that accurate prorations and other
adjustments cannot be made at Closing because current bills are not obtainable
(as, for example, in the case of utility bills), the parties shall prorate on
the best available information, subject to adjustment upon receipt of the final
bill. Seller shall attempt to have utility meters read on the Closing Date so
as to accurately determine the proration of current utility bills. Adjustments
shall be made after Closing if any closing prorations are based on inaccurate
information.

5.                 
Title.

 4

(a)               
At Closing, Seller shall convey to Purchaser, good and marketable, fee
simple title to the Property by special warranty deed (the “Deed”) in form
consistent with standard Virginia practice (and otherwise approved by Seller
and Purchaser), subject only to the Permitted Encumbrances (defined below) and
any other matters of record as of the date of Purchaser’s examinations of title
to the extent applicable to the Property and any matters which could be
discovered by a survey of the Property other than such matters to which
Purchaser has objected and which Seller has agreed or is obligated to correct
as provided herein. Purchaser agrees to accept title to the Property subject to
the Permitted Encumbrances and such additional matters as may be approved by
Purchaser, in its sole and absolute discretion, prior to Closing.

(b)              
During the Investigation Period, Purchaser shall, at its cost, obtain
(i) an owner’s title insurance commitment (the “Title Commitment”) in the full
amount of the Purchase Price to be issued by the Escrow Agent (the “Title Insurer”),
insuring the title to the Property, and (ii) a current survey (references
herein to the plat of survey shall be deemed to refer to such plat) of the
Property (the “Survey”). It shall be a condition to Purchaser’s obligations
hereunder that Seller shall have delivered all documents required to be
delivered by Seller hereunder which are required by the Title Insurer to issue
an owner’s title insurance policy pursuant to the Title Commitment (the “Title
Policy”).

(c)               
During the Investigation Period, Purchaser shall review title to the
Property as disclosed by the Title Commitment and the Survey, and satisfy
itself as to the availability from the Title Insurer of the Title Policy and
all requested endorsement to such Title Policy. Purchaser shall notify Seller
of any objections to matters disclosed by the Title Commitment and the Survey
within five (5) days after receipt of the Title Commitment and the Survey.

(d)              
Seller shall have no obligation to remove or cure title objections, except
for (1) liens of an ascertainable amount (but expressly excluding the liens
evidenced by the Loan Documents), which liens Seller shall cause to be released
at the Closing or affirmatively insured over by the Title Company, and (2) any
exceptions or encumbrances to title which are created by Seller after the date of
this Agreement without Purchaser’s consent. In addition, Seller shall provide
the Title Insurer with a customary ALTA statements, personal undertakings or
owner’s affidavit (an “Owner’s Affidavit”), in form and substance reasonably
acceptable to Seller, which will permit the Title Insurer to remove the
standard “mechanics lien” and “GAP” exceptions from the Title Policy.

(e)               
For purposes of this Agreement, the following terms shall have the
following meanings:

(1)              
“Permitted Exceptions” shall mean: (i) any exception arising out of an
act of Purchaser or its representatives, agents, employees or independent
contractors; (ii) zoning and subdivision ordinances and regulations; (iii) the
specific exceptions in the Title Commitment that the Title Insurer has not
agreed to insure over or remove from the Title Commitment as of the end of the
Investigation Period and that Seller is not required to remove as provided
herein; (iv) items shown on the Survey which have not been removed (or which
Seller has not agreed to remove) as of time end of the Investigation Period;
(v) real estate taxes not yet due and payable; and (vi) the Loan Documents.

(2)              
“Leases” shall mean the leases which are listed on the rent roll
attached hereto as Exhibit C, together with such additional leases or modifications
as may be added and excluding any leases which may be terminated in the ordinary
course of Seller’s business between the date of this Agreement and the date of
Closing and the rights of tenants under such leases, as occupancy tenants only,
and without any right of first refusal or purchase options.

 5

(3)              
“Permitted Encumbrances” shall mean a collective reference to the Leases
and Permitted Exceptions.

6.                 
Access. Upon reasonable prior notice, Seller shall provide
Purchaser and its agents, servants, employees and assigns reasonable access,
during Seller’s normal business hours, to all documentation, agreements, books,
records, and other information in the possession of Seller pertaining to the ownership,
use, rental or operations of the Property, including but not limited to,
financial records, tax assessments, bills and leases, and Purchaser shall have
the right to make copies of such non-confidential documents as Purchaser shall
reasonably specify at Purchaser’s sole expense. Furthermore, Seller hereby
grants to Purchaser and its agents, servants, employees, assigns and
independent contractors reasonable access to enter upon the Property, upon
forty-eight (48) hours advance notice and at reasonable times during Seller’s
normal business hours, for the purpose of inspecting the condition of the
Property, surveying the Property and undertaking any physical inspections that
Purchaser deems appropriate under this Agreement; provided, however, that such
inspections shall be coordinated with Seller and Purchaser shall minimize any
disruptions to the operation of the Property and the occupancy of the Property
by tenants. Purchaser shall be responsible for all costs incurred by Purchaser
in connection with its inspections and evaluation of the Property, shall repair
any damage caused by Purchaser and its agents and shall indemnify and hold
Seller harmless from and against any and all claims, demands, actions, losses,
costs, damages, liabilities and expenses (including without limitation
reasonable attorneys’ fees) incurred or sustained by Seller by reason of or
arising from the exercise by Purchaser of the rights and privileges granted in
this Paragraph 6, but only to the extent incurred or sustained as a result of
damage to the Property and injury to persons. The foregoing indemnity
obligations shall expressly survive Closing or any termination of this
Agreement.

7.                 
Investigation Period.

(a)               
For the period beginning with the Effective Date and extending through 5:00p.m
on the thirtieth (30th) day following the Effective Date (the "Investigation
Period"), Purchaser shall have the right to terminate this Agreement as provided
in Paragraph 15 if Purchaser determines, in its sole and absolute discretion,
not to purchase the Property. If no notice of termination is given by Purchaser
prior to the expiration of the Investigation Period, Purchaser and Seller shall
proceed toward Closing in accordance with the other terms of this Agreement,
including Purchaser's delivery of the Additional Deposit in accordance with
Paragraph 2.

6

(b)              
Seller shall cooperate with Purchaser in connection with its evaluation
of the Property Seller has provided Purchaser on or before the Effective Date
with copies of the documents and instruments set forth in Schedule  2 (collectively,
the “Property Information”) to the extent in Seller’s possession or control. In
addition to the Property Information and the Loan Documents, Seller shall
provide Purchaser with copies of such other reports, studies, leases (other
than copies of each individual tenant lease) and other documents in Seller’s
possession or control related to the Property as Purchaser shall reasonably
request. Purchaser shall have no obligation to pay Seller for any of such
reports, studies or other documents provided by Seller to Purchaser, all of
which shall be provided at no cost to Purchaser. Purchaser agrees that it will
preserve the confidentiality of all such documents provided by Seller; that it
will not divulge the existence or contents of any such documents to any
persons, except to its attorneys, advisors, consultants, lenders and others
employed by Purchaser to assist it in the purchase of the Property, each of
whom shall likewise observe and preserve such confidentiality, subject to any
obligation on the part of such person to disclose or deliver such information
pursuant to court order or as required pursuant to applicable laws. The
foregoing confidentiality obligations shall survive any termination of this
Agreement but shall terminate at Closing in the event Closing occurs hereunder.

(c)               
In the event that this Agreement is terminated without completion of the
transaction contemplated herein, Purchaser shall return to Seller all documents
provided to Purchaser pursuant to this Agreement, and shall additionally
provide to Seller copies of all third party studies or reports obtained by
Purchaser pertaining to the Property during the course of its investigations
and inspections, it being understood that Seller shall have no right to rely on
any such reports without the consent of the person or persons preparing such
studies and reports. The foregoing obligations shall survive any termination of
this Agreement, but shall terminate at Closing in the event that Closing occurs
hereunder.

8.                 
Purchaser’s Default; Liquidated Damages. If, prior to Closing,
Purchaser defaults in performing its obligations under this Agreement, Seller’s
sole remedy for such default shall be to give the Escrow Agent and Purchaser
prompt written notice of such default and the Escrow Agent shall, after giving
the parties five (5) working days’ notice thereof (if Purchaser fails to cure
such default within that time), pay over to Seller the Earnest Money as full
and complete liquidated damages hereunder. Thereafter, Purchaser shall have no further
obligations hereunder to Seller or any others, including but not limited to the
Escrow Agent, brokers, realtors and agents. Notwithstanding the foregoing, in
the event of a dispute regarding Seller’s right to payment of the Earnest
Money, Escrow Agent continues to hold the Earnest Money subject to the provisions
of Paragraph 28.

9.                 
Closing; Closing Deliveries and Closing Conditions. The
consummation of the transaction described herein (“Closing”) will be held at
the offices of the Title Insurer or such other location mutually agreed upon by
Purchaser and Seller on the later of (i) ten (10) days after Purchaser’s
receipt of written approval by the Lender and HUD of the transfer of the
Property to Purchaser and the assumption of the Loan by Purchaser, or (ii)
fifteen (15) days after the expiration of the Investigation Period (the
“Closing Date”). At Closing, Purchaser shall pay to Seller the outstanding
balance of the Purchase Price provided for in Paragraph 3(c) hereof, the Escrow
Agent shall pay to Seller the Earnest Money, and Seller shall give Purchaser
possession and occupancy of the Property subject only to the Permitted
Encumbrances. Any eminent domain awards, proceeds from sale under threat or
exercise of the power of eminent domain and insurance proceeds which are to be
paid or are payable to Purchaser pursuant to Paragraph 11 hereof, shall be paid
or assigned to Purchaser at Closing.

Seller agrees
that Purchaser is permitted to download lease, tenant and other property
information from Seller's on-site computers within seven (7) business days of
Closing, after which time Seller and its agents shall have the right to enter
upon the Property to remove any of Seller's confidential information not related
to the operation of the Property, to remove Seller's management software, and to
disconnect or terminate any links to Seller's server and/or database from such
on-site computers. The terms of the immediately preceding sentence shall survive
Closing.

7

Furthermore, Seller shall, at Seller’s sole cost and
expense, transfer or deliver to Purchaser at Closing (or at such other time
hereinafter set forth) the deposits, escrows, affidavits, certificates,
instruments and other matters hereinafter described, each instrument to be
executed on behalf of Seller by its duly authorized officer and to be in form
to be approved by counsel for Seller and Purchaser

(a)               
The Deed;

(b)              
An assignment and assumption agreement, in form and substance acceptable
to Seller and Purchaser, pursuant to which Seller shall transfer to Purchaser
(i) all rights in, to and under the Leases, (ii) any unexpired warranties and
guaranties in effect with respect to such portions of the Property, (iii) the Contracts
which are to be assigned by each such party to Purchaser as provided herein, and
(vi) all prorated items and adjustments described in Paragraph 4 above which
are to be paid, transferred, applied or credited to Purchaser at or as of
Closing, as applicable. Such assignment and assumption agreements shall also be
executed by Purchaser at Closing to effect Purchaser’s assumption of all
applicable obligations.

(c)               
A bill of sale from Seller, in form and substance acceptable to Seller
and Purchaser conveying, with a warranty of title but without warranties as to
the condition thereof, all personal property, equipment, signage and fixtures owned
by it and located at or used in connection with the Property, other than
property owned by tenants under the Leases, subject only to the applicable
Permitted Encumbrances and conveying, without warranty of title, all of Seller’s
right, title and interest to the name “Belvedere Apartments”, provided that
Seller shall only quitclaim its right, title and interest in and to the
property identification sign located at the corner of Robious Road and
Belvedere Vista Lane.

(d)              
An updated rent roll for the Property, dated not more than three (3)
days prior to the Closing Date, certified by Seller to be true, accurate and
complete as of such date.

(e)               
The Owner’s Affidavit.

(f)                
All documents required from Seller by the Lender or by HUD for the
transfer to Purchaser of the Property subject to the Loan Documents in
accordance with applicable HUD regulations and requirements and the Loan
Documents. Purchaser shall also execute all documents required from Purchaser
by the Lender or by HUD in accordance with applicable HUD regulations and
requirements and the Loan Documents.

(g)               
Originals or copies (if originals are unavailable) of all plans,
specifications, manuals, warranties, and guarantees in Seller’s possession
relating to the Property.

(h)               
An affidavit stating that all representations and warranties of Seller
set forth in this Agreement remain true and correct, executed and sworn on
behalf of Seller on and as of the Closing Date.

(i)                 
All deposits and escrows provided for in Paragraph 4(c) of this
Agreement

 8

(j)                
Certificates of non-foreign status, information required for Purchaser’s
compliance with I099S regulations, and such affidavits and certifications
requited from or typically provided by sellers for real estate transactions in
the Commonwealth of Virginia from Seller.

(k)              
All other documents reasonably necessary or appropriate to complete the
transaction contemplated by this Agreement

(l)                 
Evidence that any property management agreement for the Property has
been terminated by Seller at no cost, liability or expense to Purchaser.

            9A.      Conditions to Closing.

(a)               
Purchaser’s obligation under this Agreement to acquire the Property is
subject to the fulfillment at or prior to the Closing Date of the following
conditions:

(1)              
Seller shall have performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to the Closing
Date.

(2)              
The Title Insurer is in a position to and will issue to Purchaser the Mk
Policy subject only to the Permitted Exceptions.

(3)              
Each and every representation and warranty made by Seller in this Agreement
shall be true and correct in every material respect both as of the date when
made and as of the Closing Date.

(4)              
All other conditions to Purchaser’s obligation to close set forth in
other provisions of this Agreement have been satisfied, including without
limitation those set forth in Section 21 of this Agreement

If any condition specified in this Section 9A. (a) is not
timely satisfied or waived by Purchaser, Purchaser shall have the right to
terminate this Agreement, in which event, unless such condition has not been
satisfied by reason of a default by Purchaser of its obligations hereunder, the
Earnest Money (or so much thereof as has been deposited) shall be returned to
Purchaser and no party shall have any further rights, duties, obligations or liabilities
under this Agreement except as specifically set forth herein; provided, that
termination of this Agreement shall not be Purchaser’s sole remedy if Seller
defaults; it being specifically understood and agreed that nothing in this
Section 9A. (a) shall relieve Seller from liability for any breach of this
Agreement and that the provisions of Section 15(b) of this Agreement shall
govern and control in the event of a default by Seller hereunder.

(b)              
Seller’s obligation under this Agreement to sell the Property is subject
to the

fulfillment at or prior to the Closing Date of the following conditions:

(1)              
Purchaser shall have performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to the Closing
Date.

(2)              
HUD and Lender shall have consented to the sale of the Property to
Purchaser and consented to the assumption of the Loan by Purchaser.

9

If any condition specified in this Section 9A.(b) is not
timely satisfied or waived by Seller, Seller shall have the right to terminate
this Agreement, in which event, unless such condition has not been satisfied by
reason of default by Seller of its obligations hereunder, the Earnest Money
shall be paid to Seller and no party shall have any further rights, duties,
obligations or liabilities under this Agreement except as specifically set
forth herein.

10.             
Other Costs. Seller agrees to pay at Closing the Virginia
grantor’s tax required for recordation of the Deed, all costs incurred by Seller
in connection with the Transfer Approval Application (as defined herein) and
one-half (1/2) of any escrow fee for the Closing. Purchaser agrees to pay at
Closing the Virginia grantee’s tax, the costs and premium for the Title
Commitment and the Title Policy, including any endorsements to the Title
Policy, the cost of any updated survey obtained by Purchaser, all costs
associated with the transfer and assumption of the Loan and the Loan Documents
(other than the costs to be paid by Seller as provided herein) including any
assumption fee required to be paid to Lender pursuant to the Loan Documents)
and one-half (1/2) of any escrow fee for the Closing. Subject to Paragraph 30,
each party shall pay its own attorney’s fees, regardless of whether Closing occurs
and all other costs incurred by such party in connection with the transactions
contemplated by this Agreement.

11.             
Damage or Condemnation.

(a)               
Seller represents that to its knowledge there are no condemnation or
eminent domain proceedings pending or threatened against or affecting the
Property or any portion thereof. Risk of loss to the Property (i) resulting
from any such proceeding which is commenced prior to Closing, and (ii) due to
any cause, including but not limited to fire, other casualty and acts of God,
shall remain on Seller until Closing.

10

(b)              
Prior to Closing, if all or part of the Property shall be destroyed or
damaged by casualty, and there is more than $2,000,000 damage, destruction or
loss, Seller shall so notify Purchaser, and Purchaser may elect either to (i)
terminate this Agreement as provided in Paragraph 15 hereof or (ii) not
terminate this Agreement and proceed to Closing as provided in Paragraphs 9 and
15 hereof. If Purchaser elects to close pursuant to (ii) above, then at Closing
Seller shall assign, transfer and set over to Purchaser, subject to all rights
of the Lender and/or HUD therein under the Loan Documents, all of such Seller’s
right, title and interest in and to any insurance proceeds (including payment
of any deductible) and claims that have been or may thereafter be made for any
such damage. If the damage or loss from casualty is less than $2,000,000, then
Seller shall assign, transfer and convey to Purchaser all of such Seller’s
right, title and interest in and to all condemnation and insurance awards
arising therefrom, subject to all rights of the Lender and/or HUD therein under
the Loan Documents. Seller shall be responsible to obtain any consent required
by the insurer in connection with any such assignment and Purchaser’s
obligation to close shall be conditioned upon such consent as well as Lender’s
and HUD’s agreement to make such insurance proceeds or condemnation awards
available to Purchaser for restoration of the Property. If this Agreement is
not terminated as a result of any such casualty, Seller shall be entitled to utilize
such insurance or condemnation awards (to the extent permitted by the Lender
and/or HUD therein under the Loan Documents) to commence repair of such damage
prior to Closing with the unexpended proceeds to be transferred to Purchaser at
Closing, and in either event this Agreement shall be closed pursuant to the
terms hereof. Seller shall be responsible to obtain any consent required by the
insurer in connection with any such assignment and Purchaser’s obligation to
close shall be conditioned upon such consent as well as Lender’s and HUD’s
agreement to make such insurance proceeds or condemnation awards available to
Purchaser for restoration of the Property. Seller shall be responsible for
payment of any deductible under the applicable insurance policy and if Seller
does not provide Purchaser with written evidence that any such deductible has
been paid prior to the Closing, then Purchaser shall receive a credit against
the Purchase Price in the amount of any such unpaid deductible.

(c)               
Prior to Closing, if all or any part of the Property materially
affecting the use or operation thereof shall be taken under the power of
eminent domain or other proceeding, Seller shall so notify Purchaser, and
Purchaser may elect either to (i) terminate this Agreement as provided in
Paragraph 15 hereof, or (ii) not terminate this Agreement and proceed to
Closing as provided in Paragraphs 9 and 15 hereof. If there is a taking of a
portion of the Property which does not, in Purchaser’s sole discretion,
materially affect the use or operation thereof, Purchaser shall be required to proceed
to Closing. If Purchaser elects to close as provided above, then at Closing
Seller shall assign, transfer and set over to Purchaser, subject to all rights
of the Lender and/or HUD therein under the Loan Documents, all of such Seller’s
right, title and interest in and to any eminent domain awards.

12.             
Representations and Warranties. As a material inducement to
Purchaser’s entering into this Agreement, Seller hereby represents, warrants
and covenants that the following matters are true as of the date of this
Agreement, which shall survive Closing and remain in effect for a period one
(1) year thereafter:

(a)               
Laws. Seller has received no notice from any applicable
governmental authorities of any alleged violations by or at the Property of any
applicable city, county, state and United State laws, ordinances, codes, rules
and regulations.

(b)              
Contracts. On or prior to the Effective Date, Seller shall provide
Purchaser with copies of all of the Contracts, which copies shall be true,
complete and correct in all material respects. The Contracts are the only
Contracts in effect regarding the Property.

(c)               
No Defaults. Seller is in compliance with the Loan Documents, the
Leases and the Contracts. Seller has not received any notice of default under
the Loan Documents which has not been cured or waived by Lender.

(d)              
Conflicts. Except for the required consents of the Lender and
HUD, neither the execution of this Agreement by Seller nor the Closing of the
transactions contemplated hereby by Seller will (i) conflict with, or result in
a breach of the terms, conditions or provisions of, or constitute a default
under, any agreement or instrument to which Seller is a party, or by which it may
be bound or (ii) result in the creation of any material lien, charge or
encumbrance upon the Property, except as permitted hereby in respect of the
Loan Documents.

11

(e)               
Leases. No tenant leases, other than the Leases listed in the
rent roll attached as Exhibit C, affect the Property. To Seller’s
knowledge, all information contained in Exhibit C is true, correct and
complete in all material respects as of the date hereof.  All Leases are in
substantially the form attached hereto as part of Exhibit D except for
addenda which provide for rent credits to managers of the Property, employees of
Seller or Seller’s management company involved in the leasing or maintenance of
the Property and police officers who provide limited off-duty services in
connection with their residency, all of which is reflected in the attached rent
roll. Purchaser agrees that Seller shall have the right to extend such rent
credits to any such managers and employees who will not become managers or
employees of Purchaser for a period through the end of the second full month
after Closing.

(f)                
Status of the Leases. To the knowledge of Seller all of the Lease
are, as of the date of this Agreement, valid and in full force and effect, and
free of any known claims for reduction, deduction, or set-off against rent, or
any other claims against Seller or any managing agent of Seller, unless and
except as otherwise indicted in the rent roll attached hereto as Exhibit C.
No rents or Leases have been assigned, pledged or, otherwise encumbered by
Seller except as additional collateral for the Loan Seller has received no
payments of rent under the Leases more than thirty-one days prior to the due
dates thereof.

(g)               
Commissions. There are no broker’s or agent’s commissions or fees
owed with respect to the Leases.

(h)               
Litigation. Seller knows of no litigation or governmental or
other proceeding or investigation pending or threatened against or relating to
the Property or Seller, including without limitation condemnation or eminent
domain proceedings.

(i)                 
Property Information. All operating statements and, to Seller’s
knowledge, other Property information provided or to be provided by Seller to
Purchaser are or shall be correct and complete in all material respects and
such operating statements present fairly the results of operations of the
Property for the periods indicated.

(j)                
Authority of Seller. Seller is a limited liability company, duly
organized and validly existing under the laws of the Commonwealth Of Virginia.
Seller has full power and authority to enter into this Agreement and to sell
the Property in accordance with the terms and conditions hereof.

(k)              
Environmental Conditions. To Seller’s knowledge, (i) the Property
does not contain any “Hazardous Materials” (as defined below) in violation of
applicable “Environmental Laws” (as defined below), and (ii) the Property is
not subject to federal, state or local regulations or liability because of the
presence of stored, leaked, spilled or disposed petroleum products, waste
materials or debris, underground storage tanks, “PCB’s” or PCB items (as
defined in 40 C.F.R. § 761.3), “asbestos” (as defined in 40 C.F.R. § 763.63),
or the past or present accumulation, treatment, storage, disposal, spillage or
leakage of any Hazardous Materials. As used in this Paragraph 12(k), the term
“Hazardous Materials” shall mean any hazardous wastes, hazardous substances,
hazardous materials, toxic substances, hazardous air pollutants or toxic
pollutants, as those terms are defined in Environmental Laws; the term
“Environmental Laws” shall -mean the Resource Conservation and Recovery Act (42
U.S.C.A. §§ 6901 et seq.) and the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C.A. §§ 9601 et seq.) any amendments
thereto and any regulations promulgated pursuant thereto.

12

(l)                 
Loan Documents. To Seller’s knowledge, the copies of the Loan
Documents provided by Seller to Purchaser are true, correct and complete.
Purchaser acknowledges that the listing of the Loan Documents as set forth on Schedule
1 may not include documents relating to the construction of the
improvements which Seller represents are no longer of any force or effect.

(m)             
Condemnation. Seller has received no notices of any condemnation
or eminent domain proceedings pending or threatened against the Property or any
part thereof.

13.             
Operation of the Property. Between the date hereof and Closing

(a)               
Seller will not enter into any contract (other than new Leases) that
will be an obligation affecting the Property subsequent to the Closing Date
except for contacts entered into in the ordinary course of business that are
terminable without cause and without payment of a penalty on not more than 30
days’ notice.

(b)              
Seller will not remove any personal property from the Property except as
may be required for necessary repair or replacement, and in the event of such
replacement, the replacement shall be of materially equal or better quality and
quantity as existed as of the time of its removal.

(c)               
Seller will maintain casualty insurance of a level and type consistent
with the insurance maintained by Seller prior to the execution of this
Agreement with respect to the Property;

(d)              
Seller shall not do anything, nor authorize anything to be done, which
would adversely affect the condition of title as shown on the Title Commitment
without the prior consent of Purchaser which consent shall not be unreasonably
withheld, conditioned or delayed.

(e)               
Seller will maintain and operate the Property in accordance with first
class apartment management practices for the Richmond, Virginia area.

(f)                
Seller agrees that no new leases will be entered into with any new or
existing tenants unless such leases (i) have a lease term (including renewals and
extensions) of no longer than one year, (ii) provide for rent at rates
consistent with the rents reflected in the current rent roll and (iii) are
pursuant to the form of lease attached hereto as part of Exhibit D.

(g)               
Seller shall make all payments due on the Loan or as otherwise required
pursuant to the Loan Documents, pay all operating expenses through the Closing
Date and otherwise duly observe and perform its obligations under the Loan Documents,
the Leases and the Contracts. Upon request, Seller shall keep Purchaser
reasonably informed as to the status of leasing prior to the Closing Date and
shall deliver to Purchaser copies of all new Leases.

(h)               
Seller shall restore all units that become vacant at least five (5) days
prior to the Closing to “rent-ready” condition in accordance with Seller’s
customary practice and procedure for the Property. Purchaser and Seller shall
inspect each of such vacant units prior to the Closing to confirm that they are
in rent ready” condition. To the extent any of such units is not in “rent
ready” condition as of the date of Closing, Purchaser shall be entitled to a
credit in the amount of the costs, as Purchaser and Seller agree, acting
reasonably, are necessary in order to pay for the cost of restoring such vacant
units to “rent ready” condition.

13

(i)                 
At Closing, Seller shall cause any property management agreement for the
Property to be terminated, at no cost, liability or expense to Purchaser.

14.             
Commission. Each of Seller and Purchaser represents to the other
that there are no amounts due any realtor, broker, agent, finder or other
person in connection with this transaction other than Cushman & Wakefield.
Seller shall be responsible for any commission which may be due and payable to
Cushman & Wakefield pursuant to separate agreement between Seller and
Cushman & Wakefield. Each of Seller and Purchaser covenants that it will
indemnify and hold the other harmless from and against any and all liabilities
and expenses in connection with any claim or claims of any other realtor,
broker, agent, finder or other person arising out of its participation in this
transaction, including, without limitation, attorneys’ fees.

15.             
Termination; Specific Performance.

(a)               
If Purchaser elects to terminate this Agreement pursuant to Paragraph 5,
Paragraph 7, Paragraph 11 or Paragraph 21 hereof, then, in any such event, the
Escrow Agent forthwith shall return the Earnest Money in full to Purchaser and
the parties hereto shall have no further obligations or liabilities hereunder
except for the obligations of the parties which specifically survive the
termination of this Agreement. In addition, if Purchaser does not elect to terminate
this Agreement pursuant to Paragraph 7, but Purchaser does elect to terminate
the Other Agreement pursuant to the corresponding Paragraph 7 of such Other
Agreement (an “Other Agreement Termination Notice”), then Seller shall have the
one-time right, to be exercised within five (5) business days following
Purchaser’s deliver of such Other Agreement Termination Notice, to terminate
this Agreement by written notice to Purchaser and, in such event, the Escrow
Agent forthwith shall return the Earnest Money in full to Purchaser and the parties
hereto shall have no further obligations or liabilities hereunder except for
the obligations of the parties which specifically survive the termination of
this Agreement.

(b)              
If Seller defaults in the performance of any of its obligations
hereunder, then, in such event, Purchaser shall have the right to exercise any
one of the following remedies, as its sole and exclusive remedies: (a) to
terminate this Agreement, after having given five (5) days written notice to Seller
and Escrow Agent (and Seller has failed to cure such breach or default within that
period of time), whereupon the Earnest Money shall immediately be
refunded/returned to Purchaser and neither Seller nor Purchaser shall have any
further rights or duties under this Agreement, except for the indemnities of
the parties which specifically survive the termination of this Agreement; or
(b) seek to enforce specific performance of this Agreement (with the costs and
expenses of any such action being paid to the prevailing party by the non
prevailing party). Notwithstanding the foregoing to the contrary, in the event
specific performance is not reasonably available because of any affirmative act
or acts of Seller or any act or acts of any person or entity affiliated with Seller
who colludes with Seller’ so as to render specific performance not reasonably
available, then Purchaser shall have the right to terminate this Agreement,
whereupon it shall become entitled to receive (or seek, as the case may be) (i)
the immediate return of the Earnest Money and (ii) actual direct (but not
indirect or consequential) damages against Seller.

14

16.             
Assignment. Purchaser may, without Seller’s consent, assign this
Agreement and all of its rights hereunder to a single-purpose entity to be
formed by Purchaser in compliance with applicable HUD requirements, which entity
shall acquire title to the Property at Closing and of which entity Purchaser or
an affiliate of Purchaser shall be a principal. Otherwise, Purchaser shall have
no right to assign this Agreement and its rights hereunder to any other entity
or individual unless approved by Seller in its sole discretion. Notwithstanding
any of the foregoing, however, in the event of any assignment of this Agreement
by Purchaser, whether with or without the written consent of Seller, Purchaser
shall remain jointly and severally liable with such assignee for all
obligations and liabilities hereunder subject, in all events, to the provisions
of Paragraph 8.

17.             
Waiver. The failure of either party to exercise any right
hereunder, or to insist upon strict compliance by the other party, shall not constitute
a waiver of that party’s right to demand strict compliance with the terms and
conditions of this Agreement.

18.             
Notices. Any notices, requests, or other communications required
or permitted to be given hereunder shall be in writing and shall be either (i)
delivered by hand, (ii) mailed by United States certified or registered mail,
return receipt requested, postage prepaid, (iii) sent by overnight delivery
service (e.g., Federal Express, Airborne, etc.), or (iv) sent by facsimile
(with the original being sent by one of the other permitted means or by regular
United States mail) and addressed to each party at the applicable address set
forth herein. Any such notice, request, or other communication shall be
considered given or delivered, as the case may be, on the date of hand delivery
(if delivered by hand), on the third (3rd) day following deposit in the United
States mail (if sent by United States registered mail), on the next business
day following deposit with an overnight delivery service with instructions to
deliver on the next day or on the next business day (if sent by overnight
delivery service), or on the day sent by facsimile (if sent by facsimile, provided
the original is sent by one of the other permitted means as provided herein in
this paragraph or by regular United States mail). However, the time period within
which a response to any notice or request must be given, if any, shall commence
to run from the date of actual receipt of such notice, request, or other
communication by the addressee thereof. Rejection or other refusal to accept or
inability to deliver because of a changed address of which no notice was given
shall be deemed to be receipt of the notice, request, or other communication.
By giving at least ten (10) days prior written notice thereof, any party hereto
may, from time to time and at any time, change its mailing address hereunder.

If to Purchaser:

Associated Estates Realty
Corporation 

1 AEC Parkway 

Richmond Heights, Ohio 44143 

Attention: Martin A. Fishman 

Fax:  (216) 797-8719

With a copy to:

Greenberg Traurig LLP

77 West Wacker Drive, Suite 2500

Chicago, Illinois 60601 

Attention: Michael T. Fishman 

Fax: (312) 456-8435

15

If to Seller:

Bogese, L.C.

113 South 12th Street

Richmond, Virginia 23219
 

Attention: Michael Bogese, Jr.
 

Fax: (804) 644-4086

With a copy to:

Troutman Sanders LLP
 

1001 Haxall Point
 

Richmond, Virginia 23219
 

Attention:  Edward B. Kidd
 

Fax: (804) 698-6000

If to
Escrow Agent:

First
American Title Insurance Company

30 N.
LaSalle Street, Suite 300  

Chicago,
Illinois 60602  

Attention:
Jim McIntosh  

Fax: (312) 553-0480

19.             
Survival. All of Seller’s and Purchaser’s covenants, agreements,
representations and warranties contained in Paragraphs 4, 6, 7, 12, 14, 20 and
21 of this Agreement shall survive Closing and not merge into the Deed or any
other documents delivered hereunder. All other covenants, agreements,
representations and warranties contained in this Agreement shall terminate upon
Closing.

20.             
Indemnification. Seller hereby agrees to indemnify and hold
harmless Purchaser and its successors and assigns from and against any and all
claims, costs, penalties, damages, losses, liabilities and expenses (including
reasonable attorneys’ fees) arising before or after Closing (i) as a result of
any property damage or injuries to persons, including death, caused by any
occurrence as to the Property prior to Closing, or (ii) as a direct and
proximate consequence of any breach by Seller of any of its representations,
warranties or obligations set forth herein or in any other document or
instrument delivered by Seller pursuant hereto. Purchaser agrees to indemnify
and hold harmless Seller and its successors and assigns from and against any
and all claims, costs, penalties, damages, losses, liabilities and expenses
(including reasonable attorneys’ fees) arising (i) after Closing as a result of
any property damage or injuries to persons, including death, caused by any
occurrence as to the Property after Closing or (ii) before or after Closing as
a direct and proximate consequence of any breach by Purchaser of any of
its obligations set forth herein or in any other document or instrument
delivered by Purchaser pursuant hereto.

16

21.             
Approval of Transfers by HUD and Lender.

(a)               
Purchaser’s obligation to purchase the Property and proceed to the
Closing is further subject to the condition precedent that the Lender and HUD
shall have approved the sale of the Property to Purchaser and consented to the
assumption of the Loan by Purchaser (i) without modification of the Loan
Documents, (ii) without any requirement that would result in a material
increase in any replacement reserves or mortgage escrow accounts, and (iii)
without any obligation to fund additional repairs or capital expenditures which
exceed a normal expense to Purchaser and are materially different from or
substantively in excess of those, if any, identified by Purchaser in connection
with its due diligence examination of the Property. Seller shall cause Lender
to deliver to Purchaser no more than ten (10) days prior to Closing Lender’s
written confirmation of the amount of outstanding principal, interest and any
other amounts and deposits accrued and payable under the Loan Documents
together with written confirmation that the Loan is in full force and effect
and that to its knowledge Seller is not in default of any of the provisions of
the Loan Documents. No transfer of any interest in the Property under this
Agreement shall be effective prior to such HUD approval. Purchaser will not
take possession of the Property nor assume any benefits of Property ownership
prior to such approval by HUD.

(b)              
Purchaser shall submit an application for approval of the transfer and
assumption to HUD (the “Transfer Approval Application”), using commercially
reasonable efforts to insure that the Transfer Approval Application is complete
and in material compliance with all applicable requirements, within two (2)
business days after (i) approval of the draft Transfer Approval Application by
Seller as provided herein and (ii) Seller’s delivery of any documents required
to be provided by Seller and Lender as part of the Transfer Approval
Applications (after completion of any corrections required to conform to the
applicable requirements after Purchaser’s review thereof) and shall diligently
pursue in good faith approval of the Transfer Approval Application at
Purchaser’s sole expense (except as otherwise expressly provided in Section 21(a)
and 22(d) of this Agreement and except for legal and other accounting fees
incurred by Seller in providing the information and documentation Seller is
required to provide in connection with the Transfer Approval Application).
Purchaser shall promptly forward to HUD and the Lender such documents required
to correct any deficiencies in the Transfer Approval Application as may be
identified by HUD or the Lender. Seller shall cooperate with Purchaser in
connection with such applications including providing all information and
documents within Seller’s possession or control as maybe reasonably required on
a timely basis. Purchaser shall provide Seller with (i) an itemization of any
information or documents required from Seller for the Transfer Approval Application
within ten (10) days after the Effective Date and (ii) a copy of its proposed
Transfer Approval Application within ten (10) days after the expiation of the
Investigation Period and prior to its submittal to HUD and the Lender. If,
notwithstanding Purchaser’s diligent and good faith efforts, the Transfer
Approval Application is not approved within one hundred eighty (180) days after
submittal of the Transfer Approval Application, either party may terminate this
Agreement by written notice to the other party and the Escrow Agent, in which
event the Earnest Money will be refunded to Purchaser.

17

(c)               
In connection with Purchaser’s assumption of the Loan, Purchaser and
Seller acknowledge that there are certain escrow deposits (i.e. tax, insurance,
MIP, replacement reserves, etc.) being held by the Lender or HUD in connection
with the Property. Purchaser and Seller acknowledge and agree that, at Closing,
all such escrows shall be transferred to Purchaser with the Property, but that
Seller shall be entitled to a credit for the amounts held in such escrow
deposits, subject to the other provisions of this Agreement regarding proration
of real estate taxes and other expenses. Seller shall also be entitled to a credit
for any prepaid MIP.  

(d)              
Within 45 working days after the Closing Date, Seller at its sole cost
and expense, shall furnish to HUD audited financial statements for the Property
covering the period from the date of Seller’s last audited report to the Closing
Date in accordance with HUD’s final approval. process requirements.

(e)               
Purchaser acknowledges that HUD requires completion of the previous
participation” requirement as part of the Transfer Approval Application and
therefore agrees to initiate any applications, submittals and/or registrations
required to satisfy the previous participation” requirements of the Transfer
Approval Application in sufficient time to permit the timely preparation and
submittal of the Transfer Approval Application pursuant to the terms and
timelines set forth in this Agreement.

22.             
Miscellaneous. The section headings and captions contained herein
are for reference purposes only and shall not in any way affect the meaning and
interpretation of the terms of this Agreement All questions with respect to the
construction of this Agreement and the rights and liabilities of the parties
hereto shall be determined in accordance with the applicable provisions of the
laws of the Commonwealth of Virginia. This Agreement may be executed in any
number of duplicate originals or counterparts, all of which shall constitute a
single agreement. Any duplicate original on which the signatures of both
parties shall appear shall be deemed an original of this Agreement. Any number
of counterparts on which the signatures of both parties shall appear shall
constitute a duplicate original. This Agreement constitutes the entire
agreement of the parties regarding the Property, and there are no outstanding agreements
between the parties hereto other than those set out in this Agreement. This
Agreement may not be modified, changed or amended except by a written
instrument executed by all of the parties hereto. In the absence of a specific
provision to the contrary, the party upon whom an obligation is imposed
hereunder shall perform the obligation at its expense. As used herein the
singular shall include the plural, the plural the singular and the use of any
gender shall be applicable to all genders. Time shall be of the essence as to all
matters provided for in this Agreement

23.             
Binding Effect. This Agreement shall be fully binding on and
enforceable against, all parties hereto and their respective heirs,
administrators, successors and permitted assigns.

24.             
Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the Property and supersedes all prior and
contemporaneous negotiations, understandings and agreements, written or oral,
between the parties. This Agreement shall not be amended or modified, and no
waiver of any provision hereof shall be effective, unless set forth in a
written instrument authorized and executed with the same formality as this
Agreement

18

25.             
Severability. The provisions of this Agreement are severable, and
if any term, clause, or provision of this Agreement or the application thereof
to any person or circumstances is to any extent adjudicated and declared to be
illegal, invalid, or unenforceable under present or future laws in effect
during the term hereof, it is the intention of the parties hereto that the
remainder of this Agreement, and the application of such term, clause or
provision to persons or circumstances other than those to which it is held illegal,
invalid or unenforceable, shall not be affected thereby.

26.             
Days. If the final day of any period of time set out in any
provision of this Agreement or any action, is required to be performed, or if
any notice, consent or other communication is to be given on a Saturday; Sunday
or holiday recognized by the Commonwealth of Virginia or the State of Ohio for
its employees, then in such case, such period shall be deemed extended to the
next day which is not a Saturday, Sunday or holiday recognized by the
Commonwealth of Virginia or the State of Ohio. All references to any specified
number of days contained herein shall be deemed to refer to calendar days
unless a reference to business days is expressly provided.

27.             
Presumptions. No presumption shall be created in favor of or
against any of the parties to this Agreement with respect to the interpretation
of any term or provision of this Agreement due to the fact that this Agreement
was prepared by or on behalf of one of the parties hereto.

28.             
Escrow Agent.

(a)               
Escrow Agent joins in this Agreement to agree to accept and hold the
Initial Deposit and the Additional Deposit in accordance with the terms of this
Agreement

(b)              
Purchaser and Seller agree that in performing any of its duties under
this Agreement, Escrow Agent shall not be liable for any loss, costs or damage
which it may incur as a result of serving as Escrow Agent hereunder, except for
any loss, costs or damage arising out of the willful misconduct of Escrow
Agent. Accordingly, Escrow Agent shall not incur any liability with respect to
any action taken or omitted to be taken in good faith upon reliance upon any
document, including any written notice of instruction provided for in this
Agreement,, not only as to its due execution and validity and effectiveness of
its provisions, but also to the truth and accuracy of any information contained
therein, which Escrow Agent shall in good faith believe to be genuine, to have
been signed or presented by a proper person or persons and to conform with the
provisions of this Agreement.

(c)               
In the event of a dispute between any of the parties hereto, sufficient
in the discretion of Escrow Agent to justify its doing so, Escrow Agent shall
be entitled to tender unto the registry or custody of any court of competent
jurisdiction all money held by it under the terms of this Agreement, together
with such legal pleadings as it deems appropriate and thereupon be discharged
from further responsibility under this Agreement.

19

29.             
Tax Deferred Exchange. Purchaser and Seller each acknowledge that
the other may desire that this transaction be a part of a tax-deferred
transaction under the Internal Revenue Code. Purchaser and Seller agree to
cooperate with each other in order to permit this transaction to qualify for
tax deferral under the Internal Revenue Code provided that such cooperation
shall not prejudice any of the rights of Purchaser or Seller under this
Agreement. Purchaser and Seller each specifically agrees that the rights of
either party to this Agreement may be assigned to a Qualified Intermediary in
connection with any such exchange without the consent of the other party. The
cooperating party shall not be required to (i) incur any additional cost or
expense in connection with any such exchange, including, without limitation,
attorneys’ fees, (ii) enter into any agreement other than an agreement which is
fully non-recourse to such party or (iii) take title to any property as a part
of any such transaction; and the exchanging party shall indemnify and hold the
cooperating party harmless with respect to all costs, expenses, losses or
liabilities of any nature arising out of any such transaction including, without
limitation, attorneys’ fees.

30.             
Attorneys’ Fees. In the event of any action or proceeding brought
by either party against the other under this Agreement, the prevailing party
shall be entitled to recover all costs and expenses including its attorneys’
fees in such action or proceeding in such amount as the court may adjudge
reasonable. The prevailing party shall be determined by the court based upon an
assessment of which party’s major arguments made or positions taken in the
proceedings could fairly be said to have prevailed over the other party’s major
arguments or positions on major disputed issues in the court’s decision. If the
party which shall have commenced or instituted the actions, suit or proceeding
shall dismiss or discontinue it without the concurrence of the other party,
such other party shall be deemed the prevailing party.

31.             
Other Agreement. Unless Purchaser elects to terminate the Other
Agreement pursuant to an Other Agreement Termination Notice and Seller does not
timely elect to terminate this Agreement pursuant to the requirements of
Paragraph 15 of this Agreement, Seller’s obligation to sell the Property and
proceed to the Closing is conditioned upon the concurrent closing of the
transactions contemplated by the Other Agreement and a default by Purchaser in
connection with closing under the Other Agreement shall be a default by
Purchaser under this Agreement; provided, that if the closing of the
transactions contemplated by the Other Agreement do not occur by reason of (i) a
default by Seller Affiliate under the Other Agreement, (ii) the failure of any
condition precedent to Purchaser’s obligation to proceed to the closing of the
transactions contemplated by the Other Agreement, or (iii) termination of the
Other Agreement in accordance with the terms thereof as a result of a casualty
or condemnation, then the condition for concurrent closings shall be waived and
Seller shall be obligated to proceed with the Closing of the transactions
contemplated by this Agreement.

[SIGNATURES ON
FOLLOWING PAGES]

20

IN WITNESS WHEREOF, the parties have caused this
instrument to be executed for and in their respective names by their duly
authorized officials and agree to be bound hereby as of the day and year first
above stated.

SELLER:

BELVEDERE PROPERTIES, LLC

By:       /s/ Michael J. Bogese, Jr.                     
 

Name:  Michael J. Bogese                               
 

Title:     Manager                                              
 

PURCHASER:

ASSOCIATED ESTATES REALTY

CORPORATION

By:                                                                  
 

Name: Martin A. Fishman

Title: Vice President

ESCROW AGENT:

FIRST AMERICAN TITLE INSURANCE COMPANY

By:       /s/ James. W. McIntosh                       
 

Name:  James W. McIntosh                             
 

Title:     V.P.                                                    
 

IN WITNESS WHEREOF, the parties have caused this
instrument to be executed for and in their respective names by their duly
authorized officials and agree to be bound hereby as of the day and year first
above stated.

SELLER:

BELVEDERE PROPERTIES, LLC

By:                                                                  
 

Name:                                                             
 

Title:                                                                
 

PURCHASER:

ASSOCIATED ESTATES REALTY

CORPORATION

By:       /s/ Martin A. Fishman                          
 

Name: Martin A. Fishman

Title: Vice President

ESCROW AGENT:

FIRST AMERICAN TITLE INSURANCE COMPANY

By:                                                                  
 

Name:                                                             
 

Title:

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