10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission file number: 0-51948

Excelsior LaSalle Property Fund, Inc.

(Exact name of registrant as specified in its charter)

Maryland	20-1432284
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

225 High Ridge Road, Stamford, CT, 06905-3039

(Address of principal executive offices, including Zip Code)

(203) 352-4400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of each class

Class A Common Stock, $.01 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨ Accelerated filer  x Non-accelerated filer  ¨ Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

As of June 30, 2009, the aggregate market value of the 4,135,635 shares of common stock held by non-affiliates of the Registrant was $298,778,391 based upon the last appraised value of $72.24 per share.

As of March 15, 2010, there were 4,135,635 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Specified portions of the registrant’s proxy statement, which will be filed with the Commission pursuant to Regulation 14A in connection with the registrant’s 2010 Annual Meeting of Stockholders are incorporated by reference into Part III of this annual report.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	2
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	21
Item 3.	Legal Proceedings	27
Item 4.	Submission of Matters to a Vote of Security Holders	27
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
Item 6.	Selected Financial Data	32
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 8.	Financial Statements and Supplementary Data	56
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	56
Item 9A.	Controls and Procedures	56
Item 9B.	Other Information	56
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	57
Item 11.	Executive Compensation	57
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	57
Item 13.	Certain Relationships and Related Transactions, and Director Independence	57
Item 14.	Principal Accountant Fees and Services	57
PART IV
Item 15.	Exhibits, Financial Statement Schedule	57

Cautionary Note Regarding Forward-Looking Statements

This Form 10-K may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), regarding, among other things, our plans, strategies and prospects, both business and financial. Forward-looking statements include, but are not limited to, statements that represent our beliefs concerning future operations, strategies, financial results or other developments. Forward-looking statements can be identified by the use of forward-looking terminology such as, but not limited to, “may,” “should,” “expect,” “anticipate,” “estimate,” “would be,” “believe,” or “continue” or the negative or other variations of comparable terminology. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-K is filed with the Securities Exchange Commission (“SEC”). Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this Form 10-K. Important factors that could cause actual results to differ materially from the forward-looking statements are disclosed in “Item 1A. Risk Factors,” “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Presentation of Dollar Amounts

Unless otherwise noted, all dollar amounts, except per share dollar amounts, reported in this Form 10-K are in thousands.

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PART I

Item 1. Business.

GENERAL

Except where the context suggests otherwise, the terms “we,” “us,” “our” and the “Fund” refer to Excelsior LaSalle Property Fund, Inc.

The Fund is a Maryland corporation and was incorporated on May 28, 2004 (“Inception”). The Fund was created to provide accredited investors within the meaning of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), with an opportunity to participate in a private real estate investment fund that has elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes. We are authorized to issue up to 100,000,000 of our Class A common stock, $0.01 par value per share (our “Common Stock” or “Shares”). Please note that while we use the term “Fund,” the Fund is not a mutual fund or any other type of “investment company” as that term is defined by the Investment Company Act of 1940, as amended (the “Investment Company Act”), and will not be registered under the Investment Company Act.

The Fund is managed by Bank of America Capital Advisors LLC (the “Manager”). The Manager is registered as an investment advisor with the Securities and Exchange Commission (the “SEC”). The Manager has the day-to-day responsibility for our management and administration pursuant to a management agreement between the Fund and the Manager (the “Management Agreement”).

LaSalle Investment Management, Inc. (“LaSalle”) acts as our investment advisor (the “Advisor”), pursuant to the advisory agreement between the Fund, LaSalle and the Manager (the “Advisory Agreement”). The Advisor is registered as an investment advisor with the SEC. The Advisor has broad discretion with respect to our investment decisions and is responsible for selecting our investments and for managing our investment portfolio pursuant to the terms of the Advisory Agreement. LaSalle is a wholly-owned but operationally independent subsidiary of Jones Lang LaSalle Incorporated, a New York Stock Exchange-listed real estate services and money management firm. We have no employees as all operations are overseen and undertaken by the Manager and Advisor. In accordance with Maryland law, the Fund does have certain officers who administer the Fund’s operations. These officers are employees of, and are compensated by, the Manager.

The Manager has retained The Townsend Group, at the expense of the Manager, to assist the Manager in reviewing the investment activities of the Advisor and the investment performance of the Fund’s assets and monitoring compliance with the Fund’s investment guidelines. The Townsend Group is a consulting firm whose exclusive focus is the asset class of real estate. Founded in 1983, and with offices in Cleveland, Denver, San Francisco and London, The Townsend Group is a provider of real estate consulting services to institutional investors in the United States.

Our primary business is the ownership and management of a diversified portfolio of retail, office, industrial and apartment properties primarily located in the United States. As of December 31, 2009, we wholly or majority owned and controlled 38 consolidated properties. As of December 31, 2009, we owned interests in two unconsolidated properties. For a description of our properties, see “Item 2. Properties.”

INVESTMENT STRATEGY

Our investment objective is to seek to generate attractive long-term risk-adjusted total returns. We intend to pursue our investment objective by investing in real estate and real estate related assets directly or through subsidiaries (as described below), including joint venture arrangements with third parties. We have acquired and managed a portfolio of real estate investments that is diversified by property sector and geographic market. We expect to actively manage the mix of properties and markets over time in response to changing operating fundamentals within each property sector and to changing economies and real estate markets in the cities considered for investment. When consistent with our investment objective, we will also seek to maximize the tax

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efficiency of our investments through tax-free exchanges and other tax planning strategies. Our investment strategy may be changed from time to time by our board of directors. Given the uncertain economic climate and extraordinary conditions in the commercial real estate industry, management has made it a priority to implement a cash conservation strategy designed to strengthen our balance sheet and protect the value of the Fund’s assets. In this regard, we are not currently actively pursuing property acquisitions and have engaged in selective property sales. We may make further selective property dispositions. For more information regarding our cash conservation strategy, please see “Liquidity and Capital Resources—Recent Events and Outlook” in Item 7 below.

We have relied primarily on fixed-rate financing, locking in what were favorable spreads between real estate income yields and mortgage interest rates and have tried to maintain a balanced schedule of debt maturities. We attempted to limit overall portfolio leverage to 65% at the time we made our investments (portfolio leverage is calculated as our share of the current property debt balance divided by the fair value of all our real estate investments). Declining commercial property values have caused our portfolio leverage to increase above our target leverage ratio of 65%. Based upon the valuation declines in our portfolio, we estimate our current loan-to-value to be approximately 85%.

The uncertainty of the current economic environment and lack of available credit has caused unprecedented volatility in the value of all financial assets, and has spread to the commercial real estate markets, which are highly dependent upon the availability and terms of credit. After a number of years of above average appreciation in the real estate markets, values began to decrease during 2008 with significantly reduced transaction volume. Real estate values, including the values of properties that we own, may continue to decline.

As our portfolio of properties has been relatively static over the last two years (except for selected dispositions) and in response to the broader financial crisis and recessionary environment, we have prioritized the use of cash generated from operations and dispositions to strengthen our balance sheet. This strengthening has occurred as we have significantly reduced our borrowings on our line of credit, we renewed and extended the term and relaxed the covenants on the credit facility, and we have substantially increased our liquidity through accumulating cash reserves that may be necessary for the management of our properties.

We will continue to monitor the broader economic slowdown and, as best we can, mitigate the impacts of weakening property fundamentals on our portfolio. Our challenge for the coming year (and foreseeable future) will be to balance the objectives of further growing our cash reserves and retiring the debt (thereby reducing risk in our portfolio) with our desire to distribute free cash flow generated from our property investments to pay dividends to stockholders or to repurchase shares through tender offers. Our strategic bias towards longer dated leases, higher credit tenants and fixed rate financing as we grew our portfolio was at the time considered conservative by most objective criteria. However, the duration and magnitude of the current recession has exceeded expectations and historical precedents causing even the most conservative and defensive investment strategies to under perform. As liquidity (both debt and equity) dried up for commercial real estate and as valuations and operating fundamentals have continued to decline, we have been responsive to these changes in market conditions and adopted a more defensive posture in the management of our balance sheet. In this regard, in addition to establishing cash reserves for future capital needs, after 17 consecutive quarters of paying a dividend, we have not paid dividends since May 2009 and did not conduct a tender offer during 2009.

INVESTMENT POLICIES

We may invest directly in real estate or indirectly in real estate through interests in corporations, limited liability companies, partnerships and joint ventures having an equity interest in real property, real estate investment trusts, ground leases, tenant in common interests, mortgages, participating mortgages, convertible mortgages, second mortgages, mezzanine loans or other debt interests convertible into equity interests in real property, options to purchase real estate, real property purchase-and-leaseback transactions and other transactions and investments with respect to real estate.

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Historically, long-term non-recourse financing, on a portfolio-wide basis, was not expected to exceed 65% of portfolio fair value. Initial leverage on any single property was not expected to exceed 75% of the property’s fair value without the approval of our board of directors. There is no set limit as to the number of mortgages that may be secured by a single property, as long as the 75% leverage threshold is not exceeded. Declining real estate values have caused the Fund’s portfolio leverage to increase well above our target leverage of 65%. Based upon the valuation declines in our portfolio, we estimate our current loan-to-value to be approximately 85%. Our board of directors has approved a resolution that allows the Fund to operate with a higher level of portfolio leverage as a result of the decrease in property values. Going forward, we intend to reduce the overall leverage on the Fund, subject to having available capital, through principal amortization on existing loans, refinancing maturing property level debt at lower leverage amounts and selective property dispositions. At December 31, 2009, we had an unsecured line of credit of $50,000 for short-term operating, property acquisitions and other working capital needs, which is excluded from the portfolio leverage limits described above. This line of credit expired in February 2010 and was replaced with a $17,000 term loan expiring in February 2012.

Our Advisor performs hold/sell analyses for each property as part of the annual strategic planning process. A sale decision may also originate at the portfolio or Fund level, where diversification objectives relating to property, geographical mix or scheduled lease expirations may indicate the need to rebalance the portfolio, where our Advisor’s perspectives on risks within a property sector change, or where the Fund’s capital needs have changed. A range of property-specific conditions may also indicate the need to sell, including changing demand fundamentals, potential market oversupply, changing conditions in debt or equity capital markets, changes in the asset’s competitive status in its market, or lastly, changes in the Advisors outlook on the availability of refinancing a certain property. Ultimately, the optimal holding period for every property is the period that maximizes return within our risk tolerance objectives. This goal is achieved when:

• the Advisor’s research and analysis conclude that the asset or the market have reached a cyclical peak;

• analysis indicates that a property is likely to under-perform our return objectives going forward;

• analysis indicates that a property’s risk profile exceeds our tolerances; or

• we can achieve improved returns by redeploying capital into new investments.

We have no limitation on the percentage of total assets that may be invested in any asset, nor the concentration of investments in any one geographic location within the United States nor to any individual tenant. The Advisory Agreement includes broad investment guidelines that provide for our diversification goals, which include goals for investment style, property type and geographic diversification.

COMPETITION

We face competition when attempting to make real estate investments, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension funds, partnerships and individual investors. The leasing of real estate is highly competitive. Our properties compete for tenants with similar properties primarily on the basis of location, total occupancy costs (including base rent and operating expenses), services provided, and the design and condition of the improvements.

SEASONALITY

With the exception of our student-oriented apartment communities, our investments are not materially impacted by seasonality, despite certain of our retail tenants being impacted by seasonality. Percentage rents (rents computed as a percentage of tenant sales) that we earn from investments in retail and office properties may, in the future, be impacted by seasonality.

For our six student-oriented apartment communities, the majority of our leases commence mid-August and terminate the last day of July. These dates generally coincide with the commencement of the universities’ fall

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academic term and the completion of the subsequent summer school session. In certain cases we enter into leases for less than the full academic year, including nine-month or shorter-term semester leases. As a result, we may experience significantly reduced cash flows during the summer months at properties leased under leases having terms shorter than 12 months. We are required to re-lease each property in its entirety each year, resulting in significant turnover in our tenant population from year to year. We have found certain property revenues and operating expenses to be cyclical in nature, and therefore not incurred ratably over the course of the year. Prior to the commencement of each new lease period, mostly during the first two weeks of August, we prepare the units for new incoming tenants. Other than revenue generated by in-place leases for returning tenants, we do not generally recognize lease revenue during this period referred to as “Turn” as we have no leases in place. In addition, during Turn we incur significant expenses making our units ready for occupancy, which we recognize immediately. This lease Turn period results in seasonality in our operating results during the second and third quarter of each year.

ENVIRONMENTAL STRATEGIES

As an owner and operator of real estate, we are subject to various environmental laws. Compliance with existing laws has not had a material adverse effect on our financial condition and results of operations, and we do not believe it will have such an impact in the future. However, we cannot predict the impact of unforeseen environmental contingencies or new or changed environmental laws or regulations applicable to our current investments in properties or investments in properties we may make in the future. During our due diligence prior to making investments in properties, we retain qualified environmental consultants to assist us in identifying and quantifying environmental risks associated with such investments.

GEOGRAPHIC CONCENTRATION

The following sets forth the percentage of our consolidated revenues derived from properties owned in each state that accounted for more than 10% of our consolidated revenues during 2009, 2008 and 2007:

State	Percentage of Consolidated Revenues
2009
California	19	%
Georgia	13	%
Florida	10	%
2008
California	17	%
Georgia	14	%
Florida	11	%
Colorado	10	%
2007
California	22	%
Colorado	13	%
Georgia	13	%
Arizona	11	%
Washington	10	%

FOREIGN OPERATIONS

We currently own one property outside the United States, a multi-tenant office building located in Calgary, Canada. We are subject to currency risk and general Canadian economy risks associated with this investment. Canada accounted for 4%, 4% and 2%, of our consolidated revenues from the years ended December 31, 2009, 2008 and 2007, respectively.

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DEPENDENCE ON SIGNIFICANT TENANTS

No tenant accounted for more than 10% of our consolidated revenues during 2009, 2008 or 2007.

REPORTABLE SEGMENTS

The authoritative guidance regarding disclosures about segments of an enterprise requires disclosure of certain operating and financial data with respect to separate business activities within an enterprise. Our primary business is the ownership and operation of real estate investments. We evaluate cash flow and allocate resources on a property-by-property basis. We aggregate our properties into one reportable segment since all properties are institutional quality real estate. We do not distinguish or group our consolidated operations by property type or on a geographic basis. Accordingly, we have concluded that we currently have a single reportable segment under the authoritative guidance.

AVAILABLE INFORMATION

We are subject to the information requirements of the Securities Exchange Act of 1934, or the Exchange Act. Therefore, we file periodic reports, proxy statements and other information with the SEC. Such reports, proxy statements and other information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers, like the Fund, that file electronically. We currently do not have an Internet website. However we provide electronic copies of our SEC filings free of charge upon request. If you would like us to send you an electronic or paper copy of our SEC filings, please contact Peggy Lynn, 225 High Ridge Road, Stamford, CT 06905-3039, or call (203) 352-4497.

INSURANCE

Although we believe our investments are currently adequately covered by insurance consistent with the level of coverage that is standard in our industry, we cannot predict at this time if we will be able to obtain adequate coverage at a reasonable cost in the future.

EXECUTIVE OFFICERS OF THE REGISTRANT

James D. Bowden, age 56, has been Chief Executive Officer of the Fund since June 2008. Mr. Bowden has been in the financial industry for over 30 years and has specialized in private equity for the last seventeen. He joined the Manager in 1998 to form the private equity group and to manage BAC’s private equity fund of funds business. In that capacity, he has acted as the primary investment strategist for various private placement offerings and client advisory activities associated with the private equity asset class. He has led private placement capital raising activities, directed investment origination and has ongoing management and administration responsibilities for the business. He is a frequent speaker before private equity industry groups and asset management organizations concerning issues associated with investing in private equity, and is a member of the Advisory Board of Private Equity Center of the American Graduate School of International Management. Mr. Bowden’s career covers a variety of private equity, commercial banking and management consulting positions. From 1993 to 1998, he served as the manager of the Chicago office of Corporate Credit Examination Services for Continental Bank, where he had responsibility for the independent oversight of the Private Equity Investing and Midwest Commercial Banking Division. He continued in that capacity after Continental Bank merged with BAC, until he joined the Manager. From 1988 to 1993, Mr. Bowden was a Managing Consultant in the Financial Advisory Services practice of Coopers & Lybrand, specializing in corporate turnarounds. His career focused on commercial lending and problem loan workouts prior to joining Coopers & Lybrand, with work at Continental Bank from 1985 to 1988, Citicorp from 1980 to 1985 and American National Bank of Chicago from 1977 to 1980. He received his MBA and BBA degrees from the University of Michigan in 1977 and 1975, respectively. Mr. Bowden is a Certified Public Accountant.

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Steven L. Suss, age 49, has been an officer of the Fund since April 2007. Mr. Suss is the Fund’s Chief Financial Officer and the Chief Financial Officer of the Alternative Investment Solutions of GWIM and is responsible for managing the financial reporting and operational affairs of the investment vehicles within the group. Mr. Suss joined BAC in July 2007 via BAC’s acquisition of U.S. Trust, which he joined in April 2007. At U.S. Trust, Mr. Suss was the Chief Financial Officer of the Alternative Investments Division. Prior to joining U.S. Trust, Mr. Suss served as the Chief Financial Officer and Chief Compliance Officer of Heirloom Capital Management, L.P. (“Heirloom”), an SEC-registered investment adviser focused on investing in small to medium capitalized consumer, healthcare and technology companies, from May 2002 until September 2006. Mr. Suss was responsible for, among other things, all accounting and tax functions for all legal entities and managed accounts affiliated with Heirloom and investor communications. From September 1997 until January 2002, Mr. Suss served as the Chief Financial Officer and Vice President of Westway Capital LLC, an organization dedicated to achieving high performance returns by investing in technology and technology-related companies. Mr. Suss received a B.B.A. from the University of Texas at Austin.

INVESTMENT COMMITTEE OF THE ADVISOR

All of the Advisor’s major investment decisions on our behalf require the approval of its North American Private Equity Investment Committee, which is comprised of the following:

Peter H. Schaff, age 51, has been a Director of the Fund since May 2004. Mr. Schaff was designated as a Director by the Advisor. Mr. Schaff is an International Director and is the Chief Executive Officer of LaSalle’s North American Private Equity business. Mr. Schaff serves on LaSalle’s North American Private Equity Investment and Allocation Committees, and also on its Global Management Committee. Since joining LaSalle in 1984, Mr. Schaff has had extensive experience in all aspects of institutional real estate investment management, including acquisitions, joint ventures, financings, redevelopments, and dispositions. Prior to joining LaSalle, Mr. Schaff was a Banking Officer of Continental Illinois National Bank, working on private debt placements, interest rate swaps and related financial products. Mr. Schaff holds an undergraduate degree from Stanford University and an M.B.A. from the University of Chicago Graduate School of Business. Mr. Schaff is a member of the Urban Land Institute and the Pension Real Estate Association.

Wade W. Judge is an International Director and Chief Investment Officer of LaSalle’s North American Private Equity business and is the Chairman of LaSalle’s North American Private Equity Investment Committee. Prior to assuming these responsibilities in 2001, Mr. Judge was responsible for directing LaSalle’s U.S. acquisitions group for approximately 12 years. Prior to joining LaSalle in 1992, Mr. Judge worked for the Chairman of Jones Lang LaSalle and later managed the firm’s development group. Before coming to Jones Lang LaSalle in 1975, Mr. Judge was with Brown Brothers Harriman & Co. in New York City. Mr. Judge graduated with a B.A. from Dartmouth College and an M.B.A. from Stanford University.

James Hutchinson is an International Director of LaSalle and a member of the North American Private Equity Investment Committee. He also serves as the President of the Income & Growth Fund series with primary responsibility for acquisitions, financings and capital decisions. Since joining LaSalle in 1985, Mr. Hutchinson has completed property investments with an aggregate value exceeding $1 billion. Prior to joining LaSalle, Mr. Hutchinson was a senior manager in the audit division of Deloitte & Touche in Chicago. Mr. Hutchinson holds a B.A. in mathematics from Brown University and an M.B.A. from Indiana University. He is a C.P.A. and a member of the National Association of Industrial and Office Properties and the Urban Land Institute.

William J. Maher is International Director of North American Research & Strategy for LaSalle and has been since he began with the firm in 1995. Mr. Maher is responsible for research relating to real estate investment strategy and direction, as well as market analysis for existing and potential new investments. In addition to leading research efforts throughout North America, he works with clients to develop custom real estate investment and portfolio strategies. Mr. Maher is a member of LaSalle’s U.S. Private Equity Investment Committee, the Global Investment Strategy Committee, and principal author of LaSalle’s Investment Strategy Annual and quarterly Market Watch. Prior to joining LaSalle, Mr. Maher was a partner with Ernst & Young and

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director of the Real Estate Consulting Group’s Washington, DC office, where he managed the group’s efforts in the fields of strategic planning, market and financial feasibility assessment, portfolio due diligence and corporate real estate. Before that, Mr. Maher was Executive Vice President of Halcyon Ltd., a real estate consulting and services firm. Mr. Maher is a graduate of Harvard University’s Kennedy School of Government, holding a Master’s degree in Urban Planning, with distinction. Mr. Maher also completed an executive management program at Northwestern University’s Kellogg School of Management and received a B.A. in Economics from Williams College in Massachusetts. Mr. Maher is a member of the Research Advisory Task Force of the International Council of Shopping Centers; the Research Committee Vice Chairman of the Real Estate Roundtable; serves as Vice Chairman of the Program Committee for the Urban Land Institute; and is a member of the Real Estate Investment Committee at Williams College. Mr. Maher is also a member of the Association of Foreign Investors in Real Estate and NAREIT.

Non-Voting, Ex Officio Members

The following employees of the Advisor are non-voting, ex officio members of its North American Private Equity Investment Committee:

Jeff Jacobson is the Global Chief Executive Officer of LaSalle. In that role, Mr. Jacobson is responsible for a 680 plus person team managing $40 billion of investments in both private and public real estate across all major markets within Europe, North America and Asia Pacific. Mr. Jacobson is a member of Jones Lang LaSalle’s Global Executive Committee, a member of the Jones Lang LaSalle Co-Investment Capital Allocation Committee and sits on various LaSalle Investment Committees. Mr. Jacobson was appointed Regional CEO of LaSalle’s European operations in 2000, prior to his appointment as Global CEO in January 2007. Mr. Jacobson was responsible for all aspects of the European business, including servicing the firm’s European investment management clients, chairing the European Investment Committee and implementing growth initiatives. Prior to returning to LaSalle in 2000, Mr. Jacobson was a Managing Director of Security Capital Group Incorporated. From 1986 until 1997, Mr. Jacobson was at LaSalle Partners where he worked on a broad range of property acquisitions, sales financing and restructuring assignments and started up the firm’s Commercial Mortgage Backed Securities (“CMBS”) investment activities. Mr. Jacobson holds undergraduate and graduate degrees in Economics from Stanford University.

Jacques Gordon is International Director of Research and Investment Strategy for LaSalle and has served in this role since 1994. Mr. Gordon serves on the Advisor’s Global Management and North American Private Equity Investment Committees. Mr. Gordon is responsible for market forecasting, investment strategy development, and the direction of investment research, which monitors capital markets, regional economies and property markets in 120 metropolitan areas in 20 countries. Mr. Gordon is Managing Editor of Market Watch, a quarterly publication of LaSalle; a primary author of LaSalle’s Investment Strategy Annual; and co-chair of the global research committee of Jones Lang LaSalle. Mr. Gordon is a past President of the Real Estate Research Institute and currently chairs the Pension Real Estate Association’s Research Committee. Mr. Gordon also serves on the boards of the American Real Estate Society and the editorial boards of Real Estate Finance, Journal of Real Estate Portfolio Management and Wharton Real Estate Review. Previously, Mr. Gordon served as Director of Research at Baring Advisors and at Real Estate Research Corporation in Chicago. Mr. Gordon received a bachelor’s degree from the University of Pennsylvania, and M.Sc. from the London School of Economics and a Ph.D. from Massachusetts Institute of Technology.

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Item 1A. Risk Factors.

You should consider carefully the risks described below and the other information in this Form 10-K, including our consolidated financial statements and the related notes included elsewhere in this Form 10-K. If any of the following risks actually occur, they may materially harm our business and our financial condition and results of operations and cause the Fund’s NAV to decline.

The current global financial crisis may cause us to lose tenants and may impair our ability to borrow money to refinance existing mortgage loans.

Our operations and performance depend on general economic conditions. The U.S. economy has experienced a prolonged financial slowdown, which led to a decline in consumer spending, credit tightening and unemployment rising. This economic slowdown may adversely affect the businesses of many of our tenants. Accordingly, we may experience higher vacancy rates and deterioration in our financial results as a result of the economic downturn.

This economic slowdown has had an unprecedented impact on global credit markets. Credit availability has tightened significantly and continues to be less available than in the past for commercial real estate. While we recently converted our credit facility into a term loan which now expires on February 19, 2012, there can be no assurance that we will be able to obtain mortgage loans to purchase additional properties if such opportunities arise or to refinance existing mortgage loans. The Fund’s failure to obtain leverage at the contemplated levels, or to obtain leverage on attractive terms, could have a material adverse effect on the Fund’s ability to sell at fair value or refinance its existing investments and could also negatively impact its operating costs and its ability to pay dividends over time. In addition, as discussed under the heading “Liquidity and Capital Resources—Recent Events and Outlook” in Item 7 below, we have taken significant measures, including selective property dispositions, to conserve cash and preserve our liquidity. There can be no assurance that our cash conservation strategy will be sufficient, and we may be required to engage in additional property dispositions to preserve our liquidity. In this regard, to the extent the availability of credit remains tight, this may have a negative impact on the price we receive for any property disposition we undertake.

Our student-oriented apartment communities are susceptible to certain risks, including: (i) seasonality in rents; (ii) annual re-leasing that is highly dependent on marketing and university admission policies; (iii) competition for tenants from other housing operated by educational institutions or other off-campus properties; and (iv) negative publicity.

For the year ended December 31, 2009, student-oriented apartment communities comprised approximately 22% of our revenues. The results of operations from our student-oriented apartment communities are subject to an annual leasing cycle, short lease-up period, seasonal cash flows, changing university admission and housing policies and other risks inherent in the student housing industry.

Student apartment communities are typically leased by the bed on an individual lease liability basis, unlike multifamily housing where leasing is by the unit. Individual lease liability limits each resident’s liability to his or her own rent without liability for a roommate’s rent. A parent or guardian is required to execute each lease as a guarantor unless the resident provides adequate proof of acceptable credit. The number of lease contracts that we administer is therefore equivalent to the number of beds occupied and not the number of units. We generally lease our owned properties under 12-month leases, and in certain cases, under nine-month or shorter-term semester leases. As a result, we may experience significantly reduced cash flows during the summer months at properties leased under leases having terms shorter than 12 months. Furthermore, all of our student-oriented housing properties must be entirely re-leased each year, exposing us to increased leasing risk. Student apartment communities are also typically leased during a limited leasing season that usually begins in January and ends in August of each year. We are therefore highly dependent on the effectiveness of our marketing and leasing efforts and personnel during this season.

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Changes in university admission policies could adversely affect us. For example, if a university reduces the number of student admissions or requires that a certain class of students, such as freshman, live in a university owned facility, the demand for beds at our properties may be reduced and our occupancy rates may decline. While we may engage in marketing efforts to compensate for such change in admission policy, we may not be able to effect such marketing efforts prior to the commencement of the annual lease-up period or our additional marketing efforts may not be successful.

Many colleges and universities own and operate their own competing on-campus housing facilities. On-campus student housing has certain inherent advantages over off-campus student housing in terms of physical proximity to the university campus and integration of on-campus facilities into the academic community. Colleges and universities can generally avoid real estate taxes and borrow funds at lower interest rates than us and other private sector operators. We also compete with national and regional owner-operators of off-campus student housing in a number of markets as well as with smaller local owner-operators.

Currently, the student-oriented housing industry is fragmented with no participant holding a significant market share. There are a number of student apartment communities that are located near or in the same general vicinity of many of our owned properties and that compete directly with us. Such competing student housing complexes may be newer than our properties, located closer to campus, charge less rent, possess more attractive amenities or offer more services or shorter term or more flexible leases. Rental income at a particular property could also be affected by a number of other factors, including the construction of new on-campus and off-campus residences, increases or decreases in the general levels of rents for housing in competing communities and other general economic conditions. We believe that a number of other large national companies with substantial financial and marketing resources may be potential entrants in the student housing business. The entry of one or more of these companies could increase competition for students.

Federal and state laws require colleges to publish and distribute reports of on-campus crime statistics, which may result in negative publicity and media coverage associated with crimes occurring on or in the vicinity of our properties. Reports of crime or other negative publicity regarding the safety of the students residing on, or near, our properties may have an adverse effect on our business.

The Fund is subject to the risks of commercial real estate ownership that could reduce the value of its properties.

Real estate historically has experienced significant fluctuations and cycles in value that have resulted in reductions in the value of real estate related investments. Real estate will continue to be subject to such fluctuations and cycles in value in the future that may negatively impact the value of the Fund’s investments. The marketability and value of the Fund’s investments will depend on many factors beyond the control of the Fund. The ultimate performance of the Fund’s investments will be subject to the varying degrees of risk generally incident to the ownership and operation of the underlying real properties. The ultimate value of the Fund’s investment in the underlying real properties depends upon the Fund’s ability to operate the real properties in a manner sufficient to maintain or increase revenues in excess of operating expenses and debt service. Revenues and the values of our properties may be adversely affected by:

• changes in national or international economic conditions;

• cyclicality of real estate;

• changes in local market conditions due to changes in general or local economic conditions and neighborhood characteristics;

• the financial condition of tenants, buyers and sellers of properties;

• competition from other properties offering the same or similar services;

• changes in interest rates and in the availability, cost and terms of mortgage debt;

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• access to capital;

• the impact of present or future environmental legislation and compliance with environmental laws;

• the ongoing need for capital improvements (particularly in older structures);

• changes in real estate tax rates and other operating expenses;

• adverse changes in governmental rules and fiscal policies;

• civil unrest;

• acts of God, including earthquakes, hurricanes and other natural disasters, acts of war, acts of terrorism (any of which may result in uninsured losses);

• adverse changes in zoning laws; and

• other factors that are beyond the control of the real property owners and the Fund.

In the event that any of the real properties underlying the Fund’s investments experience any of the foregoing events or occurrences, the value of and return on such investments would be negatively impacted.

To the extent the Fund resumes acquiring properties, the success of the Fund may be dependent on the availability of, and the degree of competition for, attractive investments. The lack of availability of attractive investments could materially impair the financial performance of the Fund.

To the extent the Fund resumes acquiring properties, the Fund’s operating results may be dependent upon the availability of, and the Advisor’s ability to identify, acquire and manage, appropriate real estate investment opportunities. It may take considerable time for the Fund to identify and acquire appropriate investments. In general, the availability of desirable real estate opportunities and the Fund’s investment returns will be affected by the level and volatility of interest rates, conditions in the financial markets and general, national and local economic conditions. No assurance can be given that the Fund will be successful in identifying, underwriting and then acquiring investments which satisfy the Fund’s return objectives or that such investments, once acquired, will perform as intended. The Fund is engaged in a competitive business and competes for investments with traditional equity sources, both public and private, as well as existing funds, or funds formed in the future, with similar investment objectives. If the Fund cannot effectively compete with these entities for investments, its financial performance may be adversely affected.

The past performance of the Manager and the Advisor or any fund connected to either is not a predictor of future results of the Fund, and the Fund may not achieve positive financial results.

Neither the track record of senior management of the Manager or the Advisor nor the performance of any fund connected to either shall imply or predict (directly or indirectly) any level of future performance of the Fund, the Manager or the Advisor. The Advisor’s and Manager’s performance and the performance of the Fund is dependent on future events and is, therefore, inherently uncertain. Past performance cannot be relied upon to predict future events due to a variety of factors, including, without limitation, varying business strategies, different local and national economic circumstances, different supply and demand characteristics, varying degrees of competition, varying circumstances pertaining to the real estate capital markets and the cyclical nature of real estate. The Fund may not achieve positive financial results.

If the Fund is unable to obtain leverage on favorable terms, its ability to make new investments, its operating costs and its ability to make dividend payments may be adversely affected.

The Fund’s return on investment is somewhat dependent upon its ability to grow its portfolio of existing and future investments through the use of leverage. The Fund’s ability to obtain the leverage necessary on attractive terms will ultimately depend upon its ability to maintain interest coverage ratios and meet market underwriting

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standards, which will vary according to lenders’ assessments of the Fund’s creditworthiness and its ability to comply with the terms of the borrowings. The Fund’s failure to obtain leverage at the contemplated levels, or to obtain leverage on attractive terms, could have a material adverse effect on the Fund’s ability to make new investments, its operating costs and its ability to pay dividends over time.

The Fund’s use of leverage could impair its financial performance and result in the loss of some or all of its assets.

Leverage creates an opportunity for increased return on the Fund’s investments, but at the same time creates risks. For example, leveraging magnifies changes in the net worth of the Fund. This magnification may be realized, for example, in a circumstance where the gross asset value of one of the Fund’s investments declines, the principal amount of the debt secured by that investment stays constant and the net equity or net worth of the Fund absorbs 100% of the decline in the investment’s value. As stated above, the valuations of many of the Fund’s investments have declined. The Fund will leverage assets only when there is an expectation that leverage will enhance returns, although there can be no assurance that the Fund’s use of leverage will prove to be beneficial. Moreover, there can be no assurance that the Fund will be able to meet its debt service obligations and, to the extent that it cannot, the Fund risks the loss of some or all of its assets or a financial loss if the Fund is required to liquidate assets at a commercially inopportune time.

If the Manager or Advisor were to lose key personnel or the Fund were to lose the services of the Manager or the Advisor, the Fund’s ability to run its business could be adversely affected.

The Manager’s ability to successfully manage the Fund’s affairs currently depends on the Manager’s organization and the Advisor’s ability to identify, structure and finance investments. The Fund will also be relying to a substantial extent on the experience, relationships and expertise of the senior management and other key employees of the Manager and the Advisor. There can be no assurance that these individuals will remain in the employ of the Manager and the Advisor. The loss of the services of the Manager’s organization, the Advisor’s investment advice or any of such individuals, could have a material adverse effect on the Fund’s operations. In addition, under certain circumstances, our board of directors has the right to remove the Manager and the Advisor.

The Fund incurs significant costs in connection with Exchange Act compliance and it may become subject to liability or sanctions for any failure to comply, which could materially impact results of operations and financial condition of the Fund.

The Fund is subject to Exchange Act rules and related reporting requirements. Compliance with the reporting requirements of the Exchange Act requires timely filing of Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K, among other actions. Further, recently enacted regulations and standards relating to corporate governance and disclosure requirements applicable to public companies, including the Sarbanes-Oxley Act of 2002 and the SEC regulations relating thereto, have increased the costs of corporate governance, reporting and disclosure practices to which the Fund is subject. The Fund’s efforts to comply with applicable laws and regulations, including requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002, involve significant, and potentially increasing, costs. In addition, these laws, rules and regulations create legal bases for administrative, civil and criminal proceedings against the Fund in cases of non-compliance.

The Fund may not achieve its return objectives, which may adversely affect the value of our Common Stock.

To the extent the Fund resumes making investments, the Fund will make these investments based on the Advisor’s estimates or projections of internal rates of return and current returns, which in turn are based on, among other considerations, assumptions regarding the performance of Fund assets, the amount and terms of

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available financing and the manner and timing of dispositions, all of which are subject to significant uncertainty. In addition, events or conditions that have not been anticipated may occur and could have a significant effect on the ability of the Fund to generate attractive long-term risk-adjusted total returns. The Fund has a limited operating history and therefore may be subject to greater uncertainty than funds with longer track records. Moreover, the Fund’s ability to achieve its objectives may be adversely impacted by any of the factors discussed in this “Risk Factors” section. The Fund’s failure to achieve its return objectives may adversely affect the value of our Common Stock.

The Fund may suffer declines in rental revenue and/or occupancy at certain of its current and future retail properties related to co-tenancy provisions contained in certain tenant’s leases, which would have a negative impact on the value of our Common Stock.

Tenants of certain retail properties held by the Fund have leases that contain co-tenancy provisions, which require either certain tenants and/or certain amounts of square footage to be occupied and open for business or other tenants of the property gain certain rights. These rights often include the right to pay reduced rents and/or the right to terminate the lease should the co-tenancy provision not be satisfied. As a result of these co-tenancy provisions, and the exercise of rights pursuant to these provisions, the loss of a single tenant may have a negative impact on the Fund beyond the loss of rent from that particular tenant, in that the loss of a tenant due to its exercise of its co-tenancy provision, may trigger the co-tenancy provisions of other tenants, which can result in additional co-tenancy provisions being triggered. In addition, the Fund could still be negatively impacted even if a tenant that vacates the property continues to pay the full rent amount under its lease as the reduced occupancy could permit other tenants to exercise their co-tenancy provision rights. As a result, the Fund would have to recognize reduced rental income and/or reduced occupancy, which would have a negative impact on the value of the Fund’s Common Stock.

If significant tenants were to default on their lease obligations to the Fund, its results of operations and ability to pay dividends to stockholders may be adversely affected.

During the year ended December 31, 2009, Fannie Mae, Nordstrom, Inc., Conexant Systems, Inc, Havertys Furniture, and Catholic Healthcare West each individually accounted for at least 3.5% of annualized base rents. If any of these significant tenants were to default on its lease obligation(s) to the Fund or not extend current leases as they mature, our results of operations and ability to reinstate dividends to our stockholders could be adversely affected.

The costs of compliance with environmental laws and other governmental laws and regulations may adversely affect the Fund’s results of operations and financial condition and its ability to pay dividends to stockholders.

All real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, and the remediation of contamination associated with disposals. Some of these laws and regulations may impose joint and several liability on tenants, owners or operators for the costs of investigation or remediation of contaminated properties, regardless of fault or the legality of the original disposal. Under various federal, state and local laws, ordinances and regulations, a current or previous owner, developer or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances at, on, under, or in its property. In addition, the presence of these substances, or the failure to properly remediate these substances, may subject the Fund to claims by private plaintiffs and adversely affect its ability to sell or rent a property or to use the property as collateral for future borrowings.

Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations, stricter

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interpretation of existing laws or the future discovery of environmental contamination may require material expenditures by the Fund. The Fund cannot assure that future laws, ordinances or regulations will not impose any material environmental liability, or that the current environmental condition of its properties will not be affected by the operations of the tenants, by the existing condition of the land, by operations in the vicinity of the properties, such as the presence of underground storage tanks, or by the activities of unrelated third parties.

These laws typically allow liens to be placed on the affected property. In addition, there are various local, state and federal fire, health, life-safety and similar regulations with which the Fund may be required to comply and that may subject it to liability in the form of fines and/or damages for noncompliance.

The Fund cannot predict what other environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted, or what environmental conditions may be found to exist in the future. The Fund cannot provide assurance that its business, results of operations, liquidity, financial condition and ability to pay dividends will not be adversely affected by these laws.

The Fund’s properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediation of the problem.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Public concern about indoor exposure to mold has been increasing along with awareness that exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of a significant amount of mold at any of the Fund’s properties could require the Fund to undertake a costly remediation program to contain or remove the mold from the affected properties. In addition, the presence of mold could expose the Fund to liability from tenants, employees of tenants and others if property damage or health concerns arise as a result of the presence of mold in the properties of the Fund. If the Fund ever becomes subject to significant mold-related liabilities, its business, financial condition, liquidity, results of operations and ability to pay dividends could be materially and adversely affected.

Stockholders may experience dilution.

The Fund has historically and may in the future sell additional Shares through private placements to accredited investors. Stockholders that do not participate in future private placements will experience dilution in the percentage of their equity investment in the Fund. In addition, depending on the value of the Fund’s properties at the time of any future sale of Shares, stockholders may experience dilution in Current Share Price (as defined under “Item 5. Markets for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchase of Equity Securities” below) of their Shares.

If the Fund is unable to raise additional capital to support its growth through the sale of Shares, its financial results may suffer.

To support the Fund’s growth and further diversify its portfolio and investments, the Fund has historically and may in the future raise additional capital by selling Shares to accredited investors in private placement transactions. If the Fund is unable to sell additional Shares due to market forces or other factors, its ability to grow its business may be adversely affected. This may negatively affect the Fund’s ability to achieve greater diversification and economies of scale in its operations and therefore, may adversely affect its financial results. In this regard, due to market conditions, the Fund has not sold Shares since January 2009.

Future terrorist attacks may result in financial losses for the Fund and limit its ability to obtain terrorism insurance.

The terrorist attacks on September 11, 2001 disrupted the United States financial markets and negatively impacted the U.S. economy in general. Any future terrorist attacks and the anticipation of any such attacks, or the

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consequences of the military or other response by the United States and its allies, may have a further adverse impact on U.S. financial markets, including real estate capital markets, and the economy. It is not possible to predict the severity of the effect that such future events would have on the financial markets and economy.

It is possible that the economic impact of any future terrorist attacks will adversely affect some of the Fund’s investments. Some of the Fund’s investments, particularly those located in or around major population centers, may be more susceptible to these adverse effects than others. The Fund may suffer losses as a result of the adverse impact of any future attacks and these losses may adversely impact investors’ returns.

In addition, the events of September 11, 2001 created significant uncertainty regarding the ability of real estate owners of high profile properties to obtain insurance coverage protecting against terrorist attacks at commercially reasonable rates, if at all. With the enactment of the Terrorism Risk Insurance Act, which was extended through 2014 by Terrorism Risk Insurance Program Reauthorization Act of 2007, insurers must make terrorism insurance available under their property and casualty insurance policies, but this legislation does not regulate the pricing of such insurance. The absence of affordable insurance coverage may affect the general real estate lending market, lending volume and the market’s overall loss of liquidity may reduce the number of suitable investment opportunities available to the Fund and the pace at which its investments are made. The Fund currently carries terrorism insurance under its master insurance program on all of its investments, except for Railway Street Corporate Centre, an office building located in Calgary, Canada.

Insurance on the Fund’s properties may not adequately cover all losses to its properties, which could reduce stockholder returns if a material uninsured loss occurs.

The Fund’s tenants are required to maintain property insurance coverage for the properties under net leases. The Fund maintains a blanket policy on its properties not insured by its tenants. There are various types of losses, generally of a catastrophic nature, such as earthquakes, floods, hurricanes, terrorism or acts of war, that may be uninsurable or not economically insurable. Should an uninsured loss occur, the Fund could lose its capital investment and/or anticipated profits and cash flow from one or more properties. Inflation, changes in building codes and ordinances, environmental considerations, and other factors, including terrorism or acts of war, might make the insurance proceeds insufficient to repair or replace a property if it is damaged or destroyed. In that case, the insurance proceeds received might not be adequate to restore the Fund’s economic position with respect to the affected real property, which could reduce the amounts the Fund has available to pay dividends.

Due to limitations on the ability of the Fund to repurchase stockholders’ Shares and restrictions on their transfer, an investment in the Shares will be illiquid.

An investment in Shares requires a long-term commitment, with no certainty of return. The sale of Shares to investors in the Fund have not been registered under the Securities Act and the Shares may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The Fund does not currently intend to apply for listing of its Common Stock on any securities exchange or arrange for it to be quoted on any automated dealer quotation system. There is no public market for the Shares and none is expected to develop. The Shares are also subject to other transfer restrictions.

Although the Fund intends to provide limited liquidity to its stockholders, subject to board of directors approval, by conducting tender offers pursuant to which the Fund expects to offer to repurchase a specific percentage, number or dollar amount of outstanding Shares, the Fund may not have sufficient available cash to fund the repurchase of Shares. There is no guarantee that cash will be available at any particular time to fund repurchases of Shares, and the Fund will be under no obligation to make such cash available through the sale of assets, borrowings or otherwise. In addition, the Fund’s compliance with the Federal income tax rules applicable to REITs and rules under the Federal securities laws may affect the Fund’s ability to repurchase Shares. If the number of Shares tendered by stockholders exceeds the percentage, number or dollar amount of Shares offered to be repurchased by the Fund, the Fund might only accept Shares properly tendered on a pro rata basis.

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In addition, the repurchase of Shares is subject to regulatory requirements imposed by the SEC. The Fund’s repurchase procedures are intended to comply with such requirements. However, in the event that the Board determines that the Fund’s repurchase procedures described above are required to be or appropriately should be amended, the Board will adopt revised repurchase procedures as necessary to ensure the Fund’s compliance with applicable regulations or as the Board in its sole discretion deems appropriate. The Fund may terminate, reduce or otherwise change the above share repurchase program. In this regard, the Fund has not repurchased Shares since December 2008 in an effort to preserve liquidity.

The Fund’s investments may be illiquid, which may limit the Fund’s ability to repurchase Shares.

Real estate investments are relatively illiquid. Such illiquidity may limit the Fund’s ability to vary its portfolio of investments in response to changes in economic and other conditions. Illiquidity may result from the absence of an established market for real estate investments as well as the legal or contractual restrictions on their resale. In addition, illiquidity may result from the decline in value of one or more of the Fund’s investments. There can be no assurances that the fair market value of any of the Fund’s real property investments will not decrease further in the future. The relative illiquidity of the Fund’s investments may limit its ability to repurchase your Shares through tender offers as planned, and, as noted above, the Fund has not repurchased Shares since December 2008 in an effort to preserve liquidity.

If the Fund is not able to appropriately diversify its investments, its financial results would be disproportionately affected by a downturn in the particular geographic region or property sector in which its investments are concentrated.

The Fund has, to a certain extent, diversified its investments both geographically and by property sector. The Fund may not, however, be able to assemble and maintain a fully diversified portfolio. Furthermore, to the extent the Fund resumes its property acquisition activities, the Fund may make investments involving contemplated sales or refinancings that do not actually occur as expected, which could lead to increased risk as a result of it having an unintended long-term investment and reduced diversification. Further diversification consistent with the Fund’s objectives will be dependent on a number of additional factors, including the Fund’s ability to raise additional capital, so there can be no assurance that the Fund’s diversification objectives will be achieved. To the extent the Fund is not able to appropriately diversify its investments, its financial results would be adversely affected if there were a downturn in the particular geographic region or property sector in which the Fund’s investments were concentrated. As of December 31, 2009, 44% of the current fair value of the Fund’s consolidated properties is geographically concentrated in the western United States. As of December 31, 2009, 54% of the current fair value of unconsolidated properties is geographically concentrated in the midwestern United States and 46% of the current fair value is located in the western United States. The Fund’s diversification of consolidated properties by property type, based on current fair value as of December 31, 2009, consists of 46% in the office property sector, 17% in the retail property sector, 14% in the industrial property sector and 23% in the residential property sector. The Fund’s diversification of unconsolidated properties by property type at December 31, 2009 consists of 54% in the retail property sector and 46% in the office property sector. Moreover, during the fiscal year ended December 31, 2009, approximately 19%, 13% and 10% of our consolidated revenues were derived from California, Georgia and Florida, respectively. While most states have felt the impact of the current economic climate, the economies of California and Florida have been particularly hard hit.

The Fund may not have unilateral control over some of its investments and may be unable to take actions to protect its interests in these investments, which may result in losses with respect to these investments and expose the Fund to liability.

In certain situations, the Fund may (a) acquire only a noncontrolling interest in a property or other asset in which it invests, (b) rely on independent third party management or strategic partners with respect to the operations of a property or other asset in which it invests or (c) acquire only a participation in an asset underlying an investment, and therefore may not be able to exercise control over the management of such investment. The

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Fund may also co-invest with third parties through partnerships, joint ventures or other entities, thereby acquiring non-controlling interests in certain investments. These investments may involve risks not present in investments where a third party is not involved, including the possibility that a third party partner or co-venturer may have financial difficulties resulting in a negative impact on such investment, may have economic or business interests or goals that are inconsistent with or adverse to those of the Fund, or may be in a position to take action contrary to the Fund’s investment objectives. The Fund may in certain circumstances be liable for the actions of its third party partners or co-venturers. In addition, the Fund’s lack of control over the properties in which it invests could result in the Fund being unable to obtain accurate and timely financial information for these properties and could adversely affect the Fund’s internal control over financial reporting.

A portion of the Advisor’s and Manager’s fees is based on the Fund’s ability to generate cash flow from operations, which may result in the Advisor and the Manager having incentives that conflict with those of the Fund’s stockholders.

A portion of the Advisor’s and Manager’s fees is based on the Fund’s ability to generate cash flow from operations. Therefore, they may have an incentive to maximize the amount of cash generated from Fund operations, rather than to maximize appreciation, and to hold properties rather than to sell properties at an otherwise appropriate time for the stockholders.

Because a portion of the fees paid to the Manager and the Advisor is based on the Fund’s NAV, the Manager and the Advisor may have an incentive to sell Shares at a time when the capital from those sales cannot be effectively employed, which could harm the Fund’s financial performance and decrease the amount of dividends paid to stockholders.

A portion of the fees paid to the Manager and the Advisor is based on the Fund’s NAV. The Manager and the Advisor may have an incentive to sell Shares, as doing so will bring cash into the Fund and increase NAV, which, in turn, will increase the amount of fees paid to the Manager and the Advisor. However, if the Fund is not able to effectively deploy this capital in new real estate investments, the Fund’s financial performance may be harmed and the amount of dividends paid to stockholders could decrease.

Stockholders will have limited recourse against the Board, the Manager and the Advisor.

The Fund’s governing documents, as well as the Management Agreement and Advisory Agreement, limit the circumstances under which the Board, the Manager, the Advisor and their respective affiliates, including their officers, partners, employees, stockholders, members, managers and other agents, can be held liable to the Fund and our stockholders. For example, the Fund’s charter provides that the directors and officers will not be liable to the Fund or our stockholders for money damages to the maximum extent permissible under Maryland law. In addition, the Advisory Agreement and the Management Agreement, respectively, provide for the Fund to indemnify, defend and hold harmless the Advisor and the Manager and their affiliates, partners, members, stockholders, officers, employees, agents, successors, and assigns from and against all liabilities, judgments, costs, losses, and expenses, including attorneys’ fees, charges and expenses and expert witness fees, of any nature, kind or description, arising out of claims by third parties in connection with the Advisory Agreement and the Management Agreement, respectively, and the Advisor’s and the Manager’s respective services thereunder except to the extent caused by or resulting from (i) the Advisor’s or Manager’s breach of the Advisory Agreement or Management Agreement, as applicable, or (ii) the negligent or wrongful acts or omissions of the Advisor or Manager or their affiliates, officers, partners, agents, employees, successors or assigns. As a result, our stockholders may have a more limited right of action in certain cases than they would have in the absence of such limitations.

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If the Fund fails to qualify as a “venture capital operating company” under ERISA, stockholders subject to ERISA and the related excise tax provisions of the Internal Revenue Code may be subject to adverse financial and legal consequences if they engage in specified prohibited transactions.

Stockholders subject to ERISA should consult their own advisors as to the effect of ERISA on an investment in the Shares. The Advisor will use reasonable best efforts to conduct the operations of the Fund so that the Fund will qualify as a “venture capital operating company” under applicable ERISA regulations. If in the future the Fund were to fail to qualify as a venture capital operating company under ERISA and the Fund’s investments would be deemed to be “plan assets” of the stockholders that are employee benefit plans subject to ERISA (“Plans”), transactions involving the assets of the Fund with “Parties in Interest” under ERISA or “Disqualified Persons” under the Internal Revenue Code, which we refer to as the Code, with respect to such Plans might be prohibited under Section 406 of ERISA and Section 4975 of the Code.

The Fund may not be able to qualify for exemption from registration under the Investment Company Act, which could limit the Fund’s ability to use leverage and could materially impair the Fund’s financial performance.

The Fund intends not to become regulated as an investment company under the Investment Company Act based upon certain exemptions thereunder. Accordingly, the Fund does not expect to be subject to the restrictive provisions of the Investment Company Act. If the Fund fails to qualify for exemption from registration as an investment company, its ability to use leverage would be substantially reduced and it may be unable to conduct its business as described in this report. Any failure to qualify for such exemption from the Investment Company Act could have a material adverse effect on the operations and expenses of the Fund. The Fund’s efforts to avoid registration as an investment company in reliance on one of the available exemptions may affect the composition of the Fund’s investment portfolio and the investment and disposition decisions of the Advisor.

Our Charter does not permit ownership of over 9.9% of the Fund’s Common Stock by any individual or entity, and attempts to acquire Shares in excess of the 9.9% limit would be void without the prior approval of our board of directors.

For the purpose of preserving the Fund’s REIT qualification, our Charter prohibits, without the consent of our board of directors, direct or constructive ownership by any individual or entity of more than 9.9% of the lesser of the total number or value of the Shares as a means of preventing ownership of more than 50% of the Shares by five or fewer individuals. Our Charter’s constructive ownership rules are complex and may cause the Shares owned by a group of related individuals or entities to be deemed to be constructively owned by one individual. As a result, the acquisition of less than 9.9% of the Common Stock by an individual or entity could cause an individual to own constructively in excess of 9.9% of the Shares, and thus be subject to our Charter’s ownership limit. Any attempt to own or transfer Shares in excess of the ownership limit without the consent of our board of directors will be void, and will result in those Shares being transferred by operation of law to a charitable trust, and the person who acquired such excess Shares will not be entitled to any distributions thereon or to vote those excess Shares.

There are no assurances of the Fund’s ability to pay dividends in the future.

The Fund intends to pay dividends and to make distributions to stockholders in amounts such that all or substantially all of the Fund’s taxable income in each year, subject to certain adjustments, is distributed to stockholders. This, along with other factors, should enable the Fund to qualify for the tax benefits afforded to a REIT under the Code. All distributions will be made at the discretion of our board of directors and will depend on the Fund’s earnings, financial condition, maintenance of its REIT status and such other factors as our board of directors may deem relevant from time to time. In this regard, we are not immune to impacts from a continuation of the current economic climate and the financial stress it may have on our tenants. We intend to take a more defensive posture in the management of our balance sheet. These defensive tactics may include, altering the

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timing and amount of what we have historically paid in dividends. For example, we have not paid dividends since May 1, 2009. There are no assurances as to the Fund’s ability to pay dividends in the future or the amount of any future dividends. There may be little or no cash flow available to investors. In addition, any distributions made by the Fund may include a return of capital.

A stockholder who decides to participate in the dividend reinvestment plan will be subject to taxes on those dividends that are reinvested.

Each stockholder has the option of participating in the Fund’s dividend reinvestment plan under which all or a designated portion of such stockholder’s dividends will automatically be reinvested in additional Shares. A stockholder participating in the dividend reinvestment plan will be required to pay taxes with respect to such reinvested dividends in the year that the dividend is paid by the Fund although no cash is actually distributed.

If the Fund does not maintain its qualification as a REIT, the Fund will be subject to tax as a regular corporation and face a substantial tax liability.

The Fund expects to operate so as to qualify as a REIT under the Code. However, qualification as a REIT involves the application of highly technical and complex Code provisions for which only a limited number of judicial or administrative interpretations exist. Even a technical or inadvertent mistake could jeopardize the Fund’s REIT status. Furthermore, new tax legislation, administrative guidance or court decisions, in each instance potentially with retroactive effect, could make it more difficult or impossible for the Fund to qualify as a REIT. If the Fund fails to qualify as a REIT in any tax year, then:

• the Fund would be taxed as a regular domestic corporation, which under current laws, among other things, means being unable to deduct distributions to the stockholders in computing taxable income and being subject to Federal income tax on its taxable income at regular corporate rates;

• any resulting tax liability could be substantial, could have a material adverse effect on the Fund’s book value and could reduce the amount of cash available for distribution to the stockholders;

• unless the Fund was entitled to relief under applicable statutory provisions, it would be required to pay taxes, and thus, its cash available for distribution to the stockholders would be reduced for each of the years during which the Fund did not qualify as a REIT; and

• the Fund may also be disqualified from re-electing REIT status for the four taxable years following the year during which it became disqualified.

The tax treatment of dividends may cause investments in non-REIT corporations to be relatively more desirable.

The Code generally provides for reduced tax rates for certain qualified dividends paid to individuals. These reduced rates generally do not apply to dividends paid by REITs. Although this legislation does not adversely affect the tax treatment of REITs, it may cause investments in non-REIT corporations to be relatively more desirable. Such reduced tax rates are currently set to expire at the end of 2010.

Complying with REIT requirements may cause the Fund to forego otherwise attractive opportunities.

To qualify as a REIT for Federal income tax purposes, the Fund must continually satisfy tests concerning, among other things, its sources of income, the nature and diversification of its investments in commercial real estate and related assets, the amounts it distributes to stockholders and the ownership of its Shares. The Fund may also be required to make distributions to stockholders at disadvantageous times or when it does not have capital readily available for distribution. The REIT provisions of the Code may substantially limit the Fund’s ability to hedge its financial assets and related borrowings. Thus, compliance with REIT requirements may hinder the Fund’s ability to operate solely on the basis of maximizing profits.

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Complying with REIT requirements may force the Fund to liquidate or restructure otherwise attractive investments.

To qualify as a REIT, the Fund must also ensure that at the end of each calendar quarter, at least 75% of the value of its assets consists of cash, cash items, government securities and qualified REIT real estate assets. The remainder of the Fund’s investments in securities cannot include more than 10% of the outstanding voting securities of any one issuer or 10% of the total value of the outstanding securities of any one issuer. In addition, no more than 5% of the value of the Fund’s assets can consist of the securities of any one issuer. If the Fund fails to comply with these requirements, it must dispose of a portion of its assets within 30 days after the end of the calendar quarter to avoid losing its REIT status and suffering adverse tax consequences.

Complying with REIT requirements may force the Fund to borrow to make distributions to stockholders.

From time to time, the Fund’s taxable income may be greater than its cash flow available for distribution to stockholders. If the Fund does not have other capital available in these situations, it may be unable to distribute substantially all of its taxable income as required by the REIT provisions of the Code. Thus, the Fund could be required to borrow capital, sell a portion of its assets at disadvantageous prices, issue consent dividends (which will be taxable to stockholders) or find another alternative. These options could increase the Fund’s costs or reduce its NAV.

Item 1B. Unresolved Staff Comments.

As part of the review by the staff of the Division of Corporation Finance of the SEC (the “Staff”) of our Registration Statement on Form 10 initially filed with the SEC on April 28, 2006, we received and responded to a number of comments. The only comment that remains unresolved pertains to the fact that we were unable to provide financial statements under Rule 3-14 of Regulation S-X relating to our acquisition of our Metropolitan Park North property. We were unable to produce the required financial statements due to lack of access to certain information regarding the property while it was owned by a previous owner. We requested that the Staff grant us a waiver from the requirement to provide the Rule 3-14 financial statements for Metropolitan Park North due to our inability to produce them. The Staff, however, denied our waiver request and indicated that, until we provide the Rule 3-14 financial statements for Metropolitan Park North, it would neither declare effective any registration statement or post-effective amendments, nor consider compliant any proxy or other filing that require our financial statements. The Staff also indicated that our filings are not considered timely for purposes of Form S-3. Finally, the Staff stated that, subject to certain exceptions, we should not make offerings under effective registration statements or under Rule 505 or 506 of Regulation D where any purchasers are not accredited investors under Rule 501(a) of Regulation D. As stated above, we only sell Shares to accredited investors. As of the filing of this Form 10-K, we believe we are now compliant with the SEC’s financial statement requirements with respect to Metropolitan Park North.

On November 21, 2007, the Fund acquired Cabana Beach Gainesville which met the “significant” criteria as described in Rule 3-14 of Regulation S-X. Also on November 21, 2007, the Fund acquired three additional real estate investments from a related selling group (the “Selling Group”), Cabana Beach San Marcos, Campus Lodge Athens and Campus Lodge Columbia. The Fund also acquired a fifth real estate investment from the Selling Group in February 2008. Pursuant to Rule 3-14, we are required to file certain financial statements relating to these acquisitions. However, the Selling Group has refused to participate in the audits, and we are therefore unable to supply the required audited income statement required by Rule 3-14. As a result, we will be subject to limitations specified by the Staff in the preceding paragraph with respect to our failure to provide Rule 3-14 financial statements for our acquisition of the Metropolitan Park North property. Upon the filing of our Form 10-K for our fiscal year ended December 31, 2010, we believe we will be compliant with the SEC’s financial statement requirements with respect to the Selling Group.

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Item 2. Properties.

DESCRIPTION OF REAL ESTATE:

Our investments in real estate assets as of December 31, 2009 consist of our interests in properties that are consolidated in our consolidated financial statements including interests in nine joint ventures (the “Consolidated Properties”) and interests in two additional joint ventures that own real estate (the “Unconsolidated Properties”). The following table sets forth the information with respect to our real estate assets as of December 31, 2009:

Property Name	Location	Type	% Owned		Year Built	Date Acquired	Net Rentable Square Feet	Percentage Leased
Consolidated Properties:
Monument IV at Worldgate (1)	Herndon, VA	Office	100	%	2001	August 27, 2004	228,000	100	%
CHW Medical Office Portfolio (2)(3):
300 Old River Road	Bakersfield, CA	Office	100	%	1992	December 21, 2005	37,000	100	%
500 Old River Road	Bakersfield, CA	Office	100	%	1992	December 21, 2005	30,000	90	%
500 West Thomas Road	Phoenix, AZ	Office	100	%	1994	December 21, 2005	169,000	97	%
1500 South Central Ave	Glendale, CA	Office	100	%	1980	December 21, 2005	37,000	100	%
14600 Sherman Way	Van Nuys, CA	Office	100	%	1991	December 21, 2005	50,000	89	%
14624 Sherman Way	Van Nuys, CA	Office	100	%	1981	December 21, 2005	51,000	83	%
18350 Roscoe Blvd	Northridge, CA	Office	100	%	1979	December 21, 2005	68,000	91	%
18460 Roscoe Blvd	Northridge, CA	Office	100	%	1991	December 21, 2005	25,000	100	%
18546 Roscoe Blvd	Northridge, CA	Office	100	%	1991	December 21, 2005	43,000	100	%
4545 East Chandler	Chandler, AZ	Office	100	%	1994	December 21, 2005	48,000	55	%
485 South Dobson	Chandler, AZ	Office	100	%	1984	December 21, 2005	43,000	55	%
1501 North Gilbert	Gilbert, AZ	Office	100	%	1997	December 21, 2005	38,000	75	%
116 South Palisade	Santa Maria, CA	Office	100	%	1995	December 21, 2005	34,000	87	%
525 East Plaza	Santa Maria, CA	Office	100	%	1995	December 21, 2005	44,000	76	%
10440 East Riggs	Chandler, AZ	Office	100	%	1996	December 21, 2005	39,000	49	%
Marketplace at Northglenn (1)	Northglenn, CO	Retail	100	%	1999-2001(4)	December 21, 2005	439,000	92	%
Metropolitan Park North (1)	Seattle, WA	Office	100	%	2001	March 28, 2006	179,000	100	%
Stirling Slidell Shopping Centre (1)	Slidell, LA	Retail	100	%	2003	December 14, 2006	139,000	75	%
9800 South Meridian (5)	Englewood, CO	Office	90	%	1994	December 26, 2006	144,000	58	%
18922 Forge Drive (5)	Cupertino, CA	Office	90	%	1972/1999(6)	February 15, 2007	91,000	100	%
Station Nine Apartments (1)	Durham, NC	Apartment	100	%	2005	April 16, 2007	312,000	94	%
4 Research Park Drive (1)	St. Charles, MO	Office	100	%	2000/2004	June 13, 2007	60,000	100	%
36 Research Park Drive (1)	St. Charles, MO	Office	100	%	2007	June 13, 2007	81,000	100	%
The District at Howell Mill (5)	Atlanta, GA	Retail	87.85	%	2006	June 15, 2007	306,000	100	%
Canyon Plaza (1)	San Diego, CA	Office	100	%	1986/1993(7)	June 26, 2007	199,000	100	%
Railway Street Corporate Centre (1)	Calgary, Canada	Office	100	%	2007	August 30, 2007	135,000	100	%
Student-oriented Apartment Communities:
Cabana Beach San Marcos (5)	San Marcos, TX	Apartment	78	%	2006	November 21, 2007	258,000	84	%
Cabana Beach Gainesville (5)	Gainesville, FL	Apartment	78	%	2005-2007(8)	November 21, 2007	598,000	80	%
Campus Lodge Athens (5)	Athens, GA	Apartment	78	%	2003	November 21, 2007	229,000	84	%
Campus Lodge Columbia (5)	Columbia, MO	Apartment	78	%	2005	November 21, 2007	256,000	76	%
The Edge at Lafayette (5)	Lafayette, LA	Apartment	78	%	2007	January 15, 2008	207,000	95	%
Campus Lodge Tampa (5)	Tampa, FL	Apartment	78	%	2001	February 29, 2008	477,000	90	%
Properties Held for Sale:
Havertys Furniture (1)	Braselton, GA	Industrial	100	%	2002/2005(9)	December 3, 2004	808,000	100	%
25850 S. Ridgeland (1)	Monee, IL	Industrial	100	%	2004	December 31, 2004	719,000	100	%
Georgia Door Sales Distribution Center (1)	Austell, GA	Industrial	100	%	1994/1996(10)	February 10, 2005	254,000	76	%
105 Kendall Park Lane (1)	Atlanta, GA	Industrial	100	%	2002	June 30, 2005	409,000	100	%
4001 North Norfleet Road (1)	Kansas City, MO	Industrial	100	%	2007	February 27, 2007	702,000	100	%
Unconsolidated Properties:
Legacy Village (11)	Lyndhurst, OH	Retail	46.5	%	2003	August 25, 2004	595,000	92	%
111 Sutter Street (5)	San Francisco, CA	Office	80	%	1926/2001(12)	March 29, 2005	286,000	86	%

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(1) This property is owned fee.

(2) This property is owned leasehold.

(3) This portfolio was owned 95% as majority interest holder in a joint venture, leasehold until December 31, 2007 at which point the remaining 5% was acquired by the Fund.

(4) Redeveloped between 1999 and 2001.

(5) This property is owned as majority interest holder in a joint venture.

(6) Built in 1972 and renovated in 1999.

(7) Built in 1986 with addition completed in 1993.

(8) Portions of property built and completed between 2005 and 2007.

(9) Built in 2002 and expanded by 297,000 square feet in 2005.

(10) Built in 1994 and expanded in 1996.

(11) This property is owned as an interest holder in a joint venture.

(12) Built in 1926 and renovated in 2001.

ACQUISITIONS

2009 Acquisitions

None

2008 Acquisitions

Consolidated Properties

On January 15, 2008, we acquired a 78% interest in The Edge at Lafayette, a student-oriented apartment community. The Edge at Lafayette, located in Lafayette, Louisiana near the University of Louisiana-Lafayette, has 168 units and 524 bedrooms. Leases for this property generally expire within one year. The gross purchase price for the property was approximately $26,870.

On February 29, 2008, we acquired a 78% interest in Campus Lodge Tampa, a student-oriented apartment community. Campus Lodge Tampa, located in Tampa, Florida near the University of South Florida, has 312 units and 1068 bedrooms. Leases for this property generally expire within one year. The gross purchase price for the property was approximately $46,787 and included the assumption of a $33,500, nine-year fixed rate mortgage loan, at 5.95% with interest only due for the first five years.

2007 Acquisitions

Consolidated Properties

On February 15, 2007, we acquired a 90% interest in 18922 Forge Drive, a 91,000 square-foot, multi-tenant office building located in Cupertino, California with lease expirations through 2010. The property’s tenants are IBM and Oracle, which have both sub-leased their space to other technology companies. The gross purchase price was approximately $26,200.

On February 27, 2007, we acquired a 100% ownership interest in 4001 North Norfleet Road, a 702,000 square-foot, single-tenant industrial building located in Kansas City, Missouri. The property’s tenant is Musician’s Friend, a subsidiary of Guitar Center (under a net lease through 2017). The gross purchase price was approximately $37,600.

On April 16, 2007, we acquired a 100% interest in Station Nine Apartments, a 312,000 square-foot, 323 unit apartment complex located in Durham, North Carolina adjacent to the Duke University campus. The property’s leases generally expire within one year. The gross purchase price was approximately $56,400.

On June 13, 2007, we acquired a 100% interest in two single-tenant office buildings totaling 141,000 square-feet located in St. Charles, Missouri. The buildings are currently leased to a single-tenant (under net leases through 2014 and 2016). The gross purchase price was approximately $28,600.

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On June 15, 2007, we acquired an 87.85% interest in The District at Howell Mill, a 306,000 square foot retail property built in 2006, located in Atlanta, Georgia. The property’s largest tenants are Wal-Mart, TJ Maxx, Office Depot, and PetSmart with leases expiring through 2026. Tenants of this center pay their pro rata share of the property’s operating expenses. The gross purchase price was approximately $78,700.

On June 26, 2007, we acquired a 100% interest in Canyon Plaza, a 199,000 square-foot, single-tenant office building located in San Diego, California. The property’s tenant is Conexant Systems, Inc (under a net lease expiring in 2017), which has sub-leased a portion of its space to another technology company. The gross purchase price was approximately $55,000.

On August 30, 2007, we acquired a 100% ownership interest in a 137,000 square-foot, multi-tenant office building located in Calgary, Canada with leases expiring through 2017. The building is currently 100% leased to a number of tenants for between five and ten years. The gross purchase price was approximately $42,600.

On November 21, 2007, we acquired 78% interests in four student-oriented apartment communities. Cabana Beach San Marcos located in San Marcos, Texas near Texas State University has 276 units and 744 bedrooms. Cabana Beach Gainesville located in Gainesville, Florida near the University of Florida has 504 units and 1,488 bedrooms. Campus Lodge Athens located in Athens, Georgia near the University of Georgia has 240 units and 480 bedrooms. Campus Lodge Columbia located in Columbia, Missouri near the University of Missouri has 192 units and 768 bedrooms. Leases for these four properties generally expire within one year. The gross purchase price for the four communities was approximately $149,600.

On December 31, 2007, we acquired the remaining 5% membership interest in a limited liability company that owns the CHW Medical Office Portfolio. The gross purchase price was approximately $4,000.

DISPOSITIONS

2009 Dispositions

On June 26, 2009, we sold Hagemeyer Distribution Center, a 300,000 square foot industrial property located in Auburn, GA, for $10,400, resulting in a gain of $911. The property was vacant, but rent bearing under a long-term lease and no longer fit within the Fund’s strategy. The buyer was a local user looking to expand its operations. We used the proceeds to pay off the mortgage debt on the property resulting in a loss on early debt retirement of $140.

On September 4, 2009, we sold Waipio Shopping Center, a 137,000 square foot retail center in Waipahu, HI, for $30,850, resulting in a gain of $1,619. The sale reduced our refinancing risk by eliminating one of our 2010 loan maturities. We used the proceeds to payoff the mortgage debt on the property resulting in a loss on early debt retirement of $863.

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FINANCING

The following is a summary of the mortgage debt for our Consolidated Properties and our Unconsolidated Properties as of December 31, 2009.

Property	Interest Rate		Maturity Date	Principal Balance
Consolidated Properties:
9800 South Meridian	Libor + 3.50	%	January 2011	$	13,611
Monument IV at Worldgate	5.29	%	September 2011		36,264
25850 S. Ridgeland	5.05	%	April 2012		15,749
105 Kendall Park Lane	4.92	%	September 2012		12,933
Metropolitan Park North	5.73	%	April 2013		61,000
36 Research Park Drive	5.60	%	July 2013		11,050
CHW Medical Office Portfolio	5.75	%	November 2013		14,752
CHW Medical Office Portfolio	5.75	%	November 2013		15,276
CHW Medical Office Portfolio	5.75	%	November 2013		16,949
18922 Forge Drive	6.24	%	February 2014		19,050
CHW Medical Office Portfolio	5.79	%	March 2014		33,377
Stirling Slidell Shopping Centre	5.15	%	April 2014		13,326
Cabana Beach San Marcos	5.57	%	December 2014		19,650
Cabana Beach Gainesville	5.57	%	December 2014		49,108
Campus Lodge Athens	5.57	%	December 2014		13,723
Campus Lodge Columbia	5.57	%	December 2014		16,341
Georgia Door Sales Distribution Center	5.31	%	January 2015		4,947
Havertys Furniture	5.23	%	January 2015		16,582
Havertys Furniture	6.19	%	January 2015		10,101
The Edge at Lafayette	5.57	%	February 2015		17,466
4 Research Park Drive	6.05	%	March 2015		6,966
Marketplace at Northglenn	5.50	%	January 2016		62,894
Campus Lodge Tampa	5.95	%	October 2016		33,500
4001 North Norfleet Road	5.60	%	March 2017		24,230
Station Nine Apartments	5.50	%	May 2017		36,885
The District at Howell Mill	6.14	%	June 2017		10,000
Canyon Plaza	5.90	%	June 2017		30,289
Railway Street Corporate Centre	5.16	%	September 2017		28,270
The District at Howell Mill	5.30	%	March 2027		35,000
Unconsolidated Properties:
Legacy Village	5.63	%	January 2014	$	94,382
111 Sutter Street	5.58	%	June 2015		56,000

INSURANCE

We believe our properties currently are adequately covered by insurance consistent with the level of coverage that is standard in our industry.

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OPERATING STATISTICS

We generally have investments in properties with high occupancy rates leased to quality tenants under long-term, non-cancelable leases. We believe our leases are beneficial to achieving our investment objectives. The following table shows our operating statistics by property sector for our consolidated properties as of December 31, 2009:

	Number of Properties	Total Area (Sq Ft)	% of Total Area		Occupancy %		Average Minimum Base Rent per Occupied Sq Ft
Consolidated Properties:
Office:
Commercial Office	8	1,117,000	14.0	%	94.6	%	$	22.26
Medical Office	15	756,000	9.5	%	84.9	%		19.05
Retail	3	884,000	11.1	%	92.2	%		13.86
Industrial	5	2,892,000	36.1	%	97.9	%		3.38
Apartments	7	2,337,000	29.3	%	85.6	%		14.45
Total	38	7,986,000	100.0	%	92.0	%	$	11.64

The following table shows our operating statistics by property sector for our unconsolidated properties as of December 31, 2009:

	Number of Properties	Total Area (Sq Ft)	% of Total Area		Occupancy %		Average Minimum Base Rent per Occupied Sq Ft
Unconsolidated Properties:
Office:
Commercial Office	1	286,000	32.5	%	86.0	%	$	41.96
Retail	1	595,000	67.5	%	92.3	%		22.97
Total	2	881,000	100.0	%	90.3	%	$	28.84

As of December 31, 2009, the scheduled lease expirations at our consolidated properties are as follows:

Year	Number of Leases Expiring	Annualized Minimum Base Rent		Square Footage	Percentage of Annualized Minimum Base Rent
2010 (1)	111	$	9,665	333,000	18.1	%
2011	81		8,896	434,000	16.7	%
2012	50		9,406	413,000	17.6	%
2013	43		2,949	150,000	5.5	%
2014	39		6,332	1,223,000	11.9	%
2015 and thereafter	43		16,108	2,799,000	30.2	%
Total	367	$	53,356	5,352,000

(1) Does not includes 4,489 leases totaling approximately 2,003,000 square feet and approximately $28,860 in annualized minimum base rent associated with our seven apartment investments.

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As of December 31, 2009, the scheduled lease expirations at our unconsolidated properties are as follows:

Year	Number of Leases Expiring	Annualized Minimum Base Rent		Square Footage	Percentage of Annualized Minimum Base Rent
2010	44	$	3,993	105,000	17.4	%
2011	9		3,578	68,000	15.5	%
2012	2		227	7,000	1.0	%
2013	17		3,361	89,000	14.7	%
2014	12		1,647	60,000	7.2	%
2015 and thereafter	24		10,132	458,000	44.2	%
Total	108	$	22,938	787,000

PRINCIPAL TENANTS

The following table sets forth the top ten tenants, in our consolidated properties, based on their percentage of annualized minimum base rent as of December 31, 2009:

Tenants	Line of Business	Date of Lease Expiration	Lease Renewal Options	% of Total Area		% of Annualized Minimum Base Rent
Fannie Mae	Financial services	December 31, 2011	Two 5-year options	2.9	%	5.5	%
Nordstrom, Inc	Retailer	January 31, 2012	Two 5-year options	1.7	%	4.8	%
Conexant Systems, Inc.	Communications	June 20, 2017	Two 5-year options	2.5	%	4.6	%
Havertys Furniture	Furniture retailer	April 30, 2021	Five 5-year options	10.1	%	3.9	%
Catholic Healthcare West	Healthcare	Varies	Varies	2.1	%	3.6	%
Musician’s Friend, Inc.	Retailer	February 28, 2017	Three 5-year options	8.8	%	3.2	%
International Business Machines Corp.	Information Technology	March 31, 2010	Two 5-year options	0.6	%	2.7	%
Westar Aerospace & Defense Group, Inc.	Technical and Scientific Research Services	Varies	Varies	1.8	%	2.5	%
Michelin North America, Inc	Tire Manufacturer	December 30, 2014	Three 5-year options	9.0	%	2.1	%
Acuity Specialty Products Group, Inc.	Specialty chemical products	April 30, 2017	Two 5-year options	5.1	%	1.6	%
Total				44.6	%	34.5	%

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PRINCIPAL PROPERTIES

The following table sets forth the top ten properties, of our consolidated properties, based on their percentage of minimum base rent as of December 31, 2009:

Properties	% of Total Area		% of Minimum Base Rent
Metropolitan Park North	2.2	%	7.0	%
Marketplace at Northglenn	5.5	%	6.5	%
Campus Lodge Tampa	6.0	%	6.3	%
Cabana Beach Gainesville	7.5	%	6.0	%
Monument IV at Worldgate	2.9	%	5.6	%
The District at Howell Mill	3.8	%	5.2	%
Station Nine Apartments	3.9	%	4.8	%
Canyon Plaza	2.5	%	4.6	%
Cabana Beach San Marcos	3.2	%	4.4	%
Campus Lodge Columbia	3.2	%	4.1	%
Total	40.7	%	54.5	%

GROUND LEASES

We are subject to a number of ground leases at certain properties we own or control. As of December 31, 2009 we have $2 in total payments due over the next 69 years.

Item 3. Legal Proceedings.

We are involved in various matters of litigation arising in the normal course of business. While we are unable to predict with any certainty the amounts involved, management is of the opinion that, when such litigation is resolved, our resulting net liability, if any, will not have a significant effect on our consolidated financial position or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of our stockholders during the fourth quarter of the year ended December 31, 2009.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our Common Stock is not currently traded on any exchange and there is no established public trading market for our Common Stock. As of the filing date of this Form 10-K, there were approximately 1,749 holders of our Common Stock.

The price at which Shares are sold or redeemed at any future dates will be determined based on the current share price (the “Current Share Price” as defined below). We may sell additional Shares through private placements to accredited investors on a periodic basis to accommodate investment by existing and additional investors. Subsequent offerings may be made either for our Common Stock or for other share classes that may be subject to sales loads or bear different expense ratios.

Unregistered Sales of Equity Securities

During the year ended December 31, 2009, we did not sell any unregistered equity securities, other than those that have previously been reported in our Quarterly Reports on Form 10-Q or in Current Reports on Form 8-K.

Issuer Purchases of Equity Securities

During the fourth quarter of 2009, neither the Fund nor any affiliated purchaser of the Fund repurchased any of our equity securities.

CALCULATION OF SHARE PRICE

The Current Share Price of our Common Stock (the “Current Share Price”) is established quarterly based on the following valuation methodology, which may be modified from time to time by our board of directors.

Net Asset Value Calculation

The NAV of the Fund is determined as of the end of each of the first three quarters of a fiscal year, within 45 calendar days following the end of such quarter. The Fund’s year-end NAV is determined after the completion of our year-end audit. NAV is determined as follows: (i) the aggregate fair value of (A) our interests in the real estate investments (“Investments”) plus (B) all other assets of the Fund, minus (ii) the aggregate fair value of our indebtedness and other outstanding obligations as of the determination date.

We have retained independent third-party real estate appraisal firms (the “Appraisal Firms”) that appraise each Investment not less than annually beginning one year after acquisition. During the first three quarters after acquisition, the Investment will be carried at capitalized cost and reviewed quarterly for material events at the property or market level that may require an adjustment of the Investment’s valuation.

For each of the three quarters following the independent appraisal of a particular Investment, we determine the value of such Investment based on our review of the appraisal and material changes at the property or market level. We also determine the value of the indebtedness related to each Investment beginning one year after acquisition of the encumbered property and on a quarterly basis thereafter.

Current Share Price Calculation

The Current Share Price equals NAV as of the end of each quarter divided by the number of outstanding Shares at the end of such quarter. During the first three quarters of the calendar year, the Current Share Price is

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calculated based on the real estate investment value, indebtedness values and value of other assets and liabilities as determined by us and reviewed by our independent auditors. Year-end Current Share Price is calculated based on the real estate investment value, indebtedness values and value of other assets and liabilities as determined by us and audited by our independent auditors. The supplemental consolidated fair value information is presented to the board of directors with our year-end audited financial statements.

The following table presents the NAV per share for each period indicated below:

Quarter Ended	NAV per Share
December 31, 2009	$	55.53
September 30, 2009		65.56
June 30, 2009		72.24
March 31, 2009		78.04
December 31, 2008		93.80
September 30, 2008		123.43
June 30, 2008		124.65
March 31, 2008		121.58

DIVIDEND POLICY

To comply with current tax laws necessary to qualify as a REIT, we expect to distribute at least 90% of our taxable income to our stockholders. Accordingly, we currently intend, although are not legally obligated, to make distributions to our stockholders in amounts sufficient to maintain our qualification as a REIT. Before payment of any dividend, we must have cash available after payment of both operating requirements and scheduled debt service on mortgages and loans payable. The declaration of dividends is at the discretion of our board of directors, which decision is made from time to time based on then prevailing circumstances.

On March 13, 2009, our board of directors declared a dividend of $0.875 per Share to stockholders of record on March 31, 2009, payable on May 1, 2009. This represented a reduction from $1.75 per Share, our historic practice for quarterly dividends for the previous 16 quarters. No further dividends were declared in 2009. We cannot provide assurance with respect to the amount of dividends, if any, that we will pay in the future.

Our board of directors, the Manager and the Advisor will periodically review the dividend policy to determine the appropriateness of our dividend rate relative to our current and forecasted cash flows.

The following table presents the distributions declared per Share for each period indicated below:

To Stockholders of Record as of	Paid on or to be paid on	Distribution per Share
March 31, 2009	May 1, 2009	$	0.875
December 31, 2008	February 6, 2009		1.75
August 15, 2008	November 7, 2008		1.75
June 25, 2008	August 1, 2008		1.75
February 15, 2008	May 2, 2008		1.75

Any future distributions will be declared at the discretion of the board of our directors and will depend on our actual cash flow, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code, and such other factors as our board of directors deems necessary. In addition, under the terms of our term loan with PNC Bank, National Association, we may not declare a dividend unless:

• we are in compliance with the terms of our unsecured term loan; and

• either (i) payment of the dividend is required for the Fund to maintain its status as a REIT or (ii) the amount of the dividend and all other dividends paid by the Fund during the current quarter and the

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preceding three quarters does not exceed the amount of Funds From Operations (“FFO” as defined in “Item 6. Selected Financial Data”) of the Fund plus a maximum of $500 from non-revenue generating cash flows including the sales tax sharing agreement at Marketplace at Northglenn (See Note 2 for a description of the Enhanced Sales Tax Incentive Program (“ESTIP”)) and the real estate tax reimbursement agreement at 25850 S. Ridgeland (See Note 2 for a description of the 25850 S. Ridgeland Tax Increment Financing Note (“TIF Note”)) plus non-cash impairment charges taken during the four quarter measurement period.

	Year End December 31, 2009
FFO + $500	$	(3,093	)
Plus : Non-cash impairment charges		25,955
Less : Dividends declared		(3,606	)
Surplus	$	19,256

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Performance Graph (1) (Dollars in whole dollars)

The following graph is a comparison of the five-year cumulative return of our Shares (post leverage and fees), the Standard and Poor’s 500 Index (“S&P 500”), the National Real Estate Investment Trusts’ (“NAREIT”) All Equity Index and the National Counsel of Real Estate Investment Fiduciaries (“NCREIF”) Property Index, as peer group indices. The graph assumes that $100 was invested on December 31, 2004 in our Shares, the S&P 500 Index, the NAREIT All Equity Index and the NCREIF Property Index assuming that all dividends were reinvested without the payment of any commissions. There can be no assurance that the performance of our Shares will continue in line with the same or similar trends depicted in the graph below.

(1) The information in this section is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any filing of the Fund under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing.

* The NCREIF Property Index is a quarterly time series composite total rate of return measure (before leverage and fees) of investment performance of a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only. Its value is based on the value of the properties in the index and not the market value of securities. All properties in the NCREIF Property Index have been acquired, at least in part, on behalf of tax-exempt institutional investors—the great majority being pension funds. Properties in the NCREIF Property Index are accounted for using market value accounting standards, not historical cost. We measure the performance of our Advisor against the NCREIF Property Index.

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Item 6. Selected Financial Data.

The following table sets forth our selected financial and operating data on a historical basis. The following data should be read in conjunction with our consolidated financial statements and the accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K.

	Year ended December 31,
	2009			2008			2007			2006			2005
Operating Data:
Total revenues	$	96,425		$	97,519		$	62,199		$	39,179		$	7,316
Operating expenses		86,493			105,494			57,569			35,914			7,062
Operating income (loss)		9,932			(7,975	)		4,630			3,265			254
Interest income		92			298			1,411			1,211			524
Interest expense		(34,136	)		(35,533	)		(22,647	)		(13,551	)		(2,434	)
Equity in (loss) income of unconsolidated affiliates		(8,277	)		1,230			536			425			116
Gain (loss) on foreign currency derivative		—			1,492			(504	)		—			—
Net loss from continuing operations		(32,389	)		(40,488	)		(16,574	)		(8,650	)		(1,540	)
Net (loss) income from discontinued operations		(9,427	)		2,263			2,366			1,731			1,552
Net (loss) income		(41,816	)		(38,225	)		(14,208	)		(6,919	)		12
Loss allocated to noncontrolling interests		2,205			5,651			572			156			11
Net (loss) income attributable to Excelsior LaSalle Property Fund, Inc.		(39,611	)		(32,574	)		(13,636	)		(6,763	)		23
Foreign currency translation adjustment		1,846			(2,848	)		963			—			—
Net comprehensive (loss) income	$	(37,765	)	$	(35,422	)	$	(12,673	)	$	(6,763	)	$	23
Weighted average shares outstanding		4,128,290			3,822,484			3,252,725			2,341,347			1,276,388
Net (loss) income attributable to Excelsior LaSalle Property Fund, Inc. per share—basic and diluted	$	(9.59	)	$	(8.52	)	$	(4.19	)	$	(2.89	)	$	0.02
Cash distributions declared per common share	$	0.875		$	7.00		$	7.00		$	7.00		$	7.00
	December 31,
	2009			2008			2007			2006			2005
Balance Sheet Data:
Investments in real estate—net of accumulated depreciation	$	902,774		$	957,974		$	918,604		$	504,133		$	399,182
Investments in real estate and other assets held for sale		104,112			—			—			—			—
Total assets		1,017,140			1,084,805			1,070,188			635,694			502,344
Total debt		611,975			717,497			691,316			361,351			280,361
Liabilities held for sale		85,815			—			—			—			—
Total equity		289,323			323,616			331,595			244,258			188,867
	Year ended December 31,
	2009			2008			2007			2006			2005
Cash Flow Information:
Net cash flows provided by operating activities	$	17,758		$	19,983		$	26,464		$	9,941		$	5,254
Net cash flows provided by (used in) investing activities		37,384			(37,933	)		(391,619	)		(118,800	)		(222,170	)
Net cash flows (used in) provided by financing activities		(27,305	)		26,011			344,590			129,667			221,684
Other Data:
Funds from operations	$	(3,593	)	$	26,149		$	22,162		$	16,821		$	8,810
Funds from operations per share—basic and diluted (1)	$	(0.87	)	$	6.84		$	6.81		$	7.18		$	6.90

(1) Funds from operations (“FFO”) does not represent cash flow from operations as defined by accounting principles generally accepted in the United States of America (“GAAP”), should not be considered as an alternative to GAAP net income and is not necessarily indicative of cash available to fund all cash requirements. Please see below for a reconciliation of net income to FFO.

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The selected financial data presented above has been dramatically impacted by acquisitions made since the inception of the Fund. These acquisitions drastically impact the comparability of our results from operations, financial position and cash flows. We are uncertain how the results from operations, financial position and cash flows will be impacted should we make future acquisitions or dispositions.

FUNDS FROM OPERATIONS

Consistent with real estate industry and investment community preferences, we consider FFO as a supplemental measure of the operating performance for a real estate investment trust and a complement to GAAP measures because it facilitates an understanding of the operating performance of our properties. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains or losses from cumulative effects of accounting changes, extraordinary items and sales of properties, plus real estate related depreciation and amortization and after adjustments for these items related to noncontrolling interests and unconsolidated affiliates.

FFO does not give effect to real estate depreciation and amortization because these amounts are computed to allocate the cost of a property over its useful life. Because values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, we believe that FFO provides investors with a clearer view of our operating performance.

In order to provide a better understanding of the relationship between FFO and GAAP net income, the most directly comparable GAAP financial reporting measure, we have provided a reconciliation of GAAP net (loss) income attributable to Excelsior LaSalle Property Fund, Inc., to FFO. FFO does not represent cash flow from operating activities in accordance with GAAP, should not be considered as an alternative to GAAP net income and is not necessarily indicative of cash available to fund cash needs.

	For the year ended December 31, 2009			For the year ended December 31, 2008			For the year ended December 31, 2007			For the year ended December 31, 2006			For the year ended December 31, 2005
Net (loss) income attributable to Excelsior LaSalle Property Fund, Inc	$	(39,611	)	$	(32,574	)	$	(13,636	)	$	(6,763	)	$	23
Plus: Real estate depreciation and amortization		32,695			56,129			28,433			16,182			2,577
Gain from sales of real estate		(2,530	)		—			—			—			—
Real estate depreciation and amortization from discontinued operations		3,427			4,115			3,927			3,028			2,217
Real estate depreciation and amortization for noncontrolling interests		(2,260	)		(6,462	)		(1,198	)		(445	)		(19	)
Real estate depreciation and amortization from unconsolidated real estate affiliates		4,686			4,941			4,636			4,819			4,012
Funds from operations	$	(3,593	)	$	26,149		$	22,162		$	16,821		$	8,810
Weighted average shares outstanding, basic and diluted		4,128,290			3,822,484			3,252,725			2,341,347			1,276,388
Funds from operations per share, basic and diluted	$	(0.87	)	$	6.84		$	6.81		$	7.18		$	6.90

Net loss for the year ended December 31, 2009 included impairment charges of $25,955. Adjusting FFO for these impairment charges results in an adjusted FFO of $22,362 and an adjusted FFO per share, basic and diluted of $5.42 for the year ended December 31, 2009. There were no impairment charges for the years ended December 31, 2008, 2007, 2006, and 2005.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

$ in thousands, except share and per share amounts

Management Overview

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to the consolidated financial statements appearing elsewhere in this Form 10-K. All references to numbered Notes are to specific notes to our Consolidated Financial Statements beginning on page F-1 of this Form 10-K, and which descriptions are incorporated into the applicable response by reference. References to “base rent” in this Form 10-K refer to cash payments made under the relevant lease(s), excluding real estate taxes and certain property operating expenses that are paid by us and are recoverable under the relevant lease(s) and exclude adjustments for straight-line rent revenue and above- and below-market lease amortization (See Note 2).

The discussions surrounding our Consolidated Properties refer to our wholly or majority owned and controlled properties, which as of December 31, 2007 were comprised of:

• Monument IV at Worldgate,

• Havertys Furniture,

• Hagemeyer Distribution Center (sold in 2009, excluded from December 31, 2009 Consolidated Properties),

• 25850 S. Ridgeland

• Georgia Door Sales Distribution Center,

• 105 Kendall Park Lane,

• Waipio Distribution Center (sold in 2009, excluded from December 31, 2009 Consolidated Properties),

• Marketplace at Northglenn,

• the CHW Medical Office Portfolio,

• Metropolitan Park North,

• Stirling Slidell Shopping Centre,

• 9800 South Meridian,

• 18922 Forge Drive,

• 4001 North Norfleet Road,

• Station Nine Apartments,

• 4 Research Park Drive,

• 36 Research Park Drive,

• The District at Howell Mill,

• Canyon Plaza,

• Railway Street Corporate Centre,

• Cabana Beach San Marcos,

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• Cabana Beach Gainesville,

• Campus Lodge Athens,

• Campus Lodge Columbia,

As of December 31, 2008 and 2009, our Consolidated Properties were also comprised of:

• The Edge at Lafayette and

• Campus Lodge Tampa.

Our Unconsolidated Properties, which are owned through joint venture arrangements, consisted of Legacy Village and 111 Sutter Street as of December 31, 2009, 2008 and 2007. Because management’s operating strategies are generally the same whether the properties are consolidated or unconsolidated, we believe that financial information and operating statistics with respect to all properties, both consolidated and unconsolidated, provide important insights into our operating results, including the relative size and significance of these elements to our overall operations. Collectively, we refer to our Consolidated and Unconsolidated Properties as our “Fund Portfolio.”

Our primary business is the ownership and management of a diversified portfolio of retail, office, industrial and apartment properties primarily located in the United States. We hire property management companies to provide the on-site, day-to-day management services for our properties. When selecting a property management company for one of our properties, we look for service providers that have a strong local market or industry presence, create portfolio efficiencies, have the ability to develop new business for us and will provide a strong internal control environment that will comply with our Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) internal control requirements. We currently use a mix of property management service providers that include large national real estate service firms, including an affiliate of the Advisor, and smaller local firms. Our property management service providers are generally hired to perform both property management and leasing services for our properties.

We seek to minimize risk and maintain stability of income and principal value through broad diversification across property sectors and geographic markets and by balancing tenant lease expirations and debt maturities across the Fund Portfolio. Our diversification goals also take into account investing in sectors or regions we believe will create returns consistent with our investment objective. Under normal conditions, we intend to pursue investments principally in well-located, well-leased assets within the office, retail, industrial and apartment sectors, which we refer to as the “Primary Sectors”. We will also pursue investments in certain sub-sectors of the Primary Sectors, for example the medical office sub-sector of the office sector or the student-oriented housing sub-sector of the apartment sector. We expect to actively manage the mix of properties and markets over time in response to changing operating fundamentals within each property sector and to changing economies and real estate markets in the geographic areas considered for investment. When consistent with our investment objectives, we will also seek to maximize the tax efficiency of our investments through like-kind exchanges and other tax planning strategies.

A key ratio reviewed by management in our investment decision process is the cash flow generated by the proposed investment, from all sources, compared to the amount of cash investment required (the “Cash on Cash Return”). Generally, we look at the Cash on Cash Returns over the one, five and ten-year time horizons and select investments that we believe meet our objectives. We own certain investments that provide us with significant cash flows that do not get treated as revenue under GAAP, but do get factored into our Cash on Cash Return calculations. Examples of such non-revenue generating cash flows include the ESTIP, TIF Note and the income guarantees from the seller of five student-oriented apartment communities we acquired in November 2007 and February 2008. For GAAP purposes, cash received from the Marketplace at Northglenn ESTIP and 25850 S. Ridgeland TIF Note is split between repayment of the principal balance on the notes receivable and interest income earned on those notes. For GAAP purposes, cash received from the seller of the student-oriented

35

apartment communities income guarantees received in 2008 were treated as a reduction of purchase price. Additionally, certain GAAP concepts such as straight-line rent and depreciation and amortization, are not factored into our Cash on Cash Returns (See Note 2).

The following tables summarize our diversification by property sector and geographic region based upon the fair value of our Consolidated and Unconsolidated Properties. The ten-year lease expiration table represents the lease expirations by both total square feet and annualized minimum base rents for current tenants of our Consolidated and Unconsolidated Properties. The ten-year debt repayment schedule represents debt principal repayments and maturities and the weighted average interest rate of those repayments and maturities for our Consolidated and Unconsolidated Properties. These tables provide examples of how the Advisor evaluates the Fund Portfolio when making investment decisions.

Property Sector Diversification

Consolidated Properties

	Percent of Fair Value
	2009		2008
Office
Commercial Office	29	%	30	%
Medical Office	17	%	15	%
Retail	17	%	20	%
Industrial	14	%	14	%
Apartment	23	%	21	%

Unconsolidated Properties

	Percent of Fair Value
	2009		2008
Office
Commercial Office	46	%	50	%
Medical Office	—		—
Retail	54	%	50	%
Industrial	—		—
Apartment	—		—

Geographic Region Diversification

Consolidated Properties

	Percent of Fair Value
	2009		2008
East	11	%	11	%
West	44	%	46	%
Midwest	13	%	11	%
South	28	%	28	%
International	4	%	4	%

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Unconsolidated Properties

	Percent of Fair Value
	2009		2008
East	—		—
West	46	%	50	%
Midwest	54	%	50	%
South	—		—
International	—		—

Future Lease Expirations

Consolidated Properties

	Total Square Footage	Annualized Minimum Base Rents		Percent of Annualized Minimum Base Rents
2010	333,000	$	9,665	18.1	%
2011	434,000		8,896	16.7	%
2012	413,000		9,406	17.6	%
2013	150,000		2,949	5.5	%
2014	1,223,000		6,332	11.9	%
2015	132,000		2,108	4.0	%
2016	115,000		1,467	2.7	%
2017	1,507,000		6,807	12.8	%
2018	31,000		552	1.0	%
2019	22,000		280	0.5	%
2020 and thereafter	992,000		4,894	9.2	%

(1) Does not includes 4,489 leases totaling approximately 2,003,000 square feet and approximately $28,860 in annualized minimum base rent associated with our seven apartment investments.

Unconsolidated Properties

	Total Square Footage	Annualized Minimum Base Rents		Percent of Annualized Minimum Base Rents
2010	105,000	$	3,993	17.4	%
2011	68,000		3,578	15.6	%
2012	7,000		227	1.0	%
2013	89,000		3,361	14.6	%
2014	60,000		1,647	7.2	%
2015	15,000		545	2.4	%
2016	42,000		1,802	7.9	%
2017	1,000		60	0.3	%
2018	79,000		1,722	7.5	%
2019	103,000		1,778	7.7	%
2020 and thereafter	218,000		4,225	18.4	%

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Ten-Year Debt Repayment

Consolidated Properties

	Principal Repayments and Maturities	Percent of Total Outstanding Debt		Weighted Average Interest Rate
2010	8,284	1.2	%	5.35	%
2011	57,875	8.5	%	5.21	%
2012	36,209	5.3	%	5.52	%
2013	120,777	17.8	%	5.64	%
2014	159,301	23.4	%	5.62	%
2015	52,910	7.8	%	5.61	%
2016	90,525	13.3	%	5.62	%
2017	122,711	18.1	%	5.43	%
2018	666	0.1	%	5.30	%
2019 and thereafter	31,081	4.5	%	5.30	%

Unconsolidated Properties

	Principal Repayments and Maturities	Percent of Total Outstanding Debt		Weighted Average Interest Rate
2010	3,123	2.1	%	5.62	%
2011	3,742	2.5	%	5.62	%
2012	3,958	2.6	%	5.62	%
2013	4,186	2.8	%	5.62	%
2014	82,993	55.2	%	5.58	%
2015	52,380	34.8	%	5.58	%
2016	—	—		—
2017	—	—		—
2018	—	—		—
2019 and thereafter	—	—		—

Fund portfolio leverage (calculated as our share of the current property debt balance divided by the fair value of all of our real estate investments) was limited to approximately 65% loan-to-value measured at the time we made our investments. Declining commercial property values have caused our portfolio leverage to increase above our target leverage ratio of 65%. Our directors have approved the Fund operating with this higher portfolio leverage ratio as a result of the decline in values of our properties. We relied primarily on long-term fixed-rate financing to lock in favorable spreads between real estate income yields and mortgage interest rates, and strive to maintain a balanced schedule of debt maturities.

Going forward, we intend to reduce the overall leverage on the Fund, subject to having available capital, through principal amortization on existing loans, refinancing maturing property level debt at lower leverage amounts and selective property dispositions.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. For example, significant estimates and assumptions have been made with respect to the useful lives of assets, recoverable amounts of receivables, and initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. Actual results could differ from those estimates.

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Critical Accounting Policies

Critical accounting policies are those that are both significant to the overall presentation of our financial condition and results of operations in our consolidated financial statements and require management to make difficult, complex or subjective judgments. Our critical accounting policies are those applicable to the following:

Initial Valuations and Estimated Useful Lives or Amortization Periods for Real Estate Investments and Intangibles

At acquisition, we make an assessment of the value and composition of the assets acquired and liabilities assumed. These assessments consider fair values of the respective assets and liabilities and are primarily determined based on estimated future cash flows using appropriate discount and capitalization rates, but may also be based on independent appraisals or other market data. The estimated future cash flows that are used for this analysis reflect the historical operations of the property, known trends and changes expected in current market and economic conditions that would impact the property’s operations, and our plans for such property. These estimates are particularly important as they are used for the allocation of purchase price between depreciable and non-depreciable real estate and other identifiable intangibles, including above, below and at-market leases. As a result, the impact of these estimates on our operations could be substantial. Significant differences in annual depreciation or amortization expense may result from the differing useful life or amortization periods related to such purchased assets and liabilities.

Events or changes in circumstances concerning a property may occur, which could indicate that the carrying values or amortization periods of the assets and liabilities may require adjustment. The resulting recovery analysis also depends on an analysis of future cash flows to be generated from a property’s assets and liabilities. Changes in our overall plans and views on current market and economic conditions may have a significant impact on the resulting estimated future cash flows of a property that are analyzed for these purposes.

Impairment of Long-Lived Assets

Real estate investments are individually evaluated for impairment annually or whenever conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis) over the anticipated holding period is less than its depreciated historical cost. Upon determination that a permanent impairment has occurred, rental properties will be reduced to their fair value.

Our estimate of the expected future cash flows used in testing for impairment is highly subjective and based on, among other things, our estimates regarding future market conditions, rental rates, occupancy levels, costs of tenant improvements, leasing commissions and other tenant concessions, assumptions regarding the residual value of our properties at the end of our anticipated holding period, discount rates and the length of our anticipated holding period. These assumptions could differ materially from actual results. If our strategy changes or if market conditions otherwise dictate a reduction in the holding period and an earlier sale date, an impairment loss could be recognized and such loss could be material. During the year ended December 31, 2009, the Fund recorded impairment charges on consolidated real estate properties totaling $18,686. The Fund did not have impairment charges in 2008 or 2007.

The Fund evaluates the carrying value of its investments in unconsolidated joint ventures using the equity method of accounting in accordance with the authoritative guidance. We analyze our investments in unconsolidated real estate affiliates when circumstances change and at least annually and determine if an “other-than-temporary” impairment exists and, if so, assess our ability to recover our carrying cost of the investment. During the year ended December 31, 2009, the Fund recorded an “other-than-temporary” impairment charge on its investment in the Legacy Village property in the amount of $7,269. The Fund did not have an “other-than-temporary” impairment in any of its investments in unconsolidated joint ventures in 2008 or 2007.

39

Results of Operations

General

Our revenues are primarily received from tenants in the form of fixed minimum base rents and recoveries of operating expenses. Our expenses primarily relate to the costs of operating and financing the properties. Our share of the net income or net loss from Unconsolidated Properties is included in the equity in income of unconsolidated affiliates.

Results of Operations for the years ended December 31, 2009 and 2008:

We believe the following analyses of comparable real estate investments provide important information about the operating results of our real estate investments, such as trends in total revenues or operating expenses that may not be as apparent in a period-over-period comparison of the entire Fund. Comparable real estate investments represent properties currently classified as continuing operations and owned by us at December 31, 2009, which were also owned by us during the entire year ended on December 31, 2008 and classified as held for use. Comparable real estate investments at December 31, 2009 include all real estate investments except Havertys Furniture, 25850 S. Ridgeland, Georgia Door Sales Distribution Center, 105 Kendall Park Lane, Hagemeyer Distribution Center, Waipio Shopping Center, The Edge at Lafayette, and Campus Lodge Tampa.

Revenues

	Total Fund
	Year Ended December 31, 2009		Year Ended December 31, 2008		$ Change			% Change
Revenues:
Minimum rents	$	76,153	$	78,686	$	(2,533	)	(3.2	)%
Tenant recoveries and other rental income		20,272		18,833		1,439		7.6	%
Total revenues	$	96,425	$	97,519	$	(1,094	)	(1.1	)%

Included in minimum rents, as a net increase, are above- and below-market lease amortization (See Note 2) of $1,517 and $1,959 for the years ended December 31, 2009 and 2008, respectively. Also included in minimum rents is straight-line rental income, representing rents recognized prior to being billed and collectible as provided by the terms of the lease, of $459 and $1,314 for the years ended December 31, 2009 and 2008, respectively.

Tenant recoveries relate mainly to real estate taxes and certain property operating expenses that are paid by us and are recoverable under the various tenants’ leases.

	Comparable Real Estate Investments
	Year Ended December 31, 2009		Year Ended December 31, 2008		$ Change			% Change
Revenues:
Minimum rents	$	67,830	$	70,719	$	(2,889	)	(4.1	)%
Tenant recoveries and other rental income		19,721		18,414		1,307		7.1	%
Total revenues	$	87,551	$	89,133	$	(1,582	)	(1.8	)%

	Total Revenues Reconciliation
	Year Ended December 31, 2009		Year Ended December 31, 2008
Total revenues:
Comparable real estate investments	$	87,551	$	89,133
Non-comparable real estate investments		8,874		8,386
Total revenues	$	96,425	$	97,519

40

Minimum rents at comparable real estate investments decreased by $2,889 for the year ended December 31, 2009 as compared to the same period in 2008. The decrease resulted from an approximate $1,777 decrease in minimum rent at Cabana Beach Gainesville due to a decrease in occupancy and rental rates in 2009 as compared to 2008. The decrease also stemmed from a $746 decrease at Stirling Slidell Shopping Centre due to the Circuit City bankruptcy during the fourth quarter of 2008, a $677 decrease at 9800 South Meridian due to a decrease in occupancy as well as a $177 decrease at Railway Street Corporate Centre due to the impact of foreign currency translation. This decrease was partially offset by an approximate $677 increase at Campus Lodge Columbia and a $346 increase at Cabana Beach San Marcos due to increases in occupancy and rental rates during 2009 as compared to 2008.

Tenant recoveries and other rental income at comparable real estate investments increased by $1,307 for the year ended December 31, 2009 over the same period in 2008. The increase in tenant recoveries was primarily due to increases in recoverable real estate taxes at the CHW Medical Office Portfolio for $737 and 9800 South Meridian for $286. An additional increase stemmed from an approximate $162 increase in other income at Cabana Beach Gainesville due to an agreement reached with the property management company for payments on short-term leases.

Operating Expenses

	Total Fund
	Year Ended December 31, 2009		Year Ended December 31, 2008		$ Change			% Change
Operating expenses:
Real estate taxes	$	11,976	$	11,713	$	263		2.2	%
Property operating		25,056		24,284		772		3.2	%
Manager and advisor fees		6,413		9,035		(2622	)	(29.0	)%
Fund level expenses		2,518		2,449		69		2.8	%
Provision for doubtful accounts		861		935		(74	)	(7.9	)%
General and administrative		1,370		949		421		44.4	%
Provision for impairment of real estate		5,604		—		5,604		—	%
Depreciation and amortization		32,695		56,129		(23,434	)	(41.8	)%
Total operating expenses	$	86,493	$	105,494	$	(19,001	)	(18.0	)%

Real estate taxes and property operating expenses consist of the costs of ownership and operation of the real estate investments, many of which are recoverable under net leases. Examples of property operating expenses include insurance, utilities and repair and maintenance expenses. Manager and advisor fees relate to the fixed and variable management and advisory fees earned by the Manager and Advisor. Fixed fees increase or decrease based on changes in our NAV. NAV will be impacted by changes in the value of our properties and the related debt. Variable fees are calculated as a formula of cash flow generated from owning and operating the real estate investments and will fluctuate as future cash flows fluctuate. The decrease in manager and advisor fees from 2008 to 2009 relate to the fixed management and advisory fee.

Our Fund level expenses in 2009 and 2008 were subject to the Expense Limitation Agreement with the Manager (See Note 8), which limits certain expenses to 0.75% of NAV. These expenses relate mainly to our compliance, administration related costs and Share offerings. We record Fund level expenses based on a calculation of 0.75% of NAV annually, calculated quarterly, limited to actual costs incurred by the Fund during the current quarter plus reimbursable expenses carried forward from prior periods. Expenses in excess of the 0.75% of NAV annually, calculated quarterly, will be carried forward for up to three years. As of December 31, 2009 and December 31, 2008, no Fund level expenses were being carried forward by the Manager. The Expense Limitation Agreement is scheduled to expire on December 31, 2010, after which time we will be responsible for all expenses as incurred, unless the agreement is renewed by the Manager and the Fund at their discretion.

41

Provision for doubtful accounts relate to receivables deemed as potentially uncollectible due to the age of the receivable or the status of the tenant Provisions for doubtful accounts in 2008 and 2009 relate mainly to minimum rents and unit damage charges at some of our student-oriented apartment communities for tenants whose leases have expired as well as to tenant bankruptcies at some of our multi-tenant retail and office properties.

General and administrative expenses relate mainly to property expenses unrelated to property operations. The increase in general and administrative expenses from 2008 to 2009 is mainly related to expensing of pre-acquisition costs, bank fees, franchise taxes and various property level legal services.

Provision for impairment of real estate relates to assets whose undiscounted cash flows have decreased below the carrying value. A provision for impairment of real estate is recorded to write the property down from its carrying value to its fair value.

We expect depreciation and amortization expense to increase when we acquire new real estate investments. Depreciation and amortization expense will be impacted by the values assigned to buildings, personal property and in-place lease assets as part of the initial purchase price allocation.

	Comparable Real Estate Investments
	Year Ended December 31, 2009		Year Ended December 31, 2008		$ Change			% Change
Operating expenses:
Real estate taxes	$	11,065	$	10,927	$	138		1.3	%
Property operating		20,913		20,877		36		0.2	%
Provision for doubtful accounts		679		832		(153	)	(18.5	)%
General and administrative		871		841		30		3.5	%
Provision for impairment of real estate		5,604		—		5,604		—	%
Depreciation and amortization		30,109		45,894		(15,785	)	(34.4	)%
Total operating expenses	$	69,241	$	79,371	$	(10,130	)	(12.8	)%

	Operating Expenses Reconciliation
	Year Ended December 31, 2009		Year Ended December 31, 2008
Total operating expenses:
Comparable real estate investments	$	69,241	$	79,371
Non-comparable real estate investments		8,321		14,639
Manager and advisor fees		6,413		9,035
Fund level expenses		2,518		2,449
Total operating expenses	$	86,493	$	105,494

Real estate taxes expense at comparable real estate investments increased by $138 for the year ended December 31, 2009 compared to the same period of 2008. Increases stemmed from re-assessments and increased tax rates at 9800 South Meridian for $255 and at the Marketplace at Northglenn for $225. These increases were partially offset by a decrease of $354 at CHW Medical Office Portfolio related to a true-up to re-assessed values.

Property operating expenses remained relatively flat at comparable real estate investments when comparing the year ended December 31, 2009 with the same period of 2008.

The decrease in provision for doubtful accounts at comparable real estate investments is mainly related to a $110 decrease from 2008 to 2009 in uncollectable minimum rents and unit damage charges at some of our student-oriented apartment communities for tenants whose leases have expired. This decrease is offset by an increase at the CHW Medical Office Portfolio of $44 as the prior year included recoveries that did not occur in 2009.

42

The increase in general and administrative expense at comparable properties is primarily related to certain non-reimbursable state and local taxes and general property level legal costs related to leasing matters.

The increase in provision for impairment of real estate relates to an impairment charge taken on 9800 South Meridian in order to write the property down to its fair value.

The decrease in depreciation and amortization expense at comparable real estate investments is primarily related to decreases in in-place lease amortization of $11,088 at our student housing properties and $2,007 at the CHW Medical Office Portfolio. An additional decrease stemmed from the decrease of $1,232 at Metropolitan Park North as the property was classified as held for sale during July 2007 and later removed from this classification during the first quarter of 2008. As a result of this change in classification, the year ended December 31, 2008 includes additional depreciation to make up for the period when Metropolitan Park North was classified as held for sale, during which no depreciation charges were taken. Another decrease stemmed from the decrease at Stirling Slidell Shopping Centre related to the acceleration of amortization of an in-place lease intangible asset in 2008 related to the Circuit City bankruptcy in the amount of $675.

Other Income and Expenses

	Total Fund
	Year Ended December 31, 2009			Year Ended December 31, 2008			$ Change			% Change
Other income and (expenses):
Interest income	$	92		$	298		$	(206	)	(69.1	)%
Interest expense		(34,136	)		(35,533	)		1,397		3.9	%
Equity in (loss) income of unconsolidated affiliates		(8,277	)		1,230			(9,507	)	(772.9	)%
Gain on foreign currency derivative		—			1,492			(1,492	)	—	%
Total other income and (expenses):	$	(42,321	)	$	(32,513	)	$	(9,808	)	(30.2	)%

Interest income decreased for the year ended December 31, 2009 over 2008 as a result of lower interest rates in 2009.

Interest expense decreased slightly from 2008 to 2009 primarily due to lower interest rates on our variable rate loans and a lower average balance borrowed on our line of credit. Interest expense includes the amortization of deferred finance fees of $714 and $751 for the years ended December 31, 2009 and 2008, respectively. Also included in interest expense for the years ended December 31, 2009 and 2008, as a net reduction, is amortization of debt premium and discount associated with the assumption of debt of $214 and $184, respectively.

Equity in (loss) income of unconsolidated affiliates decreased by $9,507 due primarily to an impairment charge of $7,269 taken on our investment in Legacy Village in 2009. The impairment charged stemmed from the continued deterioration of the U.S. capital markets, the lack of liquidity and the related impact on the real estate market and retail industry. The impairment charge was triggered by several negative factors, including an estimated loss in value due to weakness of our retail tenant base related to requests for rent relief and the loss of some smaller tenants. Further decreases in the equity in (loss) income of unconsolidated affiliates stems from a decrease of equity income at Legacy Village of $1,636 from equity income of $1,281 for the year ended December 31, 2008 to equity loss of $355 for year ended December 31, 2009. The decrease in equity income stemmed from an increase in the amount of income allocated to other partners as the Fund had completed its preferred return allocation and decreased occupancy at the property as well as termination fee income received in 2008 that did not occur in 2009. Equity in the loss from 111 Sutter Street increased by $602 from equity loss of $51 for the year ended December 31, 2008 to equity loss of $653 for the year ended December 31, 2009. The increase in loss at 111 Sutter Street was mainly a result of decreased occupancy.

43

Gain on foreign currency derivatives relates to the change in fair value of the foreign currency forward contracts that were held in 2008 and matured on December 31, 2008.

Discontinued Operations

	Total Fund Real Estate Investments
	Year Ended December 31, 2009			Year Ended December 31, 2008		$ Change			% Change
Discontinued Operations:
(Loss) income from discontinued operations	$	(11,957	)	$	2,263	$	(14,220	)	(628.4	)%
Gain on sale of discontinued operations		2,530			—		2,530		—	%
Total income from discontinued operations	$	(9,427	)	$	2,263	$	(11,690	)	(516.6	)%

The decrease in (loss) income from discontinued operations is primarily related to $13,082 provision for impairment taken on our properties which are classified as held for sale as of December 31, 2009, the $1,003 loss on extinguishments of debt related to prepayment premiums and unamortized deferred financing fees for properties which were sold during 2009, and $302 related to partial period of ownership in 2009 for Hagemeyer Distribution Center and Waipio Shopping Center compared to a full year of ownership in the year ended December 31, 2008. We recognized a $2,530 gain on sale associated with the sales of Hagemeyer Distribution Center and Waipio Shopping Center in 2009.

Results of Operations for the years ended December 31, 2008 and 2007:

We believe the following analyses of comparable real estate investments provide important information about the operating results of our real estate investments, such as trends in total revenues or operating expenses that may not be as apparent in a period-over-period comparison of the entire Fund. Comparable real estate investments represent properties currently classified as continuing operations and owned by us at December 31, 2008, which were also owned by us during the entire year ended on December 31, 2007. Comparable real estate investments at December 31, 2008 include Monument IV at Worldgate, Marketplace at Northglenn, the CHW Medical Office Portfolio, Metropolitan Park North, Stirling Slidell Shopping Center and 9800 South Meridian.

Revenues

	Total Fund
	Year Ended December 31, 2008		Year Ended December 31, 2007		$ Change		% Change
Revenues:
Minimum rents	$	78,686	$	48,569	$	28,117	57.9	%
Tenant recoveries and other rental income		18,833		13,630		5,203	38.2	%
Total revenues	$	97,519	$	62,199	$	33,320	53.6	%

Increases in revenue line items from 2007 to 2008 are primarily attributable to the acquisition of the real estate investments that occurred during 2007 and 2008.

Included in minimum rents, as a net increase, are above- and below-market lease amortization (See Note 2) of $1,959 and $1,898 for the years ended December 31, 2008 and 2007, respectively. Also included in minimum rents is straight-line rental income, representing rents recognized prior to being billed and collectible as provided by the terms of the lease, of $1,314 and $1,493 for the years ended December 31, 2008 and 2007, respectively.

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Tenant recoveries relate mainly to real estate taxes and certain property operating expenses that are paid by us and are recoverable under the various tenants’ leases.

	Comparable Real Estate Investments
	Year Ended December 31, 2008		Year Ended December 31, 2007		$ Change		% Change
Revenues:
Minimum rents	$	35,255	$	34,590	$	665	1.9	%
Tenant recoveries and other rental income		12,596		11,335		1,261	11.1	%
Total revenues	$	47,851	$	45,925	$	1,926	4.2	%

	Total Revenues Reconciliation
	Year Ended December 31, 2008		Year Ended December 31, 2007
Total revenues:
Comparable real estate investments	$	47,851	$	45,925
Non-comparable real estate investments		49,668		16,274
Total revenues	$	97,519	$	62,199

Minimum rents at comparable real estate investments increased by $665 for the year ended December 31, 2008 as compared to the same period in 2007. The increase resulted from an approximate $1,140 increase in minimum rent at 9800 South Meridian due to a new lease of approximately 60,000 square feet that began in the first quarter of 2008 and an increase in minimum rents at Stirling Slidell Shopping Centre of approximately $330 due to the acceleration into minimum base rents of a below market lease intangible liability related to Circuit City, which vacated its lease early. The increases were partially offset by an approximate $465 decrease at the CHW Medical Office Portfolio due to decreased occupancy and conversions from gross leases to net leases. The change in minimum rents was also impacted by a decrease of approximately $370 at Metropolitan Park North due to recapture of above market lease amortization resulting from the property being reclassified to property held and used from held for sale.

Tenant recoveries and other rental income increased by $1,261 for the year ended December 31, 2008 over the same period in 2007 mainly as a result of two items. First, the primary increase was due to an approximate $1,120 increase in recoveries at the CHW Medical Office Portfolio related to conversions from gross leases to net leases and increased operating expenses. Second, an approximate $150 increase at Monument IV at Worldgate mainly related to increases in real estate taxes and operating expenses.

Operating Expenses

	Total Fund
	Year Ended December 31, 2008		Year Ended December 31, 2007		$ Change			% Change
Operating expenses:
Real estate taxes	$	11,713	$	6,276	$	5,437		86.6	%
Property operating		24,284		11,833		12,451		105.2	%
Manager and advisor fees		9,035		7,426		1,609		21.7	%
Fund level expenses		2,449		2,656		(207	)	(7.8	)%
Provision for doubtful accounts		935		379		556		146.7	%
General and administrative		949		566		383		67.7	%
Depreciation and amortization		56,129		28,433		27,696		97.4	%
Total operating expenses	$	105,494	$	57,569	$	47,925		83.2	%

Increases in operating expense line items from 2007 to 2008 are primarily attributable to the acquisition of the real estate investments that occurred during 2007 and 2008.

45

Real estate taxes and property operating expenses consist of the costs of ownership and operation of the real estate investments, many of which are recoverable under net leases. Examples of property operating expenses include insurance, utilities and repair and maintenance expenses.

Manager and advisor fees relate to the fixed and variable management and advisory fees earned by the Manager and Advisor. Fixed fees increase or decrease based on changes in our NAV. NAV will be impacted by changes in the value of our properties and the related debt. Variable fees are calculated as a formula of cash flow generated from owning and operating the real estate investments and will fluctuate as future cash flows fluctuate. The increase in manager and advisor fees from 2007 to 2008 relate mainly to the fixed management and advisory fee.

Our Fund level expenses in 2008 and 2007 were subject to the Expense Limitation Agreement with the Manager (See Note 8), which limits certain expenses to 0.75% of NAV. These expenses relate mainly to our compliance, administration related costs and Share offerings. We record Fund level expenses based on a calculation of 0.75% of NAV annually, calculated quarterly, limited to actual costs incurred by the Fund during the current quarter plus reimbursable expenses carried forward from prior periods. Expenses in excess of the 0.75% of NAV annually, calculated quarterly, will be carried forward for up to three years. As of December 31, 2008 and December 31, 2007, no Fund level expenses were being carried forward by the Manager. The Expense Limitation Agreement is scheduled to expire on December 31, 2010, after which time we will be responsible for all expenses as incurred, unless the agreement is renewed by the Manager and the Fund at their discretion.

Provision for doubtful accounts relate to receivables deemed as potentially uncollectible due to the age of the receivable or the status of the tenant. Increases in provision for doubtful accounts from 2007 to 2008 relate to minimum rents and unit damage charges at some of our student-oriented apartment communities for tenants whose leases have expired as well as to tenant bankruptcies at some of our multi-tenant retail and office properties.

General and administrative expenses relate mainly to property expenses unrelated to property operations. Increase in general and administrative expenses from 2007 to 2008 relate mainly to bank fees and state taxes.

We expect depreciation and amortization expense to increase when we acquire new real estate investments. Depreciation and amortization expense will be impacted by the values assigned to buildings, personal property and in-place lease assets as part of the initial purchase price allocation.

	Comparable Real Estate Investments
	Year Ended December 31, 2008		Year Ended December 31, 2007		$ Change			% Change
Operating expenses:
Real estate taxes	$	5,903	$	4,867	$	1,036		21.3	%
Property operating		10,452		9,812		640		6.5	%
Provision for doubtful accounts		325		372		(47	)	(12.6	)%
General and administrative		531		535		(4	)	(0.7	)%
Depreciation and amortization		20,166		18,216		1,950		9.2	%
Total operating expenses	$	37,377	$	33,802	$	3,575		10.6	%

	Operating Expenses Reconciliation
	Year Ended December 31, 2008		Year Ended December 31, 2007
Total operating expenses:
Comparable real estate investments	$	37,377	$	33,802
Non-comparable real estate investments		56,633		13,685
Manager and advisor fees		9,035		7,426
Fund level expenses		2,449		2,656
Total operating expenses	$	105,494	$	57,569

46

The increase in real estate taxes expense at comparable real estate investments is mainly due to an increase of $890 at the CHW Medical Office Portfolio due to an increase in assessed value for the properties located in California and a $160 increase at Monument IV at Worldgate as a result of being reassessed at a higher value.

The increase in property operating expenses at comparable real estate investments is mainly related to an increase of $665 at the CHW Medical Office Portfolio. The increase was a result of utility rate increases, repair and maintenance expenses for general property upkeep and payroll costs as the new property management company utilized more staff than the previous property management company. The increase is also attributable to an increase of $60 at Metropolitan Park North related to miscellaneous repairs and maintenance projects and payroll costs for the property management company as well as an increase of $55 at 9800 South Meridian related to increased utilities due to higher occupancy and miscellaneous repair and maintenance projects.

The decrease in provision for doubtful accounts at comparable properties is mainly related to a decrease in uncollectible accounts at the CHW Medical Office Portfolio of approximately $230 due to tenant bankruptcies in 2007. This decrease was partially offset by an increase in uncollectible accounts at Marketplace at Northglenn of approximately $100 and Stirling Slidell Shopping Centre of approximately $70 related to tenant bankruptcies.

The increase in general and administrative expense at comparable properties is primarily related to certain non-reimbursable state and local taxes and general property level legal costs.

The increase in depreciation and amortization expense at comparable real estate investments is primarily related to the catch up of depreciation and amortization of approximately $2,460 at Metropolitan Park North resulting from the property being reclassified as property held and used from held for sale. Additional increases stemmed from the increase of approximately $675 at Stirling Slidell Shopping Centre due to the acceleration of amortization of an in-place lease intangible asset in the fourth quarter of 2008 related to the Circuit City bankruptcy and of approximately $305 at 9800 South Meridian due to 2008 capital additions. These increases were partially offset by a decrease of approximately $1,330 at the CHW Medical Office Portfolio due to several in-place lease intangible assets becoming fully amortized in the fourth quarter of 2007.

Other Income and Expenses

	Total Fund
	Year Ended December 31, 2008			Year Ended December 31, 2007			$ Change			% Change
Other income and (expenses):
Interest income	$	298		$	1,411		$	(1,113	)	(78.9	)%
Interest expense		(35,533	)		(22,647	)		(12,886	)	(56.9	)%
Equity in income of unconsolidated affiliates		1,230			536			694		129.5	%
Gain (loss) on foreign currency derivative		1,492			(504	)		1,996		396.0	%
Total other income and (expenses):	$	(32,513	)	$	(21,204	)	$	(11,309	)	(53.3	)%

Interest income decreased for the year ended December 31, 2008 over 2007 as a result of investing less average cash balances in 2008 than were invested in 2007 and lower interest rates.

Interest expense increased from 2007 to 2008 primarily due to the acquisition of real estate investments that occurred throughout 2007 and the first quarter of 2008. Interest expense includes the amortization of deferred finance fees of $751 and $488 for the years ended December 31, 2008 and 2007, respectively. Also included in interest expense for the years ended December 31, 2008 and 2007, as a net reduction, is amortization of debt premium and discount associated with the assumption of debt of $184 and $121, respectively.

Equity in income of unconsolidated affiliates increased by $694 as equity in the income at 111 Sutter Street decreased by $42 from equity loss of $9 for the year ended December 31, 2007 to equity loss of $51 for the year ended December 31, 2008. Equity income from Legacy Village increased by $736 from equity income of $545

47

for the year ended December 31, 2007 to equity income of $1,281 for the year ended December 31, 2008. The increase at Legacy Village resulted mainly from lease termination fees earned in 2008.

Gain (loss) on foreign currency derivative relates to the change in fair value of the foreign currency forward contracts. We settled the foreign currency forward contract on December 31, 2008 and realized a gain on foreign currency derivative of $1,492. The increase in fair value resulted from the strengthening of the United States Dollar against the Canadian Dollar during the year ended December 31, 2008 as compared to the same period of 2007.

Discontinued Operations

	Total Fund Real Estate Investments
	Year Ended December 31, 2008		Year Ended December 31, 2007		$ Change			% Change
Discontinued Operations:
Income from discontinued operations	$	2,263	$	2,366	$	(103	)	(4.4	)%
Total income from discontinued operations	$	2,263	$	2,366	$	(103	)	(4.4	)%

Income from discontinued operations consists of the net income from Havertys Furniture, 25850 S. Ridgeland, Georgia Door Sales Distribution Center, 105 Kendall Park Lane, 4001 North Norfleet Road, Hagemeyer Distribution Center and Waipio Shopping Center. The decrease of income from discontinued operations is primarily due to an increase in unrecoverable expenses at Waipio Shopping Center and decreases in interest income at all the properties.

Liquidity and Capital Resources

The Fund’s primary uses and sources of cash are as follows:

Uses	Sources
Short-term liquidity and capital needs such as:
•  Interest payments on debt •  Distributions to shareholders •  Fees payable to the Manager and the Advisor •  Minor improvements made to individual properties that are not recoverable through expense recoveries or common area maintenance charges to tenants •  General and administrative costs •  Other Fund level expenses •  Lender escrow accounts for real estate taxes, insurance and capital expenditures	•  Operating cash flow, including the receipt of distributions of our share of cash flow produced by our unconsolidated real estate affiliates •  Proceeds from secured loans collateralized by individual properties •  Proceeds from our unsecured term loan •  Proceeds from construction loans •  Periodic sales of our Common Stock •  Receipts from local governments for real estate tax reimbursements and sales tax sharing agreements
Longer-term liquidity and capital needs such as:	•  Sales of real estate investments
•  Acquisitions of new real estate •  Expansion of existing properties •  Tenant improvements and leasing commissions •  Debt repayment requirements, including both principal and interest •  Repurchases of our Common Stock	•  Draws from lender escrow accounts

48

The sources and uses of cash for the years ended December 31, 2009 and 2008 were as follows:

	Year Ended December 31, 2009			Year Ended December 31, 2008			$ Change
Net cash provided by operating activities	$	17,758		$	19,983		$	(2,225	)
Net cash provided by (used in) investing activities		37,384			(37,933	)		75,317
Net cash (used in) provided by financing activities		(27,305	)		26,011			(53,316	)

Our net cash flows provided by operating activities were impacted by an increase in net loss attributable to the Fund of $7,037 primarily due to increases in provision for impairments (including discontinued operations) of $18,686 and equity in loss of unconsolidated affiliates of $9,507 partially offset by decreases in depreciation and amortization of $23,434, manager and advisor fees of $2,622, and interest expense of $1,397. Our working capital, which consists of cash, tenant accounts receivable and prepaid and other assets less accounts payable and accrued expenses, accrued interest and accrued real estate taxes, was impacted between December 31, 2008 and December 31, 2009 by the following items:

• a decrease in prepaid expenses and other assets as well as tenant accounts receivable (including discontinued operations) of $466 and $233, respectively due to timing of collections; and

• decreases in manager and advisor fees payable of $960 due to a decrease in NAV during 2009, accounts payable and accrued expenses of $557 due to timing of payments, accrued real estate taxes of $444 due to timing of payments and successful real estate tax appeals at existing properties.

Cash provided by (used in) investing activities increased as a result of sale proceeds received from the Hagemeyer Distribution Center and Waipio Shopping Center of $40,305 in addition to a $34,412 decrease in acquisition activity for the twelve months ended December 31, 2009 as compared to the same period in 2008. Cash (used in) provided by financing activities decreased for the twelve months ended December 31, 2009 over the same period in 2008 as a result of (i) a decrease in Share issuances of $65,439 offset by a decrease in Share repurchases of $25,527, (ii) a decrease in net borrowings of $19,724, as a result of less acquisition activity in 2009 than in 2008, (iii) an increase in principal payments of $29,754, mainly related to the sale of Hagemeyer Distribution Center and Waipio Shopping Center, and (iv) a decrease in net credit facility borrowings of $26,500.

Financing

We have relied primarily on fixed-rate financing, locking in what were favorable spreads between real estate income yields and mortgage interest rates and have tried to maintain a balanced schedule of debt maturities. We attempted to limit overall portfolio leverage to 65% at the time we made our investments (portfolio leverage is calculated as our share of the current property debt balance divided by the fair value of all our real estate investments). Declining commercial property values have caused our portfolio leverage to increase above our target leverage ratio of 65%. Based upon the valuation declines in our portfolio, we estimate our current loan-to-value to be approximately 85%.

The following Consolidated Debt table provides information on the outstanding principal balances and the weighted average interest rate at December 31, 2009 and 2008 for such debt. The Unconsolidated Debt table provides information on our pro rata share of debt associated with our unconsolidated joint ventures.

Consolidated Debt

	2009				2008
	Principal Balance		Weighted Average Interest Rate		Principal Balance		Weighted Average Interest Rate
Fixed	$	666,728	5.59	%	$	695,001	5.57	%
Variable		31,111	2.06	%		23,604	2.76	%
Total	$	697,839	5.43	%	$	718,605	5.48	%

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Unconsolidated Debt

	2009				2008
	Principal Balance		Weighted Average Interest Rate		Principal Balance		Weighted Average Interest Rate
Fixed	$	88,688	5.60	%	$	89,927	5.60	%
Variable		—	—			—	—
Total	$	88,688	5.60	%	$	89,927	5.60	%

We have placed mostly fixed-rate financing with maturities through 2027. At December 31, 2009, we had one floating rate loan at LIBOR plus 160 basis points (1.83% at December 31, 2009) and a borrowing on our line of credit at 2.24%. At December 31, 2008, we had one floating rate loan at LIBOR plus 160 basis points (2.04% at December 31, 2008) and a borrowing on our line of credit at 3.75%.

Covenants

At December 31, 2009, we were in compliance with all debt covenants.

Line of Credit / Term Loan

On February 19, 2010, we replaced our existing line of credit with a $17,000 term loan with a $6,000 letter of credit sub-limit provided by PNC Bank, National Association. The term loan bears interest at LIBOR plus 3.75%, with a LIBOR floor of 1.00%. The term loan requires quarterly principal amortization of $2,125 and can be prepaid anytime without penalty. The term loan matures on February 19, 2012. We have one letter of credit issued under the term loan for $3,900.

Our previous $50,000 line of credit agreement which expired in February 2010, was provided by PNC Bank, National Association BMO Capital Markets Financing, Inc. and Bank of America, N.A. (“BANA”), an affiliate of the Manager. The line of credit carried an interest rate that approximates LIBOR plus 1.50% to 2.00% based on certain covenant provisions or a base rate which was the greater of (i) the interest rate per annum announced from time to time by the lender, as its prime rate or (ii) the Federal Funds effective rate plus 0.75%. We had $17,500 borrowed at 2.24% on our line of credit at December 31, 2009, and $10,000 borrowed at 3.50% at December 31, 2008. As of December 31, 2009, we had issued two letters of credit from our line of credit totaling approximately $5,430, which were used as additional collateral on various mortgage loans. As of December 31, 2009, we were in compliance with the terms of our line of credit. At December 31, 2009, we had approximately $27,070 available to draw on our line of credit.

The monies borrowed on our term loan are expected to be repaid from two sources:

• cash flow generated by the Fund Portfolio; and

• sales of real estate investments.

Recent Events and Outlook

Given the uncertain economic climate and extraordinary conditions in the commercial real estate industry, management has made it a priority to implement a cash conservation strategy designed to strengthen our balance sheet and protect the value of the Fund’s assets. Through the establishment of cash reserves, management aims to equip the Fund with sufficient resources to address the portfolio’s fluctuating working capital needs, future capital expenditures, existing loan amortizations, and nearer-term debt maturities until market conditions stabilize. Several action steps have been taken toward this objective including reductions in discretionary expenditures, the suspension of dividend payments and the redemption of Shares through tender offers, and selected property sales. Furthermore, amidst an extremely strained market in which transaction volumes are

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down approximately 75% year-to-date from the same period in 2008, the Fund successfully executed two property dispositions at or above cost and carrying value: Hagemeyer Distribution Center (purchased in December 2004 for $10.2 million and sold in June 2009 for $10.4 million) and Waipio Shopping Center (purchased in August 2005 for $30.5 million and sold in September 2009 for $30.9 million). The combination of suspending dividends and Share redemptions, coupled with the proceeds generated from property sales, has strengthened the Fund’s balance sheet and moved the Fund into an improved cash position: at December 31, 2009, the Fund had accumulated a cash balance of $32.3 million and had retired a $19.5 million liability associated with Waipio Shopping Center’s 2010 debt maturity.

For the remainder of 2010, we will continue to monitor the broader economic slowdown and, as best we can, mitigate the impacts of weakening property fundamentals on our portfolio. The duration and magnitude of the current recession has exceeded expectations and historical precedents causing even the most conservative and defensive investment strategies to underperform. We will continue to be responsive to changes in market conditions that may require us to adopt a more defensive posture in the management of our balance sheet. These defensive tactics may include, but not be limited to, disposition of non-strategic assets, renegotiation of debt and joint venture agreements, establishing cash reserves for future capital needs, continuing the suspension of dividend payments and the redemption of Shares through tender offers. In this regard, management recommended, and our board of directors agreed, that it was not in the best interest of the Fund to declare a dividend for the second, third and fourth quarter of 2009 and first quarter of 2010. We cannot provide assurance with respect to the amount of dividends, if any, that we will pay in the future.

While we historically provided limited liquidity to our stockholders by conducting tender offers, we did not and do not guarantee that sufficient cash will be available at any particular time to fund repurchases of our Shares. In this regard, we did not conduct a tender offer during the year ended December 31, 2009, and, in order to preserve cash in light of the current market environment, we do not intend to repurchase Shares for the immediate future. The timing of future tender offers, if any, will be at the discretion of our board of directors, based on, among other things, the Fund’s need for liquidity.

The Fund is considering additional property dispositions as a means of generating cash. Selective dispositions will be considered in situations where a fair and reasonable value may be achieved and the transaction furthers the Fund’s strategic goals. The Fund will consider a disposition of non-strategic properties when it creates liquidity, deleverages the Fund and reduces risk (debt maturity and tenant lease related risk). The Fund does not intend to participate in distressed asset sales that negatively impact the Fund’s longer-term performance.

The Fund analyzed its options to access additional capital to assist it in reducing leverage, restoring dividends and/or providing an effective liquidity mechanism to investors. However, under current market conditions, management believes it will be difficult to raise capital on terms that are beneficial to existing stockholders.

The Fund was able to obtain a $17,000 two year term loan to replace the expiring line of credit. The term loan allows the Fund to retain cash reserves that will be used to fund a portion of our capital expenditures, mortgage principal amortization and other working capital requirements.

On March 12, 2010, the Manager proposed and the Board of Directors approved a reduction in the annual fixed fee paid to the Manager from 0.75% of NAV to 0.10% of NAV, which will result in a reduction of the total annual fixed fee paid by us to the Advisor and Manager from 1.5% of NAV to 0.85% of NAV. In addition, the Manager will forgo its participation in the variable fee and the aggregate annual variable fee will be reduced by that amount. The fee reductions will be retroactive to January 1, 2010 and are for an indefinite period. The Manager, with the prior approval of the Board, may discontinue either waiver at any time. Otherwise, the Agreement continues in effect in all material respects.

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Contractual Cash Obligations and Commitments

The following table below aggregates our contractual obligations and commitments with payments due subsequent to December 31, 2009. The table does not include commitments with respect to the purchase of services from the Manager and the Advisor, as future payments due on such commitments cannot be determined.

Obligations	Total		Payments due by period
			Less than 1 year		1 – 3 years		3 – 5 years		More than 5 years
Long-term debt (1)	$	1,088,574	$	75,219	$	187,542	$	430,259	$	395,554
Loan escrows		11,212		374		9,642		749		447
Total	$	1,099,786	$	75,593	$	197,184	$	431,008	$	396,001

(1) Includes interest expense calculated using the effective interest rates of the underlying borrowings for all fixed-rate debt at December 31, 2009, which was 5.59%. Since the interest rates on certain loans are based on a spread over LIBOR, the rates will periodically change; therefore, interest expense for all variable-rate debt was calculated using the effective interest rates of the underlying borrowings at December 31, 2009, which was an average interest rate of 2.89%.

As our portfolio of properties has been relatively static over the last two years (except for selected dispositions) and in response to the broader financial crisis and recessionary environment, we have prioritized the use of cash generated from operations and dispositions to strengthen our balance sheet. This strengthening has occurred as we have significantly reduced our borrowings on our line of credit, we have extended the term and relaxed the covenants on this credit facility, and we have substantially increased our liquidity through accumulating cash reserves that may be necessary for the management of our properties.

To reduce the dilutive impact to stockholders created by maintaining cash reserves, our Manager and Advisor have agreed to waive 1.0% of their combined 1.5% fixed fee expense (See Note 8). The reduced fee will apply to cash reserves generated by capital raised through the sale of Shares to stockholders.

We had one long-term debt maturity balloon payment due in January 2010 collateralized by 9800 Meridian in the aggregate amount of $13,611, which was extended and now matures in January 2011. We have one additional long-term debt maturity balloon payment due in September 2011 collateralized by Monument IV at Worldgate in the aggregate amount of $37,365. We intend to refinance this loan, or a portion of this loan, with a new long-term loan. In the event we cannot refinance this loan, we expect to pay down the debt maturity from operating cash flow and cash on hand. However, there can be no assurance that we will have such cash available at the time this debt matures.

We intend to actively monitor and manage our available liquidity to ensure the long-term viability of the Fund.

Commitments

The CHW Medical Office Portfolio mortgage debt requires that we deposit a maximum of $855 per year into an escrow account to fund future tenant improvements and leasing commissions, and the cumulative maximum required to be put into escrow at any one point in time is $1,900. The amount of the escrow funded by each of the fifteen buildings in the portfolio is capped individually pursuant to each loan agreement. At December 31, 2009, we had approximately $1,548 deposited in this escrow, and we expect to fund approximately $855 during 2010. Additionally, we are required to deposit approximately $151 per year into an escrow account to fund capital expenditures. At December 31, 2009, our capital account escrow account balance was $634. These escrow accounts allow us to withdraw funds as we incur costs related to tenant improvements, leasing commissions and capital expenditures. We expect to fund the escrow requirements with operating cash flows generated by the CHW Medical Office Portfolio.

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The mortgage loan collateralized by Metropolitan Park North required that on April 1, 2009 we post a $3,900 reserve in escrow to cover costs of certain tenant improvements, leasing commissions, rent concessions, and lost rental income in connection with re-leasing space to a major tenant of the building. We satisfied this reserve requirement with a letter of credit, which was posted on March 23, 2009. If the tenant provides written notice of its intent to exercise its lease renewal option by September 30, 2010, the lender will return the $3,900 letter of credit to us. If the tenant fails to provide notice of its renewal by September 30, 2010, we are obligated to post an additional $2,800 reserve into the escrow. The lender will return the reserve to us if the following conditions are met: (1) no default has occurred and remains outstanding; and (2) either the tenant has exercised its renewal options or the space has been re-leased to a new tenant(s). If required, the Fund plans on satisfying the additional $2,800 reserve requirement with a letter of credit collateralized by cash on hand.

The mortgage loan collateralized by Monument IV at Worldgate requires that, should the tenant not renew its lease or the space not be leased to a new tenant(s), the Fund must reserve all rental payments received from the tenant at the earlier of September 1, 2010 or upon the tenant delivering a notice of its intent not to renew the lease. The Fund can avoid reserving the rental payments by delivering a letter of credit to the lender for $2,400 on September 1, 2010. The Fund expects to fund the reserve, if required to do so, from the rental payments received from the tenant. The lender will return the reserve to the Fund if the following conditions are met: (1) no default has occurred and remains outstanding; and (2) either the tenant has renewed its lease or the space has been re-leased to a new tenant(s).

The debt associated with five of the Fund’s student-oriented apartment communities requires that we deposit a total of $224 per year into a replacement reserve to fund future furniture replacement costs. As of December 31, 2009, we had deposited approximately $194 into this escrow. We expect to fund the loan escrows from property operations. These reserve accounts allow us to withdraw funds as we incur costs related to furniture replacement.

As part of the lease with our single tenant at the 4001 North Norfleet Road property, we provided the tenant a right to expand the current building by up to 286,000 square feet of space. If the tenant exercises this right, we will be obligated to construct this expansion space. The tenant has the right to notify us of their desire to expand at any time prior to February 28, 2016, (the end of the ninth year of the lease), or if the lease is extended, until any time prior to the end of the fourth year of any extension. As of December 31, 2009, we have not received an expansion notice from the tenant.

The debt associated with 9800 Meridian requires that all property level cash flow is deposited in lender-directed accounts to cover future capital, debt service, tax, and insurance requirements. The lender has the sole right to direct any disposition of the cash. As of December 31, 2009 we had $1,000 deposited in escrows with the lender.

Off Balance Sheet Arrangements

Letters of credit are issued in most cases as additional collateral for mortgage debt on properties we own. At December 31, 2009 and 2008, we had approximately $5,580 and $3,015, respectively, in outstanding letters of credit, none of which are reflected as liabilities on our balance sheet. We have no other off balance sheet arrangements.

REIT Requirements

To remain qualified as a real estate investment trust for federal income tax purposes, we must distribute or pay tax on 100% of our capital gains and at least 90% of ordinary taxable income to stockholders.

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The following factors, among others, will affect operating cash flow and, accordingly, influence the decisions of our board of directors regarding distributions:

• scheduled increases in base rents of existing leases;

• changes in minimum base rents and/or overage rents attributable to replacement of existing leases with new or renewal leases;

• changes in occupancy rates at existing properties and procurement of leases for newly acquired or developed properties;

• necessary capital improvement expenditures or debt repayments at existing properties; and

• our share of distributions of operating cash flow generated by the unconsolidated real estate affiliates, less management costs and debt service on additional loans that have been or will be incurred.

We anticipate that operating cash flow, cash on hand, proceeds from dispositions of real estate investments, or refinancings will provide adequate liquidity to conduct our operations, fund general and administrative expenses, fund operating costs and interest payments and allow distributions to our stockholders in accordance with the requirements of the Code.

Recently Issued Accounting Pronouncements And Developments

In December 2007, the Financial Accounting Standards Board (“FASB”) amended guidance for noncontrolling interests requiring (i) that noncontrolling (minority) interests be reported as a component of shareholders’ equity, (ii) that net income attributable to the parent and to the noncontrolling interest be separately identified in the consolidated statement of operations, (iii) that changes in a parent’s ownership interest while the parent retains its controlling interest be accounted for as equity transactions, (iv) that any retained noncontrolling equity investment upon the deconsolidation of a subsidiary be initially measured at fair value, and (v) that sufficient disclosures are provided that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. The guidance is effective for annual periods beginning after December 15, 2008 and should be applied prospectively. However, the presentation and disclosure requirements of the statement shall be applied retrospectively for all periods presented. We adopted this guidance on January 1, 2009. The adoption of this provision did not have a material impact on the Fund’s consolidated financial position and results of operations, but does have an impact on the presentation of noncontrolling interest in our financial statements.

In April 2009, FASB issued amended guidance for fair value disclosures for assets and liabilities that are not currently reflected on the balance sheet. Prior to this guidance, fair values for these assets and liabilities were only required to be disclosed once a year. The guidance now requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for assets and liabilities not measured on the balance sheet at fair value.

In June 2009, FASB issued amended guidance related to the consolidation of variable-interest entities. These amendments require an enterprise to qualitatively assess the determination of the primary beneficiary of a variable interest entity (“VIE”) based on whether the entity (1) has the power to direct matters that most significantly impact the activities of the VIE, and (2) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The amendments change the consideration of kick-out rights in determining if an entity is a VIE which may cause certain additional entities to now be considered VIEs. Additionally, they require an ongoing reconsideration of the primary beneficiary and provide a framework for the events that trigger a reassessment of whether an entity is a VIE. This guidance is effective for financial statements issued for fiscal years beginning after November 15, 2009. The Fund will adopt this guidance on January 1, 2010 and has determined that it will deconsolidate some of its investments in real estate assets. In all these cases, the Fund determined that its equity interest in the real estate assets represented a variable interest in a VIE. Additionally, in all these cases, the Fund determined that it lacked the power to direct the activities that most significantly impact the VIE’s economic performance.

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In June 2009, FASB issued the codification of Generally Accepted Accounting Principles to become the source of authoritative GAAP recognized by FASB to be applied by nongovernmental entities. This guidance is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Fund implemented this in the third quarter of 2009. The adoption of the codification had no impact on the Fund’s consolidated financial position and results of operations, but does have an impact on the presentation of notes to the financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to market risk associated with changes in interest rates both in terms of our variable-rate debt and the price of new fixed-rate debt for refinancing of existing debt. As of December 31, 2009, we had consolidated debt of $697,839, which included $31,111 of variable-rate debt. Including the $1,322 net discount on the assumption of debt, we have consolidated debt of $696,517 at December 31, 2009. None of the variable-rate debt was subject to interest rate cap agreements. A 25 basis point movement in the interest rate on the $31,111 of variable-rate debt would have resulted in an approximately $78 annualized increase or decrease in consolidated interest expense and cash flow from operating activities.

As of December 31, 2008, we had consolidated debt of $718,605, which included $23,604 of variable-rate debt. Including the $1,108 net discount on the assumption of debt, we have consolidated debt of $717,497 at December 31, 2008. None of the variable-rate debt was subject to interest rate cap agreements. A 25 basis point movement in the interest rate on the $23,604 of variable-rate debt would have resulted in an approximately $59 annualized increase or decrease in consolidated interest expense and cash flow from operating activities.

All our Unconsolidated Properties are financed with fixed-rate debt; therefore we are not subject to interest rate exposure at these properties.

We are subject to interest rate risk with respect to our fixed-rate financing in that changes in interest rates will impact the fair value of our fixed-rate financing. To determine fair market value, the fixed-rate debt is discounted at a rate based on an estimate of current lending rates, assuming the debt is outstanding through maturity and considering the collateral. At December 31, 2009, the fair value of our mortgage notes payable and other debt payable was estimated to be approximately $85,067 lower than the carrying value of $696,517. If treasury rates were 25 basis points higher at December 31, 2009, the fair value of our mortgage notes payable and other debt payable would have been approximately $91,240 lower than the carrying value.

At December 31, 2008, the fair value of our mortgage notes payable and other debt payable was estimated to be approximately $51,047 lower than the carrying value of $717,497. If treasury rates were 25 basis points higher at December 31, 2008, the fair value of our mortgage notes payable and other debt payable would have been approximately $59,018 lower than the carrying value.

In August 2007, we purchased Railway Street Corporate Centre located in Calgary, Canada. For this investment, we use the Canadian dollar as the functional currency. When preparing consolidated financial statements, assets and liabilities of foreign entities are translated at the exchange rates at the balance sheet date, while income and expense items are translated at weighted average rates for the period. Foreign currency translation adjustments are recorded in accumulated other comprehensive (loss) income on the Consolidated Balance Sheet and foreign currency translation adjustment on the Consolidated Statement of Operations and Comprehensive Loss.

As a result of our Canadian investment, we are subject to market risk associated with changes in foreign currency exchange rates. These risks include the translation of local currency balances of our Canadian investment and transactions denominated in Canadian dollars. Our objective is to control our exposure to these risks through our normal operating activities. For the year ended December 31, 2009, we recognized a foreign currency translation gain of $1,846 and for the year ended December 31, 2008, we recognized a foreign currency translation loss of $2,848. At December 31, 2009, a 10% unfavorable exchange rate movement would have decreased our foreign currency translation gain by approximately $1,105 to a foreign currency translation gain of approximately $741.

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Item 8. Financial Statements and Supplementary Data.

See “Index to Financial Statements” on page F-1 of this Form 10-K.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as the end of the period covered by this report. Based on management’s evaluation as of December 31, 2009, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting during the fourth quarter ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management’s Report on Internal Control Over Financial Reporting, which appears on page F-2, is incorporated herein by reference.

Item 9B. Other Information.

None.

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PART III

In accordance with the rules of the SEC, certain information required by Part III is omitted and is incorporated by reference into this Form 10-K from our definitive proxy statement relating to our 2010 annual meeting of stockholders (our “2010 Proxy Statement”) that we intend to file with the SEC no later than April 29, 2010.

Item 10. Directors, Executive Officers and Corporate Governance.

The information regarding Directors and Executive Officers appearing under the heading “Proposal 1: Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” of our 2010 Proxy Statement is incorporated by reference. The information under the heading “Executive Officers of the Registrant” in Item 1 of this Form 10-K is also incorporated by reference in this section.

We have adopted the Excelsior LaSalle Property Fund, Inc. Code of Business Conduct and Ethics Policy that applies to all of our officers, directors and employees. We have also adopted Corporate Governance Guidelines. If you would like a copy of our Code of Business Conduct and Ethics Policy and/or our Corporate Governance Guidelines, please contact Peggy Lynn, 225 High Ridge Road, Stamford, CT 06905-3039, or call (203) 352-4497.

Item 11. Executive Compensation.

The information appearing in our 2010 Proxy Statement under the headings “Compensation,” and “Compensation Committee Interlocks and Insider Participation” is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.

We do not have any compensation plans pursuant to which our equity securities are authorized for issuance.

The information appearing in our 2010 Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management” is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information appearing in our 2010 Proxy Statement under the headings “Information Regarding the Board of Directors and its Committees” and “Transactions with Related Persons, and Certain Control Persons” is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

The information appearing in our 2010 Proxy Statement under the headings “Fees Paid to Independent Registered Public Accounting Firm” and “Audit Committee Pre-Approval Policies and Procedures” is incorporated herein by reference.

PART IV

Dollars are shown in thousands except Share and per Share amounts.

Item 15. Exhibits, Financial Statement Schedules.

(1) Financial Statements: See “Index to Financial Statements” at page F-1 below.

(2) Financial Statement Schedule: See “Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2009” at page F-26 below.

(3) The Index of Exhibits below is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant, Excelsior LaSalle Property Fund, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		EXCELSIOR LASALLE PROPERTY FUND, INC.
	By:	/S/    JAMES D. BOWDEN
Date: March 15, 2010		James D. Bowden President, Chief Executive Officer

POWER OF ATTORNEY

Each individual whose signature appears below constitutes and appoints James D. Bowden and Steven Suss, and each of them, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this report on Form 10-K, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his, her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/S/    JAMES D. BOWDEN	President, Chief Executive Officer and Director (Principal Executive Officer)	March 15, 2010
/S/    STEVEN L. SUSS	Chief Financial Officer (Principal Financial and Accounting Officer)	March 15, 2010
/S/    THOMAS F. MCDEVITT	Chairman of the Board of Directors	March 15, 2010
/S/    VIRGINIA G. BREEN	Director	March 15, 2010
/S/    JONATHAN B. BULKELEY	Director	March 15, 2010
/S/    PETER H. SCHAFF	Director	March 15, 2010

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Exhibit Number	Description
3.1 (1)	Amended and Restated Articles of Incorporation of Excelsior LaSalle Property Fund, Inc.
3.2 (2)	Amended and Restated Bylaws of Excelsior LaSalle Property Fund, Inc., Adopted by the Board of Directors on December 18, 2006.
4.1 (3)	Form of Subscription Agreement for Excelsior LaSalle Property Fund, Inc.
10.1 (3)	Amended and Restated Management Agreement by and between Excelsior LaSalle Property Fund, Inc. and Bank of America Capital Advisors, Inc., dated as of June 19, 2007.
10.2 (1)*	Letter Agreement by and between Excelsior LaSalle Property Fund, Inc., U.S. Trust Company, N.A. and LaSalle Investment Management, Inc., dated as of June 16, 2004.
10.3	Letter Agreement by and between Excelsior LaSalle Property Fund, Inc., U.S. Trust Company, N.A. and LaSalle Investment Management, Inc., dated as of September 8, 2004.
10.4 (1)*	Investment Advisory Agreement by and between Excelsior LaSalle Property Fund, Inc., U.S. Trust Company, N.A. and LaSalle Investment Management, Inc., dated as of December 23, 2004.
10.5	Letter Agreement by and between Excelsior LaSalle Property Fund, Inc., U.S. Trust Company, N.A. and LaSalle Investment Management, Inc., dated as of December 23, 2004.
10.6	Investment Advisory Agreement Assumption Agreement by and between Excelsior LaSalle Property Fund, Inc., U.S. Trust Company, N.A., LaSalle Investment Management, Inc. and UST Advisers, Inc. dated as of December 16, 2005.
10.7 (4)	Excelsior LaSalle Property Fund, Inc. Expense Limitation and Reimbursement Agreement, by and between Excelsior LaSalle Property Fund, Inc. and Bank of America Capital Advisors LLC, dated as of January 7, 2010.
10.8 (1)	Purchase Agreement for Metropolitan Park North.
10.9 (5)*	Purchase and Sale Agreement for The District at Howell Mill, dated May 13, 2007, by and among The District at Howell Mill, LLC, ELPF Howell Mill, LLC and Calloway Title and Escrow, L.L.C.
10.10 (6)*	Real Estate Purchase and Sale Agreement among Cabana Beach of San Marcos, L.P., Cabana South Beach Apartments LP and Excelsior LaSalle Property Fund, Inc. dated September 14, 2007 (the “Purchase and Sale Agreement”).
10.11 (6)	First Amendment to the Purchase and Sale Agreement dated October 1, 2007.
10.12 (6)*	Second Amendment to the Purchase and Sale Agreement dated October 9, 2007.
10.13 (6)	Third Amendment to the Purchase and Sale Agreement dated October 11, 2007.
10.14 (6)	Fourth Amendment to the Purchase and Sale Agreement dated October 12, 2007.
10.15	Amendment No. 1, dated December 4, 2009, to the Amended and Restated Management Agreement by and between Excelsior LaSalle Property Fund, Inc. and Bank of America Capital Advisors, Inc., dated as of June 19, 2007.
10.16	Amendment to the Investment Advisory Agreement by and between Excelsior LaSalle Property Fund, Inc., U.S. Trust Company, N.A. and LaSalle Investment Management, Inc., dated as of September 15, 2005.
14 (3)	Excelsior LaSalle Property Fund, Inc. Code of Business Conduct and Ethics Policy.
21	Subsidiaries of Excelsior LaSalle Property Fund, Inc.
24	Power of Attorney (see signature page to this Form 10-K)
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

59

* Portions of these exhibits have been omitted and filed separately with the Securities and Exchange Commission (the “SEC”) pursuant to confidential treatment requests filed with and approved by the SEC under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

(1) Incorporated by reference to the Fund’s Registration Statement on Form 10 filed with the SEC on April 28, 2006.

(2) Incorporated by reference to the Fund’s Annual Report on Form 10-K filed with the SEC on March 16, 2007.

(3) Incorporated by reference to the Fund’s Annual Report on Form 10-K filed with the SEC on March 7, 2008.

(4) Incorporated by reference to the Fund’s Current Report on Form 8-K filed with the SEC on January 8, 2010.

(5) Incorporated by reference to the Fund’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2007.

(6) Incorporated by reference to the Fund’s Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007.

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Excelsior LaSalle Property Fund, Inc.

INDEX TO FINANCIAL STATEMENTS

	PAGE NUMBER
FINANCIAL STATEMENTS
Management’s Report on Internal Control over Financial Reporting	F-2
Report of Independent Registered Public Accounting Firm	F-3
Consolidated Balance Sheets as of December 31, 2009 and 2008	F-4
Consolidated Statements of Operations and Comprehensive Loss for the years ended December  31, 2009, 2008 and 2007	F-5
Consolidated Statements of Equity for the years ended December 31, 2009, 2008 and 2007	F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007	F-7
Notes to Consolidated Financial Statements	F-8
FINANCIAL STATEMENT SCHEDULE
Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2009	F-33
Legacy Village Investors, LLC:
Report of Independent Registered Public Accounting Firm	F-36
Balance Sheet as of December 31, 2009	F-37
Statement of Operations for the year ended December 31, 2009	F-38
Statement of Members’ Equity for the year ended December 31, 2009	F-39
Statement of Cash Flows for the year ended December 31, 2009	F-40
Notes to Financial Statements	F-41
Balance Sheets as of December 31, 2008 and 2007 (Not covered by the report included herein)	F-48
Statements of Operations for the years ended December  31, 2008 and 2007 (Not covered by the report included herein)	F-49
Statements of Members’ Equity for the years ended December  31, 2008 and 2007 (Not covered by the report included herein)	F-50
Statements of Cash Flows for the years ended December  31, 2008 and 2007 (Not covered by the report included herein)	F-51
Notes to Financial Statements	F-52

F-1

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed under the supervision of our chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and preparation of our financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

As of December 31, 2009, our management conducted an assessment of the effectiveness of our internal control over financial reporting based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control—Integrated Framework”.

Based on the assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2009 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

The effectiveness of our internal control over financial reporting has been audited by our independent registered public accounting firm, PricewaterhouseCoopers LLP, as stated in their report, which is included on page F-3 of this Form 10-K.

/S/    JAMES D. BOWDEN        

James D. Bowden

President and Chief Executive Officer

/S/    STEVEN SUSS        

Steven Suss

Chief Financial Officer

March 15, 2010

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Excelsior LaSalle Property Fund, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive loss, of equity, and of cash flows present fairly, in all material respects, the financial position of Excelsior LaSalle Property Fund, Inc. and its subsidiaries (collectively, the “Company”) at December 31, 2009 and 2008 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion the financial statement schedule as of December 31, 2009 and for the two years then ended listed in the index appearing under Item 15(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 10 to the consolidated financial statements, the Company changed the manner in which it accounts for and presents noncontrolling interests in 2009. The change in presentation of noncontrolling interests was retroactively applied to all periods presented.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

March 15, 2010

F-3

EXCELSIOR LASALLE PROPERTY FUND, INC.

CONSOLIDATED BALANCE SHEETS

$ in thousands, except per share amounts

	December 31,
	2009			2008
ASSETS
Investments in real estate:
Land	$	119,541		$	143,595
Buildings and equipment		706,126			818,320
Less accumulated depreciation		(56,856	)		(44,888	)
Net property and equipment		768,811			917,027
Investments in unconsolidated real estate affiliates		29,851			40,947
Investments in real estate and other assets held for sale		104,112			—
Net investments in real estate		902,774			957,974
Cash and cash equivalents		44,258			16,395
Restricted cash		6,574			5,304
Tenant accounts receivable, net		3,703			3,950
Deferred expenses, net		4,679			6,325
Acquired intangible assets, net		49,301			82,557
Deferred rent receivable, net		4,760			6,321
Prepaid expenses and other assets		1,091			5,979
TOTAL ASSETS	$	1,017,140		$	1,084,805
LIABILITIES AND EQUITY
Mortgage notes and other debt payable, net	$	611,975		$	717,497
Liabilities held for sale		85,815			—
Accounts payable and other accrued expenses		9,393			10,292
Distributions payable		—			7,057
Accrued interest		2,867			3,192
Accrued real estate taxes		4,243			4,687
Manager and advisor fees payable		1,405			2,365
Acquired intangible liabilities, net		12,119			16,099
TOTAL LIABILITIES		727,817			761,189
Commitments and contingencies		—			—
Equity:
Common stock: $0.01 par value; 100,000,000 shares authorized; 4,135,635 and 4,032,563 shares issued and outstanding at December 31, 2009 and 2008, respectively		41			40
Additional paid-in capital		453,244			443,808
Accumulated other comprehensive loss		(39	)		(1,885	)
Distributions to stockholders		(78,361	)		(74,755	)
Accumulated deficit		(98,246	)		(58,635	)
Total Excelsior LaSalle Property Fund, Inc. stockholders’ equity		276,639			308,573
Noncontrolling interests		12,684			15,043
Total equity		289,323			323,616
TOTAL LIABILITIES AND EQUITY	$	1,017,140		$	1,084,805

See notes to consolidated financial statements.

F-4

EXCELSIOR LASALLE PROPERTY FUND, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

$ in thousands, except per share amounts

	Year Ended December 31, 2009			Year Ended December 31, 2008			Year Ended December 31, 2007
Revenues:
Minimum rents	$	76,153		$	78,686		$	48,569
Tenant recoveries and other rental income		20,272			18,833			13,630
Total revenues		96,425			97,519			62,199
Operating expenses:
Real estate taxes		11,976			11,713			6,276
Property operating		25,056			24,284			11,833
Manager and advisor fees		6,413			9,035			7,426
Fund level expenses		2,518			2,449			2,656
Provision for doubtful accounts		861			935			379
General and administrative		1,370			949			566
Provision for impairment of real estate		5,604			—			—
Depreciation and amortization		32,695			56,129			28,433
Total operating expenses		86,493			105,494			57,569
Operating income (loss)		9,932			(7,975	)		4,630
Other income and (expenses):
Interest income		92			298			1,411
Interest expense		(34,136	)		(35,533	)		(22,647	)
Equity in (loss) income of unconsolidated affiliates		(8,277	)		1,230			536
Gain (loss) on foreign currency derivative		—			1,492			(504	)
Total other income and (expenses)		(42,321	)		(32,513	)		(21,204	)
Loss from continuing operations		(32,389	)		(40,488	)		(16,574	)
Discontinued operations:
(Loss) income from discontinued operations		(11,957	)		2,263			2,366
Gain on sale of discontinued operations		2,530			—			—
Total (loss) income from discontinued operations		(9,427	)		2,263			2,366
Net loss		(41,816	)		(38,225	)		(14,208	)
Plus: Net loss attributable to the noncontrolling interests		2,205			5,651			572
Net loss attributable to Excelsior LaSalle Property Fund, Inc.		(39,611	)		(32,574	)		(13,636	)
Other comprehensive income (loss):
Foreign currency translation adjustment		1,846			(2,848	)		963
Total other comprehensive income (loss)		1,846			(2,848	)		963
Net comprehensive loss	$	(37,765	)	$	(35,422	)	$	(12,673	)
Net loss from continuing operations attributable to Excelsior LaSalle Property Fund, Inc. per share-basic and diluted	$	(7.31	)	$	(9.11	)	$	(4.92	)
Total (loss) income from discontinued operations per share-basic and diluted	$	(2.28	)	$	0.59		$	0.73
Net loss attributable to Excelsior LaSalle Property Fund, Inc. per share-basic and diluted	$	(9.59	)	$	(8.52	)	$	(4.19	)
Weighted average common stock outstanding-basic and diluted		4,128,290			3,822,484			3,252,725

See notes to consolidated financial statements.

F-5

EXCELSIOR LASALLE PROPERTY FUND, INC.

CONSOLIDATED STATEMENTS OF EQUITY

$ in thousands, except per share amounts

	Common Stock					Additional Paid In Capital			Other Comprehensive Income (loss)			Distributions to Stockholders			Accumulated Deficit			Noncontrolling Interests			Total Equity
	Shares		Amount
Balance, December 31, 2006	2,647,551		$	27		$	274,634		$	—		$	(26,184	)	$	(7,255	)	$	3,036		$	244,258
Issuance of common stock	1,138,920			11			133,140			—			—			—			—			133,151
Repurchase of common stock	(199,621	)		(2	)		(21,247	)		—			—			(2,236	)		—			(23,485	)
Net loss	—			—			—			—			—			(13,636	)		(572	)		(14,208	)
Other comprehensive income	—			—			—			963			—			—			—			963
Cash contributed from noncontrolling interests	—			—			—			—			—			—			15,577			15,577
Cash distributed to noncontrolling interests	—			—			—			—			—			—			(2,522	)		(2,522	)
Distributions declared ($7.00 per share)	—			—			—			—			(22,139	)		—			—			(22,139	)
Balance, December 31, 2007	3,586,850		$	36		$	386,527		$	963		$	(48,323	)	$	(23,127	)	$	15,519		$	331,595
Issuance of common stock	654,450			6			79,872			—			—			—			—			79,878
Repurchase of common stock	(208,737	)		(2	)		(22,591	)		—			—			(2,934	)		—			(25,527	)
Net loss	—			—			—			—			—			(32,574	)		(5,651	)		(38,225	)
Other comprehensive loss	—			—			—			(2,848	)		—			—			—			(2,848	)
Cash contributed from noncontrolling interests	—			—			—			—			—			—			5,964			5,964
Cash distributed to noncontrolling interests	—			—			—			—			—			—			(789	)		(789	)
Distributions declared ($7.00 per share)	—			—			—			—			(26,432	)		—			—			(26,432	)
Balance, December 31, 2008	4,032,563		$	40		$	443,808		$	(1,885	)	$	(74,755	)	$	(58,635	)	$	15,043		$	323,616
Issuance of common stock	103,072			1			9,436			—			—			—			—			9,437
Net loss	—			—			—			—			—			(39,611	)		(2,205	)		(41,816	)
Other comprehensive income	—			—			—			1,846			—			—			—			1,846
Cash contributed from noncontrolling interests	—			—			—			—			—			—			639			639
Cash distributed to noncontrolling interests	—			—			—			—			—			—			(793	)		(793	)
Distributions declared ($0.875 per share)	—			—			—			—			(3,606	)		—			—			(3,606	)
Balance, December 31, 2009	4,135,635		$	41		$	453,244		$	(39	)	$	(78,361	)	$	(98,246	)	$	12,684		$	289,323

See notes to consolidated financial statements.

F-6

EXCELSIOR LASALLE PROPERTY FUND, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

$ in thousands, except per share amounts

	Year Ended December 31, 2009			Year Ended December 31, 2008			Year Ended December 31, 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(41,816	)	$	(38,225	)	$	(14,208	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation (including discontinued operations)		22,574			22,619			12,037
Amortization of in-place lease intangible assets (including discontinued operations)		12,774			37,220			20,196
Amortization of net above-and below-market in-place leases (including discontinued operations)		(1,068	)		(1,552	)		(1,505	)
Amortization of financing fees (including discontinued operations)		864			921			654
Amortization of debt premium and discount (including discontinued operations)		(214	)		(184	)		(121	)
Amortization of lease commissions (including discontinued operations)		774			405			127
Gain on sale of real estate		(2,530	)		—			—
Loss on extinguishment of debt		90			—			—
(Gain) loss on foreign currency derivative		—			(1,492	)		504
Receipt on net settlement of foreign currency derivative		—			985			—
Provision for doubtful accounts		861			935			379
Provision for impairment of real estate (including discontinued operations)		18,686			—			(536	)
Equity in loss (income) of unconsolidated affiliates		8,277			(1,230	)		545
Distributions of income received from unconsolidated affiliates		—			911			—
Net changes in assets and liabilities:
Tenant accounts receivable		(665	)		(2,809	)		(533	)
Deferred rent receivable		(878	)		(1,679	)		(1,981	)
Prepaid expenses and other assets		468			3,034			714
Manager and advisor fees payable		(960	)		(442	)		1,020
Accounts payable and other accrued expenses		521			566			9,172
Net cash provided by operating activities		17,758			19,983			26,464
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of real estate investments		(850	)		(35,262	)		(390,494	)
Proceeds from sales of real estate investments		40,305			—			—
Capital improvements and lease commissions		(3,620	)		(6,579	)		(3,336	)
Deposits for investments under contract		—			—			(1,700	)
Deposits refunded for investments under contract		—			1,700			500
Distributions received from unconsolidated affiliates in excess of income		2,819			2,856			4,467
Loan escrows		(1,270	)		(648	)		(1,056	)
Net cash provided by (used in) investing activities		37,384			(37,933	)		(391,619	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock		5,991			71,430			126,835
Repurchase of common stock		—			(25,527	)		(23,485	)
Distributions to stockholders		(7,217	)		(17,019	)		(14,364	)
Distributions paid to noncontrolling interests		(793	)		(789	)		(654	)
Contributions received from noncontrolling interests		639			1,030			—
Deposits for loan commitments		—			—			(349	)
Return of loan commitments		—			349			485
Draws on credit facility		21,500			48,500			79,500
Payments on credit facility		(14,000	)		(67,500	)		(50,500	)
Debt issuance costs		—			(516	)		(2,866	)
Proceeds from mortgage notes and other debt payable		7			19,731			232,179
Principal payments on mortgage notes and other debt payable		(33,432	)		(3,678	)		(2,191	)
Net cash (used in) provided by financing activities		(27,305	)		26,011			344,590
Net increase in cash and cash equivalents		27,837			8,061			(20,565	)
Effect of exchange rates		26			(52	)		(19	)
Cash and cash equivalents at the beginning of the year		16,395			8,386			28,970
Cash and cash equivalents at the end of the year	$	44,258		$	16,395		$	8,386
Supplemental disclosure of cash flow information:
Interest paid	$	39,076		$	41,141		$	26,026
Interest capitalized	$	—		$	17		$	61
Non-cash activities:
Assumption of mortgage loan and other debt payable	$	1,050		$	35,081		$	69,254
Acquisition of intangible liability		2,110			—			—
Distributions payable		—			7,057			6,092
Stock issued through dividend reinvestment plan		3,446			8,448			6,315
Change in liability for capital expenditures		728			262			(550	)
Noncontrolling interests		—			4,934			13,708
Havertys Furniture land purchase		—			—			3,144
Write-offs of receivables		654			856			145
Write-offs of retired assets		1,182			184			68

See notes to consolidated financial statements.

F-7

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$ in thousands, except per share amounts

NOTE 1—ORGANIZATION

General

Except where the context suggests otherwise, the terms “we,” “us,” “our” and the “Fund” refer to Excelsior LaSalle Property Fund, Inc.

The Fund is a Maryland corporation and was incorporated on May 28, 2004 (“Inception”). The Fund was created to provide accredited investors within the meaning of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), with an opportunity to participate in a private real estate investment fund that has elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes. We are authorized to issue up to 100,000,000 of our Class A common stock, $0.01 par value per share (our “Common Stock” or “Shares”). Please note that while we use the term “Fund,” the Fund is not a mutual fund or any other type of “investment company” as that term is defined by the Investment Company Act of 1940, as amended (the “Investment Company Act”), and will not be registered under the Investment Company Act.

The Fund is managed by Bank of America Capital Advisors LLC (the “Manager”). The Manager is registered as an investment advisor with the Securities and Exchange Commission (the “SEC”). The Manager has the day-to-day responsibility for our management and administration pursuant to a management agreement between the Fund and the Manager (the “Management Agreement”).

LaSalle Investment Management, Inc. (“LaSalle”) acts as our investment advisor (the “Advisor”), pursuant to the advisory agreement between the Fund, LaSalle and the Manager (the “Advisory Agreement”). The Advisor is registered as an investment advisor with the SEC. The Advisor has broad discretion with respect to our investment decisions and is responsible for selecting our investments and for managing our investment portfolio pursuant to the terms of the Advisory Agreement. LaSalle is a wholly-owned but operationally independent subsidiary of Jones Lang LaSalle Incorporated, a New York Stock Exchange-listed real estate services and money management firm. We have no employees as all operations are overseen and undertaken by the Manager and Advisor. In accordance with Maryland law, the Fund does have certain officers who administer the Fund’s operations. These officers are employees of, and are compensated by, the Manager.

The Manager has retained The Townsend Group, at the expense of the Manager, to assist the Manager in reviewing the investment activities of the Advisor and the investment performance of the Fund’s assets and monitoring compliance with the Fund’s investment guidelines. The Townsend Group is a consulting firm whose exclusive focus is the asset class of real estate. Founded in 1983, and with offices in Cleveland, Denver, San Francisco and London, The Townsend Group is a provider of real estate consulting services to institutional investors in the United States.

Our primary business is the ownership and management of a diversified portfolio of retail, office, industrial and apartment properties primarily located in the United States. As of December 31, 2009, we wholly or majority owned and controlled 38 consolidated properties. As of December 31, 2009, we owned interests in two unconsolidated properties.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the instructions to Form 10-K and Regulation S-X and include the accounts of our wholly-owned subsidiaries, consolidated variable interest entities

F-8

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

and the unconsolidated investments in real estate affiliates accounted for under the equity method of accounting. We consider the authoritative guidance of accounting for investments in common stock, investments in real estate ventures, investors accounting for an investee when the investor has the majority of the voting interest but the minority partners have certain approval or veto rights, determining whether a general partner or general partners as a group controls a limited partnership or similar entity when the limited partners have certain rights, and the consolidation of variable interest entities in which we own less than a 100% interest. In determining whether we have a controlling interest in a non-wholly owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the members as well as whether the entity is a variable interest entity in which the Fund will absorb the majority of the entity’s expected losses, if they occur, or receive the majority of the expected residual returns, if they occur, or both. With respect to our 80% interest in 111 Sutter Street, we have concluded that we do not control the entity, despite having an ownership interest of 50% or greater, because the entity is not considered a variable interest entity and the approval of all of the members is contractually required with respect to major decisions, such as operating and capital budgets, the sale, exchange or other disposition of real property, the commencement, compromise or settlement of any lawsuit, legal proceeding or arbitration or the placement of new or additional financing collateralized by assets of the venture. All significant intercompany balances and transactions have been eliminated in consolidation.

Noncontrolling interests represent the minority members’ proportionate share of the equity in 9800 South Meridian, 18922 Forge Drive, The District at Howell Mill, Cabana Beach San Marcos, Cabana Beach Gainesville, Campus Lodge Athens, Campus Lodge Columbia, The Edge at Lafayette and Campus Lodge Tampa. At acquisition, we measured and recorded the assets, liabilities and non-controlling interests at the implied fair value, based on the purchase price. Noncontrolling interests will increase for the minority members’ share of net income of these entities and contributions and decrease for the minority members’ share of net loss and distributions.

Certain of the Fund’s joint venture agreements include provisions whereby, at certain specified times, each party has the right to initiate a purchase or sale of its interest in the joint ventures at an agreed upon fair value. Under these provisions, the Fund is not obligated to purchase the interest of its outside joint venture partners.

Certain reclassifications of prior period amounts have been made to the consolidated balance sheets and consolidated statements of cash flows. These reclassifications have been made to conform to the 2009 presentation. These reclassifications have not changed the Fund’s financial position as of December 31, 2008 and 2007 or consolidated results of operations or cash flows for the years ended December 31, 2008 and 2007.

Investments in Real Estate

Real estate assets are stated at cost. Our real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. A real estate asset is considered to be impaired when the estimated future undiscounted operating cash flow over the expected hold period is less than its carrying value in accordance with the authoritative guidance on accounting for the impairment or disposal of long-lived assets. To the extent impairment has occurred, the excess of carrying value of the asset over its estimated fair value will be charged to operations. During the year ended December 31, 2009, the Fund recorded impairment charges on consolidated real estate properties totaling $18,686. The Fund did not have impairment charges in 2008 or 2007.

F-9

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

Depreciation expense is computed using the straight-line method based upon the following estimated useful lives:

Asset Category	Estimated Useful Life
Buildings and improvements	40-50 Years
Tenant improvements	Life of related lease
Equipment and fixtures	2-10 Years

Construction in progress represents the cost of construction plus capitalized expenses incurred during the construction period for expansion projects undertaken by us. Interest costs are capitalized during the construction period for construction related expenditures based on the interest rates for in-place debt. An allocable portion of real estate taxes and insurance expense incurred during the construction period are capitalized until construction is substantially completed. Construction costs and capitalized expenses are depreciated over the useful life of the development project once placed in service.

Starting in 2009, acquisition related costs are expensed as incurred. Previous treatment was to capitalize for successful acquisitions.

Maintenance and repairs are charged to expense when incurred. Expenditures for significant betterments and improvements are capitalized.

Properties held-for-sale are carried at the lower of their carrying values (i.e., cost less accumulated depreciation and any impairment loss recognized, where applicable) or estimated fair values less costs to sell. Fair value is based upon the property’s most recent valuation. Carrying values are reassessed at each balance sheet date. Due to market fluctuation, actual proceeds realized on the ultimate sale of these properties may differ from estimates and such differences could be material. Depreciation and amortization cease once a property is classified as held-for-sale.

Investments in Unconsolidated Real Estate Affiliates

We account for our investments in unconsolidated real estate affiliates using the equity method whereby the costs of the investments are adjusted for our share of equity in net income or loss from the date of acquisition and reduced by distributions received and increased by contributions provided. The limited liability company agreements (“the Agreements”) with respect to the unconsolidated real estate affiliates provide that elements of assets, liabilities and funding obligations are shared in accordance with our ownership percentage. In addition, we share in the profits and losses, cash flows, distributions and other matters relating to our unconsolidated real estate affiliates in accordance with the Agreements.

To the extent that the Fund’s cost basis is different than the basis reflected at the joint venture level, the basis difference is amortized over the life of the related asset and included in the Fund’s share of equity in income (loss) of the unconsolidated affiliates.

The Fund evaluates the carrying value of its investments in unconsolidated joint ventures in accordance with the authoritative guidance on the equity method of accounting for investments in common stock. We analyze our investments in unconsolidated real estate affiliates when circumstances change and at least annually and determine if an “other-than-temporary” impairment exists and, if so, we assess our ability to recover our carrying cost of the investment. During 2009, we determined that an other than temporary decline in the value of

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EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

our investment in Legacy Village existed and we recognized an impairment charge of $7,269. Due to the uncertain economic climate, we will continue to monitor this investment’s value on an on-going basis and will continue to assess the value of its investment in accordance with the authoritative guidance.

Revenue Recognition

Minimum rent revenues are recognized on a straight-line basis over the terms of the related leases. For the years ended December 31, 2009, 2008 and 2007, $879, $1,697 and $1,981, respectively, have been recognized as net straight-line rent revenue (representing rents recognized prior to being billed and collectible as provided by the terms of the leases). Also included, as an increase to rent revenue, for the years ended December 31, 2009, 2008 and 2007, are $1,068, $1,552 and $1,505, respectively, of net amortization related to above-and below-market in-place leases at properties acquired as provided by authoritative guidance on goodwill and intangible assets. Tenant recoveries are recognized as revenues in the period the applicable costs are incurred.

Percentage rents are recognized when earned as certain tenant sales volume targets, as specified by the lease terms, are met. For the years ended December 31, 2009, 2008 and 2007, $247, $574 and $421 in the aggregate, respectively, have been recognized in tenant recoveries and other rental income.

We provide an allowance for doubtful accounts against the portion of accounts receivable and deferred rent receivable that is estimated to be uncollectible. Such allowance is reviewed periodically based upon our recovery experience. At December 31, 2009 and 2008, our allowance for doubtful accounts was $710 and $503, respectively.

Cash and Cash Equivalents

We consider all highly-liquid investments purchased with original maturities of three months or less to be cash equivalents. We maintain a portion of our cash in bank deposit accounts, which, at times, may exceed the federally insured limits. No losses have been experienced related to such accounts. We believe we place our cash with quality financial institutions.

Restricted Cash

Restricted cash includes amounts established pursuant to various agreements for loan escrow accounts and loan commitments.

Deferred Expenses

Deferred expenses consist of debt issuance costs and lease commissions. Debt issuance costs are capitalized and amortized over the terms of the respective agreements as a component of interest expense. Lease commissions are capitalized and are amortized over the term of the related lease as a component of amortization expense. Deferred expenses accumulated amortization at December 31, 2009 and 2008 was $3,321 and $2,540, respectively.

Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist principally of long-term notes receivable from local governments related to real estate tax rebates and sales tax sharing agreements. The acquisition of Marketplace at Northglenn included an Enhanced Sales Tax Incentive Program (“ESTIP”) note receivable from the local government that

F-11

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

allows us to share in sales tax revenue generated by the retail center until a specified amount has been paid to us. At December 31, 2008, $114 was owed to the Fund under the ESTIP agreement which was paid in full during 2009. The acquisition of 25850 S. Ridgeland included a Tax Increment Financing Note (a “TIF Note”) issued by the Village of Monee, which will reimburse to us approximately 90% of the real estate tax payments made on the property through 2016 or until the TIF note receivable is repaid. The TIF Note bears interest at 7%. At December 31, 2009 and 2008, respectively, $4,367 and $4,547 were the remaining balance owed to the Fund. Cash received from the Marketplace at Northglenn ESTIP and 25850 S. Ridgeland TIF Note is split between repayment of the principal balance on the notes receivable and interest income earned on those notes.

Foreign Exchange

We utilize the U.S. dollar as our functional currency, except for our Canadian operations, which use the Canadian dollar as the functional currency. When preparing consolidated financial statements, assets and liabilities of foreign entities are translated at the exchange rates at the balance sheet date, while income and expense items are translated at average rates for the period. Foreign currency translation adjustments are recorded in accumulated other comprehensive income.

Derivative Instruments

In August 2007, we entered into foreign currency forward contracts, to economically hedge our foreign exchange exposure, for exchanges between United States Dollars and Canadian Dollars. We contracted to buy United States Dollars with Canadian Dollars at each quarter end through and ending on December 31, 2008. We did not designate these forward contracts as accounting hedges. In accordance with the authoritative guidance on accounting for derivative instruments and hedging activities, these derivatives were recorded at fair value within accounts payable and other accrued expenses on the Consolidated Balance Sheets with gains and losses reported in gain (loss) on foreign currency derivative in the Consolidated Statement of Operations and Comprehensive Loss. We do not enter into foreign exchange forward contracts for trading purposes. We settled the foreign currency forward contract on December 31, 2008 and realized a gain on foreign currency derivative of $1,492. We have not entered into any additional foreign currency forward contracts since December 31, 2008.

Acquisitions

We use estimates of future cash flows and other valuation techniques to allocate the purchase price of acquired property among land, building and other identifiable asset and liability intangibles. We record land and building values using an as-if-vacant methodology. We record above- and below-market in-place lease values for acquired properties based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) our estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. We amortize the capitalized above-market lease values as a reduction of minimum rents over the remaining non-cancelable terms of the respective leases. We amortize the capitalized below-market lease values as an increase to minimum rents over the term of the respective leases. Should a tenant terminate its lease prior to the contractual expiration, the unamortized portion of the above-market and below-market in-place lease value is immediately charged to minimum rents.

We measure the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases and (ii) the property valued as-if-vacant. Our estimates of value are made using methods similar to those used by independent appraisers, primarily discounted cash flow analyses. Factors considered by us in our analysis include an estimate of carrying costs during the hypothetical expected

F-12

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

lease-up periods considering current market conditions at the date of acquisition, and costs to execute similar leases. We also consider information obtained about each property as a result of the pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, we will include estimates of lost rentals during the expected lease-up periods, which is expected to primarily range from one to two years, depending on specific local market conditions, and costs to execute similar leases, including leasing commissions, legal and other related expenses to the extent that such costs are not already incurred in connection with a new lease origination as part of the transaction.

The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship intangible values based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics considered by us in allocating these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors. As of December 31, 2009, we have allocated no value to customer relationship value. We amortize the value of in-place leases to expense over the remaining initial terms of the respective leases, which generally range from 1 to 29 years.

We have allocated purchase price to acquired intangible assets, which include acquired in-place lease intangibles, acquired above-market in-place lease intangibles, acquired ground lease intangibles, and tenant improvements and lease commissions funding commitment, which are reported net of accumulated amortization of $45,414 and $41,551 at December 31, 2009 and 2008, respectively, on the accompanying Consolidated Balance Sheets. The acquired intangible liabilities represent acquired below-market in-place leases, which are reported net of accumulated amortization of $17,177 and $9,701 at December 31, 2009 and 2008, respectively, on the accompanying Consolidated Balance Sheets. Our amortizing intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. According to authoritative guidance, an amortizing intangible asset is considered to be impaired when the estimated future undiscounted operating cash flow is less than its carrying value. To the extent impairment has occurred, the excess of the carrying value of the amortizing intangible asset over its estimated fair value will be charged to operations.

Future amortization related to amortizing acquired intangible assets and liabilities as of December 31, 2009 is as follows:

	Acquired in-place leases		Acquired above- market leases		Below- market ground leases		Acquired below- market leases
2010	$	9,298	$	1,373	$	146	$	(2,772	)
2011		8,384		1,128		146		(2,556	)
2012		6,161		759		146		(1,287	)
2013		4,708		625		146		(1,070	)
2014		3,743		557		146		(1,031	)
Thereafter		10,920		960		9,321		(3,403	)
	$	43,214	$	5,402	$	10,051	$	(12,119	)

Stock Redemptions

The Fund retires common stock repurchased through the Share Repurchase Program (See Note 6). The excess of redemption price over the stockholders’ cost basis in the underlying stock is charged to retained earnings.

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EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

Income Taxes

We made the election to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986 (the “Code”) as of December 23, 2004. To qualify as a REIT, we must meet a number of organizational and operational requirements, including requirements to distribute at least 90% of our ordinary taxable income and to distribute to stockholders or pay tax on 100% of capital gains and to meet certain quarterly and annual asset and income tests. It is our current intention to adhere to these requirements. As a REIT, we will generally not be subject to corporate-level federal income tax to the extent we distribute 100% of our taxable income to our stockholders. Accordingly, the consolidated statements of operations do not reflect a provision for income taxes. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income or property, and to federal income and excise taxes on our undistributed taxable income.

Earnings and profits, which determine the taxability of dividends to stockholders, differ from net income reported for financial reporting purposes due to differences for federal income tax reporting purposes in computing, among other things, estimated useful lives, depreciable basis of properties and permanent and timing differences on the inclusion or deductibility of elements of income and expense for such purposes.

Business Segments

Guidance regarding the disclosures about segments of an enterprise and related information requires disclosure of certain operating and financial data with respect to separate business activities within an enterprise. Our primary business is the ownership and operation of real estate investments. We evaluate cash flow and allocate resources on a property-by-property basis. We aggregate our properties into one reportable segment since all properties are institutional quality real estate. We do not distinguish or group our consolidated operations by property type or on a geographic basis. Accordingly, we have concluded that we currently have a single reportable segment.

At December 31, 2009 and 2008, we held one investment outside the United States. For the years ended December 31, 2009, 2008 and 2007, total revenues of this foreign investment were $3,902, $4,226 and $1,436, respectively. For the years ended December 31, 2009, 2008 and 2007 total revenues of U.S. domiciled investments were $106,582, $109,208 and $67,990, respectively. At December 31, 2009 and 2008, total assets of our foreign investment were $40,878 and $35,870, respectively. The change in total assets from December 31, 2008 to December 31, 2009 at our foreign investment was mainly a result of the change in foreign currency rate on those dates. At December 31, 2009 and 2008, total assets of U.S domiciled investments were $976,262 and $1,048,935, respectively.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. For example, significant estimates and assumptions have been made with respect to useful lives of assets, recoverable amounts of receivables, initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. Actual results could differ from those estimates.

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EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

NOTE 3—PROPERTY

The primary reason we make acquisitions of real estate investments in the retail, office, industrial, and apartment property sectors is to invest capital contributed by accredited investors in a diversified portfolio of real estate. The consolidated properties held within the Fund as of December 31, 2009 were as follows:

Property	Sector	Square Feet (Unaudited)	Location	Ownership %		Acquisition Date	Acquisition Price
Monument IV at Worldgate	Office	228,000	Herndon, VA	100	%	8/27/2004	$	59,608
Havertys Furniture (1),(2)	Industrial	808,000	Braselton, GA	100	%	12/3/2004	$	28,468
25850 S. Ridgeland (2)	Industrial	719,000	Monee, IL	100	%	12/31/2004	$	25,166
Georgia Door Sales Distribution Center (2)	Industrial	254,000	Austell, GA	100	%	2/10/2005	$	8,500
105 Kendall Park Lane (2)	Industrial	409,000	Atlanta, GA	100	%	6/30/2005	$	18,781
Marketplace at Northglenn	Retail	439,000	Northglenn, CO	100	%	12/21/2005	$	91,476
CHW Medical Office Portfolio (3)	Office	755,000	CA and AZ	100	%	12/21/2005	$	136,761
Metropolitan Park North	Office	187,000	Seattle, WA	100	%	3/28/2006	$	89,179
Stirling Slidell Shopping Centre (4)	Retail	139,000	Slidell, LA	100	%	12/14/2006	$	23,367
9800 South Meridian (5)	Office	144,000	Englewood, CO	90	%	12/26/2006	$	14,662
18922 Forge Drive (6)	Office	91,000	Cupertino, CA	90	%	2/15/2007	$	26,233
4001 North Norfleet Road (2)	Industrial	702,000	Kansas City, MO	100	%	2/27/2007	$	37,579
Station Nine Apartments	Apartment	312,000	Durham, NC	100	%	4/16/2007	$	56,417
4 Research Park Drive (7)	Office	60,000	St. Charles, MO	100	%	6/13/2007	$	11,330
36 Research Park Drive	Office	81,000	St. Charles, MO	100	%	6/13/2007	$	17,232
The District at Howell Mill (8)	Retail	306,000	Atlanta, GA	87.85	%	6/15/2007	$	78,661
Canyon Plaza (9)	Office	199,000	San Diego, CA	100	%	6/26/2007	$	54,973
Railway Street Corporate Centre	Office	137,000	Calgary, Canada	100	%	8/30/2007	$	42,614
Cabana Beach San Marcos (10)	Apartment	278,000	San Marcos, TX	78	%	11/21/2007	$	29,375
Cabana Beach Gainesville (10)	Apartment	545,000	Gainesville, FL	78	%	11/21/2007	$	74,277
Campus Lodge Athens (10)	Apartment	229,000	Athens, GA	78	%	11/21/2007	$	20,980
Campus Lodge Columbia (10)	Apartment	256,000	Columbia, MO	78	%	11/21/2007	$	24,852
The Edge at Lafayette (10)	Apartment	207,000	Lafayette, LA	78	%	1/15/2008	$	26,870
Campus Lodge Tampa (10)	Apartment	431,000	Tampa, FL	78	%	2/29/2008	$	46,787

(1) Includes 297,000 square feet (unaudited) of development constructed subsequent to the acquisition date. Acquisition price does not include approximately $11,000 of construction costs related to this development.

(2) On December 15, 2009, this property was designated as held-for-sale as the Advisor determined that the lack of core real estate properties currently on the market represented an opportunity for the Fund. In accordance with the authoritative guidance, the results of operations and future gains or losses on disposition, if any, for the property will be reported as discontinued operations for all periods presented.

(3) Consists of a portfolio of leasehold interests in fifteen medical office buildings located throughout Southern California and the greater Phoenix metropolitan area. The buildings are all subject to ground leases expiring in 2078. Acquisition price includes the assumption of four fixed-rate mortgage loans for approximately $84,300 at a weighted average interest rate of 5.77%, maturing in 2013 and 2014. From the acquisition date until December 31, 2007, we owned a 95% membership interest in the portfolio at which time we acquired the remaining 5% interest from an unrelated third party.

F-15

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

(4) Acquisition price includes the assumption of an approximate $14,000, 5.15% fixed-rate mortgage loan maturing in 2014.

(5) The building has undergone significant upgrades, which involved increasing the rentable space by approximately 10,000 square-feet (unaudited) and leasing the building to new tenants. The other member, owning a 10% interest, is an unrelated third party. The other member has the opportunity to earn a promoted return for meeting certain performance goals.

(6) The other member, owning a 10% interest, is an unrelated third party. The other member has the opportunity to earn a promoted return for meeting certain performance goals.

(7) Acquisition price includes the assumption of an approximate $7,400, 6.05% fixed-rate mortgage loan maturing in 2015.

(8) The other owner, owning a 12.15% interest, is an unrelated third party. Acquisition price includes the assumption of an approximate $35,000, 5.30% fixed-rate mortgage loan maturing in 2027.

(9) Acquisition price includes the assumption of an approximate $31,000, 5.90% fixed-rate mortgage loan maturing in 2017.

(10) The other owner, owning a 22% interest, is an investment fund advised by our Advisor and in which the parent company of our Advisor owns a noncontrolling interest.

Discontinued Operations

On June 26, 2009, we sold Hagemeyer Distribution Center, a 300,000 square foot industrial center located in Auburn, GA, for $10,400, resulting in a gain of $911. On September 4, 2009, we sold Waipio Shopping Center, a 137,000 square foot retail center in Waipahu, HI, for $30,850, resulting in a gain of $1,619. The results of operations and gain on sale of the property are reported as discontinued operations for all periods presented. The Fund’s sale of real estate investment assets were comprised of:

	Date of Sale		December 31, 2008
Land	$	13,425	$	13,425
Buildings and equipment, net		18,977		19,284
Acquired intangible assets, net		6,047		6,248
Other assets, net		991		760
Total assets	$	39,440	$	39,717

The Fund’s disposed real estate investment liabilities were as follows:

	Date of Sale		December 31, 2008
Mortgage notes and other debt payable	$	26,450	$	26,450
Acquired intangible liabilities, net		833		890
Other liabilities		569		521
Total liabilities	$	27,852	$	27,861

F-16

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

On December 15, 2009, the Advisor listed the following properties as held for sale: Havertys Furniture, 25850 S. Ridgeland, Georgia Door Sales Distribution, 105 Kendall Park Lane and 4001 North Norfleet Road. The Fund’s investment in real estate and other assets held for sale is comprised of:

	December 31, 2009
Land	$	11,979
Buildings and equipment, net		75,610
Acquired intangible assets, net		9,366
Other assets, net		7,157
Total assets	$	104,112

Liabilities held for sale are related to the properties listed as held for sale and are as follows:

	December 31, 2009
Mortgage notes and other debt payable	$	84,542
Other liabilities		1,273
Total liabilities	$	85,815

The following table summarizes income from discontinued operations for the years ended December 31, 2009, 2008 and 2007:

	Year Ended December 31, 2009			Year Ended December 31, 2008			Year Ended December 31, 2007
Total revenue	$	14,059		$	15,915		$	15,088
Real estate taxes		(2,011	)		(2,017	)		(1,738	)
Property operating		(1,080	)		(1,447	)		(1,297	)
General and administrative		(88	)		(146	)		(72	)
Provision for impairment		(13,082	)		—			—
Depreciation and amortization		(3,427	)		(4,115	)		(3,927	)
Loss on extinguishment of debt		(1,003	)		—			—
Interest income		319			345			377
Interest expense		(5,644	)		(6,272	)		(6,065	)
(Loss) income from discontinued operations	$	(11,957	)	$	2,263		$	2,366

During the first quarter of 2008, the Advisor determined that the conditions in the capital markets were not opportune to dispose of Metropolitan Park North, which as of December 31, 2007 was classified as held for sale. The property was returned to continuing operations for all periods presented. During the quarter ended March 31, 2008, the Fund recorded catch up of depreciation and amortization of building and intangible assets and liabilities in the net amount of $1,414. The catch up related to the period that Metropolitan Park North was classified as held for sale during 2007.

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EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

NOTE 4—UNCONSOLIDATED REAL ESTATE AFFILIATES

Legacy Village

On August 25, 2004, we acquired a 46.5% membership interest in Legacy Village Investors, LLC which owns Legacy Village, a 595,000 square-foot lifestyle center in Lyndhurst, Ohio, built in 2003. The aggregate consideration for our 46.5% ownership interest was approximately $35,000.

111 Sutter Street

On March 29, 2005, we acquired an 80% membership interest in CEP Investors XII LLC, which owns 111 Sutter Street in San Francisco, California, a 286,000 square-foot, multi-tenant office building built in 1926 and renovated in 2001. The aggregate consideration paid for the 80% membership interest was approximately $24,646.

SUMMARIZED FINANCIAL INFORMATION OF INVESTMENTS IN UNCONSOLIDATED REAL ESTATE AFFILIATES

The following is summarized financial information for our unconsolidated real estate affiliates:

SUMMARIZED COMBINED BALANCE SHEETS—UNCONSOLIDATED REAL ESTATE AFFILIATES

	December 31, 2009		December 31, 2008
ASSETS
Investments in real estate, net	$	160,803	$	165,548
Cash and cash equivalents		2,551		1,045
Other assets, net		18,893		22,364
TOTAL ASSETS	$	182,247	$	188,957
LIABILITIES AND MEMBERS’ EQUITY
Mortgage notes and other debt payable	$	150,382	$	153,047
Other liabilities		9,200		8,720
TOTAL LIABILITIES		159,582		161,767
Members’ Equity		22,665		27,190
TOTAL LIABILITIES AND MEMBERS’ EQUITY	$	182,247	$	188,957

FUND INVESTMENTS IN UNCONSOLIDATED REAL ESTATE AFFILIATES

	December 31, 2009			December 31, 2008
Members’ equity	$	22,665		$	27,190
Less: other members’ equity		(8,157	)		(9,367	)
Accrued distributions to members		—			241
Basis differential in investment in unconsolidated real estate affiliates, net (a)		15,343			22,883
Investments in unconsolidated real estate affiliates	$	29,851		$	40,947

F-18

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

(a) The basis differential in investment in the equity of the unconsolidated real estate affiliates is attributable to a difference in the fair value of Legacy Village over its historical cost at acquisition plus the Fund’s own acquisition costs for Legacy Village and 111 Sutter Street. The Fund amortizes the basis differential over the lives of the related assets and liabilities that make up the fair value difference, primarily buildings and improvements. In some instances, the useful lives of these assets and liabilities differ from the useful lives being used to amortize the assets and liabilities by the other members. The basis differential allocated to land is not subject to amortization. The basis differential includes charges for impairment of Legacy Village of $7,269 (see Note 12) taken in 2009.

SUMMARIZED COMBINED STATEMENTS OF OPERATIONS—UNCONSOLIDATED REAL ESTATE AFFILIATES

	Year Ended December 31, 2009			Year Ended December 31, 2008		Year Ended December 31, 2007
Total revenues	$	28,292		$	32,990	$	29,543
Total operating expenses		20,692			22,301		19,452
Operating income		7,600			10,689		10,091
Total other expenses		8,652			8,775		8,830
Net (loss) income	$	(1,052	)	$	1,914	$	1,261

FUND EQUITY IN INCOME OF UNCONSOLIDATED REAL ESTATE AFFILIATES

	Year Ended December 31, 2009			Year Ended December 31, 2008			Year Ended December 31, 2007
Net (loss) income of unconsolidated real estate affiliates	$	(1,052	)	$	1,914		$	1,261
Other members’ share of net loss (income)		245			(317	)		(562	)
Adjustment for basis differential in investment in unconsolidated real estate affiliates		(197	)		(367	)		(152	)
Other expense from unconsolidated real estate affiliates		(4	)		—			(11	)
Impairment of investments in unconsolidated real estate affiliates		(7,269	)		—			—
Fund equity in (loss) income of unconsolidated real estate affiliates	$	(8,277	)	$	1,230		$	536

F-19

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

NOTE 5—MORTGAGE NOTES AND OTHER DEBT PAYABLE

Mortgage notes payable have various maturities through 2027 and consist of the following:

Property	Maturity Date	Fixed / Floating	Stated Rate		Amount payable as of
					December 31, 2009			December 31, 2008
9800 South Meridian	January 1, 2011	Floating	LIBOR + 3.50%		$	13,611		$	13,604
Monument IV at Worldgate	September 1, 2011	Fixed	5.29	%		36,264			36,832
25850 S. Ridgeland (1)	April 1, 2012	Fixed	5.05	%		—			16,120
105 Kendall Park Lane (1)	September 1, 2012	Fixed	4.92	%		—			13,000
Metropolitan Park North	April 1, 2013	Fixed	5.73	%		61,000			61,000
36 Research Park Drive	July 1, 2013	Fixed	5.60	%		11,050			11,050
CHW Medical Office Portfolio	November 1, 2013	Fixed	5.75	%		16,949			17,254
CHW Medical Office Portfolio	November 1, 2013	Fixed	5.75	%		14,752			15,017
CHW Medical Office Portfolio	November 1, 2013	Fixed	5.75	%		15,276			15,551
18922 Forge Drive	February 14, 2014	Fixed	6.24	%		19,050			19,050
CHW Medical Office Portfolio	March 1, 2014	Fixed	5.79	%		33,377			33,957
Stirling Slidell Shopping Centre	April 1, 2014	Fixed	5.15	%		13,326			13,580
Cabana Beach San Marcos	December 1, 2014	Fixed	5.57	%		19,650			19,650
Cabana Beach Gainesville	December 1, 2014	Fixed	5.57	%		49,108			49,107
Campus Lodge Athens	December 1, 2014	Fixed	5.57	%		13,723			13,723
Campus Lodge Columbia	December 1, 2014	Fixed	5.57	%		16,341			16,341
Havertys Furniture (1)	January 1, 2015	Fixed	5.23	%		—			18,100
Havertys Furniture (1)	January 1, 2015	Fixed	6.19	%		—			11,025
Georgia Door Sales Distribution Center (1)	January 1, 2015	Fixed	5.31	%		—			5,400
The Edge at Lafayette	February 1, 2015	Fixed	5.57	%		17,466			17,465
4 Research Park Drive	March 1, 2015	Fixed	6.05	%		6,966			7,127
Marketplace at Northglenn	January 1, 2016	Fixed	5.50	%		62,894			63,755
Campus Lodge Tampa	October 1, 2016	Fixed	5.95	%		33,500			33,500
4001 North Norfleet Road (1)	March 1, 2017	Fixed	5.60	%		—			24,230
Station Nine Apartments	May 1, 2017	Fixed	5.50	%		36,885			36,885
The District at Howell Mill	June 1, 2017	Fixed	6.14	%		10,000			10,000
Canyon Plaza	June 1, 2017	Fixed	5.90	%		30,289			30,671
Railway Street Corporate Centre (2)	September 1, 2017	Fixed	5.16	%		28,270			24,161
The District at Howell Mill	March 1, 2027	Fixed	5.30	%		35,000			35,000
Hagemeyer Distribution Center	—	Fixed	5.23	%		—			6,500
Waipio Shopping Center	—	Fixed	5.15	%		—			19,950
TOTAL MORTGAGE NOTES OF HELD FOR USE PROPERTIES						594,747			708,605
Line of Credit	February 21, 2010	Floating	2.24	%		17,500			10,000
Other debt payable	August 1, 2011	Fixed	7.00	%		1,050			—
Net debt discount on assumed debt						(1,322	)		(1,108	)
MORTGAGE NOTES AND OTHER DEBT PAYABLE, NET					$	611,975		$	717,497
25850 S. Ridgeland (1)	April 1, 2012	Fixed	5.05	%	$	15,749		$	—
105 Kendall Park Lane (1)	September 1, 2012	Fixed	4.92	%		12,933			—
Havertys Furniture (1)	January 1, 2015	Fixed	5.23	%		16,582			—
Havertys Furniture (1)	January 1, 2015	Fixed	6.19	%		10,101			—
Georgia Door Sales Distribution Center (1)	January 1, 2015	Fixed	5.31	%		4,947			—
4001 North Norfleet Road (1)	March 1, 2017	Fixed	5.60	%		24,230			—
TOTAL MORTGAGE NOTES OF HELD FOR SALE PROPERTIES					$	84,542		$	—

(1) The loan associated with this property was designated as held for sale on December 15, 2009.

(2) This loan is denominated in Canadian dollars, but is reported in US dollars at the exchange rate in effect on the balance sheet date.

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EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

We have recognized a premium or discount on debt we assumed with the following property acquisitions:

Property	Debt Premium / (Discount)			Effective Interest Rate
CHW Medical Office Portfolio	$	1,124		5.41	%
Stirling Slidell Shopping Centre		(159	)	5.57	%
4 Research Park Drive		(11	)	6.17	%
The District at Howell Mill		(3,328	)	6.34	%
Canyon Plaza		(191	)	6.10	%
Campus Lodge Tampa		1,243		5.95	%
Net debt discount on assumed debt	$	(1,322	)

Included in mortgage notes and other debt payable is $2,367 and $1,025 of debt premium accumulated amortization at December 31, 2009 and 2008, respectively. Also included in mortgage notes and other debt payable is $3,689 and $426 of debt discount accumulated amortization at December 31, 2009 and 2008, respectively. Aggregate principal payments of mortgage notes payable as of December 31, 2009 are as follows:

Year	Amount
2010	$	25,784
2011		57,875
2012		36,209
2013		120,777
2014		159,301
Thereafter		297,893
Total	$	697,839

Land, buildings, equipment, and acquired intangible assets related to the mortgage notes payable, with an aggregate cost of approximately $1,071,000 and $1,122,000 at December 31, 2009 and 2008, respectively, have been pledged as collateral.

Covenants

At December 31, 2009, we were in compliance with all debt covenants.

Line of Credit / Term Loan

On February 19, 2010, we replaced our existing line of credit with a $17,000 term loan with a $6,000 letter of credit sub-limit provided by PNC Bank, National Association. The term loan bears interest at LIBOR plus 3.75%, with a LIBOR floor of 1.00%. The term loan requires quarterly principal amortization of $2,125 and can be prepaid without penalty. The term loan matures on February 19, 2012. We have one letter of credit issued under the term loan for $3,900.

Our previous $50,000 line of credit agreement, which expired in February 2010, was provided by PNC Bank, National Association BMO Capital Markets Financing, Inc. and Bank of America, N.A. (“BANA”), an affiliate of the Manager. The line of credit carried an interest rate that approximates LIBOR plus 1.50% to 2.00% based on certain covenant provisions or a base rate which was the greater of (i) the interest rate per annum

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

announced from time to time by the lender, as its prime rate or (ii) the Federal Funds effective rate plus 0.75%. We had $17,500 borrowed at 2.24% on our line of credit at December 31, 2009, and $10,000 borrowed at 3.50% at December 31, 2008. As of December 31, 2009, we had issued two letters of credit from our line of credit totaling approximately $5,430, which were used as additional collateral on various mortgage loans. As of December 31, 2009, we were in compliance with the terms of our line of credit. At December 31, 2009, we had approximately $27,070 available to draw on our line of credit.

NOTE 6—COMMON STOCK

Share Price Calculation

The Current Share Price of the Common Stock (the “Current Share Price”) is established quarterly based on the following valuation methodology, which may be modified from time to time by our board of directors.

Net Asset Value Calculation. The NAV of the Fund is determined as of the end of each of the first three quarters of a fiscal year, within 45 calendar days following the end of such quarter. The Fund’s year-end NAV is determined after the completion of our year-end audit. NAV is determined as follows: (i) the aggregate fair value of (A) our interests in real estate investments (“Investments”) plus (B) all other assets of the Fund, minus (ii) the aggregate fair value of our indebtedness and other outstanding obligations as of the determination date.

We identify and retain independent third-party real estate appraisal firms (the “Appraisal Firms”) that appraise each Investment not less than annually beginning one year after acquisition. During the first three quarters after acquisition, the Investment will be carried at capitalized cost and reviewed quarterly for material events at the property or market level that may require an adjustment of the Investment’s valuation.

For each of the three quarters following the independent appraisal of a particular Investment, we are responsible for determining the value of such Investment based on our review of the appraisal and material changes at the property or market level. We are also responsible for determining the value of the indebtedness related to each Investment beginning one year after acquisition of the encumbered property and on a quarterly basis thereafter.

Current Share Price Calculation. The Current Share Price equals the NAV as of the end of each quarter divided by the number of outstanding shares of all classes of common stock of the Fund at the end of such quarter.

Stock Subscriptions

We have historically and may in the future sell additional Shares through private placements to accredited investors when and if market conditions permit. All subscriptions are subject to the receipt of cleared funds from the investor prior to the applicable subscription date in the full amount of the subscription. The subscription amount paid by each prospective investor for Shares in the Fund will initially be held in an escrow account at an independent financial institution outside the Fund, for the benefit of the investors until such time as the funds are drawn into the Fund to purchase Shares at the Current Share Price. Subscription funds will be held in the escrow account for no more than 100 days before we are required to issue the subscribed Shares. At December 31, 2009, no subscription commitments were held in escrow. At December 31, 2008, approximately $5,990 of subscription commitments were held in escrow, which were brought into the Fund in January 2009. For the years ended December 31, 2009 and 2008, we sold 63,871 Shares for $5,991 and 585,465 Shares for $71,430, respectively, to subscribers whose funds were held in the escrow account. Subscription commitments for the issuance of new Shares held in escrow are not included in our balance sheets.

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EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

Share Repurchase Program

Tender Offers

Pursuant to our Share Repurchase Program (the “Repurchase Program”), we intend to provide limited liquidity to our stockholders by conducting tender offers pursuant to which we expect to offer to repurchase a specific percentage, number or dollar amount of outstanding Shares (“Tender Offer Amount”). The Tender Offer Amount for each tender offer, if any, will depend on a variety of factors, including our available liquidity, available borrowing under our credit facility and the amount of proceeds from our most recent offering of Shares. Such determinations will be made by our board of directors prior to each tender offer and will be communicated to stockholders. We did not conduct any tender offers during 2009, and, in order to preserve cash given the current market environment, the Fund does not intend to repurchase shares for the immediate future. We made the following tender offers in 2008:

Period	Tender Offer Amount		Number of Shares Tendered	Dollar Amount of Shares Tendered		Number of Shares Repurchased	Dollar Amount of Shares Repurchased			Date Shares Repurchased and Retired
June 2008	$	15,000	483,541	$	58,800	126,446	$	15,400	(1)	June 24, 2008
December 2008	$	10,000	1,119,033	$	138,100	81,018	$	10,000		December 22, 2008

(1) We availed ourselves of an SEC rule that allowed us to exceed our Tender Offer Amount by up to 2% of the outstanding Shares to honor redemption requests.

No Obligation to Repurchase Shares

We will only offer to repurchase Shares through tender offers and then only to the extent that we have sufficient cash available to repurchase Shares consistent with principles of prudent portfolio management and to the extent that such repurchases (i) are consistent with applicable REIT rules and federal securities laws and (ii) would not require the Fund to register as an investment company under the Investment Company Act. We do not guarantee, however, that sufficient cash will be available at any particular time to fund repurchases of our Shares, and we will be under no obligation to conduct such tender offers or to make such cash available. In determining the Tender Offer Amount, we will act in the best interest of the stockholders and may take into account our need for cash to pay operating expenses, debt service, distributions to stockholders and other obligations.

Dividend Reinvestment Plan

Stockholders may participate in a dividend reinvestment plan under which all dividends will automatically be reinvested in additional Shares. The number of Shares issued under the dividend reinvestment plan will be determined based on the Current Share Price as of the reinvestment date. For the years ended December 31, 2009 and 2008, we issued 39,201 Shares for approximately $3,446 and 68,985 Shares for approximately $8,448, respectively, under the plan.

Earnings Per Share (“EPS”)

Basic per share amounts are based on the weighted average of shares outstanding of 4,128,290, 3,822,484 and 3,252,725 for the years ended December 31, 2009, 2008 and 2007, respectively. We have no dilutive or potentially dilutive securities.

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EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

Dividends

Earnings and profits, which determine the taxability of dividends to stockholders, will differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of revenue and expense recognition, the estimated useful lives used to compute depreciation, and gains on the sale of real property.

The tax treatment of common dividends per share for federal income tax purposes is as follows:

	For the year ended December 31,
	2009				2008				2007
	Per Share		%		Per Share		%		Per Share		%
Ordinary income		—	—			—	—			—	—
Capital gains		—	—			—	—			—	—
Return of capital	$	2.625	100	%	$	7.00	100	%	$	7.00	100	%
Total	$	2.625	100	%	$	7.00	100	%	$	7.00	100	%

NOTE 7—RENTALS UNDER OPERATING LEASES

We receive rental income from operating leases. The minimum future rentals from consolidated properties, including those listed as held for sale, based on operating leases in place at December 31, 2009 are as follows:

Year	Amount (1)
2010	$	71,507
2011		51,143
2012		34,499
2013		31,329
2014		26,460
Thereafter		70,051
Total	$	284,989

(1) Amounts included related to Railway Street Corporate Centre have been converted from Canadian dollars to U.S. dollars using the appropriate exchange rate as of December 31, 2009.

Minimum future rentals do not include amounts payable by certain tenants based upon a percentage of their gross sales or as reimbursement of property operating expenses.

During the year ended December 31, 2009, 2008 and 2007, no individual tenant accounted for greater than 10% of minimum base rents.

The majority of the change from 2010 future rents to 2011 is the related to our apartment properties which usually have a one year lease life.

NOTE 8—RELATED PARTY TRANSACTIONS

Under the terms of the Management and Advisory Agreements, we pay each the Manager and Advisor an annual fixed fee equal to 0.75% of NAV, calculated quarterly. The fixed portion of the management and advisory fees for the years ended December 31, 2009, 2008 and 2007 were $4,792, $7,122 and $5,732, respectively. Included in manager and advisor fees payable at December 31, 2009 and 2008 was $1,017 and $1,897, respectively, of fixed fee expense.

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EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

To the extent that the Fund builds a cash reserve generated by capital raised through the sale of Shares to stockholders, the Manager and Advisor have agreed to waive 1.0% of their combined 1.5% fixed fee expense to reduce the dilutive impact to stockholders created by maintaining cash reserves.

Under the terms of the Management and Advisory Agreements, we pay the Manager and Advisor an aggregate annual variable fee equal to 7.50% of the Variable Fee Base Amount, as defined in the Advisory Agreement, calculated quarterly. Before the Fund’s NAV exceeded $100,000, the variable fee was allocated entirely to the Advisor. The Fund’s NAV exceeded $100,000 on April 1, 2005 and a portion of variable fee was then allocated to the Manager, with the remainder allocated to the Advisor. The Manager will be allocated an increasing proportion of the variable fee to the extent the Fund’s NAV increases, up to a maximum of 1.87% of the 7.50% fee paid to the Manager and the Advisor if the Fund’s NAV is $850,000 or more. The total variable fee for the years ended December 31, 2009, 2008 and 2007 was $1,621, $1,913 and $1,694, respectively. Included in manager and advisor fees payable at December 31, 2009 and 2008 was $388 and $468 of variable fee expense.

The Advisor receives an acquisition fee of 0.50% of the acquisition cost of each property acquired for us. Total acquisition fees for the years ended December 31, 2009, 2008 and 2007 were $9, $357 and $2,337, respectively. There were no acquisition fees included in manager and advisory fees payable at December 31, 2009 and 2008, respectively. The Advisor may pay certain third-party due diligence costs related to acquisitions or unsuccessful acquisitions, which are reimbursable by us. Total reimbursed due diligence costs related to successful investments made by us and unsuccessful acquisitions for the years ended December 31, 2009, 2008 and 2007 were $0, $243 and $578, respectively. There were no reimbursable due diligence costs included in accounts payable and other accrued expenses at December 31, 2009 and 2008, respectively. Beginning January 1, 2009, acquisition fees and due diligence costs for acquisitions were expensed as incurred. The Advisor does not receive a disposition fee for selling real estate investments.

On December 23, 2004, we entered into an expense limitation and reimbursement agreement (the “Expense Limitation Agreement”) with the Manager, which limits certain Fund expenses to 0.75% of NAV annually. The expenses subject to the limitation include fees paid to the various professional service providers, auditors, stockholder administrator, legal counsel related to the organization of the Fund or share offering, printing costs, mailing costs, fees associated with the board of directors, cost of maintaining directors and officers insurance, blue sky fees and all Fund-level organizational costs. Expenses in excess of the limitation will be carried forward for up to three years and may be reimbursed to the Manager in a year that Fund expenses are less than 0.75% of NAV, but only to the extent Fund expenses do not exceed the expense limitation. Fund expenses for the years ended December 31, 2009, 2008 and 2007 were limited to $2,396, $3,511 and $2,866, respectively. Actual Fund level expenses for the year ended December 31, 2009 were $271 less than the amount allowed under the Expense Limitation Agreement. Therefore, no Fund level expenses are being carried forward to future periods. To the extent expenses can not be allocated to the Fund in future years due to the expense limitation, these expenses will be borne by the Manager. The Expense Limitation Agreement was set to expire on December 31, 2009, but was renewed and extended through December 31, 2010. Expenses subject to the Expense Limitation Agreement are included in the Fund level expenses line on the consolidated statements of operations along with certain other Fund level expenses not subject to the expense limitation agreement, such as expenses related to unsuccessful acquisitions and state franchise taxes and filing fees.

Jones Lang LaSalle Americas, Inc. (“JLL”), an affiliate of LaSalle, is paid for property management services performed at Monument IV at Worldgate, The District at Howell Mill, 4 Research Park Drive and 36 Research Park Drive. For the years ended December 31, 2009, 2008 and 2007, JLL was paid $167, $147 and $84,

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EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

respectively, for property management services performed. In 2008, JLL was paid $61 in loan placement fees related to the mortgage debt on The Edge at Lafayette. In 2007, JLL was paid $741 in loan placement fees related to the mortgage debt on the Station Nine Apartments, Railway Street Corporate Centre, and four student-oriented apartment communities. JLL has been hired to perform leasing services for Canyon Plaza and 111 Sutter on a contingent fee basis. JLL was paid $60 and $36 for leasing services for the years ending December 31, 2009 and 2008, respectively.

Effective as of October 23, 2009, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), an affiliate of the Manager, replaced Banc of America Investment Services, Inc. as placement agent of the Fund. MLPF&S’s primary business address is: 4 World Financial Center, 250 Vesey Street, New York, NY 10080-6186. The MLPF&S is an indirect, wholly-owned subsidiary of Bank of America Corporation (“BAC”).

The Fund has mortgage notes payable to BAC collateralized by Monument IV at Worldgate and Station Nine Apartments. BANA is the lender on up to $10,000 of the Fund’s line of credit. Interest and fees paid to BAC and BANA related to the loans for the year ended December 31, 2009 and 2008 were $4,067 and $4,255, respectively. Interest and fees paid to BAC and BANA related to the loans for the period from July 1, 2007 (the date BAC acquired the Manager) through December 31, 2007 were $2,060. Included in mortgage notes and other debt payable at December 31, 2009 and 2008 was approximately $75,649 and $75,145 of debt payable to BAC and BANA, respectively.

NOTE 9—COMMITMENTS AND CONTINGENCIES

The CHW Medical Office Portfolio mortgage debt requires that we deposit a maximum of $855 per year into an escrow account to fund future tenant improvements and leasing commissions, and the cumulative maximum required to be put into escrow at any one point in time is $1,900. The amount of the escrow funded by each of the fifteen buildings in the portfolio is capped individually pursuant to each loan agreement. At December 31, 2009, we had approximately $1,548 deposited in this escrow, and we expect to fund approximately $855 during 2010. Additionally, we are required to deposit approximately $151 per year into an escrow account to fund capital expenditures. At December 31, 2009, our capital account escrow account balance was $634. These escrow accounts allow us to withdraw funds as we incur costs related to tenant improvements, leasing commissions and capital expenditures. We expect to fund the escrow requirements with operating cash flows generated by the CHW Medical Office Portfolio.

The mortgage loan collateralized by Metropolitan Park North required that on April 1, 2009 we post a $3,900 reserve in escrow to cover costs of certain tenant improvements, leasing commissions, rent concessions, and lost rental income in connection with re-leasing space to a major tenant of the building. We satisfied this reserve requirement with a letter of credit, which was posted on March 23, 2009. If the tenant provides written notice of its intent to exercise its lease renewal option by September 30, 2010, the lender will return the $3,900 letter of credit to us. If the tenant fails to provide notice of its renewal by September 30, 2010, we are obligated to post an additional $2,800 reserve into the escrow. The lender will return the reserve to us if the following conditions are met: (1) no default has occurred and remains outstanding; and (2) either the tenant has exercised its renewal options or the space has been re-leased to a new tenant(s). If required, the Fund plans on satisfying the additional $2,800 reserve requirement with a letter of credit collateralized by cash on hand.

The mortgage loan collateralized by Monument IV at Worldgate requires that, should the tenant not renew its lease or the space not be leased to a new tenant(s), the Fund must reserve all rental payments received from the tenant at the earlier of September 1, 2010 or upon the tenant delivering a notice of its intent not to renew the

F-26

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

lease. The Fund can avoid reserving the rental payments by delivering a letter of credit to the lender for $2,400 on September 1, 2010. The Fund expects to fund the reserve, if required to do so, from the rental payments received from the tenant. The lender will return the reserve to the Fund if the following conditions are met: (1) no default has occurred and remains outstanding; and (2) either the tenant has renewed its lease or the space has been re-leased to a new tenant(s).

The debt associated with five of the Fund’s student-oriented apartment communities requires that we deposit a total of $224 per year into a replacement reserve to fund future furniture replacement costs. As of December 31, 2009, we had deposited approximately $195 into this escrow. We expect to fund the loan escrows from property operations. These reserve accounts allow us to withdraw funds as we incur costs related to furniture replacement.

As part of the lease with our single tenant at the 4001 North Norfleet Road property, we provided the tenant a right to expand the current building by up to 286,000 square feet of space. If the tenant exercises this right, we will be obligated to construct this expansion space. The tenant has the right to notify us of their desire to expand at any time prior to February 28, 2016, (the end of the ninth year of the lease), or if the lease is extended, until any time prior to the end of the fourth year of any extension. As of December 31, 2009, we have not received an expansion notice from the tenant.

The debt associated with 9800 Meridian requires that all property level cash flow is deposited in lender-directed accounts to cover future capital, debt service, tax, and insurance requirements. The lender has the sole right to direct any disposition of the cash. As of December 31, 2009 we had $1,000 deposited in escrows with the lender.

NOTE 10—RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2007, the Financial Accounting Standards Board (“FASB”) amended guidance for noncontrolling interests requiring (i) that noncontrolling (minority) interests be reported as a component of shareholders’ equity, (ii) that net income attributable to the parent and to the noncontrolling interest be separately identified in the consolidated statement of operations, (iii) that changes in a parent’s ownership interest while the parent retains its controlling interest be accounted for as equity transactions, (iv) that any retained noncontrolling equity investment upon the deconsolidation of a subsidiary be initially measured at fair value, and (v) that sufficient disclosures are provided that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. The guidance is effective for annual periods beginning after December 15, 2008 and should be applied prospectively. However, the presentation and disclosure requirements of the statement shall be applied retrospectively for all periods presented. We adopted this guidance on January 1, 2009. The adoption of this provision did not have a material impact on the Fund’s consolidated financial position and results of operations, but does have an impact on the presentation of noncontrolling interest in our financial statements.

In April 2009, FASB issued amended guidance for fair value disclosures for assets and liabilities that are not currently reflected on the balance sheet. Prior to this guidance, fair values for these assets and liabilities were only required to be disclosed once a year. The guidance now requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for assets and liabilities not measured on the balance sheet at fair value.

In June 2009, FASB issued amended guidance related to the consolidation of variable-interest entities. These amendments require an enterprise to qualitatively assess the determination of the primary beneficiary of a

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EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

variable interest entity (“VIE”) based on whether the entity (1) has the power to direct matters that most significantly impact the activities of the VIE, and (2) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The amendments change the consideration of kick-out rights in determining if an entity is a VIE which may cause certain additional entities to now be considered VIEs. Additionally, they require an ongoing reconsideration of the primary beneficiary and provide a framework for the events that trigger a reassessment of whether an entity is a VIE. This guidance will be effective for financial statements issued for fiscal years beginning after November 15, 2009. The Fund will adopt this guidance on January 1, 2010 and has determined that it will deconsolidate some of its investments in real estate assets. In all these cases, the Fund determined that its equity interest in the real estate assets represented a variable interest in a VIE. Additionally, in all these cases, the Fund determined that it lacked the power to direct the activities that most significantly impact the VIE’s economic performance.

In June 2009, FASB issued the codification of Generally Accepted Accounting Principles to become the source of authoritative GAAP recognized by FASB to be applied by nongovernmental entities. This guidance is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Fund implemented this in the third quarter of 2009. The adoption of the codification had no impact on the Fund’s consolidated financial position and results of operations, but does have an impact on the presentation of notes to the financial statements.

NOTE 11—ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

As of January 1, 2008, we adopted FASB’s amended guidance for fair value measurement and disclosure. Although the adoption of this guidance did not materially impact our financial condition, results of operations, or cash flow, we are now required to provide additional disclosures as part of our financial statements.

The guidance clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• Level 1—Quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement.

• Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.

• Level 3—Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

During 2009, several assets became impaired and were measured at fair value. The impaired assets include one of the Fund’s investments in unconsolidated real estate affiliates, one of the Fund’s investments in real estate held for use and five of the Fund’s investments in real estate held for sale. See Note 12 for further information. At December 31, 2008, the Fund had no assets or liabilities measured at fair value.

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EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

The authoritative guidance requires the disclosure of the fair value of our financial instruments for which it is practicable to estimate that value. The guidance does not apply to all balance sheet items. We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed. Since such amounts are estimates, there can be no assurance that the disclosed value of any financial instrument could be realized by immediate settlement of the instrument. We consider the carrying value of our cash and cash equivalents to approximate their fair value due to the short maturity of these investments. The fair value of our notes receivable was approximately $762 higher and $1,013 higher, respectively, than the aggregate carrying amounts at December 31, 2009 and 2008. We have estimated the fair value of our mortgage notes and other debt payable reflected in the accompanying Consolidated Balance Sheets at amounts that are based upon an interpretation of available market information and valuation methodologies (including discounted cash flow analyses with regard to fixed rate debt) for similar loans made to borrowers with similar credit ratings and for the same maturities. The fair value of our mortgage notes and other debt payable was approximately $85,067 and $51,047 lower than the aggregate carrying amounts at December 31, 2009 and 2008, respectively. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition of our mortgage notes and other debt payable.

NOTE 12—IMPAIRMENT

Impairment of Investments in Real Estate held for use

In September 2009, we determined that 9800 South Meridian was impaired. In accordance with the authoritative guidance for impairment of long-lived assets held for use, we determined the carrying value of this investment exceeded the undiscounted cash flows over our expected hold period. As such, we recognized an impairment charge of approximately $5,604 on 9800 South Meridian, which represents the difference between the fair value and the carrying value of the property. The impairment stemmed from the near term debt maturity coupled with deteriorating real estate market fundamentals. In December 2009, we have determined that no additional indicators of impairment exist.

Impairment of Investments in Real Estate held for sale

In December 2009, we determined that five properties we designated as held for sale were impaired at the date the properties were classified as held for sale. These properties included 25850 S. Ridgeland, Georgia Door Sales Distribution Center, 105 Kendall Park Lane, Havertys Furniture and 4001 North Norfleet Road. In accordance with the authoritative guidance for impairment of long-lived assets held for sale, we determined the carrying values of these investments exceeded their fair value less cost to sell. As such, we recognized impairment charges of approximately $13,082, which are included within (loss) income from discontinued operations on the consolidated statements of operations and comprehensive loss. The impairment stemmed from deteriorating real estate market fundamentals.

Impairment of Investments in Unconsolidated Real Estate Affiliates

In June 2009, due to the continued deterioration of the U.S. capital markets, the lack of liquidity and the related impact on the real estate market and retail industry, we determined that one of our investments in unconsolidated real estate affiliates was impaired. As a result, we recorded an impairment charge of approximately $4,857 to our investment in Legacy Village, which is included within equity in (loss) income of unconsolidated affiliates on the consolidated statements of operations and comprehensive loss. The impairment was determined in accordance with the authoritative guidance for equity method investments. In December 2009, we determined that additional indicators of impairment existed for our investment in Legacy Village and we recorded an additional impairment charge of $2,412.

F-29

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

Measurement of Fair Value

We were required to assess the value of our impaired assets in accordance with the guidance for long lived assets and equity method investments, respectively. The valuation of these assets is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each asset as well as the income capitalization approach considering prevailing market capitalization and discount rates. We review each investment based on the highest and best use of the investment and market participation assumptions. The significant assumptions included the capitalization rate used in the income capitalization valuation and projected property net operating income and net cash flows. Additionally, the valuation considered bid and ask prices for similar properties. We have determined that the significant inputs used to value the impaired assets fall within Level 3.

The valuation adjustments were calculated based on market conditions and assumptions made by management at the time the valuation adjustments were recorded, which may differ materially from actual results if market conditions or the underlying assumptions change in the future.

NOTE 13—PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The following unaudited pro forma financial information has been presented as a result of the acquisitions made by the Fund during 2008 and 2007, which includes the historical results of all acquisitions made during these years. In our opinion, all significant adjustments necessary for a fair presentation of the pro forma financial information for the periods have been included. The pro forma financial information is based upon historical financial information and does not purport to present what actual results would have been had the acquisitions, and related transactions, in fact, occurred at the beginning of each period presented, or to project results for any future period.

	2008			2007
Total revenue	$	98,649		$	87,704
Net loss attributable to Excelsior LaSalle Property Fund, Inc.	$	(33,700	)	$	(35,869	)
Net loss attributable to Excelsior LaSalle Property Fund, Inc. per share-basic and diluted	$	(8.15	)	$	(8.67	)

F-30

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

NOTE 14—QUARTERLY FINANCIAL INFORMATION

EXCELSIOR LASALLE PROPERTY FUND, INC.

QUARTERLY FINANCIAL INFORMATION

(UNAUDITED)

	Three Months Ended March 31, 2009			Three Months Ended June 30, 2009			Three Months Ended September 30, 2009			Three Months Ended December 31, 2009
Total revenues	$	24,461		$	23,730		$	23,964		$	24,270
Operating income (loss)		4,115			3,857			(2,502	)		4,462
Loss from continuing operations		(4,193	)		(10,625	)		(12,113	)		(5,458	)
Income (loss) from discontinued operations		624			1,333			1,309			(12,693	)
Net loss attributable to Excelsior LaSalle Property Fund, Inc.		(3,305	)		(8,141	)		(8,775	)		(19,390	)
Net loss attributable to Excelsior LaSalle Property Fund, Inc. per share-basic and diluted	$	(0.80	)	$	(1.97	)	$	(2.12	)	$	(4.69	)
Weighted average common stock outstanding-basic and diluted		4,110,725			4,130,811			4,135,635			4,135,635

	Three Months Ended March 31, 2008			Three Months Ended June 30, 2008			Three Months Ended September 30, 2008			Three Months Ended December 31, 2008
Total revenues	$	23,472		$	23,977		$	24,487		$	25,583
Operating (loss) income		(2,596	)		(5,196	)		(2,257	)		2,074
Loss from continuing operations		(10,829	)		(13,771	)		(10,478	)		(5,410	)
Income from discontinued operations		622			525			527			589
Net loss attributable to Excelsior LaSalle Property Fund, Inc.		(8,830	)		(11,039	)		(8,209	)		(4,496	)
Net loss attributable to Excelsior LaSalle Property Fund, Inc. per share-basic and diluted	$	(2.45	)	$	(2.97	)	$	(2.12	)	$	(1.10	)
Weighted average common stock outstanding-basic and diluted		3,601,239			3,717,703			3,868,852			4,097,311

All significant fluctuations between the quarters are attributable to acquisitions made by us during 2008 and dispositions made in 2009 as well impairment charges taken during 2009.

NOTE 15—SUBSEQUENT EVENTS

On February 19, 2010, we amended and extended the line of credit with a new $17 million credit facility. The new term loan expires on February 19, 2012, bears interest at LIBOR plus 3.75% with a LIBOR floor of 1.00%. The new credit facility requires quarterly principal payments of $2,125.

On March 12, 2010, the Manager proposed and the Board of Directors approved a reduction in the annual fixed fee paid to the Manager from 0.75% of NAV to 0.10% of NAV, which will result in a reduction of the total annual fixed fee paid by us to the Advisor and Manager from 1.5% of NAV to 0.85% of NAV. In addition, the

F-31

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ in thousands, except per share amounts

Manager will forgo its participation in the variable fee and the aggregate annual variable fee will be reduced by that amount. The fee reductions will be retroactive to January 1, 2010 and are for an indefinite period. The Manager, with the prior approval of the Board, may discontinue either waiver at any time. Otherwise, the Agreement continues in effect in all material respects.

On March 12, 2010, the Fund entered into a purchase and sale agreement with an unrelated third party to sell Havertys Furniture and 25850 S. Ridgeland for approximately $54,060. The sale is subject to the satisfactory completion of due diligence from the purchaser and various other contingencies. Closing is expected to occur in the second quarter of 2010. There can be no assurance that the sale will occur or the amount of the sale price that will be ultimately achieved.

* * * * * *

F-32

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2009

Col. A	Col. B		Col. C				Col. D								Col. E
Description	Encumbrances		Initial Cost				Costs Capitalized Subsequent to Acquisition								Gross Amounts at which Carried at the Close of Period				Total
			Land		Building and Equipment		Land			Building and Equipment			Carrying Costs		Land		Building and Equipment
Consolidated Properties:
Monument IV at Worldgate—Herndon, VA, Office	$	36,264	$	5,186	$	57,013		—		$	(1,641	)		—	$	5,186	$	55,372	$	60,558
Marketplace at Northglenn—Northglenn, CO, Retail		62,894		15,658		66,217		(55	)		371			—		15,603		66,588		82,191
CHW Medical Office Portfolio:
300 Old River Road—Bakersfield, CA, Office		3,880		—		5,943		—			263			—		—		6,206		6,206
500 West Thomas Road—Phoenix, AZ, Office		19,238		—		25,789		—			1,433			—		—		27,222		27,222
500 Old River Road—Bakersfield, CA, Office		3,066		—		4,396		—			426			—		—		4,822		4,822
1500 S. Central Ave—Glendale, CA, Office		4,433		—		5,253		—			317			—		—		5,570		5,570
14600 Sherman Way—Van Nuys, CA, Office		5,532		—		6,348		—			788			—		—		7,136		7,136
14624 Sherman Way—Van Nuys, CA, Office		4,787		—		7,685		—			656			—		—		8,341		8,341
18350 Roscoe Blvd—Northridge, CA, Office		8,424		—		10,584		—			797			—		—		11,381		11,381
18460 Roscoe Blvd—Northridge, CA, Office		1,426		—		2,940		—			3			—		—		2,943		2,943
18546 Roscoe Blvd—Northridge, CA, Office		3,395		—		5,580		—			740			—		—		6,320		6,320
4545 East Chandler—Chandler, AZ, Office		5,314		—		5,345		—			251			—		—		5,596		5,596
485 South Dobson—Chandler, AZ, Office		5,141		—		6,785		—			157			—		—		6,942		6,942
1501 North Gilbert—Gilbert, AZ, Office		4,638		—		4,750		—			351			—		—		5,101		5,101
116 South Palisade—Santa Maria, CA, Office		2,447		—		3,190		—			119			—		—		3,309		3,309
525 East Plaza—Santa Maria, CA, Office		4,746		—		7,511		—			1,030			—		—		8,541		8,541
10440 East Riggs—Chandler, AZ, Office		3,887		—		3,017		—			218			—		—		3,235		3,235
Metropolitan Park North—Seattle, WA, Office		61,000		10,900		64,006		—			7			—		10,900		64,013		74,913
Stirling Slidell Shopping Centre—Slidell, LA, Retail		13,326		5,442		16,843		—			3			—		5,442		16,846		22,288
9800 South Meridian—Englewood, CO, Office		13,611		4,517		9,640		(1,506	)		(567	)		—		3,011		9,073		12,084
18922 Forge Drive—Cupertino, CA, Office		19,050		7,975		12,758		—			278			—		7,975		13,036		21,011
Station Nine Apartments—Durham, NC, Apartment		36,885		9,690		43,400		—			466			—		9,690		43,866		53,556
4 Research Park Drive—St. Charles, MO, Office		6,966		1,830		6,743		—			(2	)		—		1,830		6,741		8,571
36 Research Park Drive—St. Charles, MO, Office		11,050		2,655		11,089		—			(2	)		—		2,655		11,087		13,742
The District at Howell Mill—Atlanta, GA, Retail		45,000		10,000		56,040		—			697			—		10,000		56,737		66,737
Canyon Plaza—San Diego, CA, Office		30,289		14,959		32,909		—			1,120			—		14,959		34,029		48,988
Railway Street Corporate Centre—Calgary, Canada, Office		28,270		6,022		35,441		(336	)		(1,457	)		—		5,686		33,984		39,670
Cabana Beach San Marcos—San Marcos, TX, Apartment		19,650		2,530		24,421		—			186			—		2,530		24,607		27,137
Cabana Beach Gainesville—Gainesville, FL, Apartment		49,108		7,244		60,548		—			280			—		7,244		60,828		68,072
Campus Lodge Columbia—Columbia, MO, Apartment		16,341		2,079		20,838		—			321			—		2,079		21,159		23,238
Campus Lodge Athens—Athens, GA, Apartment		13,723		1,754		17,311					(632	)		—		1,754		16,679		18,433
The Edge at Lafayette—Lafayette, LA, Apartment		17,466		1,782		23,266		—			147			—		1,782		23,413		25,195
Campus Lodge Tampa—Tampa, FL, Apartment		33,500		7,205		33,310					2,093			—		7,205		35,403		42,608
Sherman Way Land—Van Nuys, CA, Land		—		4,010										—		4,010				4,010
Total Consolidated Properties	$	594,747	$	121,438	$	696,909	$	(1,895	)	$	9,215		$	—	$	119,541	$	706,126	$	825,667
Properties held for sale:
Havertys Furniture—Braselton, GA, Industrial		26,683		—		17,474		2,951			9,328			—		2,951		26,802		29,753
25850 S Ridgeland—Monee, IL, Industrial		15,749		4,300		14,003		(839	)		(1,969	)		—		3,461		12,034		15,495
Georgia Door Sales Distribution Center—Austell, GA, Industrial		4,947		1,651		5,570		(112	)		(299	)		—		1,539		5,271		6,810
105 Kendall Park Lane—Atlanta, GA, Industrial		12,933		2,656		12,836		(565	)		(2,467	)		—		2,091		10,369		12,460
4001 North Norfleet Road—Kansas City, MO, Industrial		24,230		2,134		31,397		(197	)		(2,742	)		—		1,937		28,655		30,592
Total properties held for sale	$	84,542	$	10,741	$	81,280	$	1,238		$	1,851		$	—	$	11,979	$	83,131	$	95,110

F-33

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2009—(Continued)

Col. A	Col. F		Col. G	Col. H	Col. I
Description	Accumulated Depreciation		Date of Construction	Date of Acquisition	Life on which depreciation in latest income statement is computed
Consolidated Properties:
Monument IV at Worldgate—Herndon, VA, Office	$	5,771	2001	8/27/2004	50 years
Marketplace at Northglenn—Northglenn, CO, Shopping Center		5,408	1999-2001	12/21/2005	50 years
CHW Medical Office Portfolio:
300 Old River Road—Bakersfield, CA, Office		619	1992	12/21/2005	40 years
500 West Thomas Road—Phoenix, AZ, Office		3,197	1994	12/21/2005	40 years
500 Old River Road—Bakersfield, CA, Office		531	1992	12/21/2005	40 years
1500 S. Central Ave—Glendale, CA, Office		611	1980	12/21/2005	40 years
14600 Sherman Way—Van Nuys, CA, Office		827	1991	12/21/2005	40 years
14624 Sherman Way—Van Nuys, CA, Office		858	1981	12/21/2005	40 years
18350 Roscoe Blvd—Northridge, CA, Office		1,244	1979	12/21/2005	40 years
18460 Roscoe Blvd—Northridge, CA, Office		293	1991	12/21/2005	40 years
18546 Roscoe Blvd—Northridge, CA, Office		615	1991	12/21/2005	40 years
4545 East Chandler—Chandler, AZ, Office		612	1994	12/21/2005	40 years
485 South Dobson—Chandler, AZ, Office		712	1984	12/21/2005	40 years
1501 North Gilbert—Gilbert, AZ, Office		513	1997	12/21/2005	40 years
116 South Palisade—Santa Maria, CA, Office		352	1995	12/21/2005	40 years
525 East Plaza—Santa Maria, CA, Office		1,092	1995	12/21/2005	40 years
10440 East Riggs—Chandler, AZ, Office		328	1996	12/21/2005	40 years
Metropolitan Park North—Seattle, WA, Office		4,801	2001	3/28/2006	50 years
Stirling Slidell Shopping Centre—Slidell, LA, Shopping Center		1,039	2003	12/14/2006	50 years
9800 South Meridian—Englewood, CO, Office		1,282	1994	12/26/2006	40 years
18922 Forge Drive—Cupertino, CA, Office		923	1972/1999	2/15/2007	40 years
Station Nine Apartments—Durham, NC, Apartment		2,414	2005	4/16/2007	50 years
4 Research Park Drive—St. Charles, MO, Office		348	2000/2004	6/13/2007	50 years
36 Research Park Drive—St. Charles, MO, Office		573	2007	6/13/2007	50 years
The District at Howell Mill—Atlanta, GA, Retail		2,930	2006	6/15/2007	50 years
Canyon Plaza—San Diego, CA, Office		2,189	1986/1993	6/26/2007	40 years
Railway Street Corporate Centre—Calgary, Canada, Office		1,588	2007	8/30/2007	50 years
Cabana Beach San Marcos—San Marcos, TX, Apartment		2,467	2006	11/21/2007	50 years
Cabana Beach Gainesville—Gainesville, FL, Apartment		5,289	2005/2007	11/21/2007	50 years
Campus Lodge Athens—Athens, GA, Apartment		725	2003	11/21/2007	50 years
Campus Lodge Columbia—Columbia, MO, Apartment		2,096	2005	11/21/2007	50 years
The Edge at Lafayette—Lafayette, LA, Apartment		1,673	2007	1/15/2008	50 years
Campus Lodge Tampa—Tampa, FL, Apartment		2,936	2001	2/29/2008	40 years
Sherman Way Land—Van Nuys, CA, Land		—	—	8/28/2009	—
Total Consolidated Properties	$	56,856
Consolidated Properties:
Havertys Furniture—Braselton, GA, Industrial		2,631	2002/2005	12/3/2004	50 years
25850 S Ridgeland—Monee, IL, Industrial		1,439	2004	12/31/2004	50 years
Georgia Door Sales Distribution Center—Austell, GA, Industrial		548	1994/1996	2/10/2005	50 years
105 Kendall Park Lane—Atlanta, GA, Industrial		1,148	2002	6/30/2005	50 years
4001 North Norfleet Road—Kansas City, MO, Industrial		1,755	2007	2/27/2007	50 years
Total Consolidated Properties	$	7,521

F-34

Reconciliation of Real Estate

Consolidated Properties	2009			2008
Balance at beginning of year	$	961,915		$	897,502
Additions		6,136			72,744
Deductions		(1,182	)		(252	)
Write-downs for impairment charges		(17,308	)		—
Changes related to foreign currency		5,766			(8,079	)
Dispositions		(34,550	)		—
Reclassed as held for sale		(95,110	)		—
Balance at close of year	$	825,667		$	961,915

Reconciliation of Accumulated Depreciation

Consolidated Properties	2009			2008
Balance at beginning of year	$	44,888		$	22,652
Additions		22,575			22,620
Deductions		(1,182	)		(252	)
Changes related to foreign currency		189			(132	)
Dispositions		(2,093	)		—
Reclassed as held for sale		(7,521	)		—
Balance at close of year	$	56,856		$	44,888

F-35

Report of Independent Registered Public Accounting Firm

To the Members of Legacy Village Investors, LLC

In our opinion, the accompanying balance sheet and the related statement of operations, members’ equity and cash flows present fairly, in all material respects, the financial position of Legacy Village Investors, LLC (the “Company”) at December 31, 2009, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/    PricewaterhouseCoopers LLP

Birmingham, Alabama

March 12, 2010

F-36

LEGACY VILLAGE INVESTORS, LLC

BALANCE SHEET

AS OF DECEMBER 31, 2009

	2009
Assets
Real Estate Assets—net	$	101,010,180
Cash and cash equivalents		1,955,471
Restricted cash		335,588
Escrow deposits		3,208,176
Accounts receivable, net of allowance of $219,581		2,538,728
Deferred rental income receivable		3,969,238
Deferred loan and leasing costs, net of accumulated amortization of $2,226,518		1,931,946
Prepaid expenses		4,582
Total assets	$	114,953,909
Liabilities and members’ equity
Mortgage notes payable	$	94,381,893
Accrued interest payable		442,415
Real estate taxes payable		6,060,517
Accounts payable and accrued expenses		580,449
Security deposits and prepaid rent		423,646
Distributions payable to members		83,671
Capital lease obligation		2,776
Total liabilities		101,975,367
Commitments and contingencies (Note 12)
Members’ equity		12,978,542
Total liabilities and members’ equity	$	114,953,909

The accompanying notes are an integral part of these financial statements.

F-37

LEGACY VILLAGE INVESTORS, LLC

STATEMENT OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2009

	2009
Revenue
Rental income	$	11,955,529
Lease termination fees		49,198
Recoverable tenant income		6,262,284
Other property related income		32,890
Total revenue		18,299,901
Operating expenses
Property operating expenses		3,476,124
Management fees		522,692
Real estate taxes		4,437,928
General and administrative expenses		391,171
Depreciation and amortization		4,415,237
Total operating expenses		13,243,152
Operating income		5,056,749
Other income (expense)
Interest income		12,946
Interest expense		(5,478,413	)
Total other income (expense)		(5,465,467	)
Net loss	$	(408,718	)

The accompanying notes are an integral part of these financial statements.

F-38

LEGACY VILLAGE INVESTORS, LLC

STATEMENT OF MEMBERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2009

	Legacy Village Partners LLC (Managing Member/ Class A Member)			Legacy Village Holdings LLC (Class B Member)			National Electrical Benefit Fund (Class A Member)			The Northern Ohio Building and Construction Trades Real Estate Investment Group Trust (Class A Member)			Total
Balance at December 31, 2008	$	3,481,334		$	6,150,658		$	3,445,461		$	149,767		$	13,227,220
Capital contributions		42,811			74,419			41,018			1,792			160,040
Distributions		—			—			—			—			—
Net loss		(109,332	)		(190,054	)		(104,754	)		(4,578	)		(408,718	)
December 31, 2009	$	3,414,813		$	6,035,023		$	3,381,725		$	146,981		$	12,978,542

The accompanying notes are an integral part of these financial statements.

F-39

LEGACY VILLAGE INVESTORS, LLC

STATEMENT OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2009

	2009
Cash flows from operating activities
Net loss	$	(408,718	)
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		4,041,450
Amortization		470,953
Provision for bad debt		136,514
Deferred rent		(313,575	)
Changes in other operating accounts
Accounts receivable		(419,628	)
Accounts payable and accrued expenses		710,401
Other assets and liabilities—net		82,914
Net cash provided by operating activities		4,300,311
Cash flows from investing activities
Additions to real estate assets		(363,605	)
Deferred leasing costs		(32,964	)
Change in restricted cash		914,594
Change in escrow account		(715,028	)
Net cash used in investing activities		(197,003	)
Cash flows from financing activities
Principal payments on mortgage notes payable		(2,664,742	)
Principal payments on capital lease obligation		(73,592	)
Contributions from members		160,040
Distributions to members		(518,050	)
Net cash used in financing activities		(3,096,344	)
Increase in cash and equivalents		1,006,964
Cash and equivalents
Beginning of year		948,507
End of year	$	1,955,471
Supplemental disclosure of noncash information
Interest paid	$	5,390,869

The accompanying notes are an integral part of these financial statements.

F-40

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2009

1. ORGANIZATION AND BASIS OF PRESENTATION

Legacy Village Investors, LLC (the “Company”) was formed as a limited liability company under the laws of the State of Delaware on May 24, 2004, and amended on August 25, 2004, to own and operate a shopping center known as Legacy Village (the “Project”). On August 25, 2004, Legacy Village Holdings LLC, which is owned by Excelsior LaSalle Property Fund, Inc. (“LaSalle”), was admitted to the Company. The Project, which opened on October 25, 2003, contains approximately 595,000 (unaudited) square feet and is located in Lyndhurst, Ohio.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements are prepared using the accrual basis of accounting under accounting principles generally accepted in the United States of America.

Depreciation and Amortization

Land and building is recorded at its net book value. Additions to the building are carried at cost. Depreciation is provided for using the straight-line method for financial reporting purposes. Tenant improvements are amortized by the straight-line method over the terms of the related lease, which approximate the useful lives of the improvements. Useful lives are as follows:

Building and building and land improvements	16-40 years
Tenant improvements	Life of lease
Equipment and capitalized leases	6-10 years

Impairment of Real Estate Assets

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. A real estate asset to be held and used is considered to be impaired when the estimated future undiscounted operating cash flow is less than its carrying value as prescribed by ASC 360. To the extent an impairment has occurred, the excess of carrying value of the assets over its estimated fair value is charged to operations. No such impairment was recognized during 2009.

Revenue Recognition

Fixed minimum base rents are recorded on a straight-line basis over the life of the lease and recoverable tenant income is recorded on an accrual basis. Lease termination income is recognized when the tenant vacates its leased space. Accounts receivable include billed and unbilled receivables. Unbilled receivables consist of tenant charges of $1,670,447 at December 31, 2009. The excess of cumulative minimum base rents recognized on a straight-line basis over the amounts currently billable are $3,969,238 as of December 31, 2009, and are recorded as deferred rental income receivable. Reimbursements and recoveries from tenants for certain operating expenses and real estate taxes are recognized in the period the applicable costs are incurred.

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments purchased with an original maturity of three months or less.

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LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2009

Restricted Cash

A replacement reserve for capital expenditures as required by the debt instruments has been established and provides for an amount of cash based on $.10 per square foot of gross leasable area, to be deposited each year to fund future expenditures. During 2008, the Company received $1,351,580 of lease termination fees which were to be deposited into the restricted cash account to cover future costs to be incurred to re-lease the space. Of this amount, $351,580 was transferred to the lender escrow account in 2008. $25,000 was reimbursed to the Company for cost related to separation work for destruction of a tenant’s space. The remaining $975,000 was transferred to the lender escrow account in 2009.

Escrow Deposits

The Company maintains deposits in an escrow account as required by its lender. Pursuant to the provisions of the Company’s mortgage note payable, amounts required to fund real estate taxes and reserves for leasing related expenses are deposited into an interest bearing account on a periodic basis.

Deferred Loan Costs

These costs represent the costs of obtaining financing and are amortized by the straight-line method, which approximates the effective interest method, over the term of the loan.

Deferred Leasing Costs

These costs represent the costs of leasing the shopping center and are amortized by the straight-line method over the terms of the related leases.

Income Taxes

No provision has been made for federal and state income taxes since these taxes are the responsibility of the members.

Management Fees

Management fees include amounts incurred pursuant to the Company’s management agreement with a third-party. Under the terms of the management agreement, this third-party performs various leasing, accounting, property management, administrative and other functions on behalf of the Company.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) established the FASB Accounting Standards Codification to become the source of authoritative U.S. GAAP recognized by the FASB. This source of authoritative guidance is effective for financial statements issued for periods ending after September 15, 2009.

In June 2009, the FASB amended the consolidation guidance for variable interest entities. This amendment includes: (1) the elimination of the exemption from the consolidation for qualifying special purpose entities; (2) a new approach for determining the primary beneficiary of a variable interest entity, which requires that the

F-42

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2009

primary beneficiary have both (i) the power to direct the activities of a variable interest entity that most significantly impacts the entity’s economic performance and (ii) either the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the variable interest entity; and (3) the requirement to continually reassess who should consolidate a variable interest entity. This amendment is effective for all variable interest entities and relationships with variable interest entities existing as of January 1, 2010. The Company does not believe this amendment will have a significant impact on its financial position or results of operations.

3. RELATED-PARTY TRANSACTIONS

The Company leases office space to an affiliate under an operating lease that expires in March 2019. Rental income totaled $388,747 in 2009. Total annual minimum rental payments range from $304,000 to $446,500 through 2019.

The Company is provided a variety of other services by affiliated entities including marketing, administrative, office, legal, and construction management. Fees for these services are based on hourly rates for actual hours worked by employees of the affiliates and costs incurred. Total amounts paid for these services are $112,455 in 2009.

4. REAL ESTATE ASSETS

Real estate assets at cost at December 31, 2009, consist of the following:

	2009
Land	$	23,371,768
Building and building and land improvements		96,394,615
Tenant improvements		819,914
Equipment		627,844
Personal property		887,320
		122,101,461
Less: Accumulated depreciation		(21,091,281	)
Total real estate assets—net	$	101,010,180

Depreciation expense totaled $4,041,450 in 2009.

5. MORTGAGE NOTES PAYABLE

The nonrecourse mortgage notes are collateralized by the mall facilities and assignment of all leases. The terms of the mortgage notes are summarized as follows:

Mortgagee	Midland Loan Services			Midland Loan Services			Total
Original date		December 4, 2003			December 23, 2003
Maturity		January 1, 2014			January 1, 2014
Original amount (a)(b)	$	98,000,000		$	10,000,000		$	108,000,000
Balance at December 31, 2009		85,417,802			8,964,091			94,381,893
Monthly payment		609,143			62,157
Interest rate		5.625	%		5.625	%

a. On August 25, 2004, an Assignment and Assumption Agreement was executed whereby the Company assumed the obligations as the new borrower and the Managing Member assigned its rights as the old

F-43

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2009

borrower for the $98 million mortgage note payable to Teachers Insurance and Annuity Association (“TIAA”). The mortgage note payable matures on January 1, 2014, at which time a final payment of $74,210,487 is due. The note was sold by TIAA to Morgan Stanley Mortgage Capital, Inc. on December 22, 2006. Morgan Stanley securitized the loan into Morgan Stanley Capital I Trust in 2007. The note was sold by Morgan Stanley Mortgage Capital, Inc. to Midland Loan Services on May 15, 2009.

b. On December 23, 2004, the Company executed a mortgage note payable to TIAA for $10 million. The mortgage note payable matures on January 1, 2014, at which time a final payment of $7,882,896 is due. The note was sold by TIAA to Morgan Stanley Mortgage Capital, Inc. on December 22, 2006. Morgan Stanley securitized the loan into Morgan Stanley Capital I Trust in 2007. The note was sold by Morgan Stanley Mortgage Capital, Inc. to Midland Loan Services on May 15, 2009.

The mortgages are collateralized by real property and an assignment of rents and leases. The mortgage notes have prepayment penalties as defined in the promissory notes. Additionally, affiliates of the Managing Member have a guarantee to reimburse the mortgagee for certain liabilities (as defined) that may occur in the event of foreclosure. Pursuant to the provisions of the $98,000,000 note, amounts required to fund real estate taxes are being deposited into an interest-bearing escrow account. Interest expense includes deferred loan fee amortization of $97,166 for the year ended December 31, 2009. Interest on capital lease obligations was $2,867 in 2009.

Aggregate annual maturities of the mortgage notes payable over each of the next five years and thereafter as of December 31, 2009, will be as follows:

2010	$	2,818,557
2011		2,981,253
2012		3,153,340
2013		3,335,361
2014		82,093,382
	$	94,381,893

6. MEMBERS’ EQUITY

Distributions are based on each member’s respective ownership percentages, subject to certain adjustments as defined in the Operating Agreement.

Capital contributions of $160,040 made during 2009, represent an additional funding requirement (not to exceed $500,000) of the Company’s members for construction costs committed under leases subsequent to the date the Project was contributed, in excess of the contributed construction escrow account. Contributions have been allocated in accordance with the ownership percentages as defined in the Operating Agreement.

Pursuant to the Operating Agreement, cash distributions shall be determined at the end of each calendar quarter. Distributable cash shall be paid to the members within twenty days, after each calendar quarter in accordance with the allocation provisions as set forth in the Operating Agreement. Distributions payable at December 31, 2009 were $83,671. In January 2009, distributions payable at December 31, 2008, of $518,050 were paid. The remaining $83,671 represents distributions payable related to excess refinancing proceeds in a prior year.

7. CONCENTRATION OF CREDIT RISK

The Company maintains its cash, restricted cash, and security deposit balances in one bank. The balances are insured by the Federal Deposit Insurance Corporation up to $250,000 by the bank per user account. The uninsured portion of these cash balances held by the bank was $2,040,013 at December 31, 2009.

F-44

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2009

8. LEASING ARRANGEMENT

Capital Leases

The Company leases various vehicles and equipment used in the repair, maintenance, and retail leasing of the shopping center under capital leases. The economic substance of the leases is that the Company is financing the acquisition of the assets through the lease, and accordingly, these leases are recorded in the Company’s assets and liabilities. The lease agreements each contain a bargain purchase option at their expiration.

Minimum future payments required under the leases together with their present value as of December 31, 2009, are as follows:

2010	$	2,794
Total minimum lease payments		2,794
Less: Amount representing interest		(18	)
Present value of minimum lease payments	$	2,776

Operating Leases

The Company’s operations consist of leasing retail and office space in a lifestyle center. The leases are operating leases expiring in various years through 2044.

Minimum future rental income receivable pursuant to the noncancelable leases as of December 31, 2009 is as follows:

2010	$	10,957,872
2011		10,618,117
2012		10,595,651
2013		9,966,035
2014		7,797,646
Thereafter		68,042,738
	$	117,978,059

9. MAJOR TENANTS

As of December 31, 2009 three tenants, Expo Design Center, Dick’s Sporting Goods, and Giant Eagle, accounted for approximately 42.7% (unaudited) of leasable space and 30.9% of rental income of the Company as follows:

	Space (Unaudited)		Rental Income
Expo Design Center	15.5	%	9.5	%
Dick’s Sporting Goods	13.7	%	8.8	%
Giant Eagle	13.5	%	12.6	%

F-45

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2009

Minimum future rental income receivable (included in the amounts in Note 8) pursuant to the leases for noncancelable leases as of December 31, 2009, from major tenants, is as follows:

2010	$	3,264,513
2011		3,329,497
2012		3,445,893
2013		3,533,037
2014		3,851,403
Thereafter		51,847,338
	$	69,271,681

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of ASC 825. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

The Company has various assets and liabilities that are considered financial instruments. The Company estimates that the carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates their fair values due to their short-term nature. The Company estimates the fair value of its mortgage notes payable by discounting future cash flows at estimated market interest rates for loans with similar characteristics. As of December 31, 2009, the carrying value of the Company’s mortgage notes payable is $94,381,893 and the fair value of the Company’s mortgage notes payable discounted at a market rate of 8.0% is $87,055,826.

11. REAL ESTATE TAX APPEAL

In April 2007, a sub-agency of the real estate taxing authority filed an appeal of the Company’s 2006 real estate tax assessment contesting the valuation of the property. The suggested valuation provided by the sub-agency of the real estate taxing authority would result in an increase in the Company’s cumulative, historical real estate taxes that are the subject of this contested valuation of approximately $1.7 million. Pursuant to the terms of the Company’s leases with its tenants, the Company believes it will recover approximately 69% of any increase in its cumulative, historical real estate taxes that would be due to the sub-agency in the event the sub-agency is successful in its appeal. The 2006 real estate tax assessment is in effect for tax years 2006 to 2008. However, any changes to the tax assessed value of the Company’s real estate would also likely impact periods subsequent to 2008. The Company has recorded additional real estate taxes payable to reflect this potential expense should the Company lose the appeal, as well as additional tenant receivables to reflect the estimated portion that may be collectible from tenants. Actual amounts paid to the taxing authority and/or received from tenants associated with an increase real estate taxes paid could materially differ from amounts recorded by the Company.

F-46

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2009

12. COMMITMENTS AND CONTINGENCIES

The Company is involved in various other claims and legal actions arising out of the normal course of its business. In the opinion of management, the ultimate disposition of these matters is not expected to have a material effect on the Company’s financial statements.

13. SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events through March 12, 2010, the date the financial statements were available to be issued, and concluded that there were no material subsequent events.

* * * * *

F-47

LEGACY VILLAGE INVESTORS, LLC

BALANCE SHEETS (NOT COVERED BY THE REPORT INCLUDED HEREIN)

AS OF DECEMBER 31, 2008 AND 2007

	2008		2007
Assets
Real Estate Assets—net	$	104,688,025	$	107,850,039
Cash and cash equivalents		948,507		1,083,390
Restricted cash		1,250,182		214,388
Escrow deposits		2,493,148		2,525,947
Accounts receivable, net of allowance of $179,825 and $49,027 at December 31, 2008 and 2007, respectively		2,255,614		704,713
Deferred rental income receivable		3,655,663		2,896,742
Deferred loan and leasing costs, net of accumulated amortization of $1,775,486 and $1,352,282 at December 31, 2008 and 2007, respectively		2,369,935		2,670,782
Prepaid expenses		10,993		15,749
Total assets	$	117,672,067	$	117,961,750
Liabilities and members’ equity
Mortgage notes payable	$	97,046,635	$	99,565,955
Accrued interest payable		454,906		466,715
Real estate taxes payable		5,456,920		3,432,149
Accounts payable and accrued expenses		461,154		447,148
Security deposits and prepaid rent		347,143		308,793
Distributions payable to members		601,721		686,945
Capital lease obligation		76,368		199,172
Total liabilities		104,444,847		105,106,877
Commitments and contingencies (Note 12)
Members’ equity		13,227,220		12,854,873
Total liabilities and members’ equity	$	117,672,067	$	117,961,750

The accompanying notes are an integral part of these financial statements.

F-48

LEGACY VILLAGE INVESTORS, LLC

STATEMENTS OF OPERATIONS (NOT COVERED BY THE REPORT INCLUDED HEREIN)

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

	2008			2007
Revenue
Rental income	$	12,934,211		$	12,596,889
Lease termination fees		1,258,286			—
Recoverable tenant income		8,133,194			6,024,052
Other property related income		35,374			19,889
Total revenue		22,361,065			18,640,830
Operating expenses
Property operating expenses		3,766,334			3,230,372
Management fees		783,048			726,478
Real estate taxes		5,462,045			3,438,084
General and administrative expenses		385,281			359,419
Depreciation and amortization		4,411,286			4,493,771
Total operating expenses		14,807,994			12,248,124
Operating income		7,553,071			6,392,706
Other income (expense)
Interest income		30,350			80,409
Other income		6,000			2,542
Interest expense		(5,632,907	)		(5,776,897	)
Total other income (expense)		(5,596,557	)		(5,693,946	)
Net income	$	1,956,514		$	698,760

The accompanying notes are an integral part of these financial statements.

F-49

LEGACY VILLAGE INVESTORS, LLC

STATEMENTS OF MEMBERS’ EQUITY (NOT COVERED BY THE REPORT INCLUDED HEREIN)

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

	Legacy Village Partners LLC (Managing Member/ Class A Member)			Legacy Village Holdings LLC (Class B Member)			National Electrical Benefit Fund (Class A Member)			The Northern Ohio Building and Construction Trades Real Estate Investment Group Trust (Class A Member)			Total
Balance at December 31, 2006	$	3,487,222		$	5,355,034		$	3,831,038		$	164,962		$	12,838,256
Capital contributions		7,055			12,264			6,760			295			26,374
Receivables from members		554,435			—			531,259			23,175			1,108,869
Distributions		(388,921	)		(845,084	)		(559,755	)		(23,626	)		(1,817,386	)
Net income		—			698,760			—			—			698,760
December 31, 2007	$	3,659,791		$	5,220,974		$	3,809,302		$	164,806		$	12,854,873
Capital contributions		77,290			134,355			74,054			3,237			288,936
Distributions		(400,843	)		(870,993	)		(576,916	)		(24,351	)		(1,873,103	)
Net income		145,096			1,666,322			139,021			6,075			1,956,514
December 31, 2008	$	3,481,334		$	6,150,658		$	3,445,461		$	149,767		$	13,227,220
Ownership percentage		26.75	%		46.50	%		25.63	%		1.12	%		100.00	%

The accompanying notes are an integral part of these financial statements.

F-50

LEGACY VILLAGE INVESTORS, LLC

STATEMENTS OF CASH FLOWS (NOT COVERED BY THE REPORT INCLUDED HEREIN)

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

	2008			2007
Cash flows from operating activities
Net income	$	1,956,514		$	698,760
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		3,995,508			3,923,976
Amortization		512,945			666,962
Deferred rent		(758,921	)		(914,174	)
Changes in other operating accounts
Accounts receivable		(1,550,901	)		472,931
Accounts payable and accrued expenses		2,026,968			(624,857	)
Other assets and liabilities—net		43,106			8,458
Net cash provided by operating activities		6,225,219			4,232,056
Cash flows from investing activities
Additions to real estate assets		(544,559	)		(152,868	)
Deferred leasing costs		(212,097	)		(135,972	)
Change in restricted cash		(1,035,794	)		455,959
Change in escrow account		32,799			(620,675	)
Net cash used in investing activities		(1,759,651	)		(453,556	)
Cash flows from financing activities
Principal payments on mortgage notes payable		(2,519,320	)		(2,381,833	)
Principal payments on capital lease obligation		(122,804	)		(131,975	)
Distributions to members		(1,958,327	)		(1,591,113	)
Net cash used in financing activities		(4,600,451	)		(4,104,921	)
Decrease in cash and equivalents		(134,883	)		(326,421	)
Cash and equivalents
Beginning of year		1,083,390			1,409,811
End of year	$	948,507		$	1,083,390
Supplemental disclosure of noncash information
Interest paid	$	5,536,292		$	5,690,896
Supplemental disclosure of noncash investing and financing activities
Additions to real estate assets	$	—		$	(26,374	)
Contributions receivable		—			1,108,869
Capital contributions of real estate assets		288,936			26,374
Distributions to members		—			(1,108,869	)

The accompanying notes are an integral part of these financial statements.

F-51

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS

(NOT COVERED BY THE REPORT INCLUDED HEREIN)

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

1. ORGANIZATION AND BASIS OF PRESENTATION

Legacy Village Investors, LLC (the “Company”) was formed as a limited liability company under the laws of the State of Delaware on May 24, 2004, and amended on August 25, 2004, to own and operate a shopping center known as Legacy Village (the “Project”). On August 25, 2004, Legacy Village Holdings LLC, which is owned by Excelsior LaSalle Property Fund, Inc. (“LaSalle”), was admitted to the Company. The Project, which opened on October 25, 2003, contains approximately 595,000 (unaudited) square feet and is located in Lyndhurst, Ohio.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements are prepared using the accrual basis of accounting under accounting principles generally accepted in the United States of America.

Depreciation and Amortization

Land and building is recorded at its net book value. Additions to the building are carried at cost. Depreciation is provided for in amounts sufficient to relate the value of depreciable assets to operations over their estimated service lives by use of the straight-line method for financial reporting purposes. Tenant improvements are amortized by the straight-line method over the terms of the related lease, which approximate the useful lives of the improvements. Useful lives are as follows:

Building and building and land improvements	16-40 years
Tenant improvements	Life of lease
Equipment and capitalized leases	6-10 years

Impairment of Real Estate Assets

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. A real estate asset to be held and used is considered to be impaired when the estimated future undiscounted operating cash flow is less than its carrying value as prescribed by FASB statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, (“SFAS 144”). To the extent an impairment has occurred, the excess of carrying value of the assets over its estimated fair value will be charged to operations. No such impairment was recognized during 2008 or 2007.

Revenue Recognition

Fixed minimum base rents are recorded on a straight-line basis over the life of the lease and reimbursements are recorded on an accrual basis. Lease termination income is recognized when earned and collected. Accounts receivable include billed and unbilled receivables. Unbilled receivables consist of tenant charges of $1,557,003 and $4,500 at December 31, 2008 and 2007, respectively. The excess of cumulative minimum base rents recognized on a straight-line basis over the amounts currently billable are $3,655,663 and $2,896,742, as of December 31, 2008 and 2007, respectively, and are recorded as deferred rental income receivable. Reimbursements and recoveries from tenants for certain operating expenses and real estate taxes are recognized in the period the applicable costs are incurred.

F-52

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

(NOT COVERED BY THE REPORT INCLUDED HEREIN)

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

During 2008, the Company recorded additional rental income to reflect the cumulative straight-line effect of adjusting the deferred rental income receivable relating to certain leases. The Company also recorded recoverable tenant income during 2008 to adjust the tenant reimbursement receivable relating to one tenant that was under accrued in the prior year. The amount of these cumulative out-of-period adjustments recorded in 2008 in the amount of approximately $178,000, includes 2007 and prior years rental income of $64,000 and 2007 recoverable tenant income of $114,000. Additionally, the Company recorded additional general and administrative expenses of approximately $38,000 in 2008 for various invoices that should have been accrued as of December 31, 2007.

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments purchased with an original maturity of three months or less.

Restricted Cash

A replacement reserve for capital expenditures as required by the debt instruments has been established and provides for an amount of cash based on $.10 per square foot of gross leasable area, to be deposited each year to fund future expenditures. During 2008, $1,351,580 of lease termination fees were received and deposited into the restricted cash account to cover future costs to be incurred to re-lease the space. Of this amount, $351,580 was transferred to the lender escrow account in 2008. The remaining $1,000,000 was transferred to the lender escrow account in 2009.

Deferred Loan Costs

These costs represent the costs of obtaining financing and are amortized by the straight-line method, which approximates the effective interest method, over the term of the loan.

Deferred Leasing Costs

These costs represent the costs of leasing the shopping center and are amortized by the straight-line method over the terms of the related leases.

Income Taxes

No provision has been made for federal and state income taxes since these taxes are the responsibility of the members.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-53

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

(NOT COVERED BY THE REPORT INCLUDED HEREIN)

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

Recently Issued Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for the Company’s financial assets and liabilities on January 1, 2008. In February 2008, the FASB reached a conclusion to defer the implementation of the SFAS No. 157 provisions relating to non-financial assets and liabilities until January 1, 2009. The FASB also reached a conclusion to amend SFAS No. 157 to exclude SFAS No. 13, Accounting for Leases and its related interpretive accounting pronouncements. SFAS No. 157 is not expected to materially affect how the Company determines fair value, but may result in certain additional disclosures.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. The provisions of SFAS No. 159 are effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 did not have a material impact on the Company’s financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which changes how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS No. 141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard will, among other things, impact the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration); exclude transaction costs from acquisition accounting; and change accounting practices for acquired contingencies, acquisition-related restructuring costs, and tax benefits. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating the impact of SFAS No. 141(R) on its financial statements.

3. RELATED-PARTY TRANSACTIONS

The Company entered into a management agreement with First Interstate Properties, Ltd. (“FIP”), an affiliate of the Managing Member, on August 25, 2004, to provide property management services for the Project. The agreement was terminated on March 31, 2007. FIP received 4% of gross monthly collections. Management fees earned by FIP are $0 and $183,325 in 2008 and 2007, respectively. Accrued management fees owed to FIP are $0 and $327 as of December 31, 2008 and 2007, respectively.

The Company leases office space to an affiliate under an operating lease that expires in March 2019. Rental income totaled $344,606 and $354,464 in 2008 and 2007, respectively. Total annual minimum rental payments range from $304,000 to $446,500 through 2019.

The Company is provided a variety of other services by affiliated entities including marketing, administrative, office, legal, and construction management. Fees for these services are based on hourly rates for actual hours worked by employees of the affiliates and costs incurred. Total amounts paid for these services are $122,221 and $301,156 in 2008 and 2007, respectively.

F-54

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

(NOT COVERED BY THE REPORT INCLUDED HEREIN)

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

4. REAL ESTATE ASSETS

Real estate assets at cost at December 31, 2008 and 2007, consist of the following:

	2008			2007
Land	$	23,371,768		$	23,371,768
Building and building and land improvements		96,031,010			95,780,010
Tenant improvements		819,914			263,020
Equipment		627,844			602,244
Personal property		887,320			887,320
		121,737,856			120,904,362
Less: Accumulated depreciation		(17,049,831	)		(13,054,323	)
Total real estate assets—net	$	104,688,025		$	107,850,039

Depreciation expense totaled $3,995,508 and $3,923,976 in 2008 and 2007, respectively.

5. MORTGAGE NOTES PAYABLE

The nonrecourse mortgage notes are collateralized by the mall facilities and assignment of all leases. The terms of the mortgage notes are summarized as follows:

Mortgagee	Morgan Stanley Capital I Trust			Morgan Stanley Capital I Trust			Total
Original date		December 4, 2003			December 23, 2004
Maturity		January 1, 2014			January 1, 2014
Original amount (a)(b)	$	98,000,000		$	10,000,000		$	108,000,000
Present balance		87,848,089			9,198,546			97,046,635
Monthly payment		609,143			62,157
Interest rate		5.625	%		5.625	%

a On August 25, 2004, an Assignment and Assumption Agreement was executed whereby the Company assumed the obligations as the new borrower and the Managing Member assigned its rights as the old borrower for the $98 million mortgage note payable to Teachers Insurance and Guaranty Association (“TIAA”). The mortgage note payable matures on January 1, 2014, at which time a final payment of $74,210,492 is due. The note was sold by TIAA to Morgan Stanley Mortgage Capital, Inc. on December 22, 2006. Morgan Stanley securitized the loan into Morgan Stanley Capital I Trust in 2007.

b On December 23, 2004, the Company executed a mortgage note payable to TIAA for $10 million. The mortgage note payable matures on January 1, 2014, at which time a final payment of $7,882,900 is due. The note was sold by TIAA to Morgan Stanley Mortgage Capital, Inc. on December 22, 2006. Morgan Stanley securitized the loan into Morgan Stanley Capital I Trust in 2007.

The mortgages are collateralized by real property and an assignment of rents and leases. The mortgage notes have prepayment penalties as defined in the promissory notes. Additionally, affiliates of the Managing Member have a guarantee to reimburse mortgagee for certain liabilities (as defined) that may occur in the event of foreclosure. Pursuant to the provisions of the $98,000,000 note, amounts required to fund real estate taxes are being deposited into an interest-bearing escrow account. Interest expense includes deferred loan fee amortization of $97,166 for each of the years ended December 31, 2008 and 2007. Interest on capital lease obligations was $11,258 and $17,117 in 2008 and 2007, respectively.

F-55

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

(NOT COVERED BY THE REPORT INCLUDED HEREIN)

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

Aggregate annual maturities of the mortgage notes payable over each of the next five years and thereafter as of December 31, 2008, will be as follows:

2009	$	2,664,739
2010		2,818,556
2011		2,981,251
2012		3,153,338
2013		3,335,359
Thereafter		82,093,392
	$	97,046,635

6. MEMBERS’ EQUITY

The Class B Member was entitled to receive a 7.5% preferred return on its share of the Project value as defined in the Operating Agreement. The preferred return was for a two year stated period and ended on August 25, 2006. Effective August 26, 2006, distributions are based on each member’s respective ownership percentages, subject to certain adjustments as defined in the Operating Agreement. At December 31, 2007, the preferred return earned by the Class B Member was $4,640,671 all of which was paid in 2007 and prior years.

Capital contributions of $288,936 and $26,374 made during 2008 and 2007, respectively, represent an additional funding requirement (not to exceed $500,000) for construction costs committed under leases subsequent to the date the Project was contributed, in excess of the contributed construction escrow account. The costs and related contributions represent non-cash contributions. Contributions have been allocated in accordance with the ownership percentages as defined in the Operating Agreement.

Pursuant to the Operating Agreement, cash distributions shall be determined at the end of each calendar quarter. Distributable cash shall be paid to the members within twenty days, after each calendar quarter in accordance with the allocation provisions as set forth in the Operating Agreement. Distributions payable at December 31, 2008 and 2007 were $601,721and $686,945, respectively. In January 2009, distributions payable at December 31, 2008, of $518,050 were paid. The difference of $83,671 represents distributions payable related to excess refinancing proceeds in a prior year.

7. CONCENTRATION OF CREDIT RISK

The Company maintains its cash, restricted cash, and security deposit balances in one bank. The balances are insured by the Federal Deposit Insurance Corporation up to $250,000 by the bank per user account. The uninsured portion of these cash balances held by the bank was $1,946,747 and $1,090,748 at December 31, 2008 and 2007, respectively.

8. LEASING ARRANGEMENT

Capital Leases

The Company leases various vehicles and equipment used in the repair, maintenance, and retail leasing of the shopping center under capital leases. The economic substance of the leases is that the Company is financing the acquisition of the assets through the lease, and accordingly, these leases are recorded in the Company’s assets and liabilities. The lease agreements each contain a bargain purchase option at their expiration.

F-56

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

(NOT COVERED BY THE REPORT INCLUDED HEREIN)

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

Minimum future payments required under the leases together with their present value as of December 31, 2008, are as follows:

2009	$	75,979
2010		2,795
Total minimum lease payments		78,774
Less: Amount representing interest		(2,406	)
Present value of minimum lease payments	$	76,368

The Company’s operations consist of leasing retail and office space in a lifestyle center. The leases are operating leases expiring in various years through 2044.

Minimum future rental income receivable pursuant to the noncancelable leases as of December 31, 2008, is as follows:

2009	$	11,663,648
2010		11,500,997
2011		11,419,994
2012		11,473,007
2013		10,777,677
Thereafter		76,259,741
	$	133,095,064

9. MAJOR TENANTS

As of December 31, 2008 three tenants, Expo Design Center, Dick’s Sporting Goods, and Giant Eagle, accounted for approximately 42.7% (unaudited) of space and 26.7% of rental income of the Company as follows:

	Space (Unaudited)		Rental Income
Expo Design Center	15.5	%	8.5	%
Dick’s Sporting Goods	13.7	%	5.9	%
Giant Eagle	13.5	%	12.3	%

Minimum future rental income receivable (included in the amounts in Note 8) pursuant to the leases for noncancelable leases as of December 31, 2008, from major tenants, is as follows:

2009	$	3,203,680
2010		3,264,513
2011		3,329,497
2012		3,445,893
2013		3,533,037
Thereafter		55,698,740
	$	72,475,360

F-57

LEGACY VILLAGE INVESTORS, LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

(NOT COVERED BY THE REPORT INCLUDED HEREIN)

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

Mortgage Notes Payable

The carrying value of the mortgage notes payable are a reasonable estimate of their fair value as the interest rate of 5.625% approximates the rate that is currently available to the Company for debt with similar terms and remaining maturities.

11. REAL ESTATE TAX APPEAL

In April 2007, a sub-agency of the real estate taxing authority filed an appeal of the Company’s 2006 real estate tax assessment contesting the valuation of the property. The suggested valuation provided by the sub-agency of the real estate taxing authority would result in an increase in the Company’s cumulative, historical real estate taxes that are the subject of this contested valuation of approximately $1.7 million. Pursuant to the terms of the Company’s leases with its tenants, the Company believes it will recover approximately 85% of any increase in its cumulative, historical real estate taxes that would be due to the sub-agency in the event the sub-agency is successful in its appeal. The 2006 real estate tax assessment is in effect for tax years 2006 to 2008. However, any changes to the tax assessed value of the Company’s real estate would also likely impact periods subsequent to 2008. The Company has recorded additional real estate taxes payable to reflect this potential expense should the Company lose the appeal, as well as additional tenant receivables to reflect the estimated portion that may be collectible from tenants. Actual amounts paid to the taxing authority and/or received from tenants associated with an increase real estate taxes paid could materially differ from amounts recorded by the Company.

12. COMMITMENTS AND CONTINGENCIES

The Company is involved in various other claims and legal actions arising out of the normal course of its business. In the opinion of management, the ultimate disposition of these matters is not expected to have a material effect on the Company’s financial statements.

* * * * * *

F-58

EX-10.3

Exhibit 10.3

LaSalle Investment Management, Inc.

200 East Randolph Drive

Chicago, Illinois 60601

June 16, 2004

U.S. Trust Company, N.A.

225 High Ridge Road

Stamford, Connecticut 06905

Re: Excelsior/LaSalle Property Fund, Inc.

Gentlemen:

Once again, we are pleased to have been offered the opportunity to work with U.S. Trust Company, N.A. (“U.S. Trust”) in connection with the organization and operation of Excelsior/LaSalle Property Fund, Inc., a Maryland corporation (the “Fund”), which will be an open-ended, diversified real estate fund marketed primarily to high net worth individuals. It is anticipated that the parties will work together in drafting and negotiating the Fund’s offering materials and organizational documents and the terms under which LaSalle Investment Management, Inc. (“LaSalle”) will act as the advisor to the Fund. It is also anticipated that LaSalle will undertake to cause the Fund to acquire a suitable portfolio of real estate investments (“Pre-Closing Investments”) prior to the initial closing of the Fund (“Initial Closing”), and in connection therewith, LaSalle or its affiliate, LaSalle U.S. Holdings, Inc. (“LUSHI”), will fund 100% of the equity and transaction costs required to acquire the properties, contributing up to $50 million of equity capital towards those investments in the aggregate. It is understood that LaSalle and U.S. Trust intend to negotiate, as a condition precedent to the Initial Closing, a letter agreement (the “Side Letter”) setting forth the terms and conditions of our respective commitments to one another in connection with the Initial Closing and the redemption of LUSHI’s interests in the Fund and that the terms of the Side Letter will supersede the preliminary intent of the parties with respect to such matters expressed herein. In consideration of each party’s agreement to undertake such negotiations and LaSalle’s agreement to undertake to cause the Fund to acquire such Pre-Closing Investments, the parties agree as follows:

1. Conduct of Parties. U.S. Trust agrees to use its good faith efforts to prepare the offering materials of the Fund (including, without limitation, an offering memorandum and the exhibits thereto), commence the marketing of interests in the Fund, and consummate the Initial Closing as soon as practicable. LaSalle agrees to use its good faith efforts to cause the Fund to acquire the Pre-Closing Investments prior to the Initial Closing as soon as practicable. The parties acknowledge and agree that (a) there is no assurance that any Pre-Closing Investments will be acquired and LaSalle shall have no liability to U.S. Trust for any failure to acquire Pre-Closing

C-1

Investments if such failure results from any reason other than LaSalle’s bad faith, and (b) there is no assurance that any interests in the Fund will be sold and U.S. Trust shall have no liability to LaSalle for any failure to sell interests in the Fund if such failure results from any reason other than U.S. Trust’s bad faith.

2. Initial Acquisition Fee. Upon the Initial Closing, the Fund shall redeem all of LaSalle’s (or LUSHI’s) equity capital invested in the Fund, or repay all outstanding indebtedness of the Fund to LaSalle (or LUSHI), as of such date in excess of $10 million in the aggregate, subject to such terms, conditions and limitations as the parties may agree in the Side Letter. At such time, the Fund shall pay to LaSalle an acquisition fee with respect to each of the properties owned or acquired by the Fund as of the date of the Initial Closing (the “Initial Acquisition Fee”); provided, that such payment is permitted by the terms of any other indebtedness or equity capital provided to the Fund. The Initial Acquisition Fee shall be an amount equal to one-half percent (0.5%) of the total project capitalization (including debt and equity) of each of the properties owned or acquired by the Fund as of the date of the Initial Closing. The Initial Acquisition Fee shall be paid to LaSalle in cash at the Initial Closing.

3. Exclusivity of U.S. Trust. Commencing upon the date of execution of this letter agreement (the “Letter Agreement”) by U.S. Trust and until the Initial Closing:

(a) U.S. Trust will not, directly or indirectly, through any subsidiary, affiliate or otherwise, (i) form, accept subscriptions for, or otherwise sponsor any investment vehicle which is marketed primarily to “accredited investors” within the meaning of Regulation D under the Securities Act of 1933, as amended, and which has investment objectives substantially similar to those contemplated for the Fund (a “Competing Fund”), or (ii) hire or engage any person other than LaSalle to act as an investment advisor or manager with respect to the Fund; and

(b) U.S. Trust will immediately notify LaSalle regarding any contact between U.S. Trust or its representatives and any person (other than LaSalle) regarding any offer, proposal or inquiry by such person relating to (i) the formation, organization or sponsorship of a Competing Fund, or (ii) the engagement of such person to act as an investment advisor or manager with respect to the Fund.

4. Exclusivity of LaSalle. Commencing upon the date of execution of this Letter Agreement by LaSalle and until the Initial Closing:

(a) LaSalle will not, directly or indirectly, through any subsidiary, affiliate or otherwise, (i) form, accept subscriptions for, or otherwise sponsor any Competing Fund, or (ii) accept an engagement to act as an investment advisor or manager with respect to any Competing Fund; and

(b) LaSalle will immediately notify U.S. Trust regarding any contact between LaSalle or its representatives and any person (other than U.S. Trust) regarding any offer, proposal or inquiry by such person relating to (i) the formation, organization or sponsorship of a Competing Fund, or (ii) the engagement of LaSalle to act as an investment advisor or manager with respect to any Competing Fund.

5. Remedies. Each party acknowledges that in the event of a breach of the

covenants contained in Section 3 or 4 hereof by such party, the non-breaching party will have no adequate remedy at law and such non-breaching party shall be entitled to immediate injunctive and other equitable relief without the necessity of showing actual monetary damages.

6. Termination of Letter Agreement. The parties agree that in the event that as of March 31, 2005 the Fund shall have not consummated the Initial Closing, either party shall have the right to terminate this Letter Agreement upon delivery of ninety (90) days’ prior written notice to the other party.

If you are in agreement with the foregoing, please sign in the space provided below.

Very truly yours,
LASALLE INVESTMENT MANAGEMENT, INC.
By:	/s/ C. Allan Swaringen
Name:	C. Allan Swaringen
Its:	Managing Director

Accepted and Agreed this 22nd day of June, 2004:

U.S. TRUST COMPANY, N.A.
By:	/s/ Douglas A. Lindgren
Name:	Douglas A. Lindgren
Its:	Managing Director

EX-10.5

Exhibit 10.5

INVESTMENT ADVISORY AGREEMENT

THIS INVESTMENT ADVISORY AGREEMENT (this “Agreement”), is entered into as of December 23, 2004, by and between EXCELSIOR LASALLE PROPERTY FUND, INC., a Maryland corporation (the “Fund”), U.S. TRUST COMPANY, N.A., a California corporation and national bank acting through its investment advisory division, U.S. Trust Company, N.A. Asset Management Division (the “Manager”), and LaSALLE INVESTMENT MANAGEMENT, INC., a Maryland corporation (the “Advisor”). Capitalized terms not otherwise defined shall have the meanings set forth in Exhibit A attached hereto.

WITNESSETH THAT:

WHEREAS, the Fund has entered into an agreement with the Manager pursuant to which the Manager is responsible for the day-to-day management and administration of the Fund (the “Management Agreement”); and

WHEREAS, the Manager and the Fund desire to engage the Advisor as the Fund’s investment advisor and agent for the purpose of providing investment advisory and asset management services and investing in Real Estate Investments; and

WHEREAS, the Advisor desires to accept such engagement and provide investment advisory and asset management services to the Fund as set forth below.

NOW, THEREFORE, in consideration of the foregoing, and the mutual promises hereinafter set forth, the parties hereto covenant and agree as follows:

1. Appointment; Standard of Care.

(a) The Manager hereby appoints the Advisor on an exclusive basis, and the Advisor hereby accepts such appointment, effective as of the day and year first above written, to provide investment advisory and asset management services for the Fund’s Primary Investments pursuant to the terms of this Agreement and in accordance with the Investment Guidelines adopted by the Board and set forth in Exhibit B attached hereto, as the same may be modified from time to time by the Board (the “Investment Guidelines”).

(b) The Advisor shall (i) manage all of the Fund’s Primary Investments and all Other Investments with respect to which Advisor has been retained by the Fund pursuant to Section 1(c) below (the “Managed Assets”) in good faith, with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, (ii) act in accordance with standards in effect from time to time under applicable federal and state laws and (iii) act in accordance with the provisions of the Investment Guidelines and this Agreement.

(c) The Manager may appoint one or more advisors other than the Advisor (each an “Additional Advisor”) to provide investment advisory and asset management services to the Fund with respect to Other Investments, provided that, prior to appointing any such Additional Advisor, the Manager shall (i) provide the Advisor with an opportunity to provide information to the Manager with regard to the Advisor’s capabilities with respect to the type of Other Investments for which the Manager is considering appointment of an Additional Advisor and (ii) consider, before serious consideration of alternative Additional Advisors or distributing a request for proposals with regard to such services, designating the Advisor as the manager of such Other Investments if the Manager determines in its reasonable discretion that the Advisor has the requisite capabilities. If the Fund ultimately decides to retain an Additional Advisor rather than the Advisor with respect to one or more Other Investments, before such Additional Advisor begins to provide such services, the Fund will, upon request by the Advisor, redeem in full the capital investment in the Fund of the Advisor or its Affiliate, such redemption to be effected in a manner consistent with the Fund’s redemption procedures. In addition, the parties will amend this Agreement and any other material agreements such that: (A) the Fund’s regulatory compliance continues to be achieved, including, without limitation, REIT and federal securities law compliance, (B) the Advisor is not disproportionately burdened by the accounting and reporting responsibilities related to the Other Investments for which it will not serve as the advisor for the Fund and (C) such Additional Advisor shall agree to manage the Other Investments in a manner such that the Fund continues to comply with applicable REIT and ERISA rules including continuing to qualify as a VCOC (as defined below). If the Advisor is retained with respect to one or more Other Investments, the Advisor shall receive fees consistent with the Fee Schedule attached hereto as Exhibit C for serving as the advisor to the Fund for such Other Investments.

2. Real Estate Investments. Subject to the Investment Guidelines and the other provisions of this Agreement, the Advisor shall cause the Fund to invest the Managed Assets in real property and in interests in real property of whatever nature, and in personal property, both tangible and intangible, which is directly or indirectly associated or connected with the use of real property, including, without limitation, direct or indirect investments in real estate, including investments in the form of interests in corporations, limited liability companies, partnerships and other joint ventures having an equity interest in real property, real estate investment trusts, ground leases, tenant-in-common interests, participating mortgages, convertible mortgages or other debt instruments convertible into equity interests in real property by the terms thereof, options to purchase real estate, real property purchase-and-leaseback transactions and other transactions and investments with respect to real estate (“Real Estate Investments”). The Advisor shall have full discretion with respect to the acquisition, financing, management and disposition of such Real Estate Investments, subject only to compliance with the Investment Guidelines and the terms and conditions of this Agreement.

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3. Services.

(a) The Advisor shall provide investment advisory and asset management services to the Fund similar to those services currently provided by the Advisor to its other discretionary clients and similar to those services currently provided by asset managers for similarly situated real estate investments by institutional investors, subject to the Investment Guidelines and the terms and conditions of this Agreement. Without limiting the generality of the foregoing, the Advisor shall provide to the Fund the following services:

(i) serve as the Fund’s investment advisor with respect to the Managed Assets and, in that connection, (A) cause the Fund to engage in an investment program consistent with the Investment Guidelines; (B) provide research services, and economic and statistical data, in connection with the Fund’s strategy, investments, investment objectives and investment and financial policies; and (C) analyze and evaluate the markets and submarkets which are a target of the Fund’s investments;

(ii) identify, analyze and cause the Fund to purchase or acquire Real Estate Investments that, in the reasonable judgment of the Advisor (acting through its investment committee), are consistent with the Investment Guidelines;

(iii) implement all transactions with respect to Real Estate Investments or potential Real Estate Investments, conduct negotiations relating to the foregoing, supervise compliance with contractual undertakings of the Fund with respect to Real Estate Investments, manage and act on behalf of the Fund with respect to participations in Real Estate Investments and partners, shareholders, members or other co-owners in joint venture, partnership or other arrangements with respect to Real Estate Investments and third party financing for Real Estate Investments;

(iv) to the extent appropriate, form, maintain and qualify to do business, direct or dissolve any corporation, partnership, limited liability company or other entity to hold title to any Real Estate Investment and serve (or provide employees of the Advisor to serve as) officers, directors, managers or other representatives of any such holding company or entity;

(v) advise the Fund with respect to, and arrange for and oversee on behalf of the Fund, the renovation and improvement of Real Estate Investments, where applicable; provided, however, that the Advisor shall not be directly responsible for executing or managing such renovations or improvements, but shall only be responsible for causing the Fund to engage other parties to perform such services on behalf of the Fund and supervising the performance of such services on behalf of the Fund in accordance with Section 3(h) hereof;

(vi) advise the Fund in connection with, and arrange for, the management, operation and leasing of the Real Estate Investments;

3

provided, however, that the Advisor shall not be directly responsible for providing property management and leasing services with respect to Real Estate Investments, but shall only be responsible for causing the Fund to engage other parties to perform such services on behalf of the Fund and supervising the performance of such services on behalf of the Fund in accordance with Section 3(h) hereof;

(vii) obtain and maintain insurance for each of the Real Estate Investments at the property level (the “Property Level Insurance”) in such amounts and against such risks as are prudent in accordance with customary and sound business practices applicable to similar investments in the appropriate geographic area as provided in Section 13(a) hereof;

(viii) use reasonable efforts to find or obtain, on behalf of the Fund, commitments for non-recourse financing or refinancing on the property level and cause the Fund to enter into agreements with respect to such non-recourse financing or refinancing; provided, however, that (A) the Advisor may not cause the Fund to enter into any agreement with respect to any non-recourse financing or refinancing that does not comply with the Investment Guidelines unless such non-recourse financing or refinancing is approved by the Board and (B) the Advisor shall not be directly responsible for providing non-recourse financing or refinancing of Real Estate Investments, but shall only be responsible for causing the Fund to engage other parties to provide such non-recourse financing or refinancing on behalf of the Fund; and provided, further, that (1) non-recourse financing shall be subject to standard carve-outs for environmental matters and improper actions of the borrower, such as misappropriation of rents following a default, non-payment of real estate taxes, and misappropriation of security deposits, (2) with respect to certain Non-Primary Investments which involve substantial construction or reconstruction, various completion guarantees and repayment guarantees will be permitted, and (3) with respect to portfolio acquisitions (i.e., acquisitions by the Fund of more than one Real Estate Investment in a single transaction or series of related transactions), mortgage financings which are cross-collateralized and cross-defaulted amongst the acquired portfolio shall be permitted;

(ix) use reasonable efforts to find or obtain, on behalf of the Fund, an unsecured working capital credit facility at the Fund level to support the Fund’s liquidity needs, provided, however, that the Advisor may not cause the Fund to enter into any working capital credit facility on the Fund level unless such credit facility is approved by the Manager and the Board and the Advisor shall not be directly responsible for providing a working capital credit facility, but only for causing the Fund to engage other parties to provide such working capital credit facility;

4

(x) advise the Fund with respect to, and coordinate or cause, the sale or other disposition of Real Estate Investments; provided, however, that the Advisor shall not be directly responsible for selling or otherwise disposing of Real Estate Investments, but shall only be responsible for causing the Fund to engage other parties to provide sales brokerage and related services on behalf of the Fund and supervising the performance of such services on behalf of the Fund in accordance with Section 3(h) hereof;

(xi) advise the Fund with respect to the Fund’s liquidity needs, and manage the Fund’s cash flow with a view to maintaining adequate liquidity to fund the Fund’s operations and, consistent with the foregoing, manage the investment of the Fund’s Cash pending distributions to the shareholders of the Fund or use for acquisition or development of Real Estate Investments;

(xii) use its reasonable best efforts to assist the Manager and the independent third party real estate valuation advisor engaged by the Fund at the direction of the Board, initially Standard and Poor’s Corporate Value Consulting (the “Valuation Consultant”), in connection with the valuation of the Real Estate Investments as provided in Section 5(d) hereof;

(xiii) review, develop and implement financial, recordkeeping, accounting, management and information systems and controls for the Managed Assets at both the Fund and property level as provided in Section 5(b) hereof;

(xiv) at the Manager’s request, from time to time, assist in the marketing of the Fund including, but not limited to, by being available to participate on conference calls, appearing at presentations to potential investors, preparing or assisting in the preparation of marketing materials and by answering questions posed by potential investors related to, among other things, the Real Estate Investments or Investment Guidelines;

(xv) meet with the Manager annually or more frequently as the Manager may reasonably request to discuss and develop a business plan for the Fund which shall include, but not be limited to, individual budgets for each Real Estate Investment and for the Fund as a whole, including a cash flow budget, to be presented to the Board for approval; and

(xvi) meet annually with the Manager and/or the Board (or more frequently upon the reasonable request of the Manager or the Board) to review and discuss the Investment Guidelines, including, without limitation, recommending any changes thereto for consideration by the Board, it being understood and agreed that the Board shall have the exclusive power and authority to amend the Investment Guidelines.

5

(b) The Advisor and the Manager shall each designate a person from time to time (the “Designated Representative”) to act as its primary contact and liaison when dealing with the other party. Each party shall be entitled to rely (without further inquiry) on written instructions or other communications from the other party’s Designated Representative.

(c) The Advisor shall devote such time as may be necessary in its reasonable judgment for the proper performance of all duties hereunder. The Advisor shall cause each of the individuals serving as Senior Executive Officers to devote an amount of such individual’s business time and attention to the affairs of the Fund as is reasonably necessary for the proper performance of Advisor’s duties hereunder.

(d) To the extent it is within its delegated powers hereunder, the Advisor shall use its reasonable best efforts to cause the Fund to qualify for taxation as a REIT under Sections 856 through 860 of the Code and the Treasury Regulations promulgated thereunder. Without limiting the generality of the foregoing, (i) the Advisor shall use its reasonable best efforts to ensure that rents under leases on the Real Estate Investments constitute “rents from real property” for purposes of Section 856(d) of the Code, and (ii) notwithstanding anything else in this Agreement, the Advisor shall use its reasonable best efforts to ensure that the Fund refrains from providing any services to any tenants if the provision of such services would cause rents of such tenants to fail to qualify as “rents from real property” for purposes of Section 856(d) of the Code, in each case, if it would thereby cause the Fund to fail to continue to qualify as a REIT under the Code.

(e) To the extent it is within its delegated powers hereunder, the Advisor shall use its reasonable best efforts to cause the Fund to qualify as a “venture capital operating company” (“VCOC”) as defined and described in Department of Labor Regulation Section 2510.3-101 issued under the Employee Retirement Income Security Act of 1974, as amended (the “Plan Asset Regulations”) or otherwise operate or manage the Fund in a manner so that the assets of the Fund will not be treated as “plan assets” within the meaning of the Plan Asset Regulations.

(f) The Advisor shall take such actions as are within its control to manage the investments of the Fund in such a manner that the Fund will not be required to register as an investment company under the Investment Company Act of 1940, as amended.

(g) Subject to the terms and conditions of this Agreement, including, without limitation, the Advisor’s obligations pursuant to this Section 3(g), the Advisor shall not be required to act as the Fund’s advisor as its sole and exclusive function, and the Advisor and its Affiliates may have other interests and engage in other business or activities of any type, directly or indirectly, (i) entirely for their own account despite any conflict or competition, including, without limitation, being a partner, member, shareholder, officer or director of another corporation, partnership, limited liability company or other entity, (ii) rendering advice or services to others, and (iii) investing its own capital or the capital of others in any fashion. Any or all of these activities may be competitive with the business of the Fund or the ownership, management, leasing, operation, licensing, sale or conveyance of the Fund’s assets, and may include, without

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limitation, activities in connection with the ownership, development, operation, management, leasing, sale and syndication of office, commercial, industrial, residential or other real property (including, without limitation, real property adjacent to any property owned by the Fund). Neither the Fund nor any of its Affiliates shall have any rights or claims in connection with or as a result of such activities or in any income, benefits, proceeds or profits from any of the activities described in clauses (i), (ii) or (iii) of the preceding sentence. Notwithstanding the foregoing or anything else herein to the contrary, the Advisor shall not cause the Fund to enter into any purchase or sale of property or, directly or indirectly, any other equity or debt acquisition, disposition, or lending transaction with the Advisor or any Affiliate of the Advisor, or any account managed or advised by the Advisor or any Affiliate of the Advisor, without the prior written approval of the Manager (provided, however, that the Advisor may cause the Fund to enter into a transaction with an account managed or advised by the Advisor or its Affiliate as to properties or matters with respect to which the Advisor or its Affiliate are not managing or advising such account without the prior written approval of the Manager if the Advisor provides prior written notice to the Manager of any such transaction). In addition, the Advisor shall notify the Manager promptly of any transaction or proposed transaction that, to the Advisor’s knowledge, involves a material conflict between the interests of the Fund on the one hand, and the interests of the Advisor or any account managed or advised by the Advisor on the other hand. Notwithstanding anything herein to the contrary, the Advisor shall allocate investment opportunities suitable both for the Fund and for other Persons, including the Advisor or an Affiliate of the Advisor or an account managed or advised by the Advisor or an Affiliate of the Advisor, in accordance with an equitable and reasonable allocation procedure consistent with the Advisor’s fiduciary duty to the Fund and with due regard to the investment objectives of the Fund and the characteristics of the specific investment.

(h) Services Provided by Parties Other than the Advisor. The Advisor’s services performed pursuant to this Agreement shall not include the provision of Additional Services, which services, to the extent deemed reasonably necessary or appropriate by the Advisor, shall be performed by service providers who are identified and retained by the Advisor on behalf of, and who are compensated by, the Fund. The Advisor shall use its reasonable efforts to supervise the work of such service providers, including so as to eliminate any duplication of efforts or unnecessary fees. The Advisor may cause the Fund to enter into transactions with Affiliates of the Advisor for the provision of Additional Services by such Affiliates (an “Affiliate Service Arrangement”). Notwithstanding the foregoing, the Advisor shall not permit the Fund to enter into an Affiliate Service Arrangement unless (i) the fees or other compensation charged to the Fund for services provided by Affiliates of the Advisor do not exceed the fees or other compensation available in the relevant market in an arm’s-length transaction with an independent third party, (ii) the agreements governing the relationship contain standard arm’s-length contract terms in relation to the relevant market and (iii) the Affiliate providing such services has sufficient experience and qualifications to perform such services at a level of quality comparable to the quality of similar services available from non-Affiliates in the relevant geographical area. The Board may determine whether (i), (ii) or (iii) above have been satisfied, and, if not, the Board may require the Advisor to terminate the Affiliate Service Arrangement. If the engagement of any party

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(including any Affiliate) to provide Additional Services (other than any engagement which has been approved by the Manager) involves a material conflict of interest on the part of the Advisor or any Affiliate of the Advisor which is known by the Advisor, whether arising out of a pecuniary interest or a material relationship (in the case of an Affiliate of the Advisor a conflict above and beyond the mere hiring of the Affiliate), then the Advisor shall notify the Manager of such conflict of interest and describe the material facts relating thereto. In the case of any such conflict of interest, the Board may require the Advisor to terminate the engagement of the provider of Additional Services upon reasonable prior notice if the Board determines that such engagement adversely affects the Fund. The Advisor shall not be liable for the acts, omissions, default or misconduct of any property manager, project manager, leasing agent, broker, independent appraiser, attorney, contractor or other service provider (other than an Affiliate of the Advisor) engaged by the Advisor on behalf of the Fund if such service provider has been selected with the level of reasonable care attributable to a real estate financial expert acting in a like capacity, unless the Advisor knowingly participates in such acts, omissions, default or misconduct or fails to take reasonable remedial action, or through its own negligence, wrongful acts or omissions in the performance of its own specific responsibilities hereunder has enabled such acts, omissions, default or misconduct to occur.

4. Authority.

(a) In performing the services set forth in this Agreement, the Advisor shall have the right to exercise all powers and authority which are reasonably necessary and customary for an advisor to a real estate related investment fund similar to the Fund to perform its obligations under this Agreement, including the following powers on behalf of the Fund, as agent for the Fund or any corporation, limited liability company, partnership, joint venture or other entity affiliated with the Fund through which any of the Fund’s Real Estate Investments are made, all at the Fund’s expense, subject in each case to the terms and conditions of this Agreement, including, without limitation, the Investment Guidelines:

(i) to purchase, exchange or otherwise acquire and to sell, exchange or otherwise dispose of, any property or any interest in property, including ground leases, at public or private sale;

(ii) to borrow and, for the purpose of securing the repayment thereof, to pledge, mortgage or otherwise encumber property;

(iii) to purchase, take and hold property subject to mortgages or other liens;

(iv) to extend the time of payment of any liens or encumbrances which may at any time be encumbrances upon any property, irrespective of by whom the same were made;

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(v) to foreclose, to reduce the rate of interest on, and to consent to the extension of mortgages on real property, or to accept a deed in lieu of foreclosure;

(vi) to join in a voluntary partition of any property;

(vii) to cause to be demolished any structures on any real property;

(viii) to cause renovations and capital improvements to be made to any property;

(ix) to abandon any property deemed to be worthless;

(x) to make loans, whether secured or unsecured, in connection with real estate;

(xi) to enter into joint ventures or otherwise participate in entities investing in real estate such as trusts, real estate investment trusts, general or limited partnerships, limited liability companies and corporations, including entities advised or managed by Advisor or its Affiliates;

(xii) to cause any property to be leased, operated, developed, constructed or exploited;

(xiii) to obtain and maintain insurance in such amounts and against such risks as are prudent in accordance with customary and sound business practices in the appropriate geographic area;

(xiv) to cause any property to be maintained in good state of repair and upkeep; and to pay the taxes, upkeep, repairs, carrying charges, maintenance and premiums for insurance;

(xv) to use the personnel and resources of its Affiliates in performing the services specified in this Agreement to be performed by Advisor;

(xvi) to hire service providers with respect to the management, operation, leasing and disposition of the Fund’s Real Estate Investments and other assets, including property managers and leasing agents, project managers, mortgage brokers and disposition brokers;

(xvii) to designate and engage all professionals and consultants to perform services (directly or indirectly) on behalf of the Fund or the Fund’s Affiliates, including, without limitation, accountants, legal counsel and engineers; and

(xviii) to take any and all other actions as are necessary or appropriate in connection with such Real Estate Investments.

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(b) The Advisor shall be authorized to represent to third parties that it has the power to perform the actions which it is authorized to perform under this Agreement.

(c) The Advisor shall be authorized and have the right, for so long as the Advisor is the advisor to the Fund, to designate a director to the Board of the Fund, which director designee will be included as one of the two affiliated directors in the slate of director candidates to be nominated by the Manager for a vote by the Fund’s stockholders in a manner consistent with the Fund’s bylaws. The person designated must be an officer, director or employee of the Advisor or its Affiliate. The Advisor (or its Affiliate) shall make available to the Fund the services of the person designated from time to time by the Advisor to serve on the Board as an affiliated director. The Advisor may direct the Manager to call a special meeting of the stockholders pursuant to the Fund’s bylaws for the purpose of removing and/or replacing the affiliated director designated by the Advisor.

5. Reports; Books and Records; Valuation.

(a) The Advisor shall deliver to the Manager and any consultants of the Manager identified by the Manager to the Advisor, within forty-five (45) days after the close of each quarter, a quarterly report in form and substance acceptable to the Manager which will consist of a narrative on asset activity and performance, portfolio performance yields, statement of financial position, statement of operations, statement of cash flows, statement of equity, analysis of variances, occupancy level report, report of all principal service provider engagements (including any engagement of an Affiliate of the Advisor as a service provider), leasing activity report, report on tenants with leases maturing in the current year, and an annual lease expiration schedule. The Senior Executive Officers of the Advisor shall meet with representatives of the Manager regularly at such times as are mutually agreed, not less frequently than quarterly, to discuss and review the investment activities undertaken on behalf of the Fund, the performance of the Managed Assets and any matters relating or pertaining to the terms and conditions of this Agreement.

(b) The Advisor shall (i) establish and maintain (and require property managers and other contractors to establish and maintain) a system of internal accounting and financial controls (including, without limitation, internal controls to safeguard records and to permit the Fund to comply with the Exchange Act and the Sarbanes-Oxley Act of 2002, as amended (“SOX”)) designed to provide reasonable assurance of the reliability of financial reporting, the effectiveness and efficiency of operations and compliance with applicable laws, (ii) maintain records for each Real Estate Investment on a GAAP basis, (iii) develop accounting entries and reports required by the Fund to meet its reporting requirements under applicable laws, (iv) consult with the Fund with respect to proposed or new accounting/reporting rules identified by the Manager, the Fund or the Advisor and (v) prepare quarterly and annual financial statements as soon after the end of each such period as may be reasonably requested and general ledger journal entries and other information necessary for the Fund’s compliance with applicable laws, including the Exchange Act, Regulation S-X and SOX, in accordance with GAAP and cooperate with the Fund’s independent certified accounting firm in connection with the auditing or review of such financial statements, the cost of any such audit or review to be paid by the Fund.

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(c) The Advisor shall provide to the Fund as soon after the end of each quarter or year as may be reasonably requested (within deadlines required for the Fund to comply with applicable legal requirements) by the Fund, a completed management questionnaire letter to the Manager and the Board, in such form as the Fund may reasonably request in response to applicable legal requirements, on accounting, reporting, internal controls and disclosure issues in support of any management representation letter to be issued by the Fund to its independent accountants.

(d) Pursuant to an agreement between the Fund and the Valuation Consultant, the Valuation Consultant will be responsible for the following: (i) retaining independent appraisers to perform external appraisals for all of the Real Estate Investments on an annual basis, with approximately one-fourth of the Real Estate Investments being appraised each calendar quarter and the initial external appraisal of each Real Estate Investment to be performed approximately one year after the acquisition of such Real Estate Investment; (ii) valuing the debt associated with each Real Estate Investment on a quarterly basis; (iii) reviewing the information provided by the Advisor with respect to each Real Estate Investment and determining the value of each Real Estate Investment in each of the three quarters following the calendar quarter in which such Real Estate Investment is externally appraised; (iv) preparing and delivering to the Advisor, the Manager, the Board and any consultants of the Manager identified to the Valuation Consultant by the Manager a report summarizing all external appraisals and internal appraisals completed during each calendar quarter and a summary description of the factors, assumptions and process that formed the basis of the Valuation Consultant’s determined value within five (5) Business Days after the end of such quarter; and (v) valuing each Real Estate Investment in each calendar quarter prior to such Real Estate Investment’s first external appraisal, provided that, for purposes of valuing a Real Estate Investment during the period prior to its first external appraisal (which shall take place on or within ninety (90) days after the first anniversary date of such investment), the value of such Real Estate Investment will be presumed to be its Investment Cost, absent a material event as determined by the Valuation Consultant relating to such Real Estate Investment causing the Valuation Consultant to adjust such value. The Advisor shall be responsible for the following: (i) preparing and delivering to the Valuation Consultant, promptly, a report of any material developments relating to each Real Estate Investment that could reasonably be expected to affect the valuation of such Real Estate Investment, together with an assessment of the effect of such developments on the value of such Real Estate Investment; (ii) assisting the Valuation Consultant with the valuation process, including by (A) providing information concerning each Real Estate Investment as the Valuation Consultant may reasonably request and (B) providing such information, if readily available, as the Valuation Consultant may reasonably request concerning real estate market, financial market or economic trends which may materially impact the appraisals of the Real Estate Investments; and (iii) following the determination of individual asset valuation by the Valuation Consultant, determining the applicable Net Asset Value of the Managed Assets based upon such individual asset valuations by the Valuation Consultant.

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(e) The Advisor shall maintain accurate books, records, documents, data and files (including, without limitation, computerized material) with respect to the Fund and the Managed Assets, in such detail as is appropriate under the circumstances. In accordance with and subject to applicable laws, the Advisor shall have full responsibility for the maintenance, care and safe-keeping of all Investment Information presently being maintained by the Advisor or hereafter generated or obtained by the Advisor in performing its obligations under this Agreement. All Investment Information shall be kept and maintained by the Advisor in accordance with its business contingency plan as provided to the Manager and the Board, or as otherwise approved by the Manager, which approval shall not be unreasonably withheld. All Investment Information shall be and remain the property of the Fund, which shall, together with the Manager and the representatives, employees, independent auditors and attorneys of the Fund and the Manager, at all times have complete and unrestricted access to all Investment Information. All books and records maintained by the Advisor with respect to the Fund or the Real Estate Investments shall be subject at all reasonable times to inspection, review, or audit by agents duly authorized by the Manager or the Fund. Upon reasonable advance request, the Advisor shall make such books, records and documents available for inspection by Persons authorized by the Manager or the Fund during normal business hours and at the offices of the Advisor. The Advisor shall bear the costs associated with the retention of records; and, if the Manager or the Fund shall request copies of such records, the Fund shall bear the cost of duplicating and sending such records to the Manager, the Fund or their designees.

(f) The Advisor shall prepare and deliver to the Fund and the Manager such other information regarding the Real Estate Investments or operations of the Fund as the Fund or Manager may reasonably request.

(g) The Advisor shall (i) assemble, maintain and provide to the firm designated by the Manager to prepare tax returns on behalf of the Fund and its subsidiaries (the “Tax Preparer”) information and data required for the preparation of federal, state, local and foreign tax returns, any audits, examinations or administrative or legal proceedings related thereto or any contractual tax indemnity rights or obligations of the Fund and its subsidiaries and supervise the preparation and filing of such tax returns, the conduct of such audits, examinations or proceedings and the prosecution or defense of such rights, (ii) provide factual data reasonably requested by the Tax Preparer or the Manager with respect to tax matters, (iii) assemble, record, organize and report to the Manager data and information with respect to the Managed Assets relative to taxes and tax returns in such form as may be reasonably requested by the Manager, (iv) supervise the Tax Preparer or the Custodian, as applicable, in connection with the preparation, filing or delivery to appropriate persons, of applicable tax information reporting forms with respect to the Managed Assets, the Real Estate Investments and transactions involving the Real Estate Investments (including, without limitation, information reporting forms, whether on Form 1099 or otherwise with respect to sales, interest received, interest paid, partnership reports and other relevant transactions); it being understood that, in the context of the foregoing, the Fund shall rely on its own tax advisers in the preparation of its tax returns and the conduct of any audits, examinations or administrative or legal proceedings related thereto and that, without limiting the

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Advisor’s obligation to provide the information, data, reports and other supervision and assistance provided herein, the Advisor will not be responsible for the preparation of such returns or the conduct of such audits, examinations or other proceedings.

(h) Data Processing and Computer Services. Throughout the term of this Agreement, the Advisor shall perform the services set forth in this Section 5(h):

(i) The Advisor shall provide access on a twenty four (24) hour per day, seven (7) day per week, 365 day per year basis, subject to reasonable downtimes for system maintenance and upgrades, to the Advisor’s Delphi system on a read only basis to specified employees of the Manager as designated by the Manager from time to time. Such access will be made available on a remote basis over the Internet and the Advisor will provide user names and passwords as necessary to permit such access.

(ii) The Advisor shall provide a copy to the Manager of (A) a file of all account balances recorded in the general ledger maintained by Advisor with respect to the Managed Assets on a quarterly basis within forty-five (45) days after the end of the quarter and (B) such other reports and information as the Manager and Advisor may agree to from time to time.

(iii) The Advisor shall maintain at all times the computer hardware and software systems necessary to perform its obligations under this Agreement and shall maintain and upgrade the Advisor’s systems as necessary to conform such systems to then-current industry standards applicable to institutional real estate investment advisers. The Advisor shall also be responsible for implementing computer maintenance and operating procedures, in accordance with industry standard practice, which shall include, but not be limited to, making daily back-up copies of the data related to the Managed Assets and securely storing such back-up data in accordance with the Advisor’s information systems security plan described in Section 5(h)(iv) below.

(iv) The Advisor shall keep all Advisor systems and data relating to the Managed Assets and any other data belonging to the Fund in the Advisor’s possession in secure facilities with strict control of physical and network access. Without limiting the foregoing, the Advisor shall maintain information security procedures with respect to the Advisor systems and all transmissions or delivery of data to and from the Fund or the Manager and retention of Fund data by the Advisor that will be no less stringent than the security procedures which the Advisor has in place on the date hereof. The Advisor shall certify to the Manager in writing, at least once every twelve (12) months, that it has complied throughout the prior twelve (12) months, and is then in compliance with the terms of this Section 5(h)(iv). In addition, the Manager, not more frequently than once every twelve (12) months, at the Fund’s cost, may cause an independent accounting firm to conduct a security audit of the Advisor’s systems relating to the Managed Assets in accordance with SAS 70.

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6. Custody of Assets and Receipt of Payments.

(a) The Advisor shall have authority to maintain custody and possession of such of the Fund’s assets as the Advisor deems appropriate in the management of the assets, including custody of any instruments evidencing the ownership of the assets, such as deeds, leases, purchase and sale agreements, options, trust agreements, assignments, easements, pleadings, purchase money notes, mortgages and other similar security documents. If the Fund has appointed a custodian (the “Custodian”) to hold certain of the Fund’s assets, the Custodian shall furnish to the Advisor and the Fund, and the Advisor shall furnish to the Custodian, such reports concerning receipts and disbursements with respect to the Fund’s assets as the other shall reasonably request.

(b) The Advisor or its agents may receive, on behalf of the Fund, any rent, mortgage or other payment normally incident to the day-to-day management of the Real Estate Investments, and pay expenses, on behalf of the Fund, normally incident to the day-to-day management of the Real Estate Investments (including any fees and expenses payable to the Advisor under this Agreement). The Advisor, upon prior notice to the Manager, may establish bank accounts in the name of the Fund for each Real Estate Investment or, if a Custodian is appointed, the Custodian (or its nominee) to hold such payments, including amounts retained as operating reserves. The Advisor shall provide the Manager with the account information. The Advisor will be responsible for the management of the Fund’s cash and liquidity needs as described in Section 3(a)(xi) of this Agreement.

7. Compensation. The Advisor shall be entitled to the compensation set forth in the Fee Schedule attached hereto as Exhibit C for so long as the Advisor is an advisor to the Fund.

8. Expenses. Expenses incurred with respect to the Fund’s assets shall be paid as follows:

(a) The Advisor shall, at its expense, pay (i) the compensation and benefits of all its directors, officers and employees, (ii) the costs of providing office space for its employees and all necessary office furnishings and equipment, data processing systems including hardware and software, telephone and other communications costs, file storage, photocopying costs, facsimile costs, utilities and the rent or other costs of such office space and facilities as is reasonably required by the Advisor to perform its services under this Agreement, (iii) legal and other costs and expenses of attempting to acquire Real Estate Investments or proposed Real Estate Investments, including, without limitation, travel expenses, that are not ultimately acquired, owned, managed, financed, operated or disposed of by the Fund; provided, however, that the Advisor shall be reimbursed by the Fund for out-of-pocket costs and expenses of third party professionals, such as attorneys or environmental consultants, incurred in connection with any proposed acquisition, financing or disposition of a Real Estate Investment following the approval of the Investment Committee to pursue such investment, financing or disposition on behalf of the Fund and the delivery of the investment presentation approved by the Investment Committee to the Manager, (iv) travel expenses incurred in connection with the

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Advisor’s performance of services hereunder, including, without limitation, the evaluation, negotiation, acquisition, operation or sale of proposed or existing Real Estate Investments and (v) other overhead costs applicable to its business generally.

(b) Except for those expenses set forth in Section 8(a) above, the Fund will pay the reasonable out-of-pocket costs and expenses actually incurred by the Advisor in connection with the Advisor’s services provided hereunder. Such costs and expenses may include, but shall not be limited to, (i) costs and expenses of acquiring, owning, managing, financing, operating and disposing of Real Estate Investments, (ii) fees or other costs for the services of third party property managers, leasing or brokerage agents, project managers, legal counsel, accountants, real estate and mortgage brokers, and architectural, engineering or other consultants, (iii) costs and fees incurred in connection with the formation, organization and continuation of any corporation, partnership, joint venture or other entity through which the Fund’s investments are made or in which any such entity invests, (iv) travel expenses incurred in connection with attendance at Board meetings, (v) subject to Section 20, costs and expenses of all litigation or regulatory proceedings or investigations instituted or threatened against the Fund and (vi) costs and expenses related to updating offering materials and preparing Exchange Act filings and reports. In those instances where the Fund acquires other than a 100% ownership interest in a property or entity, the Fund shall only be responsible for the payment of its proportionate share of the expenses related to such property or entity. To the extent that the Advisor pays any of the costs described in this Section 8(b) it will be reimbursed for such expenses by the Fund.

9. Representations and Warranties of the Advisor. The Advisor represents and warrants that (i) at all times during the term of this Agreement it will be validly existing and in good standing under the laws of its state of incorporation; (ii) at all times during the term of this Agreement it will be duly registered with the Securities and Exchange Commission as an Investment Adviser pursuant to the Advisers Act; (iii) at all times during the term of this Agreement it will be fully authorized under the applicable laws governing Advisor to perform the services described in this Agreement; (iv) at all times during the term of this Agreement it will be duly qualified to do business and duly registered or licensed as an investment adviser in each state or jurisdiction where such registration or license is required to perform its obligations under this Agreement, except for those failures to be so qualified and registered or licensed which (individually or in the aggregate) could not reasonably be expected to have a material adverse effect on the Advisor’s ability to perform its services under this Agreement; (v) this Agreement has been duly authorized, executed and delivered by the Advisor and constitutes the legal, valid and binding obligation of the Advisor; (vi) the execution and performance of this Agreement will not conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, any agreement or instrument to which the Advisor may be subject; (vii) at all times during the term of this Agreement it will have completed, obtained or performed all registrations, filings, approvals, licenses, consents and examinations required by any Governmental Authority in connection with the performance of its obligations under this Agreement, except for those failures which (individually or in the aggregate) could not reasonably be expected to have a material adverse effect on the Advisor’s ability to perform its services under

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this Agreement; (viii) it is in the business of advising institutional investors with respect to the acquisition, financing, management and disposition of real estate and interests therein, portfolio management and asset management; and (ix) the personnel of the Advisor who will be responsible for carrying out this Agreement are individuals experienced in the performance of the various functions contemplated by this Agreement and, in carrying out its obligations under this Agreement, the Advisor will at all times and at its expense maintain a staff of trained and competent personnel to enable it to perform its obligations under this Agreement.

10. Representations, Warranties and Covenants of the Fund.

(a) The Fund represents and warrants that (i) the Fund has full authority to enter into this Agreement; (ii) this Agreement has been duly authorized, executed and delivered by the Fund and constitutes the legal, valid and binding obligation of the Fund; and (iii) to the execution and performance of this Agreement by the Fund will not conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, any agreement or instrument to which the Fund, may be subject.

(b) The Fund agrees to maintain in the Management Agreement: (i) an obligation on the part of the Fund that, as a condition to any termination of the Manager as manager under the Management Agreement, the Fund shall assume the rights and obligations of the Manager under this Agreement, subject to the right of the Fund to appoint a substitute manager, in which case the Fund may cause such substitute manager to become a party to this Agreement and assume such rights and obligations, and the Fund shall have no further liability for the obligations of the Manager hereunder; and (ii) a provision permitting the Advisor to enforce, independently, as an intended third party beneficiary, the foregoing obligation of the Fund.

11. Representations, Warranties and Covenants of the Manager.

(a) The Manager represents and warrants that (i) the Manager has full authority to enter into this Agreement; (ii) this Agreement has been duly authorized, executed and delivered by the Manager and constitutes the legal, valid and binding obligation of the Manager; and (iii) to the execution and performance of this Agreement by the Manager will not conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, any agreement or instrument to which the Manager, may be subject.

(b) The Manager agrees to maintain in the Management Agreement: (i) an obligation on the part of the Fund that, as a condition to any termination of the Manager as manager under the Management Agreement, the Fund shall assume the rights and obligations of the Manager under this Agreement, subject to the right of the Fund to appoint a substitute manager as described in Section 10(b)(i) above; and (ii) a provision permitting the Advisor to enforce, independently, as an intended third party beneficiary, the foregoing obligation of the Fund.

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12. Assignment.

(a) Neither this Agreement nor any of the rights or obligations of the Advisor under this Agreement may be assigned (including, without limitation, by any “assignment” within the meaning of the Advisers Act) by the Advisor, in whole or in part, without the prior written consent of the Fund, it being agreed that the Fund shall not unreasonably withhold its consent to an assignment by the Advisor of this Agreement to a corporation, limited liability company, partnership, trust or other entity controlling, controlled by or under common control with the Advisor with substantially similar capabilities, regulatory status (including registration as an investment adviser under the Advisers Act) and capitalization as the Advisor.

(b) Neither this Agreement nor any of the rights and obligations of the Fund or the Manager under this Agreement may be assigned by the Fund or the Manager (as applicable), in whole or part, without the prior written consent of the Advisor, except that, upon prior written notice to Advisor, each of the Fund and the Manager shall have the right to assign this Agreement to a corporation, limited liability company, partnership, trust or other entity controlling, controlled by or under common control with the Fund or the Manager (as applicable), or any other entity in connection with a merger or consolidation of the Fund or the Manager (as applicable), provided that such other entity assumes all of the obligations of the Fund or the Manager (as applicable) with respect to this Agreement. The Fund reserves the right to designate any nominee or title holding entity for the purpose of acquiring or holding title to any asset which is part of the subject matter of this Agreement, and such designation shall not be deemed an assignment requiring the consent of the Advisor.

13. Insurance.

(a) The Advisor shall obtain and maintain on behalf of the Fund Property Level Insurance for each of the Real Estate Investments in such amounts and against such risks as are prudent in accordance with customary and sound business practices applicable to such Real Estate Investment in the appropriate geographic area. Without limiting the foregoing, the Advisor shall obtain liability and casualty insurance coverage on behalf of the Fund for each Real Estate Investment, including where deemed appropriate by the Advisor, terrorism, earthquake, flood and other disaster-type insurance coverage unless such insurance coverage is unavailable or available only at prices which the Advisor deems unreasonable. All casualty insurance shall contain a waiver of subrogation, and each of the Fund and the Manager waives any claims against the Advisor for any loss or damage to the Fund’s assets by reason of any casualty event which is insured. The Fund, its subsidiary, the Advisor, the Manager and such other parties as are customary and appropriate under a particular policy, shall be the named insured(s) on all such insurance policies.

(b) During the term of this Agreement and for a period of three years thereafter, the Advisor shall keep in force, at its own expense, a policy or policies of insurance covering loss occasioned by the errors and omissions of the Advisor’s officers, directors, agents and employees in connection with its obligations hereunder with a limit

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of at least $10,000,000 with a retroactive date not later than the date of this Agreement. Upon written request from the Manager, Advisor shall deliver evidence of such insurance to the Manager and any consultants of the Manager identified by the Manager to the Advisor.

14. Indemnification.

(a) The Advisor hereby agrees to indemnify, defend and hold harmless the Fund and the Manager and their respective Affiliates, partners, members, stockholders, officers, employees, agents, successors, and assigns from and against all liabilities, judgments, costs, losses, and expenses, including attorneys’ fees, charges and expenses and expert witness fees, of any nature, kind or description, arising out of claims by third parties and caused by or resulting from (i) the Advisor’s breach of this Agreement (provided that solely for purposes of this Section 14(a)(i), only a negligent act or omission shall be deemed in breach of Section 1(b)(i) hereof), (ii) the negligent or wrongful acts or omissions of the Advisor or its partners, members, stockholders, officers, employees, agents, successors, or assigns or (iii) in the event that an Affiliate of the Advisor has been retained to provide services to the Fund, the negligent or wrongful acts or omissions of such Affiliate or its partners, members, stockholders, officers, employees, agents, successors, and assigns, unless the Fund’s agreement with such Affiliate contains an indemnification provision substantially similar to that set forth herein.

(b) The Fund hereby agrees to indemnify, defend and hold harmless the Advisor and its Affiliates, partners, members, stockholders, officers, employees, agents, successors, and assigns from and against all liabilities, judgments, costs, losses, and expenses, including attorneys’ fees, charges and expenses and expert witness fees, of any nature, kind or description, arising out of claims by third parties in connection with this Agreement and the Advisor’s services hereunder except to the extent caused by or resulting from (i) the Advisor’s breach of this Agreement (provided that solely for purposes of this Section 14(b)(i), only a negligent act or omission shall be deemed in breach of Section 1(b)(i) hereof), (ii) the negligent or wrongful acts or omissions of the Advisor or its partners, members, stockholders, officers, employees, agents, successors, or assigns or (iii) in the event that an Affiliate of the Advisor has been retained to provide services to the Fund, the negligent or wrongful acts or omissions of such Affiliate or its partners, members, stockholders, officers, employees, agents, successors, or assigns (it being agreed that such exception shall not affect the availability of the indemnification provided pursuant to this Section 14(b) to the Advisor, its partners, members, stockholders, officers, employees, agents, successors, or assigns, provided that they have not engaged in any breach of this Agreement or any negligent or wrongful acts or omissions, and provided further that the Fund’s agreement with such Affiliate contains an indemnification provision substantially similar to that set forth herein).

(c) The party seeking indemnity (“Indemnitee”) will promptly notify the party against whom indemnity is claimed (“Indemnitor”) of any claim for which it seeks indemnification; provided, however, that the failure to so notify the Indemnitor will not relieve Indemnitor from any liability which it may have hereunder, except to the extent

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such failure actually prejudices Indemnitor. The Indemnitor shall have the right to assume the defense and settlement of such claim; provided that, Indemnitor notifies Indemnitee of its election to assume such defense and settlement within thirty (30) days after the Indemnitee gives the Indemnitor notice of the claim. In such case the Indemnitee will not settle or compromise such claim, and the Indemnitor will not be liable for any such settlement made without its prior written consent. If Indemnitor is entitled to, and does, assume such defense by delivering the aforementioned notice to Indemnitee, Indemnitee will (i) have the right to approve Indemnitor’s counsel (which approval will not be unreasonably withheld or delayed), (ii) be obligated to cooperate in furnishing evidence and testimony and in any other manner in which Indemnitor may reasonably request and (iii) be entitled to participate in (but not control) the defense of any such action, with its own counsel and at its own expense.

(d) Reasonable expenses (including attorney’s fees) incurred by an Indemnitee in defense or settlement of a claim that may be subject to a right of indemnification hereunder may be advanced by the Fund to such Indemnitee as such expenses are incurred prior to the final disposition of such claim; provided that, Indemnitee undertakes to repay such amounts if its shall be determined ultimately by a court of competent jurisdiction that Indemnitee was not entitled to be indemnified hereunder.

(e) The Advisor shall remain entitled to exculpation and indemnification from the Fund pursuant to this Section 14 (subject to the limitations set forth herein) with respect to any matter arising prior to the termination of this Agreement and shall have no liability to the Fund or the Manager in respect of any matter arising after such termination unless such matter arose out of events or circumstances that occurred prior to such termination.

(f) The Manager shall remain entitled to exculpation and indemnification from the Advisor pursuant to this Section 14 (subject to the limitations set forth herein) with respect to any matter arising prior to the termination of this Agreement and any matter arising after such termination which arose out of events or circumstances that occurred prior to such termination.

15. Term. The initial term of this Agreement shall be five (5) years commencing on the date hereof (“Initial Term”), unless sooner terminated as set forth in Sections 16, 17 or 18 or upon the resignation of the Advisor upon one hundred eighty (180) days written notice to the Manager and the Board. Thereafter, this Agreement shall automatically renew for successive five (5) year periods (each, a “Renewal Term”), unless sooner terminated (a) as set forth in Sections 16, 17 or 18, (b) upon the resignation of the Advisor upon one hundred eighty (180) days written notice to the Manager and the Board or (c) pursuant to the election of the Board (excluding the members designated by the Manager and the Advisor) not to renew this Agreement as provided in the following sentence. At the conclusion of the first Renewal Term or any Renewal Term thereafter, the Board (excluding the members designated by the Manager and the Advisor) may elect not to renew this Agreement, in its sole discretion, by giving written notice to the Advisor at least ninety (90) days, but no sooner than two hundred seventy (270) days prior to the

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expiration of the then current Renewal Term; provided, however, that in the event that LUSHI (and/or its permitted successors and assigns) at such time has capital invested in the Fund, then the written notice referred to above must be provided at least two hundred seventy (270) days prior to the end of the then current Renewal Term, such termination to be effective as of the earlier of (i) two hundred seventy (270) days following such notice; or (ii) the date specified in a written notice from the Fund given at any time following the date on which the equity investment of LUSHI (and/or its permitted successors and assigns) in the Fund shall have been fully redeemed by the Fund or transferred to another Person consistent with the Fund’s applicable procedures for redemption or transfer. Notwithstanding the foregoing, this Agreement shall terminate upon the liquidation, winding-up and termination of the Fund (subject to Section 30 hereof).

16. Termination for Cause.

(a) The Manager may terminate this Agreement at any time (i) for Cause, (ii) if the Advisor becomes the subject of any bankruptcy or insolvency proceedings which, if involuntary, are not dismissed within ninety (90) days, or (iii) following the Initial Term, if the Manager determines, in its reasonable discretion, that the Fund has experienced sustained, material underperformance with respect to the investment results of the Managed Assets in comparison to the investment strategy of the Fund applicable to such Managed Assets over a real estate market cycle, it being acknowledged and agreed that for purposes of such determination, “market cycle” may include all or part of the Initial Term as determined by the Manager. In the event that this Agreement is terminated pursuant to this Section 16(a), the Fund shall pay to the Advisor an amount equal to any earned or accrued but unpaid Acquisition Fees and Asset Management Fees as of the effective date of termination, as well as any such fees for the quarter in which this Agreement is so terminated, pro-rated through the date of termination. Such amount shall be paid in cash within ten (10) days of the effective date of termination. In the event that this Agreement is terminated pursuant to Section 16(a)(iii) and that at such time LUSHI (and/or its permitted successors and assigns) has capital invested in the Fund, the termination of the Advisor shall be effective as of the earlier of (i) two hundred seventy (270) days following notice by the Manager to the Advisor of such termination; or (ii) the date specified in a written notice from the Fund given at any time following the date on which the equity investment of LUSHI (and/or its permitted successors and assigns) in the Fund shall have been fully redeemed by the Fund or transferred to another Person consistent with the Fund’s applicable procedures for redemption or transfer.

(b) The Advisor may terminate this Agreement at any time if (i) the Manager defaults in any of its material obligations under this Agreement, which default is not cured within thirty (30) days after written notice from the Advisor describing such default in reasonable detail, or (ii) the Manager becomes the subject of any bankruptcy or insolvency proceedings which, if involuntary, are not dismissed within ninety (90) days.

17. Termination Not for Cause. The Manager may terminate this Agreement, if, at any time during the term of this Agreement, (a)(i) the Advisor consolidates or merges with any Specified Wealth Manager, except for any transaction where the persons or entities directly or indirectly controlling the Advisor immediately before such

20

transaction control the surviving entity following such transaction, (ii) the Advisor sells all or substantially all of its assets to a Specified Wealth Manager or (iii) a Specified Wealth Manager acquires direct or indirect beneficial ownership of equity securities of the Advisor representing 50% or more of the voting power of all outstanding equity securities of the Advisor and (b) at the time of such transaction, greater than 50% of the Fund’s equity is owned by Manager Clients.

18. Early Termination Upon Key Man Event. If, at any time during the Initial Term, (a) two (2) or more of the individuals serving as Senior Executive Officers cease to serve in such positions within any twelve (12) month period, and (b) the Advisor fails to select and appoint a Qualified Replacement to serve in each such position within 180 days of the date such individual ceased to serve as a Senior Executive Officer (the occurrence of (a) and (b) being a “Key Man Event”), then the Manager may elect to terminate this Agreement within thirty (30) days of such Key Man Event. In the event that this Agreement is terminated pursuant to this Section 18, the Fund shall pay to the Advisor an amount equal to any earned or accrued but unpaid Acquisition Fees and Asset Management Fees as of the effective date of termination, as well as any such fees for the quarter in which this Agreement is so terminated, pro-rated through the date of termination. Such amount shall be paid in cash within ten (10) days of the effective date of termination.

19. Further Assurances on Termination. (a) Upon termination of this Agreement for any reason whatsoever, the Advisor shall cooperate with the Fund and the Manager, including, without limitation, providing to the Fund and the Manager access to and the opportunity to consult with the Advisor’s officers and employees, in order to facilitate a smooth transition of the Advisor’s responsibilities and the Fund’s books and records so as to avoid a disruption of services to the Fund for the Managed Assets. In the case of a termination by notice, any such transition shall begin immediately upon the giving of such termination notice and the parties shall use their reasonable efforts to complete such transition by the termination date. If such transition is not completed by the termination date the Advisor shall take such actions after the termination date as are necessary to complete the transition.

(b) The Advisor shall forthwith upon any termination of this Agreement: (i) as soon as practicable after such termination pay over to the Manager all monies, securities and other assets held for the account of the Fund pursuant to this Agreement; (ii) as soon as practicable after such termination, deliver to the Manager and any consultants of the Manager identified by the Manager to the Advisor a report containing, among other things, a statement of Managed Assets and Real Estate Investments covered by this Agreement as of the date of termination and such other information regarding Managed Assets or Real Estate Investments as the Manager may reasonably request; and (iii) deliver to the Manager or its designee all or such part of the Investment Information as the Manager requests, provided that the reasonable expenses of the delivery of the Investment Information shall be paid by the Fund.

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20. Litigation.

(a) Subject to clause (c) below, the Advisor, on behalf of the Fund, shall supervise the defense and/or prosecution of any and all claims, proceedings or investigations brought or made by or against the Fund that are related to the acquisition, ownership, leasing, financing, management or disposition of any Real Estate Investment (“Real Estate Claims”). In connection with this responsibility the Advisor shall promptly notify the Manager of each such claim, proceeding or investigation and identify legal counsel to defend or prosecute each Real Estate Claim on behalf of the Fund and shall notify the Manager of the law firm that it proposes to retain. The Manager shall have thirty (30) days to either approve or reject retention of such law firm, subject to any requirements under any applicable insurance policies, provided, that, if the Manager does not object within the thirty (30) day period it will be deemed to have approved the retention of the law firm selected by the Advisor; and provided further, that, the Advisor shall be permitted to retain counsel without the approval of the Manager in connection with (i) emergency actions requiring selection of counsel where such approval is impracticable or (ii) standard landlord-tenant litigation. The Advisor shall supervise the defense or prosecution of such Real Estate Claim on behalf of the Fund in the same manner and with the same diligence that it would defend or prosecute a claim on its own behalf. Without limiting the generality of the foregoing, the Advisor shall timely notify insurance carriers as necessary in connection with any Real Estate Claims in order to obtain applicable coverage under policies held by the Fund.

(b) The Advisor shall deliver to the Manager and the Board a quarterly written report, in form and substance reasonably acceptable to the Manager and the Board, which will consist of a listing of all Real Estate Claims that were resolved in the previous quarter or are pending, or to the knowledge of the Advisor, threatened, the names of the parties involved in such claim, any trial dates that are scheduled, if known, the amount of damages or other relief sought and a narrative describing the facts and circumstances surrounding the claim.

(c) The Advisor shall not settle any Real Estate Claims without the prior approval of the Board, provided that the Advisor shall be permitted to settle emergency actions, Standard Landlord-Tenant Litigation or Real Estate Claims of $100,000 or less without prior approval.

21. Confidential Information. The Advisor acknowledges that in the course of its activities under this Agreement it may receive confidential information which relates to the business of the Fund or the Manager. The Advisor agrees to keep all such information confidential except to the extent reasonably necessary to perform its services hereunder.

22. Written Notice. Any approval, notice, demand, direction or instruction to be given hereunder shall be in writing and shall be properly given and deemed effective upon receipt if (a) mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, (b) delivered by hand or national overnight courier, or (c) by telecopy received prior to 5:00 p.m. (local time) on any business day (with any notice delivered after such time being deemed delivered on the next succeeding business day), provided that the original shall be delivered on the next succeeding business day in the

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manner described in the foregoing clauses (a) or (b), in each case to the addresses or telecopy number set forth below or such other address or telecopy number as a party may designate by like notice to the other party:

(i)	In the case of notices sent to the Fund:
	Excelsior LaSalle Property Fund, Inc. c/o U.S. Trust Company, N.A. 225 High Ridge Road Stamford, Connecticut 06905 Attn: Douglas Lindgren Telecopy: 203-352-4456
	with a simultaneous copy to:
	U.S. Trust Company, N.A. 225 High Ridge Road Stamford, Connecticut 06905 Attn: Lee Gardella Telecopy: 203-352-4456
	and U.S. Trust 114 West 47th Street, 26th Floor New York, New York 10036 Attn: Alexandra Poe Telecopy: 212-852-1310
(ii)	In the case of notices sent to the Manager:
	U.S. Trust Company, N.A. 225 High Ridge Road Stamford, Connecticut 06905 Attn: Douglas Lindgren Telecopy: 203-352-4456 with a simultaneous copy to: U.S. Trust Company, N.A. 225 High Ridge Road Stamford, Connecticut 06905 Attn: Lee Gardella Telecopy: 203-352-4456

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and
	U.S. Trust 114 West 47th Street, 26th Floor New York, New York 10036 Attn: Alexandra Poe Telecopy: 212-852-1310
(iii)	In the case of notices sent to the Advisor: LaSalle Investment Management, Inc. 200 E. Randolph Drive Chicago, Illinois 60601 Attention: Chief Operating Officer Telecopy: 312-782-4339 with a simultaneous copy to: LaSalle Investment Management, Inc. 200 E. Randolph Drive Chicago, Illinois 60601 Attention: General Counsel Telecopy: 312-782-4339

Each notice, demand, direction or instruction which shall be mailed, transmitted or delivered in the manner described above shall be deemed received and sufficiently served at such time as it is delivered to the addressee (with the return receipt, delivery receipt, confirmation of facsimile transmission or affidavit of messenger constituting conclusive evidence of such delivery) or at the time of presentation of delivery is refused by the addressee.

23. Force Majeure. The Advisor shall not be deemed in default of this Agreement if the failure to perform this Agreement arises from causes beyond its reasonable control. Such causes may include, but are not restricted to, acts of God or of the public enemy, including terrorists, acts of the Federal or state government (including all subdivisions thereof) in its sovereign capacity, fires and floods.

24. Advisor as Independent Contractor. The Advisor shall at all times be acting as an independent contractor; and this Agreement is not intended, and shall not be construed to create a relationship of employee, partnership or association as between the Fund and the Advisor. For all purposes, including, but not limited to, Workers’ Compensation liability, Advisor agrees that all persons furnishing services on behalf of the Advisor pursuant to this Agreement are deemed employees solely of the Advisor and not of the Fund.

25. Construction and Forum. This Agreement shall be governed by the laws of the State of New York, without regard to its conflicts of law principles. Each of the parties hereto irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of any New York State court or Federal court of the United States of America

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sitting in New York, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court.

26. Attorneys’ Fees. In any legal proceeding between the parties hereto which arises out of or relates to this Agreement, the prevailing party shall be entitled to recover all reasonable costs and expenses incurred by it therein from the other party including, without limitation, reasonable attorneys’ fees and court costs. These expenses shall be in addition to any other relief to which the prevailing party may be entitled and shall be included in and as part of the judgment or decision rendered in such proceeding.

27. Counterparts. This Agreement may be executed in any number of separate counterparts, each of which shall be deemed an original, but the several counterparts shall together constitute but one and the same Agreement of the parties hereto.

28. Severability. If any one or more of the covenants, agreements, provisions or texts of this Agreement shall be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement.

29. Entire Agreement; Amendment. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements between the parties hereto relating to the matters contained herein and may not be modified, waived or terminated orally and may only be amended by an agreement in writing signed by the parties hereto, except with respect to the Investment Guidelines which may be modified as provided in this Section 29. The Investment Guidelines may be modified from time to time by the Board in its sole discretion upon not less than seven (7) days prior written notice to the Advisor and the Manager. Any amendment to the Investment Guidelines adopted by the Board shall become effective on the date specified in the notice or, if no date is specified, immediately. The Manager and the Advisor shall jointly propose any modifications to the Investment Guidelines for consideration by the Board as they shall jointly determine are appropriate. Each of the Advisor and the Manager shall discuss any proposed changes to the Investment Guidelines in good faith. Nothing herein shall be deemed to limit or restrict the Board’s power and authority to adopt such modifications to the Investment Guidelines as it shall determine in its sole discretion.

30. Survival. The covenants and agreements contained in this Agreement which by their terms require performance after termination of this Agreement shall survive the termination of this Agreement in accordance with their terms including, without limitation, the provisions of Sections 14, 19, 21, 25, 26 and this Section 30. In addition, no termination shall relieve any party hereto of any liability or damages arising from such party’s breach, prior to the termination date, of any representations, warranties or covenants of this Agreement.

[Signature page follows]

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IN WITNESS WHEREOF, duly authorized representatives of the Fund, the Manager and the Advisor have caused this Agreement to be executed as of the date first above written.

EXCELSIOR LASALLE PROPERTY FUND, INC., a Maryland corporation
By:	/s/ Douglas A. Lindgren
	Name:	Douglas A. Lindgren
	Title:	President
U.S. TRUST COMPANY, N.A., a California corporation and national bank
By:	/s/ Douglas A. Lindgren
	Name:	Douglas A. Lindgren
	Title:	Managing Director
LaSALLE INVESTMENT MANAGEMENT, INC., a Maryland corporation
By:	/s/ Peter H. Schaff
	Name:	Peter H. Schaff
	Title:	Vice President

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Exhibit A

to

Investment Advisory Agreement

DEFINITIONS

For purposes of this Agreement, the following terms shall have the meanings set forth below. Additional defined terms are set forth in the Recitals and Sections of this Agreement to which they relate.

“Acquisition Cost” of a Real Estate Investment shall include the acquisition price stated in the acquisition agreement (inclusive of all potential earnouts) together with loan fees attributable to such acquisition, but without regard to adjustments for prorations. With respect to Real Estate Investments that are acquired with the intent to perform development or redevelopment as part of the acquisition strategy, Acquisition Costs shall include all costs (including interest and loan fees) related to the Real Estate Investment that are budgeted in connection with the development or redevelopment of the Real Estate Investment, including without limitation, the total amount of hard and soft costs related to construction, development or renovation of buildings (including all construction period taxes, assessments and insurance), costs of fixtures and equipment (including rental equipment) used to construct or operate the property, costs of the installation of permanent improvements in or on the property’s buildings or land (including tenant improvement costs, site work, paving and landscaping), estimated fees and earnouts to developers, fees and cost reimbursements of architects, contractors, engineers, environmental and other consultants, amounts payable to government authorities, third party marketing expenses (including leasing commissions and finders fees), and costs of bonds or letters of credit. In no event shall Acquisition Costs include due diligence expenses or legal fees incurred in connection with the acquisition or financing of the Real Estate Investment.

“Acquisition Fee” has the meaning set forth in the Fee Schedule attached hereto as Exhibit C.

“Additional Advisor” has the meaning set forth in Section 1(c) hereof.

“Additional Services” means property management and leasing services, financing and disposition brokerage services, construction management services, and other services for which fees are customarily charged in connection with the acquisition, development, management or disposition of commercial real properties, but shall not include any of the services specifically required of the Advisor under Section 3 hereof.

“Adjoining Parcel” has the meaning set forth in the Fee Schedule attached hereto as Exhibit C.

“Advisers Act” means the Investment Advisers Act of 1940, as amended, and the rules and regulations promulgated thereunder.

A-1

“Advisor” has the meaning set forth in the introductory paragraph hereof.

“Affiliate” means, with respect to a specified Person, (a) any person directly or indirectly controlling, controlled by or under common control with the specified Person, (b) a partnership or limited liability company in which the specified Person is a general partner or manager, (c) any officer, director, executive employee, manager or general partner of the specified Person, or (d) if the specified Person is an officer, director, manager, general partner or executive employee, any other entity for which the specified Person acts in any such capacity.

“Affiliate Service Arrangement” has the meaning set forth in Section 3(h) hereof.

“Agreement” has the meaning set forth in the introductory paragraph hereof.

“Applicable Percentage” means, as of the end of each calendar quarter, the percentage set forth opposite the Net Asset Value of the Fund as of the end of such quarter, in the column entitled “Applicable Percentage” below:

Net Asset Value	Applicable Percentage
Less than $100 million	7.50	%
$100 million or more and less than $250 million	7.31	%
$250 million or more and less than $400 million	7.13	%
$400 million or more and less than $550 million	6.75	%
$550 million or more and less than $700 million	6.38	%
$700 million or more and less than $850 million	6.00	%
$850 million or more	5.63	%

“Articles” shall mean the Articles of Incorporation of the Fund, as amended from time to time.

“Asset Management Fee” has the meaning set forth in the Fee Schedule attached hereto as Exhibit C.

“Board” means the Board of Directors of the Fund.

“Business Day” means any day other than a Saturday, Sunday or a day on which commercial banks are authorized or required to close in Chicago, Illinois.

“Cash” means cash and cash equivalents (including marketable securities and short-term investments).

“Cause” means the determination of the Board, after consultation with the Manager, of :

(a) the breach by the Advisor of any material term of this Agreement, which breach was not cured within sixty (60) days after written notice from the Manager describing such breach in reasonable detail;

A-2

(b) the fraud or willful misconduct of the Advisor in connection with the Advisor’s duties under this Agreement;

(c) the negligence of the Advisor in connection with the Advisor’s duties under this Agreement which materially and adversely affects the Fund; or

(d) the Advisor is convicted of or pleads guilty in any court to a felony involving investment-related business which, in the reasonable determination of the Board, has had a material adverse effect on the reputation of the Advisor in the market for real estate investment funds, or any regulatory authority or court denies, suspends or revokes the Advisor’s registration or license or otherwise enjoins the Advisor from conducting investment advisory business.

“Code” means the Internal Revenue Code of 1986, as amended.

“Custodian” has the meaning set forth in Section 6(a) hereof.

“Designated Representative” has the meaning set forth in Section 3(b) hereof.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Assets” means any Other Investments for which the Manager has appointed an Additional Advisor and any Cash held in escrow in respect of subscriptions for Shares of the Fund prior to the closing of such subscriptions.

“Fair Market Value” means, with respect to each Real Estate Investment, the most recent fair market value of such Real Estate Investment established by the Board in accordance with the valuation procedures set forth herein or otherwise adopted by the Fund.

“Fee Schedule” means that certain schedule of fees paid to the Advisor attached hereto as Exhibit C.

“Fixed Portion” has the meaning set forth in the Fee Schedule attached hereto as Exhibit C.

“Foreign Investments” shall have the meaning set forth in the Investment Guidelines attached hereto as Exhibit B.

“Fund” has the meaning set forth in the introductory paragraph hereof.

“GAAP” means United States generally accepted accounting principles.

“Governmental Authority” means any nation or government, any state, province or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, or any agency or instrumentality thereof, or any court or arbitrator (public or private).

“High Net Worth Individual” means a natural person residing in the U.S. that is an “accredited investor” within the meaning of Section 501(a) of Regulation D under the Securities Act.

“Indemnitee” has the meaning set forth in Section 14(c) hereof.

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“Indemnitor” has the meaning set forth in Section 14(c) hereof.

“Initial Closing” means the Business Day on which the first subscriptions for Shares from investors (other than the Advisor or its Affiliates) are accepted by the Fund.

“Initial Term” has the meaning set forth in Section 15 hereof.

“Investment Committee” means the investment committee of the Advisor.

“Investment Cost” of a Real Estate Investment shall include the sum of (a) the total acquisition price paid for the Real Estate Investment and subsequent capital invested in the Real Estate Investment by the Fund, including without limitation, the total amount of hard and soft costs (including interest and loan fees) related to construction, development or renovation of buildings (including all construction period taxes, assessments and insurance), costs of fixtures and equipment (including rental equipment) used to construct or operate the property, costs of the installation of permanent improvements in or on the property’s buildings or land (including tenant improvement costs, site work, paving and landscaping), fees and earnouts to developers, fees and cost reimbursements of architects, contractors, engineers, environmental and other consultants, amounts payable to government authorities, third party marketing expenses (including leasing commissions and finders fees), and costs of bonds or letters of credit, (b) all out-of-pocket costs and expenses incurred in connection with the acquisition or development of the Real Estate Investment, (c) the Acquisition Fee and (d) any other costs or expenses which may be capitalized with respect to such Real Estate Investment for accounting purposes in accordance with generally accepted accounting principles, consistently applied.

“Investment Guidelines” has the meaning set forth in Section 1 hereof.

“Investment Information” means such books, records, data, information, instruments, documents, agreements, files, reports, manuals, policies, guidelines and procedures (including without limitation, computerized materials), as relate to the Fund, the Managed Assets, the Real Estate Investments or the services provided by third parties relating to the foregoing. “Investment Information” shall not include any of the foregoing prepared by the Advisor generally for use in its business or generally for use by its clients.

“Key Man Event” has the meaning set forth in Section 18 hereof.

“LUSHI” means LaSalle U.S. Holdings, Inc., a Delaware corporation.

“Managed Assets” has the meaning set forth in Section 1(b) hereof.

“Management Agreement” has the meaning set forth in the recitals hereof.

“Manager” has the meaning set forth in the introductory paragraph hereof.

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“Manager Client” means any holder of Shares which is, or was at the time of such holder’s subscription for Shares, a client of the Manager or any of its Affiliates or a third party broker-dealer firm first identified, procured and approved by the Manager.

“Net Asset Value” means, as of any date, (a) the aggregate Fair Market Value of (i) the Fund’s interests in all Real Estate Investments plus (ii) all other assets of the Fund, minus (b) (i) the aggregate value of the Fund’s indebtedness and (ii) other outstanding obligations as of the determination date.

“Net Distributable Cash” is meant to reflect the Fund’s ability to generate cash from normal operations for purposes of calculating certain management and advisory fees, and it is not intended to be an actual measure of cash available for dividend distributions. It shall be calculated beginning with net income of the Fund from Managed Assets of the Advisor for the fiscal period, as calculated under GAAP consistently applied, and adjusted for the following factors (without duplication):

Add back depreciation of assets.

Add back amortization of intangibles.

Add back depreciation of tenant improvements and tenant allowances.

Add back amortization of deferred leasing costs and deferred financing costs.

Subtract capitalized expenditures related to the normal and recurring operations and maintenance of the Real Estate Investments (e.g. building improvements, lease-hold improvements, property leasing expenditures and land improvements).

Subtract gains and add back losses from sales of real estate investments.

Add back the Variable Portion of the Advisor’s Asset Management Fee and the “Variable Portion” of the Manager’s “Management Fee” (as those terms are defined in the Management Agreement).

Subtract gains and add back expenses for changes in accounting methodology.

Subtract income caused by the straight-lining of rental income and add back expense from the straight-lining of interest expense (including straight- lining of lease termination payments).

Subtract gains and add back losses of hedging through derivatives.

Add back the effects of impairment (per FAS 144).

Subtract gains and add back losses from extraordinary items.

Adjust the Fund’s income from unconsolidated joint ventures and discontinued operations, and expenses from minority interests, in the same manner described above.

Other modifications to net income may be made by the Advisor, with approval of the Manager, to cause Net Distributable Cash to better reflect normal cash flow from operation of Managed Assets on a consistent basis. If the calculation of the Fund’s net income is altered under GAAP, appropriate modifications shall be made to this definition to make such changes immaterial to the calculation of Net Distributable Cash.

“Non-Primary Investments” has the meaning set forth in the Investment Guidelines attached hereto as Exhibit B.

A-5

“Other Investments” has the meaning set forth in the Investment Guidelines attached hereto as Exhibit B.

“Person” means any individual, partnership, limited liability company, corporation, joint venture, trust, business trust, association or other entity.

“Plan Asset Regulations” has the meaning set forth in Section 3(e) hereof.

“Primary Investments” has the meaning set forth in the Investment Guidelines attached hereto as Exhibit B.

“Property Level Insurance” has the meaning set forth in Section 3(a)(vii) hereof.

“Qualified Replacement” means an individual who is selected and appointed by the Advisor to serve in a position as a Senior Executive Officer and who has such real estate investment management, property management, brokerage, acquisition or disposition experience and other qualifications as are consistent with the duties and responsibilities of such position.

“Real Estate Claims” has the meaning set forth in Section 20(a) hereof.

“Real Estate Investments” has the meaning set forth in Section 2 hereof.

“REIT” means a real estate investment trust within the meaning of Section 856 of the Code.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Senior Executive Officer” means the following officer positions of the Advisor: (a) the senior account officer for the Fund, which initially shall be Peter H. Schaff; (b) an officer responsible for portfolio management, which initially shall be Anthony C. O’Malley; and (c) an officer responsible for business operations and investment structuring, which initially shall be C. Allan Swaringen.

“Shares” means the shares of Common Stock, par value $0.01 per share, of the Fund.

“SOX” has the meaning set forth in Section 5(b) hereof.

“Specified Wealth Manager” means (a) a company with greater than $20 billion of assets under management for clients that are High Net Worth Individuals or (b) any Affiliate of a company specified in clause (a).

“Standard Landlord Tenant Litigation” means any Real Estate Claim that relates only to one or more of the following:

(a) the amount of rent and other charges to be paid by a tenant under a lease (including operating expenses or additional rent);

A-6

(b) the length of the term of a lease;

(c) the eviction of a tenant from the premises; or

(d) the amount of any payments by a tenant relating to termination of the lease.

“Subscription Agreement” means each Subscription Agreement executed by a holder of Shares pursuant to which such holder agreed to purchase Shares from the Fund.

“Tax Preparer” has the meaning set forth in Section 5(g) hereof.

“Treasury Regulations” means the Procedure and Administration Regulations promulgated by the U.S. Department of Treasury under the Code, as amended.

“Valuation Consultant” has the meaning set forth in Section 3(a)(xii) hereof.

“Variable Portion” has the meaning set forth in the Fee Schedule attached hereto as Exhibit C.

“VCOC” has the meaning set forth in Section 3(e) hereof.

A-7

Exhibit B

to

Investment Advisory Agreement

INVESTMENT GUIDELINES

The following sets forth the general investment guidelines established by the Fund for the Real Estate Investments. Unless otherwise approved by the Board:

(a) Investment Criteria. The Fund shall invest primarily in a portfolio of high-quality properties located primarily in the United States that is diversified both geographically and across property sectors. The Fund shall invest primarily in well-located, well-leased assets within the four primary institutional property sectors: office (including without limitation, medical office), industrial, apartments, and retail properties and other institutional quality properties consistent with the Fund’s strategy (“Primary Investments”). After the Fund’s Net Asset Value has exceeded $300 million, the Fund may also invest up to twenty-five percent (25%) of the Fund’s assets, measured at the time the investment is made, in property sectors other than Primary Investments (“Non-Primary Investments”) and properties outside of the United States (“Foreign Investments,” and together with Non-Primary Investments, the “Other Investments”).

(b) Investment Structure. The Fund will make equity and debt investments in real estate and real estate-related assets directly or indirectly through subsidiaries, including joint venture arrangements with third parties.

(c) Leverage. Advisor may leverage any Real Estate Investment, provided, that recourse with respect to any such loan is limited to such Real Estate Investment, and provided, further, at the time any leverage is put in place (i) the Fund’s long-term non-recourse financing, on a portfolio-wide basis, shall not exceed sixty-five percent (65%) of the most recent valuation of the Fund’s Real Estate Investments and (ii) the leverage being put in place on any one Real Estate Investment shall not exceed seventy-five percent (75%) of the value of the Real Estate Investment being leveraged. The Fund may, subject to Section 3(a)(ix), obtain one or more unsecured working capital credit facilities, upon the approval of the Manager and the Board, for short-term operating, cash flow and other financing needs, which will not be included in calculating the leverage employed by the Fund. Notwithstanding the foregoing, (1) non-recourse financing shall be subject to standard carve-outs for environmental matters and improper actions of the borrower, such as misappropriation of rents following a default, non-payment of real estate taxes, and misappropriation of security deposits, (2) with respect to certain Real Estate Investments which involve substantial construction or reconstruction, various completion guarantees and repayment guarantees will be permitted, and (3) with respect to portfolio acquisitions (i.e., acquisitions by the Fund of more than one Real Estate Investment in a single transaction or series of related transactions) mortgage financings which are cross-collateralized and cross-defaulted amongst the acquired portfolio shall be permitted.

B-1

(d) Diversification. The Fund’s diversification objectives will be achieved over time and as its investment base accumulates. Phase I diversification is targeted to be met while the Fund’s NAV is less than $300 million. Phase II diversification is targeted as the Fund’s NAV exceeds $300 million. The tables below outline the Fund’s diversification objectives during both phases.

Style Allocation Targets:

	Phase I Range	Phase II Range
Core to core-plus (Primary)	70% - 100%	50% - 100%
Value-add (Primary)	0% - 30%	0% - 40%
Opportunistic	0%	0% - 10%

Property Type Allocation Targets:

Phase I, the Fund will attempt to limit the exposure to any one property type to 50% of the total portfolio.

Phase II, the Fund will manage the property exposures within the Primary Investment portfolio to +/- 50% of the NPI allocation to each property type as of the most recent year end.

Phase II, the Fund will have the opportunity to allocate up to 25% of the NAV to Other Investments.

Phase II	Range	NPI Weight as of 12/31/03	NPI Based Range as of 12/31/03
Office	NPI ± 50%	39%	20% to 59%
Retail	NPI ± 50%	21%	11% to 32%
Industrial	NPI ± 50%	20%	10% to 30%
Multifamily	NPI ± 50%	19%	10% to 29%
Total Primary Investments	75% - 100%	99%	100%
Other Investments	0 - 25%	1%	N/A

B-2

Geographic Allocation Targets (Both Phase I & II):

The Fund will attempt to be diversified by metropolitan statistical area (MSA) in the United States. The Fund will invest no more than 40% of the real estate allocation into any single MSA for the 20 largest MSAs and no more than 20% of the allocation in any other single MSA.

Phase II Geographic Allocation Targets:

Phase II	Range	NPI Weight as of 12/31/03	NPI Based Range as of 12/31/03
East	NPI ± 75%	31%	8% to 54%
Midwest	NPI ± 75%	14%	4% to 25%
South	NPI ± 75%	21%	5% to 37%
West	NPI ± 75%	34%	9% to 60%
Total Primary Investments	75% - 100%	100%	100%
International	0% to 25%	0%	N/A

Exhibit C

to

Investment Advisory Agreement

FEE SCHEDULE

A. Acquisition Fee. The Fund shall pay Advisor an acquisition fee (the “Acquisition Fee”) equal to one-half percent (0.5%) of the Acquisition Cost of each Real Estate Investment acquired by the Fund. The Acquisition Fee shall be paid upon the closing of the acquisition of each Real Estate Investment.

If, during the term of this Agreement, the Fund purchases additional property adjacent to any Real Estate Investment in connection with a development opportunity identified by

B-3

Advisor (such property, an “Adjoining Parcel”), then, such Adjoining Parcel shall be treated as a separate “Real Estate Investment” and Advisor shall be entitled to receive an Acquisition Fee with respect thereto.

B. Asset Management Fee. The Fund shall pay Advisor an annual asset management fee (the “Asset Management Fee”) as follows:

(i) an amount equal to 0.75% of the Net Asset Value attributable to the Managed Assets (i.e., the Net Asset Value of the Fund determined without regard to the value of any investment managed by an Additional Advisor or any debt or other liability attributable thereto) as of the beginning of each calendar quarter to which such fee relates, plus any additional amount attributable to the receipt of funds into the Fund’s operating account during the quarter from the sale of Shares, calculated on a weighted average basis taking into account the timing of the receipt of such funds during such quarter (the “Fixed Portion”); and

(ii) an amount equal to the Applicable Percentage of the Net Distributable Cash of the Managed Assets as of the end of each quarter (the “Variable Portion”).

The Fixed Portion shall be paid quarterly in arrears on the fifth Business day after the end of the quarter for which the services are rendered. The Variable Portion shall be paid within ten (10) days after calculation of the Net Distributable Cash for the applicable quarter.

For purposes of any partial quarter during the term, including, without limitation, following any termination of the Advisor or this Agreement for any reason pursuant to the terms hereof, the Advisor shall be entitled to receive the pro rata portion of the accrued but unpaid Asset Management Fee for the period of time during the applicable quarter in which the Advisor was an advisor of the Fund.

EX-10.6

Exhibit 10.6

LaSalle Investment Management, Inc.

200 East Randolph Drive

Chicago, Illinois 60601

December 23, 2004

U.S. Trust Company, N.A.

225 High Ridge Road

Stamford, Connecticut 06905

Re:      Excelsior LaSalle Property Fund, Inc.

Gentlemen:

Reference is made to that certain Investment Advisory Agreement (the “Advisory Agreement”), of even date herewith, by and among Excelsior LaSalle Property Fund, Inc., a Maryland corporation (the “Fund”), U.S. Trust Company, N.A., a California corporation and national bank (the “Manager”), and LaSalle Investment Management, Inc., a Maryland corporation (the “Advisor”). Unless otherwise defined in Section 6 below or elsewhere in this letter agreement (this “Letter Agreement”), capitalized terms used herein shall have the meanings set forth in the Advisory Agreement. In consideration of each party’s agreement to enter into the Advisory Agreement, the parties hereby agree as follows:

1. Exclusivity of the Advisor.

(a) Notwithstanding anything in the Advisory Agreement to the contrary, subject to Section 1(c), without the prior written consent of the Manager, neither the Advisor nor any of its Affiliates shall:

(i) form, cause to be formed, or serve in a general partner, manager, advisor or similar capacity with respect to, any Open-Ended Large Institutional Fund at any time prior to the second anniversary of the Initial Closing (provided, however, that the Advisor or its Affiliates may form, cause to be formed, or serve in a general partner, manager, advisor or similar capacity with respect to, any entity or investment vehicle created by the contribution of real estate assets to such entity or investment vehicle by individual separate accounts at any time after the date that is twelve (12) months from the Initial Closing); or

(ii) serve in a general partner, manager, advisor or similar capacity with respect to any Open-Ended Fund Vehicle with an investment program substantially similar to that set forth in the Investment Guidelines at any time prior to the date that is eighteen (18) months from the Initial Closing.

C-1

(b) Notwithstanding anything in the Advisory Agreement to the contrary, without the prior written consent of the Manager, subject to Section 1(c), neither the Advisor nor any of its Affiliates shall form, cause to be formed, or serve in a general partner, manager, advisor or similar capacity with respect to, any Open-Ended High Net Worth Fund, Open-Ended Small Institutional Fund, Closed-Ended Small Institutional Fund or Closed-Ended High Net Worth Fund, in each case with a “core” investment strategy, at any time during the term of the Advisory Agreement.

(c) The covenants and agreements of the Advisor pursuant to this Section 1 shall terminate and no longer be effective upon the earliest to occur of the following events: (i) the failure of the Fund to satisfy the Size Condition; (ii) the consolidation or merger with, or sale of all or substantially all of the Manager’s assets or equity securities to, any entity by the Manager, except for any transaction where the persons or entities directly or indirectly controlling the Manager immediately before such transaction control the surviving entity following such transaction; (iii) the termination of the Advisory Agreement; or (iv) the tenth anniversary of the Initial Closing.

2. Exclusivity of the Manager. Notwithstanding anything in the Advisory Agreement to the contrary, without the prior written consent of the Advisor, neither the Manager nor any of its Affiliates shall form or cause to be formed, or serve in a general partner, manager or similar capacity with respect to, any Open-Ended High Net Worth Fund, Open-Ended Small Institutional Fund, Closed-Ended Small Institutional Fund or Closed-Ended High Net Worth Fund, in each case with a “core” investment strategy, at any time during the term of the Advisory Agreement. The covenant and agreement of the Manager pursuant to this Section 2 shall terminate and no longer be effective upon the earliest to occur of the following events: (a) (i) the Advisor consolidates or merges with any Specified Wealth Manager, except for any transaction where the persons or entities directly or indirectly controlling the Advisor immediately before such transaction control the surviving entity following such transaction, (ii) the Advisor sells all or substantially all of its assets to a Specified Wealth Manager or (iii) a Specified Wealth Manager acquires direct or indirect beneficial ownership of equity securities of the Advisor representing 50% or more of the voting power of all outstanding equity securities of the Advisor, provided that at the time of such transaction less than 50% of the outstanding Shares are held by Manager Clients; (b) the termination of the Advisory Agreement; (c) the termination of the Management Agreement; or (d) the tenth anniversary of the Initial Closing.

3. Termination of Advisory Agreement Not for Cause.

(a) In the event that the Advisory Agreement is terminated pursuant to Section 17 thereof at any time during the Initial Term, the Manager shall pay to the Advisor a termination fee, payable in three (3) installments, as follows: (i) on the first anniversary of the effective date of termination, an amount equal to eighty percent (80%) of the Asset Management Fees earned by the Advisor during the 12-month period ending on the effective date of termination; (ii) on the second anniversary of the effective date of termination, an amount equal to fifty percent (50%) of the Asset Management Fees earned by the Advisor during the 12-month period ending on the effective date of termination; and (iii) on the third anniversary of the effective date of termination, an amount equal to thirty percent (30%) of the Asset Management Fees earned by the Advisor during the 12-month period ending on the effective date of termination.

(b) In the event that the Advisory Agreement is terminated pursuant to Section 17 thereof at any time after the Initial Term, the Manager shall pay to the Advisor a termination fee, payable in two (2) installments, as follows: (i) on the first anniversary of the effective date of termination, an amount equal to fifty percent (50%) of the Asset Management Fees earned by the Advisor during the 12-month period ending on the effective date of termination; and (ii) on the second anniversary of the effective date of termination, an amount equal to twenty-five percent (25%) of the Asset Management Fees earned by the Advisor during the 12-month period ending on the effective date of termination.

4. LUSHI Commitment. The Advisor agrees that, except as specifically provided in Section 5 or 6 below or in Section 1(c) of the Advisory Agreement, at all times during the term of the Advisory Agreement, LUSHI, or its permitted successors or assigns, shall maintain an equity investment in the Fund of at least $10 million. The Advisor hereby represents and warrants that the investment in the Fund by LUSHI is permitted under its governing documents and applicable law, and LUSHI will complete a Subscription Agreement providing customary representations and warranties of an investor in a vehicle such as the Fund.

5. Withdrawal and Redemption Rights. The Fund agrees that:

(a) in the event of a termination of the Advisory Agreement for any reason, LUSHI (and/or its permitted successors and assigns) shall be entitled to withdraw its capital from the Fund, and any notice of such termination shall automatically serve as a request by LUSHI (and/or its permitted successors and assigns) for redemption at the Fund’s first redemption date succeeding such notice, which redemption request shall be satisfied in a manner consistent with the Fund’s redemption procedures generally (other than the sixty (60) day notice requirement); and

(b) at any time after the tenth anniversary of the Advisory Agreement, LUSHI (and/or its permitted successors and assigns) shall be entitled to withdraw its capital from the Fund, which withdrawal process shall be satisfied in a manner consistent with the Fund’s redemption procedures generally.

6. Transfer Rights. LUSHI (and/or its permitted successors and assigns) shall be entitled, at any time and from time to time, to transfer and assign any Shares to the Advisor or any of its Affiliates without the consent of the Fund or the Manager; provided that such transfer or assignment is made, upon written notice to the Manager, to an accredited investor and in accordance with the Securities Act, other applicable federal or state securities or other laws, and tax laws applicable to REITs. Additionally, prior to the effectiveness of any such transfer or assignment such transferee or assignee shall agree in writing to maintain the $10 million equity investment in the Fund set forth in Section 4 hereof subject to the redemption rights set forth in Section 5 hereof or Section 1(c) of the Advisory Agreement and to execute and deliver such other documentation as may be reasonably requested by the Manager to assure compliance with this Section 6.

7. Definitions. As used in this Letter Agreement, the following terms shall be defined as follows:

“Affiliate” means, with respect to a specified Person, (a) any person directly or indirectly controlling, controlled by or under common control with the specified Person, (b) a partnership or limited liability company in which the specified Person is a general partner or manager, (c) any officer, director, executive employee, manager or general partner of the specified Person, or (d) if the specified Person is an officer, director, manager, general partner or executive employee, any other entity for which the specified Person acts in any such capacity.

“Closed-Ended” means, with respect to any partnership, limited liability company or other entity or investment vehicle, that such entity or investment vehicle is not Open-Ended.

“Fund Vehicle” means a partnership, limited liability company or other entity or investment vehicle having all of the following characteristics: (a) such entity is formed after the Initial Closing; (b) such entity is formed to invest in multiple real estate or real estate-related investments primarily in the United States; (c) such entity has more than one limited partner, member or other investor (other than the general partner, manager or other controlling person of such entity and its Affiliates); (d) the limited partners, members or other investors in such entity generally are not entitled to participate in the investment decisions with respect to the investments to be acquired by such entity or the investments to be disposed of by such entity; and (e) no single limited partner, member or investor in such entity has the right to terminate or remove the general partner, manager or other controlling person of such entity or cause the termination or liquidation of one or more of the investments of such entity; provided, that any entity with respect to which all of its investments have been identified by the general partner, manager or other controlling person of such entity as of the date such entity first accepts subscriptions from investors shall not be a “Fund Vehicle” for purposes hereof.

“High Net Worth Fund” means a Fund Vehicle marketed primarily to High Net Worth Individuals.

“High Net Worth Individual” means a natural person residing in the U.S. that is an “accredited investor” within the meaning of Section 501(a) of Regulation D under the Securities Act.

“Large Institutional Fund” means a Fund Vehicle marketed primarily to Large Institutions.

“Large Institution” means a U.S. tax-exempt investor with at least $1 billion in assets.

“LUSHI” means LaSalle U.S. Holdings, Inc., a Delaware corporation.

“Manager Client” means any holder of Shares which is, or was at the time of such holder’s subscription for Shares, a client of the Manager or any of its Affiliates or a third party broker-dealer firm first identified, procured and approved by the Manager.

“Open-Ended” means, with respect to any partnership, limited liability company or other entity or investment vehicle, that such entity or investment vehicle (a) is engaged, or intends to engage, in a continuous offering of its shares or other equity interests on a periodic basis for at least the initial five (5) years of its existence and (b) permits holders of its shares or other equity interests to redeem such shares or interests or otherwise obtain liquidity with respect to such shares or interests on a periodic or scheduled basis.

“Person” means any individual, partnership, limited liability company, corporation, joint venture, trust, business trust, association or other entity.

“Size Condition” means that the aggregate amount of equity capital invested in the Fund by the holders of Shares (excluding, for this purpose, equity capital invested in the Fund by the Advisor and its Affiliates), and which remains invested in the Fund by such holders of such Shares, on each of the dates set forth below, equals or exceeds the following amounts:

Date	Amount of Invested Equity
First anniversary of the Initial Closing	$	150 million
Second anniversary of the Initial Closing	$	300 million
Third anniversary of the Initial Closing	$	400 million
Fourth anniversary of the Initial Closing	$	400 million
Fifth anniversary of the Initial Closing	$	400 million
Sixth anniversary of the Initial Closing	$	500 million
Seventh anniversary of the Initial Closing	$	500 million
Eighth anniversary of the Initial Closing	$	700 million
Ninth anniversary of the Initial Closing	$	700 million
Tenth anniversary of the Initial Closing	$	700 million

“Small Institutional Fund” means a Fund Vehicle marketed primarily to Small Institutions.

“Small Institution” means a U.S. tax-exempt investor with less than $1 billion in assets.

“Specified Wealth Manager” means (a) a company with greater than $20 billion of assets under management for clients that are High Net Worth Individuals or (b) any Affiliate of a company specified in clause (a).

8. Management Fees Attributable to LUSHI. Within five (5) Business Days following receipt of its quarterly management fee from the Fund, the Manager shall pay to the Advisor an amount equal to the amount of the Manager’s aggregate fees received from the Fund multiplied by a fraction, the numerator of which is equal to the total number of Shares owned by LUSHI as of the date that the management fee is calculated, and the denominator of which is equal to the total number of outstanding Shares of the Fund as of such date. The Advisor may rebate, offset or reduce its fees to LUSHI or to LUSHI’s direct or indirect shareholders to reflect the Advisor’s receipt of payments from the Manager pursuant to this Section 8 and fees from the Fund; provided, that (i) any such rebate, offset or reduction occurs no closer than thirty (30) days before or after any dividend distribution by the Fund, and (ii) any such rebate, offset or reduction is made among LUSHI’s direct or indirect shareholders in proportion to their respective interests in LUSHI.

9. Interpretation. In the event of any conflict or inconsistency between the provisions of this Letter Agreement, on the one hand, and the provisions of that certain Side Letter Agreement between the parties hereto dated as of June 16, 2004, on the other, the provisions of this Letter Agreement shall govern and control.

10. Counterparts. This Letter Agreement may be executed in separate counterparts, each of which shall be deemed an original, but the several counterparts shall together constitute one and the same agreement of the parties hereto.

[Signature page follows]

If you are in agreement with the foregoing, please sign in the space provided below.

Very truly yours,
LASALLE INVESTMENT MANAGEMENT, INC.
By:	/s/ Peter H. Schaff
Name:	Peter H. Schaff
Its:	Vice President

Accepted and Agreed this     day of December, 2004:

U.S. TRUST COMPANY, N.A.
By:	/s/ Douglas A. Lindgren
Name:	Douglas A. Lindgren
Its:	Managing Director

Agreed and acknowledged with respect to

the provisions of Section 5.

EXCELSIOR LASALLE PROPERTY FUND, INC.
By:	/s/ Douglas A. Lindgren
Name:	Douglas A. Lindgren
Its:	President

EX-10.15

Exhibit 10.15

AMENDMENT No. 1

to

AMENDED AND RESTATED MANAGEMENT AGREEMENT

This AMENDMENT No. 1 (“Amendment”) to that certain AMENDED AND RESTATED MANAGEMENT AGREEMENT dated June 19, 2007 (the “Management Agreement”) by and between Excelsior LaSalle Property Fund, Inc. (the “Fund”) and Bank of America Capital Advisors, Inc. (the “Manager”).

WHEREAS, the Manager has informed the Board of Directors of the Fund (the “Board”) that it is currently reviewing various strategic alternatives relating to the Fund which may impact the structure of the Fund or its long term viability and that it expects to make a recommendation to the Board regarding these matters in the near future;

WHEREAS, the Manager and the Board agree that it would be appropriate for the Board to consider and act on any such recommendation before the Board is required, by the terms of the Management Agreement, to act to provide any notice required under the Management Agreement relating to its renewal after its Initial Term (as defined therein).

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and for other good and valuable consideration the sufficiency and receipt whereof are hereby acknowledged, the parties hereto agree as follows:

1. (a) Section 9 of the Management Agreement is hereby amended to provide that any notice required to be given by the Board relating to the possible non-renewal of the Management Agreement after its Initial Term (“Termination Notice”) shall be deemed to have been timely given if such notice is delivered to the Manager by June 30, 2010.

(i) If a Termination Notice is not provided by June 30, 2010, then the Initial Term shall be deemed to have ended on December 23, 2009 and the first Renewal Term shall be deemed to have commenced on December 24, 2009.

(ii) If a Termination Notice is provided by June 30, 2010, then the Initial Term shall be deemed to end on a date that is 180 days after receipt of such Termination Notice or such earlier date as the parties may mutually agree.

(b) Except as specifically provided above, the terms and provisions of the Management Agreement remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the 4th day of December, 2009.

EXCELSIOR LaSALLE PROPERTY FUND, INC.
By:	/s/ James D. Bowden
	Name:  James D. Bowden
	Title:    President
BANK OF AMERICA CAPITAL ADVISORS, INC.
By:	/s/ Steven L. Suss
	Name:  Steven L. Suss
	Title:    Senior Vice President

EX-10.16

Exhibit 10.16

AMENDMENT TO THE INVESTMENT ADVISORY AGREEMENT

THIS AMENDMENT TO THE INVESTMENT ADVISORY AGREEMENT is made as of September 15, 2005, by and between EXCELSIOR LASALLE PROPERTY FUND, INC., a Maryland corporation (the “Fund”), U.S. TRUST COMPANY, N.A., a California corporation and national bank acting through its investment advisory division, U.S. Trust Company, N.A. Asset Management Division (the “Manager”), and LaSALLE INVESTMENT MANAGEMENT, INC., a Maryland corporation (the “Advisor”).

W I T N E S S E T H:

WHEREAS, the Fund and the Manager are parties to a Management Agreement dated as of December 23, 2004, pursuant to which the Manager is responsible for the day-to-day management and administration of the Fund; and

WHEREAS, the Fund and the Adviser are parties to an Investment Advisory Agreement dated as of December 23, 2004, pursuant to which the Advisor serves as the investment advisor for the Fund; and

WHEREAS, the Fund, the Manager and the Adviser desire to amend the Investment Advisory Agreement to change the defined term “Net Distributable Cash” to “Variable Fee Based Amount” and to make certain other, minor, technical changes in how that definition works.

NOW, THEREFORE, the parties hereby agree as follows:

1. The definition of “Net Distributable Cash,” as stated in Exhibit A to the Investment Advisory Agreement is revised as follows:

“Variable Fee Base Amount” is meant to reflect the Fund’s ability to generate cash from normal operations for purposes of calculating certain management and advisory fees, and it is not intended to be an actual measure of cash available for dividend distributions. It shall be calculated beginning with net income of the Fund from Managed Assets of the Advisor for the fiscal period, as calculated under GAAP consistently applied, and adjusted for the following factors (without duplication):

Add back depreciation of assets.

Add back amortization of intangibles.

Add back depreciation of tenant improvements and tenant allowances.

Add back amortization of deferred leasing costs and deferred financing costs.

Subtract capitalized expenditures related to the normal and recurring operations and maintenance of the Real Estate Investments (e.g. building improvements, lease-hold improvements, property leasing expenditures and land improvements).

Subtract gains and add back losses from sales of real estate investments.

Add back the Variable Portion of the Advisor’s Asset Management Fee and the “Variable Portion” of the Manager’s “Management Fee” (as those terms are defined in the Management Agreement).

Subtract gains and add back expenses for changes in accounting methodology.

Subtract income caused by the straight-lining of rental income and add back expense from the straight-lining of interest expense (including straight-lining of lease termination payments).

Subtract gains and add back losses of hedging through derivatives.

Add back the effects of impairment (per FAS 144).

Subtract gains and add back losses from extraordinary items.

Adjust the Fund’s income from unconsolidated joint ventures and discontinued operations, and expenses from minority interests, in the same manner described above.

Add back/subtract other adjustments to/from GAAP net income that more appropriately “follow the cash” generated by the investments (examples include preferred returns, guaranteed returns, rebates of real estate tax expense, etc.) plus any deductions from the cash generated by the investments for non-operating items (for example the Fund’s proportionate share of principal payments on debt).

The amortization of principal and repayment of debt are not subtracted from the Fund’s net income in arriving at the Variable Fee Base Amount.

Other modifications to net income may be made by the Advisor, with approval of the Manager, to cause Variable Fee Base Amount to better reflect normal cash flow from operation of Managed Assets on a consistent basis. If the calculation of the Fund’s net income is altered under GAAP, appropriate modifications shall be made to this definition to make such changes immaterial to the calculation of Variable Fee Base Amount.

2. All references to the term “Net Distributable Cash” in Exhibit C are replaced with the term “Variable Fee Based Amount.”

3. The Investment Advisory Agreement, as expressly amended hereby, shall continue in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT TO THE INVESTMENT ADVISORY AGREEMENT as of the day and year first above written.

EXCELSIOR LASALLE PROPERTY FUND, INC.
By:	/s/ James D. Bowden
	Name:	James D. Bowden
	Title:	President
U.S. TRUST COMPANY, N.A.
By:	/s/ James D. Bowden
	Name:	James D. Bowden
	Title:	Managing Director
LaSALLE INVESTMENT MANAGEMENT, INC.
By:	/s/ C. Allan Swaringen
	Name:	C. Allan Swaringen
	Title:	Managing Director

EX-21

Exhibit 21

ELPF Subsidiaries as of March 15, 2010	State or Jurisdiction or Incorporation	Percent Owned by the Fund
Excelsior LaSalle Property Fund Inc.	Maryland	100.00	%
Legacy Village Holdings III LLC	Delaware	100.00	%
Legacy Village Holdings II LLC	Delaware	100.00	%
Legacy Village Holdings LLC	Delaware	100.00	%
Legacy Village Investors LLC	Delaware	46.50	%
Village Valet, LLC	Delaware	46.50	%
MIVPO Member LLC	Delaware	100.00	%
MIVPO LLC	Delaware	100.00	%
ELPF Atlanta Member LLC	Delaware	100.00	%
ELPF Jackson LLC	Delaware	100.00	%
ELPF Barrow LLC	Delaware	100.00	%
ELPF Cobb LLC	Delaware	100.00	%
LaSalle Monee Purchaser LLC	Delaware	100.00	%
LaSalle Monee Lender LLC	Delaware	100.00	%
ELPF / Sutter Holdings, LLC	Delaware	100.00	%
CEP XII Investors LLC	Delaware	80.00	%
ELPF Kendall LLC	Delaware	100.00	%
ELPF Waipio LLC	Delaware	100.00	%
ELPF Northglenn Member LLC	Delaware	100.00	%
ELPF Northglenn LLC	Delaware	100.00	%
ELPF Medical Holdings LLC	Delaware	100.00	%
ELPF Acquisitions #1 partners LLC	Delaware	100.00	%
ELPF Chandler 485 South Dobson LLC	Delaware	100.00	%
ELPF Northridge 18350 Roscoe LLC	Delaware	100.00	%
ELPF Phoenix 4545 East Chandler LLC	Delaware	100.00	%
ELPF Van Nuys 14624 Sherman LLC	Delaware	100.00	%
ELPF Bakersfield 500 Old River LLC	Delaware	100.00	%
ELPF Gilbert 1501 North Gilbert LLC	Delaware	100.00	%
ELPF Northridge 18546 Roscoe LLC	Delaware	100.00	%
ELPF Sun Lakes 10440 East Riggs LLC	Delaware	100.00	%
ELPF Phoenix 500 West Thomas LLC	Delaware	100.00	%
ELPF Santa Maria 116 South Palisade LLC	Delaware	100.00	%
ELPF Glendale 1500 South Central LLC	Delaware	100.00	%
ELPF Northridge 18460 Roscoe LLC	Delaware	100.00	%
ELPF Van Nuys 14600 Sherman LLC	Delaware	100.00	%
ELPF Bakersfield 300 Old River LLC	Delaware	100.00	%
ELPF Santa Maria 525 East Plaza LLC	Delaware	100.00	%
ELPF Sherman Way Parking LLC	Delaware	100.00	%
ELPF Met Park North LLC	Delaware	100.00	%
ELPF Slidell Member, Inc.	Delaware	100.00	%
ELPF Slidell LLC	Delaware	100.00	%
ELPF Slidell Manager Inc.	Delaware	100.00	%
ELPF Meridian LLC	Delaware	90.00	%
9800 South Meridian LLC	Delaware	90.00	%
ELPF Forge Drive LLC	Delaware	90.00	%
Forge Cupertino LLC	Delaware	90.00	%
ELPF Norfleet LLC	Delaware	100.00	%
ELPF Station Nine LLC.	Delaware	100.00	%
ELPF Missouri Research Park I LLC	Delaware	100.00	%

ELPF Subsidiaries as of March 15, 2010	State or Jurisdiction or Incorporation	Percent Owned by the Fund
ELPF Missouri Research Park II LLC	Delaware	100.00	%
ELPF Howell Mill LLC	Delaware	100.00	%
ELPF Scranton Road LP	Delaware	100.00	%
ELPF Railway GP Inc.	Alberta	100.00	%
ELPF Railway LP	Delaware	100.00	%
ELPF Canada Investors GP Inc.	Delaware	100.00	%
ELPF Canada Investors LP	Delaware	100.00	%
ELPF Canada Trust	Delaware	100.00	%
ELPF 6807 Railway Street Inc	Alberta	100.00	%
ELPF 6807 Railway Street Leasehold ULC	Alberta	100.00	%
Holding Gainesville LLC	Delaware	78.00	%
Investor Gainesville LLC	Delaware	100.00	%
ELPF Gainesville LLC	Delaware	100.00	%
Holding Athens LLC	Delaware	78.00	%
Investor Athens LLC	Delaware	100.00	%
ELPF Athens LLC	Delaware	100.00	%
Holding Columbia LLC	Delaware	78.00	%
Investor Columbia LLC	Delaware	100.00	%
ELPF Columbia LLC	Delaware	100.00	%
Holding San Marcos LLC	Delaware	78.00	%
Investor San Marcos LLC	Delaware	100.00	%
ELPF San Marcos LLC	Delaware	100.00	%
ELPF Tampa Holding LLC	Delaware	100.00	%
ELPF Tampa LLC	Delaware	78.00	%
ELPF Lafayette LLC	Delaware	100.00	%
ELPF Lafayette Manager, Inc.	Delaware	100.00	%
ELPF Lafayette Member Inc.	Delaware	100.00	%

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, James D. Bowden, certify that:

1. I have reviewed this annual report on Form 10-K of Excelsior LaSalle Property Fund, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2010	/S/    JAMES D. BOWDEN
	James D. Bowden President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Steven Suss, certify that:

1. I have reviewed this annual report on Form 10-K of Excelsior LaSalle Property Fund, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2010	/S/    STEVEN SUSS
	Steven Suss Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Excelsior LaSalle Property Fund, Inc. (the “Fund”) on Form 10-K for the period ending December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James D. Bowden, in my capacity as Chief Executive Officer of the Fund, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund.

/S/    JAMES D. BOWDEN        

James D. Bowden

President and Chief Executive Officer

March 15, 2010

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Excelsior LaSalle Property Fund, Inc. (the “Fund”) on Form 10-K for the period ending December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven Suss, in my capacity as Chief Financial Officer of the Fund, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund.

/S/    STEVEN SUSS        

Steven Suss

Chief Financial Officer

March 15, 2010