8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 28, 2006

NNN Apartment REIT, Inc.

(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction
of incorporation) 333-130945
(Commission
File Number) 20-3975609
(I.R.S. Employer
Identification No.)

1551 N. Tustin Avenue,
Suite 200 Santa Ana, California
(Address of principal
executive offices) 92705
(Zip Code)

Registrant’s telephone number, including area code: 714-667-8252

Not Applicable

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EXHIBIT 10.1

EXHIBIT 10.2

EXHIBIT 10.3

EXHIBIT 10.4

EXHIBIT 10.5

EXHIBIT 10.6

EXHIBIT 10.7

EXHIBIT 10.8

EXHIBIT 10.9

EXHIBIT 10.10

EXHIBIT 10.11

EXHIBIT 10.12

EXHIBIT 10.13

EXHIBIT 10.14

EXHIBIT 10.15

EXHIBIT 10.16

EXHIBIT 99.1

Item 1.01 Entry into a Material Definitive Agreement.

     On May 4, 2006, Triple Net Properties, LLC, or our Sponsor, entered into an agreement, or the Agreement, with TR Hidden Lake Partners, Ltd., an unaffiliated third party, or the Seller, for the purchase of Hidden Lake Apartment Homes, a 380-unit class-A apartment property which consists of 19 buildings, located in San Antonio, Texas, or the Hidden Lake property, for a purchase price of $32,000,000. On May 5, 2006, May 25, 2006, and June 2, 2006, our Sponsor entered into agreements, or collectively the Feasibility Extensions, with Seller to extend the Feasibility Period (as defined in the Agreement). On September 11, 2006 and September 25, 2006, our Sponsor and the Seller entered into a letter agreement to establish October 12, 2006 as the closing date and to extend the closing date, respectively, for the acquisition. On November 27, 2006, our Sponsor entered into an amendment to the Agreement, to materially amend the Agreement to extend the closing date, to amend the purchase price of the property to $32,030,000, and to provide for an extension fee of $175,000, of which $150,000 would be applied to the purchase price. On December 28, 2006, our Sponsor executed an assignment, or the Assignment, to assign all of its interest as the buyer in the Agreement, as amended, to Apartment REIT Hidden Lakes, LP, our wholly-owned subsidiary.

     The above descriptions of the Agreement, Feasibility Extensions, Amendments, and Assignment are qualified in their entirety by the terms of the Agreement, Feasibility Extensions, Amendments, and Assignment, attached hereto as Exhibits 10.1 through 10.8 of this Report.

Item 2.01 Completion of Acquisition or Disposition of Assets.

     The information reported in Item 1.01 of this Current Report on Form 8-K, is incorporated herein by reference.

     On December 28, 2006, we purchased the Hidden Lake property for a purchase price of $32,030,000 from the Seller. Currently, the Hidden Lake property is approximately 99.5% leased. We financed the purchase price of the property with $19,218,000 in borrowings under a secured loan (as described below) with Wachovia Bank, National Association, or Wachovia, a $10,000,000 unsecured loan (as described below) from NNN Realty Advisors, Inc., the parent company of our Sponsor, and $2,500,000 in borrowings under our existing secured revolving line of credit with Wachovia (as described below). The balance was provided for with funds raised through our initial public offering. We paid an acquisition fee of $961,000, or 3.0% of the purchase price, to Triple Net Properties Realty, Inc., an affiliate of our Sponsor and NNN Apartment REIT Advisor, LLC, our advisor.

Item 2.03 Creation of a Direct Financial Obligation under an Off-Balance Sheet Arrangement of a Registrant.

     In connection with the acquisition of the Hidden Lake property, Apartment REIT Hidden Lakes, LP, our wholly owned subsidiary, entered into a secured loan with Wachovia on December 28, 2006, or the Loan, evidenced by a promissory note, or the Promissory Note, in the principal amount of $19,218,000. The Promissory Note is secured by a Deed of Trust, Security Agreement and Fixture Filing on the Hidden Lake property and matures on January 11, 2017, or the Maturity Date. In general, the Promissory Note may not be prepaid prior to three months before the Maturity Date. The Promissory Note bears interest at a fixed rate of 5.34% per annum, or the Note Rate, and requires monthly interest only payments beginning on February 11, 2007 for the 10-year term of the Loan. The Promissory Note provides for a default interest rate of 9.34% per annum in an event of default and late charges in an amount equal to 3.0% of the amount of any overdue payments, in addition to any default interest payments. Performance under the Promissory Note has been guaranteed by NNN Apartment REIT, Inc. under an Indemnity and Guaranty Agreement in favor of Wachovia, or Indemnity and Guaranty. The Loan documents contain customary representations, warranties, covenants and indemnities as well as provisions for reserves and impounds.

     The Promissory Note, the related Deed of Trust, Security Agreement and Fixture Filing, Indemnity and Guaranty, Assignment of Leases and Rents, Assignment of Warranties and Contract Rights, Environmental Indemnity Agreement and SEC Indemnity and Guaranty Agreement have been filed as Exhibits 10.9 through 10.15 to this Current Report on Form 8-K and are incorporated into this Item 2.03 by reference.

     On December 28, 2006, we also entered into an unsecured loan with NNN Realty Advisors, Inc., evidenced by an unsecured promissory note in the principal amount of $10,000,000, or the Unsecured Note. The Unsecured Note matures on June 28, 2007. The Unsecured Note bears interest at a fixed rate of 6.86% per annum and requires monthly interest only payments beginning on February 1, 2007 for the term of the Unsecured Note. The Unsecured Note provides for a default interest rate in an event of default equal to 8.86% per annum. NNN Realty Advisors, Inc. is the parent company of Triple Net Properties, LLC, our Sponsor, and therefore this loan is deemed a related party loan. The terms of this related party loan and the Unsecured Note, were approved by our board of directors, including the majority of our independent directors, and deemed fair, competitive and commercially reasonable by our board of directors. The foregoing description of the Unsecured Note is qualified in its entirety by the terms of the Unsecured Note, attached hereto as Exhibit 10.16 of this Current Report on Form 8-K.

     On December 28, 2006, we also borrowed $2,500,000 under our existing secured revolving line of credit with Wachovia. We entered into a credit agreement, or the Credit Agreement, with Wachovia on October 31, 2006 to obtain a secured revolving line of credit with a maximum amount of $75,000,000 that matures on October 31, 2009 and bears interest at our choice of a base rate loan, at the greater of Prime Rate plus 0.50% per annum or the Federal Funds Rate plus 1.00% per annum, or a LIBOR loan at LIBOR plus 1.50% per annum. On November 22, 2006, we entered into a first amendment to the Credit Agreement, or the First Amendment, with Wachovia and LaSalle Bank National Association to provide for the assignment of 50.0% of Wachovia’s interest, rights and obligations under the Credit Agreement. The foregoing description of the Credit Agreement and the First Amendment, are qualified in their entirety by the terms of the Credit Agreement, the First Amendment and related agreements, filed as Exhibits 10.9 through 10.14 to our Current Report on Form 8-K filed on November 3, 2006 and Exhibits 10.1 through 10.4 to our Current Report on Form 8-K filed on November 28, 2006, and are incorporated into this Item 2.03 by reference.

Item 7.01 Regulation FD Disclosure.

     On January 4, 2007, we issued a press release announcing our acquisition of the Hidden Lake property, the secured loan from Wachovia, and the status of our public offering. A copy of the press release, which is hereby incorporated into this filing in its entirety, is attached to this Current Report on Form 8-K as Exhibit No. 99.1

     The information furnished under this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

     Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements.

It is not practical to provide the required financial statements at this time. Such financial statements will be filed as an amendment to this report on Form 8-K no later than 71 days after the deadline for filing this Form 8-K.

(b) Pro Forma Financial Information.

     See paragraph (a) above.

(d) Exhibits.

     The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NNN Apartment REIT, Inc.
January 4, 2007	By:	/s/ Stanley J. Olander
		Name: Stanley J. Olander
		Title: Chief Executive Officer

Exhibit Index

No.	Description
10.1	Contract of Sale dated May 4, 2006 by and between TR Hidden Lake Partners, Ltd. and Triple Net Properties, LLC
10.2	Letter Agreement pursuant to the Contract of Sale dated May 5, 2006 by and between TR Hidden Lake Partners, Ltd. and Triple Net Properties, LLC
10.3	Letter Agreement pursuant to the Contract of Sale dated May 25, 2006 by and between TR Hidden Lake Partners, Ltd. and Triple Net Properties, LLC
10.4	Amendment to the Contract of Sale dated June 2, 2006 by and between TR Hidden Lake Partners, Ltd. and Triple Net Properties, LLC
10.5	Letter Agreement pursuant to the Contract of Sale dated September 11, 2006 by and between TR Hidden Lake Partners, Ltd. and Triple Net Properties, LLC
10.6	Amendment to the Contract of Sale dated September 25, 2006 by and between TR Hidden Lake Partners, Ltd. and Triple Net Properties, LLC
10.7	Amendment to the Contract of Sale dated November 27, 2006 by and between TR Hidden Lake Partners, Ltd. and Triple Net Properties, LLC
10.8	Assignment of Contract dated December 28, 2006 by Triple Net Properties, LLC to Apartment REIT Hidden Lakes, L.P.
10.9	Promissory Note dated December 28, 2006 issued by Apartment REIT Hidden Lakes, LP to Wachovia Bank, National Association
10.10	Deed of Trust, Security Agreement and Fixture Filing dated December 28, 2006 by Apartment REIT Hidden Lakes, LP fro the benefit of Wachovia Bank, National Association
10.11	Indemnity and Guaranty Agreement dated December 28, 2006 by NNN Apartment REIT, Inc. in favor of Wachovia Bank, National Association
10.12	Assignment of Leases and Rents dated December 28, 2006 by Apartment REIT Hidden Lakes, LP to Wachovia Bank, National Association
10.13	Assignment of Warranties and Other Contract Rights dated December 28, 2006 by Apartment REIT Hidden Lakes, LP in favor of Wachovia Bank, National Association
10.14	Environmental Indemnity Agreement dated December 28, 2006 by NNN Apartment REIT, Inc. in favor of Wachovia Bank, National Association*
10.15	SEC Indemnity and Guaranty Agreement dated December 28, 2006 by NNN Apartment REIT, Inc. in favor of Wachovia Bank, National Association
10.16	Unsecured Promissory Note dated December 28, 2006 issued by NNN Apartment REIT Holdings, L.P. in favor of NNN Realty Advisors, Inc.
99.1	Press release dated January 4, 2007

* To be filed by Amendement

EX-10.1

Exhibit 10.1

CONTRACT OF SALE

     THIS CONTRACT OF SALE (this “Contract”) is made and entered as of the Effective Date (as hereinafter defined) by and between TR HIDDEN LAKE PARTNERS, LTD., a Texas limited partnership (“Seller”), and TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company (“Buyer”).

     For and in consideration of the mutual covenants and agreements contained in this Contract and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows:

1. PURCHASE AND SALE. Seller agrees to sell and convey to Buyer, and Buyer agrees to buy from Seller, the Property (hereinafter defined) for the consideration and upon and subject to the terms, provisions and conditions hereinafter set forth. The “Property” means:

(a)	The land situated at 8910 N. Loop 1604 West, San Antonio, Bexar County, Texas, more particularly described in Exhibit A to this Contract (the “Land”), together with (i) the improvements situated on the Land commonly known as Hidden Lake Apartments and all other structures, fixtures, buildings and improvements situated on the Land (such buildings, structures, fixtures and improvements being herein called the “Improvements”), (ii) any and all rights, titles, powers, privileges, easements, licenses, rights-of-way and interests appurtenant to the Land and the Improvements, (iii) all rights, titles, powers, privileges, licenses, easements, rights-of-way and interests, if any, of Seller, either at law or in equity, in possession or in expectancy, in and to any real estate lying in the streets, highways, roads, alleys, rights-of-way or sidewalks, open or proposed; in front of, above, over, under, through or adjoining the Land and in and to any strips or gores of real estate adjoining the Land, and (iv) all rights, titles, powers, privileges, interests, licenses, easements and rights-of-way appurtenant or incident to any of the foregoing, including, without limitation, to the extent owned by Seller, all mineral, oil, gas and other hydrocarbon substances on and under and that may be produced from the Land, as well as all development rights, land use entitlements, air rights, water, water rights, riparian rights, and water stock relating to the Land;
(b)	All equipment, fixtures, appliances, inventory, and other personal property of whatever kind or character owned by Seller and attached to or installed or located on or in the Land or the Improvements and to the extent assignable, all leasehold interest of Seller in and to any equipment, fixtures, appliances, inventory, and other personal property of whatever kind or character leased by Seller and attached to or installed or located on or in the Land or the Improvements including, but not limited to, any furniture, furnishings, drapes and floor coverings, office equipment and supplies, heating, lighting, refrigeration, plumbing, ventilating, incinerating, cooking, laundry, communication, electrical, dishwashing, and air conditioning equipment, disposals, window screens, storm windows, recreational equipment, pool equipment, patio furniture, sprinklers, hoses, tools and lawn equipment, including any personal property owned or, to the extent assignable, leased by the current property manager (the “Personal Property”);
(c)	All of Seller’s right, title and interest in and to all agreements, leases and other agreements that relate to or affect the Land, the Improvements, the Personal Property or the operation thereof, including, without limitation, tenant leases and any guaranties of tenant leases (collectively, “Tenant Leases”) and all security deposits actually paid to or received by Seller in connection therewith (and not as of the Closing Date returned to or

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forfeited by tenants under Tenant Leases), service and maintenance contracts (“Service Contracts”), warranties, guaranties, bonds, licenses and permits, but only to the extent that such Service Contracts, warranties, guaranties, bonds, licenses and permits are assignable by Seller without any necessary third party consent, or to the extent that all necessary third party consents to such assignments have been obtained (provided that Seller shall not be obligated to obtain such third party consents); and

(d)

To the extent assignable at no cost to Seller, all intangible personal property, if any, owned by Seller and related to the Land and the Improvements, including, without limitation: the name “Hidden Lake Apartments”.

2.	CONTRACT SALES PRICE. The total purchase price for the Property (the “Sales Price”) shall be THIRTY TWO MILLION AND NO/100 DOLLARS ($32,000,000.00), payable in cash at Closing. Payment in cash means payment by wire transfer of immediately available federal funds (“Immediately Available Funds”).
3.	EARNEST MONEY. Within two (2) Business Days (as hereinafter defined) of the Effective Date, Buyer shall deliver to LandAmerica Title Company, 8201 Preston Road, Suite 280, Dallas, Texas 75225, Attention: Debbie S. Moore (Phone: (214) 368-3695, the “Title Company”), as escrow agent, ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00) (by Immediately Available Funds) as earnest money (the “Initial Earnest Money”), which funds shall be deposited and held by the Title Company in an interest bearing account, and Buyer shall provide such information, including its federal identification number, as is necessary to establish such account. Upon the closing of that certain Contract of Sale dated as of April ___, 2006, by and between Buyer and TR Walker Ranch Partners, Ltd., a Texas limited partnership, Buyer shall place into escrow with the Title Company an additional amount equal to ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00) as additional earnest money (the “Additional Earnest Money”). To the extent delivered by Buyer, the Initial Earnest Money and the Additional Earnest Money, together with any interest thereon, are collectively referred to as the “Earnest Money”. If Buyer does not timely deliver the Initial Earnest Money as provided in this Section 3, this Contract shall be null and void, and neither party shall have any rights or obligations hereunder. If Buyer has not otherwise terminated this Contract in accordance with the terms hereof, Buyer’s failure to timely deliver the Additional Earnest Money shall constitute a default by Buyer. If the transaction contemplated by this Contract is closed, then the Earnest Money will be applied in payment of the Sales Price to be paid at Closing. In the event the transaction is not closed, then the Title Company shall disburse the Earnest Money in accordance with the provisions of this Contract.
4.	CLOSING.

(a) The closing of the sale of the Property to Buyer (the “Closing”) shall take place at the Title Company on the date (the “Closing Date”) which is thirty (30) days after Buyer’s receipt of certificates of occupancy (“New Buildings CO”) for the four new buildings currently under construction on the Property (collectively, “New Buildings”) in the approximate locations depicted on Exhibit H attached hereto; provided, however, the Closing Date shall not be later than December 31, 2006. If the New Buildings CO has not been obtained by December 1, 2006, Buyer shall have the option to either (i) waive the requirement of the New Buildings CO and proceed to Closing with no reduction of the Purchase Price or (ii) terminate this Contract, whereupon the Earnest Money shall be returned to Buyer and neither party shall have any further obligations except those which expressly survive the termination of this Contract. Buyer shall have a one-time right to

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extend the Closing Date to a date not later than sixty (60) days after Buyer’s receipt of the New Buildings CO, but in no event later than December 31, 2006, by (i) notifying Seller in writing of such extension at least five (5) days prior to the then-scheduled Closing Date, and (ii) simultaneously with delivery of the written notice of extension to Seller, delivering to the Title Company (by Immediately Available Funds) the additional sum of ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00) (the “Extension Fee”) which funds shall be deposited and held by the Title Company in an interest bearing account. Except as expressly provided in this Contract, the Extension Fee shall be non-refundable to Buyer and shall be unconditionally earned by Seller, as compensation to Seller for granting the extension of the Closing Date; provided, however, the Extension Fee shall be applied to the Sales Price at Closing. If Buyer does not deliver the written notice and the Extension Fee in the manner and within the time period required above, then Buyer shall have waived its right to extend the Closing Date.

(b)

At the Closing, Seller shall deliver or cause to be delivered to Buyer, at Seller’s sole cost and expense (except as otherwise provided in this Section 4(b)), the following:

(i)	A Special Warranty Deed, in the form attached hereto as Exhibit B, duly executed and acknowledged by Seller, conveying good and indefeasible title in fee simple to the Land and Improvements, free and clear of any and all liens, encumbrances, easements and assessments, except for Permitted Exceptions (hereinafter defined) and any others approved by Buyer in writing;
(ii)	A Bill of Sale, Assignment and Assumption Agreement (the “Bill of Sale”), in the form attached hereto as Exhibit C, duly executed and acknowledged by Seller;
(iii)	An Assignment of Leases and Assumption Agreement (the “Assignment and Assumption Agreement”), in the form attached hereto as Exhibit D, duly executed and acknowledged by Seller;
(iv)	An Owner’s Policy of Title Insurance (the “Owner’s Title Policy”), delivered in due course by the Title Company after Closing, to be issued by the Title Company on the standard form in use in the State of Texas, in the full amount of the Sales Price, dated as of the Closing Date, insuring Buyer’s fee simple title to the Land and Improvements to be good and indefeasible subject only to Permitted Exceptions and others approved by Buyer in writing, and the standard printed exceptions, provided, however:

(1)	the exception as to area and boundaries may, at the option and expense of Buyer, be deleted except for “any shortages in area”;
(2)	the standard exception as to restrictive covenants shall either be deleted or except only for any restrictive covenants that are Permitted Exceptions;
(3)	the exception as to standby fees and taxes shall be limited to standby fees and taxes for the year of Closing and subsequent years, and subsequent assessments for prior years due to changes in land usage or ownership;

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	Any endorsements to the Owner’s Title Policy (except any Seller’s Curative Endorsements, as hereinafter defined) shall also be at the sole cost and expense of Buyer.
(v)	Possession of the Property, subject only to the Tenant Leases and the Permitted Exceptions;
(vi)	A non-foreign affidavit, in the form attached hereto as Exhibit E, duly executed and acknowledged by Seller;
(vii)	A form of notice to all tenants of the Property (“Tenant Notice Letter”) duly executed by Seller, in the form attached as Exhibit F;
(viii)	Subject to the limitations of this Contract, a recertification of the representations and warranties contained in Section 12;
(ix)	The most current Rent Roll (as hereinafter defined) available to Seller;
(x)	Originals, if available, and otherwise copies of the New Buildings CO;
(xi)	Evidence of its capacity and authority for the closing of this transaction; and
(xii)	Such other documents as may be reasonably required to close this transaction, duly executed.

(c) At the Closing, Buyer shall perform and deliver, at Buyer’s sole cost and expense, the following:

(i)	The Sales Price in Immediately Available Funds (reduced by the amount, if any, of the Earnest Money applied for that purpose);
(ii)	The Assignment and Assumption Agreement duly executed and acknowledged by Buyer;
(iii)	The Tenant Notice Letters duly executed by Buyer;
(iv)	Evidence of its capacity and authority for the closing of the transaction contemplated herein; and
(v)	Such other documents as may be reasonably required to close this transaction, duly executed.

(d) Seller shall pay: the premium for the Owner’s Title Policy and the cost of any Seller’s Curative Endorsements (except the premium of the area and boundary modification (if any) and the cost of any other endorsements shall be paid entirely by Buyer), 1/2 of any escrow fee; fees for preparation of the conveyance documentation; Seller’s attorneys’ fees; any costs of preparing the Existing Survey (as hereinafter defined) and the New Survey (as hereinafter defined) and other expenses stipulated to be paid by Seller under other provisions of this Contract. Buyer shall pay: survey fees (excluding the costs of preparing the Existing Survey or the New Survey but including any others costs to update or recertify the Existing Survey or the New Survey), the costs of any endorsements

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	related to the Owner’s Title Policy (except the cost of any Seller’s Curative Endorsements), including the modification of the survey exception, the cost of any mortgagee policy of title insurance (including endorsements), 1/2 of any escrow fee; Buyer’s attorneys’ fees; and other expenses stipulated to be paid by Buyer under other provisions of this Contract.
(e)	Assessments, current taxes, rents and maintenance fees will be prorated as of the Closing Date; provided, however, no prorations will be made for delinquent rents existing as of the Closing. Proration of taxes will be made on the basis of (i) the assessed value of the Land and Improvements for the year of Closing, if known, or the assessed value of the Land and Improvements for the year before Closing, if such value is not known, multiplied by (ii) the tax rates for the year of Closing, if known, or the rates for the year before Closing, if not known, with a subsequent cash adjustment of such proration to be made between Seller and Buyer, if necessary, within 30 days of when actual tax figures are available. If any such charges, expenses, and income other than taxes are unavailable at the Closing Date, then a readjustment of these items shall be made within 30 days after the Closing. With respect to any delinquent rentals, Buyer will make a reasonable attempt for 3 months following Closing (but shall not be obligated) to collect the same for Seller’s benefit after the Closing in the usual course of the operation of the Property and such collection, if any, will be remitted to Seller promptly upon receipt by Buyer. Nothing contained herein shall operate to require Buyer to institute any lawsuit or other collection procedure to collect such delinquent rentals or to prohibit Seller from any such collection. Any sums received by Buyer from any tenants owing delinquent rentals will be applied first to the current portion of such tenant’s rent, then to any delinquent rentals owed with respect to the period following Closing, and then (and only then) to delinquent rentals owed with respect to the period before Closing. Buyer additionally agrees to pay or reimburse all usual and customary finder’s fees, commissions and the like payable with respect to any Tenant Leases that (1) are executed after the Effective Date and prior to the Closing Date and (2) pursuant to which the Tenant takes occupancy of its unit on or after the expiration of the Feasibility Period. At the Closing, Seller will pay to Buyer in cash the amount of any security deposits actually paid to or received by Seller under the Tenant Leases (and not as of the Closing Date returned to or forfeited by tenants under Tenant Leases) and any prepaid rentals actually paid to or received by Seller for periods subsequent to the Closing; provided, however, non-refundable payments, deposits, or fees (including pet fees/deposits) collected by Seller shall not be prorated. In making the prorations required by this Section 4, the economic burdens and benefits of ownership of the Property for the Closing Date shall be allocated to Buyer. The provisions of this Section 4(e) shall survive the Closing.
(f)	Utilities and other customarily prorated expenses, including, without limitation, water, sewer, gas, electricity, trash removal, and fire protection service, and any contracts or agreements for services to the Property to be transferred to and assumed by Buyer, to the extent paid for by Seller or required to be paid for by Seller for a period after Closing, shall be prorated as of the Closing Date. Other expenses relating to the Property up to the Closing Date and all periods prior thereto including those required by any contract or agreement for any services to the Property and those incurred or ordered by Seller or Seller’s agents that are not to be transferred and assumed by Buyer, including, without limitation, insurance and administrative expenses, shall be paid for by Seller, and Buyer shall not be liable therefor. Seller shall not assign to Buyer, and Buyer shall not be entitled to, any deposits held by any utility company or other company servicing the Property; instead, such deposits shall be returned to Seller, and Buyer shall arrange and

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	bear all responsibility to arrange with all utility companies to have accounts styled in Buyer’s name beginning on the Closing Date. The provisions of this Section 4(f) shall survive the Closing.
(g)	At the Closing, Seller shall deliver to Buyer (or make available at the Property), to the extent in Seller’s possession or control, originals of the Tenant Leases, copies of the tenant correspondence files, keys, access codes, and originals of any other items which Seller was required to furnish or make available pursuant to Section 7, except for Seller’s general ledger and other internal books or records which shall be retained by Seller.
(h)	If any apartment unit is vacated five (5) days or more prior to Closing, then, prior to Closing, Seller shall use commercially reasonable diligence to return such unit to rentable condition in accordance with Seller’s customary cleaning, painting, and repair standards for vacant units, including causing all appliances to be cleaned and in working order (the condition of such an apartment unit after cleaning is referred to herein as a “Rent Ready Condition”). Buyer shall receive a credit for each unit that became vacant on a date that is five or more days prior to Closing and that is not in Rent Ready Condition at Closing in an amount agreed to by Seller and Buyer. In the event Seller and Buyer cannot agree upon the amount with respect to any unit or units which are not in Rent Ready Condition (“Disputed Units”), the sum of $400.00 as to each Disputed Unit shall be withheld from the Sales Price at Closing and deposited in an escrow account (“Make Ready Escrow Account”) maintained by the Title Company under an Escrow Agreement to be agreed upon by Seller and Buyer at Closing. Buyer shall be entitled to withdraw funds from the Escrow Amount as repairs are made to the Disputed Units (up to a maximum of $400.00 per Disputed Unit) within fifteen (15) days from presentation to the Title Company (with a copy to Seller) of a request for disbursement accompanied by copies of paid third party invoices evidencing such work (“Request for Disbursement”); provided, however, Seller shall have the right to dispute such payment by sending written notice of such objection to the Title Company and Buyer within ten (10) days following receipt of the Request for Disbursement. The Title Company shall hold such funds in the Make Ready Escrow Account as to the disputed Request for Disbursement until Seller and Buyer advise the Title Company in writing as to the agreed disbursement of the disputed funds. The balance of the Make Ready Escrow Account shall be paid to Seller upon the earlier to occur of (i) the completion of the repairs to all of the Disputed Units; or (ii) thirty (30) days from Closing.

5. FEASIBILITY STUDY AND INSPECTION.

(a) Buyer is granted the right to conduct engineering and/or market and economic feasibility studies of the Property and a physical inspection of the Property, including studies or inspections to determine the existence of any environmental hazards or conditions (collectively, the “Feasibility Study”) during the period (the “Feasibility Period”) commencing on the Effective Date and ending at 5:00 p.m., Dallas, Texas time on May 5, 2006. With Seller’s permission, after Seller has received advance notice sufficient to permit it to schedule in an orderly manner Buyer’s examination of the Property and to provide at least twenty-four (24) hours advance written notice to any affected tenants, Buyer or its designated agents may enter upon the Property for purposes of analysis or other tests and inspections deemed necessary by Buyer for the Feasibility Study; provided, however, Buyer is not permitted to perform any intrusive testing, including, without limitation, a Phase II environmental assessment or boring, without (i) submitting to Seller the scope and inspections for such testing; and (ii) obtaining the prior

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written consent of Seller which may be withheld in Seller’s sole and absolute discretion. Buyer shall not alter the physical condition of the Property without notifying Seller of its requested tests, and obtaining the written consent of Seller to any physical alteration of the Property. Buyer will exercise its best efforts to conduct or cause to be conducted all inspections and tests in a manner and at times which will not unreasonably interfere with any tenant’s use and occupancy of the Property. If Buyer determines, in its sole judgment, that the Property is not suitable for any reason for Buyer’s intended use or purpose, or is not in satisfactory condition, then Buyer may terminate this Contract by written notice to Seller prior to expiration of the Feasibility Period, in which case the Earnest Money will be returned to Buyer, and neither party shall have any further right or obligation hereunder other than as set forth herein with respect to rights or obligations that survive termination. If the Contract is not terminated in the manner and within the time provided in this Section 5, the condition provided in this Section 5(a) and any and all objections with respect to the Feasibility Study shall be deemed to have been waived by Buyer for all purposes. The Feasibility Study shall be at Buyer’s sole cost and expense.

(b)

Buyer shall promptly restore the Property to its original condition if damaged or changed due to the tests and inspections performed by Buyer, free of any mechanic’s or materialman’s liens or other encumbrances arising out of any of the inspections or tests, and shall provide Seller, at no cost to Seller, with a copy of the results of any tests and inspections made by Buyer, excluding any market and economic feasibility studies. Buyer shall keep confidential the results of any tests and inspections made by Buyer, and shall not disclose said results to any third parties; other than Buyer’s officers, directors, employees, affiliates, counsel, investment advisors, potential lenders, partners, investors and participants and their advisors and other representatives (collectively “Buyer Group”), and the Buyer Group shall be informed to treat such information confidentially and in accordance with the terms and conditions of this Contract. Buyer hereby indemnifies and holds Seller harmless from all claims, liabilities, damages, losses, costs, expenses (including, without limitation, reasonable attorneys’ fees), actions and causes of action arising out of or in any way relating to the Feasibility Study performed by Buyer, its agents, independent contractors, servants and/or employees, including those caused by or in any way contributed to by the negligence of Seller, its agents, independent contractors, servants and/or employees; provided such indemnity shall not extend to the gross negligence or willful misconduct of the Seller, its agents, independent contractors, servants and/or employees. Buyer further waives and releases any claims, demands, damages, actions, causes of action or other remedies of any kind whatsoever against Seller for property damages or bodily and/or personal injuries to Buyer, its agents, independent contractors, servants and/or employees arising out of the Feasibility Study or use in any manner of the Property. Buyer shall procure and continue in force from and after the date Buyer first enters the Property, and continuing throughout the term of this Contract, Comprehensive General Liability Insurance with a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence, or Commercial General Liability Insurance, with limits of not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) per event. Seller and Thompson Realty Corporation shall be included as an additional insured(s) under such comprehensive general liability or commercial general liability coverage. Such insurance shall include: (i) personal injury liability with employee and contractual exclusions removed; and (ii) a waiver of subrogation in favor of Seller without exception for the negligence of any additional insured. Buyer will not be permitted to come onto the Property unless and until Buyer has provided to Seller a

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certificate of insurance evidencing such coverage, the additional insured status of Seller, and such waiver of subrogation. The provisions of this Section 5(b) shall survive the Closing or any termination of this Contract and are not subject to any liquidated damage limitation on remedies, notwithstanding anything to the Contrary in this Contract.

(c)

During the Feasibility Period, Buyer shall review all Service Contracts provided by Seller. Buyer shall notify Seller prior to the expiration of the Feasibility Period of those Service Contracts that it disapproves, and Seller shall, at Seller’s expense, terminate such disapproved Service Contracts effective not later than the Closing Date. All Service Contracts not disapproved by Buyer during the Feasibility Period shall be deemed to have been approved by Buyer, and Buyer shall assume and be liable for any and all obligations under the respective Service Contracts extending past the Closing Date. Notwithstanding the foregoing, Buyer shall be deemed to have approved and shall have no right to reject those Service Contracts that, by their terms, cannot be terminated by Seller without the payment of a penalty, termination fee, or other charge.

6. TITLE APPROVAL.

(a) Seller has previously delivered to Buyer and Buyer acknowledges receipt of: (i) a Commitment for Title Insurance with copies of all recorded instruments affecting the Property and recited as exceptions in said Commitment for Title Insurance (collectively, the “Commitment”) and (ii) the most current survey of the Property in Seller’s possession or control (“Existing Survey”). If Buyer has an objection to items disclosed in the Commitment or the Existing Survey, then Buyer will be entitled to give Seller written notice of its objections for a period of ten (10) Business Days following the receipt of the Commitment and the Existing Survey. If Buyer gives timely written notice of its objections, then Seller may, but shall not have any obligation to, cure such objections for a period of five (5) days from the date Seller receives Buyer’s notice (“Seller’s Cure Period”). Seller shall utilize reasonable diligence to cure any errors in the Commitment, provided Seller shall not have any obligation to expend any money, to incur any contractual or other obligations, or to institute any litigation in pursuing such efforts other than to remove at Closing financing liens of an ascertainable amount created by, through, or under Seller; further provided, notwithstanding the foregoing, Seller is required to cure any objection that may be cured by performance of the following acts: (A) satisfaction of any mortgages placed upon the Property by Seller or expressly assumed by Seller as a lien to secure indebtedness; or (B) causing the release of any mechanic’s liens placed upon the Property by a third party in connection with work performed or alleged to have been performed on the Property by, or at the request of, Seller (collectively “Monetary Encumbrances”). At Seller’s option, Seller may elect to cure an objection made by Buyer by causing the Title Company to issue an endorsement to “insure over” such objection (“Seller’s Curative Endorsement”). If any objection is not satisfied during Seller’s Cure Period, then Buyer shall elect not later then five (5) days after the expiration of Seller’s Cure Period, but in any event on or before expiration of the Feasibility Period, as its sole and exclusive remedy to either: (i) terminate this Contract, in which case the Earnest Money shall be refunded to Buyer, and neither party will have any further rights or obligations pursuant to this Contract, other than as set forth herein with respect to rights or obligations that survive termination; or (ii) waive the unsatisfied objection (which shall thereupon become a Permitted Exception) and proceed to Closing. Any exception to title not objected to by Buyer in the manner and within the time period specified in this Section 6(a) shall be deemed accepted by Buyer. At least thirty (30) days prior to the Closing Date, Seller shall, at Seller’s sole cost and expense, obtain and cause to be

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delivered to Buyer an update of the Existing Survey (“New Survey”) which shall depict the location of New Buildings together with any sidewalks and paving installed in connection with the New Buildings. If the New Survey shows exceptions not previously shown on the Existing Survey (individually a “New Exception” and collectively the “New Exceptions”), Buyer may object to such New Exceptions in accordance with the mechanism contained in this Section 6(a); provided Buyer shall have no right to object to any New Exception if the New Exception (i) is a utility service easement (“Service Easement”) whereby the public utility provides utility service to any portion of the Improvements (including the New Buildings) and the Improvements do not encroach into the boundaries of the Service Easement; or (ii) reflects the addition of paving, sidewalks or landscaping and such additional of paving, sidewalks or landscaping does not cause the Property to violate applicable law or applicable restrictions, or (iii) the location of the New Buildings is the New Buildings are substantially in the locations depicted on Exhibit H attached hereto and the location does not cause the Property to violate applicable law or applicable restrictions. The phrase “Permitted Exceptions” means those exceptions to title set forth in the Commitment or Existing Survey or the New Survey and that have been accepted or deemed accepted by Buyer. The failure of Seller to deliver a Commitment or the Existing Survey satisfying the requirements of this Section 6(a) will not under any circumstances extend the period for review of the Commitment or Existing Survey beyond the Feasibility Period, and Buyer’s sole and exclusive remedy for any such failure shall be to terminate this Contract prior to the expiration of the Feasibility Period in accordance with the provisions of Section 5(a). Buyer shall notify Seller in writing of any failure of the Commitment or Existing Survey to satisfy the requirements of this Section 6(a) within ten (10) days after the Commitment and Existing Survey are received by Buyer, and if Buyer fails to do so, then they shall be deemed to satisfy such requirements.

(b)

After the Effective Date, Seller shall not intentionally or deliberately place on the Property any encumbrance (references to “encumbrance” include any lien, encumbrance, or other exception to title) other than new Tenant Leases as permitted by the terms of this Contract. If prior to the Closing Date title to the Property becomes subject to any encumbrance other than a Permitted Exception, then Seller may (but shall not be obligated to) attempt to cure such encumbrance; provided Seller shall be obligated to remove any Monetary Encumbrance. If Seller is unable or unwilling to cure any such encumbrance, then Buyer may, as its sole and exclusive remedy either: (i) terminate this Contract by written notice to Seller whereupon the Earnest Money and any Extension Fee shall be returned to Buyer, and neither party will have any right or obligation hereunder other than as set forth herein with respect to rights or obligations that survive termination; or (ii) proceed to Closing without receiving any credit against or reduction of the Sales Price whereupon Buyer shall be deemed to have accepted such encumbrance as an exception to title (which shall thereupon become a Permitted Exception).

7. SUBMISSION MATTERS.

(a) To the extent that Seller has not already done so, Seller shall within five (5) business days deliver to Buyer copies of the following (the “Submission Matters”), to the extent (and only to the extent) that such items are available and in Seller’s actual possession:

(i) revenue and expense reports, or equivalent, in the form prepared by the property manager for the most recent twenty-four (24) months (“Operating Reports”);

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(ii)	copies of any Service Contracts which are currently in effect;
(iii)	the aged delinquency report(s) for the previous twelve (12) months, in the form prepared by the property manager;
(iv)	Seller’s most current Owner’s Title Policy (with the amount of the coverage removed);
(v)	an inventory of the Personal Property, which inventory shall identify which items are leased and which items are owned by, as appropriate, the Seller or Seller’s property manager;
(vi)	a rent roll, as of a recent date in the form provided to Seller by its property manager (“Rent Roll”);
(vii)	copies of all tax (real and personal property) bills for the current year and the immediately preceding year together with the current tax assessment information;
(viii)	copies of all utility bills for the most recent twelve (12) months;
(ix)	the Phase I Environmental Site Assessment prepared by Raba-Kistner Consultants, Inc., Project NO. ASF99-163-00, dated September, 1999 (“Existing Environmental Report”); and
(x)	the insurance claim report for any insurance claims made with regard to the Property in the most recent twelve (12) months.

(b) In addition, Seller has or will cause to be made available to Buyer for inspection at the Property the following (the “Additional Submission Matters”), to the extent (and only to the extent) that such items are available and in Seller’s actual possession or control:

(i)	copies of any plans and specifications;
(ii)	maintenance records for the Property;
(iii)	tenant correspondence files;
(iv)	books and records for the Property;
(v)	copies of Tenant Leases;
(vi)	copies of the plans for the New Buildings (“New Building Plans”)
(vii)	copies of any certificates of occupancy; and
(viii)	copies of any warranties or guaranties applicable to the Property.

(c) As soon as practicable, Seller shall provide to Buyer a written report dated within 30 days of the Effective Date by a licensed pest control agent showing no visible property damage or infestation from termites or other pests (“Termite Report”). If the Termite Report shows any visible property damage or infestation from termites or other pests, Seller shall either repair such damage prior to the Closing or Buyer shall have the option to either: (i)

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	terminate this Contract, in which case the Earnest Money shall be refunded to Buyer, and neither party will have any further rights or obligations pursuant to this Contract, other than as set forth herein with respect to rights or obligations that survive termination; or (ii) waive the unsatisfied objection and proceed to Closing.
(d)	Any failure of Seller to timely deliver any of the Submission Matters or make available any of the Additional Submission Matters will not extend the Feasibility Period beyond the period prescribed in Section 5(a) hereof, and Buyer’s sole and exclusive remedy on account of any such failure will be to terminate this Contract prior to the expiration of the Feasibility Period in accordance with the provisions of such Section 5(a). Except as expressly provided in Section 12 hereof, Seller makes no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in the Submission Matters or the Additional Submission Matters.
(e)	The non-public Submission Materials, the Additional Submission Matters and the Termite Report (together with any other information regarding the Property made available to Buyer) are confidential and shall not be distributed or disclosed by Buyer to any person or entity, except as may be required by law, provided that Buyer may disclose the Submission Materials to the Buyer Group provided such parties are made aware of the confidential nature of such information. If the transaction evidenced hereby fails to close for any reason whatsoever, Buyer shall return to Seller all copies of the Submission Materials which Seller or its agents may have delivered to Buyer (together with any other information regarding the Property made available to Buyer).

8.

BROKER’S FEE. Buyer and Seller represent and warrant to each other that no real estate commissions, finders’ fees, or brokers’ fees have been or will be incurred in connection with the sale of the Property by Seller to Buyer other than William M. Woodall P.C. (“Broker”). Seller shall pay a commission to Broker pursuant to a separate agreement between Seller and Broker. Such commissions shall be deemed earned and shall be due and payable only if, as and when the sale contemplated by this Contract is consummated. Buyer and Seller shall indemnify, defend and hold each other harmless from any claim, liability, obligation, cost or expense (including attorneys’ fees and expenses) for fees or commissions relating to Buyer’s purchase of the Property asserted against either party by any broker or other person (other than the Broker) claiming by, through or under the indemnifying party or whose claim is based on the indemnifying party’s acts. The terms and provisions hereof supersede in their entirety any prior agreements or understandings of any kind or character between Seller and Broker with respect to the payment of a commission, finder’s fee or other sum in connection with the sale of the Property. The provision of this Section 8 shall survive the Closing or any termination of this Contract.

9.

LIMITATION OF SELLER’S REPRESENTATIONS AND WARRANTIES.

(a) BUYER ACKNOWLEDGES THAT EXCEPT FOR ANY EXPRESS WARRANTIES AND REPRESENTATIONS CONTAINED IN THIS CONTRACT OR ANY INSTRUMENT, DOCUMENT, OR AGREEMENT TO BE DELIVERED TO BUYER AT CLOSING, BUYER IS NOT RELYING ON ANY WRITTEN, ORAL, IMPLIED, OR OTHER REPRESENTATIONS, STATEMENTS, OR WARRANTIES BY SELLER OR ANY AGENT OF SELLER OR ANY REAL ESTATE BROKER OR SALESMAN. ALL PREVIOUS WRITTEN, ORAL, IMPLIED, OR OTHER STATEMENTS, REPRESENTATIONS, WARRANTIES, OR AGREEMENTS, IF ANY, ARE MERGED HEREIN. EXCEPT AS EXPRESSLY SET FORTH HEREIN, SELLER SHALL NOT HAVE ANY LIABILITY TO BUYER, AND BUYER SHALL RELEASE SELLER

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FROM ANY LIABILITY (INCLUDING, WITHOUT LIMITATION, CONTRACTUAL AND/OR STATUTORY ACTIONS FOR CONTRIBUTION OR INDEMNITY), FOR, CONCERNING, OR REGARDING: (A) THE NATURE AND CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE SUITABILITY THEREOF FOR ANY ACTIVITY OR USE; (B) ANY IMPROVEMENTS OR SUBSTANCES LOCATED THEREON; OR (C) THE COMPLIANCE OF THE PROPERTY WITH ANY LAWS, RULES, ORDINANCES, OR REGULATIONS OF ANY GOVERNMENT OR OTHER BODY. EXCEPT AS EXPRESSLY PROVIDED IN SECTION 12, SELLER HAS NOT MADE, DOES NOT MAKE, AND EXPRESSLY DISCLAIMS, ANY WARRANTIES, REPRESENTATIONS, COVENANTS OR GUARANTEES, EXPRESSED OR IMPLIED, OR ARISING BY OPERATION OF LAW, AS TO THE MERCHANTABILITY, HABITABILITY, QUANTITY, QUALITY, OR ENVIRONMENTAL CONDITION OF THE PROPERTY OR ITS SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE. BUYER AFFIRMS THAT IT: (I) HAS OR WILL HAVE HAD THE OPPORTUNITY TO HAVE INVESTIGATED AND INSPECTED THE PROPERTY AND IS FAMILIAR AND SATISFIED WITH THE PHYSICAL CONDITION OF THE PROPERTY; AND (II) HAS MADE OR WILL HAVE AN OPPORTUNITY TO MAKE ITS OWN DETERMINATION AS TO THE MERCHANTABILITY, QUANTITY, QUALITY, AND CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE POSSIBLE PRESENCE OF TOXIC OR HAZARDOUS SUBSTANCES OR WASTE OR OTHER ENVIRONMENTAL CONTAMINATION AND THE PROPERTY’S SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE. BUYER HEREBY ACCEPTS THE PROPERTY IN ITS PRESENT CONDITION (INCLUDING ENVIRONMENTAL CONDITIONS) ON AN “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS” BASIS. BUYER FURTHER ACKNOWLEDGES THAT WITHOUT THIS ACCEPTANCE, THIS SALE WOULD NOT BE MADE AND THAT EXCEPT AS EXPRESSLY SET FORTH IN THIS CONTRACT, SELLER WILL NOT UNDER ANY CIRCUMSTANCES HAVE ANY OBLIGATION WHATSOEVER TO UNDERTAKE ANY REPAIR, ALTERATION, REMEDIATION, OR OTHER WORK OF ANY KIND WITH RESPECT TO ANY PORTION OF THE PROPERTY. BUYER AND ITS SUCCESSORS AND ASSIGNS HAVE, AND SHALL BE DEEMED TO HAVE, ASSUMED ALL RISK AND LIABILITY WITH RESPECT TO THE PRESENCE OF TOXIC OR HAZARDOUS SUBSTANCES OR WASTE OR OTHER ENVIRONMENTAL CONTAMINATION ON OR WITHIN OR UNDER THE SURFACE OF THE PROPERTY, WHETHER KNOWN OR UNKNOWN, APPARENT, NON-APPARENT OR LATENT, AND WHETHER EXISTING PRIOR TO, AT, OR SUBSEQUENT TO, TRANSFER OF THE PROPERTY. EXCEPT AS EXPRESSLY SET FORTH IN THIS CONTRACT, BUYER AND ITS SUCCESSORS AND ASSIGNS HEREBY RELEASE SELLER OF AND FROM ANY AND ALL RESPONSIBILITY, LIABILITY, OBLIGATIONS, AND CLAIMS, KNOWN OR UNKNOWN, INCLUDING, WITHOUT LIMITATION, ANY OBLIGATION TO TAKE THE PROPERTY BACK OR REDUCE THE PRICE, OR ACTIONS FOR CONTRIBUTION OR INDEMNITY, THAT BUYER OR ITS SUCCESSORS AND ASSIGNS MAY HAVE AGAINST SELLER OR THAT MAY ARISE IN THE FUTURE, BASED IN WHOLE OR IN PART, UPON THE PRESENCE OF TOXIC OR HAZARDOUS SUBSTANCES OR WASTE OR OTHER ENVIRONMENTAL CONTAMINATION ON OR WITHIN OR UNDER THE SURFACE OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, ALL RESPONSIBILITY, LIABILITY, OBLIGATIONS, AND CLAIMS THAT MAY ARISE UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND

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LIABILITY ACT, AS AMENDED 42 U.S.C. § 9601 ET SEQ. BUYER FURTHER ACKNOWLEDGES THAT THE PROVISIONS OF THIS DISCLAIMER AND RELEASE HAVE BEEN FULLY EXPLAINED TO BUYER AND THAT BUYER FULLY UNDERSTANDS AND ACCEPTS SAME. THE PROVISIONS OF THIS DISCLAIMER AND RELEASE SURVIVE CLOSING.

(b)

Except as otherwise specifically stated in this Contract, Buyer agrees that Seller shall not be responsible or liable to Buyer for any construction defects, errors, omissions, or on account of any other conditions affecting the Property, as Buyer is purchasing the Property AS IS, WHERE IS, and WITH ALL FAULTS. Buyer or anyone claiming by, through or under Buyer, hereby fully releases Seller, its employees, officers, directors, representatives, attorneys and agents from any claim, cost, loss, liability, damage, expense, demand, action or cause of action arising from or related to any construction defects, errors, omissions, or other conditions affecting the Property. Buyer further acknowledges and agrees that this release shall be given full force and effect according to each of its expressed terms and provisions, including, without limitation, those relating to unknown and suspected claims, damages and causes of action. This covenant releasing Seller shall be a covenant running with the Property and shall be binding upon Buyer, its successors and assigns. Subject to consummation of this Contract, Seller hereby assigns to Buyer, without recourse or representation of any nature, effective upon Closing, any and all claims that Seller may have against any third party for any such errors, omissions or defects in the Property. As a material covenant and condition of this Contract, Buyer agrees that in the event of any such construction defects, errors, omissions or on account of any other conditions affecting the Property, Buyer shall look solely to Seller’s predecessors in title or to such contractors and consultants as may have contracted for work in connection with the Property for any redress or relief. Upon the assignment by Seller of its claims, Buyer releases Seller of all rights, express or implied, Buyer may have against Seller arising out of or resulting from any errors, omissions or defects in the Property. Buyer further understands that some of Seller’s predecessors in title may have filed petitions under the bankruptcy code and Buyer may have no remedy against such predecessors, contractors or consultants. This waiver and release of claims shall survive the Closing.

10. DEFAULT.

(a) Seller’s Remedies. If Buyer fails to perform its obligations pursuant to this Contract at or prior to Closing for any reason except failure by Seller to perform hereunder, or if prior to Closing any one or more of Buyer’s representations or warranties are breached in any material respect, then Seller shall be entitled, as its SOLE and EXCLUSIVE remedy (except as provided in Sections 5(b) and 8), to terminate this Contract and retain the Earnest Money as liquidated damages and not as penalty, in full satisfaction of claims against Buyer hereunder. Seller and Buyer agree that Seller’s damages resulting from Buyer’s default are difficult, if not impossible, to determine, and the Earnest Money is a fair estimate of those damages and has been agreed to in an effort to cause the amount of such damages to be certain. Notwithstanding anything in this Section 10(a) to the contrary, in the event of Buyer’s default or termination of this Contract, Seller shall have all remedies available at law or in equity if Buyer or any party related to or affiliated with Buyer is asserting any claims or right to the Property that would otherwise delay or prevent Seller from having clear, indefeasible and marketable title to the Property.

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(b)	Buyer’s Remedies. If Seller fails to perform its obligations pursuant to this Contract for any reason except failure by Buyer to perform hereunder, or if prior to Closing any one or more of Seller’s representations or warranties are breached in any material respect, then Buyer shall elect, as its SOLE and EXCLUSIVE remedy, to either: (i) terminate this Contract by giving Seller timely written notice of such election prior to or at Closing and recover the Earnest Money and any Extension Fee, together with Buyer’s actual, third party, out of pocket costs and expenses incurred in connection with Buyer’s Feasibility Study, up to a maximum cumulative reimbursement not to exceed $25,000.00; or (ii) enforce specific performance; provided, however, if — and only if — the remedy of specific performance is not available to Buyer due to Seller’s prior sale of the Property to a third party, then Buyer shall have the additional remedy of terminating the Agreement and recovering from Seller an amount equal to the sum of Buyer’s documented, out-of-pocket third party costs paid or incurred in connection with the acquisition of the Property, or (iii) waive said failure or breach and proceed to Closing. Notwithstanding anything herein to the contrary, Buyer shall be deemed to have elected to terminate this Contract if Buyer fails to deliver to Seller written notice of its intent to file a claim or assert a cause of action for specific performance against Seller on or before fifteen (15) business days following the scheduled Closing Date or, having given such notice, fails to file a lawsuit asserting such claim or cause of action in Bexar County, Texas, within two (2) months following the scheduled Closing Date. In no event or circumstance shall Buyer be entitled to any consequential or punitive damages. Buyer’s remedies shall be limited to those described in this Section 10(b).
11.	ATTORNEYS’ FEES. Any party to this Contract who is the prevailing party in any legal proceeding against the other party brought under or with respect to this Contract or transaction shall be additionally entitled to recover court costs and reasonable attorneys’ fees from the non-prevailing party.
12.	REPRESENTATIONS AND WARRANTIES OF SELLER.

(a) Seller hereby represents and warrants to Buyer, which representations and warranties shall be deemed made by Seller to Buyer as of the Effective Date and also as of the Closing Date:

(i)	To Seller’s knowledge, there are no parties in possession of any portion of the Property except Seller and tenants under Tenant Leases;
(ii)	To Seller’s knowledge, except as provided in the Rent Rolls, neither Seller nor any tenant is in default of any material obligation pursuant to the terms of the Tenant Leases;
(iii)	Seller has, or on the Closing Date will have, the partnership power and authority to sell and convey the Property as provided in this Contract and to carry out Seller’s obligations hereunder, and that all requisite partnership action necessary to authorize Seller to enter into this Contract and to carry out Seller’s obligations hereunder has been, or on the Closing Date will have been, taken;
(iv)	To Seller’s knowledge, the Operating Reports are true and correct in all material respects;

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(v)	Seller has received no written notice from any government agency having jurisdiction over the Land or Improvements that either considers the construction of the Improvements or the operation or use of the Property to be in violation of any law, ordinance, regulation or order;
(vi)	Without any other investigation or inquiry of any kind, except as may be lawfully located on the Property and except as disclosed in the Existing Environmental Report, to Seller’s knowledge, there are no Hazardous Materials in, attributable to or affecting the Land or Improvements. As used herein, a “Hazardous Material” means any hazardous, toxic or dangerous waste, substance or material, pollutant or contaminant, as defined for purposes of any Environmental Laws or any other federal, state or local law, ordinance, rule, regulation or other enforcement vehicle applicable to the Property, or any substance which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous, or any substance which contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyls (PCBs), or radon gas, urea formaldehyde, asbestos or lead. “Environmental Laws” means all federal, state and local laws, ordinances, rules and regulations now or hereafter in force, as amended from time to time, and all federal and state court decisions, consent decrees and orders interpreting or enforcing any of the foregoing, in any way relating to or regulating human health or safety, or industrial hygiene or environmental conditions, or protection of the environment, or pollution or contamination of the air, soil, surface water or groundwater, and includes the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901, et seq., and the Clean Water Act, 33 U.S.C. § 1251, et seq.;
(vii)	There are no actions, suits or proceedings pending for which Seller has received service of process, before or by any judicial, administrative or union body, any arbiter or any governmental authority, against or affecting Seller or the Property. To Seller’s knowledge, Seller has not received any written notice of a pending or threatened eminent domain or similar proceeding that would affect the Land or Improvements;
(viii)	Seller is not a “foreign person” as defined in Section 1445 of the Internal Revenue Code of 1986, as amended, and the Income Tax Regulations thereunder;
(ix)	Neither Seller, nor any of its affiliates, nor any of their respective partners, members, shareholders or other equity owners, and none of their respective employees, officers, directors, representatives or agents, is, nor will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not engage in any dealings or transactions or be otherwise associated with such persons or entities;

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(x)	To Seller’s knowledge, there are no lease brokerage agreements, leasing commission agreements or other agreements providing for payments of any amounts for leasing activities or procuring tenants with respect to the Property other than as disclosed in the Submission Matters or as set forth in the Tenant Leases;
(xi)	To Seller’s knowledge, this Contract does not and the transaction contemplated in this Contract will not violate any provision of any agreement or judicial order to which Seller is a party or to which Seller or the Property is subject; and
(xii)	Seller does not currently have any employees.

(b)	Whenever the phrases “to Seller’s actual knowledge,” “to Seller’s knowledge,” or “to the best of Seller’s knowledge” or any similar phrase is used herein, such phrases shall be deemed to mean the present, actual knowledge (as opposed to the imputed knowledge), without inquiry or investigation, of such fact or condition by W. T. Field, (President of Thompson Realty Development Corporation, the corporate general partner of Seller) (“Seller’s Representative”). The representations and warranties contained in Section 12(a) are the representations and warranties of Seller and in no event or circumstances will be construed as either the individual representations and warranties of Seller’s Representative or to create any individual liability for Seller’s Representative.
(c)	It shall be a condition precedent to Buyer’s obligations hereunder that as of the date of Closing, all of Seller’s representations and warranties shall be true and correct in all material respects. If the representations and warranties of Seller which to Sellers actual knowledge were true and correct when made are not true and correct in all material respects on the date of Closing, then Buyer may, at its option, (a) waive such condition and close this transaction in accordance with the terms and provisions of this Contract or, (b) terminate this Contract by notice in writing to Seller and receive back the Earnest Money whereupon neither party shall have any further rights or obligations pursuant to this Contract, other than as set forth herein with respect to rights or obligations that survive termination.
(d)	Subject to the provisions of Section 12(e), the representations and warranties of Seller made in Section 12(a) shall survive the Closing for a period of six (6) months (the “Survival Period”). Buyer shall have the right to bring an action against the Seller on the breach of a representation or warranty hereunder, but only on the following conditions: (i) the Buyer first learns of the breach after Closing and files such action within the Survival Period, and (ii) Buyer shall not have the right to bring a cause of action for a breach of a representation or warranty unless the damage to such party on account of such breach (individually or when combined with damages from other breaches) equals or exceeds Twenty-Five Thousand and No/100 Dollars ($25,000.00). Furthermore, Buyer agrees that the maximum liability of Seller for the alleged breach of any or all representations or warranties set forth in this Contract is limited to Two Hundred Thousand and No/100 Dollars ($200,000.00). The provisions of this Section 12(d) shall survive the Closing.
(e)	If any representation or warranty above is known by Buyer prior to Closing to be untrue and is not remedied by Seller prior to Closing, Buyer may as Buyer’s sole and exclusive remedy, either (i) terminate this Contract whereupon the Earnest Money and any Extension Fee shall be refunded to Buyer, and neither party shall have any further rights

Contract of Sale — Hidden Lake Apartments

16

or obligations pursuant to this Contract, other than as set forth herein with respect to rights or obligations that survive termination, or (ii) waive its objections and close the transaction without any reduction or credit against the Sales Price. The foregoing representations and warranties shall not survive the Closing.

13. COVENANTS OF SELLER. From the Effective Date until Closing, Seller shall:

(a)	Maintain and operate the Property in its current state and condition, reasonable wear and tear and damage from casualty excepted.
(b)	Continue all insurance policies relative to the Property in full force and effect.
(c)	Not remove any item of Personal Property from the Land or Improvements unless replaced by a comparable item of Personal Property, except for any dead landscaping, which Seller shall have no obligation to replace.
(d)	Refrain from entering into any contracts, or other agreements (excluding leases) regarding the Property (other than contracts in the ordinary and usual course of business and which are cancelable by the owner of the Property within thirty (30) days after giving notice thereof without penalty).
(e)	Use commercially reasonable efforts to cause the New Buildings to be constructed substantially in accordance with the New Building Plans.
(f)	Seller shall conduct its leasing activities in the normal course of business. All new Tenant Leases shall be on the form of lease currently used by Seller or such other form as may be approved by Buyer and Seller. All new leases shall be entered into in conformity with the lease guidelines (“Lease Guidelines”) attached hereto as Exhibit G, including lease term, rental rates and leasing concessions, or as otherwise proposed by Seller and approved by Buyer. Seller will not grant any move-in incentive to tenants greater those provided in the Lease Guidelines.
(g)	Perform Seller’s material obligations under the Tenant Leases, in accordance with Seller’s prior operations.
(h)	Provide to Buyer copies of current rent rolls in the same form as the Rent Roll which will be deemed to supplement the Rent Roll promptly following receipt by Seller.
(i)	Provide to Buyer copies of updated operating statements as received by Seller in accordance with its current course of business.
(j)	Apply any security or other deposits except in the ordinary course of Seller’s business in accordance with Seller’s prior operations.

14. USE OF PROPERTY. Seller has not claimed the benefit of laws permitting a special use valuation for the purposes of payment of ad valorem taxes on the Property. If a previous owner claimed such benefit and, after the purchase is closed, Buyer changes the use of the Property from its present use and the same results in the assessment of additional taxes, such additional taxes will be the obligation of the Buyer, notwithstanding that some or all of such additional taxes may relate back to the period prior to Closing.

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15.

CONDEMNATION. Seller agrees to give Buyer prompt notice of any condemnation action affecting the Land, the Improvements or the Personal Property between the Effective Date and the Closing Date. If prior to the Closing Date condemnation proceedings are commenced against any material portion of the Property, then this Contract shall terminate and the Earnest Money and any Extension Fee shall be refunded to Buyer. A “material portion of the Property” as used herein shall mean at least ten percent (10%) of the square footage of the structural Improvements or parking such that the Property does not comply with applicable law, or loss or relocation of the primary entrance to the Property, or loss or relocation of the primary entrance sign for the Property. If prior to the Closing Date condemnation proceedings are commenced against less than a material portion of the Property, then this Contract shall not terminate, but at Closing Seller shall assign to Buyer any condemnation award and the Sales Price shall not be reduced.

16.

DAMAGE TO PROPERTY. Seller agrees to give Buyer prompt notice of any fire or other casualty affecting the Land, the Improvements or the Personal Property between the Effective Date and the Closing.

(a)	If prior to the Closing either (i) the Property is damaged by an uninsured casualty costing TWO-HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00) or more to repair and Seller is unwilling or unable to repair such damage on or prior to the Closing; or (ii) the Property is damaged by fire or other casualty which is insured that would cost TWO-HUNDRED FIFTY-THOUSAND AND NO/100 DOLLARS ($250,000.00) or more to repair, then in any such event, either Buyer or Seller may, at its option, elect to terminate this Contract by written notice to the other party within twenty (20) days after the date of Seller’s notice to Buyer of the casualty or at the Closing, whichever is earlier, in which case the Earnest Money and any Extension Fee shall be refunded to Buyer, and neither party shall have any further rights or obligations hereunder, other than as set forth herein with respect to rights and obligations that survive termination. If neither Buyer nor Seller timely makes its election to terminate this Contract, then the Closing shall take place as provided herein without reduction of the Sales Price (except for (i) the amount equal to Seller’s deductible under its insurance policies and (ii) the amount, be in no event more than TWO-HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00) of the estimated cost to repair any uninsured casualty), and there shall be assigned to Buyer at the Closing all interest of Seller in and to any casualty insurance proceeds, including, to the extent assignable the proceeds of any business interruption or loss of rental insurance.
(b)	If prior to the Closing there shall occur damage to the Property caused by fire or other casualty which is insured that would cost less TWO-HUNDRED FIFTY-THOUSAND AND NO/100 DOLLARS ($250,000.00) to repair, then in any such event, Buyer shall have no right to terminate this Contract, but there shall be assigned to Buyer at Closing all interest of Seller in and to any casualty insurance proceeds that may be payable to Seller on account of any such occurrence, including, to the extent assignable the proceeds of any business interruption or loss of rental insurance and the Sales Price shall be reduced by an amount equal to Seller’s deductible under its insurance policies.
(c)	Seller and Buyer both agree to use the Seller’s insurance adjuster’s assessment to determine the amount of damages.

17. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to Seller, which representations and warranties shall be deemed made by Buyer to Seller as of the Effective Date and also as of the Closing Date:

Contract of Sale — Hidden Lake Apartments

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(a)

Buyer has the full right, power and authority to purchase the Property as provided in this Contract and to carry out Buyer’s obligations hereunder, and that all requisite action necessary to authorize Buyer to enter into this Contract and to carry out Buyer’s obligations hereunder has been taken.

(b)

Neither Buyer, nor any of its affiliates, nor any of their respective partners, members, shareholders or other equity owners, and none of their respective employees, officers, directors, representatives or agents, is, nor will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of OFAC (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not engage in any dealings or transactions or be otherwise associated with such persons or entities.

Notwithstanding anything herein to the contrary, any breach by Buyer of any of the foregoing representations or warranties shall constitute a default by Buyer hereunder, and Seller may thereupon, at its option, terminate this Contract by giving written notice thereof, in which event the Earnest Money shall be paid to Seller as liquidated damages, and neither Buyer nor Seller shall have any further rights or liabilities hereunder, except as otherwise provided herein.

18.

MISCELLANEOUS.

(a) All notices, demands, and requests and other communications required or permitted hereunder shall be in writing and shall be deemed to be delivered when actually received by telecopy or personal delivery or, if earlier and regardless whether actually received or not, (i) upon deposit with a nationally recognized overnight courier for next business day delivery, charges prepaid, or (ii) upon three (3) business days following deposit in a regularly maintained receptacle for the United States mail, registered or certified, postage prepaid, in either such event to be addressed to the addressee as follows:

If to Seller:

TR Hidden Lake Partners, Ltd.
c/o Thompson Realty Corporation
2505 N. Plano Road, Ste 3000
Richardson, TX 75082
Attention: W. T. Field (Tom), President
Phone (972) 644-2400
Fax (972) 644-2411

with a copy to:

Thompson Realty Corporation
2505 N. Plano Road, Ste 3000
Richardson, TX 75082
Attention: Kelly P. B. Drablos, Esq.
Vice President and Legal Counsel
Phone (972) 644-2400
Fax (972) 644-2411

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with an additional copy to:

Haynes and Boone, L.L.P.
2505 N. Plano Road, Suite 4000
Richardson, Texas 75082
Attention: Richard K. Martin, Esq.
Phone: (972)739-8634
Facsimile: (972)692-9114

If to Buyer:

Triple Net Properties, LLC
c/o ROC Realty Advisors, LLC
1606 Santa Rosa Drive, Suite 109
Richmond, Virginia 23229
Attention: Gus R. Remppies
Phone: (804) 225-1082
Facsimile: (804) 285-1376

with a copy to:

Hirschler Fleischer
701 East Byrd Street, 15th Floor
Richmond, VA 23219
Attention: David F. Belkowitz, Esq.
Phone: (804) 771-9546
Facsimile: (804) 644-0957

(b)	This Contract shall be construed under and in accordance with the laws of the State of Texas, and all obligations of the parties created hereunder are performable in Bexar County, Texas.
(c)	This Contract shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, executors, administrators, legal representatives, successors, and permitted assigns.
(d)	In case any one or more of the provisions contained in this Contract shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Contract shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein. Furthermore, in lieu of any such invalid, illegal or unenforceable provision, there shall be automatically added to this Contract a provision as similar to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.
(e)	This Contract, together with the Inspection Agreement dated as of March 15, 2006, by and between Seller and Purchaser, constitutes the sole and only agreement of the parties hereto with respect to the subject matter hereof and supersedes any prior understandings or written or oral agreements between the parties respecting the subject matter hereof and cannot be changed except by their written consent.

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(f)	Time is of the essence with this Contract.
(g)	Words of any gender used in this Contract shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.
(h)	In accordance with the requirements of the Texas Real Estate License Act, Buyer is hereby advised by Broker that (i) Buyer should be furnished with or obtain a policy of title insurance or have the abstract covering the Property examined by any attorney of its own selection, and (ii) unless otherwise agreed to in writing by the parties hereto, Broker is being paid by Seller and is representing Seller in this transaction.
(i)	The covenants, indemnification obligations and the waiver and release by Buyer set forth in Sections 5(b), 9(b) and 10, and the covenants and indemnification obligations of Buyer and Seller set forth in Sections 4(e), 4(f) and 8, shall survive consummation of Closing and any termination or cancellation of this Contract, notwithstanding any contrary provisions hereof.
(j)	The parties may execute this Contract in one or more identical counterparts, all of which when taken together will constitute one and the same instrument.
(k)	The parties hereto acknowledge that the parties and their respective counsel have each reviewed and revised this Contract, and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Contract or any amendments or exhibits hereto.
(l)	“Business Day” shall mean a date which is not a Saturday, Sunday or holiday observed by federally chartered banks in the State of Texas, whenever any determination is to be made or action to be taken on a date specified in this Contract if such date falls upon a date which is not a Business Day, the date for such determination or action shall be extended to the first Business Day immediately thereafter.

19.	ASSIGNMENT. Buyer may not assign this Contract without Seller’s prior written consent, such consent to be given or denied in Seller’s sole and absolute discretion; provided no consent of Seller shall be required in connection with the assignment of the Contract at least five (5) Business Days prior to the Closing Date to any entity controlled by or managed by Triple Net Properties, LLC. In event of any assignment of this Contract, Buyer shall promptly provide a copy of such assignment to Seller.
20.	NONREFUNDABLE CONSIDERATION. Contemporaneously with the execution and delivery of this Contract, Buyer has delivered to Seller and Seller hereby acknowledges the receipt of a check in the amount of One Hundred Dollars ($100.00) (“Independent Contract Consideration”), which amount the parties bargained for and agreed to as consideration for Buyer’s exclusive right to inspect and purchase the Property pursuant to this Contract and for Seller’s execution, delivery and performance of this Contract. The Independent Contract Consideration is in addition to and independent of any other consideration or payment provided in this Contract, is nonrefundable, and it is fully earned and shall be retained by Seller notwithstanding any other provision of this Contract.
21.	WAIVER OF CONSUMER RIGHTS. Buyer, after consultation with an attorney of its own selection (which counsel was not directly or indirectly identified, suggested or selected by Seller

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21

or any agent of Seller) hereby voluntarily waives its rights under the Deceptive Trade Practices — Consumer Protection Act (Section 17.41, et seq., Business and Commerce Code), a law that gives consumers special rights and protections. Buyer hereby acknowledges to Seller that Buyer and Seller are not in a significantly disparate bargaining position.

22.

AUDIT. If Buyer, subject to the limitations of this Contract, assigns this Contract to a publicly registered company promoted by Buyer (the “Registered Company”) and the Registered Company acquires the Property pursuant to this Contract, Seller acknowledges that the Registered Company is required to make certain filings with the Securities and Exchange Commission (the “SEC Filings”) that relate to the most recent pre-acquisition fiscal year (the “Audited Year”) for the Property. To assist the Registered Company in preparing the SEC Filings, Seller agrees to provide the Registered Company with the following:

(a)	Access to bank statements for the Audited Year;
(b)	Rent Roll as of the end of the Audited Year;
(c)	Operating Statements for the Audited Year;
(d)	Access to the general ledger for the Audited Year;
(e)	Cash receipts schedule for each month in the Audited Year;
(f)	Access to invoice for expenses and capital improvements in the Audited Year;
(g)	Copies of all insurance documentation for the Audited Year; and
(h)	Copies of accounts receivable aging as of the end of the Audited Year and an explanation for all accounts over 30 days past due as of the end of the Audited Year.

The provisions of this Section 22 shall survive Closing.

23.

BUYER’S CONDITIONS PRECEDENT. If any of the following conditions precedent to Buyer’s obligations under this Contract is not satisfied, then Buyer may, at its option, waive such condition and close this transaction, or, as Buyer’s sole and exclusive remedy, terminate this Contract, in which event the Earnest Money shall be returned to Buyer, and neither party shall have any further rights or obligations hereunder except other than as set forth herein with respect to rights or obligations which survive termination:

(a)	Each of the representations and warranties made by Seller in Section 12 shall be true and correct in all material respects when made and as of the Closing Date.
(b)	Seller shall have performed or complied in all material respects with each obligation and covenant required by applicable laws and by this Contract to be performed or complied with by Seller on or before the Closing.
(c)	Seller shall have performed or complied in all material respects with each material obligation and covenant required to be performed by Seller pursuant to the Tenant Leases and the Service Contracts; provided that if Seller is in default of any such obligation, Seller shall be afforded an opportunity to either cure such default or to escrow at Closing an amount reasonably necessary to effect such cure.

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(d)	Title to the Property and the other assets to be transferred hereunder shall be delivered to Buyer in the manner required under Section 6.
(e)	From the expiration of the Feasibility Period to the Closing Date, there has been no unlawful introduction of Hazardous Materials that would materially and adversely affect the environmental condition of the Property from that which existed at the expiration of the Feasibility Period.

If any of the above described conditions precedent to Buyer’s obligations hereunder is not satisfied, Buyer may, at its option, (A) waive such condition and close this transaction with no reduction in the Sales Price, or (B) terminate this Contract by notice in writing to Seller in which event the Earnest Money and any Extension Fee shall be returned to Buyer, and neither party shall have any further rights or obligations hereunder except other than as set forth herein with respect to rights or obligations which survive termination.

24.

EFFECTIVE DATE. The “Effective Date” of this Contract shall be the date an original of this Contract (or original counterparts of this Contract) are executed by both Seller and Buyer.

Remainder of Page Intentionally Left Blank.
Signature Pages Follow.

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EXECUTED in multiple originals effective as of the Effective Date.

SELLER:
TR HIDDEN LAKE PARTNERS, LTD., a Texas limited partnership
By:	TRDC Hidden Lake Partners, Ltd., a Texas limited partnership, its general partner
	By:	Thompson Realty Development Corporation, a Texas corporation, its general partner
		By:	/s/ W. T. Field
		Name: W. T. Field
		Title: President
		Date signed: /s/ May 4, 2006
BUYER:
TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company
By:	/s/ Louis Rogers
Name: Louis Rogers
Title: President
Date signed: /s/ May 2, 2006
BROKER:
The Broker executes this Contract for the sole purpose of acknowledging and consenting to Section 8. The Broker shall not be a necessary party to any Amendment of this Contract.
WILLIAM M. WOODALL, P.C.
By:	/s/ William M. Woodall
Name: William M. Woodall
Title: President
Date signed: /s/ April 4, 2006

Contract of Sale — Hidden Lake Apartments

G-1

TITLE COMPANY:
Receipt of $150,000.00 Earnest Money is acknowledged.
LANDAMERICA TITLE COMPANY
By:	/s/ Debby Moore
Name: Debby Moore
Title: Escrow Officer
Date signed: /s/ May 8, 2006

EXHIBITS:

Exhibit A	-	Property Description
Exhibit B	-	Special Warranty Deed
Exhibit C	-	Bill of Sale, Assignment and Assumption Agreement
Exhibit D	-	Assignment of Leases and Assumption Agreement
Exhibit E	-	Non-Foreign Affidavit
Exhibit F	-	Tenant Notice Letter
Exhibit G	-	Lease Guidelines
Exhibit H	-	Site Plan-New Buildings

Contract of Sale — Hidden Lake Apartments

G-2

EX-10.2

Exhibit 10.2

[Hirschler Fleischer letterhead]

May 5, 2006

VIA FACSIMILE — 972-644-2411

TR Hidden Lake Partners, Ltd.
c/o Thompson Realty Corporation
2505 N. Plano Road, Suite 3000
Richardson, Texas 75082
Attn: W. T. Field.

     Re: Contract of Sale Between TR Hidden Lake Partners, Ltd., a Texas limited partnership, as seller and Triple Net Properties, LLC, a Virginia limited liability company, as purchaser

Dear Mr. Field:

     On behalf of our client, Triple Net Properties, LLC, the purchaser under the captioned contract, I hereby request a one week extension of the Feasibility Period to May 12, 2006. If this extension is acceptable, please sign below.

Very truly yours,

/s/ David F. Belkowitz

David F. Belkowitz

AGREED TO:

TR HIDDEN LAKE PARTNERS, LTD.
By:	TRDC Hidden Lake Partners, Ltd., General Partner
	By:	Thompson Realty Development Corporation, General Partner
		By:	/s/ W. T. Field
		Its: President

/bh

cc: Mr. Gus Remppies

EX-10.3

Exhibit 10.3

[Hirschler Fleischer letterhead]

May 25, 2006

VIA FACSIMILE — 972-644-2411

TR Hidden Lake Partners, Ltd.
c/o Thompson Realty Corporation
2505 N. Plano Road, Suite 3000
Richardson, Texas 75082
Attn: W. T. Field.

     Re: Contract of Sale Between TR Hidden Lake Partners, Ltd., a Texas limited partnership, as seller and Triple Net Properties, LLC, a Virginia limited liability company, as purchaser

Dear Mr. Field:

     On behalf of our client, Triple Net Properties, LLC, the purchaser under the captioned contract, I hereby request an extension of the Feasibility Period to June 2, 2006. If this extension is acceptable, please sign below.

Very truly yours,

/s/ David F. Belkowitz

David F. Belkowitz

AGREED TO:

TR HIDDEN LAKE PARTNERS, LTD.
By:	TRDC Hidden Lake Partners, Ltd., General Partner
	By:	Thompson Realty Development Corporation, General Partner
		By:	/s/ W. T. Field
		Its: President

/ddb
cc: Mr. Gus Remppies

EX-10.4

Exhibit 10.4

AMENDMENT TO CONTRACT OF SALE

     This Amendment to Contract of Sale (“Amendment”), the effective date of which is June 2, 2006, is entered into by TR HIDDEN LAKE PARTNERS, LTD., a Texas limited partnership (“Seller”) and TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company (“Buyer”). Buyer and Seller are sometimes collectively referred to herein as the “Parties”.

Recitals

     A. WHEREAS, Seller and Buyer entered into that certain Contract of Sale (the “Agreement”) with an Effective Date of May 4, 2006, pursuant to which Seller agreed to sell and Buyer agreed to purchase certain improved real property located in Bexar County, Texas, more particularly described in the Agreement;

     B. WHEREAS, pursuant to the terms of the Agreement, the Feasibility Period expired May 5, 2006, but was then extended to May 12, 2006, and then June 2, 2006, pursuant to letter agreements by and between Seller and Buyer dated May 5, 2006, and May 25, 2006, respectively; and

     C. WHEREAS, Seller and Buyer mutually desire to amend certain provisions of the Agreement.

Agreement

     NOW, THEREFORE, for and in consideration of the mutual promises and agreements set forth herein entered into by Buyer and Seller, the receipt and sufficiency of which is acknowledged, Seller and Buyer agree as follows:

1.	The parties hereto have agreed that the “Feasibility Period” as defined in Section 5(a) of the Agreement will expire July 10, 2006.
2.	All terms defined in the Agreement and denoted by initial capital letters shall have the same meanings provided in the Agreement when used in this Amendment, except to the extent that the moaning of any defined term is modified by or expressly set forth in the provisions of this Amendment.
3.	This Amendment may be executed in multiple originals, each of which shall constitute an original for all purposes and together which shall constitute a fully executed agreement. A facsimile signature shall be deemed an original signature for all purposes.

     IN WITNESS WHEREOF, Seller and Buyer have executed this Amendment to be effective as of June 2, 2006.

SELLER:
TR HIDDEN LAKE PARTNERS, LTD.,
a Texas limited partnership
By:	TRDC Hidden Lake Partners, Ltd.,
	a Texas limited partnership, its general partner
	By:	Thompson Realty Development Corporation,
		a Texas corporation, its general partner
		By:	/s/ W.T. Field
		Name:	W.T. Field
		Title:	President
BUYER:
TRIPLE NET PROPERTIES, LLC,
a Virginia limited liability company
By:	/s/ Louis Rogers
Name:	Louis Rogers
Title:	President

EX-10.5

Exhibit 10.5

September 11, 2006

Via: UPS overnight delivery

Mr. Gus R. Rempies
Triple Net Properties, LLC
C/O ROC Realty Advisors, LLC
1606 Santa Rosa Drive
Suite 109
Richmond, VA 23229

Re: Contract of Sale (the “Contract”) by and between TR Hidden Lake Partners, Ltd. (“Seller”) and Triple Net Properties, LLC (“Buyer”) with Effective Date of May 8, 2005.

In accordance with the requirements of Section 4.(a) of the Contract, Seller is to Buyer the attached certificates of occupancy for the four (4) new buildings located at Hidden Lake Apartments in San Antonio. As a result, the “Closing Date” is now established to be October 12, 2006.

Very truly yours,

TR Hidden Lake Partners, Ltd., a
Texas limited partnership

By:	TRDC Hidden Lake Partners, Ltd., a Texas limited partnership,
	its general partner
	By:	Thompson Realty Development Corporation, a Texas
		corporation, its general partner
		By:

cc:	David F. Belkowitz, Esq.	Debby Moore
	Hirschler Fleischer	Land America Title Company
	701 East Bryan Street	8201 Preston Road
	15th Floor	Suite 280
	Richmond, VA 23219	Dallas, TX 75225

2505 North Plano Road     Suite 3000     Richardson, Texas 75082
Telephone 972-644-2400      FAX 972-644-2411

EX-10.6

Exhibit 10.6

AMENDMENT TO CONTRACT OF SALE

     This Amendment to Contract of Sale (“Amendment”), the effective date of which is September 25, 2006, is entered into by TR HIDDEN LAKE PARTNERS, LTD., a Texas limited partnership (“Seller”) and TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company (“Buyer”). Buyer and Seller are sometimes collectively referred to herein as the “Parties”.

Recitals

     A. WHEREAS, Seller and Buyer entered into that certain Contract of Sale (the “Agreement”) with an Effective Date of May 4, 2006, pursuant to which Seller agreed to sell and Buyer agreed to purchase certain improved real property located in Bexar County, Texas, more particularly described in the Agreement;

     B. WHEREAS, Seller and Buyer have entered into a number of contract amendments, including that certain Amendment to Contract of Sale (the “June Amendment”) with an effective date of June 2, 2006. The June Amendment extended the Feasibility Period to July 10, 2006; and

     C. WHEREAS, Seller and Buyer mutually desire to amend certain provisions of the Agreement.

Agreement

     NOW, THEREFORE, for and in consideration of the mutual promises and agreements set forth herein entered into by Buyer and Seller, the receipt and sufficiency of which is acknowledged, Seller and Buyer agree as follows:

1.	The parties hereto have agreed that the “Feasibility Period” as defined in Section 5(a) of the Agreement has expired.
2.	Prior to the effective date hereof, Buyer delivered Earnest Money to the Title Company totaling ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00) to be applied in partial payment of the Sales Price at Closing and/or otherwise disbursed in accordance with the provisions of the Agreement. Notwithstanding anything contained to the contrary in the Agreement, Buyer herein agrees, and directs the Title Company, to fully and finally release to Seller all Earnest Money presently on deposit, specifically being the $150,000.00 referred to above, such funds hereinafter being non-refundable to Buyer and unconditionally earned by Seller, as compensation to Seller for granting an extension of the Closing Date to Buyer as described below, except in the event of a “Special Seller Default”(hereinafter defined). If Buyer does in fact purchase the Property and this Contract does in fact close, the $150,000.00 in forfeited Earnest Money will remain applicable to the Sales Price.
	“Special Seller Default” means (a) Seller’s prior sale of the Property to a third party, (b) Seller’s wrongful refusal to convey the Property to Buyer at Closing, and/or (c) Seller’s refusal to remove at Closing any encumbrance intentionally placed by Seller on the Property from and after the date of that certain Lawyer’s Title Insurance Corporation Commitment for Title Insurance, GF No. 1951000600, Commitment No. 002.

3. Pursuant to that certain letter dated September 11, 2006, to Buyer from Seller the Closing Date was established to be October 12, 2006. Seller has agreed to extend the Closing Date as described below. Section 4(a) of the Agreement is hereby deleted and the following Section 4(a) is inserted in its stead;

“(a) The closing of the sale of the property to Buyer (the “Closing”) shall take place at the Title Company no later than November 10, 2006, (the “Closing Date”).” Buyer shall have a one-time right to further extend the Closing Date to November 27, 2006, by (i) notifying Seller in writing of such extension on or before November 3, 2006, and (ii) simultaneously with delivery of such written notice of extension to Seller, delivering to Seller (by Immediately Available Funds) the additional sum of ONE HUNDRED SEVENTY-FIVE THOUSAND AND NO/100 ($175,000.00) (the “Extension Fee”). The Extension Fee shall be non-refundable to Buyer and shall be unconditionally earned by Seller, as compensation to Seller for granting the additional extension of the Closing Date; provided, however, $150,000.00 of the Extension Fee shall be applied to the Sales Price at Closing, if Closing does in fact occur. If Buyer does not deliver the written notice and the Extension Fee in the manner and within the time period required above, then Buyer shall have waived its right to extend the Closing Date.”

4.	Buyer herein waives all title objections under Section 6(a) of the Agreement.
5.	Sections 23(a), 23(b), 23(c), and 23 (d) of the Agreement “BUYER’S CONDITIONS PRECEDENT”, are deleted in their entirety and Section 23(e) is hereby relettered as Section 23(a).
6.	All terms defined in the Agreement and denoted by initial capital letters shall have the same meanings provided in the Agreement when used in this Amendment, except to the extent that the meaning of any defined term is modified by or expressly set forth in the provisions of this Amendment.
7.	This Amendment may be executed in multiple originals, each of which shall constitute an original for all purposes and together which shall constitute a fully executed agreement. A facsimile signature shall be deemed an original signature for all purposes.

     IN WITNESS WHEREOF, Seller and Buyer have executed this Amendment to be effective as of September 25, 2006.

SELLER:
TR HIDDEN LAKE PARTNERS, LTD.,
a Texas limited partnership
By:	TRDC Hidden Lake Partners, Ltd.,
	a Texas limited partnership, its general partner
	By:	Thompson Realty Development Corporation,
		a Texas corporation, its general partner
		By:	/s/ W. T. Field
		Name:	W. T. Field
		Title:	President
BUYER:
TRIPLE NET PROPERTIES, LLC,
a Virginia limited liability company
By:	/s/ Louis Rogers
Name:	Louis Rogers
Title:	President

EX-10.7

Exhibit 10.7

AMENDMENT TO CONTRACT OF SALE

     This Amendment to Contract of Sale (“Amendment”), the effective date of which is November 27, 2006, is entered into by TR HIDDEN LAKE PARTNERS, LTD., a Texas limited partnership (“Seller”) and TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company (“Buyer”). Buyer and Seller are sometimes collectively referred to herein as the “Parties”.

Recitals

     A. WHEREAS, Seller and Buyer entered into that certain Contract of Sale (the “Agreement”) with an Effective Date of May 4, 2006, pursuant to which Seller agreed to sell and Buyer agreed to purchase certain improved real property located in Bexar County, Texas, more particularly described in the Agreement;

     B. WHEREAS, Seller and Buyer have entered into a number of contract amendments, including that certain Amendment to Contract of Sale (the “September Amendment”) with an effective date of September 25, 2006. The September Amendment extended the Closing Date of the Agreement to November 10, 2006, and provided for a further extension to November 27, 2006; and

     C. WHEREAS, Seller and Buyer mutually desire to amend certain provisions of the Agreement.

Agreement

     NOW, THEREFORE, for and in consideration of the mutual promises and agreements set forth herein entered into by Buyer and Seller, the receipt and sufficiency of which is acknowledged, Seller and Buyer agree as follows:

1. Prior to the effective date hereof, Buyer delivered Earnest Money to the Title Company totaling ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00) to be applied in partial payment of the Sales Price at Closing and/or otherwise disbursed in accordance with the provisions of the Agreement. In connection with the September Amendment, that Earnest Money was fully and finally released to Seller by the Title Company. In connection with the execution of this Amendment, Buyer will deliver additional Earnest Money to the Title Company totaling ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00) to be applied in partial payment of the Sales Price at Closing and/or otherwise disbursed in accordance with the provisions of the Agreement. Notwithstanding anything contained to the contrary in the Agreement, Buyer herein agrees, and directs the Title Company, to fully and finally release to Seller all this additional Earnest Money presently upon receipt, specifically being the $150,000.00 in additional Earnest Money referred to above, such funds hereinafter being non-refundable to Buyer and unconditionally earned by Seller, as compensation to Seller for granting an extension of the Closing Date to Buyer as described below, except in the event of a “Special Seller Default” (as defined in the September Amendment). If Buyer does in fact purchase the Property and this Contract does in fact close, the $300,000.00 in total forfeited Earnest Money will remain applicable to the Sales Price.

2. Pursuant to the September Amendment the Closing Date was extended to be November 3, 2006, and then further to November 27, 2006. Seller has agreed to further extend the Closing Date as described below. Section 4(a) of the Agreement is hereby deleted and the following Section 4(a) is inserted in its stead;

“(a) The closing of the sale of the property to Buyer (the “Closing”) shall take place at the Title Company no later than December 31, 2006, (the “Closing Date”).”

3. Seller and Buyer have agreed to increase the Sales Price for the Property. Section 2 of the Agreement is hereby deleted and the following Section 2 is inserted in its stead:

“CONTRACT SALES PRICE. The total purchase price for the Property (the “Sales Price”) shall be THIRTY TWO MILLION THIRTY THOUSAND AND NO/100 DOLLARS ($32,030,000.00), payable in cash at Closing. Payment in cash means payment by wire transfer of immediately available federal funds (“Immediately Available Funds”).”.

4.	All terms defined in the Agreement and denoted by initial capital letters shall have the same meanings provided in the Agreement when used in this Amendment, except to the extent that the meaning of any defined term is modified by or expressly set forth in the provisions of this Amendment.
5.	This Amendment may be executed in multiple originals, each of which shall constitute an original for all purposes and together which shall constitute a fully executed agreement. A facsimile signature shall be deemed an original signature for all purposes.
6.	In connection with the extension of the Closing Date from November 3, 2006, to November 27, 2006, Buyer paid Seller a $175,000.00 extension fee (the “Prior Extension Fee”). $150,000.00 of the Prior Extension Fee is applicable to the Sales Price at Closing in addition to total forfeited Earnest Money as described in Section 1 above.

     IN WITNESS WHEREOF, Seller and Buyer have executed this Amendment to be effective as of November 27, 2006.

SELLER:
TR HIDDEN LAKE PARTNERS, LTD.,
a Texas limited partnership
By:	TRDC Hidden Lake Partners, Ltd.,
	a Texas Limited partnership, its general partner
	By:	Thompson Realty Development Corporation,
		a Texas corporation, its general partner
		By:	/s/ W.T. Field
		Name:	W.T. Field
		Title:	President
BUYER:
TRIPLE NET PROPERTIES, LLC,
a virginia limited liability company
By:	/s/ Louis Rogers
Name:	Louis Rogers
Title:	President

EX-10.8

Exhibit 10.8

ASSIGNMENT OF CONTRACT

     THIS ASSIGNMENT OF CONTRACT (the “Assignment”) is made as of the 28th day of December 2006, by Triple Net Properties, LLC, a Virginia limited liability company (“Assignor”) to Apartment REIT Hidden Lakes, LP., a Texas limited partnership (“Assignee”).

RECITALS

     TR Hidden Lake Partners, LTD., a Texas limited partnership (“Seller”) and Assignor entered into that certain Contract of Sale, dated as of May 4, 2006, as amended from time to time (the “Contract”) with respect to certain property known as Hidden Lake Apartments located at 8910 N. Loop 1604 West, San Antonio, Bexar County, Texas, as more particularly described in the Contract. Assignor desires to assign all of its rights, title and interest in and to the Contract to Assignee.

AGREEMENT

     FOR and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor hereby assigns, transfers, conveys and sets over all of Assignor’s rights, title and interest in and to the Contract to Assignee.

     Assignee, by its execution of this Assignment, hereby assumes all of Assignor’s obligations under the Contract. Notwithstanding such assignment and assumption, Assignor shall continue to be liable under the Contract.

     WITNESS the following signatures:

ASSIGNOR:	Triple Net Properties, LLC, a Virginia limited liability company
	By:	/s/ Richard Hutton
	Name:	Richard Hutton
	Title:	Executive Vice President

ASSIGNEE:	APARTMENT REIT HIDDEN LAKES, LP, a Texas limited partnership
	By:	APARTMENT REIT HIDDEN LAKES GP, LLC, a Delaware limited liability company
	Its:	General Partner
		By:	NNN Apartment REIT Holdings, L.P., a Virginia limited partnership
		Its:	Manager
			By:	NNN Apartment REIT, Inc., a Maryland corporation,
			Its:	General Partner
				By: Name:	/s/ Shannon K S Johnson Shannon K S Johnson
				Title:	Chief Financial Officer

EX-10.9

Exhibit 10.9

Loan No.: 50-2859027 Hidden Lakes Apartments

PROMISSORY NOTE

$19,218,000.00 December 28, 2006

     FOR VALUE RECEIVED, the undersigned, APARTMENT REIT HIDDEN LAKES, LP, a Texas limited partnership (“Borrower”), having an address at c/o Triple Net Properties, LLC, 1551 North Tustin Avenue, Suite 300, Santa Ana, California 92705, promises to pay to the order of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (together with its successors and assigns, “Lender”), at the office of Lender at Commercial Real Estate Services, 8739 Research Drive URP — 4, NC 1075, Charlotte, North Carolina 28262, or at such other place as Lender may designate to Borrower in writing from time to time, the principal sum of Nineteen Million Two Hundred Eighteen Thousand and No/100 Dollars ($19,218,000.00), together with interest on so much thereof as is from time to time outstanding and unpaid, from the date of the advance of the principal evidenced hereby, at the rate of five and thirty-four one-hundredths percent (5.34%) (the “Note Rate”) or the Maximum Lawful Rate (as hereinafter defined), together with all other amounts due hereunder or under the other Loan Documents (as defined herein), in lawful money of the United States of America, which shall at the time of payment be legal tender in payment of all debts and dues, public and private.

ARTICLE I. — TERMS AND CONDITIONS

     1.1. Computation of Interest. Interest shall be computed hereunder based on a 360-day year and based on the actual number of days elapsed for any period in which interest is being calculated including, without limitation, the Interest Only Period (hereinafter defined), as more particularly set forth on Annex 1 attached hereto and incorporated by this reference. Interest shall accrue from the date on which funds are advanced hereunder (regardless of the time of day) through and including the day on which funds are credited pursuant to Section 1.2 hereof.

     1.2. Payment of Principal and Interest. Payments in federal funds immediately available at the place designated for payment received by Lender prior to 2:00 p.m. local time on a day on which Lender is open for business at said place of payment shall be credited prior to close of business, while other payments, at the option of Lender, may not be credited until immediately available to Lender in federal funds at the place designated for payment prior to 2:00 p.m. local time on the next day on which Lender is open for business. Interest only shall be payable in one hundred twenty (120) consecutive monthly installments in the amounts set forth on Annex 1, beginning on February 11, 2007 (the “First Payment Date”), and continuing on the eleventh (11^th) day of each and every calendar month thereafter through and including December 11, 2016 (each, a “Payment Date”). On January 11, 2017 (the “Maturity Date”) (provided that in the event that there is a Defeasance of the Loan pursuant to Section 1.5(d) hereof, the Maturity Date shall automatically be the Lockout Expiration Date), the entire outstanding principal balance hereof, together with all accrued but unpaid interest thereon, shall be due and payable in full.

     Borrower hereby authorizes Lender to use its automated loan payment service pursuant to which on each Payment Date Borrower shall have its monthly payments of principal (to the extent applicable) and interest payments together with any other sums then due to Lender automatically drawn by Lender or its servicer in accordance with that certain Auto-Draft Request Form by and between Borrower and Lender executed in connection with the Loan (as defined in the Security Instrument (as hereinafter defined)).

     In the event that, on any Payment Date, there are insufficient funds in such account for sums due to Lender, then Lender shall be permitted to withdraw sums from such account on any day thereafter until such time as all payments due to Lender have been drawn from such account; provided, however, the foregoing shall in no event limit or otherwise modify Borrower’s obligations to make payments of principal and interest and other sums due hereunder or under any other Loan Document.

     1.3. Application of Payments. So long as no Event of Default (as hereinafter defined) exists hereunder or under any other Loan Document, each such monthly installment shall be applied, first, to any amounts hereafter advanced by Lender hereunder or under any other Loan Document, second, to any late fees and other amounts payable to Lender, third, to the payment of accrued interest and last to reduction of principal.

     1.4. Payment of “Short Interest”. If the advance of the principal amount evidenced by this Note is made on a date other than a Payment Date, Borrower shall pay to Lender contemporaneously with the execution hereof interest at the Note Rate for a period from the date hereof through and including the tenth (10^th) day of either (x) this month, in the event that the date hereof is on or prior to the 11^th of the month, and (y) the immediately succeeding month, in the event that the date hereof is after the 11^th of the month.

     1.5. Prepayment; Defeasance.

          (a) This Note may not be prepaid, in whole or in part (except as otherwise specifically provided herein), at any time prior to the Payment Date occurring three (3) Payment Dates immediately prior to the Maturity Date (the “Lockout Expiration Date”). In the event that Borrower wishes to have the Property (as hereinafter defined) released from the lien of the Security Instrument prior to the Lockout Expiration Date, Borrower’s sole option shall be a Defeasance (as hereinafter defined) upon satisfaction of the terms and conditions set forth in Section 1.5(d) hereof. This Note may be prepaid in whole but not in part without premium or penalty on any Payment Date occurring on or after the Lockout Expiration Date provided (i) written notice of such prepayment is received by Lender not more than ninety (90) days and not less than thirty (30) days prior to the date of such prepayment, and (ii) such prepayment is accompanied by all interest accrued hereunder through and including the date of such prepayment and all other sums due hereunder or under the other Loan Documents. If, upon any such permitted prepayment on any Payment Date occurring on or after the Lockout Expiration Date, the aforesaid prior written notice has not been timely received by Lender, there shall be due a prepayment fee equal to the lesser of (i) thirty (30) days’ interest computed at the Note Rate on the outstanding principal balance of this Note so prepaid and (ii) interest computed at the Note Rate on the outstanding principal balance of this Note so prepaid that would have been payable for the period from, and including, the date of prepayment through the Maturity Date, as though such prepayment had not occurred.

          (b) If, prior to the Lockout Expiration Date, the indebtedness evidenced by this Note shall have been declared due and payable by Lender pursuant to Article II hereof or the provisions of any other Loan Document due to a default by Borrower, then, in addition to the indebtedness evidenced by this Note being immediately due and payable, there shall also then be immediately due and payable a prepayment fee in an amount equal to the Yield Maintenance Premium (as hereinafter defined) based on the entire indebtedness on the date of such acceleration. In addition to the amounts described in the preceding sentence, in the event of any such acceleration or tender of payment of such indebtedness occurs or is made on or prior to the first (1st) anniversary of the date of this Note, there shall also then be immediately due and payable an additional prepayment fee of three percent (3%) of the principal balance of this Note. The term “Yield Maintenance Premium” shall mean an amount equal to the greater of (A) two percent (2.0%) of the principal amount being prepaid, and (B) the present value of a series of payments each equal to the Payment Differential (as hereinafter defined) and payable on each Payment

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Date over the remaining original term of this Note and on the Maturity Date, discounted at the Reinvestment Yield (as hereinafter defined) for the number of months remaining as of the date of such prepayment to each such Payment Date and the Maturity Date. The term “Payment Differential” shall mean an amount equal to (i) the Note Rate less the Reinvestment Yield, divided by (ii) twelve (12) and multiplied by (iii) the principal sum outstanding under this Note after application of the constant monthly payment due under this Note on the date of such prepayment, provided that the Payment Differential shall in no event be less than zero. The term “Reinvestment Yield” shall mean an amount equal to the lesser of (i) the yield on the U.S. Treasury issue (primary issue) with a maturity date closest to the Maturity Date, or (ii) the yield on the U.S. Treasury issue (primary issue) with a term equal to the remaining average life of the indebtedness evidenced by this Note, with each such yield being based on the bid price for such issue as published in the Wall Street Journal on the date that is fourteen (14) days prior to the date of such prepayment (or, if such bid price is not published on that date, the next preceding date on which such bid price is so published) and converted to a monthly compounded nominal yield. In the event that any prepayment fee is due hereunder, Lender shall deliver to Borrower a statement setting forth the amount and determination of the prepayment fee, and, provided that Lender shall have in good faith applied the formula described above, Borrower shall not have the right to challenge the calculation or the method of calculation set forth in any such statement in the absence of manifest error, which calculation may be made by Lender on any day during the fifteen (15) day period preceding the date of such prepayment. Lender shall not be obligated or required to have actually reinvested the prepaid principal balance at the Reinvestment Yield or otherwise as a condition to receiving the prepayment fee. All sums and fees payable to Lender provided for in this Section 1.6(b) are subject to reduction, if and to the extent characterized as interest under applicable law, by the amount (if any) which would cause interest under this Note to exceed the Maximum Lawful Rate.

          (c) Partial prepayments of this Note shall not be permitted, except for partial prepayments resulting from Lender’s election to apply insurance or condemnation proceeds to reduce the outstanding principal balance of this Note as provided in the Security Instrument, in which event no prepayment fee or premium shall be due unless, at the time of either Lender’s receipt of such proceeds or the application of such proceeds to the outstanding principal balance of this Note, an Event of Default, or an event which, with notice or the passage of time, or both, would constitute an Event of Default, shall have occurred, which default or Event of Default is unrelated to the applicable casualty or condemnation, in which event the applicable prepayment fee or premium shall be due and payable based upon the amount of the prepayment. No notice of prepayment shall be required under the circumstances specified in the preceding sentence. No principal amount repaid may be reborrowed. Any such partial prepayments of principal shall be applied to the unpaid principal balance evidenced hereby but such application shall not reduce the amount of the fixed monthly installments required to be paid pursuant to Section 1.2 above. Except as otherwise expressly provided in this Section, the prepayment fees provided above shall be due, to the extent permitted by applicable law, under any and all circumstances where all or any portion of this Note is paid prior to the Maturity Date, whether such prepayment is voluntary or involuntary, including, without limitation, if such prepayment results from Lender’s exercise of its rights upon Borrower’s default and acceleration of the Maturity Date of this Note (irrespective of whether foreclosure proceedings have been commenced), and shall be in addition to any other sums due hereunder or under any of the other Loan Documents. No tender of a prepayment of this Note with respect to which a prepayment fee is due shall be effective unless such prepayment is accompanied by the applicable prepayment fee.

          (d) (i) On any Payment Date on or after the earlier to occur of (x) three (3) years following the first Payment Date hereunder, and (y) the day immediately following the date which is two (2) years after the “startup day,” within the meaning of Section 860G(a) (9) of the Internal Revenue Code of 1986, as amended from time to time or any successor statute (the “Code”), of a “real estate mortgage investment conduit,” within the meaning of Section 860D of the Code (a “REMIC Trust”), that holds this

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Note, and provided no Event of Default has occurred hereunder or under any of the other Loan Documents, at Borrower’s option, Lender shall cause the release of the Property from the lien of the Security Instrument and the other Loan Documents (a “Defeasance”) upon the satisfaction of the following conditions:

     (A) Borrower shall give not more than ninety (90) days’ or less than sixty (60) days’ prior written notice to Lender specifying the date Borrower intends for the Defeasance to be consummated (the “Release Date”), which date shall be a Payment Date.

     (B) All accrued and unpaid interest and all other sums due under this Note and under the other Loan Documents up to and including the Release Date shall be paid in full on or prior to the Release Date.

     (C) Borrower shall deliver to Lender on or prior to the Release Date:

(1)

a sum of money in immediately available funds (the “Defeasance Deposit”) equal to the outstanding principal balance of this Note plus an amount, if any, which together with the outstanding principal balance of this Note, shall be sufficient to enable Lender to purchase, through means and sources customarily employed and available to Lender, for the account of Borrower, (x) direct, non-callable, fixed rate obligations of the United States of America or (y) non-callable, fixed rate obligations, other than U.S. Treasury Obligations, that are “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, that provide for payments prior, but as close as possible, to all successive monthly Payment Dates occurring after the Release Date and to the Lockout Expiration Date, with each such payment being equal to or greater than the amount of the corresponding installment of principal and/or interest required to be paid under this Note (including, but not limited to, the scheduled outstanding principal balance of the Loan due on the Maturity Date based upon payments of principal and interest through the Lockout Expiration Date) for the balance of the term hereof (the “Defeasance Collateral”), each of which shall be duly endorsed by the holder thereof as directed by Lender or accompanied by a written instrument of transfer in form and substance satisfactory to Lender in its sole discretion (including, without limitation, such instruments as may be required by the depository institution holding such securities or the issuer thereof, as the case may be, to effectuate book-entry transfers and pledges through the book-entry facilities of such institution) in order to perfect upon the delivery of the Defeasance Security Agreement (as hereinafter defined) the first priority security interest in the Defeasance Collateral in favor of Lender in conformity with all applicable state and federal laws governing granting of such security interests.

(2)

a pledge and security agreement, in form and substance satisfactory to Lender, creating a first priority security interest in favor of Lender in the Defeasance Collateral (the “Defeasance Security Agreement”);

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(3)	a certificate of Borrower certifying that all of the requirements set forth in this subsection 1.5(d)(i) have been satisfied;
(4)	one or more opinions of counsel for Borrower in form and substance and delivered by counsel which would be satisfactory to Lender stating, among other things, that (i) Lender has a perfected first priority security interest in the Defeasance Collateral and that the Defeasance Security Agreement is enforceable against Borrower in accordance with its terms, (ii) in the event of a bankruptcy proceeding or similar occurrence with respect to Borrower, none of the Defeasance Collateral nor any proceeds thereof will be property of Borrower’s estate under Section 541 of the U.S. Bankruptcy Code, as amended, or any similar statute and the grant of security interest therein to Lender shall not constitute an avoidable preference under Section 547 of the U.S. Bankruptcy Code, as amended, or applicable state law, (iii) the release of the lien of the Security Instrument and the pledge of Defeasance Collateral will not directly or indirectly result in or cause any REMIC Trust that then holds this Note to fail to maintain its status as a REMIC Trust and (iv) the defeasance will not cause any REMIC Trust to be an “investment company” under the Investment Company Act of 1940;
(5)	evidence in writing from any applicable Rating Agency (as defined in the Security Instrument) to the effect that the Defeasance will not result in a downgrading, withdrawal or qualification of the respective ratings in effect immediately prior to such Defeasance for any Securities (as hereinafter defined) issued in connection with the securitization which are then outstanding; provided, however, no evidence from a Rating Agency shall be required if this Note does not meet the then-current review requirements of such Rating Agency.
(6)	a certificate in form and scope acceptable to Lender in its sole discretion from an acceptable independent accountant certifying that the Defeasance Collateral will generate amounts sufficient to make all payments of principal and interest due under this Note through the Lockout Expiration Date and the outstanding principal balance of the Loan due on the Maturity Date based upon payments of principal and interest through the Lockout Expiration Date;
(7)	Borrower and any guarantor or indemnitor of Borrower’s obligations under the Loan Documents for which Borrower has personal liability executes and delivers to Lender such documents and agreements as Lender shall reasonably require to evidence and effectuate the ratification of such personal liability and guaranty or indemnity, respectively;
(8)	such other certificates, documents or instruments as Lender may reasonably require; and
(9)	payment of all fees, costs, expenses and charges incurred by Lender in connection with the Defeasance of the Property and the purchase of the Defeasance Collateral, including, without limitation, all legal fees and

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costs and expenses incurred by Lender or its agents in connection with release of the Property, review of the proposed Defeasance Collateral and preparation of the Defeasance Security Agreement and related documentation, any revenue, documentary, stamp, intangible or other taxes, charges or fees due in connection with transfer of the Note, assumption of the Note, or substitution of collateral for the Property shall be paid on or before the Release Date. Without limiting Borrower’s obligations with respect thereto, Lender shall be entitled to deduct all such fees, costs, expenses and charges from the Defeasance Deposit to the extent of any portion of the Defeasance Deposit which exceeds the amount necessary to purchase the Defeasance Collateral.

     (D) In connection with the Defeasance Deposit, Borrower hereby authorizes and directs Lender using the means and sources customarily employed and available to Lender to use the Defeasance Deposit to purchase for the account of Borrower the Defeasance Collateral. Furthermore, the Defeasance Collateral shall be arranged such that payments received from such Defeasance Collateral shall be paid directly to Lender to be applied on account of the indebtedness of this Note. Any part of the Defeasance Deposit in excess of the amount necessary to purchase the Defeasance Collateral and to pay the other and related costs Borrower is obligated to pay under this Section 1.5 shall be refunded to Borrower.

     (ii) Upon compliance with the requirements of subsection 1.5(d)(i), the Property shall be released from the lien of the Security Instrument and the other Loan Documents, and the Defeasance Collateral shall constitute collateral which shall secure this Note and all other obligations under the Loan Documents. Lender will, at Borrower’s expense, execute and deliver any agreements reasonably requested by Borrower to release the lien of the Security Instrument from the Property.

     (iii) Upon the release of the Property in accordance with this Section 1.5(d), Borrower shall assign all its obligations and rights under this Note, together with the pledged Defeasance Collateral, to a newly created successor entity which complies with the terms of Section 2.29 of the Security Instrument designated by Lender in its sole discretion. Such successor entity shall execute an assumption agreement in form and substance satisfactory to Lender in its sole discretion pursuant to which it shall assume Borrower’s obligations under this Note and the Defeasance Security Agreement. As conditions to such assignment and assumption, Borrower shall (x) deliver to Lender an opinion of counsel in form and substance satisfactory to a prudent lender and delivered by counsel satisfactory to a prudent lender stating, among other things, that such assumption agreement is enforceable against Borrower and such successor entity in accordance with its terms and that this Note and the Defeasance Security Agreement as so assumed, are enforceable against such successor entity in accordance with their respective terms, and (y) pay all costs and expenses (including, but not limited to, legal fees) incurred by Lender or its agents in connection with such assignment and assumption (including, without limitation, the review of the proposed transferee and the preparation of the assumption agreement and related documentation). Upon such assumption, Borrower shall be relieved of its obligations hereunder, under the other Loan Documents other than as specified in Section 1.5(d)(i)(C)(7) above and under the Defeasance Security Agreement (or other Defeasance document).

     1.6. Security. The indebtedness evidenced by this Note and the obligations created hereby are secured by, among other things, that certain mortgage, deed of trust or deed to secure debt, security agreement and fixture filing (the “Security Instrument”) from Borrower for the benefit of Lender, dated

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of even date herewith, covering the Property. The Security Instrument, together with this Note and all other documents to or of which Lender is a party or beneficiary now or hereafter evidencing, securing, guarantying, modifying or otherwise relating to the indebtedness evidenced hereby, are herein referred to collectively as the “Loan Documents”. All of the terms and provisions of the Loan Documents are incorporated herein by reference. Some of the Loan Documents are to be filed for record on or about the date hereof in the appropriate public records.

ARTICLE II. — DEFAULT

     2.1. Events of Default. It is hereby expressly agreed that should any default occur in the payment of principal or interest as stipulated above and such payment is not made on the date such payment is due, or should any other default occur under any other Loan Document and not be cured within any applicable grace or notice period (if any), then an Event of Default (an “Event of Default”) shall exist hereunder, and in such event the indebtedness evidenced hereby, including all sums advanced or accrued hereunder or under any other Loan Document, and all unpaid interest accrued thereon, shall, at the option of Lender and without notice to Borrower, at once become due and payable and may be collected forthwith, whether or not there has been a prior demand for payment and regardless of the stipulated date of maturity.

     2.2. Late Charges. In the event that any payment is not received by Lender within ten (10) days of the date when due (subject to any applicable grace period), then, in addition to any default interest payments due hereunder, Borrower shall also pay to Lender a late charge in an amount equal to three percent (3%) of the amount of such overdue payment. Notwithstanding the foregoing, no late charge shall be due on the principal balance on the Loan as a result of the failure to repay in full the Loan on the Maturity Date.

     2.3. Default Interest Rate. So long as any Event of Default exists hereunder or under any other Loan Document, regardless of whether or not there has been an acceleration of the indebtedness evidenced hereby, and at all times after maturity of the indebtedness evidenced hereby (whether by acceleration or otherwise), interest shall accrue on the outstanding principal balance of this Note, from the date due until the date credited, at a rate per annum equal to four percent (4%) in excess of the Note Rate, or, if such increased rate of interest may not be collected under applicable law (as applicable), then at the Maximum Lawful Rate (as applicable, the “Default Interest Rate”), and such default interest shall be immediately due and payable.

     2.4. Borrower’s Agreements. Borrower acknowledges that it would be extremely difficult or impracticable to determine Lender’s actual damages resulting from any late payment or default, and such late charges and default interest are reasonable estimates of those damages and do not constitute a penalty. The remedies of Lender in this Note or in the Loan Documents, or at law or in equity, shall be cumulative and concurrent, and may be pursued singly, successively or together, in Lender’s discretion.

     2.5. Borrower to Pay Costs. In the event that this Note, or any part hereof, is collected by or through an attorney-at-law, Borrower agrees to pay all costs of collection, including, but not limited to, reasonable attorneys’ fees.

     2.6. Exculpation. Notwithstanding anything in this Note or the Loan Documents to the contrary, but subject to the qualifications hereinbelow set forth, Lender agrees that:

          (a) Borrower shall be liable upon the indebtedness evidenced hereby and for the other obligations arising under the Loan Documents to the full extent (but only to the extent) of the security therefor, the same being all properties (whether real or personal), rights, estates and interests now

7

or at any time hereafter securing the payment of this Note and/or the other obligations of Borrower under the Loan Documents (collectively, the “Property”);

          (b) if a default occurs in the timely and proper payment of all or any part of such indebtedness evidenced hereby or in the timely and proper performance of the other obligations of Borrower under the Loan Documents, any judicial proceedings brought by Lender against Borrower shall be limited to the preservation, enforcement and foreclosure, or any thereof, of the liens, security titles, estates, assignments, rights and security interests now or at any time hereafter securing the payment of this Note and/or the other obligations of Borrower under the Loan Documents, and no attachment, execution or other writ of process shall be sought, issued or levied upon any assets, properties or funds of Borrower other than the Property, except with respect to the liability described below in this section; and

          (c) in the event of a foreclosure of such liens, security titles, estates, assignments, rights or security interests securing the payment of this Note and/or the other obligations of Borrower under the Loan Documents, no judgment for any deficiency upon the indebtedness evidenced hereby shall be sought or obtained by Lender against Borrower, except with respect to the liability described below in this section; provided, however, that, notwithstanding the foregoing provisions of this section, Borrower shall be fully and personally liable and subject to legal action (i) for proceeds paid under any insurance policies (or paid as a result of any other claim or cause of action against any person or entity) by reason of damage, loss or destruction to all or any portion of the Property, to the full extent of such proceeds not previously delivered to Lender, but which, under the terms of the Loan Documents, should have been delivered to Lender, (ii) for proceeds or awards resulting from the condemnation or other taking in lieu of condemnation of all or any portion of the Property, to the full extent of such proceeds or awards not previously delivered to Lender, but which, under the terms of the Loan Documents, should have been delivered to Lender, (iii) for all tenant security deposits or other refundable deposits paid to or held by Borrower or any other person or entity in connection with leases of all or any portion of the Property which are not applied in accordance with the terms of the applicable lease or other agreement, (iv) for rent and other payments received from tenants under leases of all or any portion of the Property paid more than one (1) month in advance, (v) for rents, issues, profits and revenues of all or any portion of the Property received or applicable to a period after the occurrence of any Event of Default hereunder or under the Loan Documents or any event which, with notice or the passage of time, or both, would constitute an Event of Default, hereunder or under the Loan Documents which are not either applied to the ordinary and necessary expenses of owning and operating the Property or paid to Lender, (vi) for waste committed on the Property, damage to the Property as a result of the intentional misconduct or gross negligence of Borrower or any of its principals, officers, general partners or members, any guarantor, any indemnitor, or any agent or employee of any such person, or any removal of all or any portion of the Property in violation of the terms of the Loan Documents, to the full extent of the losses or damages incurred by Lender on account of such occurrence, (vii) for failure to pay any valid taxes, assessments, mechanic’s liens, materialmen’s liens or other liens which could create liens on any portion of the Property which would be superior to the lien or security title of the Security Instrument or the other Loan Documents, to the full extent of the amount claimed by any such lien claimant except, with respect to any such taxes or assessments, to the extent that funds have been deposited with Lender pursuant to the terms of the Security Instrument specifically for the applicable taxes or assessments and not applied by Lender to pay such taxes and assessments, (viii) for all obligations and indemnities of Borrower under the Loan Documents relating to Hazardous Substances (as defined in the Security Instrument) or radon or compliance with Environmental Laws (as defined in the Security Instrument) and regulations to the full extent of any losses or damages (including those resulting from diminution in value of any Property) incurred by Lender and/or any of its affiliates as a result of the existence of such Hazardous Substances or radon or failure to comply with such Environmental Laws or regulations, or (ix) for fraud, intentional misrepresentation, failure to disclose a material fact, any untrue statement of a material fact or omission to state a material fact in the written materials and/or information provided to Lender or any of its affiliates

8

by or on behalf of Borrower or any of its affiliates, principals, officers, general partners or members, any guarantor, any indemnitor or any agent, employee or other person authorized or apparently authorized to make statements, representations or disclosures on behalf of Borrower, any affiliate, principal, officer, general partner or member of Borrower, any guarantor or any indemnitor, to the full extent of any losses, damages and expenses of Lender and/or any of its affiliates on account thereof. References herein to particular sections of the Loan Documents shall be deemed references to such sections as affected by other provisions of the Loan Documents relating thereto. Nothing contained in this Section shall (1) be deemed to be a release or impairment of the indebtedness evidenced by this Note or the other obligations of Borrower under the Loan Documents or the lien of the Loan Documents upon the Property, or (2) preclude Lender from foreclosing the Loan Documents in case of any default or from enforcing any of the other rights of Lender except as stated in this Section, or (3) limit or impair in any way whatsoever (A) the Indemnity and Guaranty Agreement (the “Indemnity Agreement”) or (B) the Environmental Indemnity Agreement (the “Environmental Indemnity Agreement”), each of even date herewith executed and delivered in connection with the indebtedness evidenced by this Note or release, relieve, reduce, waive or impair in any way whatsoever, any obligation of any party to the Indemnity Agreement or the Environmental Indemnity Agreement.

     Notwithstanding the foregoing, the agreement of Lender not to pursue recourse liability as set forth in this Section 2.6 SHALL BECOME NULL AND VOID and shall be of no further force and effect in the event of (i) a default by Borrower, Indemnitor (as defined in the Security Instrument) or any general partner, manager or managing member of Borrower of any of the covenants set forth in Section 2.9 or Section 2.29 of the Security Instrument, or (ii) if the Property or any part thereof shall become an asset in (A) a voluntary bankruptcy or insolvency proceeding of Borrower or Indemnitor, or (B) an involuntary bankruptcy or insolvency proceeding of Borrower or Indemnitor in which the Borrower or the Indemnitor colludes with creditors in such bankruptcy or insolvency proceeding and which is not dismissed within sixty (60) days of filing.

     Notwithstanding anything to the contrary in this Note, the Security Instrument or any of the other Loan Documents, Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for the full amount of the indebtedness evidenced hereby or secured by the Security Instrument or any of the other Loan Documents or to require that all collateral shall continue to secure all of the indebtedness owing to Lender in accordance with this Note, the Security Instrument and the other Loan Documents.

ARTICLE III. — GENERAL CONDITIONS

     3.1. No Waiver; Amendment. No failure to accelerate the indebtedness evidenced hereby by reason of default hereunder, acceptance of a partial or past due payment, or indulgences granted from time to time shall be construed (i) as a novation of this Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or of the right of Lender thereafter to insist upon strict compliance with the terms of this Note, or (ii) to prevent the exercise of such right of acceleration or any other right granted hereunder or by any applicable laws; and Borrower hereby expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing. No extension of the time for the payment of this Note or any installment due hereunder made by agreement with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part, unless Lender agrees otherwise in writing. This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

9

     3.2. Waivers. Presentment for payment, demand, protest and notice of demand, protest and nonpayment and all other notices are hereby waived by Borrower. Borrower hereby further waives and renounces, to the fullest extent permitted by law, all rights to the benefits of any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, redemption, appraisement, exemption and homestead now or hereafter provided by the Constitution and laws of the United States of America and of each state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement and collection of the obligations evidenced by this Note or the other Loan Documents.

     3.3. Limit of Validity.

          (a) Definitions. As used herein, the term “Maximum Lawful Rate” shall mean the maximum lawful rate of interest which may be contracted for, charged, taken, received or reserved by Lender in accordance with the applicable laws of the State of Texas (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law), taking into account all Charges (as defined herein) made in connection with the transaction evidenced by this Note and the other Loan Documents. As used herein, the term “Charges” shall mean all fees, charges and/or any other things of value, if any, contracted for, charged, received, taken or reserved by Lender in connection with the transactions relating to this Note and the other Loan Documents, which are treated as interest under applicable law. As used herein, the term “Related Indebtedness” shall mean any and all debt paid or payable by Borrower to Lender pursuant to the Loan Documents or any other communication or writing by or between Borrower and Lender related to the transaction or transactions that are the subject matter of the Loan Documents, except such debt which has been paid or is payable by Borrower to Lender under this Note.

          (b) Ceiling Election. To the extent that Lender is relying on Chapter 303 of the Texas Finance Code to determine the Maximum Lawful Rate payable on this Note and/or the Related Indebtedness, Lender will utilize the weekly ceiling from time to time in effect as provided in such Chapter 303, as amended. To the extent United States federal law permits Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law, Lender will rely on United States federal law instead of such Chapter 303 for the purpose of determining the Maximum Lawful Rate. Additionally, to the extent permitted by applicable law now or hereafter in effect, Lender may, at its option and from time to time, utilize any other method of establishing the Maximum Lawful Rate under such Chapter 303 or under other applicable law by giving notice, if required, to Borrower as provided by applicable law now or hereafter in effect.

     3.4. Savings Clause. It is expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply strictly with the applicable Texas law governing the maximum rate or amount of interest payable on this Note or the Related Indebtedness (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law). If the applicable law is ever judicially interpreted so as to render usurious any amount (i) contracted for, charged, taken, reserved or received pursuant to this Note, any of the other Loan Documents or any other communication or writing by or between Borrower and Lender related to the transaction or transactions that are the subject matter of the Loan Documents, (ii) contracted for, charged or received by reason of Lender’s exercise of the option to accelerate the maturity of this Note and/or the Related Indebtedness, or (iii) Borrower will have paid or Lender will have received by reason of any voluntary prepayment by Borrower of this Note and/or the Related Indebtedness, then it is Borrower’s and Lender’s express intent that all amounts charged in excess of the Maximum Lawful Rate shall be automatically cancelled, ab initio, and all amounts in excess of the Maximum Lawful Rate theretofore collected by Lender shall be credited on the principal balance of this Note and/or the Related Indebtedness (or, if this Note and all Related Indebtedness have been or would thereby be paid in full, refunded to Borrower), and the provisions of this Note and the other Loan Documents immediately be

10

deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder; provided, however, if this Note has been paid in full before the end of the stated term of this Note, then Borrower and Lender agree that Lender shall, with reasonable promptness after Lender discovers or is advised by Borrower that interest was received in an amount in excess of the Maximum Lawful Rate, either refund such excess interest to Borrower and/or credit such excess interest against this Note and/or any Related Indebtedness then owing by Borrower to Lender. Borrower hereby agrees that as a condition precedent to any claim seeking usury penalties against Lender, Borrower will provide written notice to Lender, advising Lender in reasonable detail of the nature and amount of the violation, and Lender shall have sixty (60) days after receipt of such notice in which to correct such usury violation, if any, by either refunding such excess interest to Borrower or crediting such excess interest against this Note and/or the Related Indebtedness then owing by Borrower to Lender. All sums contracted for, charged or received by Lender for the use, forbearance or detention of any debt evidenced by this Note and/or the Related Indebtedness shall, to the extent permitted by applicable law, be amortized or spread, using the actuarial method, throughout the stated term of this Note and/or the Related Indebtedness (including any and all renewal and extension periods) until payment in full so that the rate or amount of interest on account of this Note and/or the Related Indebtedness does not exceed the Maximum Lawful Rate from time to time in effect and applicable to this Note and/or the Related Indebtedness for so long as debt is outstanding In no event shall the provisions of Chapter 346 of the Texas Finance Code (which regulates certain revolving credit loan accounts and revolving tri-party accounts) apply to this Note and/or the Related Indebtedness. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration.

     3.5. Use of Funds. Borrower hereby warrants, represents and covenants that no funds disbursed hereunder shall be used for personal, family or household purposes.

     3.6. Unconditional Payment. Borrower is and shall be obligated to pay principal, interest and any and all other amounts which become payable hereunder or under the other Loan Documents absolutely and unconditionally and without any abatement, postponement, diminution or deduction and without any reduction for counterclaim or setoff. In the event that at any time any payment received by Lender hereunder shall be deemed by a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under any bankruptcy, insolvency or other debtor relief law, then the obligation to make such payment shall survive any cancellation or satisfaction of this Note or return thereof to Borrower and shall not be discharged or satisfied with any prior payment thereof or cancellation of this Note, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof, and such payment shall be immediately due and payable upon demand.

     3.7. Governing Law. THIS NOTE SHALL BE INTERPRETED, CONSTRUED AND ENFORCED ACCORDING TO THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED.

     3.8. Waiver of Jury Trial. BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THE DEBT EVIDENCED BY THIS NOTE OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR BORROWER, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, IN

11

EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.

ARTICLE IV. — MISCELLANEOUS PROVISIONS

     4.1. Successors and Assigns; Joint and Several; Interpretation. The terms and provisions hereof shall be binding upon and inure to the benefit of Borrower and Lender and their respective heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of the parties or by operation of law. As used herein, the terms “Borrower” and “Lender” shall be deemed to include their respective heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of the parties or by operation of law. If Borrower consists of more than one person or entity, each shall be jointly and severally liable to perform the obligations of Borrower under this Note. All personal pronouns used herein, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and vice versa. Titles of articles and sections are for convenience only and in no way define, limit, amplify or describe the scope or intent of any provisions hereof. Time is of the essence with respect to all provisions of this Note. This Note and the other Loan Documents contain the entire agreements between the parties hereto relating to the subject matter hereof and thereof and all prior agreements relative hereto and thereto which are not contained herein or therein are terminated.

     4.2. Taxpayer Identification. The Tax Identification Number of Apartment REIT Hidden Lakes, LP is 20-8104293.

[The Remainder of the Page is Intentionally Blank]

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     THIS NOTE AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. THIS NOTE CONTAINS THE ENTIRE AGREEMENT BETWEEN THE PARTIES RESPECTING THE MATTERS HEREIN SET FORTH AND SUPERSEDES ALL PRIOR AGREEMENTS, WHETHER WRITTEN OR ORAL, BETWEEN THE PARTIES RESPECTING SUCH MATTERS. ANY AMENDMENTS OR MODIFICATIONS HERETO, IN ORDER TO BE EFFECTIVE, SHALL BE IN WRITING AND EXECUTED BY THE PARTIES HERETO. A DETERMINATION THAT ANY PROVISION OF THIS NOTE IS UNENFORCEABLE OR INVALID SHALL NOT AFFECT THE ENFORCEABILITY OR VALIDITY OF ANY OTHER PROVISION, AND ANY DETERMINATION THAT THE APPLICATION OF ANY PROVISION OF THIS NOTE TO ANY PERSON OR CIRCUMSTANCE IS ILLEGAL OR UNENFORCEABLE SHALL NOT AFFECT THE ENFORCEABILITY OR VALIDITY OF SUCH PROVISION AS IT MAY APPLY TO ANY OTHER PERSONS OR CIRCUMSTANCES.

     IN WITNESS WHEREOF, Borrower has executed this Note as of the date first written above.

BORROWER:
APARTMENT REIT HIDDEN LAKES, LP, a Texas limited partnership
By:	Apartment REIT Hidden Lakes GP, LLC,
	a Delaware limited liability company,
	its General Partner
	By:	NNN Apartment REIT Holdings, L.P.,
		a Virginia limited partnership,
		its Manager
		By:	NNN Apartment REIT, Inc.,
			a Maryland corporation,
			its General Partner
			By:	/s/ Andrea R. Biller
			Name:	Andrea R. Biller
			Title:	Secretary

ANNEX 1
TO $19,218,000 PROMISSORY NOTE
(Loan No.: 50-2859027)

[SEE ATTACHED]

EX-10.10

Exhibit 10.10

this instrument prepared by
and when recorded return to:

Kilpatrick Stockton LLP
Hearst Tower, Suite 2500
214 North Tryon Street
Charlotte, North Carolina 28202
Attn: James M. Tucker, Esq.

(SPACE ABOVE THIS LINE FOR RECORDER’S USE)

Loan No.: 50-2859027 Hidden Lakes Apartments

APARTMENT REIT HIDDEN LAKES, LP,
as Borrower

to

WILLIAM M. WOODALL, as Trustee

For the benefit of

WACHOVIA BANK, NATIONAL ASSOCIATION, as Lender

DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING

Dated as of: December 28, 2006

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER

TABLE OF CONTENTS

		Page
ARTICLE I. REPRESENTATIONS AND WARRANTIES OF BORROWER			4
1.1	Organization; Special Purpose		4
1.2	Title		4
1.3	No Bankruptcy Filing		5
1.4	Full and Accurate Disclosure		5
1.5	Proceedings; Enforceability		5
1.6	No Conflicts		5
1.7	Federal Reserve Regulations; Investment Company Act		6
1.8	Taxes		6
1.9	ERISA		6
1.10	Property Compliance		6
1.11	Utilities		7
1.12	Public Access		7
1.13	Litigation; Agreements		7
1.14	Physical Condition		7
1.15	Contracts		7
1.16	Leases		8
1.17	Foreign Person		8
1.18	Management Agreement		8
1.19	Fraudulent Transfer		8
1.20	Foreign Assets Control		8
ARTICLE II. COVENANTS OF BORROWER			9
2.1	Defense of Title		9
2.2	Performance of Obligations		10
2.3	Insurance		10
2.4	Payment of Taxes		13
2.5	Casualty and Condemnation		14
2.6	Construction Liens		16
2.7	Rents and Profits		16
2.8	Leases		17
2.9	Alienation and Further Encumbrances		19
2.10	Payment of Utilities, Assessments, Charges, Etc.		22
2.11	Access Privileges and Inspections		23
2.12	Waste; Alteration of Improvements		23
2.13	Zoning		23
2.14	Financial Statements and Books and Records		23
2.15	Further Assurances		25
2.16	Payment of Costs; Reimbursement to Lender		25
2.17	Security Interest		26
2.18	Security Agreement		27
2.19	Easements and Rights-of-Way		28
2.20	Compliance with Laws		28
2.21	Additional Taxes		29
2.22	Secured Indebtedness		29
2.23	Borrower’s Waivers		29

i

		Page
2.24	SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL		31
2.25	Attorney-in-Fact Provisions		31
2.26	Management		31
2.27	Hazardous Waste and Other Substances		32
2.28	Indemnification; Subrogation		36
2.29	Covenants with Respect to Existence, Indebtedness, Operations, Fundamental Changes of Borrower		37
2.30	Embargoed Person		39
2.31	Anti-Money Laundering		40
2.32	ERISA		40
2.33	Intentionally Deleted		40
ARTICLE III. RESERVES AND CASH MANAGEMENT			41
3.1	Reserves Generally		41
3.2	Payment Reserve		42
3.3	Impound Account		42
3.4	Intentionally Deleted		43
3.5	Replacement Reserve		43
ARTICLE IV. EVENTS OF DEFAULT			44
4.1	Events of Default		44
ARTICLE V. REMEDIES			46
5.1	Remedies Available		46
5.2	Application of Proceeds		48
5.3	Right and Authority of Receiver or Lender in the Event of Default; Power of Attorney		49
5.4	Occupancy After Foreclosure		50
5.5	Notice to Account Debtors		50
5.6	Cumulative Remedies		50
5.7	Payment of Expenses		50
ARTICLE VI. MISCELLANEOUS TERMS AND CONDITIONS			51
6.1	Time of Essence		51
6.2	Release of Deed of Trust		51
6.3	Certain Rights of Lender		51
6.4	Waiver of Certain Defenses		51
6.5	Notices		51
6.6	Successors and Assigns; Joint and Several Liability		51
6.7	Severability		52
6.8	Gender		52
6.9	Waiver; Discontinuance of Proceedings		52
6.10	Section Headings		52
6.11	GOVERNING LAW		52
6.12	Counting of Days		52
6.13	Relationship of the Parties		53
6.14	Application of the Proceeds of the Note		53
6.15	Unsecured Portion of Indebtedness		53
6.16	Cross Default		53
6.17	Interest After Sale		53
6.18	Inconsistency with Other Loan Documents		53
6.19	Construction of this Document		53
6.20	No Merger		53
6.21	Rights With Respect to Junior Encumbrances		53

ii

		Page
6.22	Lender May File Proofs of Claim		54
6.23	Fixture Filing		54
6.24	After-Acquired Property		54
6.25	No Representation		54
6.26	Counterparts		54
6.27	Personal Liability		54
6.28	Recording and Filing		54
6.29	Intentionally Deleted		55
6.30	Maximum Interest		55
6.31	Secondary Market		56
6.32	Dissemination of Information		56
6.33	Intentionally Deleted		56
6.34	REMIC Opinions		56
ARTICLE VII. CONCERNING THE TRUSTEE			57
7.1	Certain Rights		57
7.2	Retention of Money		57
7.3	Successor Trustees		57
7.4	Perfection of Appointment		58
7.5	Succession Instruments		58
7.6	No Representation by Trustee or Lender		58
7.7	Entire Agreement and Modifications		59

iii

DEED OF TRUST, SECURITY AGREEMENT

AND FIXTURE FILING

     THIS DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING (as the same may from time to time be amended, consolidated, renewed or replaced, this “Deed of Trust”) is made as of December 28, 2006 by APARTMENT REIT HIDDEN LAKES, LP, a Texas limited partnership (“Borrower”), having an address at c/o Triple Net Properties, LLC, 1551 North Tustin Avenue, Suite 300, Santa Ana, California 92705, to WILLIAM M. WOODALL, an individual and resident of Texas, as Trustee (“Trustee”), having an address at 8201 Preston Road, Suite 280, Dallas, Texas 75225, for the benefit of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as beneficiary (together with its successors and assigns, “Lender”), whose address is Commercial Real Estate Services, 8739 Research Drive URP — 4, NC 1075, Charlotte, North Carolina 28262.

W I T N E S S E T H:

     THAT FOR AND IN CONSIDERATION OF THE SUM OF TEN AND NO/100 DOLLARS ($10.00), AND OTHER VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, BORROWER HEREBY IRREVOCABLY GRANTS, BARGAINS, SELLS AND CONVEYS to Trustee in trust, for the benefit of Lender, with power of sale, all of Borrower’s estate, right, title and interest in, to and under any and all of the following described property, whether now owned or hereafter acquired by Borrower (collectively, the “Property”):

     (A) All that certain real property situated in the County of Bexar, State of Texas, more particularly described on Exhibit “A” attached hereto and incorporated herein by this reference (the “Premises”), together with all of the easements, rights, privileges, franchises, tenements, hereditaments and appurtenances now or hereafter thereunto belonging or in any way appertaining thereto, and all of the estate, right, title, interest, claim and demand whatsoever of Borrower therein or thereto, either at law or in equity, in possession or in expectancy, now or hereafter acquired;

     (B) All structures, buildings and improvements of every kind and description now or at any time hereafter located or placed on the Premises (the “Improvements”);

     (C) All furniture, furnishings, fixtures, goods, equipment, inventory or personal property owned by Borrower and now or hereafter located on, attached to or used in and about the Improvements, including, but not limited to, all machines, engines, boilers, dynamos, elevators, stokers, tanks, cabinets, awnings, screens, shades, blinds, carpets, draperies, lawn mowers, and all appliances, plumbing, heating, air conditioning, lighting, ventilating, refrigerating, disposal and incinerating equipment, and all fixtures and appurtenances thereto, and such other goods and chattels and personal property owned by Borrower as are now or hereafter used or furnished in operating the Improvements, or the activities conducted therein, and all building materials and equipment hereafter situated on or about the Premises or Improvements, and all warranties and guaranties relating thereto, and all additions thereto and substitutions and replacements therefor (exclusive of any of the foregoing owned or leased by tenants of space in the Improvements);

     (D) All easements, rights-of-way, strips and gores of land, vaults, streets, ways, alleys, passages, sewer rights, and other emblements now or hereafter located on the Premises or under or above the same or any part or parcel thereof, and all estates, rights, titles, interests, tenements, hereditaments and appurtenances, reversions and remainders whatsoever, in any way belonging, relating or appertaining to the Property or any part thereof, or which hereafter shall in any way belong, relate or be appurtenant thereto, whether now owned or hereafter acquired by Borrower;

     (E) All water, ditches, wells, reservoirs and drains and all water, ditch, well, reservoir and drainage rights which are appurtenant to, located on, under or above or used in connection with the Premises or the Improvements, or any part thereof, whether now existing or hereafter created or acquired;

     (F) All minerals, crops, timber, trees, shrubs, flowers and landscaping features now or hereafter located on, under or above the Premises;

     (G) All cash funds, deposit accounts and other rights and evidence of rights to cash, now or hereafter created or held by Lender pursuant to this Deed of Trust or any other of the Loan Documents (as hereinafter defined), including, without limitation, all funds now or hereafter on deposit in the Reserves (as hereinafter defined);

     (H) All leases (including, without limitation, oil, gas and mineral leases), licenses, concessions and occupancy agreements of all or any part of the Premises or the Improvements (each, a “Lease” and collectively, “Leases”), whether written or oral, now or hereafter entered into and all rents, royalties, issues, profits, bonus money, revenue, income, rights and other benefits (collectively, the “Rents and Profits”) of the Premises or the Improvements, now or hereafter arising from the use or enjoyment of all or any portion thereof or from any present or future Lease or other agreement pertaining thereto or arising from any of the Leases or any of the General Intangibles (as hereinafter defined) and all cash or securities deposited to secure performance by the tenants, lessees or licensees (each, a “Tenant” and collectively, “Tenants”), as applicable, of their obligations under any such Leases, whether said cash or securities are to be held until the expiration of the terms of said Leases or applied to one or more of the installments of rent coming due prior to the expiration of said terms, subject, however, to the provisions contained in Section 2.7 hereinbelow;

     (I) All contracts and agreements now or hereafter entered into covering any part of the Premises or the Improvements (collectively, the “Contracts”) and all revenue, income and other benefits thereof, including, without limitation, management agreements, service contracts, maintenance contracts, equipment leases, personal property leases and any contracts or documents relating to construction on any part of the Premises or the Improvements (including plans, drawings, surveys, tests, reports, bonds and governmental approvals) or to the management or operation of any part of the Premises or the Improvements;

     (J) All present and future monetary deposits given to any public or private utility with respect to utility services furnished to any part of the Premises or the Improvements;

     (K) All present and future funds, accounts, instruments, accounts receivable, documents, causes of action, claims, general intangibles (including, without limitation, trademarks, trade names, service marks and symbols now or hereafter used in connection with any part of the Premises or the Improvements, all names by which the Premises or the Improvements may be operated or known, all rights to carry on business under such names, and all rights, interest and privileges which Borrower has or may have as developer or declarant under any covenants, restrictions or declarations now or hereafter relating to the Premises or the Improvements) and all notes or chattel paper now or hereafter arising from or by virtue of any transactions related to the Premises or the Improvements (collectively, the “General Intangibles”);

     (L) All water taps, sewer taps, certificates of occupancy, permits, licenses, franchises, certificates, consents, approvals and other rights and privileges now or hereafter obtained in connection with the Premises or the Improvements and all present and future warranties and guaranties relating to the Improvements or to any equipment, fixtures, furniture, furnishings, personal property or components of any of the foregoing now or hereafter located or installed on the Premises or the Improvements;

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     (M) All building materials, supplies and equipment now or hereafter placed on the Premises or in the Improvements and all architectural renderings, models, drawings, plans, specifications, studies and data now or hereafter relating to the Premises or the Improvements;

     (N) All right, title and interest of Borrower in any insurance policies or binders now or hereafter relating to the Property, including any unearned premiums thereon;

     (O) All proceeds, products, substitutions and accessions (including claims and demands therefor) of the conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims, including, without limitation, proceeds of insurance and condemnation awards; and

     (P) All other or greater rights and interests of every nature in the Premises or the Improvements and in the possession or use thereof and income therefrom, whether now owned or hereafter acquired by Borrower.

     FOR THE PURPOSE OF SECURING:

     (1) The loan (the “Loan”) evidenced by that certain Promissory Note (such Promissory Note, together with any and all renewals, amendments, modifications, consolidations and extensions thereof, is hereinafter referred to as the “Note”) of even date with this Deed of Trust, made by Borrower payable to the order of Lender in the principal face amount of Nineteen Million Two Hundred Eighteen Thousand and No/100 Dollars ($19,218,000.00), together with interest as therein provided; and having a maturity date of January 11, 2017;

     (2) The full and prompt payment and performance of all of the provisions, agreements, covenants and obligations herein contained and contained in any other agreements, documents or instruments now or hereafter evidencing, securing or otherwise relating to the Debt (as hereinafter defined) including the Environmental Indemnity Agreement (as hereinafter defined) and the Indemnity and Guaranty Agreement (as hereinafter defined) (the Note, this Deed of Trust, and such other agreements, documents and instruments, together with any and all renewals, amendments, extensions and modifications thereof, are hereinafter collectively referred to as the “Loan Documents”) and the payment of all other sums herein or therein covenanted to be paid;

     (3) Any and all additional advances made by Lender to protect or preserve the Property or the lien or security interest created hereby on the Property, or for taxes, assessments or insurance premiums as hereinafter provided or for performance of any of Borrower’s obligations hereunder or under the other Loan Documents or for any other purpose provided herein or in the other Loan Documents (whether or not the original Borrower remains the owner of the Property at the time of such advances); and

     (4) Any and all other indebtedness now owing or which may hereafter be owing by Borrower to Lender, including, without limitation, all prepayment fees, however and whenever incurred or evidenced, whether express or implied, direct or indirect, absolute or contingent, or due or to become due, and all renewals, modifications, consolidations, replacements and extensions thereof, it being contemplated by Borrower and Lender that Borrower may hereafter become so indebted to Lender.

(All of the sums referred to in Paragraphs (1) through (4) above are herein referred to as the “Debt”).

     TO HAVE AND TO HOLD the Property unto Trustee, its successors, substitutes or assigns, in trust, and Borrower does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER

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DEFEND the title to the Property, subject to the Permitted Encumbrances (as hereinafter defined), unto Trustee against every person whomsoever lawfully claiming or to claim the same or any part thereof;

     PROVIDED, HOWEVER, that if the principal and interest and all other sums due or to become due under the Note or under the other Loan Documents, including, without limitation, any prepayment fees required pursuant to the terms of the Note, shall have been paid at the time and in the manner stipulated therein and the Debt shall have been paid and all other covenants contained in the Loan Documents shall have been performed, then, in such case, the liens, security interests, estates and rights granted by this Deed of Trust shall be satisfied and the estate, right, title and interest of Lender in the Property shall cease, and upon payment to Lender of all costs and expenses incurred for the preparation of the release hereinafter referenced and all recording costs if allowed by law, Lender shall promptly satisfy and release this Deed of Trust of record and the lien hereof by proper instrument.

ARTICLE I.
REPRESENTATIONS AND WARRANTIES OF BORROWER

     Borrower, for itself and its successors and assigns, does hereby represent, warrant and covenant to and with Lender, its successors and assigns, that:

     1.1 Organization; Special Purpose. Borrower has been duly organized and is validly existing and in good standing under the laws of the state of its formation, with requisite power and authority, and all rights, licenses, permits and authorizations, governmental or otherwise, necessary to own its properties and to transact the business in which it is now engaged. Borrower is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, business and operations. Borrower possesses all franchises, patents, copyrights, trademarks, trade names, licenses and permits necessary for the conduct of its business substantially as now conducted. Borrower is a Single-Purpose Entity in compliance with the provisions of Section 2.29 hereof.

     1.2 Title. Borrower has good, marketable and indefeasible fee simple title to the Property, subject only to those matters expressly set forth as exceptions to or subordinate matters in the title insurance policy insuring the lien of this Deed of Trust delivered as of the date hereof which Lender has agreed to accept, excepting therefrom all preprinted and/or standard exceptions (such items being the “Permitted Encumbrances”), and has full power and lawful authority to grant, bargain, sell, convey, assign, transfer, encumber and mortgage its interest in the Property in the manner and form hereby done or intended. Borrower will preserve its interest in and title to the Property and will forever warrant and defend the same to Lender against any and all claims whatsoever and will forever warrant and defend the validity and priority of the lien and security interest created herein against the claims of all persons and parties whomsoever, subject to the Permitted Encumbrances. Upon proper recordation and indexing, this Deed of Trust creates (i) a valid, perfected lien on the Premises, subject only to Permitted Encumbrances and the liens created by the Loan Documents and (ii) perfected security interests in and to, and perfected collateral assignments of, all personalty, all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances, such other liens as are permitted pursuant to the Loan Documents and the liens created by the Loan Documents. There are no security agreements or financing statements affecting all or any portion of the Property other than (i) as disclosed in writing by Borrower to Lender prior to the date hereof and (ii) the security agreements and financing statements created in favor of Lender. There are no claims for payment for work, labor or materials affecting the Premises which are or may become a lien prior to, or of equal priority with, the liens created by the Loan Documents. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by this Deed of Trust, materially and adversely affect the value of the Premises, impair the use or operations of the Premises or impair Borrower’s ability to pay its obligations

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in a timely manner. The foregoing warranty of title shall survive the foreclosure of this Deed of Trust and shall inure to the benefit of and be enforceable by Lender in the event Lender acquires title to the Property pursuant to any foreclosure.

     1.3 No Bankruptcy Filing. No bankruptcy, insolvency proceedings or liquidation of all or a substantial portion of the Property is pending or contemplated by Borrower or, to the best knowledge of Borrower, against Borrower or by or against any endorser or cosigner of the Note or of any portion of the Debt, or any guarantor or indemnitor under any guaranty or indemnity agreement, including, without limitation, that certain Indemnity and Guaranty Agreement, dated the date hereof, executed in favor of Lender (the “Indemnity and Guaranty Agreement”) executed in connection with the Note or the loan evidenced thereby and secured hereby (an “Indemnitor”). No petition in bankruptcy has been filed against Borrower or any general partner, manager, sole member, managing member or majority shareholder of Borrower, as applicable (collectively, the “Borrower Parties”, each a “Borrower Party”), and neither Borrower Party or any principal of a Borrower Party has ever made an assignment for the benefit of creditors or taken advantage of any insolvency act for the benefit of debtors.

     1.4 Full and Accurate Disclosure. No statement of fact made by Borrower in any Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein not misleading. There is no material fact presently known to Borrower that has not been disclosed to Lender which adversely affects, or, as far as Borrower can foresee, might adversely affect, the Property or the business, operations or condition (financial or otherwise) of Borrower. All financial data, including the statements of cash flow and income and operating expense, that have been delivered to Lender with respect to Borrower and the Property (i) are true, complete and correct in all material respects, (ii) accurately represent the financial condition of Borrower and the Property as of the date of such reports, and (iii) to the extent prepared by an independent certified public accounting firm, have been prepared in accordance with sound accounting practices relating to the real estate industry, on a Cash/Tax basis, consistently applied throughout the periods covered, except as disclosed therein. Borrower has no contingent liabilities, liabilities for taxes, unusual forward or long-term commitments, unrealized or anticipated losses from any unfavorable commitments or any liabilities or obligations not expressly permitted by this Deed of Trust. Since the date of such financial statements, there has been no materially adverse change in the financial condition, operations or business of Borrower or the Property from that set forth in said financial statements.

     1.5 Proceedings; Enforceability. The execution, delivery and performance of this Deed of Trust, the Note and all of the other Loan Documents have been duly authorized by all necessary action to be, and are, binding and enforceable against Borrower in accordance with the respective terms thereof and do not contravene, result in a breach of or constitute a default (nor upon the giving of notice or the passage of time or both will constitute a default) under the partnership agreement, articles of incorporation, operating agreement or other organizational documents of Borrower or any contract or agreement of any nature to which Borrower is a party or by which Borrower or any of its property may be bound and do not violate or contravene any law, order, decree, rule or regulation to which Borrower is subject. The Loan Documents are not subject to, and Borrower has not asserted, any right of rescission, set-off, counterclaim or defense, including the defense of usury.

     1.6 No Conflicts. Borrower is not required to obtain any consent, approval or authorization from or to file any declaration or statement with, any governmental authority or agency in connection with or as a condition to the execution, delivery or performance of this Deed of Trust, the Note or the other Loan Documents which has not been so obtained or filed. Borrower has obtained or made all necessary (i) consents, approvals and authorizations and registrations and filings of or with all governmental authorities or agencies and (ii) consents, approvals, waivers and notifications of partners, stockholders, members, creditors, lessors and other non-governmental persons and/or entities, in each

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case, which are required to be obtained or made by Borrower in connection with the execution and delivery of, and the performance by Borrower of its obligations under, the Loan Documents.

     1.7 Federal Reserve Regulations; Investment Company Act. No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation T, U or X of the Board of Governors of the Federal Reserve System or for any other purpose that would be inconsistent with such Regulation T, U or X or any other regulation of such Board of Governors, or for any purpose prohibited by law or any Loan Document. Borrower is not (i) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended; (ii) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended; or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

     1.8 Taxes. Borrower and any general partner or managing member of Borrower, if any, has filed all federal, state and local tax returns required to be filed as of the date hereof and has paid or made adequate provision for the payment of all federal, state and local taxes, charges and assessments payable by Borrower and any general partner or managing member, if any, as of the date hereof. Borrower and any general partner or managing member, if any, believe that their respective tax returns properly reflect the income and taxes of Borrower and said general partner or managing member, if any, for the periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable tax authority upon audit. Borrower and the Property are free from any past due obligations for sales and payroll taxes.

     1.9 ERISA. Borrower (i) has no knowledge of any material liability that has been incurred or is expected to be incurred by Borrower that is or remains unsatisfied for any taxes or penalties with respect to any “employee benefit plan”, as defined in section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or any “plan” within the meaning of Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (the “Code”) or any other benefit plan (other than a multi-employer plan) maintained, contributed to, or required to be contributed to by Borrower or by any entity that is under the common control with Borrower within the meaning of ERISA Section 4001(a)(14) (collectively, a “Plan”) or any plan that would be a Plan but for the fact that it is a multi-employer plan within the meaning of ERISA Section 3(37) and (ii) has made and shall continue to make when due all required contributions to all such Plans, if any. Each such Plan, if any, has been and will be administered in compliance with its terms and the applicable provisions of ERISA, the Code and any other applicable Federal or state law and no action shall be taken or fail to be taken that would result in the disqualification or loss of the tax-exempt status of any such Plan, if any, intended to be qualified or tax-exempt. The assets of Borrower do not constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101.

     1.10 Property Compliance. The Premises and the Improvements and the current intended use thereof by Borrower comply in all material respects with all applicable restrictive covenants, zoning ordinances, subdivision and building codes, flood disaster laws, health and environmental laws and regulations and all other ordinances, orders or requirements issued by any state, federal or municipal authorities having or claiming jurisdiction over the Property. In the event that all or any part of the Improvements are destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits. No legal proceedings are pending or, to the knowledge of Borrower, threatened with respect to the zoning of the Premises. Neither the zoning nor any other right to construct, use or operate the Premises is in any way dependent upon or related to any property other than the Premises. All

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certifications, permits, licenses and approvals, including certificates of completion and occupancy permits required for the legal use, occupancy and operation of the Premises have been obtained and are in full force and effect. The Premises and Improvements constitute one or more separate tax parcels for purposes of ad valorem taxation. The Premises and Improvements do not require any rights over, or restrictions against, other property in order to comply with any of the aforesaid governmental ordinances, orders or requirements.

     1.11 Utilities. All utility services necessary and sufficient for the full use, occupancy, operation and disposition of the Premises and the Improvements for their intended purposes are available to the Property, including water, storm sewer, sanitary sewer, gas, electric, cable and telephone facilities, through public rights-of-way or perpetual private easements approved by Lender. The Property is free from delinquent water charges, sewer rents, taxes and assessments.

     1.12 Public Access. All streets, roads, highways, bridges and waterways necessary for access to and full use, occupancy, operation and disposition of the Premises and the Improvements have been completed, have been dedicated to and accepted by the appropriate municipal authority and are open and available to the Premises and the Improvements without further condition or cost to Borrower. All curb cuts, driveways and traffic signals shown on the survey delivered to Lender prior to the execution and delivery of this Deed of Trust are existing and have been fully approved by the appropriate governmental authority.

     1.13 Litigation; Agreements. There are no judicial, administrative, mediation or arbitration actions, suits or proceedings pending or threatened against or affecting Borrower (or, if Borrower is a partnership or a limited liability company, any of its general partners or members) or the Property which, if adversely determined, would materially impair either the Property or Borrower’s ability to perform the covenants or obligations required to be performed under the Loan Documents. Borrower is not a party to any agreement or instrument or subject to any restriction which might adversely affect Borrower or the Property, or Borrower’s business, properties, operations or condition, financial or otherwise. Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Permitted Encumbrance or any other agreement or instrument to which it is a party or by which it or the Property is bound.

     1.14 Physical Condition. As of the date of this Deed of Trust, (i) the Property is free from unrepaired damage caused by fire, flood, accident or other casualty, (ii) no part of the Premises or the Improvements has been taken in condemnation, eminent domain or like proceeding nor is any such proceeding pending or, to Borrower’s knowledge and belief, threatened or contemplated, (iii) except as may otherwise be disclosed in that certain property condition assessment (the “Property Condition Report”), dated December 20, 2006 and prepared by IVI Due Diligence Services, Inc., the Improvements are structurally sound, in good repair and free of defects in materials and workmanship and have been constructed and installed in substantial compliance with the plans and specifications relating thereto, and (iv) all major building systems located within the Improvements, including, without limitation, the heating and air conditioning systems and the electrical and plumbing systems, are in good working order and condition.

     1.15 Contracts. Borrower has delivered to Lender true, correct and complete copies of all Contracts and all amendments thereto or modifications thereof. Each Contract constitutes the legal, valid and binding obligation of Borrower and, to the best of Borrower’s knowledge and belief, is enforceable against any other party thereto. No default exists, or with the passing of time or the giving of notice or both would exist, under any Contract which would, in the aggregate, have a material adverse effect on Borrower or the Property. No Contract provides any party with the right to obtain a lien or encumbrance upon the Property superior to the lien of this Deed of Trust. All Contracts affecting the Property have

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been entered into at arms-length in the ordinary course of Borrower’s business and provide for the payment of fees in amounts and upon terms comparable to existing market rates.

     1.16 Leases. Borrower has delivered (i) a true, correct and complete schedule (the “Rent Roll”) of all Leases affecting the Property as of the date hereof, which accurately and completely sets forth in all material respects for each such Lease, the following: the name of the Tenant, the Lease expiration date, extension and renewal provisions, the base rent payable, the security deposit held thereunder and any other material provisions of such Lease and (ii) true, correct and complete copies of all Leases described in the Rent Roll. Each Lease constitutes the legal, valid and binding obligation of Borrower and, to the best of Borrower’s knowledge and belief, is enforceable against the Tenant thereof. No default exists, or with the passing of time or the giving of notice or both would exist, under any Lease which would, in the aggregate, have a material adverse effect on Borrower or the Property. No Tenant under any Lease has, as of the date hereof, paid rent more than thirty (30) days in advance, and the rents under such Leases have not been waived, released, or otherwise discharged or compromised. All security deposits required under such Leases have been fully funded and are held by Borrower in a separate segregated account or as otherwise required by applicable law. No Lease provides any party with the right to obtain a lien or encumbrance upon the Property superior to the lien of this Deed of Trust. The Property forms no part of any property owned, used or claimed by Borrower as a residence or business homestead and is not exempt from forced sale under the laws of the state in which the Premises is located. Borrower hereby disclaims and renounces each and every claim to all or any portion of the Property as a homestead.

     1.17 Foreign Person. Borrower is not a “foreign person” within the meaning of §1445(f)(3) of the Code, and the related Treasury Department regulations, including temporary regulations.

     1.18 Management Agreement. The property management agreement relating to the Premises (the “Management Agreement”) is in full force and effect and to the best of Borrower’s knowledge, there is no default, breach or violation existing thereunder by any party thereto beyond the expiration of applicable notice and grace periods thereunder and no event has occurred (other than payments due but not yet delinquent) that, with the passage of time or the giving of notice, or both, would constitute a default, breach or violation by any party thereunder. The fee due under the Management Agreement, and the terms and provisions of the Management Agreement, are subordinate to this Deed of Trust.

     1.19 Fraudulent Transfer. Borrower has not entered into the Loan or any Loan Document with the actual intent to hinder, delay, or defraud any creditor, and Borrower has received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the transactions contemplated by the Loan Documents, the fair saleable value of Borrower’s assets exceeds and will, immediately following the execution and delivery of the Loan Documents, exceed Borrower’s total liabilities, including subordinated, unliquidated, disputed or contingent liabilities, including the maximum amount of its contingent liabilities or its debts as such debts become absolute and matured. Borrower’s assets do not and, immediately following the execution and delivery of the Loan Documents will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur debts and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of Borrower).

     1.20 Foreign Assets Control.

          (a) None of the Borrower, any subsidiary of the Borrower or any Affiliate of the Borrower or any Indemnitor (i) is a Sanctioned Person (defined below), (ii) has more than 15% of its

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assets in Sanctioned Countries (defined below), or (iii) derives more than 15% of its operating income from investments in, or transactions with Sanctioned Persons or Sanctioned Countries. The loan proceeds to be advanced by Lender will not be used and have not been used to fund any operations in, finance any investments or activities in or make any payments to, a Sanctioned Person or a Sanctioned Country. For purposes of the foregoing, a “Sanctioned Person” shall mean (i) a person named on the list of “specially designated nationals” or “blocked persons” maintained by the U.S. Office of Foreign Assets Control (“OFAC”) at http://www.treas.gov/offices/eotffc/ofac/sdn/index.html, or as otherwise published from time to time, or (ii) (A) an agency of the government of a Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or (C) a person resident in a Sanctioned Country, to the extent subject to a sanctions program administered by OFAC. A “Sanctioned Country” shall mean a country subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html, or as otherwise published from time to time.

          (b) Lender may reject or refuse to accept any Collateral for credit toward payment of the obligations hereunder or under any of the Loan Documents that is an account, instrument, chattel paper, lease, or other obligation or property of any kind due from, owed by, or belonging to, a Sanctioned Person.

          (c) Notwithstanding any grant of a security interest in the Collateral by virtue of other provisions of this Deed of Trust or under any of the Loan Documents, (i) no account, instrument, chattel paper or other obligation or property of any kind due from, owed by, or belonging to, a Sanctioned Person or (ii) any lease in which the lessee is a Sanctioned Person shall be Collateral.

          (d) Borrower shall pay any civil penalty or fine assessed by the U. S. Department of the Treasury’s Office of Foreign Assets Control against, and all reasonable costs and expenses (including counsel fees and disbursements) incurred in connection with defense thereof by Lender as a result of the funding of the loan proceeds by Lender hereunder or the acceptance of payments hereunder or under the Note and other Loan Documents or of Collateral due under any of the Loan Documents.

All of the representations and warranties in this Article I and elsewhere in the Loan Documents (i) shall survive for so long as any portion of the Debt remains owing to Lender and (ii) shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf.

ARTICLE II.
COVENANTS OF BORROWER

     For the purposes of further securing the Debt and for the protection of the security of this Deed of Trust, for so long as the Debt or any part thereof remains unpaid, Borrower covenants and agrees as follows:

     2.1 Defense of Title. If, while this Deed of Trust is in force, the title to the Property or the interest of Lender therein shall be the subject, directly or indirectly, of any action at law or in equity, or be attached directly or indirectly, or endangered, clouded or adversely affected in any manner, Borrower, at Borrower’s expense, shall take all necessary and proper steps for the defense of said title or interest, including the employment of counsel approved by Lender, the prosecution or defense of litigation, and the compromise or discharge of claims made against said title or interest. Notwithstanding the foregoing, in the event that Lender determines that Borrower is not adequately performing its obligations under this Section, Lender may, without limiting or waiving any other rights or remedies of Lender hereunder, take such steps with respect thereto as Lender shall deem necessary or proper and any and all costs and expenses incurred by Lender in connection therewith, together with interest thereon at the Default Interest

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Rate (as defined in the Note) from the date incurred by Lender until actually paid by Borrower, shall be immediately paid by Borrower on demand and shall be secured by this Deed of Trust and by all of the other Loan Documents securing all or any part of the indebtedness evidenced by the Note.

     2.2 Performance of Obligations. Borrower shall pay when due the principal of and the interest on the Debt in accordance with the terms of the Note. Borrower shall also pay all charges, fees and other sums required to be paid by Borrower as provided in the Loan Documents, in accordance with the terms of the Loan Documents, and shall observe, perform and discharge all obligations, covenants and agreements to be observed, performed or discharged by Borrower set forth in the Loan Documents in accordance with their terms. Further, Borrower shall promptly and strictly perform and comply with all covenants, conditions, obligations and prohibitions required of Borrower in connection with any other document or instrument affecting title to the Property, or any part thereof, regardless of whether such document or instrument is superior or subordinate to this Deed of Trust.

     2.3 Insurance. Borrower shall at Borrower’s expense, maintain in force and effect on the Property at all times while this Deed of Trust continues in effect the following insurance:

          (a) Insurance against loss or damage to the Property by fire, lightning, windstorm, tornado, hail, terrorism, riot and civil commotion, vandalism, malicious mischief, burglary and theft and against loss and damage by such other, further and additional risks as may be now or hereafter embraced by a “special causes of loss” type of insurance policy. The amount of such insurance shall be not less than one hundred percent (100%) of the full replacement cost (insurable value) of the Improvements (as established by a Member of the Appraisal Institute appraisal), without reduction for depreciation. The determination of the replacement cost amount shall be adjusted annually to comply with the requirements of the insurer issuing such coverage or, at Lender’s election, by reference to such indices, appraisals or information as Lender determines in its reasonable discretion in order to reflect increased value due to inflation. Absent such annual adjustment, each policy shall contain inflation guard coverage insuring that the policy limit will be increased over time to reflect the effect of inflation. “Full replacement cost,” as used herein and elsewhere in this Section 2.3, means, with respect to the Improvements, the cost of replacing the Improvements without regard to deduction for depreciation, exclusive of the cost of excavations, foundations and footings below the lowest basement floor. Borrower shall also maintain insurance against loss or damage to furniture, furnishings, fixtures, equipment and other items (whether personalty or fixtures) included in the Property and owned by Borrower from time to time to the extent applicable. Each policy shall contain a replacement cost endorsement and either an agreed amount endorsement (to avoid the operation of any co-insurance provisions) or a waiver of any co-insurance provisions, all subject to Lender’s approval. The maximum deductible shall be $25,000.00.

          (b) If the “special causes of loss” policy required in subsection (a) above excludes coverage for wind damage, Borrower shall maintain separate coverage for such risk. Furthermore, if the Property is located in the State of Florida, or within twenty five (25) miles of the ocean coast of the states of Texas, Louisiana, Mississippi, Alabama, Georgia, North Carolina, Hawaii or South Carolina, windstorm insurance must be maintained in an amount equal to the lesser of (i) the full replacement cost of the Property or (ii) the maximum limit of coverage available with respect to the Improvements and Equipment. If available, a minimum of eighteen (18) months general business income coverage specifically relating to wind damage shall be required. The maximum deductible shall be $25,000.00.

          (c) Ordinance and law insurance is required if the Property is “non-conforming” with respect to any zoning requirements. Borrower shall maintain “Coverage A” against loss on value to the undamaged portion of the Improvements for the full replacement cost of the Improvements. Borrower shall also maintain “Coverage B” against the cost of demolition in an amount equal to ten percent (10%) of the total value of the Improvements and “Coverage C” against increased cost of reconstruction in an

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amount equal to twenty percent (20%) of the total value of the Improvements. The maximum deductible shall be $25,000.00.

          (d) Commercial General Liability Insurance against claims for personal injury, bodily injury, death and property damage occurring on, in or about the Premises or the Improvements in amounts not less than $1,000,000.00 per occurrence and $2,000,000.00 in the aggregate plus umbrella coverage in an amount not less than $25,000,000. Lender hereby retains the right to periodically review the amount of said liability insurance being maintained by Borrower and to require an increase in the amount of said liability insurance should Lender deem an increase to be reasonably prudent under then existing circumstances. The maximum deductible shall be $10,000.00.

          (e) Equipment breakdown (also known as boiler and machinery insurance) is required if steam boilers or other pressure-fired vessels are in operation at the Premises. Minimum liability coverage per accident must equal the greater of the replacement cost (insurable value) of the Improvements housing such boiler or pressure-fired machinery or $2,000,000.00. If one or more large HVAC units is in operation at the Premises, “Systems Breakdowns” coverage shall be required, as determined by Lender. Minimum liability coverage per accident must equal the value of such unit(s). If available, a minimum of eighteen (18) months general business income coverage specifically relating to boiler and machinery damage shall be required. The maximum deductible shall be $10,000.00. Co-insurance is prohibited.

          (f) If the Improvements or any part thereof is situated in an area designated by the Federal Emergency Management Agency (“FEMA”) as a special flood hazard area (Zone A or Zone V), flood insurance in an amount equal to the lesser of: (i) the minimum amount required, under the terms of coverage, to compensate for any damage or loss on a replacement basis (or the unpaid balance of the Debt if replacement cost coverage is not available for the type of building insured), or (ii) the maximum insurance available under the appropriate National Flood Insurance Administration program. If available, a minimum of eighteen (18) months general business income coverage specifically relating to flood damage shall be required. The maximum deductible shall be $3,000.00 per building or a higher minimum amount as required by FEMA or other applicable law.

          (g) If the Property is situated in an area designated by FEMA as a high probability earthquake area (Zone 2b or greater), Lender may require a Probable Maximum Loss (“PML”) study to be conducted at the Property. If the PML study reveals a PML equal to or exceeding twenty percent (20%) of the full replacement cost of the Improvements, Borrower shall be required to maintain earthquake insurance in an amount equal to the PML percentage of full replacement cost of the Improvements. If available, a minimum of eighteen (18) months general business Income coverage specifically relating to earthquake damage shall be required. The maximum deductible shall be no more than five percent (5%) of the value at risk or the lowest deductible available in the State in which the Property is located.

          (h) During the period of any construction, renovation or alteration of the existing Improvements which exceeds the lesser of 10% of the principal amount of the Note or $500,000, at Lender’s request, a completed value, “All Risk” Builder’s Risk form or “Course of Construction” insurance policy in non-reporting form, in an amount approved by Lender, may be required. During the period of any construction of any addition to the existing Improvements, a completed value, “All Risk” Builder’s Risk form or “Course of Construction” insurance policy in non-reporting form, in an amount approved by Lender, shall be required. The maximum deductible shall be $25,000.00.

          (i) When required by applicable law, ordinance or other regulation, Worker’s Compensation and Employer’s Liability Insurance covering all persons subject to the worker’s

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compensation laws of the state in which the Property is located. Additionally, if Borrower has direct employees, Hired and Non-Owned Auto Insurance is required in an amount equal to $1,000,000 per occurrence. The maximum deductible shall be $25,000.00.

          (j) In addition to the specific risk coverage required herein, general business income (loss of rents) insurance in amounts sufficient to compensate Borrower for all Rents and Profits or income during a period of not less than twelve (12) months. The “actual loss” amount of coverage shall be adjusted annually to reflect the greater of (i) estimated Rents and Profits or income payable during the succeeding twelve (12) month period or (ii) the projected operating expenses, capital expenses and debt service for the Property as approved by Lender in its sole discretion. Additionally, Lender, in its sole discretion, may require an “Extended Period of Indemnity” endorsement for an additional six (6) months to allow for re-leasing of the Property. The maximum deductible shall be $10,000.00.

          (k) Such other insurance on the Property or on any replacements or substitutions thereof or additions thereto as may from time to time be required by Lender against other insurable hazards or casualties which at the time are commonly insured against in the case of property similarly situated including, without limitation, Sinkhole, Mine Subsidence and Environmental insurance, due regard being given to the height and type of buildings, their construction, location, use and occupancy.

     All such insurance shall (i) be with insurers fully licensed and authorized to do business in the state within which the Premises is located and who have and maintain a rating of at least (A) A- or higher from Standard & Poors and (B) AV or higher from A.M. Best, (ii) contain the complete address of the Premises (or a complete legal description), (iii) be for terms of at least one year, with premium prepaid, and (iv) be subject to the approval of Lender as to insurance companies, amounts, content, forms of policies, method by which premiums are paid and expiration dates, and (v) include a standard, non-contributory, mortgagee clause naming EXACTLY:

Wachovia Bank, National Association,
its Successors and Assigns ATIMA
c/o Wachovia Bank, National Association, as Servicer
P.O. Box 563956
Charlotte, North Carolina 28256-3956

(A) as an additional insured under all liability insurance policies, (B) as the first mortgagee on all property insurance policies and (C) as the loss payee on all loss of rents or loss of business income insurance policies.

     Borrower shall, as of the date hereof, deliver to Lender evidence that said insurance policies have been prepaid as required above and certified copies of such insurance policies and original certificates of insurance signed by an authorized agent of the applicable insurance companies evidencing such insurance satisfactory to Lender. Borrower shall renew all such insurance and deliver to Lender an Accord 28 certificate for proof of commercial property insurance and an Accord 25 certificate for proof of liability insurance, together with such other certificates reasonably requested by Lender and policies evidencing such renewals at least thirty (30) days before any such insurance shall expire. Borrower further agrees that each such insurance policy: (i) shall provide for at least thirty (30) days’ prior written notice to Lender prior to any policy reduction or cancellation for any reason other than non-payment of premium and at least ten (10) days’ prior written notice to Lender prior to any cancellation due to non-payment of premium; (ii) shall contain an endorsement or agreement by the insurer that any loss shall be payable to Lender in accordance with the terms of such policy notwithstanding any act or negligence of Borrower which might otherwise result in forfeiture of such insurance; (iii) shall waive all rights of subrogation against Lender; and (iv) may be in the form of a blanket policy provided that, in the event that any such

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coverage is provided in the form of a blanket policy, Borrower hereby acknowledges and agrees that failure to pay any portion of the premium therefor which is not allocable to the Property or by any other action not relating to the Property which would otherwise permit the issuer thereof to cancel the coverage thereof, would require the Property to be insured by a separate, single-property policy. The blanket policy must properly identify and fully protect the Property as if a separate policy were issued for 100% of Replacement Cost at the time of loss and otherwise meet all of Lender’s applicable insurance requirements set forth in this Section 2.3. The delivery to Lender of the insurance policies or the certificates of insurance as provided above shall constitute an assignment of all proceeds payable under such insurance policies relating to the Property by Borrower to Lender as further security for the Debt. In the event of foreclosure of this Deed of Trust, or other transfer of title to the Property in extinguishment in whole or in part of the Debt, all right, title and interest of Borrower in and to all proceeds payable under such policies then in force concerning the Property shall thereupon vest in the purchaser at such foreclosure, or in Lender or other transferee in the event of such other transfer of title. Approval of any insurance by Lender shall not be a representation of the solvency of any insurer or the sufficiency of any amount of insurance. In the event Borrower fails to provide, maintain, keep in force or deliver and furnish to Lender the policies of insurance required by this Deed of Trust or evidence of their renewal as required herein, Lender may, but shall not be obligated to, procure such insurance and Borrower shall pay all amounts advanced by Lender therefor, together with interest thereon at the Default Interest Rate from and after the date advanced by Lender until actually repaid by Borrower, promptly upon demand by Lender. Any amounts so advanced by Lender, together with interest thereon, shall be secured by this Deed of Trust and by all of the other Loan Documents securing all or any part of the Debt. Lender shall not be responsible for nor incur any liability for the insolvency of the insurer or other failure of the insurer to perform, even though Lender has caused the insurance to be placed with the insurer after failure of Borrower to furnish such insurance. Borrower shall not obtain insurance for the Property in addition to that required by Lender without the prior written consent of Lender, which consent will not be unreasonably withheld provided that (i) Lender is a named insured on such insurance, (ii) Lender receives complete copies of all policies evidencing such insurance, and (iii) such insurance complies with all of the applicable requirements set forth herein.

     2.4 Payment of Taxes. Borrower shall pay or cause to be paid, except to the extent provision is actually made therefor pursuant to Section 3.3 of this Deed of Trust, all taxes and assessments which are or may become a lien on the Property or which are assessed against or imposed upon the Property. Borrower shall furnish Lender with receipts (or if receipts are not immediately available, with copies of canceled checks evidencing payment with receipts to follow promptly after they become available) showing payment of such taxes and assessments at least fifteen (15) days prior to the applicable delinquency date therefor. Notwithstanding the foregoing, Borrower may, in good faith, by appropriate proceedings and upon notice to Lender, contest the validity, applicability or amount of any asserted tax or assessment so long as (a) such contest is diligently pursued, (b) Lender determines, in its subjective opinion, that such contest suspends the obligation to pay the tax and that nonpayment of such tax or assessment will not result in the sale, loss, forfeiture or diminution of the Property or any part thereof or any interest of Lender therein, and (c) prior to the earlier of the commencement of such contest or the delinquency date of the asserted tax or assessment, Borrower deposits in the Impound Account (as hereinafter defined) an amount determined by Lender, to be adequate to cover the payment of such tax or assessment and a reasonable additional sum to cover possible interest, costs and penalties; provided, however, that Borrower shall promptly cause to be paid any amount adjudged by a court of competent jurisdiction to be due, with all interest, costs and penalties thereon, promptly after such judgment becomes final; and provided further that in any event each such contest shall be concluded and the taxes, assessments, interest, costs and penalties shall be paid prior to the date any writ or order is issued under which the Property may be sold, lost or forfeited.

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     2.5 Casualty and Condemnation. Borrower shall give Lender prompt written notice of (i) the occurrence of any casualty affecting the Property or any portion thereof, (ii) the institution of any proceedings for eminent domain or for the condemnation of the Property or any portion thereof or (iii) any written notification threatening the institution of any proceedings for eminent domain or for the condemnation of the Property or any portion thereof or any written request to execute a deed in lieu of condemnation affecting the Property or any portion thereof. All insurance proceeds on the Property, and all causes of action, claims, compensation, awards and recoveries for any damage, condemnation or taking, or any deed in lieu of condemnation, affecting all or any part of the Property or for any damage or injury to it for any loss or diminution in value of the Property, are hereby assigned to and shall be paid to Lender. Lender may participate in any suits or proceedings relating to any such proceeds, causes of action, claims, compensation, awards or recoveries, and Lender is hereby authorized, in its own name or in Borrower’s name, to adjust any loss covered by insurance or any condemnation claim or cause of action, and to settle or compromise any claim or cause of action in connection therewith, and Borrower shall from time to time deliver to Lender any instruments required to permit such participation; provided, however, that, so long as no Event of Default has occurred, and no event has occurred or failed to occur which with the passage of time, the giving of notice, or both would constitute an Event of Default (a “Default”), Lender shall not have the right to participate in the adjustment of any loss which is not in excess of the lesser of (i) five percent (5%) of the then outstanding principal balance of the Note and (ii) $100,000. Lender shall apply any sums received by it under this Section first to the payment of all of its costs and expenses (including, but not limited to, reasonable legal fees and disbursements) incurred in obtaining those sums, and then, as follows:

          (a) In the event that (x) less than fifteen percent (15%), in the case of condemnation, or thirty percent (30%), in the case of casualty, of the fair market value or net rentable square footage of the Improvements located on the Premises have been taken or destroyed and (y) Leases covering in the aggregate at least sixty-five percent (65%) of the total rentable space in the Property which has been demised under executed and delivered Leases in effect as of the date of the occurrence of such casualty or condemnation, whichever the case may be, and each Major Lease (as hereinafter defined) in effect as of such date shall remain in full force and effect during and after the completion of the restoration without abatement of rent beyond the time required for restoration, then if and so long as:

          (1) no Default or Event of Default has occurred hereunder or under any of the other Loan Documents, and

          (2) the Property can, in Lender’s judgment, with diligent restoration or repair, be returned to a condition at least equal to the condition thereof that existed prior to the casualty or partial taking causing the loss or damage within the earlier to occur of (A) six (6) months after the initial receipt of any insurance proceeds or condemnation awards by either Borrower or Lender but in any event prior to the expiration or lapse of rent loss or general business income necessary to satisfy current obligations of the Loan, and (B) six (6) months prior to the stated maturity date of the Note, and

          (3) all necessary governmental approvals can be obtained to allow the rebuilding and reoccupancy of the Property as described in Section (a)(2) above, and

          (4) there are sufficient sums available (through insurance proceeds or condemnation awards and contributions by Borrower, the full amount of which shall, at Lender’s option, have been deposited with Lender) for such restoration or repair (including, without limitation, for any costs and expenses of Lender to be incurred in administering said restoration or repair) and for payment of principal and interest to become due and payable under the Note during such restoration or repair, and

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          (5) the economic feasibility of the Improvements after such restoration or repair will be such that income from their operation is reasonably anticipated to be sufficient to pay operating expenses of the Property and debt service on the Debt in full with the same coverage ratio considered by Lender in its determination to make the loan secured hereby, and

          (6) in the event that the insurance proceeds or condemnation awards received as a result of such casualty or partial taking exceed the lesser of (i) five percent (5%) of the then outstanding principal balance of the Note and (ii) $150,000, Borrower shall have delivered to Lender, at Borrower’s sole cost and expense, an appraisal report in form and substance satisfactory to Lender appraising the value of the Property as proposed to be restored or repaired to be not less than the appraised value of the Property considered by Lender in its determination to make the loan secured hereby, and

          (7) Borrower so elects by written notice delivered to Lender within five (5) days after settlement of the aforesaid insurance or condemnation claim.

          Lender shall, solely for the purposes of such restoration or repair, advance so much of the remainder of such sums as may be required for such restoration or repair, and any funds deposited by Borrower therefor, to Borrower in the manner and upon such terms and conditions as would be required by a prudent interim construction lender, including, but not limited to, the prior approval by Lender of plans and specifications, contractors and form of construction contracts and the furnishing to Lender of permits, bonds, lien waivers, invoices, receipts and affidavits from contractors and subcontractors, in form and substance satisfactory to Lender in its discretion, with any remainder being applied by Lender for payment of the Debt in whatever order Lender directs in its absolute sole discretion, or at the discretion of Lender, the same may be paid, either in whole or in part, to, or for the benefit of, Borrower for such purposes as Lender shall designate in its discretion.

          (b) In all other cases, namely, in the event that (x) more than fifteen percent (15%), in the case of condemnation, or thirty percent (30%), in the case of casualty, of the fair market value or net rentable square footage of the Improvements located on the Premises have been taken or destroyed (y) Leases covering in the aggregate at least sixty-five percent (65%) of the total rentable space in the Property which has been demised under executed and delivered Leases in effect as of the date of the occurrence of such casualty or condemnation, whichever the case may be, and each Major Lease (as hereinafter defined) in effect as of such date will not remain in full force and effect during and after the completion of the restoration without abatement of rent beyond the time required for restoration, or (z) Borrower does not elect to restore or repair the Property pursuant to clause (a) above or otherwise fails to meet the requirements of clause (a) above, then, in any of such events, Lender shall elect, in Lender’s absolute discretion and without regard to the adequacy of Lender’s security to do either of the following: (1) accelerate the maturity date of the Note and declare any and all of the Debt to be immediately due and payable and apply the remainder of such sums received pursuant to this Section to the payment of the Debt in whatever order Lender directs in its absolute discretion, with any remainder being paid to Borrower, or (2) notwithstanding that Borrower may have elected not to restore or repair the Property pursuant to the provisions of Section 2.5(a)(7) above, so long as the proceeds of any such award with respect to any casualty or condemnation are made available to the Borrower for restoration, require Borrower to restore or repair the Property in the manner and upon such terms and conditions as would be required by a prudent interim construction lender, including, but not limited to, the deposit by Borrower with Lender, within thirty (30) days after demand therefor, of any deficiency reasonably determined by Lender to be necessary in order to assure the availability of sufficient funds to pay for such restoration or repair, including Lender’s costs and expenses to be incurred in connection therewith, the prior approval

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by Lender of plans and specifications, contractors and form of construction contracts and the furnishing to Lender of permits, bonds, lien waivers, invoices, receipts and affidavits from contractors and subcontractors, in form and substance satisfactory to Lender in its discretion, and apply the remainder of such sums toward such restoration and repair, with any balance thereafter remaining being applied by Lender for payment of the Debt in whatever order Lender directs in its absolute sole discretion, or at the discretion of Lender, the same may be paid, either in whole or in part, to, or for the benefit of, Borrower for such purposes as Lender shall designate in its discretion.

Any reduction in the Debt resulting from Lender’s application of any sums received by it hereunder shall take effect only when Lender actually receives such sums and elects to apply such sums to the Debt and, in any event, the unpaid portion of the Debt shall remain in full force and effect and Borrower shall not be excused in the payment thereof. Partial payments received by Lender, as described in the preceding sentence, shall be applied first to the final payment due under the Note and thereafter to installments due under the Note in the inverse order of their due date. If Borrower elects or Lender directs Borrower to restore or repair the Property after the occurrence of a casualty or partial taking of the Property as provided above, Borrower shall promptly and diligently, at Borrower’s sole cost and expense and regardless of whether the insurance proceeds or condemnation award, as appropriate, shall be sufficient for the purpose, restore, repair, replace and rebuild the Property as nearly as possible to its value, condition and character immediately prior to such casualty or partial taking in accordance with the foregoing provisions and Borrower shall pay to Lender all costs and expenses of Lender incurred in administering said rebuilding, restoration or repair, provided that Lender makes such proceeds or award available for such purpose. Borrower agrees to execute and deliver from time to time such further instruments as may be requested by Lender to confirm the foregoing assignment to Lender of any award, damage, insurance proceeds, payment or other compensation. Lender is hereby irrevocably constituted and appointed the attorney-in-fact of Borrower (which power of attorney shall be irrevocable so long as any portion of the Debt is outstanding, shall be deemed coupled with an interest, shall survive the voluntary or involuntary dissolution of Borrower and shall not be affected by any disability or incapacity suffered by Borrower subsequent to the date hereof), with full power of substitution, subject to the terms of this Section, to settle for, collect and receive any such awards, damages, insurance proceeds, payments or other compensation from the parties or authorities making the same, to appear in and prosecute any proceedings therefor and to give receipts and acquittances therefor.

     2.6 Construction Liens. Borrower shall pay when due all claims and demands of mechanics, materialmen, laborers and others for any work performed or materials delivered for the Premises or the Improvements; provided, however, that, Borrower shall have the right to contest in good faith any such claim or demand, so long as it does so diligently, by appropriate proceedings and without prejudice to Lender and provided that neither the Property nor any interest therein would be in any danger of sale, loss or forfeiture as a result of such proceeding or contest. In the event Borrower shall contest any such claim or demand, Borrower shall promptly notify Lender of such contest and thereafter shall, upon Lender’s request, promptly provide a bond, cash deposit or other security satisfactory to Lender to protect Lender’s interest and security should the contest be unsuccessful. If Borrower shall fail to immediately discharge or provide security against any such claim or demand as aforesaid, Lender may do so and any and all expenses incurred by Lender, together with interest thereon at the Default Interest Rate from the date incurred by Lender until actually paid by Borrower, shall be immediately paid by Borrower on demand and shall be secured by this Deed of Trust and by all of the other Loan Documents securing all or any part of the Debt.

     2.7 Rents and Profits. As additional and collateral security for the payment of the Debt and cumulative of any and all rights and remedies herein provided for, Borrower hereby absolutely and presently assigns to Lender all existing and future Rents and Profits. Borrower hereby grants to Lender the sole, exclusive and immediate right, without taking possession of the Property, to demand, collect (by

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suit or otherwise), receive and give valid and sufficient receipts for any and all of said Rents and Profits, for which purpose Borrower does hereby irrevocably make, constitute and appoint Lender its attorney-in-fact with full power to appoint substitutes or a trustee to accomplish such purpose (which power of attorney shall be irrevocable so long as any portion of the Debt is outstanding, shall be deemed to be coupled with an interest, shall survive the voluntary or involuntary dissolution of Borrower and shall not be affected by any disability or incapacity suffered by Borrower subsequent to the date hereof). Lender shall be without liability for any loss which may arise from a failure or inability to collect Rents and Profits, proceeds or other payments. However, until the occurrence of an Event of Default under this Deed of Trust or under any other of the Loan Documents, Borrower shall have a license to collect, receive, use and enjoy the Rents and Profits when due and prepayments thereof for not more than one (1) month prior to due date thereof. Upon the occurrence of an Event of Default, Borrower’s license shall automatically terminate without notice to Borrower and Lender may thereafter, without taking possession of the Property, collect the Rents and Profits itself or by an agent or receiver. From and after the termination of such license, Borrower shall be the agent of Lender in collection of the Rents and Profits, and all of the Rents and Profits so collected by Borrower shall be held in trust by Borrower for the sole and exclusive benefit of Lender, and Borrower shall, within one (1) business day after receipt of any Rents and Profits, pay the same to Lender to be applied by Lender as hereinafter set forth. Neither the demand for or collection of Rents and Profits by Lender shall constitute any assumption by Lender of any obligations under any agreement relating thereto. Lender is obligated to account only for such Rents and Profits as are actually collected or received by Lender. Borrower irrevocably agrees and consents that the respective payors of the Rents and Profits shall, upon demand and notice from Lender of an Event of Default, pay said Rents and Profits to Lender without liability to determine the actual existence of any Event of Default claimed by Lender. Borrower hereby waives any right, claim or demand which Borrower may now or hereafter have against any such payor by reason of such payment of Rents and Profits to Lender, and any such payment shall discharge such payor’s obligation to make such payment to Borrower. All Rents collected or received by Lender may be applied against all expenses of collection, including, without limitation, reasonable attorneys’ fees, against costs of operation and management of the Property and against the Debt, in whatever order or priority as to any of the items so mentioned as Lender directs in its sole subjective discretion and without regard to the adequacy of its security. Neither the exercise by Lender of any rights under this Section nor the application of any Rents to the Debt shall cure or be deemed a waiver of any Event of Default. The assignment of Rents and Profits hereinabove granted shall continue in full force and effect during any period of foreclosure or redemption with respect to the Property. Borrower has executed an Assignment of Leases and Rents dated of even date herewith (the “Lease Assignment”) in favor of Lender covering all of the right, title and interest of Borrower, as landlord, lessor or licensor, in and to any Leases. All rights and remedies granted to Lender under the Lease Assignment shall be in addition to and cumulative of all rights and remedies granted to Lender hereunder.

     2.8 Leases.

          (a) Prior to execution of any Leases of space in the Improvements after the date hereof, Borrower shall submit to Lender, for Lender’s prior approval, which approval shall not be unreasonably withheld, a copy of the form Lease Borrower plans to use in leasing space in the Improvements or at the Property. All such Leases of space in the Improvements or at the Property shall be on terms consistent with the terms for similar leases in the market area of the Premises, shall provide for free rent only if the same is consistent with prevailing market conditions and shall provide for market rents then prevailing in the market area of the Premises. Such Leases shall also provide for security deposits in reasonable amounts consistent with prevailing market conditions. Borrower shall also submit to Lender for Lender’s approval, which approval shall not be unreasonably withheld, prior to the execution thereof, any proposed Lease of the Improvements or any portion thereof that differs materially and adversely from the aforementioned form Lease. Borrower shall not execute any Lease for all or a

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substantial portion of the Property, except for an actual occupancy by the Tenant, lessee or licensee thereunder, and shall at all times promptly and faithfully perform, or cause to be performed, all of the covenants, conditions and agreements contained in all Leases with respect to the Property, now or hereafter existing, on the part of the landlord, lessor or licensor thereunder to be kept and performed. Borrower shall furnish to Lender, within sixty (60) days after a request by Lender to do so, but in any event by January 1 of each year, a current Rent Roll, certified by Borrower as being true and correct, containing the names of all Tenants with respect to the Property, the terms of their respective Leases, the spaces occupied and the rentals or fees payable thereunder and the amount of each Tenant’s security deposit. Upon the request of Lender, Borrower shall deliver to Lender a copy of each such Lease. Borrower shall not do or suffer to be done any act, or omit to take any action, that might result in a default by the landlord, lessor or licensor under any such Lease or allow the Tenant thereunder to withhold payment of rent or cancel or terminate same and shall not further assign any such Lease or any such Rents and Profits. Borrower, at no cost or expense to Lender, shall enforce, short of termination, the performance and observance of each and every condition and covenant of each of the parties under such Leases and Borrower shall not anticipate, discount, release, waive, compromise or otherwise discharge any rent payable under any of the Leases. Notwithstanding the foregoing, at any time and from time to time, Lender shall be entitled to, and Borrower hereby grants to Lender the right to, undertake any and all action as may be required (in the sole discretion of Lender) to cure any default, or event which with the passage of time following any notice and cure period shall constitute a default by Borrower, under such Leases. Borrower shall not, without the prior written consent of Lender, modify any of the Leases, terminate or accept the surrender of any Leases, waive or release any other party from the performance or observance of any obligation or condition under such Leases except, with respect only to Leases affecting less than the lesser of (x) five percent (5%) of the gross leaseable area of the Improvements and (y) 2,500 square feet and having a term of three (3) years or less, in the normal course of business in a manner which is consistent with sound and customary leasing and management practices for similar properties in the community in which the Property is located. Borrower shall not permit the prepayment of any rents under any of the Leases for more than one (1) month prior to the due date thereof.

          (b) Each Lease executed after the date hereof affecting any of the Premises or the Improvements must provide, in a manner approved by Lender, that the Tenant will recognize as its landlord, lessor or licensor, as applicable, and attorn to any person succeeding to the interest of Borrower upon any foreclosure of this Deed of Trust or deed in lieu of foreclosure. Each such Lease shall also provide that, upon request of said successor-in-interest, the Tenant shall execute and deliver an instrument or instruments confirming its attornment as provided for in this Section; provided, however, that neither Lender nor any successor-in-interest shall be bound by any payment of rent for more than one (1) month in advance, or any amendment or modification of said Lease made without the express written consent of Lender or said successor-in-interest.

          (c) Upon the occurrence of an Event of Default under this Deed of Trust, whether before or after the whole principal sum secured hereby is declared to be immediately due or whether before or after the institution of legal proceedings to foreclose this Deed of Trust, forthwith, upon demand of Lender, Borrower shall surrender to Lender, and Lender shall be entitled to take actual possession of, the Property or any part thereof personally, or by its agent or attorneys. In such event, Lender shall have, and Borrower hereby gives and grants to Lender, the right, power and authority to make and enter into Leases with respect to the Property or portions thereof for such rents and for such periods of occupancy and upon conditions and provisions as Lender may deem desirable in its sole discretion, and Borrower expressly acknowledges and agrees that the term of any such Lease may extend beyond the date of any foreclosure sale of the Property, it being the intention of Borrower that in such event Lender shall be deemed to be and shall be the attorney-in-fact of Borrower for the purpose of making and entering into Leases of parts or portions of the Property for the rents and upon the terms, conditions and provisions deemed desirable to Lender in its sole discretion and with like effect as if such Leases had been made by

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Borrower as the owner in fee simple of the Property free and clear of any conditions or limitations established by this Deed of Trust. The power and authority hereby given and granted by Borrower to Lender shall be deemed to be coupled with an interest, shall not be revocable by Borrower so long as any portion of the Debt is outstanding, shall survive the voluntary or involuntary dissolution of Borrower and shall not be affected by any disability or incapacity suffered by Borrower subsequent to the date hereof. In connection with any action taken by Lender pursuant to this Section, Lender shall not be liable for any loss sustained by Borrower resulting from any failure to let the Property, or any part thereof, or from any other act or omission of Lender in managing the Property, nor shall Lender be obligated to perform or discharge any obligation, duty or liability under any Lease covering the Property or any part thereof or under or by reason of this instrument or the exercise of rights or remedies hereunder. Borrower shall, and does hereby, indemnify Lender for, and hold Lender harmless from, any and all claims, actions, demands, liabilities, loss or damage which may or might be incurred by Lender under any such Lease or under this Deed of Trust or by the exercise of rights or remedies hereunder and from any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements contained in any such Lease other than those finally determined by a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of Lender. Should Lender incur any such liability, the amount thereof, including, without limitation, costs, expenses and reasonable attorneys’ fees, together with interest thereon at the Default Interest Rate from the date incurred by Lender until actually paid by Borrower, shall be immediately due and payable to Lender by Borrower on demand and shall be secured hereby and by all of the other Loan Documents securing all or any part of the Debt. Nothing in this Section shall impose on Lender any duty, obligation or responsibility for the control, care, management or repair of the Property, or for the carrying out of any of the terms and conditions of any such Lease, nor shall it operate to make Lender responsible or liable for any waste committed on the Property by the Tenants or by any other parties or for any dangerous or defective condition of the Property, or for any negligence in the management, upkeep, repair or control of the Property. Borrower hereby assents to, ratifies and confirms any and all actions of Lender with respect to the Property taken under this Section.

     2.9 Alienation and Further Encumbrances.

          (a) Borrower acknowledges that Lender has relied upon the principals of Borrower and their experience in owning and operating the Property and properties similar to the Property in connection with the closing of the loan evidenced by the Note. Accordingly, except as specifically allowed hereinbelow in this Section and notwithstanding anything to the contrary contained in Section 6.6 hereof, in the event that the Property or any part thereof or direct or indirect interest therein or direct or indirect interest in Borrower shall be sold, conveyed, disposed of, alienated, hypothecated, leased (except to Tenants of space in the Improvements in accordance with the provisions of Section 2.8 hereof), assigned, pledged, mortgaged, further encumbered or otherwise transferred or Borrower shall be divested of its title to the Property or any direct or indirect interest therein, in any manner or way, whether voluntarily or involuntarily (each, a “Transfer”), without the prior written consent of Lender being first obtained, which consent may be withheld in Lender’s sole discretion, then the same shall constitute an Event of Default and Lender shall have the right, at its option, to declare any or all of the Debt, irrespective of the maturity date specified in the Note, immediately due and payable and to otherwise exercise any of its other rights and remedies contained in Article V hereof. A Transfer within the meaning of this Section 2.9 shall be deemed to include, among other things: (i) an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof for a price to be paid in installments; and (ii) an agreement by Borrower leasing all or a substantial part of the Property for other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rents and Profits.

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          (b) Notwithstanding the foregoing, the following Transfers shall be permitted under this Section 2.9 without the prior consent of Lender: (i) a Transfer of corporate stock, limited partnership interests and/or non-managing member interests in Borrower, or in any partner or member of Borrower, or any direct or indirect legal or beneficial owner of Borrower, so long as following such Transfer (whether in one or a series of transactions) or, with respect to any creation or issuance of new limited partnership interests or membership interests, not more than 49% of the beneficial economic interest in Borrower (whether directly or indirectly) has been transferred in the aggregate, there is no Change of Control and the persons responsible for the day to day management of the Property and Borrower remain unchanged following such Transfer, (ii) any involuntary Transfer caused by the death of Borrower, or any partner, shareholder, joint venturer, member or beneficial owner of a trust, or any direct or indirect legal or beneficial owner of Borrower, so long as Borrower is promptly reconstituted, if required, following such death and so long as there is no Change of Control and those persons responsible for the day to day management of the Property and Borrower remain unchanged as a result of such death or any replacement management or controlling parties are approved by Lender, and (iii) a Transfer comprised of gifts for estate planning purposes of any individual’s interests in Borrower, or in any of Borrower’s partners, members, shareholders, beneficial owners of a trust or joint venturers, or any direct or indirect legal or beneficial owner of Borrower, to the spouse or any lineal descendant of such individual, or to a trust for the benefit of any one or more of such individual, spouse or lineal descendant, so long as Borrower is reconstituted promptly, if required, following such gift and so long as there is no Change of Control and those persons responsible for the day to day management of the Property and Borrower remain unchanged following such gift. Notwithstanding any provision of this Deed of Trust to the contrary, no person or entity may become an owner of a direct or indirect interest in Borrower, which interest exceeds forty-nine (49%) percent, without Lender’s prior written consent unless Borrower has complied with the provisions set forth in Section 2.9(c) below. For purposes of this Section 2.9(b), “Change of Control” shall mean a change in the identity of the individual or entities or group of individuals or entities who have the right, by virtue of any partnership agreement, articles of incorporation, by-laws, articles of organization, operating agreement or any other agreement, with or without taking any formative action, to cause Borrower to take some action or to prevent, restrict or impede Borrower from taking some action which, in either case, Borrower could take or could refrain from taking were it not for the rights of such individuals.

          (c) Notwithstanding the foregoing provisions of this Section, Lender shall consent to (x) one or more Transfers of the Property in its entirety, or (y) one or more Transfers of direct or indirect interests in the Borrower for which consent is required under this Section 2.9 (any such hereinafter, a “Sale”) to any person or entity provided that, for each Sale, each of the following terms and conditions are satisfied:

          (1) No Default and no Event of Default is then continuing hereunder or under any of the other Loan Documents;

          (2) Borrower gives Lender written notice of the terms of such prospective Sale not less than sixty (60) days before the date on which such Sale is scheduled to close and, concurrently therewith, gives Lender all such information concerning the proposed transferee of the Property or the proposed owner of the direct or indirect interest in the Borrower for which consent is required under this Section 2.9, as applicable (hereinafter, “Buyer”) as Lender would require in evaluating an initial extension of credit to a borrower and pays to Lender a non-refundable application fee in the amount of $5,000. Lender shall have the right to approve or disapprove the proposed Buyer. In determining whether to give or withhold its approval of the proposed Buyer, Lender shall consider the Buyer’s experience and track record in owning and operating facilities similar to the Property, the Buyer’s financial strength, the Buyer’s general business standing and the Buyer’s relationships and experience with contractors, vendors, tenants,

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lenders and other business entities; provided, however, that, notwithstanding Lender’s agreement to consider the foregoing factors in determining whether to give or withhold such approval, such approval shall be given or withheld based on what Lender determines to be commercially reasonable in Lender’s sole discretion and, if given, may be given subject to such conditions as Lender may deem appropriate;

          (3) Borrower pays Lender, concurrently with the closing of such Sale, a non-refundable assumption fee in an amount equal to all out-of-pocket costs and expenses, including, without limitation, reasonable attorneys’ fees and Rating Agency fees, incurred by Lender in connection with the Sale, plus an amount equal to one percent (1.0%) of the then outstanding principal balance of the Note;

          (4) In the event that such Sale is a Transfer of the Property in its entirety, the Buyer assumes and agrees to pay the Debt subject to the provisions of Section 6.27 hereof and, in all cases (whether such Sale is a Transfer of the Property in its entirety or a Transfer of direct or indirect interests in the Borrower for which consent is required under this Section 2.9), prior to or concurrently with the closing of such Sale, the Buyer executes, without any cost or expense to Lender, such documents and agreements as Lender shall reasonably require to evidence and effectuate said assumption and delivers such legal opinions (including, without limitation, a REMIC opinion) as Lender may require;

          (5) A party associated with the Buyer approved by Lender in its sole discretion assumes the obligations of the current Indemnitor under its guaranty or indemnity agreement and environmental indemnity agreement and such party associated with the Buyer executes, without any cost or expense to Lender, a substitution agreement or a new guaranty or indemnity agreement or environmental indemnity agreement in form and substance satisfactory to Lender and delivers such legal opinions as Lender may require;

          (6) Borrower and the Buyer execute, without any cost or expense to Lender, new financing statements or financing statement amendments (and new financing statements as may be necessary) and any additional documents reasonably requested by Lender;

          (7) Borrower delivers to Lender, without any cost or expense to Lender, such replacement policy or endorsements to Lender’s title insurance policy, hazard insurance policy endorsements or certificates and other similar materials as Lender may deem necessary at the time of the Sale, all in form and substance satisfactory to Lender, including, without limitation, a replacement policy or an endorsement or endorsements to Lender’s title insurance policy insuring the lien of this Deed of Trust, extending the effective date of such policy to the date of execution and delivery (or, if later, of recording) of the assumption agreement referenced above in subparagraph (4) of this Section, with no additional exceptions added to such policy, and, in the event that such Sale is a Transfer of the Property in its entirety, insuring that fee simple title to the Property is vested in the Buyer;

          (8) Borrower and any current Indemnitor execute and deliver to Lender, without any cost or expense to Lender, a release of Lender, its officers, directors, employees and agents, from all claims and liability relating to the transactions evidenced by the Loan Documents, through and including the date of the closing of the Sale, which agreement shall be in form and substance satisfactory to Lender and shall be binding upon the Buyer and any new Indemnitor;

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          (9) Subject to the provisions of Section 6.27 hereof, such Sale is not construed so as to relieve Borrower of any personal liability under the Note or any of the other Loan Documents for any acts or events occurring or obligations arising prior to or simultaneously with the closing of such Sale, whether or not same is discovered prior or subsequent to the closing of such Sale, and Borrower executes, without any cost or expense to Lender, such documents and agreements as Lender shall reasonably require to evidence and effectuate the ratification of said personal liability. In the event that such Transfer is a Sale of the Property in its entirety, Borrower shall be released from and relieved of any personal liability under the Note or any of the other Loan Documents for any acts or events occurring or obligations arising after the closing of such Sale which are not caused by or arising out of any acts or events occurring or obligations arising prior to or simultaneously with the closing of such Sale;

          (10) Such Sale is not construed so as to relieve any current Indemnitor of its obligations under any guaranty or indemnity agreement for any acts or events occurring or obligations arising prior to or simultaneously with the closing of such Sale, and each such current Indemnitor executes, without any cost or expense to Lender, such documents and agreements as Lender shall reasonably require to evidence and effectuate the ratification of each such guaranty and indemnity agreement. In the event that such Transfer is a Sale of the Property in its entirety, each such current Indemnitor shall be released from and relieved of any of its obligations under any guaranty or indemnity agreement executed in connection with the loan secured hereby for any acts or events occurring or obligations arising after the closing of such Sale which are not caused by or arising out of any acts or events occurring or obligations arising prior to or simultaneously with the closing of such Sale;

          (11) The Buyer shall furnish, if the Buyer is a corporation, partnership or other entity, all appropriate papers evidencing the Buyer’s capacity and good standing, and the qualification of the signers to execute the assumption of the Debt, which papers shall include certified copies of all documents relating to the organization and formation of the Buyer and of the entities, if any, which are partners of the Buyer. In the event that such Sale is a Transfer of the Property in its entirety, the Buyer shall be a Single Purpose Entity whose formation documents shall be approved by counsel to Lender, and who shall comply with the requirements set forth in Section 2.29 hereof;

          (12) Borrower delivers to Lender confirmation in writing (a “No-Downgrade Confirmation”) from each Rating Agency that such Sale will not result in a qualification, downgrade or withdrawal of any ratings issued in connection with any Secondary Market Transaction (as hereinafter defined) or, in the event the Secondary Market Transaction has not yet occurred, Lender shall, in its sole discretion, have approved the Sale; and

          (13) The applicable transfer will not result in an increase in the real property taxes for the Premises and Improvements that would cause the debt service coverage ratio of the Debt with respect to the immediately succeeding twelve (12) month period to be less than the debt service coverage ratio of the Debt for the twelve (12) month period immediately preceding such transfer, in each case as determined by Lender.

     2.10 Payment of Utilities, Assessments, Charges, Etc. Borrower shall pay when due all utility charges which are incurred by Borrower or which may become a charge or lien against any portion of the Property for gas, electricity, water and sewer services furnished to the Premises and/or the Improvements and all other assessments or charges of a similar nature, or assessments payable pursuant to any restrictive covenants, whether public or private, affecting the Premises and/or the Improvements or any portion thereof, whether or not such assessments or charges are or may become liens thereon.

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     2.11 Access Privileges and Inspections. Lender and the agents, representatives and employees of Lender shall, subject to the rights of Tenants, have full and free access to the Premises and the Improvements and any other location where books and records concerning the Property are kept at all reasonable times and, except in the event of an emergency, upon not less than 24 hours prior notice (which notice may be telephonic) for the purposes of inspecting the Property and of examining, copying and making extracts from the books and records of Borrower relating to the Property. Borrower shall lend assistance to all such agents, representatives and employees of Lender.

     2.12 Waste; Alteration of Improvements. Borrower shall not commit, suffer or permit any waste on the Property nor take any actions that might invalidate any insurance carried on the Property. Borrower shall maintain the Property in good condition and repair. No part of the Improvements may be removed, demolished or materially altered, without the prior written consent of Lender other than in connection with non-structural day to day maintenance and except for tenant improvements under Leases. Without the prior written consent of Lender, Borrower shall not commence construction of any improvements on the Premises other than improvements required for the maintenance or repair of the Property. Lender reserves the right to condition its consent to any material alteration, removal, demolition or new construction on the following: (i) such conditions as would be required by a prudent interim construction lender, including, but not limited to, the prior approval by Lender of plans and specifications, construction budgets, contractors and form of construction contracts and the furnishing to Lender of evidence regarding funds, permits, approvals, bonds, insurance, lien waivers, title endorsements, appraisals, surveys, certificates of occupancy, certificates regarding completion, invoices, receipts and affidavits from contractors and subcontractors, in form and substance satisfactory to Lender in its discretion, (ii) the delivery of an opinion from counsel satisfactory to Lender in its discretion and in form and substance satisfactory to Lender in its discretion opining as to such matters as Lender may reasonably require, including, without limitation, an opinion that such alteration, removal, demolition or new construction will not have an adverse effect on the status of any trust formed in connection with a Secondary Market Transaction a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code (“REMIC”), and (iii) Borrower’s agreement to pay all fees, costs and expenses incurred by Lender in granting such consent, including, without limitation, reasonable attorneys’ fees and expenses.

     2.13 Zoning. Without the prior written consent of Lender, Borrower shall not seek, make, suffer, consent to or acquiesce in any change in the zoning or conditions of use of the Premises or the Improvements. Borrower shall comply with and make all payments required under the provisions of any covenants, conditions or restrictions affecting the Premises or the Improvements. Borrower shall comply with all existing and future requirements of all governmental authorities having jurisdiction over the Property. Borrower shall keep all licenses, permits, franchises and other approvals necessary for the operation of the Property in full force and effect. Borrower shall operate the Property as an apartment complex for so long as the Debt is outstanding. If, under applicable zoning provisions, the use of all or any part of the Premises or the Improvements is or becomes a nonconforming use, Borrower shall not cause or permit such use to be discontinued or abandoned without the prior written consent of Lender. Further, without Lender’s prior written consent, Borrower shall not file or subject any part of the Premises or the Improvements to any declaration of condominium or co-operative or convert any part of the Premises or the Improvements to a condominium, co-operative or other form of multiple ownership and governance.

     2.14 Financial Statements and Books and Records. Borrower shall keep accurate books and records of account of the Property and its own financial affairs sufficient to permit the preparation of financial statements therefrom in accordance with sound accounting practices relating to the real estate industry, on a Cash/Tax basis, consistently applied. Lender and its duly authorized representatives shall

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have the right to examine, copy and audit Borrower’s records and books of account at all reasonable times. So long as this Deed of Trust continues in effect, Borrower shall provide to Lender, in addition to any other financial statements required hereunder or under any of the other Loan Documents, the following financial statements and information, all of which must be certified to Lender as being true and correct by Borrower or the person or entity to which they pertain, as applicable, and be prepared in accordance with sound accounting practices relating to the real estate industry, on a Cash/Tax basis, consistently applied, and be in form and substance acceptable to Lender:

          (a) copies of all tax returns filed by Borrower, within thirty (30) days after the date of filing;

          (b) monthly operating statements for the Property and a Rent Roll, within sixty (60) days after the end of each calendar month commencing with the first full month after the date hereof and continuing until the earlier of (X) twelve (12) calendar months following the date hereof or (Y) the date of a Secondary Market Transaction;

          (c) quarterly balance sheets, operating statements for the Property and a Rent Roll, within sixty (60) days after the end of each March, June, September and December commencing with the calendar quarter during which the Borrower is permitted to cease submitting monthly operating statements under subsection (b) above;

          (d) annual balance sheets for the Property and annual financial statements for Borrower, and each Indemnitor, within one hundred twenty (120) days after the end of each calendar year;

          (e) such other information with respect to the Property, Borrower, the principals or general partners in Borrower and each Indemnitor, which may be reasonably requested from time to time by Lender, within a reasonable time after the applicable request; and

          (f) if, at the time one or more Disclosure Documents are being prepared for a securitization, Lender expects that Borrower alone or Borrower and one or more affiliates of Borrower collectively, or the Property alone or the Property and any other parcel(s) of real property, together with improvements thereon and personal property related thereto, that is “related”, within the meaning of the definition of Significant Obligor, to the Property (a “Related Property”) collectively, will be a Significant Obligor, Borrower shall furnish to Lender upon request (i) the selected financial data or, if applicable, net operating income, required under Item 1112(b)(1) of Regulation AB and meeting the requirements thereof, if Lender expects that the principal amount of the Loan, together with any loans made to an affiliate of Borrower or secured by a Related Property that is included in a securitization with the Loan (a “Related Loan”), as of the cut-off date for such securitization may, or if the principal amount of the Loan together with any Related Loans as of the cut-off date for such securitization and at any time during which the Loan and any Related Loans are included in a securitization does, equal or exceed ten percent (10%) (but less than twenty percent (20%)) of the aggregate principal amount of all mortgage loans included or expected to be included, as applicable, in the securitization or (ii) the financial statements required under Item 1112(b)(2) of Regulation AB and meeting the requirements thereof, if Lender expects that the principal amount of the Loan together with any Related Loans as of the cut-off date for such securitization may, or if the principal amount of the Loan together with any Related Loans as of the cut-off date for such securitization and at any time during which the Loan and any Related Loans are included in a securitization does, equal or exceed twenty percent (20%) of the aggregate principal amount of all mortgage loans included or expected to be included, as applicable, in the securitization. Such financial data or financial statements shall be furnished to Lender (A) within ten (10) Business Days after notice from Lender in connection with the preparation of Disclosure Documents for the securitization, (B) not

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later than thirty (30) days after the end of each fiscal quarter of Borrower and (C) not later than seventy-five (75) days after the end of each fiscal year of Borrower; provided, however, that Borrower shall not be obligated to furnish financial data or financial statements pursuant to clauses (B) or (C) of this sentence with respect to any period for which a filing pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) in connection with or relating to the securitization (an “Exchange Act Filing”) is not required. As used herein, “Regulation AB” shall mean Regulation AB under the Securities Act of 1933, as amended and the Exchange Act. As used herein, “Disclosure Document” shall mean a prospectus, prospectus supplement, private placement memorandum, or similar offering memorandum or offering circular, in each case in preliminary or final form, used to offer securities in connection with a securitization. As used herein, “Significant Obligor” shall have the meaning set forth in Item 1101(k) of Regulation AB.

If any of the aforementioned materials are not furnished to Lender within the applicable time periods, are not prepared in accordance with the foregoing requirements or Lender is dissatisfied with the form of any of the foregoing and has notified Borrower of its dissatisfaction, in addition to any other rights and remedies of Lender contained herein and provided Lender has given Borrower at least thirty (30) days notice of such failure and opportunity to cure, (i) Borrower shall pay to Lender upon demand, at Lender’s option and in its sole discretion, an amount equal to $2,500 per reporting period, and (ii) Lender shall have the right, but not the obligation, to obtain the same by means of an audit by an independent certified public accountant selected by Lender, in which event Borrower agrees to pay, or to reimburse Lender for, any expense of such audit and further agrees to provide all necessary information to said accountant and to otherwise cooperate in the making of such audit.

     2.15 Further Assurances. Borrower shall, on the request of Lender and at the expense of Borrower: (a) promptly correct any defect, error or omission which may be discovered in the contents of this Deed of Trust or in the contents of any of the other Loan Documents; (b) promptly execute, acknowledge, deliver and record or file such further instruments (including, without limitation, further mortgages, deeds of trust, security deeds, security agreements, financing statements, continuation statements and assignments of rents or leases) and promptly do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Deed of Trust and the other Loan Documents and to subject to the liens and security interests hereof and thereof any property intended by the terms hereof and thereof to be covered hereby and thereby, including specifically, but without limitation, any renewals, additions, substitutions, replacements or appurtenances to the Property; (c) promptly execute, acknowledge, deliver, procure and record or file any document or instrument (including specifically, without limitation, any financing statement) deemed advisable by Lender to protect, continue or perfect the liens or the security interests hereunder against the rights or interests of third persons; and (d) promptly furnish to Lender, upon Lender’s request, a duly acknowledged written statement and estoppel certificate addressed to such party or parties as directed by Lender and in form and substance supplied by Lender, setting forth all amounts due under the Note, stating whether any Default or Event of Default has occurred hereunder, stating whether any offsets or defenses exist against the Debt and containing such other matters as Lender may reasonably require.

     2.16 Payment of Costs; Reimbursement to Lender. Borrower shall pay all costs and expenses of every character reasonably incurred in connection with the closing of the loan evidenced by the Note and secured hereby, attributable or chargeable to Borrower as the owner of the Property or otherwise attributable to any consent requested of Lender or any Rating Agency under the terms hereof or any other Loan Document, including, without limitation, appraisal fees, recording fees, documentary, stamp, mortgage or intangible taxes, brokerage fees and commissions, title policy premiums and title search fees, uniform commercial code/tax lien/litigation search fees, escrow fees, consultants’ fees, No-Downgrade Confirmations and reasonable attorneys’ fees. If Borrower defaults in any such payment, which default is not cured within any applicable grace or cure period, Lender may pay the same and Borrower shall

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reimburse Lender on demand for all such costs and expenses incurred or paid by Lender, together with such interest thereon at the Default Interest Rate from and after the date of Lender’s making such payment until reimbursement thereof by Borrower. Any such sums disbursed by Lender, together with such interest thereon, shall be additional indebtedness of Borrower secured by this Deed of Trust and by all of the other Loan Documents securing all or any part of the Debt. Further, Borrower shall promptly notify Lender in writing of any litigation or threatened litigation affecting the Property, or any other demand or claim which, if enforced, could impair or threaten to impair Lender’s security hereunder. Without limiting or waiving any other rights and remedies of Lender hereunder, if Borrower fails to perform any of its covenants or agreements contained in this Deed of Trust or in any of the other Loan Documents and such failure is not cured within any applicable grace or cure period, or if any action or proceeding of any kind (including, but not limited to, any bankruptcy, insolvency, arrangement, reorganization or other debtor relief proceeding) is commenced which might affect Lender’s interest in the Property or Lender’s right to enforce its security, then Lender may, at its option, with or without notice to Borrower, make any appearances, disburse any sums and take any actions as may be necessary or desirable to protect or enforce the security of this Deed of Trust or to remedy the failure of Borrower to perform its covenants and agreements (without, however, waiving any default of Borrower). Borrower agrees to pay on demand all expenses of Lender or Trustee incurred with respect to the foregoing (including, but not limited to, reasonable fees and disbursements of counsel), together with interest thereon at the Default Interest Rate from and after the date on which Lender or Trustee incurs such expenses until reimbursement thereof by Borrower. Any such expenses so incurred by Lender, together with interest thereon as provided above, shall be additional indebtedness of Borrower secured by this Deed of Trust and by all of the other Loan Documents securing all or any part of the Debt. The necessity for any such actions and of the amounts to be paid shall be determined by Lender in its discretion. Lender is hereby empowered to enter and to authorize others to enter upon the Property or any part thereof for the purpose of performing or observing any such defaulted term, covenant or condition without thereby becoming liable to Borrower or any person in possession holding under Borrower. Borrower hereby acknowledges and agrees that the remedies set forth in this Section 2.16 shall be exercisable by Lender, and any and all payments made or costs or expenses incurred by Lender in connection therewith shall be secured hereby and shall be, without demand, immediately repaid by Borrower with interest thereon at the Default Interest Rate, notwithstanding the fact that such remedies were exercised and such payments made and costs incurred by Lender after the filing by Borrower of a voluntary case or the filing against Borrower of an involuntary case pursuant to or within the meaning of the Bankruptcy Reform Act of 1978, as amended, Title 11 U.S.C., or after any similar action pursuant to any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable to Borrower, Lender, any Indemnitor, the Debt or any of the Loan Documents. Borrower hereby indemnifies and holds Lender harmless from and against all loss, cost and expenses with respect to any Event of Default hereof, any liens (i.e., judgments, mechanics’ and materialmen’s liens, or otherwise), charges and encumbrances filed against the Property, and from any claims and demands for damages or injury, including claims for property damage, personal injury or wrongful death, arising out of or in connection with any accident or fire or other casualty on the Premises or the Improvements or any nuisance made or suffered thereon, except those that are due to Lender’s gross negligence or willful misconduct as finally determined by a court of competent jurisdiction, including, without limitation, in any case, reasonable attorneys’ fees, costs and expenses as aforesaid, whether at pretrial, trial or appellate level, and such indemnity shall survive payment in full of the Debt. This Section shall not be construed to require Lender to incur any expenses, make any appearances or take any actions.

     2.17 Security Interest. This Deed of Trust is also intended to encumber and create a security interest in, and Borrower has GRANTED, BARGAINED, CONVEYED, ASSIGNED, TRANSFERRED, and SET OVER and by these presents does GRANT, BARGAIN, CONVEY, ASSIGN, TRANSFER and SET OVER, unto Trustee and Lender, a first and prior security interest in, all of Borrower’s right, title and

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interest in, to, under and with respect to all sums on deposit with Lender pursuant to the provisions of Article III hereof or any other Section hereof or of any other Loan Document and all fixtures, chattels, accounts, equipment, inventory, contract rights, general intangibles and other personal property included within the Property, all renewals, replacements of any of the aforementioned items, or articles in substitution therefor or in addition thereto or the proceeds thereof (said property is hereinafter referred to collectively as the “Collateral”), whether or not the same shall be attached to the Premises or the Improvements in any manner. It is hereby agreed that to the extent permitted by law, all of the foregoing property is to be deemed and held to be a part of and affixed to the Premises and the Improvements. The foregoing security interest shall also cover Borrower’s fee simple interest in any of the foregoing property which is leased by Borrower. Notwithstanding the foregoing, all of the foregoing property shall be owned by Borrower and no leasing or installment sales or other financing or title retention agreement in connection therewith shall be permitted without the prior written approval of Lender. Borrower shall, from time to time upon the request of Lender, supply Lender with a current inventory of all of the property in which Lender is granted a security interest hereunder, in such detail as Lender may reasonably require. Borrower shall promptly replace all of the Collateral subject to the lien or security interest of this Deed of Trust when worn or obsolete with Collateral comparable to the worn out or obsolete Collateral when new and will not, without the prior written consent of Lender, remove from the Premises or the Improvements any of the Collateral subject to the lien or security interest of this Deed of Trust except such as is replaced by an article of equal suitability and value as above provided, owned by Borrower free and clear of any lien or security interest except that created by this Deed of Trust and the other Loan Documents. All of the Collateral shall be kept at the location of the Premises except as otherwise required by the terms of the Loan Documents. Borrower shall not use any of the Collateral in violation of any applicable statute, ordinance or insurance policy.

     2.18 Security Agreement. This Deed of Trust constitutes a security agreement between Borrower and Lender with respect to the Collateral in which Lender is granted a security interest hereunder, and, cumulative of all other rights and remedies of Lender hereunder, Lender shall have all of the rights and remedies of a secured party under any applicable Uniform Commercial Code. Borrower hereby agrees to execute and deliver on demand and hereby irrevocably constitutes and appoints Lender the attorney-in-fact of Borrower to execute and deliver and, if appropriate, to file with the appropriate filing officer or office, such security agreements, financing statements, continuation statements or other instruments as Lender may request or require in order to impose, perfect or continue the perfection of the lien or security interest created hereby. To the extent specifically provided herein, Lender shall have the right of possession of all cash, securities, instruments, negotiable instruments, documents, certificates and any other evidences of cash or other property or evidences of rights to cash rather than property, which are now or hereafter a part of the Property, and Borrower shall promptly deliver the same to Lender, endorsed to Lender, without further notice from Lender. Borrower agrees to furnish Lender with notice of any change in the name, identity, organizational structure, residence, or principal place of business or mailing address of Borrower within ten (10) days of the effective date of any such change. Upon the occurrence of any Event of Default, Lender shall have the rights and remedies as prescribed in this Deed of Trust, or as prescribed by general law, or as prescribed by any applicable Uniform Commercial Code, all at Lender’s election. Any disposition of the Collateral may be conducted by an employee or agent of Lender. Any person, including both Borrower and Lender, shall be eligible to purchase any part or all of the Collateral at any such disposition. Expenses of retaking, holding, preparing for sale, selling or the like (including, without limitation, Lender’s reasonable attorneys’ fees and legal expenses), together with interest thereon at the Default Interest Rate from the date incurred by Lender until actually paid by Borrower, shall be paid by Borrower on demand and shall be secured by this Deed of Trust and by all of the other Loan Documents securing all or any part of the Debt. Lender shall have the right to enter upon the Premises and the Improvements or any real property where any of the property which is the subject of the security interest granted herein is located to take possession of, assemble and collect the same or to render it unusable, or Borrower, upon demand of Lender, shall assemble such property and make it

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available to Lender at the Premises, or at a place which is mutually agreed upon or, if no such place is agreed upon, at a place reasonably designated by Lender to be reasonably convenient to Lender and Borrower. If notice is required by law, Lender shall give Borrower at least ten (10) days’ prior written notice of the time and place of any public sale of such property, or adjournments thereof, or of the time of or after which any private sale or any other intended disposition thereof is to be made, and if such notice is sent to Borrower, as the same is provided for the mailing of notices herein, it is hereby deemed that such notice shall be and is reasonable notice to Borrower. No such notice is necessary for any such property which is perishable, threatens to decline speedily in value or is of a type customarily sold on a recognized market. Any sale made pursuant to the provisions of this Section shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with a foreclosure sale as provided in Section 5.1(e) hereof upon giving the same notice with respect to the sale of the Property hereunder as is required under said Section 5.1(e). Furthermore, to the extent permitted by law, in conjunction with, in addition to or in substitution for the rights and remedies available to Lender pursuant to any applicable Uniform Commercial Code:

          (a) In the event of a foreclosure sale, the Property may, at the option of Lender, be sold as a whole; and

          (b) It shall not be necessary that Lender take possession of the aforementioned Collateral, or any part thereof, prior to the time that any sale pursuant to the provisions of this Section is conducted and it shall not be necessary that said Collateral, or any part thereof, be present at the location of such sale; and

          (c) Lender may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Lender, including the sending of notices and the conduct of the sale, but in the name and on behalf of Lender. The name and address of Borrower (as Debtor under any applicable Uniform Commercial Code) are as set forth on the first page hereof. The name and address of Lender (as Secured Party under any applicable Uniform Commercial Code) are as set forth on the first page hereof.

     2.19 Easements and Rights-of-Way. Borrower shall not grant any easement or right-of-way with respect to all or any portion of the Premises or the Improvements without the prior written consent of Lender. Borrower shall comply with all easements affecting the Property. The purchaser at any foreclosure sale hereunder may, at its discretion, disaffirm any easement or right-of-way granted in violation of any of the provisions of this Deed of Trust and may take immediate possession of the Property free from, and despite the terms of, such grant of easement or right-of-way. If Lender consents to the grant of an easement or right-of-way, Lender agrees to grant such consent without charge to Borrower other than expenses, including, without limitation, reasonable attorneys’ fees, incurred by Lender in the review of Borrower’s request and in the preparation of documents effecting the subordination.

     2.20 Compliance with Laws. Borrower shall at all times comply with all statutes, ordinances, regulations and other governmental or quasi-governmental requirements and private covenants now or hereafter relating to the ownership, construction, use or operation of the Property, including, but not limited to, those concerning employment and compensation of persons engaged in operation and maintenance of the Property and any environmental or ecological requirements, even if such compliance shall require structural changes to the Property; provided, however, that, Borrower may, upon providing Lender with security satisfactory to Lender, proceed diligently and in good faith to contest the validity or applicability of any such statute, ordinance, regulation or requirement so long as during such contest the Property shall not be subject to any lien, charge, fine or other liability and shall not be in danger of being forfeited, lost or closed. Borrower shall not use or occupy, or allow the use or occupancy of, the Property

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in any manner which violates any Lease of or any other agreement applicable to the Property or any applicable law, rule, regulation or order or which constitutes a public or private nuisance or which makes void, voidable or cancelable, or increases the premium of, any insurance then in force with respect thereto.

     2.21 Additional Taxes. In the event of the enactment after the date hereof of any law of the state in which the Property is located or of any other governmental entity deducting from the value of the Property for the purpose of taxing any lien or security interest thereon, or imposing upon Lender the payment of the whole or any part of the taxes or assessments or charges or liens herein required to be paid by Borrower, or changing in any way the laws relating to the taxation of deeds of trust, mortgages or security agreements or debts secured by deeds of trust, mortgages or security agreements or the interest of the beneficiary, mortgagee or secured party in the property covered thereby, or the manner of collection of such taxes, so as to adversely affect this Deed of Trust or the Debt or Lender, then, and in any such event, Borrower, upon demand by Lender, shall pay such taxes, assessments, charges or liens, or reimburse Lender therefor; provided, however, that if in the opinion of counsel for Lender (a) it might be unlawful to require Borrower to make such payment, or (b) the making of such payment might result in the imposition of interest beyond the maximum amount permitted by law, then and in either such event, Lender may elect, by notice in writing given to Borrower, to declare all of the Debt to be and become due and payable in full thirty (30) days from the giving of such notice, and, in connection with the payment of such Debt, no prepayment premium or fee shall be due unless, at the time of such payment, an Event of Default or a Default shall have occurred, which Default or Event of Default is unrelated to the provisions of this Section 2.21, in which event any applicable prepayment premium or fee in accordance with the terms of the Note shall be due and payable.

     2.22 Secured Indebtedness. It is understood and agreed that this Deed of Trust shall secure payment of not only the indebtedness evidenced by the Note but also any and all substitutions, replacements, renewals and extensions of the Note, any and all indebtedness and obligations arising pursuant to the terms hereof and any and all indebtedness and obligations arising pursuant to the terms of any of the other Loan Documents, all of which indebtedness is equally secured with and has the same priority as any amounts advanced as of the date hereof. It is agreed that any future advances made by Lender to or for the benefit of Borrower from time to time under this Deed of Trust or the other Loan Documents and whether or not such advances are obligatory or are made at the option of Lender, or otherwise, made for any purpose, and all interest accruing thereon, shall be equally secured by this Deed of Trust and shall have the same priority as all amounts, if any, advanced as of the date hereof and shall be subject to all of the terms and provisions of this Deed of Trust.

     2.23 Borrower’s Waivers. To the full extent permitted by law, Borrower agrees that Borrower shall not at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force providing for any appraisement, valuation, stay, moratorium or extension, or any law now or hereafter in force providing for the reinstatement of the Debt prior to any sale of the Property to be made pursuant to any provisions contained herein or prior to the entering of any decree, judgment or order of any court of competent jurisdiction, or any right under any statute to redeem all or any part of the Property so sold. Borrower, for Borrower and Borrower’s successors and assigns, and for any and all persons ever claiming any interest in the Property, to the full extent permitted by law, hereby knowingly, intentionally and voluntarily, with and upon the advice of competent counsel: (a) waives, releases, relinquishes and forever forgoes all rights of valuation, appraisement, stay of execution, reinstatement and notice of election or intention to mature or declare due the Debt (except such notices as are specifically provided for herein); (b) waives, releases, relinquishes and forever forgoes all right to a marshaling of the assets of Borrower, including the Property, to a sale in the inverse order of alienation, or to direct the order in which any of the Property shall be sold in the event of foreclosure of the liens and security interests hereby created and agrees that any court having jurisdiction to foreclose such liens and security

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interests may order the Property sold as an entirety; and (c) waives, releases, relinquishes and forever forgoes all rights and periods of redemption provided under applicable law. To the full extent permitted by law, Borrower shall not have or assert any right under any statute or rule of law pertaining to the exemption of homestead or other exemption under any federal, state or local law now or hereafter in effect, the administration of estates of decedents or other matters whatever to defeat, reduce or affect the right of Lender under the terms of this Deed of Trust to a sale of the Property, for the collection of the Debt without any prior or different resort for collection, or the right of Lender under the terms of this Deed of Trust to the payment of the Debt out of the proceeds of sale of the Property in preference to every other claimant whatever. Furthermore, Borrower hereby knowingly, intentionally and voluntarily, with and upon the advice of competent counsel, waives, releases, relinquishes and forever forgoes all present and future statutes of limitations as a defense to any action to enforce the provisions of this Deed of Trust or to collect any of the Debt to the fullest extent permitted by law. Borrower covenants and agrees that upon the commencement of a voluntary or involuntary bankruptcy proceeding by or against Borrower, Borrower shall not seek a supplemental stay or otherwise shall not seek pursuant to 11 U.S.C. §105 or any other provision of the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law (whether statutory, common law, case law, or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any rights of Lender against any guarantor or indemnitor of the secured obligations or any other party liable with respect thereto by virtue of any indemnity, guaranty or otherwise.

     In the event an interest in any of the Property is foreclosed upon pursuant to a judicial or nonjudicial foreclosure sale, Borrower agrees as follows: notwithstanding the provisions of Sections 51.003, 51.004, and 51.005 of the Texas Property Code (as the same may be amended from time to time), and only to the extent permitted by law and to the extent set forth in the Note, Borrower agrees that Lender shall be entitled to seek a deficiency judgment from Borrower and any other party obligated on the indebtedness secured hereby equal to the difference between the amount owing on the indebtedness Debt and the amount for which the Property was sold pursuant to judicial or nonjudicial foreclosure sale, subject, however, in all respects to the limitations in Section 2.6 of the Note and Costs (as defined in the Indemnity and Guaranty Agreement and the Environmental Indemnity Agreement). Borrower expressly recognizes that this section constitutes a waiver of the above-cited provisions of the Texas Property Code which would otherwise permit Borrower and other persons against whom recovery of deficiencies is sought or Indemnitor independently (even absent the initiation of deficiency proceedings against them) to present competent evidence of the fair market value of the Property as of the date of the foreclosure sale and offset against any deficiency the amount by which the foreclosure sale price is determined to be less than such fair market value. Borrower further recognizes and agrees that this waiver creates an irrebuttable presumption that the foreclosure sale price is equal to the fair market value of the Property for purposes of calculating deficiencies owed by Borrower, Indemnitor, and others against whom recovery of a deficiency is sought.

     Alternatively, in the event the waiver provided for above is determined by a court of competent jurisdiction to be unenforceable, the following shall be the basis for the finder of fact’s determination of the fair market value of the Property as of the date of the foreclosure sale in proceedings governed by Sections 51.003, 51.004 and 51.005 of the Texas Property Code (as amended from time to time): (i) the Property shall be valued in an “as is” condition as of the date of the foreclosure sale, without any assumption or expectation that the Property will be repaired or improved in any manner before a resale of the Property after foreclosure; (ii) the valuation shall be based upon an assumption that the foreclosure purchaser desires a resale of the Property for cash promptly (but no later than twelve (12) months) following the foreclosure sale; (iii) all reasonable closing costs customarily borne by the seller in commercial real estate transactions should be deducted from the gross fair market value of the Property, including, without limitation, brokerage commissions, title insurance, a survey of the Property, tax prorations, attorneys’ fees, and marketing costs; (iv) the gross fair market value of the Property shall be

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further discounted to account for any actual holding costs associated with maintaining the Property pending sale, including, without limitation, utilities expenses, property management fees, taxes and assessments (to the extent not accounted for in (iii) above), and other maintenance, operational and ownership expenses; and (v) any expert opinion testimony given or considered in connection with a determination of the fair market value of the Property must be given by persons having at least five (5) years experience in appraising property similar to the Property and who have conducted and prepared a complete written appraisal of the Property taking into consideration the factors set forth above.

     2.24 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

          (a) BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (i) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN WHICH THE PREMISES IS LOCATED OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THE NOTE, THIS DEED OF TRUST OR ANY OTHER OF THE LOAN DOCUMENTS, (ii) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN THE COUNTY IN WHICH THE PREMISES IS LOCATED, (iii) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND (iv) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT IT WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM).

          (b) BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THE DEBT OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR BORROWER, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.

     2.25 Attorney-in-Fact Provisions. With respect to any provision of this Deed of Trust or any other Loan Document whereby Borrower grants to Lender a power-of-attorney, provided no Default or Event of Default has occurred under this Deed of Trust, Lender shall first give Borrower written notice at least three (3) days prior to acting under such power, which notice shall demand that Borrower first take the proposed action within such period and advising Borrower that if it fails to do so, Lender will so act under the power; provided, however, that, in the event that a Default or an Event of Default has occurred, or if necessary to prevent imminent death, serious injury, damage, loss, forfeiture or diminution in value to the Property or any surrounding property or to prevent any adverse affect on Lender’s interest in the Property, Lender may act immediately and without first giving such notice. In such event, Lender will give Borrower notice of such action as soon thereafter as reasonably practical.

     2.26 Management. The management of the Property shall be by either: (a) Borrower or an entity affiliated with Borrower approved by Lender for so long as Borrower or said affiliated entity is managing the Property in a first class manner; or (b) a professional property management company approved by Lender. Such management by an affiliated entity or a professional property management company shall be pursuant to a written agreement approved by Lender. In no event shall any manager be

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removed or replaced or the terms of any management agreement modified or amended without the prior written consent of Lender which approval may be conditioned upon, among other things, receipt by Lender of a No-Downgrade Confirmation from each Rating Agency. After an Event of Default or a default under any management contract then in effect, which default is not cured within any applicable grace or cure period or if at any time during the term of the Loan the Debt Service Coverage Ratio (as hereinafter defined) of the Property is ever less than 1.15:1, as determined by Lender, Lender shall have the right to terminate, or to direct Borrower to terminate, such management contract upon thirty (30) days’ notice and to retain, or to direct Borrower to retain, a new management agent approved by Lender which approval may be conditioned upon, among other things, receipt by Lender of a No-Downgrade Confirmation from each Rating Agency. All Rents and Profits generated by or derived from the Property shall first be utilized solely for current expenses directly attributable to the ownership and operation of the Property, including, without limitation, current expenses relating to Borrower’s liabilities and obligations with respect to this Deed of Trust and the other Loan Documents, and none of the Rents and Profits generated by or derived from the Property shall be diverted by Borrower and utilized for any other purposes unless all such current expenses attributable to the ownership and operation of the Property have been fully paid and satisfied.

     2.27 Hazardous Waste and Other Substances.

          (a) Except as otherwise may be disclosed in that certain Phase I Environmental Site Assessment of the Property, dated December 19, 2006 and prepared by IVI Due Diligence Services, Inc. (the “Phase I”), Borrower hereby represents and warrants to Lender that, as of the date hereof: (i) to the best of Borrower’s knowledge, information and belief, none of Borrower nor the Property nor any Tenant at the Premises nor the operations conducted thereon is in direct or indirect violation of or otherwise exposed to any liability under any local, state or federal law, rule or regulation or common law duty pertaining to human health, natural resources or the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. §9601 et seq.) (“CERCLA”), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. §6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §1251 et seq.), the Clean Air Act (42 U.S.C. §7401 et seq.), the Emergency Planning and Community-Right-to-Know Act (42 U.S.C. §11001 et seq.), the Endangered Species Act (16 U.S.C. §1531 et seq.), the Toxic Substances Control Act (15 U.S.C. §2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. §651 et seq.) and the Hazardous Materials Transportation Act (49 U.S.C. §1801 et seq.), the Texas Solid Waste Disposals Act (V.T.C.A. Health and Safety Code §361 et seq.) and the Texas Water Code/Water Quality Control (V.T.C.A. Water Code §26.001 et seq.), regulations promulgated pursuant to said laws, all as amended from time to time (collectively, “Environmental Laws”) or otherwise exposed to any liability under any Environmental Law relating to or affecting the Property, whether or not used by or within the control of Borrower; (ii) no hazardous, toxic or harmful substances, wastes, materials, pollutants or contaminants (including, without limitation, asbestos or asbestos-containing materials, lead based paint, Toxic Mold (as hereinafter defined) polychlorinated biphenyls, petroleum or petroleum products or byproducts, flammable explosives, radioactive materials, infectious substances or raw materials which include hazardous constituents) or any other substances or materials which are included under or regulated by Environmental Laws (collectively, “Hazardous Substances”) are located on, in or under or have been handled, generated, stored, processed or disposed of on or released or discharged from the Property (including underground contamination), except for those substances used by Borrower or any Tenant in the ordinary course of their respective businesses and in compliance with all Environmental Laws and where such Hazardous Substances could not reasonably be expected to give rise to liability under Environmental Laws; (iii) radon is not present at the Property in excess or in violation of any applicable thresholds or standards or in amounts that require disclosure under applicable law to any tenant or occupant of or invitee to the Property or to any governmental agency or the general public; (iv) the Property is not subject to any private or governmental lien or judicial or administrative notice or action

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arising under Environmental Laws; (v) there is no pending, nor, to Borrower’s knowledge, information or belief, threatened litigation arising under Environmental Laws affecting Borrower or the Property; (vi) there are no and have been no existing or closed underground storage tanks or other underground storage receptacles for Hazardous Substances or landfills or dumps on the Property; (vii) Borrower has received no notice of, and to the best of Borrower’s knowledge and belief, there exists no investigation, action, proceeding or claim by any agency, authority or unit of government or by any third party which could result in any liability, penalty, sanction or judgment under any Environmental Laws with respect to any condition, use or operation of the Property, nor does Borrower know of any basis for such an investigation, action, proceeding or claim; and (viii) Borrower has received no notice of and, to the best of Borrower’s knowledge and belief, there has been no claim by any party that any use, operation or condition of the Property has caused any nuisance or any other liability or adverse condition on any other property, nor does Borrower know of any basis for such an investigation, action, proceeding or claim. For the purposes hereof, “Toxic Mold” shall mean any mold or fungus at the Property which is of a type (i) that might pose a significant risk to human health or the environment or (ii) that would negatively impact the value of the Property.

          (b) Borrower has not received nor to the best of Borrower’s knowledge, information and belief has there been issued, any notice, notification, demand, request for information, citation, summons, or order in any way relating to any actual, alleged or potential violation or liability arising under Environmental Laws.

          (c) Neither the Property, nor to the best of Borrower’s knowledge, information and belief, any property to which Borrower has, in connection with the maintenance or operation of the Property, directly or indirectly transported or arranged for the transportation of any Hazardous Substances is listed or, to the best of Borrower’s knowledge, information and belief, proposed for listing on the National Priorities List promulgated pursuant to CERCLA or CERCLIS (as defined in CERCLA) or on any similar federal or state list of sites requiring environmental investigation or clean-up.

          (d) Borrower shall comply with all applicable Environmental Laws. Except as to those items disclosed by the Phase I, if any (unless further action is required under applicable Environmental Laws), Borrower shall keep the Property or cause the Property to be kept free from Hazardous Substances (except those substances used by Borrower or any Tenant in the ordinary course of their respective businesses and except in compliance with all Environmental Laws and where such Hazardous Substances could not reasonably be expected to give rise to liability under Environmental Laws) and in compliance with all Environmental Laws, Borrower shall not install or use any underground storage tanks, shall expressly prohibit the use, generation, handling, storage, production, processing and disposal of Hazardous Substances by all Tenants in quantities or conditions that would violate or give rise to any obligation to take remedial or other action under any applicable Environmental Laws. Without limiting the generality of the foregoing, during the term of this Deed of Trust, Borrower shall not install in the Improvements or permit to be installed in the Improvements any asbestos or asbestos-containing materials.

          (e) Borrower shall promptly notify Lender if Borrower shall become aware of (i) the actual or potential existence of any Hazardous Substances on the Property other than those occurring in the ordinary course of Borrower’s business and which do not violate, or would not otherwise give rise to liability under Environmental Laws, (ii) any direct or indirect violation of, or other exposure to liability under, any Environmental Laws, (iii) any lien, action or notice affecting the Property or Borrower resulting from any violation or alleged violation of or liability or alleged liability under any Environmental Laws, (iv) the institution of any investigation, inquiry or proceeding concerning Borrower or the Property pursuant to any Environmental Laws or otherwise relating to Hazardous Substances, or (v) the discovery of any occurrence, condition or state of facts which would render any representation or

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warranty contained in this Deed of Trust incorrect in any respect if made at the time of such discovery. Immediately upon receipt of same, Borrower, shall deliver to Lender copies of any and all requests for information, complaints, citations, summonses, orders, notices, reports or other communications, documents or instruments in any way relating to any actual, alleged or potential violation or liability of any nature whatsoever arising under Environmental Laws and relating to the Property or to Borrower. Borrower shall remedy or cause to be remedied in a timely manner (and in any event within the time period permitted by applicable Environmental Laws) any violation of Environmental Laws or any condition that could give rise to liability under Environmental Laws. Without limiting the foregoing, Borrower shall, promptly and regardless of the source of the contamination or threat to the environment or human health, at its own expense, take all actions as shall be necessary or prudent, for the clean-up of any and all portions of the Property or other affected property, including, without limitation, all investigative, monitoring, removal, containment and remedial actions in accordance with all applicable Environmental Laws (and in all events in a manner satisfactory to Lender) and shall further pay or cause to be paid, at no expense to Lender, all clean-up, administrative and enforcement costs of applicable governmental agencies which may be asserted against the Property. In the event Borrower fails to do so, Lender may, but shall not be obligated to, cause the Property or other affected property to be freed from any Hazardous Substances or otherwise brought into conformance with Environmental Laws and any and all costs and expenses incurred by Lender in connection therewith, together with interest thereon at the Default Interest Rate from the date incurred by Lender until actually paid by Borrower, shall be immediately paid by Borrower on demand and shall be secured by this Deed of Trust and by all of the other Loan Documents securing all or any part of the Debt. Borrower hereby grants to Lender and its agents and employees access to the Property and a license to remove any items deemed by Lender to be Hazardous Substances and to do all things Lender shall deem necessary to bring the Property into conformance with Environmental Laws.

          (f) Borrower covenants and agrees, at Borrower’s sole cost and expense, to indemnify, defend (at trial and appellate levels, and with attorneys, consultants and experts acceptable to Lender), and hold Lender harmless from and against any and all liens, damages (including without limitation, punitive or exemplary damages), losses, liabilities (including, without limitation, strict liability), obligations, settlement payments, penalties, fines, assessments, citations, directives, claims, litigation, demands, defenses, judgments, suits, proceedings, costs, disbursements or expenses of any kind or of any nature whatsoever (including, without limitation, reasonable attorneys’, consultants’ and experts’ fees and disbursements actually incurred in investigating, defending, settling or prosecuting any claim, litigation or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against Lender or the Property, and arising directly or indirectly from or out of: (i) any violation or alleged violation of, or liability or alleged liability under, any Environmental Law; (ii) the presence, release or threat of release of or exposure to any Hazardous Substances or radon on, in, under or affecting all or any portion of the Property or any surrounding areas, regardless of whether or not caused by or within the control of Borrower; (iii) any transport, treatment, recycling, storage, disposal or arrangement therefor of Hazardous Substances whether on the Property, originating from the Property, or otherwise associated with Borrower or any operations conducted on the Property at any time; (iv) the failure by Borrower to comply fully with the terms and conditions of this Section 2.27; (v) the breach of any representation or warranty contained in this Section 2.27; or (vi) the enforcement of this Section 2.27, including, without limitation, the cost of assessment, investigation, containment, removal and/or remediation of any and all Hazardous Substances from all or any portion of the Property or any surrounding areas, the cost of any actions taken in response to the presence, release or threat of release of any Hazardous Substances on, in, under or affecting any portion of the Property or any surrounding areas to prevent or minimize such release or threat of release so that it does not migrate or otherwise cause or threaten danger to present or future public health, safety, welfare or the environment, and costs incurred to comply with Environmental Laws in connection with all or any portion of the Property or any surrounding areas. The indemnity set forth in this Section 2.27 shall also include any diminution in the

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value of the security afforded by the Property or any future reduction in the sales price of the Property by reason of any matter set forth in this Section 2.27. The foregoing indemnity shall specifically not include any such costs relating to Hazardous Substances which are initially placed on, in or under the Property after foreclosure or other taking of title to the Property by Lender or its successor or assigns. Lender’s rights under this Section shall survive payment in full of the Debt and shall be in addition to all other rights of Lender under this Deed of Trust, the Note and the other Loan Documents.

          (g) Upon Lender’s request, at any time after the occurrence of an Event of Default or at such other time as Lender has reasonable grounds to believe that Hazardous Substances are or have been released, stored or disposed of on the Property, or on property contiguous with the Property, or that the Property may be in violation of the Environmental Laws, Borrower shall perform or cause to be performed, at Borrower’s sole cost and expense and in scope, form and substance satisfactory to Lender, an inspection or audit of the Property prepared by a hydrogeologist or environmental engineer or other appropriate consultant approved by Lender indicating the presence or absence of Hazardous Substances on the Property, the compliance or non-compliance status of the Property and the operations conducted thereon with applicable Environmental Laws, or an inspection or audit of the Property prepared by an engineering or consulting firm approved by Lender indicating the presence or absence of friable asbestos or substances containing asbestos or lead or substances containing lead or lead based paint (“Lead Based Paint”) on the Property. If Borrower fails to provide reports of such inspection or audit within thirty (30) days after such request, Lender may order the same, and Borrower hereby grants to Lender and its employees and agents access to the Property and an irrevocable license to undertake such inspection or audit. The cost of such inspection or audit, together with interest thereon at the Default Interest Rate from the date incurred by Lender until actually paid by Borrower, shall be immediately paid by Borrower on demand and shall be secured by this Deed of Trust and by all of the other Loan Documents securing all or any part of the Debt.

          (h) Reference is made to that certain Environmental Indemnity Agreement of even date herewith by Triple Net Properties, LLC, a Virginia limited liability company in favor of Lender (the “Environmental Indemnity Agreement”). The provisions of this Deed of Trust and the Environmental Indemnity Agreement shall be read together to maximize the coverage with respect to the subject matter thereof, as determined by Lender.

          (i) If prior to the date hereof, it was determined that the Property contains asbestos-containing materials (“ACM’s”), Borrower covenants and agrees to institute, within thirty (30) days after the date hereof, an operations and maintenance program (the “Maintenance Program”) designed by an environmental consultant, satisfactory to Lender, with respect to ACM’s, consistent with “Guidelines for Controlling Asbestos-Containing Materials in Buildings” (USEPA, 1985) and other relevant guidelines, and such Maintenance Program will hereafter continuously remain in effect until the Debt secured hereby is repaid in full. In furtherance of the foregoing, Borrower shall inspect and maintain all ACM’s on a regular basis and ensure that all ACM’s shall be maintained in a condition that prevents exposure of residents to ACM’s at all times. Without limiting the generality of the preceding sentence, Lender may require (i) periodic notices or reports to Lender in form, substance and at such intervals as Lender may specify, (ii) an amendment to such operations and maintenance program to address changing circumstances, laws or other matters, (iii) at Borrower’s sole expense, supplemental examination of the Property by consultants specified by Lender, and (iv) variation of the operations and maintenance program in response to the reports provided by any such consultants.

          (j) If, prior to the date hereof, it was determined that the Property contains Lead Based Paint, Borrower had prepared an assessment report describing the location and condition of the Lead Based Paint (a “Lead Based Paint Report”). If, at any time hereafter, Lead Based Paint is suspected of being present on the Property, Borrower agrees, at its sole cost and expense and within twenty (20)

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days thereafter, to cause to be prepared a Lead Based Paint Report prepared by an expert, and in form, scope and substance, acceptable to Lender. Borrower agrees that if it has been, or if at any time hereafter it is, determined that the Property contains Lead Based Paint, on or before thirty (30) days following (i) the date hereof, if such determination was made prior to the date hereof or (ii) such determination, if such determination is hereafter made, as applicable, Borrower shall, at its sole cost and expenses, develop and implement, and thereafter diligently and continuously carry out (or cause to be developed and implemented and thereafter diligently and continually to be carried out), an operations, abatement and maintenance plan for the Lead Based Paint on the Property, which plan shall be prepared by an expert, and be in form, scope and substance, acceptable to Lender (together with any Lead Based Paint Report, the “O&M Plan”). If an O&M Plan has been prepared prior to the date hereof, Borrower agrees to diligently and continually carry out (or cause to be carried out) the provisions thereof. Compliance with the O&M Plan shall require or be deemed to require, without limitation, the proper preparation and maintenance of all records, papers and forms required under the Environmental Laws.

     2.28 Indemnification; Subrogation.

          (a) Borrower shall indemnify, defend and hold Lender harmless against: (i) any and all claims for brokerage, leasing, finders or similar fees which may be made relating to the Property or the Debt, and (ii) any and all liability, obligations, losses, damages, penalties, claims, actions, suits, costs and expenses (including Lender’s reasonable attorneys’ fees) of whatever kind or nature which may be asserted against, imposed on or incurred by Lender in connection with the Debt, this Deed of Trust, the Property, or any part thereof, or the exercise by Lender of any rights or remedies granted to it under this Deed of Trust or arise from the information provided in accordance with the terms hereof; provided, however, that nothing herein shall be construed to obligate Borrower to indemnify, defend and hold harmless Lender from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs and expenses enacted against, imposed on or incurred by Lender by reason of Lender’s willful misconduct or gross negligence.

          (b) If Lender is made a party defendant to any litigation or any claim is threatened or brought against Lender concerning the Debt, this Deed of Trust, the Property, or any part thereof, or any interest therein, or the construction, maintenance, operation or occupancy or use thereof, then Borrower shall indemnify, defend and hold Lender harmless from and against all liability by reason of said litigation or claims, including reasonable attorneys’ fees and expenses incurred by Lender in any such litigation or claim, whether or not any such litigation or claim is prosecuted to judgment. If Lender commences an action against Borrower to enforce any of the terms hereof or to prosecute any breach by Borrower of any of the terms hereof or to recover any sum secured hereby, Borrower shall pay to Lender its reasonable attorneys’ fees and expenses. The right to such attorneys’ fees and expenses shall be deemed to have accrued on the commencement of such action, and shall be enforceable whether or not such action is prosecuted to judgment. If Borrower breaches any term of this Deed of Trust, Lender may engage the services of an attorney or attorneys to protect its rights hereunder, and in the event of such engagement following any breach by Borrower, Borrower shall pay Lender reasonable attorneys’ fees and expenses incurred by Lender, whether or not an action is actually commenced against Borrower by reason of such breach. All references to “attorneys” in this Subsection and elsewhere in this Deed of Trust shall include, without limitation, any attorney or law firm engaged by Lender and Lender’s in-house counsel, and all references to “fees and expenses” in this Subsection and elsewhere in this Deed of Trust shall include, without limitation, any fees of such attorney or law firm, any appellate counsel fees, if applicable, and any allocation charges and allocation costs of Lender’s in-house counsel.

          (c) A waiver of subrogation shall be obtained by Borrower from its insurance carrier and, consequently, Borrower waives any and all right to claim or recover against Lender, its officers, employees, agents and representatives, for loss of or damage to Borrower, the Property, Borrower’s

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property or the property of others under Borrower’s control from any cause insured against or required to be insured against by the provisions of this Deed of Trust.

     2.29 Covenants with Respect to Existence, Indebtedness, Operations, Fundamental Changes of Borrower. (a) Borrower has, since the date of its formation, and shall do or cause to be done all things necessary to (i) preserve, renew and keep in full force and effect its existence, rights, and franchises, (ii) continue to engage in the business presently conducted by it, (iii) obtain and maintain all licenses, and (iv) qualify to do business and remain in good standing under the laws of each jurisdiction, in each case as and to the extent required for the ownership, maintenance, management and operation of the Property. Borrower hereby represents, warrants and covenants as of the date hereof and until such time as the Debt is paid in full, that Borrower has been, since the date of its formation, is, and shall remain a Single-Purpose Entity (as hereinafter defined). A “Single-Purpose Entity” or “SPE” means a corporation, limited partnership or limited liability company that:

          (1) was and will be organized solely for the purpose of (i) owning an interest in the Property, (ii) acting as a general partner of a limited partnership that owns an interest in the Property, or (iii) acting as the managing member of a limited liability company that owns an interest in the Property;

          (2) will not, nor will any partner, limited or general, member or shareholder thereof, as applicable, amend, modify or otherwise change its partnership certificate, partnership agreement, articles of incorporation, by-laws, operating agreement, articles of organization, or other formation agreement or document, as applicable, in any material term or manner, or in a manner which adversely affects Borrower’s existence as a Single Purpose Entity;

          (3) will not liquidate or dissolve (or suffer any liquidation or dissolution), or enter into any transaction of merger or consolidation, or acquire by purchase or otherwise all or substantially all the business or assets of, or any stock or other evidence of beneficial ownership of any entity;

          (4) will not, nor will any partner, limited or general, member or shareholder thereof, as applicable, violate the terms of its partnership certificate, partnership agreement, articles of incorporation, by-laws, operating agreement, articles of organization, or other formation agreement or document, as applicable;

          (5) has not and will not guarantee, pledge its assets for the benefit of, or otherwise become liable on or in connection with, any obligation of any other person or entity;

          (6) does not own and will not own any asset other than (i) the Property, and (ii) incidental personal property necessary for the operation of the Property;

          (7) is not engaged and will not engage, either directly or indirectly, in any business other than the ownership, management and operation of the Property;

          (8) will not enter into any contract or agreement with any general partner, principal, affiliate or member of Borrower, as applicable, or any affiliate of any general partner, principal or member of Borrower, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than an affiliate;

          (9) has not incurred and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) the Debt, and (ii) trade payables or accrued expenses incurred in the ordinary course of business of operating the Property customarily satisfied within thirty (30) days not evidenced by a note and in an aggregate amount not to exceed two

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percent (2.0%) of the existing principal balance of the Note, and no other debt will be secured (senior, subordinate or pari passu) by the Property;

          (10) has not made and will not make any loans or advances to any third party (including any affiliate);

          (11) is and will be solvent and pay its debts from its assets as the same shall become due;

          (12) has done or caused to be done and will do all things necessary to preserve its existence, and will observe all formalities applicable to it;

          (13) will conduct and operate its business in its own name and as presently conducted and operated;

          (14) will maintain financial statements, books and records and bank accounts separate from those of its affiliates, including, without limitation, its general partners or members, as applicable;

          (15) will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including, without limitation, any affiliate, general partner, or member, as applicable, or any affiliate of any general partner or member of Borrower, as applicable) and will correct any known misunderstanding concerning its separate identity;

          (16) will file its own tax returns;

          (17) will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

          (18) will establish and maintain an office through which its business will be conducted separate and apart from those of its affiliates or shall allocate fairly and reasonably any overhead and expense for shared office space;

          (19) will not commingle the funds and other assets of Borrower with those of any general partner, member, affiliate, principal or any other person;

          (20) has and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any affiliate or any other person;

          (21) does not and will not hold itself out to be responsible for the debts or obligations of any other person;

          (22) will pay the salaries of its own employees (if any) from its own funds and maintain a sufficient number of employees (if any) in light of its contemplated business operations;

          (23) will pay any liabilities out of its own funds, including salaries of its employees, not funds of any affiliate; and

          (24) will use stationery, invoices, and checks separate from its affiliates.

          (b) In addition to the foregoing, for any Borrower that is a single member Delaware limited liability company (a “SMLLC”), the limited liability company agreement of the SMLLC (the

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“LLC Agreement”) shall provide that (i) upon the occurrence of any event that causes the sole member of the SMLLC (“Member”) to cease to be the member of the SMLLC (other than (A) upon an assignment by Member of all of its limited liability company interest in the SMLLC and the admission of the transferee, or (B) the resignation of Member and the admission of an additional member in either case in accordance with the terms of the Loan Documents and the LLC Agreement), any person acting as a springing or special member of the SMLLC shall without any action of any other Person and simultaneously with the Member ceasing to be the member of the SMLLC, automatically be admitted to the SMLLC (“Special Member”) and shall continue the SMLLC without dissolution and (ii) Special Member may not resign from the SMLLC or transfer its rights as Special Member unless a successor Special Member has been admitted to the SMLLC as Special Member in accordance with requirements of Delaware law. The LLC Agreement shall further provide that (i) Special Member shall automatically cease to be a member of the SMLLC upon the admission to the SMLLC of a substitute Member, (ii) Special Member shall be a member of the SMLLC that has no interest in the profits, losses and capital of the SMLLC and has no right to receive any distributions of the SMLLC’s assets, (iii) pursuant to Section 18-301 of the Delaware Limited Liability Company Act (the “Act”), Special Member shall not be required to make any capital contributions to the SMLLC and shall not receive a limited liability company interest in the SMLLC, (iv) Special Member, in its capacity as Special Member, may not bind the SMLLC, and (v) except as required by any mandatory provision of the Act, Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, the SMLLC, including, without limitation, the merger, consolidation or conversion of the SMLLC. In order to implement the admission to the SMLLC of Special Member, Special Member shall execute a counterpart to the LLC Agreement. Prior to its admission to the SMLLC as Special Member, Special Member shall not be a member of the SMLLC.

          (c) Upon the occurrence of any event that causes the Member to cease to be a member of the SMLLC, to the fullest extent permitted by law, the personal representative of Member shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of Member in the SMLLC, agree in writing (i) to continue the SMLLC and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of the SMLLC, effective as of the occurrence of the event that terminated the continued membership of Member of the SMLLC in the SMLLC. Any action initiated by or brought against Member or Special Member under any creditors rights laws shall not cause Member or Special Member to cease to be a member of the SMLLC and upon the occurrence of such an event, the business of the SMLLC shall continue without dissolution. The LLC Agreement shall provide that each of Member and Special Member waives any right it might have to agree in writing to dissolve the SMLLC upon the occurrence of any action initiated by or brought against Member or Special Member under any creditors rights laws, or the occurrence of an event that causes Member or Special Member to cease to be a member of the SMLLC.

     2.30 Embargoed Person. At all times throughout the term of the Loan, including after giving effect to any Sale hereunder, (a) none of the funds or assets of Indemnitor that are used to repay the Loan or of Borrower shall constitute property of, or shall be beneficially owned directly or, to Borrower’s best knowledge, indirectly, by any person subject to sanctions or trade restrictions under United States law (“Embargoed Person” or “Embargoed Persons”) that are identified on (1) the “List of Specially Designated Nationals and Blocked Persons” maintained by the Office of Foreign Assets Control (OFAC), U.S. Department of the Treasury, and/or to Borrower’s best knowledge, as of the date thereof, based upon reasonable inquiry by Borrower, on any other similar list maintained by OFAC pursuant to any authorizing statute including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or regulation promulgated thereunder, with the result that the investment in Borrower or any Indemnitor, as applicable (whether directly or indirectly), is prohibited by law, or the Loan made by Lender would be in violation of law, or (2) Executive Order 13224 (September 23, 2001) issued by the

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President of the United States (“Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism”), any related enabling legislation or any other similar Executive Orders, and (b) no Embargoed Person shall have any direct interest, and to Borrower’s best knowledge, as of the date hereof, based upon reasonable inquiry by Borrower, indirect interest, of any nature whatsoever in Borrower or any Indemnitor, as applicable, with the result that the investment in Borrower or any Indemnitor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law.

     2.31 Anti-Money Laundering. At all times throughout the term of the Loan, including after giving effect to any Transfer permitted pursuant to the Loan Documents, none of the funds of Borrower or any Indemnitor, as applicable, that are used to repay the Loan shall be derived from any unlawful activity, with the result that the investment in Borrower or any Indemnitor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law.

     2.32 ERISA.

          (a) Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Deed of Trust or any of the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA.

          (b) Borrower further covenants and agrees to deliver to Lender such certifications or other evidence from time to time throughout the term of this Deed of Trust, as requested by Lender in its sole discretion, that (i) Borrower is not an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to Federal or state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (iii) one or more of the following circumstances is true:

     (1) Equity interests in Borrower are publicly offered securities within the meaning of 29 C.F.R. Section 2510.3-101(b)(2);

     (2) Less than 25 percent of each outstanding class of equity interests in Borrower are held by “benefit plan investors” within the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or

     (3) Borrower qualifies as an “operating company” within the meaning of 29 C.F.R. Section 2510.3-101 or an investment company registered under the Investment Company Act of 1940.

          (c) Borrower shall indemnify Lender and defend and hold Lender harmless from and against all civil penalties, excise taxes, or other loss, cost damage and expense (including, without limitation, reasonable attorneys’ fees and disbursements and costs incurred in the investigation, defense and settlement of claims and losses incurred in correcting any prohibited transaction or in the sale of a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA that may be required, in Lender’s sole discretion) that Lender may incur, directly or indirectly, as a result of a default under this Section. This indemnity shall survive any termination, satisfaction or foreclosure of this Deed of Trust.

     2.33 Intentionally Deleted.

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ARTICLE III.
RESERVES AND CASH MANAGEMENT

     3.1 Reserves Generally.

          (a) As additional security for the payment and performance by Borrower of all duties, responsibilities and obligations under the Note and the other Loan Documents, Borrower hereby unconditionally and irrevocably assigns, conveys, pledges, mortgages, transfers, delivers, deposits, sets over and confirms unto Lender, and hereby grants to Lender a security interest in, (i) the Payment Reserve, the Impound Account, the Replacement Reserve, as applicable (each as hereinafter defined) and any other reserve or escrow account established pursuant to the terms hereof or of any other Loan Document (collectively, the “Reserves”), (ii) the accounts into which the Reserves have been deposited, (iii) all insurance on said accounts, (iv) all accounts, contract rights and general intangibles or other rights and interests pertaining thereto, (v) all sums now or hereafter held therein or represented thereby, (vi) all replacements, substitutions or proceeds thereof, (vii) all instruments and documents now or hereafter evidencing the Reserves or such accounts, (viii) all powers, options, rights, privileges and immunities pertaining to the Reserves (including the right to make withdrawals therefrom), and (ix) all proceeds of the foregoing. Borrower hereby authorizes and consents to the account into which the Reserves have been deposited being held in Lender’s name or the name of any entity servicing the Note for Lender and hereby acknowledges and agrees that Lender, or at Lender’s election, such servicing agent, shall have exclusive control over said account. Notice of the assignment and security interest granted to Lender herein may be delivered by Lender at any time to the financial institution wherein the Reserves have been established, and Lender, or such servicing entity, shall have possession of all passbooks or other evidences of such accounts. Borrower hereby assumes all risk of loss with respect to amounts on deposit in the Reserves. Funds on deposit in the Replacement Reserve (collectively, if more than one, the “Interest Bearing Reserves”) shall bear interest at a rate equal to the then prevailing commercial money market rate. All amounts deemed earned on funds contributed to the Interest Bearing Reserves at the rate referenced in the immediately preceding sentence shall be retained by Lender and accumulated for the benefit of Borrower and added to the balances in the Interest Bearing Reserves and shall be disbursed for payment of the items for which other funds in the Interest Bearing Reserves are to be disbursed. Borrower shall not be entitled to earn any interest with respect to funds on deposit in the Payment Reserve and the Impound Account. Borrower hereby knowingly, voluntarily and intentionally stipulates, acknowledges and agrees that the advancement of the funds from the Reserves as set forth herein is at Borrower’s direction and is not the exercise by Lender of any right of set-off or other remedy upon a Default or an Event of Default. Borrower hereby waives all right to withdraw funds from the Reserves except as provided for in this Deed of Trust. If an Event of Default shall occur hereunder or under any other of the Loan Documents Lender may, without notice or demand on Borrower, at its option: (A) withdraw any or all of the funds (including, without limitation, interest) then remaining in the Reserves and apply the same, after deducting all costs and expenses of safekeeping, collection and delivery (including, but not limited to, reasonable attorneys’ fees, costs and expenses) to the Debt or any other obligations of Borrower under the other Loan Documents in such manner as Lender shall deem appropriate in its sole discretion, and the excess, if any, shall be paid to Borrower, (B) exercise any and all rights and remedies of a secured party under any applicable Uniform Commercial Code, or (C) exercise any other remedies available at law or in equity. No such use or application of the funds contained in the Reserves shall be deemed to cure any Default or Event of Default.

          (b) The Reserves shall not, unless otherwise explicitly required by applicable law, be or be deemed to be escrow or trust funds, but, at Lender’s option and in Lender’s discretion, may either be held in a separate account or be commingled by Lender with the general funds of Lender. The Reserves are solely for the protection of Lender and entail no responsibility on Lender’s part beyond the payment of the respective items for which they are held following receipt of bills, invoices or statements therefor in

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accordance with the terms hereof and beyond the allowing of due credit for the sums actually received. Upon assignment of this Deed of Trust by Lender, any funds in the Reserves shall be turned over to the assignee and any responsibility of Lender, as assignor, with respect thereto shall terminate. If the funds in the applicable Reserve shall exceed the amount of payments actually applied by Lender for the purposes and items for which the applicable Reserve is held, such excess may be credited by Lender on subsequent payments to be made hereunder or, at the option of Lender, refunded to Borrower. If, however, the applicable Reserve shall not contain sufficient funds to pay the sums required by the dates on which such sums are required to be on deposit in such account, Borrower shall, within ten (10) days after receipt of written notice thereof, deposit with Lender the full amount of any such deficiency. If Borrower shall fail to deposit with Lender the full amount of such deficiency as provided above, Lender shall have the option, but not the obligation, to make such deposit, and all amounts so deposited by Lender, together with interest thereon at the Default Interest Rate from the date so deposited by Lender until actually paid by Borrower, shall be immediately paid by Borrower on demand and shall be secured by this Deed of Trust and by all of the other Loan Documents securing all or any part of the Debt. If there is an Event of Default under this Deed of Trust, Lender may, but shall not be obligated to, apply at any time the balance then remaining in any or all of the Reserves against the Debt in whatever order Lender shall subjectively determine. No such application of any or all of the Reserves shall be deemed to cure any Event of Default. Upon full payment of the Debt in accordance with its terms or at such earlier time as Lender may elect, the balance of any or all of the Reserves then in Lender’s possession shall be paid over to Borrower and no other party shall have any right or claim thereto.

     3.2 Payment Reserve.

          (a) Contemporaneously with the execution hereof, Borrower has established with Lender a reserve in the amount of the first (1st) payment of principal, interest and deposits for any applicable reserves or escrow accounts required under the terms of this Deed of Trust or the other Loan Documents as calculated by Lender (the “Payment Reserve”). Borrower understands and agrees that, notwithstanding the establishment of the Payment Reserve as herein required, all of the proceeds of the Note have been, and shall be considered, fully disbursed and shall bear interest and be payable on the terms provided therein.

          (b) For so long as no Event of Default has occurred hereunder or under any of the other Loan Documents, Lender shall, on the First Payment Date (as defined in the Note) under the Note, advance from the Payment Reserve to itself the amount of the monthly installment due and payable by Borrower under the Note on the First Payment Date and shall also advance from the Payment Reserve into the Impound Account the amount of any deposit for taxes and insurance premiums and into the Replacement Reserve (as hereinafter defined) the amount of any deposit for Repairs (as hereinafter defined) and into any other reserve account the amount of any deposit in accordance with the terms of any other Loan Document required to be paid by Borrower concurrently with such monthly installment pursuant to the terms hereof and thereof. Provided no Default or Event of Default has occurred, after the scheduled disbursement from the Payment Reserve, any amounts then remaining in the Payment Reserve shall be paid to Borrower. Nothing contained herein, including, without limitation, the existence of the Payment Reserve, shall release Borrower of any obligation to make payments under the Note, this Deed of Trust or the other Loan Documents strictly in accordance with the terms hereof or thereof and, in this regard, without limiting the generality of the foregoing, should the amounts contained in the Payment Reserve not be sufficient to pay in full the monthly installments and the Impound Account, Replacement Reserve and any other applicable reserve account deposits referenced above in this subparagraph, Borrower shall be responsible for paying such deficiency on the First Payment Date.

     3.3 Impound Account. Borrower shall establish and maintain at all times while this Deed of Trust continues in effect an impound account (the “Impound Account”) with Lender for payment of real

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estate taxes and assessments and insurance on the Property and as additional security for the Debt. Simultaneously with the execution hereof, Borrower shall deposit in the Impound Account an amount determined by Lender to be necessary to ensure that there will be on deposit with Lender an amount which, when added to the monthly payments subsequently required to be deposited with Lender hereunder on account of real estate taxes, assessments and insurance premiums, will result in there being on deposit with Lender in the Impound Account an amount sufficient to pay the next due installment of real estate taxes and assessments on the Property at least one (1) month prior to the earlier of (a) the due date thereof or (b) any such date by which Borrower or Lender is required by law to pay same and the next due annual insurance premiums with respect to the Property at least one (1) month prior to the due date thereof. Commencing on the first monthly payment date under the Note and continuing thereafter on each monthly payment date under the Note, Borrower shall pay to Lender, concurrently with and in addition to the monthly payment due under the Note and until the Debt is fully paid and performed, deposits in an amount equal to one-twelfth (1/12) of the amount of the annual real estate taxes and assessments that will next become due and payable on the Property, plus one-twelfth (1/12) of the amount of the annual premiums that will next become due and payable on insurance policies which Borrower is required to maintain hereunder, each as estimated and determined by Lender. So long as no Default or Event of Default has occurred, and no event has occurred or failed to occur which with the passage of time, the giving of notice, or both would constitute an Event of Default (a “Default”), all sums in the Impound Account shall be held by Lender in the Impound Account to pay said taxes, assessments and insurance premiums before the same become delinquent. Borrower shall be responsible for ensuring the receipt by Lender, at least thirty (30) days prior to the respective due date for payment thereof, of all bills, invoices and statements for all taxes, assessments and insurance premiums to be paid from the Impound Account, and so long as no Event of Default has occurred, Lender shall pay the governmental authority or other party entitled thereto directly to the extent funds are available for such purpose in the Impound Account. In making any payment from the Impound Account, Lender shall be entitled to rely on any bill, statement or estimate procured from the appropriate public office or insurance company or agent without any inquiry into the accuracy of such bill, statement or estimate and without any inquiry into the accuracy, validity, enforceability or contestability of any tax, assessment, valuation, sale, forfeiture, tax lien or title or claim thereof.

     3.4 Intentionally Deleted.

     3.5 Replacement Reserve. As additional security for the Debt, Borrower shall establish and maintain at all times while this Deed of Trust continues in effect a repair reserve (the “Replacement Reserve”) with Lender for payment of costs and expenses incurred by Borrower in connection with the performance of work to the roofs, chimneys, gutters, downspouts, paving, curbs, ramps, driveways, balconies, porches, patios, exterior walls, exterior doors and doorways, windows, elevators and mechanical and HVAC equipment (collectively, the “Repairs”). Commencing on the first monthly Payment Date under the Note and continuing thereafter on each monthly Payment Date under the Note, Borrower shall pay to Lender, concurrently with and in addition to the monthly payment due under the Note and until the Debt is fully paid and performed, a deposit to the Replacement Reserve in an amount equal to $7,125 per month. So long as no Event of Default has occurred, all sums in the Replacement Reserve shall be held by Lender in the Replacement Reserve to pay the costs and expenses of Repairs. So long as no Default or Event of Default has occurred, Lender shall, to the extent funds are available for such purpose in the Replacement Reserve, disburse to Borrower the amount paid or incurred by Borrower in performing such Repairs within ten (10) days following: (a) the receipt by Lender of a written request from Borrower for disbursement from the Replacement Reserve and a certification by Borrower in a form approved in writing by Lender that the applicable item of Repair has been completed; (b) the delivery to Lender of invoices, receipts or other evidence satisfactory to Lender, verifying the cost of performing the Repairs; (c) for disbursement requests in excess of $25,000.00, the delivery to Lender of affidavits, lien waivers or other evidence reasonably satisfactory to Lender showing that all materialmen, laborers,

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subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished material or labor to the Property have been paid all amounts due for labor and materials furnished to the Property; (d) for disbursement requests in excess of $25,000.00, delivery to Lender of a certification from an inspecting architect or other third party acceptable to Lender describing the completed Repairs and verifying the completion of the Repairs and the value of the completed Repairs; and (e) for disbursement requests in excess of $25,000.00, delivery to Lender of a new certificate of occupancy for the portion of the Improvements covered by such Repairs, if said new certificate of occupancy is required by law, or a certification by Borrower that no new certificate of occupancy is required. Lender shall not be required to make advances from the Replacement Reserve more frequently than once in any thirty (30) day period. In making any payment from the Replacement Reserve, Lender shall be entitled to rely on such request from Borrower without any inquiry into the accuracy, validity or contestability of any such amount. Lender may, at Borrower’s expense, make or cause to be made during the term of this Deed of Trust an annual inspection of the Property to determine the need, as determined by Lender in its reasonable judgment, for further Repairs of the Property. In the event that such inspection reveals that further Repairs of the Property are required, Lender shall provide Borrower with a written description of the required Repairs and Borrower shall complete such Repairs to the reasonable satisfaction of Lender within ninety (90) days after the receipt of such description from Lender, or such later date as may be approved by Lender in its sole discretion.

ARTICLE IV.
EVENTS OF DEFAULT

     4.1 Events of Default. The occurrence of any of the following events shall be an Event of Default hereunder:

          (a) Borrower (x) fails to pay any payments due under the Note or to the Reserves on the date when the same is due and payable, or (y) fails to pay any money to Lender required hereunder at the time or within any applicable grace period set forth herein, or if no grace period is set forth herein, then within seven (7) days of the date such payment is due (except those regarding payments to be made under the Note or to the Reserves, which failure is not subject to any grace or cure period).

          (b) Borrower fails to provide insurance as required by Section 2.3 hereof or fails to perform any covenant, agreement, obligation, term or condition set forth in Section 2.27 or Section 2.29 hereof.

          (c) Borrower fails to perform any other covenant, agreement, obligation, term or condition set forth herein, other than those otherwise described in this Section 4.1, and, to the extent such failure or default is susceptible of being cured, the continuance of such failure or default for thirty (30) days after written notice thereof from Lender to Borrower; provided, however, that if such default is susceptible of cure but such cure cannot be accomplished with reasonable diligence within said period of time, and if Borrower commences to cure such default promptly after receipt of notice thereof from Lender, and thereafter prosecutes the curing of such default with reasonable diligence, such period of time shall be extended for such period of time as may be necessary to cure such default with reasonable diligence, but not to exceed an additional sixty (60) days.

          (d) Any representation or warranty made herein, in or in connection with any application or commitment relating to the Loan evidenced by the Note, or in any of the other Loan Documents to Lender by Borrower, by any principal, general partner, manager or member in Borrower, or by any Indemnitor is determined by Lender to have been false or misleading in any material respect at the time made.

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          (e) There shall be a sale, conveyance, disposition, alienation, hypothecation, leasing, assignment, pledge, mortgage, granting of a security interest in or other transfer or further encumbrancing of the Property, Borrower or its general partners or managing members, or any portion thereof or any interest therein, in violation of Section 2.9 hereof.

          (f) A default occurs under any of the other Loan Documents which has not been cured within any applicable grace or cure period therein provided.

          (g) Borrower, general partner or managing member in Borrower or any Indemnitor becomes insolvent, or makes a transfer in fraud of creditors, or makes an assignment for the benefit of creditors, or files a petition in bankruptcy, or is voluntarily adjudicated insolvent or bankrupt or admits in writing the inability to pay its debts as they mature, or petitions or applies to any tribunal for or consents to or fails to contest the appointment of a receiver, trustee, custodian or similar officer for Borrower, for any such general partner or managing member of Borrower or for any Indemnitor or for a substantial part of the assets of Borrower, of any such general partner or managing member of Borrower or of any Indemnitor, or commences any case, proceeding or other action under any bankruptcy, reorganization, arrangement, readjustment or debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect.

          (h) A petition is filed or any case, proceeding or other action is commenced against Borrower, against any general partner or managing member of Borrower or against any Indemnitor seeking to have an order for relief entered against it as debtor or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or other relief under any law relating to bankruptcy, insolvency, arrangement, reorganization, receivership or other debtor relief under any law or statute of any jurisdiction, whether now or hereafter in effect, or a court of competent jurisdiction enters an order for relief against Borrower, against any general partner or managing member of Borrower or against any Indemnitor, as debtor, or an order, judgment or decree is entered appointing, with or without the consent of Borrower, of any such general partner or managing member of Borrower or of any Indemnitor, a receiver, trustee, custodian or similar officer for Borrower, for any such general partner or managing member of Borrower or for any Indemnitor, or for any substantial part of any of the properties of Borrower, of any such general partner or managing member of Borrower or of any Indemnitor, and if any such event shall occur, such petition, case, proceeding, action, order, judgment or decree is not dismissed within sixty (60) days after being commenced.

          (i) The Property or any part thereof is taken on execution or other process of law in any action against Borrower.

          (j) Borrower abandons all or a portion of the Property.

          (k) The holder of any lien or security interest on the Property (without implying the consent of Lender to the existence or creation of any such lien or security interest), whether superior or subordinate to this Deed of Trust or any of the other Loan Documents, declares a default and such default is not cured within any applicable grace or cure period set forth in the applicable document or such holder institutes foreclosure or other proceedings for the enforcement of its remedies thereunder.

          (l) The Property, or any part thereof, is subjected to waste or to removal, demolition or material alteration so that the value of the Property is materially diminished thereby and Lender determines that it is not adequately protected from any loss, damage or risk associated therewith.

          (m) Any dissolution, termination, partial or complete liquidation, merger or consolidation of Borrower, any general partner or any managing member, or any Indemnitor.

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ARTICLE V.
REMEDIES

     5.1 Remedies Available. If there shall occur an Event of Default under this Deed of Trust, then this Deed of Trust is subject to foreclosure as provided by law and Lender may, at its option and by or through a trustee, nominee, assignee or otherwise (including, without limitation, the Trustee), to the fullest extent permitted by law, exercise any or all of the following rights, remedies and recourses, either successively or concurrently:

          (a) Acceleration. Accelerate the maturity date of the Note and declare any or all of the Debt to be immediately due and payable without any presentment, demand, protest, notice or action of any kind whatever (each of which is hereby expressly waived by Borrower), whereupon the same shall become immediately due and payable. Upon any such acceleration, payment of such accelerated amount shall constitute a prepayment of the principal balance of the Note and any applicable prepayment fee provided for in the Note shall then be immediately due and payable.

          (b) Entry on the Property. Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court and without regard to the adequacy of its security, enter upon and take possession of the Property, or any part thereof, without force or with such force as is permitted by law and without notice or process or with such notice or process as is required by law, unless such notice and process is waivable, in which case Borrower hereby waives such notice and process, and do any and all acts and perform any and all work which may be desirable or necessary in Lender’s judgment to complete any unfinished construction on the Premises, to preserve the value, marketability or rentability of the Property, to increase the income therefrom, to manage and operate the Property or to protect the security hereof, and all sums expended by Lender therefor, together with interest thereon at the Default Interest Rate, shall be immediately due and payable to Lender by Borrower on demand and shall be secured hereby and by all of the other Loan Documents securing all or any part of the Debt.

          (c) Collect Rents and Profits. With or without taking possession of the Property, sue or otherwise collect the Rents and Profits, including those past due and unpaid.

          (d) Appointment of Receiver. Upon, or at any time prior or after, initiating the exercise of any power of sale, instituting any judicial foreclosure or instituting any other foreclosure of the liens and security interests provided for herein or any other legal proceedings hereunder, to the extent permitted by law, make application to a court of competent jurisdiction for appointment of a receiver for all or any part of the Property, as a matter of strict right and without notice to Borrower and without regard to the adequacy of the Property for the repayment of the Debt or the solvency of Borrower or any person or persons liable for the payment of the Debt, and Borrower does hereby irrevocably consent to such appointment, waive any and all notices of and defenses to such appointment and agree not to oppose any application therefor by Lender, but nothing herein is to be construed to deprive Lender of any other right, remedy or privilege Lender may now have under the law to have a receiver appointed, provided, however, that the appointment of such receiver, trustee or other appointee by virtue of any court order, statute or regulation shall not impair or in any manner prejudice the rights of Lender to receive payment of the Rents and Profits pursuant to other terms and provisions hereof. Any such receiver shall have all of the usual powers and duties of receivers in similar cases, including, without limitation, the full power to hold, develop, rent, lease, manage, maintain, operate and otherwise use or permit the use of the Property upon such terms and conditions as said receiver may deem to be prudent and reasonable under the circumstances as more fully set forth in Section 5.3 below. Such receivership shall, at the option of

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Lender, continue until full payment of all of the Debt or until title to the Property shall have passed by foreclosure sale under this Deed of Trust or deed in lieu of foreclosure.

          (e) Foreclosure. Immediately commence an action to foreclose this Deed of Trust or to specifically enforce its provisions with respect to any of the Debt, pursuant to the statutes in such case made and provided, and sell the Property or cause the Property to be sold in accordance with the requirements and procedures provided by said statutes in a single parcel or, to the extent permitted by law, in several parcels at the option of Lender. In the event foreclosure proceedings are instituted by Lender, all expenses incident to such proceedings, including, but not limited to, reasonable attorneys’ fees and costs, shall be paid by Borrower and secured by this Deed of Trust and by all of the other Loan Documents securing all or any part of the Debt. The Debt and all other obligations secured by this Deed of Trust, including, without limitation, interest at the Default Interest Rate any prepayment charge, fee or premium required to be paid under the Note in order to prepay principal (to the extent permitted by applicable law), reasonable attorneys’ fees and any other amounts due and unpaid to Lender under the Loan Documents, may be bid by Lender in the event of a foreclosure sale hereunder. In the event of a judicial sale pursuant to a foreclosure decree, it is understood and agreed that Lender or its assigns may become the purchaser of the Property or any part thereof.

          (f) Judicial Remedies. Proceed by suit or suits, at law or in equity, instituted by or on behalf of Lender, to enforce the payment of the Debt or the other obligations of Borrower hereunder or pursuant to the Loan Documents, to foreclose the liens and security interests of this Deed of Trust as against all or any part of the Property, and to have all or any part of the Property sold under the judgment or decree of a court of competent jurisdiction. This remedy shall be cumulative of any other non-judicial remedies available to Lender with respect to the Loan Documents. Proceeding with the request or receiving a judgment for legal relief shall not be or be deemed to be an election of remedies or bar any available non-judicial remedy of Lender.

          (g) Sale of Property. (i) Trustee, at the request of Lender, shall have the power to sell the Property or any part thereof at public auction to the highest bidder for cash, in such manner, at such time, and place, upon such terms and notice to Borrower as provided in Section 51.002 of the Texas Property Code, as amended, or if and to the extent such statute is not then in force, with the applicable requirements at the time of sale of the successor statute or statutes, if any governing sales of Texas real property under power of sale conferred by deeds of trust. If there is no statute in force at the time of sale governing sales of Texas real property under powers of sale conferred by deeds of trust, such sale shall comply with applicable law at the time of sale. The Property shall be conveyed in fee simple by trustee’s deed with special warranty of title to and at the cost of the purchaser, who shall not be liable to see to the application of the purchase money. The proceeds or avails of any sale made under or by virtue of this paragraph, together with any other sums which then may be held by Lender under this Deed of Trust, whether under the provisions of this paragraph or otherwise, shall be applied as provided in Section 5.2 hereof. Lender, Trustee and any receiver or custodian of the Property or any part thereof shall be liable to account for only those rents, issues, proceeds and profits actually received by it.

          (ii) Lender and Trustee, as applicable, may adjourn from time to time any sale by it to be made under or by virtue of this Deed of Trust by announcement at the time and place appointed for such sale or for such adjourned sale or sales and, except as otherwise provided by any applicable law, Lender or Trustee, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned.

          (iii) Upon the completion of any sale or sales ordered by Lender and made by Trustee under or by virtue of this paragraph, Lender or Trustee, or any officer of any court empowered to do so, shall execute and deliver to the accepted purchaser or purchasers a good and sufficient instrument, or good and

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sufficient instruments, granting, conveying, assigning and transferring all estate, right, title and interest in and to the property and rights sold. Trustee is hereby irrevocably appointed the true and lawful attorney-in-fact for Borrower (coupled with an interest), in its name and stead, to make all necessary conveyances, assignments, transfers and deliveries of the property and rights so sold and for that purpose Trustee may execute all necessary instruments of conveyance, assignment, transfer and delivery, and may substitute one or more persons with like power, Borrower hereby ratifying and confirming all that its said attorney-in-fact or such substitute or substitutes shall lawfully do by virtue hereof. Nevertheless, Borrower, if so requested by Trustee or Lender, shall ratify and confirm any such sale or sales by executing and delivering to Lender, or to such purchaser or purchasers all such instruments as may be advisable, in the sole judgment of Lender, for such purpose, and as may be designated in such request. Any such sale or sales made under or by virtue of this paragraph, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of foreclosure and sale, shall operate to divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of Borrower in and to the property and rights so sold, and shall, to the fullest extent permitted under law, be a perpetual bar both at law and in equity against Borrower and against any and all persons claiming or who may claim the same, or any part thereof, from, through or under Borrower.

          (iv) In the event of any sale made under or by virtue of this Deed of Trust (whether made under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of foreclosure and sale), the entire Debt relative to the Property, immediately thereupon shall, anything in the Note, this Deed of Trust or any other of the Loan Documents to the contrary notwithstanding, become due and payable.

          (v) Upon any sale under or by virtue of this Deed of Trust (whether made under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of foreclosure and sale), Lender may bid for and acquire the Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting the Debt to and against the net sales price after deducting therefrom the expenses of the sale and the costs of the action.

          (vi) No recovery of any judgment by Lender and no levy of an execution under any judgment upon the Property or any part thereof or upon any other property of Borrower shall release the lien of this Deed of Trust upon the Property or any part thereof, or any liens, rights, powers or remedies of Lender hereunder, but such liens, rights, powers and remedies of Lender shall continue unimpaired until the entire Debt is paid in full.

          (h) Other. Exercise any other right or remedy available hereunder, under any of the other Loan Documents or at law or in equity.

     5.2 Application of Proceeds. To the fullest extent permitted by law, the proceeds of any sale under this Deed of Trust shall be applied, to the extent funds are so available, to the following items in such order as Lender in its discretion may determine:

          (a) To payment of the reasonable costs, expenses and fees of taking possession of the Property, and of holding, operating, maintaining, using, leasing, repairing, improving, marketing and selling the same and of otherwise enforcing Lender’s rights and remedies hereunder and under the other Loan Documents, including, but not limited to, receivers’ fees, court costs, attorneys’, accountants’, appraisers’, managers’ and other professional fees, title charges and transfer taxes.

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          (b) To payment of all sums expended by Lender under the terms of any of the Loan Documents and not yet repaid, together with interest on such sums at the Default Interest Rate.

          (c) To payment of the Debt and all other obligations secured by this Deed of Trust, including, without limitation, interest at the Default Interest Rate and, to the extent permitted by applicable law, any prepayment fee, charge or premium required to be paid under the Note in order to prepay principal, in any order that Lender chooses in its sole discretion.

          (d) The remainder, if any, of such funds shall be disbursed to Borrower or to the person or persons legally entitled thereto.

     5.3 Right and Authority of Receiver or Lender in the Event of Default; Power of Attorney. Upon the occurrence of an Event of Default, and entry upon the Property pursuant to Section 5.1(b) hereof or appointment of a receiver pursuant to Section 5.1(d) hereof, and under such terms and conditions as may be prudent and reasonable under the circumstances in Lender’s or the receiver’s sole discretion, all at Borrower’s expense, Lender or said receiver, or such other persons or entities as they shall hire, direct or engage, as the case may be, may do or permit one or more of the following, successively or concurrently: (a) enter upon and take possession and control of any and all of the Property; (b) take and maintain possession of all documents, books, records, papers and accounts relating to the Property; (c) exclude Borrower and its agents, servants and employees wholly from the Property; (d) manage and operate the Property; (e) preserve and maintain the Property; (f) make repairs and alterations to the Property; (g) complete any construction or repair of the Improvements, with such changes, additions or modifications of the plans and specifications or intended disposition and use of the Improvements as Lender may in its sole discretion deem appropriate or desirable to place the Property in such condition as will, in Lender’s sole discretion, make it or any part thereof readily marketable or rentable; (h) conduct a marketing or leasing program with respect to the Property, or employ a marketing or leasing agent or agents to do so, directed to the leasing or sale of the Property under such terms and conditions as Lender may in its sole discretion deem appropriate or desirable; (i) employ such contractors, subcontractors, materialmen, architects, engineers, consultants, managers, brokers, marketing agents, or other employees, agents, independent contractors or professionals, as Lender may in its sole discretion deem appropriate or desirable to implement and effectuate the rights and powers herein granted; (j) execute and deliver, in the name of Lender as attorney-in-fact and agent of Borrower or in its own name as Lender, such documents and instruments as are necessary or appropriate to consummate authorized transactions; (k) enter such leases, whether of real or personal property, or tenancy agreements, under such terms and conditions as Lender may in its sole discretion deem appropriate or desirable; (1) collect and receive the Rents and Profits from the Property; (m) eject tenants or repossess personal property, as provided by law, for breaches of the conditions of their leases or other agreements; (n) initiate a cause of action for unpaid Rents and Profits, payments, income or proceeds in the name of Borrower or Lender; (o) maintain actions in forcible entry and detainer, ejectment for possession and actions in distress for rent; (p) compromise or give acquittance for Rents and Profits, payments, income or proceeds that may become due; (q) delegate or assign any and all rights and powers given to Lender by this Deed of Trust; and (r) do any acts which Lender in its sole discretion deems appropriate or desirable to protect the security hereof and use such measures, legal or equitable, as Lender may in its sole discretion deem appropriate or desirable to implement and effectuate the provisions of this Deed of Trust. This Deed of Trust shall constitute a direction to and full authority to any lessee, or other third party who has heretofore dealt or contracted or may hereafter deal or contract with Borrower or Lender, at the request of Lender, to pay all amounts owing under any Lease, contract, concession, license or other agreement to Lender without proof of the Event of Default relied upon. Any such lessee or third party is hereby irrevocably authorized to rely upon and comply with (and shall be fully protected by Borrower in so doing) any request, notice or demand by Lender for the payment to Lender of any Rents and Profits or other sums which may be or thereafter become due under its Lease, contract, concession, license or other agreement,

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or for the performance of any undertakings under any such Lease, contract, concession, license or other agreement, and shall have no right or duty to inquire whether any Event of Default under this Deed of Trust or under any of the other Loan Documents has actually occurred or is then existing. Borrower hereby constitutes and appoints Lender, its assignees, successors, transferees and nominees, as Borrower’s true and lawful attorney-in-fact and agent, with full power of substitution in the Property, in Borrower’s name, place and stead, to do or permit any one or more of the foregoing described rights, remedies, powers and authorities, successively or concurrently, and said power of attorney shall be deemed a power coupled with an interest and irrevocable so long as any portion of the Debt is outstanding. Any money advanced by Lender in connection with any action taken under this Section 5.3, together with interest thereon at the Default Interest Rate from the date of making such advancement by Lender until actually paid by Borrower, shall be a demand obligation owing by Borrower to Lender and shall be secured by this Deed of Trust and by every other instrument securing all or any portion of the Debt.

     5.4 Occupancy After Foreclosure. In the event there is a foreclosure sale hereunder and at the time of such sale, Borrower or Borrower’s representatives, successors or assigns, or any other persons claiming any interest in the Property by, through or under Borrower (except tenants of space in the Improvements subject to leases entered into prior to the date hereof), are occupying or using the Property, or any part thereof, then, to the extent not prohibited by applicable law, each and all shall, at the option of Lender or the purchaser at such sale, as the case may be, immediately become the tenant of the purchaser at such sale, which tenancy shall be a tenancy from day-to-day, terminable at the will of either landlord or tenant, at a reasonable rental per day based upon the value of the Property occupied or used, such rental to be due daily to the purchaser. Further, to the extent permitted by applicable law, in the event the tenant fails to surrender possession of the Property upon the termination of such tenancy, the purchaser shall be entitled to institute and maintain an action for unlawful detainer of the Property in the appropriate court of the county in which the Premises is located.

     5.5 Notice to Account Debtors. Lender may, at any time after an Event of Default, notify the account debtors and obligors of any accounts, chattel paper, negotiable instruments or other evidences of indebtedness to Borrower included in the Property to pay Lender directly. Borrower shall at any time or from time to time upon the request of Lender provide to Lender a current list of all such account debtors and obligors and their addresses.

     5.6 Cumulative Remedies. All remedies contained in this Deed of Trust are cumulative and Lender shall also have all other remedies provided at law and in equity or in any other Loan Documents. Such remedies may be pursued separately, successively or concurrently at the sole subjective direction of Lender and may be exercised in any order and as often as occasion therefor shall arise. No act of Lender shall be construed as an election to proceed under any particular provisions of this Deed of Trust to the exclusion of any other provision of this Deed of Trust or as an election of remedies to the exclusion of any other remedy which may then or thereafter be available to Lender. No delay or failure by Lender to exercise any right or remedy under this Deed of Trust shall be construed to be a waiver of that right or remedy or of any Event of Default. Lender may exercise any one or more of its rights and remedies at its option without regard to the adequacy of its security.

     5.7 Payment of Expenses. Borrower shall pay on demand all of Lender’s expenses incurred in any efforts to enforce any terms of this Deed of Trust, whether or not any lawsuit is filed and whether or not foreclosure is commenced but not completed, including, but not limited to, reasonable legal fees and disbursements, fees of any Rating Agency, fees related to any No-Downgrade Confirmation, foreclosure costs and title charges, together with interest thereon from and after the date incurred by Lender until actually paid by Borrower at the Default Interest Rate, and the same shall be secured by this Deed of Trust and by all of the other Loan Documents securing all or any part of the Debt.

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ARTICLE VI.
MISCELLANEOUS TERMS AND CONDITIONS

     6.1 Time of Essence. Time is of the essence with respect to all provisions of this Deed of Trust.

     6.2 Release of Deed of Trust. If all of the Debt shall be paid, then and in that event only, all rights under this Deed of Trust, except for those provisions hereof which by their terms survive, shall terminate and the Property shall become wholly clear of the liens, security interests, conveyances and assignments evidenced hereby, which shall be promptly released of record by Lender in due form at Borrower’s cost. No release of this Deed of Trust or the lien hereof shall be valid unless executed by Lender.

     6.3 Certain Rights of Lender. Without affecting Borrower’s liability for the payment of any of the Debt, Lender may from time to time and without notice to Borrower: (a) release any person liable for the payment of the Debt; (b) extend or modify the terms of payment of the Debt; (c) accept additional real or personal property of any kind as security or alter, substitute or release any property securing the Debt; (d) recover any part of the Property; (e) consent in writing to the making of any subdivision map or plat thereof; (f) join in granting any easement therein; or (g) join in any extension agreement of this Deed of Trust or any agreement subordinating the lien hereof.

     6.4 Waiver of Certain Defenses. No action for the enforcement of the lien hereof or of any provision hereof shall be subject to any defense which would not be good and available to the party interposing the same in an action at law upon the Note or any of the other Loan Documents.

     6.5 Notices. All notices, demands, requests or other communications to be sent by one party to the other hereunder or required by law shall be in writing and shall be deemed to have been validly given or served by delivery of the same in person to the intended addressee, or by depositing the same with Federal Express or another reputable private courier service for next business day delivery, or by depositing the same in the United States mail, postage prepaid, registered or certified mail, return receipt requested, in any event addressed to the intended addressee at its address set forth on the first page of this Deed of Trust or at such other address as may be designated by such party as herein provided. All notices, demands and requests shall be effective upon such personal delivery, or one (1) business day after being deposited with the private courier service, or two (2) business days after being deposited in the United States mail as required above. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given as herein required shall be deemed to be receipt of the notice, demand or request sent. By giving to the other party hereto at least fifteen (15) days’ prior written notice thereof in accordance with the provisions hereof, the parties hereto shall have the right from time to time to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America.

     6.6 Successors and Assigns; Joint and Several Liability. The terms, provisions, indemnities, covenants and conditions hereof shall be binding upon Borrower and the successors and assigns of Borrower, including all successors in interest of Borrower in and to all or any part of the Property, and shall inure to the benefit of Lender, its directors, officers, shareholders, employees and agents and their respective successors and assigns and shall constitute covenants running with the land. All references in this Deed of Trust to Borrower or Lender shall be deemed to include all such parties’ successors and assigns, and the term “Lender” as used herein shall also mean and refer to any lawful holder or owner, including pledgees and participants, of any of the Debt. If Borrower consists of more than one person or

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entity, each is jointly and severally liable to perform the obligations of Borrower hereunder and all representations, warranties, covenants and agreements made by Borrower hereunder are joint and several.

     6.7 Severability. A determination that any provision of this Deed of Trust is unenforceable or invalid shall not affect the enforceability or validity of any other provision, and any determination that the application of any provision of this Deed of Trust to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to any other persons or circumstances.

     6.8 Gender. Within this Deed of Trust, words of any gender shall be held and construed to include any other gender, and words in the singular shall be held and construed to include the plural, and vice versa, unless the context otherwise requires.

     6.9 Waiver; Discontinuance of Proceedings. Lender may waive any single Event of Default by Borrower hereunder without waiving any other prior or subsequent Event of Default. Lender may remedy any Event of Default by Borrower hereunder without waiving the Event of Default remedied. Neither the failure by Lender to exercise, nor the delay by Lender in exercising, any right, power or remedy upon any Event of Default by Borrower hereunder shall be construed as a waiver of such Event of Default or as a waiver of the right to exercise any such right, power or remedy at a later date. No single or partial exercise by Lender of any right, power or remedy hereunder shall exhaust the same or shall preclude any other or further exercise thereof, and every such right, power or remedy hereunder may be exercised at any time and from time to time. No modification or waiver of any provision hereof nor consent to any departure by Borrower therefrom shall in any event be effective unless the same shall be in writing and signed by Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose given. No notice to nor demand on Borrower in any case shall of itself entitle Borrower to any other or further notice or demand in similar or other circumstances. Acceptance by Lender of any payment in an amount less than the amount then due on any of the Debt shall be deemed an acceptance on account only and shall not in any way affect the existence of an Event of Default. In case Lender shall have proceeded to invoke any right, remedy or recourse permitted hereunder or under the other Loan Documents and shall thereafter elect to discontinue or abandon the same for any reason, Lender shall have the unqualified right to do so and, in such an event, Borrower and Lender shall be restored to their former positions with respect to the Debt, the Loan Documents, the Property and otherwise, and the rights, remedies, recourses and powers of Lender shall continue as if the same had never been invoked.

     6.10 Section Headings. The headings of the sections and paragraphs of this Deed of Trust are for convenience of reference only, are not to be considered a part hereof and shall not limit or otherwise affect any of the terms hereof.

     6.11 GOVERNING LAW. THIS DEED OF TRUST WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PREMISES IS LOCATED, PROVIDED THAT TO THE EXTENT THAT ANY OF SUCH LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY FEDERAL LAW, SUCH FEDERAL LAW SHALL SO GOVERN AND BE CONTROLLING, AND PROVIDED FURTHER THAT THE LAWS OF THE STATE IN WHICH THE PREMISES IS LOCATED SHALL GOVERN AS TO THE CREATION, PRIORITY AND ENFORCEMENT OF LIENS AND SECURITY INTERESTS IN THE PROPERTY LOCATED IN SUCH STATE.

     6.12 Counting of Days. The term “days” when used herein shall mean calendar days. If any time period ends on a Saturday, Sunday or holiday officially recognized by the state within which the Premises is located, the period shall be deemed to end on the next succeeding business day. The term

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“business day” when used herein shall mean a weekday, Monday through Friday, except a legal holiday or a day on which banking institutions in New York, New York are authorized by law to be closed.

     6.13 Relationship of the Parties. The relationship between Borrower and Lender is that of a borrower and a lender only and neither of those parties is, nor shall it hold itself out to be, the agent, employee, joint venturer or partner of the other party.

     6.14 Application of the Proceeds of the Note. To the extent that proceeds of the Note are used to pay indebtedness secured by any outstanding lien, security interest, charge or prior encumbrance against the Property, such proceeds have been advanced by Lender at Borrower’s request and Lender shall be subrogated to any and all rights, security interests and liens owned by any owner or holder of such outstanding liens, security interests, charges or encumbrances, irrespective of whether said liens, security interests, charges or encumbrances are released.

     6.15 Unsecured Portion of Indebtedness. If any part of the Debt cannot be lawfully secured by this Deed of Trust or if any part of the Property cannot be lawfully subject to the lien and security interest hereof to the full extent of such indebtedness, then all payments made shall be applied on said indebtedness first in discharge of that portion thereof which is unsecured by this Deed of Trust.

     6.16 Cross Default. An Event of Default hereunder which has not been cured within any applicable grace or cure period shall be a default under each of the other Loan Documents.

     6.17 Interest After Sale. In the event the Property or any part thereof shall be sold upon foreclosure as provided hereunder, to the extent permitted by law, the sum for which the same shall have been sold shall, for purposes of redemption (pursuant to the laws of the state in which the Premises is located), bear interest at the Default Interest Rate.

     6.18 Inconsistency with Other Loan Documents. In the event of any inconsistency between the provisions hereof and the provisions in any of the other Loan Documents, it is intended that the provisions of the Note shall control over the provisions of this Deed of Trust, and that the provisions of this Deed of Trust shall control over the provisions of the Lease Assignment, the Indemnity and Guaranty Agreement, the Environmental Indemnity Agreement, and the other Loan Documents.

     6.19 Construction of this Document. This document may be construed as a mortgage, security deed, deed of trust, chattel mortgage, conveyance, assignment, security agreement, pledge, financing statement, hypothecation or contract, or any one or more of the foregoing, in order to fully effectuate the liens and security interests created hereby and the purposes and agreements herein set forth.

     6.20 No Merger. It is the desire and intention of the parties hereto that this Deed of Trust and the lien hereof do not merge in fee simple title to the Property. It is hereby understood and agreed that should Lender acquire any additional or other interests in or to the Property or the ownership thereof, then, unless a contrary intent is manifested by Lender as evidenced by an appropriate document duly recorded, this Deed of Trust and the lien hereof shall not merge in such other or additional interests in or to the Property, toward the end that this Deed of Trust may be foreclosed as if owned by a stranger to said other or additional interests.

     6.21 Rights With Respect to Junior Encumbrances. Any person or entity purporting to have or to take a junior mortgage or other lien upon the Property or any interest therein shall be subject to the rights of Lender to amend, modify, increase, vary, alter or supplement this Deed of Trust, the Note or any of the other Loan Documents, and to extend the maturity date of the Debt, and to increase the amount of the Debt, and to waive or forebear the exercise of any of its rights and remedies hereunder or under any of

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the other Loan Documents and to release any collateral or security for the Debt, in each and every case without obtaining the consent of the holder of such junior lien and without the lien or security interest of this Deed of Trust losing its priority over the rights of any such junior lien.

     6.22 Lender May File Proofs of Claim. In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting Borrower or the principals, general partners or managing members in Borrower, or their respective creditors or property, Lender, to the extent permitted by law, shall be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of Lender allowed in such proceedings for the entire Debt at the date of the institution of such proceedings and for any additional amount which may become due and payable by Borrower hereunder after such date.

     6.23 Fixture Filing. This Deed of Trust shall be effective from the date of its recording as a financing statement filed as a fixture filing with respect to all goods constituting part of the Property which are or are to become fixtures. This Deed of Trust shall also be effective as a financing statement covering as-extracted collateral as defined in Section 9.102(a)(6) of the Texas Business and Commerce Code, as amended, and is to be filed for record in the real estate records of the county where the Premises is situated. The mailing address of Borrower and the address of Lender from which information concerning the security interests may be obtained are set forth in first page hereof.

     6.24 After-Acquired Property. All property acquired by Borrower after the date of this Deed of Trust which by the terms of this Deed of Trust shall be subject to the lien and the security interest created hereby, shall immediately upon the acquisition thereof by Borrower and without further mortgage, conveyance or assignment become subject to the lien and security interest created by this Deed of Trust. Nevertheless, Borrower shall execute, acknowledge, deliver and record or file, as appropriate, all and every such further mortgages, security agreements, financing statements, assignments and assurances as Lender shall require for accomplishing the purposes of this Deed of Trust.

     6.25 No Representation. By accepting delivery of any item required to be observed, performed or fulfilled or to be given to Lender pursuant to the Loan Documents, including, but not limited to, any officer’s certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal or insurance policy, Lender shall not be deemed to have warranted, consented to, or affirmed the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance of delivery thereof shall not be or constitute any warranty, consent or affirmation with respect thereto by Lender.

     6.26 Counterparts. This Deed of Trust may be executed in any number of counterparts, each of which shall be effective only upon delivery and thereafter shall be deemed an original, and all of which shall be taken to be one and the same instrument, for the same effect as if all parties hereto had signed the same signature page. Any signature page of this Deed of Trust may be detached from any counterpart of this Deed of Trust without impairing the legal effect of any signatures thereon and may be attached to another counterpart of this Deed of Trust identical in form hereto but having attached to it one or more additional signature pages.

     6.27 Personal Liability. Notwithstanding anything to the contrary contained in this Deed of Trust, the liability of Borrower and its officers, directors, general partners, managers, members and principals for the Debt and for the performance of the other agreements, covenants and obligations contained herein and in the Loan Documents shall be limited as set forth in the Note.

     6.28 Recording and Filing. Borrower will cause the Loan Documents and all amendments and supplements thereto and substitutions therefor to be recorded, filed, re-recorded and re-filed in such

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manner and in such places as Lender shall reasonably request, and will pay on demand all such recording, filing, re-recording and re-filing taxes, fees and other charges. Borrower shall reimburse Lender, or its servicing agent, for the costs incurred in obtaining a tax service company to verify the status of payment of taxes and assessments on the Property.

     6.29 Intentionally Deleted.

     6.30 Maximum Interest.

          (a) Savings Clause. It is expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply strictly with the applicable Texas law governing the maximum rate or amount of interest payable on the Note or the Related Indebtedness (as hereinafter defined), or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law. If the applicable law is ever judicially interpreted so as to render usurious any amount (i) contracted for, charged, taken, reserved or received pursuant to the Note, any of the other Loan Documents or any other communication or writing by or between Borrower and Lender related to the transaction or transactions that are the subject matter of the Loan Documents, (ii) contracted for, charged or received by reason of Lender’s exercise of the option to accelerate the maturity of the Note and/or the Related Indebtedness, or (iii) Borrower will have paid or Lender will have received by reason of any voluntary prepayment by Borrower of the Note and/or the Related Indebtedness, then it is Borrower’s and Lender’s express intent that all amounts charged in excess of the Maximum Lawful Rate shall be automatically cancelled, ab initio, and all amounts in excess of the Maximum Lawful Rate theretofore collected by Lender shall be credited on the principal balance of the Note and/or the Related Indebtedness (or, if the Note and all Related Indebtedness have been or would thereby be paid in full, refunded to Borrower), and the provisions of the Note and the other Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder; provided, however, if the Note has been paid in full before the end of the stated term of the Note, then Borrower and Lender agree that Lender shall, with reasonable promptness after Lender discovers or is advised by Borrower that interest was received in an amount in excess of the Maximum Lawful Rate, either refund such excess interest to, Borrower and/or credit such excess interest against the Note and/or any Related Indebtedness then owing by Borrower to Lender. Borrower hereby agrees that as a condition precedent to any claim seeking usury penalties against Lender, Borrower will provide written notice to Lender, advising Lender in reasonable detail of the nature and amount of the violation, and Lender shall have sixty (60) days after receipt of such notice in which to correct such usury violation, if any, by either refunding such excess interest to Borrower or crediting such excess interest against the Note and/or the Related Indebtedness then owing by Borrower to Lender. All sums contracted for, charged or received by Lender for the use, forbearance or detention of any debt evidenced by the Note and/or the Related Indebtedness shall, to the extent permitted by applicable law, be amortized, or spread, using the actuarial method, throughout the stated term of the Note and/or the Related Indebtedness (including any and all renewal and extension periods) until payment in full so that the rate or amount of interest on account of the Note and/or the Related Indebtedness does not exceed the Maximum Lawful Rate from time to time in effect and applicable to the Note and/or the Related Indebtedness for so long as debt is outstanding. In no event shall the provisions of Chapter 346 of the Texas Finance Code (which regulates certain revolving credit loan accounts and revolving triparty accounts) apply to the Note and/or the Related Indebtedness. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration.

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          (b) Definitions. As used herein, the term “Maximum Lawful Rate” shall mean the maximum lawful rate of interest which may be contracted for, charged, taken, received or reserved by Lender in accordance with the applicable laws of the State of Texas (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law), taking into account all Charges (as herein defined) made in connection with the transaction evidenced by the Note and the other Loan Documents. As used herein, the term “Charges” shall mean all fees, charges and/or any other things of value, if any, contracted for, charged, received, taken or reserved by Lender in connection with the transactions relating to the Note and the other Loan Documents, which are treated as interest under applicable law. As used herein, the term “Related Indebtedness” shall mean any and all debt paid or payable by Borrower to Lender pursuant to the Loan Documents or any other communication or writing by or between Borrower and Lender related to the transaction or transactions that are the subject matter of the Loan Documents, except such debt which has been paid or is payable by Borrower to Lender under the Note.

          (c) Ceiling Election. To the extent that Lender is relying on Chapter 303 of the Texas Finance Code to determine the Maximum Lawful Rate payable on the Note and/or the Related Indebtedness, Lender will utilize the weekly ceiling from time to time in effect as provided in such Chapter 303, as amended. To the extent United States federal law permits Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law, Lender will rely on United States federal law instead of such Chapter 303 for the purpose of determining the Maximum Lawful Rate. Additionally, to the extent permitted by applicable law now or hereafter in effect, Lender may, at its option and from time to time, utilize any other method of establishing the Maximum Lawful Rate under such Chapter 303 or under other applicable law by giving notice, if required, to Borrower as provided by applicable law now or hereafter in effect.

     6.31 Secondary Market. Lender may sell, transfer and deliver the Note and the Loan Documents to one or more investors in the secondary mortgage market (a “Secondary Market Transaction”). In connection with such sale, Lender may retain or assign responsibility for servicing the loan evidenced by the Note or may delegate some or all of such responsibility and/or obligations to a servicer, including, but not limited to, any subservicer or master servicer, on behalf of the Investors (as hereinafter defined). All references to Lender herein shall refer to and include, without limitation, any such servicer, to the extent applicable.

     6.32 Dissemination of Information. If Lender determines at any time to sell, transfer or assign the Note, this Deed of Trust and the other Loan Documents, and any or all servicing rights with respect thereto, or to grant participations therein (the “Participations”) or issue mortgage pass-through certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (the “Securities”), Lender may forward to each purchaser, transferee, assignee, servicer, participant, investor, or their respective successors in such Participations and/or Securities (collectively, the “Investors”) or any rating agency rating such Securities (each a “Rating Agency”), each prospective Investor and each of the foregoing’s respective counsel, all documents and information which Lender now has or may hereafter acquire relating to the Debt, to Borrower, any guarantor, any indemnitor, and the Property, which shall have been furnished by Borrower and any Indemnitor, as Lender determines necessary or desirable.

     6.33 Intentionally Deleted.

     6.34 REMIC Opinions. In the event Borrower requests Lender’s consent with respect to any proposed action or Borrower proposes to take any action not otherwise requiring Lender’s specific consent under the Loan Documents, which Lender determines, in its discretion, may affect (i) the “REMIC” status of Lender, its successors or assigns, or (ii) the status of this Deed of Trust as a “qualified

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mortgage” as defined in Section 860G of the Internal Revenue Code of 1986 (or any succeeding provision of such law), Lender reserves the right to require Borrower, at Borrower’s sole expense, to obtain, from counsel satisfactory to Lender in its discretion, an opinion, in form and substance satisfactory to Lender in its discretion, that no adverse tax consequences will arise as a result of the proposed course of action.

ARTICLE VII.
CONCERNING THE TRUSTEE

     7.1 Certain Rights. With the approval of Lender, Trustee shall have the right to take any and all of the following actions: (i) to select, employ and consult with counsel (who may be, but need not be, counsel for Lender) upon any matters arising hereunder, including the preparation, execution and interpretation of the Loan Documents, and shall be fully protected in relying as to legal matters on the advice of counsel, (ii) to execute any of the trusts and powers hereof and to perform any duty hereunder either directly or through his or her agents or attorneys, (iii) to select and employ, in and about the execution of his or her duties hereunder, suitable accountants, engineers and other experts, agents and attorneys-in-fact, either corporate or individual, not regularly in the employ of Trustee (and Trustee shall not be answerable for any act, default, negligence, or misconduct of any such accountant, engineer or other expert, agent or attorney-in-fact, if selected with reasonable care, or for any error of judgment or act done by Trustee in good faith, or be otherwise responsible or accountable under any circumstances whatsoever, except for Trustee’s gross negligence or bad faith), and (iv) any and all other lawful action that Lender may instruct Trustee to take to protect or enforce Lender’s rights hereunder. Trustee shall not be personally liable in case of entry by Trustee, or anyone entering by virtue of the powers herein granted to Trustee, upon the Property for debts contracted for or liability or damages incurred in the management or operation of the Property. Trustee shall have the right to rely on any instrument, document, or signature authorizing or supporting any action taken or proposed to be taken by Trustee hereunder, believed by Trustee in good faith to be genuine. Trustee shall be entitled to reimbursement for expenses incurred by Trustee in the performance of Trustee’s duties hereunder and to reasonable compensation for such of Trustee’s services hereunder as shall be rendered. Borrower will, from time to time, pay the compensation due to Trustee hereunder and reimburse Trustee for, and save and hold Trustee harmless against, any and all liability and expenses which may be incurred by Trustee in the performance of Trustee’s duties.

     7.2 Retention of Money. All moneys received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, and shall be segregated from any other moneys of Trustee.

     7.3 Successor Trustees. Trustee may resign by the giving of notice of such resignation in writing to Lender. If Trustee shall die, resign or become disqualified from acting in the execution of this trust, or if, for any reason, Lender, in Lender’s sole discretion and with or without cause, shall prefer to appoint a substitute trustee or multiple substitute trustees, or successive substitute trustees or successive multiple substitute trustees, to act instead of the aforenamed Trustee, Lender shall have full power to appoint a substitute trustee (or, if preferred, multiple substitute trustees) in succession who shall succeed (and if multiple substitute trustees are appointed, each of such multiple substitute trustees shall succeed) to all the estates, rights, powers and duties of the aforenamed Trustee. Such appointment may be executed by any authorized agent of Lender, and if such Lender be a corporation and such appointment be executed on its behalf by any officer of such corporation, such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient without proof of any action by the board of directors or any superior officer of the corporation. Borrower hereby ratifies and confirms any and all acts which the aforenamed Trustee, or his or her successor or successors in this trust, shall do lawfully by virtue hereof. If multiple substitute trustees are appointed, each of such multiple substitute trustees shall be empowered and authorized to act alone without the necessity of the joinder of the other

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multiple substitute trustees, whenever any action or undertaking of such substitute trustees is requested or required under or pursuant to this Deed of Trust or applicable law. Any prior election to act jointly or severally shall not prevent either or both of such multiple substitute Trustees from subsequently executing, jointly or severally, any or all of the provisions hereof.

     7.4 Perfection of Appointment. Should any deed, conveyance, or instrument of any nature be required from Borrower by any Trustee or substitute Trustee to more fully and certainly vest in and confirm to Trustee or substitute Trustee such estates, rights, powers, and duties, then, upon request by Trustee or substitute trustee, any and all such deeds, conveyances and instruments shall be made, executed, acknowledged, and delivered and shall be caused to be recorded and/or filed by Borrower.

     7.5 Succession Instruments. Any substitute trustee appointed pursuant to any of the provisions hereof shall, without any further act, deed or conveyance, become vested with all the estates, properties, rights, powers, and trusts of its, his or her predecessor in the rights hereunder with like effect as if originally named as Trustee herein; but nevertheless, upon the written request of Lender or of the substitute trustee, the Trustee ceasing to act shall execute and deliver any instrument transferring to such substitute trustee, upon the trusts herein expressed, all the estates, properties, rights, powers, and trusts of the Trustee so ceasing to act, and shall duly assign, transfer and deliver any of the property and moneys held by such Trustee to the substitute trustee so appointed in such Trustee’s place.

     7.6 No Representation by Trustee or Lender. By accepting or approving anything required to be observed, performed, or fulfilled or to be given to Trustee or Lender pursuant to the Loan Documents, including, without limitation, any officer’s certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal or insurance policy, neither Trustee nor Lender shall be deemed to have warranted, consented to, or affirmed the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision, or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or affirmation with respect thereto by Trustee or Lender.

[The Remainder of the Page is Intentionally Blank]

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     7.7 Entire Agreement and Modifications. THIS DEED OF TRUST AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. This Deed of Trust and the other Loan Documents may not be amended, revised, waived, discharged, released or terminated orally but only by a written instrument or instruments executed by the party against which enforcement of the amendment, revision, waiver, discharge, release or termination is asserted. Any alleged amendment, revision, waiver, discharge, release or termination which is not so documented shall not be effective as to any party.

     IN WITNESS WHEREOF, Borrower has executed this Deed of Trust on the day and year first written above.

BORROWER:

NOTICE OF INDEMNIFICATION: BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT THIS DEED OF TRUST CONTAINS INDEMNIFICATION PROVISIONS PURSUANT TO SECTIONS 2.8, 2.16, 2.27(f), 2.28, 2.32(c) AND ARTICLE V HEREOF.	APARTMENT REIT HIDDEN LAKES, LP, a Texas limited partnership
	By:	Apartment REIT Hidden Lakes GP, LLC, a Delaware limited liability company, its General Partner
		By:	NNN Apartment REIT Holdings, L.P., a Virginia limited partnership, its Manager
			By:	NNN Apartment REIT, Inc., a Maryland corporation, its General Partner
				By:	/s/ Andrea R. Biller
				Name:	Andrea R. Biller
				Title:	Secretary

STATE OF California

COUNTY OF Orange

     Before me, J. Hu, Notary Public, on this day personally appeared Andrea Biller, known to me to be the person whose name is subscribed to the foregoing instrument as Secretary of NNN Apartment REIT, Inc., a Maryland corporation, the General Partner of NNN Apartment REIT Holdings, L.P., a Virginia limited partnership, the Manager of Apartment REIT Hidden Lakes GP, LLC, a Delaware limited liability company, the General Partner of APARTMENT REID HIDDEN LAKES, LP, a Texas limited partnership, and acknowledged to me that she executed the same on behalf of said limited liability company, for the purposes and consideration therein expressed, as the act and deed of said limited partnership.

     Given under my hand and seal of office this 27^thday of December, 2006.

/s/ J. Hu
Printed Name:	J. Hu
Notary Public for the State of	California
My Commission Expires:	Sept. 30, 2009

[SEAL]
J. Hu
Commission # 1610142
Notary Public — California
Orange County
My Comm. Expires Sep. 30, 2009

EXHIBIT “A”
Legal Description

TRACT I

A 48.80 acre, or 2,125,701 square feet, tract of land, out of a 69.40 acre tract recorded in Volume 6447, Pages 1192-1195 of the Official Public Records of Real Property of Bexar County, Texas, a portion of the called 48.97 acre tract of land (“Tract I”) recorded in Volume 10288, Pages 623-627 of the Official Public Records of Real Property of Bexar County, Texas, and being all of Lot 30, Block 8 of the Replat and Subdivision Plat Establishing Bandera Springs as recorded in Volume 9559, Pages 114-116 of the Deed and Plat Records of Bexar County, Texas, also being out of the Perry Davis Survey Number 267, Abstract Number 189, County Block 4528, now all in New City Block (N.C.B.) 14614, In the City of San Antonio, Bexar County, Texas, said 48.88 acre being more particularly described by metes and bounds as follows, with the basis of bearings being the said Bandera Springs Subdivision:

BEGINNING at a found Texas Department of Transportation monument with brass plate, a point on the southeast right-of-way line of F.M. 1604, the northwest corner of the above referenced 69.40 acre tract, the northeast corner of a 13.923 acre tract recorded in Volume 10593, Pages 769-772 of the Official Public Records of Real Property of Bexar County, Texas, the northwest corner of the herein described tract, from which a found 1/2 inch iron rod bears S 45° 39’ 57” W, a distance of 126.85 feet; thence N 45° 30’ 49” E, along and with the southeast right-of-way of said F.M. 1604, a distance of 196.51 feet to a set “x” in concrete; thence : N 44° 34’ 21” E, along and with the southeast right-of-way of said F.M. 1604, a distance of 40.71 feet to a set “x” in concrete, the west corner of a 47.04 acre tract recorded in Volume 7321, Page 1004-1007 of the Official Public Records of Real Property of Bexar County, Texas, the north corner of the herein described tract; thence departing the southeast right-of-way line of said F.M. 1604, along and with the southwest line of said 47.04 acre tract, the northeast line of herein described tract the following calls and distances: S 44° 27’ 48” E, a distance of 68.58 feet to the center of a sanitary sewer manhole lid; S 30° 13’ 45” E, a distance of 397.94 feet to a set “x” on a sanitary sewer manhole lid; S 60° 22’ 03” E. a distance of 698.23 feet to the center of a sanitary sewer manhole lid; S 22° 51’ 53” E. a distance of 251.38 feet to a set “x” on a sanitary sewer manhole lid; S 78° 38’ 40” E. a distance of 491.06 feet, to a found 1/2 inch iron rod with a yellow cap marked “Pape-Dawson”, the southeast corner of said 47.04 acre tract, the northeast corner of this tract, a point on the west right-of-way line of South Hausman Road (a variable width right-of-way); thence S 00° 03’ 57” W, along and with the west right-of-way of said South Hausman Road, a distance of 245.33 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 84° 21’ 08” W, departing the west right-of-way of said South Hausman Road, a distance of 10.05 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” being a northeast corner of said Lot 30; thence S 00°03’57” W, along and with the west right-of-way of said South Hausman Road, the west line of a 10-dedication for future street widening recorded fn Volume 9559, Pages 114-116 of the Deed and Plat Records of Bexar County, Texas, the east line of said Lot 30, a distance of 351.58 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 17° 06’ 38” E, departing the west right-of-way of said South Hausman Road, Along the south line of a said 10-dedication for future street widening, the east line of said Lot 30, a distance of 34.12 to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” in the west right-of-way line of said South Hausman Road; thence S 00° 03’ 57” W, along and with the west right-of-way of said South Hausman Road, a distance of 551.48 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence S 80° 07’ 33’’ W, departing the west right-of-way line of said South Hausman Road, at a distance of 5.08 feet passing the northeast corner of Oakridge Pointe Unit-4 Subdivision, as recorded in Volume 9534, Page 117, Deed and Plat Records of Bexar County, Texas, continuing along the north line of said Oakridge Pointe, Unit-4 at a distance of 181.40 passing the southwest corner of said Lot 30, Block 8, in all a total distance of 298.93 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence S 46° 06’ 14” W, with the northwest line of Oakridge Pointe Unit-4, a distance of 50.04 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”’, the northwest corner of said subdivision the northeast corner of Lot 20, Block 8, N.C.B. 14614, South Hausman Road Elementary, as recorded in Volume 9535, Pages 34-35, Deed and Plat Records of Bexar County, Texas, being the southeast corner of the remaining

portion of that 16.12 acre tract conveyed to Northside Independent School District in Volume 6761, Pages 1256-1274 of the Official Public Records of Real Property of Bexar County, Texas, a point on curve of a non-tangent curve to the left; thence Northwesterly, along and with the east tine of said remaining portion of that 16.12 acre tract and along the arc of said curve to the left, said curve having a radial bearing of S 43° 51’ 41” W, a radius of 375.00 feet, a central angle of 101° 1’ 53”, a chord bearing and distance of N 46° 44’ 15” W, 7.84 feet, an arc length of 7.84 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 47° 20’ 12” W, a distance of 20.00 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” at the north corner of said remaining portion of that 16.12 acre tract; thence S 58° 56’ 36” W, along and with the west line of said remaining portion of that 16.12 acre tract, the south line of said 48.80 acre tract and said Lot 30, a distance of 62.28 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, at the southwest corner of said remaining portion of that 16.12 acre tract, and angle point in the north line of said Lot 20, Block 8 of South Hausman Road Elementary, the beginning of a curve to the right; thence Southwesterly, along and with the northwest and north line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and arc of said curve to the right, said curve having a radius of 300.00 feet, a central angle of 36° 02’ 40”, a chord bearing and distance of S 76° 57’ 56” W, 185.63 feet, an arc length of 188.73 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 85° 00’ 44” W, along and with the north line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance of 115.39 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence Northwesterly, along and with the north and northeast line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and the arc of said curve to the right, said curve having a radius of 350.00 feet, a central angle of 44° 59’ 40”, a chord bearing and distance of N 62° 31’ 12” W. 267.79 feet, an arc length of 274.79 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 40° 01’ 40” W, along and with the northeast line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance of 245.43 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, the beginning of a curve to the left; thence Northwesterly, along and with the northeast line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and the arc of said curve to the left, said curve having a radius of 250.00 feet, a central angle of 49° 57’ 50”, a chord bearing and distance of N 65° 00’ 35” W, 211.17 feet, an arc length of 218.01 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 89° 59’ 30” W, along and with the north line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance of 52.06 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, a point on the west line of a 3 8.966 acre tract recorded in Volume 2569, Page 1217, Official Public Records of Real Property of Bexar County, Texas, the southwest corner of said Lot 30 and the southwest corner of the herein described tract; thence N 00° 00’ 12” E, along and with the east line of said 38.966 acre tract, a distance of 706.02 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” at a common corner between said 38.966 acre tract and said 13.923 acre tract; thence N 14°12’ 23” W. along and with the east line of said 13.923 acre tract, the west line of said Lot 30 and said 48.80 acre tract, a distance of 1071.43 feet to the POINT OF BEGINNING and containing 48.80 acres of land in the City of San Antonio, Bexar County, Texas.

TRACT II:

Drainage easement as provided by document recorded in Volume 7032, Page 1269, Real Property Records of Bexar County, Texas.

TRACT III:

Landscape buffer, lighting and access easement agreement as prodded by document recorded in Volume 41880, Page 1700, Real Property Records of Bexar County, Texas.

EX-10.11

Exhibit 10.11

Loan No.: 50-2859027 Hidden Lakes Apartments

INDEMNITY AND GUARANTY AGREEMENT

     THIS INDEMNITY AND GUARANTY AGREEMENT (as the same may hereafter be amended, consolidated, renewed or replaced, this “Agreement”), made as of December 28, 2006, by NNN APARTMENT REIT, INC., a Maryland corporation (“Indemnitor”), whose address is 1551 North Tustin Avenue, Suite 300, Santa Ana, California 92705, in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (together with its successors and assigns, “Lender”), whose address is Commercial Real Estate Services, 8739 Research Drive URP — 4, NC 1075, Charlotte, North Carolina 28262.

W I T N E S S E T H:

     WHEREAS, Apartment REIT Hidden Lakes, LP, a Texas limited partnership (“Borrower”), has obtained a loan (the “Loan”) in the principal amount of Nineteen Million Two Hundred Eighteen Thousand and No/100 Dollars ($19,218,000.00) from Lender; and

     WHEREAS, the Loan is evidenced by a Promissory Note (as the same may from time to time be amended, consolidated, renewed or replaced, the “Note”) dated of even date herewith, executed by Borrower and payable to the order of Lender, in the stated principal amount of Nineteen Million Two Hundred Eighteen Thousand and No/100 Dollars ($19,218,000.00), and is secured by a Deed of Trust, Security Agreement and Fixture Filing dated of even date herewith (as the same may from time to time be amended, consolidated, renewed or replaced, the “Security Instrument”) from Borrower for the benefit of Lender, encumbering that certain real property situated in the County of Bexar, State of Texas, as more particularly described on Exhibit “A” attached hereto and incorporated herein by this reference, together with the buildings, structures and other improvements now or hereafter located thereon (the “Property”) and by other documents and instruments (the Note, the Security Instrument and such other documents and instruments, as the same may from time to time be amended, consolidated, renewed or replaced, being collectively referred to herein as the “Loan Documents”); and

     WHEREAS, as a condition to making the Loan to Borrower, Lender has required that Indemnitor indemnify Lender from and against and guarantee payment to Lender of those items for which Borrower is personally liable and for which Lender has recourse against Borrower under the terms of the Note and the Security Instrument; and

     WHEREAS, the extension of the Loan to Borrower is of substantial benefit to Indemnitor and, therefore, Indemnitor desires to indemnify Lender from and against and guarantee payment to Lender of those items for which Borrower is personally liable and for which Lender has recourse against Borrower under the terms of the Note and the Security Instrument.

     NOW, THEREFORE, to induce Lender to extend the Loan to Borrower and in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitor hereby covenants and agrees for the benefit of Lender, as follows:

     1. Indemnity and Guaranty. Indemnitor hereby assumes liability for, hereby guarantees payment to Lender of, hereby agrees to pay, protect, defend and save Lender harmless from and against, and hereby indemnifies Lender from and against any and all liabilities, obligations, losses, damages, costs and expenses (including, without limitation, attorneys’ fees), causes of action, suits, claims, demands and

judgments of any nature or description whatsoever (collectively, “Costs”) which may at any time be imposed upon, incurred by or awarded against Lender as a result of:

          (a) Proceeds paid under any insurance policies (or paid as a result of any other claim or cause of action against any person or entity) by reason of damage, loss or destruction to all or any portion of the Property, to the full extent of such proceeds not previously delivered to Lender, but which, under the terms of the Loan Documents, should have been delivered to Lender;

          (b) Proceeds or awards resulting from the condemnation or other taking in lieu of condemnation of all or any portion of the Property to the full extent of such proceeds or awards not previously delivered to Lender, but which, under the terms of the Loan Documents, should have been delivered to Lender;

          (c) All tenant security deposits or other refundable deposits paid to or held by Borrower or any other person or entity in connection with leases of all or any portion of the Property, which are not applied in accordance with the terms of the applicable lease or other agreement;

          (d) Rent and other payments received from tenants under leases of all or any portion of the Property paid more than one (1) month in advance;

          (e) Rents, issues, profits and revenues of all or any portion of the Property received or applicable to a period after the occurrence of an Event of Default under the Loan Documents, or any event which with notice or the passage of time, or both, would constitute an Event of Default, which are not either applied to the ordinary and necessary expenses of owning and operating the Property or paid to Lender;

          (f) Waste committed on the Property, damage to the Property as a result of the intentional misconduct or gross negligence of Borrower or any of its principals, officers, general partners or members, any guarantor, any indemnitor, or any agent or employee of any such persons, or any removal of all or any portion of the Property in violation of the terms of the Loan Documents, to the full extent of the losses or damages incurred by Lender and/or any of its affiliates on account of such occurrence;

          (g) Failure to pay any valid taxes, assessments, mechanic’s liens, materialmen’s liens or other liens which could create liens on any portion of the Property which would be superior to the lien or security title of the Security Instrument or the other Loan Documents except, with respect to any such taxes or assessments, to the extent that funds have been deposited with Lender pursuant to the terms of the Security Instrument specifically for the applicable taxes or assessments and not applied by Lender to pay such taxes and assessments; and

          (h) Fraud, intentional misrepresentation, failure to disclose a material fact, any untrue statement of a material fact or omission to state a material fact in the written materials and/or information provided to Lender or any of its affiliates by or on behalf of Borrower or any of its affiliates, principals, officers, general partners or members, any guarantor, any indemnitor, or any agent, employee or other person authorized or apparently authorized to make statements, representations or disclosures on behalf of Borrower, any affiliate, principal, officer, general partner or member of Borrower, or any guarantor or any indemnitor, to the full extent of any losses, damages and expenses of Lender and/or any of its affiliates on account thereof.

          In addition to the foregoing, and notwithstanding anything to the contrary set forth in this Agreement or any of the other Loan Documents, Indemnitor shall be fully liable for all principal, interest

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and other amounts which may be due and owing by Borrower under the Note, the Security Instrument and any other Loan Document from and after (i) a default by Borrower, Indemnitor or any general partner, manager or managing member of Borrower of any of the covenants set forth in Section 2.9 or Section 2.29 of the Security Instrument, or (ii) the Property or any part thereof becoming an asset in (x) a voluntary bankruptcy or insolvency proceeding of Borrower or Indemnitor, or (y) an involuntary bankruptcy or insolvency proceeding of Borrower or Indemnitor in which Borrower or Indemnitor colludes with creditors in such bankruptcy or insolvency proceeding and which is not dismissed within sixty (60) days of filing.

     This is a guaranty of payment and performance and not of collection. The liability of Indemnitor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower or any other person (including, without limitation, other guarantors, if any), nor against the collateral for the Loan. Indemnitor waives any right to require that an action be brought against Borrower or any other person or to require that resort be made to any collateral for the Loan or to any balance of any deposit account or credit on the books of Lender in favor of Borrower or any other person. In the event of a default under the Loan Documents which is not cured within any applicable grace or cure period, Lender shall have the right to enforce its rights, powers and remedies (including, without limitation, foreclosure of all or any portion of the collateral for the Loan) thereunder or hereunder, in any order, and all rights, powers and remedies available to Lender in such event shall be non-exclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or in equity. If the indebtedness and obligations guaranteed hereby are partially paid or discharged by reason of the exercise of any of the remedies available to Lender, this Agreement shall nevertheless remain in full force and effect, and Indemnitor shall remain liable for all remaining indebtedness and obligations guaranteed hereby, even though any rights which Indemnitor may have against Borrower may be destroyed or diminished by the exercise of any such remedy.

     2. Indemnification Procedures.

          (a) If any action shall be brought against Lender based upon any of the matters for which Lender is indemnified hereunder, Lender shall notify Indemnitor in writing thereof and Indemnitor shall promptly assume the defense thereof, including, without limitation, the employment of counsel acceptable to Lender and the negotiation of any settlement; provided, however, that any failure of Lender to notify Indemnitor of such matter shall not impair or reduce the obligations of Indemnitor hereunder. Lender shall have the right, at the expense of Indemnitor (which expense shall be included in Costs), to employ separate counsel in any such action and to participate in the defense thereof. In the event Indemnitor shall fail to discharge or undertake to defend Lender against any claim, loss or liability for which Lender is indemnified hereunder, Lender may, at its sole option and election, defend or settle such claim, loss or liability. The liability of Indemnitor to Lender hereunder shall be conclusively established by such settlement, provided such settlement is made in good faith, the amount of such liability to include both the settlement consideration and the costs and expenses, including, without limitation, attorneys’ fees and disbursements, incurred by Lender in effecting such settlement. In such event, such settlement consideration, costs and expenses shall be included in Costs and Indemnitor shall pay the same as hereinafter provided. Lender’s good faith in any such settlement shall be conclusively established if the settlement is made on the advice of independent legal counsel for Lender.

          (b) Indemnitor shall not, without the prior written consent of Lender: (i) settle or compromise any action, suit, proceeding or claim or consent to the entry of any judgment that does not include as an unconditional term thereof the delivery by the claimant or plaintiff to Lender of a full and complete written release of Lender (in form, scope and substance satisfactory to Lender in its sole discretion) from all liability in respect of such action, suit, proceeding or claim and a dismissal with prejudice of such action, suit, proceeding or claim; or (ii) settle or compromise any action, suit,

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proceeding or claim in any manner that may adversely affect Lender or obligate Lender to pay any sum or perform any obligation as determined by Lender in its sole discretion.

          (c) All Costs shall be immediately reimbursable to Lender when and as incurred and, in the event of any litigation, claim or other proceeding, without any requirement of waiting for the ultimate outcome of such litigation, claim or other proceeding, and Indemnitor shall pay to Lender any and all Costs within ten (10) days after written notice from Lender itemizing the amounts thereof incurred to the date of such notice. In addition to any other remedy available for the failure of Indemnitor to periodically pay such Costs, such Costs, if not paid within said ten-day period, shall bear interest at the Default Interest Rate (as defined in the Note).

     3. Reinstatement of Obligations. If at any time all or any part of any payment made by Indemnitor or received by Lender from Indemnitor under or with respect to this Agreement is or must be rescinded or returned for any reason whatsoever (including, but not limited to, the insolvency, bankruptcy or reorganization of Indemnitor or Borrower), then the obligations of Indemnitor hereunder shall, to the extent of the payment rescinded or returned, be deemed to have continued in existence, notwithstanding such previous payment made by Indemnitor, or receipt of payment by Lender, and the obligations of Indemnitor hereunder shall continue to be effective or be reinstated, as the case may be, as to such payment, all as though such previous payment by Indemnitor had never been made.

     4. Waivers by Indemnitor. To the extent permitted by law, Indemnitor hereby waives and agrees not to assert or take advantage of:

          (a) Any right to require Lender to proceed against Borrower or any other person or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy in Lender’s power or under any other agreement before proceeding against Indemnitor hereunder;

          (b) Any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other person or persons or the failure of Lender to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other person or persons;

          (c) Demand, presentment for payment, notice of nonpayment, protest, notice of protest and all other notices of any kind, or the lack of any thereof, including, without limiting the generality of the foregoing, notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of Borrower, Lender, any endorser or creditor of Borrower or of Indemnitor or on the part of any other person whomsoever under this or any other instrument in connection with any obligation or evidence of indebtedness held by Lender;

          (d) Any defense based upon an election of remedies by Lender;

          (e) Any right or claim of right to cause a marshalling of the assets of Indemnitor;

          (f) Any principle or provision of law, statutory or otherwise, which is or might be in conflict with the terms and provisions of this Agreement;

          (g) Any duty on the part of Lender to disclose to Indemnitor any facts Lender may now or hereafter know about Borrower or the Property, regardless of whether Lender has reason to believe that any such facts materially increase the risk beyond that which Indemnitor intends to assume or has reason to believe that such facts are unknown to Indemnitor or has a reasonable opportunity to communicate such facts to Indemnitor, it being understood and agreed that Indemnitor is fully responsible for being and keeping informed of the financial condition of Borrower, of the condition of the Property

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and of any and all circumstances bearing on the risk that liability may be incurred by Indemnitor hereunder;

          (h) Any lack of notice of disposition or of manner of disposition of any collateral for the Loan;

          (i) Any invalidity, irregularity or unenforceability, in whole or in part, of any one or more of the Loan Documents;

          (j) Any deficiencies in the collateral for the Loan or any deficiency in the ability of Lender to collect or to obtain performance from any persons or entities now or hereafter liable for the payment and performance of any obligation hereby guaranteed;

          (k) An assertion or claim that the automatic stay provided by 11 U.S.C. §362 (arising upon the voluntary or involuntary bankruptcy proceeding of Borrower) or any other stay provided under any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, shall operate or be interpreted to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any of its rights, whether now or hereafter required, which Lender may have against Indemnitor or the collateral for the Loan;

          (l) Any modifications of the Loan Documents or any obligation of Borrower relating to the Loan by operation of law or by action of any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or otherwise. Without limiting the generality of the foregoing, Indemnitor expressly waives any and all rights to which Indemnitor may otherwise have been entitled under any suretyship laws in effect from time to time, including (without limitation) any rights pursuant to Rule 31 of the Texas Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code, and Chapter 34 of the Texas Business and Commerce Code.

          (m) Any action, occurrence, event or matter consented to by Indemnitor under Section 6(h) hereof, under any other provision hereof, or otherwise;

          5. Representation and Warranty. Indemnitor hereby represents, warrants and covenants that Indemnitor’s net worth is, and at all times while this Agreement shall be in effect, shall be not less than $10,000,000 with Liquid Assets (as hereinafter defined) exceeding $1,000,000. For the purposes of this Section 5, “Liquid Assets” shall mean assets in the form of cash, cash deposits, available lines of credit, accounts receivables, “soft” earnest money deposits, obligations of (or fully guaranteed as to principal and interest by) the United States or any agency or instrumentality thereof (provided the full faith and credit of the United States supports such obligation or guarantee), securities listed and traded on a recognized stock exchange or traded over the counter and listed in the National Association of Securities Dealers Automatic Quotations, or liquid debt instruments that have a readily ascertainable value and are regularly traded in a recognized financial market.

     6. General Provisions.

          (a) Fully Recourse. All of the terms and provisions of this Agreement are recourse obligations of Indemnitor and not restricted by any limitation on personal liability set forth in any of the Loan Documents.

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          (b) Unsecured Obligations. Indemnitor hereby acknowledges that Lender’s appraisal of the Property is such that Lender is not willing to accept the consequences of the inclusion of Indemnitor’s indemnity set forth herein among the obligations secured by the Security Instrument and the other Loan Documents and that Lender would not make the Loan but for the unsecured personal liability undertaken by Indemnitor herein.

          (c) Survival. This Agreement shall be deemed to be continuing in nature and shall remain in full force and effect and shall survive the exercise of any remedy by Lender under the Security Instrument or any of the other Loan Documents, including, without limitation, any foreclosure or deed in lieu thereof, even if, as a part of such remedy, the Loan is paid or satisfied in full.

          (d) No Subrogation; No Recourse Against Lender. Notwithstanding the satisfaction by Indemnitor of any liability hereunder, Indemnitor shall not have any right of subrogation, contribution, reimbursement or indemnity whatsoever or any right of recourse to or with respect to the assets or property of Borrower or to any collateral for the Loan. In connection with the foregoing, Indemnitor expressly waives any and all rights of subrogation to Lender against Borrower, and Indemnitor hereby waives any rights to enforce any remedy which Lender may have against Borrower and any right to participate in any collateral for the Loan. In addition to and without in any way limiting the foregoing, Indemnitor hereby subordinates any and all indebtedness of Borrower now or hereafter owed to Indemnitor to all indebtedness of Borrower to Lender, and agrees with Lender that Indemnitor shall not demand or accept any payment of principal or interest from Borrower, shall not claim any offset or other reduction of Indemnitor’s obligations hereunder because of any such indebtedness and shall not take any action to obtain any of the collateral from the Loan. Further, Indemnitor shall not have any right of recourse against Lender by reason of any action Lender may take or omit to take under the provisions of this Agreement or under the provisions of any of the Loan Documents.

          (e) Reservation of Rights. Nothing contained in this Agreement shall prevent or in any way diminish or interfere with any rights or remedies, including, without limitation, the right to contribution, which Lender may have against Borrower, Indemnitor or any other party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (codified at Title 42 U.S.C. §9601 et seq.), as it may be amended from time to time, or any other applicable federal, state or local laws, all such rights being hereby expressly reserved.

          (f) Financial Statements. Indemnitor hereby agrees, as a material inducement to Lender to make the Loan to Borrower, to furnish to Lender, from time to time, promptly upon demand by Lender annual financial statements for Indemnitor, within one hundred twenty (120) days after the end of each calendar year, certified by or on behalf of Indemnitor, in form and substance acceptable to Lender. Indemnitor hereby warrants and represents unto Lender that any and all balance sheets, net worth statements and other financial data which have heretofore been given or may hereafter be given to Lender with respect to Indemnitor did or will at the time of such delivery fairly and accurately present the financial condition of Indemnitor.

          (g) Rights Cumulative; Payments. Lender’s rights under this Agreement shall be in addition to all rights of Lender under the Note, the Security Instrument and the other Loan Documents. Further, payments made by Indemnitor under this Agreement shall not reduce in any respect Borrower’s obligations and liabilities under the Note, the Security Instrument and the other Loan Documents except with respect to, and to the extent of, Borrower’s obligation and liability for the payment made by Indemnitor.

          (h) No Limitation on Liability. Indemnitor hereby consents and agrees that Lender may at any time and from time to time without further consent from Indemnitor do any of the following

6

events (if applicable), and the liability of Indemnitor under this Agreement shall be unconditional and absolute and shall in no way be impaired or limited by any of the following events, whether occurring with or without notice to Indemnitor or with or without consideration: (i) any extensions of time for performance required by any of the Loan Documents or extension or renewal of the Note; (ii) any sale, assignment or foreclosure of the Note, the Security Instrument or any of the other Loan Documents or any sale or transfer of the Property or any portion thereof; (iii) any change in the composition of Borrower, including, without limitation, the withdrawal or removal of Indemnitor from any current or future position of ownership, management or control of Borrower; (iv) the accuracy or inaccuracy of the representations and warranties made by Indemnitor herein or by Borrower in any of the Loan Documents; (v) the release of Borrower or of any other person or entity from performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law, Lender’s voluntary act or otherwise; (vi) the release or substitution in whole or in part of any security for the Loan; (vii) Lender’s failure to record the Security Instrument or to file any financing statement (or Lender’s improper recording or filing thereof) or to otherwise perfect, protect, secure or insure any lien or security interest given as security for the Loan; (viii) the modification of the terms of any one or more of the Loan Documents; or (ix) the taking of, or failure to take any action of any type whatsoever. No such action which Lender shall take or fail to take in connection with the Loan Documents or any collateral for the Loan, nor any course of dealing with Borrower or any other person, shall limit, impair or release Indemnitor’s obligations hereunder, affect this Agreement in any way or afford Indemnitor any recourse against Lender. Nothing contained in this Section shall be construed to require Lender to take or refrain from taking any action referred to herein.

          (i) Intentionally Reserved.

          (j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, EXCEPT TO THE EXTENT THAT THE APPLICABILITY OF ANY OF SUCH LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY FEDERAL LAW, IN WHICH CASE SUCH FEDERAL LAW SHALL SO GOVERN AND BE CONTROLLING.

          (k) Binding Effect; Waiver of Acceptance. This Agreement shall bind Indemnitor and its heirs, personal representatives, successors and assigns and shall inure to the benefit of Lender and the officers, directors, shareholders, agents and employees of Lender and their respective heirs, successors and assigns. Notwithstanding the foregoing, Indemnitor shall not assign any of its rights or obligations under this Agreement without the prior written consent of Lender, which consent may be withheld by Lender in its sole discretion. Indemnitor hereby waives any acceptance of this Agreement by Lender, and this Agreement shall immediately be binding upon Indemnitor.

          (l) Notice. All notices, demands, requests or other communications to be sent by one party to the other hereunder or required by law shall be in writing and shall be deemed to have been validly given or served by delivery of the same in person to the intended addressee, or by depositing the same with Federal Express or another reputable private courier service for next business day delivery to the intended addressee at its address set forth on the first page of this Agreement or at such other address as may be designated by such party as herein provided, or by depositing the same in the United States mail, postage prepaid, registered or certified mail, return receipt requested, addressed to the intended addressee at its address set forth on the first page of this Agreement or at such other address as may be designated by such party as herein provided. All notices, demands and requests shall be effective upon such personal delivery, or one (1) business day after being deposited with the private courier service, or two (2) business days after being deposited in the United States mail as required above. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given as herein required shall be deemed to be receipt of the notice, demand or request sent. By giving to the

7

other party hereto at least fifteen (15) days’ prior written notice thereof in accordance with the provisions hereof, the parties hereto shall have the right from time to time to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America.

          (m) No Waiver; Time of Essence; Business Day. The failure of any party hereto to enforce any right or remedy hereunder, or to promptly enforce any such right or remedy, shall not constitute a waiver thereof nor give rise to any estoppel against such party nor excuse any of the parties hereto from their respective obligations hereunder. Any waiver of such right or remedy must be in writing and signed by the party to be bound. This Agreement is subject to enforcement at law or in equity, including actions for damages or specific performance. Time is of the essence hereof. The term “business day” as used herein shall mean a weekday, Monday through Friday, except a legal holiday or a day on which banking institutions in New York, New York are authorized by law to be closed.

          (n) Captions for Convenience. The captions and headings of the sections and paragraphs of this Agreement are for convenience of reference only and shall not be construed in interpreting the provisions hereof.

          (o) Reasonable Attorney’s Fees. In the event it is necessary for Lender to retain the services of an attorney or any other consultants in order to enforce this Agreement, or any portion thereof, Indemnitor agrees to pay to Lender, in addition to Indemnitor’s other obligations to pay Lender hereunder, any and all costs and expenses, including, without limitation, reasonable attorneys’ fees, incurred by Lender as a result thereof and such costs, fees and expenses shall be included in Costs.

          (p) Successive Actions. A separate right of action hereunder shall arise each time Lender acquires knowledge of any matter indemnified or guaranteed by Indemnitor under this Agreement. Separate and successive actions may be brought hereunder to enforce any of the provisions hereof at any time and from time to time. No action hereunder shall preclude any subsequent action, and Indemnitor hereby waives and covenants not to assert any defense in the nature of splitting of causes of action or merger of judgments.

          (q) Joint and Several Liability. Notwithstanding anything to the contrary contained herein, the representations, warranties, covenants and agreements made by Indemnitor herein, and the liability of Indemnitor hereunder, is joint and several if Indemnitor is comprised of more than one person or entity.

          (r) Reliance. Lender would not make the Loan to Borrower without this Agreement. Accordingly, Indemnitor intentionally and unconditionally enters into the covenants and agreements as set forth above and understands that, in reliance upon and in consideration of such covenants and agreements, the Loan shall be made and, as part and parcel thereof, specific monetary and other obligations have been, are being and shall be entered into which would not be made or entered into but for such reliance.

          (s) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be effective only upon delivery and thereafter shall be deemed an original, and all of which shall be taken to be one and the same instrument, for the same effect as if all parties hereto had signed the same signature page. Any signature page of this Agreement may be detached from any counterpart of this Agreement without impairing the legal effect of any signatures thereon and may be attached to another counterpart of this Agreement identical in form hereto but having attached to it one or more additional signature pages.

          (t) SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

8

(1)

INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN WHICH THE PROPERTY IS LOCATED OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT, (B) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN THE COUNTY AND STATE IN WHICH THE PROPERTY IS LOCATED, (C) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND (D) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT INDEMNITOR WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM).

(2)

INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR INDEMNITOR, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR INDEMNITOR, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.

          (u) Waiver by Indemnitor. Indemnitor covenants and agrees that, upon the commencement of a voluntary or involuntary bankruptcy proceeding by or against Borrower, Indemnitor shall not seek or cause Borrower or any other person or entity to seek a supplemental stay or other relief, whether injunctive or otherwise, pursuant to 11 U.S.C. §105 or any other provision of the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law, (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any rights of Lender against Indemnitor or the collateral for the Loan by virtue of this Agreement or otherwise.

          (v) SPECIFIC NOTICE. IT IS EXPRESSLY AGREED AND UNDERSTOOD THAT THIS AGREEMENT INCLUDES INDEMNIFICATION PROVISIONS WHICH, IN CERTAIN CIRCUMSTANCES, COULD INCLUDE AN INDEMNIFICATION BY INDEMNITOR OF LENDER FROM CLAIMS OR LOSSES ARISING AS A RESULT OF LENDER’S OWN NEGLIGENCE.

          (w) Secondary Market. Lender may sell, transfer and deliver the Loan Documents to one or more investors in the secondary mortgage market. In connection with such sale or otherwise, Lender may retain or assign responsibility for servicing the Loan or may delegate some or all of such responsibility and/or obligations to a servicer, including, but not limited to, any subservicer or master servicer, on behalf of the investors. All references to Lender herein shall refer to and include, without limitation, any such servicer, to the extent applicable.

9

          (x) Decisions. Wherever pursuant to this Agreement (i) Lender exercises any right given to it to approve or disapprove, (ii) any arrangement or term is to be satisfactory or acceptable to Lender, or (iii) any other decision or determination is to be made by Lender, the decision of Lender to approve or disapprove or to accept or not accept, all decisions that arrangements or terms are satisfactory or not satisfactory and all other decisions and determinations made by Lender, shall be in the sole and absolute discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein.

          (y) Dissemination of Information. If Lender determines at any time to sell, transfer or assign the Note, the Security Instrument and the other Loan Documents, and any or all servicing rights with respect thereto, or to grant participations therein (the “Participations”) or issue mortgage pass-through certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (the “Securities”), Lender may forward to each purchaser, transferee, assignee, servicer, participant, investor, or their respective successors in such Participations and/or Securities (collectively, the “Investor”) or any Rating Agency (as defined in the Security Instrument) rating such Securities, each prospective Investor and each of the foregoing’s respective counsel, all documents and information which Lender now has or may hereafter acquire relating to the Loan and to Borrower, any Indemnitor and the Property, which shall have been furnished by Borrower, or any Indemnitor as Lender determines necessary or desirable.

          (z) Costs. Wherever pursuant to this Agreement it is provided that Indemnitor shall pay any costs and expenses, such costs and expenses shall include, but not be limited to, reasonable legal fees and disbursements of Lender.

[The Remainder of the Page is Intentionally Blank]

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          (aa) Entire Agreement; Amendment; Severability. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. This Agreement contains the entire agreement between the parties respecting the matters herein set forth and supersedes all prior agreements, whether written or oral, between the parties respecting such matters. Any amendments or modifications hereto, in order to be effective, shall be in writing and executed by the parties hereto. A determination that any provision of this Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other provision, and any determination that the application of any provision of this Agreement to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to any other persons or circumstances.

     IN WITNESS WHEREOF, Indemnitor has executed this Indemnity and Guaranty Agreement as of the day and year first written above.

	INDEMNITOR:
NOTICE OF INDEMNIFICATION: INDEMNITOR HEREBY ACKNOWLEDGES AND AGREES THAT THIS INDEMNITY AGREEMENT CONTAINS CERTAIN INDEMNIFICATION PROVISIONS PURSUANT TO SECTION 1 HEREOF	NNN APARTMENT REIT, INC., a Maryland corporation
	By:	/s/ Andrea R. Biller
	Name:	Andrea R. Biller
	Title:	Secretary

EXHIBIT “A”
Legal Description

TRACT I

A 48.80 acre, or 2,125,701 square feet, tract of land, out of a 69.40 acre tract recorded in Volume 6447, Pages 1192-1195 of the Official Public Records of Real Property of Bexar County, Texas, a portion of the called 48.97 acre tract of land (“Tract I”) recorded in Volume 10288, Pages 623-627 of the Official Public Records of Real Property of Bexar County, Texas, and being all of Lot 30, Block 8 of the Replat and Subdivision Plat Establishing Bandera Springs as recorded in Volume 9559, Pages 114-116 of the Deed and Plat Records of Bexar County, Texas, also being out of the Perry Davis Survey Number 267, Abstract Number 189, County Block 4528, now all in New City Block (N.C.B.) 14614, In the City of San Antonio, Bexar County, Texas, said 48.88 acre being more particularly described by metes and bounds as follows, with the basis of bearings being the said Bandera Springs Subdivision:

BEGINNING at a found Texas Department of Transportation monument with brass plate, a point on the southeast right-of-way line of F.M. 1604, the northwest corner of the above referenced 69.40 acre tract, the northeast corner of a 13.923 acre tract recorded in Volume 10593, Pages 769-772 of the Official Public Records of Real Property of Bexar County, Texas, the northwest corner of the herein described tract, from which a found 1/2 inch iron rod bears S 45° 39’ 57” W, a distance of 126.85 feet; thence N 45° 30’ 49” E, along and with the southeast right-of-way of said F.M. 1604, a distance of 196.51 feet to a set “x” in concrete; thence : N 44° 34’ 21” E, along and with the southeast right-of-way of said F.M. 1604, a distance of 40.71 feet to a set “x” in concrete, the west corner of a 47.04 acre tract recorded in Volume 7321, Page 1004-1007 of the Official Public Records of Real Property of Bexar County, Texas, the north corner of the herein described tract; thence departing the southeast right-of-way line of said F.M. 1604, along and with the southwest line of said 47.04 acre tract, the northeast line of herein described tract the following calls and distances: S 44° 27’ 48” E, a distance of 68.58 feet to the center of a sanitary sewer manhole lid; S 30° 13’ 45” E, a distance of 397.94 feet to a set “x” on a sanitary sewer manhole lid; S 60° 22’ 03” E. a distance of 698.23 feet to the center of a sanitary sewer manhole lid; S 22° 51’ 53” E. a distance of 251.38 feet to a set “x” on a sanitary sewer manhole lid; S 78° 38’ 40” E. a distance of 491.06 feet, to a found 1/2 inch iron rod with a yellow cap marked “Pape-Dawson”, the southeast corner of said 47.04 acre tract, the northeast corner of this tract, a point on the west right-of-way line of South Hausman Road (a variable width right-of-way); thence S 00° 03’ 57” W, along and with the west right-of-way of said South Hausman Road, a distance of 245.33 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 84° 21’ 08” W, departing the west right-of-way of said South Hausman Road, a distance of 10.05 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” being a northeast corner of said Lot 30; thence S 00°03’57” W, along and with the west right-of-way of said South Hausman Road, the west line of a 10-dedication for future street widening recorded fn Volume 9559, Pages 114-116 of the Deed and Plat Records of Bexar County, Texas, the east line of said Lot 30, a distance of 351.58 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 17° 06’ 38” E, departing the west right-of-way of said South Hausman Road, Along the south line of a said 10-dedication for future street widening, the east line of said Lot 30, a distance of 34.12 to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” in the west right-of-way line of said South Hausman Road; thence S 00° 03’ 57” W, along and with the west right-of-way of said South Hausman Road, a distance of 551.48 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence S 80° 07’ 33’’ W, departing the west right-of-way line of said South Hausman Road, at a distance of 5.08 feet passing the northeast corner of Oakridge Pointe Unit-4 Subdivision, as recorded in Volume 9534, Page 117, Deed and Plat Records of Bexar County, Texas, continuing along the north line of said Oakridge Pointe, Unit-4 at a distance of 181.40 passing the southwest corner of said Lot 30, Block 8, in all a total distance of 298.93 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence S 46° 06’ 14” W, with the northwest line of Oakridge Pointe Unit-4, a distance of 50.04 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”’, the northwest corner of said subdivision the northeast corner of Lot 20, Block 8, N.C.B. 14614, South Hausman Road Elementary, as recorded in Volume 9535, Pages 34-35, Deed and Plat Records of Bexar County, Texas, being the southeast corner of the remaining portion of that 16.12 acre tract conveyed to Northside Independent School District in Volume 6761, Pages

1256-1274 of the Official Public Records of Real Property of Bexar County, Texas, a point on curve of a non-tangent curve to the left; thence Northwesterly, along and with the east tine of said remaining portion of that 16.12 acre tract and along the arc of said curve to the left, said curve having a radial bearing of S 43° 51’ 41” W, a radius of 375.00 feet, a central angle of 101° 1’ 53”, a chord bearing and distance of N 46° 44’ 15” W, 7.84 feet, an arc length of 7.84 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 47° 20’ 12” W, a distance of 20.00 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” at the north corner of said remaining portion of that 16.12 acre tract; thence S 58° 56’ 36” W, along and with the west line of said remaining portion of that 16.12 acre tract, the south line of said 48.80 acre tract and said Lot 30, a distance of 62.28 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, at the southwest corner of said remaining portion of that 16.12 acre tract, and angle point in the north line of said Lot 20, Block 8 of South Hausman Road Elementary, the beginning of a curve to the right; thence Southwesterly, along and with the northwest and north line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and arc of said curve to the right, said curve having a radius of 300.00 feet, a central angle of 36° 02’ 40”, a chord bearing and distance of S 76° 57’ 56” W, 185.63 feet, an arc length of 188.73 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 85° 00’ 44” W, along and with the north line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance of 115.39 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence Northwesterly, along and with the north and northeast line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and the arc of said curve to the right, said curve having a radius of 350.00 feet, a central angle of 44° 59’ 40”, a chord bearing and distance of N 62° 31’ 12” W. 267.79 feet, an arc length of 274.79 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 40° 01’ 40” W, along and with the northeast line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance of 245.43 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, the beginning of a curve to the left; thence Northwesterly, along and with the northeast line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and the arc of said curve to the left, said curve having a radius of 250.00 feet, a central angle of 49° 57’ 50”, a chord bearing and distance of N 65° 00’ 35” W, 211.17 feet, an arc length of 218.01 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 89° 59’ 30” W, along and with the north line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance of 52.06 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, a point on the west line of a 3 8.966 acre tract recorded in Volume 2569, Page 1217, Official Public Records of Real Property of Bexar County, Texas, the southwest corner of said Lot 30 and the southwest corner of the herein described tract; thence N 00° 00’ 12” E, along and with the east line of said 38.966 acre tract, a distance of 706.02 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” at a common corner between said 38.966 acre tract and said 13.923 acre tract; thence N 14°12’ 23” W. along and with the east line of said 13.923 acre tract, the west line of said Lot 30 and said 48.80 acre tract, a distance of 1071.43 feet to the POINT OF BEGINNING and containing 48.80 acres of land in the City of San Antonio, Bexar County, Texas.

TRACT II:

Drainage easement as provided by document recorded in Volume 7032, Page 1269, Real Property Records of Bexar County, Texas.

TRACT III:

Landscape buffer, lighting and access easement agreement as prodded by document recorded in Volume 41880, Page 1700, Real Property Records of Bexar County, Texas.

EX-10.12

Exhibit 10.12

this instrument prepared by

and when recorded return to:

Kilpatrick Stockton LLP

Hearst Tower, Suite 2500

214 North Tryon Street

Charlotte, North Carolina 28202

Attn: James M. Tucker., Esq.

(SPACE ABOVE THIS LINE FOR RECORDER’S USE)

Loan No.: 50-2859027 Hidden Lakes Apartments

APARTMENT REIT HIDDEN LAKES, LP,
as Borrower

to

WACHOVIA BANK, NATIONAL ASSOCIATION,
as Lender

ASSIGNMENT OF LEASES AND RENTS

Dated: December 28, 2006

     NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

ASSIGNMENT OF LEASES AND RENTS

     THIS ASSIGNMENT OF LEASES AND RENTS (as the same may be hereafter amended, restated or modified, this “Assignment”) made as of December 28, 2006, by APARTMENT REIT HIDDEN LAKES, LP, a Texas limited partnership (“Borrower”), having an address at c/o Triple Net Properties, LLC, 1551 North Tustin Avenue, Suite 300, Santa Ana, California 92705, in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (together with its successors and assigns, “Lender”), whose address is Commercial Real Estate Services, 8739 Research Drive URP — 4, NC 1075, Charlotte, North Carolina 28262.

W I T N E S S E T H:

     THAT, WHEREAS, Borrower has executed that certain Promissory Note (the “Note”) dated of even date herewith, payable to the order of Lender in the stated principal amount of Nineteen Million Two Hundred Eighteen Thousand and No/100 Dollars ($19,218,000.00); and

     WHEREAS, the Note is secured by that certain Deed of Trust, Security Agreement and Fixture Filing (as the same may from time to time be amended, consolidated, renewed or replaced, the "Security Instrument”) dated of even date herewith, from Borrower, for the benefit of Lender, encumbering that certain real property situated in the County of Bexar, State of Texas, as more particularly described on Exhibit “A” attached hereto and incorporated herein by this reference, and all buildings and other improvements now or hereafter located thereon (collectively, the “Improvements”) (said real property and the Improvements are hereinafter sometimes collectively referred to as the “Property”); and

     WHEREAS, Borrower desires to further secure to Lender the performance of the terms, covenants and agreements hereof and of the Note, the Security Instrument and each other document evidencing, securing, guaranteeing or otherwise relating to the indebtedness evidenced by the Note (the Note, the Security Instrument and such other documents, as each of the foregoing may from time to time be amended, consolidated, renewed or replaced, being collectively referred to herein as the “Loan Documents”).

     NOW, THEREFORE, in consideration of the making of the loan evidenced by the Note by Lender to Borrower and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower does hereby irrevocably, absolutely and unconditionally transfer, sell, assign, pledge and convey to Lender, its successors and assigns, all of the right, title and interest of Borrower in and to:

     (a) any and all leases, licenses, rental agreements and occupancy agreements of whatever form now or hereafter affecting all or any part of the Property and any and all guarantees, extensions, renewals, replacements and modifications thereof (collectively, the “Leases”); and

     (b) all deposits (whether for security or otherwise), rents, issues, profits, revenues, royalties, accounts, rights, benefits and income of every nature of and from the Property, including, without limitation, minimum rents, additional rents, termination payments, forfeited security deposits, liquidated damages following an Event of Default (as defined in the Security Instrument) and all proceeds payable under any policy of insurance covering loss of rents resulting from untenantability due to destruction or damage to the Property, together with the immediate and continuing right to collect and receive the same, whether now due or hereafter becoming due, and together with all rights and claims of any kind that Borrower may have against any tenant, lessee or licensee under the Leases or against any other occupant of the Property, any award or other payment which Borrower may hereafter become entitled to receive

with respect to any of the Leases as a result of or pursuant to any bankruptcy, insolvency or reorganization or similar proceedings involving the tenants under such Leases, and any and all payments made by or on behalf of any tenant of any part of the Property in lieu of Rent (collectively, the “Rents”).

     TO HAVE AND TO HOLD the same unto Lender, its successors and assigns.

     IT IS AGREED that this Assignment is made upon the following terms, covenants and conditions

     1. Borrower represents, warrants and covenants to and for the benefit of Lender: (a) that Borrower now is (or with respect to any Leases not yet in existence, will be immediately upon the execution thereof) the absolute owner of the landlord’s interest in the Leases, with full right and title to assign the same and the Rents due or to become due thereunder; (b) that, other than this Assignment and those assignments, if any, specifically permitted in the Security Instrument, there are no outstanding assignments of the Leases or Rents; (c) that no Rents have been anticipated, discounted, released, waived, compromised or otherwise discharged, except for prepayment of rent of not more than one (1) month prior to the accrual thereof; (d) that there are no material defaults now existing under any of the Leases by the landlord or tenant, and there exists no state of facts which, with the giving of notice or lapse of time or both, would constitute a default under any of the Leases by the landlord or tenant, except as disclosed in writing to Lender; (e) that Borrower has and shall duly and punctually observe and perform all covenants, conditions and agreements in the Leases on the part of the landlord to be observed and performed thereunder; and (f) the Leases are in full force and effect and are the valid and binding obligations of Borrower, and, to the knowledge of Borrower, are the valid and binding obligations of the tenants thereto.

     2. Notwithstanding that this instrument is a present, absolute and executed assignment of the Rents and of the Leases and a present, absolute and executed grant of the powers herein granted to Lender, Borrower is hereby permitted, and is hereby granted a revocable license by Lender, to retain possession of the Leases and to collect and retain the Rents unless and until there shall be an Event of Default under this Assignment, the Security Instrument or the other Loan Documents. In the event of such Event of Default, the aforementioned license granted to Borrower shall automatically terminate without notice to Borrower, and Lender may thereafter, without taking possession of the Property, take possession of the Leases and collect the Rents. Further, from and after such termination, Borrower shall be the agent of Lender in collection of the Rents, and any Rents so collected by Borrower shall be held in trust by Borrower for the sole and exclusive benefit of Lender, and Borrower shall, within one (1) business day after receipt of any Rents, pay the same to Lender to be applied by Lender as hereinafter set forth. Furthermore, from and after such Event of Default and termination of the aforementioned license, Lender shall have the right and authority, without any notice whatsoever to Borrower and without regard to the adequacy of the security therefor, to: (a) manage and operate the Property, with full power to employ agents to manage the same; (b) demand, collect, receive and sue for the Rents, including those past due and unpaid; and (c) do all acts relating to such management, operation, rental, leasing, repair improvement and alteration of the Property as Lender in its sole subjective judgment and discretion shall determine. Lender may apply the Rents received by Lender from the Property, after deducting the costs of collection thereof, including, without limitation, attorneys’ fees and a management fee for any management agent so employed, against amounts expended for repairs, upkeep, maintenance, service, fuel, utilities, taxes, assessments, insurance premiums and such other expenses as Lender incurs in connection with the operation of the Property and against interest, principal, required escrow deposits and other sums which have or which may become due, from time to time, under the terms of the Loan Documents, in such order or priority as to any of the items so mentioned as Lender, in its sole subjective discretion, may determine.

     3. Without limiting the rights granted hereinabove, in the event Borrower shall fail to make any payment or to perform any act required under the terms hereof and such failure shall not be cured

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within any applicable grace or cure period, then Lender may, but shall not be obligated to, without prior notice to or demand on Borrower, and without releasing Borrower from any obligation hereof, make or perform the same in such manner and to such extent as Lender may deem necessary to protect the security hereof, including specifically, without limitation, appearing in and defending any action or proceeding purporting to affect the security hereof or the rights or powers of Lender, performing or discharging any obligation, covenant or agreement of Borrower under any of the Leases, and, in exercising any of such powers, paying all necessary costs and expenses, employing counsel and incurring and paying attorneys’ fees. Any sum advanced or paid by Lender for any such purpose, including, without limitation, attorneys’ fees, together with interest thereon at the Default Interest Rate (as defined in the Note) from the date paid or advanced by Lender until repaid by Borrower, shall immediately be due and payable to Lender by Borrower on demand and shall be secured by the Security Instrument and by all of the other Loan Documents securing all or any part of the indebtedness evidenced by the Note.

     4. This Assignment shall not operate to place responsibility for the control, care, management or repair of the Property upon Lender, nor for the performance of any of the terms and conditions of any of the Leases, nor shall it operate to make Lender responsible or liable for any waste committed on the Property by the tenants or any other party or for any dangerous or defective condition of the Property or for any negligence in the management, upkeep, repair or control of the Property. Lender shall not be liable for any loss sustained by Borrower resulting from Lender’s failure to let the Property or from any other act or omission of Lender in managing the Property. This Assignment shall not be construed as making Lender a mortgagee-in-possession. Lender is obligated to account to Borrower only for such Rents as are actually collected or received by Lender.

     5. BORROWER SHALL AND DOES HEREBY INDEMNIFY AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL LIABILITY, LOSS, CLAIM, DEMAND OR DAMAGE WHICH MAY OR MIGHT BE INCURRED BY REASON OF THIS ASSIGNMENT, INCLUDING, WITHOUT LIMITATION, CLAIMS OR DEMANDS FOR SECURITY DEPOSITS FROM TENANTS OF SPACE IN THE IMPROVEMENTS DEPOSITED WITH BORROWER, AND FROM AND AGAINST ANY AND ALL CLAIMS AND DEMANDS WHATSOEVER WHICH MAY BE ASSERTED AGAINST LENDER BY REASON OF ANY ALLEGED OBLIGATIONS OR UNDERTAKINGS ON ITS PART TO PERFORM OR DISCHARGE ANY OF THE TERMS, COVENANTS OR AGREEMENTS CONTAINED IN ANY OF THE LEASES. SHOULD LENDER INCUR ANY LIABILITY BY REASON OF THIS ASSIGNMENT OR IN DEFENSE OF ANY CLAIM OR DEMAND FOR LOSS OR DAMAGE AS PROVIDED ABOVE, THE AMOUNT THEREOF, INCLUDING, WITHOUT LIMITATION, COSTS, EXPENSES AND ATTORNEYS’ FEES, TOGETHER WITH INTEREST THEREON AT THE DEFAULT INTEREST RATE FROM THE DATE PAID OR INCURRED BY LENDER UNTIL REPAID BY BORROWER, SHALL BE IMMEDIATELY DUE AND PAYABLE TO LENDER BY BORROWER UPON DEMAND AND SHALL BE SECURED BY THE SECURITY INSTRUMENT AND BY ALL OF THE OTHER LOAN DOCUMENTS SECURING ALL OR ANY PART OF THE INDEBTEDNESS EVIDENCED BY THE NOTE.

     6. Borrower hereby irrevocably appoints Lender as its attorney-in-fact which power of attorney is coupled with an interest by virtue of this Assignment and is irrevocable so long as any sums are outstanding under the loan evidenced by the Note to, from and after the occurrence of an Event of Default by Borrower hereunder or under any of the other Loan Documents, do, make or perform any act, right or privilege which Lender shall have under or by virtue of this Assignment.

     7. Borrower covenants and agrees that Borrower shall not, without the prior written consent of Lender, further pledge, transfer, mortgage or otherwise encumber or assign the Leases or future payments of Rents, except as otherwise expressly permitted by the terms of the Security Instrument, or

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incur any material indebtedness, liability or other obligation to any tenant, lessee or licensee under the Leases, or permit any Lease to become subordinate to any lien other than the lien of the Security Instrument.

     8. Borrower covenants and agrees that Borrower shall, at its sole cost and expense, appear in and defend any action or proceeding arising under, growing out of, or in any manner connected with the Leases or the obligations, duties or liabilities of the landlord or tenant thereunder, and if Borrower shall fail to do so, Lender, at its option but without obligation, may do so. Borrower shall pay on demand all costs and expenses, including, without limitation, attorneys’ fees, which Lender may incur in connection with Lender’s appearance, voluntary or otherwise, in any such action or proceeding, together with interest thereon at the Default Interest Rate from the date incurred by Lender until repaid by Borrower.

     9. At any time, Lender may, at its option, notify any tenants or other parties of the existence of this Assignment. Borrower does hereby specifically authorize, instruct and direct each and every present and future tenant, lessee and licensee of the whole or any part of the Property to pay all unpaid and future Rents to Lender upon receipt of demand from Lender to pay the same, and Borrower hereby agrees that each such present and future tenant, lessee and licensee may rely upon such written demand from Lender to so pay said Rents without any inquiry into whether there exists an Event of Default hereunder or under the other Loan Documents or whether Lender is otherwise entitled to said Rents. Borrower hereby waives any right, claim or demand which Borrower may now or hereafter have against any present or future tenant, lessee or licensee by reason of such payment of Rents to Lender, and any such payment shall discharge such tenant’s, lessee’s or licensee’s obligation to make such payment to Borrower.

     10. Lender may take or release any security for the indebtedness evidenced by the Note, may release any party primarily or secondarily liable for the indebtedness evidenced by the Note, may grant extensions, renewals or indulgences with respect to the indebtedness evidenced by the Note and may apply any other security therefor held by it to the satisfaction of any indebtedness evidenced by the Note without prejudice to any of its rights hereunder or under any of the Loan Documents.

     11. The acceptance of this Assignment and the collection of the Rents as herein provided shall be without prejudice to Lender. The exercise or failure to exercise by Lender of the rights granted Lender in this Assignment, and the collection of the Rents and the application thereof as herein provided, shall not be considered a waiver by Lender of any Event of Default under the Loan Documents or prevent foreclosure of any liens on the Property nor shall such exercise make Lender liable under any of the Leases, Lender hereby expressly reserving all of its rights and privileges under the Security Instrument and the other Loan Documents as fully as though this Assignment had not been entered into. The rights of Lender hereunder are cumulative and concurrent, may be pursued separately, successively or together and may be exercised as often as occasion therefor shall arise, it being agreed by Borrower that the exercise of any one or more of the rights provided for herein shall not be construed as a waiver of any of the other rights or remedies of Lender, at law or in equity or otherwise, so long as any obligation under the Loan Documents remains unsatisfied.

     12. All rights of Lender hereunder shall inure to the benefit of its successors and assigns; and shall pass to and may be exercised by any assignee of Lender. All obligations of Borrower shall bind its successors and assigns and any subsequent owner of the Property. Borrower hereby agrees that if Lender gives notice to Borrower of an assignment of said rights, upon such notice the liability of Borrower to the assignee of Lender shall be immediate and absolute. Borrower will not set up any claim against Lender or any intervening assignee as a defense, counterclaim or set-off to any action brought by Lender or any

4

intervening assignee for any amounts due hereunder or for possession of or the exercise of rights with respect to the Leases or the Rents.

     13. It shall be an Event of Default hereunder (a) if any representation or warranty made herein by Borrower is determined by Lender to have been false or misleading in any material respect at the time made, or (b) if Borrower violates the provisions of paragraph 7 hereof, or (c) if any Event of Default under the Security Instrument or any of the other Loan Documents shall occur.

     14. If any provision under this Assignment or the application thereof to any entity, person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Assignment and the application of the provisions hereof to other entities, persons or circumstances shall not be affected thereby and shall be enforced to the fullest extent permitted by law.

     15. This Assignment may not be amended, modified or otherwise changed except by a written instrument duly executed by Borrower and Lender.

     16. This Assignment shall be in full force and effect continuously from the date hereof to and until the Security Instrument shall be released of record, and the release of the Security Instrument shall, for all purposes, automatically terminate this Assignment and render this Assignment null and void and of no effect whatsoever. This Assignment shall continue and remain in full force and effect during any period of foreclosure with respect to the Property.

     17. In case of a conflict between any provision of this Assignment and any provision of the other Loan Documents, the provisions of the Note or the Security Instrument, if such document shall be the conflicting other Loan Document, shall prevail and be controlling.

     18. All notices, demands, requests or other communications to be sent by one party to the other hereunder or required by law shall be given and become effective as provided in the Security Instrument.

     19. THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS SITUATED, EXCEPT TO THE EXTENT THAT ANY OF SUCH LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY FEDERAL LAW, IN WHICH CASE SUCH FEDERAL LAW SHALL SO GOVERN AND BE CONTROLLING.

     20. BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FOREGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THE DEBT OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR BORROWER, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.

     21. This Assignment may be executed in any number of counterparts, each of which shall be effective only upon delivery and thereafter shall be deemed an original, and all of which shall be taken to be one and the same instrument, for the same effect as if all parties hereto had signed the same signature page. Any signature page of this Assignment may be detached from any counterpart of this Assignment

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without impairing the legal effect of any signatures thereon and may be attached to another counterpart of this Assignment identical in form hereto but having attached to it one or more additional signature pages.

     22. In addition to, but not in lieu of, any other rights hereunder, Lender shall have the right to institute suit and obtain a protective or mandatory injunction against Borrower to prevent a breach or Event of Default, or to enforce the observance, of the agreements, covenants, terms and conditions contained herein.

     23. Lender may sell, transfer and deliver the Note and the Loan Documents to one or more investors in the secondary mortgage market. In connection with such sale, Lender may retain or assign responsibility for servicing the loan evidenced by the Note or may delegate some or all of such responsibility and/or obligations to a servicer, including, but not limited to, any subservicer or master servicer, on behalf of the investors. All references to Lender herein shall refer to and include, without limitation, any such servicer, to the extent applicable.

     24. Lender shall, as a matter of absolute right, be entitled, upon application to a court of applicable jurisdiction, and without notice to Borrower, to the appointment of a receiver to obtain and secure the rights of Lender hereunder and the benefits intended to be provided to Lender hereunder.

     25. Notwithstanding anything to the contrary contained in this Assignment, the liability of Borrower and its officers, directors, general partners, managers, members and principals for the indebtedness secured hereby and for the performance of the other agreements, covenants and obligations contained herein and in the Loan Documents shall be limited as set forth in the Note.

[The Remainder of the Page is Intentionally Blank]

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     THIS ASSIGNMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. In case of a conflict between any provision of this Assignment and any provision of the other Loan Documents, the provisions of the Note or the Security Instrument, if they shall be the conflicting other Loan Document, shall prevail and be controlling.

     IN WITNESS WHEREOF, Borrower has executed this Assignment as of the day and year first written above.

BORROWER:
BORROWER ACKNOWLEDGES AND AGREES THAT THIS ASSIGNMENT CONTAINS INDEMNIFICATION PROVISIONS PURSUANT TO SECTION 5 HEREOF	APARTMENT REIT HIDDEN LAKES, LP, a Texas limited partnership
	By:	Apartment REIT Hidden Lakes GP, LLC, a Delaware limited liability company, its General Partner
		By:	NNN Apartment REIT Holdings, L.P., a Virginia limited partnership, its Manager
			By:	NNN Apartment REIT, Inc., a Maryland corporation, its General Partner
				By:	/s/ Andrea R. Biller
				Name:	Andrea R. Biller
				Title:	Secretary

STATE OF California

COUNTY OF Orange

     Before me, Andrea Biller, known to me to be the person whose name is subscribed to the foregoing instrument as                      of NNN Apartment REIT, Inc., a Maryland corporation, the General Partner of NNN Apartment REIT Holdings, L.P., a Virginia limited partnership, the Manager of Apartment REIT Hidden Lakes GP, LLC, a Delaware limited liability company, the General Partner of APARTMENT REID HIDDEN LAKES, LP, a Texas limited partnership, and acknowledged to me that she executed the same on behalf of said limited liability company, for the purposes and consideration therein expressed, as the act and deed of said limited partnership.

     Given under my hand and seal of office this 27^th day of December, 2006.

/s/ J. Hu
Printed Name:	J. Hu
Notary Public for the State of	California
My Commission Expires:	Sept. 30, 2009

[SEAL]
J. Hu
Commission # 1610142
Notary Public — California
Orange County
My Comm. Expires Sep. 30, 2009

EXHIBIT “A”
[Legal Description]

TRACT I

A 48.80 acre, or 2,125,701 square feet, tract of land, out of a 69.40 acre tract recorded in Volume 6447, Pages 1192-1195 of the Official Public Records of Real Property of Bexar County, Texas, a portion of the called 48.97 acre tract of land (“Tract I”) recorded in Volume 10288, Pages 623-627 of the Official Public Records of Real Property of Bexar County, Texas, and being all of Lot 30, Block 8 of the Replat and Subdivision Plat Establishing Bandera Springs as recorded in Volume 9559, Pages 114-116 of the Deed and Plat Records of Bexar County, Texas, also being out of the Perry Davis Survey Number 267, Abstract Number 189, County Block 4528, now all in New City Block (N.C.B.) 14614, In the City of San Antonio, Bexar County, Texas, said 48.88 acre being more particularly described by metes and bounds as follows, with the basis of bearings being the said Bandera Springs Subdivision:

BEGINNING at a found Texas Department of Transportation monument with brass plate, a point on the southeast right-of-way line of F.M. 1604, the northwest corner of the above referenced 69.40 acre tract, the northeast corner of a 13.923 acre tract recorded in Volume 10593, Pages 769-772 of the Official Public Records of Real Property of Bexar County, Texas, the northwest corner of the herein described tract, from which a found 1/2 inch iron rod bears S 45° 39’ 57” W, a distance of 126.85 feet; thence N 45° 30’ 49” E, along and with the southeast right-of-way of said F.M. 1604, a distance of 196.51 feet to a set “x” in concrete; thence : N 44° 34’ 21” E, along and with the southeast right-of-way of said F.M. 1604, a distance of 40.71 feet to a set “x” in concrete, the west corner of a 47.04 acre tract recorded in Volume 7321, Page 1004-1007 of the Official Public Records of Real Property of Bexar County, Texas, the north corner of the herein described tract; thence departing the southeast right-of-way line of said F.M. 1604, along and with the southwest line of said 47.04 acre tract, the northeast line of herein described tract the following calls and distances: S 44° 27’ 48” E, a distance of 68.58 feet to the center of a sanitary sewer manhole lid; S 30° 13’ 45” E, a distance of 397.94 feet to a set “x” on a sanitary sewer manhole lid; S 60° 22’ 03” E. a distance of 698.23 feet to the center of a sanitary sewer manhole lid; S 22° 51’ 53” E. a distance of 251.38 feet to a set “x” on a sanitary sewer manhole lid; S 78° 38’ 40” E. a distance of 491.06 feet, to a found 1/2 inch iron rod with a yellow cap marked “Pape-Dawson”, the southeast corner of said 47.04 acre tract, the northeast corner of this tract, a point on the west right-of-way line of South Hausman Road (a variable width right-of-way); thence S 00° 03’ 57” W, along and with the west right-of-way of said South Hausman Road, a distance of 245.33 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 84° 21’ 08” W, departing the west right-of-way of said South Hausman Road, a distance of 10.05 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” being a northeast corner of said Lot 30; thence S 00°03’57” W, along and with the west right-of-way of said South Hausman Road, the west line of a 10-dedication for future street widening recorded fn Volume 9559, Pages 114-116 of the Deed and Plat Records of Bexar County, Texas, the east line of said Lot 30, a distance of 351.58 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 17° 06’ 38” E, departing the west right-of-way of said South Hausman Road, Along the south line of a said 10-dedication for future street widening, the east line of said Lot 30, a distance of 34.12 to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” in the west right-of-way line of said South Hausman Road; thence S 00° 03’ 57” W, along and with the west right-of-way of said South Hausman Road, a distance of 551.48 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence S 80° 07’ 33’’ W, departing the west right-of-way line of said South Hausman Road, at a distance of 5.08 feet passing the northeast corner of Oakridge Pointe Unit-4 Subdivision, as recorded in Volume 9534, Page 117, Deed and Plat Records of Bexar County, Texas, continuing along the north line of said Oakridge Pointe, Unit-4 at a distance of 181.40 passing the southwest corner of said Lot 30, Block 8, in all a total distance of 298.93 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence S 46° 06’ 14” W, with the northwest line of Oakridge Pointe Unit-4, a distance of 50.04 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson"', the northwest corner of said subdivision the northeast corner of Lot 20, Block 8, N.C.B. 14614, South Hausman Road Elementary, as recorded in Volume 9535, Pages 34-35, Deed and Plat Records of Bexar County, Texas, being the southeast corner of the remaining

portion of that 16.12 acre tract conveyed to Northside Independent School District in Volume 6761, Pages 1256-1274 of the Official Public Records of Real Property of Bexar County, Texas, a point on curve of a non-tangent curve to the left; thence Northwesterly, along and with the east tine of said remaining portion of that 16.12 acre tract and along the arc of said curve to the left, said curve having a radial bearing of S 43° 51’ 41” W, a radius of 375.00 feet, a central angle of 101° 1’ 53”, a chord bearing and distance of N 46° 44’ 15” W, 7.84 feet, an arc length of 7.84 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 47° 20’ 12” W, a distance of 20.00 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” at the north corner of said remaining portion of that 16.12 acre tract; thence S 58° 56’ 36” W, along and with the west line of said remaining portion of that 16.12 acre tract, the south line of said 48.80 acre tract and said Lot 30, a distance of 62.28 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, at the southwest corner of said remaining portion of that 16.12 acre tract, and angle point in the north line of said Lot 20, Block 8 of South Hausman Road Elementary, the beginning of a curve to the right; thence Southwesterly, along and with the northwest and north line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and arc of said curve to the right, said curve having a radius of 300.00 feet, a central angle of 36° 02’ 40”, a chord bearing and distance of S 76° 57’ 56” W, 185.63 feet, an arc length of 188.73 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 85° 00’ 44” W, along and with the north line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance of 115.39 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence Northwesterly, along and with the north and northeast line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and the arc of said curve to the right, said curve having a radius of 350.00 feet, a central angle of 44° 59’ 40”, a chord bearing and distance of N 62° 31’ 12” W. 267.79 feet, an arc length of 274.79 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 40° 01’ 40” W, along and with the northeast line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance of 245.43 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, the beginning of a curve to the left; thence Northwesterly, along and with the northeast line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and the arc of said curve to the left, said curve having a radius of 250.00 feet, a central angle of 49° 57’ 50”, a chord bearing and distance of N 65° 00’ 35” W, 211.17 feet, an arc length of 218.01 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 89° 59’ 30” W, along and with the north line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance of 52.06 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, a point on the west line of a 3 8.966 acre tract recorded in Volume 2569, Page 1217, Official Public Records of Real Property of Bexar County, Texas, the southwest corner of said Lot 30 and the southwest corner of the herein described tract; thence N 00° 00’ 12” E, along and with the east line of said 38.966 acre tract, a distance of 706.02 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” at a common corner between said 38.966 acre tract and said 13.923 acre tract; thence N 14°12’ 23” W. along and with the east line of said 13.923 acre tract, the west line of said Lot 30 and said 48.80 acre tract, a distance of 1071.43 feet to the POINT OF BEGINNING and containing 48.80 acres of land in the City of San Antonio, Bexar County, Texas.

TRACT II:

Drainage easement as provided by document recorded in Volume 7032, Page 1269, Real Property Records of Bexar County, Texas.

TRACT III:

Landscape buffer, lighting and access easement agreement as prodded by document recorded in Volume 41880, Page 1700, Real Property Records of Bexar County, Texas.

EX-10.13

Exhibit 10.13

Loan No.: 50-2859027 Hidden Lakes Apartments

ASSIGNMENT OF WARRANTIES AND OTHER CONTRACT RIGHTS

     THIS ASSIGNMENT OF WARRANTIES AND OTHER CONTRACT RIGHTS (as the same may be hereafter amended, restated or modified, this “Assignment”), made as of December 28, 2006, by Apartment REIT Hidden Lakes, LP, a Texas limited partnership (“Borrower”), having an address at c/o Triple Net Properties, LLC, 1551 North Tustin Avenue, Suite 200, Santa Ana, California 92705, in favor of Wachovia Bank, National Association, a national banking association (together with its successors and assigns, “Lender”), whose address is Commercial Real Estate Services, 8739 Research Drive URP - 4, NC 1075, Charlotte, North Carolina 28262.

WITNESSETH:

     THAT, WHEREAS, Borrower has executed and delivered to Lender a Promissory Note dated of even date herewith (the “Note”), payable to the order of Lender, which Note evidences a loan made by Lender to Borrower; and

     WHEREAS, the Note is secured by that certain Deed of Trust, Security Agreement and Fixture Filing dated of even date herewith (as the same may from time to time be amended, consolidated, renewed or replaced, the “Security Instrument”), from Borrower, as mortgagor, to Lender, as mortgagee, encumbering that certain real property situated at 8910 North Loop 1604 West, San Antonio, and County of Bexar, State of Texas, as more particularly described on Exhibit “A” attached hereto and by this reference incorporated herein (the “Real Estate”); and

     WHEREAS, Borrower is desirous of further securing to Lender the repayment of the indebtedness evidenced by the Note and the performance of the other terms, covenants and agreements contained herein and in the Note, the Security Instrument and each other document evidencing, securing, guaranteeing and/or relating to the indebtedness evidenced by the Note (the Note, the Security Instrument and such other documents, as each of the foregoing may from time to time be amended or replaced, are herein sometimes collectively referred to as the “Loan Documents”).

     NOW, THEREFORE, in consideration of the making of the loan evidenced by the Note by Lender to Borrower and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower hereby irrevocably, absolutely and unconditionally assigns and transfers to Lender, its successors and assigns, all of Borrower’s right, title and interest in and to:

     (A) any and all contracts and agreements with management agents, leasing agents, sales agents, service and maintenance agents, contractors and other third parties (collectively, the “Contracting Parties”, or, singularly, a “Contracting Party”), whether now existing or hereafter arising, relating to the management, operation, leasing, sale, maintenance and repair of the Real Estate and/or the apartment complex containing a total of 630 units and other improvements located on the Real Estate (the “Improvements”) (the Real Estate and the Improvements are sometimes hereinafter collectively referred to as the “Property”), including, without limitation, management agreements, equipment leases and personal property leases (collectively, the “Contracts” or, singularly, a "Contract”); and

     (B) any and all warranties and guaranties relating to the Property or any fixtures, equipment or personal property owned by Borrower and located on and/or used in connection with the Property, whether now existing or hereafter arising; and

     (C) any and all permits, licenses, certificates of use and occupancy (or their equivalent) and applications and approvals issued by any governmental authority or agency relating to the construction, ownership, operation and/or use of the Property, whether now existing or hereafter arising.

(The Contracts, together with the items referred to in subparagraphs (B) and (C) above, are sometimes herein collectively referred to as the “General Intangibles”.)

     This Assignment is made upon the following terms and conditions:

     1. Borrower represents, warrants and covenants to and with Lender that: (a) Borrower shall not make any changes in or amendments to any of the General Intangibles without the prior written consent of Lender, which consent shall not be unreasonably withheld, provided, however, that notwithstanding the foregoing, Lender’s consent shall not be required with respect to changes in or amendments to any Contract (i) which does not relate to the overall management or operation of the Property, (ii) which is terminable without cause and without payment of any penalty or termination fee on thirty (30) days’ notice, and (iii) under which the Contractor does not have any right, by reason of applicable law or otherwise, to assert a lien against the Property which is superior to the lien of the Security Instrument; (b) Borrower shall not tender or accept a surrender or cancellation of any of the General Intangibles without the prior written consent of Lender where such surrender or cancellation would materially or adversely affect the Property or Lender’s interest therein or Lender’s security or where such surrender or cancellation would violate the terms of any Loan Document; (c) Borrower shall promptly provide to Lender copies of all changes in or amendments to the Contract whether or not Lender’s consent thereto is required pursuant to clause (a) above and Borrower shall promptly notify Lender in writing of any surrender or cancellation of a Contract whether or not Lender’s consent thereto is required pursuant to clause (b) above; (d) except as otherwise expressly permitted by the terms of the Security Instrument, Borrower has not assigned or granted and will not assign or grant a security interest in any of the General Intangibles to anyone other than Lender; (e) Borrower’s interest in the General Intangibles is not subject to any claim, setoff, lien, deduction or encumbrance of any nature (other than the encumbrance created hereby, the encumbrance created by the Security Instrument and those subordinate encumbrances, if any, created in connection with any junior encumbrances on the Real Estate expressly permitted by the terms of the Security Instrument); (f) Borrower has full power and authority to make this Assignment; (g) Borrower shall make all required payments and otherwise perform its obligations under the General Intangibles; and (h) Borrower shall give immediate notice to Lender of any notice of default served upon Borrower with respect to its obligations under any of the General Intangibles and, at the sole cost and expense of Borrower, shall enforce or secure the performance of each and every material obligation of the Contracting Parties to be kept or performed under the Contracts.

     2. Neither this Assignment nor any action or actions on the part of Lender (including, without limitation, any assumption by Lender of the rights and obligations under the General Intangibles pursuant to the provisions of Paragraph 3 hereof) shall relieve Borrower of any obligation under the General Intangibles and Borrower shall continue to be primarily liable for all obligations thereunder, Borrower hereby agreeing to perform each and all of its obligations under the General Intangibles. Borrower hereby protects, defends, indemnifies and holds Lender free and harmless from and against any and all loss, cost, liability or expense (including, but not limited to, attorneys’ fees and accountants’ fees) resulting from any failure of Borrower to so perform under the General Intangibles.

     3. It shall be an Event of Default hereunder upon any failure by Borrower in the performance or observance of any covenant or condition hereof and the continuance of such failure for thirty (30) days (or such shorter period of time provided under any other Loan Document) after notice of such default from Lender (provided that no such notice shall be required if not required under any other Loan Document) within which to cure the same. Upon an Event of Default hereunder or under any of the

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other Loan Documents, Lender may, but shall not be obligated to, assume any or all of the obligations of Borrower under any or all of the Contracts and/or exercise the rights, benefits and privileges of Borrower under any or all of the General Intangibles.

     4. Upon the occurrence of an Event of Default hereunder or under any of the other Loan Documents, Lender may give notice to any or all of the Contracting Parties, either requiring the Contracting Party to continue performance under its Contract or, alternatively, terminating the Contract. This Assignment shall constitute a direction to and full authority to the Contracting Parties under the Contracts to act at Lender’s written direction and otherwise perform on Lender’s behalf under the Contracts, without proof of the event of default relied upon. The Contracting Parties shall be entitled to rely upon written notice from Lender that Lender has assumed all of the rights and obligations of Borrower under the applicable Contract without any inquiry into whether Borrower is in default hereunder or under any of the other Loan Documents. Such assumption of a Contract by Lender shall be evidenced by written notice from Lender to the applicable Contracting Party. Under no circumstances shall Lender be deemed by any party to have assumed Borrower’s rights and obligations under a Contract unless and until such written notice is delivered to the Contracting Party in accordance with the foregoing provision.

     5. Lender shall have the right at any time, but shall have no obligation, to take in its name or in the name of Borrower, or otherwise, such action as Lender may at any time or from time to time determine to be reasonably necessary to cure any default under the General Intangibles or to protect the rights of Borrower or Lender thereunder. Lender shall incur no liability to Borrower if any action taken by Lender or in Lender’s behalf in good faith pursuant to this Assignment shall prove to be in whole or in part inadequate or invalid. Borrower hereby protects, defends, indemnifies and holds Lender and its affiliated entities, free and harmless from and against any and all loss, cost, liability or expense (including, but not limited to, attorneys’ fees and accountants’ fees) to which Lender may be exposed, or that Lender may incur, in exercising any of its rights under this Assignment, unless caused by the intentional misconduct or gross negligence of Lender.

     6. Borrower hereby irrevocably constitutes and appoints Lender its true and lawful attorney-in-fact in Borrower’s name or in Lender’s name, or otherwise, to, from and after the occurrence of an Event of Default by Borrower hereunder or under any of the other Loan Documents to enforce all of the rights of Borrower under the General Intangibles. It is hereby recognized that the power of attorney herein granted is coupled with an interest and shall not be revocable so long as any sums are outstanding under the loan evidenced by the Note.

     7. Borrower shall deliver to Lender a true, correct and complete copy of each Contract promptly after it has been executed and delivered by the parties thereto.

     8. Notwithstanding anything to the contrary contained herein, Lender shall have no right under this Assignment to assume any Contract or to exercise any rights, benefits or privileges of Borrower under any of the other General Intangibles until Borrower shall be in default under the terms of this Assignment or the terms of any of the other Loan Documents and such default shall not have been cured within any applicable grace or cure period.

     9. Borrower shall promptly obtain and deliver to Lender consents to the terms of this Assignment, in forms reasonably acceptable to Lender, from such Contracting Parties as Lender may request from time to time.

     10. This Assignment and the agreements and undertakings of Borrower hereunder shall be binding upon Borrower, their successors and assigns and any subsequent owner of the Property, and shall

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inure to the benefit of Lender and its successors and assigns and any purchaser of any interest of Lender in the Note, the Security Instrument and the other Loan Documents.

     11. Borrower covenants and agrees to make, execute and deliver all such further or additional instruments as may be necessary to satisfy the intents and purposes hereof and to perfect the assignment made hereby.

     12. This Assignment shall be construed under and governed by the laws of the State in which the Property is located, except to the extent that any of such laws may now or hereafter be preempted by Federal law, in which case such Federal law shall so govern and be controlling. In any action brought under or arising out of this Assignment or the other Loan Documents, Borrower hereby consents to the jurisdiction of any competent court within the State in which the Property is located and consents to service of process by any means authorized by the law of the State in which the Property is located.

     13. All notices, demands, requests or other communication to be sent by one party to any other hereunder or required by law shall be in writing and shall be deemed to have been validly given or served by delivery of the same in person to the intended addressee, or by depositing the same with Federal Express or another reputable private courier service for next business day delivery to the intended addressee at its address set forth on the first page of this Assignment or at such other address as may be designated by such party as herein provided, or by depositing the same in the United States mail, postage prepaid, registered or certified mail, return receipt requested, addressed to the intended addressee at its address set forth on the first page of this Assignment or at such other address as may be designated by such party as herein provided. All notices, demands and requests shall be effective upon such personal delivery, or one (1) business day after being deposited with the private courier service, or two (2) business days after being deposited in the United States mail as required above. Rejection or other refusal to accept or the inability to deliver because of changed address of which notice was given as herein required shall be deemed to be receipt of the notice, demand or request sent. By giving to any other party hereto at least fifteen (15) days’ prior written notice thereof in accordance with the provisions hereof, the parties hereto shall have the right from time to time to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America.

     14. In case of a conflict between any provision of this Assignment and any provision of the other Loan Documents, the provisions of the Note or the Security Instrument, if they shall be the conflicting other Loan Document, shall prevail and be controlling.

     15. This Assignment may be executed in any number of counterparts, each of which shall be effective upon delivery and thereafter shall be deemed an original, and all of which shall be taken to be one and the same instrument, for the same effect as if all parties hereto had signed the same signature page. Any signature page of this Assignment may be detached from any counterpart of this Assignment without impairing the legal effect of any signatures thereon and may be attached to another counterpart of this Assignment identical in form hereto but having attached to it one or more additional signature pages.

     16. Notwithstanding anything to the contrary contained in this Assignment, the liability of Borrower and its officers, directors, general partners, managers, members and principals for the indebtedness issued hereby and for the performance of the other agreements, covenants and obligations contained herein and in the Loan Documents shall be limited as set forth in Section 2.6 of the Note.

     17. If any provision under this Assignment or the application thereof to any entity, person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Assignment and the application of the provisions hereof to other entities, persons or circumstances shall not be affected thereby and shall be enforced to the fullest extent permitted by law.

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     18. This Assignment may not be amended, modified or otherwise changed except by a written instrument duly executed by Borrower and Lender.

[THE BALANCE OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

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     IN WITNESS WHEREOF, Borrower has executed this Assignment as of the day and year first above written.

BORROWER:
APARTMENT REIT HIDDEN LAKES, LP,
a Texas limited partnership
By:	Apartment REIT Hidden Lakes GP, LLC,
	a Delaware limited liability company,
	its General Partner
	By:	NNN Apartment REIT Holdings, L.P.,
		a Virginia limited partnership,
		its Manager
		By:	NNN Apartment REIT, Inc.,
			a Maryland corporation,
			its General Partner
			By:	/s/ Andrea R. Biller
			Name:	Andrea R. Biller
			Title:	Secretary

EXHIBIT “A”

Legal Description

TRACT I

A 48.80 acre, or 2,125,701 square feet, tract of land, out of a 69.40 acre tract recorded in Volume 6447, Pages 1192-1195 of the Official Public Records of Real Property of Bexar County, Texas, a portion of the called 48.97 acre tract of land (“Tract I”) recorded in Volume 10288, Pages 623-627 of the Official Public Records of Real Property of Bexar County, Texas, and being all of Lot 30, Block 8 of the Replat and Subdivision Plat Establishing Bandera Springs as recorded in Volume 9559, Pages 114-116 of the Deed and Plat Records of Bexar County, Texas, also being out of the Perry Davis Survey Number 267, Abstract Number 189, County Block 4528, now all in New City Block (N.C.B.) 14614, In the City of San Antonio, Bexar County, Texas, said 48.88 acre being more particularly described by metes and bounds as follows, with the basis of bearings being the said Bandera Springs Subdivision:

BEGINNING at a found Texas Department of Transportation monument with brass plate, a point on the southeast right-of-way line of F.M. 1604, the northwest corner of the above referenced 69.40 acre tract, the northeast corner of a 13.923 acre tract recorded in Volume 10593, Pages 769-772 of the Official Public Records of Real Property of Bexar County, Texas, the northwest corner of the herein described tract, from which a found 1/2 inch iron rod bears S 45° 39’ 57” W, a distance of 126.85 feet; thence N 45° 30’ 49” E, along and with the southeast right-of-way of said F.M. 1604, a distance of 196.51 feet to a set “x” in concrete; thence : N 44° 34’ 21” E, along and with the southeast right-of-way of said F.M. 1604, a distance of 40.71 feet to a set “x” in concrete, the west corner of a 47.04 acre tract recorded in Volume 7321, Page 1004-1007 of the Official Public Records of Real Property of Bexar County, Texas, the north corner of the herein described tract; thence departing the southeast right-of-way line of said F.M. 1604, along and with the southwest line of said 47.04 acre tract, the northeast line of herein described tract the following calls and distances: S 44° 27’ 48” E, a distance of 68.58 feet to the center of a sanitary sewer manhole lid; S 30° 13’ 45” E, a distance of 397.94 feet to a set “x” on a sanitary sewer manhole lid; S 60° 22’ 03” E. a distance of 698.23 feet to the center of a sanitary sewer manhole lid; S 22° 51’ 53” E. a distance of 251.38 feet to a set “x” on a sanitary sewer manhole lid; S 78° 38’ 40” E. a distance of 491.06 feet, to a found 1/2 inch iron rod with a yellow cap marked “Pape-Dawson”, the southeast corner of said 47.04 acre tract, the northeast corner of this tract, a point on the west right-of-way line of South Hausman Road (a variable width right-of-way); thence S 00° 03’ 57” W, along and with the west right-of-way of said South Hausman Road, a distance of 245.33 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 84° 21’ 08” W, departing the west right-of-way of said South Hausman Road, a distance of 10.05 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” being a northeast corner of said Lot 30; thence S 00°03’57” W, along and with the west right-of-way of said South Hausman Road, the west line of a 10-dedication for future street widening recorded fn Volume 9559, Pages 114-116 of the Deed and Plat Records of Bexar County, Texas, the east line of said Lot 30, a distance of 351.58 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 17° 06’ 38” E, departing the west right-of-way of said South Hausman Road, Along the south line of a said 10-dedication for future street widening, the east line of said Lot 30, a distance of 34.12 to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” in the west right-of-way line of said South Hausman Road; thence S 00° 03’ 57” W, along and with the west right-of-way of said South Hausman Road, a distance of 551.48 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence S 80° 07’ 33’’ W, departing the west right-of-way line of said South Hausman Road, at a distance of 5.08 feet passing the northeast corner of Oakridge Pointe Unit-4 Subdivision, as recorded in Volume 9534, Page 117, Deed and Plat Records of Bexar County, Texas, continuing along the north line of said Oakridge Pointe, Unit-4 at a distance of 181.40 passing the southwest corner of said Lot 30, Block 8, in all a total distance of 298.93 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence S 46° 06’ 14” W, with the northwest line of Oakridge Pointe Unit-4, a distance of 50.04 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson"', the northwest corner of said subdivision the northeast corner of Lot 20, Block 8, N.C.B. 14614, South Hausman Road Elementary, as recorded in Volume 9535,

Pages 34-35, Deed and Plat Records of Bexar County, Texas, being the southeast corner of the remaining portion of that 16.12 acre tract conveyed to Northside Independent School District in Volume 6761, Pages 1256-1274 of the Official Public Records of Real Property of Bexar County, Texas, a point on curve of a non-tangent curve to the left; thence Northwesterly, along and with the east tine of said remaining portion of that 16.12 acre tract and along the arc of said curve to the left, said curve having a radial bearing of S 43° 51’ 41” W, a radius of 375.00 feet, a central angle of 101° 1’ 53”, a chord bearing and distance of N 46° 44’ 15” W, 7.84 feet, an arc length of 7.84 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 47° 20’ 12” W, a distance of 20.00 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” at the north corner of said remaining portion of that 16.12 acre tract; thence S 58° 56’ 36” W, along and with the west line of said remaining portion of that 16.12 acre tract, the south line of said 48.80 acre tract and said Lot 30, a distance of 62.28 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, at the southwest corner of said remaining portion of that 16.12 acre tract, and angle point in the north line of said Lot 20, Block 8 of South Hausman Road Elementary, the beginning of a curve to the right; thence Southwesterly, along and with the northwest and north line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and arc of said curve to the right, said curve having a radius of 300.00 feet, a central angle of 36° 02’ 40”, a chord bearing and distance of S 76° 57’ 56” W, 185.63 feet, an arc length of 188.73 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 85° 00’ 44” W, along and with the north line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance of 115.39 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence Northwesterly, along and with the north and northeast line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and the arc of said curve to the right, said curve having a radius of 350.00 feet, a central angle of 44° 59’ 40”, a chord bearing and distance of N 62° 31’ 12” W. 267.79 feet, an arc length of 274.79 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 40° 01’ 40” W, along and with the northeast line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance of 245.43 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, the beginning of a curve to the left; thence Northwesterly, along and with the northeast line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract and the arc of said curve to the left, said curve having a radius of 250.00 feet, a central angle of 49° 57’ 50”, a chord bearing and distance of N 65° 00’ 35” W, 211.17 feet, an arc length of 218.01 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”; thence N 89° 59’ 30” W, along and with the north line of said South Hausman Road Elementary, the south line of said Lot 30 and said 48.80 acre tract, a distance of 52.06 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson”, a point on the west line of a 3 8.966 acre tract recorded in Volume 2569, Page 1217, Official Public Records of Real Property of Bexar County, Texas, the southwest corner of said Lot 30 and the southwest corner of the herein described tract; thence N 00° 00’ 12” E, along and with the east line of said 38.966 acre tract, a distance of 706.02 feet to a set 1/2 inch iron rod with yellow cap marked “Pape-Dawson” at a common corner between said 38.966 acre tract and said 13.923 acre tract; thence N 14°12’ 23” W. along and with the east line of said 13.923 acre tract, the west line of said Lot 30 and said 48.80 acre tract, a distance of 1071.43 feet to the POINT OF BEGINNING and containing 48.80 acres of land in the City of San Antonio, Bexar County, Texas.

TRACT II:

Drainage easement as provided by document recorded in Volume 7032, Page 1269, Real Property Records of Bexar County, Texas.

TRACT III:

Landscape buffer, lighting and access easement agreement as prodded by document recorded in Volume 41880, Page 1700, Real Property Records of Bexar County, Texas.

EX-10.14

Exhibit 10.16

UNSECURED PROMISSORY NOTE (this “Note”)

$10,000,000

December 28, 2006 (the “Note Date”)

     FOR VALUE RECEIVED, NNN Apartment REIT Holdings, L.P., a Virginia limited partnership (“Borrower”), unconditionally promises to pay NNN Realty Advisors, Inc., a Delaware corporation (“Lender”), in the manner and at the place hereinafter provided, the principal amount of Ten Million Dollars ($10,000,000).

     Borrower also promises to pay interest on the unpaid principal amount hereof from the Note Date until paid in full at a rate per annum equal to the Interest Rate (capitalized terms used herein and not otherwise defined herein shall have the meanings provided in Schedule A attached hereto), provided that any principal amount not paid when due and, to the extent permitted by applicable law, any interest not paid when due, in each case whether at stated maturity, declaration, acceleration, demand or otherwise (both before as well as after judgment), shall bear interest payable upon demand at a rate per annum equal to the Default Interest Rate. Interest on this Note shall be payable in arrears on the first day of each month beginning on the Commencement Date, each date on which an installment of principal is due and payable hereunder, upon any prepayment of this Note (to the extent accrued on the amount being prepaid) and at maturity. All computations of interest shall be made by Lender on the basis of a 365-day year, for the actual number of days elapsed in the relevant period (including the first day but excluding the last day). In no event shall the interest rate payable on this Note exceed the maximum rate of interest permitted to be charged under applicable law.

     1. Maturity Date. The outstanding principal amount of the Note, and any accrued but unpaid interest thereon, shall be automatically due and payable on the Maturity Date.

     2. Payments. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of Lender located at 1551 N. Tustin Avenue, Suite 200, Santa Ana, California 92705, or at such other place as Lender may direct. Whenever any payment on this Note is stated to be due on a day that is not a Business Day (as defined herein), such payment shall instead be made on the next Business Day and such extension of time shall be included in the computation of interest payable on this Note. Each payment made hereunder shall be credited first to interest then due and the remainder of such payment shall be credited to principal, and interest shall thereupon cease to accrue upon the principal so credited. Each of Lender and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof the Lender and any subsequent holder of this Note will mutually agree on the amount of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of Borrower hereunder with respect to payments of principal or interest on this Note. “Business Day” means any day other than a Saturday, Sunday or legal holiday under the laws of the State of California or

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any other day on which banking institutions located in such state are authorized or required by law or other governmental action to close.

     3. Prepayments. Borrower shall have the right at any time and from time to time on or prior to the Maturity Date to prepay the principal of this Note in whole or in part, without premium or penalty. Any prepayment hereunder shall be accompanied by the payment of accrued interest on the principal amount of the Note being prepaid to the date of prepayment.

     4. Covenants. Borrower covenants and agrees that until this Note is paid in full it will:

     (a) promptly provide to Lender financial and operational information with respect to Borrower or any of its subsidiaries as Lender may reasonably request;

     (b) promptly after the occurrence of an Event of Default (as defined herein) or an event, act or condition that, with notice or lapse of time or both, would constitute an Event of Default, provide Lender with a certificate of the chief executive officer, chief financial officer or general partner(s) of Borrower specifying the nature thereof and Borrower’s proposed response thereto; and

     (c) not merge or consolidate with any other Person (as defined herein), or sell, lease or otherwise dispose of all or any substantial part of its property or assets to any other Person.

     “Person” means any individual, partnership, limited liability company, joint venture, firm, corporation, association, bank, trust or other enterprise, whether or not a legal entity, or any government or political subdivision or any agency, department or instrumentality thereof.

     5. Representations and Warranties. Borrower hereby represents and warrants to Lender that:

     (a) it is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its organization and has the corporate power and authority to own and operate its properties, to transact the business in which it is now engaged and to execute and deliver this Note;

     (b) this Note constitutes the duly authorized, legally valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms;

     (c) all consents and grants of approval required to have been granted by any Person in connection with the execution, delivery and performance of this Note have been granted;

     (d) the execution, delivery and performance by Borrower of this Note do not and will not violate any law, governmental rule or regulation, court order or

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agreement to which it is subject or by which its properties are bound or the charter documents or bylaws of Borrower;

     (e) there is no action, suit, proceeding or governmental investigation pending or, to the knowledge of Borrower, threatened against Borrower or any of its subsidiaries or any of their respective assets which, if adversely determined, would have a material adverse effect on the business, operations, properties, assets, condition (financial or otherwise) or prospects of Borrower and its subsidiaries, taken as a whole, or the ability of Borrower to comply with its obligations hereunder; and

     (f) the proceeds of the loan evidenced by this Note shall be used by Borrower for the purpose of acquiring real property.

     6. Events of Default. The occurrence of any of the following events shall constitute an “Event of Default”:

     (a) failure of Borrower to pay any Installment Payment or interest thereon due under this Note within five business days after the date due, or failure of Borrower to pay any principal, interest or other amount due under this Note when otherwise due, whether at stated maturity, declaration, acceleration, demand or otherwise; or

     (b) failure of Borrower to perform or observe any other term, covenant or agreement to be performed or observed by it pursuant to this Note; or

     (c) any representation or warranty made by Borrower to Lender in connection with this Note shall prove to have been false in any material respect when made; or

     (d) any order, judgment or decree shall be entered against Borrower decreeing the liquidation, dissolution or split-up of Borrower; or

     (e) suspension of the usual business activities of Borrower or the complete or partial liquidation of Borrower’s business; or

     (f) (i) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of Borrower in an involuntary case under Title 11 of the United States Code entitled “Bankruptcy” (as now and hereinafter in effect, or any successor thereto, the “Bankruptcy Code”) or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed, or any other similar relief shall be granted under any applicable federal or state law, or (ii) an involuntary case shall be commenced against Borrower under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Borrower or over all or a substantial part of its property shall have been entered, or the involuntary appointment of an interim receiver, trustee or other custodian of Borrower for all or a substantial part of its property shall have occurred, or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Borrower and, in the case of any event described in this clause

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(ii), such event shall have continued for 60 days unless dismissed, bonded or discharged; or

     (g) an order for relief shall be entered with respect to Borrower or Borrower shall commence a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property, or Borrower shall make an assignment for the benefit of creditors, or Borrower shall be unable or fail, or shall admit in writing its inability, to pay its debts as such debts become due, or the board of directors or general partner(s) of Borrower (or any committee thereof) shall adopt any resolution or otherwise authorize action to approve any of the foregoing; or

     (h) Borrower shall challenge, or institute any proceedings to challenge, the validity, binding effect or enforceability of this Note or any endorsement of this Note or any other obligation to Lender; or

     (i) any provision of this Note or any provision hereof or thereof shall cease to be in full force or effect or shall be declared to be null or void or otherwise unenforceable in whole or in part.

     7. Remedies. Upon the occurrence of any Event of Default specified in Section 6(g) or 6(h) above, and upon Borrower’s receipt of written notice of any Event of Default from Lender, the principal amount of this Note, together with accrued interest thereon, shall become immediately due and payable. Upon the occurrence and during the continuance of any other Event of Default, Lender may, by written notice to Borrower, declare the principal amount of this Note, together with accrued interest thereon, to be due and payable, and the principal amount of this Note, together with such interest, shall thereupon immediately become due and payable without presentment, further notice, protest or other requirements of any kind (all of which are hereby expressly waived by Borrower). From and after any Event of Default until such time as the Event of Default has been cured, the Default Interest Rate shall be applicable.

     8. Miscellaneous.

     (a) All notices and other communications provided for hereunder shall be in writing (including telefacsimile communication) and mailed, telecopied or delivered by overnight courier as follows: if to Borrower, at its address specified opposite its signature below and, if to Lender, at Lender’s address in Section 2 above or, in each case, at such other address as shall be designated by Lender or Borrower. All such notices and communications shall, when mailed, telecopied or delivered by overnight courier, be effective when deposited in the mails, sent by telecopier or delivered to the overnight courier, as the case may be.

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     (b) Borrower shall indemnify Lender against any losses, claims, damages and liabilities and related expenses, including counsel fees and expenses, incurred by Lender arising out of or in connection with or as a result of the transactions contemplated by this Note. In particular, Borrower shall pay all costs and expenses, including reasonable attorneys’ fees, incurred in connection with the collection and enforcement of this Note.

     (c) No failure or delay on the part of Lender or any other holder of this Note to exercise any right, power or privilege under this Note and no course of dealing between Borrower and Lender shall impair such right, power or privilege or operate as a waiver of any default or an acquiescence therein, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies expressly provided in this Note are cumulative to, and not exclusive of, any rights or remedies that Lender would otherwise have. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of Lender to any other or further action in any circumstances without notice or demand.

     (d) Borrower and any endorser of this Note hereby consent to renewals and extensions of time at or after the Maturity Date, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder.

     (e) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND LENDER HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

     (f) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWER ARISING OUT OF OR RELATING TO THIS NOTE MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS NOTE BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS NOTE. Borrower hereby agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to Borrower at its address set forth below its signature hereto, such service being hereby acknowledged by Borrower to be sufficient for personal jurisdiction in any action against Borrower in any such court and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other

5

manner permitted by law or shall limit the right of Lender to bring proceedings against Borrower in the courts of any other jurisdiction.

     (g) BORROWER AND, BY THEIR ACCEPTANCE OF THIS NOTE, LENDER AND ANY SUBSEQUENT HOLDER OF THIS NOTE HEREBY IRREVOCABLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS NOTE AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Borrower and, by their acceptance of this Note, Lender and any subsequent holder of this Note each (i) acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this relationship and that each will continue to rely on this waiver in their related future dealings, and (ii) further warrants and represents that each has reviewed this waiver with its legal counsel and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS NOTE. In the event of litigation, this provision may be filed as a written consent to a trial by the court.

     (h) Borrower hereby waives the benefit of any statute or rule of law or judicial decision, including without limitation California Civil Code § 1654, which would otherwise require that the provisions of this Note be construed or interpreted most strongly against the party responsible for the drafting thereof.

[Remainder of page intentionally left blank]

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     IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of the Note Date at Lender’s address.

“Borrower”


NNN APARTMENT REIT HOLDINGS, L.P.,
a Virginia limited partnership
 

By:   NNN APARTMENT REIT, INC.,
a Maryland corporation, its general partner 

By:	/s/ Shannon K S Johnson
Its:	Chief Financial Officer

Address:    1551 N. Tustin Avenue, Suite 200
Santa Ana, CA 92705
 

“Lender” NNN REALTY ADVISORS, Inc., a Delaware corporation
By:	/s/ Francene LaPoint
Its:	Chief Financial Officer

S-1

SCHEDULE A

DEFINED TERMS

     The following terms used in the Note shall have the following meanings (and any of such terms may, unless the context otherwise requires, be used in the singular or the plural depending on the reference):

Defined Term	Definition
Commencement Date	February 1, 2007.
Maturity Date	June 28, 2007.
Interest Rate	6.86% per annum.
Default Interest Rate	The rate that is 2% per annum in excess of the Interest Rate.

Schedule A-1

EX-10.15

Exhibit 10.15

Loan No.: 50-2859027 Hidden Lakes Apartments

SEC INDEMNITY AND GUARANTY AGREEMENT

     THIS SEC INDEMNITY AND GUARANTY AGREEMENT (as the same may hereafter be amended, consolidated, renewed or replaced, this “Agreement”), made as of December 28, 2006, by NNN APARTMENT REIT, INC., a Maryland corporation (“Indemnitor”), whose address is c/o Triple Net Properties, LLC, 1551 North Tustin Avenue, Suite 300, Santa Ana, California 92705, in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (together with its successors and assigns, “Lender”), whose address is Commercial Real Estate Services, 8739 Research Drive URP — 4, NC 1075, Charlotte, North Carolina 28262.

W I T N E S S E T H:

     WHEREAS, Apartment REIT Hidden Lakes, LP, a Texas limited partnership (“Borrower”), has obtained a loan (the “Loan”) in the principal amount of Nineteen Million Two Hundred Eighteen Thousand and No/100 Dollars ($19,218,000.00) from Lender; and

     WHEREAS, the Loan is evidenced by a Promissory Note (as the same may from time to time be amended, consolidated, renewed or replaced, the “Note”) dated of even date herewith, executed by Borrower and payable to the order of Lender, in the stated principal amount of Nineteen Million Two Hundred Eighteen Thousand and No/100 Dollars ($19,218,000.00), and is secured by a Deed of Trust, Security Agreement and Fixture Filing dated of even date herewith (as the same may from time to time be amended, consolidated, renewed or replaced, the “Security Instrument”) from Borrower for the benefit of Lender, encumbering that certain real property situated in the County of Bexar, State of Texas, as more particularly described on Exhibit “A” attached hereto and incorporated herein by this reference, together with the buildings, structures and other improvements now or hereafter located thereon (the “Property”) and by other documents and instruments (the Note, the Security Instrument and such other documents and instruments, as the same may from time to time be amended, consolidated, renewed or replaced, being collectively referred to herein as the “Loan Documents”); and

     WHEREAS, as a condition to making the Loan to Borrower, Lender has required that Indemnitor execute and deliver this Agreement; and

     WHEREAS, the extension of the Loan to Borrower is of substantial benefit to Indemnitor and, therefore, Indemnitor desires to execute and delivery this Agreement.

     NOW, THEREFORE, to induce Lender to extend the Loan to Borrower and in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitor hereby covenants and agrees for the benefit of Lender, as follows:

     1. Indemnity and Guaranty. Indemnitor irrevocably and unconditionally guarantees to Lender the prompt payment of all liabilities, obligations, losses, damages, costs and expenses (including, without limitation, attorneys’ fees), causes of action, suits, claims, demands and judgments of any nature or description whatsoever (collectively, “Costs”) arising out of or attributable to (i) the violation of any applicable law governing the sale of securities in connection with the structure, organization, sale or syndication of partnership interests in Apartment REIT Hidden Lakes, LP, or in the sale or syndication or tenant in common ownership interest in the property and (ii) the Securities Liabilities (as hereinafter defined) and any legal or other expenses reasonably incurred by Lender, in investigating or defending the Securities Liabilities, to the extent such Securities Liabilities relate to a Securities and Exchange Commission (“SEC”) investigation, inquiry or proceeding relating to Triple Net Properties, LLC or any of its affiliates. As used herein, the term “Securities Liabilities” shall mean any liability, obligation or other remedy (including, without limitation, any right or rescission in favor of any Borrower or any member of any Borrower) arising from or related to that certain investigation by the SEC captioned “In

the matter of Triple Net Properties, LLC” (as well as any subsequent related investigation involving any affiliate of Triple Net Properties, LLC) pursuant to which the SEC has requested information, including financial information, from Triple Net Properties, LLC relating to disclosure in securities offerings sponsored by Triple Net Properties, LLC and its affiliates.

     This is a guaranty of payment and performance and not of collection. The liability of Indemnitor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower or any other person (including, without limitation, other guarantors, if any), nor against the collateral for the Loan. Indemnitor waives any right to require that an action be brought against Borrower or any other person or to require that resort be made to any collateral for the Loan or to any balance of any deposit account or credit on the books of Lender in favor of Borrower or any other person. In the event of a default under the Loan Documents which is not cured within any applicable grace or cure period, Lender shall have the right to enforce its rights, powers and remedies (including, without limitation, foreclosure of all or any portion of the collateral for the Loan) thereunder or hereunder, in any order, and all rights, powers and remedies available to Lender in such event shall be non-exclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or in equity. If the indebtedness and obligations guaranteed hereby are partially paid or discharged by reason of the exercise of any of the remedies available to Lender, this Agreement shall nevertheless remain in full force and effect, and Indemnitor shall remain liable for all remaining indebtedness and obligations guaranteed hereby, even though any rights which Indemnitor may have against Borrower may be destroyed or diminished by the exercise of any such remedy.

     2. Indemnification Procedures.

          (a) If any action shall be brought against Lender based upon any of the matters for which Lender is indemnified hereunder, Lender shall notify Indemnitor in writing thereof and Indemnitor shall promptly assume the defense thereof, including, without limitation, the employment of counsel acceptable to Lender and the negotiation of any settlement; provided, however, that any failure of Lender to notify Indemnitor of such matter shall not impair or reduce the obligations of Indemnitor hereunder. Lender shall have the right, at the expense of Indemnitor (which expense shall be included in Costs), to employ separate counsel in any such action and to participate in the defense thereof. In the event Indemnitor shall fail to discharge or undertake to defend Lender against any claim, loss or liability for which Lender is indemnified hereunder, Lender may, at its sole option and election, defend or settle such claim, loss or liability. The liability of Indemnitor to Lender hereunder shall be conclusively established by such settlement, provided such settlement is made in good faith, the amount of such liability to include both the settlement consideration and the costs and expenses, including, without limitation, attorneys’ fees and disbursements, incurred by Lender in effecting such settlement. In such event, such settlement consideration, costs and expenses shall be included in Costs and Indemnitor shall pay the same as hereinafter provided. Lender’s good faith in any such settlement shall be conclusively established if the settlement is made on the advice of independent legal counsel for Lender.

          (b) Indemnitor shall not, without the prior written consent of Lender: (i) settle or compromise any action, suit, proceeding or claim or consent to the entry of any judgment that does not include as an unconditional term thereof the delivery by the claimant or plaintiff to Lender of a full and complete written release of Lender (in form, scope and substance satisfactory to Lender in its sole discretion) from all liability in respect of such action, suit, proceeding or claim and a dismissal with prejudice of such action, suit, proceeding or claim; or (ii) settle or compromise any action, suit, proceeding or claim in any manner that may adversely affect Lender or obligate Lender to pay any sum or perform any obligation as determined by Lender in its sole discretion.

          (c) All Costs shall be immediately reimbursable to Lender when and as incurred and, in the event of any litigation, claim or other proceeding, without any requirement of waiting for the ultimate outcome of such litigation, claim or other proceeding, and Indemnitor shall pay to Lender any and all Costs within ten (10) days after written notice from Lender itemizing the amounts thereof incurred to the date of such notice. In addition to any other remedy available for the failure of Indemnitor to

periodically pay such Costs, such Costs, if not paid within said ten-day period, shall bear interest at the Default Interest Rate (as defined in the Note).

     3. Reinstatement of Obligations. If at any time all or any part of any payment made by Indemnitor or received by Lender from Indemnitor under or with respect to this Agreement is or must be rescinded or returned for any reason whatsoever (including, but not limited to, the insolvency, bankruptcy or reorganization of Indemnitor or Borrower), then the obligations of Indemnitor hereunder shall, to the extent of the payment rescinded or returned, be deemed to have continued in existence, notwithstanding such previous payment made by Indemnitor, or receipt of payment by Lender, and the obligations of Indemnitor hereunder shall continue to be effective or be reinstated, as the case may be, as to such payment, all as though such previous payment by Indemnitor had never been made.

     4. Waivers by Indemnitor. To the extent permitted by law, Indemnitor hereby waives and agrees not to assert or take advantage of:

          (a) Any right to require Lender to proceed against Borrower or any other person or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy in Lender’s power or under any other agreement before proceeding against Indemnitor hereunder;

          (b) Any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other person or persons or the failure of Lender to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other person or persons;

          (c) Demand, presentment for payment, notice of nonpayment, protest, notice of protest and all other notices of any kind, or the lack of any thereof, including, without limiting the generality of the foregoing, notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of Borrower, Lender, any endorser or creditor of Borrower or of Indemnitor or on the part of any other person whomsoever under this or any other instrument in connection with any obligation or evidence of indebtedness held by Lender;

          (d) Any defense based upon an election of remedies by Lender;

          (e) Any right or claim of right to cause a marshalling of the assets of Indemnitor;

          (f) Any principle or provision of law, statutory or otherwise, which is or might be in conflict with the terms and provisions of this Agreement;

          (g) Any duty on the part of Lender to disclose to Indemnitor any facts Lender may now or hereafter know about Borrower or the Property, regardless of whether Lender has reason to believe that any such facts materially increase the risk beyond that which Indemnitor intends to assume or has reason to believe that such facts are unknown to Indemnitor or has a reasonable opportunity to communicate such facts to Indemnitor, it being understood and agreed that Indemnitor is fully responsible for being and keeping informed of the financial condition of Borrower, of the condition of the Property and of any and all circumstances bearing on the risk that liability may be incurred by Indemnitor hereunder;

          (h) Any lack of notice of disposition or of manner of disposition of any collateral for the Loan;

          (i) Any invalidity, irregularity or unenforceability, in whole or in part, of any one or more of the Loan Documents;

          (j) Any deficiencies in the collateral for the Loan or any deficiency in the ability of Lender to collect or to obtain performance from any persons or entities now or hereafter liable for the payment and performance of any obligation hereby guaranteed;

          (k) An assertion or claim that the automatic stay provided by 11 U.S.C. §362 (arising upon the voluntary or involuntary bankruptcy proceeding of Borrower) or any other stay provided under any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, shall operate or be interpreted to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any of its rights, whether now or hereafter required, which Lender may have against Indemnitor or the collateral for the Loan;

          (l) Any modifications of the Loan Documents or any obligation of Borrower relating to the Loan by operation of law or by action of any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or otherwise. Without limiting the generality of the foregoing, Indemnitor expressly waives any and all rights to which Indemnitor may otherwise have been entitled under any suretyship laws in effect from time to time, including (without limitation) any rights pursuant to Rule 31 of the Texas Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code, and Chapter 34 of the Texas Business and Commerce Code.

          (m) Any action, occurrence, event or matter consented to by Indemnitor under Section 6(h) hereof, under any other provision hereof, or otherwise; and

     5. Intentionally Deleted.

     6. General Provisions.

          (a) Fully Recourse. All of the terms and provisions of this Agreement are recourse obligations of Indemnitor and not restricted by any limitation on personal liability set forth in any of the Loan Documents.

          (b) Unsecured Obligations. Indemnitor hereby acknowledges that Lender’s appraisal of the Property is such that Lender is not willing to accept the consequences of the inclusion of Indemnitor’s indemnity set forth herein among the obligations secured by the Security Instrument and the other Loan Documents and that Lender would not make the Loan but for the unsecured personal liability undertaken by Indemnitor herein.

          (c) Survival. This Agreement shall be deemed to be continuing in nature and shall remain in full force and effect and shall survive the exercise of any remedy by Lender under the Security Instrument or any of the other Loan Documents, including, without limitation, any foreclosure or deed in lieu thereof, even if, as a part of such remedy, the Loan is paid or satisfied in full.

          (d) No Subrogation; No Recourse Against Lender. Notwithstanding the satisfaction by Indemnitor of any liability hereunder, Indemnitor shall not have any right of subrogation, contribution, reimbursement or indemnity whatsoever or any right of recourse to or with respect to the assets or property of Borrower or to any collateral for the Loan. In connection with the foregoing, Indemnitor expressly waives any and all rights of subrogation to Lender against Borrower, and Indemnitor hereby waives any rights to enforce any remedy which Lender may have against Borrower and any right to participate in any collateral for the Loan. In addition to and without in any way limiting the foregoing, Indemnitor hereby subordinates any and all indebtedness of Borrower now or hereafter owed to Indemnitor to all indebtedness of Borrower to Lender, and agrees with Lender that Indemnitor shall not demand or accept any payment of principal or interest from Borrower, shall not claim any offset or other reduction of Indemnitor’s obligations hereunder because of any such indebtedness and shall not take

any action to obtain any of the collateral from the Loan. Further, Indemnitor shall not have any right of recourse against Lender by reason of any action Lender may take or omit to take under the provisions of this Agreement or under the provisions of any of the Loan Documents.

          (e) Reservation of Rights. Nothing contained in this Agreement shall prevent or in any way diminish or interfere with any rights or remedies, including, without limitation, the right to contribution, which Lender may have against Borrower, Indemnitor or any other party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (codified at Title 42 U.S.C. §9601 et seq.), as it may be amended from time to time, or any other applicable federal, state or local laws, all such rights being hereby expressly reserved.

          (f) Financial Statements. Indemnitor hereby agrees, as a material inducement to Lender to make the Loan to Borrower, to furnish to Lender, from time to time, promptly upon demand by Lender annual financial statements for Indemnitor, within one hundred twenty (120) days after the end of each calendar year, certified by or on behalf of Indemnitor, in form and substance acceptable to Lender. Indemnitor hereby warrants and represents unto Lender that any and all balance sheets, net worth statements and other financial data which have heretofore been given or may hereafter be given to Lender with respect to Indemnitor did or will at the time of such delivery fairly and accurately present the financial condition of Indemnitor.

          (g) Rights Cumulative; Payments. Lender’s rights under this Agreement shall be in addition to all rights of Lender under the Note, the Security Instrument and the other Loan Documents. Further, payments made by Indemnitor under this Agreement shall not reduce in any respect Borrower’s obligations and liabilities under the Note, the Security Instrument and the other Loan Documents except with respect to, and to the extent of, Borrower’s obligation and liability for the payment made by Indemnitor.

          (h) No Limitation on Liability. Indemnitor hereby consents and agrees that Lender may at any time and from time to time without further consent from Indemnitor do any of the following events (if applicable), and the liability of Indemnitor under this Agreement shall be unconditional and absolute and shall in no way be impaired or limited by any of the following events, whether occurring with or without notice to Indemnitor or with or without consideration: (i) any extensions of time for performance required by any of the Loan Documents or extension or renewal of the Note; (ii) any sale, assignment or foreclosure of the Note, the Security Instrument or any of the other Loan Documents or any sale or transfer of the Property or any portion thereof; (iii) any change in the composition of Borrower, including, without limitation, the withdrawal or removal of Indemnitor from any current or future position of ownership, management or control of Borrower; (iv) the accuracy or inaccuracy of the representations and warranties made by Indemnitor herein or by Borrower in any of the Loan Documents; (v) the release of Borrower or of any other person or entity from performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law, Lender’s voluntary act or otherwise; (vi) the release or substitution in whole or in part of any security for the Loan; (vii) Lender’s failure to record the Security Instrument or to file any financing statement (or Lender’s improper recording or filing thereof) or to otherwise perfect, protect, secure or insure any lien or security interest given as security for the Loan; (viii) the modification of the terms of any one or more of the Loan Documents; or (ix) the taking of, or failure to take any action of any type whatsoever. No such action which Lender shall take or fail to take in connection with the Loan Documents or any collateral for the Loan, nor any course of dealing with Borrower or any other person, shall limit, impair or release Indemnitor’s obligations hereunder, affect this Agreement in any way or afford Indemnitor any recourse against Lender. Nothing contained in this Section shall be construed to require Lender to take or refrain from taking any action referred to herein.

          (i) Intentionally Reserved.

          (j) Governing Law. THIS AGREEMENT SHALL BE EXCLUSIVELY GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, EXCEPT TO THE EXTENT THAT THE APPLICABILITY OF ANY OF SUCH LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY FEDERAL LAW, IN WHICH CASE SUCH FEDERAL LAW SHALL SO GOVERN AND BE CONTROLLING.

          (k) Binding Effect; Waiver of Acceptance. This Agreement shall bind Indemnitor and its heirs, personal representatives, successors and assigns and shall inure to the benefit of Lender and the officers, directors, shareholders, agents and employees of Lender and their respective heirs, successors and assigns. Notwithstanding the foregoing, Indemnitor shall not assign any of its rights or obligations under this Agreement without the prior written consent of Lender, which consent may be withheld by Lender in its sole discretion. Indemnitor hereby waives any acceptance of this Agreement by Lender, and this Agreement shall immediately be binding upon Indemnitor.

          (l) Notice. All notices, demands, requests or other communications to be sent by one party to the other hereunder or required by law shall be in writing and shall be deemed to have been validly given or served by delivery of the same in person to the intended addressee, or by depositing the same with Federal Express or another reputable private courier service for next business day delivery to the intended addressee at its address set forth on the first page of this Agreement or at such other address as may be designated by such party as herein provided, or by depositing the same in the United States mail, postage prepaid, registered or certified mail, return receipt requested, addressed to the intended addressee at its address set forth on the first page of this Agreement or at such other address as may be designated by such party as herein provided. All notices, demands and requests shall be effective upon such personal delivery, or one (1) business day after being deposited with the private courier service, or two (2) business days after being deposited in the United States mail as required above. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given as herein required shall be deemed to be receipt of the notice, demand or request sent. By giving to the other party hereto at least fifteen (15) days’ prior written notice thereof in accordance with the provisions hereof, the parties hereto shall have the right from time to time to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America.

          (m) No Waiver; Time of Essence; Business Day. The failure of any party hereto to enforce any right or remedy hereunder, or to promptly enforce any such right or remedy, shall not constitute a waiver thereof nor give rise to any estoppel against such party nor excuse any of the parties hereto from their respective obligations hereunder. Any waiver of such right or remedy must be in writing and signed by the party to be bound. This Agreement is subject to enforcement at law or in equity, including actions for damages or specific performance. Time is of the essence hereof. The term “business day” as used herein shall mean a weekday, Monday through Friday, except a legal holiday or a day on which banking institutions in New York, New York are authorized by law to be closed.

          (n) Captions for Convenience. The captions and headings of the sections and paragraphs of this Agreement are for convenience of reference only and shall not be construed in interpreting the provisions hereof.

          (o) Reasonable Attorney’s Fees. In the event it is necessary for Lender to retain the services of an attorney or any other consultants in order to enforce this Agreement, or any portion thereof, Indemnitor agrees to pay to Lender, in addition to Indemnitor’s other obligations to pay Lender hereunder, any and all costs and expenses, including, without limitation, reasonable attorneys’ fees, incurred by Lender as a result thereof and such costs, fees and expenses shall be included in Costs.

          (p) Successive Actions. A separate right of action hereunder shall arise each time Lender acquires knowledge of any matter indemnified or guaranteed by Indemnitor under this Agreement. Separate and successive actions may be brought hereunder to enforce any of the provisions hereof at any time and from time to time. No action hereunder shall preclude any subsequent action, and Indemnitor

hereby waives and covenants not to assert any defense in the nature of splitting of causes of action or merger of judgments.

          (q) Joint and Several Liability. Notwithstanding anything to the contrary contained herein, the representations, warranties, covenants and agreements made by Indemnitor herein, and the liability of Indemnitor hereunder, is joint and several if Indemnitor is comprised of more than one person or entity.

          (r) Reliance. Lender would not make the Loan to Borrower without this Agreement. Accordingly, Indemnitor intentionally and unconditionally enters into the covenants and agreements as set forth above and understands that, in reliance upon and in consideration of such covenants and agreements, the Loan shall be made and, as part and parcel thereof, specific monetary and other obligations have been, are being and shall be entered into which would not be made or entered into but for such reliance.

          (s) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be effective only upon delivery and thereafter shall be deemed an original, and all of which shall be taken to be one and the same instrument, for the same effect as if all parties hereto had signed the same signature page. Any signature page of this Agreement may be detached from any counterpart of this Agreement without impairing the legal effect of any signatures thereon and may be attached to another counterpart of this Agreement identical in form hereto but having attached to it one or more additional signature pages.

          (t) SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

(1)

INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN WHICH THE PROPERTY IS LOCATED OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT, (B) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN THE COUNTY AND STATE IN WHICH THE PROPERTY IS LOCATED, (C) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND (D) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT INDEMNITOR WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM).

(2)

INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR INDEMNITOR, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR INDEMNITOR, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.

          (u) Waiver by Indemnitor. Indemnitor covenants and agrees that, upon the commencement of a voluntary or involuntary bankruptcy proceeding by or against Borrower, Indemnitor shall not seek or cause Borrower or any other person or entity to seek a supplemental stay or other relief, whether injunctive or otherwise, pursuant to 11 U.S.C. §105 or any other provision of the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law, (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any rights of Lender against Indemnitor or the collateral for the Loan by virtue of this Agreement or otherwise.

          (v) SPECIFIC NOTICE. IT IS EXPRESSLY AGREED AND UNDERSTOOD THAT THIS AGREEMENT INCLUDES INDEMNIFICATION PROVISIONS WHICH, IN CERTAIN CIRCUMSTANCES, COULD INCLUDE AN INDEMNIFICATION BY INDEMNITOR OF LENDER FROM CLAIMS OR LOSSES ARISING AS A RESULT OF LENDER’S OWN NEGLIGENCE.

          (w) Secondary Market. Lender may sell, transfer and deliver the Loan Documents to one or more investors in the secondary mortgage market. In connection with such sale or otherwise, Lender may retain or assign responsibility for servicing the Loan or may delegate some or all of such responsibility and/or obligations to a servicer, including, but not limited to, any subservicer or master servicer, on behalf of the investors. All references to Lender herein shall refer to and include, without limitation, any such servicer, to the extent applicable.

          (x) Decisions. Wherever pursuant to this Agreement (i) Lender exercises any right given to it to approve or disapprove, (ii) any arrangement or term is to be satisfactory or acceptable to Lender, or (iii) any other decision or determination is to be made by Lender, the decision of Lender to approve or disapprove or to accept or not accept, all decisions that arrangements or terms are satisfactory or not satisfactory and all other decisions and determinations made by Lender, shall be in the sole and absolute discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein.

          (y) Dissemination of Information. If Lender determines at any time to sell, transfer or assign the Note, the Security Instrument and the other Loan Documents, and any or all servicing rights with respect thereto, or to grant participations therein (the “Participations”) or issue mortgage pass-through certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (the “Securities”), Lender may forward to each purchaser, transferee, assignee, servicer, participant, investor, or their respective successors in such Participations and/or Securities (collectively, the “Investor”) or any Rating Agency (as defined in the Security Instrument) rating such Securities, each prospective Investor and each of the foregoing’s respective counsel, all documents and information which Lender now has or may hereafter acquire relating to the Loan and to Borrower, any Indemnitor and the Property, which shall have been furnished by Borrower, or any Indemnitor as Lender determines necessary or desirable.

          (z) Costs. Wherever pursuant to this Agreement it is provided that Indemnitor shall pay any costs and expenses, such costs and expenses shall include, but not be limited to, reasonable legal fees and disbursements of Lender.

          (aa) Other Guaranties. This Agreement is in addition to any and all other guaranties relating to the Debt (as defined in the Security Instrument) or any portion thereof. To the extent Indemnitor may become liable under this Agreement and one or more other indemnitors may become liable under the terms of any other guaranty made in favor of Lender with respect to the Debt, Lender shall be entitled to exercise any and all of its remedies against Indemnitor under this Agreement as well as any and all of its remedies against any one or more indemnitors under such other guaranties jointly and severally.

          (bb) Future Assignments by Borrower. Indemnitor agrees that, upon a TIC Transfer (as defined in the Security Instrument) in accordance with Section 2.9 of the Security Instrument the Co-Owner Transferee shall be included in the defined term “Borrower” hereunder, and Indemnitor shall be deemed to have restated, ratified and affirmed the representations, warranties, covenants and obligations set forth herein. Such restatement, ratification and affirmation shall be deemed made on the date of closing of each such TIC Transfer, based solely on the provisions of this Section, without any requirement for further documentation.

[The Remainder of the Page is Intentionally Blank]

          (cc) Entire Agreement; Amendment; Severability. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. This Agreement contains the entire agreement between the parties respecting the matters herein set forth and supersedes all prior agreements, whether written or oral, between the parties respecting such matters. Any amendments or modifications hereto, in order to be effective, shall be in writing and executed by the parties hereto. A determination that any provision of this Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other provision, and any determination that the application of any provision of this Agreement to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to any other persons or circumstances.

          IN WITNESS WHEREOF, Indemnitor has executed this SEC Indemnity and Guaranty Agreement as of the day and year first written above.

	INDEMNITOR
NOTICE OF INDEMNIFICATION: INDEMNITOR HEREBY ACKNOWLEDGES AND AGREES THAT THIS INDEMNITY AGREEMENT CONTAINS CERTAIN INDEMNIFICATION PROVISIONS PURSUANT TO SECTION 1 HEREOF	NNN APARTMENT REIT, INC., a Maryland corporation
	By:	/s/ Andrea R. Biller
		Name:	Andrea R. Biller
		Title:	Secretary

EX-10.16

Exhibit 10.16

UNSECURED PROMISSORY NOTE (this “Note”)

$10,000,000

December 28, 2006 (the “Note Date”)

     FOR VALUE RECEIVED, NNN Apartment REIT Holdings, L.P., a Virginia limited partnership (“Borrower”), unconditionally promises to pay NNN Realty Advisors, Inc., a Delaware corporation (“Lender”), in the manner and at the place hereinafter provided, the principal amount of Ten Million Dollars ($10,000,000).

     Borrower also promises to pay interest on the unpaid principal amount hereof from the Note Date until paid in full at a rate per annum equal to the Interest Rate (capitalized terms used herein and not otherwise defined herein shall have the meanings provided in Schedule A attached hereto), provided that any principal amount not paid when due and, to the extent permitted by applicable law, any interest not paid when due, in each case whether at stated maturity, declaration, acceleration, demand or otherwise (both before as well as after judgment), shall bear interest payable upon demand at a rate per annum equal to the Default Interest Rate. Interest on this Note shall be payable in arrears on the first day of each month beginning on the Commencement Date, each date on which an installment of principal is due and payable hereunder, upon any prepayment of this Note (to the extent accrued on the amount being prepaid) and at maturity. All computations of interest shall be made by Lender on the basis of a 365-day year, for the actual number of days elapsed in the relevant period (including the first day but excluding the last day). In no event shall the interest rate payable on this Note exceed the maximum rate of interest permitted to be charged under applicable law.

     1. Maturity Date. The outstanding principal amount of the Note, and any accrued but unpaid interest thereon, shall be automatically due and payable on the Maturity Date.

     2. Payments. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of Lender located at 1551 N. Tustin Avenue, Suite 200, Santa Ana, California 92705, or at such other place as Lender may direct. Whenever any payment on this Note is stated to be due on a day that is not a Business Day (as defined herein), such payment shall instead be made on the next Business Day and such extension of time shall be included in the computation of interest payable on this Note. Each payment made hereunder shall be credited first to interest then due and the remainder of such payment shall be credited to principal, and interest shall thereupon cease to accrue upon the principal so credited. Each of Lender and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof the Lender and any subsequent holder of this Note will mutually agree on the amount of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of Borrower hereunder with respect to payments of principal or interest on this Note. “Business Day” means any day other than a Saturday, Sunday or legal holiday under the laws of the State of California or

1

any other day on which banking institutions located in such state are authorized or required by law or other governmental action to close.

     3. Prepayments. Borrower shall have the right at any time and from time to time on or prior to the Maturity Date to prepay the principal of this Note in whole or in part, without premium or penalty. Any prepayment hereunder shall be accompanied by the payment of accrued interest on the principal amount of the Note being prepaid to the date of prepayment.

     4. Covenants. Borrower covenants and agrees that until this Note is paid in full it will:

     (a) promptly provide to Lender financial and operational information with respect to Borrower or any of its subsidiaries as Lender may reasonably request;

     (b) promptly after the occurrence of an Event of Default (as defined herein) or an event, act or condition that, with notice or lapse of time or both, would constitute an Event of Default, provide Lender with a certificate of the chief executive officer, chief financial officer or general partner(s) of Borrower specifying the nature thereof and Borrower’s proposed response thereto; and

     (c) not merge or consolidate with any other Person (as defined herein), or sell, lease or otherwise dispose of all or any substantial part of its property or assets to any other Person.

     “Person” means any individual, partnership, limited liability company, joint venture, firm, corporation, association, bank, trust or other enterprise, whether or not a legal entity, or any government or political subdivision or any agency, department or instrumentality thereof.

     5. Representations and Warranties. Borrower hereby represents and warrants to Lender that:

     (a) it is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its organization and has the corporate power and authority to own and operate its properties, to transact the business in which it is now engaged and to execute and deliver this Note;

     (b) this Note constitutes the duly authorized, legally valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms;

     (c) all consents and grants of approval required to have been granted by any Person in connection with the execution, delivery and performance of this Note have been granted;

     (d) the execution, delivery and performance by Borrower of this Note do not and will not violate any law, governmental rule or regulation, court order or

2

agreement to which it is subject or by which its properties are bound or the charter documents or bylaws of Borrower;

     (e) there is no action, suit, proceeding or governmental investigation pending or, to the knowledge of Borrower, threatened against Borrower or any of its subsidiaries or any of their respective assets which, if adversely determined, would have a material adverse effect on the business, operations, properties, assets, condition (financial or otherwise) or prospects of Borrower and its subsidiaries, taken as a whole, or the ability of Borrower to comply with its obligations hereunder; and

     (f) the proceeds of the loan evidenced by this Note shall be used by Borrower for the purpose of acquiring real property.

     6. Events of Default. The occurrence of any of the following events shall constitute an “Event of Default”:

     (a) failure of Borrower to pay any Installment Payment or interest thereon due under this Note within five business days after the date due, or failure of Borrower to pay any principal, interest or other amount due under this Note when otherwise due, whether at stated maturity, declaration, acceleration, demand or otherwise; or

     (b) failure of Borrower to perform or observe any other term, covenant or agreement to be performed or observed by it pursuant to this Note; or

     (c) any representation or warranty made by Borrower to Lender in connection with this Note shall prove to have been false in any material respect when made; or

     (d) any order, judgment or decree shall be entered against Borrower decreeing the liquidation, dissolution or split-up of Borrower; or

     (e) suspension of the usual business activities of Borrower or the complete or partial liquidation of Borrower’s business; or

     (f) (i) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of Borrower in an involuntary case under Title 11 of the United States Code entitled “Bankruptcy” (as now and hereinafter in effect, or any successor thereto, the “Bankruptcy Code”) or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed, or any other similar relief shall be granted under any applicable federal or state law, or (ii) an involuntary case shall be commenced against Borrower under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Borrower or over all or a substantial part of its property shall have been entered, or the involuntary appointment of an interim receiver, trustee or other custodian of Borrower for all or a substantial part of its property shall have occurred, or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Borrower and, in the case of any event described in this clause

3

(ii), such event shall have continued for 60 days unless dismissed, bonded or discharged; or

     (g) an order for relief shall be entered with respect to Borrower or Borrower shall commence a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property, or Borrower shall make an assignment for the benefit of creditors, or Borrower shall be unable or fail, or shall admit in writing its inability, to pay its debts as such debts become due, or the board of directors or general partner(s) of Borrower (or any committee thereof) shall adopt any resolution or otherwise authorize action to approve any of the foregoing; or

     (h) Borrower shall challenge, or institute any proceedings to challenge, the validity, binding effect or enforceability of this Note or any endorsement of this Note or any other obligation to Lender; or

     (i) any provision of this Note or any provision hereof or thereof shall cease to be in full force or effect or shall be declared to be null or void or otherwise unenforceable in whole or in part.

     7. Remedies. Upon the occurrence of any Event of Default specified in Section 6(g) or 6(h) above, and upon Borrower’s receipt of written notice of any Event of Default from Lender, the principal amount of this Note, together with accrued interest thereon, shall become immediately due and payable. Upon the occurrence and during the continuance of any other Event of Default, Lender may, by written notice to Borrower, declare the principal amount of this Note, together with accrued interest thereon, to be due and payable, and the principal amount of this Note, together with such interest, shall thereupon immediately become due and payable without presentment, further notice, protest or other requirements of any kind (all of which are hereby expressly waived by Borrower). From and after any Event of Default until such time as the Event of Default has been cured, the Default Interest Rate shall be applicable.

     8. Miscellaneous.

     (a) All notices and other communications provided for hereunder shall be in writing (including telefacsimile communication) and mailed, telecopied or delivered by overnight courier as follows: if to Borrower, at its address specified opposite its signature below and, if to Lender, at Lender’s address in Section 2 above or, in each case, at such other address as shall be designated by Lender or Borrower. All such notices and communications shall, when mailed, telecopied or delivered by overnight courier, be effective when deposited in the mails, sent by telecopier or delivered to the overnight courier, as the case may be.

4

     (b) Borrower shall indemnify Lender against any losses, claims, damages and liabilities and related expenses, including counsel fees and expenses, incurred by Lender arising out of or in connection with or as a result of the transactions contemplated by this Note. In particular, Borrower shall pay all costs and expenses, including reasonable attorneys’ fees, incurred in connection with the collection and enforcement of this Note.

     (c) No failure or delay on the part of Lender or any other holder of this Note to exercise any right, power or privilege under this Note and no course of dealing between Borrower and Lender shall impair such right, power or privilege or operate as a waiver of any default or an acquiescence therein, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies expressly provided in this Note are cumulative to, and not exclusive of, any rights or remedies that Lender would otherwise have. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of Lender to any other or further action in any circumstances without notice or demand.

     (d) Borrower and any endorser of this Note hereby consent to renewals and extensions of time at or after the Maturity Date, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder.

     (e) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND LENDER HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

     (f) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWER ARISING OUT OF OR RELATING TO THIS NOTE MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS NOTE BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS NOTE. Borrower hereby agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to Borrower at its address set forth below its signature hereto, such service being hereby acknowledged by Borrower to be sufficient for personal jurisdiction in any action against Borrower in any such court and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other

5

manner permitted by law or shall limit the right of Lender to bring proceedings against Borrower in the courts of any other jurisdiction.

     (g) BORROWER AND, BY THEIR ACCEPTANCE OF THIS NOTE, LENDER AND ANY SUBSEQUENT HOLDER OF THIS NOTE HEREBY IRREVOCABLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS NOTE AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Borrower and, by their acceptance of this Note, Lender and any subsequent holder of this Note each (i) acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this relationship and that each will continue to rely on this waiver in their related future dealings, and (ii) further warrants and represents that each has reviewed this waiver with its legal counsel and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS NOTE. In the event of litigation, this provision may be filed as a written consent to a trial by the court.

     (h) Borrower hereby waives the benefit of any statute or rule of law or judicial decision, including without limitation California Civil Code § 1654, which would otherwise require that the provisions of this Note be construed or interpreted most strongly against the party responsible for the drafting thereof.

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     IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of the Note Date at Lender’s address.

“Borrower”
NNN APARTMENT REIT HOLDINGS, L.P., a Virginia limited partnership
By:	NNN APARTMENT REIT, INC., a Maryland corporation, its general partner
By:	/s/ Shannon K S Johnson
Its:	Chief Financial Officer
Address:		1551 N. Tustin Avenue, Suite 200 Santa Ana, CA 92705
“Lender”
NNN REALTY ADVISORS, Inc., a Delaware corporation
By:	/s/ Francene LaPoint
Its:	Chief Financial Officer

S-1

SCHEDULE A

DEFINED TERMS

     The following terms used in the Note shall have the following meanings (and any of such terms may, unless the context otherwise requires, be used in the singular or the plural depending on the reference):

Defined Term	Definition
Commencement Date	February 1, 2007.
Maturity Date	June 28, 2007.
Interest Rate	6.86% per annum.
Default Interest Rate	The rate that is 2% per annum in excess of the Interest Rate.

Schedule A-1

EX-99.1

Exhibit 99.1

Louis Rogers, President
NNN Apartment REIT, Inc.
1551 N. Tustin Ave., Suite 200
Santa Ana, CA 92705
714-667-8252
lrogers@1031nnn.com
Media Contact: Jill Swartz
714-667-8252 ext. 251
jswartz@1031nnn.com

NNN APARTMENT REIT ACQUIRES HIDDEN LAKE APARTMENT HOMES
IN SAN ANTONIO, TEXAS

Santa Ana, California, January 04, 2007 — NNN Apartment REIT, Inc. recently completed the acquisition of Hidden Lake Apartment Homes in San Antonio, Texas, a newly-constructed 380-unit Class A garden-style multifamily property. Hidden Lake is the second acquisition by NNN Apartment REIT, which has raised more than $16 million through its initial public offering as of December 31, 2006.

NNN Apartment REIT purchased Hidden Lake Apartment Homes from Thompson Realty for $32,030,000. Permanent financing for the purchase of the property was provided by Wachovia Bank, National Association.

Hidden Lake Apartment Homes is comprised of 19 individual buildings, totaling 380 units and 304,000 rentable square feet, as well as a 1,500-square-foot community clubhouse. The property is surrounded by natural wooded landscaping and offers one, two and three bedroom floor plans. Hidden Lake features secluded hill country views, extensive walking trails throughout, and a 900-square-foot fitness center, that make it possible for residents to enjoy the comforts of a true luxury apartment community in San Antonio’s far West Side. The property is currently 99.5% lease.

“Hidden Lake is a significant acquisition for NNN Apartment REIT,” said Louis Rogers, President of NNN Apartment REIT, “As we begin to stock our portfolio with exemplary apartment homes from across the country, these first two acquisitions are examples of the high level of quality our investors can expect.”

Triple Net Properties, LLC, the sponsor for NNN Apartment REIT, Inc., is a wholly-owned subsidiary of NNN Realty Advisors, Inc., a nationwide commercial real estate asset management and services firm. Triple Net Properties, LLC and affiliates manage a growing portfolio of nearly 32 million square feet of real estate, including more than 6,600 apartment units, with a combined market value of approximately $4.28 billion. Triple Net Properties, LLC and affiliates are currently buying and selling properties throughout the United States, offering a full range of commercial real estate investments, including Tenant-in-Common (TIC) programs for investors structuring tax-deferred (like-kind) exchanges under Section 1031 of the Internal Revenue Code, Real Estate Investment Trusts (REITs), value added property funds, and institutional investments.

***

This press release contains certain forward-looking statements that are not descriptions of historical facts and include statements regarding management’s intentions, beliefs, expectations, plans or predictions of the future, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from those expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to, the following: uncertainties relating to changes in general economic and real estate conditions; uncertainties relating to the implementation of our real estate investment strategy; and other risk factors as outlined in the Company’s prospectus, as amended from time to time, and as detailed from time to time in out periodic reports, as filed with the Securities and Exchange Commission.