NNN Apartment REIT, Inc. (Form: 8-K)

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is entered into as of April 26, 2007, between BRAEMAR HOUSING LIMITED PARTNERSHIP, an Ohio limited partnership (“Seller”) and TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company (“Purchaser”).

A. Seller owns that certain real property located in the County of Mecklenburg, State of North Carolina (the “State”), consisting of approximately twelve (12) acres of land, commonly known as “Residences at Braemar”, and more particularly described on Exhibit A attached hereto and incorporated herein by this reference (the “Land”), together with the improvements located thereon, containing one hundred sixty (160) apartments, and all other improvements located thereon (the “Improvements”).

B. Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller, all of Seller’s right, title and interest in and to the Property (hereinafter defined) for the price and on the terms and conditions hereinafter set forth.

C. The date the Escrow Agent (hereinafter defined) receives a fully executed copy of this Agreement shall be the “Effective Date.”

NOW, THEREFORE, in consideration of the foregoing, the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

Seller hereby agrees to sell and convey to Purchaser and Purchaser hereby agrees to purchase from Seller all of Seller’s right, title and interest in and to the following:

(b) All of Seller’s interest as lessor in all leases covering the Land and the Improvements (said leases, together with any and all amendments, modifications or supplements thereto, are hereinafter referred to collectively as the “Leases” and are identified in the Rent Roll (hereinafter defined) attached hereto as Exhibit B);

(c) All rights, privileges, easements and appurtenances appertaining to the Land and the Improvements including, without limitation, all easements, rights-of-way and other appurtenances used, connected with or inuring to the beneficial use or enjoyment of the Land and the Improvements. The Land, the Improvements and all such rights, privileges, easements and appurtenances (including, without limitation, Seller’s interest as lessor under the Leases) are sometimes hereinafter collectively referred to as the “Real Property;”

(d) All personal property, equipment, supplies and fixtures (collectively, the “Personal Property”) owned by Seller and used in the operation of the Real Property including, without limitation, all property described in Exhibit C attached hereto; and

(e) All intangible property used in connection with the foregoing including, without limitation, all trademarks, trade names (including, without limitation, the exclusive right to use the name “Residences at Braemar”), and the contract rights, licenses (to the extent transferable), permits (to the extent transferable) and warranties (to the extent transferable), more particularly described in Exhibit D attached hereto (the “Intangible Personal Property”). The Real Property, the Personal Property and the Intangible Personal Property are sometimes hereinafter collectively referred to as the “Property.”

(a) The purchase price for the Property is Fifteen Million and No/100 Dollars ($15,000,000.00) (the “Purchase Price”) and shall be paid to Seller by paying the balance of the Purchase Price by wire transfer of immediately available funds at the Closing (hereinafter defined), net of any mortgage loan Purchaser elects to assume pursuant to the terms of this Agreement and net of all prorations and adjustments as provided herein.

(b) Within two (2) business days of the execution of this Agreement, Purchaser shall deliver to LandAmerica American Title, 8201 Preston Road, Suite 280, Dallas, Texas 75225, Attention: Debby S. Moore, as escrow agent (“Escrow Agent”), by wire transfer in the amount of $150,000 (the “Initial Deposit” and together with the Extension Deposit, hereinafter defined, collectively the “Deposit”), which Deposit Escrow Agent shall hold and disburse in accordance with the terms and provisions of this Agreement and a written escrow agreement (the “Escrow Agreement”). For purposes of this Agreement, the term “Deposit” includes interest earned thereon, if any. All interest earned on the Deposit, until Closing or payment to Seller, shall be attributed to Purchaser for federal income tax purposes; Purchaser’s federal tax identification number is set forth on the signature page of this Agreement. Escrow Agent shall pay the Deposit to Seller at Closing, and the Deposit shall be applied as a credit to the Purchase Price and shall otherwise be held and disbursed in accordance with the terms of this Agreement and the Escrow Agreement. If either Purchaser or Seller is entitled under this Agreement to the payment of the Deposit, or any portion thereof, and requests Escrow Agent to make such payment (whether to itself or the other party), the other party agrees promptly to provide notice to Escrow Agent authorizing such payment, unless such other party disagrees with such request in which event the provisions of the Escrow Agreement shall control.

(c) Purchaser, in its sole discretion, may elect to assume Seller’s obligations under that certain loan (the “Assumed Loan”) made by Transamerica Occidental Life Insurance Company, an Iowa corporation (the “Lender”), to Seller evidenced by a promissory note dated May 25, 2005 (the “Note”) in the original principal amount of Ten Million and No/100 Dollars ($10,000,000.00), the outstanding principal amount of which will be approximately Nine Million Seven Hundred Fifty Thousand and No/100 Dollars ($9,750,000.00) after the monthly debt service payment in May of 2007, which Note is secured by a Deed of Trust, Security Agreement and Fixture Filing dated May 25, 2005 (the “Deed of Trust”), and the Purchase Price shall be adjusted and reduced by the amount of the Assumed Loan. In the event Purchaser elects to assume the Assumed Loan, Purchaser shall pay assumption fees and Lender’s counsel fees, in each case, payable to Lender, and Seller shall cooperate, without charge to Purchaser, to facilitate such assumption and it shall be a condition to Closing (notwithstanding Section 13 below) that (i) Purchaser and the Lender (each in its sole and absolute discretion) shall be satisfied with all environmental conditions related to the Real Property and any adjoining property in the vicinity of the Real Property, which Purchaser shall be entitled to discuss with the Lender prior to Closing in such detail as Purchaser shall deem appropriate, and (ii) Lender has approved the assumption of the Assumed Loan in accordance with the terms of the Deed of Trust (including without limitation Article 14 thereof) and the other “Loan Documents” (as defined in the Deed of Trust). In the event Purchaser elects not to assume the Assumed Loan, the Assumed Loan and the Deed of Trust and other documents related thereto shall be deemed to be “Disapproved Matters” (as hereinafter defined), such loan shall be paid in full at Closing and such Deed of Trust and all other documents evidencing and/or securing such loan shall be satisfied and released of record. Any prepayment fee payable to Lender shall be borne by Purchaser in the case of a prepayment of such loan, and Seller will cooperate, without charge to Purchaser, to facilitate such prepayment.

(a) Promptly following the execution of this Agreement, Purchaser shall order, at Purchaser’s expense, a title commitment on the Real Property (the “Commitment”), together with legible copies of all documents relating to the title exceptions referred to in the Commitment.

(b) As soon as possible following the execution of this Agreement, Purchaser shall order, at Purchaser’s own expense, an updated survey of the Real Property sufficient to enable title company to issue an ALTA owner’s policy of title insurance (the “Survey”), showing lot lines and monuments, building lines, easements both burdening and benefiting the Real Property, utilities, including water and sewer lines to the point of connection with the public system, the Improvements (including loading docks, if any, and parking spaces), encroachments, if any, on the Real Property or over adjoining properties, and other matters located on or affecting the Real Property, together with a certificate as to whether the Real Property lies within a flood zone as determined by the U.S. Department of Housing and Urban Development. The Survey shall be certified as true and correct by the surveyor for the benefit of Purchaser and title company.

Prior to the end of the Due Diligence Period (hereinafter defined), Purchaser shall give notice (the “Title Notice”) to Seller of any objections Purchaser may have to title or survey matters affecting the Real Property (“Disapproved Matters”). All title exceptions set forth in the Commitment not objected to by Purchaser shall constitute the “Permitted Encumbrances.” As a condition to the Closing, Seller shall use its best efforts to remove, or cause to be removed, all Disapproved Matters or, in the alternative, obtain title insurance in a form satisfactory to Purchaser insuring against the effect of such Disapproved Matters. Notwithstanding the foregoing, Seller shall be obligated to remove all monetary encumbrances at or prior to Closing other than the Assumed Loan in the event Purchaser, at its election, agrees to assume the Assumed Loan. Within five (5) business days of receipt of the Title Notice, Seller shall notify Purchaser in writing of any Disapproved Matters which Seller is unable to cause to be removed or satisfactorily insured against. Purchaser shall, within five (5) business days after receipt of such notice from Seller, elect, by giving written notice to Seller (i) to terminate this Agreement, in which event the Deposit shall be returned to Purchaser, or (ii) to waive its disapproval of such exceptions or survey matters, in which event such exceptions or survey matters as to which Purchaser has waived its objections shall be deemed to be “Permitted Encumbrances”). Failure by the Purchaser to give the Seller notice pursuant to the preceding sentence shall constitute a determination by Purchaser to terminate this Agreement for title or survey objections.

Seller hereby represents, warrants and covenants to Purchaser that the following matters are true and correct as of the execution of this Agreement and will also be true and correct as of the Closing:

(a) Seller is a limited partnership duly organized and validly existing under the laws of the State of Ohio. This Agreement has been, and all the documents executed by Seller which are to be delivered to Purchaser at the Closing will be, duly authorized, executed and delivered by Seller and will be legal, valid and binding obligations of Seller enforceable against Seller in accordance with their respective terms (except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, moratorium and other principles relating to or limiting the right of contracting parties generally), will be sufficient to convey title (if they purport to do so) and will not violate any provisions of any agreement to which Seller is a party or to which the Property or Seller is subject or bound. No consent, waiver or approval by any third party is required in connection with the execution and delivery by Seller of this Agreement or the performance by Seller of the obligations to be performed by Seller under this Agreement.

(b) Seller has not received notice (from any applicable governmental entity or otherwise) of any violation of any applicable building codes, environmental, zoning, subdivision and land use laws, and other local, state and federal laws and regulations affecting the use and/or operation of the Property.

(c) (i) The plans and specifications, certificate(s) of occupancy, warranties, operating statements, income and expense reports and all other contracts or documents required to be delivered to Purchaser pursuant to this Agreement are true, correct and complete copies; and (ii) the certificate(s) of occupancy and warranties are in full force and effect.

(d) The Rent Roll attached hereto as Exhibit B is true, correct and complete. As of the Closing, the Rent Roll delivered at the Closing will be true, correct and complete. The copies of the Leases delivered to Purchaser are true, correct and complete copies and, to the best of Seller’s knowledge, are in full force and effect, without default by any party and without any right of setoff, except as expressly provided by the terms of such Leases or as disclosed to Purchaser in writing at the time of delivery or identified on the Rent Roll. The copies of the Leases and other agreements with the tenants under the Leases (the “Tenants”) delivered to Purchaser pursuant to this Agreement constitute the entire agreements with such Tenants relating to the Real Property, have not been amended, modified or supplemented, except for such amendments, modifications and supplements delivered to Purchaser, and there are no other leases or tenancy agreements affecting the Real Property.

(e) Exhibit F attached hereto is a true and complete schedule of all of the Contracts (as hereinafter defined in Section 7), true, complete and correct copies of which will have been delivered to Purchaser for Purchaser’s approval within ten (10) business days hereof. To the best of Seller’s knowledge, the Contracts, and all other documents required to be delivered to Purchaser pursuant to this Agreement, are in full force and effect, without material default by any party and without any claims made for the right of setoff, except as expressly provided by the terms of such Contracts or as disclosed to Purchaser in writing at the time of such delivery. The Contracts constitute the entire agreements with such vendors relating to the Property, have not been amended, modified or supplemented, except for such amendments, modifications and supplements delivered to Purchaser, and there are no other agreements with any third parties (excluding, however, the Leases and Permitted Encumbrances) affecting the Property which will survive the Closing.

(f) Except as disclosed to Purchaser in writing, there are no condemnation, environmental, zoning or other land-use regulation proceedings, either instituted or, to the best of Seller’s knowledge, threatened to be instituted, which would detrimentally affect the value of the Real Property or the use and operation of the Real Property for its intended purpose, and there are no assessments affecting the Real Property other than as set forth in the Commitment or as disclosed in Exhibit G attached hereto.

(g) Seller has received no notice advising that (i) any utility required for the present use and operation of the Property has not been installed across public property or valid easements to the boundary lines of the Real Property, or is not connected pursuant to valid permits, or (ii) such facilities are inadequate to service the Property or are not in good operating condition.

(h) To the best of Seller’s knowledge, Seller has obtained all licenses, permits, easements, and rights-of-way, including proof of dedication, required from all governmental authorities having jurisdiction over the Real Property or from private parties for the present use and operation of the Real Property and to assure vehicular and pedestrian ingress to and egress from the Real Property at all access points currently being used.

(i) At the Closing, there will be no outstanding contracts made by Seller for the construction or repair of any improvements to the Improvements which have not been fully paid for and Seller shall cause to be discharged all mechanics’ or materialmen’s liens arising from any labor or materials furnished to the Improvements prior to the Closing.

(j) Seller does not use, treat, store or dispose of, and Seller has not permitted anyone else to use, treat, store or dispose of, whether temporarily or permanently, any hazardous or toxic materials (“Hazardous Materials”) at, on or beneath the Real Property in violation of any federal, state or local law, regulation or ordinance. Seller has no knowledge of the presence, use, treatment, storage, release or disposal of any Hazardous Materials at, on or beneath the Real Property which has created or might create any liability of owners or occupants of the Real Property under any federal, state or local law or regulation or which would require reporting to a governmental agency. Except as disclosed in writing to Purchaser, to the best of Seller’s knowledge, no asbestos or PCBs are contained in or stored on the Real Property. To the best of Seller’s knowledge, there are no storage tanks located in, on or under the Real Property.

(k) Seller has not received any notice from any insurance carrier of any defects or inadequacies in the Property, or in any portion thereof, which would adversely affect the insurability thereof or the cost of such insurance. Except as set forth on Exhibit G, there are no pending insurance claims.

(l) Except as set forth in Exhibit G attached hereto, there are no pending or, to the best of Seller’s knowledge, threatened legal proceedings or actions of any kind or character affecting the Property or Seller’s interest therein. Except as delivered to Purchaser, there are no litigation documents relating to any of the matters set forth in Exhibit G other than routine landlord-tenant proceedings (relating to evictions and/or recovery of rent) in the ordinary course of business.

(m) Seller is not a “foreign person” within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), and Seller will furnish to Purchaser, prior to the Closing, an affidavit in the form attached hereto as Exhibit H.

The representations and warranties made in this Agreement by Seller shall be continuing and shall be deemed made by Seller as of the Closing with the same force and effect as if in fact made at that time. All representations and warranties made in this Agreement shall not merge into any instrument or conveyance delivered at the Closing but shall survive the Closing for a period of one (1) year, at which time Seller’s liability with respect to such representations and warranties shall terminate except as otherwise provided herein or in any document or instrument entered into or delivered in connection with the transactions contemplated by this Agreement (including, without limitation, the deed) and except as to claims asserted in writing within such one (1) year period.

Purchaser hereby represents and warrants to Seller that this Agreement has been, and all the documents to be delivered by Purchaser to Seller at the Closing will be, duly authorized, executed and delivered by Purchaser (and have been or will be executed by an individual authorized to do so), are, and in the case of the documents to be delivered will be, legal and binding obligations of Purchaser, are, and in the case of the documents to be delivered will be, enforceable in accordance with their respective terms (except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, moratorium and other principles relating to or limiting the rights of contracting parties generally), and do not, and will not at the Closing, violate any provisions of any material agreement to which Purchaser is a party.

(a) Seller has delivered, or will deliver to Purchaser no later than five (5) days following the execution hereof by all parties, the following documents and the documents listed on Exhibit A-1 (the “Due Diligence Documents”):

(i) A current rent roll pertaining to the Real Property (the “Rent Roll”) setting forth in respect of each Tenant unit: the name of the Tenant occupying such unit, the security deposit or other deposit paid by the Tenant, the term of the Lease for such unit, the commencement date for the term of the Lease for such space, the annual rent for each unit, and the expiration date of the term of such Lease.

(ii) A statement of insurance coverage and premiums by policy type and copies of insurance policies for the fire, extended coverage and public liability insurance maintained by or for the benefit of Seller (the “Existing Insurance Policies”); provided that Seller need not deliver such Policies to the extent coverage is provided by Seller’s blanket policies.

(iii) A copy of all income and expense statements, year end financial and monthly operating statements for the Property (the “Operating Statements”) for the three (3) most recent full calendar years prior to the Closing and, to the extent available, the current year, and copies of operating budgets for the current fiscal year.

(iv) A copy of “as built” plans and specifications of the Improvements and any other plans and specifications relating to the Real Property in the possession or control of Seller.

(v) Copies of any inspection, soils, engineering, environmental or architectural notices, plans, diagrams, studies or reports in the possession or control of Seller which relate to the physical condition or operation of the Real Property or the Personal Property or recommended improvements thereto.

(vi) A copy of the bill or bills issued for the most recent year for which bills have been issued for all real estate taxes (including assessed value) and personal property taxes, and a copy of any and all notices in the possession or control of Seller pertaining to real estate taxes or assessments applicable to the Real Property or the Personal Property (the “Tax Bills”).

(vii) A copy of all outstanding management, leasing, maintenance, repair, service, pest control and supply contracts (including, without limitation, janitorial, scavenger and landscaping agreements), equipment rental agreements, all contracts for repair or capital replacement to be performed at the Real Property, all contracts in Seller’s possession or control for repair or capital replacement covering work performed at the Real Property during the three (3) years immediately preceding the date hereof if the contract price was in excess of $10,000, and any other contracts relating to or affecting the Property (other than Leases) which will be binding upon the Property or Purchaser subsequent to the Closing, all as amended (collectively, the “Contracts”).

(viii) A copy of all Leases and any other agreements which are in effect thereto with the Tenants of the Real Property, all as amended, together with any financial statements of such Tenants to the extent such disclosure is not restricted by any applicable confidential agreement and to the extent such financial statements are in the possession or control of Seller.

(ix) Copies of all certificate(s) of occupancy, licenses, permits, authorizations and approvals in the possession or control of Seller which were obtained by Seller with respect to the Property, or any portion thereof, occupancy thereof or any present use thereof, including, without limitation, such permits as are necessary for the present operation of the Property with full use of all Improvements located thereon (the “Governmental Approvals”).

(x) A copy of all third party guarantees and warranties relating to the Property in the possession or control of Seller.

(xi) Copies of pending insurance claims or litigation documents relating to the Property.

(xii) Any other documents and information in the possession or control of Seller reasonably requested by Purchaser and used or useful in connection with Seller’s ownership or operation of the Property, including, without limitation, all documents evidencing, securing or otherwise relating to the Assumed Loan.

Notwithstanding anything to the contrary contained in this Agreement, in the event that Seller, despite its good-faith efforts, shall be unable to fully perform its obligations to deliver all of the documents and information as required under this Section 7, then Purchaser’s sole remedy shall be the right to elect, by giving written notice to Seller, either (i) to terminate this Agreement and have the Deposit returned to it or (ii) to waive such failure to provide such documents and information and to consummate the transaction contemplated hereby with no adjustment in the Purchase Price. If Purchaser elects to terminate this Agreement, the Deposit shall be returned to Purchaser, and thereafter this Agreement shall become null and void with no further obligation on the part of either party.

For a period of thirty (30) days after the Effective Date (the “Due Diligence Period”) and with prior reasonable notification to Seller, Purchaser, its agents and representatives shall be entitled: (i) to enter onto the Real Property during normal business hours to perform inspections and tests of the Real Property or the Personal Property, including all leased areas (subject to the rights of the Tenants) and structural and mechanical systems within the Improvements; (ii) to examine and copy any and all books and records maintained by Seller or its agents relating to receipts and expenditures pertaining to the Property; (iii) subject to the terms of the Leases, to interview the Tenants during normal business hours; (iv) to examine for the presence or absence of hazardous or toxic materials, substances or wastes (collectively, “Hazardous Materials”); and (v) to review the documentation described in this subsection (a). After making such tests and inspections, Purchaser agrees to promptly restore the Real Property and the Personal Property to their condition prior to such tests and inspections. Purchaser agrees to indemnify and hold harmless Seller from all loss, cost and expense (including reasonable attorneys’ fees) incurred, suffered by, or claimed against Seller by reason of any actual damage to the Real Property or the Personal Property or injury to persons caused by Purchaser and/or its agents, employees or contractors in exercising its rights under clauses (i) or (iv) above. The indemnification and hold harmless provisions of this Section 7 shall survive any termination of this Agreement. All such investigations and inspections shall be done in such a way as to minimize disruption of tenants’ business operations and interference with tenants generally.

In the event that all aspects of the Property are not acceptable to Purchaser in its sole discretion, Purchaser shall give written notice thereof to Seller and Escrow Agent prior to the expiration of the Due Diligence Period, the Deposit shall be returned to Purchaser and this Agreement shall terminate and both Seller and Purchaser shall thereafter be relieved from any and all liability under this Agreement except the indemnification obligation described in the preceding paragraph.

Failure of the Purchaser to give the Seller a letter objecting to any of the documentation described in subsection (a) of this Section 7 within the Due Diligence Period shall constitute a determination by Purchaser to terminate this Agreement because of the unacceptability of these items.

Purchaser shall give Seller written notice of those Contracts Purchaser desires Seller to terminate prior to Closing and Seller shall arrange to terminate those Contracts designated by Purchaser as of the Closing.

(b) PURCHASER SPECIFICALLY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN SECTION 5 OR OTHERWISE IN THIS AGREEMENT, SELLER IS SELLING AND PURCHASER IS PURCHASING THE PROPERTY ON AN “AS IS WITH ALL FAULTS” BASIS AND THAT PURCHASER IS NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, FROM SELLER, ITS AGENTS, OR BROKERS AS TO ANY MATTERS CONCERNING THE PROPERTY, INCLUDING, WITHOUT LIMITATION: (i) the quality, nature, adequacy and physical condition of the Property, including, but not limited to, the structural elements, foundation, roof, appurtenances, access, landscaping, parking facilities and the electrical, mechanical, HVAC, plumbing, sewage, and utility systems, facilities and appliances, (ii) the quality, nature, adequacy, and physical condition of soils, geology and any groundwater, (iii) the existence, quality, nature, adequacy and physical condition of utilities serving the Property, (iv) the development potential of the Property, and the Property’s use, habitability, merchantability, or fitness, suitability, value or adequacy of the Property for any particular purpose, (v) the zoning or other legal status of the Property or any other public or private restrictions on use of the Property, (vi) the compliance of the Property or its operation with any applicable codes, laws, regulations, statutes, ordinances, covenants, conditions and restrictions of any governmental or quasi-governmental entity or of any other person or entity, (vii) the presence of Hazardous Materials on, under or about the Property or the adjoining or neighboring property, (viii) the quality of any labor and materials used in any improvements on the Real Property, (ix) the condition of title to the Property, (x) the Leases or Contracts and (xi) the economics of the operation of the Property.

(c) Without limiting the above, except with respect to a breach by Seller of any of the representations and warranties contained in Section 5 hereof or Seller’s obligations hereunder, or Seller’s fraud, Purchaser (on behalf of itself and its successors and assigns) waives its right to recover from, and forever releases and discharges, Seller, Seller’s affiliates, Seller’s investment manager, the partners, trustees, shareholders, directors, officers, employees and agents of each of them, and their respective heirs, successors, personal representatives and assigns, from any and all demands, claims, legal or administrative proceedings, losses, liabilities, damages, penalties, fines, liens, judgments, costs or expenses whatsoever (including, without limitation, attorneys’ fees and costs), whether direct or indirect, known or unknown, foreseen or unforeseen, that may arise on account of or in any way be connected with the physical condition of the Property or any law or regulation applicable thereto, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Safe Drinking Water Act (42 U.S.C. Section 300f et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), and the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.).

The following shall be conditions precedent to Purchaser’s obligation to consummate the purchase and sale transaction contemplated herein (“Purchaser’s Conditions Precedent”):

(a) Title shall have been approved by Purchaser under Section 4 with title company standing ready to issue an owner’s policy of title insurance in the form customarily delivered in the State insuring Purchaser’s interest in the Real Property, dated the day of the Closing, with liability in the amount of the Purchase Price, subject only to the Permitted Encumbrances, together with such endorsements as Purchaser reasonably may require (the “Title Policy”). Any endorsements required by Purchaser for which the Title Company charges a fee shall be paid for by Purchaser.

(b) Seller and Purchaser shall each have executed and delivered to the other a certificate (the “Certificate”) in the form attached hereto as Exhibit I updating their respective representations and warranties through Closing, which Certificate each party covenants to deliver to the other unless new matters or knowledge of a defect arises, in which case such party shall deliver a Certificate stating such matter. Purchaser may then (i) waive such matter and consummate the transaction contemplated hereby or (ii) terminate this Agreement, in which case the Deposit shall be returned to Purchaser and neither party shall have any further obligations or liabilities hereunder and any documents shall be returned to the party depositing the same.

In the event that any Purchaser’s Condition Precedent is not satisfied, Purchaser shall give written notice thereof to the Seller and Escrow Agent, the Deposit shall be returned to the Purchaser and this Agreement shall terminate and both Seller and Purchaser shall thereafter be relieved from any and all liability under this Agreement except for the indemnification and hold harmless provisions contained in Section 7.

(a) Prior to the expiration of the Due Diligence Period, Seller shall not enter into any Contract with respect to the Property without giving Purchaser written notice of its execution. After the expiration of the Due Diligence Period and prior to the Closing, Seller shall not enter into any Contract with respect to the Property which will survive the Closing or will otherwise affect the use, operation or enjoyment of the Property after the Closing, unless Seller first shall have obtained Purchaser’s prior written consent. If Purchaser has not notified Seller within five (5) business days of receipt of a request for approval of its decision, Purchaser shall be deemed to have approved the matter.

(b) The Existing Insurance Policies, or equivalent coverage, shall remain continuously in force through the day of the Closing.

(c) At all times prior to the Closing, Seller shall (i) operate and manage the Property in the same manner it presently operates and manages the Property, (ii) maintain present services, (iii) maintain the Property in good repair and working order, reasonable wear and tear excepted, (iv) keep on hand sufficient materials, supplies, equipment and other personal property for the efficient operation and management of the Property in a first class manner, and (v) perform when due all of Seller’s material obligations under the Leases, the instruments securing any mortgage lien on the Property, Contracts, Governmental Approvals and other agreements relating to the Property and otherwise in accordance with applicable laws, ordinances, rules and regulations affecting the Property. Prior to and as of the Closing, Seller shall cause all vacant units to be made rent-ready and available for occupancy based on standards and methods used by Seller prior to execution of this Agreement, and shall cause all appliances in all vacant units to be clean and in working order (the “Appliance Standards”). Purchaser shall receive a credit of Seven Hundred Fifty and No/100 Dollars ($750.00) for each unit that became vacant on a date that is five (5) or more days prior to Closing and that is not rent-ready (as reasonably determined by Purchaser based on standards customary in the industry) and available for occupancy as of the day of Closing; provided that such Seven Hundred Fifty and No/100 Dollars ($750.00) shall not include any costs to cause the appliances to meet the Appliance Standards. After full execution of this Agreement and until the Closing, Seller shall maintain all existing personnel on the Property in their current employment positions at their current rates of compensation. In the event of the Closing of the purchase of the Property, Purchaser shall not retain the existing employees and management agents of Seller for the Property, and, accordingly, on the Closing, Seller shall (i) cause all employment and management agreements respecting the Property to be terminated, and deliver evidence of such termination to Purchaser, and (iii) remove all employees and management personnel from the Property. Except for the obligation of Seller to use its reasonable efforts to fully enforce the material obligations of Tenants under the Leases, nothing contained in this Section 9(c) shall be deemed or construed as imposing any obligations of such Tenants onto Seller. Seller shall take steps to terminate, as of the day of the Closing, those of the Contracts designated in writing by Purchaser (no less than ten (10) days prior to Closing) which may by their terms be so terminated. None of the Personal Property shall be removed from the Real Property, unless replaced by Personal Property of equal or greater utility and value unless such Personal Property has no value.

(d) Seller shall pay in full, prior to the Closing, all bills and invoices for labor, goods, utility charges, material and services of any kind relating to the Property.

(e) Seller agrees to pay any brokerage or leasing fee or similar commission or other compensation with respect to the Leases, if any (“Leasing Commissions”) which is or will become due and payable prior to the Closing, except for lease renewals, or exercises of expansion options, entered into after the date of this Agreement which shall be Purchaser’s obligation if the Closing occurs. All other brokerage or leasing fees or similar commissions with respect to the Leases which, on an absolute or contingent basis, will become due and payable after the Closing, including fees or commissions or other compensation with respect to renewals are disclosed on Exhibit E; the amount of such fees or commissions due on an absolute basis prior to Closing will be credited against the Purchase Price payable by Purchaser at the Closing, however, all such fees or commissions or other compensation due or payable after the Closing on an absolute or contingent basis, to the extent disclosed on Exhibit E, shall become obligations of Purchaser after the Closing.

(f) After the date hereof and prior to the Closing, except for leases in the ordinary course of business above, no part of the Property, or any interest therein, shall be alienated, liened, encumbered or otherwise transferred. Seller shall make all payments of principal and interest required under any mortgages encumbering the Property due prior to the Closing.

(g) Seller agrees that it will, at any time and from time to time after the Closing, upon the reasonable request of Purchaser and at Purchaser’s cost and expense, do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances and assurances as may be reasonably required for better assigning, transferring and conveying the Property to Purchaser.

(h) Upon Purchaser’s request, for a period of six (6) months after the Closing, Seller shall make all Seller’s records with respect to the Property available to Purchaser for inspection, copying and audit by Purchaser’s designated accountants.

(i) Seller shall promptly notify Purchaser of any change in any condition with respect to the Real Property or of any event or circumstance which makes any representation or warranty of Seller to Purchaser under this Agreement materially untrue or misleading, or any covenant of Seller under this Agreement incapable or less likely of being performed.

(j) Seller shall deliver to Purchaser on a monthly basis until Closing updated operating statements and Rent Rolls.

(k) Seller shall not apply any tenant’s security deposit unless the tenant is out of its premises as of Closing.

(l) Seller shall give Purchaser prompt notice of any fire or other casualty affecting the Property.

(m) Seller shall give Purchaser prompt notice of any violation issued by any governmental authorities with respect to the Property.

(n) Seller shall, at its sole cost and expense, remedy before Closing all violations of legal requirements affecting or relating to the Real Property and known to the Seller.

At the Closing, Seller shall deliver to Purchaser the following, in form and substance acceptable to Purchaser:

(a) A general warranty deed executed by Seller (the “Deed”), in recordable form, conveying the Property to Purchaser, free and clear of all liens, encumbrances, security interests, options and adverse claims of any kind or character except the Permitted Encumbrances.

(b) A Bill of Sale, executed by Seller (the “Bill of Sale”) in the form attached hereto as Exhibit J, transferring, conveying and assigning and warranting to Purchaser, the Personal Property, free and clear of all liens, encumbrances, security interests, options and adverse claims of any kind or character other than the Permitted Encumbrances, together with the original certificates of title thereto, if any.

(c) An assignment (the “Contract Assignment”) in the form attached hereto as Exhibit K, executed by Seller, to Purchaser, of (i) those of the Contracts which Purchaser has elected in writing to assume (the “Assigned Contracts”) with the agreement of Seller to indemnify, protect, defend and hold Purchaser harmless from and against any and all claims, damages, losses, costs and expenses (including attorneys’ fees) arising in connection with the Assigned Contracts and related to the period prior to the Closing and a comparable indemnity from Purchaser relating to the period following the Closing, (ii) any and all guarantees and warranties used or made in connection with the operation, construction, improvement, alteration or repair of the Property, and (iii) all right, title and interest of Seller and its agents in and to the Intangible Personal Property (including the Governmental Approvals to the extent assignable).

(d) An assignment of lessor’s interest in the Leases (the “Lease Assignment”) in the form attached hereto as Exhibit L executed by Seller, to Purchaser, together with an agreement by Seller to indemnify, protect, defend and hold Purchaser harmless from and against any and all claims, damages, losses, costs and expenses (including attorneys’ fees) arising in connection with the Leases relating to the period prior to the Closing and a comparable indemnity from Purchaser relating to the period following the Closing.

(e) To the extent not previously delivered to Purchaser, originals of the Leases, the Contracts which have not been terminated pursuant to Section 9(c), certificate(s) of occupancy and other instruments evidencing the Governmental Approvals in Seller’s possession or, if such originals are not available, copies certified by Seller to be true, correct and complete copies of such originals.

(g) Letters executed by Seller and Seller’s management agent, if any, addressed to all Tenants, in form of Exhibit M attached hereto, notifying and directing payment of all rent and other sums due from Tenants from and after the date of the Closing to be made at Purchaser’s direction.

(h) Reasonable proof of the due authorization, execution and delivery by Seller of this Agreement and the documents delivered by Seller pursuant hereto.

(i) A Rent Roll, prepared as of the day of the Closing, certified by Seller to be true and correct through the day of the Closing.

(j) An affidavit from Seller in the form attached hereto as Exhibit H certifying that such Seller is not a “foreign person” within the meaning of Section 1445(f)(3) of the Code.

(l) Any other documents, instruments or agreements called for hereunder which have not previously been delivered or which may be required by Purchaser title insurance company to issue the Title Policy.

(c) The Purchase Price, net of the Deposit and prorations and, if Purchaser elects to assume the Assumed Loan, net of the Assumed Loan, by wire transfer and an amount.

(e) Any other documents, instruments or agreements reasonably necessary to close the transaction as contemplated by this Agreement.

The following shall be prorated and adjusted between Seller and Purchaser as of the day of the Closing, except as otherwise specified:

(a) Collected Rents and other charges, other than for Tenants who owe Delinquent Rents (as hereinafter defined), shall be prorated by credit to Purchaser. Prepaid rents and other charges shall be credited to Purchaser. Rents unpaid for the month in which the Closing occurs, which are uncollected as of Closing but which are received within the month in which the Closing occurs shall be prorated. Rents and other charges which at the Closing are thirty (30) or more days past due (“Delinquent Rents”) shall not be prorated. Rents and other amounts received by Purchaser within thirty (30) days after the Closing from a Tenant owing Delinquent Rents shall be applied (i) first, to all Purchaser’s costs of collection incurred with respect to such Tenant (including reasonable attorneys’ fees); (ii) second, to rents due for the month in which such payment is received by Purchaser; (iii) third, to rents attributable to any period after the Closing which are past due on the date of receipt; and (iv) then, to Delinquent Rents. Seller shall promptly remit to Purchaser all sums received by Seller from Tenants after the Closing other than for rents for which Purchaser received credit hereunder.

(b) The amount of all security and other Tenant deposits and interest due thereon, if any, shall be credited to Purchaser.

(c) Accrued general real estate, personal property and ad valorem taxes and assessments for the current tax year shall be prorated on the basis of bills, if available prior to the Closing.

(d) Such other items that are customarily prorated in transactions of this nature (including, without limitation, any utilities paid by Seller under the Leases) shall be prorated.

Purchaser shall be deemed to be the owner of the Property and, therefore, entitled to the income from the Property and responsible for the expenses of the Property for the entire day upon which the Closing occurs. All such prorations shall be made on the basis of the actual number of days of the month which shall have elapsed as of the day of the Closing. To the extent information necessary to make such prorations is not available at the Closing, the amount of such prorations shall be subject to adjustment in cash after the Closing as and when complete and accurate information becomes available. Seller and Purchaser agree to cooperate and use their best efforts to make such adjustments no later than sixty (60) days after the Closing. Except as set forth in this Section 12, all items of income and expense for the period prior to the Closing Date will be for the account of Seller and all items of income and expense for the period on and after the Closing Date will be for the account of Purchaser, all as determined by the accrual method of accounting. Bills received after the Closing Date which relate to expenses incurred, services performed or other amounts allocable to the period prior to the Closing Date shall be paid by Seller.

The purchase and sale contemplated herein shall close at the offices of Escrow Agent within thirty (30) days after expiration of the Due Diligence Period or at such other time, date and place as the parties shall mutually agree. As used herein, the terms “Closing” and “Closing Date” shall mean the date on which Escrow Agent (i) has received all funds and all documents (property executed and acknowledged, as necessary) as required hereunder, (ii) is in a position to record the Deed and issue the Title Policy, and (iii) has taken all actions necessary to consummate the transaction contemplated by this Agreement. Purchaser shall have the right to extend the closing date for thirty (30) days (the “Extension”) upon (i) giving Seller notice to do so at least three (3) business days prior to the originally scheduled Closing Date and (ii) payment to Escrow Agent of an extension deposit (the “Extension Deposit”) of One Hundred Fifty Thousand and No/100 Dollars ($150,000.00). Upon Purchaser’s exercise of the Extension in accordance with this Section 13 the Initial Deposit shall become non-refundable to Purchaser, except as otherwise expressly provided herein (including without limitation in the event of a default by Seller under this Agreement or in the event that any of Purchaser’s Conditions Precedent are not satisfied pursuant to Section 8 above, whereupon the Deposit shall be returned to Purchaser in accordance with the terms of this Agreement).

Seller shall pay the cost of the title policy. In connection with the sale of the Property contemplated under this Agreement, Seller shall be responsible for all transfer and recordation taxes, including, without limitation, all transfer, sales or bulk transfer taxes or like taxes on or in connection with the transfer of the Personal Property constituting part of the Property pursuant to the Bill of Sale and all accrued taxes of Seller prior to Closing and income taxes and other such taxes of Seller attributable to the sale of the Property to Purchaser. Each party shall bear the expense of its own counsel.

(a) In the event that prior to the Closing, the Improvements, or any part thereof, are destroyed or materially damaged (as defined in Section 15(e)), Purchaser shall have the right, exercisable by giving notice to Seller within fifteen (15) business days after receiving written notice of such damage or destruction, either (i) to terminate this Agreement, in which case neither party shall have any further rights or obligations hereunder except any indemnification obligations of Purchaser, and the Deposit shall be returned to Purchaser and any documents shall be returned to the party depositing the same, or (ii) to accept the Improvements in their then condition and to proceed with the Closing with an abatement or reduction in the Purchase Price in the amount of the deductible for the applicable insurance coverage, and to receive an assignment of all of Seller’s rights to any insurance proceeds payable by reason of such damage or destruction. If Purchaser elects to proceed under clause (ii) above, Seller shall not compromise, settle or adjust any claims to such proceeds without Purchaser’s prior written consent.

(b) In the event that prior to the Closing there is any non-material damage to the Improvements, or any part thereof, Seller shall repair or replace such damage prior to the Closing. Notwithstanding the preceding sentence, in the event Seller is unwilling or unable to repair or replace such damage, Seller shall notify Purchaser of such fact (“Seller’s Notice”) and Purchaser thereafter shall have the right, exercisable by giving Seller notice within fifteen (15) days after receiving Seller’s Notice either (i) to terminate this Agreement, in which case neither party shall have any further rights or obligations hereunder except any indemnification obligations of Purchaser, and the Deposit shall be returned to Purchaser and any documents shall be returned to the party depositing the same, or (ii) to accept the Improvements in their then condition with an abatement or reduction in the Purchase Price in the amount of the deductible for the applicable insurance coverage and proceed with the Closing, in which case Purchaser shall be entitled to an assignment of all of Seller’s rights to insurance proceeds payable by reason of such non-material damage. For purposes of contemplating any repairs or replacements under this Section 15(b), the Closing may be extended for a reasonable time to allow such repairs or replacements to be made by Seller.

(c) In the event that prior to the Closing, all or any material portion (as defined in Section 15(e)) of the Land and Improvements are subject to a taking by public authority, Purchaser shall have the right, exercisable by giving notice to Seller within fifteen (15) business days after receiving written notice of such taking, either (i) to terminate this Agreement, in which case neither party shall have any further rights or obligations hereunder except any indemnification obligations of Purchaser and the Deposit shall be returned to Purchaser and any documents shall be returned to the party depositing the same, or (ii) to accept the Land and Improvements in their then condition, without a reduction in the Purchase Price, and to receive an assignment of all of Seller’s rights to any condemnation award payable by reason of such taking. If Purchaser elects to proceed under clause (ii) above, Seller shall not compromise, settle or adjust any claims to such award without Purchaser’s prior written consent.

(d) In the event that prior to the Closing, any non-material portion of the Land or Improvements is subject to a taking, Purchaser shall accept the Property in its then condition and proceed with the Closing, in which case Purchaser shall be entitled to an assignment of all of Seller’s rights to any award in connection with such taking. In the event of any such non-material taking, Seller shall not compromise, settle or adjust any claims to such award without Purchaser’s prior written consent.

(e) For the purpose of this Section 15, damage to the Improvements or a taking of a portion thereof shall be deemed to involve a material portion thereof if the reasonably estimated cost of restoration or repair of such damage or the amount of the condemnation award with respect of such taking shall exceed One Hundred Thousand and No/100 Dollars ($100,000.00), if the number of parking spaces is reduced or the entrances and entrance signs are relocated.

(f) Seller agrees to give Purchaser prompt notice of any taking, damage or destruction of the Land or Improvements.

(g) The provisions of this Section 15 shall survive the Closing subject to the conditions and limitations set forth in this Section 15.

(a) The parties agree that, in the event of a default by Purchaser under this Agreement, the damages suffered by Seller would be difficult to ascertain. Seller and Purchaser agree that, in the event of a default by Purchaser, Seller’s sole remedy shall be to terminate this Agreement and retain the Deposit (including accrued interest thereon), as liquidated damages, and Seller hereby specifically waives the right to seek specific performance of this Agreement by Purchaser or other damages.

(b) In the event of a default hereunder by Seller, Purchaser shall have at its option either to (i) bring an action for specific performance of this Agreement or (ii) terminate this Agreement, and have the Deposit returned to it and be reimbursed for its actual out-of-pocket due diligence expenses. In the event of a willful default by Seller, in addition to receiving the Deposit and reimbursement for its actual out-of-pocket due diligence expenses, Purchaser shall be reimbursed for any non-refundable fees paid to its lender, including, but not limited to fees for third party reports, attorneys, rate lock, application and commitment fees in which case neither party shall have any further rights or obligations hereunder except any indemnification obligations of Purchaser.

(a) Seller hereby agrees to indemnify, hold harmless and defend Purchaser and any successor in interest (the “Indemnified Parties”) from and against:

(i) any loss, liability or damage suffered or incurred by the Indemnified Parties because any representation or warranty made by Seller in this Agreement was incorrect in any material respect or as a result of any legal action filed against Purchaser as a result of events arising at the Property prior to Closing and not caused by Purchaser; and

(ii) all costs and expenses (including reasonable attorneys’ fees and disbursements) incurred by the Indemnified Parties in connection with any action, suit, proceeding, demand, assessment or judgment incident to any of the matters indemnified against in this Section 17(a).

(b) Purchaser hereby agrees to indemnify, hold harmless and defend Seller from and against:

(i) any loss, liability or damage suffered or incurred by Seller because any representation or warranty made by Purchaser in this Agreement was incorrect in any material respect; and

(ii) all costs and expenses (including reasonable attorneys’ fees and disbursements) incurred by Seller in connection with any action, suit, proceeding, demand, assessment or judgment incident to any of the matters indemnified against in this Section 17(b).

(c) The provisions of this Section 17 shall survive the Closing for a period of one (1) year, at which time the indemnification obligations of Seller and Purchaser pursuant to this Section 17 shall terminate except as to claims asserted within such one (1) year period.

(a) Seller represents and warrants to Purchaser that no brokerage commissions, finder’s fees or other compensation is due or payable by reason of the actions of Seller with respect to the transaction contemplated hereby. Seller agrees to indemnify and hold Purchaser harmless from and against any losses, damages, costs and expenses (including attorneys’ fees) incurred by Purchaser by reason of any breach or inaccuracy of the representation and warranty contained in this Section 18(a).

(b) Purchaser represents and warrants to Seller that Purchaser has not entered into any agreement or incurred any obligation which might result in the obligation to pay any brokerage commission, finder’s fee or other compensation with respect to the transaction contemplated hereby. Purchaser agrees to indemnify and hold Seller harmless from and against any losses, damages, costs and expenses (including attorneys’ fees) incurred by Seller by reason of any breach or inaccuracy of the representation and warranty contained in this Section 18(b).

(a) Each individual and entity executing this Agreement hereby represents and warrants that he or it has the capacity set forth on the signature pages hereof with full power and authority to bind the party on whose behalf he or it is executing this Agreement to the terms hereof.

(b) This Agreement is the entire Agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements between the parties with respect to the matters contained in this Agreement. Any waiver, modification, consent or acquiescence with respect to any provision of this Agreement shall be set forth in writing and duly executed by or in behalf of the party to be bound thereby. No waiver by any party of any breach hereunder shall be deemed a waiver of any other or subsequent breach.

(c) This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument. The signature page of any counterpart may be detached therefrom without impairing the legal effect of the signature(s) thereon provided such signature page is attached to any other counterpart identical thereto except having additional signature pages executed by other parties to this Agreement attached thereto.

(d) Any communication, notice or demand of any kind whatsoever which either party may be required or may desire to give to or serve upon the other shall be in writing and delivered by personal service (including express or courier service) or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

Any party may change its address for notice by written notice given to the other in the manner provided in this Section. Any such communication, notice or demand shall be deemed to have been duly given or served on the date personally served, if by personal service, or on the date shown on the return receipt or other evidence of delivery, if mailed.

(e) The parties agree to execute such instructions to the Escrow Agent and such other instruments and to do such further acts as may be reasonably necessary to carry out the provisions of this Agreement.

(f) The making, execution and delivery of this Agreement by the parties hereto have been induced by no representations, statements, warranties or agreements other than those expressly set forth herein.

(g) Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be valid under applicable law, but, if any provision of this Agreement shall be invalid or prohibited thereunder, such invalidity or prohibition shall be construed as if such invalid or prohibited provision had not been inserted herein and shall not affect the remainder of such provision or the remaining provisions of this Agreement.

(h) The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly for or against any of the parties hereto. Section headings of this Agreement are solely for convenience of reference and shall not govern the interpretation of any of the provisions of this Agreement.

(i) This Agreement shall be governed by and construed in accordance with the laws of the State in which the Property is located.

(j) This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and to their respective transferees, successors, and assigns; provided, however, that neither this Agreement nor any of the rights or obligations of Seller hereunder shall be transferred or assigned by Seller without the prior written consent of Purchaser. Purchaser shall have the right to assign all of its right, title and interest under this Agreement without the prior written consent of Seller to an entity managed or controlled by Purchaser or an affiliate of Purchaser.

(l) Notwithstanding anything to the contrary contained herein, this Agreement shall not be deemed or construed to make the parties hereto partners or joint venturers, or to render either party liable for any of the debts or obligations of the other, it being the intention of the parties to merely create the relationship of seller and purchaser with respect to the Property to be conveyed as contemplated hereby.

(m) This Agreement shall not be recorded or filed in the public land or other public records of any jurisdiction by either party and any attempt to do so may be treated by the other party as a breach of this Agreement.

(n) Purchaser, during its inspection of the Real Property, agrees not to notify or advise of the existing tenants of the Real Property that the Real Property is for sale until such time as all conditions precedent to closing have been satisfied.

(o) During the period from the date of execution of this Agreement until the Closing or this Agreement is terminated, Seller agrees not to market the Property for sale, accept any offer for purchase, offer the Property for joint venture, apply for any financing, divulge to any potential purchaser or joint venturer or lender any written material with respect to the Property nor divulge nor communicate in any way to any potential purchaser or joint venturer or lender with respect to the Property, any information with respect to the Property.

(p) Unless provided to the contrary in any particular provision, all time periods shall refer to calendar days and shall expire at 5:00 p.m. Pacific Time on the last of such days; provided, however, that if the time for the performance of any obligation expires on a day which is not a “business day” (which term shall mean a Saturday, Sunday and days on which banks in the state where the Property is located are closed), the time for performance shall be extended to the next business day.

(q) The Seller acknowledges that Purchaser intends to assign all of its rights, title and interest in and to this Agreement. The assignee may be a publicly registered company (“Registered Company”) promoted by the Purchaser. The Seller acknowledges that it has been advised that if the purchaser is a Registered Company, the assignee 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 assignee in preparing the SEC Filings, the Seller agrees to provide the assignee with the following:

(6) Access to invoice for expenses and capital improvements in the Audited Year;

(8) 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; and

(9) Signed representation letter in the form attached hereto as Exhibit N at the end of the field work.

3 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written.

This ASSIGNMENT AND ASSUMPTION OF PURCHASE AND SALE AGREEMENT (“Assignment Agreement”) is made by and between TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company (“Assignor”) and APARTMENT REIT RESIDENCES AT BRAEMAR, LLC, a Delaware limited liability company (“Assignee”) as of June 29, 2007 (“Effective Date”), with reference to the facts set forth below.

A. Assignor and Braemar Housing Limited Partnership (“Seller”) entered into that certain Purchase and Sale Agreement dated April 26, 2007 (“Purchase Agreement”). Pursuant to the Purchase Agreement, Assignor agreed to purchase from Seller that certain real property known as Residences at Braemar in the City of Charlotte, Mecklenburg County, North Carolina, as more particularly described in the Purchase Agreement (the “Property”).

B. Assignor desires to assign all of its rights and obligations under the Purchase Agreement to Assignee and Assignee desires to assume such rights and obligations of Assignor under the Purchase Agreement on the terms and conditions set forth below.

NOW, THEREFORE, in consideration of the covenants contained herein, the premises set forth above and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as set forth below.

1. Assignment and Assumption. In consideration of the covenants contained herein, Assignor hereby assigns to Assignee all of its right, title, obligations, liabilities and interest under the Purchase Agreement and in and to the Property, and Assignee hereby assumes all such right, title, obligations, liabilities and interest under the Purchase Agreement and in and to the Property, including, without limitation, all post-Closing obligations of Assignor under the Purchase Agreement (“Assigned Rights and Obligations”). Assignor and Assignee agree to execute any further documents or instruments reasonably required to effectuate the assignment of the Assigned Rights and Obligations.

2. No Release of Assignor. Assignee’s assumption of the Assigned Rights and Obligations shall not release Assignor of any liabilities or obligations under the Purchase Agreement.

3. Successors and Assigns. Each and all of the covenants and conditions of this Assignment Agreement shall inure to the benefit of and shall be binding upon the successors-in-interest, assigns, and representatives of the parties hereto. Paragraphs 1 and 2 of this Assignment Agreement also inure to the benefit of Seller and its successors and assigns.

4. Miscellaneous. Assignor and Assignee each hereby represents and warrants that it has full right, power and authority to enter into this Assignment Agreement and that the person executing this Assignment Agreement on behalf of Assignor and Assignee, respectively, is duly authorized to do so. This Assignment Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which when taken together shall constitute one and the same instrument. This Assignment Agreement may be executed by facsimile transmission.

IN WITNESS WHEREOF, this Assignment Agreement has been made and executed as of the date first above written.

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

PREPARED BY AND AFTER RECORDING
RETURN TO:
J. Lindsay Stradley, Jr.
Epstein Becker & Green, P.C.
945 E. Paces Ferry Road., Suite 2700
Atlanta, GA 30326-1380

THIS LOAN ASSUMPTION AND MODIFICATION AGREEMENT (the “Agreement”), is made and entered into effective as of the 29th day of June, 2007 (the “Effective Date”), by and between APARTMENT REIT RESIDENCES AT BRAEMAR, LLC, a North Carolina limited liability company (“Purchaser”), whose principal place of business is located at c/o Triple Net Properties, LLC, 1606 Santa Rosa Drive, Suite 109, Richmond, Virginia 23229, and TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, an Iowa corporation (“Lender”), whose address is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499, and is joined in by BRAEMAR HOUSING LIMITED PARTNERSHIP, an Ohio limited partnership (“Seller”), having an office at 3103 Camden Drive, Troy, Michigan 48084 and by PHILLIP I. LEVIN, BRADLEY J. SCHRAM AND NORMAN A. PAPPAS (collectively, the “Original Carveout Obligor”), having an office at 3103 Camden Drive, Troy, Michigan 48084.

WHEREAS, effective as of May 25, 2005 (the “Original Loan Date”), the Lender funded a loan to Seller in the principal amount of $10,000,000.00 (the “Loan”) as evidenced by that certain Secured Promissory Note dated as of the Original Loan Date in the original principal amount of $10,000,000.00 (the “Note”);

WHEREAS, the Note is secured by (a) that certain Deed of Trust, Security Agreement and Fixture Filing executed by Seller for the benefit of Lender and recorded in Book 18849, Page 135, Mecklenburg County, North Carolina, Registry (the “Deed of Trust”), and (b) that certain Absolute Assignment of Leases and Rents recorded in Book 18849, Page 187, Mecklenburg County, North Carolina, Registry (the “Lease Assignment”);

WHEREAS, the Deed of Trust and the Lease Assignment hereinafter are sometimes collectively referred to as the “Original Security Instruments”;

WHEREAS, the Original Security Instruments encumber that certain real and personal property that is more particularly described therein (collectively, the “Property”);

WHEREAS, Seller and Original Carveout Obligor also executed and delivered to Lender in connection with the Loan that Environmental Indemnity Agreement dated as of the Original Loan Date (the “Environmental Indemnity”);

WHEREAS, Original Carveout Obligor also executed and delivered to Lender in connection with the Loan that certain Carveout Guarantee and Indemnity Agreement dated as of the Original Loan Date (the “Carveout Indemnity”);

WHEREAS, the Note, the Original Security Instruments, the Environmental Indemnity, the Carveout Indemnity and all other instruments or documents executed in connection with the Loan hereinafter are sometimes collectively referred to in this Agreement as the “Original Loan Documents”;

WHEREAS, by a certain deed dated as of the Effective Date and to be recorded in the Mecklenburg County, North Carolina, Registry immediately prior to the recordation of this Agreement, and by other instruments of transfer or conveyance of even date therewith, Seller has transferred and conveyed all of the Property to Purchaser;

WHEREAS, Seller, Original Carveout Obligor and Purchaser have requested that Lender consent to the above-described sale and conveyance of the Property to Purchaser, and Lender has agreed to consent to such sale and conveyance provided that (i) Purchaser, Seller and Original Carevout Obligor enter into this Agreement with Lender, whereby, inter alia, Purchaser assumes and agrees to pay and perform all of the past, current and future obligations of Seller under the Original Loan Documents, (ii) Purchaser and NNN Apartment REIT, Inc., a Maryland corporation (“New Carveout Obligor”), execute and deliver to Lender that certain Supplemental Environmental Indemnity Agreement dated as of the Effective Date (the “Supplemental Environmental Indemnity”), and (iii) New Carveout Obligor executes and delivers to Lender that certain Supplemental Carveout Guarantee and Indemnity Agreement dated as of the Effective Date (the “Supplemental Carveout Indemnity”).

WHEREAS, Purchaser and Lender desire to modify the Original Loan Documents in the manner more particularly hereinafter set forth; and

WHEREAS, the Original Loan Documents (as amended by this Agreement), this Agreement, the Supplemental Environmental Indemnity, the Supplemental Carveout Indemnity and all other instruments or documents executed and delivered by any one or more of Seller, Purchaser, Original Carveout Obligor and/or the New Carveout Obligor to or with Lender hereinafter are collectively referred to as the “Loan Documents”;

NOW, THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Purchaser, Seller, Original Carveout Obligor, and Lender hereby covenant and agree as follows:

1. Recitals. The above recitals are true and correct and are incorporated herein by reference. This Agreement is for the benefit of, and the recitals, covenants, representations, and warranties in this Agreement may be relied upon by, each of the parties hereto and their respective heirs, personal representatives, successors, and assigns.

2. Assumption of Original Loan Documents. Subject to the limitations on the personal liability of “Borrower” under the limited exculpation provisions set forth in Section 13 of the Note, Purchaser hereby assumes and agrees to promptly and faithfully pay and perform all of the terms, covenants, agreements, representations, warranties, provisions, indemnifications, liabilities, and obligations on the part of Seller and/or Original Carveout Obligor to be paid or performed under the Note, the Deed of Trust, the Lease Assignment, or any one or more of the other Original Loan Documents other than the Carveout Indemnity, whether to be paid or performed in the past, currently, or in the future, all in accordance with the terms and conditions thereof, as hereby amended, including, without limitation of the generality of the foregoing, all of the Carveout Obligations (as defined in the Deed of Trust) that are exceptions to the nonrecourse feature of the Loan and that are more particularly described in Section 14 of the Note and in Section 21 of the Deed of Trust (the “Carveout Obligations”). Purchaser hereby agrees to be bound by all of the Original Loan Documents as though Purchaser were and at all times had been the Borrower, Grantor and the Original Carveout Obligor thereunder. The parties acknowledge and agree that the unpaid principal balance of the Note as of July 1, 2007, is $9,721,916.77 and that interest due on the Note has been paid through June 30, 2007. The parties to this Agreement further acknowledge that as of July 1, 2007, escrow funds in the amount of $67,494.30 are now held by Lender for the payment of taxes and insurance on the Property.

3. Consent to Purchase. Lender hereby consents to the acquisition of the Property by Purchaser and the assumption by Purchaser of the Original Loan Documents in accordance with the terms of this Agreement. Seller and Purchaser acknowledge that this Agreement is the one-time assumption allowed by Lender under Subsection 14.1 of the Deed of Trust. Nothing contained herein, however, shall in any manner be interpreted or construed as a consent by Lender to any further sale, transfer, or conveyance of all or any portion of any interest in the Property or any portion thereof.

4. Lender’s Rights. Seller, Purchaser, and Original Carveout Obligor acknowledge, warrant and represent that Lender’s rights under the terms of this Agreement and any and all rights of Lender pursuant to the other Loan Documents, or with respect to any collateral security for the Loan, are cumulative, concurrent and exercisable by Lender as Lender may desire in its sole discretion, from time to time, as set forth in such other Loan Documents. Any default by Seller, Purchaser, or Original Carveout Obligor under this Agreement shall be deemed to be a “Default” under, and as defined in, each of the other Loan Documents and any other document or instrument creating any collateral security for the repayment of the Loan, and any “Default” under or with respect to any of such other Loan Documents shall be deemed a default under this Agreement.

5. Amendments to Original Loan Documents. The Deed of Trust, the Lease Assignment, and the Note are hereby respectively amended from and after the Effective Date hereof as follows:

(a) All references in the Deed of Trust, the Lease Assignment, and the Note to the “Seller” or “Borrower” hereafter shall be deemed to refer to Purchaser.

(b) Subject to the provisions of Section 15 of this Agreement, all references in the Deed of Trust, the Lease Assignment, and the Note to the “Environmental Indemnity Agreement” or the “Unsecured Environmental Indemnity Agreement” hereafter shall be deemed to refer to the Supplemental Environmental Indemnity.

(c) Subject to the provisions of Section 15 of this Agreement, all references in any of the Loan Documents to the “Carveout Guarantee and Indemnity Agreement,” the “Carveout Guarantee and Indemnity,” or “Guarantee and Indemnity Agreement” hereafter shall be deemed to refer to the Supplemental Carveout Indemnity.

6. Amendment of Deed of Trust. The Deed of Trust is hereby further amended from and after the Effective Date hereof as follows:

(a) All references in the Deed of Trust to the “Note,” the “Deed of Trust,” the “Absolute Assignment of Leases and Rents,” or the other “Loan Documents” hereafter shall mean and refer to the Note, the Deed of Trust, the Lease Assignment, or the other Loan Documents, as the case may be, as amended by this Agreement.

(b) As used in the Deed of Trust, the term “Loan Documents” also shall be deemed to include, without limitation, the Supplemental Environmental Indemnity and the Supplemental Carveout Indemnity.

(c) The definition of “Carveout Obligors” in Section 3 of the Deed of Trust is hereby amended to substitute “NNN Apartment REIT, Inc.” for “Phillip I. Levin, Joseph J. Recchie, Bradley J. Schram and Norman A. Pappas”.

(d) The definition of “Qualified Property Manager” is added to Section 3 of the Deed of Trust as follows:

“Qualified Property Manager” means either (A) a financially sound, professional property management company, experienced in managing properties similar in type, size and quality to the Real Property (“Similar Properties”), and which is then currently managing no less than eight (8) Similar Properties in any of the following states: Florida, Georgia, Alabama, Mississippi, Louisiana, Texas, Arkansas, Tennessee, South Carolina, North Carolina, Kentucky and Maryland; (B) another property management company approved in writing by the Lender; or (C) Triple Net Properties Realty, Inc., a California corporation.

(e) The definitions of “Permitted Control Group Member,” “Prohibited Structural Change” and “Recourse Release Conditions” in Section 3 of the Deed of Trust are hereby deleted, as are Subsections 14.1, 14.2 and 14.4 and clause (b) of the first sentence in Section 21 of the Deed of Trust. The following is inserted as Section 14:

The offering, sale or other transfer of capital stock or shares of beneficial interests in or of the Carveout Obligors, or any distributions of dividends to public shareholders of the Carveout Obligors shall constitute Permitted Transfers for purposes of Section 13.

“without Lender’s consent, merge into or consolidate with any Person, or dissolve, terminate, liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure;”

(ii)

Paragraph (viii) is amended by deleting the reference to “financial statements”.

“fail to file its own tax returns (unless prohibited by Legal Requirements from doing so, or an affiliate of Borrower files a consolidated return);”

“fail to allocate shared expenses (including shared office space) and, to the extent required for its operations, to use separate stationery, invoices and checks;”

The Real Property shall be managed at all times by a Qualified Property Manager.

(h) Subsection 26.13 of the Deed of Trust is amended to provide that the notice address of the Seller is as follows:

7. Amendment of Lease Assignment. The Lease Assignment is hereby amended from and after the Effective Date hereof as follows:

(a) All references in the Lease Assignment to the “Note,” the “Deed of Trust,” the “Assignment,” or the other “Loan Documents” hereafter shall mean and refer to the Note, the Deed of Trust, the Assignment, or the other Loan Documents, as the case may be, as amended by this Agreement.

(b) The definition of “Loan Documents” in Section 2 of the Lease Assignment is amended to exclude from the documents to which that term refers both the Environmental Indemnity and the Supplemental Environmental Indemnity.

8. Amendment of Note. The Note is hereby amended from and after the Effective Date hereof as follows:

(a) All references in the Note to the (a) “Note,” (b) the “Deed of Trust,” and (c) the “Absolute Assignment of Leases and Rents”, or the “Assignment” hereafter shall mean the Note, the Deed of Trust, and the Absolute Assignment of Leases and Rents, as the case may be, as amended by this Agreement.

“The Lender agrees that it shall not seek to enforce any monetary judgment with respect to the indebtedness evidenced by this Note against the Borrower or NNN Apartment REIT, Inc., except through recourse to the Property, unless the obligation from which the judgment arises is one of the “Carveout Obligations” defined in Section 14.

9. Waiver and Release. Seller, Purchaser, and Original Carveout Obligor, for themselves and their respective members, managers and managing directors, and the respective heirs, personal representatives, successors and assigns of all of them, acknowledge and agree that none of them has any right of setoff or defense or any counterclaim with respect to any of the indebtedness or other obligations evidenced or secured by any of the Loan Documents (or any other document or instrument executed in connection therewith), and hereby release and discharge any counterclaim or right of action that Seller, Purchaser, or the Original Carveout Obligor or any of their respective partners, members, managers, managing directors, or the respective heirs, personal representatives, successors or assigns of any of them, may have had, may now have, or may hereafter have against Lender, its affiliates, successors, and/or assigns, arising from any cause or matter whatsoever occurring or existing prior to and through the execution and delivery of this Agreement.

10. Lien. Seller, Purchaser, and Original Carveout Obligor, jointly and severally, warrant and represent to, and agree with, Lender that the Original Security Instruments, as amended by this Agreement, collectively constitute a valid first-priority lien and security title on the Property, enforceable in accordance with their respective terms, except to the extent that the enforceability or any of such instruments may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforceability of creditor’s rights generally, or by equitable principles of general application (whether considered in an action at law or in equity).

11. Representations and Warranties of Purchaser. Purchaser represents and warrants to Lender that:

(a) The Note and the Original Security Instruments, as herein amended, are in full force and effect and are enforceable in accordance with their respective terms.

(b) As of the Effective Date, Purchaser has no defense, counterclaim, or right of offset with respect to any indebtedness to Lender.

(c) Purchaser is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of North Carolina, is authorized to transact business in the State of North Carolina, and has full power and authority to enter into this Agreement and the other Loan Documents to which it is a party. The execution and delivery of this Agreement and all instruments and documents executed by Purchaser or any of its managing directors, managers, members, or officers in connection therewith have been duly authorized and approved by all of the members or managers of Purchaser, as required by its organizational documents and the organizational documents of any entity through which the authority of any signatory to this Agreement or any such instruments and documents derives his or her authority to execute them on Purchaser’s behalf (collectively, “Purchaser’s Organizational Documents”).

(d) Neither the execution and delivery of this Agreement, nor the complete performance of the provisions of this Agreement, nor the purchase, ownership or operation of the Property by Purchaser, will result in the breach of, or constitute a default under, or, except as provided by the Loan Documents, result in the creation of any lien, charge or encumbrance upon any property or assets of Purchaser or under Purchaser’s Organizational Documents, or any court order, administrative order, indenture, mortgage, security agreement, bank loan or credit agreement or other instrument to which Purchaser is a party or by which Purchaser is bound.

(e) Purchaser possesses and has carefully examined copies of the Loan Documents.

(f) Purchaser owns good and marketable fee simple title to the Property, free and clear of all liens and encumbrances whatsoever other than real estate taxes for the year 2007 and subsequent years (which are not yet due and payable) and the other Permitted Encumbrances (as defined in the Deed of Trust).

(g) The Deed of Trust, as amended by this Agreement, is and will remain a valid and enforceable first lien and security title on the Property.

(h) All information and financial statements furnished to Lender by or on behalf of the Purchaser and the New Carveout Obligor are true, correct, and complete in all material respects and are not intentionally misleading. The financial statements of Purchaser heretofore furnished to Lender present fairly the financial position, results of operations, and changes in financial condition of the Purchaser and of the New Carveout Obligor at the respective dates or for the respective periods to which they apply, and such statements and notes thereto have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved.

(i) There are no actions, suits, proceedings, or investigations pending or threatened against or affecting Purchaser, at law or in equity, or before or by any governmental or administrative agency or instrumentality which, if adversely determined, would have an adverse effect upon the business or condition of the Purchaser or upon the Property.

(j) No judgment, decree, injunction, writ, or order of any court or governmental or administrative agency or instrumentality has been issued against Purchaser which has or may have any adverse effect upon the business or condition of Purchaser or upon the Property.

(k) No fact known to Purchaser exists which Purchaser has not disclosed to Lender in writing which materially affects adversely nor, so far as Purchaser can now foresee, will materially adversely affect the business prospects, profits or conditions (financial or otherwise) of Purchaser, or Purchaser’s ability to perform Purchaser’s obligations under the transactions contemplated by this Agreement or under the Loan Documents.

(l) Purchaser is not the subject of any pending or threatened bankruptcy or insolvency proceeding.

(m) No consent or approval of any regulatory authority on the part of Purchaser is necessary or required by law as a prerequisite to the execution and delivery of this Agreement.

(o) Purchaser is indirectly controlled by the New Carveout Obligor, which indirectly owns 99.9% of the membership interests in Purchaser.

(a) Purchaser shall not raise or otherwise exercise any right of setoff or defense or any counterclaim with respect to any of the indebtedness or other obligations evidenced or secured by any of the Loan Documents (or by any document or instrument executed in connection therewith) which asserts that either any “Default” under (and as defined in) any of the Loan Documents or any event that, with notice and/or the passage of time, would become a “Default” under any of the Loan Documents has occurred or is in existence as of the Effective Date.

(b) Purchaser shall not raise or otherwise exercise any right of setoff or defense or any counterclaim with respect to any of the indebtedness or other obligations evidenced or secured by any of the Loan Documents (or by any document or instrument executed in connection therewith) which challenges or otherwise questions the accuracy, as of the Effective Date, of any of the representations and warranties in any one or more of the Original Loan Documents or in any other agreement, document or instrument executed in connection therewith.

13. Representations and Warranties of Seller and Original Carveout Obligor. Seller and Original Carveout Obligor, jointly and severally, represent and warrant to Lender that:

(a) To the best of Seller’s and Original Carveout Obligor’s knowledge, no “Default” under (and as defined in) any of the Loan Documents has occurred or is in existence as of the Effective Date hereof, nor has any event occurred that, with notice and/or the passage of time, would become a “Default” under any of the Loan Documents.

(b) None of the representations and warranties made in any one or more of the Original Loan Documents or any other agreement, document, and instrument executed in connection therewith is untrue or incorrect in any material respect as of the time of delivery of this Agreement.

(c) The Original Loan Documents and all such other agreements, documents, and instruments are in full force and effect and are enforceable in accordance with their respective terms, except to the extent that the enforceability of any of such documents may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforceability of creditor’s rights generally, or by equitable principles of general application (whether considered in an action at law or in equity).

(d) Neither Seller nor the Original Carveout Obligor has any defense, counterclaim, or right of offset with respect to any indebtedness to Lender.

(e) Seller is a limited partnership duly organized and validly existing under the laws of the State of Ohio, with the requisite power and authority to enter into the transactions contemplated by this Agreement.

(f) This Agreement and any other documents executed and delivered by Seller to Lender concurrently herewith have been executed in accordance with the requirements of law and in accordance with all requirements of its organizational documents and the organizational documents of any entity through which the authority of any signatory to this Agreement or any other such document derives his or her authority to execute them on Seller’s behalf (collectively, “Seller’s Organizational Documents”), and are legal, valid and binding documents, enforceable against Seller in accordance with their respective terms.

(g) The execution and delivery of this Agreement (i) have been duly authorized pursuant to the terms of Seller’s Organizational Documents; (ii) will not violate Seller’s Organizational Documents; and (iii) will not result in any breach of or constitute a default under any court order, administrative order, indenture, mortgage, security agreement, bank loan or credit agreement or other instrument to which Seller is a party or by which Seller is bound.

(h) All information provided by Seller to AEGON USA Realty Advisors, Inc. in connection with the proposed sale of the Property from Seller to Purchaser and Purchaser’s proposed assumption of the Loan is true, correct and complete in all material respects.

14. Indemnification. Purchaser hereby agrees to defend, indemnify, and hold Lender harmless from and against any and all claims, demands, actions, or causes of action of any third party against Lender in connection with or as a result of entering into this Agreement (including, without limitation, all losses, damages, liabilities, costs, including reasonable attorneys’ fees, and expenses whatsoever incurred or sustained by Lender in connection therewith), except to the extent caused by the gross negligence or willful misconduct of Lender. Without limitation of the generality of the foregoing, Purchaser agrees to defend, indemnify, and hold Lender harmless from and against any and all recording, documentary stamp, intangible and other taxes, if any, imposed upon Lender by virtue of the execution and delivery of this Agreement or any instrument or document executed in connection therewith, including, without limitation, all penalties, interest, and reasonable attorneys’ fees incurred by Lender in connection therewith. It is expressly understood and agreed that the liability of Purchaser arising under this Section is not limited by any limitation on the recourse of Lender for the Loan that may be provided in the Loan Documents and that Lender shall have full recourse to all of the assets of Purchaser for the satisfaction of the obligations arising under this Section. The provisions of this Section shall survive the repayment of the Note and the indebtedness evidenced thereby, and the satisfaction of the Loan Documents, and shall continue for so long as a claim may be asserted by any third party.

15. Release of Seller and Original Carveout Obligor. Upon the complete execution and recordation of this Agreement, (a) Seller shall be deemed to have been released from (i) all obligations under the Loan with respect to the payment of principal, interest and late fees under the Loan arising after the Effective Date, and (ii) all obligations under the Loan Documents with respect to any acts or omissions occurring after the Effective Date; and (b) Original Carveout Obligor shall be deemed to have been released from all obligations under the Environmental Indemnity and the Carveout Indemnity with respect to acts or omissions occurring after the Effective Date. Nevertheless, Seller acknowledges and agrees that neither any of the transactions described in this Agreement nor any provision of this Agreement shall be construed to release Seller from any obligations under the Loan Documents which pertain to obligations, acts or omissions arising or occurring (i) prior to the Effective Date or (ii) out of circumstances or conditions existing as of the Effective Date, and Seller hereby acknowledges its continuing liability for all such obligations. Furthermore, Original Carveout Obligor acknowledges and agrees that neither any of the transactions described in this Agreement nor any provision of this Agreement shall be construed to release Original Carveout Obligor from any obligations under the Carveout Indemnity or the Environmental Indemnity which pertain to acts or omissions occurring or arising prior to the Effective Date or arising out of circumstances or conditions existing as of the Effective Date, and Original Carveout Obligor hereby acknowledges the continuing liability of Original Carveout Obligor for all such obligations.

16. No Novation. All of the “Property” described in the Deed of Trust shall remain in all respects subject to the liens, charges and encumbrances of the Deed of Trust, and no provision contained in this Agreement, and no action taken pursuant to this Agreement, is intended to affect, shall affect, or shall be construed as affecting the liens, charges or encumbrances of the Deed of Trust, or the priority thereof over any other lien, charge or encumbrance, nor shall any provision contained in this Agreement or any action taken pursuant to this Agreement affect or be construed as affecting any other security or instrument held by Lender in connection with the Loan. Accordingly, it is the intent of the parties that this instrument shall not constitute a novation, and shall in no way adversely affect the priority of the lien or security title or effect of any of the Original Security Instruments. In the event that this Agreement, or any part hereof, shall be construed by a court of competent jurisdiction as operating to affect the priority of the lien or security title of any of the Original Security Instruments over claims that would otherwise be subordinate thereto, then to the extent that third parties acquiring an interest in the Property between the time of execution and delivery of the Original Security Instruments and the execution and delivery of this Agreement are prejudiced thereby, this Agreement or such portion hereof as shall be so construed, shall be void and of no force and effect, and this Agreement shall constitute, as to that portion, a subordinate lien on the collateral incorporating by reference the terms of the Original Security Instruments, and which Original Security Instruments then shall be enforced pursuant to the terms therein contained, independent of this Agreement; provided, however, that notwithstanding the foregoing, the parties hereto agree as between themselves that they shall be bound by all terms and conditions hereof until all indebtedness evidenced by any of the Loan Documents has been satisfied in full.

17. Ratification. Except as herein amended or concurrently released, the Original Loan Documents shall remain unaffected, unchanged, unmodified, and unimpaired, and the priority of the lien and security interest of the Original Security Instruments on the Property shall not be changed or in any way altered or affected hereby, and the Note and Original Security Instruments, as herein amended, are hereby ratified and confirmed.

18. Subordination by Seller and Original Carveout Obligor. As inducement to Lender to permit a transfer of the Property and the assumption of the Loan by Purchaser, Seller and Original Carveout Obligor, jointly and severally, hereby subordinate any and all indebtedness of Purchaser hereafter owed to Seller and/or Original Carveout Obligor to all indebtedness of Purchaser to Lender, and covenant with Lender not to demand or accept any payment of principal or interest on any such indebtedness or a return while any “Default” exists under the terms of any of the Loan Documents.

(a) Headings. Paragraph headings used herein are for convenience only and shall not be construed as controlling the scope of any provision hereof.

(b) Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina.

(d) Gender/Number. As used herein, the plural number shall include the singular and vice versa, and the neuter gender shall include the masculine and feminine genders, and vice versa, as the context demands.

(e) Attorneys’ Fees, Legal Assistants’ Fees and Costs. Purchaser agrees to pay to Lender all reasonable costs and expenses incurred by Lender in connection with protecting, defending, or enforcing Lender’s rights under this Agreement, including costs and reasonable attorneys’ fees and legal assistants’ fees prior to trial, at trial, on appeal, and in any bankruptcy, insolvency, or similar proceedings, and in collecting upon or enforcing any judgment.

(f) Security. All obligations on the part of Purchaser arising under this Agreement shall be secured by the lien and security title of the Original Security Instruments, as herein amended, and shall bear interest at the default rate under the Note from the date due until paid.

(g) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, personal representatives, successors, and assigns.

(h) Notices. In order for any demand, consent, approval or other communication to be effective under the terms of this Agreement, notice must be provided under the terms of this Section. All notices must be in writing. Notices may be (a) delivered by hand, (b) transmitted by facsimile (with a duplicate copy sent by first class mail, postage prepaid), (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by reputable overnight courier service, delivery charges prepaid. Notices shall be addressed as set forth below:

Notices delivered by hand or by overnight courier shall be deemed given when actually received or when refused by their intended recipient. Telecopied Notices will be deemed delivered when a legible copy has been received (provided receipt has been verified by telephone confirmation or one of the other permitted means of giving Notices under this Subsection). Mailed Notices shall be deemed received on the date received as evidenced by the returned receipt, or the date of the first attempted delivery. Any party to this Agreement may change its address for notice by giving at least fifteen (15) business days’ prior Notice of such change to the other parties.

(i) Entire Agreement; Amendment; Waiver. This Agreement embodies the entire understanding and agreement among the parties relative to the matters contained herein, and supersedes all prior negotiations, understandings or agreements in regard thereto, whether written or oral. This Agreement may be amended, altered or revoked only by a written instrument executed by Lender and any other party affected thereby. No provision of this Agreement may be waived by Lender, except by an agreement in writing signed by Lender. A waiver of any term or provision shall not be construed as a waiver of any other term or provision.

(j) Further Actions. Upon the reasonable request of any party hereto, from time to time, any party shall execute and deliver such additional documents and instruments and take such other actions as may be reasonably necessary to give effect to the intents and purposes of this Agreement.

(k) No Third-Party Benefit. No third parties are intended to benefit by the covenants, agreements, representations, warranties or any other terms or conditions of this Agreement.

(l) Continued Effect. Except as expressly set forth in this Agreement, no provision of this Agreement shall be deemed to modify or amend any of the Loan Documents, all of which shall remain in full force and effect in accordance with their respective terms.

(m) Counterpart Execution. This instrument may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, and such counterparts together shall constitute one and the same instrument. Signature and acknowledgment pages may be detached from the counterparts and attached to a single copy of this document to physically form one document.

APARTMENT REIT RESIDENCES AT BRAEMAR, LLC, a North Carolina limited liability company
[SEAL]


		Print Name: Shannon K.S. Johnson
		Title: Chief Financial Officer
STATE OF
COUNTY OF

I, , a Notary Public of the County and State aforesaid, do hereby certify that personally came before me this day and after being duly sworn, says that he/she is a of Apartment REIT Residences at Braemar, LLC, and that this instrument was signed and sealed by him/her, on behalf of the aforementioned limited liability company by its authority duly given, and further acknowledged this instrument to be the act and deed of the aforementioned limited liability company.

WITNESS my hand and official stamp or seal, this day of , 2007.

Notary Public

My Commission Expires:

[NOTARIAL SEAL]

[see attached]


STATE OF CALIFORNIA			)
			)
COUNTY OF ORANGE			)

On June 29, 2007, before me, L.A. Forniss, Notary Public, personally appeared Shannon K S Johnson, personally known to me whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and the by his signature on the instruction the person, or entity upon behalf of which person acted, executed the instrument.

WITNESS my hand and official stamp or seal.

[Notarial Seal: L.A. Forniss
Commission # 1639895
Notary Public – California
Orange County
My Comm. Expires on Jan. 21, 2010]

Signature L.A. Forniss

My Commission Expires:
January 21, 2010

LENDER:

TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, an Iowa corporation

By: /s/ Stephen Noonan
Stephen Noonan
Vice President

STATE OF IOWA

COUNTY OF Linn

I, Elaine E. Minor , a Notary Public of the County and State aforesaid, do hereby certify that Stephen Noonan personally came before me this day and after being duly sworn, says that he/she is Vice President of Transamerica Occidental Life Insurance Company, an Iowa corporation, and that this instrument was signed and sealed by him/her, on behalf of the aforementioned corporation by its authority duly given, and further acknowledged this instrument to be the act and deed of the aforementioned corporation.

WITNESS my hand and official stamp or seal, this 27 day of June, 2007.

/s/ Elaine E. Minor

Notary Public

My Commission Expires:

2-12-08

[NOTARIAL SEAL]

[NOTARIAL SEAL IOWA ELAINE E. MINOR

COMMISSION NO. 220928

My Commission Expires

2-12-08]

BRAEMAR HOUSING LIMITED PARTNERSHIP, an Ohio partnership [SEAL]

By: Treyburn Housing, LLC, an Ohio limited liability company, its sole General Partner

By: LPS Investments, L.L.C., a Michigan limited liability company, its sole Managing Member


By:		/s/ Phillip I. Levin [SEAL]

		Phillip I. Levin, Manager

STATE OF MICHIGAN

COUNTY OF OAKLAND

I, JULIE CORONADO, a Notary Public of the County and State aforesaid, do hereby certify that Phillip I. Levin personally came before me this day and after being duly sworn, said that he is the Manager of LPS Investments, L.L.C., a Michigan limited liability company, which is the sole Managing Member of Treyburn Housing, LLC, an Ohio limited partnership, which is the sole General Partner of Braemar Housing Limited Partnership, an Ohio limited partnership, and that this instrument was signed and sealed by him, on behalf of the aforementioned limited liability companies and limited partnership by their authority duly given, and further acknowledged this instrument to be the act and deed of the aforementioned limited liability companies and limited partnership.


WITNESS my hand and official stamp or seal, this 28th day of June, 2007.

/s/ Julie Coronado

Notary Public Acting in: [JULIE CORONADO NOTARY PUBLIC OAKLAND CO., MI MY COMMISSION EXPIRES Nov 10, 2006 Acting In:		County, MI ]

My Commission Expires:

[NOTARIAL SEAL]

ORIGINAL CARVEOUT OBLIGOR:

/s/ Phillip I. Levin [SEAL]

Phillip I. Levin

STATE OF MICHIGAN

COUNTY OF OAKLAND

I, JULIE CORONADO, a Notary Public of the County and State aforesaid, do hereby certify that Phillip I. Levin personally came before me this day and after being duly sworn, says that this instrument was signed and sealed by him, and further acknowledged this instrument to be his free act and deed.

WITNESS my hand and official stamp or seal, this 28th day of June , 2007.

/s/ Julie Coronado

Notary Public

My Commission Expires:

[JULIE CORONADO

NOTARY PUBLIC OAKLAND CO., MI

MY COMMISSION EXPIRES Nov 10, 2006

Acting In: County, MI ]

[NOTARIAL SEAL]

/s/ Bradley J. Schram [SEAL]

Bradley J. Schram

STATE OF MICHIGAN

COUNTY OF OAKLAND

I, Barbara Kraus, a Notary Public of the County and State aforesaid, do hereby certify that Bradley J. Schram personally came before me this day and after being duly sworn, says that this instrument was signed and sealed by him, and further acknowledged this instrument to be his free act and deed.

WITNESS my hand and official stamp or seal, this 28th day of June, 2007.

/s/Barbara Kraus

Notary Public

My Commission Expires:

[Barbara Kraus
Notary Public, Macomb co., MI
My Commission Expires: 08/14/2012
Acting in Oakland County, MI]

[NOTARIAL SEAL]

/s/ Norman A. Pappas [SEAL]

Norman A. Pappas

STATE OF MICHIGAN

COUNTY OF OAKLAND

I, Jeanne L. Apple, a Notary Public of the County and State aforesaid, do hereby certify that Norman A. Pappas personally came before me this day and after being duly sworn, says that this instrument was signed and sealed by him, and further acknowledged this instrument to be his free act and deed.

WITNESS my hand and official stamp or seal, this 27 day of June, 2007.

/s/ Jeanne L. Apple

Notary Public

My Commission Expires:

[JEANNE L. APPLE
Notary Public, State of Michigan
County of Oakland
My Commission Expirex Mar. 17, 2013
Acting in the County of Oakland]

[NOTARIAL SEAL]

J. Lindsay Stradley, Jr., as Trustee under the Deed of Trust and Security Agreement described in the within and foregoing Agreement, hereby joins in the execution of this Agreement for the sole purpose of evidencing his consent to the amendments to such Deed of Trust and Security Agreement effected by this Agreement.

/s/ J. Lindsay Stradley, Jr.

J. Lindsay Stradley, Jr., as Trustee aforesaid

I, Marjorie Jones, a Notary Public of the County and State aforesaid, do hereby certify that J. Lindsay Stradley, Jr. personally came before me this day and after being duly sworn, says that this instrument was signed and sealed by him, and further acknowledged this instrument to be his free act and deed.

WITNESS my hand and official stamp or seal, this 27th day of June, 2007.

/s/ Marjorie Jones

Notary Public

My Commission Expires: 1/15/2010

[NOTARIAL SEAL]

$10,000,000.00
May 25, 2005

Secured Promissory Note

FOR VALUE RECEIVED, the undersigned, BRAEMAR HOUSING LIMITED PARTNERSHIP, an Ohio limited partnership, whose address is 3103 Camden Drive, Troy, Michigan 48084 (the “Borrower”), promises to pay Ten Million Dollars and No Cents ($10,000,000.00), together with interest according to the terms of this secured promissory note (this “Note”), to the order of TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, an Iowa corporation (together with any future holder, the “Lender”), whose address is C/O AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-5443. Capitalized terms used but not defined in this Note shall have the meanings assigned to them in the Deed of Trust, as defined in Section 12 below.

1. CONTRACT INTEREST RATE

The principal balance of this Note shall bear interest at the rate of Five and Seventy-Two One Hundredths percent (5.72%) per annum (the “Note Rate”). Interest shall he calculated in arrears based on a 360-day year having twelve thirty-day months.

2. SCHEDULED PAYMENTS

2.1 PREPAYMENT OF INTEREST FOR THE MONTH OF FUNDING

Unless the funding of the loan evidenced by this Note (together with all additional charges, advances and accruals, the “Loan”) occurs on the first day of a calendar month, the Borrower shall prepay, on the date of the funding, interest due from the date of the funding through and including the last day of the calendar month in which the funding occurs.

2.2 MONTHLY PRINCIPAL AND INTEREST PAYMENTS

On the first day of July, 2005 and on the first day of each subsequent calendar month through May, 2015, the Borrower shall pay an installment in the amount of Fifty-Eight Thousand One Hundred Sixty-Six Dollars and Eighty-Five Cents ($58,166.85). Monthly installments of principal and interest shall be made when due, regardless of the prior acceptance by the Lender of unscheduled payments.

2.3 FINAL PAYMENT

The Loan shall mature on the first day of June, 2015 (the “Maturity Date”), when the Borrower shall pay its entire principal balance, together with all accrued interest and any other amounts owed by the Borrower under this Note or under any of the other documents entered into now or in the future in connection with the Loan (the “Loan Documents”).

3. BALLOON PAYMENT ACKNOWLEDGMENT

The Borrower acknowledges that the scheduled monthly payments referred to in Section 2 will not amortize fully the principal sum of this Note over its term, resulting in a “balloon” payment at maturity. Any future agreement to extend this Note or refinance the indebtedness it evidences may be made only by means of a writing executed by a duly authorized officer of the Lender.

4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS

When the Lender receives a monthly principal and interest payment, the Lender shall apply it first to interest in arrears for the previous month and then to the amortization of the principal amount of this Note, unless other amounts are then due under this Note or the other Loan Documents. If other amounts are due when a regular monthly payment is received, the Lender shall apply the payment first to accrued interest and then, at its discretion, either to those other amounts or to principal.

5. DEFAULT INTEREST

If a Default exists (as defined in Section 9 below) the outstanding principal balance of this Note shall, at the option of the Lender, bear interest at a rate (the “Default Rate”) equal to the lesser of (i) eighteen percent (18%) per annum and (ii) the maximum rate allowed by law. If interest has accrued at the Default Rate during any period, the difference between such accrued interest and interest which would have accrued at the Note Rate during such period shall be payable on demand. If a court of competent jurisdiction determines that any interest charged has exceeded the maximum rate allowed by law, the excess of the amount collected over the legal rate of interest will be applied to the indebtedness as a principal prepayment without premium, retroactively, as of the date of receipt, or returned to the Borrower if the Indebtedness bas been fully paid.

6. LATE CHARGE

Scheduled payments of principal and interest pursuant to Subsection 2.2 above are due on the first day of each calendar month, and if not paid on or before that date, become past due on the second day of each calendar month. If the Lender does not receive any scheduled monthly principal and interest payment on or before the seventeenth (17th) day of the calendar month in which it is due, the Lender will send the Borrower written notice that a late charge equal to four percent (4%) of the late payment has accrued. Unless the Borrower can show that the installment was paid in full and on time, the Borrower shall pay any such late charge on or before the tenth day of the calendar month following the month during which the late payment was scheduled to have been received.

7. PREPAYMENT

This Note may be prepaid upon not less than sixty (60) days’ prior written notice to the Lender. At the time of any prepayment, the Borrower shall pay all accrued interest on the principal balance of this Note and all other sums due to the Lender under the Loan Documents. In addition, unless the prepayment is a “Permitted Par Prepayment” (as defined in Section 8 below), the Borrower shall remit together with any prepayment a premium (the “Prepayment Premium Amount”) equal to the greater of (A) one percent (1%) of the prepayment and (B) the amount (the “Yield Protection Amount”) calculated in accordance with the next succeeding paragraph of this Note.

The Yield Protection Amount shall be calculated as follows:

First, the Lender shall determine the annual percentage yield on U.S. Treasury securities maturing at the end of the term of the Loan (the “Annual Treasury Instrument Yield”). The Annual Treasury Instrument Yield shall be determined as of ten (10) Business Days before the effective date of the prepayment. The Lender shall base its determination of the Annual Treasury Inshument Yield on the yield on U.S. Treasury instruments, as published in The Wall Sheet Journal (or, if The Wall Sheet Journal is not then being published or if no such reports are then being published in The Wall Sheet Journal as reported in another public source of information nationally recognized for accuracy in the reporting of the trading of governmental securities). If no such instruments mature on the exact maturity date of this Note, the Lender shall interpolate the Annual Treasury Inshument Yield on a shaight-line basis using the yield on the instrument whose maturity date most closely precedes that of this Note, and the yield on the instrument whose maturity date most closely succeeds that of this Note.

Second, the Lender shall determine the monthly payment (the “Monthly Reinvestment Payment”), based on a 360-day year and 30-day months, which would be payable on a hypothetical interest-only promissory note having a principal balance equal to the prepaid amount and bearing interest at the rate (the “Reinvestment Rate”) which, when compounded monthly, would produce a yield equal to the Annual Treasury Instrument Yield.

Third, the Lender shall determine the hypothetical monthly interest-only payment (based on a 360-day year and 30-day months) which would be payable on a promissory note having a principal balance equal to the prepaid amount and bearing interest at this Note Rate (the “Monthly Coupon Rate Payment”). Fourth, the Lender shall determine the present value of a series of monthly payments, each equal in amount to the amount by which the Monthly Coupon Rate Payment exceeds the Monthly Reinvestment Payment, received on the first day of each calendar month from and including the first day of the first full calendar month immediately following the effective date of prepayment to and including the Maturity Date, using the Reinvestment Rate as the discount rate.

Voluntary partial prepayments shall be permitted only in minimum amounts of Five Hundred Thousand Dollars ($500,000).

The Prepayment Premium Amount constitutes liquidated damages to compensate the Lender for reinvestment costs, lost opportunity costs, and the loss by the Lender of its bargained-for investment in the Loan. The Borrower agrees that such liquidated damages are not a penalty but are a reasonable estimate in good faith of the actual damages sustained by the Lender as a result of such prepayment, which actual damages are impossible to ascertain with precision.

8. PERMITTED PAR PREPAYMENTS

The Lender shall not charge a prepayment premium on certain prepayments (the “Permitted Par Prepayments”). Permitted Par Prepayments include:

(a) any prepayment in full of the Loan made no more than ninety (90) days before the Maturity Date; and

(b) any prepayment made as the result of the Lender’s election to apply insurance or condemnation proceeds to the principal balance of this Note.

9. DEFAULT

A default on this Note (“Default”) shall exist if (a) the Lender fails to receive any required installment of principal and interest on or before the tenth (10th) day of the calendar month in which it is due, (b) the Borrower fails to pay the matured balance of this Note on the Maturity Date or (c) a “Default” exists as defined in any other Loan Document. If a Default exists and the Lender engages counsel to collect any amount due under this Note or if the Lender is required to protect or enforce this Note in any probate, bankruptcy or other proceeding, then any expenses incurred by the Lender in respect of the engagement, including the reasonable fees and reimbursable expenses of counsel and including such costs and fees which relate to issues that are particular to any given proceeding, shall constitute indebtedness evidenced by this Note, shall he payable on demand, and shall bear interest at the Default Rate. Such fees and expenses include those incurred in connection with any action against the Borrower for a deficiency judgment after a trustee’s sale of the Real Properly under the Deed of Trust (defined below), including all of the Lender’s reasonable attorneys’ fees, property appraisal costs and witness fees.

The attorneys’ fees for which the Borrower shall be liable under this Section shall be limited to the reasonable attorneys’ fees actually incurred by the Lender.

10. ACCELERATION

If a Default exists, the Lender may, at its option, declare the unpaid principal balance of this Note to be immediately due and payable, together with all accrued interest on the indebtedness, all costs of collection (including reasonable attorneys’ fees and expenses) and all other charges due and payable by the Borrower under this Note or any other Loan Document. Nevertheless, if the subject Default has arisen from a failure by the Borrower to make a regular monthly payment of principal and interest, the Lender shall not accelerate the indebtedness unless the Lender shall have given the Borrower a cure period of at least three (3) Business Days following Notice of its intent to do so. If the subject Default is a “Curable Nonmonetary Default” as defined in the Deed of Trust, the Lender shall exercise its option to accelerate only by delivering notice of acceleration to the Borrower. The Lender shall not deliver any such notice of acceleration until (a) the Borrower has received any required notice of the prospective Default and (b) any applicable cure period has expired.

Except as expressly described in this Section, no notice of acceleration shall be required in order for the Lender to exercise its option to accelerate the indebtedness in the event of Default.

11. PREPAYMENT FOLLOWING ACCELERATION

Any Default resulting in the acceleration of the indebtedness evidenced by this Note shall be presumed to be an attempt to avoid the provisions of Section 7 of this Note, which prohibit prepayment or condition the Lender’s obligation to accept prepayment on the payment of a prepayment premium. Accordingly, if the indebtedness is accelerated, any amounts tendered to repay the accelerated indebtedness, or realized by the Lender through its remedies following acceleration, shall be subject to the prepayment premium that would have been applicable under Section 7 (calculated as if the prepayment had occurred on the date of acceleration).

12. SECURITY

This Note is secured by a Deed of Trust, Security Agreement and Fixture Filing (the “Deed of Trust”) granted by the Borrower to J. Lindsay Stradley, Jr., the Trustee, for the benefit of the Lender, conveying the Real Property, which is located in the City of Charlotte, Mecklenburg County, North Carolina, and granting a security interest in certain fixtures and personal property, and by an Absolute Assignment of Leases and Rents made by the Borrower to the Lender, assigning the landlord’s interest in all present and future leases (the “Leases”) of all or any portion of the Real Property encumbered by the Deed of Trust. Reference is made to the Loan Documents for a description of the security and rights of the Lender. This reference shall not affect the absolute and unconditional obligation of the Borrower to repay the Loan in accordance with its terms.

13. RECOURSE TO BORROWER

The Lender agrees that it shall not seek to enforce any monetary judgment with respect to the indebtedness evidenced by this Note against the Borrower, the Borrower’s general partner, Phillip I. Levin, Joseph J. Recchie, Bradley J. Schram or Norman A. Pappas (a) except through recourse to the Property, unless the obligation from which the judgment arises is one of the “Carveout Obligations” defined in Section 14, and (b) except to the extent of an aggregate of Four Million Dollars and No Cents ($4,000,000.00), unless and until the Recourse Release Conditions have been satisfied.

14. CARVEOUT OBLIGATIONS

The “Carveout Obligations” are (a) the obligation to repay any portion of the indebtedness evidenced by this Note that arises from any of the “Carveouts” (as defined below), (b) the obligation to repay the entire indebtedness evidenced by this Note, if the Lender’s exculpation of the Borrower from personal liability under this Section has become void as set forfh below, (c) the obligation to indemnify the Lender in respect of its actual damages suffered in connection with any of the Carveouts, and (d) the obligation to defend and hold the Lender harmless from and against any claims, judgments, causes of action or proceedings arising from any of the Carveouts. The “Carveouts” are:

(i) fraud or material written misrepresentation;

(ii) waste of the Property (which shall include damage, destruction or disrepair of the Real Property caused by a willful act or grossly negligent omission of the Borrower, but shall exclude ordinary wear and tear in the absence of gross negligence);

(iii) misappropriation of tenant security deposits (including proceeds of tenant letters of credit), Insurance Proceeds or Condemnation Proceeds;

(iv) failure to pay property taxes, assessments or other lienable Impositions;

(v) failure to pay to the Lender all Rents, income and profits (including any rent collected more than one month in advance, or any rent for the last month of the lease term, under any Lease in force at the time of Default), net of reasonable and customary operating expenses, received in respect of a period when the Loan is in Default;

(vi) removal &om the Real Property of fixtures or Personal Property, unless replaced in a commercially reasonable manner;

(vii) the out-of-pocket expenses of enforcing the Loan Documents following. Default, not including expenses incurred after the Borrower has agreed in writing to transfer the Real Property to the Lender by the Lender’s choice of either an uncontested foreclosure or delivery of a deed in lieu of foreclosure;

(viii) terminating or amending a Lease other than in the ordinary course of business; and

(ix) any liability of the Borrower under the Environmental Indemnity Agreement.

The Lender’s exculpation of the Borrower from personal liability for the repayment of the Indebtedness shall be void without Notice if the Borrower (A) voluntarily transfers or creates any voluntary lien on the Property in violation of this Deed of Trust, or (B) files a voluntary petition for reorganization under Title 11 of the United States Code (or under any other present or future law, domestic or foreign, relating to bankruptcy, insolvency, reorganization proceedings or otherwise similarly affecting the rights of creditors), and has not offered, prior to the filing, to enter into the Lender’s choice of either an agreement to permit an uncontested foreclosure, or an agreement to deliver a deed in lieu of foreclosure within sixty (60) days of the Lender’s acceptance of the offer. After the Lender accepts such an offer, default by the Borrower in fulfilling the terms of the accepted offer shall trigger personal liability for the entire Indebtedness. No such offer shall be conditioned on any payment by the Lender, on the release of any Obligor from any Obligation, or on any other concession.

15. SEVERABILITY

If any provision of this Note is held to be invalid, illegal or unenforceable in any respect, or operates, or would if enforced operate to invalidate this Note, then that provision shall be deemed null and void. Nevertheless, its nullity shall not affect the remaining provisions of this Note, which shall in no way be affected, prejudiced or disturbed.

16. WAIVER

Except to the extent that such rights are expressly provided in this Note, the Borrower waives demand, presentment for payment, notice of intent to accelerate, notice of acceleration, protest, notice of protest, dishonor and of nonpayment and any and all lack of diligence or delays in collection or enforcement of this Note. Without affecting the liability of the Borrower under this Note, the Lender may release any of the Property, grant any indulgence, forbearance or extension of time for payment, or release any other person now or in the future liable for the payment or performance of any obligation under this Note or any of the Loan Documents.

The Borrower further (a) waives any homestead or similar exemption; (h) waives any statute of limitation; (c) agrees that the Lender may, without impairing any future right to insist on strict and timely compliance with the terms of this Note, grant any number of extensions of time for the scheduled payments of any amounts due, and may make any other accommodation with respect to the indebtedness evidenced by this Note; (d) waives any right to require a marshaling of assets; and (e) to the extent not prohibited by applicable law, waives the benefit of any law or rule of law intended for its advantage or protection as a debtor or providing for its release or discharge from liability under this Note, excepting only the defense of full and complete payment of all amounts due under this Note and the Loan Documents.

17. VARIATION IN PRONOUNS

All the terms and words used in this Note, regardless of the number and gender in which they are used, shall he deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine, or neuter, as the context or sense of this Note or any paragraph or clause herein may require, the same as if such word had been fully and properly written in the correct number and gender.

18. OFFSET RIGHTS

In addition to all liens upon and rights of setoff against the money, securities, or other property of the Borrower given to the Lender by law, the Lender shall have a lien upon and a right of setoff against all money, securities, and other property of the Borrower, now or hereafter in possession of or on deposit with the Lender, whether held in a general or special account or deposit, or safe-keeping or otherwise, and, following a Default, every such lien and right of setoff may be exercised without demand upon, or notice to the Borrower. No lien or right of setoff shall he deemed to have been waived by any act or conduct on the part of the Lender, or by any neglect to exercise such right of setoff or to enforce such lien, or by any delay in so doing, and every right of setoff and lien shall continue in full force and effect until such right of setoff or lien is specifically waived or released by an instrument in writing executed by the Lender.

19. COMMERCIAL LOAN

The Borrower hereby represents and warrants to the Lender that the Loan was made for commercial or business purposes, and that the funds evidenced by this Note will be used solely in connection with such purposes.

20. REPLACEMENT OR BIFURCATION OF NOTE

If this Note is lost or destroyed, the Borrower shall, at the Lender’s request, execute and return to the Lender a replacement promissory note identical to this Note, provided the Lender delivers to the Borrower an affidavit to the foregoing effect. Upon delivery of the executed replacement Note, the Lender shall indemnify the Borrower from and against its actual damages suffered as a result of the existence of two Notes evidencing the same obligation. No replacement of this Note under this Section shall result in a novation of the Borrower’s obligations under this Note. In addition, the Lender may at its sole and absolute discretion require that the Borrower execute and deliver two separate promissory notes, which shall replace this Note as evidence of the Borrower’s obligations. The two replacement notes shall, taken together, evidence the exact obligations set forth in this Note. The replacement notes shall be independently transferable. If this Note is so replaced, the Lender shall return this Note to the Borrower marked to evidence its cancellation.

21. GOVERNING LAW

This Note shall he construed and enforced according to, and governed by, the laws of North Carolina without reference to conflicts of laws provisions which, but for this provision, would require the application of the law of any other jurisdiction.

22. TIME OF ESSENCE

In the performance of the Borrower’s obligations under this Note, time is of the essence.

23. NO ORAL AGREEMENTS

THIS NOTE AND ALL THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT OF THE BORROWER AND THE LENDER AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE LOAN AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE BORROWER AND THE LENDER. THERE ARE NO ORAL AGREEMENTS BETWEEN THE BORROWER AND THE LENDER THE PROVISIONS OF THIS NOTE AND THE OTHER LOAN DOCUMENTS MAY BE AMENDED OR REVISED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE BORROWER AND THE LENDER.

IN WITNESS’ WHEREOF, the Borrower has caused this Note to be duly executed under seal as of the date first above written.

BRAEMAR HOUSING LIMITED PARTNERSHIP, an Ohio limited Partnership

By: Treybum Housing, LLC, an Ohio limited liability company, its sole General Partner

By: LPS Investments, L.L.C., a Michigan limited liability company, its sole Managing Member

By: Phillip I. Levin

Phillip I. Levin, Manager

Prepared by, and after recording return
to:
J. Lindsay Stradley, Jr.
Epstein Becker & Green, P.C.
945 East Paces Ferry Road, Suite 2700
Atlanta, Georgia 30326

DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE
FILING

BRAEMAR HOUSING LIMITED PARTNERSHIP,
an Ohio limited partnership,
Borrower,

having an office at
3103 Camden Drive
Troy, Michigan 48084

J. LINDSAY STRADLEY, JR.,
Trustee

for the benefit of
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY,
an Iowa corporation,
Lender,

having an office
c/o AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-5443

[COLLATERAL IS OR INCLUDES FIXTURES]
Loan Amount: $10,000,000.00
Premises: Residences at Braemar, Mecklenburg County, Charlotte, North Carolina

Deed of Trust, Security Agreement and Fixture Filing

This Deed of Trust Security Agreement and Fixture Filing (this “Deed of Trust”) is made and given as of the 25^th day of May, 2005, by BRAEMAR HOUSING LIMITED PARTNERSHIP, an Ohio limited partnership, as Grantor, whose address is 3103 Camden Drive, Troy, Michigan 48084 (the “Borrower”), to J. LINDSAY STRADLEY, JR., as Trustee, whose address is 945 East Paces Ferry Road, Suite 2700, Atlanta, Georgia 30326-1380 (together with his successors and assigns, the “Trustee”), for the benefit of TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, an Iowa corporation, as Beneficiary, having an office c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-5443 (the “Lender”). The definitions of capitalized terms used in this Deed of Trust may be found either in Section 3 below, through the cross-references provided in that Section, or in Section 22 below.

1. RECITALS

A. Under the terms of a Revised Loan Application/Commitment dated March 16, 2005, as amended (the Commitment”), AEGON USA Realty Advisors, Inc. (“AEGON”), as agent for the Lender, agreed to fund a loan in an original principal amount to be determined in accordance with procedures described in the Commitment (the “Loan”).

B. The Lender has funded the Loan in the principal amount of $10,000,000 in accordance with the Commitment, and to evidence the Loan, the Borrower has executed and delivered to the Lender a certain Secured Promissory Note, of even date, in the amount of $10,000,000, with a maturity and final payment date of June 1,2015.

C. The Commitment requires that the Loan be secured by all of the Borrower’s existing and after-acquired interest in certain real property and by certain tangible and intangible personal property.

2. GRANTING CLAUSE

To secure the repayment of the Indebtedness, any increases, modifications, renewals or extensions of the Indebtedness, and any substitutions for the Indebtedness, as well as the performance of the Borrower’s other Obligations, and in consideration of the sum of ten dollars ($10.00) and other valuable consideration, the receipt and sufficiency of which are acknowledged, the Borrower grants, bargains, warrants, conveys, alienates, releases, Assigns, sets over and confirms to the Trustee, in trust with the power of sale for the benefit of the Lender and to his successors and assigns forever, all of the Borrower’s existing and after-acquired interests in the Real Property, TO HAVE AND TO HOLD the Real Property and all parts, rights, members and appurtenances thereof, to the use, benefit and behalf of the Lender and its successors and assigns, IN FEE SIMPLE forever.

3. DEFINED TERMS

The following defined terms are used in this Deed of Trust. For ease of reference, terms relating primarily to the Security Agreement are defined in Subsection 22.1.

"Absolute Assignment of Leases and Rents” means the Loan Document bearing this heading.

"Appurtenances” means all rights, estates, titles, interests, privileges, easements, tenements, hereditaments, titles, royalties, reversions, remainders and other interests, whether presently held by the Borrower or acquired in the future, that may be conveyed as interests in the Land under the laws of North Carolina. Appurtenances include the Easements and the Assigned Rights.

"Assigned Rights” means all of the Borrower’s rights, easements, privileges, tenements, hereditaments, contracts, claims, licenses or other interests, whether presently existing or arising in the future. The Assigned Rights include all of the Borrower’s rights in and to:

(a) any greater estate in the Real Property;

(b) insurance policies required to be carried hereunder, including the right to negotiate claims and to receive Insurance Proceeds and unearned insurance premiums (except as expressly provided in Subsection 8.1);

(c) Condemnation Proceeds, provided that the award does not reduce, directly or indirectly, the award to the owner of the Real Property;

(d) licenses and agreements permitting the use of sources of groundwater or water utilities, septic leach fields, railroad sidings, sewer lines, or means of ingress and egress;

(e) drainage over other property;

(f) air space above the Land;

(g) mineral rights;

(h) party walls;

(i) vaults and their usage;

(j) franchises;

(k) commercial tort claims that arise during the Loan term in respect of damages to the Real Property or to its operations, in respect of any impairment to the value of the Real Property, or in respect of the collection of any Rents;

(l) construction contracts;

(m) roof and equipment guarantees and warranties;

(n) building and development licenses and permits;

(o) tax credits or other governmental entitlements, credits or rights, whether or not vested;

(p) licenses and applications (whether or not yet approved or issued);

(q) rights under management and service contracts;

(r) leases of Fixtures; and

(s) trade names, trademarks, trade styles, service marks, copyrights, and agreements with architects, environmental consultants, property tax consultants, engineers, and any other third-party contractors whose services benefit the Real Property.

"Bankruptcy Code” shall mean the Bankruptcy Reform Act of 1978, as amended, 11U.S.C. Sections 101 et seq., and the regulations promulgated pursuant to those statutes.

"Business Day” means any day when state and federal banks are open for business in Cedar Rapids, Iowa.

"Carveout Guarantee and Indemnity” means that certain “Carveout Guarantee and Indemnity Agreement” entered into by the Carveout Obligors on the date of this Deed of Trust.

"Carveout Obligations” means those obligations described in Section 21.

"Carveout Obligors” means Phillip I. Levin, Joseph J. Recchie, Bradley J. Schram, and Norman A. Pappas. Any other person who expressly assumes liability for the Carveout Obligations during the term of the Loan shall become a “Carveout Obligor” for purposes of this Deed of Trust.

"Carvwuts” means those matters from which Carveout Obligations may arise, which are described in Section 21.

"Condemnation Proceeds” means all money or other property that has been, or is in the future, awarded or agreed to be paid or given in connection with any taking by eminent domain of all or any part of the Real Property (including a taking through the vacation of any street dedication or through a change of grade of such a street), either permanent or temporary, or in connection with any purchase in lieu of such a taking, or as a part of any related settlement, except for the right to condemnation proceeds awarded to the tenant in a separate proceeding in respect of the lost value of the tenant’s leasehold interest, provided that the award does not reduce, directly or indirectly, the award to the owner of the Real Property.

"Curable Nonmonetarv Default” means any of the acts, omissions, or circumstances specified in Subsection 10.3 below.

"Default” means any of the acts, omissions, or circumstances specified in Section 10 below.

"Default Rate” means the rate of interest specified as the “Default Rate” in the Note.

"Development Agreements” means all development, utility or similar agreements included in the Permitted Encumbrances.

"Easements” means the Borrower’s existing and future interests in and to the declarations, easements, covenants, and restrictions appurtenant to the Land.

"Environmental Indemnity Agreement” means the Loan Document bearing that heading.

"Environmental Laws” means all present and future laws, statutes, ordinances, rules, regulations, orders, guidelines, rulings, decrees, notices and determinations of any Governmental Authority to the extent that they pertain to: (A) the protection of health against environmental hazards; (B) the protection of the environment, including air, soils, wetlands, and surface and underground water, from contamination by any substance that may have any adverse health effect on humans, livestock, fish, wildlife, or plant life, or which may disturb an ecosystem; (C) underground storage tank regulation or removal; (D) wildlife conservation; (E) protection or regulation of natural resources; (F) the protection of wetlands; (G) management, regulation and disposal of solid and hazardous wastes; (H) radioactive materials; (I) biologically hazardous materials; (0 indoor air quality; or (K) the manufacture, possession, presence, use, generation, storage, transportation, treatment, release, emission, discharge, disposal, abatement, cleanup, removal, remediation or handling of any Hazardous Substances. “Environmental Laws” include the Comprehensive Environmental Response, Compensation, and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. ^§9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ^§6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act, 33 U.S.C. ^§1251 et seq., the Clean Air Act, 42 U.S.C. $7401 et seq., the Toxic Substances Control Act, 15 U.S.C. $2601 et seq., all similar state statutes and local ordinances, and all regulations promulgated under any of those statutes, and all administrative and judicial actions respecting such legislation, all as amended from time to time.

“ESA” means the written environmental site assessment of the Real Property obtained under the terms of the Commitment.

"Escrow Expenses” means those expenses in respect of real and personal property taxes and assessments, Insurance Premiums and such other Impositions as the Lender pays from time to time directly from the Escrow Fund using monies accumulated through the collection of Monthly Escrow Payments.

"Escrow Fund” means the funds deposited by Borrower with the Lender pursuant to Section 9 hereof, as reflected in the accounting entry maintained on the books of the Lender as funds available for the payment of Escrow Expenses under the terms of this Deed of Trust.

“Fixtures” means all materials, supplies, equipment, apparatus and other items now or hereafter attached to or installed on the Land and Improvements in a manner that causes them to become fixtures under the laws of North Carolina, including all built-in or attached furniture or appliances, elevators, escalators, heating, ventilating and air conditioning system components, emergency electrical generators and related fuel storage or delivery systems, septic system components, storm windows, doors, electrical equipment, plumbing, water conditioning, lighting, cleaning, snow removal, lawn, landscaping, irrigation, security, incinerating, fire-fighting, sprinkler or other fire safety equipment, bridge cranes or other installed materials handling equipment, satellite dishes or other telecommunication equipment, built-in video wnferencing equipment, sound systems or other audiovisual equipment, and cable television distribution systems. Fixtures do not include trade fixtures, office furniture and office equipment owned by tenants who are unrelated to the Borrower. Fixtures expressly include HVAC, mechanical, security and similar systems of general utility for the operation of the Improvements as leasable commercial real property.

"Governmental Authority” means any political entity with the legal authority to impose any requirement on the Property, including the governments of the United States, the State of North Carolina, Mecklenburg County, the City of Charlotte, and any other entity with jurisdiction to decide, regulate, or affect the ownership, construction, use, occupancy, possession, operation, maintenance, alteration, repair, demolition or reconstruction of any portion or element of the Real Property.

"Guarantors” means Phillip I. Levin, Joseph J. Recchie, Bradley J. Schram and Norman A. Pappas.

"Hazardous Substance” means any substance the release of or the exposure to which is prohibited, limited or regulated by any Environmental Law, or which poses a hazard to human health, including: (A) any “oil,” as defined by the Federal Water Pollution Control Act and regulations promulgated thereunder (including crude oil or any fraction of crude oil), (B) any radioactive substance and (C) Stacchybotris chartarum or other molds. However, the term “Hazardous Substance” includes neither (A) a substance used in the cleaning and maintenance of the Real Property, if the quantity, storage and manner of its use are customary, prudent, and do not violate applicable law, nor (B) automotive motor oil in immaterial quantities, if leaked from vehicles in the ordinary course of the operation of the Real Property and cleaned up in accordance with reasonable property management procedures and in a manner that violates no applicable law.

"Impositions” means all real and personal property taxes levied against the Property; general or special assessments; ground rent; water, gas, sewer, vault, electric or other utility charges; common area charges; owners’ association dues or fees; fees for any easement, license or agreement maintained for the benefit of the Property; and any and all other taxes, levies, user fees, claims, charges and assessments whatsoever that at any time may be assessed, levied or imposed on the Property or upon its ownership, use, occupancy or enjoyment, and any related costs, interest or penalties. In addition, “Impositions” include all documentary, stamp or intangible personal property taxes that may become due in connection with the Indebtedness, including Indebtedness in respect of any future advance made by the Lender to the Borrower, or that are imposed on any of the Loan Documents.

"Improvements” means, to the extent of the Borrower’s existing and future interest, all buildings and improvements of any kind erected or placed on the Land now or in the future, including the Fixtures, together with all appurtenant rights, privileges, Easements, tenements, hereditaments, titles, reversions, remainders and other interests. “Indebtedness” means all sums that are owed or become due pursuant to the terms of the Note, this Deed of Trust, or any of the other Loan Documents or any other writing executed by the Borrower relating to the Loan, including scheduled principal payments, scheduled interest payments, default interest, late charges, prepayment premiums, accelerated or matured principal balances, advances, collection costs (including reasonable attorneys’ fees), reasonable attorneys’ fees and costs in enforcing or protecting the Note, this Deed of Trust, or any of the other Loan Documents in any probate, bankruptcy or other proceeding, receivership costs, fees and costs of the Trustee and all other financial obligations of the Borrower incurred in connection with the Loan transaction, provided, however, that this Deed of Trust shall not secure any Loan Document or any particular person’s liabilities or obligations under any Loan Document to the extent that such Loan Document expressly states that it or such particular person’s liabilities or obligations are unsecured by this Deed of Trust. Indebtedness shall also include any obligations under agreements executed and delivered by Borrower which specifically provide that such obligations are secured by this Deed of Trust.

"Insurance Premiums” means all premiums or other charges required to maintain in force any and all insurance policies that this Deed of Trust requires that the Borrower maintain.

"Insurance Proceeds” means (A) all proceeds of all insurance now or hereafter carried by or payable to the Borrower with respect to the Real Property, including with respect to the interruption of rents or income derived from the Property, all unearned insurance premiums and all related claims or demands, and (B) all Proceeds (as defined in Subsection 22.1).

“Land” means that certain tract of land located in Charlotte, Mecklenburg County, North Carolina, which is described on the attached Exhibit A, together with the Appurtenances.

“Leases” means all leases, subleases, licenses, concessions, extensions, renewals and other agreements (whether written or oral, and whether presently effective or made in the future) through which the Borrower grants any possessory interest in and to, or any right to occupy or use, all or any part of the Real Property, and any related guaranties.

’’Legal Control” means the power, either directly or indirectly, to exercise the authority of the owner of the Real Property, either as the majority shareholder of the common stock of a corporation, as the sole general partner of a limited partnership, as the managing general partner of a general partnership, or as the sole manager of a limited liability company, provided the entity exercising such authority cannot be divested of such authority without its consent, either directly or indirectly, except for cause.

"Legal Requirements” means all laws, statutes, rules, regulations, ordinances, judicial decisions, administrative decisions, building permits, development permits, certificates of occupancy, or other requirements of any Governmental Authority.

"Loan Documents” means all documents evidencing the Loan or delivered in connection with the Loan, whether entered into at the closing of the Loan or in the future.

"Maximum Permitted Rate” means the highest rate of interest permitted to be paid or collected by applicable law with respect to the Loan.

"Monthly Escrow Pavment” means the sum of the Monthly Imposition Requirement, the Monthly Insurance Premium Requirement, and the Monthly Reserve Requirement.

"Monthly Imposition Requirement” means one-twelfth (11 12th) of the annual amount that the Lender estimates will be required to permit the timely payment by the Lender of those Impositions that the Lender elects, from time to time, to include in the calculation of the Monthly Imposition Requirement. Such Impositions shall include real and personal property taxes and may include, at the Lender’s sole and absolute discretion any Impositions that the Borrower has failed to pay on a timely basis during the term of the Loan. The Lender shall base its estimate on the most recent information supplied by the Borrower concerning future Impositions. If the Borrower fails to supply such information or if it is unavailable at the time of estimation, the Lender shall estimate future Impositions using historical information and an annual inflation factor equal to the lesser of five percent (5%) and the maximum inflation factor permitted by law.

"Monthly Insurance Premium Reauirement” means one-twelfth (1112th) of the annual amount that the Lender estimates (based on available historical data and using, if future Insurance Premiums are as yet undeterminable, a five percent (5%) inflation factor) will be required to permit the timely payment of the Insurance Premiums by the Lender.

"Monthlv Reserve Reauirement” means the monthly payment amount which the Lender estimates will, over the subsequent twelve (12) months, result in the accumulation of a surplus in the Escrow Fund equal to the sum of the Monthly Imposition Requirement and the Monthly Insurance Premium Requirement.

"Net Worth Reauirement” means the lesser of (i) the aggregate net worth of the Carveout Obligors most recently represented to the Lender at the time of the approval of the Loan by AEGON’s Investments Committee and (ii) the principal balance of the Loan at the time of determination.

"Note” means the Secured Promissory Note dated of even date herewith to evidence the Indebtedness in the original principal amount of $10,000,000, together with all extensions, renewals and modifications.

“Notice” means a notice given in accordance with the provisions of Subsection 26.13.

"Oblieations” means all of the obligations required to be performed under the terms and conditions of any of the Loan Documents by any Obligor, except for obligations that are expressly stated to be unsecured under the terms of another Loan Document.

"Obligor” means the Borrower, any Carveout Obligor, any Guarantor, or any other Person that is liable under the Loan Documents for the payment of any portion of the Indebtedness, or the performance of any other obligation required to he performed under the terms and conditions of any of the Loan Documents, under any circumstances.

"Particioations” means participation interests in the Loan Documents granted by the Lender.

"Permitted Control Group Member” shall mean any member of a group comprised of Phillip I. Levin, Bradley J. Schram, and Norman A. Pappas.

"Permitted Encumbrances” means (A) the lien of taxes and assessments not yet due and payable and (B) those matters of public record listed as special exceptions or subordinate matters in the Lender’s title insurance policy insuring the priority of this Deed of Trust.

"Permitted Transfer” means a transfer specifically described in Section 14 as permitted.

“Person” means any individual, corporation, limited liability company, partnership, trust, unincorporated association, government, governmental authority or other entity.

"Prohibited Structural Change” means a change in the identity of any of the entities through which the Permitted Control Group Members exercise Legal Control over the Real Property, or a change in the capacity through which any Permitted Control Group Member exercises such Legal Control.

“Property” means the Real Property and the Personal Property (as defined in Subsection 22.1 below).

"Qualified Passive Interest Transfer” shall have the meaning set forth in Section 14.4 below.

"Rating Agencies” means one or more credit rating agencies approved by Lender.

"Real Property” means the Land, the Improvements, the Leases and the Rents.

"Recourse Release Conditions” are that (A) the Borrower shall have delivered the written request to the Lender that the Lender release the Guarantors from liability under the Guarantee executed by them in connection with the Loan, (B) no Default then exists and no action or omission has occurred that, with the giving of Notice or the passage of time, or both, would constitute a Default, (C) for the three consecutive calendar months prior to the Borrower’s request for such release (i) not less than ninety percent (90%) of the apartment units on the Land have been occupied by bona fide tenants and (ii) the effective gross rental income generated by the Real Property from bona fide apartment tenants has been not less than $122,250 per month, (D) the Borrower has provided the Lender with rent rolls and operating statements certified by the Borrower and such additional information as the Lender may have reasonably requested for the purpose of verifying that the conditions described in items (B) and (C) of this paragraph have been satisfied, and (E) the Borrower has paid all costs incurred by the Lender in connection with the review of the Borrower’s release request and related materials as described above in this paragraph.

“Rents” means all rents, income, receipts, issues and profits and other benefits paid or payable for using, leasing, licensing, possessing, operating from or in, residing in, selling, mining, extracting minerals from, or otherwise enjoying the Real Property, whether presently existing or arising in the future, to which the Borrower may now or hereafter become entitled or may demand or claim from the commencement of the Loan term through the time of the satisfaction of all of the Obligations, including security deposits, amounts drawn under letters of credit securing tenant obligations, minimum rents, additional rents, common area maintenance charges, parking revenues, deficiency rents, termination payments, space contraction payments, damages following default under a Lease, premiums payable by tenants upon their exercise of cancellation privileges, proceeds from lease guarantees, proceeds payable under any policy of insurance covering loss of rents resulting from untenantability caused by destruction or damage to the Real Property, all rights and claims of any kind which the Borrower has or may in the future have against the tenants under the Leases, lease guarantors, or any subtenants or other occupants of the Real Property, all proceeds of any sale of the Real Property in violation of the Loan Documents, any future award granted the Borrower in any court proceeding involving any such tenant in any bankruptcy, insolvency, or reorganization proceedings in any state or federal court, and any and all payments made by ny such tenant in lieu of rent.

"Restoration” means (A) in the case of a casualty resulting in damage to or the destruction of the Improvements, the repair or rebuilding of the Improvements to their original condition, or (B) in the case of the condemnation of a portion of the Real Property, the completion of such work as may be necessary in order to remedy the effects of the condemnation so that the value and income-generating characteristics of the Real Property are restored.

"Securities” means mortgage pass-through certificates or other securities evidencing a beneficial interest in the Loan, issued in a rated or unrated public offering or private placement.


		“Securitization” means the issuance of Securities.

4		TITLE

The Borrower represents to and covenants with the Lender and with its successors and assigns that, at the point in time of the grant of the lien created by this Deed of Trust, the Borrower is well-seized of good and indefeasible title to the Real Property, in fee simple absolute, subject to no lien or encumbrance except the Permitted Encumbrances. The Borrower warrants this estate and title to the Trustee and to his successors and assigns forever, against all lawful claims and demands of all Persons. The Borrower shall maintain mortgagee title insurance issued by a solvent carrier, covering the Real Property in an amount at least equal to the amount of the Loan’s original principal balance. This Deed of Trust is and shall remain a valid and enforceable first lien on the Real Property, and if the validity or enforceability of this first lien is attacked by appropriate proceedings, the Borrower shall diligently and continuously defend it through appropriate proceedings. Should the Borrower fail to do so, the Lender may at the Borrower’s expense take all necessary action, including the engagement and compensation of legal counsel, the prosecution or defense of litigation, and the compromise or discharge of claims. The Borrower shall defend, indemnify and hold the Lender harmless in any suit or proceeding brought to challenge or attack the validity, enforceability or priority of the lien granted by this Deed of Trust. If a prior construction, mechanics’ or materialmen’s lien on the Real Properly arises by operation of statute during any construction or repair of the Improvements, the Borrower shall either cause the lien to he discharged by paying when due any amounts owed to such persons, or shall comply with Section 12 of this Deed of Trust.

5. REPRESENTATIONS OF THE GRANTOR

The Borrower represents to the Lender as follows:

5.1 FORMATION, EXISTENCE, GOOD STANDING

The Borrower is a limited partnership duly organized, validly existing and in good standing under the laws of Ohio and has obtained all licenses and permits and filed all statements of fictitious name and registrations necessary for the lawful operation of its business in Ohio.

5.2 QUALIFICATION TO DO BUSINESS

The Borrower is qualified to do business as a foreign limited partnership under the laws of North Carolina and has obtained all licenses and permits and filed all statements of fictitious name and registrations necessary for the lawful operation of its business in North Carolina.

5.3 POWER AND AUTHORITY

The Borrower has full power and authority to carry on its business as presently conducted, to own the Properly, to execute and deliver the Loan Documents, and to perform its Obligations.

5.4 ANTI-TERRORISM REGULAZONS

Neither the Borrower, any affiliate of the Borrower, nor any person owning an interest in either of the foregoing is a “Specially Designated National” or a “Blocked Person” as those terms are defined in the Office of Foreign Asset Control Regulations (31 CFR Section 500 et seq.).

5.5 DUE AUTHORIZATION

The Loan transaction and the performance of all of the Borrower’s Obligations have been duly authorized by all requisite partnership action, and each individual executing any Loan Document on behalf of the Borrower has been duly authorized to do so.

5.6 NO DEFAULT OR VIOLATIONS

The execution and performance of the Borrower’s Obligations will not result in any breach of, or constitute a default under, any contract, agreement, document or other instrument to which the Borrower is a party or by which the Borrower may be bound or affected, and do not and will not violate or contravene any law to which the Borrower is subject; nor do any such other instruments impose or contemplate any obligations which are or will be inconsistent with the Loan Documents.

5.7 NO FURTER APPROVALS OR ACTIONS REQUIRED

No approval by, authorization of, or filing with any federal, state or municipal or other governmental commission, board or agency or other governmental authority is necessary in connection with the authorization, execution and delivery of the Loan Documents by the Borrower.

5.8 DUE EXECUTION AND DELIVERY

Each of the Loan Documents to which the Borrower is a party has been duly executed and delivered on behalf of the Borrower.

5.9 LEGAL, VALID, BINDING AND ENFORCEABLE

Each of the Loan Documents to which the Borrower is a party constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms.

5.10 ACCURATE FINANCIAL INFORMATION

All financial information furnished by the Borrower to the Lender in connection with the application for the Loan is true, correct and complete in all material respects and does not omit to state any fact or circumstance necessary to make the statements in them not misleading, and there has been no material adverse change in the financial condition of the Borrower since the date of such financial information.

5.11 COMPLIANCE WITH LEGAL REQUIREMENTS

All governmental approvals and licenses required for the conduct of the Borrower’s business and for the maintenance and operation of the Real Property in compliance with applicable law are in full force and effect, and the Real Property is currently being operated in compliance with the Legal Requirements in all material respects.

5.12 CONTRACTS AND FRANCHISES

All contracts and franchises necessary for the conduct of the Borrower’s business and for the operation of the Real Property in accordance with good commercial practice are in force.

5.13 NO CONDEMNATION PROCEEDING

As of the date of this Deed of Trust, the Borrower has no knowledge of any present, pending or threatened condemnation proceeding or award affecting the Real Properly.

5.14 NO CASUALTY

As of the date of this Deed of Trust, no damage to the Real Property by any fire or other casualty has occurred, other than damage that has been completely repaired in accordance with good commercial practice and in compliance with applicable law.

5.15 INDEPENDENCE OF THE REAL PROPERTY

The Real Property may be operated independently from other land and improvements not included within or located on the Land, and it is not necessary to own or control any property other than the Real Property in order to meet the obligations of the landlord under any Lease, or in order to comply with the Legal Requirements.

5.16 COMPLETE LOTS AND TAX PARCELS

The Land is comprised exclusively of tax parcels that are entirely included within the Land, and, if the Land is subdivided, of subdivision lots that are entirely included within the Land.

5.17 OWNERSHIP OF FIXTURES

The Borrower owns the Fixtures free of any encumbrances, including purchase money security interests, rights of lessors, and rights of sellers under conditional sales contracts or other financing arrangements.

5.18 MULTIFAMILY RESIDENTIAL PROPERTY

The Real Property is zoned for multifamily residential use, and the Loan has not been made for personal, family or household purposes.

5.19 PERFORMANCE UNDER DEVELOPMENT AGREEMENTS

A11 of the obligations of the owner of the Real Property due under the Development Agreements have been fully, timely and completely performed and such performance has been accepted by the related governmental agency or utility company, and no Governmental Authority has alleged that any default exists under any of the Development Agreements.

5.20 STATUS OF CERTAIN TITLE MATTERS

Each of the Easements included within the Appurtenances (a) is valid and in full force and effect and may not be amended or terminated, except for cause, without the consent of the Borrower, (b) has not been amended or supplemented, (c) requires no approval of the Improvements that has not been obtained, (d) is free of defaults or alleged defaults, (e) does not provide for any assessment against the Real Property that has not been paid in full, and (f) has not been violated by the owner of the Real Property or, to the best of the Borrower’s knowledge, by any tenant of the Real Property.

5.2 I NO PROHIBITED TRANSACTIONS

The Borrower represents to the Lender that either (a) the Borrower is not an “employee benefit plan” within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), that is subject to Title I of ERISA, a “plan” within the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), or an entity that is deemed to hold “plan assets” within the meaning of 29 C.F.R. §2510.3-101 of any such employee benefit plan or (b) the execution of the Loan Documents, the acceptance of the Loan by the Borrower and the existence of the Loan will not result in a non-exempt prohibited transaction under §406 of ERISA or Section 4975 of the Code. The Borrower further warrants and covenants that the foregoing representation will remain true during the term of the Loan.

6. COVENANTS

6.1 GOOD STANDING

The Borrower shall remain in good standing as a limited partnership under the laws of Ohio and shall maintain in force all statements of fictitious name and registrations necessary for the lawful operation of its business in Ohio during the term of the Loan.

6.2 QUALIFICATION TO DO BUSINESS

The Borrower shall remain qualified to do business as a foreign limited partnership under the laws of North Carolina and Michigan and shall maintain in force all licenses and permits, filings and statements of fictitious name and registrations necessary for the lawful operation of its business in North Carolina.

6.3 NO DEFAULT OR VIOLATIONS

The Borrower shall not enter into any contract, agreement, document or other instrument, if the performance of the Borrower’s Obligations would result in any breach of, or constitute a default under, any such contract, agreement, document or other instrument, or if the contract, agreement, document or other instrument would impose or contemplate any obligations the performance of which would result in a Default under the Loan Documents or would be inconsistent with the performance of the Borrower’s Obligations.

6.4 PAYMENT AND PERFORMANCE

The Borrower shall pay the Indebtedness and perform all of its other Obligations, as and when the Loan Documents require such payment and performance.

6.5 SPECIAL PURPOSE ENTITY

The Borrower has not and will not:

(i) engage in any business or activity other than the ownership, operation and maintenance of the Property, and activities incidental thereto;

(ii) acquire or own any assets other than (A) the Property, and (B) such incidental Personal Property as may be necessary for the operation of the Property;

(iii) merge into or consolidate with any Person, or dissolve, terminate, liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure;

(iv) fail to observe all organizational formalities, or fail to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the Legal Requirements of the jurisdiction of its organization or formation, or amend, modify, terminate or fail to comply with the provisions of its organizational documents;

(v) own any subsidiary, or make any investment in, any Person;

(vi) commingle its assets with the assets of any other Person;

(vii) incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the Indebtedness, unsecured trade payables and unsecured equipment leases (both of which must be incurred in the ordinary course of business relating to the ownership and operation of the Property,) provided the same (x) do not exceed at any time in the aggregate a maximum amount of one percent (1%) of the outstanding principal amount of the Note, and (y) are paid within sixty (60) days after the date incurred;

(viii) fail to maintain its records, hooks of account, bank accounts, financial statements, accounting records and other entity documents separate and apart from those of any other Person;

(ix) enter into any contract or agreement with any general partner, member, shareholder, principal or affiliate, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arm’s-length basis with unaffiliated third parties;

(x) maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

(xi) assume or guaranty the debts of any other Person, hold itself out to be responsible for the debts of any other Person, or otherwise pledge its assets for the benefit of any other Person or hold out its credit as being available to satisfy the obligations of any other Person;

(xii) make any loans or advances to any Person (but excluding partnership distributions);

(xiii) fail to file its own tax returns (unless prohibited by Legal Requirements from doing so);

(xiv) fail either to hold itself out to the public as a legal entity separate and distinct from any other Person or to conduct its business solely in its own name or fail to correct any known misunderstanding regarding its separate identity;

(xv) fail to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operation;

(xvi) fail to allocate shared expenses (including shared office space) and to use separate stationery, invoices and checks;

(xvii) fail to pay its own liabilities (including salaries of its own employees) from its own funds; and

(xviii) acquire obligations or securities of its partners, members, shareholders or other affiliates, as applicable.

6.6 PAYMENT OF IMPOSITIONS

The Borrower shall pay the Impositions on or before the last day on which they may be paid without penalty or interest, and shall, within thirty (30) days, furnish the Lender with a paid receipt or a cancelled check as evidence of payment. If the Lender does not receive such evidence, the Lender may obtain it directly. If it does so, the Lender will charge the Borrower an administrative fee of $250 for securing the evidence of payment. The payment of this fee shall be a demand obligation of the Borrower. The Borrower may meet the Imposition payment requirements of this Subsection 6.6 by remitting the Monthly Escrow Payments when due, by immediately providing Notice to the Lender of any new Imposition or increased Imposition unknown to the Lender, and by paying to the Lender on demand any amount required to increase the Escrow Fund to an amount sufficient to permit the Lender to pay all Impositions from the Escrow Fund on time. If the Borrower wishes to contest the validity or amount of an Imposition, it may do so by complying with Section 12. If any new Legal Requirement (other than a general tax on income or on inlerest payments) taxes the Deed of Trust so that the yield on the Indebtedness would be reduced, and the Borrower may lawfully pay the tax or reimburse the Lender for its payment, the Borrower shall do so.

6.7 MAINTENANCE OF THE REAL PROPERTY

The Borrower shall not commit or permit any waste of the Real Property as a physical or economic asset, and agrees to maintain in good repair the Improvements, including structures, roofs, mechanical systems, parking lots or garages, and other components of the Real Property that are necessary or desirable for the use of the Real Property, or which the Borrower as landlord under any Lease is required to maintain for the benefit of any tenant. In its

performance of this Obligation, the Borrower shall promptly and in a good and workmanlike manner repair or restore, as required under Subsection 6.17, any elements of the Improvements that are damaged or destroyed. The Borrower shall also replace roofs, parking lots, mechanical systems, and other elements of the Improvements requiring periodic replacement. The Borrower shall carry out such replacements no less frequently than would a commercially reasonable owner intending to maintain the maximum income-generating potential of the Real Property over its reasonable economic life. The Borrower shall not, without the prior written consent of the Lender, demolish, reconfigure, or materially alter the structural elements of the Improvements, unless such an action is the obligation of the Borrower under a Lease approved by Lender or for which the Lender’s approval is not required under the Absolute Assignment of Leases and Rents. The Lender agrees that any request for its consent to such an action shall be deemed given if the Lender does not respond within fifteen (15) Business Days to any written request for such a consent, if the request is accompanied by all materials required to permit the Lender to analyze the proposed action.

6.8 USE OF THE REAL PROPERTY

The Borrower agrees that the Real Property may only be used as a residential apartment complex and for no other purpose. The Real Property may not he converted to a cooperative or condominium without Beneficiary’s prior written consent, which consent may be withheld in Beneficiary’s sole and absolute discretion.

6.9 LEGAL REQUIREMENTS

The Borrower shall maintain in full force and effect all governmental approvals and licenses required for the conduct of the Borrower’s business and for the maintenance and operation of the Real Property in compliance with applicable law, and shall comply with all Legal Requirements relating to the Real Property at all times.

6.10 CONTRACTS AND FRANCHISES

The Borrower shall maintain in force all contracts and franchises necessary for the conduct of the Borrower’s business and for the operation of the Real Property in accordance with good commercial practice.

6.11 COVENANTS REGARDING CERTAIN TITLE WTI’ERS

The Borrower shall promptly pay, perform and observe all of its obligations under the Easements included within the Appurtenances or under reciprocal easement agreements, operating agreements, declarations, and restrictive covenants included in the Permitted Encumbrances, shall not modify or consent to the termination of any of them without the prior written consent of the Lender, shall promptly furnish the Lender with copies of all notices of default under them, and shall cause all covenants and conditions under them and benefiting the Real Property to be fully performed and observed.

6.12 INDEPENDENCE OF THE REAL PROPERTY

The Borrower shall maintain the independence of the Real Property from other land and improvements not included within or located on the Land. In fulfilling this covenant, the Borrower shall neither take any action which would make it necessary to own or control any property other than the Real Property in order to meet the obligations of the landlord under any Lease, or in order to comply with the Legal Requirements, nor take any action which would cause any land or improvements other than the Land and the Improvements to rely upon the Land or the Improvements for those purposes.

6.13 COMPLETE LOTS AND TAX PARCELS

The Borrower shall take no action that would result in the inclusion of any portion of the Land in a tax parcel or subdivision lot that is not entirely included within the Land.

6.14 APARTMENT PROPERTY

The Real Property shall be used for residential apartments, rather than for personal, family or household purposes.

6.15 PERFORMANCE UNDER DEVELOPMENT AGREEMENTS

The Borrower shall fully, timely and completely perform all of the obligations of the owner of the Real Property due under the Development Agreements and shall cause no default under any of the Development Agreements.

6.16 STATUS OF CERTAIN TITLE MA’ITERS

The Borrower shall not take or fail to take any action with respect to the Easements included within the Appurtenances or the reciprocal easement agreements, operating agreements, declarations, and restrictive covenants included in the Permitted Encumbrances, If as the result of such an action or failure, the subject Easement or other title matter would (a) be rendered invalid or without force or effect, (b) be amended or supplemented without the consent of the Lender, (c) be placed in default or alleged default, (d) result in any lien against the Real Property, or (e) give rise to any assessment against the Real Property, unless immediately paid in full.

6.17 RESTORATION WON CASUALTY OR CONDEMNATION

If a casualty or condemnation occurs, the Borrower shall promptly commence the Restoration of the Real Property, to the extent that the Lender has made Insurance Proceeds or Condemnation Proceeds available to the Borrower for such Restoration.

6.18 PERFORMANCE OF LANDWRDO BLIGATIONS

The Borrower shall perform its obligations as landlord under the Leases, and shall neither take any action, nor fail to take any action, if the action or failure would be inconsistent with the commercially reasonable management of the Real Property for the purpose of enhancing its long-term performance and value. The Borrower shall not, without the Lender’s written consent, extend, modify, declare a default under, terminate, or enter into any Lease of the Real Property.

6.19 FINANCIAL REPORTS AND OPERATING STATEMENTS

(a) Maintenance of Books and Records

During the term of the Loan, the Borrower shall maintain complete and accurate accounting and operational records, including copies of all Leases and other material written contracts relating to the Real Property, copies of all tax statements, and evidence to support the payment of all material property-related expenses.

(b) Delivery of Financial and Property-Related Information

Within one hundred twenty (120) days after the end of each of its fiscal years, or, if a Default exists, on demand by the Lender, the Borrower shall deliver to the Lender (A) copies of the financial statements of the Borrower and its general partner, including balance sheets and earnings statements, (B) a complete and accurate operating statement for the Real Property, and (C) a complete rent roll, all in form satisfactory to the Lender. The rent roll must be certified by the Borrower to be true and correct and must include each tenant’s name, premises, type of unit occupied and leased, rent (including any percentage rent and supporting sales reports from the related tenants), lease expiration date, renewal options and related rental rates, delinquencies and vacancies and the existence of any unsatisfied landlord obligations, e.g., in respect of free-rent periods, unfinished tenant improvements or other leasing costs. If the Borrower fails to deliver the items required in this Subsection, the Lender may engage an accounting firm to prepare the required items. The Borrower shall cooperate fully with any investigative audit required to permit the accounting firm to produce these items, and the fees and expenses incurred in connection with their preparation shall be paid on demand by the Borrower.

(c) Effect of Failure to Deliver Financial and Property Reports

If no Default exists and the Borrower fails to provide the financial and property reports required under this Section within one hundred twenty (120) days of the close of any fiscal year, the Lender will provide a Notice of this failure and a thirty (30)-day opportunity to cure before a Default shall exist. All monthly payments of principal and interest under the Note that become due after this cure period has elapsed but before the reports are received by the Lender must be accompanied by a fee of,000834 times the principal balance of the Loan at the beginning of the previous month, regardless of whether the Notice has asserted that the failure constitutes a Default under this Deed of Trust. This fee is to compensate the Lender for (A) the increased risk resulting from the Lender’s inability to monitor and service the Loan using up-to-date information and (B) the reduced value and liquidity of the Loan as a financial asset.

(dl) Certification of Information

The financial and operating statements provided under this Subsection need not, as an initial matter, be certified by an independent certified public accountant as having been prepared in accordance with generally accepted accounting principles, consistently applied, or, in the case of financial statements prepared on a cash or income tax basis, or of operating statements, as not materially misleading based on an audit conducted in accordance with generally accepted auditing standards. The Borrower shall, however, certify that such statements are true and correct, and the Lender expressly reserves the right to require such a certification by an independent certified public accountant if a Default exists or if the Lender has reason to believe that any previously provided financial or operating statement is misleading in any material respect.

6.20 ESTOPPEL STATEMENTS

Upon request by the Lender, the Borrower shall, within ten (10) Business Days of Notice of the request, furnish to the Lender or to whom it may direct, a written statement acknowledging the amount of the Indebtedness and disclosing whether any offsets or defenses exist against the Indebtedness. Thereafter, the Borrower shall be estopped from asserting any other offsets or defenses alleged to have arisen as of the date of the statement.

6.21 PROHIBITION ON CERTAIN DISTRIBUTIONS

If Default exists under Subsection 10.1 or under any of Subparagraphs (b), (c), (d), (e) or (f) of Subsection 10.2, the Borrower shall not pay any dividend or make any partnership, trust or other distribution, and shall not make any payment or transfer any property in order to purchase, redeem or retire any interest in its beneficial interests or ownership.


6.22		USE OF LOAN PROCEEDS The Loan proceeds shall be used solely for commercial purposes.
6.23		PROHIBITION ON CUTOFF NOTICES

The Borrower shall not issue any Notice to the Lender to the effect that liens on the Real Property after the date of the Notice will enjoy priority over the lien of this Deed of Trust.

6.24 PROHIBITED PERSON COMPLIANCE

The Borrower warrants, represents and covenants that neither the Borrower nor any Obligor nor any of their respective affiliated entities is or will be an entity or person (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 (“E013224”), (ii) whose name appears on the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”) most current list of “Specifically Designated Nationals and Blocked Persons” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/tl1sdn.pdf), (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO 13224, or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in subparts [i] — [iv] above are herein referred to as a “Prohibited Person”). The Borrower covenants and agrees that neither the Borrower, nor any Obligor nor any of their respective affiliated entities will (i) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person, or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in E013224. The Borrower further covenants and agrees to deliver (from time to time) to the Lender any such certification or other evidence as may be requested by the Lender in its sole and absolute discretion, confirming that (i) neither the Borrower nor any Obligor is a Prohibited Person and (ii) neither the Borrower nor any Obligor has engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person.

6.25 EXERCISE OF LEGAL CONTROL

One or more of Phillip I. Levin, Joseph J. Recchie, Bradley J. Schram and Norman A. Pappas (together with any Person who assumes liability for Carveout Obligations in the future) shall at all times exercise Legal Contml of the Borrower, provided that Joseph J. Recchie shall not solely exercise such Legal Control.

7. INSURANCE REQUIREMENTS

At all times until the Indebtedness is paid in full, the Borrower shall maintain insurance coverage and administer insurance claims in compliance with this Section.

7.1 REQUIRED COVERAGES

(a) Open Perils/Special Form/Special Perils Property

The Borrower shall maintain “Open Perils,” “Special Form,” or “Special Perils” property insurance coverage in an amount not less than one hundred percent (100%) of the replacement cost of all insurable elements of the Real Property and of all tangible Personal Property, with coinsurance waived, or if a coinsurance clause is in effect, with an agreed amount endorsement acceptable to the Lender. Coverage shall extend to the Real Property and to all tangible Personal Property.

(b) Broad Form Boiler and Machinery

If any boiler or other machinery is located on or about the Real Property, the Borrower shall maintain broad form boiler and machinery coverage, including a form of business income coverage.

(c) Flood

If the Real Property is located in a special flood hazard area (that is, an area within the 100-year floodplain) according to the most current flood insurance rate map issued by the Federal Emergency Management Agency and if flood insurance is available, the Borrower shall maintain flood insurance coverage on all insurable elements of Real Property and of all tangible Personal Property.

(d) Business Interruption

The Borrower shall maintain a form of business income coverage in the amount of eighty percent (80%) of one year’s business income from the Property.

(e) Comprehensive/General Liability

The Borrower shall maintain commercial general liability coverage (which may be in the form of umbrella/excess liability insurance) with a $1,000,000 combined single limit per occurrence and a minimum aggregate limit of $2,000,000.

Liquor Liability

The Borrower shall maintain liquor liability coverage, if applicable law may impose liability on those selling, serving, or giving alcoholic beverages to others and if such beverages will be sold, served or given on the Real Property by the Borrower.

(g) Elective Coverages

The Lender may require additional coverages appropriate to the property type and site location. Additional coverages may include earthquake, windstorm, mine subsidence, sinkhole, personal property, supplemental liability, or coverages of other property-specific risks.

7.2 PRIMARY COVERAGE

Each coverage required under this Section shall be primary rather than contributing or secondary to the coverage the Borrower may carry for other properties or risks; provided, however, that blanket coverage which otherwise complies with the terms of this Section shall be acceptable if (a) the policy includes limits by property location and (b) the Lender determines, in the exercise of its sole and absolute discretion, that the amount of such coverage is sufficient in light of the other risks and properties insured under the blanket policy.

7.3 HOW THE LENDER SHALL BE NAMED

On all property insurance policies and coverages required under this Section (including coverage against loss of business income), the Lender must be named as “first mortgagee” under a standard mortgage clause. On all liability policies and coverages, the Lender must be named as an “additional insured.” The Lender shall he referred to verbatim as follows: “Transamerica Occidental Life Insurance Company and its successors, assigns, and affiliates; as their interest may appear; c/o AEGON USA Realty Advisors, Inc.; Mortgage Loan Dept.; 4333 Edgewood, Rd., NE, Cedar Rapids, Iowa 52499-5443.”

7.4 RACING

Each insurance carrier providing insurance required under this Section must have, independently of its parent’s or any reinsurer’s rating, a General Policyholder Rating of A, and a Financial Rating of IX or better, as reported in the most current issue of Best’s Insurance Guide, or as reported by Best on its internet web site.


7.5		DEDUCTIBLE The maximum deductible on each required coverage or policy is $100,000.
7.6		NOTICES, CHANGES AND RENEWALS

All policies must require the insurance carrier to give the Lender a minimum of thirty (30) days’ notice in the event of modification, cancellation or termination for non payment of premium and a minimum of thirty (30) days’ notice of nonrenewal. The Borrower shall report to the Lender immediately any facts known to the Borrower that may adversely affect the appropriateness or enforceability of any insurance contract, including, without limitation, changes in the ownership or occupancy of the Real Property, any hazard to the Real Property and any matters that may give rise to any claim. Prior to expiration of any policy required under this Section, the Borrower shall provide either (a) an original or certified copy of the renewed policy, or (b) a “binder,” an Acord 28 (real property), Acord 27 (personal property) or Acord 25 (liability) certificate, or another document satisfactory to the Lender conferring on the Lender the rights and privileges of mortgagee. If the Borrower meets the foregoing requirement under clause (h), the Borrower shall supply an original or certified copy of the original policy within ninety (90) days. All binders, certificates, documents, and original or certified copies of policies must name the Borrower as a named insured or as an additional insured, must include the complete and accurate property address and must hear the original signature of the issuing insurance agent.

7.7 UNEARNED PREMIUMS

If this Deed of Trust is foreclosed, the Lender may at its discretion cancel any of the insurance policies required under this Section and apply any unearned premiums to the Indebtedness.

7.8 FORCED PLACEMENT OF INSURANCE

If the Borrower fails to comply with the requirements of this Section, the Lender may, at its discretion, procure any required insurance. Any premiums paid for such insurance, or the allocable portion of any premium paid by the Lender under a blanket policy for such insurance, shall be a demand obligation under this Deed of Trust, and any unearned premiums under such insurance shall comprise Insurance Proceeds and therefore a portion of the Property.

8. INSURANCE AND CONDEMNATION PROCEEDS

8.1 ADJUSTMENT AND COMPROMISE OF CLAIMS AND AWARDS

The Borrower may settle any insurance claim or condemnation proceeding if the effect of the casualty or the condemnation may be remedied for $100,000 or less, and if the Borrower promptly notifies the Lender of the existence of such insurance claim or condemnation and provides the Lender copies of all correspondence and other documentation involved in the settling of the claim or condemnation, with such copies to be furnished as the correspondence or other documentation is sent or received by the Borrower. If a greater sum is required, the Borrower may not settle any such claim or proceeding without the advance written consent of the Lender. If a Default exists, the Borrower may not settle any insurance claim or condemnation proceeding without the advance written consent of the Lender.

8.2 DIRECT PAYMENT TO THE LENDER OF PROCEEDS

If the Insurance Proceeds received in connection with a casualty or the Condemnation Proceeds received in respect of a condemnation exceed $1 00,000, or if there is a Default, then such proceeds shall be paid directly to the Lender.
The Lender shall have the right to endorse instruments which evidence proceeds that it is entitled to receive directly.

8.3 AVAILABILl7Y TO THE BORROWER OF PROCEEDS

The Borrower shall have the right to use the Insurance Proceeds or the Condemnation Proceeds to carry out the Restoration of the Real Property, if the amount received is less than $290,000, subject to the conditions set forth in Subsections 8.4, 8.5, and 8.6 of this Section. If the amount received in respect of a casualty or condemnation equals or exceeds $290,000, and if the Loan-to-Value ratio of the Property on completion will be eighty percent (80%) or less, as determined by the Lender in its discretion based on its estimate of the market value of the Real Property, the Lender shall receive such Insurance Proceeds or Condemnation Proceeds directly and hold them in a fund for Restoration subject to the conditions set forth in Subsections 8.4, 8.5, and 8.6 of this Section. If the Lender’s estimate of the market value of the Real Property implies a Loan-to-value ratio of over SO%, and the Borrower disagrees with the Lender’s estimate, the Borrower may require that the Lender engage an independent appraiser (the “Fee Appraiser”) to prepare and submit to AEGON a full narrative appraisal report estimating the market value of the Real Property. The Fee Appraiser shall be certified in North Carolina and shall be a member of a national appraisal organization that has adopted the Uniform Standards of Professional Appraisal Practice (USPAP) established by the Appraisal Standards Board of the Appraisal Foundation. The Fee Appraiser will be required to use assumptions and limiting conditions established by the Lender prior to the funding of the Loan and to prepare the appraisal in conformity with the Lender’s Appraisal Guidelines. For purposes of this Section, the independent appraiser’s value conclusion shall he binding on both the Lender and the Borrower. The Borrower shall have the right to make a prepayment of the Loan, without premium, sufficient to achieve this Loan-to-value ratio. The independent fee appraisal shall be at the Borrower’s expense, and the Borrower shall pay to the Lender an administrative fee of $2,500 in connection with its review. The Lender may require that the Borrower deposit $10,000 with the Lender as security for these expenses or may pay the fee appraiser’s and administrative fees from the proceeds at its sole discretion.

Unless the Borrower has the right to use the Insurance Proceeds or the Condemnation Proceeds under the foregoing paragraphs, the Lender may, in its sole and absolute discretion, either apply them to the Loan balance or disburse them for the purposes of repair and reconstruction, or to remedy the effects of the condemnation. No prepayment premium will be charged on amounts applied to reduce the principal balance of the Loan.

8.4 CONDITIONS TO AVAILABILITY OF PROCEEDS

The Lender shall have no obligation to release Insurance Proceeds or Condemnation Proceeds to the Borrower, and may hold such amounts as additional security for the Loan, if (a) a Default exists, (b) a payment Default has occurred during the preceding twelve (12) months, (c) the Lender has delivered to the Borrower Notice of any act, omission or circumstance that will, if uncured, become a Default, and the required cure has not been effected or (d) if the Insurance Proceeds or Condemnation Proceeds received by the Lender and any other funds deposited by the Borrower with the Lender are insufficient, as determined by the Lender in its reasonable discretion, to complete the
Restoration. If a Default exists, the Lender may at its sole and absolute discretion apply such Insurance Proceeds and Condemnation Proceeds to the full or partial cure of the Default.

8.5 PERMITTED MEZZANINE FINANCING FOR REBUIZDINOGR REMEDIATION OF THE EFFECT OF TAKING BY EMINENT DOMAIN

If the Lender reasonably determines that the Insurance Proceeds or Condemnation Proceeds received in respect of a casualty or condemnation, as the case may be, would be insufficient to permit the Borrower to restore the Improvements to their condition before the casualty, or to remedy the effect on the Real Property of the condemnation, then the Borrower shall use its best efforts to secure such additional funds as are necessary to effect the Restoration. The Borrower’s obligation to use its best efforts shall be limited to securing such funds on a non-recourse basis. Interests in the Borrower may be pledged as security to the extent necessary in connection with any such financing.

8.6 DRAW REQUIREMENTS

The Borrower’s right to receive Insurance Proceeds and Condemnation Proceeds held by the Lender under this Section shall be conditioned on the Lender’s approval of plans and specifications for the Restoration. Each draw except the last shall be in the minimum amount of $50,000. Draw requests shall be accompanied by customary evidence of construction completion, and by endorsements to the Lender’s mortgagee title insurance coverage insuring the absence of construction, mechanics’ or materialmen’s liens. Draws based on partial completion of the Restoration shall be subject to a ten percent (10%) holdback. All transactional expenses shalt be paid by the Borrower.

9. ESCROW FUND

The Borrower shall pay the Monthly Escrow Payment on the first (1st) day of every month, commencing with the month in which the first regular payment of principal and interest is due. The Lender shall hold Monthly Escrow Payments in an interest-bearing fund from which the Lender will pay on a timely basis those Escrow Expenses that the Lender has anticipated will become payable on a regular basis during the Loan’s term, and on which the Lender has based its determination of the Monthly Imposition Requirement, the Monthly Insurance Premium Requirement and the Monthly Reserve Requirement. The Escrow Fund will he maintained as an accounting entry in the Lender’s general account, where it may be commingled with the Lender’s other funds. The Escrow Fund shall bear interest, which shall become part of the Escrow Fund. The interest rate will he the passbook rate of interest at a bank in Cedar Rapids, Iowa, at the end of the interest accrual period. Interest will be compounded annually based on the average monthly balance. The Lender may reanalyze the projected Escrow Expenses from time to time and shall advise the Borrower of any change in the amount of the Monthly Escrow Payment. Upon the foreclosure of this Deed of Trust, the delivery of a deed in lieu of foreclosure, or the payoff of the Loan, the Lender sball apply amounts in the Escrow Fund, net of accrued Escrow Expenses, to the Indebtedness. The Lender shall remit any amounts in excess of the lndebtedness to the Borrower.

10. DEFAULT

10.1 PAYMENT DEFAULTS

A “Default” shall exist without Notice upon the occurrence of any of the following events:

(a) Scheduled Payments

The Borrower’s failure to pay, or to cause to be paid, (i) any regular monthly payment of principal and interest under the Note, together with any required Monthly Escrow Payment, on or before the seventeenth (17”) day of the month in which it is due and (ii) any other scheduled payment under the Note, this Deed of Trust or any other Loan Document.

(b) Payment at Maturity

The Borrower’s failure to pay, or to cause to be paid, the Indebtedness when the Loan matures by acceleration under Section 16, because of a transfer or encumbrance under Section 13, or by lapse of time.

(c) Demand Obligations

The Borrower’s failure to pay, or to cause to be paid, within five (5) Business Days of the Lender’s demand, any other amount required under the Note, this Deed of Trust or any of the other Loan Documents.

10.2 INCURABLE NONMONETARY DEFAULT

A Default shall exist upon any of the following:
(a) Material Untruth or Misrepresentation

The Lender’s discovery that any representation made by the Borrower in any Loan Document was materially untrue or misleading when made, if the misrepresentation either was intentional or is not capable of being cured as described in paragraph 10.3(a) below.

(b) Due on Sale or Encumbrance

The occurrence of any sale, conveyance, transfer or vesting that would result in the Loan becoming immediately due and payable at the Lender’s option under Section 13.

(c) Voluntary Bankruptcy Filing

The filing by the Borrower or any Guarantor of a petition in bankruptcy or for relief &om creditors under any present or hture law that affords general protection from creditors.

(d) Insolvency

The failure of the Borrower generally to pay its debts as they become due, its admission in writing to an inability so to pay its debts, the making by the Borrower of a general assignment for the benefit of creditors, or a judicial determination that the Borrower is insolvent.

(e) Receivership

The appointment of a receiver or trustee to take possession of any of the assets of the Borrower.

(f) Levy or Attachment

The taking or seizure of any material portion of the Property under levy of execution or attachment.

(g) Lien

The filing against the Real Property of any lien or claim of lien for the performance of work or the supply of materials, or the filing of any federal, state or local tax lien against the Borrower, or against the Real Property, unless the Borrower promptly complies with Section 12 of this Deed of Trust.

(h) Defaults under other Loan Documents

The existence of any default under any other Loan Document, provided any required Notice of such default has been given and any applicable cure period has expired.

(i) Dissolution or Liquidation

The Borrower shall initiate or suffer the commencement of a proceeding for its dissolution or liquidation, and such proceeding shall not be dismissed within thirty (30) days, or the Borrower shall cease to exist as a legal entity (unless resulting in a Permitted Transfer).

10.3 CURABLE NON-MONETARY DEFAULT

A Default shall exist, following the cure periods specified below, under the following circumstances:

(a) Unintentional Misrepresentations that are Capable of Being Cure

A “Default” shall exist if the Lender discovers that the Borrower has unintentionally made any material misrepresentation that is capable of being cured, unless following Notice thereof by the Lender to the Borrower, the Borrower promptly commences and diligently pursues a cure of the misrepresentation approved by the Lender, and completes the cure within thirty (30) days following such Notice. Any such cure shall place the Lender in the risk position that would have existed had the false representation been true when made.

(b) Involuntary Bankruptcy or Similar Filing

The Borrower or any Guarantor becomes the subject of any petition or action seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief, or that may result in a composition of its debts, provide for the marshaling of the Borrower’s or any Guarantor’s assets for the satisfaction of its debts, or result in the judicially ordered sale of the Borrower’s or any Guarantor’s assets for the purpose of satisfying its obligations to creditors, unless a motion for the dismissal of the petition or other action is filed within ten (10) days and results in its dismissal within sixty (60) days of the filing of the petition or other action.

(c) Entry of a Material Judgment

Any judgment is entered against the Borrower or any other Obligor, and the judgment may materially and adversely affect the value, use or operation of the Real Property, unless either (i) a timely appeal of such judgment is filed, within ten (10) Business Days following the entering of such judgment, the enforcement of such judgment is stayed by a bond or other means, and such stay remains in force until the judgment is overturned on appeal or satisfied, or (ii) the judgment is satisfied within ten (10) Business Days.

(d) Other Defaults

The Borrower fails to observe any promise or covenant made in this Deed of Trust, unless the failure results in a Default described elsewhere in this Section 10, provided the Lender delivers written Notice to the Borrower of the existence of such an act, omission or circumstance, and that such an act, omission or circumstance shall constitute a Default under the Loan Documents unless the Borrower promptly initiates an effort to cure the potential Default, pursues the cure diligently and continuously, and succeeds in effecting the cure within one hundred twenty (120) days of its receipt of Notice. The Lender shall afford the Borrower an additional period of one hundred twenty (120) days in cases where construction or repair is needed to cure the potential Default, and the cure cannot be completed within the first one hundred twenty (120) day cure period. During the cure period, the Borrower has the obligation to provide on demand satisfactory documentation of its effort to cure, and, upon completion, evidence that the cure has been achieved. All notice and cure periods provided in this Deed of Trust shall run concurrently with any notice or cure periods provided by law.

11. RIGHT TO CURE

The Lender shall have the right to cure any Default. The expenses of doing so shall be part of the Indebtedness, and the Borrower shall pay them to the Lender on demand.

12. CONTEST RIGHTS

The Borrower may secure the right to contest Impositions and construction, mechanics’ or materialmen’s liens, through appropriate proceedings conducted in good faith, by either (A) depositing with the Lender an amount equal to one hundred twenty five percent (125%) of the amount of the Imposition or the lien, or (B) obtaining and maintaining in effect a bond issued by a surety acceptable to the Lender, in an amount equal to the greater of (i) the amount of a required deposit under clause (A) above and (ii) the amount required by the surety or by the court in order to obtain a court order staying the foreclosure of the lien pending resolution of the dispute, and releasing the lien of record. The proceeds of such a bond must be payable directly to the Lender. The surety issuing such a bond must be acceptable to the Lender in its sole discretion. After such a deposit is made or bond issued, the Borrower shall promptly commence the contest of the lien and continuously pursue that contest in good faith and with reasonable diligence. If the contest of the related Imposition or lien is unsuccessful, any deposits or bond proceeds shall he used to pay the Imposition or to satisfy the obligation from which the lien has arisen. Any surplus shall be refunded to the Borrower.

13. DUE ON TRANSFER OR ENCUMBRANCE

Upon the sale or transfer of any portion of the Real Property or any other conveyance, transfer or vesting of any direct or indirect interest in the Borrower or the Property, including (i) the direct or indirect transfer of, or the granting of a security interest in, the ownership of the Borrower, (ii) any encumbrance (other than a Permitted Encumbrance) of the Real Property (unless the Borrower contests the encumbrance in compliance with Section 12) and (iii) the lease, license or granting of any security interest in the Personal Property, the Indebtedness shall, at the Lender’s option, become immediately due and payable upon Notice to the Borrower, unless the sale, conveyance, transfer or vesting is a Permitted Transfer.

14. DUE ON SALE EXCEPTIONS

14.1 TRANSFER TO AN APPROVED PURCHASER

The Borrower shall have the right, on one occasion during the term of the Loan, to sell or transfer the Property in a transaction approved by the Lender. The Lender agrees to approve a transfer if the following conditions are satisfied:

(a) No Default

No Default shall exist, and no act, omission or circumstance shall exist which, if uncured following Notice and the passage of time, would become a Default.

(b) Request and Supporting Materials

The Lender shall receive a written request for its approval at least ninety (90) days before the proposed transfer. The request shall specify the identity of the proposed transferee and the purchase price and other terms of the transaction, shall include a copy of the proposed contract of sale, and shall be accompanied by the financial statements, tax returns, and organizational documents of the proposed transferee and its principals.

(c) Criteria to be Considered

The ownership structure, financial strength, credit history and demonstrated property management expertise of the proposed transferee and its principals shall be satisfactory to the Lender in its sole discretion. The Lender expressly reserves the right to withhold its approval of the proposed transfer if the proposed transferee or any of its principals is or has been the subject of any bankruptcy, insolvency, or similar proceeding.

(d) Assumption Agreement

Under the terms of the proposed transfer, the proposed transferee shall assume the Loan, without modification, under the tenns of an assumption agreement and additional documentation satisfactory to the Lender in form and substance. Under the assumption agreement, the transferee shall provide a representation as to tbe purchase price paid for the Real Property.

(e) Retention of Caweout Obligations

Under the terms of the assumption agreement and additional documentation, liability for Carveout Obligations arising after the date of the transfer and assumption shall be assumed by the principals of the proposed transferee, and liability for Carveout Obligations arising before or in connection with the transfer shall be retained by those liable for them before the transfer.

(f) Title Insurance Endorsement

The Borrower shall agree to provide an endorsement to the Lender’s mortgagee title insurance policy, insuring the continued validity and priority of this Deed of Trust following the assumption.

(g) Assumption Fee

The Lender shall receive an assumption fee of one percent (1%) of the outstanding balance of the Loan, and the Borrower shall agree to reimburse the Lender’s out-of-pocket expenses incurred in connection with the proposed transfer, including title updates and endorsement charges, recording fees, any applicable taxes and attorneys’ fees, regardless of whether the transfer is consummated.

14.2 LIMITED PARTNERSHIP TRANSFERS

Transfers between limited partners of the Borrower of their limited partnership interests and the Borrower’s admission of new limited partners shall constitute Permitted Transfers for purposes of Section 13.

14.3 PERMITTED MEZZANINE FINANCING IN CONNECTION WITH CASUALTY OR CONDEMNATION

Any pledge of interests in the Borrower in connection with a financing described in Subsection 8.5 shall constitute a Permitted Transfer for purposes of Section 13.

14.4 P ERMITTED TRANSFERS OF CERTAIN PASSIVE INTERESTS

The Lender agrees that it shall not unreasonably withhold its consent to certain transfers of direct or indirect interests in the Borrower (each a “Qualified Passive Interest Transfer”). A “Qualified Passive Interest Transfer” is any transfer of a direct or indirect interest in the Borrower, if, following the transfer (i) the Real Property remains under the individual or collective Legal Control of one or more Permitted Control Group Members, (ii) the transfer does not result in a Prohibited Structural Change and (iii) the transfer either (A) does not result in a change in assets that would be at risk with respect to any recourse obligations, or (B) is a transfer of direct interests in the Borrower to the devisees of the estate of a deceased Carveout Obligor, and the Net Worth Requirement with respect to the remaining or new Carveout Obligors shall have been met by the Borrower.

14.5 TRANSACTION COSTS

The Borrower shall pay all out-of-pocket expenses incurred by the Lender in the review and processing of any proposed Permitted Transfer, regardless of whether the Permitted Transfer is carried out.

15. NOTICE OF ABSOLUTE ASSIGNMENT OF LEASES AND RENTS

Under the Absolute Assignment of Leases and Rents, the Borrower has assigned to the Lender, and to its successors and assigns, all of the Borrower’s right and title to, and interest in, the Leases, including all rights under the Leases and all benefits to be derived from them. The rights assigned include all authority of the Borrower to modifL or terminate Leases, or to exercise any remedies, and the benefits assigned include all Rents. This assignment is present and absolute, hut under the terms of the Absolute Assignment of Leases and Rents, the Lender has granted the Borrower a conditional license to collect and use the Rents, and to exercise the rights assigned, in a manner consistent with the Obligations, all as more particularly set forth in the Absolute Assignment of Leases and Rents. The Lender may, however, terminate the license by written Notice to the Borrower only on certain conditions set forth in the Absolute Assignment of Leases and Rents.

16. ACCELERATION

If a Default exists, the Lender may, at its option, declare the unpaid principal balance of the Note to be immediately due and payable, together with all accrued interest on the indebtedness, all wsts of collection (including reasonable attorneys’ fees and expenses) and all other charges due and payable by the Borrower under the Note or any other Loan Document. Nevertheless, if the subject Default has arisen from a failure by the Borrower to make a regular monthly payment of principal and interest, the Lender shall not accelerate the indebtedness unless the Lender shall have given the Borrower a cure period of least three (3) Business Days following Notice of its intent to do so. If the subject Default is curable and nonmooetary in nature, the Lender shall exercise its option to accelerate only by delivering notice of acceleration to the Borrower. The Lender shall not deliver any such notice of acceleration until (a) the Borrower has received any required notice of the prospective Default and (b) any applicable cure period has expired. Except as expressly described in this Section, no notice of acceleration shall be required in order for the Lender to exercise its option to accelerate the indebtedness in the event of Default.

17. RIGHTS OF ENTRY AND TO OPERATE

1 7.1 ENTRY ON REAL PROPERTY

If a Default exists, the Lender may, to the extent permitted by law, enter upon the Real Property and take exclusive possession of the Real Property and of all books, records and accounts, all without Notice and without being guilty of trespass, but subject to the rights of tenants in possession under the Leases. If the Borrower remains in possession of all or any part of the Property after Default and without the Lender’s prior written consent, the Lender may, without Notice to the Borrower, invoke any and all legal remedies to dispossess the Borrower. Following Default, the Lender may hold, lease, manage, operate or otherwise use or permit the use of the Real Property, either itself or by other persons, firms or entities, in such manner, for such time and upon such other terms as the Lender may deem to be prudent under the circumstances (making such repairs, alterations, additions and improvements thereto and taking any and all other action with reference thereto, from time to time, as the Lender deems prudent), and apply all Rents and other amounts collected by the Lender in accordance with the provisions of the Absolute Assignment of Leases and Rents.

18. RECEIVERSHIP

Following Default, the Lender may apply to a court of competent jurisdiction for the appointment of a receiver of the Property, ex parte without Notice to the Borrower, whether or not the value of the Property exceeds the Indebtedness, whether or not waste or deterioration of the Real Property has occurred, and whether or not other arguments based on equity would justify the appointment. To the extent permitted by law, the Borrower irrevocably, with knowledge and for valuable consideration, consents to such an appointment. Any such receiver shall have all the rights and powers customarily given to receivers in North Carolma, including the rights and powers granted to the Lender by this Deed of Trust, the power to maintain, lease and operate the Real Property on terms approved by the court, and the power to collect the Rents and apply them to the Indebtedness or otherwise as the court may direct. Once appointed, a receiver may at the Lender’s option remain in place until the Indebtedness has been paid in full.

19. FORECLOSURE; POWER OF SALE

Upon Default, the Lender may elect immediately to proceed with the foreclosure of the lien of this Deed of Trust, against all or part of the Property, and at the option of the Lender, the Trustee may foreclose this Deed of Trust by judicial proceedings in accordance with the laws of North Carolina, or the Lender may without further notice direct Trustee, and Trustee is authorized and empowered, in accordance with applicable law relating to nonjudicial foreclosure sales under power of sale then in effect, to foreclose the lien of this Deed of Trust, after having first given such notice of hearing as to commencement of foreclosure proceedings and obtained such findings of leave of court as may then be required by law, and after having given such notice and advertising the time and place of sale in such manner as may then be required by law, and to sell and dispose of all or any part of the Property at public auction for cash, in any sequence or order as the Lender may elect, and all the right, title, and interest of the Borrower therein, by sale at any place then authorized by law as may be specified in the notice of such sale, to the highest bidder. Upon final completion of such sale and any resales as made pursuant to law, Trustee shall execute a conveyance of the Property, or applicable portion thereof, to the purchaser. After retaining a reasonable fee, not to exceed five percent (5%) of the gross proceeds of sale, as compensation to Trustee, Trustee shall apply the proceeds of the sale as follows: first, to pay all reasonable fees, charges and costs of conducting the sale and advertising the Property, and to pay any prior liens or encumbrances unless such sale is made subject thereto, and to pay necessary costs, as well as to reimburse the Lender for its advances, to protect and maintain the Property, and to pay Impositions, in accordance herewith; second, to pay the Lender all accrued and unpaid interest under the Note, then the unpaid principal balance of the Note, and then all of the other Indebtedness; and third, the remainder of the proceeds, if any, to Grantor. The purchaser at the sale shall not be responsible for the application of the proceeds. No provision in this Deed of Trust concerning foreclosure procedures which specifies any particular actions to be taken by Trustee or the Lender shall he deemed to contradict the requirements and procedures (now or hereafter existing) of North Carolina law, and any such contradiction shall he resolved in favor of North Carolina law applicable at the time of foreclosure. The Lender may sell the Personal Property hereunder in whole or part and in any order, together with the remaining Property or separately. The Lender may hid and become the purchaser at any sale under this Deed of Trust and may apply against the purchase price all or any portion of the balance of the Indebtedness.

20. WAIVERS

To the maximum extent permitted by law, the Borrower irrevocably and unconditionally WAIVES and RELEASES any present or future rights (a) of reinstatement or redemption (b) that may exempt the Property from any civil process, (c) to appraisal or valuation of the Property, (d) to extension of time for payment, (e) that may subject the Lender’s exercise of its remedies to the administration of any decedent’s estate or to any partition or liquidation action, (0 to any homestead and exemption rights provided by the Constitution and laws of the United States and of Nortb Carolina, (g) to notice of acceleration or notice of intent to accelerate (other than as expressly stated herein), and (h) that in any way would delay or defeat the right of the Lender to cause the sale of the Real Property for the purpose of satisfying the Indebtedness. To the fullest extent permitted by law, the Borrower agrees that the price paid at a lawful foreclosure sale, whether by the Lender or by a third party, and whether paid through cancellation of all or a portion of the Indebtedness or in cash, shall conclusively establish the value of the Real Property. The foregoing waivers shall apply to and bind any party assuming the Obligations of the Borrower under this Deed of Trust.

21. EXCULPATION CLAUSE AND CARVEOUT OBLIGATIONS

The Lender agrees that it shall not seek to enforce any monetary judgment with respect to the Indebtedness evidenced by the Note against the Borrower (a) except through recourse to the Property, unless the Obligation from which the judgment arises is a Carveout Obligation, and (b) except to the extent of an aggregate of Four Million Dollars and No Cents ($4,000,000.00), unless and until the Recourse Release Conditions have been satisfied. The Carveout Obligations include (a) the obligation to repay any portion of the Indebtedness that arises because the Lender has advanced funds or incurred expenses as a result of any of the “Carveouts” (as defined below), (b) the obligation to repay the entire Indebtedness, if the Lender’s exculpation of the Borrower from personal liability under
this Section has become void as set forth below, (c) the obligation to indemnify the Lender in respect of its actual damages suffered in connection with a Carveout, and (d) the obligation to defend and hold the Lender harmless from and against any claims, judgments, causes of action or proceedings arising from a Carveout. The Carveouts are:

(i) fraud or material written misrepresentation;

(ii) waste of the Property (which shall include damage, destruction or disrepair of the Real Property caused by a willful act or grossly negligent omission. of the Borrower, but shall exclude ordinary wear and tear in the absence of gross negligence);

(iii) misappropriation of tenant security deposits (including proceeds of tenant letters of credit), Insurance Proceeds or Condemnation Proceeds;

(iv) failure to pay property taxes, assessments or other lienable Impositions;

(vi) removal from the Real Property of fixtures or Personal Property, unless replaced in a commercially reasonable manner;

(vii) the out-of-pocket expenses of enforcing the Loan Documents following Default, not including expenses incurred after the Borrower has agreed in writing to transfer the Real Property to the Lender by the Lender’s choice of either an uncontested foreclosure or delivery of a deed in lieu of foreclosure;

(viii) terminating or amending a Lease other than in the ordinary course of business; and

(ix) any liability of the Borrower under the Environmental Indemnity Agreement. The Lender’s exculpation of the Borrower from personal liability for the repayment of the Indebtedness evidenced by this Note shall be void without Notice if the Borrower (A) voluntarily transfers or creates any voluntary lien on the Property in violation of the Loan Documents, or (B) files a voluntary petition for reorganization under Title I I of the United States Code (or under any other present or future law, domestic or foreign, relating to bankruptcy, insolvency, reorganization proceedings or otherwise similarly affecting the rights of creditors), and has not offered, prior to the filing, to enter into the Lender’s choice of either an agreement to permit an uncontested foreclosure, or an agreement to deliver a deed in lieu of foreclosure within sixty (60) days of the Lender’s acceptance of the offer. After the Lender accepts such an offer, default by the Borrower in fulfilling the terms of the accepted offer shall trigger personal liability for the entire Indebtedness. No such offer shall be conditioned on any payment by the Lender, on the release of any Obligor from any Obligation, or on any other concession.

22. SECURITY AGREEMENT AND FIXTURE FILING

22.1 DEFINITIONS

"Account” shall have the definition assigned in the UCC.
“Bank” shall have the meaning assigned in the UCC.
“Chattel Paoer” shall have the definition assigned in the UCC.
“Deposit Account” shall have the definition assigned in the UCC.
“Document” shall have the definition assigned in the UCC.
“Eauioment” shall have the definition assigned in the UCC.
“Financing Statements” shall have the definition assigned in the UCC.
“General Intangibles” shall have the definition assigned in the UCC.
“Goods” shall have the definition assigned in the UCC. “Goods” include all detached Fixtures, items of Personal Property that may become Fixtures, property management files, accounting books and records, reports of consultants relating
to the Real Property, site plans, test borings, environmental or geotechnical surveys, samples and test results, blueprints, construction and shop drawings, and plans and specifications.
“Instrument” shall have the definition assigned in the UCC.
“Investment Property” shall have the definition assigned in the UCC.
“Letter-of-Credit” shall have the definition assigned in the UCC.
“Letter-of-Credit Rights” shall have the definition assigned in the UCC.
“Money Collateral” means all money received in respect of Rents.
“Personal Property” means Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, Goods, Instruments, General Intangibles, Investment Property, Letter-of-Credit Rights, Letters of Credit, and Money Collateral.
“Proceeds” shall have the meaning assigned in the UCC.
“UCC” means the Uniform Commercial Code as adopted in North Carolina.

22.2 CREATION OF SECURITY MEREST

This Deed of Trust shall be self-operative and shall constitute a Security Agreement pursuant to the provisions of the UCC with respect to the Personal Property. The Borrower, as debtor, hereby grants the Lender, as secured party, for the purpose of securing the Indebtedness, a security interest in the Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Goods, Equipment, Instruments, General Intangibles, Investment Property, Letter-of-Credit Rights, Letters of Credit, and Money Collateral, in the accessions, additions, replacements, substitutions and Proceeds of any of the foregoing items of collateral. Upon Default, the Lender shall have the rights and remedies of a secured party under the UCC as well as all other rights and remedies available at law or in equity, and, at the Lender’s option, the Lender may also invoke the remedies provided elsewhere in this Deed of Trust as to such Property. The Borrower and the Lender agree that the rights granted to the Lender as secured party under this Section 22 are in addition to rather than a limitation on any of the Lender’s other rights under this Deed of Trust with respect to the Property.

22.3 FILING AUTHOREATION

The Borrower irrevocably authorizes the Lender to file, in the appropriate locations for filings of UCC financing statements in any jurisdictions as the Lender in good faith deems appropriate, such financing statements and amendments as the Lender may require in order to perfect or continue this security interest, or in order to prevent any filed financing statement from becoming misleading or from losing its perfected status.

22.4 ADDITIONAL SEARCHES AND DOCUMENTATION

The Borrower shall provide to the Lender upon request, certified copies of any searches of UCC records deemed necessary or appropriate by Lender to confirm the first-priority status of its security interest in the Personal Property, together with copies of all documents or records evidencing security interests disclosed by such searches.

22.5 COSTS

The Borrower shall pay all filing fees and costs and all reasonable costs and expenses of any record searches (or their continuations) as the Lender may require.


22.6		REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER

(a) Ownership of the Personal Property

All of the Personal Property is, and shall during the term of the Loan continue to be, owned by the Borrower, and is not the subject matter of any lease, control agreement or other instrument, agreement or transaction whereby any ownership, security or beneficial interest in the Personal Property is held by any person or entity other than the Borrower, subject only to (1) the Lender’s security interest, (2) the rights of tenants occupying the Property pursuant to Leases approved by the Lender, and (3) the Permitted Encumbrances.

(b) No Other Identity

The Borrower represents and warrants that the Borrower has not used or operated under any other name or identity for at least five (5) years. The Borrower covenants and agrees that Borrower will furnish Lender with notice of any change in its name, form of organization, or state of organization within thirty (30) days prior to the effective date qf any such change.

(c) Location of Equipment

All Equipment is located upon the Land.

(d) Removal of Goods

The Bonower will not remove or permit to he removed any item included in the Goods from the Land, unless the same is replaced immediately with unencumbered Goods (1) of a quality and value equal or superior to that which it replaces and (2) which is located on the Land. All such replacements, renewals, and additions shall become and be immediately subject to the security interest of this Deed of Trust.

(e) Proceeds

The Borrower may, without the Lender’s prior written consent, dispose of Goods in the ordinary course of business, provided that, following the disposition, the perfection of the Lender’s security interest in the Proceeds of the disposition will continue under $9-315 (d) of the UCC. The Borrower shall not, without the Lender’s prior written consent, dispose of any Personal Property in any other manner, except in compliance with Paragraph (d) of this Subsection 22.6.

22.7 FIXTURE FILING

This Deed of Trust constitutes a financing statement filed as a fixture filing in the Official Records of the Register of Deeds of Mecklenburg County, North Carolina, with respect to any and all fixtures comprising Property. The “debtor” is Braemar Housing Limited Partnership, a limited partnership organized under Ohio law; the “secured party” is Transamerica Occidental Life Insurance Company, an Iowa corporation; the collateral is as described in Subsection 22.1 above and the granting clause of this Deed of Trust; and the addresses of the debtor and secured party are the addresses stated in Subsection 26.13 of this Deed of Trust for Notices to such parties. The organizational identification number of the debtor is LP13929. The owner of record of the Real Property is Braemar Housing Limited Partnership.

23. ENVIRONMENTAL MATTERS

23.1 REPRESENTATIONS

The Borrower represents as follows:

(a) No Hazardous Substances

To the best of the Borrower’s knowledge as a duly diligent property owner, and except as disclosed in the ESA, no release of any Hazardous Substance has occurred on or about the Real Property in a quantity or at a concentration level that (i) violates any Environmental Law, or (ii) requires reporting to any regulatory authority or may result in any obligation to remediate under any Environmental Law.

(b) Compliance with Environmental Laws

The Real Property and its current use and presently anticipated uses comply with all Environmental Laws, including those requiring permits, licenses, authorizations, and other consents and approvals.

(c) No Actions or Proceedings

No governmental authority or agency has commenced any action, proceeding or investigation based on any suspected or actual violation of any Environmental Law on or about the Real Property. To the best of the Borrower’s knowledge as a duly diligent property owner, no such authority or agency has threatened to commence any such action, proceeding, or investigation.

23.2 ENVIROMNTAL COVENANTS

The Borrower covenants as follows:

(a) Compliance with Environmental Laws

The Borrower shall, and the Borrower shall cause all employees, agents, contractors, and tenants of the Borrower and any other persons present on or occupying the Real Property to, keep and maintain the Real Property in compliance with all Environmental Laws.

(b) Notices, Actions and Claims

The Borrower shall immediately advise the Lender in writing of (i) any notices from any governmental or quasi-governmental agency or authority of violation or potential violation of any Environmental Law received by the Borrower, (ii) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened pursuant to any Environmental Law, (iii) all claims made or threatened by any third party against the Borrower or the Real Property relating to damage, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Substances, and (iv) discovery by the Borrower of any occurrence or condition on any real property adjoining or in the vicinity of the Real Property that creates a foreseeable risk of contamination of the Real Property by or with Hazardous Substances.

23.3 THE LENDER’S RIGHT TO CONTROL CLAIMS

The Lender shall have the right (but not the obligation) to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Substances and to have its related and reasonable attorneys’ and consultants’ fees paid by the Borrower upon demand.

23.4 INDEMNIFICATION

The Borrower shall be solely responsible for, and shall indemnify, defend, and hold harmless the Lender, the Trustee, and their respective directors, officers, employees, agents, successors and assigns, from and against, any claim, judgment, loss, damage, demand, cost, expense or liability of whatever kind or nature, known or unknown, contingent or otherwise, directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, disposal, or presence (whether prior to or after the date of this Deed of Trust) of Hazardous Substances on, in, under or about the Real Property (whether by the Borrower, a predecessor in title, any tenant, or any employees, agents, contractor or subcontractors of any of the foregoing or any third persons at any time occupying or present on the Real Property), including: (i) personal injury; ii) death; (iii) damage to property; (iv) all consequential damages; (v) the cost of any required or necessary repair, cleanup or detoxification of the Real Property, including the soil and ground water thereof, and the preparation and implementation of any closure, remedial or other required plans; (vi) damage to any natural resources; and (vii) all reasonable costs and expenses incurred by the Lender or the Trustee in connection with clauses (i) through (vi), including reasonable attorneys’ and consultants’ fees; provided. however, that nothing contained in this Section shall be deemed to preclude the Borrower from seeking indemnification from, or otherwise proceeding against, any third party including any tenant or predecessor in title to the Real Property, and further provided that this indemnification will not extend to matters caused by the Lender’s gross negligence or willful misconduct, or arising from a release of Hazardous Substances which occurs after the Lender has taken possession of the Real Property, so long as the Borrower has not caused the release through any act or omission. The covenants, agreements, and indemnities set forth in this Section shall be binding upon the Borrower and its heirs, personal representatives, successors and assigns, and shall survive repayment of the Indebtedness, foreclosure of the Real Property, and the Borrower’s granting of a deed to the Real Property. Payment shall not be a condition precedent to this indemnity. Any costs or expenses incurred by the Lender or the Trustee for which the Borrower is responsible or for which the Borrower has indemnified the Lender shall be paid to the Lender on demand, with interest at the Default Rate from the date incurred by the Lender until paid in full, and shall be secured by this Deed of Tmst. Without the prior written consent of the Lender, the Borrower shall not enter into any settlement agreement, consent decree, or other compromise in respect to any claims relating to Hazardous Substances. The Lender agrees that it shall not unreasonably delay its consideration of any written request for its consent to any such settlement agreement, consent decree, or other compromise once all information, reports, studies, audits, and other documentation have been submitted to the Lender.

23.5 ENVIRONMENTAL AUDITS

If a Default exists, or at any time the Lender has reason to believe that a release of Hazardous Substances may have occurred or may be likely to occur, the Lender may require that the Borrower retain, or the Lender may retain directly, at the sole cost and expense of the Borrower, a licensed geologist, industrial hygienist or an environmental consultant acceptable to the Lender to conduct an environmental assessment or audit of the Real Property. In the event that the Lender makes a reasonable determination of the need for an environmental assessment or audit, the Lender shall inform the Borrower in writing that such a determination has been made and, if requested to do so by the Borrower, give the Borrower a written explanation of that determination before the assessment or audit is conducted. The Borrower shall afford any person conducting an environmental assessment or audit access to the Real Property and all materials reasonably requested. The Borrower shall pay on demand the cost and expenses of any environmental consultant engaged by the Lender under this Subsection. The Borrower shall, at the Lender’s request and at the Borrower’s sole cost and expense, take such investigative and remedial measures the Lender determines to be necessary to address any condition discovered by the assessment or audit so that (i) the Real Property shall be in compliance with all Environmental Laws, (ii) the condition of the Real Property shall not constitute any identifiable risk to human health or to the environment, and (iii) the value of the Real Property shall not be affected by the presence of Hazardous Substances.

24. CONCERNING THE TRUSTEE

The Trustee will not be liable for any error of judgment or act, or be otherwise responsible or accountable under any circumstances. If the Trustee or anyone acting by virtue of the Trustee’s powers enters the Real Property, the Trustee will not be personally liable for debts contracted or for liability or damages incurred in the management or operation of the Real Property. The Trustee will have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by the Trustee or believed by the Trustee in good faith to be genuine. The Trustee will be entitled to reimbursement from the Borrower for expenses actually incurred by the Trustee in the performance of the Trustee’s duties and to reasonable compensation for services rendered following Default, which, in the event of a nonjudicial foreclosure sale, shall not exceed five percent (5%) of the gross proceeds of the sale. The Borrower shall, from time to time, save and hold the Trustee harmless from and against any and ail loss, cost, liability, damage and expense whatsoever incurred by the Trustee in the performance of the Trustee’s duties.

24.2 RETENTION OF MONEY

All money received by the Trustee must, until used or applied, be held in trust for the purposes for which it was received, but need not be segregated in any manner from any other money (except to the extent required by law) and the Trustee will have no liability for interest on any money received.

24.3 SUCCESSOR TRUSTEES

The Trustee may resign by giving notice of such resignation in writing to the Lender. If the Trustee dies, resigns or becomes disqualified from acting in the execution of this Trust or fails or refuses to exercise the same when requested by the Lender so to do or if for any reason and without cause the Lender prefers to appoint a substitute trustee to act instead of the original Trustee, or any prior successor or substitute trustee, the Lender will have full power to appoint a substitute trustee and, if preferred, several substitute trustees in succession who shall succeed to all the estates, rights, powers and duties of the Trustee. Any new Trustee appointed will, without any further act, deed or conveyance, become vested with all the estates, properties, rights, powers and trusts of the Trustee’s predecessor. Upon the written request of the Lender or of any successor trustee, the former Trustee shall execute and deliver an instrument transferring to such successor Trustee all the estates, properties, rights, powers and trusts of the former Trustee, and shall duly assign, transfer and deliver any of the property and money held by the former Trustee to the successor Trustee so appointed in the former Trustee’s place.

24.5 PERFORMANCE OF DUTIES BY AGENTS

The Trustee may authorize one or more parties to act on the Trustee’s behalf to perform the Trustee’s ministerial functions, including, without limitation, the transmittal and posting of any notices.

25. SECONDARY MARKET

25.1 DISSEMINATION OF INFORMATION

In connection with any transfer of the Loan, the Lender may forward all documents and information that the Lender deems necessary or desirable concerning the Loan, including the financial statements of any Obligor, and such other information as may be reasonably related to the Obligors, the Property or the Leases to any:

(a) transferee or prospective transferee of the Loan;
(b) Rating Agency rating the Loan, a Participation, or Securities; or

(c) purchaser, transferee, assignee, servicer, participant, investor in any securitization and each prospective investor and the advisor of each of he foregoing, all documents and information which Lender now has or may hereafter acquire relating to the Loan, to any Obligor and to the Real Property, as Lender determines necessary or desirable.

The Borrower irrevocably waives any and all rights it may have under applicable Legal Requirements to prohibit such disclosure, including any right of privacy.

25.2 COOPERATION

The Borrower, any guarantor and any Carveout Obligor agree to cooperate with the Lender in connection with any transfer of the Loan or any Participation or Securities. The Borrower agrees to provide to the Lender or to any persons to whom the Lender may disseminate such information, at the Lender’s request, financial statements of Obligors, an estoppel certificate and such other documents as may be reasonably related to the Obligors, the Property, or the Leases

25.3 ADDTIONAL FINANCIAL INFORMATION

If a decision is made to include the Loan in a Securitization and the amount of the Loan would exceed 20% of the amount estimated in good faith to be raised in the offering, the Borrower agrees to provide, to the extent required by SEC Regulation S-X Rule 3-14, and to the extent not previously supplied to Lender, financial statements for the Real Property in respect of the three years prior to the Securitization. If the amount of the Loan would exceed 10% (but not 20%) of the amount estimated in good faith to be raised by the offering, the Borrower agrees to provide such additional property-related financial information as the Lender may request in order to meet then-applicable SEC rules in connection with the contemplated manner of the offering.

25.4 RESERVES/ESCROWS

If Participations are granted or Securities issued in connection with the Loan, all finds held by the Lender in escrow or as reserves in accordance with the Loan Documents may, at the Lender’s discretion, be deposited in “eligible accounts” at “eligible institutions” and invested in “permitted investments” as then defined and required by the Rating Agencies.

26. MISCELLANEOUS

26.1 SUCCESSORS AND ASSIGNS

All of the terms of the Loan Documents shall apply to, be binding upon and inure to the benefit of the heirs, personal representatives, successors and assigns of the Obligors, or to the holder of the Note, as the case may be.

26.2 SURVIVAL OF OBLIGATIONS

Each and all of the Obligations shall continue in full force and effect until the latest of (a) the date the Indebtedness has been paid in full and the Obligations have been performed and satisfied in full, (b) the last date permitted by law for bringing any claim or action with respect to which the Lender may seek payment or indemnification in connection with the Loan Documents, and (c) the date on which any claim or action for which the Lender seeks payment or indemnification is fully and finally resolved and, if applicable, any compromise thereof ofjudgment or award thereon is paid in fill.

26.3 FURTHER ASSURANCES

The Borrower, upon the request of the Lender or the Trustee, shall complete, execute, acknowledge, deliver and record or file such further instruments and do such further acts as may be necessary to cany out more effectively the purposes of this Deed of Trust, to subject any property intended to be covered by this Deed of Trust to the liens and security interests it creates, to place third parties on notice of those liens and security interests, or to correct any defects which may be found in any Loan Document.

26.4 RIGHT OF INSPECTION

The Lender shall have the right from time to time, upon reasonable advance notice to the Borrower, to enter onto the Real Property for the purpose of inspecting and reporting on its physical condition, tenancy and operations.

26.5 EXPENSE INDEMNIFICATION

The Borrower shall pay all filing and recording fees, documentary stamps, intangible taxes, and all expenses incident to the execution and acknowledgment of this Deed of Trust, the Note or any of the other Loan Documents, any supplements, amendments, renewals or extensions of any of them, or any instrument entered into under Subsection 26.3. The Borrower shall pay or reimburse the Lender, upon demand, for all costs and expenses, including appraisal and reappraisal costs of the Property and reasonable attorneys’ and legal assistants’ fees, which the Lender may incur in connection with enforcement proceedings under the Note, this Deed of Trust, or any of the other Loan Documents (including all fees and costs incurred in enforcing or protecting the Note, this Deed of Trust, or any of the other Loan Documents in any bankruptcy proceeding), and attorneys’ and legal assistants’ fees incurred by the Lender in any other suit, action, legal proceeding or dispute of any kind in which the Lender is made a party or appears as party plaintiff or defendant, affecting the Indebtedness, the Note, this Deed of Trust, any of the other Loan Documents, or the Property, or required to protect or sustain the lien of this Deed of Trust. The Borrower shall be obligated to pay (or to reimburse the Lender) for such fees, costs and expenses and shall indemnify and hold the Lender and the Trustee harmless from and against any and all loss, cost, expense, liability, damage and claims and causes of action, including attorneys’ fees, incurred or accruing by reason of the Borrower’s failure to promptly repay any such fees, costs and expenses. If any suit or action is brought to enforce or interpret any of the terms of this Deed of Trust (including any effort to modify or vacate any automatic stay or injunction, any trial, any appeal, any petition for review or any bankruptcy proceeding), the Lender shall be entitled to recover all expenses reasonably incurred in preparation for or during the suit or action or in connection with any appeal of the related decision, whether or not taxable as costs. Such expenses include reasonable attorneys’ fees, witness fees (expert or othenvise), deposition costs, copying charges and other expenses. Whether or not any court action is involved, all reasonable expenses, including the costs of searching records, obtaining title reports, appraisals, environmental assessments, surveying costs, title insurance premiums, trustee fees, and other reasonable attorneys’ fees, incurred by the Lender that are necessary at any time in the Lender’s opinion for the protection of its interest or enforcement of its rights shall become a part of the Indebtedness payable on demand and shall bear interest from the date of expenditure until repaid at the interest rate as provided in the Note.

26.6 GENERAL INDEMNIFICATION

The Borrower shall indemnify, defend and hold the Lender harmless against: (i) any and all claims for brokerage, leasing, finder’s or similar fees which may be made relating to the Real Property or the Indebtedness and (ii) any and all liability, obligations, losses, damages, penalties, claims, actions, suits, costs and expenses (including the Lender’s reasonable attorneys’ fees, together with reasonable appellate counsel fees, if any) of whatever kind or nature which may he asserted against, imposed on or incurred by the Lender in connection with the Indebtedness, this Deed of Trust, the Real Property or any part thereof, or the operation, maintenance and/or use thereof, or the exercise by the Lender of any rights or remedies granted to it under this Deed of Trust or pursuant to applicable law; provided, however, that nothing herein shall be construed to obligate the Borrower to indemnify, defend and hold harmless the Lender from and against any of the foregoing which is imposed on or incurred by the Lender by reason of the Lender’s willful misconduct or gross negligence.

26.7 RECORDING AND FILING

The Borrower shall cause this Deed of Trust and all amendments, supplements, and substitutions to be recorded, filed, re-recorded and re-filed in such manner and in such places as the Lender may reasonably request. The Borrower will pay all recording filing, re-recording and re-filing taxes, fees and other charges.

26.8 NO WAIVER

No deliberate or unintentional failure by the Lender to require strict performance by the Borrower of any Obligation shall be deemed a waiver, and the Lender shall have the right at any time to require strict performance by the Borrower of any Obligation.

26.9 COVENANTS RUNNING WITH THE LAND

All Obligations are intended by the parties to he and shall be construed as covenants running with the Land.

26.10 SEVERABILITY

The Loan Documents are intended to be performed in accordance with, and only to the extent permitted by, all applicable Legal Requirements. Any provision of the Loan Documents that is prohibited or unenforceable in any jurisdiction shall nevertheless be construed and given effect to the extent possible. The invalidity or unenforceability of any provision in a particular jurisdiction shall neither invalidate nor render unenforceable any other provision of the Loan Documents in that jurisdiction, and shall not affect the validity or enforceability of that provision in any other jurisdiction. If a provision is held to be invalid or unenforceable as to a particular person or under a particular circumstance, it shall nevertheless he presumed valid and enforceable as to others, or under other circumstances.

26.11 USURY

The parties intend that no provision of the Note or the Loan Documents he interpreted, construed, applied, or enforced so as to permit or require the payment or collection of interest in excess of the Maximum Permitted Rate. In this regard, the Borrower and the Lender each stipulate and agree that it is their common and overriding intent to contract in strict compliance with applicable usury laws. Accordingly, none of the terms of this Deed of Trust, the Note or any of the other Loan Documents shalt ever be construed to create a contract to pay, as consideration for the use, forbearance or detention of money, interest at a rate in excess of the Maximum Permitted Rate, and the Borrower shall never be liable for interest in excess of the Maximum Permitted Rate. Therefore, (a) in the event that the Indebtedness and Obligations are prepaid or the maturity of the Indebtedness and Obligations is accelerated by reason of an election by the Lender, unearned interest shall be canceled and, if theretofore paid, shall either be refunded to the Borrower or credited on the Indebtedness, as the Lender may elect; (b) the aggregate of all interest and other charges constituting interest under applicable laws and contracted for, chargeable or receivable under the Note and the other Loan Documents or otherwise in connection with the transaction contemplated thereby shall never exceed the maximum amount of interest, nor produce a rate in excess of the Maximum Permitted Rate; and (c) if any excess interest is provided for or received, it shall be deemed a mistake, and the same shall, at the option of the Lender, either be refunded to the Borrower or credited on the unpaid principal amount (if any), and the Indebtedness shall be automatically reformed so as to permit only the collection of the interest at the Maximum Permitted Rate. Furthermore, if any provision of the Note or any of the other Loan Documents is interpreted, construed, applied, or enforced, in such a manner as to provide for interest in excess of the Maximum Permitted Rate, then the parties intend that such provision automatically shall be deemed reformed retroactively so as to require payment only of interest at the Maximum Permitted Rate. If, for any reason whatsoever, interest paid or received during the full term of the applicable Indebtedness produces a rate which exceeds the Maximum Permitted Rate, then the amount of such excess shall be deemed credited retroactively in reduction of the then outstanding principal amount of the Indebtedness, together with interest at such Maximum Permitted Rate. The Lender shall credit against the principal of such Indebtedness (or, if such Indebtedness shall have been paid in full, shall refund to the payor of such interest) such portion of said interest as shall be necessary to cause the interest paid to produce a rate equal to the Maximum Permitted Rate. All sums paid or agreed to be paid to the Lender for the use, forbearance or detention of money shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in equal parts throughout the full term of the applicable Indebtedness, so that the interest rate is uniform throughout the full term of such Indebtedness. In connection with all calculations to determine the Maximum Permitted Rate, the parties intend that all charges be excluded to the extent they are properly excludable under applicable usury laws, as they from time to time are determined to apply to this transaction. The provisions of this Section shall control all agreements, whether now or hereafter existing and whether written or oral, between the Borrower and the Lender.

26.12 ENTIRE AGREEMENT

The Loan Documents contain the entire agreements between the parties relating to the financing of the Real Properly, and all prior agreements which are not contained in the Loan Documents, other than the Environmental Indemnity Agreement, are terminated. The Loan Documents represent the fmal agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. The Loan Documents may be amended, revised, waived, discharged, released or terminated only by a written instrument or instruments executed by the party against whom enforcement of the amendment, revision, waiver, discharge, release or termination is asserted. Any alleged amendment, revision, waiver, discharge, release or termination that is not so documented shall be null and void.

26.1 3 NOTICES

In order for any demand, consent, approval or other communication to be effective under the terms of this Deed of Trust, “Notice” must be provided under the terms of this Subsection. All Notices must be in writing. Notices may be (a) delivered by hand, (b) transmitted by facsimile (with a duplicate copy sent by first class mail, postage prepaid), (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by reputable overnight courier service, delivery charges prepaid. Notices shall be addressed as set forth below:

If to the Lender:

Transamerica Occidental Life Insurance Company
C/O AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-5443
Attn: Mortgage Loan Department
Reference: Loan #89441
Fax Number: (3 19) 369-2277

If to the Borrower:

Braemar Housing Limited Partnership
c/o Levin Development
3 103 Camden Drive
Troy, Michigan 48084
Fax Number: (248) 588-4455

with a copy of any Notice of default or acceleration to:

Kenneth F. Silver
Hertz, Schram & Saretsky, P.C.
1760 South Telegraph Road, Suite 300
Bloomfield Hills, Michigan 48302
Fax Number: (248) 335-3346

If to the Trustee:

J. Lindsay Stradley, Jr.
945 East Paces Ferry Road, Suite 2700
Atlanta, Georgia 30326-1380
Fax Number: (404) 923-9099

Notices delivered by hand or by overnight courier shall be deemed given when actually received or when refused by their intended recipient. Notices sent by facsimile will be deemed delivered when a legible copy has been received (provided receipt has been verified by telephone confirmation or one of the other permitted means of giving Notices under this Subsection). Mailed Notices shall be deemed given on the date of the first attempted delivery (whether or not actually received). The Lender, the Trustee or the Borrower may change its address for Notice by giving at least fifteen (15) Business Days’ prior Notice of such change to the other parties.

26.14 COUNTERPARTS

This Deed of Trust may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute but one instrument.

26.15 CHOICEOFLAW

This Deed of Trust shall be interpreted, construed, applied, and enforced according to, and will be governed by, the laws of North Carolina, without regard to any choice of law principle which, but for this provision, would require the application of the law of another jurisdiction and regardless of where executed or delivered, where payable or paid, where any cause of action accrues in connection with this transaction, where any action or other proceeding involving the Loan is instituted, or whether the laws of North Carolina otherwise would apply the laws of another jurisdiction.

26.1 6 FORUM SELECTION

The Borrower agrees that the sole and exclusive forum for the determination of any action relating to the validity and enforceability of the Note, this Deed of Trust and the other Loan Documents, and any other instruments securing the Note shall be either in an appropriate wurt of the State of North Carolina or the applicable United States District Court.

26.17 SOLE BENEFIT

This Deed of Trust and the other Loan Documents have been executed for the sole benefit of the Borrower, the Trustee, Guarantors and the Lender and the successors and assigns of the Lender. No other party shall have rights thereunder or be entitled to assume that the parties thereto will insist upon strict performance of their mutual obligations hereunder, any of which may be waived from time to time. Neither the Borrower nor Guarantors shall have any right to assign any of its rights under the Loan Documents to any party whatsoever.

26.18 RELEASE OF CLAIMS

To the fullest extent permitted by applicable laws, the Borrower hereby RELEASES, DISCHARGES and ACQUITS forever the Lender and the Trustee and their officers, directors, trustees, agents, employees and counsel (in each case, past, present or future) from any and all Claims existing as of the date hereof (or the date of actual execution hereof by the Borrower, if later). As used herein, the term “Claim” shall mean any and all liabilities, claims, defenses, demands, actions, causes of action, judgments, deficiencies, interest, liens, costs or expenses (including court costs, penalties, attorneys’ fees and disbursements, and amounts paid in settlement) of any kind and character whatsoever, including claims for usury, breach of contract, breach of commitment, negligent misrepresentation or failure to act in good faith, in each case whether now known or unknown, suspected or unsuspected, asserted or unasserted or primary or contingent, and whether arising out of written documents, unwritten undertakings, course of conduct, tort, violations of laws or regulations or otherwise.

26.19 NO PARTNERSHIP

Nothing contained in the Loan Documents is intended to create any partnership, joint venture or association between the Borrower and the Lender, or in any way make the Lender a co-principal with the Borrower with reference to the Property.

26.20 PAYOFF PROCEDURES

If the Borrower pays or causes to be paid to the Lender all of the Indebtedness, then the Trustee’s interest in the Real Property shall cease, and upon receipt by the Lender of such payment, the Lender shall release this Deed of Trust.

26.2 1 SURVIVAL OF COMMRMENT TERMS

The Commitment shall survive the execution of this Deed of Trust and the other Loan Documents. Any term of the Commitment that has been inadvertently omitted from the Loan Documents is hereby incorporated in this Deed of Trust by reference. If any term of the Commitment conflicts with a provision of this Deed of Trust that addresses the same subject, the terms of this Deed of Trust shall prevail. Any provision of the Commitment which specifically states that it shall survive the closing of the Loan shall so survive, and is hereby incorporated in this Deed of Trust by reference.

26.22 FUTURE ADVANCES

This Deed of Trust secures (a) all present and future loan disbursements made by the Lender under the Note, and (b) all other sums from time to time owing to the Lender under the Loan Documents. The amount of the present disbursement secured hereby is $10,000,000, and the maximum principal amount which may be secured hereby at any one time is $20,000,000. The time period within which such future disbursements are to be made is the period between the date of this Deed of Trust and the date which is ten (10) years from the date of this Deed of Trust. Disbursements secured hereby shall not be required to be evidenced by a “written instrument or notation” as described in Section 45-68 (2) of the North Carolina General Statutes, it being the intent of tbe parties that the requirements of Section 45-68 (2) for a “written instrument or notation” for each advance shall not be applicable to disbursements made under the Deed of Trust and Note.

26.23 INTERPRETATION

(a) Headings and General Application

The section, subsection, paragraph and subparagraph headings of this Deed of Trust are provided for convenience of reference only and shall in no way affect, modify or define, or be used in construing, the text of the sections, subsections, paragraphs or subparagraphs. If the text requires, words used in the singular shall be read as including the plural, and pronouns of any gender shall include all genders.

(b) Sole Discretion

The Lender may take any action or decide any matter under the terms of this Deed of Trust or of any other Loan Document (including any consent, approval, acceptance, option, election or authorization) in its sole and absolute discretion, for any reason or for no reason, unless the related Loan Document contains specific language to the contrary. Any approval or consent that the Lender might withhold may be conditioned in any way.

(c) Result of Negotiations

This Deed of Trust results from negotiations between the Borrower and the Lender and from their mutual efforts. Therefore, it shall be so construed, and not as though it had been prepared solely by the Lender.

(d) Reference to Particulars

The scope of a general statement made in this Deed of Trust or in any other Loan Document shall not be construed as having been reduced through the inclusion of references to particular items that would be included within the statement’s scope. Therefore, unless the relevant provision of a Loan Document contains specific language to the contrary, the term “include” shall mean “include, but shall not be limited to” and the term “including” shall mean “including, without limitation.”

26.24 JOINT AND SEVERAL LIABILITY

If there is more than one individual or entity executing this Deed of Trust as the Borrower, liability of such individuals and entities under this Deed of Trust shall be joint and several.

26.25 TIME OF ESSENCE

Time is of the essence of each and every covenant, condition and provision of this Deed of Trust to be performed by the Borrower.

26.26 RENEWAL, EXTENSION, MODIFICATION AND WAIVER

The Lender, at its option, may at any time renew or extend this Deed of Trust, the Note or any other Loan Document. The Lender may enter into a modification of any Loan Document or of the Environmental Indemnity Agreement without the consent of any person not a party to the document being modified. The Lender may waive any covenant or condition of any Loan Document or of the Environmental Indemnity Agreement, in whole or in part, at the request of any person then having an interest in the Property or in any way liable for any part of the Indebtedness. The Lender may take, release, or resort to any security for the Note and the Obligations and may release any party primarily or secondarily liable on any Loan Document or on the Environmental Indemnity Agreement, all without affecting any liability not expressly released in writing by the Lender.

26.27 CUMULATNREE MEDIES

Every right and remedy provided in this Deed of Trust shall be cumulative of every other right or remedy of the Lender, whether conferred by law or by grant or contract, and may be enforced concurrently with any such right or remedy. The acceptance of the performance of any obligation to cure any Default shall not he construed as a waiver of any rights with respect to any other past, present or future Default. No waiver in a particular instance of the requirement that any Obligation be performed shall be construed as a waiver with respect to any other Obligation or instance. Furthermore, the Borrower hereby waives any rights or remedies on account of any extensions of time, releases granted, or other dealings between the Lender and any subsequent owner of the Property as such activities
are contemplated or otherwise addressed in N.C. Gen. Stat. Sections 45-45.1 or any similar or subsequent law.

26.28 NO OBLIGATION TO MARSHAL ASSETS

No holder of any deed of trust, security interest or other encumbrance affecting all or any portion of the Real Property, which encumbrance is inferior to the title and security title of this Deed of Trust, shall have any right to require the Lender to marshal assets.

26.29 TRANSFER OF OWNERSHIP

The Lender may, without notice to the Borrower, deal with any person in whom ownership of any part of the Real Property has vested, without in any way vitiating or discharging the Borrower from liability for any of the Obligations.

IN WITNESS WHEREOF, the Borrower has caused this Deed of Trust to be duly executed under seal as of the date first above written.

BRAEMAR HOUSING LIMITED
PARTNERSHIP, an Ohio limited partnership

[SEAL]


By:	Treybum Housing, LLC, an Ohio
	limited liability company, its sole
	General Partner [SEAL]
	By:	LPS Investments, L.L.C., a Michigan limited liability company, its sole Managing Member [SEAL]
		By: /s/ Phillip I. Levin[SEAL]

		Phillip I. Levin, Manager

STATEOF Michigan

COUNTY OF Oakland

I, Shelly M. Rayment, Notary Public of the County and State aforesaid, do hereby certify that Phillip I. Levin personally came before me this day and after being duly sworn, said that he is the Manager of LPS Investments, L.L.C., a Michigan limited liability company, which is the sole Managing Member of Treyburn Housing, LLC, an Ohio limited partnership, which is the sole General Partner of Braemar Housing Limited Partnership, an Ohio limited partnership, and that this instrument was signed and sealed by him, on behalf of the aforementioned limited liability companies and limited partnership by their authority duly given, and further acknowledged this instrument to be the act and deed of the aforementioned limited liability companies and limited partnership.

WITNESS my hand and official stamp or seal, this 25 day of May , 2005.

_/s/ Shelly M. Rayment

Notary Public

My Commission Expires:

[SHELLY M. RAYMENT

NOTARY PUBLIC STATE OF MICHIGAN GENESSEE COUNTY
ACTING IN:
OAKLAND COUNTY
MY COMMISSION EXP. JUNE 27, 2005]

EXHIBIT A

THE LAND

That certain tract located in Long Creek Township, Mecklenburg County, North Carolina, and being more particularly described as follows:

Beginning at a found #4 rebar along the southern right-of-way line of Vance Road (SR 21 13), a 60’ public right-of-way, a common comer with Russell Kakaley (Deed Book 4263 Page 175); thence with the west line of Russell Kakaley the following three (3) courses: 1) S 37°41’42” W 188.44 feet to a found iron pipe; 2) S 24’01’37” W 445.09 feet to a found 314” square pipe; 3) S 27^o46’39” W 11 1.27 feet to a found #4 rebar, a common comer with Russell Kakaley and Floreine F. Burt Family Limited Partnership (Deed Book 10993 Page 139); thence with the west line of Floreine F. Burt Family Limited Partnership the following two (2) courses: 1) S 03“3 1’39” E 173.20 feet to a found #4 rebar; 2) S 13°36’32” E 110.76 feet to a set #4 rebar, a common comer with area dedicated to Mecklenburg County Greenways from Braemar Housing Limited Partnership (Map Book 34 Page 312); thence along the north line of area dedicated to Mecklenburg County Greenways from Braemar Housing Limited Partnership the following three (3) courses: 1) S 39’25’26” W 93.98 feet to a set #4 rebar; 2) S 83°51’31” W 84.36 feet to a set #4 rebar; 3) S 55°59’02” W 88.93 feet to a found #4 rebar along the east line of Towne Meadows at Treyburn — Phase 2 (Map Book 29 Page 123); thence with the east line of Towne Meadows at Treyburn — Phase 2 the following five (5) courses: 1) N 20°06’40” W 33.87 feet to a found #5 rebar; 2) N 28°34’49” W 62.39 feet to a found #4 rebar; 3) N 77’53’39” W, passing a found #4 rebar at 107.42 feet, a total distance of 128.43 feet to a found #4 rebar; 4) N 2X028’1 1” W 172.88 feet to a found #4 rebar; 5) N 48°44’20^” W, passing a found #4 rebar at 155.83 feet, a total distance of 241.22 feet to a found #4 rebar along the southeastem right-of-way line Treyburn Drive (Map Book 26 Page 680), a public right-of-way (width varies); thence with the southeastern right-of-way line of Treyburn Drive the following eight (8) courses: 1) N 35^o23’59” E 398.48 feet to a set #4 rebar; 2) with the arc of a circular curve to the right having a radius of 570.00 feet, an arc length of 339.85 feet and a chord bearing and distance of N 52^o29’36” E 334.84 feet to a set #4 rebar; 3) with the arc of a circular curve to the right having a radius of 562.50 feet, an arc length of 50.60 feet and a chord bearing and distance of N 75°18’27” E 50.59 feet to a set #4 rebar; 4) N 77°53’05” E 61.18 feet to a set #4 rebar; 5) with the arc of a circular curve to the left having a radius of 1010.00 feet, an arc length of 51.03 feet and a chord bearing and distance of N 76°09’03” E 51.02 feet to a set masonry nail in sidewalk; 6) N 74°42’12” E 48.10 feet to a set #4 rebar; 7) with the arc of a circular curve to the left having a radius of 737.50 feet, an arc length of 219.55 feet and a chord bearing and distance of N 66°10’30” E 218.74 feet to a set #4 rebar; 8) with the arc of a circular curve to the right having a radius of 35.00 feet, an arc length of 54.85 feet and a chord bearing and distance of S 77^o27’32” E 49.41 feet to a set #4 rebar along the southern right of way line of the aforesaid Vance Road; thence with the southern right of way of Vance Road along the arc of a circular curve to the left having a radius of 666.62 feet, an arc length of 18.55 feet and a chord bearing and distance of S 33°21’40” E 18.55 feet to the Point of Beginning, containing 10.922 acres and being the same property conveyed to Braemar Housing Limited Partnership in Deed Book 10139 Page 209 and recorded in Mecklenburg County Register of Deeds.

Prepared by, and after recording return
to:
J. Lindsay Stradley, Jr.
Epstein Becker & Green, P.C.
945 E. Paces Ferry Road, Suite 2700
Atlanta, Georgia 30326

SPACE ABOVE THIS LINE FOR RECORDER 5 USE

Absolute Assignment of Leases and Rents

This Absolute Assignment of Leases and Rents (this “Assignment”) is made as of this 25th day of
May, 2005, by BRAEMAR HOUSING LIMITED PARTNERSHIP, an Ohio limited partnership
(the “Borrower”), whose address is 3103 Carnden Drive, Troy, Michigan 48084, in favor of
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, an Iowa corporation (the
“Lender”), whose address is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Linn County, Iowa 52499-5443. The definitions of capitalized terms used in this Assignment and not defined above or in the recitals of Section 1 may be found in Section 2 below.

1. RECITALS

A. The Lender has advanced funds (the “Loan”) to the Borrower, evidenced by the Secured Promissory Note of the Borrower, dated as of even date herewith and payable to the order of the Lender, in the principal amount of $10,000,000 (together with any extensions, renewals, amendments, or modifications, the “Note”), secured in part by that certain Deed of Trust, Security Agreement and Fixture Filing, dated of even date herewith and filed for record in the official records of Mecklenhurg County, North Carolina (together with any extensions, supplements, modifications, amendments, and consolidations thereof, collectively referred to herein as the “Deed of Trust”), and encumbering that certain land situated in Mecklenburg County, North Carolina, described on Exhibit A attached hereto and incorporated herein (the “Land”) and the Improvements (as defined below) located on the Land. The Land and the Improvements, collectively, are the “Real Property.”

B. The Lender has required the Borrower, as a condition to the Lender making the Loan, to make the assignments and grant the rights set forth in this Assignment. Absolute Assignment of Leases and Rents.

C. The Lender desires to grant the Borrower a conditional license to collect and use the income derived from the Real Property and to take certain leasing actions in the ordinary course of business.

2. DEFINITIONS

"Borrower Affiliate” means an entity that is controlled by, or is under common control with, the Borrower.
“Business Day” means any day when state and federal banks are open for business in Cedar Rapids, Iowa.
“Default” shall have the definition set forth in the Deed of Trust.
“Fixtures” shall have the definition set forth in the Deed of Trust.
“Improvements” shall have the definition set forth in the Deed of Trust.
“Leases” means all of the Borrower’s right, title and interest, now or in the future, under leases or other agreements, written or oral, conferring any tenancy or right to occupy, possess or use any portion of the Real Property (together with all extensions, renewals and modifications of Leases), all guaranties of or letters of credit securing the tenants’ performance of obligations under Leases, the Borrower’s interest in any further leases, subleases, lettings or agreements (including subleases and tenancies following attomnent) upon or covering use or occupancy of all or any part of the Real Property, and all other agreements conferring any right to collect Rents, including the Borrower’s rights to cancel, modify, terminate, or accept the surrender of the Leases, to remove and evict the tenants under any Lease, or to increase or reduce Rents.
“Leasing Actions” means all executions, modifications, terminations, and extensions of Leases, all grants of purchase options or rights of first refusal, and all other actions taken by the Borrower in exercising its rights as landlord under the Leases.
“Loan Documents” means all documents entered into in connection with the making and acceptance of the Loan, with the exception of the Environmental Indemnity Agreement (the “Environmental Indemnity Agreement”) entered into as of even date herewith in support of the Loan.
“New Owner” means (a) the purchaser at a trustee’s sale of the Real Property, whether the purchaser is the Lender or a third party, or (b) the grantee of a deed given in lieu of foreclosure.
“Notice” means a notice delivered in accordance with Section 17.
“Obligations” means all of the obligations required to be performed under the terms and conditions of any of the Loan Documents by the Borrower or by any other person, except for obligations that are expressly stated to be unsecured under the terms of another Loan Document.
“Rents” means all rents, income, receipts, royalties, issues and profits and other benefits paid or payable for using, leasing, licensing, possessing, operating from or in, residing in, selling, mining, extracting minerals from, or otherwise enjoying the Real Property, whether presently existing or arising in the future, to which the Borrower may now or hereafter become entitled or may demand or claim, including security deposits, amounts drawn under letters of credit securing tenant obligations, minimum rents, common area maintenance charges, additional rents, parking revenues, deficiency rents, termination payments, space contraction payments, damages following default under a Lease, premiums payable by tenants upon their exercise of cancellation privileges, proceeds from lease guarantees, proceeds payable under any policy of insurance covering loss of rents resulting from untenantability caused by destruction or damage to the Real Property, all rights and claims of any kind which the Borrower has or may in the future have against the tenants under the Leases, lease guarantors, or any subtenants and other occupants of the Real Property; all proceeds of any sale of the Real Property in violation of the Loan Documents, any W r e award granted the Borrower in any court proceeding involving any tenant in any bankruptcy, insolvency, or reorganization proceedings in any state or federal court; and any and all payments made by any tenant in lieu of rent.

3. ASSIGNMENT

For value received, and as an inducement to the Lender to advance the proceeds of the Loan to or for the benefit of the Borrower, the Borrower does hereby agree as set forth below and grant, bargain, sell, transfer, set over, deliver, and absolutely, unconditionally and irrevocably assign unto the Lender the Lewes and the Rents, to have and to hold the same unto the Lender and unto its successors and assigns, forever, subject to the terms of Sections 4,5 and 26 below.
This Assignment is made in support of the Loan and in support of the payment, observance, performance and discharge of all obligations, conditions, covenants, and warranties contained in the Deed of Trust and the other Loan Documents. This Assignment is and shall be primary and on parity with the lien on the real estate conveyed by the Deed of Trust.
The Lender and the Borrower intend for this Assignment to be a present and absolute assignment of the Leases and the Rents. However, if future legislation shall provide, or a court of competent jurisdiction shall decree, that an assignment of leases and rents made in support of a commercial mortgage loan such as the Loan may not be absolute, then this Assignment shall be deemed amended retroactively to the minimum extent necessary to achieve compliance with applicable legal requirements.

4. LICENSE TO COLLECT AND USE THE RENTS

The Lender grants to the Borrower a conditional license, subject to the Lender’s rights under Section 10 below, to collect the Rents, other than those Rents paid more than one month in advance. The Borrower may use the Rents so collected for any lawful purpose which is consistent with the Borrower’s ongoing performance of its obligations under the Loan Documents, provided (a) no Default then exists and (b) the Borrower does not intend to cause, and has no reason to expect the occurrence of, any Default in respect of the Obligations due to be performed in the following calendar month.
Any Rents excluded from the scope of this license shall be trust funds for the benefit of the Lender. The Lender may require that such Rents be deposited in a reserve fund to serve as additional security for the Loan, or to be used to benefit the Real Property, under such terms and conditions as the Lender may determine in the exercise of its sole and absolute discretion.

5. LICENSE TO TAKE CERTAIN LEASING ACTIONS

5.1 GRANT OF LICENSE

The Lender grants to the Borrower a conditional license, subject to the Lender’s rights under this Assignment, to take all Leasing Actions, including the modification or termination of Leases of apartment units in the ordinary course of business, provided such Leasing Actions are not excluded from the swpe of the Borrower’s license under Subsection 5.2 and are taken in strict compliance with the requirements of this Section.

5.2 EXCLUDED LEASING ACTIONS

The license granted by the Lender under this Section does not extend to the acceptance of any Rent delivered more than one month in advance of the related period (other than a security deposit), to the grant of any option to purchase any part of the Real Property or of first refusal, or to any Leasing Action that results in a Lease:

(i) that is not a Lease of an apartment unit in the ordinary course of business;

(ii) at less than reasonable market rent during its original term or any extension period;

(iii) granting the tenant ownership rights in any Fixtures;

(iv) providing for the payment of rent more than one month in advance; or

(v) that entails alterations to the structural elements of any Improvement or would materially involve the principal mechanical, electrical, or other building systems of any Improvement.

5.2 STANDARD PROVISIONS IN FUTURE LEASES

All new Leases entered into by the Borrower pursuant to the license granted in this Section shall be in a form of lease previously approved in writing by the Lender, without material modification thereof, or shall contain provisions that:

(a) obligate the tenant, in the event of foreclosure, to attorn to the New Owner as successor landlord under the related Lease;

(b) grant the Lender the right to subordinate the lien of the Deed of Trust to the Lease by filing a notice of subordination with the Register of Deeds of Mecklenburg County, North Carolina, at any time before the Lender conducts a foreclosure sale pursuant to the Deed of Trust;

(c) obligate the tenant under a Lease to which the lien of the Deed of Trust has been so subordinated to attorn to a New Owner;

(d) relieve the New Owner from responsibility for accrued liabilities of the landlord under the terms of a Lease;

(e) relieve the New Owner from the obligation to cure existing defaults, other than defaults of a continuing nature of which the Lender has received Notice, and in respect of which tenant has afforded the Lender a reasonable cure period following such Notice;

(f) relieve the New Owner from the obligation to return any security deposit not actually received by the Lender or the other New Owner;

(g) provide that the New Owner shall not be bound by Rents paid more than one month in advance, or by Leasing Actions taken by the landlord, unless such Rents have been paid, or such Leasing Actions have been taken, in compliance with the terms of this Assignment;

(h) provide that the tenant shall provide the Lender with Notice of landlord default and a reasonable opportunity to cure the default before exercising any right to terminate the Lease;

(i) provide that the tenant is obligated to repair any damages incidental to the removal of trade fixtures, office furniture or office equipment owned by the tenant; and

(j) provide that the tenant shall be authorized to pay Rent to the Lender upon notice from the Lender that the Borrower’s license to collect the Rents has been revoked.

6. LENDER’S APPROVAL OF LEASING ACTIONS

Leasing Actions that the Borrower is not expressly licensed to take under Section 5 require the Lender’s advance written approval. The Borrower shall request such approval in writing, presenting the terms of the proposed Leasing Action in summary form. The request shall be accompanied by (i) a copy of the form of lease, lease amendment, or other written instrument that is to effect the proposed Leasing Action, and (ii) any financial materials (such as credit reports, tenant financial statements, or retail tenant sales information) used by the Borrower in arriving at its decision to take the proposed Leasing Action. The Lender may within ten (10) Business Days of its receipt of the Borrower’s request, and in the exercise of its reasonable discretion, request any additional documentation required to permit its analysis of the proposed Leasing Action. Unless the Lender declines a request for its approval of a Leasing Action by Notice within ten (10) Business Days of its receipt, together with all documentation required under this Section, the Lender shall be deemed to have approved the request.

7. BORROWER’S REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants as follows:

7.1 THE BORROWER’S EXCLUSIVE RIGHT TO ASSIGN

The Borrower is the owner in fee simple absolute of the Real Property, has good title to the Leases and Rents and has good right to assign them to Lender. No other natural or legal person has any right, title or interest to the Borrower’s interest in the Leases and Rents.

7.2 NO LANDLORD DEFAULTS

The Borrower has duly and punctually performed all of the landlord’s obligations, covenants, conditions and warranties under the terms of the Leases.

7.3 NO TENANT DEFAULTS

To the Borrower’s best knowledge as a duly diligent property owner, no tenant under a Lease is in material default in the performance of its terms, except as disclosed in the rent roll delivered to the Lender in connection with the Loan, an aged receivables delinquency report delivered by the Borrower to the Lender in connection with the Loan, or an exhibit to the Closing Certificate of Borrower of even date herewith from the Borrower to the Lender.

7.4 NO PREVIOUS ASSIGNMENT IN FORCE

The Borrower has not previously sold, assigned, transferred, mortgaged, or pledged the Leases or the Rents except under documents that have been discharged and released in MI.

7.5 STATUS OF LEASES

To the best of the Borrower’s knowledge, the Leases delivered to the Lender in connection with the closing of the Loan are valid, unmodified (except pursuant to modifications that have been delivered to the Lender) and are in full force and effect.

7.6 STATUS OF FUTURE RENTS

No Rent that will accrue under a Lease has been waived, released, discounted, set off or otherwise discharged or compromised except rental concessions granted in the ordinary course of the business of operating a first-class apartment project.

7.7 NO RENT RECEIVED IN ADVANCE

The Borrower has not received any h d s or deposits from the tenant under any Lease in excess of one (1) month’s Rent, other than security deposits or advance rents in respect of periods of the rental term that have elapsed.

8. BORROWER’S COVENANTS

8.1 PERFORMANCE OF OBLIGATIONS

The Borrower shall observe, perform and discharge, duly and punctually, the Borrower’s obligations, covenants, conditions and warranties under the terms of the Note, the Deed of Trust, this Assignment, the other Loan Documents, and the Leases.

8.2 TENANT PERFORMANCE

The Borrower shall use commercially reasonable efforts to cause the tenants under the Leases to perform their obligations under the Leases.

8.3 LEASING ACTIONS

The Borrower shall take no Leasing Action without the Lender’s advance written approval, except as expressly permitted under the license granted to the Borrower under Section 5 of this Assignment.

8.4 ACTIONS AND PROCEEDINGS

The Borrower shall appear in and defend any action or proceeding arising under, or connected with the Leases or the obligations, duties or liabilities of the Borrower and the tenants under the Leases.

8.5 FURTHER ASSURANCES

The Borrower shall execute and deliver to the Lender from time to time such further assignments and instruments as the Lender reasonably may request in order to effectuate the intent of this Assignment.

8.6 NOTICES OF LANDLORD DEFAULT

If within any thirty (30)-day period the Borrower receives three written notices from any tenants asserting a material default by the landlord under a Lease, or advising the Borrower that a condition exists which may become a material default with the passage of time, the Borrower shall send a copy or memorandum of each such notice to the Lender.

8.7 RENTROLLS

If a Default has occurred, the Borrower shall, within ten (10) days after receipt of the Lender’s written request, furnish to the Lender a certificate of the Borrower setting forth the names of all tenants under the Leases, the terms of their respective Leases, the space occupied, the rents payable under the Leases, any security deposits paid, the dates through which any and all rents have been paid and any other information reasonably requested by the Lender.

8.8 NOTICE TO TENANTS

The Borrower agrees upon written request of the Lender following a Default, to notify the tenants under the Leases of this Assignment, to direct them in writing to send the Lender, simultaneously, copies of all notices of default that they serve on the Borrower, and to direct them, at the Lender’s request, to pay all future Rent directly to the Lender. The Rents and copies of such notices shall be sent to the Lender at such address as is specified by the Lender to tenants from time to time.

8.9 FUTURE ASSIGNMENTS

The Borrower shall not create or permit any lien, charge, or encumbrance of the Leases or of the Rents, and shall not pledge, transfer, or otherwise assign the Leases or the Rents unless at the Lender’s request, or unless otherwise agreed to by the Lender in writing.

8.10 CONSENT TO ASSIGNMENT OF TENANTS’ INTERESTS

The Borrower shall consent to neither an assignment of the tenant’s interest in any Lease nor to any tenant’s subletting all or any portion of the Real Property leased by it except to the extent such consent expressly may be required by the terms and conditions of Leases.

8.11 GENERAL SERVICE ADMINISTRATION LEASES

If at any time the Borrower shall execute any Lease with the General Services Administration or any other federal agency, the Borrower shall immediately (i) cause all of the conditions and provisions of the federal Assignment of Claims Act and the Assignment of Contracts Act to be complied with in full as additional security for the Obligations, and (ii) provide the Lender with the name, address and telephone number of the contracting officer and of the disbursement officer associated with such Lease.

9. NOTICE TO FUTURE TENANTS CONCERNING ATTORNMENT

By occupying any part of the Real Property under a Lease, each future tenant, at the option of the Lender or another New Owner, shall be deemed to have agreed to attorn to the New Owner as successor landlord, subject to the Lender’s or New Owner’s agreement not to disturb such tenant under its Lease so long as tenant is not in default thereunder. The recording of this Assignment is intended to impart notice to all future tenants of the foregoing provision of this Assignment. If the new Lease has been entered into in accordance with the terms of the license granted to the Borrower in this Assignment, the New Owner shall accept the tenant’s attornment and shall recognize the Lease as a direct lease between the New Owner and the tenant.

10. LENDER’S RIGHTS WON DEFAULT

10.1 REVOCATION OF LICENSES

Upon Default, the Lender may by Notice to the Borrower immediately terminate the Borrower’s licenses under either or both of Sections 4 and 5 of this Assignment, regardless of whether the Real Property or any other collateral adequately secures the Loan’s eventual repayment. Upon the termination of the Borrower’s license under Section 4, the Borrower shall immediately deliver to the Lender all Rents then in the Borrower’s possession, and all Rents then due or accruing thereafter shall be payable by tenants directly to the Lender. This Assignment shall constitute a direction to and full authority to any tenant of the Real Property, upon the Lender’s written request to pay all Rents to the Lender, without requiring the Lender to prove to the tenant the existence of Default. The Borrower agrees to deliver immediately to the Lender any Rents received by the Borrower after the revocation of the Borrower’s license under Section 4, and at the Lender’s written request, shall execute such further assignments to the Lender of any Lease as the Lender may in its sole judgment request. This Assignment is given in connection with the Loan and in support of the performance of the Borrower’s Obligations, and nothmg herein contained shall be construed as (a) constituting the Lender a “mortgagee-in-possession” of the Real Property or (b) an assumption by the Lender of the Borrower’s obligations as landlord under the Leases.

10.2 APPLICATION OF RENTS

The Lender shall apply Rents it collects as follows: (i) first, to the payment of late and other charges, if any, due and payable under the Loan Documents; (ii) second, to the repayment of any sums advanced by the Lender for the payment of any insurance premiums, taxes, assessments or other impositions or charges against the Real Property; (iii) third, to the payment of any other sums due from the Borrower to the Lender pursuant to the Loan Documents (other than the amounts described in clauses (v) and (vi) below); (iv) fourth, to the payment of any obligations of the Borrower under the Environmental Indemnity Agreement; fifth, to the payment of interest and principal then due under the Note; (vi) sixth, to the establishment and maintenance of an impound account for the payment of impositions on the Real Property in accordance with the Loan Documents; (vii) seventh, to the payment to unaffiliated third parties of ordinary expenses incurred in connection with operation of the Real Property, including reasonable and customary third-party management fees not exceeding four percent (4%) of effective gross income; (viii) eighth, to establish a fund to be held by the Lender in its general account, without interest, as additional security for the Loan pending the cure of all Defaults, and to be disbursed by the Lender in its reasonable discretion to permit such Defaults to be cured; and (ix) ninth, after the cure of all Defaults and only thereafter, the balance of the Rents shall be distributed to the Borrower or to the order of the Borrower.

10.3 NO ACCORD AND SATISFACTION OR WAIVER

The Borrower agrees that the Lender’s exercise of its rights under this Section shall give rise to neither (a) an accord and satisfaction with respect to any obligation not fully performed by the Borrower or completely satisfied through the application of Rents by the Lender, nor (b) a waiver of any rights or remedies of the Lender.

10.4 DEFAULT INTEREST

Default under this Assignment is a “Default” under the terns of the Deed of Trust. The Lender is therefore entitled, at its sole discretion, to elect for interest on the Loan to accrue at the Default Rate specified in the Note until the Default is cured.

10.5 REINSTATEMENT OF THE BORROWER’S LICENSES

Upon the cure of all Defaults, the Lender may by Notice to the Borrower, reinstate the licenses of the borrower under Sections 4 and 5.1 of this Assignment.

10.6 ADDITIONAL NORTH CAROLINA REMEDIES

The Borrower expressly agrees that the Lender shall have, in addition to all other rights and remedies set forth elsewhere in this Assignment, all the rights regarding enforcement of assignments of rents and leases, or otherwise available under North Carolina law.

11. POWER OF ATTORNEY

The Borrower appoints the Lender as its attorney-in-fact, coupled with an interest, with full power of substitution, in the name, place, and stead of the Borrower to do, while a Default exists, all things and to perform all acts with respect to the Leases and the Real Property authorized by the terms of this assignment, as the Lender may determine from time to time in its discretion.

12. WAIVER OF CLAIMS

The Borrower waives any right, claim, or demand it may now or hereafter have against any tenant by reason of payment of Rents to the Lender at the Lender’s request following a Default.

13. LENDER NOT MORTGAGEE-IN-POSSESSION

Acceptance by the Lender of this Assignment shall not, prior to entry upon and taking of possession of the Real Property by the Lender, be deemed or construed to constitute the Lender a mortgagee in possession of the Real Property, nor shall the Lender be deemed to have assumed, by accepting this Assignment, the landlord’s obligations to any tenant. In particular, acceptance by Lender of this Assignment shall not obligate the Lender (a) to appear in or to defend any action or proceeding relating to the Leases or to the Real Property, (b) to perform any obligation as landlord under the Leases, (c) to pay any amount or to assume any future financial obligation of the landlord, including any obligation to pay to any tenant a security or other deposit not actually received by the Lender or (d) to indemnify any tenant for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Real Property.

14. CUMULATIVE REMEDIES

The Lender may take or release other security, may release any party primarily or secondarily liable for any Obligation, may grant extensions, renewals or indulgences with respect to such indebtedness, and may apply any other security therefore held by it to the satisfaction of such indebtedness without prejudice to any of its rights hereunder. Nothing herein contained and no act or omission by the Lender pursuant to the powers and rights granted it herein shall he deemed to be a waiver by the Lender of its rights and remedies under any of the Loan Documents, or shall prejudice any of the rights and remedies possessed by the Lender under their terms. The right of the Lender to collect the Loan or additional Obligations may be exercised by the Lender prior to, simultaneously with, or subsequently to any action taken by the Lender under this Assignment.

15. EXPENSES

Any expenses incurred by the Lender in exercising its remedies under this Assignment after the occurrence of a Default (including attorneys’ fees and costs in enforcing or protecting this Assignment in any bankruptcy proceeding) shall constitute further indebtedness of the Borrower to the Lender and shall be immediately payable to the Lender, together with interest at the Default Rate specified in the Note.

16. INDEMNIFICATION

The Borrower hereby agrees to indemnify, defend, and hold the Lender harmless from and against any and all liability, loss, damage or expense (unless such liability, loss, damage or expenses arises through the Lender’s gross negligence or willful misconduct) which the Lender may or might incur under or by reason of this Assignment, or for any lawful action taken by the Lender hereunder, or by reason or in defense of any and all claims and demands whatsoever which may be asserted against the Lender arising out of the Leases, including, without limitation, any claim by any tenant of credit for Rent paid to and received by the Borrower, but not delivered to the Lender, for any period under any Leases more than one month in advance of the due date thereof; and should the Lender incur any such liability, loss, damage or expense, the amount thereof (including reasonable attorneys’ fees) with interest thereon at the rate specified as the Default Rate in the Note shall be payable by the Borrower immediately without demand, and shall be secured hereby and by the Deed of Trust.

17. NOTICE

In order for any demand, consent, approval or other communication to be effective under the terms of this Assignment, “Notice” must be provided under the terms of this Section. All Notices must be in writing. Notices may be (a) delivered by band, (h) transmitted by facsimile (with a duplicate copy sent by first class mail, postage prepaid), (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by reputable overnight courier service, delivery charges prepaid. Notices shall be addressed as set forth below:

If to the Lender:

Transamerica Occidental Life Insurance Company
c/o AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-5443
Attn: Mortgage Loan Department
Reference: Loan #89441
Fax Number: (319) 369-2277

If to the Borrower:

Braemar Housing Limited Partnership
c/o Levin Development
3103 Camden Drive
Troy, Michigan 48084
Fax Number: (248) 588-4455
with a copy of any Notice of default or acceleration to:

Kenneth F. Silver
Hertz, Schram & Saretsky, P.C.
1760 South Telegraph Road, Suite 300
Bloomfield Hills, Michigan 48302
Fax Number: (248) 335-3346

Notices delivered by hand or by overnight courier shall be deemed given when actually received or when refused by their intended recipient. Notices sent by facsimile will be deemed delivered when a legible copy has been received (provided receipt has been verified by telephone confirmation or one of the other permitted means of giving Notices under this Section). Mailed Notices shall be deemed given on the date of the first attempted delivery (whether or not actually received). Either the Lender or the Borrower may change its address for Notice by giving at least fifteen (15) Business Days’ prior Notice of such change to the other party.

18. SUCCESSORS AND ASSIGNS

The terms, covenants, conditions and warranties contained herein and the powers granted hereby shall run with the land, shall inure to the benefit of and bind the parties hereto and their respective heirs, executors, administrators, successors and assigns, and all tenants, sub-tenants and assigns of same, and all occupants and subsequent owners of the Real Property.

19. CHOICE OF LAW

This Assignment shall be construed and enforced according to, and governed by, the laws of North Carolina without reference to conflicts of laws provisions which, but for this provision, would require the application of the law of any other jurisdiction.

20. TIME OF ESSENCE

Time shall be of the essence in the Borrower’s performance of its obligations under this Assignment.

21. SEVERABILITY

In the event that any one or more of the provisions of this Assignment shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part, or in any respect, or in the event that any one or more of the provisions of this Assignment shall operate, or would prospectively operate, to invalidate this Assignment, then, and in any such event, such provision or provisions only shall be deemed to be null and void and of no force or effect, and shall not affect any other provision of this Assignment which other provisions shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby.

22. AMENDMENT

This Assignment may be amended, revised, waived, discharged, released or terminated 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 that is not so documented shall be null and void.

23. VARIATION IN PRONOUNS

All the terms and words used in this Assignment, regardless of the number and gender in which they are used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine, or neuter, as the context or sense of this Assignment or any paragraph or clause herein may require, the same as if such word had been fully and properly written in the correct number and gender.

24. CAPTIONS

The section titles or captions contained in this Assignment are for convenience only and shall not be deemed to define, S i t or otherwise modify the scope or intent of this Assignment.

25. COUNTERPARTS

This Assignment may be executed in one or more counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same agreement.

26. TERMINATION

Upon discharge of record of the Deed of Trust and payment in full of all monetary obligations under the Note, this Assignment shall terminate without the need for any separate instrument of discharge; provided that if the Borrower requests a termination in recordable form, the Lender shall provide one, at the Borrower’s expense.

IN WITNESS WHEREOF, the Borrower has caused this Absolute Assignment of Leases and Rents to be duly executed under seal as of the date first above written.

BRAEMAR HOUSING LIMITED PARTNERSHIP, an Ohio limited partnership

[SEAL]

By: Treyburn Housing, LLC, an Ohio limited liability company, its sole General Partner

[SEAL]

By: LPS Investments, L.L.C., a Michigan limited liability company, its sole Managing Member [SEAL]

By: Phillip I. Levin [SEAL]

Phillip I. Levin, Manager

STATE OF MICHIGAN

COUNTY OF OAKLAND

I, Shelly M. Rayment a Notary Public of the County and State aforesaid, do hereby certify that Phillip I. Levin personally came before me this day and after being duly sworn, said that he is the Manager of LPS Investments, L.L.C., a Michigan limited liability company, which is the sole Managing Member of Treyburn Housing, LLC, an Ohio limited partnership, which is the sole General Partner of Braemar Housing Limited Partnership, an Ohio limited partnership, and that this instrument was signed and sealed by him, on behalf of the aforementioned limited liability companies and limited partnership by their authority duly given, and M e r acknowledged this instrument to be the act and deed of the aforementioned limited liability companies and limited partnership.

WITNESS my hand and official stamp or seal, this _25 day of May , 2005.

/s/ Shelly M. Rayment

Notary Public

Acting in:

My Commission Expires:

[NOTARIAL SEAL]

[SHELLY M. RAYMENT

NOTARY PUBLIC STATE OF MICHIGAN

GENESSEE COUNTY

ACTING IN:

OAKLAND COUNTY

MY COMMISSION EXP. JUNE 27, 2005]

EXHIBIT A
THE LAND

That certain tract located in Long Creek Township, Mecklenburg County, North Carolina, and being more particularly described as follows:

Supplemental Carveout Guarantee and Indemnity Agreement

This Supplemental Indemnity Agreement (this “Agreement”) is made as of the 29th day of June, 2007 (the “Effective Date”), by NNN APARTMENT REIT, INC., a Maryland corporation (“Carveout Obligor”), whose address is c/o Triple Net Properties, LLC, 1551 N. Tustin Ave., Suite 300, Santa Ana, California 92705, in favor of TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, an Iowa corporation, and its successors and assigns (the “Lender”), whose address is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001.

1. RECITALS

A. The Lender funded a certain loan in the original principal amount of TEN MILLION AND NO/100THS DOLLARS ($10,000,000) (the “Loan”), and to evidence the Loan, Braemar Housing Limited Partnership, an Ohio limited partnership (the “Grantor”), made and delivered to the Lender a certain Secured Promissory Note dated May 25, 2005, in the original principal amount of $10,000,000 (the “Note”) and certain additional documents (together with the Note, the “Loan Documents”). The Loan is secured, inter alia, by the Deed of Trust, Security Agreement and Fixture Filing given by Grantor to Lender encumbering certain real property (the “Real Property”) in the City of Charlotte, County of Mecklenburg, North Carolina, and recorded in Book 18849, Page 135, in the Registry of Mecklenburg County, North Carolina (the “Deed of Trust”).

B. The Loan was assumed by Apartment REIT Residences at Braemar, LLC, a North Carolina limited liability company (the “Borrower”), and modified pursuant to the Loan Assumption and Modification Agreement dated as of the Effective Date among the Lender, the Borrower, the Grantor and Phillip I. Levin, Bradley J. Schram and Norman A. Pappas (collectively, the “Original Carveout Obligors”).

C. The Borrower has purchased the Property from the Grantor, and the Borrower and the Grantor have requested that the Lender consent to such purchase pursuant to the terms of the Deed of Trust.

D. To fulfill a condition of the Lender to the granting of such consent, the Borrower has agreed to be bound by all of the Loan Documents as though the Borrower were originally the “Grantor” under the Deed of Trust and the “Borrower” under the Note and the other Loan Documents.

E. The Note and certain of the Loan Documents include an “exculpation clause” in which the Lender agrees that it shall not seek to collect the Loan except through recourse to certain Property (as defined below), subject, however, to certain exceptions (the “Carveouts”).

F. The Deed of Trust provides that the exculpation clause shall be void without notice if the Borrower voluntarily transfers or encumbers the Property in violation of Section 13 (the “due on transfer or encumbrance” section) of the Deed of Trust, or files a voluntary bankruptcy petition under certain conditions.

G. The Lender has required, as a further condition to the granting of such consent, that the Carveout Obligor (a) guarantee that portion of the Indebtedness that arises because the Lender has advanced funds or incurred expenses in respect of the Carveouts while the Loan has remained outstanding, (b) guarantee the entire Indebtedness, if the Borrower takes any action that voids the exculpation clause set forth in the Note, and (c) indemnify the Lender and hold it harmless, to the extent of the Lender’s actual damages and losses, with respect to any circumstance or event comprising a Carveout.

2. AGREEMENT

NOW THEREFORE, in consideration of the premises, to induce the Lender to consent to both the conveyance of the Property to the Borrower and the Borrower’s assumption of the Loan, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Carveout Obligor hereby agrees as follows:

3. DEFINITIONS

Capitalized terms used but not defined herein shall have the meanings assigned to them in the Deed of Trust. The following capitalized terms shall have the meanings set forth below:

“Bankruptcy Code” means 11 U.S.C. §§101-1330 or any successor statute.

“Business Day” means any day when state and federal banks are open for business in Cedar Rapids, Iowa.

“Carveouts” means the following matters, whether occurring prior to or after the date of this Agreement:

(i) fraud or material written misrepresentation;

(iii) misappropriation of tenant security deposits (including proceeds of tenant letters of credit), Insurance Proceeds or Condemnation Proceeds;

(iv) failure to pay property taxes, assessments or other lienable Impositions;

(vi) removal from the Real Property of fixtures or Personal Property, unless replaced in a commercially reasonable manner;

(viii) terminating or amending a Lease other than in the ordinary course of business.

“Carveout Obligation” means any obligation under this Agreement.

“Claim” means any action, suit, proceeding, demand, assessment, adjustment, penalty or other assertion of liability, if it arises, and only to extent that it arises, as a result of any Carveout.

“Environmental Indemnity Agreement” means the Environmental Indemnity Agreement executed by the Borrower and the Carveout Obligor in connection with the Loan.

“Indebtedness” means all sums that are owed or become due pursuant to the terms of the Loan Documents, which sums include any amounts advanced by the Lender to cure defaults or to pay attorneys’ fees and expenses, receivership costs, fees and costs of the Trustee and other collection costs. Such costs and fees shall include those that relate to issues particular to any given type of proceeding and all appraisal fees and expert witness fees pertaining to the establishment of the fair value of the Property, whether or not the Carveout Obligor or any court requires that such value be ascertained.

“Net Worth Requirement” means the lesser of (i) the aggregate net worth of the Original Carveout Obligors most recently represented to the Lender at the time of the approval of the Loan by AEGON’s Investments Committee and (ii) the principal balance of the Loan at the time of determination.

“Notice” means a notice given in accordance with Subsection 13.3 below.

“Property” means the Real Property and any other property now or hereafter subjected to any lien or security interest created by any of the Loan Documents.

4. GUARANTEE OF INDEBTEDNESS ARISING FROM CARVEOUTS

In consideration of the Lender agreeing to make the Loan, and upon the terms and provisions hereof, the Carveout Obligor hereby irrevocably, absolutely and unconditionally guarantees the full and prompt payment to the Lender of the Indebtedness, to the extent, and only to the extent, of the amount of the Indebtedness which has arisen as a result of the Carveouts.

The Carveout Obligor acknowledges that the Loan is made solely for business purposes and that the Carveout Obligor will be liable for a deficiency judgment after any trustee’s sale or deed in lieu of trustee’s sale that the Lender elects to prosecute or accept, to the extent that Carveout Obligations have remained unsatisfied. Any such deficiency or any judgment therefore shall bear interest at the default rate specified in the Note from and after the date of such trustee’s sale or the Lender’s or its affiliate’s acceptance of a deed in lieu thereof until and including the date the deficiency or judgment is paid.

5. INDEMNITY AND HOLD HARMLESS

The Carveout Obligor agrees to indemnify the Lender and hold it harmless, to the extent of the Lender’s actual damages and losses, with respect to any circumstance or event comprising a Carveout. This obligation includes the protection of the Lender from, and the defense of the Lender against, all Claims, and to the indemnification of the Lender from and against all of out-of-pocket costs and expenses sustained by the Lender in enforcing this Agreement, including reasonable attorneys’ fees and expenses.

6. CONDITIONAL GUARANTEE OF ENTIRE INDEBTEDNESS

The Carveout Obligor hereby irrevocably, absolutely and unconditionally guarantees the full and prompt payment to Lender of the Indebtedness if the Borrower (a) voluntarily transfers or creates any material voluntary lien on the Property in violation of the Loan Documents, or (b) files a voluntary petition for reorganization under the Bankruptcy Code and has not offered, prior to the filing, to enter into the Lender’s choice of either an agreement to permit an uncontested foreclosure, or an agreement to deliver a deed in lieu of foreclosure within sixty days of the Lender’s acceptance of the offer. Following the Lender’s acceptance of such an offer, default by the Borrower under such an agreement shall trigger personal liability for the entire Indebtedness. No such offer shall be conditioned on any payment by the Lender, on the release of any Obligor from any Carveout Obligation, or on any other concession.

The foregoing guarantee is not a guarantee of collection, but rather is an irrevocable, absolute and unconditional, continuing guarantee of payment and performance. In this regard, the Carveout Obligor hereby acknowledges that the guarantee set forth in this Agreement may not be revoked as to any present or future advances to or existing or additional liability incurred by the Borrower under the terms of the Loan Documents. The guarantee set forth in this Section 6 shall terminate when the Indebtedness has been satisfied in full.

7. REPRESENTATIONS AND WARRANTIES

The Carveout Obligor hereby represents and warrants to the Lender as follows:

(a) This Agreement has been duly executed and delivered.

(b) The execution and performance of this Agreement and all guaranties, indemnities and covenants herein will not result in any breach of, or constitute a default under, any contract, guarantee, document or other instrument to which the Carveout Obligor is a party or by which the Carveout Obligor may be bound or affected, and do not and will not violate or contravene any law to which the Carveout Obligor is subject; nor do any such other instruments impose or contemplate any obligations which are or will be inconsistent with this Agreement.

(c) No approval by, authorization of, or filing with any federal, state or municipal or other governmental commission, board or agency or other governmental authority is necessary in connection with the authorization, execution and delivery of this Agreement.

(d) This Agreement constitutes the legal, valid and binding obligation of the Carveout Obligor, enforceable against the Carveout Obligor in accordance with its terms, except to the extent that the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforceability of creditors’ rights generally or by equitable principles of general application (whether considered in an action at law or in equity).

(e) All financial information furnished by the Carveout Obligor to Lender is true, correct and complete in all material respects and does not omit to state any fact or circumstance necessary to make the statements contained therein not misleading.

(f) The following financial statement of the Carveout Obligor, as received by the Lender, is true and accurate as of its date: June 19, 2007. There has been no material adverse change in the Carveout Obligor’s financial condition since the date of this financial statement.

(g) The Carveout Obligor is not the subject of any bankruptcy court filing, insolvency proceeding, receivership, composition or assignment for the benefit of creditors.

(h) There are no material actions, suits or proceedings pending or, to the best of the knowledge of the Carveout Obligor, threatened against or affecting Carveout Obligor.

8. FINANCIAL REPORTS

Unless the Carveout Obligor is a reporting company under the Securities and Exchange Act of 1934 as of the end of any fiscal year, it shall, within one hundred twenty (120) days of the end of such fiscal year, deliver to the Lender copies of its financial statements. If the Carveout Obligor fails to deliver the items required in this Section, the Lender may engage an accounting firm to prepare the required items. The Carveout Obligor shall cooperate fully with any investigative audit required to permit the accounting firm to produce these items, and the Carveout Obligor shall pay the fees and expenses incurred in connection with their preparation on demand. The financial and operating statements provided under this Section need not, as an initial matter be certified by an independent certified public accountant as having been prepared in accordance with generally accepted accounting principles, consistently applied, or, in the case of operating statements, in accordance with generally accepted auditing standards. The Carveout Obligor shall, however, certify that such statements are true and correct, and the Lender expressly reserves the right to require such a certification by an independent certified public accountant if it has reason to believe that any previously provided financial or operating statement is misleading in any material respect.

9. DEFAULT

A “Default” shall occur under this Agreement if any of the following events shall occur:

(a) The Carveout Obligor shall fail to pay any Carveout Obligation within five (5) Business Days after Notice and demand by the Lender;

(b) The Carveout Obligor shall fail to perform, observe, or comply with any covenant under this Agreement, within thirty (30) days after Notice from the Lender demanding such performance, observance, or compliance; or

(c) The filing by the Carveout Obligor of a petition in bankruptcy or for relief from creditors under any present or future law that affords general protection from creditors; the filing by any other person of an involuntary petition in bankruptcy against the Carveout Obligor; or the filing of any other action that may result in a composition of debts, provide for the marshaling of assets for the satisfaction of the Carveout Obligor’s debts, or result in the judicially ordered sale of assets for the purpose of satisfying obligations to creditors (unless a motion for the dismissal of the petition or other action is filed within ten (10) days and results in its dismissal within sixty (60) days of the filing of the petition or other action); or the dissolution or liquidation of the Carveout Obligor, or the cessation of its legal existence; or the death of the Borrower or the Carveout Obligor who is a natural person (unless the event described in this Subsection 9(c) results in a Permitted Transfer as defined in the Deed of Trust) unless, following any such event affecting the Carveout Obligor, any remaining persons or entities liable for the Carveout Obligations (in addition to Borrower) have the direct or indirect power to exercise management control over the Real Property and have an aggregate net worth (excluding the value of the Borrower’s equity interest in the Real Property) at least equal to the Net Worth Requirement, or unless the Borrower and any remaining persons or entities liable for the Carveout Obligations (including the executor of the estate of any deceased Carveout Obligor) diligently and continuously pursue the replacement of the Carveout Obligor, and succeed, within sixty (60) days of such an event, in causing another person or entity to assume the Carveout Obligations, so that persons or entities who collectively meet the Net Worth Requirement have the direct or indirect power to exercise management control over the Real Property.

10. APPLICATION OF PAYMENTS

All payments with respect to the Indebtedness received by the Lender from the Borrower, or any party other than the Carveout Obligor may be applied by the Lender to the Indebtedness in such manner and order as the Lender desires, in its sole discretion, whether or not such application reduces the liability of the Carveout Obligor with respect to the Carveout Obligations. If a foreclosure sale of the Real Property takes place, the proceeds of the sale (whether received in cash or by credit bid) shall be applied first to reduce that portion of the Indebtedness which is not guaranteed under this Agreement.

11. UNSECURED OBLIGATION

This Agreement is not secured by any of the Loan Documents securing the Loan.

12. WAIVERS

12.1 Subrogation Rights Against Borrower

The Carveout Obligor waives (a) any right of reimbursement, subrogation, exoneration, contribution, or indemnity from or by the Borrower with respect to the satisfaction by the Carveout Obligor of any obligation of the Borrower, and (b) any “claim,” as that term is defined in the Bankruptcy Code, which the Carveout Obligor might now have or hereafter acquire against the Borrower by virtue of the Carveout Obligor’s performance of any obligation of the Borrower. In connection with the waiver set forth in clause (a), the Carveout Obligor expressly waives (i) any and all rights to subrogation to the Lender against the Borrower and (ii) any rights to enforce any remedy which the Lender may have against the Borrower and any right of participate in any collateral for the Loan. In addition, the Carveout Obligor hereby subordinates any and all indebtedness of the Borrower now or hereafter owed to the Carveout Obligor to all indebtedness of the Borrower to the Lender, and covenants with the Lender not to demand or accept any payment of principal or interest on any such indebtedness while any “Default” exists under the terms of any of the Loan Documents.

12.2 Marshaling of Assets

The Carveout Obligor waives any right to cause a marshaling of the Borrower’s assets.

12.3 Homestead Laws and Exemptions

The Carveout Obligor waives all rights and exemptions under homestead and similar laws.

12.4 Valuation of Collateral

The Carveout Obligor waives any right to assert that the amount paid for the Property at a lawfully conducted judicial or non-judicial foreclosure sale is less than the value of the Property.

12.5 Protest, Demand, Dishonor

The Carveout Obligor waives all rights of protest, demand, dishonor, presentment or any other notices or demands which might otherwise be required by any statute or rule of law now or hereafter in effect with respect to this Agreement or any of the Carveout Obligations.

12.6 Waiver of Statutory Rights

The Carveout Obligor waives any right the Carveout Obligor may have pursuant to Section 26-7 of the North Carolina General Statutes and any other statutory rights provided to sureties, endorsers or guarantors.

12.7 Additional Waivers

The Carveout Obligor waives any defense based upon the Lender’s election of any remedy, the Lender’s failure to disclose to the Carveout Obligor any information concerning the financial condition of the Borrower or any other circumstances bearing on the ability of the Borrower to pay and perform its obligations under the Loan Documents, or the Lender’s failure to provide Notice of any act or omission by the Borrower from which any Carveout Obligation may have arisen.

13. MISCELLANEOUS

13.1 Independence of Obligations

The Carveout Obligor shall be fully and personally liable for the Carveout Obligations, and the Lender shall be entitled to maintain an independent action against the Carveout Obligor regardless of whether Lender has commenced or completed any action against the Borrower or the Property. The Carveout Obligor disclaims any status as beneficiary of any obligation of the Lender to the Borrower to provide notice of default under the Loan Documents. If the Lender has initiated any action against the Borrower to enforce the Loan Documents, the Lender may join the Carveout Obligor or refrain from doing so, at the Lender’s sole and absolute discretion. The liability of the Carveout Obligor under this Agreement shall be reinstated with respect to any amount at any time paid to Lender by the Borrower on account of the Carveout Obligations which shall thereafter be required to be restored or returned by the Lender upon the bankruptcy, insolvency or reorganization of the Borrower or any other Carveout Obligor other than the party against whom the Lender has sought to enforce this Agreement, as though such amount had not been paid. Except as expressly agreed in writing by the Lender, the Carveout Obligations shall not be released, diminished, impaired, reduced or otherwise affected by (a) the reconveyance of the interest created by the Deed of Trust, (b) the consent by the Lender to any transfer of a direct or indirect interest in the Property (whether through sale of the Property, transfers of interests in the Borrower, or a change in the form of business organization of the Borrower), or (c) any forbearance by the Lender to exercise any rights under the Loan Documents, unless those rights are expressly waived or modified in a written instrument duly executed by the Lender; provided, however, that any written modification of the Loan that affects the amount of the Indebtedness may be considered in ascertaining the amount of the Indebtedness for purposes of determining the amount of any Carveout Obligation that arises under Section 6 of this Agreement, absent fraud or material written misrepresentation in connection with such a modification.

13.2 Offsets and Defenses

No liability of the Carveout Obligor under this Agreement shall be released, diminished, impaired, reduced or otherwise affected by any existing or future offset, claim, or defense of the Carveout Obligor against the Lender.

13.3 Notices

In order for any demand, consent, approval or other communication to be effective under the terms of this Agreement, including any notice to the Carveout Obligor relating to a trustee’s sale or deed in lieu thereof or in connection with any action or claim made against the Carveout Obligor, “Notice” must be provided under the terms of this Section. All Notices must be in writing. Notices may be (a) delivered by hand, (b) transmitted by facsimile (with a duplicate copy sent by first class mail, postage prepaid), (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by reputable overnight courier service, delivery charges prepaid. Notices shall be addressed as set forth below:

If to the Lender:

Transamerica Occidental Life Insurance Company

c/o AEGON USA Realty Advisors, Inc.

4333 Edgewood Road, N.E.

Cedar Rapids, Iowa 52499-5443

Attn: Mortgage Loan Department

Reference: Loan #89441

Fax Number: (319) 369-2277

If to the Carveout Obligor:

NNN Apartment REIT, Inc.

c/o Triple Net Properties, LLC

1551 N. Tustin Ave., Suite 300

Santa Ana, California 92705

Attn: Shannon K. S. Johnson, CPA, CFO

Fax Number: (714) 881-2217

With a copy of Notice of demand or acceleration to:

McGuire Woods LLP

One James Center

901 E. Cary Street

Richmond, Virginia 23219

Attn: Nancy R. Little, Esq.

Fax Number: (804) 698-2101

Notices delivered by hand or by overnight courier shall be deemed given when actually received or when refused by their intended recipient. Notices sent by facsimile will be deemed delivered when a legible copy has been received (provided receipt has been verified by telephone confirmation or one of the other permitted means of giving Notices under this Subsection). Mailed Notices shall be deemed received on the date of the first attempted delivery (whether or not actually received). Either the Lender or the Carveout Obligor may change its address for Notice by giving at least fifteen (15) Business Days’ prior Notice of such change to the other party.

13.4 Entire Agreement and Modification

This Agreement contains the entire agreement of the Carveout Obligor relating to the subject matter hereof, and all prior guaranties relative hereto which are not contained herein are hereby terminated. This Agreement may not be amended, revised, waived, discharged, released or terminated orally but only by a written instrument or instruments executed by the Lender. Any alleged amendment, revision, waiver, discharge, release or termination that is not so documented shall not be effective as to the Lender.

13.5 Counterparts

This Agreement may be executed in multiple counterparts, all of which taken together shall constitute one and the same Agreement.

13.6 Governing Law

This Agreement shall be construed and enforced according to, and governed by, the laws of North Carolina without reference to conflicts of laws provisions which, but for this provision, would require the application of the law of any other jurisdiction.

13.7 Cumulative Remedies

Every right and remedy provided in this Agreement shall be cumulative of every other right or remedy of the Lender whether herein or by law conferred and may be enforced concurrently with any such right or remedy. No acceptance of performance of any Carveout Obligation as to which the Carveout Obligor shall be in Default, or waiver of particular or single performance of any obligation or observance of any covenant, shall be construed as a waiver of the obligation or covenant or as a waiver of any other Default then, theretofore or thereafter existing.

13.8 Severability

In the event that any one or more of the provisions of this Agreement shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part, or in any respect, or in the event that any one or more of the provisions of this Agreement shall operate, or would prospectively operate, to invalidate this Agreement, then, and in any such event, such provision or provisions only shall be deemed to be null and void and of no force or effect and shall not affect any other provision of this Agreement, and the remaining provisions of this Agreement shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby.

13.9 Settlements

Upon the Lender’s request, the Carveout Obligor agrees to participate in good faith and in a commercially reasonable manner in any settlement between the Borrower and the Lender which includes or may include a deed in lieu of trustee’s sale.

13.10 Reference to Particulars

The scope of a general statement made in this Agreement shall not be construed as having been reduced through the inclusion of references to particular items that would be included within the statement’s scope. Therefore, unless the relevant provision of this Agreement contains specific language to the contrary, the term “include” shall mean “include, but shall not be limited to” and the term “including” shall mean “including, without limitation.”

13.11 Assignment

The Lender may assign its rights under this Agreement without Notice to any holder of the Note and assignee of the Lender’s rights under the Loan Documents.

IN WITNESS WHEREOF, the Carveout Obligor has caused this Agreement to be duly executed under seal as of the date first above written.

NNN APARTMENT REIT, INC.,
a Maryland corporation

By: /s/ Shannon K S Johnson

Print Name: Shannon K.S. Johnson
Its: Chief Financial Officer

Supplemental Environmental Indemnity Agreement

This Supplemental Environmental Indemnity Agreement (this “Agreement”) is made as of the 29^th day of June, 2007 (the “Effective Date”), by APARTMENT REIT RESIDENCES AT BRAEMAR, LLC, a North Carolina limited liability company (the “Borrower”), with its principal place of business at c/o Triple Net Properties, LLC, 1606 Santa Rosa Drive, Suite 109, Richmond, Virginia 23229, and NNN APARTMENT REIT, INC., a Maryland corporation (“Carveout Obligor”), whose address is c/o Triple Net Properties, LLC, 1551 N. Tustin Ave., Suite 300, Santa Ana, CA 92705, in favor of TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, an Iowa corporation, and its successors and assigns (the “Lender”), whose address is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001.

1. RECITALS

B. The Loan was assumed by the Borrower and modified pursuant to the Loan Assumption and Modification Agreement dated as of the Effective Date among the Lender, the Borrower, the Grantor and Phillip I. Levin, Bradley J. Schram and Norman A. Pappas (collectively, the “Original Carveout Obligors”).

C. The Borrower has purchased the Property from the Grantor, and the Lender has consented to such purchase pursuant to the terms of the Deed of Trust subject to certain conditions.

D. To fulfill a condition of the Lender to the granting of such consent, the Borrower and the Carveout Obligor desire to (a) assume full personal liability for the repayment of that portion of the Indebtedness that arises because the Lender has advanced funds or incurred expenses as a result of the failure of the Borrower to meet its obligations under the Loan Documents with respect to environmental matters and (b) indemnify the Lender and hold it harmless from actual damages suffered as a result of environmental matters.

2. AGREEMENT

NOW THEREFORE, in consideration of the premises, to induce the Lender to consent to both the conveyance of the Property to the Borrower and the Borrower’s assumption of the Loan, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Borrower and the Carveout Obligor agree as follows:

3. DEFINITIONS

The following capitalized terms shall have the meanings set forth below:

“Bankruptcy Code” means 11 U.S.C. §§101-1330 or any successor statute.

“Business Day” means any weekday when state and federal banks are open for business in Cedar Rapids, Iowa.

“Claim” means any action, suit, proceeding, demand, assessment, adjustment, penalty, judgment or other assertion of liability.

“Default Rate” means the lesser of (i) eighteen percent (18%) per annum and (ii) the maximum rate allowed by law.

“Environmental Laws” means all present and future laws, statutes, ordinances, rules, regulations, orders, guidelines, rulings, decrees, notices and determinations of any Governmental Authority to the extent that they pertain to: (A) the protection of health against environmental hazards; (B) the protection of the environment, including air, soils, wetlands, and surface and underground water, from contamination by any substance that may have any adverse health effect on humans, livestock, fish, wildlife, or plant life, or which may disturb an ecosystem; (C) underground storage tank regulation or removal; (D) wildlife conservation; (E) protection or regulation of natural resources; (F) the protection of wetlands; (G) management, regulation and disposal of solid and hazardous wastes; (H) radioactive materials; (I) biologically hazardous materials; (J) indoor air quality; (K) the manufacture, possession, presence, use, generation, storage, transportation, treatment, release, emission, discharge, disposal, abatement, cleanup, removal, remediation or handling of any Hazardous Substances. “Environmental Laws” include, the Comprehensive Environmental Response, Compensation, and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act, 33 U.S.C. §1251 et seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the Toxic Substances Control Act, 15 U.S.C. §2601 et seq., all similar state statutes and local ordinances, and all regulations promulgated under any of those statutes, and all administrative and judicial actions respecting such legislation, all as amended from time to time.

“Governmental Authority” means any political entity with the legal authority to impose any requirement on the Property, including the governments of the United States, the State of North Carolina, Mecklenburg County, the City of Charlotte, and any other entity with jurisdiction to decide, regulate, or affect the ownership, construction, use, occupancy, possession, operation, maintenance, alteration, repair, demolition or reconstruction of any portion or element of the Real Property.

“Hazardous Substance” means any substance the release of or the exposure to which is prohibited, limited or regulated by any Environmental Law, or which poses a hazard to human health, including (A) any “oil,” as defined by the Federal Water Pollution Control Act and regulations promulgated thereunder (including crude oil or any fraction of crude oil), (B) any radioactive substance and (C) Stacchybotris chartarum and other molds. However, the term “Hazardous Substance” does not include (A) a substance used in the cleaning and maintenance of the Real Property, if the quantity and manner of its use are customary, prudent, and do not violate applicable law, or (B) automotive motor oil in immaterial quantities, if leaked from vehicles in the ordinary course of the operation of the Real Property and cleaned up in accordance with reasonable property management procedures and in a manner that violates no applicable law.

“Indebtedness” means all sums that are owed or become due pursuant to the terms of the Loan Documents, which sums include any amounts advanced by the Lender to cure defaults or to pay attorneys’ fees and expenses (including any such fees or expenses incurred in connection with enforcing or protecting any of the Loan Documents in any bankruptcy proceeding), receivership costs, fees and costs of the Trustee and other collection costs.

“Notice” means a notice given in accordance with Subsection 12.4 below.

“Obligation” means any obligation under this Agreement.

“Property” means the Real Property and any other property now or hereafter subjected to any lien or security interest created by any of the Loan Documents.

“Trustee” means J. Lindsay Stradley, Jr. and his successors and assigns.

4. LIABILITY FOR REPAYMENT OF INDEBTEDNESS

In consideration of the benefits which the Borrower and the Carveout Obligor receive as a result of the Loan (including the benefit of the Loan’s non-recourse feature), the Borrower expressly assumes personal liability for, and the Carveout Obligor irrevocably, absolutely and unconditionally guarantees the full and prompt payment to the Lender of the Indebtedness, to the extent of that amount of the Indebtedness which arises because the Borrower fails, or the Grantor has prior to the Effective Date failed, to perform their respective obligations under the Loan Documents with respect to environmental matters. Such Indebtedness includes interest on the Loan which accrues at the Default Rate, minus interest that would otherwise have accrued in the absence of Default, during a period in which a “Default” exists under the Deed of Trust as a result of the Borrower’s or the Grantor’s failure to meet their respective obligations under the Loan Documents with respect to environmental matters.

5. INDEMNITY AND HOLD HARMLESS

The Borrower and the Carveout Obligor jointly and severally agree to indemnify the Lender, the Trustee, and their respective directors, officers, employees, agents, successors and assigns and to hold them harmless, to the extent of the Lender’s actual damages and losses, from any Claim, cost, expense or liability of whatever kind or nature, known or unknown, contingent or otherwise, directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, disposal, or presence (whether prior to or after the date of this Agreement) of Hazardous Substances on, in, under or about the Real Property. Obligations indemnified under this Section include (A) out-of-pocket costs and expenses, including reasonable attorneys’ fees and expenses, sustained by the Lender in enforcing this Agreement or the Borrower’s obligations under the Loan Documents with respect to environmental matters, and including any such fees or expenses incurred in connection with the enforcement or protection of this Agreement in any bankruptcy proceeding, and (B) the protection of the Lender from, and the defense of the Lender against, all such Claims. This Section shall be binding upon the Borrower and the Carveout Obligor and their heirs, personal representatives, successors and assigns, and shall survive repayment of the Indebtedness, foreclosure of the Real Property, and the Borrower’s granting of a deed to the Real Property. Obligations under this Section shall not extend to any Claim, cost, expense or liability caused by the Lender’s gross negligence or willful misconduct, or arising from a release of Hazardous Substances that occurs after the Lender has taken possession of the Real Property (provided neither the Borrower nor Carveout Obligor has caused the release through any act or omission).

6. REPRESENTATIONS AND WARRANTIES

The Borrower and the Carveout Obligor represent and warrant to the Lender as follows:

(a) This Agreement has been duly executed and delivered.

(b) The execution and performance of this Agreement and all guaranties, indemnities and covenants herein will not result in any breach of, or constitute a default under, any contract, guarantee, document or other instrument to which the Borrower or Carveout Obligor is a party or by which the Borrower or Carveout Obligor may be bound or affected, and do not and will not violate or contravene any law to which the Borrower or Carveout Obligor is subject; nor do any such other instruments impose or contemplate any obligations which are or will be inconsistent with this Agreement.

(d) This Agreement constitutes the legal, valid and binding obligation of the Borrower and the Carveout Obligor, enforceable against each of them in accordance with its terms.

(e) There are no material actions, suits or proceedings pending or, to the best of the knowledge of the Borrower and the Carveout Obligor, threatened against or affecting the Borrower or the Carveout Obligor.

(g) The following financial statement of the Borrower, as received by the Lender, is true and accurate as of its date: June 19, 2007. There has been no material adverse change in the Borrower’s financial condition since the date of this financial statement.

7. DEFAULT

A “Default” shall occur under this Agreement upon:

(a) the Borrower’s and the Carveout Obligor’s failure to pay any Obligation within five (5) Business Days after Notice and demand by the Lender;

(b) the Borrower’s and the Carveout Obligor’s failure to perform, observe, or comply with any nonmonetary Obligation within the time period afforded the Borrower for such performance under the express terms of the Deed of Trust; or

(c) the filing by the Borrower or the Carveout Obligor of a petition in bankruptcy or for relief from creditors under any present or future law that affords general protection from creditors; the filing by any other person of an involuntary petition in bankruptcy against the Borrower or the Carveout Obligor; or the filing of any other action that may result in a composition of debts, provide for the marshaling of assets for the satisfaction of the Borrower’s or the Carveout Obligor’s debts, or result in the judicially ordered sale of assets for the purpose of satisfying obligations to creditors (unless a motion for the dismissal of the petition or other action is filed within ten (10) days and results in its dismissal within sixty (60) days of the filing of the petition or other action); or the dissolution or liquidation of the Borrower or the Carveout Obligor, or the cessation of its legal existence; or the death of the Borrower or the Carveout Obligor who is a natural person (unless the event described in this Paragraph results in a Permitted Transfer as defined in the Deed of Trust) unless, following any such event affecting the Carveout Obligor, any remaining persons or entities liable for the Obligations have the direct or indirect power to exercise management control over the Real Property and have an aggregate net worth (excluding the value of the Borrower’s equity interest in the Real Property) at least equal to the Net Worth Requirement, or unless the Borrower and any remaining persons or entities liable for the Obligations (including the executor of the estate of any deceased Carveout Obligor) diligently and continuously pursue the replacement of the subject Carveout Obligor, and succeed, within sixty (60) days of such an event, in causing another person to assume the Obligations, so that persons or entities who collectively meet the Net Worth Requirement have the direct or indirect power to exercise management control over the Real Property.

8. REMEDIES ON DEFAULT

Upon Default under this Agreement, the Lender shall have all of the rights of a guaranteed or indemnified party under the laws of North Carolina. Interest on any unpaid obligations shall accrue at the Default Rate. Interest which accrues on the Indebtedness at the Default Rate as a result of a Default under this Agreement is an Obligation under Section 4.

9. APPLICATION OF PAYMENTS

All payments with respect to the Indebtedness received by the Lender from the Borrower, or from any party other than the Carveout Obligor, may be applied by the Lender to the Indebtedness in such manner and order as the Lender desires, in its sole discretion, whether or not such application reduces the liability of the Carveout Obligor with respect to the Obligations. If a foreclosure sale of the Real Property takes place, the proceeds of the sale (whether received in cash or by credit bid) shall be applied first to reduce that portion of the Indebtedness for which the Borrower has not assumed personal liability under Section 4 and which is not guaranteed by the Carveout Obligor under Section 4.

10. UNSECURED OBLIGATION

The Deed of Trust secures neither (A) the Carveout Obligor’s Obligations, nor (B) those of the Borrower’s Obligations (i) that either (a) have not been paid as of the date of a trustee’s sale under the Deed of Trust, or (b) have not been paid as of the Lender’s acceptance of a deed in lieu of trustee’s sale, and (ii) that arise with respect to expenses, liabilities or damages incurred by the Lender after a trustee’s sale under the Deed of Trust, or after the Lender’s or its affiliate’s acceptance of a deed in lieu thereof, or that are the subject of any Claim or any portion of a Claim against the Lender or the Property. The Borrower acknowledges and agrees that the Obligations which are so unsecured are separate and distinct from, and not the substantial equivalent of, those that are so secured, and that such unsecured Obligations shall survive such a trustee’s sale or acceptance of a deed in lieu of a trustee’s sale.

11. WAIVERS

11.1 Subrogation Rights Against the Borrower

The Carveout Obligor waives (a) any right of reimbursement, subrogation, exoneration, contribution, or indemnity from or by the Borrower, and (b) any “claim,” as that term is defined in the Bankruptcy Code, which the Carveout Obligor might now have or hereafter acquire against the Borrower by virtue of the Carveout Obligor’s performance of any obligation of the Borrower.

11.2 Marshaling of Assets

The Borrower and the Carveout Obligor waive any right to cause a marshaling of the Borrower’s assets.

11.3 Homestead Laws and Exemptions

The Borrower and the Carveout Obligor waive all rights and exemptions under homestead and similar laws.

11.4 Valuation of Collateral

The Borrower and the Carveout Obligor waive any right to a defense to an action under this Agreement based on an assertion that the amount paid for the Property at a lawfully conducted judicial or non-judicial foreclosure sale is less than the value of the Property.

11.5 Protest, Demand, Dishonor

The Borrower and the Carveout Obligor waive all rights of protest, demand, dishonor, presentment or any other notices or demands which might otherwise be required by any statute or rule of law now or hereafter in effect with respect to this Agreement or any of the Obligations.

11.6 Waiver of Statutory Rights

The Borrower and the Carveout Obligor waive any rights pursuant to Section 26-7 of the North Carolina General Statutes or any other statutory rights provided to sureties, endorsers or guarantors.

11.7 Suretyship Waivers

The Borrower and the Carveout Obligor waive any statutory or common law rights and defenses available to sureties, indemnitors, endorsers or guarantors of obligations.

11.8 Additional Waivers

The Borrower and the Carveout Obligor waive (A) any defense based upon the Lender’s election of any remedy and (B) any defense based on the Lender’s failure to disclose any information concerning the financial condition of the Borrower or any other circumstances bearing on the ability of the Borrower to pay and perform its obligations under the Loan Documents, or the Lender’s failure to provide Notice of any act or omission by the Borrower from which any Obligation may have arisen.

12. MISCELLANEOUS

12.1 Independence of Obligations

The Borrower and the Carveout Obligor shall be jointly, severally, fully and personally liable for any or all of the Obligations. The Lender shall be entitled to maintain an independent action against the Carveout Obligor regardless of whether the Lender has commenced or completed any action against the Borrower or the Property. The Carveout Obligor disclaims any status as beneficiaries of any obligation of the Lender to the Borrower to provide notice of default under the Loan Documents. If the Lender has initiated any action against the Borrower to enforce the Loan Documents, the Lender may join the Carveout Obligor or refrain from doing so, at the Lender’s sole and absolute discretion. The liability of the Carveout Obligor under this Agreement shall be reinstated with respect to any amount at any time paid to the Lender by the Borrower on account of the Obligations which shall thereafter be required to be restored or returned by the Lender upon the bankruptcy, insolvency or reorganization of the Borrower or the Carveout Obligor other than the party against whom the Lender has sought to enforce this Agreement, as though such amount had not been paid. Except as expressly agreed in writing by the Lender, the Obligations shall not be released, diminished, impaired, reduced or otherwise affected by (a) the reconveyance of the interest created by the Deed of Trust, (b) the consent by the Lender to any transfer of a direct or indirect interest in the Property (whether through sale of the Property, transfers of interests in the Borrower, or a change in the form of business organization of the Borrower), or (c) any forbearance by the Lender to exercise any rights under the Loan Documents; provided, however, that any written modification of the Loan Documents that affects the amount of the Indebtedness may be considered in ascertaining the amount of the Indebtedness for purposes of determining the amount of any Obligation that arises under Section 4 of this Agreement, absent fraud or material written misrepresentation in connection with such a modification.

12.2 Waiver of Jury Trial

ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT IS WAIVED BY THE BORROWER AND THE CARVEOUT OBLIGOR, AND IT IS AGREED BY THE BORROWER AND THE CARVEOUT OBLIGOR THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.

12.3 Offsets and Defenses

The liability of the Borrower and of the Carveout Obligor under this Agreement shall not be released, diminished, impaired, reduced or otherwise affected by any existing or future offset, claim, or defense of the Borrower or of the Carveout Obligor against the Lender.

12.4 Notices

In order for any demand, consent, approval or other communication to be effective under the terms of this Agreement, Notice must be provided under the terms of this Section. All Notices must be in writing. Notices may be (a) delivered by hand, (b) transmitted by facsimile (with a duplicate copy sent by first class mail, postage prepaid), (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by reputable overnight courier service, delivery charges prepaid. Notices shall be addressed as set forth below:

If to the Lender:

If to the Carveout Obligor:

NNN Apartment REIT, Inc.

c/o Triple Net Properties, LLC

1551 N. Tustin Ave., Suite 300

Santa Ana, California 92705

Attn: Shannon K. S. Johnson, CPA, CFO

Fax Number: (714) 881-2217

With a copy of Notice of Default or acceleration to:

McGuire Woods LLP

One James Center

901 E. Cary Street

Richmond, Virginia 23219

Attn: Nancy R. Little, Esq.

Fax Number: (804) 698-2101

If to the Borrower:

Apartment REIT Residences at Braemar, LLC

c/o Triple Net Properties, LLC

1606 Santa Rosa Drive, Suite 109

Richmond, Virginia 23229

Attn: Jorge Figueirdo

Fax Number: (804) 285-1376

With a copy of Notice of Default or acceleration to:

McGuire Woods LLP

One James Center

901 E. Cary Street

Richmond, Virginia 23219

Attn: Nancy R. Little, Esq.

Fax Number: (804) 698-2101

Notices delivered by hand or by overnight courier shall be deemed given when actually received or when refused by their intended recipient. Notices sent by facsimile will be deemed delivered when a legible copy has been received (provided receipt has been verified by telephone confirmation or one of the other permitted means of giving Notices under this Subsection). Mailed Notices shall be deemed given on the date of the first attempted delivery (whether or not actually received). Any party to this Agreement may change its address for Notice by giving at least fifteen (15) Business Days’ prior Notice of such change to the other parties.

12.5 Entire Agreement and Modification

This Agreement and the other Loan Documents embody the final, entire agreement of the parties relating to its subject matter and supersede any and all prior agreements, whether written or oral. This Agreement may not be contradicted or varied by evidence of any prior, contemporaneous, or subsequent oral agreements or discussions of the parties, and may be amended, waived, released or terminated only by a written instrument or instruments executed by the Lender. Any alleged amendment, revision, waiver, discharge, release or termination that is not so documented shall not be effective as to the Lender.

12.6 Counterparts

This Agreement may be executed in multiple counterparts, all of which taken together shall constitute one and the same Agreement.

12.7 Governing Law

12.8 Cumulative Remedies

Every right and remedy provided in this Agreement shall be cumulative of every other right or remedy of the Lender whether herein or by law conferred and may be enforced concurrently with any such right or remedy. No acceptance of performance of any Obligation as to which the Borrower or the Carveout Obligor shall be in Default, or waiver of particular or single performance of any obligation or observance of any covenant, shall be construed as a waiver of the obligation or covenant or as a waiver of any other Default then, theretofore or thereafter existing.

12.9 Severability

12.10 Reference to Particulars

12.11 Assignment

The Lender may assign its rights under this Agreement without Notice to any holder of the Note and assignee of the Lender’s rights under the Loan Documents.

[The remainder of this page left blank intentionally.]

IN WITNESS WHEREOF, the Borrower and the Carveout Obligor have caused this Agreement to be duly executed under seal as of the date first above written.

BORROWER:

APARTMENT REIT RESIDENCES AT BRAEMAR, LLC, a North Carolina limited liability company

BY: NNN Apartment REIT Holdings, L.P., a Virginia limited partnership, its sole member

By: NNN Apartment REIT, Inc.,

a Maryland corporation

By: /s/ Shannon K S Johnson
Print Name: Shannon K.S. Johnson Title:
Chief Financial Officer

CARVEOUT OBLIGOR:

NNN APARTMENT REIT, INC.,

a Maryland corporation

By: /s/ Shannon K S Johnson
Print Name: Shannon K.S. Johnson
Title: Chief Financial Officer

Assignment and Subordination of Management Agreement

This Assignment and Subordination of Management Agreement (this “Assignment”) is made as of the 29th day of June, 2007, by and among APARTMENT REIT RESIDENCES AT BRAEMAR, LLC, a North Carolina limited liability company (“Borrower”), TRIPLE NET PROPERTIES REALTY, INC., a California corporation (“Triple Net” or “Manager”) and TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, an Iowa corporation (“Lender”).

W I T N E S S E T H:

WHEREAS, Borrower, as the owner, and Triple Net, as the property manager, entered into that certain Management Agreement dated as of June 29, 2007 (the “Management Agreement”), with respect to a parcel of improved real property in Mecklenburg County, North Carolina (the “Property”), containing 160 multi-family apartment units and related amenities, the address of the rental office for which is located at 8010 Woodsedge Drive, Charlotte, North Carolina 28216;

WHEREAS, Lender made a loan (hereinafter referred to as the “Loan”) to Braemar Housing Limited Partnership, an Ohio limited partnership (“Original Borrower”), evidenced by a Secured Promissory Note in the principal face amount of $10,000,000.00 dated May 25, 2005, which Borrower, as the successor in title of Original Borrower, is assuming pursuant to the terms of a certain Loan Assumption and Modification Agreement of even date herewith among Borrower, Original Borrower, Lender and others (the “Assumption Agreement”; such Secured Promissory Note, as affected by the Assumption Agreement, collectively referred to as the “Note”),

WHEREAS, the Loan is secured by, inter alia, a Deed of Trust dated May 25, 2005, recorded in Deed Book 18849, Page 135, Registry of Mecklenburg County, North Carolina, encumbering the Property, as modified by that certain Loan Assumption and Modification Agreement dated of even date herewith (hereinafter referred to as the “Security Instrument”); and

WHEREAS, it is a condition of Lender’s execution of the Assumption Agreement that the Management Agreement be subordinated to the lien of the Security Instrument and be collaterally assigned to Lender;

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto covenant and agree as follows:

1. Borrower hereby collaterally assigns and transfers to Lender all of Borrower’s right, title, interest and privileges in the Management Agreement, together with any extensions or renewals thereof and subcontracts thereunder.

2. The assignment herein granted is given for the purpose of securing the performance by Borrower of all of its obligations and liabilities to Lender created or incurred under the Note, the Security Instrument or under any other instrument or document given to evidence, secure or support the Loan, whether now existing or hereafter arising, contracted or incurred (hereinafter collectively referred to as the “Loan Documents”).

3. Borrower will not terminate the Management Agreement, or modify or amend any material terms of the Management Agreement without the written consent of Lender.

4. Notwithstanding any presumption to the contrary, (i) so long as Lender has not succeeded to the interest of Borrower under the Management Agreement as herein provided, Lender shall not be obligated by reason of acceptance of the assignment herein granted to perform any obligation of Borrower under the Management Agreement, and (ii) Lender shall have no duty or obligation under the Management Agreement until such time as Lender gives Manager written notice of its election not to terminate the Management Agreement.

5. Borrower hereby represents and warrants to Lender, as a material inducement to Lender to accept the assignment, that:

(a) The Management Agreement is in full force and effect, free from any default, and has not been amended or modified;

(b) Borrower has made no prior assignment of any of Borrower’s rights under the Management Agreement and Borrower shall not make any such assignment; and

(c) Borrower has not done anything which might prevent Lender from or limit Lender in operating under any of the provisions hereof.

6. A “Default” under the Security Instrument or the Note shall constitute a “Default” hereunder.

7. Upon the occurrence of a Default, Borrower hereby authorizes Lender to give written notice to Manager of Borrower’s default, and, if Lender gives affirmative notice that it desires the benefits hereof, Lender shall be entitled to all benefits of Borrower under the Management Agreement.

8. The Management Agreement and any extension, renewal, replacement or modification thereof, and all of the right, title and interest (if any) of Manager in and to the Property are and shall be subject and subordinate to the Security Instrument and to any renewals, modifications or extensions thereof, and all rights of Manager, including but not limited to any right to collect any management fees, leasing fees or other amounts accrued prior to any foreclosure under the Security Instrument, are and shall be subject and subordinate to the rights and claims of Lender under the Security Instrument.

9. In the event of the acceleration of the Note or the foreclosure of the Security Instrument, or in the event Lender comes into possession of or acquires title to the Property by any other means arising out of a Default by Borrower, Lender may, at its option, upon notice to Manager, terminate the Management Agreement without obligation to Manager including, without limitation, liability for any management, leasing or other fees or other amounts claimed by Manager; provided, however, that at the option of Lender, Manager shall continue for a period determined by Lender, to perform all of its obligations under the Management Agreement and shall receive compensation as provided therein (excluding any compensation for or in connection with termination of the Management Agreement) until such time as Lender terminates the Management Agreement or a substitute manager shall have been approved by Lender and shall have commenced to manage the Property. Notwithstanding anything herein to the contrary, in the event Lender continues the Management Agreement, Lender shall be responsible only for obligations which first arise thereunder during the period Lender keeps the Management Agreement in force. Under no circumstances will Lender have any liability for any obligations under the Management Agreement accruing prior to or after the period during which Lender retains Manager pursuant to the Management Agreement or for any termination or similar charges provided for in the Management Agreement.

10. In the event Lender comes into possession of or acquires title to the Property as described in Paragraph 9 above and elects in writing not to terminate the Management Agreement as described in Paragraph 9 above, Manager agrees to attorn to Lender and be bound to Lender under all of the terms, covenants and conditions of the Management Agreement for the period commencing on the date when Lender succeeds to the interest of Borrower under the Management Agreement and ending with Lender’s termination thereof, with the same force and effect as if Lender were a party to the Management Agreement. Any such attornment shall be effective and self-operative as an agreement between Manager and Lender without the execution of any further instruments on the part of any party hereto. Nevertheless, Manager and Lender agree, upon the election of and written demand of Lender, to execute an instrument in confirmation of the foregoing provision.

11. Manager hereby certifies to Lender that the Management Agreement is in full force and effect, free from any default, and has not been amended or modified except to the extent, if any, described herein. Without limiting the foregoing, Manager warrants that it has received payment in full of all leasing commissions and similar compensation due in connection with all leases executed with respect to the Property.

12. Manager hereby agrees with Lender as follows:

(a) Manager shall serve upon Lender notice of (i) any alleged default by Borrower under the Management Agreement, (ii) any intention to terminate the Management Agreement pursuant to any of the provisions set forth therein, or (iii) any proposed amendment of the Management Agreement, along with a copy of such amendment.

(b) In the event Borrower defaults under any of the terms and conditions of the Management Agreement, Lender shall have the right, but not the obligation, to cure such default. Manager shall not take any action with respect to such default under the Management Agreement, including without limitation any action in order to terminate, rescind or void the Management Agreement or to withhold any payments thereunder, for a period of thirty days after the receipt of such written notice from Manager to Lender (provided that in the case of any default which cannot be cured by the payment of money and cannot with diligence be cured within such thirty-day period, if Lender shall proceed promptly to cure the same and thereafter shall prosecute the curing of such default with diligence and continuity, then the time within which such default may be cured shall be extended for such period as may be necessary to complete the curing of the same).

(c) In no event shall Manager terminate the Management Agreement while Lender is proceeding with the foreclosure of the Security Instrument or otherwise exercising its rights and/or remedies as a result of a default of Borrower under the Security Instrument, the Note or any related security instruments, except for the failure of Lender to perform its obligations pursuant to Paragraph 9 above.

(d) Notwithstanding anything to the contrary contained in the Management Agreement, from and after the occurrence of any Default by Borrower under any Loan Document, and for as long as such Default continues uncured, Manager shall not retain any sums in excess of the amount due and owing Manager as compensation to Manager under the Management Agreement. Any such excess sums received by Manager attributable to the period during which a Default exists shall be held by Manager in trust for Lender, and Manager shall deliver such excess sums to Lender immediately upon Manger’s receipt of notice from Lender of Borrower’s default.

13. Manager hereby agrees with Lender that if Lender shall succeed to the interest of Borrower under the Management Agreement, or if Lender shall give Manager notice of its intention to foreclose the Security Instrument and to come into possession of the Property, as provided above, Lender shall not be:

(a) liable for any omission of Borrower under the Management Agreement; or

(b) subject to any offsets or defenses which Manager might have against Borrower; or

(c) liable for any management fees or other amounts due to Manager from Borrower for any period prior to the date when Lender succeeds to the interest of Borrower under the Management Agreement; or

(d) bound by any amendment or modification of the Management Agreement made without Lender’s prior written consent.

14. All rights and remedies of Lender expressed herein are in addition to all other rights and remedies possessed by it, including those under any other Loan Document. No delay on the part of Lender in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Lender of any right or remedy shall preclude other or future exercises thereof or the exercise of any other right or remedy. No action of Lender permitted hereunder shall impair or affect the rights of Lender in and to the Management Agreement.

15. This Agreement shall bind and inure to the benefit of the parties hereto, their successors and assigns. The words “foreclosure” and “foreclosure sale” as used herein shall be deemed to include the acquisition of Borrower’s estate in the Property by voluntary deed (or assignment) in lieu of foreclosure, by power of sale, or otherwise. The word “Lender” shall include Lender as herein specifically named and any of its successors and assigns, including any person or entity who shall have succeeded to Borrower’s interest in the Property by, through or under foreclosure of the Security Instrument. The word “Borrower” shall include Borrower as herein specifically named and any of its successors and assigns.

16. This Agreement shall not be modified or amended except in a writing signed by all parties hereto. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter herein contained.

17. The use of the neuter gender in this Agreement shall be deemed to include any other gender, and words in the singular number shall be held to include the plural, when the context requires.

18. In order for any demand, consent, approval or other communication to be effective under the terms of this Agreement, “Notice” must be provided under the terms of this Section. All Notices must be in writing. Notices may be (a) delivered by hand, (b) transmitted by facsimile (with a duplicate copy sent by first class mail, postage prepaid), (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by reputable overnight courier service, delivery charges prepaid. Notices shall be addressed as set forth below:

If to Borrower:

Apartment REIT Residences at Braemar, LLC
c/o Triple Net Properties, LLC
1606 Santa Rosa Drive, Suite 109
Richmond, Virginia 23229
Attention: Jorge Figueiredo
Fax Number: (804) 285-1376

If to Lender:

Transamerica Occidental Life Insurance Company
c/o AEGON USA Realty Advisors, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-5443
Attention: Mortgage Loan Department
Reference: Loan # 89441
Fax Number: (319) 369-2277

If to Manager:

Triple Net Properties, LLC
1606 Santa Rosa Drive, Suite 109
Richmond, Virginia 23229
Attention: Jorge Figueiredo
Fax Number: (804) 285-1376

Notices delivered by hand or by overnight courier shall be deemed given when actually received or when refused by their intended recipient. Faxed Notices will be deemed delivered when a legible copy has been received (provided receipt has been verified by telephone confirmation or one of the other permitted means of giving Notices under this Section). Mailed Notices shall be deemed given on the date of the first attempted delivery (whether or not actually received). Any party to this Agreement may change its address for Notice by giving at least fifteen (15) Business Days’ (as defined in the Security Instrument) prior Notice of such change to the other parties.

19. This instrument shall be governed by, construed and enforced according to the laws of the State of North Carolina (without reference to any provision for choice of law). Wherever possible each provision of this instrument shall be interpreted in such a manner as to be effective and valid under applicable law, but if such provision of this instrument shall be prohibited by or invalidated under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this instrument.

20. This instrument may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute but a single instrument.

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

BORROWER:

APARTMENT REIT RESIDENCES AT BRAEMAR, LLC, a North Carolina limited company

By:
Name:
Title:

MANAGER:

TRIPLE NET PROPERTIES REALTY, INC., a California

corporation

By: , a , as

By:
Name:
Title:

[Signatures continue on following pages.]

LENDER:

TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, an Iowa corporation

By:

UNSECURED PROMISSORY NOTE (this “Note”)

$3,300,000

June 29, 2007 (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 Three Million Three Hundred Thousand Dollars ($3,300,000).

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 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 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 (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.

(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 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]

“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 La Point

Its:		Chief Financial Officer

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		August 1, 2007.

Maturity Date		December 29, 2007.

Interest Rate		6.85% per annum.

Default Interest Rate		The rate that is 2% per annum in excess of the Interest Rate.

[NNN Apartment REIT, Inc. logo]

Contact: Jill Swartz

NNN Realty Advisors, Inc.

1551 N. Tustin Ave., Suite 300

Santa Ana, CA 92705

714-667-8252 ext.251

jswartz@nnnrealtyadvisors.com

NNN APARTMENT REIT ACQUIRES
RESIDENCES AT BRAEMAR IN CHARLOTTE, NORTH CAROLINA

[photo omitted] Santa Ana, California, July 6, 2007 – NNN Apartment REIT, Inc. has acquired Residences at Braemar in Charlotte, North Carolina. The acquisition closed on June 29, 2007.

Residences at Braemar is a 160-unit multifamily community consisting of one two-story and seven three-story apartment buildings plus a community clubhouse on a 12 acre site. Completed in 2005, the property features a business center, 24-hour fitness center, swimming pool with spa, picnic and grilling areas, patios/balconies, and private wooded views. The property offers two bedroom/two bathroom and three bedroom/two bathroom units that range in size from 991 to 1,113 square feet. Residences at Braemar lies just two miles from the 1.2 million square foot Northlake Mall and within minutes of Interstate 77. The property is currently 99 percent leased.

“Charlotte is a high-growth, high-income market, and Residences at Braemar is a top-level multifamily asset,” explained Stanley J. Olander Jr., president and chief executive officer of NNN Apartment REIT. “The property is in the northern part of Charlotte, which is quickly developing, and will continue to experience tremendous growth with the completion of Interstate 485 later this year and the opening of a commuter rail line serving Charlotte’s northern corridor expected to be finished in 2012.”

According to information compiled by the Bureau of Labor Statistics, Charlotte is both the largest and fastest growing city in North Carolina by population, and has historically exhibited job and population growth at double the national average. Economy.com forecasts employment growth at approximately two percent per year and population growth at 40,000 per year through 2011. Additionally, the Palos Verdes, California-based Center for Real Estate Studies named Charlotte the top market for apartment investors in 2006.

NNN Apartment REIT offers a monthly distribution of 7.0 percent per annum, and is seeking to acquire properties in geographically-diverse markets throughout the United States that are poised for strong population and economic growth. As of June 29, 2007, NNN Apartment REIT has sold approximately 5.3 million shares of its common stock for approximately $52.5 million through its initial public offering, which began in the third quarter of 2006.

— MORE —

2 – 2 – 2 NNN Apartment REIT Acquires Residences at Braemar

NNN Realty Advisors, Inc., a nationwide commercial real estate asset management and services firm, is the sponsor of NNN Apartment REIT, Inc. NNN Realty Advisors and affiliates manage a growing portfolio of more than 35 million square feet of real estate, including approximately 7,600 apartment units, with a combined market value approaching $4.8 billion. NNN Realty Advisors 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 with respect to the future population, job growth and economic performance of Charlotte, North Carolina. Forward-looking statements are 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 economy of Charlotte, North Carolina; 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 our periodic reports, as filed with the Securities and Exchange Commission.

###


Maryland	000-52612	20-3975609
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

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


	NNN Apartment REIT, Inc.

July 6, 2007	By:	/s/ Stanley J. Olander, Jr.

		Name: Stanley J. Olander, Jr.
		Title: Chief Executive Officer and President


Exhibit No.		Description

10.1		Purchase and Sale Agreement by and between Braemar Housing Limited Partnership and Triple Net Properties, LLC entered into as of April 26, 2007
10.2		Assignment and Assumption of Real Estate Purchase Agreement by and between Triple Net Properties, LLC and Apartment REIT Residences at Braemar, LLC as of June 29, 2007
10.3		Loan Assumption and Modification Agreement by and between Apartment REIT Residences at Braemar, LLC, and Transamerica Occidental Life Insurance Company and is joined by Braemar Housing Limited Partnership, et al. made and entered into and effective as of June 29, 2007
10.4		Secured Promissory Note issued by Braemar Housing Limited Partnership in favor of Transamerica Occidental Life Insurance Company dated May 25, 2005
10.5		Deed of Trust, Security Agreement and Fixture Filing made and given by Braemar Housing Limited Partnership to J. Lindsay Stradley, Jr. as Trustee for Transamerica Occidental Life Insurance Company as of March 25, 2005
10.6		Absolute Assignment of Leases and Rents by Braemar Housing Limited Partnership in favor of Transamerica Occidental Life Insurance Company dated May 25, 2005
10.7		Supplemental Carveout Guarantee and Indemnity Agreement by NNN Apartment REIT, Inc. in favor of Transamerica Occidental Life Insurance Company dated June 29, 2007
10.8		Supplemental Environmental Indemnity Agreement by Apartment REIT Residences at Braemar, LLC and NNN Apartment REIT, Inc. in favor of Transamerica Occidental Life Insurance Company dated June 29, 2007
10.9		Assignment and Subordination of Management Agreement by Apartment REIT Residences at Braemar, LLC, Triple Net Properties Realty, Inc. and Transamerica Occidental Life Insurance Company dated June 29, 2007
10.10		Unsecured Promissory Note dated June 29, 2007 issued by NNN Apartment REIT Holdings, L.P. in favor of NNN Realty Advisors, Inc.
99.1		NNN Apartment REIT, Inc. Press Release dated July 6, 2007


Seller:		Braemar Housing Limited Partnership 3103 Camden Drive Troy, MI 48084 Attn: Philip Levin
With Copy to:		Hertz, Schram & Saretsky, P.C. 1760 S. Telegraph Road, Suite 300 Bloomfield Hills, MI 48302 Attn: Kenneth F. Silver, Esq.
Purchaser: With Copy to:		Triple Net Properties, LLC c/o ROC Realty Advisors, LLC 1606 Santa Rosa Road, Suite 109 Richmond, VA 23229 Attn: Gus R. Remppies McGuireWoods LLP One James Center 901 E. Cary Street Richmond, VA 23219 Attn: Nancy R. Little, Esq.


SELLER:	BRAEMAR HOUSING LIMITED
	PARTNERSHIP, an Ohio limited partnership
	By:	TREYBURN HOUSING, LLC, an Ohio limited liability company, its General Partner
		By: /s/ Phillip Levin Its: General Partner


Date of Report (Date of Earliest Event Reported):		June 29, 2007


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


PURCHASER:	TRIPLE NET PROPERTIES, LLC,
	a Virginia limited liability company
	By: Its:	/s/Richard Hutton 4/26/07 Executive Vice President


By: Name: Title:		/s/ Richard Hutton Richard Hutton Executive Vice President

			By: NNN Apartment REIT, Inc., a Maryland

			corporation, its general partner