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


SECTION			PAGE

SIGNATURE PAGE
EXHIBITS

EXHIBIT A	-	Legal Description of the Land
EXHIBIT A-1 -		Reserved
EXHIBIT B EXHIBIT C EXHIBIT D EXHIBIT E EXHIBIT F EXHIBIT G EXHIBIT H EXHIBIT I EXHIBIT J EXHIBIT K EXHIBIT L EXHIBIT M	- - - - - - - - - - - - - - - - - - - - - - -	Rent Roll Reserved Reserved Reserved Schedule of Contracts Reserved Form of Certification of Non-Foreign Status Form of Certificate Regarding Representations and Warranties Form of Bill of Sale Form of Contract Assignment Form of Lease Assignment Form of Notice to Tenants

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is entered into as of February 21, 2007, between FS TOWNE CROSSING, LTD., a Texas limited partnership (“Seller”) and TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company (“Purchaser”).

A. Seller owns that certain real property located in Tarrant County, State of Texas (the “State”), consisting of approximately 17.255 acres of land, commonly known as the Towne Crossing Apartments, and more particularly described on Exhibit A attached hereto and incorporated herein by this reference (the “Land”), together with the improvements located thereon, containing 268 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 or connected with 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 the inventory delivered as part of the Due Diligence Documents; and

(e) All intangible property used in connection with the foregoing, if any, including, without limitation, any trademarks, trade names (including, without limitation, the exclusive right to use the name Towne Crossing Apartments), and any contract rights, licenses (to the extent transferable), permits (to the extent transferable) and warranties (to the extent transferable), all as may be more particularly described in the Due Diligence Documents (the “Intangible Personal Property”). The Real Property, the Personal Property and the Intangible Personal Property are sometimes hereinafter collectively referred to as the “Property”.

The purchase price for the Property is Twenty Two Million Five Hundred Thousand and No/100 Dollars ($22,500,000.00) (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 all prorations and adjustments as provided herein.

Within two (2) business days of the execution of this Agreement, Purchaser shall deliver to LandAmerica, 8201 Preston Road, Suite 288, Dallas, Texas 75225, as escrow agent (the “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. 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 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.

(a) As soon as possible following the execution of this Agreement, Purchaser shall order, at Seller’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) The Due Diligence Documents include an existing survey of the Property (the “Survey”). As soon as possible following the execution of this Agreement, Purchaser shall order an update of the Survey sufficient to enable title company to amend the “areas and boundaries” exception to except only to “shortages in area” (the “Updated Survey”), showing, at Purchaser’s determination, 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 Federal Emergency Management Agency. The Updated Survey shall be certified as true and correct by the surveyor for the benefit of Seller, Purchaser and title company. Seller shall pay for the cost of updating the Survey to a current date. Purchaser shall pay for any additional surveying desired beyond what was included in the Survey, including any revisions to the form of certificate.

By the end of the Due Diligence Period (hereinafter defined), Purchaser shall notify (the “Title Notice”) Seller of any title exceptions or survey matters which adversely affect Purchaser’s use, or the marketability of title to, the Real Property (“Disapproved Matters”). All other title exceptions set forth in the Commitment or shown on the Survey or Updated Survey shall constitute the “Permitted Encumbrances”. Seller shall have the right, but not the obligation, to remove, or cause to be removed, all Disapproved Matters or, in the alternative, obtain title insurance in a form reasonably satisfactory to Purchaser insuring against the effect of such Disapproved Matters. Notwithstanding the foregoing, Seller shall be obligated to remove all monetary encumbrances. Within five (5) days of receipt of the Title Notice, Seller shall notify Purchaser in writing of any Disapproved Matters which Seller is unable or unwilling to cause to be removed or satisfactorily insured against. If Seller shall fail to give any such notice within such time, Seller shall be deemed to have given a notice stating that it will not cause any Disapproved Matters to be removed or satisfactorily insured against. Purchaser shall then, within five (5) days after Seller gives or is deemed to have given its notice, elect, by giving written notice to Seller, (i) to terminate this Agreement and have the Deposit returned to it, or (ii) to waive its disapproval of such exceptions or survey matters (such exceptions or survey matters shall then be deemed to be “Permitted Encumbrances”). Failure by the Purchaser to give the Seller said notice shall constitute a determination by Purchaser to terminate this Agreement for title or survey objections.

Seller hereby represents and warrants 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 Texas. 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. 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 received no notice from any governmental authority advising of a violation of any applicable building codes, environmental, zoning, subdivision, and land use laws, and other local, state and federal laws and regulations.

(c) (i) To Seller’s knowledge, the Due Diligence Documents (other than as to the Contracts and the Operating Statements) delivered to Purchaser pursuant to this Agreement, are true, correct and complete in all material respects, (ii) the Contracts and the Operating Statements delivered to Purchaser pursuant to this Agreement, are true, correct and complete in all material respects, (iii) to Seller’s knowledge, all certificate(s) of occupancy and warranties are in full force and effect, and (iv) to Seller’s knowledge, all contracts or 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 right of set-off except as disclosed in writing at the time of such delivery.

(d) The Rent Roll attached hereto as Exhibit B is true, correct and complete in all material respects. As of the Closing, the Rent Roll delivered at the Closing will be true, correct and complete in all material respects. To Seller’s knowledge, the copies of the Leases delivered to Purchaser are, in all material respects, true, correct and complete copies and 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. 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 in any material manner, 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 be included in the Due Diligence Documents. Those Contracts which cannot be terminated as of the Closing Date are designated as such on Exhibit F and are referred to herein as the “Non-Cancellable Contracts.” To Seller’s knowledge, the Contracts 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 in any material respect, 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) To Seller’s knowledge, and except as disclosed to Purchaser in writing as part of the Due Diligence Documents, there are no condemnation, environmental, zoning or other land-use regulation proceedings, either instituted or 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 in the Due Diligence Documents.

(g) Seller has received no notice advising that (i) any utility required by law 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) 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 or are due to be paid for in the ordinary course of business, and Seller shall cause to be discharged or bonded off all mechanics’ or materialmen’s liens arising from any labor or materials furnished to the Improvements prior to the Closing.

(i) Except for de minimus amounts of same as may be customarily found in apartment complexes and used in compliance with all applicable laws (such as cleaners, fuel, pesticides and the like), Seller does not use, treat, store or dispose of, and, to Seller’s knowledge, 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 Seller’s knowledge no asbestos or PCBs are contained in or stored on the Real Property. To Seller’s knowledge, there are no storage tanks located in, on or under the Real Property.

(j) 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 delivered to Purchaser, there are no pending insurance claims.

(k) Except as set forth in the Due Diligence Materials, there are no pending or, to 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 as part of the Due Diligence Documents, to Seller’s knowledge there are no litigation documents relating to any of the matters referred to in the preceding sentence.

(l) 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 remade 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 seven (7) months. To that end, Purchaser must notify Seller in writing of any claim of a breach of any representation or warranty on or before the date that is seven (7) months after the Closing. Any claim for a breach as to which Purchaser does not timely so notify Seller will be barred. Seller may attempt to cure the breach for a period of thirty (30) days after Seller receives the written notice. If Seller fails to cure the breach within the thirty (30) day cure period, Purchaser may file a pleading for recovery due to the breach in a court of competent jurisdiction on or before the date that is two (2) years after the Closing Date. Any suit that is not filed on or before that date will be barred. The provisions of this Section will survive the Closing.

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, 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 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 (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, pet 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, together with an aged delinquency report.

(ii) A statement of insurance coverage and premiums by policy type and copies of insurance certificates (or the actual policies, if available) for the fire, extended coverage, public liability insurance, flood insurance, if any, and any other 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 and capital improvements (the “Operating Statements”) for the calendar year 2006 and, to the extent available, the current year, copies of operating and capital budgets for the current fiscal year.

(iv) The Survey, and any “as built” plans and specifications of the Improvements, floor plans, site plans 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, ADA, zoning, termite seismic 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 third party 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”) together with a list of any Non-Cancellable 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, shall be made available at the Property and need not be actually delivered to Purchaser.

(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 written 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.

(xiii) Utility bills for the preceding twelve (12) months and a summary of all utility deposits.

(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 will either be made available to Purchaser at the Property or delivered to Purchaser.

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, on or before the expiration of the Due Diligence Period, 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 as aforesaid, any money or documents shall be returned to the party depositing the same, and thereafter this Agreement shall become null and void with no further obligation on the part of either party.

For a period of time expiring on April 5, 2007 (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, at Seller’s option, with a representative of Seller present) 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). Prior to entering upon the Land to make inspections, Purchaser shall provide and shall cause each third party making inspections to provide, to Seller liability insurance in the amount of $2,000,000 naming Seller as an additional insured. 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 may give written notice thereof to Seller and Escrow Agent prior to the expiration of the Due Diligence Period, the Initial 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 waiver by Purchaser to terminate this Agreement because of the unacceptability of these items.

Purchaser shall give Seller written notice of those Contracts, other than the Non-Cancellable 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, 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 Land and Improvements, dated the day of the Closing, with liability in the amount of the Purchase Price, subject only to the Permitted Encumbrances, together with such amendments and endorsements as Purchaser reasonably may require and as may be agreed upon with the Title Company prior to the expiration of the Due Diligence Period (the “Title Policy”).

(b) Seller shall have executed and delivered to Purchaser a certificate (the “Certificate”) in the form attached hereto as Exhibit I updating the representations and warranties of Seller through Closing, which Certificate Seller covenants to deliver unless new matters or knowledge of a defect arises, in which case Seller shall deliver a Certificate disclosing such matter and the representations and warranties shall be appropriately reformed to reflect any such disclosure. If the newly disclosed matter is material, Purchaser may then either (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, not to be unreasonably withheld, conditioned or delayed. If Purchaser has not notified Seller within three (3) 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 units vacated at least seven (7) days prior to Closing 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”). As to units vacated within seven (7) days of Closing, in lieu of making same ready, Seller shall have the right to give Purchaser a credit of $750 for each such unit and upon Purchaser’s assumption of responsibility for same, assign the tenant’s security deposit to Purchaser for such unit. After full execution of this Agreement and until the Closing, Seller shall maintain substantially 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 need 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(d) 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, excluding the Non-Cancellable Contracts. 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 material 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 included as part of the Due Diligence Documents; the amount of such fees or commissions due on an absolute basis prior to Closing but unpaid as of 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 in the Due Diligence Documents, 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. Purchaser agrees that it will, at any time and from time to time after the Closing, upon the reasonable request of Seller and at Seller’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 notice of violation issued by any governmental authorities with respect to the Property and received by Seller.

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

(a) A special 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 and matters arising by or through Purchaser.

(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 (the “Tenant Letters”), 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 in all material respects through the day preceding 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 the Escrow Agent to issue the Title Policy.

(d) 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 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 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 unforfeited or applied security and other Tenant deposits and interest due thereon, if any, shall be credited to Purchaser.

(c) If current bills for accrued general real estate, personal property and ad valorem taxes and assessments for the current tax year are not available, the same shall be prorated on the basis of the most recent assessed valuation and the most recent millage rate, re-prorated when actual figures are known.

(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 as soon as practical 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 the Escrow Agent on April 30, 2007 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. In addition to Purchaser’s extension rights set forth in Section 19(r) below, Purchaser shall have the right to extend the closing date for thirty (30) days upon (i) giving Seller notice to do so at least three (3) business days prior to the originally scheduled Closing Date and (ii) payment of an extension deposit (the “Extension Deposit”) of $150,000.

Seller shall pay the base cost of the title policy and Purchaser shall pay for any amendments and endorsements and any lender coverage. The costs of the Updated Survey shall be paid as provided above. The costs to record the Deed shall be allocated between Seller and Purchaser in accordance with local custom, as determined by the Escrow Agent. Purchaser shall pay for all due diligence expenses. 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) 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, not to be unreasonably withheld, conditioned or delayed.

(b) In the event that prior to the Closing there is any non-material damage to the Improvements, or any part thereof, Seller shall either repair or replace such damage prior to the Closing or credit Purchaser for the amount of the damage, in which case Purchaser shall accept the Improvements in their then condition and proceed with the Closing, and in either case Seller shall be entitled to retain all 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) 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, not to be unreasonably withheld, conditioned or delayed.

(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, not to be unreasonably withheld, conditioned or delayed.

(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 Two Hundred Thousand Dollars ($200,000), if the number of parking spaces is reduced or the entrances and entrance signs are relocated.

(f) In the event of material or non-material damage to the Improvements which is non-insured and Purchaser elects to proceed to Closing Purchaser shall receive a credit at Closing in the amount of the uninsured loss, provided, however, if the amount of the uninsured loss exceeds $200,000, the Seller shall have the right to terminate this Agreement and the Deposit shall be returned to Purchaser and any documents shall be returned to the party depositing the same.

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

(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 as liquidated damages, and Seller hereby specifically waives the right to seek specific performance of this Agreement by Purchaser.

(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. If specific performance is not available as a remedy due to Seller’s voluntary and intentional actions, such as conveying the property to a third party without notice of the contract, then upon termination by Purchaser pursuant to (ii) above, Seller shall reimburse Purchaser for its actual, out-of-pocket due diligence expenses, non-refundable fees and expenses paid to lenders, including but not limited to third party reports, attorneys’ fees, rate lock deposits, application fees and commitment fees.

(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 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 as a result of any legal action filed against Seller as a result of events arising at the Property from and after Closing and not caused by Seller; 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).

(a) Seller shall be solely responsible for brokerage commissions due Thompson Realty Corporation and Carbon Capital Management, LLC, each in the amount of .5% of the Purchase Price (the “Seller’s Broker”), which shall be due only in the event Closing occurs and not otherwise. Seller represents and warrants to Purchaser that no other 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, 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:


Seller:		c/o Parkwood Management Comany 1221 West Airport Freeway , Suite 113 Irving, Texas 75062 Attn: Mr. Evan Jacobson
With copy to:		Clifford L. Friedman, Esq. Smith, Stern, Friedman & Nelms, P.C. 6688 N. Central Expressway, Suite 550 Dallas, Texas 75206
Purchaser:		Triple Net Properties, LLC c/o ROC Realty Advisors, LLC 1606 Santa Rosa Road, Suite 109 Richmond, VA 23229 Attn: Gus R. Remppies
With Copy to:		David F. Belkowitz, Esq.

Hirschler Fleischer
The Edgeworth Building
2100 E. Cary Street
Richmond, VA 23223-7078

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 has 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.

(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. Except as to any such affiliate, or as provided for in Section 19(q) below, Purchaser may not otherwise assign this Agreement without Seller’s prior, written consent.

(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 (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 to a publicly registered company (“Registered Company”) promoted by the Purchaser, to which Seller hereby consents. 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:

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

Signed representation letter at the end of the field work in form reasonably acceptable to Seller and its counsel and accountants.

(r) This Agreement is executed concurrently with Purchase and Sale Agreements (the “Other Agreements”) between Purchaser and Northspring Park, LLC, El Dorado Apartments, LLC and San Marin Corpus Christi, Ltd., with respect to the Parks at Northgate Apartments, the Villas at El Dorado Apartments and the San Marin Apartments, respectively (collectively, the “Other Properties”). So long as Purchaser timely closes at least one of the Other Properties, Purchaser shall have the right to extend the Closing hereunder or under any of the remaining Other Agreements by up to ten (10) days per closing, so that as between this Agreement and the Other Agreements, the four closings shall occur approximately one every ten (10) days, or sooner. Notwithstanding the foregoing, however, Purchaser may not postpone Closing hereunder so that same occurs after the closing for the Parks at Northgate. Seller’s obligations under this Agreement are conditioned upon closing occurring under such Other Agreements. If the closing under any Other Agreement does not occur for reasons other than solely due to the default of the applicable seller thereunder, Seller shall have the right, but not the obligation, to terminate this Agreement. If under any such Other Agreement the seller thereunder is entitled to receive the Deposit (as such term is defined in the applicable Other Agreement), then Seller shall be entitled to receive the Deposit hereunder, and if under any such Other Agreement the Purchaser is entitled to receive the Deposit (as such term is defined in the applicable Other Agreement), then Purchaser shall be entitled to receive the Deposit hereunder.

(s) Either or both of Purchaser or Seller may structure this transaction as a like-kind exchange under Section 1031 of the Internal Revenue Code, whereby Purchaser completes a like-kind exchange by acquiring the Property as the exchange property or whereby Seller commences a like-kind exchange by selling the Property and thereafter acquiring exchange property. In either such event the parties agree to cooperate with each other, without any delay in the Closing and without cost, expense or liability to the cooperating party, in connection therewith. Such cooperation shall include the right to assign this Contract to a third-party accommodator; provided in such event the assigning party shall not be relieved of any liability or obligation hereunder.

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.

REINSTATEMENT OF AND FIRST AMENDMENT TO
AND JOINDER AND RATIFICATION OF
PURCHASE AND SALE AGREEMENT

THIS REINSTATMENT OF AND FIRST AMENDMENT TO AND JOINDER AND RATIFICATION OF PURCHASE AND SALE AGREEMENT (this “First Amendment”) is made as of June 8, 2007, by and between FS TOWNE CROSSING, L.P., a Texas limited partnership (the “FS Seller”), and FOUNTAIN GREEN, L.C., a Utah limited liability company (the “FG Seller”) (the FS Seller and the FG Seller are jointly referred to herein as the “Seller”), and TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company (“Purchaser”).

A. The FS Seller and Purchaser executed an Purchase and Sale Agreement dated February 21, 2007 (the “Contract”), pursuant to the terms and conditions of which the FS Seller agreed to convey and Purchaser agreed to purchase certain real estate situated in Mansfield, Tarrant County, Texas, as more particularly described therein (the “Property”).

B. The following parties own undivided interests as tenants in common in the Property:

C. Seller and Purchaser have agreed to make certain amendments, modifications and ratifications to the Contract as expressly set forth in this First Amendment.

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser hereby agree as follows:

1. Capitalized Terms. All capitalized terms used but not otherwise defined in this Amendment shall have the meanings ascribed to them in the Contract.

a. Section 1. Identification of Parties is amended to read in its entirety as follows:

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is entered into as of February 21, 2007, between FS TOWNE CROSSING, L.P., a Texas limited partnership, and FOUNTAIN GREEN, L.C., a Utah limited liability company (jointly, “Seller”), and TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company (“Purchaser”).

b. The first paragraph of Section 3 of the Contract is amended and restated as follows:

“The purchase price for the Property is Twenty One Million, Six Hundred Thousand and No/100 Dollars ($21,600,000) (the “Purchase Price”) and shall be paid to Seller by Purchaser (a) assuming the outstanding principal balance at Closing (hereinafter defined) of the existing loan in the original principal amount of $15,760,000 (“the “Loan”) made to Seller by Key Corp Real Estate Capital Markets, Inc. now held by Freddie Mac (the “Lender”), (b) paying the balance of the Purchase Price by wire transfer of immediately available funds at the Closing, net of all prorations and adjustments as provided herein and (c) paying the Seller for all escrow and reserves held by the Lender.”

c. SmartMoves® Contract Number S0301042 dated May 22, 2003, between Southwestern Bell Telephone, L.P. and FS Towne Crossing, L.P., as evidenced by Memorandum of Contract dated May 22, 2003 recorded August 5, 2003 in Volume 17021, Page 148 of the Real Property Records of Tarrant County, Texas, is a Non-Cancellable Contract, as defined in Section 5(e) of the Contract, and is to be listed on Exhibit F attached to the Contract.

(e) Purchaser acknowledges receipt of the loan documents evidencing and securing the Loan (the “Loan Documents”) and, subject to the matter referred to in Section 8(d) below, hereby approves same. Purchaser acknowledges that it has made application to Lender to assume the Loan, including paying all required fees and deposits and providing all required information.

(d) Approval by the Lender of the assumption of the Loan, the agreement of lender that publicly traded REIT shares of the assuming borrower’s limited partner may be freely transferred without violating due-on-sale provisions, and without any other changes in the terms of the Loan other than the substitution of guarantors/key principals.

e. It shall be a condition precedent to Seller’s obligation to consummate the purchase and sale transaction contemplated herein that Lender (i) consent to the transfer of the Property to Purchaser and the assumption of the Loan by Purchaser and (ii) release Seller and any affiliate of Seller, including Wendell A. Jacobson or any other individual guarantor, from any and all liability under the Loan Documents arising from any matter occurring on or after the Closing Date. In the event that such condition precedent is not satisfied, Seller shall give written notice thereof to the Purchaser and Escrow Agent, the Deposit shall be returned to the Purchaser and the Contract shall terminate and both Seller and Purchaser shall thereafter be relieved from any and all liability under the Contract except for the indemnification and hold harmless provisions contained in Section 7.

(m) An assumption agreement pursuant to which the Seller consents to Purchaser’s assumption of the Loan as required by Lender (the “Assumption Agreement”).

(e) The Assumption Agreement and such other documents required by Lender in connection with Purchaser’s assumption of the Loan, including the written agreement of any substitute guarantor.


i.		The first sentence of Section 13 is amended and restated as follows:
j.		“The purchase and sale contemplated herein shall close at the offices of the Escrow Agent within thirty (30) days after Lender’s approval of the Purchaser’s assumption of the Loan or at such other time, date and place as the parties shall mutually agree. If Lender has not approved the Purchaser’s assumption of the Loan (including the matters set forth in Sections 2(d) and (e) above) within sixty (60) days after the date hereof, either party shall have the right to terminate this Agreement and both Seller and Purchaser shall thereafter be relieved from any and all liability under the Contract except for the indemnification and hold harmless provisions contained in Section 7. If Purchaser shall be in default of any of its obligations hereunder, including those set forth in Section 14, the Deposit shall be paid to Seller. If Purchaser shall not be in default of any of its obligations hereunder, including those set forth in Section 14, the Deposit shall be paid to Purchaser.” Section 14 is amended to add the following sentence at the end of the Section:

Purchaser will be responsible for any costs and fees involved in assuming the Loan. Purchaser agrees to use best efforts to obtain the approval of the Lender, but if the Lender refuses to consent to the assumption then this Agreement shall terminate without liability of Seller or Purchaser to the other except for Purchaser’s indemnification obligations under Section 7 and, so long as Purchaser has complied with its obligations regarding loan assumption, the Deposit shall be returned to Purchaser.

3. Increase to the Deposit. Concurrent with the execution hereof, Purchaser shall deposit the sum of One Million Dollars ($1,000,000) (herein, the “Additional Earnest Money) with the Escrow Agent, which Additional Earnest Money shall be immediately released to the Seller. The Additional Earnest Money shall be a part of the Deposit and applied to the Purchase Price at Closing. All references in the Contract to Seller receiving the Deposit shall include retaining the Additional Earnest Money and all references in the Contract to Purchaser receiving a refund or return of the Deposit shall include the requirement of Seller to return the Additional Earnest Money to Purchaser.

4. Other Agreements. Section 19(r) of the Contract is hereby deleted. Section 19(q) of the Contract remains in effect.

5. Joinder and Ratification of FG Seller. FG Seller hereby joins in the Contract as a selling party as to a 18.21% undivided interest as tenant in common. FS Seller acknowledges and ratifies the Contract, as amended hereby, and all of its terms and provisions. FG Seller hereby advises Purchaser that it will either (a) convey its 18.21% undivided interest in the Property directly to Purchaser at Closing, or (b) reconvey its 18.21% undivided interest in the Property to FS Seller and FS Seller will convey the entire Property to Purchaser at Closing.

6. Due Diligence Period. Purchaser and Seller acknowledge that the Due Diligence Period has expired and the Initial Deposit is non-refundable to Purchaser, except in the event of a default by Seller, the failure of a Purchaser’s condition precedent, or a casualty or condemnation that permits the Purchaser or Seller to terminate the Contract.

7. Conflicts. In the event of any conflict between the terms of this First Amendment and the Contract, the terms of this First Amendment shall prevail.

8. Headings. The heading or captions of the paragraphs in this First Amendment are for convenience only and do not limit or expand the construction and intent of the contents of the respective paragraph.

9. Binding Effect. This First Amendment is binding upon and inures to the benefit of the parties and their respective successors and assigns, but this reference to assigns is not a consent to assignment by Purchaser.

10. Counterparts; Facsimile Signatures. This First Amendment may be executed in two or more counterparts, each of which is deemed an original and all of which together constitute one and the same instrument. Facsimile or electronic signatures are binding on the party providing them.

11. Ratification. The Contract as amended and modified by this First Amendment is ratified and confirmed by the parties and remains in full force and effect.

IN WITNESS WHEREOF, Seller and Purchaser have executed this First Amendment as of the date first above written.

Signature Page of Seller to First Amendment to and
Joinder and Ratification of Agreement of Purchase and Sale

Signature Page of Purchaser to First Amendment to and
Joinder and Ratification of Agreement of Purchase and Sale

By: /s/ Richard Hutton
Printed Name: Richard Hutton
Title: Executive Vice President

THIS ASSIGNMENT OF CONTRACT (the “Assignment”) is made as of the 29th day of

August, 2007 by Triple Net Properties, LLC, a Virginia limited liability company (“Assignor”) to Apartment REIT Towne Crossing, LP, a Texas limited partnership (“Assignee”).

Assignor and FS Towne Crossing, Ltd., a Texas limited partnership entered into that certain Purchase and Sale Agreement, dated February 21, 2007, as amended (as amended, the “Contract”) with respect to certain property known as Towne Crossing Apartments, located in Tarrant County, Texas, as more particularly described in the Contract. Assignor desires to assign all of its rights, title and interest in and to the Contract to Assignee.

FOR and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor hereby assigns all of its rights, title and interest in and to the Contract to Assignee.

Assignee by its execution of this Assignment hereby assumes all of Assignor’s obligations under the Contract.


ASSIGNOR:	TRIPLE NET PROPERTIES, LLC,
	a Virginia limited liability company
	By:	/s/ Jack Maurer
		Name:	Jack Maurer
		Title:	Executive Vice President
ASSIGNEE:	APARTMENT REIT TOWNE CROSSING, LP,
	a Texas limited partnership
	By:	Apartment REIT Towne Crossing GP, LLC,
		a Delaware limited liability company
	Its:	General Partner
		By:	NNN Apartment REIT Holdings, L.P.,
			a Virginia limited partnership
		Its:	Manager
			By:	NNN Apartment REIT, Inc.,
				a Maryland corporation
			Its:	General Partner
				By: Name: Its:	/s/ Andrea R. Biller Andrea R. Biller Secretary

When Recorded Mail to:
Sameer Upadhya, Esq.
Krooth & Altman LLP
1850 M Street NW
Suite 400
Washington, DC 20036

THIS ASSUMPTION AGREEMENT is made effective as of the 24th day of August, 2007, by and among FS TOWNE CROSSING, L.P., a Texas limited partnership (“Original Borrower”), BOWLER HOLDINGS, L.C., a Utah limited liability company (“Bowler”), FOUNTAIN GREEN, L.C., a Utah limited liability company (“Fountain Green”), APARTMENT REIT TOWNE CROSSING, LP, a Texas limited partnership (“New Borrower”), and the FEDERAL HOME LOAN MORTGAGE CORPORATION (“Noteholder”) and is acknowledged and consented to by WENDELL A. JACOBSON (“Original Guarantor”).

Original Borrower obtained a mortgage loan (the “Loan”) from KeyCorp Real Estate Capital Markets, Inc., an Ohio corporation (“Original Lender”), which loan is secured by certain Land and Improvements (the “Property”), located in Mansfield, Tarrant County, Texas. The Land is more particularly described in Exhibit A, attached to this Agreement.

Original Borrower executed a promissory note evidencing the Loan, dated as of October 31, 2005, in the original principal amount of $15,760,000.00, payable to Original Lender (the “Note”). The Original Guarantor guaranteed payment of certain amounts due under the Note by executing a Guaranty – Multistate dated as of October 31, 2005 (the “Original Guaranty”).

To secure repayment of the Loan, Original Borrower executed and delivered to Original Lender a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the “Security Instrument”) of even date with the Note, which is recorded in the Official Records in the County of Tarrant, State of Texas (the “Land Records”) in/under Instrument Number D205323652. Any capitalized terms used in this Agreement and not defined shall have the meaning ascribed to them in the Security Instrument.

The Note, Security Instrument and any other document executed by Original Borrower in connection with the Loan that will be assumed by New Borrower, all as listed on Exhibit B to this Agreement, are referred to collectively in this Agreement as the “Loan Documents”.

Original Lender endorsed the Note to the order of the Noteholder and by instrument dated as of October 31, 2005 filed for record on October 31, 2005 in the Land Records in/under Instrument Number D205323653 sold, assigned and transferred all right, title and interest of the Original Lender in and to the Security Instrument and the Loan Documents to the Noteholder. The Noteholder is now the owner and holder of the Note and the Loan is serviced by KeyCorp Real Estate Capital Markets, Inc., an Ohio corporation (the “Servicer”).

The Security Instrument was further modified by a Modification to Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of November 3, 2005 and recorded in the Land Records on November 9, 2005 in/under Instrument Number D205337539.

Original Borrower transferred 18.21% of its interest in the Property to Bowler on February 8, 2006 (“Unauthorized Transfer 1”), creating tenant-in-common ownership of the Property. Bowler transferred its 18.21% interest in the Property to Fountain Green on September 29, 2006 (“Unauthorized Transfer 2”). Original Borrower executed Unauthorized Transfer 1 and Original Borrower and Bowler executed Unauthorized Transfer 2 without obtaining prior approval from Noteholder as required by Section 21 of the Security Instrument. (Hereinafter, Bowler and Fountain Green shall be included in the definition of “Original Borrower”.)

Original Borrower has transferred or has agreed to transfer all of its right, title, and interest in and to the Property to New Borrower (the “Transfer”).

New Borrower has agreed to assume all of Original Borrower’s rights, obligations, and liabilities created or arising under the Loan Documents, with certain modifications, if any, as set forth in Exhibit C to this Agreement (the “Assumption”).

Subject to the full satisfaction of all conditions set forth below, the Noteholder has agreed to consent to New Borrower’s Assumption.

Original Borrower desires to be released by the Noteholder from any and all obligations and liabilities under the terms and provisions of the Loan Documents, and Noteholder has agreed to release Original Borrower from further liability (except as provided in Section 14 of this Agreement).

NOW, THEREFORE, in consideration of these premises, the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:

1. Assumption of Obligations. New Borrower covenants, promises and agrees that New Borrower, jointly and severally if more than one, will unconditionally assume and be bound by all terms, provisions, and covenants of the Loan Documents set forth in Exhibit B to this Agreement, as if New Borrower had been the original maker of the Loan Documents. New Borrower will pay all sums to be paid and perform each and every obligation to be performed by Original Borrower under and in accordance with the terms and conditions of the Loan Documents.

2. Affirmation by New Borrower. New Borrower agrees that the Loan Documents set forth in Exhibit B to this Agreement are and will be and remain in full force and effect, enforceable against New Borrower in accordance with their terms, except as modified by Exhibit C to this Agreement. The Property will remain subject to the lien, charge and encumbrance of the Security Instrument. Nothing contained in this Agreement or done pursuant to this Agreement will affect or be construed to affect the lien, charge, and encumbrance of the Security Instrument or the priority of the Security Instrument over other liens, charges and encumbrances. Nothing contained in this Agreement or done pursuant to this Agreement will release or be construed to release or affect the liability of any party or parties who may now or after the date of this Agreement be liable under or on account of the Note and the Security Instrument, except as expressly provided in this Agreement. New Borrower will be liable for the payment of all sums and the performance of every obligation required under the Loan Documents to the extent set forth in the Loan Documents as modified by this Agreement.

3. Subordination of Rights of Original Borrower and New Borrower. Any indebtedness of Original Borrower to New Borrower, or of New Borrower to Original Borrower, now or existing after the date of this Agreement, together with any interest on such debt, is hereby subordinated to any indebtedness of Original Borrower or New Borrower to the Noteholder under the Loan Documents. Any collection or receipts with respect to any such indebtedness of Original Borrower to New Borrower, or of New Borrower to Original Borrower, will be collected, enforced and received by New Borrower or Original Borrower (as applicable) in trust for the benefit of the Noteholder, and will be paid over to the Noteholder on account of the indebtedness of Original Borrower and New Borrower to the Noteholder, but without impairing or affecting in any manner the liability of Original Borrower or New Borrower under the other provisions of the Loan Documents and this Agreement. However, until the occurrence of an Event of Default under the Security Instrument, Original Borrower or New Borrower (as applicable) will be entitled to retain for its own account all payments made on account of the principal of and interest on any such indebtedness; provided no such payment is made more than ten (10) days in advance of the due date.
4. Modification of Note and Security Instrument. New Borrower and Noteholder agree that the provisions of the Loan Documents are modified as set forth on Exhibit C to this Agreement.

5. Replacement Reserve. New Borrower and Noteholder agree that a Replacement Reserve Account will be established with Servicer with payments to be made by New Borrower to such account in the amount of Three Thousand Nine Hundred Eight and No/100ths Dollars ($3,908.00) per month, in accordance with the terms and provisions of the Replacement Reserve Agreement to be executed by New Borrower and Noteholder on the same date as this Agreement. The failure of New Borrower to comply with the additional obligations contained in this Section will constitute an Event of Default under the Security Instrument, and the Noteholder will be entitled to exercise all remedies available to it under the terms of the Loan Documents. Original Borrower acknowledges and agrees that by executing this Agreement it relinquishes all right, title and interest it has or may have in the Replacement Reserve Account.

6. Repairs. No Repair Escrow is required. Original Borrower acknowledges and agrees that Noteholder is not holding any funds pursuant to the Repair Escrow, if any, executed by Original Borrower.

7. Tax and Insurance Escrow. On or prior to the execution of this Agreement, to ensure that sufficient funds are available for the payment of real estate taxes, fire, hazard insurance, or other insurance premiums, an escrow account will be established with Servicer, with payments to be made by New Borrower to such account in the amount required by Noteholder and/or Servicer. By execution of this Agreement, Original Borrower acknowledges and agrees that it relinquishes any right, title or interest it has or may have in any escrow account held by Servicer in connection with the Property.

8. Guaranty Requirements. On the date of execution of this Agreement, NNN APARTMENT REIT, INC., a Maryland corporation (jointly and severally if more than one, “New Guarantor”) will execute and deliver to Noteholder the appropriate version of the Guaranty (the “Guaranty”) under which the New Guarantor guarantees the full and punctual payment when due of the “Guaranteed Obligations” (as such term is defined in the Guaranty). The Guaranty will provide that New Guarantor is personally liable for zero percent (0%) of the outstanding principal balance of the Loan. New Guarantor automatically will become liable for one hundred percent (100%) of all amounts payable under the Loan Documents upon the occurrence of certain events more specifically set forth in the Guaranty.

9. Ratification of Original Guaranty. By signing the Acknowledgment and Consent to this Agreement where indicated below, the Original Guarantor:

ratifies the guaranty under which it guaranteed payments of certain amounts under the Loan Documents (the “Original Guaranty”) only to the extent that it guaranties payments of the Borrower’s liability under Section 18 (ENVIRONMENTAL HAZARDS) of the Security Instrument arising out of conditions existing on or before the date of this Agreement (“Preexisting Conditions”); and

agrees that Section 18 (ENVIRONMENTAL HAZARDS) of the Security Instrument as assumed by New Borrower and modified by this Agreement will continue to be guaranteed by the Original Guarantor as and to the full extent provided in the Original Guaranty for such Preexisting Conditions.

Noteholder hereby releases Original Guarantor from any and all liability under the Original Guaranty except to the extent that the Original Guaranty guarantees payment of the Original Borrower’s liability under Section 18 of the Security Instrument arising out of Preexisting Conditions.

As of the date of this Agreement, the amount of the unpaid indebtedness under the Note is Fifteen Million Three Hundred Sixty Six Thousand Three Hundred Sixty Two and 47/100ths Dollars ($15,366,362.47).

Interest at the rate set forth in the Note has been paid to Noteholder in full through and including August 1, 2007.

All of the representations and warranties in the Loan Documents are true as of the date on which Original Borrower executes this Agreement.

No Event of Default (or event which, with the giving of notice or the passage of time or both, would be an Event of Default) has occurred or is continuing under the Security Instrument.

Original Borrower has no claims, offsets, defenses, or counterclaims of any kind to its performance under, or Noteholder’s enforcement of, the Note and the other Loan Documents; and to the extent any such counterclaims, setoffs, defenses or other causes of action may exist, whether known or unknown, Original Borrower waives all such items. Original Borrower acknowledges that all of Noteholder’s actions in connection with the Loan have been in compliance with the terms of the applicable Loan Documents, and Original Borrower acknowledges and agrees that Noteholder has not breached or failed to perform any duty or obligation that Noteholder may owe Original Borrower.

There are no suits or actions threatened or pending against Original Borrower which affect the enforcement or validity of the Note, the Security Instrument and/or the Loan Documents.

11.

Additional Transfers. Notwithstanding the Noteholder’s consent to the Transfer of the Property to New Borrower, New Borrower understands and agrees that such consent will in no way limit or operate as a waiver of the Noteholder’s continuing rights under Section 21 of the Security Instrument.

12.

Continuing Obligations. New Borrower will execute, acknowledge and deliver Replacement Reserve Agreement and such other documents as Noteholder, or Servicer may require to document the Assumption described in this Agreement and to more fully effectuate the provisions of this Agreement. The failure of New Borrower to comply with the additional obligations contained in this Section will constitute an Event of Default under the Security Instrument, and the Noteholder will be entitled to exercise all remedies available to it under the terms of the Loan Documents.

To induce the Noteholder to consent to New Borrower’s Assumption, in addition to the covenants and agreements set forth in the Loan Documents, New Borrower agrees that it will comply with the Additional Obligations set forth on Exhibit D to this Agreement, if applicable.

The failure of New Borrower to comply with the Additional Obligations, if applicable, will constitute an Event of Default under the Security Instrument, and the Noteholder will be entitled to exercise all remedies available to it under the terms of the Loan Documents.

In reliance upon Original Borrower’s representations and warranties, the Noteholder releases Original Borrower from any and all obligations under the terms and provisions of the Loan Documents; provided, however, that Original Borrower is not released from any liability pursuant to Section 18 (ENVIRONMENTAL HAZARDS) of the Security Instrument arising out of conditions existing on or before the date of this Agreement (“Preexisting Conditions”).

If any material element of Original Borrower’s representations and warranties are materially false or misleading, this release will be canceled and Original Borrower will remain obligated under the Loan Documents as though there had been no release.

If at any time all or any part of any payment by Original Borrower which has been applied by the Noteholder to payment of the Loan on or prior to the date of this Agreement is or must be rescinded, repaid or returned by the Noteholder for any reason whatsoever (including, without limitation, the application of any bankruptcy, insolvency or other law), for purposes of this Agreement, to the extent that such payment is or must be rescinded, repaid or returned, such payment will be deemed to have continued to be due and payable, notwithstanding such application by the Noteholder and this Agreement will continue to be effective as to such payment as though such application by the Noteholder had not been made. Original Borrower and New Borrower will each remain liable to the Noteholder for the amount so rescinded, repaid, or returned to the same extent as if such amount had never originally been received by the Noteholder, notwithstanding any cancellation of the Note, release or satisfaction of the Security Instrument, or the cancellation of any other Loan Document.

15. Expenses. New Borrower’s execution of this Agreement will constitute New Borrower’s agreement to pay all expenses incurred by the Noteholder in connection with this Assumption, including without limitation the payment of any title endorsement costs, legal costs (including in-house legal costs) attorney’s fees, and assumption fees required by the Noteholder.

This Agreement will be binding upon and will inure to the benefit of the parties to the Agreement and their respective heirs, successors and permitted assigns.

Except as expressly modified by this Agreement, the Note, the Security Instrument and all other Loan Documents will be unchanged and remain in full force and effect, and are hereby expressly approved, ratified and confirmed. No provision of this Agreement that is held to be inoperative, unenforceable or invalid will affect the remaining provisions, and to this end all provisions of this Agreement are declared to be severable.

This Agreement may not be changed orally, but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

This Agreement will be construed in accordance with the laws of the jurisdiction in which the Property is located.

This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same document.

All notices given pursuant to the Agreement must be in writing and will be effectively given if personally delivered or, if mailed, postage prepaid, certified or registered mail, return receipt requested, to the addresses of the parties set forth below or to such other address as any party subsequently may designate in writing.

17. Executed Originals. An executed original of this Agreement will be (i) attached permanently to the Note as an amendment to the Note, and (ii) recorded in the Land Records as a modification to the Security Instrument.

18. State Specific Requirements. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS NEW BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date written above.

Address for Notice to Original Borrower:
P.O. Box 400; 400 North State Street
Fountain Green, Utah 84632

BEFORE ME, the undersigned, a Notary Public in and for said County and State, on this day personally appeared Wendell A. Jacobson, known to me to be the President of Management Solutions, Incorporated, a Texas corporation, the corporation that executed the foregoing instrument, and known to me to be general partner of FS Towne Crossing, L.P., a Texas limited partnership, that executed the foregoing instrument, and acknowledged to me that such corporation executed the same as such general partner and that such limited partnership executed the same for the purposes and consideration therein expressed.


/s/ Tina Stephensen Notary Public in and for the said County and State		[Seal] Tina Stephensen [Seal] Notary Public-State of Utah [Seal] 255 West Center POB 194 [Seal] Fountain Green, UT 84632 [Seal] Comm. Exp. 08-24-2010
My Commission Expires:		Printed Name of Notary:
08-24-2010		Tina Stephensen

BEFORE ME, the undersigned, a Notary Public in and for said County and State, on this day personally appeared R. Lynn Bowler, known to me to be the Manager of Bowler Holdings, L.C., the limited liability company that executed the foregoing instrument, and executed the same for the purposes and consideration therein expressed.


/s/ Kristy Wardle Notary Public in and for the said County and State		[Seal] Notary Public [Seal] Kristy Wardle [Seal] My Commission Expires [Seal] January 26. 2008
My Commission Expires:		Printed Name of Notary:
1-26-08		Kristy Wardle

BEFORE ME, the undersigned, a Notary Public in and for said County and State, on this day personally appeared R. Lynn Bowler known to me to be the Manager of Bowler Holdings, L.C., a Utah limited liability company, the limited liability company that executed the foregoing instrument, and known to me to be Managing Member of Fountain Green, L.C., a Utah limited liability company, that executed the foregoing instrument, and acknowledged to me that such limited liability company executed the same as such general partner and that such limited partnership executed the same for the purposes and consideration therein expressed.


/s/ Kristy Wardle Notary Public in and for the said County and State		[Seal] Notary Public [Seal] Kristy Wardle [Seal] My Commission Expires [Seal] January 26. 2008
My Commission Expires:		Printed Name of Notary:
1-26-08		Kristy Wardle


By:	APARTMENT REIT TOWNE CROSSING GP, LLC
	a Delaware limited liability company
	General Partner
	By:	NNN Apartment REIT Holdings, L.P.
		a Virginia limited partnership
		Manager
		By:	NNN Apartment REIT, Inc.
			a Maryland corporation
			General Partner
			By:	/s/ S. Jay Olander

Address for Notice to New Borrower:
c/o Triple Net Properties, LLC
1551 N. Tustin Avenue, Suite 300
Santa Ana, California 92705

BEFORE ME, the undersigned, a Notary Public in and for said City and Commonwealth, on this day personally appeared S. Jay Olander, known to me to be the Chief Executive Officer of NNN Apartment REIT, Inc., a Maryland corporation, the corporation that executed the foregoing instrument, and known to me to be general partner of NNN Apartment REIT Holdings, L.P., Manager of Apartment REIT Towne Crossing GP, LLC, general partner of Apartments REIT Towne Crossing, LP, that executed the foregoing instrument, and acknowledged to me that such corporation executed the same for the purposes and consideration therein expressed.


CONSENTED TO BY NOTEHOLDER:

FEDERAL HOME LOAN MORTGAGE CORPORATION, a corporation organized and existing under the laws of the Unit		ed States
By: Name: Title:		/s/ Ed Gagermeier Ed Gagermeier Manager – Multifamily Portfolio Services
Date:		8/28/07

Address for Notice to Noteholder:
8200 Jones Branch Drive
McLean, Virginia 22102

BEFORE ME, the undersigned, a Notary Public in and for said County and State, on this day personally appeared Ed Gagermeier known to me to be the Manager – MF PS of Federal Home Loan Mortgage Corporation, the corporation that executed the foregoing instrument, and executed the same for the purposes and consideration therein expressed.

[Seal] Leslie R. Gallahan
[Seal] Notary Public
[Seal] Commonwealth of Virginia
[Seal] My Commission Expires
[Seal] December 31, 2008
Notary Registration # 239709

Address for Notice to Original Guarantor:
P.O. Box 400; 400 North State Street
Fountain Green, Utah 84632

BEFORE ME, the undersigned, a Notary Public in and for said County and State, on this day personally appeared Wendell A. Jacobson, known to me to be the person(s) whose name(s) he subscribed to the foregoing instrument, and acknowledge to me that he executed the same for the purposes and consideration therein expressed.

BEFORE ME, the undersigned, a Notary Public in and for said City and Commonwealth, on this day personally appeared S. Jay Olander, known to me to be the Chief Executive Officer of NNN Apartment REIT, Inc., the corporation that executed the foregoing instrument, and known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that the same was the act of the said corporation and that he executed the same as the act of such corporation for the purposes and consideration therein expressed and in the capacity therein stated.

FOR VALUE RECEIVED, the undersigned (together with such party’s or parties’ successors and assigns, “Borrower”), jointly and severally (if more than one) promises to pay to the order of KEYCORP REAL ESTATE CAPITAL MARKETS, INC., an Ohio corporation, the principal sum of Fifteen Million Seven Hundred Sixty Thousand and No/100ths Dollars (US $15,760,000.00), with interest on the unpaid principal balance, as hereinafter provided.

"Adjustable Interest Rate” means the variable annual interest rate calculated for each Interest Adjustment Period so as to equal the Index Rate for such Interest Adjustment Period (truncated at the fifth (5^th) decimal place if necessary) plus the Margin.

"Amortization Period” means a period of 360 full consecutive calendar months.

"Base Recourse” means a portion of the Indebtedness equal to zero percent (0%) of the original principal balance of this Note.

"Business Day” means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business.

"Default Rate” means (i) during the Fixed Rate Period, an annual interest rate equal to four (4) percentage points above the Fixed Interest Rate; and (ii) during the Extension Period, a variable annual interest rate equal to four (4) percentage points above the Adjustable Interest Rate in effect from time to time. However, at no time will the Default Rate exceed the Maximum Interest Rate.

"Extended Maturity Date” means, if the Extension Period becomes effective pursuant to this Note, the earlier of (i) November 1, 2015, and (ii) the date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise pursuant to the Loan Documents or the exercise by Lender of any right or remedy thereunder.

"Extension Period” means the twelve (12) consecutive calendar months period commencing on the Scheduled Initial Maturity Date.

"Fixed Interest Rate” means the annual interest rate of five and four hundredths percent (5.04%).

"Fixed Rate Period” means the period beginning on the date of this Note and continuing through October 31, 2014.

"Index Rate” means, for any Interest Adjustment Period, the Reference Billâ Index Rate for such Interest Adjustment Period.

"Initial Maturity Date” means the earlier of (i) November 1, 2014 (the “Scheduled Initial Maturity Date”), and (ii) the date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise pursuant to the Loan Documents or the exercise by Lender of any right or remedy thereunder.

"Installment Due Date” means, for any monthly installment of interest only or principal and interest, the date on which such monthly installment is due and payable pursuant to Section 3 of this Note. The “First Installment Due Date” under this Note is December 1, 2005.

"Interest Adjustment Period” means each successive one calendar month period during the Extension Period and until the entire Indebtedness is paid in full.

"LIBOR Index” means the British Bankers Association’s (BBA) one (1) month LIBOR Rate for United States Dollar deposits, as displayed on the LIBOR Index Page used to establish the LIBOR Index Rate.

"LIBOR Index Rate” means, for any Interest Adjustment Period after the first Interest Adjustment Period, the BBA’s LIBOR Rate for the LIBOR Index released by the BBA most recently preceding the first day of such Interest Adjustment Period, as such LIBOR Rate is displayed on the LIBOR Index Page. The LIBOR Index Rate for the first Interest Adjustment Period means the British Bankers Association’s (BBA) LIBOR Rate for the LIBOR Index released by the BBA most recently preceding the first day of the month in which the first Interest Adjustment Period begins, as such LIBOR Rate is displayed on the LIBOR Index Page. “LIBOR Index Page” is the Bloomberg L.P., page “BBAM”, or such other page for the LIBOR Index as may replace page BBAM on that service, or at the option of Lender (i) the applicable page for the LIBOR Index on another service which electronically transmits or displays BBA LIBOR Rates, or (ii) any publication of LIBOR rates available from the BBA. In the event the BBA ceases to set or publish a LIBOR rate/interest settlement rate for the LIBOR Index, Lender will designate an alternative index, and such alternative index shall constitute the LIBOR Index Rate.

"Margin” means two and one-half (2.5) percentage points (250 basis points).

"Maturity Date” means the Extended Maturity Date unless pursuant to Section 3(f) of this Note the Extension Period does not or cannot become effective, in which case the Maturity Date means the Initial Maturity Date.

"Maximum Interest Rate” means the rate of interest that results in the maximum amount of interest allowed by applicable law.

"Prepayment Premium Period” means the period during which, if a prepayment of principal occurs, a prepayment premium will be payable by Borrower to Lender. The Prepayment Premium Period is the period from and including the date of this Note until but not including the first day of the Window Period. For this Note, the Prepayment Premium Period equals the Yield Maintenance Period.

"Reference Billsâ” means the unsecured general obligations of the Federal Home Loan Mortgage Corporation (“Freddie Mac”) designated by Freddie Mac as “Reference BillsâSecurities” and having original durations to maturity most comparable to the term of the Reference Bill Index, and issued by Freddie Mac at regularly scheduled auctions. In the event Freddie Mac shall at any time cease to designate any unsecured general obligations of Freddie Mac as “Reference Bills Securities”, then at the option of Lender (i) Lender may select from time to time another unsecured general obligation of Freddie Mac having original durations to maturity most comparable to the term of the Reference Bill Index and issued by Freddie Mac at regularly scheduled auctions, and the term “Reference Bills” as used in this Note shall mean such other unsecured general obligations as selected by Lender; or (ii) for any one or more Interest Adjustment Periods, Lender may use the applicable LIBOR Index Rate as the Index Rate for such Interest Adjustment Period(s).

"Reference Bill Index” means the one-month Reference Bills. One-month reference bills have original durations to maturity of approximately 30 days.

"Reference Bill Index Rate” means, for any Interest Adjustment Period after the first Interest Adjustment Period, the Money Market Yield for the Reference Bills as established by the Reference Bill auction conducted by Freddie Mac most recently preceding the first day of such Interest Adjustment Period, as displayed on the Reference Bill Index Page. The Reference Bill Index Rate for the first Interest Adjustment Period means the Money Market Yield for the Reference Bills as established by the Reference Bill auction conducted by Freddie Mac most recently preceding the first day of the month in which the first Interest Adjustment Period begins, as displayed on the Reference Bill Index Page. The “Reference Bill Index Page” is the Freddie Mac Debt Securities Web Page (accessed via the Freddie Mac internet site at www.freddiemac.com), or at the option of Lender, any publication of Reference Bills auction results available from Freddie Mac. However, if Freddie Mac has not conducted a Reference Bill auction within the 60-calendar day period prior to the first day of an Interest Adjustment Period, the Reference Bill Index Rate for such Interest Adjustment Period will be the LIBOR Index Rate for such Interest Adjustment Period.

"Remaining Amortization Period” means, at any point in time, the number of consecutive calendar months equal to the number of months in the Amortization Period minus the number of scheduled monthly installments of principal and interest that have elapsed since the date of this Note.

"Security Instrument” means the multifamily mortgage, deed to secure debt or deed of trust effective as of the effective date of this Note, from Borrower to or for the benefit of Lender and securing this Note.

"Treasury Security” means the 4.25% U.S. Treasury Security due November 2014.

"Yield Maintenance Period” means the period from and including the date of this Note until but not including the Scheduled Initial Maturity Date.

(b) Other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Security Instrument.

2. Address for Payment. All payments due under this Note shall be payable at KeyBank Real Estate Capital, P.O. Box 145404, Cincinnati, OH 45250, or such other place as may be designated by Notice to Borrower from or on behalf of Lender.

(a) During the Fixed Rate Period, interest will accrue on the outstanding principal balance of this Note at the Fixed Interest Rate, subject to the provisions of Section 8 of this Note. During the Extension Period, interest will accrue on the outstanding principal balance of this Note at the Adjustable Interest Rate, subject to the provisions of Section 8 of this Note.

(b) Interest under this Note shall be computed, payable and allocated on the basis of an actual/360 interest calculation schedule (interest is payable for the actual number of days in each month, and each month’s interest is calculated by multiplying the unpaid principal amount of this Note as of the first day of the month for which interest in being calculated by the Fixed Interest Rate (during the Fixed Rate Period) or the applicable Adjustable Interest Rate (during the Extension Period), dividing the product by 360, and multiplying the quotient by the number of days in the month for which interest is being calculated). For convenience in determining the amount of a monthly installment of principal and interest under this Note, Lender will use a 30/360 interest calculation payment schedule (each year is treated as consisting of twelve 30-day months). However, as provided above, the portion of the monthly installment actually payable as and allocated to interest will be based upon an actual/360 interest calculation schedule, and the amount of each installment attributable to principal and the amount attributable to interest will vary based upon the number of days in the month for which such installment is paid. Each monthly payment of principal and interest will first be applied to pay in full interest due, and the balance of the monthly payment paid by Borrower will be credited to principal.

(c) Unless disbursement of principal is made by Lender to Borrower on the first day of a calendar month, interest for the period beginning on the date of disbursement and ending on and including the last day of such calendar month shall be payable by Borrower simultaneously with the execution of this Note. If disbursement of principal is made by Lender to Borrower on the first day of a calendar month, then no payment will be due from Borrower at the time of the execution of this Note. The Installment Due Date for the first monthly installment payment under Section 3(d) of interest only or principal and interest, as applicable, will be the First Installment Due Date set forth in Section 1(a) of this Note. Except as provided in this Section 3(c) and in Section 10, accrued interest will be payable in arrears.

(d) Beginning on the First Installment Due Date, and continuing until and including the monthly installment due on the Initial Maturity Date, principal and accrued interest shall be payable by Borrower in consecutive monthly installments due and payable on the first day of each calendar month. The amount of the monthly installment of principal and interest payable pursuant to this Section 3(d) on an Installment Due Date shall be Eighty-Four Thousand Nine Hundred Eighty-Eight and 78/100ths Dollars ($84,988.78).

(e) Except as otherwise provided in this Section 3(e), all remaining Indebtedness, including all principal and interest, shall be due and payable by Borrower on the Initial Maturity Date. However, so long as (i) the Initial Maturity Date has not occurred prior to the Scheduled Initial Maturity Date, and (ii) no Event of Default or event or circumstance which, with the giving of notice or passage of time or both, could constitute an Event of Default exists on the Scheduled Initial Maturity Date, then the Extension Period automatically will become effective and the date for full payment of the Indebtedness automatically shall be extended until the Extended Maturity Date. If the Extension Period becomes effective, monthly installments of principal and interest or interest only will be payable during the Extension Period as provided in Section 3(f). Anything in Section 21 of the Security Instrument to the contrary notwithstanding, during the Extension Period, Borrower will not request that Lender consent to, and Lender will not consent to, a Transfer that, absent such consent, would constitute an Event of Default.

(f) If the Extension Period becomes effective, beginning on December 1, 2014, and continuing until and including the monthly installment due on the Extended Maturity Date, principal and accrued interest shall be payable by Borrower in consecutive monthly installments due and payable on the first day of each calendar month. The amount of the monthly installment of principal and interest payable pursuant to this Section 3(f) on an Installment Due Date shall be calculated so as to equal the monthly payment amount which would be payable on the Installment Due Date as if the unpaid principal balance of this Note as of the first day of the Interest Adjustment Period immediately preceding the Installment Due Date was to be fully amortized, together with interest thereon at the Adjustable Interest Rate in effect for such Interest Adjustment Period, in equal consecutive monthly payments paid on the first day of each calendar month over the Remaining Amortization Period.

(g) During the Extension Period, Lender shall provide Borrower with Notice, given in the manner specified in the Security Instrument, of the amount of each monthly installment due under this Note. However, if Lender has not provided Borrower with prior notice of the monthly payment due on any Installment Due Date, then Borrower shall pay on that Installment Due Date an amount equal to the monthly installment payment for which Borrower last received notice. If Lender at any time determines that Borrower has paid one or more monthly installments in an incorrect amount because of the operation of the preceding sentence, or because Lender has miscalculated the Adjustable Interest Rate or has otherwise miscalculated the amount of any monthly installment, then Lender shall give notice to Borrower of such determination. If such determination discloses that Borrower has paid less than the full amount due for the period for which the determination was made, Borrower, within 30 calendar days after receipt of the notice from Lender, shall pay to Lender the full amount of the deficiency. If such determination discloses that Borrower has paid more than the full amount due for the period for which the determination was made, then the amount of the overpayment shall be credited to the next installment(s) of interest only or principal and interest, as applicable, due under this Note (or, if an Event of Default has occurred and is continuing, such overpayment shall be credited against any amount owing by Borrower to Lender).

(h) All payments under this Note shall be made in immediately available U.S. funds.

(i) Any regularly scheduled monthly installment of interest only or principal and interest payable pursuant to this Section 3 that is received by Lender before the date it is due shall be deemed to have been received on the due date for the purpose of calculating interest due.

(j) Any accrued interest remaining past due for 30 days or more, at Lender’s discretion, may be added to and become part of the unpaid principal balance of this Note and any reference to “accrued interest” shall refer to accrued interest which has not become part of the unpaid principal balance. Any amount added to principal pursuant to the Loan Documents shall bear interest at the applicable rate or rates specified in this Note and shall be payable with such interest upon demand by Lender and absent such demand, as provided in this Note for the payment of principal and interest.

(k) In accordance with Section 14, interest charged under this Note cannot exceed the Maximum Interest Rate. If the Adjustable Interest Rate at any time exceeds the Maximum Interest Rate, resulting in the charging of interest hereunder to be limited to the Maximum Interest Rate, then any subsequent reduction in the Adjustable Interest Rate shall not reduce the rate at which interest under this Note accrues below the Maximum Interest Rate until the total amount of interest accrued hereunder equals the amount of interest which would have accrued had the Adjustable Interest Rate at all times been in effect.

4. Application of Payments. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, Lender may apply the amount received to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion. Borrower agrees that neither Lender’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender’s application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

5. Security. The Indebtedness is secured by, among other things, the Security Instrument, and reference is made to the Security Instrument for other rights of Lender as to collateral for the Indebtedness.

6. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, any prepayment premium payable under Section 10, and all other amounts payable under this Note and any other Loan Document, shall at once become due and payable, at the option of Lender, without any prior notice to Borrower (except if notice is required by applicable law, then after such notice). Lender may exercise this option to accelerate regardless of any prior forbearance. For purposes of exercising such option, Lender shall calculate the prepayment premium as if prepayment occurred on the date of acceleration. If prepayment occurs thereafter, lender shall recalculate the prepayment premium as of the actual prepayment date.

(a) If any monthly installment of interest or principal and interest or other amount payable under this Note or under the Security Instrument or any other Loan Document is not received in full by Lender (i) during the Fixed Rate Period, within ten (10) days after the installment or other amount is due, or (ii) during the Extension Period, within five (5) days after the installment or other amount is due, counting from and including the date such installment or other amount is due (unless applicable law requires a longer period of time before a late charge may be imposed, in which event such longer period shall be substituted), Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent (5%) of such installment or other amount due (unless applicable law requires a lesser amount be charged, in which event such lesser amount shall be substituted).

(b) Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan and that it is extremely difficult and impractical to determine those additional expenses. Borrower agrees that the late charge payable pursuant to this Section represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment. The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Section 8.

(a) So long as (i) any monthly installment under this Note remains past due for thirty (30) days or more or (ii) any other Event of Default has occurred and is continuing, then notwithstanding anything in Section 3 of this Note to the contrary, interest under this Note shall accrue on the unpaid principal balance from the Installment Due Date of the first such unpaid monthly installment or the occurrence of such other Event of Default, as applicable, at the Default Rate.

(b) From and after the Maturity Date, the unpaid principal balance shall continue to bear interest at the Default Rate until and including the date on which the entire principal balance is paid in full.

(c) Borrower acknowledges that (i) its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, (ii) during the time that any monthly installment under this Note is delinquent for thirty (30) days or more, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities; and (iii) it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any monthly installment under this Note is delinquent for thirty (30) days or more or any other Event of Default has occurred and is continuing, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk. Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of the Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan.

(a) Except as otherwise provided in this Section 9, Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of the Indebtedness or for the performance of any other obligations of Borrower under the Loan Documents and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such obligations shall be Lender’s exercise of its rights and remedies with respect to the Mortgaged Property and to any other collateral held by Lender as security for the Indebtedness. This limitation on Borrower’s liability shall not limit or impair Lender’s enforcement of its rights against any guarantor of the Indebtedness or any guarantor of any other obligations of Borrower.

(b) Borrower shall be personally liable to Lender for the amount of the Base Recourse, plus any other amounts for which Borrower has personal liability under this Section 9.

(c) In addition to the Base Recourse, Borrower shall be personally liable to Lender for the repayment of a further portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of the occurrence of any of the following events:

(i)

Borrower fails to pay to Lender upon demand after an Event of Default all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence. However, Borrower will not be personally liable for any failure described in this subsection (i) if Borrower is unable to pay to Lender all Rents and security deposits as required by the Security Instrument because of a valid order issued in a bankruptcy, receivership, or similar judicial proceeding.

(ii)

Borrower fails to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument. However, Borrower will not be personally liable for any failure described in this subsection (ii) if Borrower is unable to apply insurance or condemnation proceeds as required by the Security Instrument because of a valid order issued in a bankruptcy, receivership, or similar judicial proceeding.

(iii)

Borrower fails to comply with Section 14(g) or (h) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports.

(iv)

Borrower fails to pay when due in accordance with the terms of the Security Instrument the amount of any item below marked “Deferred”; provided however, that if no item is marked “Deferred”, this Section 9(c)(iv) shall be of no force or effect.

[Deferred] water and sewer charges (that could become a lien on the Mortgaged Property),

[Deferred] assessments or other charges (that could become a lien on the Mortgaged Property)

(d) In addition to the Base Recourse, Borrower shall be personally liable to Lender for:

(i)

the performance of all of Borrower’s obligations under Section 18 of the Security Instrument (relating to environmental matters);

(iii)

any costs and expenses incurred by Lender in connection with the collection of any amount for which Borrower is personally liable under this Section 9, including Attorneys’ Fees and Costs and the costs of conducting any independent audit of Borrower’s books and records to determine the amount for which Borrower has personal liability.

(e) All payments made by Borrower with respect to the Indebtedness and all amounts received by Lender from the enforcement of its rights under the Security Instrument and the other Loan Documents shall be applied first to the portion of the Indebtedness for which Borrower has no personal liability.

(f) Notwithstanding the Base Recourse, Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default:

(i)

Borrower’s ownership of any property or operation of any business not permitted by Section 33 of the Security Instrument;

(ii)

a Transfer (including, but not limited to, a lien or encumbrance) that is an Event of Default under Section 21 of the Security Instrument, other than a Transfer consisting solely of the involuntary removal or involuntary withdrawal of a general partner in a limited partnership or a manager in a limited liability company; or

(iii)

fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedness or any request for any action or consent by Lender.

(g) To the extent that Borrower has personal liability under this Section 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. To the fullest extent permitted by applicable law, in any action to enforce Borrower’s personal liability under this Section 9, Borrower waives any right to set off the value of the Mortgaged Property against such personal liability.

(a) Any receipt by Lender of principal due under this Note prior to the Maturity Date, other than principal required to be paid in monthly installments pursuant to Section 3, constitutes a prepayment of principal under this Note. Without limiting the foregoing, any application by Lender, prior to the Maturity Date, of any proceeds of collateral or other security to the repayment of any portion of the unpaid principal balance of this Note constitutes a prepayment under this Note.

(b) Borrower may voluntarily prepay all of the unpaid principal balance of this Note on a Business Day designated as the date for such prepayment in a Notice from Borrower to Lender given at least 30 days prior to the date of such prepayment. Unless otherwise expressly provided in the Loan Documents, Borrower may not voluntarily prepay less than all of the unpaid principal balance of this Note.

(c) Borrower acknowledges that Lender has agreed that principal may be prepaid other than on the last calendar day of a month only because, for the purposes of the accrual of interest, any prepayment received by Lender on any day other than the last calendar day of the month shall be deemed to have been received on the last calendar day of the month in which the prepayment occurs.

(d) In order to voluntarily prepay all or any part of the principal of this Note, Borrower must also pay to Lender, together with the amount of principal being prepaid, (i) all accrued and unpaid interest due under this Note, plus (ii) all other sums due to Lender at the time of such prepayment, plus (iii) any prepayment premium calculated pursuant to Section 10(e).

(e) Except as provided in Section 10(f), a prepayment premium shall be due and payable by Borrower in connection with any prepayment of principal under this Note during the Prepayment Premium Period. The prepayment premium shall be whichever is the greater of subsections (A) and (B) below:

(2)

the excess (if any) of the Monthly Note Rate over the Assumed Reinvestment Rate,

Monthly Note Rate: one-twelfth (1/12) of the Fixed Interest Rate, expressed as a decimal calculated to five digits.

Prepayment Date: in the case of a voluntary prepayment, the date on which the prepayment is made; in the case of the application by Lender of collateral or security to a portion of the principal balance, the date of such application.

Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate, as of the date 5 Business Days before the Prepayment Date, on the Treasury Security, as reported in The Wall Street Journal, expressed as a decimal calculated to five digits. In the event that no yield is published on the applicable date for the Treasury Security, Lender, in its discretion, shall select the non-callable Treasury Security maturing in the same year as the Treasury Security with the lowest yield published in The Wall Street Journal as of the applicable date. If the publication of such yield rates in The Wall Street Journal is discontinued for any reason, Lender shall select a security with a comparable rate and term to the Treasury Security. The selection of an alternate security pursuant to this Section shall be made in Lender’s discretion.

Present Value Factor: the factor that discounts to present value the costs resulting to Lender from the difference in interest rates during the months remaining in the Yield Maintenance Period, using the Assumed Reinvestment Rate as the discount rate, with monthly compounding, expressed numerically as follows:

(f) Notwithstanding any other provision of this Section 10, no prepayment premium shall be payable with respect to (i) any prepayment made during the Window Period, or (ii) any prepayment occurring as a result of the application of any insurance proceeds or condemnation award under the Security Instrument.

(g) Unless Lender agrees otherwise in writing, a permitted or required prepayment of less than the unpaid principal balance of this Note shall not extend or postpone the due date of any subsequent monthly installments or change the amount of such installments.

(h) Borrower recognizes that any prepayment of any of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from an Event of Default by Borrower, will result in Lender’s incurring loss, including reinvestment loss, additional expense and frustration or impairment of Lender’s ability to meet its commitments to third parties. Borrower agrees to pay to Lender upon demand damages for the detriment caused by any prepayment, and agrees that it is extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges and agrees that the formula for calculating prepayment premiums set forth in this Note represents a reasonable estimate of the damages Lender will incur because of a prepayment. Borrower further acknowledges that any lockout and the prepayment premium provisions of this Note are a material part of the consideration for the Loan, and that the terms of this Note are in other respects more favorable to Borrower as a result of the Borrower’s voluntary agreement to the lockout and prepayment premium provisions.

11. Costs and Expenses. To the fullest extent allowed by applicable law, Borrower shall pay all expenses and costs, including Attorneys’ Fees and Costs incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

12. Forbearance. Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy. The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment. Enforcement by Lender of any security for Borrower’s obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

13. Waivers. Borrower and all endorsers and guarantors of this Note and all other third party obligors waive presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness.

14. Loan Charges (Texas Only). Borrower and Lender intend at all times to comply with the law of the State of Texas governing the Maximum Interest Rate or maximum amount of interest payable on or in connection with this Note and the Indebtedness (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law). If the applicable law is ever judicially interpreted so as to render usurious any amount payable under this Note or under any other Loan Document, or contracted for, charged, taken, reserved or received with respect to the Indebtedness, or of acceleration of the maturity of this Note, or if any prepayment by Borrower results in Borrower having paid any interest in excess of that permitted by any applicable law, then Borrower and Lender expressly intend that all excess amounts collected by Lender shall be applied to reduce the unpaid principal balance of this Note (or, if this Note has been or would thereby be paid in full, shall be refunded to Borrower), and the provisions of this Note, the Security Instrument and any other Loan Documents immediately shall be deemed reformed and the amounts thereafter collectible under this Note or any other Loan Document reduced, without the necessity of the execution of any new documents, so as to comply with any applicable law, but so as to permit the recovery of the fullest amount otherwise payable under this Note or any other Loan Document. The right to accelerate the Maturity Date of this Note does not include the right to accelerate any interest, which has not otherwise accrued on the date of such acceleration, and Lender does not intend to collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Lender for the use, forbearance or detention of the Indebtedness shall, to the extent permitted by any applicable law, be amortized, prorated, allocated and spread throughout the full term of the Indebtedness until payment in full so that the rate or amount of interest on account of the Indebtedness does not exceed the applicable usury ceiling. Notwithstanding any provision contained in this Note, the Security Instrument or any other Loan Document that permits the compounding of interest, including any provision by which any accrued interest is added to the principal amount of this Note, the total amount of interest that Borrower is obligated to pay and Lender is entitled to receive with respect to the Indebtedness shall not exceed the amount calculated on a simple (i.e., non-compounded) interest basis at the maximum rate on principal amounts actually advanced to or for the account of Borrower, including all current and prior advances and any advances made pursuant to the Security Instrument or other Loan Documents (such as for the payment of taxes, insurance premiums and similar expenses or costs).

15. Commercial Purpose. Borrower represents that Borrower is incurring the Indebtedness solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family, household, or agricultural purposes.

16. Counting of Days. Except where otherwise specifically provided, any reference in this Note to a period of “days” means calendar days, not Business Days.

17. Governing Law. This Note shall be governed by the law of the Property Jurisdiction.

18. Captions. The captions of the Sections of this Note are for convenience only and shall be disregarded in construing this Note.

(a) All Notices, demands and other communications required or permitted to be given pursuant to this Note shall be given in accordance with Section 31 of the Security Instrument.

(b) Any modification or amendment to this Note shall be ineffective unless in writing signed by the party sought to be charged with such modification or amendment; provided, however, that in the event of a Transfer under the terms of the Security Instrument that requires Lender’s consent, any or some or all of the Modifications to Multifamily Note set forth in Exhibit A to this Note may be modified or rendered void by Lender at Lender’s option, by Notice to Borrower and the transferee, as a condition of Lender’s consent.

20. Consent to Jurisdiction and Venue. Borrower agrees that any controversy arising under or in relation to this Note may be litigated in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have jurisdiction over all controversies that shall arise under or in relation to this Note. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. However, nothing in this Note is intended to limit any right that Lender may have to bring any suit, action or proceeding relating to matters arising under this Note in any court of any other jurisdiction.

21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

ATTACHED EXHIBIT. The Exhibit noted below, if marked with an “X” in the space provided, is attached to this Note:

IN WITNESS WHEREOF, and in consideration of the Lender’s agreement to lend Borrower the principal amount set forth above, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative.

Prepared by, and after recording
return to:
Sameer Upadhya, Esq.
Krooth & Altman LLP
1850 M Street, NW, Suite 400
Washington, DC 20036

MULTIFAMILY DEED OF TRUST,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT AND FIXTURE FILING

The following must appear in 12 point Times New Roman font (or the equivalent) on the first page of any recorded document:

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

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT AND FIXTURE FILING (the “Instrument”) is made to be effective as of this 31^st day of October, 2005, by FS TOWNE CROSSING, L.P., a limited partnership organized and existing under the laws of Texas, whose address is P.O. Box 400, 400 N. State Street, Fountain Green, Utah 84632, as trustor (“Borrower”), to SAMEER UPADHYA, ESQUIRE, as trustee (“Trustee”), for the benefit of KEYCORP REAL ESTATE CAPITAL MARKETS, INC., a corporation organized and existing under the laws of Ohio, whose address is 127 Public Square, Cleveland, Ohio 44114, as beneficiary (“Lender”). Borrower’s organizational identification number, if applicable, is 800198578.

Borrower, in consideration of the Indebtedness and the trust created by this Instrument, irrevocably grants, conveys and assigns to Trustee, in trust, with power of sale, the Mortgaged Property, including the Land located in Tarrant County, State of Texas and described in Exhibit A attached to this Instrument. To have and to hold the Mortgaged Property unto Trustee, Trustee’s successor in trust and Trustee’s assigns forever.

TO SECURE TO LENDER the repayment of the Indebtedness evidenced by Borrower’s Multifamily Note payable to Lender, dated as of the date of this Instrument, and maturing on November 1, 2015 (the "Maturity Date”), in the principal amount of $15,760,000.00, and all renewals, extensions and modifications of the Indebtedness, and the performance of the covenants and agreements of Borrower contained in the Loan Documents.

Borrower warrants and represents that Borrower is lawfully seized of the Mortgaged Property and has the right, power and authority to grant, convey and assign the Mortgaged Property, and that the Mortgaged Property is unencumbered, except as shown on the schedule of exceptions to coverage in the title policy issued to and accepted by Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender’s interest in the Mortgaged Property (the "Schedule of Title Exceptions”). Borrower covenants that Borrower will warrant and defend generally the title to the Mortgaged Property against all claims and demands, subject to any easements and restrictions listed in the Schedule of Title Exceptions.

Covenants. In consideration of the mutual promises set forth in this Instrument, Borrower and Lender covenant and agree as follows:

1. DEFINITIONS. The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings:

(a) "Attorneys’ Fees and Costs” means (i) fees and out-of-pocket costs of Lender’s and Loan Servicer’s attorneys, as applicable, including costs of Lender’s and Loan Servicer’s in-house counsel, support staff costs, costs of preparing for litigation, computerized research, telephone and facsimile transmission expenses, mileage, deposition costs, postage, duplicating, process service, videotaping and similar costs and expenses; (ii) costs and fees of expert witnesses, including appraisers; and (iii) investigatory fees.

(b) "Borrower” means all persons or entities identified as “Borrower” in the first paragraph of this Instrument, together with their successors and assigns.

(c) "Business Day” means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business.

(d) "Collateral Agreement” means any separate agreement between Borrower and Lender for the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to assure the completion of repairs or improvements specified in that agreement, or assuring reduction of the outstanding principal balance of the Indebtedness if the occupancy of or income from the Mortgaged Property does not increase to a level specified in that agreement, or any other agreement or agreements between Borrower and Lender which provide for the establishment of any other fund, reserve or account.

(e) "Controlling Entity” means an entity which owns, directly or indirectly through one or more intermediaries, (i) a general partnership interest or a Controlling Interest of the limited partnership interests in Borrower (if Borrower is a partnership or joint venture), (ii) a manager’s interest in Borrower or a Controlling Interest of the ownership or membership interests in Borrower (if Borrower is a limited liability company), (iii) a Controlling Interest of any class of voting stock of Borrower (if Borrower is a corporation), (iv) a trustee’s interest or a Controlling Interest of the beneficial interests in Borrower, or (v) a managing partner’s interest or a Controlling Interest of the partnership interests in Borrower (if Borrower is a limited liability partnership).

(f) "Controlling Interest” means (i) 51 percent or more of the ownership interests in an entity, or (ii) a percentage ownership interest in an entity of less than 51 percent, if the owner(s) of that interest actually direct(s) the business and affairs of the entity without the requirement of consent of any other party. The Controlling Interest shall be deemed to be 51 percent unless otherwise stated in Exhibit B.

(g) "Environmental Permit” means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property.

(h) "Event of Default” means the occurrence of any event listed in Section 22.

(i) "Fixtures” means all property owned by Borrower which is so attached to the Land or the Improvements as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators, installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention, or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm windows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

(j) "Governmental Authority” means any board, commission, department or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property.

(l) "Hazardous Materials” means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls (“PCBs”) and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any federal, state or local authority; any substance that requires special handling and any other material or substance now or in the future that (i) is defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” by or within the meaning of any Hazardous Materials Law, or (ii) is regulated in any way by or within the meaning of any Hazardous Materials Law.

(m) "Hazardous Materials Laws” means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future and including all amendments, that relate to Hazardous Materials or the protection of human health or the environment and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 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 Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101 et seq., and their state analogs.

(n) "Impositions” and “Imposition Deposits” are defined in Section 7(a).

(o) "Improvements” means the buildings, structures, improvements, and alterations now constructed or at any time in the future constructed or placed upon the Land, including any future replacements and additions.

(p) "Indebtedness” means the principal of, interest at the fixed or variable rate set forth in the Note on, and all other amounts due at any time under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances as provided in Section 12 to protect the security of this Instrument.

(q) "Initial Owners” means, with respect to Borrower or any other entity, the persons or entities that (i) on the date of the Note, or (ii) on the date of a Transfer to which Lender has consented, own in the aggregate 100 percent of the ownership interests in Borrower or that entity.

(s) "Leases” means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.

(t) "Lender” means the entity identified as “Lender” in the first paragraph of this Instrument, or any subsequent holder of the Note.

(u) "Loan Documents” means the Note, this Instrument, all guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs, the MMP and any other documents now or in the future executed by Borrower, any guarantor or any other person in connection with the loan evidenced by the Note, as such documents may be amended from time to time.

(v) "Loan Servicer” means the entity that from time to time is designated by Lender to collect payments and deposits and receive Notices under the Note, this Instrument and any other Loan Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender. Unless Borrower receives Notice to the contrary, the Loan Servicer is the entity identified as “Lender” in the first paragraph of this Instrument.

(w) "MMP” means a moisture management plan to control water intrusion and prevent the development of Mold or moisture at the Mortgaged Property throughout the term of this Instrument. At a minimum, the MMP must contain a provision for (i) staff training, (ii) information to be provided to tenants, (iii) documentation of the plan, (iv) the appropriate protocol for incident response and remediation and (v) routine, scheduled inspections of common space and unit interiors.

(x) "Mold” means mold, fungus, microbial contamination or pathogenic organisms.

(y) "Mortgaged Property” means all of Borrower’s present and future right, title and interest in and to all of the following:

(v)

all current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, easements, tenements, rights-of-way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses, and appurtenances related to or benefiting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated;

(vi)

all proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the insurance pursuant to Lender’s requirement;

(vii)

all awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from condemnation proceedings or the total or partial taking of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof;

(viii)

all contracts, options and other agreements for the sale of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations;

(ix)

all proceeds from the conversion, voluntary or involuntary, of any of the above into cash or liquidated claims, and the right to collect such proceeds;

(xi)

all earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the loan secured by this Instrument and, if Borrower is a cooperative housing corporation, maintenance charges or assessments payable by shareholders or residents;

(xiii)

all refunds or rebates of Impositions by any municipal, state or federal authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Instrument is dated);

(xiv)

all tenant security deposits which have not been forfeited by any tenant under any Lease and any bond or other security in lieu of such deposits; and

(xv)

all names under or by which any of the above Mortgaged Property may be operated or known, and all trademarks, trade names, and goodwill relating to any of the Mortgaged Property.

(z) "Note” means the Multifamily Note described on page 1 of this Instrument, including all schedules, riders, allonges and addenda, as such Multifamily Note may be amended from time to time.

(i)

accounts (including deposit accounts) of Borrower related to the Mortgaged Property;

(ii)

equipment and inventory owned by Borrower, which are used now or in the future in connection with the ownership, management or operation of the Land or Improvements or are located on the Land or Improvements, including furniture, furnishings, machinery, building materials, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software);

(iii)

other tangible personal property owned by Borrower which are used now or in the future in connection with the ownership, management or operation of the land or Improvements or are located on the Land or in the Improvements, including ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances (other than Fixtures);

(v)

any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements;

(vi)

all other intangible property, general intangibles and rights relating to the operation of, or used in connection with, the Land or the Improvements, including all governmental permits relating to any activities on the Land and including subsidy or similar payments received from any sources, including a governmental authority; and

(dd) "Rents” means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due, or to become due, and deposits forfeited by tenants.

(ee) "Taxes” means all taxes, assessments, vault rentals and other charges, if any, whether general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a lien on the Land or the Improvements.

(a) This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subjected to a security interest under the Uniform Commercial Code, whether such Mortgaged Property is owned now or acquired in the future, and all products and cash and non-cash proceeds thereof (collectively, “UCC Collateral”), and Borrower hereby grants to Lender a security interest in the UCC Collateral. Borrower hereby authorizes Lender to prepare and file financing statements, continuation statements and financing statement amendments in such form as Lender may require to perfect or continue the perfection of this security interest and Borrower agrees, if Lender so requests, to execute and deliver to Lender such financing statements, continuation statements and amendments. Borrower shall pay all filing costs and all costs and expenses of any record searches for financing statements and/or amendments that Lender may require. Without the prior written consent of Lender, Borrower shall not create or permit to exist any other lien or security interest in any of the UCC Collateral.

(b) Unless Borrower gives Notice to Lender within 30 days after the occurrence of any of the following, and executes and delivers to Lender modifications or supplements of this Instrument (and any financing statement which may be filed in connection with this Instrument) as Lender may require, Borrower shall not (i) change its name, identity, structure or jurisdiction of organization; (ii) change the location of its place of business (or chief executive office if more than one place of business); or (iii) add to or change any location at which any of the Mortgaged Property is stored, held or located.

(c) If an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured party under the Uniform Commercial Code, in addition to all remedies provided by this Instrument or existing under applicable law. In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order, without in any way affecting the availability of Lender’s other remedies.

(d) This Instrument constitutes a financing statement with respect to any part of the Mortgaged Property that is or may become a Fixture, if permitted by applicable law.

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all Rents. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action on the part of Borrower. Promptly upon request by Lender, Borrower agrees to execute and deliver such further assignments as Lender may from time to time require. Borrower and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only. For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the Mortgaged Property. However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b) After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender. However, until the occurrence of an Event of Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other amounts then due and payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs and expenses of managing, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums (to the extent not included in Imposition Deposits), tenant improvements and other capital expenditures. So long as no Event of Default has occurred and is continuing, the Rents remaining after application pursuant to the preceding sentence may be retained by Borrower free and clear of, and released from, Lender’s rights with respect to Rents under this Instrument. From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, or by a receiver, Borrower’s license to collect Rents shall automatically terminate and Lender shall without Notice be entitled to all Rents as they become due and payable, including Rents then due and unpaid. Borrower shall pay to Lender upon demand all Rents to which Lender is entitled. At any time on or after the date of Lender’s demand for Rents, (i) Lender may give, and Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of the Mortgaged Property instructing them to pay all Rents to Lender, (ii) no tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and (iii) no tenant shall be obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a notice. Any such notice by Lender shall be delivered to each tenant personally, by mail or by delivering such demand to each rental unit. Borrower shall not interfere with and shall cooperate with Lender’s collection of such Rents.

(c) Borrower represents and warrants to Lender that Borrower has not executed any prior assignment of Rents (other than an assignment of Rents securing any prior indebtedness that is being assigned to Lender, or paid off and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not performed, and Borrower covenants and agrees that it will not perform, any acts and has not executed, and shall not execute, any instrument which would prevent Lender from exercising its rights under this Section 3, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents. Borrower shall not collect or accept payment of any Rents more than two months prior to the due dates of such Rents.

(d) If an Event of Default has occurred and is continuing, Lender may, regardless of the adequacy of Lender’s security or the solvency of Borrower and even in the absence of waste, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property, including the execution, cancellation or modification of Leases, the collection of all Rents, the making of repairs to the Mortgaged Property and the execution or termination of contracts providing for the management, operation or maintenance of the Mortgaged Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as Lender in its discretion may deem necessary or desirable. Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy of Lender’s security, without regard to Borrower’s solvency and without the necessity of giving prior notice (oral or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all of the actions set forth in the preceding sentence. If Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Borrower, by its execution of this Instrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law. Lender or the receiver, as the case may be, shall be entitled to receive a reasonable fee for managing the Mortgaged Property. Immediately upon appointment of a receiver or immediately upon the Lender’s entering upon and taking possession and control of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged Property to Lender or the receiver, as the case may be, and shall deliver to Lender or the receiver, as the case may be, all documents, records (including records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents. In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude Borrower and its representatives from the Mortgaged Property. Borrower acknowledges and agrees that the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements.

(e) If Lender enters the Mortgaged Property, Lender shall be liable to account only to Borrower and only for those Rents actually received. Except to the extent of Lender’s gross negligence or willful misconduct, Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by reason of any act or omission of Lender under Section 3(d), and Borrower hereby releases and discharges Lender from any such liability to the fullest extent permitted by law.

(f) If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall become an additional part of the Indebtedness as provided in Section 12.

(g) Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as the case may be, and any application of Rents as provided in this Instrument shall not cure or waive any Event of Default or invalidate any other right or remedy of Lender under applicable law or provided for in this Instrument.

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all of Borrower’s right, title and interest in, to and under the Leases, including Borrower’s right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Borrower’s right, title and interest in, to and under the Leases. Borrower and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only. For purposes of giving effect to this absolute assignment of the Leases, and for no other purpose, the Leases shall not be deemed to be a part of the Mortgaged Property. However, if this present, absolute and unconditional assignment of the Leases is not enforceable by its terms under the laws of the Property Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on the Leases in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b) Until Lender gives Notice to Borrower of Lender’s exercise of its rights under this Section 4, Borrower shall have all rights, power and authority granted to Borrower under any Lease (except as otherwise limited by this Section or any other provision of this Instrument), including the right, power and authority to modify the terms of any Lease or extend or terminate any Lease. Upon the occurrence of an Event of Default, the permission given to Borrower pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall automatically terminate. Borrower shall comply with and observe Borrower’s obligations under all Leases, including Borrower’s obligations pertaining to the maintenance and disposition of tenant security deposits.

(c) Borrower acknowledges and agrees that the exercise by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and the Improvements. The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take any action under this Instrument or to expend any money or to incur any expenses. Except to the extent of Lender’s gross negligence or willful misconduct, Lender shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Mortgaged Property. Prior to Lender’s actual entry into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform any of the terms, covenants and conditions contained in any Lease (or otherwise have any obligation with respect to any Lease); (ii) be obligated to appear in or defend any action or proceeding relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation, control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged Property. The execution of this Instrument by Borrower shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and shall be that of Borrower, prior to such actual entry and taking of possession.

(d) Upon delivery of Notice by Lender to Borrower of Lender’s exercise of Lender’s rights under this Section 4 at any time after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver, or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender immediately shall have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.

(e) Borrower shall, promptly upon Lender’s request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least six months and not more than two years, and shall not include options to purchase. If Borrower is a cooperative housing corporation, association or other validly organized entity under municipal, county, state or federal law, notwithstanding anything to the contrary contained in this subsection, so long as Borrower is not in breach of any covenant of this Instrument, Lender hereby consents to the execution of leases of apartments for a term in excess of two years from Borrower to a tenant shareholder of Borrower, to the surrender or termination of such leases of apartments where the surrendered or terminated lease is immediately replaced or where the Borrower makes its best efforts to secure such immediate replacement by a newly executed lease of the same apartment to a tenant shareholder of the Borrower. However, no consent is hereby given by Lender to any execution, surrender, termination or assignment of a lease under terms that would waive or reduce the obligation of the resulting tenant shareholder under such lease to pay cooperative assessments in full when due or the obligation of the former tenant shareholder to pay any unpaid portion of such assessments.

(f) Borrower shall not lease any portion of the Mortgaged Property for non-residential use except with the prior written consent of Lender and Lender’s prior written approval of the Lease agreement. Borrower shall not modify the terms of, or extend or terminate, any Lease for non-residential use (including any Lease in existence on the date of this Instrument) without the prior written consent of Lender. However, Lender’s consent shall not be required for the modification or extension of a non-residential Lease if such modification or extension is on terms at least as favorable to Borrower as those customary at that time in the applicable market and the income from the extended or modified Lease will not be less than the income received from the Lease as of the date of this Instrument. Borrower shall, without request by Lender, deliver an executed copy of each non-residential Lease to Lender promptly after such Lease is signed. All non-residential Leases, including renewals or extensions of existing Leases, shall specifically provide that (i) such Leases are subordinate to the lien of this Instrument; (ii) the tenant shall attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner; (iii) the tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request; (iv) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (v) after a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at such foreclosure sale may, at Lender’s or such purchaser’s option, accept or terminate such Lease; and (vi) the tenant shall, upon receipt after the occurrence of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender.

(g) Borrower shall not receive or accept Rent under any Lease (whether residential or non-residential) for more than two months in advance.

5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM. Borrower shall pay the Indebtedness when due in accordance with the terms of the Note and the other Loan Documents and shall perform, observe and comply with all other provisions of the Note and the other Loan Documents. Borrower shall pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender’s exercise of any right of acceleration of the Indebtedness, as provided in the Note.

6. EXCULPATION. Borrower’s personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Instrument is limited in the manner, and to the extent, provided in the Note.

(a) Unless this requirement is waived in writing by Lender, which waiver may be contained in this Section 7(a), Borrower shall deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due, the items marked “Collect” below. Lender will not require the Borrower to make Imposition Deposits with respect to the items marked “Deferred” below.

[Collect] Hazard Insurance premiums or other insurance premiums required by Lender under Section 19,

[Deferred] water and sewer charges (that could become a lien on the Mortgaged Property),

[Deferred] assessments or other charges (that could become a lien on the Mortgaged Property)

The amounts deposited under the preceding sentence are collectively referred to in this Instrument as the “Imposition Deposits.” The obligations of Borrower for which the Imposition Deposits are required are collectively referred to in this Instrument as “Impositions.” The amount of the Imposition Deposits shall be sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty or interest charge being added. Lender shall maintain records indicating how much of the monthly Imposition Deposits and how much of the aggregate Imposition Deposits held by Lender are held for the purpose of paying Taxes, insurance premiums and each other Imposition.

(b) Imposition Deposits shall be held in an institution (which may be Lender, if Lender is such an institution) whose deposits or accounts are insured or guaranteed by a federal agency. Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of the federal deposit insurance or guaranty. Lender shall apply the Imposition Deposits to pay Impositions so long as no Event of Default has occurred and is continuing. Unless applicable law requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the Imposition Deposits. As additional security for all of Borrower’s obligations under this Instrument and the other Loan Documents, Borrower hereby pledges and grants to Lender a security interest in the Imposition Deposits and all proceeds of, and all interest and dividends on, the Imposition Deposits. Any amounts deposited with Lender under this Section 7 shall not be trust funds, nor shall they operate to reduce the Indebtedness, unless applied by Lender for that purpose under Section 7(e).

(c) If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition from the Imposition Deposits held by Lender. Lender shall have no obligation to pay any Imposition to the extent it exceeds Imposition Deposits then held by Lender. Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition.

(d) If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be credited against future installments of Imposition Deposits. If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the deficiency within 15 days after Notice from Lender.

(e) If an Event of Default has occurred and is continuing, Lender may apply any Imposition Deposits, in any amounts and in any order as Lender determines, in Lender’s discretion, to pay any Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to Borrower any Imposition Deposits held by Lender.

(f) If Lender does not collect an Imposition Deposit with respect to an Imposition either marked “Deferred” in Section 7(a) or pursuant to a separate written waiver by Lender, then on or before the date each such Imposition is due, or on the date this Instrument requires each such Imposition to be paid, Borrower must provide Lender with proof of payment of each such Imposition for which Lender does not require collection of Imposition Deposits. Lender may revoke its deferral or waiver and require Borrower to deposit with Lender any or all of the Imposition Deposits listed in Section 7(a), regardless of whether any such item is marked “Deferred” in such section, upon Notice to Borrower, (i) if Borrower does not timely pay any of the Impositions, (ii) if Borrower fails to provide timely proof to Lender of such payment, or (iii) at any time during the existence of an Event of Default.

(g) In the event of a Transfer prohibited by or requiring Lender’s approval under Section 21, Lender’s waiver of the collection of any Imposition Deposit in this Section 7 may be modified or rendered void by Lender at Lender’s option by Notice to Borrower and the transferee(s) as a condition of Lender’s approval of such Transfer.

8. COLLATERAL AGREEMENTS. Borrower shall deposit with Lender such amounts as may be required by any Collateral Agreement and shall perform all other obligations of Borrower under each Collateral Agreement.

9. APPLICATION OF PAYMENTS. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion. Neither Lender’s acceptance of an amount that is less than all amounts then due and payable nor Lender’s application of such payment in the manner authorized shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction. Notwithstanding the application of any such amount to the Indebtedness, Borrower’s obligations under this Instrument and the Note shall remain unchanged.

10. COMPLIANCE WITH LAWS. Borrower shall comply with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, disability accommodation, zoning and land use, and Leases. Borrower also shall comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits. Borrower shall at all times maintain records sufficient to demonstrate compliance with the provisions of this Section 10. Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the lien created by this Instrument or Lender’s interest in the Mortgaged Property. Borrower represents and warrants to Lender that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

11. USE OF PROPERTY. Unless required by applicable law, Borrower shall not (a) allow changes in the use for which all or any part of the Mortgaged Property is being used at the time this Instrument was executed, except for any change in use approved by Lender, (b) convert any individual dwelling units or common areas to commercial use, (c) initiate a change in the zoning classification of the Mortgaged Property or acquiesce without Notice to and consent of Lender in a change in the zoning classification of the Mortgaged Property, (d) establish any condominium or cooperative regime with respect to the Mortgaged Property, (e) combine all or any part of the Mortgaged Property with all or any part of a tax parcel which is not part of the Mortgaged Property, or (f) subdivide or otherwise split any tax parcel constituting all or any part of the Mortgaged Property without the prior consent of Lender.

(a) If Borrower fails to perform any of its obligations under this Instrument or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender’s security or Lender’s rights under this Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender at Lender’s option may make such appearances, file such documents, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender’s interest, including (i) payment of Attorneys’ Fees and Costs, (ii) payment of fees and out-of-pocket expenses of accountants, inspectors and consultants, (iii) entry upon the Mortgaged Property to make repairs or secure the Mortgaged Property, (iv) procurement of the insurance required by Section 19, and (v) payment of amounts which Borrower has failed to pay under Sections 15 and 17.

(b) Any amounts disbursed by Lender under this Section 12, or under any other provision of this Instrument that treats such disbursement as being made under this Section 12, shall be secured by this Instrument, shall be added to, and become part of, the principal component of the Indebtedness, shall be immediately due and payable and shall bear interest from the date of disbursement until paid at the “Default Rate,” as defined in the Note.

(a) Lender, its agents, representatives, and designees may make or cause to be made entries upon and inspections of the Mortgaged Property (including environmental inspections and tests) during normal business hours, or at any other reasonable time, upon reasonable notice to Borrower if the inspection is to include occupied residential units (which notice need not be in writing). Notice to Borrower shall not be required in the case of an emergency, as determined in Lender’s discretion, or when an Event of Default has occurred and is continuing.

(b) If Lender determines that Mold has developed as a result of a water intrusion event or leak, Lender, at Lender’s discretion, may require that a professional inspector inspect the Mortgaged Property as frequently as Lender determines is necessary until any issue with Mold and its cause(s) are resolved to Lender’s satisfaction. Such inspection shall be limited to a visual and olfactory inspection of the area that has experienced the Mold, water intrusion event or leak. Borrower shall be responsible for the cost of such professional inspection and any remediation deemed to be necessary as a result of the professional inspection. After any issue with Mold, water intrusion or leaks is remedied to Lender’s satisfaction, Lender shall not require a professional inspection any more frequently than once every three years unless Lender is otherwise aware of Mold as a result of a subsequent water intrusion event or leak.

(c) If Lender or Loan Servicer determines not to conduct an annual inspection of the Mortgaged Property, and in lieu thereof Lender requests a certification, Borrower shall be prepared to provide and must actually provide to Lender a factually correct certification each year that the annual inspection is waived to the following effect:

Borrower has not received any written complaint, notice, letter or other written communication from tenants, management agent or governmental authorities regarding odors, indoor air quality, mold, fungus, microbial contamination or pathogenic organisms (“Mold”) or any activity, condition, event or omission that causes or facilitates the growth of Mold on or in any part of the Mortgaged Property or if Borrower has received any such written complaint, notice, letter or other written communication that Borrower has investigated and determined that no Mold activity, condition or event exists or alternatively has fully and properly remediated such activity, condition, event or omission in compliance with the Moisture Management Plan for the Mortgaged Property.

If Borrower is unwilling or unable to provide such certification, Lender may require a professional inspection of the Mortgaged Property at Borrower’s expense.

(a) Borrower shall keep and maintain at all times at the Mortgaged Property or the management agent’s office, and upon Lender’s request shall make available at the Mortgaged Property (or, at Borrower’s option, at the management agent’s office), complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property. The books, records, contracts, Leases and other instruments shall be subject to examination and inspection by Lender at any reasonable time.

(b) Within 120 days after the end of each fiscal year of Borrower, Borrower shall furnish to Lender a statement of income and expenses for Borrower’s operation of the Mortgaged Property for that fiscal year, a statement of changes in financial position of Borrower relating to the Mortgaged Property for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year. If Borrower’s fiscal year is other than the calendar year, Borrower must also submit to Lender a year-end statement of income and expenses within 120 days after the end of the calendar year.

(c) Within 120 days after the end of each calendar year, and at any other time, upon Lender’s request, Borrower shall furnish to Lender each of the following. However, Lender shall not require any of the following more frequently than quarterly except when there has been an Event of Default and such Event of Default is continuing, in which case Lender may, upon written request to Borrower, require Borrower to furnish any of the following more frequently:

(i)

a rent schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

(ii)

an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts; and

(iii)

a statement that identifies all owners of any interest in Borrower and any Controlling Entity and the interest held by each (unless Borrower or any Controlling Entity is a publicly-traded entity in which case such statement of ownership shall not be required), if Borrower or a Controlling Entity is a corporation, all officers and directors of Borrower and the Controlling Entity, and if Borrower or a Controlling Entity is a limited liability company, all managers who are not members.

(d) At any time upon Lender’s request, Borrower shall furnish to Lender each of the following. However, Lender shall not require any of the following more frequently than quarterly except when there has been an Event of Default and such Event of Default is continuing, in which case Lender may require Borrower to furnish any of the following more frequently:

(i)

a balance sheet, a statement of income and expenses for Borrower and a statement of changes in financial position of Borrower for Borrower’s most recent fiscal year;

(ii)

a quarterly or year-to-date income and expense statement for the Mortgaged Property; and

(iii)

a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender.

(e) Upon Lender’s request at any time when an Event of Default has occurred and is continuing, Borrower shall furnish to Lender monthly income and expense statements and rent schedules for the Mortgaged Property.

(f) An individual having authority to bind Borrower shall certify each of the statements, schedules and reports required by Sections 14(b) through 14(e) to be complete and accurate. Each of the statements, schedules and reports required by Sections 14(b) through 14(e) shall be in such form and contain such detail as Lender may reasonably require. Lender also may require that any of the statements, schedules or reports listed in Section 14(b) and 14(c)(i) and (ii) be audited at Borrower’s expense by independent certified public accountants acceptable to Lender, at any time when an Event of Default has occurred and is continuing or at any time that Lender, in its reasonable judgment, determines that audited financial statements are required for an accurate assessment of the financial condition of Borrower or of the Mortgaged Property.

(g) If Borrower fails to provide in a timely manner the statements, schedules and reports required by Sections 14(b) through (e), Lender shall give Borrower Notice specifying the statements, schedules and reports required by Section 14(b) through (e) that Borrower has failed to provide. If Borrower has not provided the required statements, schedules and reports within 10 Business Days following such Notice, then Lender shall have the right to have Borrower’s books and records audited, at Borrower’s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12. Notice to Borrower shall not be required in the case of an emergency, as determined in Lender’s discretion, or when an Event of Default has occurred and is continuing.

(h) If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

(i) Borrower authorizes Lender to obtain a credit report on Borrower at any time.

(a) Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay, or cause to be paid, all Taxes when due and before the addition of any interest, fine, penalty or cost for nonpayment.

(b) Subject to the provisions of Section 15(c), Borrower shall (i) pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including utilities, repairs and replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added, and (ii) pay insurance premiums at least 30 days prior to the expiration date of each policy of insurance, unless applicable law specifies some lesser period.

(c) If Lender is collecting Imposition Deposits, to the extent that Lender holds sufficient Imposition Deposits for the purpose of paying a specific Imposition, then Borrower shall not be obligated to pay such Imposition, so long as no Event of Default exists and Borrower has timely delivered to Lender any bills or premium notices that it has received. If an Event of Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits without regard to whether Impositions are then due and payable. Lender shall have no liability to Borrower for failing to pay any Impositions to the extent that (i) any Event of Default has occurred and is continuing, (ii) insufficient Imposition Deposits are held by Lender at the time an Imposition becomes due and payable or (iii) Borrower has failed to provide Lender with bills and premium notices as provided above.

(d) Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than insurance premiums, if (i) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (ii) the Mortgaged Property is not in danger of being sold or forfeited, (iii) if Borrower has not already paid the Imposition, Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (iv) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender.

(e) Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for, Impositions, and if Borrower pays any Imposition directly, Borrower shall furnish to Lender on or before the date this Instrument requires such Impositions to be paid, receipts evidencing that such payments were made.

16. LIENS; ENCUMBRANCES. Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a “Lien”) on the Mortgaged Property (other than the lien of this Instrument) or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the lien of this Instrument, is a “Transfer” which constitutes an Event of Default and subjects Borrower to personal liability under the Note.

(a) Borrower shall not commit waste or permit impairment or deterioration of the Mortgaged Property.

(c) Borrower shall restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not insurance proceeds or condemnation awards are available to cover any costs of such restoration or repair; however, Borrower shall not be obligated to perform such restoration or repair if (i) no Event of Default has occurred and is continuing, and (ii) Lender has elected to apply any available insurance proceeds and/or condemnation awards to the payment of Indebtedness pursuant to Section 19(h)(ii), (iii), (iv) or (v), or pursuant to Section 20.

(d) Borrower shall keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality.

(e) Borrower shall provide for professional management of the Mortgaged Property by a residential rental property manager satisfactory to Lender at all times under a contract approved by Lender in writing, which contract must be terminable upon not more than 30 days notice without the necessity of establishing cause and without payment of a penalty or termination fee by Borrower or its successors.

(f) Borrower shall give Notice to Lender of and, unless otherwise directed in writing by Lender, shall appear in and defend any action or proceeding purporting to affect the Mortgaged Property, Lender’s security or Lender’s rights under this Instrument. Borrower shall not (and shall not permit any tenant or other person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property, including any removal, demolition or alteration occurring in connection with a rehabilitation of all or part of the Mortgaged Property, except (i) in connection with the replacement of tangible Personalty, (ii) if Borrower is a cooperative housing corporation, to the extent permitted with respect to individual dwelling units under the form of proprietary lease or occupancy agreement and (iii) repairs and replacements in connection with making an individual unit ready for a new occupant.

(g) Unless otherwise waived by Lender in writing, Borrower must have or must establish and must adhere to the MMP. If the Borrower is required to have an MMP, the Borrower must keep all MMP documentation at the Mortgaged Property or at the management agent’s office and available for the Lender or the Loan Servicer to review during any annual assessment or other inspection of the Mortgaged Property that is required by Lender.

(a) Except for matters described in Section 18(b), Borrower shall not cause or permit any of the following:

(i)

the presence, use, generation, release, treatment, processing, storage (including storage in above ground and underground storage tanks), handling, or disposal of any Hazardous Materials on or under the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property;

(ii)

the transportation of any Hazardous Materials to, from, or across the Mortgaged Property;

(iii)

any occurrence or condition on the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws;

(iv)

any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged Property;

(v)

any violation or noncompliance with the terms of any O&M Program as defined in subsection (d).

The matters described in clauses (i) through (v) above, except as otherwise provided in Section 18(b), are referred to collectively in this Section 18 as “Prohibited Activities or Conditions.”

(b) Prohibited Activities or Conditions shall not include lawful conditions permitted by an O&M Program or the safe and lawful use and storage of quantities of (i) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (ii) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged Property; and (iii) petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws.

(c) Borrower shall take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Instrument) to prevent its employees, agents, and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions. Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition.

(d) As required by Lender, Borrower shall also have established a written operations and maintenance program with respect to certain Hazardous Materials. Each such operations and maintenance program and any additional or revised operations and maintenance programs established for the Mortgaged Property pursuant to this Section 18 must be approved by Lender and shall be referred to herein as an “O&M Program.” Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Mortgaged Property to comply with each O&M Program. Borrower shall pay all costs of performance of Borrower’s obligations under any O&M Program, and Lender’s out-of-pocket costs incurred in connection with the monitoring and review of each O&M Program and Borrower’s performance shall be paid by Borrower upon demand by Lender. Any such out-of-pocket costs of Lender that Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.

(e) Borrower represents and warrants to Lender that, except as previously disclosed by Borrower to Lender in writing (which written disclosure may be in certain environmental assessments and other written reports accepted by Lender in connection with the funding of the Indebtedness and dated prior to the date of this Instrument):

(i)

Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions on the Mortgaged Property;

(ii)

to the best of Borrower’s knowledge after reasonable and diligent inquiry, no Prohibited Activities or Conditions exist or have existed on the Mortgaged Property;

(iii)

the Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower’s knowledge after reasonable and diligent inquiry, the Mortgaged Property has not contained any underground storage tanks in the past. If there is an underground storage tank located on the Mortgaged Property that has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws;

(iv)

to the best of Borrower’s knowledge after reasonable and diligent inquiry, Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials. Without limiting the generality of the foregoing, Borrower has obtained all Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect and all such Environmental Permits are in full force and effect;

(v)

to the best of Borrower’s knowledge after reasonable and diligent inquiry, no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would constitute, noncompliance with the terms of any Environmental Permit;

(vi)

there are no actions, suits, claims or proceedings pending or, to the best of Borrower’s knowledge after reasonable and diligent inquiry, threatened that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition; and

(vii)

Borrower has not received any written complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property.

(f) Borrower shall promptly notify Lender in writing upon the occurrence of any of the following events:

(ii)

Borrower’s receipt of or knowledge of any written complaint, order, notice of violation or other communication from any tenant, management agent, Governmental Authority or other person with regard to present or future alleged Prohibited Activities or Conditions, or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property;

Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any obligation under this Instrument, the Note, or any other Loan Document.

(g) Borrower shall pay promptly the costs of any environmental inspections, tests or audits, a purpose of which is to identify the extent or cause of or potential for a Prohibited Activity or Condition (“Environmental Inspections”), required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender’s consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist. Any such costs incurred by Lender (including Attorneys’ Fees and Costs and the costs of technical consultants whether incurred in connection with any judicial or administrative process or otherwise) that Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12. As long as (i) no Event of Default has occurred and is continuing, (ii) Borrower has actually paid for or reimbursed Lender for all costs of any such Environmental Inspections performed or required by Lender, and (iii) Lender is not prohibited by law, contract or otherwise from doing so, Lender shall make available to Borrower, without representation of any kind, copies of Environmental Inspections prepared by third parties and delivered to Lender. Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by or for Lender with respect to the Mortgaged Property. Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any Environmental Inspections made by or for Lender. Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount that a party may bid at such sale. Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results to any third party of any Environmental Inspections made by or for Lender, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising out of, connected with or incidental to the results of, the delivery of any of Environmental Inspections made by or for Lender.

(h) If any investigation, site monitoring, containment, clean-up, restoration or other remedial work (“Remedial Work”) is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property, or is otherwise required by Lender as a consequence of any Prohibited Activity or Condition or to prevent the occurrence of a Prohibited Activity or Condition, Borrower shall, by the earlier of (i) the applicable deadline required by Hazardous Materials Law or (ii) 30 days after Notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and shall in any event complete the work by the time required by applicable Hazardous Materials Law. If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower shall reimburse Lender on demand for the cost of doing so. Any reimbursement due from Borrower to Lender shall become part of the Indebtedness as provided in Section 12.

(i) Borrower shall comply with all Hazardous Materials Laws applicable to the Mortgaged Property. Without limiting the generality of the previous sentence, Borrower shall (i) obtain and maintain all Environmental Permits required by Hazardous Materials Laws and comply with all conditions of such Environmental Permits; (ii) cooperate with any inquiry by any Governmental Authority; and (iii) comply with any governmental or judicial order that arises from any alleged Prohibited Activity or Condition.

(j) Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers, directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the "Indemnitees”) from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including Attorneys’ Fees and Costs and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

(i)

any breach of any representation or warranty of Borrower in this Section 18;

(ii)

any failure by Borrower to perform any of its obligations under this Section 18;

(iii)

the existence or alleged existence of any Prohibited Activity or Condition;

(iv)

the presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or in any of the Improvements or on or under any property of Borrower that is adjacent to the Mortgaged Property; and

(k) Counsel selected by Borrower to defend Indemnitees shall be subject to the approval of those Indemnitees. In any circumstances in which the indemnity under this Section 18 applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which shall not be unreasonably withheld, delayed or conditioned) may settle or compromise any action or legal or administrative proceeding. However, unless an Event of Default has occurred and is continuing, or the interests of Borrower and Lender are in conflict, as determined by Lender in its discretion, Lender shall permit Borrower to undertake the actions referenced in this Section in accordance with this Section and Section 18(l) so long as Lender approves such action, which approval shall not be unreasonably withheld or delayed. Borrower shall reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, consultants’ fees and Attorneys’ Fees and Costs.

(l) Borrower shall not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (a “Claim”), settle or compromise the Claim if the settlement (i) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender; or (ii) may materially and adversely affect Lender, as determined by Lender in its discretion.

(m) Borrower’s obligation to indemnify the Indemnitees shall not be limited or impaired by any of the following, or by any failure of Borrower or any guarantor to receive notice of or consideration for any of the following:

(iii)

any provision in any of the Loan Documents limiting Lender’s recourse to property securing the Indebtedness, or limiting the personal liability of Borrower or any other party for payment of all or any part of the Indebtedness;

(iv)

the accuracy or inaccuracy of any representations and warranties made by Borrower under this Instrument or any other Loan Document;

(v)

the release of Borrower or any other person, by Lender or by operation of law, from performance of any obligation under any Loan Document;

(vi)

the release or substitution in whole or in part of any security for the Indebtedness; and

(vii)

Lender’s failure to properly perfect any lien or security interest given as security for the Indebtedness.

(i)

pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Section 18;

(ii)

reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Section 18; and

(iii)

reimburse Indemnitees for any and all expenses, including Attorneys’ Fees and Costs, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Section 18, or in monitoring and participating in any legal or administrative proceeding.

(o) The provisions of this Section 18 shall be in addition to any and all other obligations and liabilities that Borrower may have under applicable law or under other Loan Documents, and each Indemnitee shall be entitled to indemnification under this Section 18 without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one person or entity, the obligation of those persons or entities to indemnify the Indemnitees under this Section 18 shall be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Section 18 shall survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the lien of this Instrument. Notwithstanding the foregoing, if Lender has never been a mortgagee-in-possession of, or held title to, the Mortgaged Property, Borrower shall have no obligation to indemnify the Indemnitees under this Section 18 after the date of the release of record of the lien of this Instrument by payment in full at the Maturity Date or by voluntary prepayment in full.

(a) Borrower shall keep the Improvements insured at all times against such hazards as Lender may from time to time require, which insurance shall include but not be limited to coverage against loss by fire and allied perils, general boiler and machinery coverage, rent loss and extra expense insurance. If Lender so requires, such insurance shall also include sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to applicable zoning or land use laws, building ordinance or law coverage. Borrower acknowledges and agrees that Lender’s insurance requirements may change from time to time throughout the term of the Indebtedness. If any of the Improvements is located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as an area having special flood hazards, Borrower shall insure such Improvements against loss by flood. All insurance required pursuant to this Section 19(a) shall be referred to as “Hazard Insurance.”

(b) All premiums on Hazard Insurance policies required under Section 19(a) shall be paid in the manner provided in Section 7, unless Lender has designated in writing another method of payment. All such policies shall also be in a form approved by Lender. All policies of property damage insurance shall include a non-contributing, non-reporting mortgage clause in favor of, and in a form approved by, Lender. Lender shall have the right to hold the original policies or duplicate original policies of all Hazard Insurance required by Section 19(a). Borrower shall promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies and all receipts for paid premiums. At least 5 days prior to the expiration date of any Hazard Insurance policy, Borrower shall deliver to Lender evidence acceptable to Lender that the policy has been renewed. If Borrower has not delivered the original (or a duplicate original) of a renewal policy prior to the expiration date of any Hazard Insurance policy, Borrower shall deliver the original (or a duplicate original) of a renewal policy in a form satisfactory to Lender within 120 days after the expiration date of the original policy.

(c) Borrower shall maintain at all times commercial general liability insurance, workers’ compensation insurance and such other liability, errors and omissions and fidelity insurance coverages as Lender may from time to time require.

(d) All insurance policies and renewals of insurance policies required by this Section 19 shall be in such amounts and for such periods as Lender may from time to time require, and shall be issued by insurance companies satisfactory to Lender.

(e) Borrower shall comply with all insurance requirements and shall not permit any condition to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that this Instrument requires Borrower to maintain.

(f) In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender. Borrower hereby authorizes and appoints Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of Hazard Insurance, to appear in and prosecute any action arising from such Hazard Insurance policies, to collect and receive the proceeds of Hazard Insurance, and to deduct from such proceeds Lender’s expenses incurred in the collection of such proceeds. This power of attorney is coupled with an interest and therefore is irrevocable. However, nothing contained in this Section 19 shall require Lender to incur any expense or take any action. Lender may, at Lender’s option, (i) require a “repair or replacement” settlement, in which case the proceeds will be used to reimburse Borrower for the cost of restoring and repairing the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (the “Restoration”), or (ii) require an “actual cash value” settlement in which case the proceeds may be applied to the payment of the Indebtedness, whether or not then due. To the extent Lender determines to require a repair or replacement settlement and apply insurance proceeds to Restoration, Lender shall apply the proceeds in accordance with Lender’s then-current policies relating to the restoration of casualty damage on similar multifamily properties.

(g) Notwithstanding any provision to the contrary in this Section 19, as long as no Event of Default, or any event which, with the giving of Notice or the passage of time, or both, would constitute an Event of Default, has occurred and is continuing,

(i)

in the event of a casualty resulting in damage to the Mortgaged Property which will cost $10,000 or less to repair, the Borrower shall have the sole right to make proof of loss, adjust and compromise the claim and collect and receive any proceeds directly without the approval or prior consent of the Lender so long as the insurance proceeds are used solely for the Restoration of the Mortgaged Property; and

(ii) in the event of a casualty resulting in damage to the Mortgaged Property which will cost more than $10,000 but less than $50,000 to repair, the Borrower is authorized to make proof of loss and adjust and compromise the claim without the prior consent of Lender, and Lender shall hold the applicable insurance proceeds to be used to reimburse Borrower for the cost of Restoration of the Mortgaged Property and shall not apply such proceeds to the payment of sums due under this Instrument.

(h) Lender will have the right to exercise its option to apply insurance proceeds to the payment of the Indebtedness only if Lender determines that at least one of the following conditions is met:

(i)

an Event of Default (or any event, which, with the giving of Notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing;

(ii)

Lender determines, in its discretion, that there will not be sufficient funds from insurance proceeds, anticipated contributions of Borrower of its own funds or other sources acceptable to Lender to complete the Restoration;

(iii)

Lender determines, in its discretion, that the rental income from the Mortgaged Property after completion of the Restoration will not be sufficient to meet all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan repayment obligations relating to the Mortgaged Property; or

(iv)

Lender determines, in its discretion, that the Restoration will not be completed at least one year before the Maturity Date (or six months before the Maturity Date if Lender determines in its discretion that re-leasing of the Mortgaged Property will be completed within such six-month period); or

(v)

Lender determines that the Restoration will not be completed within one year after the date of the loss or casualty.

(i) If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender shall automatically succeed to all rights of Borrower in and to any insurance policies and unearned insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition.

(j) Unless Lender otherwise agrees in writing, any application of any insurance proceeds to the Indebtedness shall not extend or postpone the due date of any monthly installments referred to in the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such installments.

(k) Borrower agrees to execute such further evidence of assignment of any insurance proceeds as Lender may require.

(a) Borrower shall promptly notify Lender in writing of any action or proceeding or notice relating to any proposed or actual condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (a “Condemnation”). Borrower shall appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing. Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation, after consultation with Borrower and consistent with commercially reasonable standards of a prudent lender. This power of attorney is coupled with an interest and therefore is irrevocable. However, nothing contained in this Section 20 shall require Lender to incur any expense or take any action. Borrower hereby transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation.

(b) Lender may apply such awards or proceeds, after the deduction of Lender’s expenses incurred in the collection of such amounts (including Attorneys’ Fees and Costs) at Lender’s option, to the restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower. Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness shall not extend or postpone the due date of any monthly installments referred to in the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such installments. Borrower agrees to execute such further evidence of assignment of any awards or proceeds as Lender may require.

21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER. [RIGHT TO UNLIMITED TRANSFERS — WITH LENDER APPROVAL].

(i) a sale, assignment, transfer or other disposition (whether voluntary, involuntary or by operation of law);

(ii) the granting, creating or attachment of a lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law);

(iii) the issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock;

(iv) the withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or manager in a limited liability company; or

(v) the merger, dissolution, liquidation, or consolidation of a legal entity or the reconstitution of one type of legal entity into another type of legal entity.

For purposes of defining the term “Transfer,” the term “partnership” shall mean a general partnership, a limited partnership, a joint venture and a limited liability partnership, and the term “partner” shall mean a general partner, a limited partner and a joint venturer.

(i) a conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under this Instrument,

(ii) the Mortgaged Property becoming part of a bankruptcy estate by operation of law under the United States Bankruptcy Code, or

(iii) a lien against the Mortgaged Property for local taxes and/or assessments not then due and payable.

(c) The occurrence of any of the following Transfers shall not constitute an Event of Default under this Instrument, notwithstanding any provision of Section 21(e) to the contrary:

(iii)

the grant of a leasehold interest in an individual dwelling unit for a term of two years or less not containing an option to purchase;

(iv)

a Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender;

(v)

the creation of a mechanic’s, materialman’s, or judgment lien against the Mortgaged Property, which is released of record or otherwise remedied to Lender’s satisfaction within 60 days of the date of creation;

(vi)

if Borrower is a housing cooperative, any Transfer of the shares in the housing cooperative or any assignment of the occupancy agreements or leases relating thereto by tenant shareholders of the housing cooperative; and

(vii)

any Transfer of an interest in Borrower or any interest in a Controlling Entity (which, if such Controlling Entity were Borrower, would result in an Event of Default) listed in (A) through (F) below (a “Preapproved Transfer”), under the terms and conditions listed as items (1) through (7) below:

(A)

a sale or transfer to one or more of the transferor’s immediate family members; or

(B)

a sale or transfer to any trust having as its sole beneficiaries the transferor and/or one or more of the transferor’s immediate family members; or

(C)

a sale or transfer from a trust to any one or more of its beneficiaries who are immediate family members of the transferor ; or

(D)

the substitution or replacement of the trustee of any trust with a trustee who is an immediate family member of the transferor; or

(E)

a sale or transfer to an entity owned and controlled by the transferor or the transferor’s immediate family members; or

(F)

a sale or transfer to an individual or entity that has an existing interest in the Borrower or in a Controlling Entity.

(1)

Borrower shall provide Lender with prior written Notice of the proposed Preapproved Transfer, which Notice must be accompanied by a non-refundable review fee in the amount of $3,000.

(2)

For the purposes of these Preapproved Transfers, a transferor’s immediate family members will be deemed to include a spouse, parent, child or grandchild of such transferor.

(3)

Either directly or indirectly, Management Solutions, Incorporated shall retain at all times a managing interest in the Borrower.

(4)

At the time of the proposed Preapproved Transfer, no Event of Default shall have occurred and be continuing and no event or condition shall have occurred and be continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.

(5)

Lender shall be entitled to collect all costs, including the cost of all title searches, title insurance and recording costs, and all Attorneys’ Fees and Costs.

(6)

Lender shall not be entitled to collect a transfer fee as a result of these Preapproved Transfers.

(7)

In the event of a Transfer prohibited by or requiring Lender’s approval under this Section 21, this Section (c)(vii) may be modified or rendered void by Lender at Lender’s option by Notice to Borrower and the transferee(s), as a condition of Lender’s consent.

(d) The occurrence of any of the following Transfers shall not constitute an Event of Default under this Instrument, provided that Borrower has notified Lender in writing within 30 days following the occurrence of any of the following, and such Transfer does not constitute an Event of Default under any other Section of this Instrument:

(i)

a change of the Borrower’s name, provided that UCC financing statements and/or amendments sufficient to continue the perfection of Lender’s security interest have been properly filed and copies have been delivered to Lender;

(ii)

a change of the form of the Borrower not involving a transfer of the Borrower’s assets and not resulting in any change in liability of any Initial Owner, provided that UCC financing statements and/or amendments sufficient to continue the perfection of Lender’s security interest have been properly filed and copies have been delivered to Lender;

(iii)

the merger of the Borrower with another entity when the Borrower is the surviving entity

(iv)

a Transfer that occurs by devise, descent, or by operation of law upon the death of a natural person; and

(v)

the grant of an easement, if before the grant Lender determines that the easement will not materially affect the operation or value of the Mortgaged Property or Lender’s interest in the Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and expenses, including Attorneys’ Fees and Costs, incurred by Lender in connection with reviewing Borrower’s request.

(e) The occurrence of any of the following Transfers shall constitute an Event of Default under this Instrument:

(i)

a Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property;

(ii)

if Borrower is a limited partnership, a Transfer of (A) any general partnership interest, or (B) limited partnership interests in Borrower that would cause the Initial Owners of Borrower to own less than a Controlling Interest of all limited partnership interests in Borrower;

(iii)

if Borrower is a general partnership or a joint venture, a Transfer of any general partnership or joint venture interest in Borrower;

(iv)

if Borrower is a limited liability company, (A) a Transfer of any membership interest in Borrower which would cause the Initial Owners to own less than a Controlling Interest of all the membership interests in Borrower, (B) a Transfer of any membership or other interest of a manager in Borrower that results in a change of manager or (C) a change in a nonmember manager;

(v)

if Borrower is a corporation (A) the Transfer of any voting stock in Borrower which would cause the Initial Owners to own less than a Controlling Interest of any class of voting stock in Borrower or (B) if the outstanding voting stock in Borrower is held by 100 or more shareholders, one or more Transfers by a single transferor within a 12-month period affecting an aggregate of 5 percent or more of that stock;

(vi)

if Borrower is a trust, (A) a Transfer of any beneficial interest in Borrower which would cause the Initial Owners to own less than a Controlling Interest of all the beneficial interests in Borrower, (B) the termination or revocation of the trust, or (C) the removal, appointment or substitution of a trustee of Borrower;

(vii)

if Borrower is a limited liability partnership, (A) a Transfer of any partnership interest in Borrower which would cause the Initial Owners to own less than a Controlling Interest of all partnership interests in Borrower, or (B) a transfer of any partnership or other interest of a managing partner in Borrower that results in a change of manager; and

(viii)

a Transfer of any interest in a Controlling Entity which, if such Controlling Entity were Borrower, would result in an Event of Default under any of Sections 21(e)(i) through (vii) above.

Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default in order to exercise any of its remedies with respect to an Event of Default under this Section 21.

(f) Lender shall consent, without any adjustment to the rate at which the Indebtedness secured by this Instrument bears interest or to any other economic terms of the Indebtedness set forth in the Note, to a Transfer that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each of the following requirements:

(i)

the submission to Lender of all information required by Lender to make the determination required by this Section 21(f);

(iii)

the transferee meets all of the eligibility, credit, management and other standards (including but not limited to any standards with respect to previous relationships between Lender and the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers in connection with the origination or purchase of similar mortgages on multifamily properties;

(iv)

the transferee’s organization, credit and experience in the management of similar properties are deemed by the Lender, in its discretion, to be appropriate to the overall structure and documentation of the existing financing;

(v)

the Mortgaged Property, at the time of the proposed Transfer, meets all standards as to its physical condition, occupancy, net operating income and the collection of reserves that are customarily applied by Lender at the time of the proposed Transfer to the approval of properties in connection with the origination or purchase of similar mortgages on multifamily properties;

(vi)

in the case of a Transfer of all or any part of the Mortgaged Property, (A) the execution by the transferee of Lender’s then-standard assumption agreement that, among other things, requires the transferee to perform all obligations of Borrower set forth in the Note, this Instrument and any other Loan Documents, and may require that the transferee comply with any provisions of this Instrument or any other Loan Document which previously may have been waived or modified by Lender, (B) if Lender requires, the transferee causes one or more individuals or entities acceptable to Lender to execute and deliver to Lender a guaranty in a form acceptable to Lender, and (C) the transferee executes such additional Collateral Agreements as Lender may require;

(vii)

in the case of a Transfer of any interest in a Controlling Entity, if a guaranty has been executed and delivered in connection with the Note, this Instrument or any of the other Loan Documents, the Borrower causes one or more individuals or entities acceptable to Lender to execute and deliver to Lender a guaranty in a form acceptable to Lender; and

(B)

a transfer fee in an amount equal to one percent of the unpaid principal balance of the Indebtedness immediately before the applicable Transfer; and

(C)

the amount of Lender’s out-of-pocket costs (including reasonable Attorneys’ Fees and Costs) incurred in reviewing the Transfer request.

22. EVENTS OF DEFAULT. The occurrence of any one or more of the following shall constitute an Event of Default under this Instrument:

(a) any failure by Borrower to pay or deposit when due any amount required by the Note, this Instrument or any other Loan Document;

(b) any failure by Borrower to maintain the insurance coverage required by Section 19;

(d) fraud or material misrepresentation or material omission by Borrower, any of its officers, directors, trustees, general partners or managers or any guarantor in connection with (i) the application for or creation of the Indebtedness, (ii) any financial statement, rent schedule, or other report or information provided to Lender during the term of the Indebtedness, or (iii) any request for Lender’s consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement;

(g) the commencement of a forfeiture action or proceeding, whether civil or criminal, which, in Lender’s reasonable judgment, could result in a forfeiture of the Mortgaged Property or otherwise materially impair the lien created by this Instrument or Lender’s interest in the Mortgaged Property;

(h) any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (g)), as and when required, which continues for a period of 30 days after Notice of such failure by Lender to Borrower. However, if Borrower’s failure to perform its obligations as described in this Section 22(h) is of the nature that it cannot be cured within the 30 day grace period but reasonably could be cured within 90 days, then Borrower shall have additional time as determined by Lender in its discretion, not to exceed an additional 60 days, in which to cure such default, provided that Borrower has diligently commenced to cure such default during the 30-day grace period and diligently pursues the cure of such default. However, no such Notice or grace periods shall apply in the case of any such failure which could, in Lender’s judgment, absent immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender, impairment of the Note or this Instrument or any other security given under any other Loan Document;

(i) any failure by Borrower to perform any of its obligations as and when required under any Loan Document other than this Instrument which continues beyond the applicable cure period, if any, specified in that Loan Document;

(j) any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under that debt instrument immediately due and payable;

(k) Borrower voluntarily files for bankruptcy protection under the United States Bankruptcy Code or voluntarily becomes subject to any reorganization, receivership, insolvency proceeding or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights, or an involuntary case is commenced against Borrower by any creditor (other than Lender) of Borrower pursuant to the United States Bankruptcy Code or other federal or state law affecting debtor and creditor rights and is not dismissed or discharged within 90 days after filing; and

(l) any of Borrower’s representations and warranties in this Instrument is false or misleading in any material respect.

23. REMEDIES CUMULATIVE. Each right and remedy provided in this Instrument is distinct from all other rights or remedies under this Instrument or any other Loan Document or afforded by applicable law, and each shall be cumulative and may be exercised concurrently, independently, or successively, in any order.

(a) Lender may (but shall not be obligated to) agree with Borrower, from time to time, and without giving notice to, or obtaining the consent of, or having any effect upon the obligations of, any guarantor or other third party obligor, to take any of the following actions: extend the time for payment of all or any part of the Indebtedness; reduce the payments due under this Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note; modify the terms and time of payment of the Indebtedness; join in any extension or subordination agreement; release any Mortgaged Property; take or release other or additional security; modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable under the Note; and otherwise modify this Instrument, the Note, or any other Loan Document.

(b) Any forbearance by Lender in exercising any right or remedy under the Note, this Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any other right or remedy, or the subsequent exercise of any right or remedy. The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender. Lender’s receipt of any awards or proceeds under Sections 19 and 20 shall not operate to cure or waive any Event of Default.

25. LOAN CHARGES. If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in any Loan Document, whether considered separately or together with other charges levied in connection with any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that charge is hereby reduced to the extent necessary to eliminate that violation. The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the principal of the Indebtedness. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness which constitutes interest, as well as all other charges levied in connection with the Indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

26. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce any Loan Document.

27. WAIVER OF MARSHALLING. Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Mortgaged Property shall be subjected to the remedies provided in this Instrument, the Note, any other Loan Document or applicable law. Lender shall have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies. Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of this Instrument waives any and all right to require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Instrument.

28. FURTHER ASSURANCES. Borrower shall execute, acknowledge, and deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements or amendments, transfers and assurances as Lender may require from time to time in order to better assure, grant, and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Instrument and the Loan Documents.

29. ESTOPPEL CERTIFICATE. Within 10 days after a request from Lender, Borrower shall deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any person designated by Lender, as of the date of such statement, (i) that the Loan Documents are unmodified and in full force and effect (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications); (ii) the unpaid principal balance of the Note; (iii) the date to which interest under the Note has been paid; (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Instrument or any of the other Loan Documents (or, if the Borrower is in default, describing such default in reasonable detail); (v) whether or not there are then existing any setoffs or defenses known to Borrower against the enforcement of any right or remedy of Lender under the Loan Documents; and (vi) any additional facts requested by Lender.

(a) This Instrument, and any Loan Document which does not itself expressly identify the law that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is located (the “Property Jurisdiction”).

(b) Borrower agrees that any controversy arising under or in relation to the Note, this Instrument, or any other Loan Document may be litigated in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have jurisdiction over all controversies that shall arise under or in relation to the Note, any security for the Indebtedness, or any other Loan Document. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. However, nothing in this Section 30 is intended to limit Lender’s right to bring any suit, action or proceeding relating to matters under this Instrument in any court of any other jurisdiction.

(a) All Notices, demands and other communications (“Notice”) under or concerning this Instrument shall be in writing. Each Notice shall be addressed to the intended recipient at its address set forth in this Instrument, and shall be deemed given on the earliest to occur of (i) the date when the Notice is received by the addressee; (ii) the first Business Day after the Notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery; or (iii) the third Business Day after the Notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested.

(b) Any party to this Instrument may change the address to which Notices intended for it are to be directed by means of Notice given to the other party in accordance with this Section 31. Each party agrees that it will not refuse or reject delivery of any Notice given in accordance with this Section 31, that it will acknowledge, in writing, the receipt of any Notice upon request by the other party and that any Notice rejected or refused by it shall be deemed for purposes of this Section 31 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.

(c) Any Notice under the Note and any other Loan Document that does not specify how Notices are to be given shall be given in accordance with this Section 31.

32. SALE OF NOTE; CHANGE IN SERVICER; LOAN SERVICING. The Note or a partial interest in the Note (together with this Instrument and the other Loan Documents) may be sold one or more times without prior Notice to Borrower. A sale may result in a change of the Loan Servicer. There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note. If there is a change of the Loan Servicer, Borrower will be given Notice of the change. All actions regarding the servicing of the loan evidenced by the Note, including the collection of payments, the giving and receipt of Notice, inspections of the Mortgaged Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives Notice to the contrary. If Borrower receives conflicting Notices regarding the identity of the Loan Servicer or any other subject, any such Notice from Lender shall govern.

33. SINGLE ASSET BORROWER. Until the Indebtedness is paid in full, Borrower (a) shall not own any real or personal property other than the Mortgaged Property and personal property related to the operation and maintenance of the Mortgaged Property; (b) shall not operate any business other than the management and operation of the Mortgaged Property; and (c) shall not maintain its assets in a way difficult to segregate and identify.

34. SUCCESSORS AND ASSIGNS BOUND. This Instrument shall bind, and the rights granted by this Instrument shall inure to, the respective successors and assigns of Lender and Borrower. However, a Transfer not permitted by Section 21 shall be an Event of Default.

35. JOINT AND SEVERAL LIABILITY. If more than one person or entity signs this Instrument as Borrower, the obligations of such persons and entities shall be joint and several.

(a) The relationship between Lender and Borrower shall be solely that of creditor and debtor, respectively, and nothing contained in this Instrument shall create any other relationship between Lender and Borrower.

(b) No creditor of any party to this Instrument and no other person shall be a third party beneficiary of this Instrument or any other Loan Document. Without limiting the generality of the preceding sentence, (i) any arrangement (a “Servicing Arrangement”) between the Lender and any Loan Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness, (ii) Borrower shall not be a third party beneficiary of any Servicing Arrangement, and (iii) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness.

37. SEVERABILITY; AMENDMENTS. The invalidity or unenforceability of any provision of this Instrument shall not affect the validity or enforceability of any other provision, and all other provisions shall remain in full force and effect. This Instrument contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Instrument. This Instrument may not be amended or modified except by a writing signed by the party against whom enforcement is sought; provided, however, that in the event of a Transfer prohibited by or requiring Lender’s approval under Section 21, any or some or all of the Modifications to Instrument set forth in Exhibit B (if any) may be modified or rendered void by Lender at Lender’s option by Notice to Borrower and the transferee(s).

38. CONSTRUCTION. The captions and headings of the Sections of this Instrument are for convenience only and shall be disregarded in construing this Instrument. Any reference in this Instrument to an “Exhibit” or a “Section” shall, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Instrument or to a Section of this Instrument. All Exhibits attached to or referred to in this Instrument are incorporated by reference into this Instrument. Any reference in this Instrument to a statute or regulation shall be construed as referring to that statute or regulation as amended from time to time. Use of the singular in this Agreement includes the plural and use of the plural includes the singular. As used in this Instrument, the term “including” means “including, but not limited to.”

39. DISCLOSURE OF INFORMATION. Lender may furnish information regarding Borrower or the Mortgaged Property to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, purchase or securitization of the Indebtedness, including but not limited to trustees, master servicers, special servicers, rating agencies, and organizations maintaining databases on the underwriting and performance of multifamily mortgage loans. Borrower irrevocably waives any and all rights it may have under applicable law to prohibit such disclosure, including but not limited to any right of privacy.

40. NO CHANGE IN FACTS OR CIRCUMSTANCES. Borrower warrants that (a) all information in the application for the loan submitted to Lender (the “Loan Application”) and in all financial statements, rent schedules, reports, certificates and other documents submitted in connection with the Loan Application are complete and accurate in all material respects; and (b) there has been no material adverse change in any fact or circumstance that would make any such information incomplete or inaccurate.

41. SUBROGATION. If, and to the extent that, the proceeds of the loan evidenced by the Note are used to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged Property (a “Prior Lien”), such loan proceeds shall be deemed to have been advanced by Lender at Borrower’s request, and Lender shall automatically, and without further action on its part, be subrogated to the rights, including lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

42. ADJUSTABLE RATE MORTGAGE — THIRD PARTY CAP AGREEMENT “CAP COLLATERAL.”

(a) If the Note provides for interest to accrue at an adjustable or variable interest rate (other than during the “Extension Period,” as defined in the Note, if applicable), then the definition of “Mortgaged Property” shall include the “Cap Collateral.” The “Cap Collateral” shall mean

(i)

any interest rate cap agreement, interest rate swap agreement, or other interest rate-hedging contract or agreement obtained by Borrower as a requirement of any Loan Document or as a condition of Lender’s making the Loan (a “Cap Agreement”);

(ii)

any and all moneys (collectively, “Cap Payments”) payable pursuant to any Cap Agreement by the interest rate cap provider or other counterparty to a Cap Agreement or any guarantor of the obligations of any such cap provider or counterparty (a “Cap Provider”);

(iii)

all rights of Borrower under any Cap Agreement and all rights of Borrower to all Cap Payments, including contract rights and general intangibles, whether existing now or arising after the date of this Instrument;

(iv)

all rights, liens and security interests or guaranties granted by a Cap Provider or any other person to secure or guaranty payment of any Cap Payment whether existing now or granted after the date of this Instrument;

(v)

all documents, writings, books, files, records and other documents arising from or relating to any of the foregoing, whether existing now or created after the date of this Instrument; and

(b) As additional security for Borrower’s obligation under the Loan Documents, Borrower hereby assigns and pledges to Lender all of Borrower’s right, title and interest in and to the Cap Collateral. Borrower has instructed and will instruct each Cap Provider and any guarantor of a Cap Provider’s obligations to make Cap Payments directly to Lender or to Loan Servicer on behalf of Lender.

(c) So long as there is no Event of Default, Lender or Loan Servicer will remit to Borrower each Cap Payment received by Lender or Loan Servicer with respect to any month for which Borrower has paid in full the monthly installment of principal and interest or interest only, as applicable, due under the Note. Alternatively, at Lender’s option so long as there is no Event of Default, Lender may apply a Cap Payment received by Lender or Loan Servicer with respect to any month to the applicable monthly payment of accrued interest due under the Note if Borrower has paid in full the remaining portion of such monthly payment of principal and interest or interest only, as applicable.

(d) Following an Event of Default, in addition to any other rights and remedies Lender may have, Lender may retain any Cap Payments and apply them to the Indebtedness in such order and amounts as Lender determines. Neither the existence of a Cap Agreement nor anything in this Instrument shall relieve Borrower of its primary obligation to timely pay in full all amounts due under the Note and otherwise due on account of the Indebtedness.

(e) If the Note does not provide for interest to accrue at an adjustable or variable interest rate (other than during the Extension Period) then this Section 42 shall be of no force or effect.

43. ACCELERATION; REMEDIES. At any time during the existence of an Event of Default, Lender, at Lender’s option, may declare the Indebtedness to be immediately due and payable without further demand, and may invoke the power of sale and any other remedies permitted by Texas law or provided in this Instrument or in any other Loan Document. Borrower acknowledges that the power of sale granted in this Instrument may be exercised by Lender without prior judicial hearing. Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including attorneys’ fees, costs of documentary evidence, abstracts and title reports.

(a) If Lender invokes the power of sale, Lender may, by and through the Trustee, or otherwise, sell or offer for sale the Mortgaged Property in such portions, order and parcels as Lender may determine, with or without having first taken possession of the Mortgaged Property, to the highest bidder for cash at public auction. Such sale shall be made at the courthouse door of the county in which all or any part of the Land to be sold is situated (whether the parts or parcel, if any, situated in different counties are contiguous or not, and without the necessity of having any Personalty present at such sale) on the first Tuesday of any month between the hours of 10:00 a.m. and 4:00 p.m., after advertising the time, place and terms of sale and that portion of the Mortgaged Property to be sold by posting or causing to be posted written or printed notice of sale at least twenty-one (21) days before the date of the sale at the courthouse door of the county in which the sale is to be made and at the courthouse door of any other county in which a portion of the Land may be situated, and by filing such notice with the County Clerk(s) of the county(s) in which all or a portion of the Land may be situated, which notice may be posted and filed by the Trustee acting, or by any person acting for the Trustee, and Lender has, at least twenty-one (21) days before the date of the sale, served written or printed notice of the proposed sale by certified mail on each debtor obligated to pay the Indebtedness according to Lender’s records by the deposit of such notice, enclosed in a postpaid wrapper, properly addressed to such debtor at debtor’s most recent address as shown by Lender’s records, in a post office or official depository under the care and custody of the United States Postal Service. The affidavit of any person having knowledge of the facts to the effect that such service was completed shall be prima facie evidence of the fact of service.

(b) Trustee shall deliver to the purchaser at the sale, within a reasonable time after the sale, a deed conveying the Mortgaged Property so sold in fee simple with covenants of general warranty. Borrower covenants and agrees to defend generally the purchaser’s title to the Mortgaged Property against all claims and demands. The recitals in Trustee’s deed shall be prima facie evidence of the truth of the statements contained in those recitals. Trustee shall apply the proceeds of the sale in the following order: (i) to all reasonable costs and expenses of the sale, including reasonable Trustee’s fees not to exceed 5% of the gross sales price, attorneys’ fees and costs of title evidence; (ii) to the Indebtedness in such order as Lender, in Lender’s discretion, directs; and (iii) the excess, if any, to the person or persons legally entitled to the excess.

(c) If all or any part of the Mortgaged Property is sold pursuant to this Section 43, Borrower will be divested of any and all interest and claim to the Mortgaged Property, including any interest or claim to all insurance policies, utility deposits, bonds, loan commitments and other intangible property included as a part of the Mortgaged Property. Additionally, after a sale of all or any part of the Land, Improvements, Fixtures and Personalty, Borrower will be considered a tenant at sufferance of the purchaser of the same, and the purchaser shall be entitled to immediate possession of such property. If Borrower shall fail to vacate the Mortgaged Property immediately, the purchaser may and shall have the right, without further notice to Borrower, to go into any justice court in any precinct or county in which the Mortgaged Property is located and file an action in forcible entry and detainer, which action shall lie against Borrower or its assigns or legal representatives, as a tenant at sufferance. This remedy is cumulative of any and all remedies the purchaser may have under this Instrument or otherwise.

(d) In any action for a deficiency after a foreclosure under this Instrument, if any person against whom recovery is sought requests the court in which the action is pending to determine the fair market value of the Mortgaged Property, as of the date of the foreclosure sale, the following shall be the basis of the court’s determination of fair market value:

(i)

the Mortgaged Property shall be valued “as is” and in its condition as of the date of foreclosure, and no assumption of increased value because of post-foreclosure repairs, refurbishment, restorations or improvements shall be made;

(ii)

any adverse effect on the marketability of title because of the foreclosure or because of any other title condition not existing as of the date of this Instrument shall be considered;

(iii)

the valuation of the Mortgaged Property shall be based upon an assumption that the foreclosure purchaser desires a prompt resale of the Mortgaged Property for cash within a six month-period after foreclosure;

(iv)

although the Mortgaged Property may be disposed of more quickly by the foreclosure purchaser, the gross valuation of the Mortgaged Property as of the date of foreclosure shall be discounted for a hypothetical reasonable holding period (not to exceed 6 months) at a monthly rate equal to the average monthly interest rate on the Note for the twelve months before the date of foreclosure;

(v)

the gross valuation of the Mortgaged Property as of the date of foreclosure shall be further discounted and reduced by reasonable estimated costs of disposition, including brokerage commissions, title policy premiums, environmental assessment and clean-up costs, tax and assessment, prorations, costs to comply with legal requirements and attorneys’ fees;

(vi)

expert opinion testimony shall be considered only from a licensed appraiser certified by the State of Texas and, to the extent permitted under Texas law, a member of the Appraisal Institute, having at least five years’ experience in appraising property similar to the Mortgaged Property in the county where the Mortgaged Property is located, and who has conducted and prepared a complete written appraisal of the Mortgaged Property taking into considerations the factors set forth in this Instrument; no expert opinion testimony shall be considered without such written appraisal;

(vii)

evidence of comparable sales shall be considered only if also included in the expert opinion testimony and written appraisal referred to in subsection (vi), above; and

(viii)

an affidavit executed by Lender to the effect that the foreclosure bid accepted by Trustee was equal to or greater than the value of the Mortgaged Property determined by Lender based upon the factors and methods set forth in subsections (i) through (vii) above before the foreclosure shall constitute prima facie evidence that the foreclosure bid was equal to or greater than the fair market value of the Mortgaged Property on the foreclosure date.

(e) Lender may, at Lender’s option, comply with these provisions in the manner permitted or required by Title 5, Section 51.002 of the Texas Property Code (relating to the sale of real estate) or by Chapter 9 of the Texas Business and Commerce Code (relating to the sale of collateral after default by a debtor), as those titles and chapters now exist or may be amended or succeeded in the future, or by any other present or future articles or enactments relating to same subject. Unless expressly excluded, the Mortgaged Property shall include Rents collected before a foreclosure sale, but attributable to the period following the foreclosure sale, and Borrower shall pay such Rents to the purchaser at such sale. At any such sale:

(i)

whether made under the power contained in this Instrument, Section 51.002 of the Texas Property Code, Chapter 9 of the Texas Business and Commerce Code, any other legal requirement or by virtue of any judicial proceedings or any other legal right, remedy or recourse, it shall not be necessary for Trustee to have physically present, or to have constructive possession of, the Mortgaged Property (Borrower shall deliver to Trustee any portion of the Mortgaged Property not actually or constructively possessed by Trustee immediately upon demand by Trustee) and the title to and right of possession of any such property shall pass to the purchaser as completely as if the property had been actually present and delivered to the purchaser at the sale;

(ii)

each instrument of conveyance executed by Trustee shall contain a general warranty of title, binding upon Borrower;

(iii)

the recitals contained in any instrument of conveyance made by Trustee shall conclusively establish the truth and accuracy of the matters recited in the Instrument, including nonpayment of the Indebtedness and the advertisement and conduct of the sale in the manner provided in this Instrument and otherwise by law and the appointment of any successor Trustee;

(iv)

all prerequisites to the validity of the sale shall be conclusively presumed to have been satisfied;

(v)

the receipt of Trustee or of such other party or officer making the sale shall be sufficient to discharge to the purchaser or purchasers for such purchaser(s)’ purchase money, and no such purchaser or purchasers, or such purchaser(s)’ assigns or personal representatives, shall thereafter be obligated to see to the application of such purchase money or be in any way answerable for any loss, misapplication or nonapplication of such purchase money;

(vi)

to the fullest extent permitted by law, Borrower shall be completely and irrevocably divested of all of Borrower’s right, title, interest, claim and demand whatsoever, either at law or in equity, in and to the property sold, and such sale shall be a perpetual bar to any claim to all or any part of the property sold, both at law and in equity, against Borrower and against any person claiming by, through or under Borrower; and

(vii)

to the extent and under such circumstances as are permitted by law, Lender may be a purchaser at any such sale.

44. RELEASE. Upon payment of the Indebtedness, Lender shall release this Instrument. Borrower shall pay Lender’s reasonable costs incurred in releasing this Instrument.

(a) Trustee may resign by giving of notice of such resignation in writing to Lender. If Trustee shall die, resign or become disqualified from acting under this Instrument or shall fail or refuse to act in accordance with this Instrument when requested by Lender or if for any reason and without cause Lender shall prefer to appoint a substitute trustee to act instead of the original Trustee named in this Instrument or any prior successor or substitute trustee, Lender shall have full power to appoint a substitute trustee and, if preferred, several substitute trustees in succession who shall succeed to all the estate, rights, powers and duties of the original Trustee named in this Instrument. Such appointment may be executed by an authorized officer, agent or attorney-in-fact of Lender (whether acting pursuant to a power of attorney or otherwise), and such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient without proof of any action by Lender.

(b) Any successor Trustee appointed pursuant to this Section shall, without any further act, deed or conveyance, become vested with all the estates, properties, rights, powers and trusts of the predecessor Trustee with like effect as if originally named as Trustee in this Instrument; but, nevertheless, upon the written request of Lender or such successor Trustee, the Trustee ceasing to act shall execute and deliver an instrument transferring to such successor Trustee, all the estates, properties, rights, powers and trusts of the Trustee so ceasing to act, and shall duly assign, transfer and deliver any of the property and monies held by the Trustee ceasing to act to the successor Trustee.

(c) Trustee may authorize one or more parties to act on Trustee’s behalf to perform the ministerial functions required of Trustee under this Instrument, including the transmittal and posting of any notices.

46. VENDOR’S LIEN; RENEWAL AND EXTENSION. The Note is [select one: primarily secured by the Vendor’s Lien retained in the Deed, bearing the same date as this Instrument, conveying the Mortgaged Property to Borrower, which Vendor’s Lien has been assigned to Lender, this Instrument being additional security therefor. OR in renewal and extension, but not in extinguishment, of the following indebtedness: .]

47. NO FIDUCIARY DUTY. Lender owes no fiduciary or other special duty to Borrower.

48. FIXTURE FILING. This Instrument is also a fixture filing under the Uniform Commercial Code of Texas.

49. ADDITIONAL PROVISIONS REGARDING ASSIGNMENT OF RENTS. Section 3 shall not be construed to require a pro tanto or other reduction of the Indebtedness resulting from the assignment of Rents. If the provisions of Section 3 and the preceding sentence cause the assignment of Rents in Section 3 to be deemed to be an assignment for additional security only, Lender shall be entitled to all rights, benefits and remedies attendant to such collateral assignment. The assignment of Rents contained in Section 3 shall terminate upon the release of this Instrument.

50. LOAN CHARGES. Borrower and Lender intend at all times to comply with the laws of the State of Texas governing the maximum rate or amount of interest payable on or in connection with the Indebtedness (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law). If the applicable law is ever judicially interpreted so as to render usurious any amount payable under the Note, this Instrument or any other Loan Document, or contracted for, charged, taken, reserved or received with respect to the Indebtedness, or if acceleration of the maturity of the Indebtedness, or if any prepayment by Borrower results in Borrower having paid any interest in excess of that permitted by any applicable law, then Borrower and Lender expressly intend that all excess amounts collected by Lender shall be applied to reduce the unpaid principal balance of the Indebtedness (or, if the Indebtedness has been or would thereby be paid in full, shall be refunded to Borrower), and the provisions of the Note, this Instrument and the other Loan Documents immediately shall be deemed reformed and the amounts thereafter collectible under the Loan Documents reduced, without the necessity of the execution of any new documents, so as to comply with any applicable law, but so as to permit the recovery of the fullest amount otherwise payable under the Loan Documents. The right to accelerate the maturity of the Indebtedness does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Lender does not intend to collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Lender for the use, forbearance or detention of the Indebtedness shall, to the extent permitted by any applicable law, be amortized, prorated, allocated and spread throughout the full term of the Indebtedness until payment in full so that the rate or amount of interest on account of the Indebtedness does not exceed the applicable usury ceiling. Notwithstanding any provision contained in the Note, this Instrument or any other Loan Document that permits the compounding of interest, including any provision by which any accrued interest is added to the principal amount of the Indebtedness, the total amount of interest that Borrower is obligated to pay and Lender is entitled to receive with respect to the Indebtedness shall not exceed the amount calculated on a simple (i.e., noncompounded) interest basis at the maximum rate on principal amounts actually advanced to or for the account of Borrower, including all current and prior advances and any advances made pursuant to the Instrument or any other Loan Document (such as for the payment of Impositions and similar expenses or costs).

51. PROPERTY AND LIABILITY INSURANCE — DELIVERY OF POLICY TO LENDER. Notwithstanding the provisions of Section 19(b), Borrower shall not be required to deliver the original (or a duplicate original) of any renewal policy of insurance to Lender more than 15 days prior to the expiration date of the policy then held by Lender.

52. ENTIRE AGREEMENT. THIS INSTRUMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

53. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this Instrument to be signed and delivered by its duly authorized representative.

BEFORE ME, the undersigned, a Notary Public in and for said County and State, on this day personally appeared Wendell A. Jacobson, known to me to be the President of Management Solutions, Incorporated, the corporation that executed the foregoing instrument, and known to me to be the person who executed the foregoing instrument on behalf of said corporation, said corporation being known to me to be General Partner of FS Towne Crossing, L.P., and acknowledged to me that such corporation executed the same as such general partner and that such limited partnership executed the same for the purposes and consideration therein expressed.

This Guaranty (“Guaranty”) is entered into to be effective as of August 28, 2007, by the undersigned person(s) (the “Guarantor” jointly and severally if more than one), for the benefit of FEDERAL HOME LOAN MORTGAGE CORPORATION (the “Lender”).

A. FS TOWNE CROSSING, L.P., a Texas limited partnership (the “Original Borrower”) previously obtained a loan from KEYCORP REAL ESTATE CAPITAL MARKETS, INC., an Ohio corporation (“Original Lender”) in the amount of $15,760,000.00 (the “Loan”). The Loan is evidenced by a Multifamily Note from Borrower to Original Lender dated as of October 31, 2005 (the “Note”). The Note is secured by a Multifamily Deed of Trust, Assignment of Rents and Security Agreement and Fixture Filing dated the same date as the Note (the “Security Instrument”), encumbering the real property described in the Security Instrument (the “Mortgaged Property”). The Original Lender sold the Note, assigned its rights in the Security Instrument and transferred the Loan to Federal Home Loan Mortgage Corporation, which is now the holder of the Note and the owner of the Loan (the “Lender”).

B. As a condition to allowing the Original Borrower to transfer the Property to APARTMENT REIT TOWNE CROSSING, LP, a Texas limited partnership (the “New Borrower”) and to allow New Borrower to assume the Loan, Lender has required that NNN APARTMENT REIT, INC., a Maryland corporation (the "New Guarantor”) execute this Guaranty.

C. All references to Borrower in this Guaranty will be deemed to refer to the New Borrower. All references to Guarantor in this Guaranty will be deemed to refer to the New Guarantor.

NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower, and in consideration thereof, Guarantor agrees as follows:

1. Defined Terms. "Indebtedness,” “Loan Documents” and “Property Jurisdiction” and other capitalized terms used but not defined in this Guaranty shall have the meanings assigned to them in the Security Instrument.

(a)

Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender:

(i)

the full and prompt payment when due, whether at the Maturity Date or earlier, by reason of acceleration or otherwise, and at all times thereafter, of each of the following:

(A)

a portion of the Indebtedness equal to zero percent (0%) of the original principal balance of the Note (the “Base Guaranty”); and

(B)

in addition to the Base Guaranty, all other amounts for which Borrower is personally liable under Sections 9(c), 9(d) and 9(f) of the Note; and

(C)

all costs and expenses, including reasonable Attorneys’ Fees and Costs incurred by Lender in enforcing its rights under this Guaranty; and

(ii)

the full and prompt payment and performance when due of all of Borrower’s obligations under Section 18 of the Security Instrument.

(b) If the Base Guaranty stated in Section 2(a)(i)(A) is 100 percent of the original principal balance of the Note, then (i) the Base Guaranty shall mean and include the full and complete guaranty of payment of the entire Indebtedness and the performance of all Borrower’s obligations under the Loan Documents; and (ii) for so long as the Base Guaranty remains in effect (there being no limit to the duration of the Base Guaranty unless otherwise expressly provided in this Guaranty), the obligations guaranteed pursuant to Sections 2(a)(i)(B), 2(a)(i)(C) and Section 3 shall be part of, and not in addition to or in limitation of, the Base Guaranty.

If the Base Guaranty stated in Section 2(a)(i)(A) is less than 100 percent of the original principal balance of the Note, then this Section 2(b) shall be completely inapplicable and shall be treated as if not a part of this Guaranty.

(c) If Guarantor is not liable for the entire Indebtedness, then all payments made by Borrower with respect to the Indebtedness and all amounts received by Lender from the enforcement of its rights under the Security Instrument and the other Loan Documents (except this Guaranty) shall be applied first to the portion of the Indebtedness for which neither Borrower nor Guarantor has personal liability.

(a) Notwithstanding any limitation on liability provided for elsewhere in this Guaranty, Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender the full and prompt payment when due, whether at the Maturity Date or earlier, by reason of acceleration or otherwise, and at all times thereafter, the entire Indebtedness, in the event that:

(i)

Borrower voluntarily files for bankruptcy protection under the United States Bankruptcy Code; or

(ii)

Borrower voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights; or

(iii)

an order of relief is entered against Borrower pursuant to the United States Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a “Related Party.”

(ii) any person or entity that holds, directly or indirectly, any ownership interest in or right to manage Borrower or Guarantor, including without limitation, any shareholder, member or partner of Borrower or Guarantor; and

(iii) any person or entity in which any ownership interest (direct or indirect) or right to manage is held by Borrower, Guarantor or any partner, shareholder or member of, or any other person or entity holding an interest in, Borrower or Guarantor; and

(iv) any other creditor of Borrower that is related by blood, marriage or adoption to Borrower, Guarantor or any partner, shareholder or member of, or any other person or entity holding an interest in, Borrower or Guarantor.

(c) If Borrower, Guarantor or any Related Party has solicited creditors to initiate or participate in any proceeding referred to in this Section, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding shall be considered as having been initiated by a Related Party.

4. Guarantor’s Obligations Survive Foreclosure. The obligations of Guarantor under this Guaranty shall survive any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the Security Instrument, and, in addition, the obligations of Guarantor relating to Borrower’s obligations under Section 18 of the Security Instrument shall survive any repayment or discharge of the Indebtedness. Notwithstanding the foregoing, if Lender has never been a mortgagee-in-possession of or held title to the Mortgaged Property, Guarantor shall have no obligation under this Guaranty relating to Borrower’s obligations under Section 18 of the Security Instrument after the date of the release of record of the lien of the Security Instrument as a result of the payment in full of the Indebtedness on the Maturity Date or by voluntary prepayment in full.

5. Guaranty of Payment and Performance. Guarantor’s obligations under this Guaranty constitute an unconditional guaranty of payment and performance and not merely a guaranty of collection.

6. No Demand by Lender Necessary; Waivers by Guarantor. The obligations of Guarantor under this Guaranty shall be performed without demand by Lender and shall be unconditional regardless of the genuineness, validity, regularity or enforceability of the Note, the Security Instrument, or any other Loan Document, and without regard to any other circumstance which might otherwise constitute a legal or equitable discharge of a surety, a guarantor, a borrower or a mortgagor. Guarantor hereby waives, to the fullest extent permitted by applicable law:

(a) the benefit of all principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of this Guaranty and agrees that Guarantor’s obligations shall not be affected by any circumstances, whether or not referred to in this Guaranty, which might otherwise constitute a legal or equitable discharge of a surety, a guarantor, a borrower or a mortgagor;

(b) the benefits of any right of discharge under any and all statutes or other laws relating to a guarantor, a surety, a borrower or a mortgagor, and any other rights of a surety, a guarantor, a borrower or a mortgagor under such statutes or laws;

(c) diligence in collecting the Indebtedness, presentment, demand for payment, protest, all notices with respect to the Note and this Guaranty which may be required by statute, rule of law or otherwise to preserve Lender’s rights against Guarantor under this Guaranty, including, but not limited to, notice of acceptance, notice of any amendment of the Loan Documents, notice of the occurrence of any default or Event of Default, notice of intent to accelerate, notice of acceleration, notice of dishonor, notice of foreclosure, notice of protest, and notice of the incurring by Borrower of any obligation or indebtedness;

(d) all rights to cause a marshalling of the Borrower’s assets or to require Lender to:

(i) proceed against Borrower or any other guarantor of Borrower’s payment or performance under the Loan Documents (an “Other Guarantor”);

(ii) proceed against any general partner of Borrower or any Other Guarantor if Borrower or any Other Guarantor is a partnership;

(iii) proceed against or exhaust any collateral held by Lender to secure the repayment of the Indebtedness; or

(iv) pursue any other remedy it may now or hereafter have against Borrower, or, if Borrower is a partnership, any general partner of Borrower;

(e) any right to object to the timing, manner or conduct of Lender’s enforcement of its rights under any of the Loan Documents; and

(f) any right to revoke this Guaranty as to any future advances by Lender under the terms of the Security Instrument to protect Lender’s interest in the Mortgaged Property.

7. Modification of Loan Documents. At any time or from time to time and any number of times, without notice to Guarantor and without affecting the liability of Guarantor, Lender may:

(a) extend the time for payment of the principal of or interest on the Indebtedness or renew the Indebtedness in whole or in part;

(b) extend the time for Borrower’s performance of or compliance with any covenant or agreement contained in the Note, the Security Instrument or any other Loan Document, whether presently existing or hereinafter entered into, or waive such performance or compliance;

(c) accelerate the Maturity Date of the Indebtedness as provided in the Note, the Security Instrument, or any other Loan Document;

(d) with Borrower, modify or amend the Note, the Security Instrument, or any other Loan Document in any respect, including, but not limited to, an increase in the principal amount; and/or

(e) modify, exchange, surrender or otherwise deal with any security for the Indebtedness or accept additional security that is pledged or mortgaged for the Indebtedness.

8. Joint and Several Liability. The obligations of Guarantor (and each party named as a Guarantor in this Guaranty) and any Other Guarantor shall be joint and several. Lender, in its sole and absolute discretion, may:

(a) bring suit against Guarantor, or any one or more of the parties named as a Guarantor in this Guaranty, and any Other Guarantor, jointly and severally, or against any one or more of them;

(b) compromise or settle with Guarantor, any one or more of the parties named as a Guarantor in this Guaranty, or any Other Guarantor, for such consideration as Lender may deem proper;

(c) release one or more of the parties named as a Guarantor in this Guaranty, or any Other Guarantor, from liability; and

(d) otherwise deal with Guarantor and any Other Guarantor, or any one or more of them, in any manner, and no such action shall impair the rights of Lender to collect from Guarantor any amount guaranteed by Guarantor under this Guaranty.

9. Subordination of Borrower’s Indebtedness to Guarantor. Any indebtedness of Borrower held by Guarantor now or in the future is and shall be subordinated to the Indebtedness and Guarantor shall collect, enforce and receive any such indebtedness of Borrower as trustee for Lender, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty.

10. Waiver of Subrogation. Guarantor shall have no right of, and hereby waives any claim for, subrogation or reimbursement against Borrower or any general partner of Borrower by reason of any payment by Guarantor under this Guaranty, whether such right or claim arises at law or in equity or under any contract or statute, until the Indebtedness has been paid in full and there has expired the maximum possible period thereafter during which any payment made by Borrower to Lender with respect to the Indebtedness could be deemed a preference under the United States Bankruptcy Code.

11. Preference. If any payment by Borrower is held to constitute a preference under any applicable bankruptcy, insolvency, or similar laws, or if for any other reason Lender is required to refund any sums to Borrower, such refund shall not constitute a release of any liability of Guarantor under this Guaranty. It is the intention of Lender and Guarantor that Guarantor’s obligations under this Guaranty shall not be discharged except by Guarantor’s performance of such obligations and then only to the extent of such performance.

12. Financial Statements. Guarantor, from time to time upon written request by Lender, shall deliver to Lender such financial statements as Lender may reasonably require.

13. Assignment. Lender may assign its rights under this Guaranty in whole or in part and upon any such assignment, all the terms and provisions of this Guaranty shall inure to the benefit of such assignee to the extent so assigned. The terms used to designate any of the parties herein shall be deemed to include the heirs, legal representatives, successors and assigns of such parties, and the term “Lender” shall also include any lawful owner, holder or pledgee of the Note. Reference in this Guaranty to “person” or “persons” shall be deemed to include individuals and entities.

14. Complete and Final Agreement. This Guaranty and the other Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements. There are no unwritten oral agreements between the parties. All prior or contemporaneous agreements, understandings, representations, and statements, oral or written, are merged into this Guaranty and the other Loan Documents. Guarantor acknowledges that Guarantor has received a copy of the Note and all other Loan Documents. Neither this Guaranty nor any of its provisions may be waived, modified, amended, discharged, or terminated except by a writing signed by the party against which the enforcement of the waiver, modification, amendment, discharge, or termination is sought, and then only to the extent set forth in that writing.

15. Governing Law. This Guaranty shall be governed by and enforced in accordance with the laws of the Property Jurisdiction, without giving effect to the choice of law principles of the Property Jurisdiction that would require the application of the laws of a jurisdiction other than the Property Jurisdiction.

16. Jurisdiction; Venue. Guarantor agrees that any controversy arising under or in relation to this Guaranty may be litigated in the Property Jurisdiction, and that the state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have jurisdiction over all controversies which shall arise under or in relation to this Guaranty. Guarantor irrevocably consents to service, jurisdiction and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. However, nothing herein is intended to limit Lender’s right to bring any suit, action or proceeding relating to matters arising under this Guaranty against Guarantor or any of Guarantor’s assets in any court of any other jurisdiction.

17. Guarantor’s Interest in Borrower. Guarantor represents to Lender that Guarantor has a direct or indirect ownership or other financial interest in Borrower and/or will otherwise derive a material financial benefit from the making of the Loan.

20. GUARANTOR AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS GUARANTY OR THE RELATIONSHIP BETWEEN THE PARTIES AS GUARANTOR AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

IN WITNESS WHEREOF, Guarantor has signed and delivered this Guaranty under seal or has caused this Guaranty to be signed and delivered under seal by its duly authorized representative.

BEFORE ME, the undersigned, a Notary Public in and for said County and State, on this day personally appeared S. Jay Olander, known to me to be the Chief Executive Officer of NNN Apartment REIT, Inc., the corporation that executed the foregoing instrument, and known to me to be the

person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that the same was the act of the said corporation and that he executed the same as the act of such corporation for the purposes and consideration therein expressed and in the capacity therein stated.

/s/ Brenda M. Holmes
Notary Public in and for City of Richmond County, Virginia

The following modifications are made to the text of the Guaranty that precedes this Exhibit:

“(B) in addition to the Base Guaranty, all other amounts for which Borrower is personally liable under Sections 9(c) through (f) of the Note; and”

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 Five Million Four Hundred Thousand Dollars ($5,400,000).

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.

(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.

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

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):

Santa Ana, California, August 31, 2007 – NNN Apartment REIT, Inc. has acquired Towne Crossing Apartments in Mansfield, Texas. The acquisition closed on August 29, 2007.

Towne Crossing is a 268-unit multifamily property totaling nearly 232,000 square feet in the Dallas/Fort Worth suburb of Mansfield, Texas. Completed in 2004, the property consists of 12 three-story apartment buildings and a clubhouse situated on more than 17 acres. The gated community offers six floor plans ranging in size from 659-square-foot one bedroom/one bath units to 1,202-square-foot three bedroom/two bath units. Unit amenities include washer/dryer connections, crown molding, and either private balconies or patios. Community amenities include a swimming pool with a fountain and spa, laundry facilities, barbeque/picnic area, and a clubhouse with a 24-hour fitness center.

Towne Crossing is located 20 miles from downtown Dallas and 18 miles from downtown Fort Worth. The property provides 482 parking spaces, including 210 carports and 58 attached garages. A variety of retail, commercial and entertainment amenities are located near the property, which is 96 percent occupied.

Money Magazine and CNN Money recently added the city of Mansfield to its annual list of Best Places to Live in America. According to the Mansfield Economic Development Corporation, the city’s quality of life is among the highest in the Dallas/Fort Worth metroplex. The average new single-family home built in 2006 was valued at more than $239,000; and the average annual family income is estimated to be $91,878.

Mansfield has experienced substantial population and economic growth in recent years. According to statistics provided by the United States Census Bureau, the population of Mansfield increased from 28,031 in 2000 to nearly 52,000 in 2007, or approximately 12 percent per year. The $134 million Methodist Mansfield Medical Center opened in December of 2006, creating a surge in job openings. In addition, two other hospitals are being planned, as well as five hotels, numerous restaurants, a Big League Dreams sports complex, and a Hawaiian Falls Waterpark.

“The population growth and economic vitality of the city of Mansfield makes it an ideal market for an investment by NNN Apartment REIT,” explained Gus Remppies., executive vice president and chief investment officer of NNN Apartment REIT. “With such extensive commercial development underway, teamed with the underlying value of this Class A property, Towne Crossing Apartments is an excellent addition to our growing portfolio.”

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 August 17, 2007, NNN Apartment REIT has sold approximately 5.9 million shares of its common stock for nearly $59.2 million through its initial public offering, which began in the third quarter of 2006.

NNN Apartment REIT purchased Towne Crossing from Parkwood Management, which was represented by Evan Jacobson of Thompson Realty, an unaffiliated third party. NNN Apartment REIT assumed the property’s existing Freddie Mac financing.

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 37 million square feet of real estate, including approximately 9,000 apartment units, with a combined market value in excess of $5.1 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 Mansfield, Texas. 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 Mansfield, Texas; 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.

August 31, 2007	By:	/s/ Stanley J. Olander

		Name: Stanley J. Olander
		Title: President and Chief Executive Officer


Exhibit No.		Description

10.1		Purchase and Sale Agreement by and between FS Towne Crossing, Ltd. and Triple Net Properties, LLC, dated February 21, 2007
10.2		Reinstatement of and First Amendment to and Joinder and Ratification of Purchase and Sale Agreement by and among FS Towne Crossing, L.P., Fountain Green, L.C. and Triple Net Properties, LLC, date June 8, 2007
10.3		Assignment and Assumption of Real Estate Purchase Agreement by and between Triple Net Properties, LLC and Apartment REIT Towne Crossing, LP, dated August 29, 2007
10.4		Assumption Agreement by and among FS Towne Crossing, L.P., Bowler Holdings, L.C., Fountain Green, L.C., Apartment REIT Towne Crossing, LP, and the Federal Home Loan Mortgage Corporation, dated August 29, 2007
10.5		Multifamily Note by FS Towne Crossing, L.P. in favor of Keycorp Real Estate Capital Markets, Inc., dated October 31, 2005
10.6		Multifamily Deed of Trust, Assignment of Rents and Security Agreement and Fixture Filing, by FS Towne Crossing, L.P. in favor of Keycorp Real Estate Capital Markets, Inc., dated October 31, 2005
10.7		Guaranty by NNN Apartment REIT, Inc. for the benefit of Federal Home Loan Mortgage Corporation, dated August 28, 2007
10.8		Unsecured Promissory Note issued by NNN Apartment REIT Holdings, L.P. in favor of NNN Realty Advisors, Inc., dated August 29, 2007
99.1		NNN Apartment REIT, Inc. Press Release dated August 31, 2007


[X] Exhibit A		Legal Description of the Land (required).
[X] Exhibit B		List of Loan Documents (required).


By:	MANAGEMENT SOLUTIONS, INCORPORATED
	a Texas corporation General Partner
	By:	/s/ Wendell A. Jacobson


Date of Report (Date of Earliest Event Reported):		August 29, 2007


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


At the Closing, Purchaser shall deliver to Seller:
(a) (b)		An executed counterpart of the Contract Assignment. An executed counterpart of the Lease Assignment.


By:	Bowler Holdings, L.C.
	a Utah limited liability company, its Managing Member
	By:	/s/ R. Lynn Bowler


My Commission Expires: 9-30-07 Printed Name of Notary: Brenda M. Holmes
Registration Number: 224930
[Seal]


[Collect] [Collect]		Hazard Insurance premiums or other insurance premiums, Taxes,


(aa)		"O&M Program” is defined in Section 18(d).
(bb)		"Personalty” means all


		(vii)any rights of Borrower in or under letters of credit.
(cc)		“Property Jurisdiction” is defined in Section 30(a).


By:	MANAGEMENT SOLUTIONS,
	INCORPORATED
	a Texas corporation
	General Partner
	By:	/s/ Wendell A. Jacobson


Tammy J. Martin Notary Public State of Texas		/s/ Tammy J. Martin Notary Public in and for Dallas County, Texas


FG Seller	18.21	%
FS Seller	81.79	%


(a)		Guarantor represents and warrants that his/her state of residence is *N/A*.
		(b)Guarantor warrants and represents that s/he is: *N/A* [ ] single [ ] married


Name: Address:		NNN Apartments REIT, Inc. c/o Triple Net Properties, LLC 1551 N. Tustin Avenue, Suite 300 Santa Ana, California 93705


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


Defined Term		Definition
Commencement Date		October 1, 2007

Maturity Date		March 1, 2008

Interest Rate		6.85% per annum.

Default Interest Rate		The rate that is 2% per annum in excess of the Interest Rate.