Grubb & Ellis Apartment REIT, Inc. (Form: 8-K)

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

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

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

(a)

The land situated in Cedar Park, Williamson County, Texas, more particularly described in Exhibit A to this Contract (the “Land”), together with (i) the improvements situated on the Land commonly known as Cedar Park Apartments and all other structures, fixtures, buildings and improvements situated on the Land (such buildings, structures, fixtures and improvements being herein called the “Improvements”), (ii) any and all rights, titles, powers, privileges, easements, licenses, rights-of-way and interests appurtenant to the Land and the Improvements, (iii) all rights, titles, powers, privileges, licenses, easements, rights-of-way and interests, if any, of Seller, either at law or in equity, in possession or in expectancy, in and to any real estate lying in the streets, highways, roads, alleys, rights-of-way or sidewalks, open or proposed; in front of, above, over, under, through or adjoining the Land and in and to any strips or gores of real estate adjoining the Land, and (iv) all rights, titles, powers, privileges, interests, licenses, easements and rights-of-way appurtenant or incident to any of the foregoing, including, without limitation, to the extent owned by Seller, all mineral, oil, gas and other hydrocarbon substances on and under and that may be produced from the Land, as well as all development rights, land use entitlements, air rights, water, water rights, riparian rights, and water stock relating to the Land;

(b)

All equipment, fixtures, appliances, inventory, and other personal property of whatever kind or character owned by Seller and attached to or installed or located on or in the Land or the Improvements and to the extent assignable, all leasehold interest of Seller in and to any equipment, fixtures, appliances, inventory, and other personal property of whatever kind or character leased by Seller and attached to or installed or located on or in the Land or the Improvements including, but not limited to, any furniture, furnishings, drapes and floor coverings, office equipment and supplies, heating, lighting, refrigeration, plumbing, ventilating, incinerating, cooking, laundry, communication, electrical, dishwashing, and air conditioning equipment, disposals, window screens, storm windows, recreational equipment, pool equipment, patio furniture, sprinklers, hoses, tools and lawn equipment, including any personal property owned or, to the extent assignable, leased by the current property manager (the “Personal Property”);

(c)

All of Seller’s right, title and interest in and to all agreements, leases and other agreements that relate to or affect the Land, the Improvements, the Personal Property or the operation thereof, including, without limitation, tenant leases (collectively, “Tenant Leases”) and all security deposits actually paid to or received by Seller in connection therewith (and not as of the Closing Date returned to or forfeited by tenants under Tenant Leases), service and maintenance contracts (“Service Contracts”), warranties, guaranties, bonds, licenses and permits, but only to the extent that such Service Contracts, warranties, guaranties, bonds, licenses and permits are assignable by Seller without any necessary third party consent, or to the extent that all necessary third party consents to such assignments have been obtained (provided that Seller shall not be obligated to obtain such third party consents); and

(d)

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

CONTRACT SALES PRICE. The total purchase price for the Property (the “Sales Price”) shall be TWENTY-NINE MILLION TWO-HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($29,250,000.00), payable in cash at Closing. Payment in cash means payment by wire transfer of immediately available federal funds (“Immediately Available Funds”).

EARNEST MONEY. Within two (2) Business Days (as hereinafter defined) of the Effective Date, Buyer shall deliver to LandAmerica Title Company, 2505 N. Plano Road, Suite 3100, Richardson, Texas 75082, Attention: Debby S. Moore (Phone: (214) 368-3695, the “Title Company”), as escrow agent, TWO-HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($250,000.00) (by Immediately Available Funds) as earnest money (the “Initial Deposit”, and together with the Additional Deposit (as hereinafter defined) the “Earnest Money”), which funds shall be deposited and held by the Title Company in an interest bearing account, and Buyer shall provide such information, including its federal identification number, as is necessary to establish such account. If Buyer does not timely deliver the Initial Deposit as provided in this Section 3 or the Additional Deposit as provided in Section 5 hereof, this Contract shall be null and void, and neither party shall have any rights or obligations hereunder. The Initial Deposit shall be released by the Title Company to Seller on January 31, 2008 unless Purchaser has terminated this Contract on or prior to January 31, 2008. The provisions of this Section 3 shall constitute Purchaser’s instructions to the Title Company to release the Initial Deposit to Seller on January 31, 2008 and Purchaser agrees that no further consent or authorization from Purchaser to the Title Company shall be required. If the transaction contemplated by this Contract is closed, then the Earnest Money will be applied in payment of the Sales Price to be paid at Closing. In the event the transaction is not closed, then the Title Company shall disburse the Earnest Money in accordance with the provisions of this Contract on or prior to January 31, 2008; from and after January 31, 2008, the Initial Deposit shall be refunded by Seller to Buyer immediately upon written demand therefor in the event of a default by Seller or failure of a condition to Closing under this Contract.

(a)

The closing of the sale of the Property to Buyer (the “Closing”) shall take place at the Title Company on the date (the “Closing Date”) which is thirty (30) days after expiration of the Feasibility Period (hereinafter defined). Buyer shall have a one-time right to extend the Closing Date thirty (30) days by (i) notifying Seller in writing of such extension at least five (5) days prior to the then-scheduled Closing Date, and (ii) simultaneously with delivery of the written notice of extension to Seller, delivering to the Title Company (by Immediately Available Funds) the additional sum of ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00) (the “Extension Fee”). Except as expressly provided in this Contract (including as a result of default by Seller or failure of a condition to Closing under this Contract), the Extension Fee shall be non-refundable to Buyer and shall be unconditionally earned by Seller, as compensation to Seller for granting the extension of the Closing Date; provided, however, the Extension Fee shall be applied to the Sales Price at Closing. If Buyer does not deliver the written notice and the Extension Fee in the manner and within the time period required above, then Buyer shall have waived its right to extend the Closing Date.

(b)

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

(i)

A Special Warranty Deed, in the form attached hereto as Exhibit B, duly executed and acknowledged by Seller, conveying good and indefeasible title in fee simple to the Land and Improvements, free and clear of any and all liens, encumbrances, easements and assessments, except for Permitted Exceptions (hereinafter defined) and any others approved by Buyer in writing;

(ii)

A Bill of Sale, Assignment and Assumption Agreement (the “Bill of Sale”), in the form attached hereto as Exhibit C, duly executed and acknowledged by Seller;

(iii)

An Assignment of Leases and Assumption Agreement (the “Assignment and Assumption Agreement”), in the form attached hereto as Exhibit D, duly executed and acknowledged by Seller;

(iv)

An Owner’s Policy of Title Insurance (the “Owner’s Title Policy”), delivered in due course by the Title Company after Closing, to be issued by the Title Company on the standard form in use in the State of Texas, in the full amount of the Sales Price, dated as of the Closing Date, insuring Buyer’s fee simple title to the Land and Improvements to be good and indefeasible subject only to Permitted Exceptions and others approved by Buyer in writing, and the standard printed exceptions, provided, however:

(1)

the exception as to area and boundaries may, at the option and expense of Buyer, be deleted except for “any shortages in area”;

(2)

the standard exception as to restrictive covenants shall either be deleted or except only for any restrictive covenants that are Permitted Exceptions;

(3)

the exception as to standby fees and taxes shall be limited to standby fees and taxes for the year of Closing and subsequent years, and subsequent assessments for prior years due to changes in land usage or ownership;

Any endorsements to the Owner’s Title Policy (except any Seller’s Curative Endorsements, as hereinafter defined) shall also be at the sole cost and expense of Buyer.

(v)

Possession of the Property, subject only to the Tenant Leases and the Permitted Exceptions;

(vi)

A non-foreign affidavit, in the form attached hereto as Exhibit E, duly executed and acknowledged by Seller;

(vii)

A form of notice to all tenants of the Property (“Tenant Notice Letter”) duly executed by Seller, in the form attached as Exhibit F;

(viii)

Subject to the limitations of this Contract, a recertification of the representations and warranties contained in Section 12;

(x)

Evidence of its capacity and authority for the closing of this transaction; and

(xi)

Such other documents as may be reasonably required to close this transaction, duly executed.

(c)

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

(i)

The Sales Price in Immediately Available Funds (reduced by the amount, if any, of the Earnest Money applied for that purpose);

(ii)

The Assignment and Assumption Agreement duly executed and acknowledged by Buyer;

(iv)

Evidence of its capacity and authority for the closing of the transaction contemplated herein; and

(v)

Such other documents as may be reasonably required to close this transaction, duly executed.

(d)

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

(e)

Assessments, current taxes, rents and maintenance fees will be prorated as of the Closing Date; provided, however, no prorations will be made for delinquent rents existing as of the Closing. Proration of taxes will be made on the basis of (i) the assessed value of the Land and Improvements for the year of Closing, if known, or the assessed value of the Land and Improvements for the year before Closing, if such value is not known, multiplied by (ii) the tax rates for the year of Closing, if known, or the rates for the year before Closing, if not known, with a subsequent cash adjustment of such proration to be made between Seller and Buyer, if necessary, within 30 days of when actual tax figures are available. If any such charges, expenses, and income other than taxes are unavailable at the Closing Date, then a readjustment of these items shall be made within 30 days after the Closing. With respect to any delinquent rentals, Buyer will make a reasonable attempt for 3 months following Closing (but shall not be obligated) to collect the same for Seller’s benefit after the Closing in the usual course of the operation of the Property and such collection, if any, will be remitted to Seller promptly upon receipt by Buyer. Nothing contained herein shall operate to require Buyer to institute any lawsuit or other collection procedure to collect such delinquent rentals or to prohibit Seller from any such collection. Any sums received by Buyer from any tenants owing delinquent rentals will be applied first to the current portion of such tenant’s rent, then to any delinquent rentals owed with respect to the period following Closing, and then (and only then) to delinquent rentals owed with respect to the period before Closing. Buyer additionally agrees to pay or reimburse all usual and customary finder’s fees, commissions and the like payable with respect to any Tenant Leases that (1) are executed after the Effective Date and prior to the Closing Date and (2) pursuant to which the Tenant takes occupancy of its unit on or after the expiration of the Feasibility Period. At the Closing, Seller will pay to Buyer in cash the amount of any security deposits actually paid to or received by Seller under the Tenant Leases (and not as of the Closing Date returned to or forfeited by tenants under Tenant Leases) and any prepaid rentals actually paid to or received by Seller for periods subsequent to the Closing; provided, however, non-refundable payments, deposits, or fees (including pet fees/deposits) collected by Seller shall not be prorated. In making the prorations required by this Section 4, the economic burdens and benefits of ownership of the Property for the Closing Date shall be allocated to Buyer. The provisions of this Section 4(e) shall survive the Closing.

(f)

Utilities and other customarily prorated expenses, including, without limitation, water, sewer, gas, electricity, trash removal, and fire protection service, and any contracts or agreements for services to the Property to be transferred to and assumed by Buyer, to the extent paid for by Seller or required to be paid for by Seller for a period after Closing, shall be prorated as of the Closing Date. Other expenses relating to the Property up to the Closing Date and all periods prior thereto including those required by any contract or agreement for any services to the Property and those incurred or ordered by Seller or Seller’s agents that are not to be transferred and assumed by Buyer, including, without limitation, insurance and administrative expenses, shall be paid for by Seller, and Buyer shall not be liable therefor. Seller shall not assign to Buyer, and Buyer shall not be entitled to, any deposits held by any utility company or other company servicing the Property; instead, such deposits shall be returned to Seller, and Buyer shall arrange and bear all responsibility to arrange with all utility companies to have accounts styled in Buyer’s name beginning on the Closing Date. The provisions of this Section 4(f) shall survive the Closing.

(g)

At the Closing, Seller shall deliver to Buyer (or make available at the Property), to the extent in Seller’s possession or control, originals of the Tenant Leases, copies of the tenant correspondence files, keys, access codes, and originals of any other items which Seller was required to furnish or make available pursuant to Section 7, except for Seller’s general ledger and other internal books or records which shall be retained by Seller.

(h)

If any apartment unit is vacated five (5) days or more prior to Closing, then, prior to Closing, Seller shall use commercially reasonable diligence to return such unit to rentable condition in accordance with Seller’s customary cleaning, painting, and repair standards for vacant units, including causing all appliances to be cleaned and in working order (the condition of such an apartment unit after cleaning is referred to herein as a “Rent Ready Condition”). Buyer shall receive a credit for each unit that became vacant on a date that is five or more days prior to Closing and that is not in Rent Ready Condition at Closing in an amount agreed to by Seller and Buyer. In the event Seller and Buyer cannot agree upon the amount with respect to any unit or units which are not in Rent Ready Condition (“Disputed Units”), the sum of $400.00 as to each Disputed Unit shall be withheld from the Sales Price at Closing and deposited in an escrow account (“Make Ready Escrow Account”) maintained by the Title Company under an Escrow Agreement to be agreed upon by Seller and Buyer at Closing. Buyer shall be entitled to withdraw funds from the Escrow Amount as repairs are made to the Disputed Units (up to a maximum of $400.00 per Disputed Unit) within fifteen (15) days from presentation to the Title Company (with a copy to Seller) of a request for disbursement accompanied by copies of paid third party invoices evidencing such work (“Request for Disbursement”); provided, however, Seller shall have the right to dispute such payment by sending written notice of such objection to the Title Company and Buyer within ten (10) days following receipt of the Request for Disbursement. The Title Company shall hold such funds in the Make Ready Escrow Account as to the disputed Request for Disbursement until Seller and Buyer advise the Title Company in writing as to the agreed disbursement of the disputed funds. The balance of the Make Ready Escrow Account shall be paid to Seller upon the earlier to occur of (i) the completion of the repairs to all of the Disputed Units; or (ii) thirty (30) days from Closing.

(a)

Buyer is granted the right to conduct engineering and/or market and economic feasibility studies of the Property and a physical inspection of the Property, including studies or inspections to determine the existence of any environmental hazards or conditions (collectively, the “Feasibility Study”) during the period (the “Feasibility Period”) commencing on the Effective Date and ending at 5:00 p.m., Austin, Texas time on the date that is thirty (30) days after the Effective Date. With Seller’s permission, after Seller has received advance notice sufficient to permit it to schedule in an orderly manner Buyer’s examination of the Property and to provide at least twenty-four (24) hours advance written notice to any affected tenants, Buyer or its designated agents may enter upon the Property for purposes of analysis or other tests and inspections deemed necessary by Buyer for the Feasibility Study; provided, however, Buyer is not permitted to perform any intrusive testing, including, without limitation, a Phase II environmental assessment or boring, without (i) submitting to Seller the scope and inspections for such testing; and (ii) obtaining the prior written consent of Seller which may be withheld in Seller’s sole and absolute discretion. Buyer shall not alter the physical condition of the Property without notifying Seller of its requested tests, and obtaining the written consent of Seller to any physical alteration of the Property. Buyer will exercise its best efforts to conduct or cause to be conducted all inspections and tests in a manner and at times which will not unreasonably interfere with any tenant’s use and occupancy of the Property. If Buyer determines, in its sole judgment, that the Property is not suitable for any reason for Buyer’s intended use or purpose, or is not in satisfactory condition, then Buyer may terminate this Contract by written notice to Seller prior to expiration of the Feasibility Period, in which case the Initial Deposit will be returned to Buyer, and neither party shall have any further right or obligation hereunder other than as set forth herein with respect to rights or obligations that survive termination. If the Contract is not terminated in the manner and within the time provided in this Section 5, the condition provided in this Section 5(a) and any and all objections with respect to the Feasibility Study shall be deemed to have been waived by Buyer for all purposes, and Buyer shall deliver the additional amount of TWO-HUNDRED FIFTY-THOUSAND DOLLARS AND NO/100 ($250,000.00) (the “Additional Deposit”) to the Title Company within two (2) Business Days after the expiration of the Feasibility Period, which Additional Deposit shall be held by the Title Company as escrow agent and distributed (or refunded to Buyer, as applicable) according to the terms of this Contract and at such time the Initial Deposit and the Additional Deposit shall (i) become non-refundable to Purchaser except as provided in this Contract (including, without limitation, as a result of a default by Seller or failure of a condition to Closing under this Contract); and (ii) be applicable to the Purchase Price at Closing. The Feasibility Study shall be at Buyer’s sole cost and expense.

(b)

Buyer shall promptly restore the Property to its original condition if damaged or changed due to the tests and inspections performed by Buyer, free of any mechanic’s or materialman’s liens or other encumbrances arising out of any of the inspections or tests, and shall provide Seller, at no cost to Seller, with a copy of the results of any tests and inspections made by Buyer, excluding any market and economic feasibility studies. Buyer shall keep confidential the results of any tests and inspections made by Buyer, and shall not disclose said results to any third parties; other than Buyer’s officers, directors, employees, affiliates, counsel, investment advisors, potential lenders, partners, investors and participants and their advisors and other representatives (collectively “Buyer Group”), and the Buyer Group shall be informed to treat such information confidentially and in accordance with the terms and conditions of this Contract. Buyer hereby indemnifies and holds Seller harmless from all claims, liabilities, damages, losses, costs, expenses (including, without limitation, reasonable attorneys’ fees), actions and causes of action arising out of or in any way relating to the Feasibility Study performed by Buyer, its agents, independent contractors, servants and/or employees, including those caused by or in any way contributed to by the negligence of Seller, its agents, independent contractors, servants and/or employees; provided such indemnity shall not extend to the gross negligence or willful misconduct of the Seller, its agents, independent contractors, servants and/or employees. Buyer further waives and releases any claims, demands, damages, actions, causes of action or other remedies of any kind whatsoever against Seller for property damages or bodily and/or personal injuries to Buyer, its agents, independent contractors, servants and/or employees arising out of the Feasibility Study or use in any manner of the Property. Buyer shall procure and continue in force from and after the date Buyer first enters the Property, and continuing throughout the term of this Contract, Comprehensive General Liability Insurance with a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence, or Commercial General Liability Insurance, with limits of not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) per event. Seller shall be included as an additional insured(s) under such comprehensive general liability or commercial general liability coverage. Such insurance shall include: (i) personal injury liability with employee and contractual exclusions removed; and (ii) a waiver of subrogation in favor of Seller without exception for the negligence of any additional insured. Buyer will not be permitted to come onto the Property unless and until Buyer has provided to Seller a certificate of insurance evidencing such coverage, the additional insured status of Seller, and such waiver of subrogation. The provisions of this Section 5(b) shall survive the Closing or any termination of this Contract and are not subject to any liquidated damage limitation on remedies, notwithstanding anything to the contrary in this Contract.

(c)

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

(a)

Seller has previously delivered to Buyer and Buyer acknowledges receipt of: a Commitment for Title Insurance with copies of all recorded instruments affecting the Property and recited as exceptions in said Commitment for Title Insurance (collectively, the “Commitment”). Within fifteen (15) days of the Effective Date, Seller shall, at Seller’s sole cost and expense provide to Buyer a current “as-built” survey (“New Survey”). New Survey must: (1) be prepared by a Registered Professional Land Surveyor; (2) be in a form reasonably acceptable to the Title Company; (3) set forth a legal description of the Lands by metes and bounds or by reference to a platted lot or lots; (4) show that the New Survey was made on the ground with corners marked with monuments either found or placed; (5) show any discrepancies or conflicts in boundaries, and any visible encroachments; (6) contain the surveyor’s certificate that the Survey is true and correct; and (7) show the location and size of all of the following on or immediately adjacent to the Land, if any, if recorded or visible and apparent: (a) buildings, (b) building set back lines (as shown on any recorded plat, but not as may be described in any restrictive covenants or zoning ordinances), (c) streets and roads, (d) 100-year flood plain (approximate location), (e) improvements, (f) encroachments, (g) easements, (h) recording information of recorded easements, (i) pavements, (j) protrusions, (k) fences, (1) rights-of-way, and (m) any markers or other visible evidence of utilities. Any area of the Property within the 100-year flood plain will be shown on the Survey as the approximate location of the 100-year flood plain as defined by the Federal Emergency Management Agency or other applicable governmental authority. If Buyer has an objection to items disclosed in the Commitment or the New Survey, then Buyer will be entitled to give Seller written notice of its objections for a period of ten (10) Business Days following the receipt of the New Survey. If Buyer gives timely written notice of its objections, then Seller may, but shall not have any obligation to, cure such objections for a period of five (5) days from the date Seller receives Buyer’s notice (“Seller’s Cure Period”). Seller shall utilize reasonable diligence to cure any errors in the Commitment, provided Seller shall not have any obligation to expend any money, to incur any contractual or other obligations, or to institute any litigation in pursuing such efforts other than to remove at Closing financing liens of an ascertainable amount created by, through, or under Seller; further provided, notwithstanding the foregoing, Seller is required to cure any objection that may be cured by performance of the following acts: (A) satisfaction of any mortgages placed upon the Property by Seller or expressly assumed by Seller as a lien to secure indebtedness; or (B) causing the release of any mechanic’s liens placed upon the Property by a third party in connection with work performed or alleged to have been performed on the Property by, or at the request of, Seller (collectively “Monetary Encumbrances”). At Seller’s option, Seller may elect to cure an objection made by Buyer by causing the Title Company to issue an endorsement to “insure over” such objection (“Seller’s Curative Endorsement”). If any objection is not satisfied during Seller’s Cure Period, then Buyer shall elect not later then five (5) days after the expiration of Seller’s Cure Period, but in any event on or before expiration of the Feasibility Period, as its sole and exclusive remedy to either: (i) terminate this Contract, in which case the Earnest Money shall be refunded to Buyer, and neither party will have any further rights or obligations pursuant to this Contract, other than as set forth herein with respect to rights or obligations that survive termination; or (ii) waive the unsatisfied objection (which shall thereupon become a Permitted Exception) and proceed to Closing. Any exception to title not objected to by Buyer in the manner and within the time period specified in this Section 6(a) shall be deemed accepted by Buyer. Buyer may, at Buyer’s sole cost and expense, obtain an update of the New Survey (“Updated Survey”). If the Updated Survey shows exceptions not previously shown on the New Survey (individually a “New Exception” and collectively the “New Exceptions”), Buyer may object to such New Exceptions in accordance with the mechanism contained in this Section 6(a); provided Buyer shall have no right to object to any New Exception if the New Exception (i) is a utility service easement (“Service Easement”) whereby the public utility provides utility service to any portion of the Improvements and the Improvements do not encroach into the boundaries of the Service Easement; or (ii) reflects the addition of paving, sidewalks, pool decking or landscaping and such additional of paving, sidewalks, pool decking or landscaping does not cause the Property to violate applicable law or applicable restrictions. The phrase “Permitted Exceptions” means those exceptions to title set forth in the Commitment or the New Survey or the Updated Survey and that have been accepted or deemed accepted by Buyer. Buyer shall notify Seller in writing of any failure of the Commitment or New Survey to satisfy the requirements of this Section 6(a) within ten (10) days after the Commitment and New Survey are received by Buyer, and if Buyer fails to do so, then they shall be deemed to satisfy such requirements.

(b)

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

(a)

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

(i)

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

(iii)

the aged delinquency report(s) for the previous twelve (12) months, in the form prepared by the property manager;

(iv)

Seller’s most current Owner’s Title Policy (with the amount of the coverage removed);

(v)

an inventory of the Personal Property, which inventory shall identify which items are leased and which items are owned by, as appropriate, the Seller or Seller’s property manager;

(vi)

a rent roll, as of a recent date in the form provided to Seller by its property manager (“Rent Roll”);

(vii)

copies of all tax (real and personal property) bills for the current year and the immediately preceding year together with the current tax assessment information;

(ix)

the Phase I Environmental Site Assessment prepared by Alpha Testing Company, dated November 2, 2005 (“Existing Environmental Report”); and

(x)

the insurance claim report for any insurance claims made with regard to the Property in the most recent twelve (12) months.

(b)

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

(c)

. Seller has delivered to Buyer that certain Subterranean Termite Agreement (“Termite Agreement”) issued by Triple L Termite Control. Seller shall assign to Buyer at Closing all of Seller’s rights under the Termite Agreement.

(d)

Any failure of Seller to timely deliver any of the Submission Matters or make available any of the Additional Submission Matters will not extend the Feasibility Period beyond the period prescribed in Section 5(a) hereof, and Buyer’s sole and exclusive remedy on account of any such failure will be to terminate this Contract prior to the expiration of the Feasibility Period in accordance with the provisions of such Section 5(a). Except as expressly provided in Section 12 hereof, Seller makes no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in the Submission Matters or the Additional Submission Matters.

(e)

The non-public Submission Materials, the Additional Submission Matters and the Termite Report (together with any other information regarding the Property made available to Buyer) are confidential and shall not be distributed or disclosed by Buyer to any person or entity, except as may be required by law, provided that Buyer may disclose the Submission Materials to the Buyer Group provided such parties are made aware of the confidential nature of such information. If the transaction evidenced hereby fails to close for any reason whatsoever, Buyer shall return to Seller all copies of the Submission Materials which Seller or its agents may have delivered to Buyer (together with any other information regarding the Property made available to Buyer).

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

(a)

BUYER ACKNOWLEDGES THAT EXCEPT FOR ANY EXPRESS WARRANTIES AND REPRESENTATIONS CONTAINED IN THIS CONTRACT OR ANY INSTRUMENT, DOCUMENT, OR AGREEMENT TO BE DELIVERED TO BUYER AT CLOSING, BUYER IS NOT RELYING ON ANY WRITTEN, ORAL, IMPLIED, OR OTHER REPRESENTATIONS, STATEMENTS, OR WARRANTIES BY SELLER OR ANY AGENT OF SELLER OR ANY REAL ESTATE BROKER OR SALESMAN. ALL PREVIOUS WRITTEN, ORAL, IMPLIED, OR OTHER STATEMENTS, REPRESENTATIONS, WARRANTIES, OR AGREEMENTS, IF ANY, ARE MERGED HEREIN. EXCEPT AS EXPRESSLY SET FORTH HEREIN, SELLER SHALL NOT HAVE ANY LIABILITY TO BUYER, AND BUYER SHALL RELEASE SELLER FROM ANY LIABILITY (INCLUDING, WITHOUT LIMITATION, CONTRACTUAL AND/OR STATUTORY ACTIONS FOR CONTRIBUTION OR INDEMNITY), FOR, CONCERNING, OR REGARDING: (A) THE NATURE AND CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE SUITABILITY THEREOF FOR ANY ACTIVITY OR USE; (B) ANY IMPROVEMENTS OR SUBSTANCES LOCATED THEREON; OR (C) THE COMPLIANCE OF THE PROPERTY WITH ANY LAWS, RULES, ORDINANCES, OR REGULATIONS OF ANY GOVERNMENT OR OTHER BODY. EXCEPT AS EXPRESSLY PROVIDED IN SECTION 12, SELLER HAS NOT MADE, DOES NOT MAKE, AND EXPRESSLY DISCLAIMS, ANY WARRANTIES, REPRESENTATIONS, COVENANTS OR GUARANTEES, EXPRESSED OR IMPLIED, OR ARISING BY OPERATION OF LAW, AS TO THE MERCHANTABILITY, HABITABILITY, QUANTITY, QUALITY, OR ENVIRONMENTAL CONDITION OF THE PROPERTY OR ITS SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE. BUYER AFFIRMS THAT IT: (I) HAS OR WILL HAVE HAD THE OPPORTUNITY TO HAVE INVESTIGATED AND INSPECTED THE PROPERTY AND IS FAMILIAR AND SATISFIED WITH THE PHYSICAL CONDITION OF THE PROPERTY; AND (II) HAS MADE OR WILL HAVE AN OPPORTUNITY TO MAKE ITS OWN DETERMINATION AS TO THE MERCHANTABILITY, QUANTITY, QUALITY, AND CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE POSSIBLE PRESENCE OF TOXIC OR HAZARDOUS SUBSTANCES OR WASTE OR OTHER ENVIRONMENTAL CONTAMINATION AND THE PROPERTY’S SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE. BUYER HEREBY ACCEPTS THE PROPERTY IN ITS PRESENT CONDITION (INCLUDING ENVIRONMENTAL CONDITIONS) ON AN “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS” BASIS. BUYER FURTHER ACKNOWLEDGES THAT WITHOUT THIS ACCEPTANCE, THIS SALE WOULD NOT BE MADE AND THAT EXCEPT AS EXPRESSLY SET FORTH IN THIS CONTRACT, SELLER WILL NOT UNDER ANY CIRCUMSTANCES HAVE ANY OBLIGATION WHATSOEVER TO UNDERTAKE ANY REPAIR, ALTERATION, REMEDIATION, OR OTHER WORK OF ANY KIND WITH RESPECT TO ANY PORTION OF THE PROPERTY. BUYER AND ITS SUCCESSORS AND ASSIGNS HAVE, AND SHALL BE DEEMED TO HAVE, ASSUMED ALL RISK AND LIABILITY WITH RESPECT TO THE PRESENCE OF TOXIC OR HAZARDOUS SUBSTANCES OR WASTE OR OTHER ENVIRONMENTAL CONTAMINATION ON OR WITHIN OR UNDER THE SURFACE OF THE PROPERTY, WHETHER KNOWN OR UNKNOWN, APPARENT, NON-APPARENT OR LATENT, AND WHETHER EXISTING PRIOR TO, AT, OR SUBSEQUENT TO, TRANSFER OF THE PROPERTY. EXCEPT AS EXPRESSLY SET FORTH IN THIS CONTRACT, BUYER AND ITS SUCCESSORS AND ASSIGNS HEREBY RELEASE SELLER OF AND FROM ANY AND ALL RESPONSIBILITY, LIABILITY, OBLIGATIONS, AND CLAIMS, KNOWN OR UNKNOWN, INCLUDING, WITHOUT LIMITATION, ANY OBLIGATION TO TAKE THE PROPERTY BACK OR REDUCE THE PRICE, OR ACTIONS FOR CONTRIBUTION OR INDEMNITY, THAT BUYER OR ITS SUCCESSORS AND ASSIGNS MAY HAVE AGAINST SELLER OR THAT MAY ARISE IN THE FUTURE, BASED IN WHOLE OR IN PART, UPON THE PRESENCE OF TOXIC OR HAZARDOUS SUBSTANCES OR WASTE OR OTHER ENVIRONMENTAL CONTAMINATION ON OR WITHIN OR UNDER THE SURFACE OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, ALL RESPONSIBILITY, LIABILITY, OBLIGATIONS, AND CLAIMS THAT MAY ARISE UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT, AS AMENDED 42 U.S.C. § 9601 ET SEQ. BUYER FURTHER ACKNOWLEDGES THAT THE PROVISIONS OF THIS DISCLAIMER AND RELEASE HAVE BEEN FULLY EXPLAINED TO BUYER AND THAT BUYER FULLY UNDERSTANDS AND ACCEPTS SAME. THE PROVISIONS OF THIS DISCLAIMER AND RELEASE SURVIVE CLOSING.

(b)

Except as otherwise specifically stated in this Contract, Buyer agrees that Seller shall not be responsible or liable to Buyer for any construction defects, errors, omissions, or on account of any other conditions affecting the Property, as Buyer is purchasing the Property AS IS, WHERE IS, and WITH ALL FAULTS. Buyer or anyone claiming by, through or under Buyer, hereby fully releases Seller, its employees, officers, directors, representatives, attorneys and agents from any claim, cost, loss, liability, damage, expense, demand, action or cause of action arising from or related to any construction defects, errors, omissions, or other conditions affecting the Property. Buyer further acknowledges and agrees that this release shall be given full force and effect according to each of its expressed terms and provisions, including, without limitation, those relating to unknown and suspected claims, damages and causes of action. This covenant releasing Seller shall be a covenant running with the Property and shall be binding upon Buyer, its successors and assigns. Subject to consummation of this Contract, Seller hereby assigns to Buyer, without recourse or representation of any nature, effective upon Closing, any and all claims that Seller may have against any third party for any such errors, omissions or defects in the Property. As a material covenant and condition of this Contract, Buyer agrees that in the event of any such construction defects, errors, omissions or on account of any other conditions affecting the Property, Buyer shall look solely to Seller’s predecessors in title or to such contractors and consultants as may have contracted for work in connection with the Property for any redress or relief. Upon the assignment by Seller of its claims, Buyer releases Seller of all rights, express or implied, Buyer may have against Seller arising out of or resulting from any errors, omissions or defects in the Property. This waiver and release of claims shall survive the Closing.

(a)

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

(b)

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

11.

ATTORNEYS’ FEES. Any party to this Contract who is the prevailing party in any legal proceeding against the other party brought under or with respect to this Contract or transaction shall be additionally entitled to recover court costs and reasonable attorneys’ fees from the non-prevailing party.

(a)

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

(i)

To Seller’s knowledge, there are no parties in possession of any portion of the Property except Seller and tenants under Tenant Leases;

(ii)

To Seller’s knowledge, except as provided in the Rent Rolls, neither Seller nor any tenant is in default of any material obligation pursuant to the terms of the Tenant Leases;

(iii)

Seller has, or on the Closing Date will have, the partnership power and authority to sell and convey the Property as provided in this Contract and to carry out Seller’s obligations hereunder, and that all requisite partnership action necessary to authorize Seller to enter into this Contract and to carry out Seller’s obligations hereunder has been, or on the Closing Date will have been, taken;

(iv)

To Seller’s knowledge, the Operating Reports are true and correct in all material respects;

(v)

Seller has received no written notice from any government agency having jurisdiction over the Land or Improvements that either considers the construction of the Improvements or the operation or use of the Property to be in violation of any law, ordinance, regulation or order;

(vi)

Without any other investigation or inquiry of any kind, except as may be lawfully located on the Property and except as disclosed in the Existing Environmental Report, to Seller’s knowledge, there are no Hazardous Materials in, attributable to or affecting the Land or Improvements. As used herein, a “Hazardous Material” means any hazardous, toxic or dangerous waste, substance or material, pollutant or contaminant, as defined for purposes of any Environmental Laws or any other federal, state or local law, ordinance, rule, regulation or other enforcement vehicle applicable to the Property, or any substance which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous, or any substance which contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyls (PCBs), or radon gas, urea formaldehyde, asbestos or lead. “Environmental Laws” means all federal, state and local laws, ordinances, rules and regulations now or hereafter in force, as amended from time to time, and all federal and state court decisions, consent decrees and orders interpreting or enforcing any of the foregoing, in any way relating to or regulating human health or safety, or industrial hygiene or environmental conditions, or protection of the environment, or pollution or contamination of the air, soil, surface water or groundwater, and includes the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901, et seq., and the Clean Water Act, 33 U.S.C. § 1251, et seq.;

(vii)

There are no actions, suits or proceedings pending for which Seller has received service of process, before or by any judicial, administrative or union body, any arbiter or any governmental authority, against or affecting Seller or the Property. To Seller’s knowledge, Seller has not received any written notice of a pending or threatened eminent domain or similar proceeding that would affect the Land or Improvements;

(viii)

Seller is not a “foreign person” as defined in Section 1445 of the Internal Revenue Code of 1986, as amended, and the Income Tax Regulations thereunder;

(ix)

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

(x)

To Seller’s knowledge, there are no lease brokerage agreements, leasing commission agreements or other agreements providing for payments of any amounts for leasing activities or procuring tenants with respect to the Property other than as disclosed in the Submission Matters or as set forth in the Tenant Leases;

(xi)

To Seller’s knowledge, this Contract does not and the transaction contemplated in this Contract will not violate any provision of any agreement or judicial order to which Seller is a party or to which Seller or the Property is subject; and

(b)

Whenever the phrases “to Seller’s actual knowledge,” “to Seller’s knowledge,” or “to the best of Seller’s knowledge” or any similar phrase is used herein, such phrases shall be deemed to mean the present, actual knowledge (as opposed to the imputed knowledge), without inquiry or investigation, of such fact or condition by Edmund Garahan (“Seller’s Representative”). The representations and warranties contained in Section 12(a) are the representations and warranties of Seller and in no event or circumstances will be construed as either the individual representations and warranties of Seller’s Representative or to create any individual liability for Seller’s Representative.

(c)

It shall be a condition precedent to Buyer’s obligations hereunder that as of the date of Closing, all of Seller’s representations and warranties shall be true and correct in all material respects. If the representations and warranties of Seller which to Sellers actual knowledge were true and correct when made are not true and correct in all material respects on the date of Closing, then Buyer may, at its option, (a) waive such condition and close this transaction in accordance with the terms and provisions of this Contract or, (b) terminate this Contract by notice in writing to Seller and receive back the Earnest Money whereupon neither party shall have any further rights or obligations pursuant to this Contract, other than as set forth herein with respect to rights or obligations that survive termination.

(d)

Subject to the provisions of Section 12(e), the representations and warranties of Seller made in Section 12(a) shall survive the Closing for a period of six (6) months (the “Survival Period”). Buyer shall have the right to bring an action against the Seller on the breach of a representation or warranty hereunder, but only on the following conditions: (i) the Buyer first learns of the breach after Closing and files such action within the Survival Period, and (ii) Buyer shall not have the right to bring a cause of action for a breach of a representation or warranty unless the damage to such party on account of such breach (individually or when combined with damages from other breaches) equals or exceeds Twenty-Five Thousand and No/100 Dollars ($25,000.00). Furthermore, Buyer agrees that the maximum liability of Seller for the alleged breach of any or all representations or warranties set forth in this Contract is limited to Two Hundred Thousand and No/100 Dollars ($200,000.00). The provisions of this Section 12(d) shall survive the Closing.

(e)

If any representation or warranty above is known by Buyer prior to Closing to be untrue and is not remedied by Seller prior to Closing, Buyer may as Buyer’s sole and exclusive remedy, either (i) terminate this Contract whereupon the Earnest Money and any Extension Fee shall be refunded to Buyer, and neither party shall have any further rights or obligations pursuant to this Contract, other than as set forth herein with respect to rights or obligations that survive termination, or (ii) waive its objections and close the transaction without any reduction or credit against the Sales Price. The foregoing representations and warranties known by Buyer to be untrue prior to Closing shall not survive the Closing.

(a)

Maintain and operate the Property in its current state and condition, reasonable wear and tear and damage from casualty excepted.

(b)

Continue all insurance policies relative to the Property in full force and effect.

(c)

Not remove any item of Personal Property from the Land or Improvements unless replaced by a comparable item of Personal Property, except for any dead landscaping, which Seller shall have no obligation to replace.

(d)

Refrain from entering into any contracts, or other agreements (excluding leases) regarding the Property (other than contracts in the ordinary and usual course of business and which are cancelable by the owner of the Property within thirty (30) days after giving notice thereof without penalty).

(e)

Seller shall conduct its leasing activities in the normal course of business. All new Tenant Leases shall be on the form of lease currently used by Seller or such other form as may be approved by Buyer and Seller. All new leases shall be entered into in conformity with the lease guidelines (“Lease Guidelines") attached hereto as Exhibit G, including lease term, rental rates and leasing concessions, or as otherwise proposed by Seller and approved by Buyer. Seller will not grant any move-in incentive to tenants greater those provided in the Lease Guidelines.

(f)

Perform Seller’s material obligations under the Tenant Leases, in accordance with Seller’s prior operations.

(g)

Provide to Buyer copies of current rent rolls in the same form as the Rent Roll which will be deemed to supplement the Rent Roll promptly following receipt by Seller.

(h)

Provide to Buyer copies of updated operating statements as received by Seller in accordance with its current course of business.

(i)

Not apply any tenant security or other deposits except in the ordinary course of Seller’s business in accordance with Seller’s prior operations.

14.

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

15.

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

16.

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

(a)

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

(b)

If prior to the Closing there shall occur damage to the Property caused by fire or other casualty which is insured that would cost less TWO-HUNDRED FIFTY-THOUSAND AND NO/100 DOLLARS ($250,000.00) to repair, then in any such event, Buyer shall have no right to terminate this Contract, but there shall be assigned to Buyer at Closing all interest of Seller in and to any casualty insurance proceeds that may be payable to Seller on account of any such occurrence, including, to the extent assignable the proceeds of any business interruption or loss of rental insurance and the Sales Price shall be reduced by an amount equal to Seller’s deductible under its insurance policies.

(c)

Seller and Buyer both agree to use the Seller’s insurance adjuster’s assessment to determine the amount of damages.

17.

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

(a)

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

(b)

Buyer is not a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of OFAC (including those named on OFAC’s Specially Designated and Blocked Persons List) or under the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism.

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

(a)

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

Glast, Phillips & Murray
13355 Noel Road
Suite 2200
Dallas, Texas 75240
Attention: Ronald D. Law
Phone: (972)419-8398
Facsimile: (972)419-8329

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

McGuireWoods LLP
901 E. Cary Street
Richmond, VA 23219
Attention: Nancy R. Little, Esq.
Phone: (804) 775-1010
Facsimile: (804) 698-2101

(b)

This Contract shall be construed under and in accordance with the laws of the State of Texas, and all obligations of the parties created hereunder are performable in Williamson County, Texas.

(c)

This Contract shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, executors, administrators, legal representatives, successors, and permitted assigns.

(d)

In case any one or more of the provisions contained in this Contract shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Contract shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein. Furthermore, in lieu of any such invalid, illegal or unenforceable provision, there shall be automatically added to this Contract a provision as similar to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

(e)

This Contract constitutes the sole and only agreement of the parties hereto with respect to the subject matter hereof and supersedes any prior understandings or written or oral agreements between the parties respecting the subject matter hereof and cannot be changed except by their written consent.

(g)

Words of any gender used in this Contract shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.

(h)

In accordance with the requirements of the Texas Real Estate License Act, Buyer is hereby advised by Broker that (i) Buyer should be furnished with or obtain a policy of title insurance or have the abstract covering the Property examined by any attorney of its own selection, and (ii) unless otherwise agreed to in writing by the parties hereto, Broker is being paid by Seller and is representing Seller in this transaction.

(i)

The covenants, indemnification obligations and the waiver and release by Buyer set forth in Sections 5(b), 9(b) and 10, and the covenants and indemnification obligations of Buyer and Seller set forth in Sections 4(e), 4(f) and 8, shall survive consummation of Closing and any termination or cancellation of this Contract, notwithstanding any contrary provisions hereof.

(j)

The parties may execute this Contract in one or more identical counterparts, all of which when taken together will constitute one and the same instrument.

(k)

The parties hereto acknowledge that the parties and their respective counsel have each reviewed and revised this Contract, and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Contract or any amendments or exhibits hereto.

(l)

"Business Day” shall mean a date which is not a Saturday, Sunday or holiday observed by federally chartered banks in the State of Texas, whenever any determination is to be made or action to be taken on a date specified in this Contract if such date falls upon a date which is not a Business Day, the date for such determination or action shall be extended to the first Business Day immediately thereafter.

19.

ASSIGNMENT. Buyer may not assign this Contract without Seller’s prior written consent, such consent to be given or denied in Seller’s sole and absolute discretion; provided no consent of Seller shall be required in connection with the assignment of the Contract at least five (5) Business Days prior to the Closing Date to any entity controlled by or managed by Triple Net Properties, LLC. In event of any assignment of this Contract, Buyer shall promptly provide a copy of such assignment to Seller.

20.

NONREFUNDABLE CONSIDERATION. Contemporaneously with the execution and delivery of this Contract, Buyer has delivered to Seller and Seller hereby acknowledges the receipt of a check in the amount of One Hundred Dollars ($100.00) (“Independent Contract Consideration”), which amount the parties bargained for and agreed to as consideration for Buyer’s exclusive right to inspect and purchase the Property pursuant to this Contract and for Seller’s execution, delivery and performance of this Contract. The Independent Contract Consideration is in addition to and independent of any other consideration or payment provided in this Contract, is nonrefundable, and it is fully earned and shall be retained by Seller notwithstanding any other provision of this Contract.

21.

WAIVER OF CONSUMER RIGHTS. Buyer, after consultation with an attorney of its own selection (which counsel was not directly or indirectly identified, suggested or selected by Seller or any agent of Seller) hereby voluntarily waives its rights under the Deceptive Trade Practices — Consumer Protection Act (Section 17.41, et seq., Business and Commerce Code), a law that gives consumers special rights and protections. Buyer hereby acknowledges to Seller that Buyer and Seller are not in a significantly disparate bargaining position.

22.

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

(f)

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

(h)

Copies of accounts receivable aging as of the end of the Audited Year and an explanation for all accounts over 30 days past due as of the end of the Audited Year.

23.

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

(a)

Each of the representations and warranties made by Seller in Section 12 shall be true and correct in all material respects when made and as of the Closing Date.

(b)

Seller shall have performed or complied in all material respects with each obligation and covenant required by applicable laws and by this Contract to be performed or complied with by Seller on or before the Closing.

(c)

Seller shall have performed or complied in all material respects with each material obligation and covenant required to be performed by Seller pursuant to the Tenant Leases and the Service Contracts; provided that if Seller is in default of any such obligation, Seller shall be afforded an opportunity to either cure such default or to escrow at Closing an amount reasonably necessary to effect such cure.

(d)

Title to the Property and the other assets to be transferred hereunder shall be delivered to Buyer in the manner required under Section 6.

(e)

From the expiration of the Feasibility Period to the Closing Date, there has been no unlawful introduction of Hazardous Materials that would materially and adversely affect the environmental condition of the Property from that which existed at the expiration of the Feasibility Period.

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

24.

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

By: /s/ Edmund H. Garahan
Name: Edmund Garahan
Title: Manager
Date signed: January 8, 2008

BROKER:

The Broker executes this Contract for the sole purpose
of acknowledging and consenting to Section 8. The
Broker shall not be a necessary party to any Amendment
of this Contract.

By: /s/ Edmund H. Garahan
Name: Edmund H. Garahan
Title: Manager
Date signed: January 8, 2008

BUYER:

By: /s/ Jeff Hanson
Name: Jeff Hanson
Title: Chief Investment Officer
Date signed: January 11, 2008

TITLE COMPANY:

By: /s/ Debby Moore
Name: Debby Moore
Title: Escrow Officer

Date signed: January 11, 2008


EXHIBITS:

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

THIS AMENDMENT TO CONTRACT OF SALE (this “Amendment”) is entered into effective as of February 26, 2008 (the “Effective Date”), by and between CEDAR PARK MULTIFAMILY, LTD., a Texas limited partnership (“Seller”), and GRUBB & ELLIS REALTY INVESTORS, LLC (formerly known as TRIPLE NET PROPERTIES, LLC), a Virginia limited liability company (together with its successors and assigns, “Buyer”).

C. Seller and Buyer desire to reinstate the Agreement and amend the Agreement as hereinafter provided.

NOW, THEREFORE, for and in consideration of the premises and the mutual agreements herein set forth and further good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows:

1. Definitions. Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Agreement.

2. Reinstatement. The Agreement is hereby reinstated as of the date hereof subject to the terms, conditions and provisions set forth therein, as amended by this Amendment.

3. Eagle Brothers Mechanics’ Lien. Seller acknowledges that the Property is subject to that certain Mechanic’s Lien by Affidavit (the “Lien”) executed by Eagle’s Brother Construction (“Eagle Brothers”), in the amount of One-Hundred Thirty-Four Thousand Eight-Hundred Eighteen and 58/100 Dollars ($134,818.58), filed December 22, 2006, and recorded under Document No. 2006112288 of the real property records of Williamson County, Texas (the “Public Records”). Buyer agrees to reinstate the Agreement, and Buyer’s obligations under the Agreement shall be conditioned, upon the following terms and conditions:

(i) As a condition to Buyer’s obligation to close, Seller covenants and agrees to perform either of the following as of Closing, the election to be made by Seller at Seller’s discretion:

(a) On or before the Closing Date, Seller shall cause a release of the Lien to be recorded in the Public Records, and Seller shall provide to Buyer and to the Title Company evidence of such release, which evidence shall be satisfactory in form and substance to the Title Company to remove the Lien from any policy of title insurance to be issued by the Title Company, or

(b) At Closing, a creditworthy principal of Seller (such creditworthiness to be determined at Buyer’s reasonable discretion) (the “Indemnitor”) shall enter into a supplemental Indemnity Agreement (the “Indemnity”) with Buyer, and such Indemnity shall provide that Indemnitor shall indemnify, hold harmless and defend Buyer with counsel selected by or acceptable to Buyer against any and all losses, costs, expenses, damages, suits, claims or actions in any way relating to or arising from the Lien and/or claims of Eagle Brothers for amounts owed for work, services or materials supplied to or for the Property and shall be on such other terms and conditions as are satisfactory to Buyer in Buyer’s reasonable discretion.

(ii) Seller acknowledges that Buyer intends to obtain financing on the Property from one or more lenders (collectively, the “Lender”). Seller covenants and agrees if required by Lender to (a) name Lender (together with its successors and assigns) as a beneficiary of the Indemnity; and/or (b) provide additional security for the Indemnity; or (c) cause the Lien to be released of record as provided in Section 3(i)(a) of this Amendment; provided, it is expressly understood and agreed that in no event shall Seller be required to undertake items (a) or (b) above if Seller elects, or is required by Lender, to cause the Lien to be released of record as provided in Section 3(i)(a).

(iii) Seller acknowledges and agrees that in the event Seller fails and refuses to perform as required in subsections (i) and (ii) above, such failure and refusal shall constitute a default by Seller under the Agreement, and Buyer shall be entitled to all of Buyer’s rights and remedies thereunder.

(iv) Buyer, for itself and its wholly-owned affiliates only, and not on behalf of any successors or assigns or any lender or other third party, from the date hereof until the Closing Date, agrees that it will not willfully and intentionally take affirmative action to directly notify Eagle Brothers of Buyer’s acquisition of the Property as contemplated by the Agreement, or the existence of the Indemnity.

4. Additional Deposit. Within two (2) Business Days after the Effective Date, Buyer shall deliver to the Title Company the Additional Deposit, which Additional Deposit shall be held by the Title Company as escrow agent and distributed (or refunded to Buyer, as applicable) according to the terms of the Agreement.

5. Ratification. Seller and Buyer acknowledge and agree that, except as amended herein, the Agreement is in full force and effect and is hereby ratified and confirmed.

6. Miscellaneous. This Amendment (i) may be executed by facsimile signatures and in several counterparts, and each counterpart when so executed and delivered shall constitute an original of this Amendment, and all such separate counterparts shall constitute but one and the same Amendment and (ii) embodies the entire agreement and understanding between the parties with respect to the subject matter hereof and supercedes all prior agreements, consents and understandings related to such subject matter.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW]

THIS SECOND AMENDMENT TO CONTRACT OF SALE (this “Amendment”) is entered into effective as of March 7, 2008 (the “Effective Date”), by and between CEDAR PARK MULTIFAMILY, LTD., a Texas limited partnership (“Seller”), and GRUBB & ELLIS REALTY INVESTORS, LLC (formerly known as TRIPLE NET PROPERTIES, LLC), a Virginia limited liability company (together with its successors and assigns, “Buyer”).

A. Seller and Buyer are parties to that certain Contract of Sale dated effective as of January 8, 2008, as amended by that certain Amendment to Contract of Sale dated effective as of February 26, 2008 (as amended, the “Agreement”) with respect to that certain real and personal property located in Williamson County, Texas and more particularly described in the Agreement (the “Property”).

1. Definitions. Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Agreement.

2. Amendment. Section 1(d) of the Agreement shall be deleted in its entirety and replaced as follows:

“(d) To the extent assignable at no cost to Seller, all intangible personal property, if any, owned by Seller and related to the Land and the Improvements, including, without limitation, the name ‘Arboleda Luxury Apartment Homes.’”

3. Ratification. Seller and Buyer acknowledge and agree that, except as amended herein, the Agreement is in full force and effect and is hereby ratified and confirmed.

4. Miscellaneous. This Amendment (i) may be executed by facsimile signatures and in several counterparts, and each counterpart when so executed and delivered shall constitute an original of this Amendment, and all such separate counterparts shall constitute but one and the same Amendment and (ii) embodies the entire agreement and understanding between the parties with respect to the subject matter hereof and supercedes all prior agreements, consents and understandings related to such subject matter.

THIS THIRD AMENDMENT TO CONTRACT OF SALE (this “Amendment”) is entered into effective as of March 27, 2008 (the “Effective Date”), by and between CEDAR PARK MULTIFAMILY, LTD., a Texas limited partnership (“Seller”), and GRUBB & ELLIS REALTY INVESTORS, LLC (formerly known as TRIPLE NET PROPERTIES, LLC), a Virginia limited liability company (together with its successors and assigns, “Buyer”).

A. Seller and Buyer are parties to that certain Contract of Sale dated effective as of January 8, 2008 (the “Agreement”), with respect to that certain real and personal property located in Williamson County, Texas and more particularly described in the Agreement (the “Property”). The Agreement was amended by Amendment to Contract of Sale dated effective February 26, 2008 (“First Amendment”) and by Second Amendment to Contract of Sale dated effective March 7, 2008 (“Second Amendment”).

B. Section 4(a) provides that for Buyer to extend the scheduled Closing Date, Buyer must (i) notify Seller of such election at least five (5) days prior to the scheduled Closing Date; and (ii) deposit with the Title Company the Extension Fee in the amount of $150,000.00 by the same date. The Closing was scheduled to occur on March 10, 2008. Buyer notified Seller by letter dated March 3, 2008 of Buyer’s election to extend the Closing Date and requested that Seller extend the date the Extension Fee is due.

1. Definitions. Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Agreement.

2. Extension Fee and Closing. Seller and Buyer agree that (i) the date the Extension Fee is due is hereby extended until April 4, 2008; and (ii) the Closing shall occur on or before April 9, 2008.

3. Ratification. Seller and Buyer acknowledge and agree that, except as amended herein and by the First Amendment and Second Amendment, the Agreement is in full force and effect and is hereby ratified and confirmed.

This Sale Agreement Assignment (“Assignment”) is made as of March 27, 2008 by and between Grubb & Ellis realty Investors, LLC, (formerly known as Triple Net Properties, LLC) a Virginia limited liability company (“Assignor”), and G&E Apartment REIT Arboleda, LLC, a Delaware limited liability company (“Assignee”), and is made with respect to the Contract of Sale by and between Assignor and Cedar Park Multifamily, Ltd., a Texas limited partnership (“Seller”) dated January 7, 2008, as amended (“PSA”). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

Assignor hereby assigns to Assignee all of Assignor’s right, title and interest in and to the PSA, the escrow created pursuant to the PSA, any Deposits (as defined in the PSA) in such escrow or held by Seller, and all other rights and assets appurtenant to any of the foregoing (“Assets”).

Assignee hereby accepts the Assets and assumes all of Assignor’s obligations under the PSA, whether arising before or after the date of this Assignment. Assignor acknowledges that it is not released from any PSA obligations, whether arising before or after the date of this Assignment, as a result of such assignment.

Upon deliver hereto to Seller, Buyer’s address per PSA Section 18 is hereby unchanged.

In witness whereof, the undersigned have executed this Assignment as of the above date.

Grubb & Ellis Realty Investors, LLC (formerly
known as Triple Net Properties, L.L.C.) a
Virginia limited liability company

FOR VALUE RECEIVED, the undersigned (“Borrower”) jointly and severally (if more than one) promises to pay to the order of PNC ARCS LLC, a Delaware limited liability company the principal sum of Seventeen Million Six Hundred Fifty One Thousand and No/100 Dollars (US $17,651,000.00), with interest accruing at the Interest Rate on the unpaid principal balance from the Disbursement Date until fully paid.

1. Defined Terms. In addition to defined terms found elsewhere in this Note, as used in this Note, the following definitions shall apply:

Adjustable Rate. From and after each Rate Change Date until the next Rate Change Date, the Adjustable Rate shall be the sum of (i) the Current Index, and (ii) the Margin, which sum is then rounded to three decimal places, subject to the limitations that the Adjustable Rate shall not be less than the Margin.

Adjustable Rate Period: The period commencing on the First Rate Change Date and ending on the Maturity Date.

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

Current Index: The published Index that is effective on the 15th day before the applicable Rate Change Date.

Debt Service Amounts: Amounts payable under this Note, the Security Instrument or any other Loan Document.

Default Rate: A rate equal to the lesser of 4 percentage points above the Interest Rate or the maximum interest rate which may be collected from Borrower under applicable law.

First Payment Date or First Interest Only Payment Date: The first day of May, 2008.

Indebtedness: The principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument.

Index: The British Bankers Association fixing of the London Inter-Bank Offered Rate for 1-month U.S. Dollar-denominated deposits as reported by Telerate through electronic transmission. If the Index is no longer available, or is no longer posted through electronic transmission, Lender will choose a new index that is based upon comparable information and provide notice thereof to Borrower.

Fixed Rate: The annual rate of Five and Thirty Six Hundredths Percent (5.36%).

Maturity Date: The first day of April, 2015, or any earlier date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise.

Payment Change Date: The first day of the month following each Rate Change Date until this Note is repaid in full.

Remaining Amortization Period: For an amortizing Loan, as of each Payment Change Date, the Amortization Period minus the number of scheduled monthly principal and interest payments that have elapsed since the date of this Note.

Rate Change Date: The First Rate Change Date and the first day of each month thereafter until this Note is repaid in full.

Security Instrument: A Multifamily Deed of Trust, Assignment of Rents and Security Agreement and Fixture Filing dated as of the date of this Note.

Yield Maintenance Period End Date or Prepayment Premium Period End Date: The last day of March, 2014.

Event of Default, Key Principal and 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 26901 Agoura Road, Suite 200, Calabasas Hills, California 91301, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3. Payment of Principal and Interest. Principal and interest shall be paid as follows:

(a) Short Month Interest. If disbursement of principal is made by Lender to Borrower on any day other than the first day of the month, interest for the period beginning on the Disbursement Date and ending on and including the last day of the month in which such disbursement is made shall be payable simultaneously with the execution of this Note.

(b) Interest Computation. Interest under this Note shall be computed on the basis of (check one only):

[ X ] Actual/360. A 360-day year. The amount of each monthly payment made by Borrower pursuant to Paragraph 3(d) below that is allocated to interest will be based on the actual number of calendar days during such month and shall be calculated by multiplying the unpaid principal balance of this Note by the per annum Interest Rate, dividing the product by 360 and multiplying the quotient by the actual number of days elapsed during the month. Borrower understands that the amount allocated to interest for each month will vary depending on the actual number of calendar days during such month.

(c) Interest Accrual. Interest shall accrue on the unpaid principal balance of this Note at the Fixed Rate or the Adjustable Rate, as applicable. Interest shall accrue at the Fixed Rate until the First Rate Change Date. Thereafter, interest shall accrue at the Adjustable Rate. During the Adjustable Rate Period, the Adjustable Rate shall change on each Rate Change Date until the loan is repaid in full.

Consecutive monthly installments of principal and interest, each in the amount of Dollars (US $ ), shall be payable on the First Payment Date and on the first day of every month thereafter, until and including the First Rate Change Date

[ ] 30/360. If interest accrues based on a 30/360 interest computation, then consecutive monthly installments of interest only, each in the amount of Dollars (US $ ), shall be payable on the First Payment Date and on the first day of every month thereafter, until and including the First Rate Change Date.

[ ] Actual/360. If interest accrues based on an Actual/360 interest computation, the amount of Dollars (US $ ) shall be payable on the First Payment Date and thereafter consecutive monthly installments of interest only, shall be payable as follows:

(1) Dollars (US $ ), shall be payable on the first day of each month during the term hereof which follows a 28-day month;

(2) Dollars (US $ ), shall be payable on the first day of each month during the term hereof which follows a 29-day month,

(3) Dollars (US $ ), shall be payable on the first day of each month during the term hereof which follows a 30-day month, or

(4) Dollars (US $ ), shall be payable on the first day of each month during the term hereof which follows a 31-day month,

(1)

Interest Only Period. Commencing on the First Interest Only Payment Date and on the first day of every month until and including the Last Interest Only Payment Date, consecutive monthly installments of interest only shall be payable and in an amount equal to one of the following (check one only):

[ ] 30/360. If interest accrues based on a 30/360 interest computation, then consecutive monthly installments of interest only, each in the amount of Dollars (US $ ).

[ ] Actual/360. If interest accrues based on an Actual/360 interest computation, the amount of Seventy Eight Thousand Eight Hundred Forty One and 13/100 Dollars (US $78,841.13) shall be payable on the First Interest Only Payment Date and thereafter consecutive monthly installments of interest only shall be payable as follows:

(i) Seventy Three Thousand Five Hundred Eighty Five and 06/100 Dollars (US $73,585.06), shall be payable on the first day of each month during the term hereof which follows a 28-day month;

(ii) Seventy Six Thousand Two Hundred Thirteen and 10/100 Dollars (US $76,213.10), shall be payable on the first day of each month during the term hereof which follows a 29-day month,

(iii) Seventy Eight Thousand Eight Hundred Forty One and 13/100 Dollars (US $78,841.13), shall be payable on the first day of each month during the term hereof which follows a 30-day month, or

(iv) Eighty One Thousand Four Hundred Sixty Nine and 17/100 Dollars (US $81,469.17), shall be payable on the first day of each month during the term hereof which follows a 31-day month,

(2)

Amortizing Period. Commencing on the First Principal and Interest Payment Date and on the first day of every month thereafter, until and including the First Rate Change Date, consecutive monthly installments of principal and interest shall be due and payable, each in the amount of Ninety Eight Thousand Six Hundred Seventy Five and 53/100 Dollars (US $98,675.53).

[ X ] Amortizing Loan. If the Loan is an amortizing Loan, consecutive monthly installments of principal and interest, each in the amount of the Required Monthly Payment (defined below), shall be payable on the first day of each month beginning on the First Payment Change Date and on each Payment Change Date thereafter until the entire unpaid principal balance evidenced by this Note is fully paid. The initial Required Monthly Payment shall be the amount required to pay the unpaid principal balance of this Note in equal monthly installments, including accrued interest at the Adjustable Rate over the Remaining Amortization Period. Thereafter, to the extent that the Adjustable Rate has changed, the Required Monthly Payment shall change on each Payment Change Date, and shall be in such amount as shall cause the unpaid principal balance of the Note to be amortized over the Remaining Amortization Period. Notwithstanding the interest accrual method selected in paragraph 3(b) above, the amount of the initial and all other Required Monthly Payments shall be calculated utilizing a 30/360 interest calculation payment schedule whether the amount allocated to interest on the loan is based on a 360-day year consisting of twelve 30-day months or on a 360-day year consisting of the actual number of days in each month. Any remaining principal and interest, if not sooner paid, shall be due and payable on the Maturity Date.

[ ] Interest-Only Loan. If the Loan is an interest-only Loan, consecutive monthly installments of interest only, each in the amount of the Required Monthly Payment (defined below), shall be payable on the First Payment Change Date and on each Payment Change Date thereafter until the entire unpaid principal balance evidenced by this Note is fully paid. The initial Required Monthly Payment shall be calculated based on the outstanding principal balance and the then-applicable Adjustable Rate. Thereafter, to the extent that the Adjustable Rate has changed, the Required Monthly Payment shall change on each Payment Change Date based on the then-applicable Adjustable Rate. The amount of the initial and any changed Required Monthly Payment shall be calculated utilizing the interest accrual method selected in paragraph 3(b) above. The entire unpaid principal balance and accrued but unpaid interest, if not sooner paid, shall be due and payable on the Maturity Date.

(i) Adjustable Rate. The Adjustable Rate shall be in effect beginning on the First Rate Change Date. From and after each Rate Change Date until the next Rate Change Date, the Adjustable Rate shall be the sum of (a) the Current Index, and (b) the Margin, which sum is then rounded to three decimal places, subject to the limitations that the Adjustable Rate shall not be less than the Margin. Accrued interest on this Note shall be paid in arrears.

(ii) Notice of Interest Rate Change. Before each Payment Change Date, Lender shall re-calculate the Adjustable Rate and shall notify Borrower (in the manner specified in the Security Instrument for giving notices) of any change in the Adjustable Rate and the Required Monthly Payment.

(iii) Correction to Required Monthly Payment. If Lender at any time determines, in its sole but reasonable discretion, that it has miscalculated the amount of the Required Monthly Payment (whether because of a miscalculation of the Adjustable Rate or otherwise), then Lender shall give notice to Borrower of the corrected amount of the Required Monthly Payment (and the corrected Adjustable Rate, if applicable) and (a) if the corrected amount of the Required Monthly Payment represents an increase, then Borrower shall, within 30 calendar days thereafter, pay to Lender any sums that Borrower would have otherwise been obligated under this Note to pay to Lender had the amount of the Required Monthly Payment not been miscalculated, or (b) if the corrected amount of the Required Monthly Payment represents a decrease thereof and Borrower is not otherwise in breach or default under any of the terms and provisions of the Note, the Security Instrument or any other loan document evidencing or securing the Note, then Borrower shall thereafter be paid the sums that Borrower would not have otherwise been obligated to pay to Lender had the amount of the Required Monthly Payment not been miscalculated.

(e) Payments Before Due Date. Any regularly scheduled monthly installment of principal and interest that is received by Lender before the date it is due shall be deemed to have been received on the due date solely for the purpose of calculating interest due.

(f) Accrued Interest. Any accrued interest remaining past due for 30 days or more shall be added to and become part of the unpaid principal balance and shall bear interest at the rate or rates specified in this Note. Any reference herein 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.

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 that payment 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, among other things, by the Security Instrument, and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

6. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, 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. Lender may exercise this option to accelerate regardless of any prior forbearance.

7. Late Charge. If any monthly installment due hereunder is not received by Lender on or before the 10th day of each month or if any other amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 10 days after the date such amount is due, counting from and including the date such amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such monthly installment or other amount due. 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 Paragraph 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 Paragraph 8.

8. Default Rate. So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at the Default Rate. If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, 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 that it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any monthly installment or other payment due under this Note is delinquent for more than 30 days, 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 Paragraph 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 (as such term is defined in the Security Instrument) and 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 obligations of Borrower.

(b) Borrower shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of:

(1) failure of Borrower 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;

(2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument;

(3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports;

(4) fraud or written material misrepresentation by Borrower, Key Principal 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; or

(5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to Debt Service Amounts, except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and Debt Service Amounts for that calendar year.

(c) 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:

(1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or

(2) a Transfer that is an Event of Default under Section 21 of the Security Instrument.

(d) To the extent that Borrower has personal liability under this Paragraph 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. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

(a) A prepayment premium shall be payable in connection with any prepayment made under this Note as provided below:

(1) Borrower may voluntarily prepay all (but not less than all) of the unpaid principal balance of this Note only on the last calendar day of a calendar month (the “Last Day of the Month”) and only if Borrower has complied with all of the following:

(i)

Borrower must give Lender at least 30 days (if given via U.S. Postal Service) or 20 days (if given via facsimile, email or overnight courier), but not more than 60 days, prior written notice of Borrower’s intention to make a prepayment (the “Prepayment Notice”). The Prepayment Notice shall be given in writing (via facsimile, email, U.S. Postal Service or overnight courier) and addressed to Lender. The Prepayment Notice shall include, at a minimum, the Business Day upon which Borrower intends to make the prepayment (the “Intended Prepayment Date”).

(ii)

Borrower acknowledges that the Lender is not required to accept any voluntary prepayment of this Note on any day other than the Last Day of the Month even (A) if Borrower has given a Prepayment Notice with an Intended Prepayment Date other than the Last Day of the Month or (B) if the Last Day of the Month is not a Business Day. Therefore, even if Lender accepts a voluntary prepayment on any day other than the Last Day of the Month, for all purposes (including the accrual of interest and the calculation of the prepayment premium), any prepayment received by Lender on any day other than the Last Day of the Month shall be deemed to have been received by Lender on the Last Day of the Month and any prepayment calculation will include interest to and including the Last Day of the Month in which such prepayment occurs. If the Last Day of the Month is not a Business Day, then the Borrower must make the payment on the Business Day immediately preceding the Last Day of the Month.

(iii)

Any prepayment shall be made by paying (A) the amount of principal being prepaid, (B) all accrued interest (calculated to the Last Day of the Month), (C) all other sums due Lender at the time of such prepayment, and (D) the prepayment premium calculated pursuant to Schedule A.

(iv)

If, for any reason, Borrower fails to prepay this Note (A) within five (5) Business Days after the Intended Prepayment Date or (B) if the prepayment occurs in a month other than the month stated in the original Prepayment Notice, then Lender shall have the right, but not the obligation, to recalculate the prepayment premium based upon the date that Borrower actually prepays this Note and to make such calculation as described in Schedule A attached hereto. For purposes of such recalculation, such new prepayment date shall be deemed the “Intended Prepayment Date.”

(2) Upon Lender’s exercise of any right of acceleration under this Note, Borrower shall pay to Lender, in addition to the entire unpaid principal balance of this Note outstanding at the time of the acceleration, (i) all accrued interest and all other sums due Lender under this Note and the other Loan Documents, and (ii) the prepayment premium calculated pursuant to Schedule A.

(3) Any application by Lender of any collateral or other security to the repayment of any portion of the unpaid principal balance of this Note prior to the Maturity Date and in the absence of acceleration shall be deemed to be a partial prepayment by Borrower, requiring the payment to Lender by Borrower of a prepayment premium.

(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment premium shall be payable (1) with respect to any prepayment occurring as a result of the application of any insurance proceeds or condemnation award under the Security Instrument, or (2) as provided in subparagraph (b) of Schedule A.

(d) Any required prepayment of less than the entire 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, unless Lender agrees otherwise in writing.

(e) Borrower recognizes that any prepayment of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from a 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 on Schedule A represents a reasonable estimate of the damages Lender will incur because of a prepayment.

(f) Borrower further acknowledges that the prepayment premium provisions of this Note are a material part of the consideration for the loan evidenced by this Note, and acknowledges 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 prepayment premium provisions.

11. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, 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. 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 are waived by Borrower, Key Principal, and all endorsers and guarantors of this Note and all other third party obligors.

14. Loan Charges. Borrower and Lender intend at all times to comply with the law of the State of Texas governing the maximum rate or 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 at 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 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. 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 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 the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household 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 jurisdiction in which the Land is located.

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

19. Notices. All notices, demands and other communications required or permitted to be given by Lender to Borrower pursuant to this Note shall be given in accordance with Section 31 of the Security Instrument.

20. Consent to Jurisdiction and Venue. Borrower and Key Principal each agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note. Borrower and Key Principal each 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.

21. WAIVER OF TRIAL BY JURY. BORROWER, KEY PRINCIPAL 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, KEY PRINCIPAL 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.

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

By: /s/ Gus G. Remppies
Name: Gus G. Remppies
Title: Executive Vice-President

Borrower’s Social Security/Employer ID Number: 26-2140096
Fannie Mae Commitment Number: 854544

ACKNOWLEDGMENT AND AGREEMENT OF KEY PRINCIPAL TO
PERSONAL LIABILITY FOR EXCEPTIONS TO NON-RECOURSE LIABILITY

Key Principal, who has an economic interest in Borrower or who will otherwise obtain a material financial benefit from the Loan, hereby absolutely, unconditionally and irrevocably agrees to pay to Lender, or its assigns, on demand, all amounts for which Borrower is personally liable under Paragraph 9 of the Multifamily Note to which this Acknowledgment is attached (the “Note”). The obligations of Key Principal 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. Lender may pursue its remedies against Key Principal without first exhausting its remedies against the Borrower or the Mortgaged Property. All capitalized terms used but not defined in this Acknowledgment shall have the meanings given to such terms in the Security Instrument. As used in this Acknowledgment, the term “Key Principal” (each if more than one) shall mean only those individuals or entities that execute this Acknowledgment.

The obligations of Key Principal shall be performed without demand by Lender and shall be unconditional irrespective of the genuineness, validity, or enforceability of the Note, or any other Loan Document, and without regard to any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Key Principal hereby waives the benefit of all principles or provisions of law, which are or might be in conflict with the terms of this Acknowledgment, and agrees that Key Principal’s obligations shall not be affected by any circumstances which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Key Principal hereby waives the benefits of any right of discharge and all other rights under any and all statutes or other laws relating to guarantors or sureties, to the fullest extent permitted by law, diligence in collecting the Indebtedness, presentment, demand for payment, protest, all notices with respect to the Note including this Acknowledgment, which may be required by statute, rule of law or otherwise to preserve Lender’s rights against Key Principal under this Acknowledgment, including 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, notice of the incurring by Borrower of any obligation or indebtedness and all rights to require Lender to (a) proceed against Borrower, (b) proceed against any general partner of Borrower, (c) proceed against or exhaust any collateral held by Lender to secure the repayment of the Indebtedness, or (d) if Borrower is a partnership, pursue any other remedy it may have against Borrower, or any general partner of Borrower. In addition, Key Principal waives the benefit of any right to discharge under chapter 34 of the Texas Business and Commerce Code and all other rights of sureties and guarantors thereunder.

At any time without notice to Key Principal, and without affecting the liability of Key Principal hereunder, (a) the time for payment of the principal of or interest on the Indebtedness may be extended or the Indebtedness may be renewed in whole or in part; (b) the time for Borrower’s performance of or compliance with any covenant or agreement contained in the Note, or any other Loan Document, whether presently existing or hereinafter entered into, may be extended or such performance or compliance may be waived; (c) the maturity of the Indebtedness may be accelerated as provided in the Note or any other Loan Document; (d) the Note or any other Loan Document may be modified or amended by Lender and Borrower in any respect, including an increase in the principal amount; and (e) any security for the Indebtedness may be modified, exchanged, surrendered or otherwise dealt with or additional security may be pledged or mortgaged for the Indebtedness.

Key Principal acknowledges that Key Principal has received a copy of the Note and all other Loan Documents. Neither this Acknowledgment nor any of its provisions may be waived, modified, amended, discharged, or terminated except by an agreement in 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 agreement. Key Principal agrees to notify Lender (in the manner for giving notices provided in Section 31 of the Security Instrument) of any change of Key Principal’s address within 10 Business Days after such change of address occurs. Any notices to Key Principal shall be given in the manner provided in Section 31 of the Security Instrument. Key Principal agrees to be bound by Paragraphs 20 and 21 of the Note.

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

THIS ACKNOWLEDGMENT IS AN INSTRUMENT SEPARATE FROM, AND NOT A PART OF, THE NOTE. BY SIGNING THIS ACKNOWLEDGMENT, KEY PRINCIPAL DOES NOT INTEND TO BECOME AN ACCOMMODATION PARTY TO, OR AN ENDORSER OF, THE NOTE.

IN WITNESS WHEREOF, Key Principal has signed and delivered this Acknowledgment or has caused this Acknowledgment to be signed and delivered by its duly authorized representative.

KEY PRINCIPALS:

Grubb & Ellis Apartment REIT, Inc., a Maryland corporation By: /s/ Gus G. Remppies Name: Gus G. Remppies Title: Executive Vice-President

1551 North Tustin Avenue

Suite 300

Santa Ana, CA 92705

Social Security/Employer ID Number: 20-3975609

/s/ Stanley J. Olander

Stanley J. Olander 4319 Monument Avenue

Richmond, VA 23230

Social Security/Employer ID Number: ###-##-####

Closing Department
PNC ARCS LLC
26901 Agoura Road, Suite 200
Calabasas Hills, California 91301

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

Notice of Confidentiality Rights: If you are a natural person, you may remove or strike any of the
following information from this instrument before it is filed for record in the Public Records:
Your social security number or your driver’s license number.TABLE OF CONTENTS


	DOCUMENTS; PREPAYMENT PREMIUM11
6.	EXCULPATION11
7.	DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES				12
8.	COLLATERAL AGREEMENTS		13
9.	APPLICATION OF PAYMENTS		13
10.	COMPLIANCE WITH LAWS		13
11.	USE OF PROPERTY13
12.	PROTECTION OF LENDER'S SECURITY14
13.	INSPECTION14
14.	BOOKS AND RECORDS; FINANCIAL REPORTING			16
15.	TAXES; OPERATING EXPENSES		17
16.	LIENS; ENCUMBRANCES	17


	INTERESTS IN BORROWER29
22.	EVENTS OF DEFAULT30
23.	REMEDIES CUMULATIVE31
24.	FORBEARANCE31
25.	INTENTIONALLY DELETED31
26.	WAIVER OF STATUTE OF LIMITATIONS31
27.	WAIVER OF MARSHALLING32
28.	FURTHER ASSURANCES32
29.	ESTOPPEL CERTIFICATE32
30.	GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE32
31.	NOTICE33
32.	SALE OF NOTE; CHANGE IN SERVICER33
33.	SINGLE ASSET BORROWER33
34.	SUCCESSORS AND ASSIGNS BOUND33
35.	JOINT AND SEVERAL LIABILITY33
36.	RELATIONSHIPOF PARTIES; NO THIRD PARTY BENEFICIARY33
37.	SEVERABILITY; AMENDMENTS34
38.	CONSTRUCTION34
39.	LOAN SERVICING34
40.	DISCLOSURE OF INFORMATION34
41.	NO CHANGE IN FACTS OR CIRCUMSTANCES34
42.	SUBROGATION35
43.	ACCELERATION; REMEDIES.35
44.	RELEASE.38
45.	TRUSTEE38
46.	VENDOR’S LIEN; RENEWAL AND EXTENSION39
47.	NO FIDUCIARY DUTY39
48.	FIXTURE FILING39
49.	ADDITIONAL PROVISIONS REGARDING ASSIGNMENT OF RENTS	39

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

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT AND FIXTURE FILING (the “Instrument”) is dated as of the 31st day of March, 2008, by G&E Apartment REIT Arboleda, LLC, a Delaware limited liability company organized and existing under the laws of Delaware, whose address is 1551 North Tustin Avenue, Santa Ana, CA 92705, as trustor (“Borrower”), to Lawyers Title Insurance Corporation, as trustee (“Trustee”), for the benefit of PNC ARCS LLC, a Delaware limited liability company organized and existing under the laws of the State of Delaware, whose address is 26901 Agoura Road, Suite 200, Calabasas Hills, California 91301, as beneficiary (“Lender”).

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 Williamson 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

April 1, 2015, in the principal amount of $17,651,000.00, 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. 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 a schedule of exceptions to coverage in any title insurance policy issued to Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender’s interest in the Mortgaged Property.

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

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

(b) "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 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.

(c) "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.

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

(e) "Fixtures” means all property 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.

(f) "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.

(g) "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 defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” within the meaning of any Hazardous Materials Law.

(h) "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 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, 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.

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

(j) "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.

(k) "Indebtedness” means the principal of, interest 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.

(m) "Key Principal” means the natural person(s) or entity identified as such at the foot of this Instrument, and any person or entity who becomes a Key Principal after the date of this Instrument and is identified as such in an amendment or supplement to this Instrument.

(o) "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.

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

(q) "Loan Documents” means the Note, this Instrument, all guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs, and any other documents now or in the future executed by Borrower, Key Principal, 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.

(r) "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.

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

(5)

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 benefitting 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;

(6)

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;

(7)

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;

(8)

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;

(9)

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;

(11)

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;

(13)

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);

(14)

all tenant security deposits which have not been forfeited by any tenant under any Lease; and

(15)

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.

(t) "Note” means the Multifamily Note described on page 1 of this Instrument, including the Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may be amended from time to time.

(v) "Personalty” means all equipment, inventory, general intangibles which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, including furniture, furnishings, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property 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.

(x) "Rents” means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including subsidy payments received from any sources (including, but not limited to payments under any Housing Assistance Payments Contract), 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.

(y) "Taxes” means all taxes, assessments, vault rentals and other charges, if any, 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.

(z) "Transfer” means (A) a sale, assignment, transfer or other disposition (whether voluntary, involuntary or by operation of law); (B) the granting, creating or attachment of a lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law); (C) 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; (D) the withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or manager in a limited liability company; or (E) the merger, dissolution, liquidation, or consolidation of a legal entity. “Transfer” does not include (i) a conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under this Instrument or (ii) the Mortgaged Property becoming part of a bankruptcy estate by operation of law under the United States Bankruptcy Code. 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.

2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subject to a security interest under the Uniform Commercial Code, whether acquired now or 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 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 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. 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. This Instrument constitutes a financing statement with respect to any part of the Mortgaged Property which is or may become a Fixture.

(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,” as that term is defined in Section 1(s). 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, and Borrower shall, upon Borrower’s receipt of any Rents from any sources (including, but not limited to subsidy payments under any Housing Assistance Payments Contract), pay the total amount of such receipts to the 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 after the occurrence of an Event of Default, 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; provided, however, that the giving of any such notice by Lender shall not affect, in any way, Lender’s entitlement to the Rents as of the date on which the Event of Default occurs. No tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and 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 indebtedness that will be 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. 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 this Section 3, 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,” as that term is defined in Section 1(s). 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 the occurrence of an Event of Default, 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. 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) 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, 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 customary in the applicable market, residential Leases with terms of less than six months may be permitted with Lender’s prior written consent.

(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. 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 (1) such Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender); (2) 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; (3) 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; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (5) 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 (6) 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) 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 (1) any water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under Section 19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender’s interests, all as reasonably estimated from time to time by Lender. 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 obligation of Borrower for which Imposition Deposits are required. Any waiver by Lender of the requirement that Borrower remit Imposition Deposits to Lender may be revoked by Lender, in Lender’s discretion, at any time upon notice to Borrower.

(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. Borrower hereby pledges and grants to Lender a security interest in the Imposition Deposits as additional security for all of Borrower’s obligations under this Instrument and the other Loan Documents. 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.

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 which 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, 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) except for any change in use approved by Lender, 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, (b) convert any individual dwelling units or common areas to commercial use, (c) initiate or acquiesce in a change in the zoning classification of the Mortgaged Property, or (d) establish any condominium or cooperative regime with respect to the Mortgaged Property.

(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, 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 (1) payment of fees and out-of-pocket expenses of attorneys, accountants, inspectors and consultants, (2) entry upon the Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement of the insurance required by Section 19, and (4) 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 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.

13. INSPECTION. 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.

(a) Borrower shall keep and maintain at all times at the Mortgaged Property or the management agent’s offices, and upon Lender’s request shall make available at the Mortgaged Property, 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 at any reasonable time by Lender.

(1)

within 120 days after the end of each fiscal year of Borrower, 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;

(2)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, 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;

(3)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, 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;

(4)

within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members;

(5)

upon Lender’s request, 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;

(6)

upon Lender’s request, 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; and

(7)

if required by Lender, a statement of income and expense for the Mortgaged Property for the prior month or quarter.

(c) Each of the statements, schedules and reports required by Section 14(b) shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require. Lender also may require that any statements, schedules or reports be audited at Borrower’s expense by independent certified public accountants acceptable to Lender.

(d) If Borrower fails to provide in a timely manner the statements, schedules and reports required by Section 14(b), 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.

(e) 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.

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

(g) If an Event of Default has occurred and Lender has not previously required Borrower to furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require Borrower to furnish such a statement within 45 days after the end of each fiscal quarter of Borrower following such Event of Default.

(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 pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including insurance premiums, utilities, repairs and replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added.

(c) As long as no Event of Default exists and Borrower has timely delivered to Lender any bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes, insurance premiums or any other individual Imposition to the extent that sufficient Imposition Deposits are held by Lender for the purpose of paying that specific Imposition. 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 any Event of Default has occurred and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition becomes due and payable or 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 (1) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (4) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of the reserves established by Borrower to pay the contested Imposition.

(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 promptly furnish to Lender receipts evidencing such payments.

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.

(a) Borrower (1) shall not commit waste or permit impairment or deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged Property, (3) 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, (4) shall keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality, (5) shall provide for professional management of the Mortgaged Property by a residential rental property manager satisfactory to Lender under a contract approved by Lender in writing, and (6) 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 except in connection with the replacement of tangible Personalty.

(b) If, in connection with the making of the loan evidenced by the Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a written contract for management of the Mortgaged Property and if, after the date of this Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have the right to approve such new property manager and the written contract for the management of the Mortgaged Property and require that Borrower and such new property manager enter into an Assignment of Management Agreement on a form approved by Lender. If required by Lender (whether before or after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable for the management of the Mortgaged Property to enter into an agreement with Lender, in a form approved by Lender, providing for subordination of those fees and such other provisions as Lender may require. “Affiliate of Borrower” means any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control with, or which controls Borrower (the term “control” for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests).

(a) Except for matters covered by a written program of operations and maintenance approved in writing by Lender (an “O&M Program”) or matters described in Section 18(b), Borrower shall not cause or permit any of the following:

(1)

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;

(2)

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

(3)

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; or

(4)

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.

The matters described in clauses (1) through (4) above are referred to collectively in this Section 18 as “Prohibited Activities or Conditions”.

(b) Prohibited Activities and Conditions shall not include the safe and lawful use and storage of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (2) 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 (3) 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) If an O&M Program has been established with respect to Hazardous Materials, 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 the O&M Program. All costs of performance of Borrower’s obligations under any O&M Program shall be paid by Borrower, and Lender’s out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and Borrower’s performance shall be paid by Borrower upon demand by Lender. Any such out-of-pocket costs of Lender which 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:

(1)

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

(2)

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

(3)

except to the extent previously disclosed by Borrower to Lender in writing, 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 Property which has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws;

(4)

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;

(5)

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;

(6)

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

(7)

Borrower has not received any 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.

The representations and warranties in this Section 18 shall be continuing representations and warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced by the Note, until the Indebtedness has been paid in full.

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

(2)

Borrower’s receipt of or knowledge of any complaint, order, notice of violation or other communication from any 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; and

(3)

any representation or warranty in this Section 18 becomes untrue after the date of this Agreement.

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 (“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 the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12. The results of all Environmental Inspections made by Lender shall at all times remain the property of Lender and Lender shall have no obligation to disclose or otherwise make available to Borrower or any other party such results or any other information obtained by Lender in connection with its Environmental Inspections. 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 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 of Lender’s Environmental Inspections. Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its 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 which a party may bid at such sale. Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, 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 Lender’s Environmental Inspections.

(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 under any Hazardous Materials Law, Borrower shall, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 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 cooperate with any inquiry by any Governmental Authority and shall comply with any governmental or judicial order which 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 fees and out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

(1)

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

(2)

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

(4)

the presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or 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. However, any Indemnitee may elect to defend any claim or legal or administrative proceeding at the Borrower’s expense.

(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 (1) 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 (2) may materially and adversely affect Lender, as determined by Lender in its discretion.

(m) Lender agrees that the indemnity under this Section 18 shall be limited to the assets of Borrower and Lender shall not seek to recover any deficiency from any natural persons who are general partners of Borrower.

(1)

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;

(2)

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

(3)

reimburse Indemnitees for any and all expenses, including fees and out-of-pocket expenses of attorneys and expert witnesses, 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) 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. Borrower shall reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, and the fees and out-of-pocket expenses of such attorneys and consultants.

(p) 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.

(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, and business income coverage. Lender’s insurance requirements may change from time to time throughout the term of the Indebtedness. 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. 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, and if flood insurance is available in that area, Borrower shall insure such Improvements against loss by flood.

(b) All premiums on 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 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 30 days prior to the expiration date of a policy, Borrower shall deliver to Lender the original (or a duplicate original) of a renewal policy in form satisfactory to Lender.

(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 property damage insurance, to appear in and prosecute any action arising from such property damage insurance policies, to collect and receive the proceeds of property damage 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, (1) hold the balance of such proceeds to 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 (2) apply the balance of such proceeds to the payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply insurance proceeds to Restoration, Lender shall do so in accordance with Lender’s then-current policies relating to the restoration of casualty damage on similar multifamily properties.

(g) Lender shall not exercise its option to apply insurance proceeds to the payment of the Indebtedness if all of the following conditions are met: (1) 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; (2) Lender determines, in its discretion, that there will be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the rental income from the Mortgaged Property after completion of the Restoration will be sufficient to meet all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan repayment obligations relating to the Mortgaged Property; (4) Lender determines, in its discretion, that the Restoration will be completed before the earlier of (A) one year before the maturity date of the Note or (B) one year after the date of the loss or casualty; and (5) upon Lender’s request, Borrower provides Lender evidence of the availability during and after the Restoration of the insurance required to be maintained by Borrower pursuant to this Section 19.

(h) 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.

(a) Borrower shall promptly notify Lender of any action or proceeding relating to any 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. 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, 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.

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

(1)

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

(3)

a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Borrower;

(4)

a Transfer of all or any part of Key Principal’s ownership interests (other than limited partnership interests) in Borrower, or in any other entity which owns, directly or indirectly through one or more intermediate entities, an ownership interest in Borrower;

(5)

if Key Principal is an entity, (A) a Transfer of a Controlling Interest in Key Principal, or (B) a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Key Principal;

(6)

if Borrower or Key Principal is a trust, the termination or revocation of such trust; and

(7)

a conversion of Borrower from one type of legal entity into another type of legal entity, whether or not there is a Transfer.

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.

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

(2)

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

(3)

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;

(4)

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;

(5)

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 incurred by Lender in connection with reviewing Borrower’s request; and

(6)

the creation of a tax lien or a mechanic’s, materialman’s or judgment lien against the Mortgaged Property which is bonded off, released of record or otherwise remedied to Lender’s satisfaction within 30 days of the date of creation.

(c) 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, to a Transfer that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each of the following requirements:

(1)

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

(3)

the transferee meets all of the eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of 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, deeds of trust or deeds to secure debt on multifamily properties;

(4)

the Mortgaged Property, at the time of the proposed Transfer, meets all standards as to its physical condition 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;

(5)

in the case of a Transfer of all or any part of the Mortgaged Property, direct or indirect ownership interests in Borrower or Key Principal (if an entity), if transferor or any other person has obligations under any Loan Document, the execution by the transferee or one or more individuals or entities acceptable to Lender of an assumption agreement (including, if applicable, an Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability) that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Instrument or any other Loan Document which previously may have been waived by Lender;

(6)

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

(A)

a non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1 percent of the outstanding Indebtedness immediately prior to the Transfer.

(B)

In addition, Borrower shall be required to reimburse Lender for all of Lender’s out-of-pocket costs (including reasonable attorneys’ fees) incurred in reviewing the Transfer request, to the extent such expenses exceed $3,000.

(d) For purposes of this Section, the following terms shall have the meanings set forth below:

(1)

“Initial Owners” means, with respect to Borrower or any other entity, the persons or entities who on the date of the Note own in the aggregate 100% of the ownership interests in Borrower or that entity.

(2)

A Transfer of a “Controlling Interest” shall mean, with respect to any entity, the following:

(i)

if such entity is a general partnership or a joint venture, a Transfer of any general partnership interest or joint venture interest which would cause the Initial Owners to own less than 51% of all general partnership or joint venture interests in such entity;

(ii)

if such entity is a limited partnership, a Transfer of any general partnership interest;

(iii)

if such entity is a limited liability company or a limited liability partnership, a Transfer of any membership or other ownership interest which would cause the Initial Owners to own less than 51% of all membership or other ownership interests in such entity;

(iv)

if such entity is a corporation (other than a Publicly-Held Corporation) with only one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than 51% of voting stock in such corporation;

(v)

if such entity is a corporation (other than a Publicly-Held Corporation) with more than one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than a sufficient number of shares of voting stock having the power to elect the majority of directors of such corporation; and

(vi)

if such entity is a trust, the removal, appointment or substitution of a trustee of such trust other than (A) in the case of a land trust, or (B) if the trustee of such trust after such removal, appointment or substitution is a trustee identified in the trust agreement approved by Lender.

(3)

“Publicly-Held Corporation” shall mean a corporation the outstanding voting stock of which is registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934, as amended.

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, or any of its officers, directors, trustees, general partners or managers, Key Principal or any guarantor in connection with (A) the application for or creation of the Indebtedness, (B) any financial statement, rent roll, or other report or information provided to Lender during the term of the Indebtedness, or (C) any request for Lender’s consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement;

(f) 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;

(g) any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (f)), as and when required, which continues for a period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace period 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;

(h) 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; and

(i) 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.

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. 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.

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, 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 shall be litigated exclusively in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which 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.

(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 (1) the date when the notice is received by the addressee; (2) 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 (3) the third Business Day after the notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested. As used in this Section 31, the term “Business Day” means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business.

(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 which 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. 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.

33. SINGLE ASSET BORROWER. Until the Indebtedness is paid in full, Borrower (a) shall not acquire 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, (1) 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, (2) Borrower shall not be a third party beneficiary of any Servicing Arrangement, and (3) 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.

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. LOAN SERVICING. 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 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.

40. 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 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 any right of privacy.

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

42. 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.

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.

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.

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: (a) to all reasonable costs and expenses of the sale, including reasonable Trustee’s fees and attorneys’ fees and costs of title evidence; (b) to the Indebtedness in such order as Lender, in Lender’s discretion, directs; and (c) the excess, if any, to the person or persons legally entitled to the excess.

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.

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:

(a)

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;

(b)

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;

(c)

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;

(d)

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;

(e)

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;

(f)

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;

(g)

evidence of comparable sales shall be considered only if also included in the expert opinion testimony and written appraisal referred to in the preceding paragraph; and

(h)

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 subparagraphs (a) through (g) 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.

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:

(a)

whether made under the power contained in this Instrument, Section 51.002, 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;

(b)

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

(c)

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;

(d)

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

(e)

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;

(f)

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

(g)

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.

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. In no event shall the assignment of Rents or Leases in Section 3 and Section 4 cause the Indebtedness to be reduced by an amount greater than the Rents actually received by Lender and applied by Lender to the Indebtedness, whether before, during or after (i) an Event of Default, or (ii) a suspension or revocation of the license granted to Borrower in Section 3(c) with regard to the Rents. Borrower and Lender specifically intend that the assignment of Rents and Leases in Section 3 and Section 4 is not intended to result in a pro tanto reduction of the Indebtedness. The assignment of Rents and Leases in Section 3 and Section 4 is not intended to constitute a payment of, or with respect to, the Indebtedness and, therefore, Borrower and Lender specifically intend that the Indebtedness shall not be reduced by the value of the Rents and Leases assigned. Such reduction shall occur only if, and to the extent that, Lender actually receives Rents pursuant to Section 3 and applies such Rents to the Indebtedness. Borrower agrees that the value of the license granted with regard to the Rents equals the value of the absolute assignment of Rents to Lender. 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 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.

I, MARGARETE L. SCOTT, a notary public of the City/County of HENRICO, Commonwealth of Virginia, do hereby certify that GUS G. REMPPIES, whose name is signed to the writing above bearing date on the day of March, 2008, has acknowledged the same before me in my State aforesaid in his capacity as the/a EXECUTIVE VICE PRESIDENT of Grubb & Ellis Apartment REIT, Inc., in its capacity as the General Partner of Grubb & Ellis Apartment REIT Holdings, LP, a Virginia limited partnership, in its capacity as the Manager of G&E Apartment REIT Arboleda, LLC, a Delaware limited liability company, on behalf of said limited liability company.

[Seal] Margarete L. Scott /s/ Margarete L. Scott
[Seal] Notary Public
[Seal] Reg #7103331
[Seal] My Commission Expires 5/31/2011
[Seal] Commonwealth of Virginia

THIS SECOND AMENDMENT TO AND WAIVER OF LOAN AGREEMENT (this “Amendment”), executed and delivered as of March 31, 2008, is between GRUBB & ELLIS APARTMENT REIT, INC. (formerly known as NNN Apartment REIT, Inc.), a Maryland corporation (the “Company”), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (the “Lender”).

A. Pursuant to that certain Loan Agreement between the Company and the Lender dated as of November 1, 2007, as amended by that certain First Amendment to and Waiver of Loan Agreement dated as of December 21, 2007 (as so amended, the “Loan Agreement”), the Lender made available to the Company a revolving line of credit in an outstanding aggregate principal amount not to exceed $10,000,000.00, as evidenced by that certain Promissory Note dated November 1, 2007 made by the Company and payable to the order of the Lender (the “Note”).

B. The Company has notified the Lender that it intends to acquire (the “Proposed Acquisition”), through its subsidiary Grubb & Ellis Apartment REIT Holdings, L.P. (formerly known as NNN Apartment REIT Holdings, L.P.), G&E Apartment REIT Arboleda, LLC, a Delaware limited liability company (the “New Property Owner”), which New Property Owner will own a multi-family property known as Arboleda Luxury Apartment Homes, located in Cedar Park, Texas. The Company has requested an Advance under the Loan Agreement to finance, in part, the Proposed Acquisition, which Advance shall require the temporary increase of the aggregate principal amount available under the Loan Agreement. The Lender has agreed to make such Advance, to agree to such temporary increase, and to continue to make available to the Company the credit facilities provided for in the Loan Agreement, on the terms and conditions stated herein.

C. Capitalized terms not otherwise defined herein shall have such meaning as assigned to them in the Loan Agreement.

NOW, THEREFORE, in consideration of the mutual promises herein contained and for other valuable consideration, the parties hereto agree as follows:

(a) Paragraphs 1(a) and 1(b) of the Loan Agreement are hereby deleted in their entireties and the following paragraphs are hereby substituted in lieu thereof:

“1(a) Loan. Subject to the conditions set forth herein, so long as no Event of Default has occurred and is continuing, Lender may elect, in Lender’s sole and absolute discretion, to advance to the Company, from time to time from the date hereof until the day immediately preceding the Maturity Date, an aggregate principal amount up to the Aggregate Availability (collectively, the “Loan” and each, an “Advance”). If the Lender, in its sole and absolute discretion, refuses to fund a requested Advance, the Lender shall use its best efforts to provide notice thereof to the Company. So long as no Event of Default has occurred and is continuing, amounts repaid by the Company prior to the Maturity Date may, in Lender’s sole and absolute discretion, be reborrowed by the Company, provided that (i) the aggregate principal amount outstanding at any time shall not exceed the Aggregate Availability, and (ii) the Arboleda Advance Overage, once repaid in accordance with the terms hereof, may not be reborrowed. In the event that in connection with any Advance made hereunder, the Company has not commenced repayment of such Advance within three (3) months following the applicable Advance Date by a principal amount of at least $500,000, such amount to consist of Equity Proceeds, such failure to repay such Advance in such amount shall constitute an Event of Default hereunder.

1(b) Interest Rate. The Loan shall bear interest as follows: (i) the outstanding principal amount of that portion of the Loan consisting of the Arboleda Advance Overage shall bear interest at a fixed rate equal to fifteen percent (15%) per annum, and (ii) the remaining outstanding principal amount of the Loan shall bear interest at the Applicable LIBOR Rate, except as otherwise provided herein.”

(b) Paragraph 2(a) of the Loan Agreement is hereby amended by deleting the last sentence of such Section in its entirety and substituting the following sentence in lieu thereof:

“It is hereby acknowledged and agreed that notwithstanding the foregoing, (i) the proceeds of the Loan made available to the Company pursuant to the Myrtles and Heights Advance shall finance those required acquisition costs on the Properties acquired thereby which are in excess of the costs funded through each Property Loan related thereto in the approximate principal amount of fifty-six percent (56%) of each Property’s appraised value; provided that the sum of such Property Loan proceeds and any proceeds disbursed hereunder pursuant to the Myrtles and Heights Advance shall not exceed seventy-four percent (74%) of each such Property’s appraised value; and (ii) the above percentages shall not apply to the proceeds of the Loan made available to the Company pursuant to the Arboleda Advance or the Arboleda Property Loan.”

(c) Paragraph 2(k)(6) of the Loan Agreement is hereby deleted in its entirety and the following paragraph is hereby substituted in lieu thereof:

"(6) Each prepayment or repayment of principal shall be applied as follows: (i) to the outstanding amount of the Arboleda Advance Overage, until the Arboleda Advance Overage has been repaid in full, any excess principal being applied to the Advance then outstanding which was made on the earliest date as among all remaining outstanding Advances; (ii) then, to the Advance then outstanding which was made on the earliest date as among all outstanding Advances, until such Advance is paid in full, any excess principal being applied to the Advance then outstanding which was made on the earliest date as among all remaining outstanding Advances; (iii) and continuing on in like manner until all outstanding Advances have been paid in full.”

(d) The following paragraph is hereby added as a new Paragraph 9(j) to the Loan Agreement:

“9(j) Acknowledgments and Agreements Regarding Arboleda Property Loan and Pledge of Equity interests in G&E Apartment REIT Arboleda, LLC. The parties hereto agree and acknowledge that: (i) the Arboleda Property Loan is being made to G&E Apartment REIT Arboleda, LLC by PNC ARCS, (ii) PNC ARCS intends to sell the Arboleda Property Loan to Fannie Mae, who will become the lender thereunder, (iii) pursuant to the Pledge Agreement, the Pledgor has pledged in favor of the Lender all right, title and interest in the “Class B Interest” the Pledgor owns in G&E Apartment REIT Arboleda, LLC (as the term “Class B Interest” is defined in the operating agreement of such limited liability company), (iv) the “Class B Interest” so pledged constitutes a forty-nine percent (49%) interest in G&E Apartment REIT Arboleda, LLC, and (v) Fannie Mae, as the lender under the Arboleda Property Loan, has not agreed to permit the pledge by the Pledgor of any interest in G&E Apartment REIT Arboleda, LLC other than the pledge of the “Class B Interest.”

(e) Paragraph 10 of the Loan Agreement is hereby amended by amending and restating the following defined terms in their entirety:

"Aggregate Availability” shall mean, as of any date of determination, (a) from the date of the making of the Arboleda Advance until the Arboleda Advance Overage has been repaid in full, the sum of (i) $10,000,000.00 and (ii) the outstanding principal amount of the Arboleda Advance Overage (provided, that the sum of (i) and (ii) shall not exceed $16,250,000.00 at any time), and (b) after such time as the Arboleda Advance Overage has been repaid in full, the lesser of (i) $10,000,000.00 and (ii) the difference of (A) ninety percent (90%) of the aggregate Appraised Value for all the Properties (other than the Arboleda Property) as of such date, minus (B) the aggregate outstanding principal amount of the Property Loans (other than the Arboleda Property Loan) as of such date.

"Facility Interest Expense” shall mean, for any period, that portion of Interest Expense attributable solely to interest due and payable on the credit facility evidenced by the Loan Documents; provided, that for the purpose of this definition, the principal amount outstanding under this Agreement at any time shall be deemed to be the sum of (i) $10,000,000.00 plus (ii) the outstanding principal amount, if any, of the Arboleda Advance Overage at such time.

"LIBOR Rate Loan” shall mean the Loan, or any portion thereof, at such time as it is bearing interest at the Applicable LIBOR Rate.

"LIBOR Spread” shall mean (i) solely with respect to (A) the Myrtles and Heights Advance and (B) that portion of the Arboleda Advance which is not bearing interest at the fixed rate provided for in Paragraph 1(b) above, five percent (5.00%), and (b) otherwise, four and fifty one hundredths percent (4.50%).”

"Prime Rate Loan” shall mean the Loan, or any portion thereof, at such time as it is bearing interest at the Applicable Prime Rate or at a fixed rate of interest.

“Property Owners” shall mean the collective reference to: Apartment REIT Walker Ranch, L.P., Apartment REIT Hidden Lakes, L.P., Apartment REIT Park at North Gate, L.P., Apartment REIT Residences at Braemar, LLC, Apartment REIT Bay Point Resort, LLC, Apartment REIT Towne Crossing, L.P., Apartment REIT Villas of El Dorado, LLC, G&E Apartment REIT The Myrtles at Olde Towne, LLC, G&E Apartment REIT The Heights at Olde Towne, LLC, G&E Apartment REIT Arboleda, LLC and to any other Person which may become the fee owner of a Property on or after the date hereof.

(f) Paragraph 10 of the Loan Agreement is hereby amended by adding the following new definitions in appropriate alphabetical order:

"Arboleda Advance” means that certain Advance in an aggregate principal amount not to exceed $11,550,000.00 made to the Company on , 2008 to finance the acquisition of a multi-family property known as Arboleda Luxury Apartment Homes, located in Cedar Park, Texas, which Property shall be owned by G&E Apartment REIT Arboleda, LLC.

"Arboleda Advance Overage” means that portion of the outstanding principal amount of the Loan which is in excess of $10,000,000.00; provided that such excess amount shall not exceed $6,250,000.00 at any time.

"Arboleda Property” means that certain multi-family property known as Arboleda Luxury Apartment Homes, located in Cedar Park, Texas, which Property shall be owned by G&E Apartment REIT Arboleda, LLC.

"Arboleda Property Loan” means that certain first priority real estate-secured loan made or to be made by a financial institution to G&E Apartment REIT Arboleda, LLC , which loan is secured by a first priority lien on the Arboleda Property.

Section 2. Waiver. Pursuant to Paragraph 9(b) of the Loan Agreement and solely with respect to the Proposed Acquisition, the Lender hereby waives (a) the requirement set forth in Paragraph 6(i)(i) of the Loan Agreement that Pledgor pledge of all of the Ownership Interests in the New Property Owner in favor of Lender, and (b) the requirement set forth in Paragraph 6(i)(ii) of the Loan Agreement that the provisions of the Property Loan Documents to which the New Property Owner is a party specifically permit and consent to the pledge of one hundred percent (100%) of the Ownership Interests in the New Property Owner in favor of Lender; provided, that not less than forty-nine (49%) of the Ownership Interests in the New Property Owner shall be pledged in favor of Lender pursuant to and in accordance with the terms of Paragraph 6(i) of the Loan Agreement, and all other provisions of Paragraph 6(i) of the Loan Agreement shall apply. For avoidance of doubt, this waiver shall apply solely with respect to the Proposed Acquisition and shall not apply to the acquisition of any Property or of any Property Owner after the date of this Amendment.

Section 3. Amendment to Schedules to Loan Agreement. Each of Schedule II and Schedule 5(d) to the Loan Agreement are hereby amended and restated in their entirety as set forth on Exhibit A to this Agreement.

Section 4. Conditions Precedent to Closing of Amendment. In addition to such other requirements as may be set forth in the Loan Documents, the Lender’s obligation to close this Amendment (the “Closing”), and to continue to make the Loan available, is subject to satisfaction of the following conditions:

(a) Executed Documents. Delivery to the Lender of a duly executed counterpart of (i) this Agreement from the Company and the Pledgor, (ii) the Note, as amended and restated as of the date hereof, from the Company, and (ii) the Pledge Agreement, as amended and restated as of the date hereof, from the Pledgor.

(1) a certificate of the Secretary or Assistant Secretary of the Company certifying (i) that the Articles of Incorporation and Bylaws or Certificate of Limited Partnership and Limited Partnership Agreement, as applicable, of each Credit Party previously delivered to the Lender remain accurate and complete and in full force and effect, (ii) that the Resolutions of each Credit Party previously delivered to the Lender remain in full force and effect and authorize the execution and delivery of this Amendment, the amended and restated Note, and the amended and restated Pledge Agreement, as applicable, and the consummation of the transactions contemplated hereby and thereby and (iii) as to such other items and conditions as the Lender may reasonably request, and otherwise in form and content reasonably acceptable to the Lender; and

(2) a certificate in form and substance satisfactory to the Lender from a Responsible Officer of the Company certifying that as of the date hereof and after giving effect to the Advance requested in connection with the Proposed Acquisition, each Credit Party is in compliance with the covenants set forth in Paragraphs 6 and 7 of the Loan Agreement.

(c) Good Standing Certificates. Delivery to the Lender of (i) a certificate of the Secretary of State of the State of Maryland, certifying as of a recent date that the Company is in good standing and (ii) a certificate of the State Corporation Commission of the Commonwealth of Virginia, certifying as of a recent date that the Pledgor is in good standing.

(d) Property Loan Documents and Organization Documents. Delivery to the Lender of (i) the Property Loan Documents executed in connection with the acquisition of the Property owned by the New Property Owner and (ii) the organizational documents of the New Property Owner, in each case, which documents shall be on terms and conditions reasonably satisfactory to the Lender.

(e) Opinion of Counsel. Delivery to the Lender of an opinion of counsel to the Company and the Pledgor, in form and content reasonably satisfactory to the Lender.

(f) Payment of Fees, Costs and Expenses. Payment by the Company of (i) a fee in connection with the increase in Aggregate Availability provided hereunder, such fee to be in an amount equal to one-half of one percent (0.005%)of the Arboleda Advance Overage as of the date of funding of the Arboleda Advance, which fee shall be fully earned as of the date of Closing and shall be non-refundable, (ii) any and all other fees, if any, due the Lender or otherwise due and payable under the terms of the Loan Documents and (iii) all costs, expenses, and fees (including without limitation, the Lender’s attorneys’ fees and expenses) associated with this Amendment or otherwise due and payable.

(g) Repayment of Outstanding Advances. The Company shall have repaid the outstanding Advances under the Loan in an amount sufficient to cause the outstanding principal amount of the Loan to be less than or equal to Four Million Seven Hundred Thousand Dollars ($4,700,000.00) prior to the making of the Arboleda Advance.

(h) No Event of Default. No Event of Default shall exist under the Loan Documents, nor would occur as a result of the execution and performance of this Amendment to the Loan Agreement, as amended hereby.

(i) Representations and Warranties. The representations and warranties contained in the Loan Documents shall be true and correct in all material respects as of the date of Closing.

(j) Additional Documentation. Delivery to Lender of such other documentation or information as may reasonably be required by the Lender and its counsel.

Section 5. Representations, Warranties and Covenants. The Company hereby acknowledges and agrees that:

(a) Loan Balance. As of the Closing date, the outstanding aggregate principal amount of the Loan, after making the payment required under Section 4(g) above, is $4,700,000.00.

(b) Aggregate Availability. Following the funding of the requested Advance, the aggregate principal amount outstanding under the Loan Documents shall not exceed the Aggregate Availability.

(c) Reaffirmation of Representations, Warranties and Covenants. The Company reaffirms and remakes as of the date hereof (taking into consideration the effects of the transactions contemplated in this Amendment), each of the representations and warranties contained in the Loan Agreement, as amended hereby, as being true and correct in all respects. The Company agrees that until payment in full of all Obligations, the Company shall comply with all covenants as set forth in the Loan Agreement, as amended hereby.

(a) Representations and Warranties Accurate; Compliance; No Material Adverse Effect. Each of the representations and warranties of the Credit Parties contained in the Loan Documents, as such Loan Documents may have been amended, modified, replaced, restated, renewed or extended from time to time, including by this Amendment and by any documents, instruments or agreements executed in connection with the Amendment, is true, accurate and complete on and as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof (except for representations and warranties which relate to a specific date, in which case such representations and warranties shall be true, accurate and complete as of such date). Each Credit Party has performed all its obligations under the Loan Documents, as so amended, modified, replaced, restated, renewed or extended, required to be performed by such Credit Party at or prior to the date hereof. Each Credit Party is in compliance with all the terms and provisions set forth in the Loan Documents, as so amended, modified, replaced, restated, renewed or extended, on its part to be observed and performed. No proceedings are pending or threatened which might materially adversely affect the ability of the any Credit Party to perform (a) its obligations under the Loan Documents, as amended, modified, replaced, restated, renewed or extended as set forth above, or (b) its contractual obligations with any other person or entity.

(b) No Event of Default. The Company hereby represents and warrants that as of the effective date hereof, there exists no Event of Default, and no Credit Party has any claim or cause of action against the Lender arising out of or relating in any way to the Loan Agreement (as amended hereby) or the other Loan Documents, and each Credit Party hereby waives and releases any and all claims or causes of action which such Credit Party may have as of the effective date hereof against the Lender arising out of or relating in any way to the Loan Agreement (as amended hereby) or the other Loan Documents.

(c) Limited Effect. Except as expressly provided herein, the Loan Agreement and each other Loan Document shall continue to be, and shall remain, in full force and effect. This Amendment shall not be deemed (i) to be a waiver of, or consent to, or a modification or amendment of, any other term or condition of the Loan Agreement or any other Loan Document or (ii) to prejudice any right or rights which the Lender may now have or may have in the future under or in connection with the Loan Agreement or the other Loan Documents or any of the instruments or agreements referred to therein, as the same may be amended or modified from time to time. References in the Loan Agreement to “this Agreement” (and indirect references such as “hereunder”, “hereby”, “herein”, and “hereof”) and in any Loan Document to the “Loan Agreement” shall be deemed to be references to the Loan Agreement as modified hereby.

(d) Counterparts. This Amendment may be executed in any number of counterparts by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which together shall constitute one and the same instrument. A complete set of counterparts shall be lodged with the Company and the Lender.

(e) Governing Law. This Amendment and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the State of North Carolina.

(k) Electronic Transmission. A facsimile, telecopy or other reproduction of this Amendment may be executed by one or more parties hereto, and an executed copy of this Amendment may be delivered by one or more parties hereto by facsimile or similar instantaneous electronic transmission device pursuant to which the signature of or on behalf of such party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all parties hereto agree to execute an original of this Amendment as well as any facsimile, telecopy or other reproduction hereof.

(l) WAIVER OF JURY TRIAL. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AMENDMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY RELATING HERETO OR THERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THIS AMENDMENT.

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the day and year first above written.

GRUBB & ELLIS APARTMENT REIT, INC. (formerly known as NNN Apartment REIT, Inc.), a Maryland corporation

FOR VALUE RECEIVED, GRUBB & ELLIS APARTMENT REIT, INC. (formerly known as NNN Apartment REIT, Inc.), a Maryland corporation (the “Company”) hereby unconditionally promises to pay to the order of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (the “Lender”), at the office of WACHOVIA BANK, located at One Wachovia Center, TW-16, 301 South College Street, Charlotte, North Carolina 28288-0172, in lawful money of the United States and in immediately available funds, on the dates required under that certain Loan Agreement dated as of November 1, 2007 by and between the Company and the Lender, as amended by that certain First Amendment to and Waiver of Loan Agreement dated as of December 21, 2007 between the Company and the Lender and by that certain Second Amendment to and Waiver of Loan Agreement of even date herewith between the Company and the Lender (as so amended, and as the same may be further amended, extended or replaced from time to time, the “Agreement” and with the capitalized terms not otherwise defined herein used with the meanings given such terms in the Agreement), a sum equal to the Aggregate Availability, or such lesser amount as has been actually disbursed to the Company by the Lender from time to time pursuant to the Agreement.

The Company further agrees to pay interest in like money and funds at the office of the Lender referred to above, on the unpaid principal balance hereof from the date advanced until paid in full on the dates and at the applicable rates set forth in the Agreement. The holder of this Note is hereby authorized to record the date and amount of each payment of principal and interest, and applicable interest rates and other information with respect thereto, on the schedules annexed to and constituting a part of this Note (or by any analogous method the holder hereof may elect consistent with its customary practices) and any such recordation shall, absent manifest error, constitute prima facie evidence of the accuracy of the information so recorded; provided, however, that the failure to make a notation or the inaccuracy of any notation shall not limit or otherwise affect the obligations of the Company under the Note, the Agreement or any other documents which may evidence or govern this indebtedness.

This Note is the Note referred to in, and is entitled to all the benefits of, the Agreement. Reference is hereby made to the Agreement for rights and obligations of payments and prepayment, Events of Default and the rights of acceleration of the maturity hereof upon the occurrence of an Event of Default.

This Note is given in modification, replacement and restatement of, but not extinguishment of the unpaid indebtedness evidenced by, that certain Promissory Note in the principal amount of $10,000,000.00 dated as of November 1, 2007 and made payable by the Company to the order of the Lender (the “Original Note”). This Note modified and replaces, but does not repay said Original Note, and all indebtedness formerly evidenced by said Original Note and unpaid on the date hereof shall now be evidenced by this Note, and as of the date hereof, said Original Note shall no longer evidence said outstanding indebtedness. This Note shall not be considered to be a novation of said Original Note as this Note evidences the same indebtedness and is secured by the same collateral.

This Note shall be governed by, and construed in accordance with, the laws of the State of North Carolina, and is being executed by the duly authorized officers of the Company as of the day and year first above written.

GRUBB & ELLIS APARTMENT REIT, INC.,
(formerly known as NNN Apartment REIT, Inc.), a
Maryland corporation

SECOND AMENDED AND RESTATED PLEDGE AGREEMENT
(MEMBERSHIP AND PARTNERSHIP INTERESTS)

THIS SECOND AMENDED AND RESTATED PLEDGE AGREEMENT (MEMBERSHIP AND PARTNERSHIP INTERESTS) (as amended, modified, replaced, renewed, restated or extended from time to time, this “Agreement”), dated as of the 31st day of March, 2008, by and between WACHOVIA BANK, N.A., a national banking association (“Lender”), and GRUBB & ELLIS APARTMENT REIT HOLDINGS, L.P., a Virginia limited partnership (formerly known as NNN Apartment REIT Holdings, LP) (“Pledgor”).

WHEREAS: Pursuant to that certain Loan Agreement dated as of November 1, 2007 by and between GRUBB & ELLIS APARTMENT REIT, INC. (formerly known as NNN Apartment REIT, Inc.), a Maryland corporation (“Borrower”) and Lender, as amended by that certain First Amendment to and Waiver of Loan Agreement dated as of December 21, 2007 (as so amended and as otherwise amended, modified, renewed, restated, extended or replaced from time to time, the “Existing Loan Agreement”), Lender agreed to extend credit to Borrower on the terms and subject to the conditions set forth therein; and

WHEREAS: Pledgor owns one hundred percent (100%) of (i) the limited partnership interests in each of APARTMENT REIT WALKER RANCH, L.P., a Texas limited partnership (“Walker Ranch”), APARTMENT REIT HIDDEN LAKES, L.P., a Texas limited partnership (“Hidden Lakes”), APARTMENT REIT PARK AT NORTH GATE, L.P., a Texas limited partnership (“North Gate”) and APARTMENT REIT TOWNE CROSSING, L.P., a Texas limited partnership (“Towne Crossing”) (collectively, the “Owned LP’s”), (ii) the membership interests in each of Apartment REIT Walker Ranch GP, LLC, a Delaware limited liability company, Apartment REIT Hidden Lakes GP, LLC, a Delaware limited liability company, Apartment REIT Park at North Gate GP, LLC, a Delaware limited liability company and Apartment REIT Towne Crossing GP, LLC, a Delaware limited liability company (collectively, the “Property Owner GP’s”), each of which Property Owner GP’s is the sole general partner of the respective Owned LP, and (iii) the membership interests in each of G&E APARTMENT REIT THE HEIGHTS AT OLDE TOWNE, LLC, a Delaware limited liability company (“The Heights”) and G&E APARTMENT REIT THE MYRTLES AT OLDE TOWNE, LLC, a Delaware limited liability company (“The Myrtles”) (collectively, the “Existing Owned LLC’s”); and

WHEREAS: As consideration for the credit facilities made available to Borrower pursuant to the Existing Loan Agreement, Pledgor agreed, as required pursuant to Paragraph 3 of the Existing Loan Agreement, to pledge as security for Borrower’s obligations under the Existing Loan Agreement certain of the Partnership Interests Pledgor owns in the Owned LP’s and certain of the Membership Interests Pledgor owns in the Existing Owned LLC’s; and

WHEREAS: Pledgor agreed not to sell, convey, transfer or encumber in any way any of the general or limited partnership interests, or membership interests, as applicable, owned by Pledgor in any of the Property Owner GP’s, the Owned LP’s or the Existing Owned LLC’s, so long as the Existing Loan Agreement remained in effect; and

WHEREAS, in furtherance of the above-referenced agreements of Pledgor, Pledgor executed that certain Pledge Agreement (Partnership Interests) dated as of November 1, 2007 between Pledgor and Lender, as amended and restated pursuant to that certain First Amended and Restated Pledge Agreement (Membership and Partnership Interests) dated as of December 21, 2007 (as so amended and restated and as otherwise amended, modified, renewed, restated, extended or replaced from time to time, the “Existing Pledge Agreement”), pursuant to which Pledgor granted a security interest in favor of Lender, in certain of the Partnership Interests Pledgor owns in the Owned LP’s and certain of the Membership Interests Pledgor owns in the Existing Owned LLC’s; and

WHEREAS, Pledgor has acquired one hundred percent (100%) of the membership interests in G&E APARTMENT REIT ARBOLEDA, LLC, a Delaware limited liability company (“Arboleda”; Arboleda, together with the Existing Owned LLC’s, the “Owned LLC’s” and each an “Owned LLC”; the Owned LLC’s, together with the Owned LP’s, the “Owned Companies” and each an “Owned Company”); and

WHEREAS, Borrower and Lender have agreed to amend the Existing Loan Agreement pursuant to that certain Second Amendment to and Waiver of Loan Agreement of even date herewith between Borrower and Lender (the “Second Amendment,” and the Existing Loan Agreement, as amended by the Second Amendment, and as the same may be further amended, modified, renewed, restated, extended or replaced from time to time, the “Loan Agreement”); and

WHEREAS, as consideration for the credit facilities continuing to be made available to Borrower pursuant to the Loan Agreement, Pledgor has agreed, as required pursuant to Paragraph 3 of the Loan Agreement, to pledge as security for Borrower’s obligations under the Loan Agreement certain of the Membership Interests Pledgor owns in Arboleda; and

WHEREAS, Pledgor has agreed not to sell, convey, transfer or encumber in any way any of the Membership Interests owned by Pledgor in Arboleda so long as the Loan Agreement remains in effect; and

WHEREAS, in connection with the amendment of the Existing Loan Agreement pursuant to the Second Amendment, Pledgor and Lender have agreed to amend and restate the Existing Pledge Agreement pursuant to this Agreement. The parties hereto agree that from and after the date hereof, this Agreement shall supersede the Existing Pledge Agreement in all respects and shall constitute the entire agreement among the parties hereto with respect to the subject matter contained therein; and

WHEREAS, one hundred percent (100%) of the general partnership interests in Pledgor are owned by Borrower, and one hundred percent (100%) of the limited partnership interests in Pledgor are owned by NNN Apartment REIT Advisor, LLC, a limited liability company which is under common ownership with Borrower, and Pledgor will derive benefit from the credit facilities to be made available to Borrower by Lender pursuant to the Loan Agreement;

NOW, THEREFORE, in consideration of the credit facilities continuing to be made available pursuant to the Loan Agreement and other good and valuable consideration, the receipt of which is hereby acknowledged by the parties hereto, the parties do hereby agree as follows:

1. Definitions. All capitalized undefined terms used herein shall have the respective meanings assigned thereto in the Loan Agreement. In addition, the following terms, when used herein, shall have the following meanings:

“Collateral” means, collectively, (i) with respect to each of the Owned LLC’s one hundred percent (100%) of those Membership Interests of Pledgor in such Owned LLC which are designated as “Class B Interests” in the operating agreement of such Owned LLC, whether now owned or hereafter acquired, (ii) with respect to each of Walker Ranch, Hidden Lakes and Towne Crossing, forty-nine percent (49%) of the Partnership Interests of Pledgor in such Owned LP, whether now owned or hereafter acquired, (iii) with respect to North Gate, one hundred percent (100%) of the Partnership Interests of Pledgor in such Owned LP, whether now owned or hereafter acquired, and (iv) all proceeds of the property described in each of items (i), (ii) and (iii) above, including, without limitation, proceeds from any permitted sale or other disposition thereof (including without limitation all payment intangibles relating thereto).

“Membership Interests” means the entire membership interests of Pledgor in each of the Owned LLC’s, including, without limitation, Pledgor’s capital account, its interest as a member in the net cash flow, net profit and net loss, and items of income, gain, loss, deduction and credit of each of the Owned LLC’s, its interest in all distributions made or to be made by any of the Owned LLC’s to Pledgor and all of the other rights, titles and interests of Pledgor as a member of each of the Owned LLC’s, whether set forth in the operating agreement of such Owned LLC, by separate agreement or otherwise.

“Partnership Interests” means the entire limited partnership interests of Pledgor in each of the Owned LP’s, including, without limitation, Pledgor’s capital account, its interest as a limited partner in the net cash flow, net profit and net loss, and items of income, gain, loss, deduction and credit of each of the Owned LP’s, its interest in all distributions made or to be made by any of the Owned LP’s to Pledgor and all of the other rights, titles and interests of Pledgor as a limited partner of each of the Owned LP’s, whether set forth in the partnership agreement of such Owned LP, by separate agreement or otherwise.

“UCC” means the North Carolina Uniform Commercial Code, or as to any matter governed by the Uniform Commercial Code of another jurisdiction, the Uniform Commercial Code of such other jurisdiction.

2. Pledge and Security Interest. As collateral security for the due and punctual payment and performance by Borrower of all of its obligations under the Loan Agreement and the other Loan Documents (collectively, the “Obligations”), Pledgor hereby pledges and assigns to Lender a continuing first priority security interest in and to the Collateral.

3. Pledgor Remains Liable. Anything herein to the contrary notwithstanding, (a) Pledgor shall remain liable to perform all of its duties and obligations as a member of each of the Owned LLC’s, and all of its duties and obligations as a limited partner of each of the Owned LP’s, to the same extent as if this Agreement had not been executed, (b) the exercise by Lender of any of its rights hereunder shall not release Pledgor from any of its duties or obligations as a member or limited partner, as applicable, of any Owned Company, and (c) Lender shall not have any obligation or liability as a member or limited partner, as applicable, of any Owned Company by reason of this Agreement.

(a) Pledgor owns one hundred percent (100%) of the membership interests in, and is the sole member of, each of the Owned LLC’s.

(b) Pledgor (i) owns one hundred percent (100%) of the limited partnership interests in, and is the sole limited partner of, each of the Owned LP’s, and (ii) owns one hundred percent (100%) of the membership interests in, and is the sole member of, each of the Property Owner GP’s, each of which owns one hundred percent (100%) of the general partnership interests in, and is the sole general partner of, the respective Owned LP.

(d) The jurisdiction in which Pledgor is located for purposes of Section 9-307 of the UCC is the State of Virginia.

(e) Pledgor conducts business only under the name “GRUBB & ELLIS APARTMENT REIT HOLDINGS, LP,” and does not use and has not used any trade name, fictitious name or similar name.

(f) Properly completed financing or other statements have been filed in all necessary jurisdictions with respect to the Collateral, and certificates representing the Collateral have been delivered as may be required, so that the pledge and security interest granted pursuant to this Agreement constitutes a valid, continuing and perfected security interest in and lien on the Collateral under the UCC.

(g) Pledgor has full power and authority to execute this Agreement and to perform its obligations hereunder, and the execution and delivery of this Agreement, and the performance of Pledgor’s obligations hereunder, have been duly authorized by all necessary corporate or other action of Pledgor.

(h) The execution, delivery and performance by Pledgor of this Agreement does not conflict with, or result in a breach or violation of, (i) any law, regulation or court order applicable to Pledgor or its property, (ii) any document or instrument to which Pledgor is a party or by which its assets may be bound, (iii) the operating agreement of any of the Owned LLC’s, (iv) the partnership agreement of any of the Owned LP’s, or (v) any document, instrument or agreement evidencing or relating to any credit facility or loan to which any of the Owned Companies is a party.

(i) No authorization, approval or other action by, and no notice to or filing with, any governmental authority (other than as set forth in Section 4(f) above) is required (i) for the execution, delivery and performance of this Agreement by Pledgor, or (ii) for the exercise by the Lender of any rights or remedies in respect of the Collateral hereunder.

(j) None of the Partnership Interests in North Gate, Towne Crossing or Walker Ranch, and none of the Membership Interests in any of the Owned LLC’s, are dealt in or traded on securities markets, and neither the terms of the respective partnership agreements governing the Partnership Interests in North Gate, Towne Crossing and Walker Ranch nor the terms of the respective operating agreements governing the Membership Interests in the Owned LLC’s, provide that such interests are securities governed by Article 8 of the UCC. None of the Partnership Interests in North Gate, Towne Crossing or Walker Ranch, and none of the Membership Interests in any of the Owned LLC’s, is evidenced by a certificate of ownership.

(j) None of the Partnership Interests in Hidden Lakes are dealt in or traded on securities markets; however, the terms of the partnership agreement governing the Partnership Interests in Hidden Lakes provide that such interests are securities governed by Article 8 of the UCC. The Partnership Interests in Hidden Lakes are evidenced by a certificate of ownership.

(a) Pledgor will, at all times the Loan Agreement remains in full force and effect, remain the legal and beneficial owner of the Collateral free and clear of all liens and encumbrances except for liens and encumbrances in favor of Lender. In furtherance of the foregoing, Pledgor will not sell, convey, transfer, assign or encumber in any way, all or any portion of the Collateral.

(b) Pledgor will, at all times the Loan Agreement remains in full force and effect, remain the legal and beneficial owner of (i) all Membership Interests in each Owned LLC, (ii) all Partnership Interests in each Owned LP, and (iii) all membership interests in each Property Owner GP, each of which in turn will remain the beneficial owner of all general partnership interests in the respective Owned LP, in each case free and clear of all liens and encumbrances except for, as to the Collateral, liens and encumbrances in favor of Lender. In furtherance of the foregoing, Pledgor will not sell, convey, transfer, assign or encumber in any way, all or any portion of any Membership Interests, any Partnership Interests, or any membership interests in the Property Owner GP’s, and will not permit the sale, conveyance, transfer, assignment or encumbrance, in any way, of any general partnership interests owned by any Property Owner GP in any Owned LP, in each case except in favor of Lender.

(c) Except upon thirty (30) days prior written notice to the Lender, Pledgor will not (i) change its name, identity, or corporate structure or jurisdiction of incorporation so as to make any financing or other statement filed as provided herein become seriously misleading, (ii) with respect to Hidden Lakes, opt out of Article 8 for purposes of classifying the Partnership Interests therein as securities or (iii) with respect to any Owned LLC or any Owned LP other than Hidden Lakes, opt into Article 8 for purposes of classifying the Membership Interests or Partnership Interests therein as securities.

(d) Pledgor will, upon request of Lender, prepare and deliver such financing statements, notices of lien, notices of assignment and continuations or amendments to any of the foregoing, and other documents (and pay the costs of filing or recording the same in all public offices deemed necessary by Lender) and do such other acts and things, all as Lender may from time to time request to establish and maintain a valid perfected first priority pledge and security interest in the Collateral to secure the payment of the Obligations. Pledgor hereby constitutes and appoints Lender (and any of its officers) as its attorney-in-fact with full power and authority to execute and deliver all documents necessary to perfect and keep perfected the security interests created hereby. This power of attorney hereby granted is a special power of attorney coupled with an interest and shall be irrevocable by Pledgor.

(e) Pledgor will pay or cause to be paid, prior to delinquency, all taxes, charges, liens and assessments against the Collateral, except to the extent and so long as (i) the same are being contested in good faith by appropriate proceedings, and (ii) the effect of any lien, charge or encumbrance is stayed pending final resolution.

(f) Pledgor will pay promptly on demand by Lender all advances, charges, costs and expenses, including reasonable attorneys’ fees, incurred or paid by Lender in protecting and preserving the Collateral or in exercising any right, power or remedy conferred by this Agreement.

(g) Without the prior written consent of the Lender, the Pledgor will not (i) vote to enable, or take any other action to permit, any Owned Company to issue any additional Membership Interests or Partnership Interests, as applicable, except for such additional Membership Interests or Partnership Interests that will be subject to the security interest granted herein in favor of the Lender or (ii) vote to enable, or take any other action to permit, any Owned LLC to recharacterize its Membership Interests into classes other than those existing as of the date hereof, or discontinue any classes existing as of the date hereof, or transfer Membership Interests among classes, or (iii) enter into any agreement or undertaking restricting the right or ability of the Pledgor or the Lender to sell, assign or transfer any Collateral. The Pledgor will defend the right, title and interest of the Lender in and to the Collateral against the claims and demands of all Persons whomsoever.

(h) The Pledgor will deliver to the Lender all Partnership Interests or Membership Interests evidenced by a certificate (including, without limitation, certificates evidencing the Partnership Interests in Hidden Lakes), together with such effective endorsements and assignments as may be required. If the Pledgor shall become entitled to receive or shall receive (i) any certificate evidencing any Collateral, whether in addition to, in substitution of, or as a conversion of, or in exchange for, any Collateral, or otherwise in respect thereof or (ii) any sums paid upon or in respect of any Collateral upon the liquidation or dissolution of any Owned Company, the Pledgor shall accept the same as the agent for the Lender, hold the same in trust for the Lender, segregated from other funds of the Pledgor, and promptly deliver the same to the Lender in accordance with the terms hereof.

6. Events of Default. The occurrence of an “Event of Default” (as defined in the Loan Agreement) which has not been cured during the applicable cure period, if any, provided for therein, shall constitute an event of default (an “Event of Default”) hereunder.

7. Lender’s Rights and Remedies Upon Default. Upon the occurrence of any Event of Default, Lender shall be entitled, at its option, to exercise all such rights and remedies with respect to the Collateral as (i) are available under the UCC and (ii) are otherwise available at law or in equity. Without limiting the foregoing, the Lender shall have the right to receive any and all cash dividends, payments or distributions made in respect of any Membership Interests and/or Partnership Interests or other proceeds paid in respect of any Membership Interests and/or Partnership Interests, and any or all of any Membership Interests and/or Partnership Interests shall be registered in the name of the Lender or its nominee, and the Lender or its nominee may thereafter exercise (A) all voting, corporate and other rights pertaining to such Membership Interests and/or Partnership Interests at any meeting of partners or members, as applicable, of the relevant Owned Companies and (B) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Membership Interests and/or Partnership Interests as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Membership Interests and/or Partnership Interests upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the limited liability company or partnership structure of any Owned Company or upon the exercise by the Pledgor or the Lender of any right, privilege or option pertaining to such Membership Interests and/or Partnership Interests, and in connection therewith, the right to deposit and deliver any and all of the Membership Interests and/or Partnership Interests with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Lender may determine), all without liability except to account for property actually received by it; but the Lender shall have no duty to the Pledgor to exercise any such right, privilege or option and the Lender shall not be responsible for any failure to do so or delay in so doing. In furtherance thereof, the Pledgor hereby authorizes and instructs each Owned Company to (i) comply with any instruction received by it from the Lender in writing that (A) states that an Event of Default has occurred and is continuing and (B) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that each Owned Company shall be fully protected in so complying following receipt of such notice and prior to notice that such Event of Default is no longer continuing, and (ii) except as otherwise expressly permitted hereby, pay any dividends, distributions or other payments with respect to any Membership Interests and/or Partnership Interests directly to the Lender.

(a) Lender shall have the right at all times to enforce the provisions of this Agreement in strict accordance with the terms hereof, notwithstanding any conduct or custom on its part in refraining from so doing at any time. No amendment or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and executed by the parties hereto (subject to the provisions of the Loan Agreement), and no waiver or omission to act by Lender as to any Event of Default shall operate as a waiver of any other Event of Default or of the same Event of Default at a future time, and no single or partial exercise by Lender of any right or remedy shall preclude any other or future exercise of that or of any other right or remedy. The provisions, rights and remedies hereof are cumulative to and concurrent with those of all other agreements and documents held by Lender in connection with the Obligations.

(b) This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until payment in full of the Obligations.

(c) This Agreement, unless otherwise expressly set forth herein, shall be governed by, and construed in accordance with, the laws of the State of North Carolina.

(d) TO THE EXTENT PERMITTED BY LAW, PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THIS AGREEMENT AND INTO THE LOAN AGREEMENT.

(e) Any and all notices, elections or demands permitted or required to be made under this Agreement shall be in writing, signed by the party giving such notice, election or demand and shall be delivered personally, or sent by overnight courier or by certified mail, postage prepaid, to the other party at the address set forth below, or at such other address within the continental United States of America as may have theretofore been designated in writing in accordance with the terms and conditions hereof:

Grubb & Ellis Apartment REIT Holdings, LP
c/o Grubb & Ellis Apartment REIT, Inc.
1551 N. Tustin Ave., Suite 200
Santa Ana, CA 92705
Attention:

Wachovia Bank, National Association
One Wachovia Center, 16^th Floor
301 South College Street
Charlotte, NC 28288-0172
Attention: Chris Troutman

(f) In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby.

(g) This Agreement may be executed in any number of counterparts and all the counterparts taken together shall be deemed to constitute one and the same instrument.

(h) This Agreement constitutes the final, exclusive and complete statement of the agreement of the parties hereto with respect to the subject matter hereof and all other prior or contemporaneous agreements with respect to the subject matter hereof are superseded hereby.

(i) The Pledgor hereby waives and releases any rights, demands, and defenses the Pledgor may have with respect to the Lender pursuant to any law or statute that requires that the Lender make demand upon, assert claims against, or collect from Borrower or other persons or entities, foreclose any security interest, sell collateral, exhaust any remedies, or take any other action against Borrower or other persons or entities prior to making demand upon, collecting from or taking action against the Pledgor under this Agreement, including any such rights the Pledgor might otherwise have had under N.C.G.S. §§ 26-7, et seq. and any successor statute and any other applicable law.

IN WITNESS WHEREOF, Pledgor and Lender have duly executed this Agreement, or caused this Agreement to be duly executed, as of the day and year first above written.

GRUBB & ELLIS APARTMENT REIT
HOLDINGS, L.P. (formerly known as
NNN Apartment REIT Holdings, LP), a Virginia
limited partnership

By: /s/ Gus G. Remppies
Name: Gus G. Remppies
Title: Chief Investment Officer

LENDER:

SANTA ANA, Calif. (April 4, 2008) – Grubb & Ellis Apartment REIT, Inc. today announced the acquisition of Arboleda Apartments in the Austin-suburb of Cedar Park, Texas.

Arboleda Apartments is a 312-unit multifamily property totaling approximately 250,000 gross leaseable square feet. Completed in 2007, the property consists of 13 two- and three-story buildings that offer six different floor plans ranging in size from 650-square-foot one bedroom/one bath units to 1,230-square-foot three bedroom/two bath units. Property amenities include a fitness center, business center, controlled access gates and detached garages. Unit features include full-size washer and dryer connections, kitchen pantries, walk-in closets and patios and balconies.

Located at 900 Discovery Blvd., Arboleda Apartments is adjacent to the 183-A Toll Road and in close proximity to Country Route 180 and U.S. Route 183. The property provides 536 parking spaces, including 48 detached garages. Arboleda Apartments is currently 92 percent occupied.

“Arboleda Apartments has a high tenancy rate in an expanding market, which should provide steady cash flow and growth in the long-term value of the property,” said Grubb & Ellis Apartment REIT Chief Executive Officer Stanley J. Olander Jr. “The addition of Arboleda Apartments further strengthens the Grubb & Ellis Apartment REIT portfolio.”

According to the United States Census Bureau, Cedar Park is one of the fastest growing cities in the nation. Since 1990, the city has grown by a factor greater than 10, from approximately 5,000 people in 1990 to an estimated 52,000 in 2006. Additionally, the Greater Austin region boasts an unemployment rate of just 3.6 percent as of February 2008, significantly lower than the national rate of 4.8 percent, according to the United States Bureau of Labor Statistics.

There are 17 hospitals within a 30-mile radius of Cedar Park, as well as a number of institutions of higher education, including: Austin Community College, Concordia University, Houston-Tillotson College, LeTourneau University, Round Rock Higher Education Center, Southwestern University, St. Edwards University and University of Texas at Austin. Major area employers include Texas Technologies, 3ps Inc. and TouchKO Inc.

Grubb & Ellis Apartment REIT purchased Arboleda Apartments from Cedar Park Multifamily, Ltd. Financing was arranged by Don Marshall and Mike Bryant with Capmark Finance.

As of March 21, 2007, Grubb & Ellis Apartment REIT has sold approximately 10.1 million shares of its common stock, excluding the shares issued under its distribution reinvestment plan, for approximately $100 million through its initial public offering, which began in the third quarter of 2006.

Grubb & Ellis Apartment REIT offers a monthly distribution of 7.00 percent per annum and, as of April 2, 2008, has made 10 geographically-diverse acquisitions with a total portfolio valued at approximately $251 million.

About Grubb & Ellis
Grubb & Ellis Company (NYSE: GBE), one of the largest and most respected commercial real estate services companies, is the sponsor of Grubb & Ellis Apartment REIT, Inc. With more than 130 owned and affiliate offices worldwide, Grubb & Ellis offers property owners, corporate occupants and investors comprehensive integrated real estate solutions, including transaction, management, consulting and investment advisory services supported by proprietary market research and extensive local market expertise.

Grubb & Ellis and its subsidiaries are leading sponsors of real estate investment programs that provide individuals and institutions the opportunity to invest in a broad range of real estate investment vehicles, including tax-deferred 1031 tenant-in-common (TIC) exchanges, public non-traded real estate investment trusts (REITs) and real estate investment funds. As of December 31, 2007, nearly $3 billion in investor equity has been raised for these investment programs. The company and its subsidiaries currently manage a growing portfolio of more than 216 million square feet of real estate. In 2007, Grubb & Ellis was selected from among 15,000 vendors as Microsoft Corporation’s Vendor of the Year. For more information regarding Grubb & Ellis Company, please visit www.grubb-ellis.com.

This press release contains certain forward-looking statements with respect to the importance that the property adds to the Grubb & Ellis Apartment REIT portfolio, and the enhancement of stockholder value. 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 and demand for healthcare related services of the greater Cedar Park and Austin, Texas area; the strengths and financial condition of Arboleda Apartments; the 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 300, Santa Ana, California		92705
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	Grubb & Ellis Apartment REIT, Inc.

April 4, 2008	By:	/s/ Stanley J. Olander, Jr.

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


Exhibit No.		Description

10.1		Contract of Sale by and between Cedar Park Multifamily, Ltd. and Triple Net Properties, LLC, dated January 8, 2008
10.2		Amendment to Contract of Sale by and between Cedar Park Multifamily, Ltd. and Triple Net Properties, LLC, dated February 26, 2008
10.3		Second Amendment to Contract of Sale by and between Cedar Park Multifamily, Ltd. and Grubb & Ellis Realty Investors, LLC, dated March 7, 2008
10.4		Third Amendment to Contract of Sale by and between Cedar Park Multifamily, Ltd. and Grubb & Ellis Realty Investors, LLC, dated March 27, 2008
10.5		Sale Agreement Assignment by and between Grubb & Ellis Realty Investors, LLC and G&E Apartment REIT Arboleda, LLC, dated March 27, 2008
10.6		Fixed+1 Multifamily Note by G&E Apartment REIT Arboleda, LLC in favor of PNC ARCS, LLC, dated March 31, 2008
10.7		Multifamily Deed of Trust, Assignment of Rents and Security Agreement and Fixture Filing by G&E Apartment REIT Arboleda, LLC for the benefit of PNC ARCS, LLC, dated March 31, 2008
10.8		Second Amendment to and Waiver of Loan Agreement by and between Grubb & Ellis Apartment REIT, Inc. and Wachovia Bank, National Association, date March 31, 2008
10.9		Amended and Restated Promissory Note by Grubb & Ellis Apartment REIT, Inc. in favor of Wachovia Bank, National Association, dated March 31, 2008
10.10		Second Amended and Restated Pledge Agreement (Membership and Partnership Interests) by and between Wachovia Bank, National Association and Grubb & Ellis Apartment REIT Holdings, L.P., dated March 31, 2008
99.1		Grubb & Ellis Apartment REIT, Inc. Press Release, dated April 4, 2008


[ X ] Schedule A		Prepayment Premium (required)
[ ]	Schedule B		Modifications to Multifamily Note


By: Its:		Grubb & Ellis Apartment REIT Holdings, LP, a Virginia limited partnership Manager
By: Its:		Grubb & Ellis Apartment REIT, Inc., a Maryland corporation General Partner


Date of Report (Date of Earliest Event Reported):		March 27, 2008


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


(ii) (iii) (iv)		maintenance records for the Property; tenant correspondence files; books and records for the Property;


By:		1341-Discover Multifamily, Ltd., a Texas limited partnership, its general partner
By:		ROLED Cedar Park, LLC, a Texas limited


By:		1341-Discover Multifamily, Ltd., a Texas limited partnership, its general partner
By:		ROLED Cedar Park, LLC, a Texas


By: /s/ Larry R. Sneathern
Its:		Larry R. Sneathern Senior Vice President


	MORTGAGED PROPERTY18
18.	ENVIRONMENTAL HAZARDS24
19.	PROPERTY AND LIABILITY INSURANCE		25
20.	CONDEMNATION	26


	POLICY TO LENDER40
52.	ENTIRE AGREEMENT40
53.	WAIVER OF TRIAL BY JURY	41