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

GRUBB & ELLIS REALTY INVESTORS, LLC,
a Virginia limited liability company, BUYER

THIS REAL ESTATE PURCHASE AND SALE AGREEMENT (this “Agreement”), is made as of the day of July, 2008 (the “Agreement Date”) by and between APARTMENTS AT CANYON RIDGE, LLC, a Delaware limited liability company, herein referred to as “Seller” and GRUBB & ELLIS REALTY INVESTORS, LLC, a Virginia limited liability company, its permitted successors and/or assigns, collectively herein referred to as “Buyer.”

WHEREAS, Seller desires to sell certain improved real property along with certain related personal and intangible property, and Buyer desires to purchase said real, personal and intangible property on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing and the mutual undertakings set forth herein, and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Buyer and Seller hereby agree as follows:

1. Property Included in Sale. Seller hereby agrees to sell and convey to Buyer, and Buyer hereby agrees to purchase from Seller, the following:

(a) That certain real property commonly known as 3868 Central Pike Road, Hermitage, Tennessee, and more particularly described in Exhibit A attached hereto (the “Real Property”);

(b) Seller’s interest in all rights, privileges and easements appurtenant to the Real Property, including, without limitation, all minerals, oil, gas and other hydrocarbon substances as well as all development rights, air rights, water, water rights (and water stock, if any) relating to the Real Property and any easements, rights-of-way or other appurtenances used in connection with the beneficial use and enjoyment of the Real Property;

(c) Seller’s interest in all improvements and fixtures located on the Real Property, including all buildings and structures presently located on the Real Property, all apparatus, equipment and appliances used in connection with the operation or occupancy of the Real Property, such as heating and air conditioning systems and facilities used to provide any utility services, refrigeration, ventilation, garbage disposal, recreation or other services on the Real Property (all of which are collectively referred to as the “Improvements”);

(d) Seller’s interest in any tangible or intangible personal property owned by Seller and used in the ownership, use and operation of the Real Property and Improvements, including, without limitation, the right to use any trade name (excepting those including the name “Principal”), trademarks, service marks, building and property names and building signs used in connection with the Real Property and the Improvements, including the names “Canyon Ridge Apartments” and all variations thereof (the “Personal Property”) and any contract or lease rights, agreements, utility contracts, management, maintenance and service contracts or other rights relating to the ownership, use and operation of the Real Property (the “Service Contracts”);

All of the items referred to in subparagraphs (a), (b), (c) and (d) above are hereinafter collectively referred to as the “Property.”

(a) The total purchase price (the “Purchase Price”) for the Property is Thirty-Six Million Fifty Thousand and 00/100 Dollars ($36,050,000.00). The Purchase Price is payable by wire transfer of immediately available funds in U.S. dollars via the federal bank wire transfer system deliverable no later than 12:00 p.m. Central on the Closing Date (as defined herein) to LandAmerica American Title Company — 1951, Attn: Debby S. Moore, 2505 N. Plano Road, Suite 3100, Richardson, Texas 75082 (telephone: 214.570.0200 (x103); fax: 214.570.0210) (the “Title Company”) at Closing.

(b) Within two (2) business days of the Agreement Date, Buyer shall deposit into escrow with the Title Company the sum of Three Hundred Sixty Thousand Five Hundred and 00/100 Dollars ($360,500.00) as the earnest money deposit (the “Initial Deposit”) payable by wire transfer of immediately available funds in U.S. dollars via the federal bank wire transfer system. Provided that Buyer has not terminated this Agreement prior to the Approval Date, Buyer shall deposit an additional Three Hundred Sixty Thousand Five Hundred and 00/100 Dollars ($360,500.00) (the “Additional Deposit”) within two (2) business days after the Approval Date. (The Initial Deposit and the Additional Deposit are collectively referred to herein as the “Deposit”.) Any interest earned by the Deposit shall be considered part of the Deposit. Except as otherwise provided in this Agreement, the Deposit shall be held by the Title Company in a federally insured interest bearing account and applied against the cash portion of the Purchase Price at Closing.

(c) In the event Buyer shall be in or alleged to be in default hereunder, Seller shall deliver a written notice to Buyer within five (5) business days of learning of such default, stating with particularity the alleged default of Buyer and the action required by Buyer to cure such default, whereupon Buyer shall have ten (10) business days after receipt of such written notice in which to cure the alleged default to Seller’s reasonable satisfaction (and the Closing Date shall be delayed, if necessary, until the end of such ten (10) business day period). Seller shall not be required to give notice of default, opportunity to cure or delay the Closing Date if Buyer’s default is the failure to deliver the items required by paragraphs 2(b), 7(c) and 7(d) of this Agreement. In the event after the expiration of the ten (10) business day cure period set forth in the previous sentence, the purchase and sale provided for under this Agreement does not close due to Buyer’s default and no fault of Seller, Buyer and Seller hereby agree that Seller will be damaged thereby. Therefore, Seller and Buyer hereby agree that the Deposit shall represent and be liquidated damages payable to Seller in such event as a fair and reasonable sum to recompense Seller in light of Seller’s removal of the Property from the market and the costs incurred, labor and services performed and the loss of its bargain, all of which are difficult to ascertain. These liquidated damages shall constitute Seller’s sole and exclusive remedy except for those certain indemnifications of Seller by Buyer otherwise provided for in this Agreement.

(d) In the event that Seller shall be in default hereunder, Buyer’s sole and exclusive remedy shall be either: (i) deliver a written notice to Seller within five (5) business days of learning of such default, stating with particularity the alleged default of Seller and the action required by Seller to cure such default, and stating Buyer’s intent to terminate this Agreement if the default is not cured, whereupon Seller shall have ten (10) business days after receipt of such written notice in which to cure the alleged default to Buyer’s reasonable satisfaction and to thereby prevent termination of this Agreement (and the Closing Date shall be delayed, if necessary, until the end of such ten (10) business day period), or in the event such default is not cured within such ten (10) business day period, terminate this Agreement by written notice to Seller and the Title Company, in which case the Deposit shall be returned to Buyer; or (ii) if Seller’s default results from its failure to transfer possession and title to the Property to Buyer at Closing, enforce specific performance. In no event under (i) or (ii) above shall Seller be liable to Buyer for any actual, punitive, speculative, consequential or other damages.

3. Title to the Property. At the Closing, Seller shall convey to Buyer and Buyer shall accept from Seller marketable and insurable fee simple title to the Real Property, all rights, privileges and easements appurtenant thereto, and to the Improvements, by duly executed and acknowledged Special Warranty Deed attached hereto as Exhibit H (the “Deed”), subject only to the Permitted Exceptions. Evidence of delivery of marketable and insurable fee simple title shall be the issuance at Closing of a current ALTA Owner’s Policy of Title Insurance in the full amount of the Purchase Price by the Title Company, dated the day of Closing, insuring fee simple title to the Real Property, Improvements, and appurtenant rights, privileges and easements, in Buyer, subject only to the Permitted Exceptions and together with such endorsements as are reasonably required by Buyer (the “Title Policy”).

4. Buyer’s Due Diligence. Buyer shall be allowed to conduct the following due diligence prior to purchasing the Property:

(a) Seller has provided Buyer with a copy of its existing title policy for review, and Buyer shall order, at Buyer’s expense, a title commitment for the Property (the “Title Report”). Seller has also provided Buyer with a copy of an existing as-built survey showing the location of all improvements and recorded easements on the Property as of the date of such survey, and Buyer shall also order, at Buyer’s expense, an updated survey of the Property sufficient to enable Buyer’s title company to issue an ALTA owner’s policy of title insurance (the “Survey”). The Title Report and the Survey are collectively referred to as the “Title Documents”. On or before 5:00 p.m. Central on July 7, 2008, Buyer may approve or disapprove (in its sole and absolute discretion) the Title Documents for the Property by delivering written notice to Seller (“Buyer’s Title Notice”) specifying each title defect or matter for which Buyer is requesting a cure by Seller (“Title Defect”) and each Title Company requirement (“Title Requirement”) which Buyer is requesting Seller to satisfy in order for the Title Policy to be issued for the Property at Closing. Buyer’s failure to deliver Buyer’s Title Notice to Seller within the time period specified above shall be a conclusive presumption that Buyer has approved the Title Documents and this Agreement shall remain in full force and effect. Within three (3) business days after receiving Buyer’s Title Notice, Seller shall deliver to Buyer written notice (“Seller’s Title Notice”) of those Title Defects which Seller covenants and agrees to either eliminate or cure to Buyer’s satisfaction by the Closing Date and those Title Requirements which Seller agrees to satisfy by the Closing Date. Seller’s failure to deliver Seller’s Title Notice to Buyer within the time period specified above shall be deemed to constitute Seller’s election not to eliminate or cure any such Title Defect or to satisfy any such Title Requirements; provided, however, that Seller shall in any case be obligated to remove all monetary encumbrances at or prior to Closing without Buyer having to notify Seller of same. If Seller elects (or is deemed to have elected) not to eliminate or cure any Title Defects or to not satisfy any Title Requirements, Buyer shall have the right, by written notice delivered to Seller within two (2) business days of Seller’s Title Notice (or the expiration of the three (3) business days in which Seller must provide Seller’s Title Notice), to either (i) waive its prior notice as to the Title Defects which Seller has elected (or is deemed to have elected) not to cure and those Title Requirements which Seller has elected (or is deemed to have elected) not to satisfy, or (ii) terminate this Agreement by delivering written notice to Seller, at which time the Deposit shall be returned to Buyer and the parties shall have no further obligations hereunder except for those which expressly survive termination. Buyer’s failure to deliver any written notice within such two (2) business day period shall be a conclusive presumption that Buyer has approved the uncured Title Documents and unsatisfied Title Requirements and this Agreement shall remain in full force and effect.

(b) Buyer’s review of the operating statements of the Property only for the previous two (2) calendar years as well as the current calendar year-to-date, provided same are available and in Seller’s actual possession.

(c) Buyer’s review of copies of any site plans and building drawings and specifications currently in the possession of Seller.

(d) Buyer’s review of copies of any maintenance and service agreements currently in force and in the possession of Seller. Buyer shall provide written notice to Seller no less than three (3) business days prior to the Approval Date of those agreements Buyer wishes to assume. In the absence of such notice, Seller shall terminate all agreements.

(e) Buyer’s review of a certain environmental report prepared for Seller and currently in the possession of Seller (as set forth on Exhibit K, the “Environmental Report”). Seller is providing the Environmental Report to Buyer for informational purposes only and Buyer shall not rely on the Environmental Report in determining whether to purchase the Property; provided, however, that the foregoing statement shall not prohibit Buyer from exercising its right to terminate prior to the Approval Date based on its own environmental due diligence. In the event the transaction contemplated herein does not close for any reason whatsoever, Buyer shall immediately return the Environmental Report to Seller.

(f) Buyer’s review of the Tenant files. Seller shall allow Buyer to review the tenant files (including tenant leases) at the office of the property manager during normal business hours upon one (1) business day’s notice. Files must be reviewed in the property manager’s office and no part thereof may be removed, copied or duplicated prior to Closing.

The items referred to above in subparagraphs 4(a)-(f) , any other items provided by Seller to Buyer in connection with Buyer’s inspection of the Property, or items reviewed at the Property by Buyer (e.g. if applicable, tenant files, plans and specifications) shall be collectively referred to as the “Due Diligence Items”; provided, however, that “Due Diligence Items” shall not include any items ordered and paid by Buyer (e.g., the updated title commitment and updated survey). Buyer acknowledges receipt of the Due Diligence Items on June 13, 2008.

The Due Diligence Items contain confidential material, data and information and by accepting delivery of same Buyer hereby acknowledges that the Due Diligence Items will be relied upon at Buyer’s own risk and further that as provided herein below will be kept confidential at all times by Buyer and its agents, employees and representatives (“Confidentiality Requirement”).

Buyer agrees that it shall make no copies of the Due Diligence Items. It may, however, make notes (such notes shall be deemed to be part of the Due Diligence Items). The Due Diligence Items will be kept confidential and shall not, without Seller’s prior written consent (which consent shall be granted or denied in Seller’s sole discretion), be disclosed by Buyer, or by its agents, representatives or employees, except Seller’s prior written consent shall not be required in order to disclose such information (i) to Buyer’s lender, (ii) its or their consultants, employees, attorneys or other parties assisting Buyer with the transaction contemplated by this Agreement, (iii) as required to be disclosed by applicable laws, rules or regulations, and (iv) to prospective tenant-in-common investors of Buyer. If such consent is granted, the Due Diligence Items shall not be disclosed prior to Seller’s receipt of an Acknowledgment and Disclaimer Agreement as attached hereto as Exhibit E from the person or entity to whom the Due Diligence Items is being disclosed. Moreover, Buyer agrees to reveal the Due Diligence Items only to those of its agents, representatives and employees (“Representatives”) who need to know the Due Diligence Items and who are informed by Buyer of the confidential nature of the Due Diligence Items. Buyer or its Representatives will not volunteer or disclose in any way to any person (i) the fact that the Due Diligence Items have been made available, (ii) any of the Due Diligence Items or any summaries or notes thereof, or (iii) any of the terms, conditions or other facts with respect to the Agreement except as otherwise provided herein.

Buyer hereby releases and discharges any and all claims it may have against Seller or its consultant arising out of the delivery of the Due Diligence Items to Buyer or any inaccuracy of the Due Diligence Items. Further, Buyer hereby agrees to indemnify and hold Seller harmless from any and all claims arising out of the delivery to Buyer of the Due Diligence Items; provided, however, that the foregoing indemnity excludes any claims arising out of the gross negligence or willful misconduct of Seller, its agents, representatives and employees.

Buyer agrees that if it, its Representatives commit a breach of any of the provisions of this Confidentiality Requirement, Seller shall have the right and remedy to institute proceedings to obtain immediate injunctive relief for any breach or threatened breach hereof, it being hereby acknowledged and agreed that any such breach or threatened breach may cause irreparable injury to Seller and its affiliates and that money damages will not provide an adequate remedy to Seller and its affiliates. This stipulation with respect to damages incurred by Seller upon a breach of this Confidentiality Requirement by Buyer shall be limited to use in an action for injunctive relief. Further, nothing herein shall be construed to limit any other remedy available to Seller.

(g) Buyer’s review of the physical, environmental, financial and all other characteristics and condition of the Property. Seller agrees to provide Buyer access to the Property following the Agreement Date for the purpose of performing, at Buyer’s sole cost and expense, studies, physical inspections, investigations and tests on the Property (the “Tests”) provided that no such Tests shall be conducted without at least one (1) business day’s prior written notice to Seller and Seller’s prior approval of such Tests. Seller’s execution of this Agreement shall constitute its consent to a non-invasive phase I environmental site assessment being performed on the Property. All forms of invasive Tests are prohibited without Seller’s prior written consent, which consent may be granted or withheld in Seller’s sole discretion. Invasive Tests hereunder include, but are not limited to, any tests or testing beyond a Phase I environmental site assessment, such as collecting or testing asbestos, water, radon, soil or air samples. Buyer’s access is further conditioned on Buyer providing Seller with certificates of insurance listing Seller as an additional insured on all insurance policies evidencing that Buyer’s agents or contractors performing the Tests have insurance in types and amounts satisfactory to Seller as determined by Seller in its reasonable discretion as more specifically set forth on Exhibit J attached hereto and hereby made a part hereof. Seller hereby acknowledges receipt of certificates of insurance on June 30, 2008, and Seller further acknowledges that such insurance certificates are satisfactory to Seller. Buyer shall be required to conduct such Tests in a manner as to not unreasonably disturb or interfere with the current use of the Property and upon completion of such Tests, Buyer agrees at its sole cost to restore the Property to the condition it was in immediately prior to such Tests, including, but not limited to the immediate removal of anything placed on the Property in connection with such Tests. Copies of any third-party reports, letters or other written information generated as a result of such Tests shall be provided to Seller if the sale contemplated by this Agreement does not close for any reason. Buyer shall indemnify, defend (with counsel reasonably satisfactory to Seller), protect, and hold Seller harmless from and against any and all liability, loss, cost, damage, or expense (including, without limitation, reasonable attorney’s fees and costs) (“Losses”) which Seller may sustain or incur by reason of or in connection with any Tests made by Buyer or Buyer’s agents or contractors relating to or in connection with the Property, or entries by Buyer or its agents or contractors onto the Property provided that, Buyer shall not be liable for any losses or liabilities resulting from Buyer’s investigations uncovering the existence of any environmental contamination or any other defects or conditions which adversely impact the Property, except to the extent that Buyer’s investigations exacerbate such conditions and cause Losses to Seller, and Buyer shall not be liable for any losses or liabilities resulting from the gross negligence or willful misconduct of Seller or its agents, representatives or employees. Notwithstanding any provision to the contrary in this Agreement, the indemnity obligations of Buyer under this Agreement shall survive any termination of this Agreement or the delivery of the Deed and the transfer of title pursuant to this Agreement.

If on or before 5:00 p.m. Central on July 14, 2008 (the “Approval Date”), Buyer disapproves any of the Due Diligence Items or the physical and environmental condition of the Property or otherwise decides in its sole discretion not to acquire the Property for any or no reason by providing Seller with written notice, this Agreement shall terminate without any further liability on the part of either party (except for Buyer’s indemnity obligations set forth in paragraph 4 above). In the event of such termination, the Initial Deposit (which amount shall be credited to Seller), shall be returned to Buyer after Buyer returns to Seller all Due Diligence Items and any copies of same. If by 5:00 p.m. Central on the Approval Date Buyer approves the Due Diligence Items and the physical and environmental condition of the Property by providing Seller with written notice, then this Agreement shall remain in full force and effect, Buyer shall deposit the Additional Deposit as set forth in paragraph 2(b) above, and the Deposit shall be held by the Title Company and credited to Seller at Closing as provided herein. If by 5:00 p.m. Central on the Approval Date Buyer does not waive or deem satisfied in writing the Due Diligence Items and the physical and environmental condition of the Property, there shall be a conclusive presumption that Buyer has approved the Due Diligence Items and the physical and environmental condition of the Property, this Agreement shall remain in full force and effect, Buyer shall deposit the Additional Deposit as set forth in paragraph 2(b) above, and the Deposit shall be held by the Title Company and credited to Seller at Closing as provided herein.

5. Buyer’s Conditions to Closing. The following conditions are conditions precedent to Buyer’s obligation to purchase the Property:

(a) Seller maintaining the Property in its present condition until Closing, reasonable wear and tear excepted. In the event that, prior to Closing, the Property, or any part thereof, is destroyed or materially damaged, and such damage exceeds Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), or if condemnation proceedings are commenced against the Property, Buyer shall have the right, exercisable by giving notice of such decision to Seller within ten (10) business days after receiving written notice of such damage, destruction or condemnation proceedings, to terminate this Agreement, in which case neither party shall have any further rights or obligations hereunder. In the event of such termination, the Deposit shall be returned to Buyer. If Buyer elects to accept the Property in its then condition, all proceeds of insurance or condemnation awards payable to Seller by reason of such damage, destruction or condemnation shall be paid or assigned to Buyer and Seller shall credit the Purchase Price to the extent of any deductible under any policies of insurance, which credit shall not exceed the amount of such damages, and Seller shall not compromise, settle or adjust any claims to such proceeds or awards without Buyer’s prior written consent. In the event the casualty damage to the Property is Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) or less, Seller shall have the option to repair or replace such damage prior to Closing. In the event Seller is unwilling or unable to repair or replace such damage, Seller shall, within three (3) business days of its determination of the amount of such damage, notify Buyer of such fact (“Seller’s Notice”) and Buyer shall have the right, exercisable by giving Seller notice within ten (10) business days after receiving Seller’s Notice, either to (i) terminate this Agreement, in which case neither party shall have any further rights or obligations hereunder except any indemnification obligations of Buyer, and the Deposit shall be returned to Buyer and any documents shall be returned to the party depositing the same, or (ii) to accept the Property in its then condition and proceed with the purchase, in which case Buyer shall accept payment or assignment of applicable insurance proceeds, if any, from policies of insurance maintained and paid for by Seller covering the Property up to the amount necessary to make the necessary repairs or restorations and Seller shall credit the Purchase Price to the extent of any deductible under any policies of insurance, which credit shall not exceed the amount of such damages. If Buyer elects to proceed under clause (ii) above, Seller shall not compromise, settle or adjust any claims to such proceeds or awards without Buyer’s prior written consent.

(b) Delivery by Seller at Closing of the Deed and the other items described in Section 7(b) hereof.

(c) Performance by Seller as and when required by this Agreement of each and every term, covenant, condition and agreement required to be performed by Seller pursuant to this Agreement.

(d) Neither Seller nor any agent, representative or employee of Seller shall have introduced any hazardous substances on the Property other than those substances, if any, present as of the Approval Date, or as the same may be found in standard office products or cleaning materials in reasonable quantities and in compliance with all laws.

In the event that the conditions set forth above in this paragraph 5 are not satisfied (and Buyer is not otherwise in default of this Agreement), Buyer may terminate this Agreement, subject to paragraph 2(d) hereof, or waive satisfaction of the condition and close escrow in either instance by giving written notice to Seller. In the event of such termination, for reasons described in (b) – (c) above, the Deposit shall be returned to Buyer.

6. Seller’s Conditions to Closing. The following conditions are conditions precedent to Seller’s obligation to sell the Property:

(a) The approval of the applicable committee of Seller (the “Committee”), which approval Buyer acknowledges Seller will not seek until the Approval Date has passed and Buyer has failed to exercise its right of termination of this Agreement under paragraph 4. Seller makes no representation with regard to the likelihood of approval of this Agreement or the transaction contemplated herein by its Committee. Seller shall have a period of ten (10) business days after the Approval Date to obtain such approval by its Committee. If for any reason Seller’s Committee does not approve this Agreement or the transaction contemplated herein, this Agreement shall terminate, the Title Company shall return the Deposit to Buyer and neither party shall have any further obligations or rights hereunder.

(b) Delivery by Buyer at Closing of the Purchase Price and the executed Assignment and Assumption of Lessor’s Interest in Leases in the form attached hereto as Exhibit B.

(c) Performance by Buyer as and when required by this Agreement of each and every term, covenant, condition and agreement required to be performed by Buyer pursuant to this Agreement.

In the event that the conditions in this paragraph 6 are not satisfied, Seller may elect, at its sole discretion, to terminate this Agreement or waive satisfaction of the condition and close escrow. In the event of such termination, for reasons described in (b) or (c) above, the Deposit shall be retained by Seller and shall be non-refundable to Buyer.

(a) The Closing hereunder shall be held and delivery of all items to be made at the Closing under the terms of this Agreement shall be made at the offices of the Title Company on August 15, 2008, or such other date prior thereto as Buyer and Seller may mutually agree in writing; provided, however, should such date fall during the final two (2) business days of any calendar month, the date shall automatically be extended to the first business day of the following calendar month such that Closing will not occur during the final two (2) business days of any calendar month (the “Closing Date”). Except as otherwise provided herein, such date may not be extended without the prior written approval of both Seller and Buyer. In the event the Closing does not occur on or before the Closing Date, the Title Company shall, subject to the provisions of paragraph 2, and unless it is notified by both parties to the contrary, within three (3) business days after the Closing Date, return to the depositor thereof items which may have been deposited pursuant to this Agreement. Any such return shall not, however, relieve either party hereto of any liability it may have for its wrongful failure to close.

(ii) originals or copies of all leases (and amendments thereto, if any) (the “Leases”) and lease files in Seller’s actual and physical possession covering any portion of the Property, any security deposits relating thereto in Seller’s possession, and an executed Assignment and Assumption of Lessor’s Interest in Leases in the form attached hereto as Exhibit B;

(iv) notices to the tenants at the Property in the form attached as Exhibit D, executed by Seller;

(v) originals or copies of (i) the Service Contracts that have not been terminated and are in Seller’s or its property manager’s possession (and amendments thereto, if any), (ii) certificates of occupancy and other instruments evidencing applicable governmental approvals in Seller’s possession and (iii) any and all guaranties and warranties used or made in connection with the operation, construction, improvement, alteration or repair of the Property, and an original, executed Assignment of Warranties, Guaranties and Service Contracts in the form attached hereto as Exhibit G;

(vii) any keys in the possession of Seller to all locks located in the Property;

(viii) reasonable proof of the due authorization, execution and delivery by Seller of this Agreement and the documents delivered by Seller pursuant hereto;

(ix) a rent roll dated as of the business day immediately preceding the Closing Date, prepared by Seller in the ordinary course of business for the ownership and operation of a residential apartment complex;

Buyer may waive compliance on Seller’s part under any of the foregoing items by an instrument in writing.

(c) At or before the Closing, Buyer shall deliver to escrow the balance of the Purchase Price (as may be adjusted pursuant to this Agreement) and an executed Assignment and Assumption of Lessor’s Interest in Leases in the form attached hereto as Exhibit B.

(d) Seller and Buyer shall each deposit such other instruments as are reasonably required by the escrow holder to close the escrow and consummate the purchase of the Property in accordance with the terms hereof.

(i) In each proration set forth below, the portion thereof applicable to the period beginning at 12:01 a.m. on the date the Deed is recorded shall be credited to Buyer and the portion thereof applicable to the period ending at such time shall be credited to Seller. Prorations shall be calculated on the basis of a 366-day year.

(A) Collected Rent. All collected rent and other collected income (and any applicable state or local tax on rent) under Leases in effect on the Closing Date shall be prorated as of the Closing. Buyer shall be credited with any rent and other income collected by Seller before Closing but applicable to any period of time after Closing. Rents unpaid for the month in which Closing occurs shall be prorated. Uncollected rent and other income that are more than thirty (30) or more days past due shall not be prorated. Any rent received by Seller after the Closing with respect to time periods after the Closing shall be delivered to Buyer within ten (10) days of Seller’s receipt. Buyer shall apply rent and other income from tenants that are collected within ninety (90) days after the Closing first to the obligations then owing to Buyer for its period of ownership and to those reasonable attorney fees incurred by Buyer in collecting said amount, remitting the balance, if any, to Seller. Buyer will make reasonable efforts, without suit, to collect any rents from tenants in occupancy at Closing applicable to the period before Closing, provided that at or prior to Closing Seller delivers a schedule of rent delinquencies to Buyer. Seller may pursue collection as to any rent not collected by Buyer within six (6) months following the Closing Date for rents that are due and owing to Seller for the period prior to Closing, provided that Seller shall have no right to terminate any Lease or any tenant’s occupancy under any Lease in connection therewith. Seller is not restricted in any way from collecting any rent or other income owed by past tenants who are no longer in occupancy at Closing.

(B) Taxes and Assessments. Real estate taxes and assessments imposed by governmental authority that are not yet due and payable shall be initially prorated as of the Closing based upon the most recent ascertainable assessed values and tax rates, but subject to reproration upon issuance of the actual bill therefor to effectuate the actual proration. Seller shall receive a credit for any taxes and assessments paid by Seller and applicable to any period after the Closing. All refunds or tax savings relating to real estate taxes shall inure to the benefit of Seller to the extent such refunds or tax savings relate to any period for which Seller owned the Property. Buyer shall remit to Seller any such refund or tax savings relating to such period within five (5) business days of Buyer’s receipt, after deducting any amounts due to tenants under the Leases. Any additional taxes relating to the year of Closing or prior years arising out of a change in the use of the Property or a change in ownership shall be assumed by Buyer effective as of Closing and paid by Buyer when due and payable, and Buyer shall indemnify Seller from and against any and all such taxes, which indemnification obligation shall survive the Closing. Buyer shall receive a credit for any taxes and assessments not paid as of the Closing covering any portion of the period prior to Closing.

(C) Final Adjustment After Closing. If final prorations cannot be made at Closing for any item being prorated under this subsection (e), then Buyer and Seller agree to allocate such items on an accrual basis as soon as invoices or bills are available, with final adjustment to be made as soon as practicable after Closing except for real estate taxes, which shall be reprorated when final bills are issued. Income and expenses shall be received and paid by the parties on an accrual basis with respect to their period of ownership. Payments in connection with the final adjustment shall be due within thirty (30) days of written notice. Each party shall have reasonable access to, and the right to review the other party’s supporting documentation to confirm the final prorations (at the cost and expense of the first party); provided at least five (5) business days advance notice is given by the reviewing party to the reviewed party.

(ii) Leasing Commissions. Seller shall pay any finder’s fee or leasing commissions owed for the existing term of existing Leases or provide Buyer a credit at Closing.

(iii) Tenant Deposits. All tenant security deposits and pet, cleaning or similar deposits paid under the Leases actually received by Seller (and interest thereon if required by law or contract to be earned thereon) and not theretofore applied to tenant obligations under the Leases shall be transferred or credited to Buyer at Closing or placed in escrow if required by law. As of the Closing, Buyer shall assume Seller’s obligations related to such tenant security deposits. Buyer will indemnify, defend, and hold Seller harmless from and against all demands and claims made by tenants with respect to any security deposits that are actually transferred or credited to Buyer as of the day of such transfer or credit, and will reimburse Seller for all reasonable attorneys’ fees incurred as a result of any such claims or demands as well as for all loss, expenses, verdicts, judgments, settlements, interest, costs and other expenses incurred or that may be incurred by Seller as a result of any such claims or demands by tenants that arise after such deposits are actually transferred or credited to Buyer.

(iv) Utility Deposits. Buyer shall take all steps necessary to effectuate the transfer of all utilities to its name as of the Closing Date, and where necessary, post deposits with the utility companies. Seller shall use good faith efforts to ensure that all utility meters are read as of the Closing Date. Seller shall be entitled to recover any and all deposits posted by Seller and held by any utility company as of the Closing Date.

(v) Insurance. The fire, hazard, and other insurance policies relating to the Property shall be cancelled by Seller as of the Closing Date and shall not, under any circumstances, be assigned to Buyer. All unearned premiums for fire and any additional hazard insurance premium or other insurance policy premiums with respect to the Property shall be retained by Seller.

(vi) Service Contracts and Other Expenses. The following other items shall be adjusted, prorated and credited as applicable: (1) amounts due and prepayments under the Service Contracts; (2) assignable license and permit fees; (3) any previously paid signing bonus or similar payment relating to any laundry room, cable television, telephone or similar agreement in effect as of the Closing; and (4) other expenses of operation and similar items.

(i) The Tangible Personal Property is included in this sale, without further charge, except that Buyer shall pay the applicable taxing authority the amount of any sales or similar taxes payable in connection with the Tangible Personal Property and Buyer shall execute and deliver any tax returns required of it in connection therewith, said obligations of Buyer to survive Closing.

(ii) Buyer shall pay standard rates for the Title Policy. Buyer shall pay for any special endorsements to the Title Policy and any extended coverage.

(iii) Buyer shall pay the cost of any transfer taxes and recording fees applicable to the sale.

(vi) Seller shall pay all costs incurred to prepay and release any existing financing (including any prepayment fees or penalties), if any. Buyer shall pay all costs and expenses related to any financing procured by Buyer.

(i) Seller is a limited liability company duly organized and validly existing under the laws of the State of Delaware and is in good standing under the laws of the State in which the Property is located.

(ii) This Agreement and all closing documents executed by Seller which are to be delivered to Buyer at the Closing are or at the Closing will be duly authorized, executed, and delivered by Seller, are or at the Closing will be legal, valid, and binding obligations of Seller, are sufficient to convey title, and do not violate any provisions of any agreement to which Seller is a party or to which it is subject.

(iii) Seller and each person or entity owning an interest in Seller is (a) (i) not currently identified on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, Department of the Treasury (“OFAC”) and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation (collectively, the “List”), and (ii) not a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States, (b) none of the funds or other assets of Seller constitute property of, or are beneficially owned, directly or indirectly, by any Embargoed Person (as hereinafter defined), (c) no Embargoed Person has any interest of any nature whatsoever in Seller (whether directly or indirectly), and (d) Seller has implemented procedures, and will consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times.

The term “Embargoed Person” means any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Seller is prohibited by law or Seller is in violation of law.

Seller also shall require, and shall take reasonable measures to ensure compliance with the requirement, that no person who owns any other direct interest in Seller is or shall be listed on any of the Lists or is or shall be an Embargoed Person. This Section shall not apply to any person to the extent that such person’s interest in Seller is through a U.S. Publicly-Traded Entity. As used in this Agreement, “U.S. Publicly-Traded Entity” means a person (other than an individual) whose securities are listed on a national securities exchange, or quoted on an automated quotation system, in the United States, or a wholly-owned subsidiary of such a person.

(iv) Except as otherwise disclosed to Buyer in the Due Diligence Items, to Seller’s Knowledge (as hereinafter defined), there are no liens, security interests, covenants, conditions, restrictions, rights-of-way, easements or encumbrances of any kind or character whatsoever, encumbering the Property other than those set forth in the Title Report and/or Survey.

(v) Except as set forth on Exhibit L, there is no pending (or to Seller’s knowledge, threatened) litigation, action or other legal proceeding which materially affects the use and operation of the Property or Seller’s ability to fulfill all of its obligations under this Agreement.

(vi) Except as otherwise provided in the Due Diligence Items, to Seller’s Knowledge, Seller has not received any written notice from a governmental entity indicating that the Property does not comply with all laws, ordinances, codes, rules and regulations.

(vii) Seller is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as defined in the Internal Revenue Code (“Code”)).

(viii) Except as otherwise provided in the Due Diligence Items, to Seller’s Knowledge, there is no existing or threatened condemnation action with respect to the Property.

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

(x) To Seller’s Knowledge, Seller has provided true and correct copies of all leases and amendments thereto pertaining to the Property. To Seller’s Knowledge, the rent roll dated June 18, 2008 and previously delivered to Buyer was prepared by Seller in Seller’s ordinary course of business as the owner and operator of a residential apartment complex.

(xi) To Seller’s Knowledge, the Service Contracts that Buyer has reviewed or may review at Seller’s office at the Property are in full force and effect, without material default by any party and without any claims made for the right of setoff, except as expressly provided by the terms of the Service Contracts or as disclosed to Buyer in writing by Seller. To Seller’s Knowledge, Seller has made available to Buyer true and correct copies of all Service Contracts and amendments thereto pertaining to the Property which have been made available to Seller by Seller’s property manager or which are used and relied upon by Seller in its ordinary course of business in owning, operating and managing the Property.

The foregoing representations and warranties shall be in full force and effect on the Agreement Date and at the Closing. Such representations and warranties shall be reaffirmed and restated by Seller as of the Closing Date on a certificate in the form attached hereto as Exhibit M (the “Certificate”) updating the representations and warranties of Seller through Closing, which Certificate Seller covenants to deliver to Buyer at Closing. If any material change in any of the foregoing representations or warranties or any material breach thereof occurs, Seller shall, upon discovery of same, give prompt written notice of such change or breach to Buyer in writing at any time and from time to time prior to the Closing (each a “Disclosure” and collectively, the “Disclosures”), which Disclosures shall thereafter be updated by Seller prior to the Closing Date (and the Certificate shall at Closing be updated by such Disclosures, subject to Buyer’s termination right described below). If any change in any of the foregoing representations or any breach of any of the foregoing warranties or agreements is a material change or breach, and Seller does not elect to cure such matters within twenty (20) business days after Seller’s receipt of a written request from Buyer to do so, or does not agree in writing within said twenty (20) business day period to indemnify Buyer against and hold Buyer harmless from any and all losses, liabilities, claims, costs and expenses incurred by Buyer as a result thereof, then, notwithstanding anything contained herein to the contrary, Buyer, at its sole option, and as its sole remedy, may either (a) close and consummate the transaction contemplated by this Agreement, without reduction in the Purchase Price or (b) terminate this Agreement by written notice to Seller, whereupon the Title Company shall return the Deposit to Buyer and the parties shall have no rights or obligations hereunder, except for those which expressly survive any such termination. Such election shall be made by Buyer within five (5) business days after receipt of notice from Seller that Seller has elected not to cure or indemnify Buyer with respect to such material change or breach. Failure of Buyer to deliver to Seller a notice of such election of Buyer within such five (5) business days period shall conclusively be construed as Buyer’s having elected alternative (a) above. The Closing Date shall be postponed automatically, if necessary, to permit the full running of such twenty-five (25) day period. Notwithstanding the foregoing, in the event Seller willfully caused the material change or breach, Seller shall be in default hereunder and Buyer shall have the rights and remedies set forth in Section 2(d) hereof. The term “Seller’s Knowledge” as used herein means the actual knowledge (and not the implied or constructive knowledge) without any duty of investigation or inquiry of the following person: Aaron Russell, Asset Manager. All representations and warranties made by Seller in this Section 8(a) shall survive the Closing for six (6) months and written notification of any claim arising therefrom must be received in writing by Seller within such six (6) month period or such claim shall be forever barred and Seller shall have no liability with respect thereto. The aggregate liability of Seller, with respect to all claims made by Buyer under Section 8(a) of this Agreement, shall not exceed Five Hundred and 00/100 Dollars ($500,000.00). Notwithstanding the foregoing, no representation, warranty, covenant or agreement made in this Agreement by Seller shall survive the Closing relative to any matters disclosed in the Due Diligence Items or known to Buyer to be untrue or incorrect and of which Seller is not notified by Buyer prior to or at the Closing. Buyer is deemed to have constructive knowledge of all information contained in the Due Diligence Items that could be reasonably inferred from such Due Diligence Items. Buyer further acknowledges it has a duty of investigation and inquiry in determining whether or not the Property is suitable for its purpose.

(b) Buyer hereby represents and warrants to Seller as follows: (i) Buyer is a limited liability company, duly organized and validly existing under the laws of the Commonwealth of Virginia and is or will be in good standing under the laws of the State in which the Property is located as of the Closing Date; (ii) all documents executed by Buyer which are to be delivered to Seller at Closing are or at the Closing will be duly authorized, executed, and delivered by Buyer, and are or at the Closing will be legal, valid, and binding obligations of Buyer, and do not and at the Closing will not violate any provisions of any agreement to which Buyer is a party or to which it is subject; (iii) Buyer shall furnish all of the funds for the purchase of the Property (other than funds supplied by institutional lenders which will hold valid mortgage liens against the Property) and such funds will not be from sources of funds or properties derived from any unlawful activity by Buyer; and (iv) Buyer is a sophisticated investor with substantial experience in investing in assets of the same type as the Property and has such knowledge and experience in financial and business matters that Buyer is capable of evaluating the merits and risks of an investment in the Property.

(c) Buyer represents and warrants that (a) Buyer (i) is not currently identified on the List, and (ii) is not a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States, (b) none of the funds or other assets of Buyer constitute property of, or are beneficially owned, directly or indirectly, by any Embargoed Person (as hereinafter defined), and (c) Buyer has implemented procedures, and will consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times.

Buyer also shall require, and shall take reasonable measures to ensure compliance with the requirement, that no person who owns any other direct interest in Buyer is or shall be listed on any of the Lists or is or shall be an Embargoed Person. This Section shall not apply to any person to the extent that such person’s interest in Buyer is through a U.S. Publicly-Traded Entity.

9. Covenants of Seller. Seller hereby covenants with Buyer, from the Agreement Date until the Closing or earlier termination of this Agreement, as follows:

(a) Operation of Property. Seller shall use reasonable efforts to operate and maintain the Property in a manner generally consistent with the manner in which Seller has operated and maintained the Property prior to and on the date hereof. As of Closing, all management contracts pertaining to the Property shall have been terminated by Seller. Prior to and as of the Closing, Seller shall cause all vacant units to be made rent-ready and available for occupancy based on standards and methods used by Seller prior to execution of this Agreement and shall cause all appliances in all vacant units to be clean and in working order (the “Appliance Standards”). Buyer shall receive a credit of Seven Hundred Fifty and No/100 Dollars ($750.00) for each unit that became vacant on a date that is five (5) or more business days prior to Closing and that is not rent-ready (as reasonably determined by Buyer based on standards customary in the industry) and available for occupancy as of the day of Closing, provided that such $750.00 shall not include any costs to cause the appliances to meet the Appliance Standards. For purposes of this paragraph, “rent ready” shall mean maintaining the apartments in good condition and repair, including the cleaning, replacement, and repair of all apartment components (such as carpets) reasonably required in Seller’s discretion, considering Seller’s past practices for the Property, to make each apartment ready for re-lease.

(b) Execution of New Leases and Renewals. Seller shall use reasonable efforts to negotiate leases or Lease renewals for unrented apartment units in the Improvements and shall maintain an advertising and marketing program for apartment units in the Improvements consistent with Seller’s past practices at the Property. Unless Buyer agrees otherwise in writing, any new leases or renewals for such apartment units entered into by Seller after the Agreement Date until the Closing or earlier termination of this Agreement shall be on Seller’s standard apartment lease or renewal form for the Property, and shall be for terms of no less than six (6) months and no more than twelve (12) months. Following the Approval Date, no new leases or leases or lease renewals shall be executed by Seller without the prior written consent of Buyer. In all cases, Seller shall retain the discretion to set rent rates, concessions and other terms of occupancy, provided Seller shall only enter into new leases or renewals in the ordinary course of business taking into account Seller’s then-current good faith evaluation of market conditions. Each such new lease or renewal entered into by Seller shall constitute a “Lease” for purposes of this Agreement.

(c) Maintenance of Insurance. Seller shall keep the Improvements insured against loss or damage (including rental loss) by fire and all risks covered by Seller’s insurance that is currently in force, provided that Seller may make adjustments in Seller’s insurance coverage for the Property which are consistent with Seller’s general insurance program for Seller’s other apartment properties as in effect from time to time. Seller shall give Buyer prompt notice of any fire or other casualty affecting the Property.

(d) Enforcement of Existing Leases. Seller shall perform the landlord’s material obligations arising prior to Closing to the tenants under the Leases and enforce the material obligations of the tenants under the Leases, in each case accordance with the current management standards of Seller for its apartment properties, provided that Seller shall not apply any security deposits against rent delinquencies or other Lease defaults with respect to tenants who remain tenants of the Property without notice to and the prior written consent of Buyer. Seller shall terminate and modify Leases in accordance with Seller’s customary practices.

(e) Provide Copies of Notices. Seller shall furnish Buyer with a copy of all written notices received by Seller from any governmental authority of any violation of any law, statute, ordinance, regulation or order of any governmental or public authority relating to the Property within five (5) business days following Seller’s receipt thereof.

(f) No Encumbrances or Actions. Seller shall not sell, mortgage, pledge, hypothecate or otherwise transfer or dispose of all or any part of the Property or any interest therein, nor shall Seller initiate, consent to, approve or otherwise take any action with respect to zoning or any other governmental rules or regulations presently applicable to all or any part of the Property. Seller shall make all payments of principal and interest required under any mortgages encumbering the Property due prior to Closing.

(g) Service Contracts. Without the prior written consent of Buyer, Seller shall not terminate, modify, extend, amend or renew any Service Contract or enter into any new Service Contract except in accordance with Seller’s customary business practices and that will not be cancelable by Buyer without penalty upon no greater than thirty (30) days notice.

(h) Operating Statements and Rent Rolls. Seller shall, upon Buyer’s written request, deliver updated operating statements and rent rolls to Buyer no more frequently than once per month until Closing.

10. Condition of Property. At or before the Approval Date, Buyer will have approved the physical and environmental characteristics and condition of the Property, as well as the economic characteristics of the Property. Buyer hereby waives any and all defects in the physical, environmental and economic characteristics and condition of the Property which would be reasonably disclosed by such inspection. Buyer further acknowledges that neither Seller nor any of Seller’s officers or directors, nor Seller’s employees, agents, representatives, or any other person or entity acting on behalf of Seller (hereafter, for the purpose of this paragraph, such persons and entities are individually and collectively referred to as the “Seller”), except as otherwise expressly provided in paragraph 8(a) herein, have made any representations, warranties or agreements (express or implied) by or on behalf of Seller as to any matters concerning the Property, the economic results to be obtained or predicted, or the present use thereof or the suitability for Buyer’s intended use of the Property, including, without limitation, the following: suitability of the topography; the availability of water rights or utilities; the present and future zoning, subdivision and any and all other land use matters; the condition of the soil, subsoil, or groundwater; the purpose(s) to which the Property is suited; drainage; flooding; access to public roads; or proposed routes of roads or extensions thereof. Buyer acknowledges and agrees that the Property is to be purchased, conveyed and accepted by Buyer in its present condition, “as is” and that no patent or latent defect in the physical or environmental condition of the Property whether or not known or discovered, shall affect the rights of either party hereto. Any documents furnished to Buyer by Seller relating to the Property including, without limitation, rent rolls, service agreements, management contracts, maps, surveys, studies, pro formas, reports and other information, including but not limited to the Due Diligence Items, shall be deemed furnished as a courtesy to Buyer but without warranty from Seller. All work done in connection with preparing the Property for the uses intended by Buyer including any and all fees, studies, reports, approvals, plans, surveys, permits, and any expenses whatsoever necessary or desirable in connection with Buyer’s acquiring, developing, using and/or operating the Property shall be obtained and paid for by, and shall be the sole responsibility of Buyer. Buyer has investigated and has knowledge of operative or proposed governmental laws and regulations including land use laws and regulations to which the Property may be subject and shall acquire the Property upon the basis of its review and determination of the applicability and effect of such laws and regulations. Buyer has neither received nor relied upon any representations concerning such laws and regulations from Seller.

Except for claims of fraud or willful misrepresentation on the part of Seller, and except for those representations and warranties expressly set forth herein, Buyer, on behalf of itself and its employees, agents, successors and assigns attorneys and other representatives, and each of them, hereby releases Seller from and against any and all claims, demands, causes of action, obligations, damages and liabilities of any nature whatsoever, whether alleged under any statute, common law or otherwise, directly or indirectly, arising out of or related to the condition, operation or economic performance of the Property.

By signing in the space provided below in this paragraph 10, Buyer acknowledges that it has read and understood the provisions of this paragraph 10.

BUYER:

GRUBB & ELLIS REALTY INVESTORS, LLC, a Virginia limited liability company
By: /s/ Francene LaPoint
Francene LaPoint
Its: Chief Financial Officer

11. Possession. Buyer shall have the right of possession on the Closing Date, provided, however, that Seller shall allow authorized representatives of Buyer reasonable access to the Property prior to the Closing Date for the purposes of satisfying Buyer with respect to satisfaction of any conditions precedent to the Closing contained herein.

(a) Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to be an adequate and sufficient notice if given in writing and service is made either by (i) personal delivery, in which case the service shall be deemed received the date of such personal delivery, (ii) nationally recognized overnight air courier service, next day delivery, prepaid, in which case the notice shall be deemed to have been received one (1) business day following delivery to such nationally recognized overnight air courier service, or (iii) at the time of being sent by facsimile if delivery thereof is confirmed by sender’s receipt of a transmission report, generated by sender’s facsimile machine, which confirms that the facsimile was successfully transmitted in its entirety and provided the facsimile was forwarded prior to 5:00 p.m. Central, and to the following addresses or facsimile numbers:

If to Seller:

Apartments at Canyon Ridge, LLC c/o Principal Real Estate Investors, LLC 801 Grand Avenue Des Moines, Iowa 50392 Attn: Rick Massa Fax: 866.850.4022 Phone: 515.248.2759

with a copy to:

Principal Real Estate Investors, LLC 801 Grand Avenue Des Moines, Iowa 50392-5590 Attn: Johnna E. Donahue Fax: 866.850.4019 Phone: 515.235.5443 and a copy to:

Thompson Hine LLP 10 West Broad Street, Suite 700 Columbus, Ohio 43215-3435 Attn: Darrel R. Davison Fax: 614.469.3361 Phone: 614.469.3231

If to Buyer:

Grubb & Ellis Realty Investors, LLC
1606 Santa Rosa Road, Suite 109
Richmond, Virginia 23229
Attn: Jorge De Figueiredo
Fax: 804.285.1376
Phone: 804.285.1082

with a copy to:

McGuire Woods LLP
101 West Main Street
Suite 9000
Norfolk, Virginia 23510
Attn: Karen L. Duncan
Fax: 757.640.3958
Phone: 757.640.3725

or such other address as either party may from time to time specify in writing to the other.

(b) Brokers and Finders. Neither party has had any contact or dealings regarding the Property, or any communication in connection with the subject matter of this transaction, through any licensed real estate broker, entity, agent, commission salesperson, or other person who will claim a right to compensation or a commission or finder’s fee as a procuring cause of the sale contemplated herein, except for Colliers International, whose commission shall be paid by Seller. In the event that any company, firm, broker, agent, commission salesperson or finder perfects a claim for a commission or finder’s fee based upon any such contract, dealings or communication, the party through whom the company, firm, broker, agent, commission salesperson or finder makes his claim shall be responsible for said commission or fee and all costs and expenses (including reasonable attorneys’ fees) incurred by the other party in defending against the same. No commission shall be paid or become payable unless the Closing actually occurs. The provisions of this subparagraph (b) shall survive Closing and any termination, cancellation or rescission of this Agreement.

(c) Successors and Assigns. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors, heirs, administrators and assigns and may be assigned by Buyer to an affiliated entity provided that (i) Buyer shall remain jointly and severally liable for the obligations contained in this Agreement; (ii) Buyer and any assignee, by accepting assignment of this Agreement, expressly agrees to defend and indemnify Seller from any litigation arising out of the assignment; (iii) no further assignment shall occur without the prior written consent of Seller; (iv) written notice of the assignment, including the name of the Assignee, is provided to Seller no fewer than five (5) business days prior to Closing; and (v) Buyer shall provide to Seller at Closing an Assignment and Assumption of Real Estate Purchase and Sale Agreement in the form attached hereto as Exhibit F, executed by both Buyer and Assignee (the “Buyer Assignment”).

(d) Amendments and Terminations. Except as otherwise provided herein, this Agreement may be amended or modified by, and only by, a written instrument executed by Seller and Buyer.

(e) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state in which the Property is located.

(f) Merger of Prior Agreements. This Agreement supersedes all prior agreements and understandings between the parties hereto relating to the subject matter hereof.

(g) Enforcement. In the event either party hereto fails to perform any of its obligations under this Agreement or in the event a dispute arises concerning the meaning or interpretation of any provision of this Agreement, the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys’ fees. Buyer and Seller both acknowledge each has been advised by counsel as to their respective rights, duties and obligations in this Agreement and have had ample opportunity to negotiate same. Thus, both Buyer and Seller acknowledge that any ambiguity in this Agreement should not necessarily be resolved against the drafter of this Agreement.

(i) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but such counterparts when taken together shall constitute but one Agreement.

(j) Survivability. Except as otherwise provided herein, the covenants contained in this Agreement shall survive the closing of the purchase and sale and shall not be deemed merged in the Deed, but shall remain in full force and effect.

(k) No Recordation. Neither Seller nor Buyer shall record this Agreement or memorandum thereof in or among the land or chattel records of any jurisdiction. The foregoing shall not affect Buyer’s ability to exercise the remedy of specific performance pursuant to Section 2(d) hereof.

(l) Proper Execution. The submission by Seller to Buyer of this Agreement in unsigned form shall have no binding force and effect, shall not constitute an option, and shall not confer any rights upon Buyer or impose any obligations on Seller irrespective of any reliance thereon, change of position or partial performance until Seller shall have executed this Agreement and the Deposit shall have been received by the Title Company.

(m) Computation of Time. The time in which any act is to be done under this Agreement is computed by excluding the first day, and including the last day, unless the last day is a holiday or Saturday or Sunday, and then that day is also excluded. Unless expressly indicated otherwise, (a) all references to time shall be deemed to refer to Central time, and (b) all time periods shall expire at 5:00 p.m. Central time.

(n) Tax-Deferred Exchange. Buyer and Seller agree that, at either Buyer’s or Seller’s sole election, this transaction shall be structured as an exchange of like-kind properties under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations and proposed regulations thereunder. The parties agree that if either wishes to make such election, it must do so prior to the Closing Date. If either so elects, the other shall reasonably cooperate, provided any such exchange is consummated pursuant to an agreement that is mutually acceptable to Buyer and Seller and which shall be executed and delivered on or before the Closing Date. The electing party shall in all events be responsible for all costs and expenses related to the Section 1031 exchange and shall fully indemnify, defend and hold the other harmless from and against any and all liability, claims, damages, expenses (including reasonable attorneys’ and paralegal fees and reasonable attorneys’ and paralegal fees on appeal), proceedings and causes of action of any kind or nature whatsoever arising out of, connected with or in any manner related to such 1031 exchange that would not have been incurred by the non-electing party if the transaction were a purchase for cash. The provisions of the immediately preceding sentence shall survive closing and the transfer of title to subject Property to Buyer. Notwithstanding anything to the contrary contained in this paragraph: any such Section 1031 exchange shall be consummated through the use of a facilitator or intermediary so that Buyer shall in no event be requested or required to acquire title to any property other than the Property.

(o) No Beneficiary. Nothing in this Agreement, expressed or implied, is intended to confer any right, remedy or benefit upon any person other than the parties hereto and, subject to any restrictions on assignment contained herein, their respective successors and assigns.

(p) Limitation of Liability. The liability of Principal Life Insurance Company hereunder is limited to the assets of its Principal U.S. Property Separate Account.

(q) No Disclosure. Except as may be required by law, without the prior written consent of the other party, neither party shall disclose to any third party the terms of this Agreement (including, without limitation, purchase price). The provisions of this subsection (q) shall survive Closing.

(r) Buyer Indemnification. Buyer hereby agrees, as of the Closing Date, to indemnify, defend and hold Seller harmless from and against any and all Losses which Seller may suffer, incur or be obligated to perform as a result of Buyer or its assignee converting the form of ownership of the Real Property to a condominium form of ownership within five (5) years after the Closing Date and subsequently selling residential condominium units in connection therewith, whether or not any of such Losses are as a result of claims instituted by condominium unit owners, contract vendees of condominium units, any condominium association or any other party and whether or not such Losses relate to the construction of the Property or any other matter whatsoever. In the event Buyer commences the conversion of the form of ownership of the Real Property to a condominium form of ownership within five (5) years after the Closing Date, Buyer covenants and agrees to maintain a minimum net worth of at least One Million and 00/100 Dollars ($1,000,000.00) for the remainder of such five (5) year period.

(s) Permitted Assignments. Seller shall not assign any of its right, title, claim or interest in, to or under this Agreement. Buyer may assign any or all of its rights and obligations under this Agreement to any one or more persons or entities upon notice to Seller; provided, however, that absent the express agreement of Seller, no such assignment shall release Buyer from its liabilities hereunder. Buyer may not assign this Agreement except (a) to a Permitted Assignee (as defined below), or (b) to a Registered Company (as defined below), provided that Buyer and the Permitted Assignee or Registered Company, as applicable, execute the Buyer Assignment. A “Permitted Assignee” shall mean any entity directly or indirectly owned or controlled by Buyer or under common control with Buyer or Buyer’s principals. A “Registered Company” shall mean a publicly registered company or the subsidiary of a publicly registered company that is managed by, sponsored by or under common control with Buyer or Buyer’s principals. No assignment shall release the obligations of Buyer named herein for any obligation under this Agreement prior to the date of assignment, including but not limited to any such obligation which survives Closing. Seller acknowledges that Buyer shall have the right, without assigning this Agreement, to cause Seller to grant title to the Property to up to thirty-five (35) tenants-in-common (the “Nominees”) in lieu of granting title to the Property to Buyer, provided that (i) Buyer notifies Seller, in writing, at least ten (10) days prior to the Closing Date that Buyer wishes to cause Seller to grant title to the Property to the Nominees, along with the names of the Nominees and any other information reasonably required by Seller to prepare and complete the Deed and any other closing documents to reflect the vesting of title to the Property in the Nominees, (ii) there is no additional cost, liability or expense incurred by Seller in connection therewith, (iii) the Closing Date is not delayed in connection therewith, and (iv) Buyer agrees to and hereby does indemnify and hold Seller harmless from and against any and all liability, damage, and cost, including reasonably attorneys’ fees, incurred by Seller by virtue of Seller’s granting of title to the Property to the Nominees. Seller further acknowledges that it has been advised that Buyer may assign this Agreement to a publicly registered company or the subsidiary of a Registered Company and that in such event the assignee will be 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”) and the current fiscal year through the date of acquisition (the “Stub Period”) for the Property. To assist the assignee in preparing the SEC Filings, Seller agrees to provide assignee with the following: (i) rent roll as of the end of the Audited Year and Stub Period, (ii) operating statements for the Audited Year and Stub Period (iii) cash receipts schedule for each month in the Audited Year and Stub Period, (iv) access to invoices for expenses and capital improvements in the Audited Year and Stub Period, (v) check register for the three (3) months following the Audited Year and Stub Period, (vi) copies of the Leases, (vii) copies of accounts receivable aging as of the end of the Audited Year and Stub Period along with an explanation for all accounts over thirty (30) days past due as of the end of the Audited Year and Stub Period, and (vi) an executed representation letter in the form attached hereto as Exhibit N one (1) business day prior to the Closing Date. The provisions of the foregoing two (2) sentences shall survive Closing.

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

SELLER:

APARTMENTS AT CANYON RIDGE, LLC, a Delaware limited liability company
By: PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company,
its authorized signatory
By: /s/ Johnna Donahue
Johnna E. Donahue
Senior Acquisition Consultant
By: /s/ Donna H. Lutcavish
Donna H. Lutcavish
Assistant Managing Director Equity Closing

BUYER:

GRUBB & ELLIS REALTY INVESTORS, LLC, a Virginia limited liability company
By: /s/ Francene LaPoint
Francene LaPoint
Its: Chief Financial Officer

THIS FIRST AMENDMENT TO REAL ESTATE PURCHASE AND SALE AGREEMENT (this “Amendment”) is made as of this 15th day of August, 2008, by and between APARTMENTS AT CANYON RIDGE, LLC, a Delaware limited liability company (“Seller”), and GRUBB & ELLIS REALTY INVESTORS, LLC, a Virginia limited liability company (“Buyer”).

WHEREAS, Seller and Buyer have previously executed that certain Real Estate Purchase and Sale Agreement dated as of July 10, 2008 (the “Agreement”), regarding certain real property commonly known as Canyon Ridge Apartments, 3868 Central Pike Road, Hermitage, Tennessee and more particularly described as set forth in Exhibit A thereto; and

WHEREAS, Seller and Buyer have agreed to make certain modifications to the Agreement.

NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, effective on the date first set forth above, the parties agree to the foregoing recitals and as follows:

The Closing Date (as defined in paragraph 7(a) of the Agreement) is hereby amended to be September 15, 2008.

Within two (2) business days of the date of this Amendment, (i) Buyer shall deposit with Seller an additional non-refundable deposit in the amount of One Million Two Hundred Seventy-nine Thousand and 00/100 Dollars ($1,279,000.00) by wire transfer of immediately available funds in U.S. dollars via the federal bank wire transfer system and (ii) the Title Company shall disburse the existing Deposit, in the amount of Seven Hundred Twenty-one Thousand and 00/100 Dollars ($721,000.00), to Seller.

Unless otherwise defined in this Amendment, the defined terms used herein shall have the meanings defined in the Agreement.

Except as modified by the terms of this Amendment, the Agreement shall remain in full force and effect.

This Amendment may be executed in multiple counterparts via facsimile or other electronic means via e-mail, each of which shall constitute an original, but all of which together shall constitute but one instrument.

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

SELLER:

APARTMENTS AT CANYON RIDGE, LLC, a Delaware limited liability company
By: PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company,
its authorized signatory
By: /s/ Johnna Donahue
Johnna E. Donahue
Senior Acquisition Consultant
By: /s/ Cara A. Underwood
Cara A. Underwood
Investment Director-Asset Management

BUYER:

GRUBB & ELLIS REALTY INVESTORS, LLC, a Virginia limited liability company
By: /s/ Jeff Hanson
Its: President & CIO

THIS ASSIGNMENT AND ASSUMPTION OF REAL ESTATE PURCHASE AND SALE AGREEMENT (this “Assignment”) is made and entered into this 15th day of September, 2008, by and between GRUBB & ELLIS REALTY INVESTORS, LLC, a Virginia limited liability company (“Assignor”), and G&E Apartment REIT Canyon Ridge, LLC, a Delaware limited liability company, (“Assignee”).

WHEREAS, Assignor entered into that certain Real Estate Purchase and Sale Agreement dated as of July 10, 2008 (“Purchase Agreement”) for that certain real property known as Apartments at Canyon Ridge, 3868 Central Pike Road, Hermitage, Tennessee, with Apartments at Canyon Ridge, LLC, a Delaware limited liability company (“Seller”), and

WHEREAS, Assignor wishes to assign to Assignee its rights pursuant to the Purchase Agreement, relating to the purchase of that certain real property, with all improvements and appurtenances thereto more particularly described in the Purchase Agreement.

NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor hereby assigns to Assignee all of Assignor’s right, title and interest in and to the Purchase Agreement in order to expressly confer upon Assignee all of the benefits of a successor, assign or nominee of Assignor under the Purchase Agreement.

Nothing in this Assignment shall be deemed to release Assignor from being directly liable to Seller under the Purchase Agreement.

By executing this Assignment, Assignee hereby accepts the assignment of and assumes the obligations set forth in the Purchase Agreement, as aforesaid.

Assignor will indemnify, defend and hold harmless Seller for any damages, including reasonable attorneys fees and litigation costs from any suit, claim, demand or proceeding arising out of the Assignment or by a breach of this Assignment.

Assignor hereby covenants and warrants to Seller that Assignee is the only assignee of the Purchase Agreement and Assignee hereby covenants and warrants to Seller that Assignee (i) is in good standing under the laws of the State in which the Property is located; (ii) all documents executed by Assignee which are to be delivered to Seller at Closing are or at the Closing will be duly authorized, executed, and delivered by Assignee, and are or at the Closing will be legal, valid, and binding obligations of Assignee, and do not and at the Closing will not violate any provisions of any agreement to which Assignee is a party or to which it is subject; (iii) Assignee shall furnish all of the funds for the purchase of the Property (other than funds supplied by institutional lenders which will hold valid mortgage liens against the Property) and such funds will not be from sources of funds or properties derived from any unlawful activity; and (iv) Assignee is a sophisticated investor with substantial experience in investing in assets of the same type as the Property and has such knowledge and experience in financial and business matters that Assignee is capable of evaluating the merits and risks of an investment in the Property.

This Assignment shall be governed by, and construed in accordance with, the laws of the State of Tennessee. This Assignment may be executed in counterparts, including facsimile counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment to be executed as of the date and year first set forth herein.

ASSIGNOR

GRUBB & ELLIS REALTY INVESTORS, LLC, a Virginia limited liability company
By: /s/ Gus G. Remppies
Its:

ASSIGNEE

G&E APARTMENT REIT CANYON RIDGE, LLC, a Delaware limited liability company
By: /s/ Gus G. Remppies
Its:

Consented to by Seller:

APARTMENTS AT CANYON RIDGE, LLC, a Delaware limited liability company
By: PRINCIPAL REAL ESTATE
INVESTORS, LLC, a Delaware limited
liability company, its authorized
signatory
By: /s/ Johnna Donahue
Johnna E. Donahue
Senior Acquisition Consultant
By: /s/ Cara A. Underwood
Cara A. Underwood
Investment Director-Asset Management

FOR VALUE RECEIVED, the undersigned (together with such party’s or parties’ successors and assigns, “Borrower”), jointly and severally (if more than one) promises to pay to the order of CAPMARK BANK, a Utah industrial bank the principal sum of Twenty-Four Million and 00/100 Dollars (US $24,000,000.00), with interest on the unpaid principal balance as hereinafter provided.

"Adjustable Interest Rate” means the variable annual interest rate calculated for each Interest Adjustment Period so as to equal the Index Rate for such Interest Adjustment Period (truncated at the fifth (5^th) decimal place if necessary) plus the Margin. However, in no event will the Adjustable Interest Rate exceed the Capped Interest Rate.

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

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

"Business Day” means any day other than a Saturday, a Sunday or any other day on which Lender or the national banking associations are not open for business.

"Capped Interest Rate” means six and seventy-five hundredths percent (6.75%) per annum.

"Default Rate” means a variable annual interest rate equal to four (4) percentage points above the Adjustable Interest Rate in effect from time to time. However, at no time will the Default Rate exceed the Maximum Interest Rate.

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

"Installment Due Date” means, for any monthly installment of interest only or principal and interest, the date on which such monthly installment is due and payable pursuant to Section 3 of this Note. The “First Installment Due Date” under this Note is November 1, 2008.

"Interest Adjustment Period” means each successive one (1) calendar month period until the entire Indebtedness is paid in full, except that the first Interest Adjustment Period is the period from the date of this Note through September 30, 2008. Therefore, the second Interest Adjustment Period shall be the period from October 1, 2008 through October 31, 2008, and so on until the entire Indebtedness is paid in full.

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

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

"Lockout Period” is not applicable, there is no Lockout Period under this Note.

"Margin” means two hundred forty-one (241) percentage points (241 basis points).

"Maturity Date” means the earlier of (i) October 1, 2015 (the “Scheduled Maturity Date”), and (ii) the date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise pursuant to the Loan Documents or the exercise by Lender of any right or remedy under any Loan Document.

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

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

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

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

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

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

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

"Window Period” means the three (3) consecutive calendar month period prior to the Scheduled Maturity Date.

"Yield Maintenance Period” is not applicable, there is no Yield Maintenance Period under this Note.

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

2. Address for Payment. All payments due under this Note shall be payable at c/o Capmark Finance Inc., 116 Welsh Road, Horsham, Pennsylvania 19044, Attn: Servicing — Account Manager, or such other place as may be designated by Notice to Borrower from or on behalf of Lender.

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

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

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

(d)

(i) Beginning on the First Installment Due Date, and continuing until and including the monthly installment due on October 1, 2013, accrued interest only shall be payable by Borrower in consecutive monthly installments due and payable on the first day of each calendar month. The amount of the monthly installment of interest only payable pursuant to this Section 3(d)(i) on an Installment Due Date shall equal the product of (A) annual interest on the unpaid principal balance of this Note as of the first day of the Interest Adjustment Period immediately preceding the Installment Due Date at the Adjustable Interest Rate in effect for such Interest Adjustment Period, divided by 360, multiplied by (B) the number of days in such Interest Adjustment Period.

(ii)

Beginning on November 1, 2013, and continuing until and including the monthly installment due on the Maturity Date, principal and accrued interest shall be payable by Borrower in consecutive monthly installments due and payable on the first day of each calendar month. The amount of the monthly installment of principal and interest payable pursuant to this Section 3(d)(ii) on an Installment Due Date shall be calculated so as to equal the monthly payment amount which would be payable on the Installment Due Date as if the unpaid principal balance of this Note as of the first day of the Interest Adjustment Period immediately preceding the Installment Due Date was to be fully amortized, together with interest thereon at the Adjustable Interest Rate in effect for such Interest Adjustment Period, in equal consecutive monthly payments paid on the first day of each calendar month over the Remaining Amortization Period.

(e) All remaining Indebtedness, including all principal and interest, shall be due and payable by Borrower on the Maturity Date.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(i)

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

(ii)

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

(iii)

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

(iv)

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

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

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

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

(i)

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

(iii)

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

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

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

(i)

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

(ii)

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

(iii)

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

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

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

(b) Borrower may not voluntarily prepay any portion of the principal balance of this Note during the Lockout Period, if a Lockout Period is applicable to this Note. However, if any portion of the principal balance of this Note is prepaid during the Lockout Period by reason of the application by Lender of any proceeds of collateral or other security to any portion of the unpaid principal balance of this Note or following a determination that the prohibition on voluntary prepayments during the Lockout Period is in contravention of applicable law, then Borrower must also pay to Lender upon demand by Lender, a prepayment premium equal to five percent (5.0%) of the amount of principal being prepaid.

(c) Following the end of the Lockout Period, Borrower may voluntarily prepay all of the unpaid principal balance of this Note on an Installment Due Date so long as Borrower designates the date for such prepayment in a Notice from Borrower to Lender given at least 30 days prior to the date of such prepayment. If an Installment Due Date (as defined in Section 1(a)) falls on a day which is not a Business Day, then with respect to payments made under this Section 10 only, the term “Installment Due Date” shall mean the Business Day immediately preceding the scheduled Installment Due Date.

(d) Notwithstanding subsection (c) above, Borrower may voluntarily prepay all of the unpaid principal balance of this Note on a Business Day other than an Installment Due Date if Borrower provides Lender with the Notice set forth in subsection (c) and meets the other requirements set forth in this subsection. Borrower acknowledges that Lender has agreed that Borrower may prepay principal on a Business Day other than an Installment Due Date only because Lender shall deem any prepayment received by Lender on any day other than an Installment Due Date to have been received on the Installment Due Date immediately following such prepayment and Borrower shall be responsible for all interest that would have been due if the prepayment had actually been made on the Installment Due Date immediately following such prepayment.

(e) Unless otherwise expressly provided in the Loan Documents, Borrower may not voluntarily prepay less than all of the unpaid principal balance of this Note. In order to voluntarily prepay all or any part of the principal of this Note, Borrower must also pay to Lender, together with the amount of principal being prepaid, (i) all accrued and unpaid interest due under this Note, plus (ii) all other sums due to Lender at the time of such prepayment, plus (iii) any prepayment premium calculated pursuant to Section 10(f).

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

(i)

5.0% of the amount of principal being prepaid if the prepayment occurs prior to the twelfth (12th) Installment Due Date under this Note; or

(ii)

4.0% of the amount of principal being prepaid if the prepayment occurs on or after the twelfth (12th) Installment Due Date under this Note and prior to the twenty-fourth (24th) Installment Due Date under this Note; or

(iii)

3.0% of the amount of principal being prepaid if the prepayment occurs on or after the twenty-fourth (24th) Installment Due Date under this Note and prior to the thirty-sixth (36th) Installment Due Date under this Note; or

(iv)

2.0% of the amount of principal being prepaid if the prepayment occurs on or after the thirty-sixth (36th) Installment Due Date under this Note and prior to the forty-eighth (48th) Installment Due Date under this Note; or

(v)

1.0% of the amount of principal being prepaid if the prepayment occurs on or after the forty-eighth (48th) Installment Due Date under this Note.

(g) Notwithstanding any other provision of this Section 10, no prepayment premium shall be payable with respect to (i) any prepayment made during the Window Period, or (ii) any prepayment occurring as a result of the application of any insurance proceeds or condemnation award under the Security Instrument, or (iii) any prepayment of the entire principal balance of this Note that occurs on or after the sixtieth (60th) Installment Due Date under this Note with the proceeds of a fixed interest rate or fixed-to-float interest rate mortgage loan that is the subject of a binding commitment for purchase between the Freddie Mac and a Freddie Mac-approved Program Plusâ Seller/Servicer.

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

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

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

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

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

14. Loan Charges. Neither this Note nor any of the other Loan Documents shall be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate greater than the Maximum Interest Rate. If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation. The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the unpaid principal balance of this Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of this Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of this Note.

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

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

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

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

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

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

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

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

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

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

Edwin C. Cox, Esquire
Troutman Sanders LLP
P.O. Box 1122
Richmond, Virginia 23218-1122

MULTIFAMILY DEED OF TRUST,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
(Including Fixture Filing)

Maximum Principal Indebtedness for Tennessee
Recording Tax Purposes is $24,000,000.00.

MULTIFAMILY DEED OF TRUST,
ASSIGNMENT OF RENTS AND
SECURITY AGREEMENT
(TENNESSEE – REVISION DATE 10-18-2007)

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the “Instrument”) is made as of this 15th day of September, 2008, among G&E APARTMENT REIT CANYON RIDGE, LLC, a limited liability company organized and existing under the laws of Delaware, whose address is c/o Grubb & Ellis Realty Investors, LLC, 1606 Santa Rosa Road, Suite 109, Richmond, Virginia 23229, as grantor (“Borrower”), to MID-SOUTH TITLE CORP., as trustee, a resident of Shelby County, Tennessee, whose address is 6363 Poplar Ave., Suite 208, Memphis, Tennessee (“Trustee”), for the benefit of CAPMARK BANK, an industrial bank organized and existing under the laws of Utah, whose address is 6955 Union Park Center, Suite 330, Midvale, Utah 84047, Attn: President, as beneficiary (“Lender”). Borrower’s organizational identification number, if applicable, is 4587727.

This Instrument covers property which is or may become so affixed to real property as to become fixtures and also constitutes a fixture filing under § 47-9-502 of Tennessee Code Annotated. NOTICE PURSUANT TO § 47-28-104 OF TENNESSEE CODE ANNOTATED. This Instrument secures obligatory advances for “commercial purposes” as such terms are defined in §§ 47-28-103 and 47-28-104 of Tennessee Code Annotated.

Borrower, in consideration of the Indebtedness and the trust created by this Instrument, irrevocably grants, conveys, bargains, sells, confirms and assigns to Trustee, in trust, with power of sale, the Mortgaged Property, including the Land located in the County of Davidson, State of Tennessee and described in Exhibit A attached to this Instrument.

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 October 1, 2015 (the "Maturity Date”), in the principal amount of $24,000,000.00, 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 represents and warrants that Borrower is lawfully seized of the Mortgaged Property and has the right, power and authority to grant, convey and assign the Mortgaged Property, and that the Mortgaged Property is unencumbered except as shown on the schedule of exceptions to coverage in the title policy issued to and accepted by Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender’s interest in the Mortgaged Property (the "Schedule of Title Exceptions”). Borrower covenants that Borrower will warrant and defend generally the title to the Mortgaged Property against all claims and demands, subject to any easements and restrictions listed in the Schedule of Title Exceptions.

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

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

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

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

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

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

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

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

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

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

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

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

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

(m) "Hazardous Materials Laws” means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future and including all amendments, that relate to Hazardous Materials or the protection of human health or the environment and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101 et seq., and their state analogs.

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

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

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

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

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

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

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

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

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

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

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

(v)

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

(vi)

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

(vii)

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

(viii)

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

(ix)

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

(xi)

all earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the loan secured by this Instrument;

(xiii)

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

(xiv)

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

(xv)

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

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

(i)

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

(ii)

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

(iii)

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

(v)

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

(vi)

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


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

(dd) "Rents” means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due, or to become due, and deposits forfeited by tenants, and, if Borrower is a cooperative housing corporation or association, maintenance fees, charges or assessments payable by shareholders or residents under proprietary leases or occupancy agreements, whether now due, past due, or to become due.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(e) Borrower shall, promptly upon Lender’s request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least six months and not more than two years, and shall not include options to purchase.

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

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

(h) If Borrower is a cooperative housing corporation or association, notwithstanding anything to the contrary contained in this subsection or in Section 21, so long as Borrower remains a cooperative housing corporation or association and is not in breach of any covenant of this Instrument, Lender hereby consents to:

(i)

the execution of leases of apartments for a term in excess of two years from Borrower to a tenant shareholder of Borrower, so long as such leases, including proprietary leases, are and will remain subordinate to the lien of this Instrument; and

(ii)

the surrender or termination of such leases of apartments where the surrendered or terminated lease is immediately replaced or where the Borrower makes its best efforts to secure such immediate replacement by a newly executed lease of the same apartment to a tenant shareholder of the Borrower. However, no consent is hereby given by Lender to any execution, surrender, termination or assignment of a lease under terms that would waive or reduce the obligation of the resulting tenant shareholder under such lease to pay cooperative assessments in full when due or the obligation of the former tenant shareholder to pay any unpaid portion of such assessments.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(a) Borrower shall comply with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, disability accommodation, zoning and land use, and Leases. Borrower also shall comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits.

(b) Borrower shall at all times maintain records sufficient to demonstrate compliance with the provisions of this Section 10.

(c) 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.

(d) Borrower shall at all times comply with all laws, regulations and requirements of any Governmental Authority relating to Borrower’s formation, continued existence and good standing in the Property Jurisdiction. Borrower shall at all times comply with its organizational documents, including but not limited to its partnership agreement (if Borrower is a partnership), its by-laws (if Borrower is a corporation or housing cooperative corporation or association) or its operating agreement (if Borrower is an limited liability company, joint venture or tenancy-in-common ). If Borrower is a housing cooperative corporation or association, Borrower shall at all times maintain its status as a “cooperative housing corporation” as such term is defined in Section 216(b) of the Internal revenue Code of 1986, as amended, or any successor statute thereto.

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

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

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

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

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

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

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

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

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

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

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

(i)

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

(ii)

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

(iii)

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

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

(i)

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

(ii)

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

(iii)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(h) If Borrower is a housing cooperative corporation or association, until the Indebtedness is paid in full Borrower shall not reduce the maintenance fees, charges or assessments payable by shareholders or residents under proprietary leases or occupancy agreements below a level which is sufficient to pay all expenses of the Borrower, including, without limitation, all operating and other expenses for the Mortgaged Property and all payments due pursuant to the terms of the Note and any Loan Documents.

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

(i)

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

(ii)

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

(iii)

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

(iv)

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

(v)

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

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

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

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

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

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

(i)

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

(ii)

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

(iii)

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

(iv)

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

(v)

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

(vi)

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

(vii)

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

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

(ii)

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

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

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

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

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

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

(i)

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

(ii)

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

(iii)

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

(iv)

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

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

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

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

(iii)

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

(iv)

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

(v)

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

(vi)

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

(vii)

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

(i)

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

(ii)

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

(iii)

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

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

(a) Borrower shall keep the Improvements insured at all times against such hazards as Lender may from time to time require, which insurance shall include but not be limited to coverage against loss by fire, windstorm and allied perils, general boiler and machinery coverage, and business interruption including loss of rental value insurance for the Mortgaged Property with extra expense insurance. If Lender so requires, such insurance shall also include sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to applicable zoning or land use laws, building ordinance or law coverage. In the event any updated reports or other documentation are reasonably required by Lender in order to determine whether such additional insurance is necessary or prudent, Borrower shall pay for all such documentation at its sole cost and expense. Borrower acknowledges and agrees that Lender’s insurance requirements may change from time to time throughout the term of the Indebtedness. If any of the Improvements is located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as an area having special flood hazards, Borrower shall insure such Improvements against loss by flood. All insurance required pursuant to this Section 19(a) shall be referred to as "Hazard Insurance.” All policies of Hazard Insurance must include a non-contributing, non-reporting mortgagee clause in favor of, and in a form approved by, Lender.

(b) All premiums on insurance policies required under this Section 19 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. Borrower shall deliver to Lender a legible copy of each insurance policy (or duplicate original) and Borrower shall promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies and all receipts for paid premiums. At least 5 days prior to the expiration date of any insurance policy, Borrower shall deliver to Lender evidence acceptable to Lender that the policy has been renewed. If Borrower has not delivered a legible copy of each renewal policy (or a duplicate original) prior to the expiration date of any insurance policy, Borrower shall deliver a legible copy of each renewal policy (or a duplicate original) in a form satisfactory to Lender within 120 days after the expiration date of the original policy.

(c) Borrower shall maintain at all times commercial general liability insurance, workers’ compensation insurance and such other liability, errors and omissions and fidelity insurance coverages as Lender may from time to time require. All policies for general liability insurance must contain a standard additional insured provision, in favor of, and in a form approved by, Lender.

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

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

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

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

(i)

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

(ii)

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

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

(i)

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

(ii)

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

(iii)

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

(iv)

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

(v)

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

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

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

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

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

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

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

(i)

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

(ii)

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

(iii)

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

(iv)

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

(v)

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

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

(i)

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

(ii)

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

(iii)

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

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

(iii)

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

(iv)

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

(v)

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

(vi)

if Borrower is a housing cooperative corporation or association, the Transfer of more than 49 percent of the shares in the housing cooperative or the assignment of more than 49 percent of the occupancy agreements or leases relating thereto by tenant shareholders of the housing cooperative or association to other tenant shareholders; and

(vii)

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

(A)

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

(B)

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

(C)

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

(D)

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

(E)

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

(F)

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

(1)

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

(2)

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

(3)

Either directly or indirectly, [See Exhibit B] shall retain at all times a managing interest in the Borrower.

(4)

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

(5)

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

(6)

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

(7)

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

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

(i)

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

(ii)

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

(iii)

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

(iv)

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

(v)

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

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

(i)

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

(ii)

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

(iii)

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

(iv)

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

(v)

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

(vi)

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

(vii)

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

(viii)

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

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

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

(i)

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

(iii)

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

(iv)

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

(v)

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

(vi)

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

(vii)

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

(B)

a transfer fee in an amount equal to 1 percent of the unpaid principal balance of the Indebtedness immediately before the applicable Transfer; and

(C)

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

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

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

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

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

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

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

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

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

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

(l) any representations and warranties by Borrower in this Instrument which is false or misleading in any material respect.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

41. SUBROGATION. If, and to the extent that, the proceeds of the loan evidenced by the Note, or subsequent advances under Section 12, are used to pay, satisfy or discharge a Prior Lien, such loan proceeds or advances shall be deemed to have been advanced by Lender at Borrower’s request, and Lender shall automatically, and without further action on its part, be subrogated to the rights, including lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

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

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

(i)

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

(ii)

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

(iii)

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

(iv)

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

(v)

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

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

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

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

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

43. ACCELERATION; REMEDIES. At any time during the existence of an Event of Default, Lender, at Lender’s option, may declare the Indebtedness to be immediately due and payable without further demand and Lender shall have the STATUTORY POWER OF SALE and any other remedies permitted by applicable 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 through the Trustee without prior judicial hearing. Borrower has the right to bring an action to assert the non-existence of an Event of Default or any other defense of Borrower to acceleration and sale. 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, Trustee shall give notice of sale by public advertisement for the time and in the manner provided by the laws of Tennessee, and Lender or Trustee shall mail a copy of the notice of sale to Borrower in the manner provided in Section 31 of this Instrument. Trustee, without demand on Borrower, shall sell the Mortgaged Property at the time and under the terms designated in the notice of sale at public auction to the highest bidder, in one or more parcels and in such order as Trustee may determine. Trustee may postpone sale of all or any part of the Mortgaged Property by public announcement at the time and place of any previously scheduled sale. Lender or Lender’s designee may purchase the Mortgaged Property at any sale.

Trustee shall deliver to the purchaser at the sale, within a reasonable time after the sale, a deed conveying the Mortgaged Property so sold without any covenant or warranty, express or implied. The recitals in Trustee’s deed shall be prima facie evidence of the truth of the statements made therein. Trustee shall apply the proceeds of the sale in the following order: (a) to all costs and expenses of the sale, including Trustee’s fees not to exceed 5% of the gross sales price, attorneys’ fees and costs of title evidence; (b) to the Indebtedness in such order as Lender, in Lender’s sole discretion, directs; and (c) the excess, if any, to the person or persons legally entitled thereto.

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

45. SUBSTITUTE TRUSTEE. Lender, at Lender’s option, may from time to time remove Trustee and appoint a successor trustee to any Trustee appointed hereunder by an instrument recorded in the county in which this Instrument is recorded. Without conveyance of the Mortgaged Property, the successor trustee shall succeed to all the title, power and duties conferred upon the Trustee herein and by applicable law.

46. NO CONSENT TO SENIOR LIENS. Lender has not consented and will not consent to any contract or to any work or to the furnishing of any materials which might be deemed to create a lien or liens superior to the lien of this Instrument, either under § 66-11-108 of Tennessee Code Annotated, or otherwise.

47. WAIVER OF TRUSTEE’S BOND. Borrower waives the necessity of the Trustee appointed hereunder, or any successor in trust, making oath or giving bond.

48. WAIVER OF HOMESTEAD, DOWER, CURTESY AND REDEMPTION. Borrower waives all right of homestead exemption in and equitable and statutory redemption of the Mortgaged Property, and Borrower relinquishes all right of dower and curtesy in the Mortgaged Property.

49. 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.

On this 11th day of September, 2008, before me personally appeared Gus G. Remppies, Authorized Signatory of G&E Apartment Reit Canyon Ridge, LLC, a Delaware limited liability company, to me

known to be the person who executed the foregoing instrument on behalf of said limited liability company and acknowledged the execution of the same to be the free act and deed of said limited liability company. Witness my hand and official seal.

GUARANTY
MULTISTATE
(for use in all Property jurisdictions except California)
REVISION DATE 05/06/2005

This Guaranty (“Guaranty”) is entered into to be effective as of September 15, 2008, by the undersigned person(s) (the “Guarantor” jointly and severally if more than one), for the benefit of CAPMARK BANK, a Utah industrial bank (the “Lender”).

A. G&E Apartment REIT Canyon Ridge, LLC, a Delaware limited liability company (the “Borrower”) has requested that Lender make a loan to Borrower in the amount of $24,000,000.00 (the “Loan”). The Loan will be evidenced by a Multifamily Note from Borrower to Lender dated effective as of the effective date of this Guaranty (the “Note”). The Note will be secured by a Multifamily Mortgage, Deed of Trust, or Deed to Secure Debt dated effective as of the effective date of the Note (the "Security Instrument”), encumbering the Mortgaged Property described in the Security Instrument.

B. As a condition to making the Loan to Borrower, Lender requires that the Guarantor execute this Guaranty.

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

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

(a) Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender:

(i)

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

(A)

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

(B)

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

(C)

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

(ii)

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

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

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

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

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

(i)

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

(ii)

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

(iii)

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

(ii)

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

(iii)

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

(iv)

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

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

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

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

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

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

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

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

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

(i)

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

(ii)

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

(iii)

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

(iv)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

18. STATE-SPECIFIC PROVISIONS: Guarantor waives the benefit of O.C.G.A. Section 10-7-24.

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

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

On this 11th day of September, 2008, before me personally appeared Gus G. Remppies, Authorized Signatory of Grubb & Ellis Apartment Reit, Inc., a Maryland corporation, to me known to be the

person who executed the foregoing instrument on behalf of said corporation and acknowledged the execution of the same to be the free act and deed of said corporation. Witness my hand and official seal.


Name:		Grubb & Ellis Apartment REIT, Inc.
Address:		c/o Grubb & Ellis Realty Investors, LLC
		1606 Santa Rosa Road, Suite 109
		Richmond, Virginia 23229

THIS FOURTH AMENDMENT TO AND WAIVER OF LOAN AGREEMENT (this “Amendment”), executed and delivered as of September 15, 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, by that certain Second Amendment to and Waiver of Loan Agreement dated as of March 31, 2008 and by that certain Third Amendment to and Waiver of Loan Agreement dated as of June 26, 2008 (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 $16,000,000.00, as evidenced by that certain Amended and Restated Promissory Note dated as of March 31, 2008 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, LP (formerly known as NNN Apartment REIT Holdings, L.P.), a multi-family property known as Canyon Ridge Apartments, located in Nashville, Tennessee, which property will be owned by G&E Apartment REIT Canyon Ridge, LLC, a Delaware limited liability company (the “New Property Owner”). The Company has requested an Advance under the Loan Agreement to finance, in part, the Proposed Acquisition. The Company has also requested an extension of the maturity date of the credit facilities extended pursuant to the Credit Agreement. The Lender has agreed to make such Advance, to agree to such extension, and to continue to make available to the Company the credit facilities provided for in the Loan Agreement, subject to and 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) Paragraph 7(c) of the Loan Agreement is hereby amended by adding the following proviso to the end thereof immediately preceding the period at the end of the sentence:

“; provided further, that notwithstanding the foregoing prohibition, the Company shall be permitted to incur Indebtedness from time to time in the form of a limited guaranty of any Property Owner’s obligations under its Property Loan in favor of the lender thereof, with respect to any Property the acquisition of which is financed in part with the proceeds of an Advance hereunder, so long as (i) the Company’s obligations thereunder are limited to guaranteeing the recourse obligations and the environmental liabilities of such Property Owner under such Property Loan and liabilities arising from a voluntary bankruptcy or the bankruptcy of an Affiliate, and (ii) such guaranty is otherwise in form and content acceptable to the Lender”

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

“9(l) Acknowledgments and Agreements Regarding Canyon Ridge Property Loan and Pledge of Equity Interests in G&E Apartment REIT Canyon Ridge, LLC. The parties hereto agree and acknowledge that: (i) the Canyon Ridge Property Loan is being made to G&E Apartment REIT Canyon Ridge, LLC by Capmark Bank, (ii) Capmark Bank intends to sell the Canyon Ridge Property Loan to Freddie Mac, 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 Canyon Ridge, 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 Canyon Ridge, LLC, and (v) Freddie Mac, as the lender under the Canyon Ridge Property Loan, has not agreed to permit the pledge by the Pledgor of any interest in G&E Apartment REIT Canyon Ridge, LLC, other than the pledge of the “Class B Interest” in such limited liability company.”

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

“Creekside and Kedron Advance Overage” means that portion of the outstanding principal amount of the Loan which was in excess of $10,000,000.00 as a result of the making of the Creekside and Kedron Advance; provided that such excess amount did not exceed $6,000,000.00 at any time; provided further, that the Creekside and Kedron Advance Overage has been repaid in full and may not be reborrowed.

“Maturity Date” shall mean (i) in the event that on November 1, 2008 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 Six Million Dollars ($6,000,000.00), then the Maturity Date shall be November 1, 2009, as such date may be extended by the Lender, in its sole and absolute discretion, and (ii) in the event that on November 1, 2008 the Company shall not 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 Six Million Dollars ($6,000,000.00), then the Maturity Date shall be November 1, 2008.

“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, G&E Apartment REIT Creekside Crossing, LLC, G&E Apartment REIT Kedron Village, LLC, G&E Apartment REIT Canyon Ridge, LLC and to any other Person which may become the fee owner of a Property on or after the date hereof.

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

“Canyon Ridge Property” means that certain multi-family property known as Canyon Ridge Apartments, located in Nashville, Tennessee, which Property shall be owned by G&E Apartment REIT Canyon Ridge, LLC.

“Canyon Ridge 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 Canyon Ridge, LLC, which loan is secured by a first priority lien on the Canyon Ridge 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 entireties 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 (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 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) any and all fees, if any, due the Lender or otherwise due and payable under the terms of the Loan Documents and (ii) 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) 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.

(h) 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, except for those representation and warranties which relate to a specific date, in which case such representations and warranties shall be true and correct in all material respects as of such date.

(i) 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 is $2,700,000.00.

(b) Myrtles and Heights Advance, Arboleda Advance, Arboleda Advance Overage and Creekside and Kedron Advance Overage. The Myrtles and Heights Advance, the Arboleda Advance, the Arboleda Advance Overage, and the Creekside and Kedron Advance Overage (as such term is defined in the Loan Agreement prior to its modification pursuant to this Amendment) have been repaid in full, and neither the Arboleda Advance Overage nor the Creekside and Kedron Advance Overage may be reborrowed.

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

(d) 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.

(e) Payment of Extension Fee. In the event the Maturity Date is extended to November 1, 2009 pursuant to the conditions set forth in the definition of such term (as amended hereby), the Company shall pay to the Lender a fee in connection with the extension of the Maturity Date, such fee to be in the amount of One Hundred Thousand and No/xx Dollars ($100,000.00), which fee shall be fully earned as of, and payable on, November 1, 2008, and shall be non-refundable.

(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 in all material respects 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 in all material respects 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, to the Company’s knowledge, 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. Except as expressly provided herein, 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.

(j) 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.

(k) 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.

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

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

THIS FOURTH 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 15th day of September, 2008, by and between WACHOVIA BANK, N.A., a national banking association (“Lender”), and GRUBB & ELLIS APARTMENT REIT HOLDINGS, LP, a Virginia limited partnership (formerly known as NNN Apartment REIT Holdings, L.P.) (“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, by that certain Second Amendment to and Waiver of Loan Agreement dated as of March 31, 2008 and by that certain Third Amendment to and Waiver of Loan Agreement dated as of June 26, 2008 (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, G&E APARTMENT REIT THE MYRTLES AT OLDE TOWNE, LLC, a Delaware limited liability company, G&E APARTMENT REIT ARBOLEDA, LLC, a Delaware limited liability company, G&E APARTMENT REIT CREEKSIDE CROSSING, LLC, a Delaware limited liability company and G&E APARTMENT REIT KEDRON VILLAGE, LLC, a Delaware limited liability company (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 further amended and restated pursuant to that certain Second Amended and Restated Pledge Agreement (Membership and Partnership Interests) dated as of March 31, 2008, and as further amended and restated pursuant to that certain Third Amended and Restated Pledge Agreement (Membership and Partnership Interests) dated as of June 26, 2008 (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 owns one hundred percent (100%) of the membership interests in G&E APARTMENT REIT CANYON RIDGE, LLC, a Delaware limited liability company (the “New Owned LLC”; the New Owned LLC, 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 Fourth Amendment to and Waiver of Loan Agreement of even date herewith between Borrower and Lender (the “Fourth Amendment,” and the Existing Loan Agreement, as amended by the Fourth 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 the New Owned LLC; and

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

WHEREAS, in connection with the amendment of the Existing Loan Agreement pursuant to the Fourth 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:


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

By: GRUBB & ELLIS APARTMENT REIT, INC. (formerly known as NNN Apartment REIT, Inc.), a Maryland corporation, its sole general partner

FOR VALUE RECEIVED, Grubb & Ellis Apartment REIT Holdings, LP, a Virginia limited partnership (“Borrower”), unconditionally promises to pay NNN Realty Advisors, Inc., a Delaware corporation (“Lender”), in the manner and at the place hereinafter provided, the principal amount of Five Million Four Hundred Dollars ($5,400,000).

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

1. Maturity Date. The outstanding principal amount of the Note, and any accrued but unpaid interest thereon, shall be automatically due and payable on the Maturity Date; provided, that Borrower may not make any payment of the principal of this Note in whole or in part on any date on which there is any principal amount outstanding under the Loan (as such term is defined below).

2. Payments. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of Lender located at 1551 N. Tustin Avenue, Suite 300, Santa Ana, California 92705, or at such other place as Lender may direct. Whenever any payment on this Note is stated to be due on a day that is not a Business Day (as defined herein), such payment shall instead be made on the next Business Day and such extension of time shall be included in the computation of interest payable on this Note. Each payment made hereunder shall be credited first to interest then due and the remainder of such payment shall be credited to principal, and interest shall thereupon cease to accrue upon the principal so credited. Each of Lender and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof the Lender and any subsequent holder of this Note will mutually agree on the amount of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of Borrower hereunder with respect to payments of principal or interest on this Note. “Business Day” means any day other than a Saturday, Sunday or legal holiday under the laws of the State of California or any other day on which banking institutions located in such state are authorized or required by law or other governmental action to close.

3. Prepayments. Borrower shall have the right at any time and from time to time on or prior to the Maturity Date to prepay the principal of this Note in whole or in part, without premium or penalty; provided, that Borrower may not make any payment of the principal of this Note in whole or in part on any date on which there is any principal amount outstanding under the Loan (as such term is defined below). Any prepayment hereunder shall be accompanied by the payment of accrued interest on the principal amount of this Note being prepaid to the date of prepayment.

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

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

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

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

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

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

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

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

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

(d) the execution, delivery and performance by Borrower of this Note do not and will not violate any law, governmental rule or regulation, court order or agreement to which it is subject or by which its properties are bound or the charter documents or bylaws of Borrower;

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

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

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

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

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

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

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

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

(f) (i) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of Borrower in an involuntary case under Title 11 of the United States Code entitled “Bankruptcy” (as now and hereinafter in effect, or any successor thereto, the “Bankruptcy Code”) or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed, or any other similar relief shall be granted under any applicable federal or state law, or (ii) an involuntary case shall be commenced against Borrower under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Borrower or over all or a substantial part of its property shall have been entered, or the involuntary appointment of an interim receiver, trustee or other custodian of Borrower for all or a substantial part of its property shall have occurred, or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Borrower and, in the case of any event described in this clause (ii), such event shall have continued for 60 days unless dismissed, bonded or discharged; or

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

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

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

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

(a) Borrower and Lender agree that Borrower’s obligations hereunder shall be subordinated to the prior repayment in full in cash of the “Obligations”, as defined in that certain Loan Agreement dated as of November 1, 2007 by and between Borrower and Wachovia Bank, National Association (“Senior Lender"), as modified by that certain First Amendment to and Waiver of Loan Agreement dated as of December 21, 2007, that certain Second Amendment to and Waiver of Loan Agreement dated as of March 31, 2008, that certain Third Amendment to and Waiver of Loan Agreement dated as of June 26, 2008 and by that certain Fourth Amendment to and Waiver of Loan Agreement dated September 15, 2008 (as so modified and as it may be further amended, restated, supplemented or otherwise modified, the “Credit Agreement”), pursuant to which Credit Agreement Senior Lender has made available to Borrower certain credit facilities as more particularly provided therein (advances of proceeds under such credit facilities, the “Loan”).

(b) Lender agrees that, for as long as, and at any time that, any Obligations remain outstanding, without the consent of Senior Lender, Lender (i) will not take, demand or receive, or take any action to accelerate or collect, any payment of all or any part of this Note and (ii) will not commence or voluntarily join with or facilitate any other person, corporation, partnership or other entity in commencing any proceeding against Borrower or any other person, corporation, partnership or other entity under any bankruptcy, reorganization, readjustment of debt, dissolution, receivership, liquidation or insolvency law or statute now or hereafter in effect in any jurisdiction, nor shall Lender, in its capacity as holder of this Note, voluntarily participate in any assignment for benefit of creditors, compositions, or arrangements with respect to Borrower’s debts.

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

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

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

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

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

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

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

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

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

By: GRUBB & ELLIS APARTMENT REIT, INC., a Maryland corporation, its general partner

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


Defined Term		Definition
Commencement Date		October 1, 2008

Maturity Date		March 15, 2009

Interest Rate		4.99% per annum.

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


Contacts:		Julia McCartney, 714.975.2230 julia.mccartney@grubb-ellis.com
		Damon Elder, 714.975.2659 damon.elder@grubb-ellis.com

Grubb & Ellis Apartment REIT Acquires
Canyon Ridge Apartments in Hermitage, Tenn.

SANTA ANA, Calif. (Sept. 19, 2008) – Grubb & Ellis Apartment REIT, Inc. today announced the acquisition of Canyon Ridge Apartments, a 350-unit multifamily community in the Nashville suburb of Hermitage, Tenn.

Located at 3868 Central Pike, Canyon Ridge Apartments consists of approximately 341,000 rentable square feet situated on roughly 22.5 acres. Built in 2005, the gated community comprises 13 three-story buildings offering one-, two- and three-bedroom apartments as well as a community clubhouse. There are six floor plans available that vary in unit size from approximately 750 square feet to roughly 1,184 square feet. Property amenities include a fitness center, cyber cafe, lap pool with surround sound and two tanning salons. Unit features may include island kitchens with granite counter tops, full-size washer and dryer connections, ceiling fans, walk-in closets and fireplaces.

Canyon Ridge Apartments offers easy access to Interstate 40, is in close proximity to Nashville International Airport, and is surrounded by residential developments as well as retail outlets, including Kroger, Wal-Mart and Home Depot. The property is currently 94 percent leased and provides parking for 660 passenger vehicles, split between attached and detached garages, carports and surface parking spaces.

“The acquisition of Canyon Ridge Apartments further diversifies the Grubb & Ellis Apartment REIT portfolio and is consistent with our investment strategy to acquire assets in growing markets with strong economies,” said Grubb & Ellis Apartment REIT Chief Executive Officer Stanley J. Olander Jr.

Grubb & Ellis Apartment REIT purchased Canyon Ridge Apartments from an affiliate of Principal Real Estate Investors LLC, represented by Scott Tyrone and Perry Gooch of Colliers Turley Martin Tucker. Financing was primarily provided by Capmark Bank, arranged by Don Marshall and Mike Bryant.

As of August 29, 2008, Grubb & Ellis Apartment REIT has sold approximately 13.5 million shares of its common stock, excluding the shares issued under its distribution reinvestment plan, for approximately $134.6 million through its initial public offering, which began in the third quarter of 2006.

Grubb & Ellis Apartment REIT offers a monthly distribution of seven percent per annum and, as of September 15, 2008, has made 13 geographically diverse acquisitions with a total portfolio valued at approximately $341 million, based on purchase price.

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 June 30, 2008, more than $3.6 billion in investor equity has been raised for these investment programs. The Company and its subsidiaries currently manage a growing portfolio of more than 218 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 and diversity that the property adds to the Grubb & Ellis Apartment REIT portfolio. 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 strength of the economy of the greater Nashville area; 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.

September 19, 2008	By:	/s/ Stanley J. Olander, Jr.

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


Exhibit No.		Description

10.1		Real Estate Purchase and Sale Agreement by and between Apartments at Canyon Ridge, LLC and Grubb & Ellis Realty Investors, LLC, dated July 10, 2008
10.2		First Amendment to Real Estate Purchase and Sale Agreement by and between Apartments at Canyon Ridge, LLC and Grubb & Ellis Realty Investors, LLC, dated August 15, 2008
10.3		Assignment and Assumption of Real Estate Purchase and Sale Agreement by and between Grubb & Ellis Realty Investors, LLC and G&E Apartment REIT Canyon Ridge, LLC, dated September 15, 2008
10.4		Multifamily Note by G&E Apartment REIT Canyon Ridge, LLC to the order of Capmark Bank, dated September 15, 2008
10.5		Multifamily Deed of Trust, Assignment of Rents and Security Agreement by G&E Apartment REIT Canyon Ridge, LLC for the benefit of Capmark Bank, dated September 15, 2008
10.6		Guaranty by G&E Apartment REIT, Inc. for the benefit of Capmark Bank, dated September 15, 2008
10.7		Fourth Amendment to and Waiver of Loan Agreement between Grubb & Ellis Apartment REIT, Inc. and Wachovia Bank, National Association, dated September 15, 2008
10.8		Fourth Amended and Restated Pledge Agreement by and between Wachovia Bank, National Association and Grubb and Ellis Apartment REIT Holdings, L.P., dated September 15, 2008
10.9		Unsecured Promissory Note by Grubb & Ellis Apartment REIT Holdings, LP in favor of NNN Realty Advisors, Inc., dated September 15, 2008
99.1		Grubb & Ellis Apartment REIT, Inc. Press Release, dated September 19, 2008


Date of Report (Date of Earliest Event Reported):		September 15, 2008


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


[ Collect ]		Hazard Insurance premiums or other insurance premiums,

[ Collect ]		Taxes,


(ii) (iii) (iv)		the Improvements; the Fixtures; the Personalty;


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


X	Exhibit A	Description of the Land (required).

X	Exhibit B	Modifications to Instrument


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