10-Q

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13

OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2007

Commission file number 1-33106

DOUGLAS EMMETT, INC.

(Exact name of registrant as specified in its charter)

Maryland	20-3073047
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

808 Wilshire Boulevard,

Suite 200

Santa Monica, California 90401

(Address and zip code of principal executive offices)

(310) 255-7700

Registrant’s telephone number, including area code:

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨                Accelerated filer  ¨                Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at August 8, 2007
Common Shares of beneficial interest, $0.01 par value per share	109,833,903 shares

DOUGLAS EMMETT, INC.

FORM 10-Q

TABLE OF CONTENTS

			PAGE NO.
PART I.	FINANCIAL INFORMATION		3
	Item 1.	Financial Statements	3
		Consolidated Balance Sheets as of June 30, 2007 (unaudited) and December 31, 2006	3
		Consolidated Statements of Operations for the three and six months ended June 30, 2007 and 2006 (unaudited)	4
		Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006 (unaudited)	5
		Notes to Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
	Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION		27
	Item 1.	Legal Proceedings	27
	Item 1A.	Risk Factors	27
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
	Item 3.	Defaults Upon Senior Securities	27
	Item 4.	Submission of Matters to a Vote of Security Holders	28
	Item 5.	Other Information	28
	Item 6.	Exhibits	29
	SIGNATURES		30

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Douglas Emmett, Inc.

Consolidated Balance Sheets

(in thousands, except for share data)

	June 30, 2007			December 31, 2006
	(unaudited)
Assets
Investment in real estate
Land	$	817,249		$	813,599
Buildings and improvements		4,893,677			4,863,955
Tenant improvements and leasing costs		432,998			411,063
		6,143,924			6,088,617
Less: accumulated depreciation		(134,135	)		(32,521	)
Net investment in real estate		6,009,789			6,056,096
Cash and cash equivalents		65,961			4,536
Tenant receivables, net		857			4,160
Deferred rent receivables, net		12,594			3,587
Interest rate contracts		142,639			76,915
Acquired lease intangible assets, net		29,042			34,137
Other assets		21,386			20,687
Total assets	$	6,282,268		$	6,200,118
Liabilities
Secured notes payable, including loan premium	$	2,927,497		$	2,789,702
Accounts payable and accrued expenses		51,065			51,736
Security deposits		29,839			28,670
Acquired lease intangible liabilities, net		238,617			263,649
Interest rate contracts		47,702			6,278
Dividends payable		19,982			13,801
Total liabilities		3,314,702			3,153,836
Minority interests		894,982			934,509
Stockholders’ equity
Common stock, $.01 par value 750 million shares authorized, 114,183,204 and 115,005,860 shares outstanding at June 30, 2007 and December 31, 2006, respectively.		1,142			1,150
Additional paid-in capital		2,144,556			2,144,600
Accumulated other comprehensive income		31,200			415
Accumulated deficit		(104,314	)		(34,392	)
Total stockholders’ equity		2,072,584			2,111,773
Total liabilities and stockholders’ equity	$	6,282,268		$	6,200,118

The accompanying notes are an integral part of the consolidated financial statements

3

Douglas Emmett, Inc.

Consolidated Statements of Operations

(Unaudited and in thousands, except for share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
	Douglas Emmett, Inc.			The Predecessor			Douglas Emmett, Inc.			The Predecessor
Revenues
Office rental
Rental revenues	$	92,884		$	74,759		$	184,496		$	150,519
Tenant recoveries		5,362			4,808			13,220			8,903
Parking and other income		11,098			9,792			22,198			20,031
Total office revenues		109,344			89,359			219,914			179,453
Multifamily rental
Rental revenues		16,879			13,619			33,393			25,900
Parking and other income		526			589			1,017			824
Total multifamily revenues		17,405			14,208			34,410			26,724
Total revenues		126,749			103,567			254,324			206,177
Operating Expenses
Office expense		31,124			31,702			64,090			61,132
Multifamily expense		3,872			4,463			8,795			8,696
General and administrative		5,120			1,431			10,162			3,136
Depreciation and amortization		50,494			27,833			101,615			53,616
Total operating expenses		90,610			65,429			184,662			126,580
Operating income		36,139			38,138			69,662			79,597
Gain on investments in interest rate contracts, net		—			25,024			—			59,967
Interest and other income		372			1,327			454			2,548
Interest expense		(38,313	)		(30,001	)		(76,615	)		(58,055	)
Deficit (distributions to) recovery from minority partners, net		—			(1,521	)		—			6,248
(Loss) income before minority interests		(1,802	)		32,967			(6,499	)		90,305
Minority Interests
Minority interests		542			(23,613	)		1,966			(64,434	)
Preferred minority investor		—			(4,025	)		—			(8,050	)
Net (loss) income	$	(1,260	)	$	5,329		$	(4,533	)	$	17,821
Net (loss) income per common share – basic and diluted	$	(0.01	)	$	81,985		$	(0.04	)	$	274,169
Dividends declared per common share	$	0.175		$	—		$	0.35		$	—
Weighted average shares of common stock outstanding – basic and diluted		114,861,872			65			114,933,468			65

The accompanying notes are an integral part of the consolidated financial statements

4

Douglas Emmett, Inc.

Consolidated Statements of Cash Flows

(Unaudited and in thousands)

	Douglas Emmett, Inc.			The Predecessor
	Six Months Ended June 30, 2007			Six Months Ended June 30, 2006
Operating Activities
Net (loss) income	$	(4,533	)	$	17,821
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Minority interests in consolidated real estate partnerships		(1,966	)		72,484
Deficit recovery from minority partners		—			(6,248	)
Depreciation and amortization		101,615			53,616
Net accretion of acquired lease intangibles		(19,937	)		(932	)
Amortization of deferred loan costs		500			1,679
Amortization of loan premium		(2,205	)		—
Non-cash market value adjustment on interest rate contracts		6,620			(59,967	)
Non-cash amortization of stock-based compensation		1,476			—
Change in working capital components:
Tenant receivables		3,303			(1,172	)
Deferred rent receivables		(9,007	)		(4,261	)
Accounts payable, accrued expenses and security deposits		3,480			1,016
Other		(133	)		(4,069	)
Net cash provided by operating activities		79,213			69,967
Investing Activities
Capital expenditures and property acquisitions		(58,549	)		(138,340	)
Net cash used in investing activities		(58,549	)		(138,340	)
Financing Activities
Proceeds from borrowings		285,500			82,000
Deferred loan costs		(1,122	)		(1,253	)
Repayment of borrowings		(145,500	)		—
Contributions by minority interests		—			33,264
Distributions to minority interests		(14,824	)		(46,322	)
Redemption of minority interests		(29,211	)		—
Distributions to stockholders		—			(7,096	)
Repurchase of common stock		(20,155	)		—
Cash dividends		(33,927	)		—
Net cash provided by financing activities		40,761			60,593
Increase (decrease) in cash and cash equivalents		61,425			(7,780	)
Cash and cash equivalents at beginning of period		4,536			108,282
Cash and cash equivalents at end of period	$	65,961		$	100,502
Supplemental disclosure of non-cash financing information
Notes receivable from stockholders	$	—		$	(60,000	)
Contribution of notes receivable from stockholders		—			60,000

The accompanying notes are an integral part of the consolidated financial statements.

5

Douglas Emmett, Inc

Notes to Consolidated Financial Statements

(in thousands, except shares and per share data)

1. Organization and Basis of Presentation

Douglas Emmett, Inc., a Maryland corporation formed on June 28, 2005, is a fully integrated, self-administered, and self-managed Real Estate Investment Trust (REIT). We did not have any meaningful operating activity until the consummation of our initial public offering (IPO) and the related acquisition of our predecessor and certain other entities on October 30, 2006. Through our interest in Douglas Emmett Properties, LP (our operating partnership) and its subsidiaries, we own, manage, lease, acquire and develop real estate. As of June 30, 2007, we owned a portfolio of 47 office properties (including ancillary retail space) and nine multifamily properties, as well as the fee interests in two parcels of land that we lease to third parties. All of these properties are located in Los Angeles County, California and Honolulu, Hawaii. We qualified as a REIT for federal income tax purposes beginning with our initial taxable year ending December 31, 2006 and expect to maintain such qualification.

The historical financial results for the three and six months ended June 30, 2006 in these financial statements relate to our accounting predecessor only. Our predecessor includes Douglas Emmett Realty Advisors, Inc. (DERA) as the accounting acquirer, and nine consolidated real estate limited partnerships that owned, directly or indirectly, office and multifamily properties and fee interests in land subject to ground leases, which we refer to collectively as the “institutional funds.” For the period prior to our IPO presented herein, DERA was the general partner and had responsibility for the asset management of the institutional funds.

Our predecessor did not include certain other entities we acquired at the time of our IPO, including Douglas, Emmett and Company (DECO), P.L.E. Builders, Inc., subsequently renamed Douglas Emmett Builders (DEB), and seven California limited partnerships and one California limited liability company, which we refer to collectively as the eight “single-asset entities.” DECO provided property management and leasing services to all of the properties acquired in our formation transactions and DEB provided construction services in connection with improvements to tenant suites and common areas in the properties. Each of the eight single-asset entities owned, directly or indirectly, one multifamily or office property (or, in one case, a fee interest in land subject to a ground lease).

2. Summary of Significant Accounting Policies

Basis of Presentation

In March 2005, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a consensus on Issue No. 04-5, Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights. EITF 04-5 clarifies certain aspects of Statement of Positions 78-9 Accounting for Investments in Real Estate Ventures, and provides guidance on determining whether a sole general partner in a limited partnership should consolidate its investment in a limited partnership. DERA was the sole general partner of the institutional funds and the limited partners of the institutional funds did not have substantive “kick-out” or participation rights as defined by EITF 04-5. DERA adopted the guidance of EITF 04-5 and consolidated the institutional funds.

The accompanying consolidated financial statements as of December 31, 2006 and June 30, 2007, and for the three and six months ended June 30, 2007 are the consolidated financial statements of Douglas Emmett, Inc. and its subsidiaries including our operating partnership. The financial statements for the three and six months ended June 30, 2006 represent the consolidated financial statements of our predecessor. They include the accounts of DERA and the institutional funds, but do not include the accounts of the non-predecessor entities which were acquired at the time of our IPO as discussed in Note 1. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements.

6

Douglas Emmett, Inc

Notes to Consolidated Financial Statements (continued)

(in thousands, except shares and per share data)

Unaudited Interim Financial Information

The accompanying unaudited interim financial statements have been prepared by our management pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosure normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) may have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the presentation not misleading. The accompanying unaudited financial statements include, in the opinion of our management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial information set forth therein. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ended December 31, 2007. The interim financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2006 and notes thereto.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates of certain items and judgments as to certain future events, for example with respect to the allocation of the purchase price of acquired property among land, buildings, improvements, equipment, and any related intangible assets and liabilities, or the effect of a property tax reassessment of our properties in connection with the IPO. These determinations, even though inherently subjective and subject to change, affect the reported amounts of our assets, liabilities and expenses. While we believe that our estimates are based on reasonable assumptions and judgments at the time they are made, some of our assumptions, estimates and judgments will inevitably prove to be incorrect. As a result, actual outcomes will likely differ from our accruals, and those differences—positive or negative—could be material. Some of our accruals are subject to adjustment as we believe appropriate based on revised estimates and reconciliation to the actual results when available.

In the second quarter of 2007, based on our most recent judgment of the ongoing reassessment process, we reduced the accrual for property tax expenses expected to result from the reassessment of properties in connection with our IPO. However, until that process is final, our accruals are only estimates of the actual outcome. We will continue to evaluate potential increases in property taxes and will adjust future accruals if we believe appropriate.

Acquisitions

Acquisitions of properties are accounted for utilizing the purchase method. Accordingly, the results of operations of acquired properties are included in our results of operations from the respective dates of acquisition. Estimates of future cash flows and other valuation techniques are used to allocate the purchase price of acquired property between land, buildings and improvements, equipment and identifiable intangible assets and liabilities such as amounts related to in-place at-market leases, acquired above/below-market ground leases, acquired above/below-market tenant leases and tenant relationships. Initial valuations, including the valuation of assets as part of our IPO, are subject to change until such information is finalized, but no later than 12 months from the acquisition date.

Interest Rate Contracts

We and our predecessor have managed our interest rate risk associated with borrowings by obtaining interest rate swap and interest rate cap contracts. No other derivative instruments have been used by us or our predecessor.

7

Douglas Emmett, Inc

Notes to Consolidated Financial Statements (continued)

(in thousands, except shares and per share data)

In June 1998, the FASB issued FAS No. 133 Accounting for Derivative Instruments and Hedging Activities (FAS No. 133, as amended by FAS No. 138). The statement requires our predecessor to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value and the changes in fair value must be reflected as income or expense. Changes in the fair value of derivatives which are hedges, depending on the nature of the hedge, are either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income, a component of stockholders’ equity (deficit) until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings. Our predecessor’s investments in interest rate swap and interest rate cap contracts did not qualify as effective hedges, and consequently the changes in such contracts’ fair market values were being recorded in earnings. See Note 8.

Income Taxes

We elected to be taxed as a REIT under the Internal Revenue Code (the “Code”) commencing with our initial taxable year ending December 31, 2006. To qualify as a REIT, we are required to distribute at least 90% of our REIT taxable income to our shareholders and meet the various other requirements imposed by the Code, through actual operating results, asset holdings, distribution levels and diversity of stock ownership. Provided we qualify for taxation as a REIT, we generally will not be subject to corporate-level income tax on the earnings distributed currently to our shareholders that we derive from our REIT qualifying activities. We will be subject to corporate-level tax on the earnings we derive through our taxable REIT subsidiary (TRS). If we fail to qualify as a REIT in any taxable year, and are unable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to federal income tax at regular corporate rates, including any applicable alternative minimum tax.

In addition, we will be subject to foreign, state and local taxation in various foreign, state and local jurisdictions, including those in which we transact business or reside. Our predecessor, DERA, was an S-Corporation and the institutional funds were limited partnerships. Our non TRS subsidiaries, including the operating partnership, are either partnerships or disregarded entities for federal income tax purposes. Under applicable federal and state income tax rules, the allocated share of net income or loss from the limited partnerships and S-Corporation is reportable in the income tax returns of the respective partners and stockholders. Accordingly, no income tax provision is included in the accompanying consolidated financial statements other than the 1.5% tax due on taxable income of S-Corporations in the State of California attributable to periods prior to our formation transactions.

Minority Interests

Our predecessor reflected unaffiliated partners’ interests in the institutional funds as minority interest in consolidated real estate partnerships, which represented the minority partners’ share of the underlying net assets of our predecessor’s consolidated real estate partnerships. When these consolidated real estate partnerships made cash distributions to partners in excess of the carrying amount of the minority interest, our predecessor recorded a charge equal to the amount of such excess distributions, even though there was no economic effect or cost.

If the excess distributions previously absorbed by our predecessor were recovered through the future earnings of the consolidated real estate partnership, our predecessor would record income in the period of recovery. Our predecessor reported this charge and any subsequent recovery in the consolidated statements of operations as deficit distribution to/recovery from minority partners, net.

After the completion of our IPO and formation transactions, the continuing investors (including our predecessor principals and our executive officers) that elected to own units in our operating partnership comprise the minority interests in our operating partnership.

8

Douglas Emmett, Inc

Notes to Consolidated Financial Statements (continued)

(in thousands, except shares and per share data)

Earnings Per Share

Basic earnings per share is calculated by dividing the net income applicable to common stockholders for the period by the weighted average of common shares outstanding during the period. Diluted earnings per share is calculated by dividing the net income applicable to common stockholders for the period by the weighted average number of common and dilutive instruments outstanding during the period using the treasury stock method. Since we are in a net loss position during the three and six months ended June 30, 2007, all potentially dilutive instruments are anti-dilutive and have been excluded from our computation of weighted average dilutive shares outstanding.

Recently Issued Accounting Literature

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. We adopted FIN 48 on January 1, 2007. Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements at June 30, 2007.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (FAS 157). FAS 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. FAS 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. FAS 157 applies whenever other standards require assets or liabilities to be measured at fair value. This statement is effective in fiscal years beginning after November 15, 2007. We do not expect that the adoption of this standard will have a material effect on our financial position and results of operations.

3. Acquisitions

In May 2007, we acquired an approximate 50,000 rentable square foot Class A office building located in our Century City submarket for a contract price of $32 million. We obtained the ground leasehold in the property and the option to acquire fee title to the land for a fixed price of $800,000 in conjunction with the acquisition. We intend to exercise this option by the end of 2007. The building is currently 100% leased through December 2019. In March 2006, DERA acquired a multifamily property in Honolulu, Hawaii. The aggregate acquisition costs of this property approximated $113.7 million. The following table summarizes the allocations of estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

	2007 Acquisition			2006 Acquisition
Investment in real estate:
Land	$	3,650		$	42,887
Buildings and improvements		26,274			68,394
Tenant improvements and other in-place lease assets		3,024			2,982
Tenant receivables and other assets		24			579
Accounts payable, accrued expenses and tenant security deposits:		(988	)		(849	)
Acquired lease intangible liabilities		—			(263	)
Net acquisition cost	$	31,984		$	113,730

9

Douglas Emmett, Inc

Notes to Consolidated Financial Statements (continued)

(in thousands, except shares and per share data)

Our acquired lease intangibles related to above/below-market leases is summarized as of:

	June 30, 2007			December 31, 2006
Above-market tenant leases	$	32,770		$	32,770
Accumulated amortization		(6,873	)		(1,817	)
Below-market ground leases		3,198			3,198
Accumulated amortization		(53	)		(14	)
Acquired lease intangible assets, net	$	29,042		$	34,137
Below-market tenant leases	$	256,151		$	256,151
Accumulated accretion		(32,571	)		(8,353	)
Above-market ground leases		16,200			16,200
Accumulated accretion		(1,163	)		(349	)
Acquired lease intangible liabilities, net	$	238,617		$	263,649

4. Other Assets

Other assets consist of the following as of:

	June 30, 2007		December 31, 2006
Deferred loan costs, net of accumulated amortization of $668 and $168 at June 30, 2007 and December 31, 2006, respectively	$	5,103	$	4,356
Restricted cash		2,834		2,827
Prepaid interest		6,643		4,953
Prepaid expenses		1,375		3,291
Interest receivable		2,811		3,015
Other indefinite-lived intangible		1,988		1,988
Other		632		257
	$	21,386	$	20,687

We and our predecessor incurred deferred loan cost amortization expense of $251 and $1,029 for the three months ended June 30, 2007 and 2006, respectively and $500 and $1,679 for the six months ended June 30, 2007 and 2006, respectively. The deferred loan cost amortization is included as a component of interest expense in the consolidated statements of operations.

10

Douglas Emmett, Inc

Notes to Consolidated Financial Statements (continued)

(in thousands, except shares and per share data)

5. Minimum Future Lease Rentals

We and our predecessor have leased space to tenants primarily under noncancelable operating leases which generally contain provisions for a base rent plus reimbursement for certain operating expenses. Operating expense reimbursements are reflected in our consolidated statements of operations as tenant recoveries.

We and our predecessor have leased space to certain tenants under noncancelable leases which provide for percentage rents based upon tenant revenues. Percentage rental income for the three months ended June 30, 2007 and 2006 totaled $357 and $278, respectively, and $621 and $573 for the six months ended June 30, 2007 and 2006, respectively.

Future minimum base rentals on noncancelable operating leases at June 30, 2007 are as follows:

July 1, 2007 to December 31, 2007	$	155,085
2008		296,515
2009		260,129
2010		219,387
2011		176,118
Thereafter		469,906
Total future minimum base rentals	$	1,577,140

The above future minimum lease payments exclude tenant reimbursements, amortization of deferred rent receivables and above/below-market lease intangibles. Some leases are subject to termination options. In general, these leases provide for termination payments should the termination options be exercised. The preceding table is prepared assuming such options are not exercised.

6. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following as of:

	June 30, 2007		December 31, 2006
Accounts payable	$	33,512	$	32,978
Accrued interest payable		12,735		12,701
Deferred revenue		4,818		6,057
	$	51,065	$	51,736

11

Douglas Emmett, Inc

Notes to Consolidated Financial Statements (continued)

(in thousands, except shares and per share data)

7. Secured Notes Payable

In June 2007, we borrowed an additional $150 million of long term variable rate debt. This included an increase of $132 million in our existing loan facilities with Fannie Mae, plus additional loan facilities with Fannie Mae totaling $18 million. These loans are secured by our residential properties with maturity dates ranging from June 1, 2012 to June 1, 2017. Concurrent with the incremental borrowings, we entered into interest rate contracts to swap the underlying variable rates to fixed rates. These contracts are designated as hedges and result in a weighted average fixed interest rate of approximately 5.87%.

A summary of our secured notes payable is as follows:

Type of Debt	June 30, 2007			December 31, 2006		Fixed/Floating Rate		Effective Annual Interest Rate(1)		Maturity Date		Swap Maturity Date
Variable Rate Swapped to Fixed Rate:
Modified Term Loan(2)	$	2,300,000	(3)	$	2,300,000	LIBOR + 0.85	%	5.20	%	09/01/12		08/01/10-
												08/01/12
Fannie Mae Loan I(4)		293,000			293,000	DMBS + 0.60	%	4.76		06/01/12	(5)	08/01/11
Fannie Mae Loan II(4)		75,000			75,000	DMBS + 0.76	%	4.93		02/01/15		08/01/11
Fannie Mae Loan III(4)		82,000			82,000	LIBOR + 0.62	%	5.70		02/01/16		03/01/12
Fannie Mae Loan IV(4)		95,080	(6)		—	DMBS + 0.60	%	5.86		06/01/12		08/01/11
Fannie Mae Loan V(4)		36,920	(6)		—	DMBS + 0.60	%	5.86		02/01/15		08/01/11
Fannie Mae Loan VI(4)		18,000	(6)		—	LIBOR + 0.62	%	5.90		06/01/17		06/01/12
Subtotal		2,900,000			2,750,000			5.20	%
Variable Rate:
Senior Secured Revolving Credit Facility		—			10,000	LIBOR + 0.70	%	—		10/30/09		—
Subtotal		2,900,000	(7)		2,760,000
Add: Unamortized Non-Cash Loan Premium(8)		27,497			29,702
Total	$	2,927,497		$	2,789,702

(1) Includes the effect of interest rate contracts. Based on actual/365-day basis and excludes amortization of loan fees and unused fees on credit line.

(2) Secured by seven separate cross collateralized pools. Requires monthly payments of interest only, with outstanding principal due upon maturity.

(3) Includes $1.11 billion swapped to 4.89% until August 1, 2010; $545.0 million swapped to 5.75% until December 1, 2010; $322.5 million swapped to 4.98% until August 1, 2011; and $322.5 million swapped to 5.02% until August 1, 2012.

(4) Secured by four separate collateralized pools. Fannie Mae Discount Mortgage-Backed Security (DMBS) generally tracks 90-day LIBOR.

(5) The maturity date was extended by five months in conjunction with the $150 million of incremental loans entered into during the second quarter of 2007.

(6) Represents part of $150 million in incremental borrowings made during the second quarter of 2007.

(7) The weighted average remaining life of our outstanding debt is 5.3 years. The weighted average remaining life of the interest rate swaps associated with this balance is 3.7 years.

(8) Represents non-cash mark-to-market adjustment on variable rate debt associated with office properties.

12

Douglas Emmett, Inc

Notes to Consolidated Financial Statements (continued)

(in thousands, except shares and per share data)

The minimum future principal payments due on our secured notes payable at June 30, 2007 are as follows:

July 1, 2007 to December 31, 2007	$	—
2008		—
2009		—
2010		—
2011		—
Thereafter		2,900,000
Total future principal	$	2,900,000

We have a $250.0 million secured revolving credit facility with a group of banks led by Bank of America, NA and Banc of America Securities, LLC, which bears interest at a rate per annum equal to LIBOR plus 70 basis points if the amount outstanding is $175.0 million or less and at LIBOR plus 80 basis points if the amount outstanding is greater than $175.0 million. The senior secured revolving credit facility contains an accordion feature that allows us to increase the availability by $250.0 million, to $500.0 million, under specified circumstances. The facility bears interest at 15 basis points on the undrawn balance. The facility has a term of three years and two one-year extensions.

8. Interest Rate Contracts

We have executed interest rate swaps with a notional amount of $2.90 billion to protect against interest rate fluctuations on existing variable-rate term loan facilities. These derivatives were designated and qualify as highly effective cash flow hedges under FAS 133 and remove the variability from the hedged cash flows. Unrealized gains of $42.7 million and $30.8 million were recorded in accumulated other comprehensive income in our consolidated balance sheets, representing the increase in fair value of the cash flow hedges for the three and six months ended June 30, 2007, respectively. An immaterial amount of hedge ineffectiveness has also been recorded in interest expense.

The components of comprehensive income consist of the following:

	Three Months Ended June 30,					Six Months Ended June 30,
	2007			2006		2007			2006
	Douglas Emmett, Inc.			Predecessor		Douglas Emmett, Inc.			Predecessor
Net (loss) income	$	(1,260	)	$	5,329	$	(4,533	)	$	17,821
Cash flow hedge adjustment		42,673			—		30,785			—
Comprehensive income	$	41,413		$	5,329	$	26,252		$	17,821

We also have additional interest rate swaps that were not designated as hedges under FAS 133 and as such, the changes in fair value of these interest rate swaps have been recognized in earnings for all periods. The fair value of these derivatives decreased $2.9 million and $6.5 million for the three and six months ended June 30, 2007, respectively, representing the realization of the pre-IPO fair value of the swaps over their remaining term. These amounts were recorded in interest expense. Prior to our IPO, the existing interest rate swaps were marked to their market value through gain on investments in interest contracts, net, in the amounts of $25.0 million and $60.0 million for the three and six months ended June 30, 2006, respectively.

13

Douglas Emmett, Inc

Notes to Consolidated Financial Statements (continued)

(in thousands, except shares and per share data)

9. Equity Repurchases

During the second quarter of 2007, we repurchased approximately 2.0 million share equivalents in private transactions for a total consideration of approximately $49.4 million.

10. Related-Party Transactions

During the six months ended June 30, 2007, there were no related-party transactions.

Our predecessor paid $2.74 million and $3.95 million in real estate commissions to an operating company owned by the stockholders of DERA for the three and six months ended June 30, 2006, respectively. The commissions paid to that operating company were accounted for as leasing costs and were included in our predecessor’s investment in real estate in the consolidated balance sheets for the period prior to our IPO. This operating company was acquired by us in the formation transactions.

Our predecessor contributed its share of discretionary profit-sharing contributions (subject to statutory limitations), totaling $100 and $192 for the three and six months ended June 30, 2006, respectively, for services rendered by employees of an operating company owned by the stockholders of DERA. This operating company was acquired by us in the formation transactions.

Property management fees related to management services were paid to an operating company owned by the stockholders of DERA. This operating company was acquired by us in the formation transactions. The management fees are based upon percentages of the rental cash receipts collected by the properties. The fees range from 1.75% to 4.00% of the cash receipts. Our predecessor expensed $2.46 million and $4.71 million in such property management fees for the three and six months ended June 30, 2006, respectively.

Our predecessor contracted with an operating company owned by the stockholders of DERA to provide building and tenant improvement work. This operating company was acquired by us in the formation transactions. For the three and six months ended June 30, 2006, $3.14 million and $4.83 million was paid to the operating company for contracting work performed. This amount was included in the cost basis of buildings and tenant improvements in the consolidated balance sheet of our predecessor.

Our predecessor leased approximately 26,785 square feet of office space to two operating companies owned or controlled by the stockholders of DERA. These operating companies were acquired by us in the formation transactions. The rents from these leases totaled $195 and $390 for the three and six months ended June 30, 2006, respectively.

On March 15, 2006, DERA’s stockholders contributed $60 million to DERA in the form of promissory notes. As part of our IPO and formation transactions, these notes were paid in full.

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Douglas Emmett, Inc

Notes to Consolidated Financial Statements (continued)

(in thousands, except shares and per share data)

11. Commitments and Contingencies

Litigation

We are subject to various legal proceedings and claims that arise in the ordinary course of business. We believe that these matters are generally covered by insurance. We believe that the ultimate settlement of these actions will not have a material adverse effect to our financial position and results of operations or cash flows.

Concentration of Credit Risk

Our properties are located in Los Angeles County, California and Honolulu, Hawaii. The ability of the tenants to honor the terms of their respective leases is dependent upon the economic, regulatory and social factors affecting the markets in which the tenants operate. We perform ongoing credit evaluations of our tenants for potential credit losses. Financial instruments that subject us to credit risk consist primarily of cash, accounts receivable, deferred rents receivable and interest rate contracts. We maintain our cash and cash equivalents with high quality financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100; and to date, we have not experienced any losses on our deposited cash.

Asset Retirement Obligations

In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143 (FIN 47). FIN 47 clarifies that the term “conditional asset retirement obligation” as used in SFAS No. 143, Accounting for Asset Retirement Obligations, represents a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within a company’s control. Under this standard, a liability for a conditional asset retirement obligation must be recorded if the fair value of the obligation can be reasonably estimated. Environmental site assessments and investigations have identified 18 properties in our portfolio containing asbestos, which would have to be removed in compliance with applicable environmental regulations if these properties undergo major renovations or are demolished. As of June 30, 2007, the obligations to remove the asbestos from these properties have indeterminable settlement dates, and therefore, we are unable to reasonably estimate the fair value of the associated conditional asset retirement obligation.

Future Minimum Lease Payments

We lease (and during 2006, our predecessor leased) portions of the land underlying three of our office properties as more fully described in the notes to consolidated financial statements contained in our 2006 Annual Report on Form 10-K. During the second quarter of 2007, we obtained a fourth ground leasehold in conjunction with our acquisition of the Century City building described in Note 3. We and our predecessor expensed ground lease payments in the amount of $843 and $855 for the three months ended June 30, 2007 and 2006, respectively and $1,704 and $1,676 for the six months ended June 30, 2007 and 2006, respectively.

The following is a schedule of minimum ground lease payments as of June 30, 2007:

July 1, 2007 to December 31, 2007	$	1,589
2008		3,178
2009		3,309
2010		3,335
2011		3,335
Thereafter		112,004
Total future minimum ground lease payments	$	126,750

Tenant Concentrations

For the six months ended June 30, 2007 and 2006, no tenant exceeded 10% of either our or our predecessor’s total cash rents.

15

Douglas Emmett, Inc

Notes to Consolidated Financial Statements (continued)

(in thousands, except shares and per share data)

12. Segment Reporting

Statement of Financial Accounting Standards (FAS) No. 131, Disclosures about Segments of an Enterprise and Related Information, established standards for disclosure about operating segments and related disclosures about products and services, geographic areas and major customers. Segment information is prepared on the same basis that our management reviews information for operational decision making purposes. We and our predecessor have operated in two business segments: (i) the acquisition, redevelopment, ownership and management of office real estate and (ii) the acquisition, redevelopment, ownership and management of multifamily real estate. The products for our office segment include primarily rental of office space and other tenant services including parking and storage space rental. The products for our multifamily segment include rental of apartments and other tenant services including parking and storage space rental.

Asset information by segment is not reported because we do not use this measure to assess performance and make decisions to allocate resources. Therefore, depreciation and amortization expense is not allocated among segments. Interest and other income, management services, general and administrative expenses, interest expense, depreciation and amortization expense and net derivative gains and losses are not included in rental revenues less rental expenses as the internal reporting addresses these items on a corporate level.

Rental revenues less rental expenses is not a measure of operating results or cash flows from operating activities as measured by GAAP, and it is not indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. All companies may not calculate rental revenues less rental expenses in the same manner. We and our predecessor both considered rental revenues less rental expenses to be an appropriate supplemental measure to net income because it assisted both investors and management to understand the core operations of our and our predecessor’s properties.

	Douglas Emmett, Inc.									Predecessor
	Three Months Ended June 30, 2007									Three Months Ended June 30, 2006
	Office			Multifamily			Total			Office			Multifamily			Total
Rental revenues	$	109,344		$	17,405		$	126,749		$	89,359		$	14,208		$	103,567
Percentage of total		86	%		14	%		100	%		86	%		14	%		100	%
Rental expenses	$	31,124		$	3,872		$	34,996		$	31,702		$	4,463		$	36,165
Percentage of total		89	%		11	%		100	%		88	%		12	%		100	%
Rental revenues less rental expenses	$	78,220		$	13,533		$	91,753		$	57,657		$	9,745		$	67,402
Percentage of total		85	%		15	%		100	%		86	%		14	%		100	%
	Douglas Emmett, Inc.									Predecessor
	Six Months Ended June 30, 2007									Six Months Ended June 30, 2006
	Office			Multifamily			Total			Office			Multifamily			Total
Rental revenues	$	219,914		$	34,410		$	254,324		$	179,453		$	26,724		$	206,177
Percentage of total		86	%		14	%		100	%		87	%		13	%		100	%
Rental expenses	$	64,090		$	8,795		$	72,885		$	61,132		$	8,696		$	69,828
Percentage of total		88	%		12	%		100	%		88	%		12	%		100	%
Rental revenues less rental expenses	$	155,824		$	25,615		$	181,439		$	118,321		$	18,028		$	136,349
Percentage of total		86	%		14	%		100	%		87	%		13	%		100	%

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Douglas Emmett, Inc

Notes to Consolidated Financial Statements (continued)

(in thousands, except shares and per share data)

The following is a reconciliation of rental revenues less rental expenses to net (loss) income available to common stockholders:

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
	Douglas Emmett, Inc.			Predecessor			Douglas Emmett, Inc.			Predecessor
Rental revenues less rental expenses	$	91,753		$	67,402		$	181,439		$	136,349
Add:
Interest and other income		372			1,327			454			2,548
Gain on investments in interest rate contracts, net		—			25,024			—			59,967
Deficit recovery from minority partners, net		—			(1,521	)		—			6,248
Less:
General and administrative expenses		(5,120	)		(1,431	)		(10,162	)		(3,136	)
Interest expense		(38,313	)		(30,001	)		(76,615	)		(58,055	)
Depreciation and amortization		(50,494	)		(27,833	)		(101,615	)		(53,616	)
Minority interests		542			(23,613	)		1,966			(64,434	)
Preferred minority investor		—			(4,025	)		—			(8,050	)
Net (loss) income	$	(1,260	)	$	5,329		$	(4,533	)	$	17,821

13. Subsequent Events

During July 2007, we repurchased approximately 4.3 million additional share equivalents in private transactions for total consideration of approximately $105.0 million. We may make additional purchases of our share equivalents from time to time, but do not have any commitments to do so.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this report. We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995. We caution investors that any forward-looking statements presented in this report, or which management may make orally or in writing from time to time, are based on the beliefs of, assumptions made by, and information currently available to management. Such statements are based on assumptions and the actual outcome will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. As a result, our actual future results may differ from our expectations, and those differences may be material. We are not undertaking any obligation to update any forward-looking statements. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include the following: adverse economic or real estate developments in Southern California and Honolulu; decreased rental rates or increased tenant incentive and vacancy rates; defaults on, early termination of, or non-renewal of leases by tenants; increased interest rates and operating costs; failure to generate sufficient cash flows to service our outstanding indebtedness; difficulties in identifying properties to acquire and completing acquisitions; failure to successfully operate acquired properties and operations; failure to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended; possible adverse changes in rent control laws and regulations; environmental uncertainties; risks related to natural disasters; lack or insufficient amount of insurance; inability to successfully expand into new markets and submarkets; risks associated with property development; conflicts of interest with our officers; changes in real estate and zoning laws or increases in real property tax rates; and the consequences of any future terrorist attacks. Please refer to the risk factors under “Item 1A. Risk Factors” beginning on page 9 and elsewhere in our 2006 Annual Report on Form 10-K.

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Basis of Presentation

The accompanying consolidated financial statements as of December 31, 2006 and June 30, 2007, and for the three and six months ended June 30, 2007, are the consolidated financial statements of Douglas Emmett, Inc. and its subsidiaries including our operating partnership. Douglas Emmett, Inc. is a Maryland corporation formed on June 28, 2005 which did not have any meaningful operating activity until the consummation of our IPO and the related acquisition of our predecessor and certain other entities in October 2006. For a detailed description of this transaction and our resulting organization, see footnote 1 “Organization and Basis of Presentation” to our consolidated financial statements included in this Quarterly Report on Form 10-Q and footnote 1 “Organization and Description of Business” to our consolidated financial statements included in our 2006 Annual Report on Form 10-K. The financial statements for the three and six months ended June 30, 2006 represent the consolidated financial statements of our predecessor. They include the accounts of DERA and the institutional funds, but do not include the accounts of the non-predecessor entities which were acquired at the time of our IPO. Because the 2007 and 2006 periods reflect significant differences in both the assets included and accounting, the results are in many cases not directly comparable and we urge readers to be even more than usually cautious in using them to predict future results.

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Critical Accounting Policies

Our discussion and analysis of the historical financial condition and results of operations of Douglas Emmett, Inc. and our predecessor are based upon their respective consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements in conformity with GAAP requires us to make estimates of certain items and judgments as to certain future events, for example with respect to the allocation of the purchase price of acquired property among land, buildings, improvements, equipment, and any related intangible assets and liabilities, or the effect of a property tax reassessment of our properties in connection with the IPO. These determinations, even though inherently subjective and subject to change, affect the reported amounts of our assets, liabilities and expenses. While we believe that our estimates are based on reasonable assumptions and judgments at the time they are made, some of our assumptions, estimates and judgments will inevitably prove to be incorrect. As a result, actual outcomes will likely differ from our accruals, and those differences—positive or negative—could be material. Some of our accruals are subject to adjustment as we believe appropriate based on revised estimates and reconciliation to the actual results when available.

In addition, we identified certain critical accounting policies which affect certain of our more significant estimates and assumptions used in preparing our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2006. We have not made any material changes to these policies as previously disclosed.

Historical Results of Operations

Overview

We are a fully integrated, self-administered and self-managed REIT and one of the largest owners and operators of high-quality office and multifamily properties in Los Angeles County, California and in Honolulu, Hawaii. Our presence in Los Angeles and Honolulu is the result of a consistent and focused strategy of identifying submarkets that are supply constrained, have high barriers to entry and exhibit strong economic characteristics such as population and job growth and a diverse economic base. Los Angeles County represents the nation’s second largest office market with a total inventory of approximately 368 million rentable square feet. The Honolulu Central Business District has the largest concentration of institutional quality office space in Hawaii, totaling over 5.2 million rentable square feet. In our office portfolio, we focus primarily on owning and acquiring a substantial share of top-tier office properties within submarkets located near high-end executive housing and key lifestyle amenities. In our multifamily portfolio, we focus primarily on owning and acquiring select properties at premier locations within these same submarkets. Our properties are concentrated in nine premier Los Angeles County submarkets—Brentwood, Olympic Corridor, Century City, Santa Monica, Beverly Hills, Westwood, Sherman Oaks/Encino, Warner Center/Woodland Hills and Burbank—as well as in Honolulu, Hawaii.

Significant transactions that impact our results of operations since filing our 2006 Annual Report on Form 10-K include the acquisition of an office property and incremental borrowings of $150 million. In May 2007, we acquired a Class A office building of approximately 50,000 square feet located in our Century City submarket for a contract price of $32 million. The building is currently 100% leased through December 2019. This acquisition was funded with amounts drawn on our revolving credit facility. The revolver was subsequently repaid at the beginning of June 2007 with a portion of the proceeds from our incremental $150 million borrowings secured by our residential properties. During the second quarter of 2007, we repurchased approximately 2.0 million share equivalents in private transactions for a total consideration of approximately $49.4 million. During July 2007, we repurchased approximately 4.3 million additional share equivalents in private transactions for total consideration of approximately $105.0 million. We may make additional purchases from time to time in private transactions or in the public markets, but do not have any commitments to do so. See “Liquidity and Capital Resources” below.

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As discussed under “Basis of Presentation” above, our results of operations for 2007 periods contain the consolidated results of Douglas Emmett, Inc. and its subsidiaries, including our operating partnership, while our results of operations for 2006 periods reflect those of our predecessor, which includes the accounts of DERA and the institutional funds. Our results of operations in the first half of 2007 and 2006 were significantly affected by our acquisition and repositioning activities in both years. As a consequence, our results are not comparable from period to period due to the varying timing of acquisitions, including the eight properties acquired at the time of our IPO, and the impact of lease-up periods or increased vacancy resulting from repositioning activities.

Through our interest in Douglas Emmett Properties, LP (our operating partnership) and its subsidiaries, at June 30, 2007 our office portfolio consisted of 47 properties with approximately 11.6 million rentable square feet, including an approximate 50,000 square foot building that we acquired in May 2007 in our Century City submarket, and our multifamily portfolio consists of nine properties with a total of 2,868 units. As of June 30, 2007, our office portfolio was 95.7% leased, and our multifamily properties were 99.5% leased. Our office portfolio contributed approximately 84.8% of our annualized rent as of June 30, 2007, while our multifamily portfolio contributed the remaining 15.2%. As of June 30, 2007, our Los Angeles County office and multifamily portfolio contributed approximately 90.9% of our annualized rent, and our Honolulu, Hawaii office and multifamily portfolio contributed the remaining 9.1%.

Our repositioning efforts impacted our operating results in both 2006 and 2007. Upon completion of our repositioning efforts, we expect that we will be able to stabilize occupancy at these properties at levels consistent with the rest of our portfolio. In our office portfolio, our repositioning properties include the results of Warner Center Towers, The Trillium and Bishop Place for all periods presented. In addition, Harbor Court was a repositioning property during 2006. Our office acquisition properties consist of four properties acquired at the time of our IPO in October 2006 (Brentwood Court, Brentwood Plaza, Brentwood San Vicente Medical and San Vicente Plaza) and one additional office property acquired in May 2007, as described above. In addition, in our multifamily portfolio, we acquired four properties during the periods being reported: Royal Kunia in March 2006 and Barrington/Kiowa, Barry and Kiowa at the time of our formation transactions in October 2006. During the periods presented, we had no multifamily repositioning properties.

In the second quarter of 2007, based on our most recent judgment of the ongoing reassessment process, we reduced the accrual for property tax expenses expected to result from the reassessment of properties in connection with our IPO. However, until that process is final, our accruals are only estimates of the actual outcome. We will continue to evaluate potential increases in property taxes and will adjust future accruals if we believe appropriate.

Comparison of three months ended June 30, 2007 to three months ended June 30, 2006

Revenue

Office Revenue

Total Office Revenue. Total office revenue consists of rent, tenant recoveries and parking and other income. Total office portfolio revenue increased by $19.9 million, or 22.4%, to $109.3 million for the three months ended June 30, 2007 compared to $89.4 million for the three months ended June 30, 2006 for the reasons described below.

Rent. Rent includes rental revenues from our office properties, percentage rent on the retail space contained within office properties and lease termination income. Total office portfolio rent increased by $18.1 million, or 24.2%, to $92.9 million for the three months ended June 30, 2007 compared to $74.8 million for the three months ended June 30, 2006, primarily due to incremental rent from the four properties acquired in the fourth quarter of 2006 and one property acquired in the second quarter of 2007, as described above, and gains in occupancy at our four repositioning properties. Rent also increased for the remainder of our office portfolio that was not acquired or repositioned during the periods presented, primarily due to gains in occupancy and increases in average rental rates for new and renewal leases signed since April 1, 2006. In addition, we recognized approximately $7.8 million of incremental rent related to the amortization of net below-market rents that resulted from the mark to market adjustments to our leases that we recorded in connection with our IPO.

20

Tenant Recoveries. Total office portfolio tenant recoveries increased by $0.6 million, or 11.5%, to $5.4 million for the three months ended June 30, 2007 compared to $4.8 million for the three months ended June 30, 2006 primarily due to incremental recoveries from the four properties acquired in the fourth quarter of 2006 and one property acquired in the second quarter of 2007, as described above. The overall increase also reflects increases in tenant recoveries at our repositioning properties due to increases in occupancy and recoveries related to increases in operating expenses, as discussed below, for the remainder of our office portfolio.

Parking and Other Income. Total office portfolio parking and other income increased by $1.3 million, or 13.3%, to $11.1 million for the three months ended June 30, 2007 compared to $9.8 million for the three months ended June 30, 2006. This increase was primarily due to gains in occupancy in our repositioning properties and parking rate increases implemented across the portfolio.

Multifamily Revenue

Total Multifamily Revenue. Total multifamily revenue consists of rent and parking and other income. Total multifamily portfolio revenue increased by $3.2 million, or 22.5%, to $17.4 million for the three months ended June 30, 2007 compared to $14.2 million for the three months ended June 30, 2006, primarily due to the four multifamily property acquisitions in our formation transactions. In addition, a significant number of our Santa Monica multifamily units were under leases signed prior to a 1999 change in California Law that allows landlords to reset rents to market rates when a tenant moves out. A portion of the multifamily increase was due to the rollover to market rents of several of these rent-controlled units, or “Pre-1999 Units,” since April 1, 2006. The remainder of the increase was primarily due to increases in rents charged to other existing and new tenants. In addition, we recognized approximately $1.9 million of incremental rent related to the amortization of net below-market rents that resulted from the mark to market adjustments to our leases that we recorded in connection with our IPO.

Operating Expenses

Office Expense. Total portfolio office expense decreased by $0.6 million, or 1.8%, to $31.1 million for the three months ended June 30, 2007 compared to $31.7 million for the three months ended June 30, 2006, reflecting higher utilities costs in 2006, as the summer of 2006 was warmer than average, partially offset by higher costs in 2007 as a result of additional properties in our portfolio.

Multifamily Expense. Total multifamily portfolio expense decreased by $0.6 million, or 13.2%, to $3.9 million for the three months ended June 30, 2007 compared to $4.5 million for the three months ended June 30, 2006, primarily due to higher expenses in 2006 related to timing of repairs and maintenance projects partially offset by incremental expenses at the three multifamily properties acquired at the time of our IPO, as described above.

General and Administrative. General and administrative expenses for the three months ended June 30, 2007 increased $3.7 million to $5.1 million for the three months ended June 30, 2007 compared to $1.4 million for the three months ended June 30, 2006. The increase is primarily due to publicly-traded REIT related costs subsequent to our IPO, including legal and audit fees, directors and officers insurance and costs related to our compliance with section 404 of Sarbanes-Oxley.

Depreciation and Amortization. Depreciation and amortization expense increased $22.7 million, or 81.4%, to $50.5 million for the three months ended June 30, 2007 compared to $27.8 million for the three months ended June 30, 2006. The increase was primarily due to incremental depreciation related to the nine office and multifamily property acquisitions described above, as well as depreciation of the higher cost basis for each existing property in our portfolio as a result of recording these real estate assets at market value in connection with our IPO and formation transactions.

21

Non-Operating Income and Expenses

Gain on Investments in Interest Rate Contracts, Net. We recognized a net gain of $25.0 million on investments in interest rate contracts for the three months ended June 30, 2006 due to changes in the fair market value of our in place interest rate swap contracts during the applicable three-month period. In conjunction with our IPO, we entered into a series of interest rate swaps that effectively offset any future changes in the fair value of our predecessor’s existing interest rate contracts. Therefore, no comparable gain or loss was recognized during the three months ended June 30, 2007.

Interest Expense. Interest expense increased $8.3 million, or 27.7%, to $38.3 million for the three months ended June 30, 2007 compared to $30.0 million for the three months ended June 30, 2006. The increase was primarily due to an increase in our average outstanding debt related to $545 million borrowed in the fourth quarter of 2006 to fund a portion of the formation transactions related to our IPO and the $150 million of incremental debt borrowed during the second quarter of 2007 to fund repurchases of equity and the purchase of our new property in Century City. The remaining increase in interest expense was primarily due to borrowings outstanding under our corporate revolver during the three months ended June 30, 2007.

Deficit Distribution to Minority Partners, Net. Deficit distribution to minority partners, net was a $1.5 million net distribution for the three months ended June 30, 2006. The expense was primarily due to distributions to limited partners exceeding the net income attributable to the limited partners in three of the institutional funds. This category was not applicable subsequent to our IPO and therefore no such amount was recorded in 2007.

Minority Interests. Minority interest income totaling $0.5 million was recognized for the three months ended June 30, 2007 compared to a $27.6 million expense for the three months ended June 30, 2006 resulting in a net difference of $28.1 million. The amount in 2006 represents the limited partners’ ownership interest in our predecessor, including a preferred minority investor. The amount in 2007 represents the portion of results attributable to minority ownership interests in our operating partnership by holders of OP units.

Comparison of six months ended June 30, 2007 to six months ended June 30, 2006

Revenue

Office Revenue

Total Office Revenue. Total office portfolio revenue increased by $40.4 million, or 22.5%, to $219.9 million for the six months ended June 30, 2007 compared to $179.5 million for the six months ended June 30, 2006 for the reasons described below.

Rent. Total office portfolio rent increased by $34.0 million, or 22.6%, to $184.5 million for the six months ended June 30, 2007 compared to $150.5 million for the six months ended June 30, 2006, primarily due to incremental rent from the four properties acquired in the fourth quarter of 2006 and one property acquired in the second quarter of 2007, as described above, and gains in occupancy at our four repositioning properties. Rent also increased for the remainder of our office portfolio that was not acquired or repositioned during the periods presented, primarily due to gains in occupancy and increases in average rental rates for new and renewal leases signed since January 1, 2006. In addition, we recognized approximately $15.4 million of incremental rent related to the amortization of net below-market rents that resulted from the mark to market adjustments to our leases that we recorded in connection with our IPO.

Tenant Recoveries. Total office portfolio tenant recoveries increased by $4.3 million, or 48.5%, to $13.2 million for the six months ended June 30, 2007 compared to $8.9 million for the six months ended June 30, 2006 primarily due to incremental recoveries from the four properties acquired in the fourth quarter of 2006, as described above. The overall increase is also attributable to increases in tenant recoveries at our repositioning properties due to increases in occupancy and recoveries related to increases in operating expenses, as discussed below, for the remainder of our office portfolio.

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Parking and Other Income. Total office portfolio parking and other income increased by $2.2 million, or 10.8%, to $22.2 million for the six months ended June 30, 2007 compared to $20.0 million for the six months ended June 30, 2006. This increase was primarily due to gains in occupancy in our repositioning properties and parking rate increases implemented across the portfolio.

Multifamily Revenue

Total Multifamily Revenue. Total multifamily portfolio revenue increased by $7.7 million, or 28.8%, to $34.4 million for the six months ended June 30, 2007 compared to $26.7 million for the six months ended June 30, 2006, primarily due to the four multifamily property acquisitions in our formation transactions, as well as Villas at Royal Kunia, which we acquired in March 2006. In addition, a portion of the multifamily increase was due to the rollover to market rents of several “Pre-1999 Units” since January 1, 2006. The remainder of the increase was primarily due to increases in rents charged to other existing and new tenants. In addition, we recognized approximately $3.8 million of incremental rent related to the amortization of net below-market rents that resulted from the mark to market adjustments to our leases that we recorded in connection with our IPO.

Operating Expenses

Office Expense. Total portfolio office expense increased by $3.0 million, or 4.8%, to $64.1 million for the six months ended June 30, 2007 compared to $61.1 million for the six months ended June 30, 2006, reflecting the additional properties acquired at our IPO, increases in contractual expenses, including janitorial and security costs, and higher insurance costs in 2007 as a result of industry wide rate increases, partially offset by higher utilities costs in 2006.

Multifamily Expense. Total multifamily portfolio expense increased by $0.1 million, or 1.1%, to $8.8 million for the six months ended June 30, 2007 compared to $8.7 million for the six months ended June 30, 2006, primarily due to incremental expenses at the four multifamily property acquisitions described above, almost entirely offset by higher expenses in 2006 related to the timing of repairs and maintenance projects.

General and Administrative. General and administrative expenses for the six months ended June 30, 2007 increased $7.0 million to $10.2 million for the six months ended June 30, 2007 compared to $3.1 million for the six months ended June 30, 2006. The increase is primarily due to publicly-traded REIT related costs subsequent to our IPO, including legal and audit fees, directors and officers insurance and costs related to our compliance with section 404 of Sarbanes-Oxley.

Depreciation and Amortization. Depreciation and amortization expense increased $48.0 million, or 89.5%, to $101.6 million for the six months ended June 30, 2007 compared to $53.6 million for the six months ended June 30, 2006. The increase was primarily due to incremental depreciation related to the nine office and multifamily property acquisitions described above, as well as depreciation of the higher cost basis for each existing property in our portfolio as a result of recording these real estate assets at market value in connection with our IPO and formation transactions.

Non-Operating Income and Expenses

Gain on Investments in Interest Rate Contracts, Net. We recognized a net gain of $60.0 million on investments in interest rate contracts for the six months ended June 30, 2006 due to changes in the fair market value of our in place interest rate swap contracts during the applicable six-month period. In conjunction with our IPO, we entered into a series of interest rate swaps that effectively offset any future changes in the fair value of our predecessor’s existing interest rate contracts. Therefore, no comparable gain or loss was recognized during the six months ended June 30, 2007.

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Interest Expense. Interest expense increased $18.6 million, or 32.0%, to $76.6 million for the six months ended June 30, 2007 compared to $58.1 million for the six months ended June 30, 2006. The increase was primarily due to an increase in our average outstanding debt related to $545 million borrowed in the fourth quarter of 2006 to fund a portion of the formation transactions related to our IPO. Additional interest expense was recorded on $150 million of incremental debt borrowed during the second quarter of 2007 to fund repurchases of equity and the purchase of our new property in Century City. The remaining increase in interest expense was primarily due to borrowings outstanding under our corporate revolver during the six months ended June 30, 2007.

Deficit Recovery from Minority Partners, Net. Deficit recovery from minority partners, net was a $6.3 million net recovery for the six months ended June 30, 2006. The revenue was primarily due to the net income attributable to limited partners exceeding distributions to the limited partners in three of the institutional funds, resulting in the reversal of a portion of the deficit distribution expense incurred in prior periods. This category was not applicable subsequent to our IPO and therefore no such amount was recorded in 2007.

Minority Interests. Minority interest income totaling $2.0 million was recognized for the six months ended June 30, 2007 compared to a $72.5 million expense for the six months ended June 30, 2006 resulting in a net difference of $74.5 million. The amount in 2006 represents the limited partners’ ownership interest in our predecessor, including a preferred minority investor. The amount in 2007 represents the portion of results attributable to minority ownership interests in our operating partnership by holders of OP units.

Liquidity and Capital Resources

Available Borrowings, Cash Balances and Capital Resources

In June 2007, we borrowed an additional $150 million of long term variable rate debt. This included an increase of $132 million in our existing loan facilities with Fannie Mae, plus additional loan facilities with Fannie Mae totaling $18 million. These loans are secured by our residential properties with maturity dates ranging from June 1, 2012 to June 1, 2017. Concurrent with the incremental borrowings, we entered into interest rate contracts to swap the underlying variable rates to fixed rates. These contracts are designated as hedges and result in a weighted average fixed interest rate of approximately 5.87%.

We had total indebtedness of $2.9 billion at June 30, 2007 excluding a loan premium representing the mark-to-market adjustment on variable rate debt assumed from our predecessor. Our debt increased $140 million from December 31, 2006 as a result of $150 million of incremental borrowings during the second quarter of 2007, net of amounts repaid under our revolving credit facility. At June 30, 2007, all of our debt other than our revolving credit facility was effectively fixed through the use of interest rate swaps at a weighted average effective rate of 5.20%. See footnote 7 to our consolidated financial statements in this quarterly report for a summary of our outstanding debt. In addition to our outstanding debt at June 30, 2007, we also have available to us a $250 million senior secured revolving credit facility with a group of banks led by Bank of America, N.A. and Banc of America Securities LLC, which contains an accordion feature that allows us to increase availability to $500 million under specified circumstances. This revolving credit facility has a three year term with two one-year extensions and an effective rate of LIBOR plus 70 basis points if the outstanding amount is less than $175 million and LIBOR plus 80 basis points if the amount outstanding is greater than $175 million. We intend to use our revolving credit facility for general corporate purposes, including funding acquisitions, redevelopment and repositioning opportunities, funding tenant improvements and capital expenditures, funding recapitalizations and providing working capital. On June 30, 2007, there was no outstanding balance on our revolving credit facility.

At June 30, 2007, our total borrowings under secured loans represented 41.8% of our total market capitalization of $6.9 billion. Total market capitalization includes our consolidated debt, excluding the unamortized loan premium, and the value of common stock and operating partnership units each based on our common stock closing price on the New York Stock Exchange of $24.74 per share on June 29, 2007, the last trading day of the quarter.

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During the second quarter of 2007, we repurchased approximately 2.0 million share equivalents in private transactions for a total consideration of approximately $49.4 million. During July 2007, we repurchased approximately 4.3 million additional share equivalents in private transactions for total consideration of approximately $105.0 million. We may make additional purchases from time to time in private transactions or in the public markets, but do not have any commitments to do so.

The nature of our business, and the requirement imposed by REIT rules that we distribute a substantial majority of our taxable income on an annual basis, will cause us to have substantial liquidity needs over both the short term and the long term. We intend to pay an annual dividend of $0.70 per share. Thus far during calendar year 2007, we have paid first and second quarter dividends each of $0.175 per share. In addition, on January 15, 2007 we paid a dividend of $0.12 per share, which represents the prorated quarterly dividend for the period from October 31, 2006 to December 31, 2006.

We expect to meet our short-term liquidity requirements generally through cash provided by operations and, if necessary, by drawing upon our revolving credit facility. We anticipate that cash provided by operations and borrowings under our senior secured revolving credit facility will be sufficient to meet our liquidity requirements for at least the next 12 months. We have historically financed our operations, acquisitions and development through the use of short-term acquisition lines of credit and replaced those lines with long-term secured floating rate mortgage debt. To mitigate the impact of fluctuations in short-term interest rates on our cash flow from operations, we generally enter into interest rate swap or interest rate cap agreements.

Our long-term liquidity needs consist primarily of funds necessary to pay for distributions to our stockholders, acquisitions, redevelopment and repositioning of properties, non-recurring capital expenditures, any equity repurchases and repayment of indebtedness at maturity. We will seek to satisfy these needs through cash flow from operations, long-term secured and unsecured indebtedness, the issuance of debt and equity securities, including units in our operating partnership, property dispositions and joint venture transactions.

Cash Flows

Net cash provided by operating activities increased $9.2 million to $79.2 million for the six months ended June 30, 2007 compared to $70.0 million for the six months ended June 30, 2006. The increase reflects higher net cash flow from existing properties that generated higher quarter over quarter results, as described in results of operations above, as well as incremental net cash flow from acquired properties. This increase was partially offset by higher payments of financing costs in 2007 as a result of a greater average outstanding debt balance.

Net cash used in investing activities decreased $79.8 million to $58.5 million for the six months ended June 30, 2007 compared to $138.3 million for the six months ended June 30, 2006. The decrease was primarily due to a lower level of spending on property acquisitions in the first six months of 2007 in comparison to the first six months of 2006 as described in footnote 3 to our consolidated financial statements in this quarterly report.

Cash flow provided by financing activities decreased $19.8 million to $40.8 million for the six months ended June 30, 2007 compared to $60.6 million for the six months ended June 30, 2006. The decrease in cash provided by financing activities during 2007 is due to a lower level of acquisition activity in comparison to 2006 partially offset by additional borrowings used to fund dividend payments and equity repurchases.

Contractual Obligations

During the second quarter of 2007, there were no material changes outside the ordinary course of our business in the information regarding specified contractual obligations contained in our Annual Report on Form 10-K for the year ended December 31, 2006.

Off-Balance Sheet Arrangements

At June 30, 2007, we did not have any off balance sheet financing arrangements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

During the first six months of 2007, there were no material changes in the information regarding market risk contained in our Annual Report on Form 10-K for the year ended December 31, 2006.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and regulations and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of June 30, 2007, the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, regarding the effectiveness in design and operation of our disclosure controls and procedures at the end of the period covered by this report. Based on the foregoing, the Chief Executive Officer and Chief Financial Officer concluded, as of that time, that our disclosure controls and procedures were effective at the reasonable assurance level.

There have been no significant changes that occurred during the quarter covered by this report in our internal control over financial reporting identified in connection with the evaluation referenced above that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

During 2006 and the first six months of 2007, we made many changes to our accounting and finance environment in order to meet our new obligations as a public company. Although we had been preparing audited financial statements for many years, they did not need to comply with all of the requirements imposed on public companies. For example, our predecessor historically prepared financial statements for its funds on a “fair value” basis, which differs from the “historical cost” basis on which we now report. These changes and our new obligations as a public company required an expansion of our finance and accounting staff as well as changes in our disclosure controls and procedures during 2006 and the first six months of 2007.

We anticipate further changes to our accounting and finance environment during the remainder of 2007 including the expansion of our accounting and finance staff. In particular, we were not required to comply with Section 404 of the Sarbanes Oxley Act of 2002 with respect to 2006, but will have to do so by the end of 2007. This will require us to document our internal controls over financial reporting. We also intend to take steps to make our internal controls and procedures more efficient through system improvements and automation. For example, because our current accounting software was better adapted to our predecessor’s needs, we intend to upgrade to a new accounting software package which is more commonly used by public REITs. As a result, during 2007 we will continue to make refinements to our disclosure controls and procedures as well as our internal controls over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to various legal proceedings and claims that arise in the ordinary course of business. We believe that these matters are generally covered by insurance. Management believes that the ultimate settlement of these actions will not have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes to the risk factors included in the section entitled “Risk Factors” beginning on page 9 and elsewhere in our 2006 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Securities and Use of Proceeds

Sales. We did not make any unregistered sales of our securities during the quarter ended June 30, 2007.

Purchases. We made the following purchases of our share equivalents during the quarter ended June 30, 2007.

ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total number of shares (or units) purchased	(b) Average price paid per share (or unit)
April 2007	—		—
May 2007	772,001	$	24.50
June 2007	1,242,936	$	24.50
Total	2,014,937	$	24.50

These purchases were not made pursuant to a publicly announced program. All purchases were made in private unsolicited transactions.

Item 3. Defaults Upon Senior Securities

Not applicable.

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Item 4. Submission of Matters to a Vote of Security Holders

Our annual meeting of stockholders was held on May 31, 2007. Approximately 86% of the eligible shares were voted. A detailed description of the matters voted upon at the meeting is contained in our proxy statement, which was filed with the Securities and Exchange Commission on April 19, 2007. The voting results for each of the proposals are as follows:

Proposal	For	Withheld/ Against	Abstain	Broker Non-Vote
1. Election of directors
Dan A. Emmett	95,289,108	4,127,082
Jordan L. Kaplan	95,703,274	3,712,916
Kenneth M. Panzer	95,267,693	4,148,497
Leslie E. Bider	95,195,019	4,221,171
Victor J. Coleman	95,194,519	4,221,671
Ghebre Selassie Mehreteab	95,702,971	3,713,219
Thomas E. O’Hern	88,440,506	10,975,684
Dr. Andrea Rich	87,935,113	11,481,077
William Wilson III	95,701,806	3,714,384
2. Ratification of Ernst & Young LLP as independent registered public accounting firm	99,390,383	13,430	12,377

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number	Description
10.1	Amended and Restated Discount MBS Multifamily Note for $153,630,000 between Fannie Mae and Barrington Pacific, LLC, dated June 1, 2007.
10.2	Amended and Restated Discount MBS Multifamily Note for $46,400,000 between Fannie Mae and Barrington Pacific, LLC, dated June 1, 2007.
10.3	Amended and Restated Discount MBS Multifamily Note for $43,440,000 between Fannie Mae and Shores Barrington LLC, dated June 1, 2007.
10.4	Amended and Restated Discount MBS Multifamily Note for $144,610,000 between Fannie Mae and Shores Barrington LLC, dated June 1, 2007.
10.5	Discount MBS Multifamily Note for $111,920,000 between Fannie Mae and DEG Residential, LLC, dated June 1, 2007.
10.6	Adjustable Rate Multifamily Note for $7,750,000 between Fannie Mae and Douglas Emmett Residential 2006, LLC, dated June 1, 2007.
10.7	Adjustable Rate Multifamily Note for $7,150,000 between Fannie Mae and Douglas Emmett Residential 2006, LLC, dated June 1, 2007.
10.8	Adjustable Rate Multifamily Note for $3,100,000 between Fannie Mae and Douglas Emmett Residential 2006, LLC, dated June 1, 2007.
31.1	Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certificate of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(1)
32.2	Certificate of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

(1) In accordance with SEC Release No. 33-8212, the following exhibit is being furnished, and is not being filed as part of this Report on Form 10 Q or as a separate disclosure document, and is not being incorporated by reference into any Securities Act of 1933 registration statement.

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Signatures

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

	DOUGLAS EMMETT, INC.
Date: August 9, 2007	By:	/s/ JORDAN L. KAPLAN
		Jordan L. Kaplan
		President and Chief Executive Officer
Date: August 9, 2007	By:	/s/ WILLIAM KAMER
		William Kamer
		Chief Financial Officer

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EX-10.1

Exhibit 10.1

SECOND AMENDED AND RESTATED

DISCOUNT MBS MULTIFAMILY NOTE

(Barrington Plaza)

US $153,630,000.00 June 1, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”), jointly and severally (if more than one) promises to pay to the order of FANNIE MAE, a federally-chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 et seq., the principal sum of One Hundred Fifty-Three Million Six Hundred Thirty Thousand and 00/100 Dollars (US$153,630,000.00), with interest on the unpaid principal balance at the rates applicable from time to time set forth in this Second Amended and Restated Discount MBS Multifamily Note (the “Note”).

A Discount MBS Multifamily Note (the “Original Note”) in the original principal amount of $100,000,000.00, dated July 2, 2001, was executed by Borrower in favor of Berkshire Mortgage Finance Limited Partnership, a Massachusetts limited partnership (“Berkshire”), and secured, inter alia, by a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (as amended from time to time, the “Original Security Instrument”) dated as of July 2, 2001, made by Borrower for the benefit of Berkshire, recorded with the Office of the County Recorder of Los Angeles County, California as Instrument No. 01-1145237, encumbering a certain multifamily property known as Barrington Plaza in Los Angeles, Los Angeles County, California (the “Property”). The Original Note was previously endorsed by Berkshire in favor of Fannie Mae and the Original Security Instrument was assigned by Berkshire to Fannie Mae pursuant to an Assignment of Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of July 2, 2001. The Original Note was previously amended and restated in its entirety pursuant to an Amended and Restated Discount MBS Multifamily Note made by Borrower payable to the order of Fannie Mae in the original principal amount of $117,600,000, dated December 22, 2004 (the “Amended Note”). The Amended Note was secured by, inter alia, an Amended and Restated Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the “Amended Security Instrument”) dated as of December 22, 2004, made by Borrower for the benefit of Fannie Mae, recorded with the Office of the County Recorder of Los Angeles County, California as Instrument No. 05-0015177, encumbering the Property. Borrower and Fannie Mae desire to and hereby amend and restate the Amended Note in its entirety to reflect an increase in the note amount, an extension of the term and certain other modifications, as hereinafter set forth.

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1. Defined Terms. As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument. Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Security Instrument (as defined in Section 7).

2. Address for Payment. All payments due under this Note shall be payable at c/o Deutsche Bank Berkshire Mortgage, Inc., One Beacon Street, 14^th floor, Boston, Massachusetts 02108, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3. Discount Mortgage Backed Security. The original stated principal amount of this Note shall be funded by the issuance of a discount mortgage backed security in the face amount of this Note (the “DMBS”). The original stated principal amount of this Note shall be equal to the sum of (i) the price (the “Price”) of the initial DMBS and (ii) the discount (the “Discount”) of the initial DMBS. The Price is equal to the proceeds of the sale of the DMBS and the Discount is an amount equal to the difference between (i) the face amount of the DMBS and (ii) the Price of the DMBS. Except as provided in Section 4(a), the proceeds made available by Lender to Borrower shall equal the Price of the DMBS. Except for the initial DMBS, which shall be issued for the period from June 1, 2007 to August 1, 2007, and subject to the last sentence of Section 12(b)(1), each DMBS shall be issued for a three month period. Except for the initial DMBS if not issued on the first day of the month as specified in the preceding sentence, the issuance date for each DMBS shall be the first day of a month and the maturity date for each DMBS shall be the first day of the month following such three month period. For example, the maturity date for a DMBS issued on December 1 is March 1. Provided, however, that Borrower may request the issuance of a DMBS with a maturity date shorter or longer than three months (but in no event shorter than one month or longer than nine months) in accordance with the terms and conditions of the last sentence of Section 12(b)(1).

The entire unpaid principal of the Note will be due and payable by the Borrower to the Lender on the maturity date of the outstanding DMBS unless the outstanding DMBS is renewed with a new DMBS or converted to a fixed rate to take effect on the maturity date of the outstanding DMBS.

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4. Payment of Principal and Interest.

(a) The original proceeds in the amount of $100,000,000 under this Note were made available to Borrower on July 2, 2001. Additional proceeds under the Amended Note in the amount of $17,600,000 were made available to the Borrower on December 22, 2004, and additional proceeds in the amount of $36,030,000 under this Note were made available to Borrower on June 1, 2007 (the “Disbursement Date”). The issuance date of the initial DMBS which shall include the original proceeds and the additional proceeds is June 22, 2007 (the “Settlement Date”). The Borrower shall pay interest on the amount disbursed on the Disbursement Date for the partial month period beginning on the Disbursement Date and ending on and including the Settlement Date, at a rate per annum equal to 5.18%.

(b) Borrower shall pay, in immediately available funds, (1) on the Disbursement Date, an amount equal to the sum of (i) the Discount of the initial DMBS, (ii) a sum equal to two thirds of the estimated Discount on the next succeeding 3-month DMBS to be issued August 1, 2007, (iii) an amount equal to sixty (60) basis points (.60%) times the outstanding principal amount divided by 12 (less any amounts paid by Borrower pursuant to Section 4(b)(2)(ii) of the Amended Note with respect to such period, if any), and (iv) the amount of interest due pursuant to Section 4(a) above, and (2) thereafter, until the Maturity Date, consecutive monthly payments on the first day of each month beginning July 1, 2007, in an amount equal to the sum of (i) one third ( ¹/3) of the Discount calculated on the then outstanding DMBS and (ii) an amount equal to sixty (60) basis points (.60%) times the outstanding principal amount divided by 12. Payments must be received by Lender not later than 5 p.m. Pacific Time on the date due. Notwithstanding the foregoing provisions of Section 4(b)(2)(i) above and provided that Borrower has made all payments required under Section 4(d) below, Borrower shall not be obligated to make the monthly payment described in Section 4(b)(2)(i) during the last 3 months prior to the Maturity Date.

(c) Not less than 20 days prior to the maturity date of each DMBS, Lender shall notify Borrower (in the manner specified in the Security Instrument (defined below) for giving notices) that the outstanding DMBS is scheduled to mature on its maturity date and offer Borrower the opportunity to have a new DMBS issued on such maturity date. If Borrower elects to have the Indebtedness refinanced with a new DMBS, not less than three (3) Business Days prior to the maturity date of the maturing DMBS, Lender shall notify Borrower of the Discount on the new DMBS to be issued by sending Borrower the Rate Confirmation Form attached hereto as Schedule D. Borrower shall execute and return Schedule D to the Lender not later than one (1) Business Day prior to the issuance date of the new DMBS. For purposes of this Note, a “Business Day” means any day other than a Saturday, Sunday or any other day on which Lender is not open for business.

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(d) If the amount of the Discount for the new DMBS to be issued is greater than the Discount for the outstanding DMBS, then not less than two (2) Business Days prior to the maturity date of the outstanding DMBS the Borrower shall pay to the Lender the aggregate amount of such difference. If the amount of the Discount for the new DMBS is less than the Discount for the outstanding DMBS, the aggregate amount of such difference shall be credited against the regular monthly installment due on the first day of the month immediately following the issuance date of the new DMBS.

(e) If Borrower timely exercises its option to convert the interest rate on this Note to a fixed rate pursuant to the Second Amended and Restated Conversion Agreement, dated the same day as this Note, between the Borrower and Lender (the “Conversion Agreement”), Borrower will execute the DMBS Multifamily Note Modification Agreement (the form of which is attached to the Conversion Agreement as Exhibit A) to reflect the fixed rate established in accordance with the terms of the Conversion Agreement.

(f) Any remaining principal and all other amounts due under this Note or any of the Loan Documents, if not sooner paid, shall be due and payable on the Maturity Date. Failure to pay such amounts on the Maturity Date shall result in the immediate imposition of the Default Rate (as defined in Section 10) on such unpaid amounts.

5. Maturity Date: June 1, 2012, or any earlier date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise.

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

7. Security. The Indebtedness is secured, among other things, by a Second Amended and Restated Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of the date of this Note (the “Security Instrument”), and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

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8. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, the prepayment premium payable under Section 12, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any prior notice to Borrower. Lender may exercise this option to accelerate regardless of any prior forbearance.

9. Late Charge. If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 5 days after Lender has notified Borrower that such amount is due and has not been paid, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent of such amount; provided, however, that if the payment due on the Maturity Date is not received by Lender on the date such payment is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent of such amount. Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (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 10.

10. Default Rate. So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, or if any payment due on the Maturity Date is not paid on the Maturity Date, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of (i) the sum of the rate at which deposits in United States Dollars in amounts approximately equal to the outstanding principal amount and with three month maturities are offered in immediately available funds in the London Interbank Market by leading banks in the Eurodollar market as of 11:00 a.m. (London Time), as published daily by Telerate News Service on Telerate page 3750, plus four hundred (400) basis points (4.00%) as determined by Lender and (ii) the maximum interest rate which may be collected from Borrower under applicable law. If the Telerate News Service is no longer available, or is no longer posted through electronic transmission, Lender will choose a new service that provides comparable information and provide notice

Page 5

thereof to Borrower. If the unpaid principal balance and all other payments required under this Note are not paid in full on the Maturity Date, the unpaid principal balance and all such other required payments shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, that, during the time that any payment under this Note is delinquent, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any payment due under this Note is delinquent, 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.

11. Limits on Personal Liability.

(a) Except as otherwise provided in this Section 11, neither Borrower nor its members or non-member manager shall have any 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 any other collateral held by Lender as security for the Indebtedness.

(b) Borrower, but not its members or non-member manager, or their respective partners, members, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns, shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents due after the earlier of (i) a declaration of default or (ii) the occurrence of an Event of Default, to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of

Page 6

Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4) fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedness or any request for any action or consent by Lender; or (5) failure to apply Rents, due after the earlier of (i) a declaration of default or (ii) an Event of Default, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to the Indebtedness payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and debt service amounts for that calendar year).

(c) Borrower, but not its members or non-member manager, or their respective partners, members, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns, shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21(a) of the Security Instrument, unless consented to by Lender pursuant to Section 21(c) of the Security Instrument.

(d) To the extent that Borrower has personal liability under this Section 11, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Section 11, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

Page 7

12. Voluntary and Involuntary Prepayments.

(a) Borrower may voluntarily prepay all (but not less than all) of the Indebtedness evidenced hereby.

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

(1) At any time Borrower may voluntarily prepay all (but not less than all) of the unpaid principal balance of this Note on any DMBS maturity date if Borrower has given Lender at least 30 days prior notice of its intention to make such prepayment. Such prepayment shall be made by paying (A) the amount of principal being prepaid, (B) all other sums due Lender at the time of such prepayment, and (C) the applicable prepayment premium calculated pursuant to Schedule A, if any. For all purposes any prepayment received by Lender on any day other than the maturity date of the then outstanding DMBS shall be deemed to have been received on the maturity date of the then outstanding DMBS. Borrower may request the issuance of a DMBS with a maturity date shorter or longer than three (3) months (but in no event shorter than one (1) month or longer than nine (9) months) but only to facilitate (A) the scheduling of a prepayment in connection with the sale of the Mortgaged Property or (B) the refinancing of the Loan.

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

(3) Any application by Lender of any collateral or other security to the repayment of any portion of the unpaid principal balance of this Note prior to the Maturity Date and in the absence of acceleration shall be deemed to be a partial prepayment by Borrower, requiring the payment to Lender by Borrower of the applicable prepayment premium calculated pursuant to Schedule A, if any. The amount of any such partial prepayment shall be computed so as to provide to Lender a prepayment premium computed pursuant to Schedule A without Borrower having to pay out-of-pocket any additional amounts.

(c) Notwithstanding the provisions of Section 12(b), no prepayment premium shall be payable with respect to (A) any prepayment made no more than

Page 8

twelve (12) months before the Maturity Date, or (B) any prepayment occurring as a result of the application of any insurance proceeds or condemnation award under the Security Instrument.

(d) Schedule A is hereby incorporated by reference into this Note.

(e) Any required prepayment of less than the unpaid principal balance of this Note shall not extend or postpone the due date of any subsequent payment or change the amount of such payments, unless Lender agrees otherwise in writing.

(f) Borrower recognizes that any prepayment of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from a default by Borrower, will result in Lender’s incurring loss, including reinvestment loss, additional expense and frustration or impairment of Lender’s ability to meet its commitments to third parties. Borrower agrees to pay to Lender upon demand damages for the detriment caused by any prepayment, and agrees that it is extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges and agrees that the formula for calculating prepayment premiums set forth on Schedule A represents a reasonable estimate of the damages Lender will incur because of a prepayment.

(g) Borrower further acknowledges that the prepayment premium provisions of this Note are a material part of the consideration for the loan evidenced by this Note, and acknowledges that the terms of this Note are in other respects more favorable to Borrower as a result of the Borrower’s voluntary agreement to the prepayment premium provisions.

13. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

14. 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

Page 9

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.

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

16. Loan Charges. 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 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.

17. Commercial Purpose. Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

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

19. Governing Law. The law of the State of California shall govern this Note.

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

Page 10

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

22. Consent to Jurisdiction and Venue. Borrower agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in the State of California (the “Property Jurisdiction”). The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note. Borrower 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.

23. 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 SCHEDULES. The following Schedules are attached to this Note:

x	Schedule A	Prepayment Premium (required)
x	Schedule B	Modifications to Multifamily Note
¨	Schedule C	Payment Amortization Schedule
x	Schedule D	DMBS Rate Confirmation Form

Page 11

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

BARRINGTON PACIFIC, LLC,
a California limited liability company
By:	Douglas Emmett Management, Inc.,
	a Delaware corporation, its Manager
		By:
		Name:	William Kamer
		Title:	Chief Financial Officer
Borrower’s Social Security/Employer
ID Number: 91-2132884

Fannie Mae Pool Number:                     

Page S-1

SCHEDULE A

MBS - GRADUATED PREPAYMENT PREMIUM

Any prepayment premium payable under Paragraph 12 of this Note shall be computed as follows:

(a) Borrower may voluntarily prepay all (but not less than all) of the indebtedness evidenced hereby at any time during the Loan term, subject to the requirements of subparagraph (b) below.

(b) If Borrower makes a voluntary prepayment of this Note, Lender accelerates the unpaid principal balance of this Note, or the Lender applies collateral held by Lender to the repayment of any portion of the unpaid principal balance as permitted in Section 12(b)(3) of the Note (if any), the prepayment premium shall be equal to the following percentage of the amount of principal being prepaid at the time of such prepayment, acceleration or application:

First Loan Year	3.00	%
Second Loan Year	2.00	%
Third Loan Year	.75	%
Fourth Loan Year	.50	%
Fifth Loan Year	0.00	%

(c) For the purposes of this Note, a “Loan Year” means either (i) the period beginning on the date of this Note and ending on the day before the 13^th full calendar month thereafter (i.e. May 31, 2008) or (ii) each successive 12-month period thereafter.

BORROWER’S INITIALS

Page A-1

SCHEDULE B

MODIFICATIONS TO MULTIFAMILY NOTE

The following modifications are made to the text of the Note that precedes this Schedule:

1. A new Section 4A shall be added as follows:

4A. Borrower may apply for an increase in the principal amount of the Loan from the first anniversary date of the closing of the Loan until the Maturity Date, to be effective as of the issuance date of any new DMBS funding the Indebtedness. Approval of an increased amount of the Loan will be subject to satisfying all of Lender’s and Fannie Mae’s underwriting criteria and guidelines applicable to loans of a similar underwriting tier. The guaranty and servicing fee applicable to the increased amount of Loan will equal Fannie Mae’s then current best published rate for loans with 1.10 debt service coverage (variable rate) (1.25 debt service coverage-fixed rate) and a 70% loan to value ratio. The maturity date of the increased amount shall not extend beyond the Maturity Date. Borrower shall pay all actual, reasonable out of pocket costs to third parties, with legal fees not to exceed $10,000.

2. A new Section 7A shall be added as follows:

7A. Interest Rate Hedge. (a) The Initial Hedge. To protect against fluctuations in interest rates, Borrower shall make arrangements for a LIBOR based hedge instrument (“Hedge”) to be in place and maintained at all times with respect to the Loan. For purposes of this Note, “LIBOR” is defined as an interest rate based upon the London Inter-Bank Offered Rate for three (3) month U.S. Dollar-denominated deposits. Lender acknowledges that Borrower has previously obtained Caps in an aggregate amount equal to the Amended Note (the “Existing Caps”) which are presently due to expire on August 1, 2011. The Borrower shall obtain one or more additional Caps (the “Supplemental Caps”) in an aggregate amount equal to the difference between the original principal amount of this Note and the original principal amount of the Amended Note. The Hedge for the initial DMBS shall be a Cap (whether one or more) for a period beginning not later than the date of this Note (with the exception that the Supplemental Caps shall have an effective date not later than August 1, 2007) and ending (i) with respect to the Existing Caps, not earlier than the third anniversary of the date of the Amended Note and (ii) with respect to the Supplemental Caps, ending not earlier than the third anniversary of the date of this Note (the “Initial Hedge Period”).

Page B-1

(b) Subsequent Hedges. Additional Hedges (each, a “Subsequent Hedge”) shall be required for the lesser of (i) three (3) years, or (ii) the remaining term of the Note, upon the expiration of the Cap (whether one or more) in place for the applicable Initial Hedge Period (it being understood that if the term of any such Cap is longer than the applicable Initial Hedge Period, then the three (3) year period provided in clause (i) shall commence on the actual termination date of the Cap). It is the intention of the parties, and a condition of the Note, that Borrower shall obtain, and shall maintain at all times during the term of the Note, a Hedge in an aggregate notional principal amount equal to the outstanding principal balance of the Note on the date that the Hedge is purchased, covering the required term of the Note as set forth in this Section 7A.

(c) Hedge Terms. Each Hedge which is a Cap shall:

(1) collectively with all other Hedges provided to Lender in connection with the Loan, provide for a notional principal amount equal at all times to the outstanding principal balance of the Note on the date that the Hedge is purchased;

(2) with respect to the Existing Caps, provide a strike rate not greater than 5.0% per annum and with respect to the Supplemental Caps, provide for a strike rate not greater than 6.0% per annum.

(3) with respect to any Subsequent Hedge, provide a strike rate not greater than the lowest interest rate which, when increased by sixty (60) basis points (.60%) and multiplied by the portion of the outstanding principal balance of the Loan to be covered by such Subsequent Hedge (i.e. the notional amount of the replacement Cap), would equal an amount which, when combined with (i) the debt service on the remaining portion of the Loan covered by any other Cap(s) then in effect (such debt service to be calculated based upon the strike rate of the additional Cap(s) and applicable portion of the principal amount of the Loan covered by such Caps(s) (i.e. the notional amount(s) of any such Cap(s)), and (ii) the amount of assumed principal payments which would be due on a loan in an amount equal to the then outstanding principal balance of the Loan and a thirty year amortization schedule, would result in a combined debt service coverage ratio of not less than 1.10 to 1.00 (the “Hedge Rate”), based upon the underwritten net operating income of the Property (and the net cash flow after debt service generated by the Pacific Plaza project, if applicable) determined as provided herein. The debt service coverage ratio (and its components) for each Cap shall be determined in accordance with the underwriting standards set forth in the Fannie Mae Multifamily Delegated Underwriting and Servicing (DUS) Guide in effect as of the time of such determination (the “DUS Guide”), based

Page B-2

upon the underwritten net operating income of the Property calculated using the net revenue generated by the operation of the Property for the three (3) month period immediately preceding the date of determination, annualized and the underwritten expenses of the Property for the twelve (12) month period immediately preceding the date of determination, adjusted for inflation at a rate of three and 00/100 percent (3.00%) per annum. If such determination is made at a time when the Property is cross-collateralized with the Pacific Plaza project, then debt service coverage ratio (and its components) shall be determined utilizing the combined sum of (i) the underwritten net operating income of the Property, determined as set forth above and (ii) the net cash flow after debt service generated by the Pacific Plaza project;

(4) require the counterparty to make interest payments on the notional principal amount at a rate equal to the amount by which Coupon Rate exceeds the Hedge Rate;

(5) require the counterparty to make such interest payments either to an account pledged to the Lender or directly to the Lender after an Event of Default pursuant to the Hedge Security Agreement (as defined below); and

(6) be evidenced, governed and secured on terms and conditions, and pursuant to documentation (the “Hedge Documents”), in form and content acceptable to Fannie Mae, and with a counterparty (a “Counterparty”) approved by Fannie Mae, which may include Bank of America, Wells Fargo and Wachovia.

(d) Hedge Security Agreement; Delivery of Hedge Payments. Pursuant to a security agreement in form and content acceptable to Lender (each a “Hedge Security Agreement”), Lender shall be granted an enforceable, perfected, first priority lien on and security interest in each Hedge and payments due under the Hedge (including scheduled and termination payments) in order to secure Borrower’s obligations to Lender under this Note. With respect to each Hedge, the Hedge Security Agreement must be delivered by Borrower to Lender no later than the effective date of the Hedge.

(e) Termination. Borrower shall not terminate, transfer or consent to any transfer of any existing Hedge without Lender’s prior written consent as long as Borrower is required to maintain a Hedge pursuant to the Note; provided, however, that if, and at such time as, the Note is paid off or converted to a fixed rate pursuant to the terms of the Conversion Agreement between Borrower and Lender, Borrower shall have the right to terminate the existing Hedge.

Page B-3

(f) Escrow. Upon the occurrence of an Event of Default under the Security Instrument, Borrower will be required to (i) make annual deposits (“Annual Deposits”) to be held in an interest bearing hedge reserve escrow account during any period in which a Hedge with an original term of less than the remaining term of the Note is in effect, to provide moneys for the purchase of a Subsequent Hedge and (ii) enter into a Hedge Reserve Escrow Account Security Agreement with Lender. Lender shall determine the amount of the Annual Deposits and shall monitor the hedge reserve escrow account holding such Annual Deposits.

(g) Performance Under Hedge Documents. Borrower agrees to comply fully with, and to otherwise perform when due, its obligations under, all applicable Hedge Documents and all other agreements evidencing, governing and/or securing any Hedge arrangement contemplated under this Section. Borrower shall not exercise, without the Lender’s prior written consent, and shall exercise, at Lender’s direction, any rights or remedies under any Hedge Document, including without limitation the right of termination.

3. A new Section 12(h) shall be added as follows:

(h) BORROWER EXPRESSLY (A) WAIVES ANY RIGHTS IT MAY HAVE UNDER CALIFORNIA CIVIL CODE SECTION 2954.10 TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT FEE OR PENALTY, UPON ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND (B) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT OF THIS NOTE IS MADE, UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY HOLDER ON ACCOUNT OF ANY EVENT OF DEFAULT BY BORROWER UNDER ANY LOAN DOCUMENT, INCLUDING BUT NOT LIMITED TO ANY TRANSFER WHICH IS PROHIBITED BY THE SECURITY INSTRUMENT, THEN BORROWER SHALL BE OBLIGATED TO PAY THE APPLICABLE PREMIUM REQUIRED BY SECTION 12 OF THIS NOTE. BY INITIALING THIS PROVISION IN THE SPACE PROVIDED BELOW, BORROWER AGREES THAT LENDER’S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND AGREEMENT.

BORROWER’S INITIALS

Page B-4

SCHEDULE C

PRINCIPAL AMORTIZATION SCHEDULE

NOT APPLICABLE

Page C-1

SCHEDULE D

RATE CONFIRMATION FORM

Pursuant to Section 4(c) of that certain Second Amended and Restated Discount MBS Multifamily Note dated June 1, 2007 (the “Note”), from the undersigned (the “Borrower”) to FANNIE MAE, a federally-chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 et seq., (the “Lender”), the Borrower hereby requests that the Lender issue to it an advance for the purpose of refinancing the Indebtedness, to be funded by a discount mortgaged backed security (“DMBS”) and the Lender hereby confirms that it has obtained a commitment for the purchase of a Fannie Mae DMBS with the following terms:

Advance Amount	$
Term	Three months
DMBS Issue Date	1st,
DMBS Imputed Interest Rate	%
Discount	%
Price
Closing Date no later than	,

Page D-1

Dated:                             ,         

DEUTSCHE BANK BERKSHIRE

MORTGAGE, INC., a Delaware corporation

By:

Name:

Title:

By:

Name:

Title:

Rate Setting Date:                             ,             ,     :     AM/PM Eastern Time

AGREED TO AND ACCEPTED BY:

Dated:                             ,         

BARRINGTON PACIFIC, LLC,
a California limited liability company
By:	Douglas Emmett Management, Inc.,
	a Delaware corporation, its Manager
	By:
	Name:
	Title:
Borrower’s Social Security/
Employer ID Number: 91-2132884

Page D-2

EX-10.2

Exhibit 10.2

SECOND AMENDED AND RESTATED

DISCOUNT MBS MULTIFAMILY NOTE

(Pacific Plaza)

US $46,400,000.00 June 1, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”), jointly and severally (if more than one) promises to pay to the order of FANNIE MAE, a federally-chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 et seq., the principal sum of Forty-Six Million Four Hundred Thousand and 00/100 Dollars (US$46,400,000.00), with interest on the unpaid principal balance at the rates applicable from time to time set forth in this Second Amended and Restated Discount MBS Multifamily Note (the “Note”).

A Discount MBS Multifamily Note (the “Original Note”) in the original principal amount of $30,000,000.00, dated July 2, 2001, was executed by Borrower in favor of Berkshire Mortgage Finance Limited Partnership, a Massachusetts limited partnership (“Berkshire”), and secured, inter alia, by a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (as amended from time to time, the “Original Security Instrument”) dated as of July 2, 2001, made by Borrower for the benefit of Berkshire, recorded with the Office of the County Recorder of Los Angeles County, California as Instrument No. 01-1145223, encumbering a certain multifamily property known as Pacific Plaza in Santa Monica, Los Angeles County, California (the “Property”). The Original Note was previously amended and restated in its entirety pursuant to an Amended and Restated Discount MBS Multifamily Note made by Borrower payable to the order of Fannie Mae in the original principal amount of $35,400,000, dated December 22, 2004 (the “Amended Note”). The Amended Note was secured by, inter alia, an Amended and Restated Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the “Amended Security Instrument”) dated as of December 22, 2004, made by Borrower for the benefit of Fannie Mae, recorded with the Office of the County Recorder of Los Angeles County, California as Instrument No. 05-0015224, encumbering the Property. Borrower and Fannie Mae desire to and hereby amend and restate the Amended Note in its entirety to reflect an increase in the note amount, an extension of the term and certain other modifications, as hereinafter set forth.

1. Defined Terms. As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument

Page 1

or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument. Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Security Instrument (as defined in Section 7).

2. Address for Payment. All payments due under this Note shall be payable at c/o Deutsche Bank Berkshire Mortgage, Inc., One Beacon Street, 14^th floor, Boston, Massachusetts 02108, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3. Discount Mortgage Backed Security. The original stated principal amount of this Note shall be funded by the issuance of a discount mortgage backed security in the face amount of this Note (the “DMBS”). The original stated principal amount of this Note shall be equal to the sum of (i) the price (the “Price”) of the initial DMBS and (ii) the discount (the “Discount”) of the initial DMBS. The Price is equal to the proceeds of the sale of the DMBS and the Discount is an amount equal to the difference between (i) the face amount of the DMBS and (ii) the Price of the DMBS. Except as provided in Section 4(a), the proceeds made available by Lender to Borrower shall equal the Price of the DMBS. Except for the initial DMBS, which shall be issued for the period from June 1, 2007 to August 1, 2007, and subject to the last sentence of Section 12(b)(1), each DMBS shall be issued for a three month period. Except for the initial DMBS if not issued on the first day of the month as specified in the preceding sentence, the issuance date for each DMBS shall be the first day of a month and the maturity date for each DMBS shall be the first day of the month following such three month period. For example, the maturity date for a DMBS issued on December 1 is March 1. Provided, however, that Borrower may request the issuance of a DMBS with a maturity date shorter or longer than three months (but in no event shorter than one month or longer than nine months) in accordance with the terms and conditions of the last sentence of Section 12(b)(1).

The entire unpaid principal of the Note will be due and payable by the Borrower to the Lender on the maturity date of the outstanding DMBS unless the outstanding DMBS is renewed with a new DMBS or converted to a fixed rate to take effect on the maturity date of the outstanding DMBS.

4. Payment of Principal and Interest.

(a) The original proceeds in the amount of $30,000,000 under this Note were made available to Borrower on July 2, 2001. Additional proceeds under the Amended Note in the amount of $5,400,000 were made available to the Borrower on December 22, 2004, and additional proceeds in the amount of $11,000,000 under

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this Note were made available to Borrower on June 1, 2007 (the “Disbursement Date”). The issuance date of the initial DMBS which shall include the original proceeds and the additional proceeds is June 22, 2007 (the “Settlement Date”). The Borrower shall pay interest on the amount disbursed on the Disbursement Date for the partial month period beginning on the Disbursement Date and ending on and including the Settlement Date, at a rate per annum equal to 5.18%.

(b) Borrower shall pay, in immediately available funds, (1) on the Disbursement Date, an amount equal to the sum of (i) the Discount of the initial DMBS, (ii) a sum equal to two thirds of the estimated Discount on the next succeeding 3-month DMBS to be issued August 1, 2007, (iii) an amount equal to sixty (60) basis points (.60%) times the outstanding principal amount divided by 12 (less any amounts paid by Borrower pursuant to Section 4(b)(2)(ii) of the Amended Note with respect to such period, if any), and (iv) the amount of interest due pursuant to Section 4(a) above, and (2) thereafter, until the Maturity Date, consecutive monthly payments on the first day of each month beginning July 1, 2007, in an amount equal to the sum of (i) one third ( ¹/3) of the Discount calculated on the then outstanding DMBS and (ii) an amount equal to sixty (60) basis points (.60%) times the outstanding principal amount divided by 12. Payments must be received by Lender not later than 5 p.m. Pacific Time on the date due. Notwithstanding the foregoing provisions of Section 4(b)(2)(i) above and provided that Borrower has made all payments required under Section 4(d) below, Borrower shall not be obligated to make the monthly payment described in Section 4(b)(2)(i) during the last 3 months prior to the Maturity Date.

(c) Not less than 20 days prior to the maturity date of each DMBS, Lender shall notify Borrower (in the manner specified in the Security Instrument (defined below) for giving notices) that the outstanding DMBS is scheduled to mature on its maturity date and offer Borrower the opportunity to have a new DMBS issued on such maturity date. If Borrower elects to have the Indebtedness refinanced with a new DMBS, not less than three (3) Business Days prior to the maturity date of the maturing DMBS, Lender shall notify Borrower of the Discount on the new DMBS to be issued by sending Borrower the Rate Confirmation Form attached hereto as Schedule D. Borrower shall execute and return Schedule D to the Lender not later than one (1) Business Day prior to the issuance date of the new DMBS. For purposes of this Note, a “Business Day” means any day other than a Saturday, Sunday or any other day on which Lender is not open for business.

(d) If the amount of the Discount for the new DMBS to be issued is greater than the Discount for the outstanding DMBS, then not less than two (2) Business

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(e) Days prior to the maturity date of the outstanding DMBS the Borrower shall pay to the Lender the aggregate amount of such difference. If the amount of the Discount for the new DMBS is less than the Discount for the outstanding DMBS, the aggregate amount of such difference shall be credited against the regular monthly installment due on the first day of the month immediately following the issuance date of the new DMBS.

(f) If Borrower timely exercises its option to convert the interest rate on this Note to a fixed rate pursuant to the Second Amended and Restated Conversion Agreement, dated the same day as this Note, between the Borrower and Lender (the “Conversion Agreement”), Borrower will execute the DMBS Multifamily Note Modification Agreement (the form of which is attached to the Conversion Agreement as Exhibit A) to reflect the fixed rate established in accordance with the terms of the Conversion Agreement.

(f) Any remaining principal and all other amounts due under this Note or any of the Loan Documents, if not sooner paid, shall be due and payable on the Maturity Date. Failure to pay such amounts on the Maturity Date shall result in the immediate imposition of the Default Rate (as defined in Section 10) on such unpaid amounts.

5. Maturity Date: June 1, 2012, or any earlier date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise.

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

7. Security. The Indebtedness is secured, among other things, by a Second Amended and Restated Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of the date of this Note (the “Security Instrument”), and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

8. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, the prepayment premium payable under Section 12, if any, and all other amounts payable under this Note and any other

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Loan Document shall at once become due and payable, at the option of Lender, without any prior notice to Borrower. Lender may exercise this option to accelerate regardless of any prior forbearance.

9. Late Charge. If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 5 days after Lender has notified Borrower that such amount is due and has not been paid, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent of such amount; provided, however, that if the payment due on the Maturity Date is not received by Lender on the date such payment is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent of such amount. Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (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 10.

10. Default Rate. So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, or if any payment due on the Maturity Date is not paid on the Maturity Date, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of (i) the sum of the rate at which deposits in United States Dollars in amounts approximately equal to the outstanding principal amount and with three month maturities are offered in immediately available funds in the London Interbank Market by leading banks in the Eurodollar market as of 11:00 a.m. (London Time), as published daily by Telerate News Service on Telerate page 3750, plus four hundred (400) basis points (4.00%) as determined by Lender and (ii) the maximum interest rate which may be collected from Borrower under applicable law. If the Telerate News Service is no longer available, or is no longer posted through electronic transmission, Lender will choose a new service that provides comparable information and provide notice thereof to Borrower. If the unpaid principal balance and all other payments required under this Note are not paid in full on the Maturity Date, the unpaid principal balance and all such other required payments shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, that, during the time that any payment under this Note is

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delinquent, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any payment due under this Note is delinquent, 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.

11. Limits on Personal Liability.

(a) Except as otherwise provided in this Section 11, neither Borrower nor its members or non-member manager shall have any 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 any other collateral held by Lender as security for the Indebtedness.

(b) Borrower, but not its members or non-member manager, or their respective partners, members, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns, shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents due after the earlier of (i) a declaration of default or (ii) the occurrence of an Event of Default, to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4) fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedness or any request for any action or consent by Lender; or (5) failure to apply Rents, due after the earlier of (i) a declaration of default or (ii) an Event of

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

(c) Borrower, but not its members or non-member manager, or their respective partners, members, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns, shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21(a) of the Security Instrument, unless consented to by Lender pursuant to Section 21(c) of the Security Instrument.

(d) To the extent that Borrower has personal liability under this Section 11, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Section 11, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

12. Voluntary and Involuntary Prepayments.

(a) Borrower may voluntarily prepay all (but not less than all) of the Indebtedness evidenced hereby.

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

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(1) At any time Borrower may voluntarily prepay all (but not less than all) of the unpaid principal balance of this Note on any DMBS maturity date if Borrower has given Lender at least 30 days prior notice of its intention to make such prepayment. Such prepayment shall be made by paying (A) the amount of principal being prepaid, (B) all other sums due Lender at the time of such prepayment, and (C) the applicable prepayment premium calculated pursuant to Schedule A, if any. For all purposes any prepayment received by Lender on any day other than the maturity date of the then outstanding DMBS shall be deemed to have been received on the maturity date of the then outstanding DMBS. Borrower may request the issuance of a DMBS with a maturity date shorter or longer than three (3) months (but in no event shorter than one (1) month or longer than nine (9) months) but only to facilitate (A) the scheduling of a prepayment in connection with the sale of the Mortgaged Property or (B) the refinancing of the Loan.

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

(3) Any application by Lender of any collateral or other security to the repayment of any portion of the unpaid principal balance of this Note prior to the Maturity Date and in the absence of acceleration shall be deemed to be a partial prepayment by Borrower, requiring the payment to Lender by Borrower of the applicable prepayment premium calculated pursuant to Schedule A, if any. The amount of any such partial prepayment shall be computed so as to provide to Lender a prepayment premium computed pursuant to Schedule A without Borrower having to pay out-of-pocket any additional amounts.

(c) Notwithstanding the provisions of Section 12(b), no prepayment premium shall be payable with respect to (A) any prepayment made no more than twelve (12) months before the Maturity Date, or (B) any prepayment occurring as a result of the application of any insurance proceeds or condemnation award under the Security Instrument.

(d) Schedule A is hereby incorporated by reference into this Note.

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(e) Any required prepayment of less than the unpaid principal balance of this Note shall not extend or postpone the due date of any subsequent payment or change the amount of such payments, unless Lender agrees otherwise in writing.

(f) Borrower recognizes that any prepayment of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from a default by Borrower, will result in Lender’s incurring loss, including reinvestment loss, additional expense and frustration or impairment of Lender’s ability to meet its commitments to third parties. Borrower agrees to pay to Lender upon demand damages for the detriment caused by any prepayment, and agrees that it is extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges and agrees that the formula for calculating prepayment premiums set forth on Schedule A represents a reasonable estimate of the damages Lender will incur because of a prepayment.

(g) Borrower further acknowledges that the prepayment premium provisions of this Note are a material part of the consideration for the loan evidenced by this Note, and acknowledges that the terms of this Note are in other respects more favorable to Borrower as a result of the Borrower’s voluntary agreement to the prepayment premium provisions.

13. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

14. 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.

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

16. Loan Charges. 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 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.

17. Commercial Purpose. Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

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

19. Governing Law. The law of the State of California shall govern this Note.

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

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

22. Consent to Jurisdiction and Venue. Borrower agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in

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the State of California (the “Property Jurisdiction”). The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note. Borrower 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.

23. 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 SCHEDULES. The following Schedules are attached to this Note:

x	Schedule A	Prepayment Premium (required)
x	Schedule B	Modifications to Multifamily Note
¨	Schedule C	Payment Amortization Schedule
x	Schedule D	DMBS Rate Confirmation Form

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

BARRINGTON PACIFIC, LLC,
a California limited liability company
By:	Douglas Emmett Management, Inc.,
	a Delaware corporation, its Manager
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
Borrower’s Social Security/Employer
ID Number: 91-2132884

Fannie Mae Pool Number:

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SCHEDULE A

MBS - GRADUATED PREPAYMENT PREMIUM

Any prepayment premium payable under Paragraph 12 of this Note shall be computed as follows:

(a) Borrower may voluntarily prepay all (but not less than all) of the indebtedness evidenced hereby at any time during the Loan term, subject to the requirements of subparagraph (b) below.

(b) If Borrower makes a voluntary prepayment of this Note, Lender accelerates the unpaid principal balance of this Note, or the Lender applies collateral held by Lender to the repayment of any portion of the unpaid principal balance as permitted in Section 12(b)(3) of the Note (if any), the prepayment premium shall be equal to the following percentage of the amount of principal being prepaid at the time of such prepayment, acceleration or application:

First Loan Year	3.00	%
Second Loan Year	2.00	%
Third Loan Year	.75	%
Fourth Loan Year	.50	%
Fifth Loan Year	0.00	%

(c) For the purposes of this Note, a “Loan Year” means either (i) the period beginning on the date of this Note and ending on the day before the 13^th full calendar month thereafter (i.e. May 31, 2008) or (ii) each successive 12-month period thereafter.

BORROWER’S INITIALS

Page A-1

SCHEDULE B

MODIFICATIONS TO MULTIFAMILY NOTE

The following modifications are made to the text of the Note that precedes this Schedule:

1. A new Section 4A shall be added as follows:

4A. Borrower may apply for an increase in the principal amount of the Loan from the first anniversary date of the closing of the Loan until the Maturity Date, to be effective as of the issuance date of any new DMBS funding the Indebtedness. Approval of an increased amount of the Loan will be subject to satisfying all of Lender’s and Fannie Mae’s underwriting criteria and guidelines applicable to loans of a similar underwriting tier. The guaranty and servicing fee applicable to the increased amount of Loan will equal Fannie Mae’s then current best published rate for loans with 1.10 debt service coverage (variable rate) (1.25 debt service coverage-fixed rate) and a 70% loan to value ratio. The maturity date of the increased amount shall not extend beyond the Maturity Date. Borrower shall pay all actual, reasonable out of pocket costs to third parties, with legal fees not to exceed $10,000.

2. A new Section 7A shall be added as follows:

7A. Interest Rate Hedge. (a) The Initial Hedge. To protect against fluctuations in interest rates, Borrower shall make arrangements for a LIBOR based hedge instrument (“Hedge”) to be in place and maintained at all times with respect to the Loan. For purposes of this Note, “LIBOR” is defined as an interest rate based upon the London Inter-Bank Offered Rate for three (3) month U.S. Dollar-denominated deposits. Lender acknowledges that Borrower has previously obtained Caps in an aggregate amount equal to the Amended Note (the “Existing Caps”) which are presently due to expire on August 1, 2011. The Borrower shall obtain one or more additional Caps (the “Supplemental Caps”) in an aggregate amount equal to the difference between the original principal amount of this Note and the original principal amount of the Amended Note. The Hedge for the initial DMBS shall be a Cap (whether one or more) for a period beginning not later than the date of this Note (with the exception that the Supplemental Caps shall have an effective date not later than August 1, 2007) and ending (i) with respect to the Existing Caps, not earlier than the third anniversary of the date of the Amended Note and (ii) with respect to the Supplemental Caps, ending not earlier than the third anniversary of the date of this Note (the “Initial Hedge Period”).

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(b) Subsequent Hedges. Additional Hedges (each, a “Subsequent Hedge”) shall be required for the lesser of (i) three (3) years, or (ii) the remaining term of the Note, upon the expiration of the Cap (whether one or more) in place for the applicable Initial Hedge Period (it being understood that if the term of any such Cap is longer than the applicable Initial Hedge Period, then the three (3) year period provided in clause (i) shall commence on the actual termination date of the Cap). It is the intention of the parties, and a condition of the Note, that Borrower shall obtain, and shall maintain at all times during the term of the Note, a Hedge in an aggregate notional principal amount equal to the outstanding principal balance of the Note on the date that the Hedge is purchased, covering the required term of the Note as set forth in this Section 7A.

(c) Hedge Terms. Each Hedge which is a Cap shall:

(1) collectively with all other Hedges provided to Lender in connection with the Loan, provide for a notional principal amount equal at all times to the outstanding principal balance of the Note on the date that the Hedge is purchased;

(2) with respect to the Existing Caps, provide a strike rate not greater than 5.0% per annum and with respect to the Supplemental Caps, provide for a strike rate not greater than 6.0% per annum.

(3) with respect to any Subsequent Hedge, provide a strike rate not greater than the lowest interest rate which, when increased by sixty (60) basis points (.60%) and multiplied by the portion of the outstanding principal balance of the Loan to be covered by such Subsequent Hedge (i.e. the notional amount of the replacement Cap), would equal an amount which, when combined with (i) the debt service on the remaining portion of the Loan covered by any other Cap(s) then in effect (such debt service to be calculated based upon the strike rate of the additional Cap(s) and applicable portion of the principal amount of the Loan covered by such Caps(s) (i.e. the notional amount(s) of any such Cap(s)), and (ii) the amount of assumed principal payments which would be due on a loan in an amount equal to the then outstanding principal balance of the Loan and a thirty year amortization schedule, would result in a combined debt service coverage ratio of not less than 1.10 to 1.00 (the “Hedge Rate”), based upon the underwritten net operating income of the Property (and the net cash flow after debt service generated by the Barrington Plaza project, if applicable) determined as provided herein. The debt service coverage ratio (and its components) for each Cap shall be determined in accordance with the underwriting standards set forth in the Fannie Mae Multifamily Delegated Underwriting and Servicing (DUS) Guide in effect as of the time of such determination (the

Page B-2

“DUS Guide”), based upon the underwritten net operating income of the Property calculated using the net revenue generated by the operation of the Property for the three (3) month period immediately preceding the date of determination, annualized and the underwritten expenses of the Property for the twelve (12) month period immediately preceding the date of determination, adjusted for inflation at a rate of three and 00/100 percent (3.00%) per annum. If such determination is made at a time when the Property is cross-collateralized with the Barrington Plaza project, then debt service coverage ratio (and its components) shall be determined utilizing the combined sum of (i) the underwritten net operating income of the Property, determined as set forth above and (ii) the net cash flow after debt service generated by the Barrington Plaza project;

(4) require the counterparty to make interest payments on the notional principal amount at a rate equal to the amount by which Coupon Rate exceeds the Hedge Rate;

(5) require the counterparty to make such interest payments either to an account pledged to the Lender or directly to the Lender after an Event of Default pursuant to the Hedge Security Agreement (as defined below); and

(6) be evidenced, governed and secured on terms and conditions, and pursuant to documentation (the “Hedge Documents”), in form and content acceptable to Fannie Mae, and with a counterparty (a “Counterparty”) approved by Fannie Mae, which may include Bank of America, Wells Fargo and Wachovia.

(d) Hedge Security Agreement; Delivery of Hedge Payments. Pursuant to a security agreement in form and content acceptable to Lender (each a “Hedge Security Agreement”), Lender shall be granted an enforceable, perfected, first priority lien on and security interest in each Hedge and payments due under the Hedge (including scheduled and termination payments) in order to secure Borrower’s obligations to Lender under this Note. With respect to each Hedge, the Hedge Security Agreement must be delivered by Borrower to Lender no later than the effective date of the Hedge.

(e) Termination. Borrower shall not terminate, transfer or consent to any transfer of any existing Hedge without Lender’s prior written consent as long as Borrower is required to maintain a Hedge pursuant to the Note; provided, however, that if, and at such time as, the Note is paid off or converted to a fixed rate pursuant to the terms of the Conversion Agreement between Borrower and Lender, Borrower shall have the right to terminate the existing Hedge.

Page B-3

(f) Escrow. Upon the occurrence of an Event of Default under the Security Instrument, Borrower will be required to (i) make annual deposits (“Annual Deposits”) to be held in an interest bearing hedge reserve escrow account during any period in which a Hedge with an original term of less than the remaining term of the Note is in effect, to provide moneys for the purchase of a Subsequent Hedge and (ii) enter into a Hedge Reserve Escrow Account Security Agreement with Lender. Lender shall determine the amount of the Annual Deposits and shall monitor the hedge reserve escrow account holding such Annual Deposits.

(g) Performance Under Hedge Documents. Borrower agrees to comply fully with, and to otherwise perform when due, its obligations under, all applicable Hedge Documents and all other agreements evidencing, governing and/or securing any Hedge arrangement contemplated under this Section. Borrower shall not exercise, without the Lender’s prior written consent, and shall exercise, at Lender’s direction, any rights or remedies under any Hedge Document, including without limitation the right of termination.

3. A new Section 12(h) shall be added as follows:

(h) BORROWER EXPRESSLY (A) WAIVES ANY RIGHTS IT MAY HAVE UNDER CALIFORNIA CIVIL CODE SECTION 2954.10 TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT FEE OR PENALTY, UPON ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND (B) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT OF THIS NOTE IS MADE, UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY HOLDER ON ACCOUNT OF ANY EVENT OF DEFAULT BY BORROWER UNDER ANY LOAN DOCUMENT, INCLUDING BUT NOT LIMITED TO ANY TRANSFER WHICH IS PROHIBITED BY THE SECURITY INSTRUMENT, THEN BORROWER SHALL BE OBLIGATED TO PAY THE APPLICABLE PREMIUM REQUIRED BY SECTION 12 OF THIS NOTE. BY INITIALING THIS PROVISION IN THE SPACE PROVIDED BELOW, BORROWER AGREES THAT LENDER’S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND AGREEMENT.

BORROWER’S INITIALS

Page B-4

SCHEDULE C

PRINCIPAL AMORTIZATION SCHEDULE

NOT APPLICABLE

Page C-1

SCHEDULE D

RATE CONFIRMATION FORM

Pursuant to Section 4(c) of that certain Second Amended and Restated Discount MBS Multifamily Note dated June 1, 2007 (the “Note”), from the undersigned (the “Borrower”) to FANNIE MAE, a federally-chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 et seq., (the “Lender”), the Borrower hereby requests that the Lender issue to it an advance for the purpose of refinancing the Indebtedness, to be funded by a discount mortgaged backed security (“DMBS”) and the Lender hereby confirms that it has obtained a commitment for the purchase of a Fannie Mae DMBS with the following terms:

Advance Amount	$
Term	Three months
DMBS Issue Date	1st,
DMBS Imputed Interest Rate	%
Discount	%
Price
Closing Date no later than	,

Page D-1

Dated:                                         ,                     

DEUTSCHE BANK BERKSHIRE

MORTGAGE, INC., a Delaware corporation

By:

Name:

Title:

By:

Name:

Title:

Rate Setting Date:                                                              ,                     ,     :      AM/PM Eastern Time

AGREED TO AND ACCEPTED BY:

Dated:                                         ,                     

BARRINGTON PACIFIC, LLC,
a California limited liability company
By:	Douglas Emmett Management, Inc.,
	a Delaware corporation, its Manager
	By:
	Name:
	Title:
Borrower’s Social Security/ Employer ID Number: 91-2132884

Page D-2

EX-10.3

Exhibit 10.3

SECOND AMENDED AND RESTATED

DISCOUNT MBS MULTIFAMILY NOTE

(555 Barrington)

US $43,440,000.00 June 1, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”), jointly and severally (if more than one) promises to pay to the order of FANNIE MAE, a federally-chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 et seq., the principal sum of Forty-Three Million Four Hundred Forty Thousand and 00/100 Dollars (US$43,440,000.00), with interest on the unpaid principal balance at the rates applicable from time to time set forth in this Second Amended and Restated Discount MBS Multifamily Note (the “Note”).

A Discount MBS Multifamily Note (the “Original Note”) in the original principal amount of $25,000,000.00, dated March 5, 2001, was executed by Douglas Emmett Realty Fund 1998, a California limited partnership (“DE 1998”), in favor of Berkshire Mortgage Finance Limited Partnership, a Massachusetts limited partnership (“Berkshire”), and secured, inter alia, by a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (as amended from time to time, the “Original Security Instrument”) dated as of March 5, 2001, made by DE 1998 for the benefit of Berkshire, recorded with the Office of the County Recorder of Los Angeles County, California as Instrument No. 01-0357626, encumbering a certain multifamily property known as 555 Barrington in Los Angeles, Los Angeles County, California (the “Property”). The Original Note was previously endorsed by Berkshire in favor of Fannie Mae and the Original Security Instrument was assigned by Berkshire to Fannie Mae pursuant to an Assignment of Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of March 5, 2001. The Original Note was previously amended and restated in its entirety pursuant to an Amended and Restated Discount MBS Multifamily Note made by Borrower payable to the order of Fannie Mae in the original principal amount of $35,900,000, dated December 22, 2004 (the “Amended Note”). The Amended Note was secured by, inter alia, an Amended and Restated Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the “Amended Security Instrument”) dated as of December 22, 2004, made by Borrower for the benefit of Fannie Mae, recorded with the Office of the County Recorder of Los Angeles County, California as Instrument No. 05-0015219, encumbering the Property.

Pursuant to the terms and conditions set forth in that certain Assumption

Page 1

and Release Agreement (the “Assumption”) dated as of December 22, 2004, executed by and between DE 1998, Borrower and Fannie Mae and recorded with the Office of the County Recorder of Los Angeles County, California on January 4, 2005, as Instrument No. 05-0015223, Borrower assumed all of the payment and performance obligations of DE 1998 set forth in the Amended Note, the Amended Security Instrument and all of the other documents and instruments executed in connection therewith, as modified by the Assumption.

Borrower and Fannie Mae desire to and hereby amend and restate the Amended Note in its entirety to reflect an increase in the note amount, an extension of the term and certain other modifications, as hereinafter set forth.

1. Defined Terms. As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument. Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Security Instrument (as defined in Section 7).

2. Address for Payment. All payments due under this Note shall be payable at c/o Deutsche Bank Berkshire Mortgage, Inc., One Beacon Street, 14^th floor, Boston, Massachusetts 02108, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3. Discount Mortgage Backed Security. The original stated principal amount of this Note shall be funded by the issuance of a discount mortgage backed security in the face amount of this Note (the “DMBS”). The original stated principal amount of this Note shall be equal to the sum of (i) the price (the “Price”) of the initial DMBS and (ii) the discount (the “Discount”) of the initial DMBS. The Price is equal to the proceeds of the sale of the DMBS and the Discount is an amount equal to the difference between (i) the face amount of the DMBS and (ii) the Price of the DMBS. Except as provided in Section 4(a), the proceeds made available by Lender to Borrower shall equal the Price of the DMBS. Except for the initial DMBS, which shall be issued for the period from June 1, 2007 to August 1, 2007, and subject to the last sentence of Section 12(b)(1), each DMBS shall be issued for a three month period. Except for the initial DMBS if not issued on the first day of the month as specified in the preceding sentence, the issuance date for each DMBS shall be the first day of a month and the maturity date for each DMBS shall be the first day of the month following such three month period. For example, the maturity date for a DMBS issued on December 1 is March 1. Provided, however, that Borrower may

Page 2

request the issuance of a DMBS with a maturity date shorter or longer than three months (but in no event shorter than one month or longer than nine months) in accordance with the terms and conditions of the last sentence of Section 12(b)(1).

The entire unpaid principal of the Note will be due and payable by the Borrower to the Lender on the maturity date of the outstanding DMBS unless the outstanding DMBS is renewed with a new DMBS or converted to a fixed rate to take effect on the maturity date of the outstanding DMBS.

4. Payment of Principal and Interest.

(a) The original proceeds in the amount of $25,000,000 under this Note were made available to Borrower on March 5, 2001. Additional proceeds under the Amended Note in the amount of $10,900,000 were made available to the Borrower on December 22, 2004, and additional proceeds in the amount of $7,540,000 under this Note were made available to Borrower on June 1, 2007 (the “Disbursement Date”). The issuance date of the initial DMBS which shall include the original proceeds and the additional proceeds is June 22, 2007 (the “Settlement Date”). The Borrower shall pay interest on the amount disbursed on the Disbursement Date for the partial month period beginning on the Disbursement Date and ending on and including the Settlement Date, at a rate per annum equal to 5.18%.

(b) Borrower shall pay, in immediately available funds, (1) on the Disbursement Date, an amount equal to the sum of (i) the Discount of the initial DMBS, (ii) a sum equal to two thirds of the estimated Discount on the next succeeding 3-month DMBS to be issued August 1, 2007, (iii) an amount equal to sixty (60) basis points (.60%) times the outstanding principal amount divided by 12 (less any amounts paid by Borrower pursuant to Section 4(b)(2)(ii) of the Amended Note with respect to such period, if any), and (iv) the amount of interest due pursuant to Section 4(a) above, and (2) thereafter, until the Maturity Date, consecutive monthly payments on the first day of each month beginning July 1, 2007, in an amount equal to the sum of (i) one third (1/3) of the Discount calculated on the then outstanding DMBS and (ii) an amount equal to sixty (60) basis points (.60%) times the outstanding principal amount divided by 12. Payments must be received by Lender not later than 5 p.m. Pacific Time on the date due. Notwithstanding the foregoing provisions of Section 4(b)(2)(i) above and provided that Borrower has made all payments required under Section 4(d) below, Borrower shall not be obligated to make the monthly payment described in Section 4(b)(2)(i) during the last 3 months prior to the Maturity Date.

(c) Not less than 20 days prior to the maturity date of each DMBS, Lender shall notify Borrower (in the manner specified in the Security Instrument (defined

Page 3

below) for giving notices) that the outstanding DMBS is scheduled to mature on its maturity date and offer Borrower the opportunity to have a new DMBS issued on such maturity date. If Borrower elects to have the Indebtedness refinanced with a new DMBS, not less than three (3) Business Days prior to the maturity date of the maturing DMBS, Lender shall notify Borrower of the Discount on the new DMBS to be issued by sending Borrower the Rate Confirmation Form attached hereto as Schedule D. Borrower shall execute and return Schedule D to the Lender not later than one (1) Business Day prior to the issuance date of the new DMBS. For purposes of this Note, a “Business Day” means any day other than a Saturday, Sunday or any other day on which Lender is not open for business.

(d) If the amount of the Discount for the new DMBS to be issued is greater than the Discount for the outstanding DMBS, then not less than two (2) Business Days prior to the maturity date of the outstanding DMBS the Borrower shall pay to the Lender the aggregate amount of such difference. If the amount of the Discount for the new DMBS is less than the Discount for the outstanding DMBS, the aggregate amount of such difference shall be credited against the regular monthly installment due on the first day of the month immediately following the issuance date of the new DMBS.

(e) If Borrower timely exercises its option to convert the interest rate on this Note to a fixed rate pursuant to the Second Amended and Restated Conversion Agreement, dated the same day as this Note, between the Borrower and Lender (the “Conversion Agreement”), Borrower will execute the DMBS Multifamily Note Modification Agreement (the form of which is attached to the Conversion Agreement as Exhibit A) to reflect the fixed rate established in accordance with the terms of the Conversion Agreement.

(f) Any remaining principal and all other amounts due under this Note or any of the Loan Documents, if not sooner paid, shall be due and payable on the Maturity Date. Failure to pay such amounts on the Maturity Date shall result in the immediate imposition of the Default Rate (as defined in Section 10) on such unpaid amounts.

5. Maturity Date: June 1, 2012, or any earlier date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise.

6. Application of Payments. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion. Borrower agrees that neither Lender’s acceptance of

Page 4

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.

7. Security. The Indebtedness is secured, among other things, by a Second Amended and Restated Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of the date of this Note (the “Security Instrument”), and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

8. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, the prepayment premium payable under Section 12, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any prior notice to Borrower. Lender may exercise this option to accelerate regardless of any prior forbearance.

9. Late Charge. If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 5 days after Lender has notified Borrower that such amount is due and has not been paid, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent of such amount; provided, however, that if the payment due on the Maturity Date is not received by Lender on the date such payment is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent of such amount. Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (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 10.

10. Default Rate. So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, or if any payment due on the Maturity Date is not paid on the Maturity Date, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of (i) the sum of the rate at which deposits in United States Dollars in amounts approximately equal to the outstanding principal amount and with three month maturities are offered in

Page 5

immediately available funds in the London Interbank Market by leading banks in the Eurodollar market as of 11:00 a.m. (London Time), as published daily by Telerate News Service on Telerate page 3750, plus four hundred (400) basis points (4.00%) as determined by Lender and (ii) the maximum interest rate which may be collected from Borrower under applicable law. If the Telerate News Service is no longer available, or is no longer posted through electronic transmission, Lender will choose a new service that provides comparable information and provide notice thereof to Borrower. If the unpaid principal balance and all other payments required under this Note are not paid in full on the Maturity Date, the unpaid principal balance and all such other required payments shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, that, during the time that any payment under this Note is delinquent, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any payment due under this Note is delinquent, 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.

11. Limits on Personal Liability.

(a) Except as otherwise provided in this Section 11, neither Borrower nor its members or non-member manager shall have any 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 any other collateral held by Lender as security for the Indebtedness.

(b) Borrower, but not its members or non-member manager, or their respective partners, members, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns, shall be personally liable to Lender for the repayment of a portion of the

Page 6

Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents due after the earlier of (i) a declaration of default or (ii) the occurrence of an Event of Default, to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4) fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedness or any request for any action or consent by Lender; or (5) failure to apply Rents, due after the earlier of (i) a declaration of default or (ii) an Event of Default, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to the Indebtedness payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and debt service amounts for that calendar year).

(c) Borrower, but not its members or non-member manager, or their respective partners, members, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns, shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21(a) of the Security Instrument, unless consented to by Lender pursuant to Section 21(c) of the Security Instrument.

(d) To the extent that Borrower has personal liability under this Section 11, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Section 11, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an

Page 7

Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

12. Voluntary and Involuntary Prepayments.

(a) Borrower may voluntarily prepay all (but not less than all) of the Indebtedness evidenced hereby.

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

(1) At any time Borrower may voluntarily prepay all (but not less than all) of the unpaid principal balance of this Note on any DMBS maturity date if Borrower has given Lender at least 30 days prior notice of its intention to make such prepayment. Such prepayment shall be made by paying (A) the amount of principal being prepaid, (B) all other sums due Lender at the time of such prepayment, and (C) the applicable prepayment premium calculated pursuant to Schedule A, if any. For all purposes any prepayment received by Lender on any day other than the maturity date of the then outstanding DMBS shall be deemed to have been received on the maturity date of the then outstanding DMBS. Borrower may request the issuance of a DMBS with a maturity date shorter or longer than three (3) months (but in no event shorter than one (1) month or longer than nine (9) months) but only to facilitate (A) the scheduling of a prepayment in connection with the sale of the Mortgaged Property or (B) the refinancing of the Loan.

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

(3) Any application by Lender of any collateral or other security to the repayment of any portion of the unpaid principal balance of this Note prior to the Maturity Date and in the absence of acceleration shall be deemed to be a partial prepayment by Borrower, requiring the payment to Lender by Borrower of the applicable prepayment premium calculated pursuant to Schedule A, if any. The amount of any such partial prepayment shall be computed so as to provide to Lender a prepayment premium computed pursuant to Schedule A without Borrower having to pay out-of-pocket any additional amounts.

Page 8

(c) Notwithstanding the provisions of Section 12(b), no prepayment premium shall be payable with respect to (A) any prepayment made no more than twelve (12) months before the Maturity Date, or (B) any prepayment occurring as a result of the application of any insurance proceeds or condemnation award under the Security Instrument.

(d) Schedule A is hereby incorporated by reference into this Note.

(e) Any required prepayment of less than the unpaid principal balance of this Note shall not extend or postpone the due date of any subsequent payment or change the amount of such payments, unless Lender agrees otherwise in writing.

(f) Borrower recognizes that any prepayment of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from a default by Borrower, will result in Lender’s incurring loss, including reinvestment loss, additional expense and frustration or impairment of Lender’s ability to meet its commitments to third parties. Borrower agrees to pay to Lender upon demand damages for the detriment caused by any prepayment, and agrees that it is extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges and agrees that the formula for calculating prepayment premiums set forth on Schedule A represents a reasonable estimate of the damages Lender will incur because of a prepayment.

(g) Borrower further acknowledges that the prepayment premium provisions of this Note are a material part of the consideration for the loan evidenced by this Note, and acknowledges that the terms of this Note are in other respects more favorable to Borrower as a result of the Borrower’s voluntary agreement to the prepayment premium provisions.

13. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

Page 9

14. 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.

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

16. Loan Charges. 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 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.

17. Commercial Purpose. Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

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

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19. Governing Law. The law of the State of California shall govern this Note.

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

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

22. Consent to Jurisdiction and Venue. Borrower agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in the State of California (the “Property Jurisdiction”). The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note. Borrower 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.

23. 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 SCHEDULES. The following Schedules are attached to this Note:

x	Schedule A	Prepayment Premium (required)
x	Schedule B	Modifications to Multifamily Note
¨	Schedule C	Payment Amortization Schedule
x	Schedule D	DMBS Rate Confirmation Form

Page 11

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

SHORES BARRINGTON, LLC,
a Delaware limited liability company
By:	Douglas Emmett Management, Inc., a Delaware corporation, its Manager
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
Borrower’s Social Security/Employer
ID Number: 32-0129042

Fannie Mae Pool Number:                     

Page S-1

SCHEDULE A

MBS—GRADUATED PREPAYMENT PREMIUM

Any prepayment premium payable under Paragraph 12 of this Note shall be computed as follows:

(a) Borrower may voluntarily prepay all (but not less than all) of the indebtedness evidenced hereby at any time during the Loan term, subject to the requirements of subparagraph (b) below.

(b) If Borrower makes a voluntary prepayment of this Note, Lender accelerates the unpaid principal balance of this Note, or the Lender applies collateral held by Lender to the repayment of any portion of the unpaid principal balance as permitted in Section 12(b)(3) of the Note (if any), the prepayment premium shall be equal to the following percentage of the amount of principal being prepaid at the time of such prepayment, acceleration or application:

First Loan Year	3.00	%
Second Loan Year	2.00	%
Third Loan Year	.75	%
Fourth Loan Year	.50	%
Fifth Loan Year	0.00	%

(c) For the purposes of this Note, a “Loan Year” means either (i) the period beginning on the date of this Note and ending on the day before the 13^th full calendar month thereafter (i.e. May 31, 2008) or (ii) each successive 12-month period thereafter.

BORROWER’S INITIALS

Page A-1

SCHEDULE B

MODIFICATIONS TO MULTIFAMILY NOTE

The following modifications are made to the text of the Note that precedes this Schedule:

1. A new Section 4A shall be added as follows:

4A. Borrower may apply for an increase in the principal amount of the Loan from the first anniversary date of the closing of the Loan until the Maturity Date, to be effective as of the issuance date of any new DMBS funding the Indebtedness. Approval of an increased amount of the Loan will be subject to satisfying all of Lender’s and Fannie Mae’s underwriting criteria and guidelines applicable to loans of a similar underwriting tier. The guaranty and servicing fee applicable to the increased amount of Loan will equal Fannie Mae’s then current best published rate for loans with 1.10 debt service coverage (variable rate) (1.25 debt service coverage-fixed rate) and a 70% loan to value ratio. The maturity date of the increased amount shall not extend beyond the Maturity Date. Borrower shall pay all actual, reasonable out of pocket costs to third parties, with legal fees not to exceed $10,000.

2. A new Section 7A shall be added as follows:

7A. Interest Rate Hedge.(a) The Initial Hedge. To protect against fluctuations in interest rates, Borrower shall make arrangements for a LIBOR based hedge instrument (“Hedge”) to be in place and maintained at all times with respect to the Loan. For purposes of this Note, “LIBOR” is defined as an interest rate based upon the London Inter-Bank Offered Rate for three (3) month U.S. Dollar-denominated deposits. Lender acknowledges that Borrower has previously obtained Caps in an aggregate amount equal to the Amended Note (the “Existing Caps”) which are presently due to expire on August 1, 2011. The Borrower shall obtain one or more additional Caps (the “Supplemental Caps”) in an aggregate amount equal to the difference between the original principal amount of this Note and the original principal amount of the Amended Note. The Hedge for the initial DMBS shall be a Cap (whether one or more) for a period beginning not later than the date of this Note (with the exception that the Supplemental Caps shall have an effective date not later than August 1, 2007) and ending (i) with respect to the Existing Caps, not earlier than the third anniversary of the date of the Amended Note and (ii) with respect to the Supplemental Caps, ending not earlier than the third anniversary of the date of this Note (the “Initial Hedge Period”).

Page B-1

(b) Subsequent Hedges. Additional Hedges (each, a “Subsequent Hedge”) shall be required for the lesser of (i) three (3) years, or (ii) the remaining term of the Note, upon the expiration of the Cap (whether one or more) in place for the applicable Initial Hedge Period (it being understood that if the term of any such Cap is longer than the applicable Initial Hedge Period, then the three (3) year period provided in clause (i) shall commence on the actual termination date of the Cap). It is the intention of the parties, and a condition of the Note, that Borrower shall obtain, and shall maintain at all times during the term of the Note, a Hedge in an aggregate notional principal amount equal to the outstanding principal balance of the Note on the date that the Hedge is purchased, covering the required term of the Note as set forth in this Section 7A.

(c) Hedge Terms. Each Hedge which is a Cap shall:

(1) collectively with all other Hedges provided to Lender in connection with the Loan, provide for a notional principal amount equal at all times to the outstanding principal balance of the Note on the date that the Hedge is purchased;

(2) with respect to the Existing Caps, provide a strike rate not greater than 5.0% per annum and with respect to the Supplemental Caps, provide for a strike rate not greater than 6.0% per annum.

(3) with respect to any Subsequent Hedge, provide a strike rate not greater than the lowest interest rate which, when increased by sixty (60) basis points (.60%) and multiplied by the portion of the outstanding principal balance of the Loan to be covered by such Subsequent Hedge (i.e. the notional amount of the replacement Cap), would equal an amount which, when combined with (i) the debt service on the remaining portion of the Loan covered by any other Cap(s) then in effect (such debt service to be calculated based upon the strike rate of the additional Cap(s) and applicable portion of the principal amount of the Loan covered by such Caps(s) (i.e. the notional amount(s) of any such Cap(s)), and (ii) the amount of assumed principal payments which would be due on a loan in an amount equal to the then outstanding principal balance of the Loan and a thirty year amortization schedule, would result in a combined debt service coverage ratio of not less than 1.10 to 1.00 (the “Hedge Rate”), based upon the underwritten net operating income of the Property (and the net cash flow after debt service generated by the Santa Monica Shores project, if applicable) determined as provided herein. The debt service coverage ratio (and its components) for each Cap shall be determined in accordance with the underwriting standards set forth in the Fannie Mae Multifamily Delegated Underwriting and Servicing (DUS) Guide in effect as of the time of such determination (the

Page B-2

“DUS Guide”), based upon the underwritten net operating income of the Property calculated using the net revenue generated by the operation of the Property for the three (3) month period immediately preceding the date of determination, annualized and the underwritten expenses of the Property for the twelve (12) month period immediately preceding the date of determination, adjusted for inflation at a rate of three and 00/100 percent (3.00%) per annum. If such determination is made at a time when the Property is cross-collateralized with the Santa Monica Shores project, then debt service coverage ratio (and its components) shall be determined utilizing the combined sum of (i) the underwritten net operating income of the Property, determined as set forth above and (ii) the net cash flow after debt service generated by the Santa Monica Shores project;

(4) require the counterparty to make interest payments on the notional principal amount at a rate equal to the amount by which Coupon Rate exceeds the Hedge Rate;

(5) require the counterparty to make such interest payments either to an account pledged to the Lender or directly to the Lender after an Event of Default pursuant to the Hedge Security Agreement (as defined below); and

(6) be evidenced, governed and secured on terms and conditions, and pursuant to documentation (the “Hedge Documents”), in form and content acceptable to Fannie Mae, and with a counterparty (a “Counterparty”) approved by Fannie Mae, which may include Bank of America, Wells Fargo and Wachovia.

(d) Hedge Security Agreement; Delivery of Hedge Payments. Pursuant to a security agreement in form and content acceptable to Lender (each a “Hedge Security Agreement”), Lender shall be granted an enforceable, perfected, first priority lien on and security interest in each Hedge and payments due under the Hedge (including scheduled and termination payments) in order to secure Borrower’s obligations to Lender under this Note. With respect to each Hedge, the Hedge Security Agreement must be delivered by Borrower to Lender no later than the effective date of the Hedge.

(e) Termination. Borrower shall not terminate, transfer or consent to any transfer of any existing Hedge without Lender’s prior written consent as long as Borrower is required to maintain a Hedge pursuant to the Note; provided, however, that if, and at such time as, the Note is paid off or converted to a fixed rate pursuant to the terms of the Conversion Agreement between Borrower and Lender, Borrower shall have the right to terminate the existing Hedge.

Page B-3

(f) Escrow. Upon the occurrence of an Event of Default under the Security Instrument, Borrower will be required to (i) make annual deposits (“Annual Deposits”) to be held in an interest bearing hedge reserve escrow account during any period in which a Hedge with an original term of less than the remaining term of the Note is in effect, to provide moneys for the purchase of a Subsequent Hedge and (ii) enter into a Hedge Reserve Escrow Account Security Agreement with Lender. Lender shall determine the amount of the Annual Deposits and shall monitor the hedge reserve escrow account holding such Annual Deposits.

(g) Performance Under Hedge Documents. Borrower agrees to comply fully with, and to otherwise perform when due, its obligations under, all applicable Hedge Documents and all other agreements evidencing, governing and/or securing any Hedge arrangement contemplated under this Section. Borrower shall not exercise, without the Lender’s prior written consent, and shall exercise, at Lender’s direction, any rights or remedies under any Hedge Document, including without limitation the right of termination.

3. A new Section 12(h) shall be added as follows:

(h) BORROWER EXPRESSLY (A) WAIVES ANY RIGHTS IT MAY HAVE UNDER CALIFORNIA CIVIL CODE SECTION 2954.10 TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT FEE OR PENALTY, UPON ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND (B) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT OF THIS NOTE IS MADE, UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY HOLDER ON ACCOUNT OF ANY EVENT OF DEFAULT BY BORROWER UNDER ANY LOAN DOCUMENT, INCLUDING BUT NOT LIMITED TO ANY TRANSFER WHICH IS PROHIBITED BY THE SECURITY INSTRUMENT, THEN BORROWER SHALL BE OBLIGATED TO PAY THE APPLICABLE PREMIUM REQUIRED BY SECTION 12 OF THIS NOTE. BY INITIALING THIS PROVISION IN THE SPACE PROVIDED BELOW, BORROWER AGREES THAT LENDER’S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND AGREEMENT.

BORROWER’S INITIALS

Page B-4

SCHEDULE C

PRINCIPAL AMORTIZATION SCHEDULE

NOT APPLICABLE

Page C-1

SCHEDULE D

RATE CONFIRMATION FORM

Pursuant to Section 4(c) of that certain Second Amended and Restated Discount MBS Multifamily Note dated June 1, 2007 (the “Note”), from the undersigned (the “Borrower”) to FANNIE MAE, a federally-chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 et seq., (the “Lender”), the Borrower hereby requests that the Lender issue to it an advance for the purpose of refinancing the Indebtedness, to be funded by a discount mortgaged backed security (“DMBS”) and the Lender hereby confirms that it has obtained a commitment for the purchase of a Fannie Mae DMBS with the following terms:

Advance Amount	$
Term	Three months
DMBS Issue Date	1st,
DMBS Imputed Interest Rate	%
Discount	%
Price
Closing Date no later than	,

Page D-1

Dated:                             ,         

DEUTSCHE BANK BERKSHIRE

MORTGAGE, INC., a Delaware corporation

By:

Name:

Title:

By:

Name:

Title:

Rate Setting Date:                             ,             ,     :     AM/PM Eastern Time

AGREED TO AND ACCEPTED BY:

Dated:                             ,         

SHORES BARRINGTON, LLC, a Delaware limited liability company
By:	Douglas Emmett Management, Inc., a Delaware corporation, its Manager
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
Borrower’s Social Security/Employer
ID Number: 32-0129042

Page D-2

EX-10.4

Exhibit 10.4

SECOND AMENDED AND RESTATED

DISCOUNT MBS MULTIFAMILY NOTE

(Santa Monica Shores)

US $144,610,000.00 June 1, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”), jointly and severally (if more than one) promises to pay to the order of FANNIE MAE, a federally-chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 et seq., the principal sum of One Hundred Forty-Four Million Six Hundred Ten Thousand and 00/100 Dollars (US$144,610,000.00), with interest on the unpaid principal balance at the rates applicable from time to time set forth in this Second Amended and Restated Discount MBS Multifamily Note (the “Note”).

A Discount MBS Multifamily Note (the “Original Note”) in the original principal amount of $63,000,000.00, dated March 5, 2001, was executed by Douglas Emmett Realty Fund 1998, a California limited partnership (“DE 1998”), in favor of Berkshire Mortgage Finance Limited Partnership, a Massachusetts limited partnership (“Berkshire”), and secured, inter alia, by a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (as amended from time to time, the “Original Security Instrument”) dated as of March 5, 2001, made by DE 1998 for the benefit of Berkshire, recorded with the Office of the County Recorder of Los Angeles County, California as Instrument No. 01-0357622, encumbering a certain multifamily property known as Santa Monica Shores in Santa Monica, Los Angeles County, California (the “Property”). The Original Note was previously amended and restated in its entirety pursuant to an Amended and Restated Discount MBS Multifamily Note made by Borrower payable to the order of Fannie Mae in the original principal amount of $104,100,000, dated December 22, 2004 (the “Amended Note”). The Amended Note was secured by, inter alia, an Amended and Restated Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the “Amended Security Instrument”) dated as of December 22, 2004, made by Borrower for the benefit of Fannie Mae, recorded with the Office of the County Recorder of Los Angeles County, California as Instrument No. 05-0015214, encumbering the Property.

Pursuant to the terms and conditions set forth in that certain Assumption and Release Agreement (the “Assumption”) dated as of December 22, 2004, executed by and between DE 1998, Borrower and Fannie Mae and recorded with the Office of the County Recorder of Los Angeles County, California on January 4, 2005, as Instrument No. 05-0015218, Borrower assumed all of the payment and

Page 1

performance obligations of DE 1998 set forth in the Amended Note, the Amended Security Instrument and all of the other documents and instruments executed in connection therewith, as modified by the Assumption.

Borrower and Fannie Mae desire to and hereby amend and restate the Amended Note in its entirety to reflect an increase in the note amount, an extension of the term and certain other modifications, as hereinafter set forth.

1. Defined Terms. As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument. Event of Default and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Security Instrument (as defined in Section 7).

2. Address for Payment. All payments due under this Note shall be payable at c/o Deutsche Bank Berkshire Mortgage, Inc., One Beacon Street, 14^th floor, Boston, Massachusetts 02108, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3. Discount Mortgage Backed Security. The original stated principal amount of this Note shall be funded by the issuance of a discount mortgage backed security in the face amount of this Note (the “DMBS”). The original stated principal amount of this Note shall be equal to the sum of (i) the price (the “Price”) of the initial DMBS and (ii) the discount (the “Discount”) of the initial DMBS. The Price is equal to the proceeds of the sale of the DMBS and the Discount is an amount equal to the difference between (i) the face amount of the DMBS and (ii) the Price of the DMBS. Except as provided in Section 4(a), the proceeds made available by Lender to Borrower shall equal the Price of the DMBS. Except for the initial DMBS, which shall be issued for the period from June 1, 2007 to August 1, 2007, and subject to the last sentence of Section 12(b)(1), each DMBS shall be issued for a three month period. Except for the initial DMBS if not issued on the first day of the month as specified in the preceding sentence, the issuance date for each DMBS shall be the first day of a month and the maturity date for each DMBS shall be the first day of the month following such three month period. For example, the maturity date for a DMBS issued on December 1 is March 1. Provided, however, that Borrower may request the issuance of a DMBS with a maturity date shorter or longer than three months (but in no event shorter than one month or longer than nine months) in accordance with the terms and conditions of the last sentence of Section 12(b)(1).

Page 2

The entire unpaid principal of the Note will be due and payable by the Borrower to the Lender on the maturity date of the outstanding DMBS unless the outstanding DMBS is renewed with a new DMBS or converted to a fixed rate to take effect on the maturity date of the outstanding DMBS.

4. Payment of Principal and Interest.

(a) The original proceeds in the amount of $63,000,000 under this Note were made available to Borrower on March 5, 2001. Additional proceeds under the Amended Note in the amount of $41,100,000 were made available to the Borrower on December 22, 2004, and additional proceeds in the amount of $40,510,000 under this Note were made available to Borrower on June 1, 2007 (the “Disbursement Date”). The issuance date of the initial DMBS which shall include the original proceeds and the additional proceeds is June 22, 2007 (the “Settlement Date”). The Borrower shall pay interest on the amount disbursed on the Disbursement Date for the partial month period beginning on the Disbursement Date and ending on and including the Settlement Date, at a rate per annum equal to 5.18%.

(b) Borrower shall pay, in immediately available funds, (1) on the Disbursement Date, an amount equal to the sum of (i) the Discount of the initial DMBS, (ii) a sum equal to two thirds of the estimated Discount on the next succeeding 3-month DMBS to be issued August 1, 2007, (iii) an amount equal to sixty (60) basis points (.60%) times the outstanding principal amount divided by 12 (less any amounts paid by Borrower pursuant to Section 4(b)(2)(ii) of the Amended Note with respect to such period, if any), and (iv) the amount of interest due pursuant to Section 4(a) above, and (2) thereafter, until the Maturity Date, consecutive monthly payments on the first day of each month beginning July 1, 2007, in an amount equal to the sum of (i) one third (1/3) of the Discount calculated on the then outstanding DMBS and (ii) an amount equal to sixty (60) basis points (.60%) times the outstanding principal amount divided by 12. Payments must be received by Lender not later than 5 p.m. Pacific Time on the date due. Notwithstanding the foregoing provisions of Section 4(b)(2)(i) above and provided that Borrower has made all payments required under Section 4(d) below, Borrower shall not be obligated to make the monthly payment described in Section 4(b)(2)(i) during the last 3 months prior to the Maturity Date.

(c) Not less than 20 days prior to the maturity date of each DMBS, Lender shall notify Borrower (in the manner specified in the Security Instrument (defined below) for giving notices) that the outstanding DMBS is scheduled to mature on its maturity date and offer Borrower the opportunity to have a new DMBS issued on such maturity date. If Borrower elects to have the Indebtedness refinanced with a

Page 3

new DMBS, not less than three (3) Business Days prior to the maturity date of the maturing DMBS, Lender shall notify Borrower of the Discount on the new DMBS to be issued by sending Borrower the Rate Confirmation Form attached hereto as Schedule D. Borrower shall execute and return Schedule D to the Lender not later than one (1) Business Day prior to the issuance date of the new DMBS. For purposes of this Note, a “Business Day” means any day other than a Saturday, Sunday or any other day on which Lender is not open for business.

(d) If the amount of the Discount for the new DMBS to be issued is greater than the Discount for the outstanding DMBS, then not less than two (2) Business Days prior to the maturity date of the outstanding DMBS the Borrower shall pay to the Lender the aggregate amount of such difference. If the amount of the Discount for the new DMBS is less than the Discount for the outstanding DMBS, the aggregate amount of such difference shall be credited against the regular monthly installment due on the first day of the month immediately following the issuance date of the new DMBS.

(e) If Borrower timely exercises its option to convert the interest rate on this Note to a fixed rate pursuant to the Second Amended and Restated Conversion Agreement, dated the same day as this Note, between the Borrower and Lender (the “Conversion Agreement”), Borrower will execute the DMBS Multifamily Note Modification Agreement (the form of which is attached to the Conversion Agreement as Exhibit A) to reflect the fixed rate established in accordance with the terms of the Conversion Agreement.

(f) Any remaining principal and all other amounts due under this Note or any of the Loan Documents, if not sooner paid, shall be due and payable on the Maturity Date. Failure to pay such amounts on the Maturity Date shall result in the immediate imposition of the Default Rate (as defined in Section 10) on such unpaid amounts.

5. Maturity Date: June 1, 2012, or any earlier date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise.

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

Page 4

7. Security. The Indebtedness is secured, among other things, by a Second Amended and Restated Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of the date of this Note (the “Security Instrument”), and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

8. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, the prepayment premium payable under Section 12, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any prior notice to Borrower. Lender may exercise this option to accelerate regardless of any prior forbearance.

9. Late Charge. If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 5 days after Lender has notified Borrower that such amount is due and has not been paid, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent of such amount; provided, however, that if the payment due on the Maturity Date is not received by Lender on the date such payment is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent of such amount. Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (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 10.

10. Default Rate. So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, or if any payment due on the Maturity Date is not paid on the Maturity Date, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of (i) the sum of the rate at which deposits in United States Dollars in amounts approximately equal to the outstanding principal amount and with three month maturities are offered in immediately available funds in the London Interbank Market by leading banks in the Eurodollar market as of 11:00 a.m. (London Time), as published daily by Telerate News Service on Telerate page 3750, plus four hundred (400) basis points

Page 5

(4.00%) as determined by Lender and (ii) the maximum interest rate which may be collected from Borrower under applicable law. If the Telerate News Service is no longer available, or is no longer posted through electronic transmission, Lender will choose a new service that provides comparable information and provide notice thereof to Borrower. If the unpaid principal balance and all other payments required under this Note are not paid in full on the Maturity Date, the unpaid principal balance and all such other required payments shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, that, during the time that any payment under this Note is delinquent, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any payment due under this Note is delinquent, 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.

11. Limits on Personal Liability.

(a) Except as otherwise provided in this Section 11, neither Borrower nor its members or non-member manager shall have any 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 any other collateral held by Lender as security for the Indebtedness.

(b) Borrower, but not its members or non-member manager, or their respective partners, members, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns, shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents due after the earlier of (i) a declaration of default or (ii) the occurrence of an

Page 6

Event of Default, to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4) fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedness or any request for any action or consent by Lender; or (5) failure to apply Rents, due after the earlier of (i) a declaration of default or (ii) an Event of Default, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to the Indebtedness payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and debt service amounts for that calendar year).

(c) Borrower, but not its members or non-member manager, or their respective partners, members, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns, shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21(a) of the Security Instrument, unless consented to by Lender pursuant to Section 21(c) of the Security Instrument.

(d) To the extent that Borrower has personal liability under this Section 11, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Section 11, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

Page 7

12. Voluntary and Involuntary Prepayments.

(a) Borrower may voluntarily prepay all (but not less than all) of the Indebtedness evidenced hereby.

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

(1) At any time Borrower may voluntarily prepay all (but not less than all) of the unpaid principal balance of this Note on any DMBS maturity date if Borrower has given Lender at least 30 days prior notice of its intention to make such prepayment. Such prepayment shall be made by paying (A) the amount of principal being prepaid, (B) all other sums due Lender at the time of such prepayment, and (C) the applicable prepayment premium calculated pursuant to Schedule A, if any. For all purposes any prepayment received by Lender on any day other than the maturity date of the then outstanding DMBS shall be deemed to have been received on the maturity date of the then outstanding DMBS. Borrower may request the issuance of a DMBS with a maturity date shorter or longer than three (3) months (but in no event shorter than one (1) month or longer than nine (9) months) but only to facilitate (A) the scheduling of a prepayment in connection with the sale of the Mortgaged Property or (B) the refinancing of the Loan.

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

(3) Any application by Lender of any collateral or other security to the repayment of any portion of the unpaid principal balance of this Note prior to the Maturity Date and in the absence of acceleration shall be deemed to be a partial prepayment by Borrower, requiring the payment to Lender by Borrower of the applicable prepayment premium calculated pursuant to Schedule A, if any. The amount of any such partial prepayment shall be computed so as to provide to Lender a prepayment premium computed pursuant to Schedule A without Borrower having to pay out-of-pocket any additional amounts.

Page 8

(c) Notwithstanding the provisions of Section 12(b), no prepayment premium shall be payable with respect to (A) any prepayment made no more than twelve (12) months before the Maturity Date, or (B) any prepayment occurring as a result of the application of any insurance proceeds or condemnation award under the Security Instrument.

(d) Schedule A is hereby incorporated by reference into this Note.

(e) Any required prepayment of less than the unpaid principal balance of this Note shall not extend or postpone the due date of any subsequent payment or change the amount of such payments, unless Lender agrees otherwise in writing.

(f) Borrower recognizes that any prepayment of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from a default by Borrower, will result in Lender’s incurring loss, including reinvestment loss, additional expense and frustration or impairment of Lender’s ability to meet its commitments to third parties. Borrower agrees to pay to Lender upon demand damages for the detriment caused by any prepayment, and agrees that it is extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges and agrees that the formula for calculating prepayment premiums set forth on Schedule A represents a reasonable estimate of the damages Lender will incur because of a prepayment.

(g) Borrower further acknowledges that the prepayment premium provisions of this Note are a material part of the consideration for the loan evidenced by this Note, and acknowledges that the terms of this Note are in other respects more favorable to Borrower as a result of the Borrower’s voluntary agreement to the prepayment premium provisions.

13. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

14. 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

Page 9

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.

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

16. Loan Charges. 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 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.

17. Commercial Purpose. Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

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

19. Governing Law. The law of the State of California shall govern this Note.

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

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

22. Consent to Jurisdiction and Venue. Borrower agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in the State of California (the “Property Jurisdiction”). The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note. Borrower 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.

23. 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 SCHEDULES. The following Schedules are attached to this Note:

x	Schedule A	Prepayment Premium (required)
x	Schedule B	Modifications to Multifamily Note
¨	Schedule C	Payment Amortization Schedule
x	Schedule D	DMBS Rate Confirmation Form

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

SHORES BARRINGTON, LLC, a Delaware limited liability company
By:	Douglas Emmett Management, Inc., a Delaware corporation, its Manager
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
Borrower’s Social Security/Employer
ID Number: 32-0129042

Fannie Mae Pool Number:                     

Page S-1

SCHEDULE A

MBS - GRADUATED PREPAYMENT PREMIUM

Any prepayment premium payable under Paragraph 12 of this Note shall be computed as follows:

(a) Borrower may voluntarily prepay all (but not less than all) of the indebtedness evidenced hereby at any time during the Loan term, subject to the requirements of subparagraph (b) below.

(b) If Borrower makes a voluntary prepayment of this Note, Lender accelerates the unpaid principal balance of this Note, or the Lender applies collateral held by Lender to the repayment of any portion of the unpaid principal balance as permitted in Section 12(b)(3) of the Note (if any), the prepayment premium shall be equal to the following percentage of the amount of principal being prepaid at the time of such prepayment, acceleration or application:

First Loan Year	3.00	%
Second Loan Year	2.00	%
Third Loan Year	.75	%
Fourth Loan Year	.50	%
Fifth Loan Year	0.00	%

(c) For the purposes of this Note, a “Loan Year” means either (i) the period beginning on the date of this Note and ending on the day before the 13^th full calendar month thereafter (i.e. May 31, 2008) or (ii) each successive 12-month period thereafter.

BORROWER’S INITIALS

Page A-1

SCHEDULE B

MODIFICATIONS TO MULTIFAMILY NOTE

The following modifications are made to the text of the Note that precedes this Schedule:

1. A new Section 4A shall be added as follows:

4A. Borrower may apply for an increase in the principal amount of the Loan from the first anniversary date of the closing of the Loan until the Maturity Date, to be effective as of the issuance date of any new DMBS funding the Indebtedness. Approval of an increased amount of the Loan will be subject to satisfying all of Lender’s and Fannie Mae’s underwriting criteria and guidelines applicable to loans of a similar underwriting tier. The guaranty and servicing fee applicable to the increased amount of Loan will equal Fannie Mae’s then current best published rate for loans with 1.10 debt service coverage (variable rate) (1.25 debt service coverage-fixed rate) and a 70% loan to value ratio. The maturity date of the increased amount shall not extend beyond the Maturity Date. Borrower shall pay all actual, reasonable out of pocket costs to third parties, with legal fees not to exceed $10,000.

2. A new Section 7A shall be added as follows:

7A. Interest Rate Hedge. (a) The Initial Hedge. To protect against fluctuations in interest rates, Borrower shall make arrangements for a LIBOR based hedge instrument (“Hedge”) to be in place and maintained at all times with respect to the Loan. For purposes of this Note, “LIBOR” is defined as an interest rate based upon the London Inter-Bank Offered Rate for three (3) month U.S. Dollar-denominated deposits. Lender acknowledges that Borrower has previously obtained Caps in an aggregate amount equal to the Amended Note (the “Existing Caps”) which are presently due to expire on August 1, 2011. The Borrower shall obtain one or more additional Caps (the “Supplemental Caps”) in an aggregate amount equal to the difference between the original principal amount of this Note and the original principal amount of the Amended Note. The Hedge for the initial DMBS shall be a Cap (whether one or more) for a period beginning not later than the date of this Note (with the exception that the Supplemental Caps shall have an effective date not later than August 1, 2007) and ending (i) with respect to the Existing Caps, not earlier than the third anniversary of the date of the Amended Note and (ii) with respect to the Supplemental Caps, ending not earlier than the third anniversary of the date of this Note (the “Initial Hedge Period”).

Page B-1

(b) Subsequent Hedges. Additional Hedges (each, a “Subsequent Hedge”) shall be required for the lesser of (i) three (3) years, or (ii) the remaining term of the Note, upon the expiration of the Cap (whether one or more) in place for the applicable Initial Hedge Period (it being understood that if the term of any such Cap is longer than the applicable Initial Hedge Period, then the three (3) year period provided in clause (i) shall commence on the actual termination date of the Cap). It is the intention of the parties, and a condition of the Note, that Borrower shall obtain, and shall maintain at all times during the term of the Note, a Hedge in an aggregate notional principal amount equal to the outstanding principal balance of the Note on the date that the Hedge is purchased, covering the required term of the Note as set forth in this Section 7A.

(c) Hedge Terms. Each Hedge which is a Cap shall:

(1) collectively with all other Hedges provided to Lender in connection with the Loan, provide for a notional principal amount equal at all times to the outstanding principal balance of the Note on the date that the Hedge is purchased;

(2) with respect to the Existing Caps, provide a strike rate not greater than 5.0% per annum and with respect to the Supplemental Caps, provide for a strike rate not greater than 6.0% per annum.

(3) with respect to any Subsequent Hedge, provide a strike rate not greater than the lowest interest rate which, when increased by sixty (60) basis points (.60%) and multiplied by the portion of the outstanding principal balance of the Loan to be covered by such Subsequent Hedge (i.e. the notional amount of the replacement Cap), would equal an amount which, when combined with (i) the debt service on the remaining portion of the Loan covered by any other Cap(s) then in effect (such debt service to be calculated based upon the strike rate of the additional Cap(s) and applicable portion of the principal amount of the Loan covered by such Caps(s) (i.e. the notional amount(s) of any such Cap(s)), and (ii) the amount of assumed principal payments which would be due on a loan in an amount equal to the then outstanding principal balance of the Loan and a thirty year amortization schedule, would result in a combined debt service coverage ratio of not less than 1.10 to 1.00 (the “Hedge Rate”), based upon the underwritten net operating income of the Property (and the net cash flow after debt service generated by the 555 Barrington project, if applicable) determined as provided herein. The debt service coverage ratio (and its components) for each Cap shall be determined in accordance with the underwriting standards set forth in the Fannie Mae Multifamily Delegated Underwriting and Servicing (DUS) Guide in effect as of the time of such determination (the

Page B-2

“DUS Guide”), based upon the underwritten net operating income of the Property calculated using the net revenue generated by the operation of the Property for the three (3) month period immediately preceding the date of determination, annualized and the underwritten expenses of the Property for the twelve (12) month period immediately preceding the date of determination, adjusted for inflation at a rate of three and 00/100 percent (3.00%) per annum. If such determination is made at a time when the Property is cross-collateralized with the 555 Barrington project, then debt service coverage ratio (and its components) shall be determined utilizing the combined sum of (i) the underwritten net operating income of the Property, determined as set forth above and (ii) the net cash flow after debt service generated by the 555 Barrington project;

(4) require the counterparty to make interest payments on the notional principal amount at a rate equal to the amount by which Coupon Rate exceeds the Hedge Rate;

(5) require the counterparty to make such interest payments either to an account pledged to the Lender or directly to the Lender after an Event of Default pursuant to the Hedge Security Agreement (as defined below); and

(6) be evidenced, governed and secured on terms and conditions, and pursuant to documentation (the “Hedge Documents”), in form and content acceptable to Fannie Mae, and with a counterparty (a “Counterparty”) approved by Fannie Mae, which may include Bank of America, Wells Fargo and Wachovia.

(d) Hedge Security Agreement; Delivery of Hedge Payments. Pursuant to a security agreement in form and content acceptable to Lender (each a “Hedge Security Agreement”), Lender shall be granted an enforceable, perfected, first priority lien on and security interest in each Hedge and payments due under the Hedge (including scheduled and termination payments) in order to secure Borrower’s obligations to Lender under this Note. With respect to each Hedge, the Hedge Security Agreement must be delivered by Borrower to Lender no later than the effective date of the Hedge.

(e) Termination. Borrower shall not terminate, transfer or consent to any transfer of any existing Hedge without Lender’s prior written consent as long as Borrower is required to maintain a Hedge pursuant to the Note; provided, however, that if, and at such time as, the Note is paid off or converted to a fixed rate pursuant to the terms of the Conversion Agreement between Borrower and Lender, Borrower shall have the right to terminate the existing Hedge.

Page B-3

(f) Escrow. Upon the occurrence of an Event of Default under the Security Instrument, Borrower will be required to (i) make annual deposits (“Annual Deposits”) to be held in an interest bearing hedge reserve escrow account during any period in which a Hedge with an original term of less than the remaining term of the Note is in effect, to provide moneys for the purchase of a Subsequent Hedge and (ii) enter into a Hedge Reserve Escrow Account Security Agreement with Lender. Lender shall determine the amount of the Annual Deposits and shall monitor the hedge reserve escrow account holding such Annual Deposits.

(g) Performance Under Hedge Documents. Borrower agrees to comply fully with, and to otherwise perform when due, its obligations under, all applicable Hedge Documents and all other agreements evidencing, governing and/or securing any Hedge arrangement contemplated under this Section. Borrower shall not exercise, without the Lender’s prior written consent, and shall exercise, at Lender’s direction, any rights or remedies under any Hedge Document, including without limitation the right of termination.

3. A new Section 12(h) shall be added as follows:

(h) BORROWER EXPRESSLY (A) WAIVES ANY RIGHTS IT MAY HAVE UNDER CALIFORNIA CIVIL CODE SECTION 2954.10 TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT FEE OR PENALTY, UPON ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND (B) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT OF THIS NOTE IS MADE, UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY HOLDER ON ACCOUNT OF ANY EVENT OF DEFAULT BY BORROWER UNDER ANY LOAN DOCUMENT, INCLUDING BUT NOT LIMITED TO ANY TRANSFER WHICH IS PROHIBITED BY THE SECURITY INSTRUMENT, THEN BORROWER SHALL BE OBLIGATED TO PAY THE APPLICABLE PREMIUM REQUIRED BY SECTION 12 OF THIS NOTE. BY INITIALING THIS PROVISION IN THE SPACE PROVIDED BELOW, BORROWER AGREES THAT LENDER’S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND AGREEMENT.

BORROWER’S INITIALS

Page B-4

SCHEDULE C

PRINCIPAL AMORTIZATION SCHEDULE

NOT APPLICABLE

Page C-1

SCHEDULE D

RATE CONFIRMATION FORM

Pursuant to Section 4(c) of that certain Second Amended and Restated Discount MBS Multifamily Note dated June 1, 2007 (the “Note”), from the undersigned (the “Borrower”) to FANNIE MAE, a federally-chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 et seq., (the “Lender”), the Borrower hereby requests that the Lender issue to it an advance for the purpose of refinancing the Indebtedness, to be funded by a discount mortgaged backed security (“DMBS”) and the Lender hereby confirms that it has obtained a commitment for the purchase of a Fannie Mae DMBS with the following terms:

Advance Amount	$
Term	Three months
DMBS Issue Date	1st,
DMBS Imputed Interest Rate	%
Discount	%
Price
Closing Date no later than	,

Page D-1

Dated:                             ,         

DEUTSCHE BANK BERKSHIRE

MORTGAGE, INC., a Delaware corporation

By:

Name:

Title:

By:

Name:

Title:

Rate Setting Date:                             ,             ,     :     AM/PM Eastern Time

AGREED TO AND ACCEPTED BY:

Dated:                             ,         

SHORES BARRINGTON, LLC, a Delaware limited liability company
By:	Douglas Emmett Management, Inc., a Delaware corporation, its Manager
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
Borrower’s Social Security/Employer
ID Number: 32-0129042

Page D-2

EX-10.5

Exhibit 10.5

AMENDED AND RESTATED

DISCOUNT MBS MULTIFAMILY NOTE

(Moanalua Hillside Apartments)

US $111,920,000.00 June 1, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) jointly and severally (if more than one) promises to pay to the order of FANNIE MAE, a federally-chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 et seq., the principal sum of One Hundred Eleven Million Nine Hundred Twenty Thousand and 00/100 Dollars (US $111,920,000.00), with interest on the unpaid principal balance at the rates applicable from time to time set forth in this Amended and Restated Discount MBS Multifamily Note (the “Note”).

A Discount MBS Multifamily Note (the “Original Note”) in the original principal amount of $75,000,000.00, dated January 13, 2005, was executed by Borrower in favor of Deutsche Bank Berkshire Mortgage, Inc., a Delaware corporation (“DBBM”), and secured, inter alia, by a Multifamily Mortgage, Assignment of Rents and Security Agreement (as amended from time to time, the “Original Security Instrument”) dated as of January 13, 2005, made by Borrower in favor of DBBM, recorded with the Office of the Assistant Registrar of the Land Court of the State of Hawaii as Document No. 3218129, encumbering a certain multifamily property known as Moanalua Hillside Apartments in Honolulu, Honolulu County, Hawaii (the “Property”). The Original Note was previously endorsed by DBBM in favor of Fannie Mae and the Original Security Instrument was assigned by DBBM to Fannie Mae pursuant to an Assignment of Multifamily Mortgage, Assignment of Rents and Security Agreement dated as of January 13, 2005, filed with the Office of the Assistant Registrar of the Land Court of the State of Hawaii as Document No. 3220351.

Borrower and Fannie Mae desire to and hereby amend and restate the Original Note in its entirety to reflect an increase in the note amount, an extension of the term and certain other modifications, as hereinafter set forth.

1. Defined Terms. As used in this Note, (i) the term “Lender” means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument. Event of Default, Key Principal and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Security Instrument (as defined in Paragraph 7).

2. Address for Payment. All payments due under this Note shall be payable at c/o Deutsche Bank Berkshire Mortgage, Inc., One Beacon Street, 14^th floor, Boston, Massachusetts 02108, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3. Discount Mortgage Backed Security. The original stated principal amount of this Note shall be funded by the issuance of a discount mortgage backed security in the face amount of this Note (the “DMBS”). The original stated principal amount of this Note shall be equal to the sum of (i) the price (the “Price”) of the initial DMBS and (ii) the discount (the “Discount”) of the initial DMBS. The Price is equal

Page 1

to the proceeds of the sale of the DMBS and the Discount is an amount equal to the difference between (i) the face amount of the DMBS and (ii) the Price of the DMBS. Except as provided in Paragraph 4(a), the proceeds made available by Lender to Borrower shall equal the Price of the DMBS. Except for the initial DMBS which shall be issued for the period from June 1, 2007 to August 1, 2007, and subject to the last sentence of Paragraph 12(b)(1), each DMBS shall be issued for a three month period. Except for the initial DMBS if not issued on the first day of the month as specified in the preceding sentence, the issuance date for each DMBS shall be the first day of a month and the maturity date for each DMBS shall be the first day of the month following such three month period. For example, the maturity date for a DMBS issued on December 1 is March 1. Provided, however, that Borrower may request the issuance of a DMBS with a maturity date shorter or longer than three months (but in no event shorter than one month or longer than nine months) in accordance with the terms and conditions of the last sentence of Paragraph 12(b)(1). The entire unpaid principal of the Note will be due and payable by the Borrower to the Lender on the maturity date of the outstanding DMBS unless the outstanding DMBS is renewed with a new DMBS or converted to a fixed rate to take effect on the maturity date of the outstanding DMBS.

4. Payment of Principal and Interest. Principal and interest on this Note shall be paid as follows:

(a) The original proceeds in the amount of $75,000,000 under this Note were made available to Borrower on January 13, 2005 and additional proceeds in the amount of $36,920,000 under this Note were made available to Borrower on June 1, 2007 (the “Disbursement Date”). The issuance date of the initial DMBS which shall include the original proceeds and the additional proceeds is June 22, 2007 (the “Settlement Date”). The Borrower shall pay interest on the amount disbursed on the Disbursement Date for the partial month period beginning on the Disbursement Date and ending on and including the Settlement Date, at a rate per annum equal to 5.18.

(b) Borrower shall pay, in immediately available funds, (1) on the Disbursement Date, an amount equal to the sum of (i) the Discount of the initial DMBS, (ii) a sum equal to two thirds of the estimated Discount on the next succeeding 3-month DMBS to be issued August 1, 2007, (iii) an amount equal to seventy and  ⁷/10 (70.7) basis points (.707%) times the outstanding principal amount divided by 12 (less any amounts paid by Borrower pursuant to Paragraph 4(b)(2)(ii) of the Original Note with respect to such period, if any), and (iv) the amount of interest due pursuant to Paragraph 4(a) above, and (2) thereafter, until the Maturity Date, consecutive monthly payments on the first day of each month beginning July 1, 2007, in an amount equal to the sum of (i) one third ( ¹/3) of the Discount calculated on the then outstanding DMBS and (ii) an amount equal to seventy and  ⁷/10 (70.7) basis points (.707%) times the outstanding principal amount divided by 12. Payments must be received by Lender not later than 5 p.m. Pacific Time on the date due. Notwithstanding the foregoing provisions of Paragraph 4(b)(2)(i) above and provided that Borrower has made all payments required under Paragraph 4(d) below, Borrower shall not be obligated to make the monthly payment described in Paragraph 4(b)(2)(i) during the last 3 months prior to the Maturity Date.

(c) Not less than 20 days prior to the maturity date of each DMBS, Lender shall notify Borrower (in the manner specified in the Security Instrument (defined below) for giving notices) that the outstanding DMBS is scheduled to mature on its maturity date and offer Borrower the opportunity to have a new DMBS issued on such maturity date. If Borrower elects to have the Indebtedness refinanced with a new DMBS, not less than three (3) Business Days prior to the maturity date of the maturing DMBS, Lender shall notify Borrower of the Discount on the new DMBS to be issued by sending Borrower the Rate Confirmation Form attached hereto as Schedule D. Borrower shall execute and return Schedule D to the Lender not later

Page 2

than one (1) Business Day prior to the issuance date of the new DMBS. For purposes of this Note, a “Business Day” means any day other than a Saturday, Sunday or any other day on which Lender is not open for business.

(d) If the amount of the Discount for the new DMBS to be issued is greater than the Discount for the outstanding DMBS, then not less than two (2) Business Days prior to the maturity date of the outstanding DMBS the Borrower shall pay to the Lender the aggregate amount of such difference. If the amount of the Discount for the new DMBS is less than the Discount for the outstanding DMBS, the aggregate amount of such difference shall be credited against the regular monthly installment due on the first day of the month immediately following the issuance date of the new DMBS.

(e) If Borrower timely exercises its option to convert the interest rate on this Note to a fixed rate pursuant to the Amended and Restated Conversion Agreement dated the same day as this Note between the Borrower and Lender (the “Conversion Agreement”), Borrower will execute the DMBS Multifamily Note Modification Agreement (the form of which is attached to the Conversion Agreement as Exhibit A) to reflect the fixed rate established in accordance with the terms of the Conversion Agreement.

(f) Any remaining principal and all other amounts due under this Note or any of the Loan Documents, if not sooner paid, shall be due and payable on the Maturity Date. Failure to pay such amounts on the Maturity Date shall result in the immediate imposition of the Default Rate (as defined in Paragraph 10) on such unpaid amounts.

5. Maturity Date: February 1, 2015, or any earlier date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise.

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

7. Security. The Indebtedness is secured, among other things, by an Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement dated as of the date of this Note (the “Security Instrument”), and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

8. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, the prepayment premium payable under Paragraph 12, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any prior notice to Borrower. Lender may exercise this option to accelerate regardless of any prior forbearance.

9. Late Charge. If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within five (5) days after Lender has notified Borrower that such amount is due and has not been paid, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent (5%) of such amount; provided,

Page 3

however, that if the payment due on the Maturity Date is not received by Lender on the date such payment is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent (5%) of such amount. Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (the “Loan”), and that it is extremely difficult and impractical to determine those additional expenses. Borrower agrees that the late charge payable pursuant to this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment. The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 10.

10. Default Rate. So long as any monthly installment or any other payment due under this Note remains past due for thirty (30) days or more, or if any payment due on the Maturity Date is not paid on the Maturity Date, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the “Default Rate”) equal to the lesser of (i) the sum of the rate at which deposits in United States Dollars in amounts approximately equal to the outstanding principal amount and with three-month maturities are offered in immediately available funds in the London Interbank Market by leading banks in the Eurodollar market as of 11:00 a.m. (London Time), as published daily by Telerate News Service on Telerate page 3750, plus four hundred (400) basis points (4.00%) as determined by Lender, and (ii) the maximum interest rate which may be collected from Borrower under applicable law. If the Telerate News Service is no longer available, or is no longer posted through electronic transmission, Lender will choose a new service that provides comparable information and provide notice thereof to Borrower. If the unpaid principal balance and all other payments required under this Note are not paid in full on the Maturity Date, the unpaid principal balance and all such other required payments shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, that, during the time that any payment under this Note is delinquent, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any payment due under this Note is delinquent, 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.

11. Limits on Personal Liability.

(a) Except as otherwise provided in this Paragraph 11, neither Borrower nor its members or non-member manager shall have any 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 any other collateral held by Lender as security for the Indebtedness.

(b) Borrower, but not its members or non-member manager, or their respective partners, members, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal

Page 4

representatives, successors or assigns, shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents due after the earlier of (i) a declaration of default, or (ii) the occurrence of an Event of Default, to which Lender is entitled under Section 3(a) of the Security Instrument, and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of Borrower to comply with Section 14(d) or 14(e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4) fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedness or any request for any action or consent by Lender; or (5) failure to apply Rents due after the earlier of (i) a declaration of default, or (ii) an Event of Default, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to the Indebtedness payable under this Note, the Security Instrument or any other Loan Document (except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if Borrower has paid all operating expenses and debt service amounts for that calendar year).

(c) Borrower, but not its members or non-member manager, or their respective partners, members, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns, shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer that is an Event of Default under Section 21(a) of the Security Instrument, unless consented to by Lender pursuant to Section 21(c) of the Security Instrument.

(d) To the extent that Borrower has personal liability under this Paragraph 11, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 11, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

12. Voluntary and Involuntary Prepayments.

(a) Borrower may voluntarily prepay all (but not less than all) of the Indebtedness evidenced hereby.

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

(1) At any time Borrower may voluntarily prepay all, but not less than all, of the unpaid principal balance of this Note on any DMBS maturity date if Borrower has given Lender at least thirty (30) days prior notice of its intention to make such prepayment. Such prepayment shall be

Page 5

made by paying (A) the amount of principal being prepaid, (B) all other sums due Lender at the time of such prepayment, and (C) the applicable prepayment premium calculated pursuant to Schedule A, if any. For all purposes any prepayment received by Lender on any day other than the maturity date of the then outstanding DMBS shall be deemed to have been received on the maturity date of the then outstanding DMBS. Borrower may request the issuance of a DMBS with a maturity date shorter or longer than three (3) months (but in no event shorter than one (1) month or longer than nine (9) months) but only to facilitate (A) the scheduling of a prepayment in connection with the sale of the Mortgaged Property, or (B) the refinancing of the Loan.

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

(3) Any application by Lender of any collateral or other security to the repayment of any portion of the unpaid principal balance of this Note prior to the Maturity Date and in the absence of acceleration shall be deemed to be a partial prepayment by Borrower, requiring the payment to Lender by Borrower of the applicable prepayment premium calculated pursuant to Schedule A, if any. The amount of any such partial prepayment shall be computed so as to provide to Lender a prepayment premium computed pursuant to Schedule A without Borrower having to pay out-of-pocket any additional amounts.

(c) Notwithstanding the provisions of Paragraph 12(b), no prepayment premium shall be payable with respect to (A) any prepayment made no more than twelve (12) months before the Maturity Date, or (B) any prepayment occurring as a result of the application of any insurance proceeds or condemnation award under the Security Instrument.

(d) Schedule A is hereby incorporated by reference into this Note.

(e) Any required prepayment of less than the unpaid principal balance of this Note shall not extend or postpone the due date of any subsequent payment or change the amount of such payments, unless Lender agrees otherwise in writing.

(f) Borrower recognizes that any prepayment of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from a default by Borrower, will result in Lender’s incurring loss, including reinvestment loss, additional expense and frustration or impairment of Lender’s ability to meet its commitments to third parties. Borrower agrees to pay to Lender upon demand damages for the detriment caused by any prepayment, and agrees that it is extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges and agrees that the formula for calculating prepayment premiums set forth on Schedule A represents a reasonable estimate of the damages Lender will incur because of a prepayment.

(g) Borrower further acknowledges that the prepayment premium provisions of this Note are a material part of the consideration for the loan evidenced by this Note, and acknowledges that the terms of this Note are in other respects more favorable to Borrower as a result of the Borrower’s voluntary agreement to the prepayment premium provisions.

13. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including fees

Page 6

and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

14. 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.

15. Waivers. Presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are waived by Borrower, Key Principal, and all endorsers and guarantors of this Note and all other third party obligors.

16. Loan Charges. 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 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.

17. Commercial Purpose. Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

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

19. Governing Law. The law of the State of Hawaii shall govern this Note.

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

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

Page 7

22. Consent to Jurisdiction and Venue. Borrower and Key Principal each agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in the State of Hawaii (the “Property Jurisdiction”). The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note. Borrower and Key Principal each irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

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

ATTACHED SCHEDULES. The following Schedules are attached to this Note:

x	Schedule A	Prepayment Premium (required)
x	Schedule B	Modifications to Multifamily Note
¨	Schedule C	Payment Amortization Schedule
x	Schedule D	DMBS Rate Confirmation Form

Page 8

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

BORROWER:
DEG RESIDENTIAL, LLC, a Delaware limited liability company
By:	Douglas Emmett Management, Inc.,
	a Delaware corporation, its Manager
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
68-0599468
Borrower’s Employer ID Number

Page 9

ACKNOWLEDGMENT AND AGREEMENT OF KEY PRINCIPAL TO

PERSONAL LIABILITY FOR EXCEPTIONS TO NON-RECOURSE LIABILITY

Key Principal, who has an economic interest in Borrower or who will otherwise obtain a material financial benefit from the Loan, hereby absolutely, unconditionally and irrevocably agrees to pay to Lender, or its assigns, on demand, all amounts for which Borrower is personally liable under Paragraph 11 of the Amended and Restated Discount MBS Multifamily Note to which this Acknowledgment is attached (the “Note”). The obligations of Key Principal shall survive any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the Security Instrument. Lender may pursue its remedies against Key Principal without first exhausting its remedies against the Borrower or the Mortgaged Property. All capitalized terms used but not defined in this Acknowledgment shall have the meanings given to such terms in the Security Instrument. As used in this Acknowledgment, the term “Key Principal” (each if more than one) shall mean only those individuals or entities that execute this Acknowledgment.

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

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

Key Principal acknowledges that Key Principal has received a copy of the Note and all other Loan

Page 10

Documents. Neither this Acknowledgment nor any of its provisions may be waived, modified, amended, discharged, or terminated except by an agreement in writing signed by the party against which the enforcement of the waiver, modification, amendment, discharge, or termination is sought, and then only to the extent set forth in that agreement. Key Principal agrees to notify Lender (in the manner for giving notices provided in Section 31 of the Security Instrument) of any change of Key Principal’s address within 10 Business Days after such change of address occurs. Any notices to Key Principal shall be given in the manner provided in Section 31 of the Security Instrument at the address set forth below or such other address as to which notice of change of address has been given in accordance with Section 31(b) of the Security Instrument. Key Principal agrees to be bound by Paragraphs 22 and 23 of the Note.

Key Principal’s members and non-member manager and their respective direct or indirect partners, members, shareholders, managers, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, shall have no personal liability under this Acknowledgment for the performance of any of the obligations of Key Principal under this Acknowledgment.

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

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

KEY PRINCIPAL:
DEGA, LLC, a Delaware limited liability company
By:	Douglas Emmett Management, Inc.,
	a Delaware corporation, its Manager
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
Employer ID No.: 68-0599468

Page 11

SCHEDULE A

MBS - GRADUATED PREPAYMENT PREMIUM

Any prepayment premium payable under Paragraph 12 of this Note shall be computed as follows:

(a) Borrower may voluntarily prepay all (but not less than all) of the indebtedness evidenced hereby at any time during the Loan term, subject to the requirements of subparagraph (b) below.

(b) If Borrower makes a voluntary prepayment of this Note, Lender accelerates the unpaid principal balance of this Note, or the Lender applies collateral held by Lender to the repayment of any portion of the unpaid principal balance as permitted in Section 12(b)(3) of the Note (if any), the prepayment premium shall be equal to the following percentage of the amount of principal being prepaid at the time of such prepayment, acceleration or application:

First Loan Year	3.00%
Second Loan Year	2.00%
Third Loan Year	2.00%
Fourth Loan Year	1.00%
Fifth Loan Year	0.75%
Sixth Loan Year	.50%
06/01/2013 – 01/31/2014	0.50%
02/01/2014 – 01/31/2015	0.00%

(c) For the purposes of this Note, a “Loan Year” means either (i) the period beginning on the date of this Note and ending on the day before the 13^th full calendar month thereafter (i.e. May 31, 2008) or (ii) each successive 12-month period thereafter.

BORROWER’S INITIALS

Page A-1

SCHEDULE B

MODIFICATIONS TO MULTIFAMILY NOTE

The following modifications are made to the text of the Note that precedes this Schedule:

1. A new Paragraph 4A shall be added as follows:

4A. Borrower may apply for an increase in the principal amount of the Loan from the first anniversary date of the closing of the Loan until the Maturity Date, to be effective as of the issuance date of any new DMBS funding the Indebtedness. Approval of an increased amount of the Loan will be subject to satisfying all of Lender’s and Fannie Mae’s underwriting criteria and guidelines applicable to loans of a similar underwriting tier. The guaranty and servicing fee applicable to the increased amount of Loan will equal Fannie Mae’s then current best published rate for loans with 1.10 debt service coverage (variable rate) (1.25 debt service coverage-fixed rate) and a 70% loan to value ratio. The maturity date of the increased amount shall not extend beyond the Maturity Date. Borrower shall pay all actual, reasonable out-of-pocket costs to third parties, with legal fees not to exceed $10,000.

2. A new Paragraph 7A shall be added as follows:

7A. Interest Rate Hedge. (a) The Initial Hedge. To protect against fluctuations in interest rates, Borrower shall make arrangements for a LIBOR based hedge instrument (“Hedge”) to be in place and maintained at all times with respect to the Loan. For purposes of this Note, “LIBOR” is defined as an interest rate based upon the London Inter-Bank Offered Rate for three (3) month U.S. Dollar-denominated deposits. Lender acknowledges that Borrower has previously obtained Caps in an aggregate amount equal to the Original Note (the “Existing Caps”) which are presently due to expire August 1, 2011. The Borrower shall obtain one or more additional Caps (the “Supplemental Caps”) in an aggregate amount equal to the difference between the original principal amount of this Note and the original principal amount of the Original Note. The Hedge for the initial DMBS shall be a Cap (whether one or more) for a period beginning not later than the date of this Note (with the exception that the Supplemental Caps shall have an effective date not later than August 1, 2007) and ending (i) with respect to the Existing Caps, not earlier than the third anniversary of the date of the Original Note and (ii) with respect to the Supplemental Caps, ending not earlier than the third anniversary of the date of this Note (the “Initial Hedge Period”).

(b) Subsequent Hedges. Additional Hedges (each, a “Subsequent Hedge”) shall be required for the lesser of (i) three (3) years, or (ii) the remaining term of the Note, upon the expiration of the Cap (whether one or more) in place for the applicable Initial Hedge Period (it being understood that if the term of any such Cap is longer than the applicable Initial Hedge Period, then the three (3) year period provided in clause (i) shall commence on the actual termination date of the Cap). It is the intention of the parties, and a condition of the Note, that Borrower shall obtain, and shall maintain at all times during the term of the Note, a Hedge in an aggregate notional principal amount equal to the outstanding principal balance of the Note on the date that the Hedge is purchased, covering the required term of the Note as set forth in this Paragraph 7A.

Page B-1

(c) Hedge Terms. Each Hedge which is a Cap shall:

(1) collectively, with all other Hedges provided to Lender in connection with the Loan, provide for a notional principal amount equal at all times to the outstanding principal balance of the Note on the date that the Hedge is purchased;

(2) with respect to the Existing Caps, provide a strike rate not greater than 5.0% per annum and with respect to the Supplemental Caps, provide for a strike rate not greater than 6.0% per annum;

(3) with respect to any Subsequent Hedge, provide a strike rate not greater than the lowest interest rate which, when increased by seventy and  ⁷/10 basis points (.707%) and multiplied by the portion of the outstanding principal balance of the Loan to be covered by such Subsequent Hedge (i.e. the notional amount of the replacement Cap), would equal an amount which, when combined with (i) the debt service on the remaining portion of the Loan covered by any other Cap(s) then in effect (such debt service to be calculated based upon the strike rate of the additional Cap(s) and applicable portion of the principal amount of the Loan covered by such Caps(s) (i.e. the notional amount(s) of any such Cap(s)), and (ii) the amount of assumed principal payments which would be due on a loan in an amount equal to the then outstanding principal balance of the Loan and a thirty year amortization schedule, would result in a combined debt service coverage ratio of not less than 1.10 to 1.00 (the “Hedge Rate”), based upon the underwritten net operating income of the Property, determined as provided herein. The debt service coverage ratio (and its components) for each Cap shall be determined in accordance with the underwriting standards set forth in the Fannie Mae Multifamily Delegated Underwriting and Servicing (DUS) Guide in effect as of the time of such determination (the “DUS Guide”), based upon the underwritten net operating income of the Property calculated using the net revenue generated by the operation of the Property for the three (3) month period immediately preceding the date of determination, annualized and the underwritten expenses of the Property for the twelve (12) month period immediately preceding the date of determination, adjusted for inflation at a rate of three and 00/100 percent (3.00%) per annum.;

(4) require the counterparty to make interest payments on the notional principal amount at a rate equal to the amount by which Coupon Rate exceeds the Hedge Rate;

(5) require the counterparty to make such interest payments either to an account pledged to the Lender or directly to the Lender after an Event of Default pursuant to the Hedge Security Agreement (as defined below); and

(6) be evidenced, governed and secured on terms and conditions, and pursuant to documentation (the “Hedge Documents”), in form and content acceptable to Fannie Mae, and with a counterparty (a “Counterparty”) approved by Fannie Mae, which may include Bank of America, Wells Fargo and Wachovia.

Page B-2

(d) Hedge Security Agreement; Delivery of Hedge Payments. Pursuant to a security agreement in form and content acceptable to Lender (each a “Hedge Security Agreement”), Lender shall be granted an enforceable, perfected, first priority lien on and security interest in each Hedge and payments due under the Hedge (including scheduled and termination payments) in order to secure Borrower’s obligations to Lender under this Note. With respect to each Hedge, the Hedge Security Agreement must be delivered by Borrower to Lender no later than the effective date of the Hedge.

(e) Termination. Borrower shall not terminate, transfer or consent to any transfer of any existing Hedge without Lender’s prior written consent as long as Borrower is required to maintain a Hedge pursuant to the Note; provided, however, that if, and at such time as, the Note is paid off or converted to a fixed rate pursuant to the terms of the Conversion Agreement between Borrower and Lender, Borrower shall have the right to terminate the existing Hedge.

(f) Escrow. Upon the occurrence of an Event of Default under the Security Instrument, Borrower will be required to (i) make annual deposits (“Annual Deposits”) to be held in an interest bearing hedge reserve escrow account during any period in which a Hedge with an original term of less than the remaining term of the Note is in effect, to provide moneys for the purchase of a Subsequent Hedge and (ii) enter into a Hedge Reserve Escrow Account Security Agreement with Lender. Lender shall determine the amount of the Annual Deposits and shall monitor the hedge reserve escrow account holding such Annual Deposits.

(g) Performance Under Hedge Documents. Borrower agrees to comply fully with, and to otherwise perform when due, its obligations under, all applicable Hedge Documents and all other agreements evidencing, governing and/or securing any Hedge arrangement contemplated under this Paragraph. Borrower shall not exercise, without the Lender’s prior written consent, and shall exercise, at Lender’s direction, any rights or remedies under any Hedge Document, including without limitation the right of termination.

BORROWER’S INITIAL(S)

Page B-3

SCHEDULE C

PRINCIPAL AMORTIZATION SCHEDULE

NOT APPLICABLE

Page C-1

SCHEDULE D

RATE CONFIRMATION FORM

Pursuant to Paragraph 4(c) of that certain Amended and Restated Discount MBS Multifamily Note dated as of June 1, 2007 (the “Note”), from the undersigned (the “Borrower”) to Fannie Mae, a federally-chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716 et seq., (the “Lender”), the Borrower hereby requests that the Lender issue to it an advance for the purpose of refinancing the Indebtedness to be funded by a discount mortgaged backed security (“DMBS”) and the Lender hereby confirms that it has obtained a commitment for the purchase of a Fannie Mae DMBS with the following terms:

Advance Amount	$
Term	Three months
DMBS Issue Date	1,
DMBS Imputed Interest Rate	%
Discount	%
Price
Closing Date no later than	,

Page D-1

Dated:                             ,         

DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation

By:

Name:

Title:

By:

Name:

Title:

Rate Setting Date:                             ,             ,     :     AM/PM Eastern Time

AGREED TO AND ACCEPTED BY:

Dated:                             ,         

BORROWER:
DEG RESIDENTIAL, LLC
a Delaware limited liability company
By:	Douglas Emmett Management, Inc.,
	a Delaware corporation, its Manager
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
68-0599468
Borrower’s Employer ID Number

Page D-2

EX-10.6

Exhibit 10.6

ADJUSTABLE RATE MULTIFAMILY NOTE

(1-Month LIBOR Index Structured ARM)

US $7,750,000 June 1, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) jointly and severally (if more than one) promises to pay to the order of DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation, the principal sum of Seven Million Seven Hundred Fifty Thousand and 00/100 Dollars (US $7,750,000.00), with interest on the unpaid principal balance from the Disbursement Date until fully paid at the rates applicable from time to time set forth in this Adjustable Rate Multifamily Note (“Note”).

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

Amortization Period: 0 months.

Adjustable Rate. The initial Adjustable Rate shall be 5.94% per annum until the first Rate Change Date. From and after each Rate Change Date until the next Rate Change Date, the Adjustable Rate shall be the sum of (i) the Current Index, and (ii) the Margin, which sum is then rounded to three decimal places, subject to the limitations that the Adjustable Rate shall not be less than the Margin.

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

Current Index: The published Index that is effective on the Business Day immediately preceding the applicable Rate Change Date.

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

Disbursement Date: The date of disbursement of Loan proceeds hereunder.

First Payment Date: The first day of July, 2007.

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

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

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Initial Adjustable Rate: 5.94% per annum until the first Rate Change Date.

Lender: The holder of this Note.

Loan: The loan evidenced by this Note.

Loan Year: The period beginning on the Disbursement Date and ending on the day before the twelfth Rate Change Date and each successive 12-month period thereafter.

Margin: .62%.

Maturity Date: The first day of June, 2017, or any earlier date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise.

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

Prepayment Lockout Period: That period of time as may be stated in Schedule A attached hereto, if any.

Prepayment Premium Term: The period beginning on the Disbursement Date and ending on the last calendar day of the 4^th month prior to the month in which the Maturity Date occurs.

Property Jurisdiction: The jurisdiction in which the Land is located.

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

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

Servicing Payment Date: Two (2) Business Days prior to the date each monthly payment is due under this Note.

Event of Default, Key Principal and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Security Instrument.

2. Address for Payment. All payments due under this Note shall be payable at One Beacon Street, 14^th Floor, Boston, Massachusetts 02108, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3. Payment of Principal and Interest. This Note will accrue interest on the outstanding principal balance at the Adjustable Rate. Principal and interest shall be paid as follows:

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

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(b) Interest Accrual. Interest shall accrue on the unpaid principal balance of this Note at the Adjustable Rate. The Adjustable Rate shall change on each Rate Change Date until the loan is repaid in full. Interest under this Note shall be computed on the basis of a 360-day year. The amount of each monthly payment made by Borrower pursuant to Paragraph 3(d) below that is allocated to interest will be based on the actual number of calendar days during such month and shall be calculated by multiplying the unpaid principal balance of this Note by the applicable Adjustable Rate, dividing the product by 360 and multiplying the quotient by the actual number of days elapsed during the month. Borrower understands that the amount allocated to interest for each month will vary depending on the actual number of calendar days during such month.

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

(d) Monthly Payments. Borrower acknowledges and agree to pay all Required Monthly Payments (defined below) due under this Note to the Lender on the Servicing Payment Date even though such Required Monthly Payments are due on the first day of every month. Select one only:

¨ Amortizing Loan. If the Loan is an amortizing Loan, consecutive monthly installments of principal and interest, each in the amount of the Required Monthly Payment (defined below), shall be payable on the First Payment Date and on the first day of each month thereafter until the entire unpaid principal balance evidenced by this Note is fully paid. The initial Required Monthly Payment shall be the amount required to pay the unpaid principal balance of this Note in equal monthly installments, including accrued interest at the Initial Adjustable Rate over the Original Amortization Period. The initial Required Monthly Payment shall be                                                              Dollars (US $                                         ). Thereafter, to the extent that the Adjustable Rate has changed, the Required Monthly Payment shall change on each Payment Change Date based on the then-applicable Adjustable Rate, and shall be in an amount equal to the sum of (i) a principal payment equal to                                                               Dollars (US $                                ) plus (ii) an interest payment calculated utilizing the accrual method stated in Paragraph 3(b) above.

x Interest Only Loan. If the Loan is an interest-only Loan, consecutive monthly installments of interest only, each in the amount of the Required Monthly Payment (defined below), shall be payable on the First Payment Date and on the first day of each month thereafter until the entire unpaid principal balance evidenced by this Note is fully paid. The entire unpaid principal balance and accrued but unpaid interest, if not sooner paid, shall be due and payable on the Maturity Date. The initial Required Monthly Payment shall be Thirty-Eight Thousand Three Hundred Sixty-Two and 50/100 Dollars (US $38,362.50). Thereafter, to the extent that the Adjustable Rate has changed, the Required

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Monthly Payment shall change on each Payment Change Date based on the then-applicable Adjustable Rate. The amount of the initial and any changed Required Monthly Payment shall be calculated utilizing the interest accrual method stated in Paragraph 3(b) above.

(e) Conversion Option. Borrower is simultaneously herewith executing a Conversion Agreement (the “Conversion Agreement”) which provides, among other things, that Borrower shall have the right at any time after the expiration of three (3) full calendar months after the Note date to convert the interest rate on this Note to a fixed rate (the “Fixed Rate Conversion Option”). If Borrower timely exercises the Fixed Rate Conversion Option, the applicable interest rate under this Note, beginning on the date the conversion to a fixed rate becomes effective and continuing until the Maturity Date as the Maturity Date may be modified as reflected in an amendment to this Note, shall not be the rate determined in accordance with subsection (c) above, but shall be the fixed rate established in accordance with the terms of the Conversion Agreement. Such fixed rate shall be reflected in an amendment to this Note.

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

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

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

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

4. Application of Payments. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order

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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. If Lender accepts a guaranty of only a portion of the Indebtedness, Borrower hereby waives its right under California Civil Code Section 2822(a) to designate the portion of the Indebtedness which shall be satisfied by any guarantor’s partial payment.

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

6. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any prior notice to Borrower. Lender may exercise this option to accelerate regardless of any prior forbearance.

7. Late Charge. MONTHLY PAYMENTS UNDER THIS NOTE ARE DUE ON THE FIRST DAY OF EACH AND EVERY MONTH UNTIL THIS NOTE IS PAID IN FULL. BORROWER HEREBY AGREES THAT SUCH PAYMENTS SHALL BE MADE TO THE LENDER ON THE SERVICING PAYMENT DATE. THERE IS NO “GRACE” PERIOD FOR ANY MONTHLY INSTALLMENTS DUE HEREUNDER. If any monthly installment due hereunder is not received by Lender on or before the first-day of each month or if any other amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender before or on the date such amount is due, counting from and including the date such amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such monthly installment or other amount due. Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan and that it is extremely difficult and impractical to determine those additional expenses. Borrower agrees that the late charge payable pursuant to this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment. The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8.

8. Default Rate. So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at the Default Rate. If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any monthly installment or other payment due under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk. Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate

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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.

9. Limits on Personal Liability.

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

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

(1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence;

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

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

(4) fraud or written material misrepresentation by Borrower, Key Principal or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedness or any request for any action or consent by Lender; or

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

(c) Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default:

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

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

(d) To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. If Borrower is a married person, then Borrower agrees that Lender may look to all of Borrower’s community property and separate property to satisfy Borrower’s recourse obligations under this Paragraph 9. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

10. Lockout; Voluntary and Involuntary Prepayments.

(a) Borrower may voluntarily prepay all (but not less than all) of the indebtedness evidenced hereby subject to the prepayment provisions and any Prepayment Lockout Period described in Schedule A.

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

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

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

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

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Day of the Month in which such prepayment occurs. If the Last Day of the Month is not a Business Day, then the Borrower must make the payment on the Business Day immediately preceding the Last Day of the Month.

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

(iv) If, for any reason, Borrower fails to prepay this Note within five (5) Business Days after the Intended Prepayment Date, then Lender shall have the right, but not the obligation, to recalculate the prepayment premium pursuant to Schedule A based upon the date that Borrower actually prepays this Note. Notwithstanding the foregoing, if the delayed prepayment occurs in a month other than the month stated in the original Prepayment Notice, then Lender shall (a) have the right, but not the obligation, to recalculate the prepayment premium pursuant to Schedule A based upon the date that Borrower actually prepays this Note and (b) recalculate the amount of interest payable. In either instance, for purposes of recalculation, such new prepayment date shall be deemed the “Intended Prepayment Date.”

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

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

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

(d) Schedule A is hereby incorporated by reference into this Note.

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

(f) Borrower recognizes that any prepayment of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from a default by Borrower, will result in Lender’s incurring loss, including reinvestment loss, additional expense and frustration or impairment of Lender’s ability to meet its commitments to third parties. Borrower agrees to pay to Lender upon demand damages for the

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detriment caused by any prepayment, and agrees that it is extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges and agrees that the formula for calculating prepayment premiums set forth on Schedule A represents a reasonable estimate of the damages Lender will incur because of a prepayment.

(g) Borrower further acknowledges that the prepayment premium provisions of this Note are a material part of the consideration for the loan evidenced by this Note, and acknowledges that the terms of this Note are in other respects more favorable to Borrower as a result of the Borrower’s voluntary agreement to the prepayment premium provisions.

11. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

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

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

14. Loan Charges. Borrower agrees to pay an effective rate of interest equal to the sum of the interest rate provided for in this Note and any additional rate of interest resulting from any other charges of interest or in the nature of interest paid or to be paid in connection with the loan evidenced by this Note and any other fees or amounts to be paid by Borrower pursuant to any of the other Loan Documents. 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 permitted to be charged under applicable law. 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

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deemed to be allocated and spread ratably 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.

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

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

17. Governing Law. This Note shall be governed by the law of the jurisdiction in which the Land is located.

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

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

20. Consent to Jurisdiction and Venue. Borrower and Key Principal each agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note. Borrower and Key Principal each irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

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

ATTACHED SCHEDULES. The following Schedules are attached to this Note:

x Schedule A Prepayment Premium (required)

x Schedule B Modifications to Multifamily Note

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

BORROWER
DOUGLAS EMMETT RESIDENTIAL 2006, LLC, a Delaware limited liability company
By:	Douglas Emmett Management, Inc., a Delaware corporation, its Manager
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
20-5945327
Borrower’s Social Security/Employer ID Number

Fannie Mae Commitment Number:

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PAY TO THE ORDER OF                                                              

WITHOUT RECOURSE

DEUTSCHE BANK BERKSHIRE MORTGAGE, INC.,

a Delaware corporation

By:

Name:

Title:

By:

Name:

Title:

Date:                         , 2007

Fannie Mae Commitment Number:

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ACKNOWLEDGMENT AND AGREEMENT OF KEY PRINCIPAL TO

PERSONAL LIABILITY FOR EXCEPTIONS TO NON-RECOURSE LIABILITY

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

The obligations of Key Principal shall be performed without demand by Lender and shall be unconditional irrespective of the genuineness, validity, or enforceability of the Note, or any other Loan Document, and without regard to any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Key Principal hereby waives any and all benefits and defenses under California Civil Code Section 2810 and agrees that by doing so Key Principal shall be liable even if Borrower had no liability at the time of execution of the Note, the Security Instrument or any other Loan Document, or thereafter ceases to be liable. Key Principal hereby waives any and all benefits and defenses under California Civil Code Section 2809 and agrees that by doing so Key Principal’s liability may be larger in amount and more burdensome than that of Borrower. Key Principal hereby waives the benefit of all principles or provisions of law, which are or might be in conflict with the terms of this Acknowledgment, and agrees that Key Principal’s obligations shall not be affected by any circumstances which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Key Principal hereby waives the benefits of any right of discharge and all other rights under any and all statutes or other laws relating to guarantors or sureties, to the fullest extent permitted by law, diligence in collecting the Indebtedness, presentment, demand for payment, protest, all notices with respect to the Note including this Acknowledgment, which may be required by statute, rule of law or otherwise to preserve Lender’s rights against Key Principal under this Acknowledgment, including notice of acceptance, notice of any amendment of the Loan Documents, notice of the occurrence of any default or Event of Default, notice of intent to accelerate, notice of acceleration, notice of dishonor, notice of foreclosure, notice of protest, notice of the incurring by Borrower of any obligation or indebtedness and all rights to require Lender to (a) proceed against Borrower, (b) proceed against any general partner of Borrower, (c) proceed against or exhaust any collateral held by Lender to secure the repayment of the Indebtedness, or (d) if Borrower is a partnership, pursue any other remedy it may have against Borrower, or any general partner of Borrower, including any and all benefits under California Civil Code Sections 2845, 2849 and 2850.

Key Principal understands that the exercise by Lender of certain rights and remedies contained in the Security Instrument (such as a nonjudicial foreclosure sale) may affect or eliminate Key Principal’s right of subrogation against Borrower and that Key Principal may therefore incur a partially or totally nonreimburseable liability under this Acknowledgment. Nevertheless, Key Principal hereby authorizes and empowers Lender to exercise, in its sole and absolute discretion, any right or remedy, or any combination thereof, which may then be available, since it is the intent and purpose of Key Principal that the obligations under this Acknowledgment shall be absolute, independent and unconditional under any

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and all circumstances. Key Principal expressly waives any defense (which defense, if Key Principal had not given this waiver, Key Principal might otherwise have) to a judgment against Key Principal by reason of a nonjudicial foreclosure. Without limiting the generality of the foregoing, Key Principal hereby expressly waives any and all benefits under (i) California Code of Civil Procedure Section 580a (which Section, if Key Principal had not given this waiver, would otherwise limit Key Principal’s liability after a nonjudicial foreclosure sale to the difference between the obligations of Key Principal under this Acknowledgment and the fair market value of the property or interests sold at such nonjudicial foreclosure sale), (ii) California Code of Civil Procedure Sections 580b and 580d (which Sections, if Key Principal had not given this waiver, would otherwise limit Lender’s right to recover a deficiency judgement with respect to purchase money obligations and after a nonjudicial foreclosure sale, respectively), and (iii) California Code of Civil Procedure Section 726 (which Section, if Key Principal had not given this waiver, among other things, would otherwise require Lender to exhaust all of its security before a personal judgment could be obtained for a deficiency). Notwithstanding any foreclosure of the lien of the Security Instrument, whether by the exercise of the power of sale contained in the Security Instrument, by an action for judicial foreclosure or by Lender’s acceptance of a deed in lieu of foreclosure, Key Principal shall remain bound under this Acknowledgment.

In accordance with Section 2856 of the California Civil Code, Key Principal also waives any right or defense based upon an election of remedies by Lender, even though such election (e.g., nonjudicial foreclosure with respect to any collateral held by Lender to secure repayment of the Indebtedness) destroys or otherwise impairs the subrogation rights of Key Principal or the right of Key Principal (after payment of the obligations guaranteed by Key Principal under this Acknowledgment) to proceed against Borrower for reimbursement, or both, by operation of Section 580d of the California Code of Civil Procedure or otherwise.

In accordance with Section 2856 of the California Civil Code, Key Principal waives any and all other rights and defenses available to Key Principal by reason of Sections 2787 through 2855, inclusive, of the California Civil Code, including any and all rights or defenses Key Principal may have by reason of protection afforded to Borrower with respect to any of the obligations of Key Principal under this Acknowledgment pursuant to the antideficiency or other laws of the State of California limiting or discharging Borrower’s Indebtedness, including Sections 580a, 580b, 580d, and 726 of the California Code of Civil Procedure.

In accordance with Section 2856 of the California Civil Code, Key Principal agrees to withhold the exercise of any and all subrogation and reimbursement rights against Borrower, against any other Person, and against any collateral or security for the Indebtedness, including any such rights pursuant to Sections 2847 and 2848 of the California Civil Code, until the Indebtedness has been indefeasibly paid and satisfied in full, all obligations owed to Lender under the Loan Documents have been fully performed, and Lender has released, transferred or disposed of all of its right, title and interest in such collateral or security.

Key Principal acknowledges that Key Principal has received a copy of the Note and all other Loan Documents. Neither this Acknowledgment nor any of its provisions may be waived, modified, amended, discharged, or terminated except by an agreement in writing signed by the party against which the enforcement of the waiver, modification, amendment, discharge, or termination is sought, and then only to the extent set forth in that agreement. Key Principal agrees to notify Lender (in the manner for giving notices provided in Section 31 of the Security Instrument) of any change of Key Principal’s address within 10 Business Days after such change of address occurs. Any notices to Key Principal shall be given in the manner provided in Section 31 of the Security Instrument. Key Principal agrees to be bound by Paragraphs 20 and 21 of the Note.

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

(Remainder of this page intentionally left blank.)

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

KEY PRINCIPAL
DOUGLAS EMMETT PROPERTIES, LP, a Delaware limited partnership
By:	Douglas Emmett Management, Inc., a Delaware corporation, its General Partner
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
Address:		808 Wilshire Boulevard, Suite 200
		Santa Monica, California 90401
		Attn: Jordan L. Kaplan and William Kamer
Employer ID No.: 20-3213411

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SCHEDULE A

PREPAYMENT PREMIUM

STRUCTURED ARM LOAN - GRADUATED PREPAYMENT PREMIUM

Any prepayment premium payable under Paragraph 10 of this Note shall be computed as follows:

(a) Borrower may voluntarily prepay all (or any part) of the indebtedness evidenced hereby at any time during the Loan term, subject to the requirements of subparagraph (b) below.

(b) If Borrower makes a voluntary prepayment of this Note, Lender accelerates the unpaid principal balance of this Note, or the Lender applies collateral held by Lender to the repayment of any portion of the unpaid principal balance as permitted in Section 10(b)(3) of the Note (if any), the prepayment premium shall be equal to the following percentage of the amount of principal being prepaid at the time of such prepayment, acceleration or application:

First Loan Year	3.00	%
Second Loan Year	2.00	%
Third Loan Year	1.00	%
Fourth Loan Year	1.00	%
Fifth Loan Year	1.00	%
Sixth Loan Year	1.00	%
Seventh Loan Year	1.00	%
Eighth Loan Year	.50	%
Ninth Loan Year	0.00	%
Tenth Loan Year	0.00	%

Borrower Initials

Page A-1

SCHEDULE B

MODIFICATIONS TO MULTIFAMILY NOTE

The following modifications are made to the text of the Note and the Acknowledgement of Key Principal that precede this Schedule:

1. The definition of the term “Index” appearing in Paragraph 1 is hereby modified by inserting the words “, in its reasonable discretion,” immediately following the word “Lender” appearing in the second sentence thereof.

2. The definition of the term “Prepayment Lockout Period” appearing in Paragraph 1 is hereby modified to provide as follows: “None.”.

3. The definition of the term “Prepayment Premium Term” appearing in Paragraph 1 is hereby deleted.

4. Paragraph 3(a) is hereby modified by deleting the words “simultaneously with the execution of this Note” and replacing them with the words “on the Disbursement Date”.

5. Paragraph 3(c) is hereby modified by inserting the word “monthly” immediately preceding the words “in arrears” appearing in the third sentence of said subparagraph.

6. Paragraph 3(f) is hereby modified by deleting the word “Before” and inserting the words “Not less than three (3) Business Days before” in place thereof.

7. Paragraph 3(g) is hereby modified by inserting the word “promptly” immediately following the word “thereafter” appearing in subparagraph (ii) thereof.

8. Paragraph 6 is hereby modified by inserting the word “applicable” immediately preceding the words “prepayment premium” appearing in the first sentence thereof.

9. Paragraph 9(a) is hereby modified by deleting the words “Borrower shall have no” and inserting the following words in place thereof: “neither Borrower, nor its members or non-member manager, or their respective partners, members, managers, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns, shall have any”.

10. Paragraph 9(b) is hereby modified as follows:

The following words are inserted immediately after the word “Borrower” appearing in the first line of said subparagraph:

“, but not its members or non-member manager, or their respective partners, members, managers, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns,”.

Page B-1

The following words are inserted immediately following the word “Rents” appearing in subparagraph (1) of said paragraph 9(b): “due after the earlier of (i) a declaration of default, or (ii) the occurrence of an Event of Default,”.

The following words are inserted immediately following the word “Rents” appearing in the first line of subparagraph (5) of said paragraph 9(b): “due after the earlier of (i) a declaration of default, or (ii) the occurrence of an Event of Default”. Paragraph 9(b)(5) is hereby further amended by replacing the words “Debt Service Amounts” appearing immediately preceding the words “, except that Borrower” with the words “the Indebtedness” and the words “Debt Service Amounts” appearing in subparagraph (ii) thereof with the words “Required Monthly Payments”.

11. Paragraph 9(c) is hereby modified as follows:

The following words are inserted immediately preceding the word “shall” appearing in the first line of said paragraph:

“, but not its members or non-member manager, or their respective partners, members, managers, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns,”.

The following words are inserted immediately following the word “Instrument” appearing in subparagraph (1) of said paragraph 9(c): “, or otherwise consented to by Lender;”.

The following words are inserted immediately following the word “Instrument” appearing in subparagraph (2) of said paragraph 9(c): “, unless consented to pursuant to Section 21(c) of the Security Instrument”.

12. Paragraph 10(a) is hereby amended by deleting the words “(but not less than all)” appearing therein and inserting the words “(or any part)” in place thereof.

13. Paragraph 10(b)(1) is hereby amended by deleting the words “after the expiration of the Prepayment Lockout Period” appearing therein and by deleting the words “(but not less than all)” appearing therein and inserting the words “(or any part)” in place thereof.

14. Paragraph 10(b)(1)((ii) is hereby amended by inserting the words “on the amount prepaid” in the second sentence of said subsection immediately following the words “will include interest”.

15. Paragraph 10(b)(1)(iii)(B) is hereby amended by inserting the words “on the amount prepaid” immediately following the words “accrued interest”.

16. Paragraph 10(b)(1)(iv) is hereby amended by inserting the parenthetical “(unless requested by Borrower)” immediately following the words “but not the obligation” appearing in the first and second sentences of said subparagraph.

17. Paragraph 10(b)(3) is hereby amended by deleting the words “a prepayment premium” appearing therein and inserting the words “the applicable prepayment premium, if any” in place thereof.

Page B-2

18. Paragraph 10(f) is hereby amended by adding the parenthetical “(and Lender by acceptance of this Note)” immediately following the word “Borrower” appearing in the third sentence of said subparagraph.

19. Paragraph 14 is hereby modified as follows:

By inserting the words “pursuant to the Loan Documents” in the first sentence thereof immediately preceding the words “in connection”.

By adding the words “without penalty or premium to Borrower” to the end of the fourth sentence of said paragraph immediately following the word “Note”.

20. Section 19 is hereby modified by inserting the words “, or Borrower to Lender,” immediately following the word “Borrower” appearing therein.

21. The Acknowledgement of Key Principal is hereby modified as follows:

The following new paragraph is hereby inserted immediately following the fourth paragraph:

“Key Principal’s director’s, officers, employees, and shareholders and their respective direct or indirect partners, members shareholders, managers, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors and assigns, shall have no personal liability under this Acknowledgement for the performance of any of the obligations of Key Principal under this Acknowledgement.”.

The sixth paragraph is hereby deleted in its entirety and the following new paragraph is hereby inserted in place thereof:

“In accordance with Section 2856 of the California Civil Code, Key Principal agrees to withhold the exercise of any and all subrogation and reimbursement rights against Borrower, against any other person who is a guarantor or surety with respect to the Indebtedness, and against any collateral or security for the Indebtedness, including any such rights pursuant to Sections 2847 and 2848 of the California Civil Code, until the Indebtedness has been indefeasibly paid and satisfied in full and the lien of the Security Instrument has been reconveyed or Lender has otherwise released, transferred or disposed of all of its right, title and interest in such collateral or security.”

The seventh paragraph is modified by adding the following words to the end of the fourth sentence of said paragraph immediately following the word “Security Instrument”: “at the address of Key Principal set forth below or such other address as to which notice of change of address has been given in accordance with Section 31(b) of the Security Instrument”.

Page B-3

The following new sentence is added to the end of the Acknowledgement and Agreement of Key Principal: “All authorizations and waivers contained in this Acknowledgement are made by Key Principal for itself only and not on behalf, or in its capacity as a member of, Borrower.”

Borrower’s Initials

Key Principal’s Initials

Page B-4

EX-10.7

Exhibit 10.7

ADJUSTABLE RATE MULTIFAMILY NOTE

(1-Month LIBOR Index Structured ARM)

US $7,150,000 June 1, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) jointly and severally (if more than one) promises to pay to the order of DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation, the principal sum of Seven Million One Hundred Fifty Thousand and 00/100 Dollars (US $7,150,000.00), with interest on the unpaid principal balance from the Disbursement Date until fully paid at the rates applicable from time to time set forth in this Adjustable Rate Multifamily Note (“Note”).

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

Amortization Period: 0 months.

Adjustable Rate. The initial Adjustable Rate shall be 5.94% per annum until the first Rate Change Date. From and after each Rate Change Date until the next Rate Change Date, the Adjustable Rate shall be the sum of (i) the Current Index, and (ii) the Margin, which sum is then rounded to three decimal places, subject to the limitations that the Adjustable Rate shall not be less than the Margin.

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

Current Index: The published Index that is effective on the Business Day immediately preceding the applicable Rate Change Date.

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

Disbursement Date: The date of disbursement of Loan proceeds hereunder.

First Payment Date: The first day of July, 2007.

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

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

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Initial Adjustable Rate: 5.94% per annum until the first Rate Change Date.

Lender: The holder of this Note.

Loan: The loan evidenced by this Note.

Loan Year: The period beginning on the Disbursement Date and ending on the day before the twelfth Rate Change Date and each successive 12-month period thereafter.

Margin: .62%.

Maturity Date: The first day of June, 2017, or any earlier date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise.

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

Prepayment Lockout Period: That period of time as may be stated in Schedule A attached hereto, if any.

Prepayment Premium Term: The period beginning on the Disbursement Date and ending on the last calendar day of the 4^th month prior to the month in which the Maturity Date occurs.

Property Jurisdiction: The jurisdiction in which the Land is located.

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

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

Servicing Payment Date: Two (2) Business Days prior to the date each monthly payment is due under this Note.

Event of Default, Key Principal and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Security Instrument.

2. Address for Payment. All payments due under this Note shall be payable at One Beacon Street, 14^th Floor, Boston, Massachusetts 02108, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3. Payment of Principal and Interest. This Note will accrue interest on the outstanding principal balance at the Adjustable Rate. Principal and interest shall be paid as follows:

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

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(b) Interest Accrual. Interest shall accrue on the unpaid principal balance of this Note at the Adjustable Rate. The Adjustable Rate shall change on each Rate Change Date until the loan is repaid in full. Interest under this Note shall be computed on the basis of a 360-day year. The amount of each monthly payment made by Borrower pursuant to Paragraph 3(d) below that is allocated to interest will be based on the actual number of calendar days during such month and shall be calculated by multiplying the unpaid principal balance of this Note by the applicable Adjustable Rate, dividing the product by 360 and multiplying the quotient by the actual number of days elapsed during the month. Borrower understands that the amount allocated to interest for each month will vary depending on the actual number of calendar days during such month.

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

(d) Monthly Payments. Borrower acknowledges and agree to pay all Required Monthly Payments (defined below) due under this Note to the Lender on the Servicing Payment Date even though such Required Monthly Payments are due on the first day of every month. Select one only:

¨ Amortizing Loan. If the Loan is an amortizing Loan, consecutive monthly installments of principal and interest, each in the amount of the Required Monthly Payment (defined below), shall be payable on the First Payment Date and on the first day of each month thereafter until the entire unpaid principal balance evidenced by this Note is fully paid. The initial Required Monthly Payment shall be the amount required to pay the unpaid principal balance of this Note in equal monthly installments, including accrued interest at the Initial Adjustable Rate over the Original Amortization Period. The initial Required Monthly Payment shall be                                                                                   Dollars (US $                            ). Thereafter, to the extent that the Adjustable Rate has changed, the Required Monthly Payment shall change on each Payment Change Date based on the then-applicable Adjustable Rate, and shall be in an amount equal to the sum of (i) a principal payment equal to                                                                                   Dollars (US $                            ) plus (ii) an interest payment calculated utilizing the accrual method stated in Paragraph 3(b) above.

x Interest Only Loan. If the Loan is an interest-only Loan, consecutive monthly installments of interest only, each in the amount of the Required Monthly Payment (defined below), shall be payable on the First Payment Date and on the first day of each month thereafter until the entire unpaid principal balance evidenced by this Note is fully paid. The entire unpaid principal balance and accrued but unpaid interest, if not sooner paid, shall be due and payable on the Maturity Date. The initial Required Monthly Payment shall be Thirty-Five Thousand Three Hundred Ninety-Two and 50/100 Dollars (US $35,392.50). Thereafter, to the extent that the Adjustable Rate has changed, the Required

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Monthly Payment shall change on each Payment Change Date based on the then-applicable Adjustable Rate. The amount of the initial and any changed Required Monthly Payment shall be calculated utilizing the interest accrual method stated in Paragraph 3(b) above.

(e) Conversion Option. Borrower is simultaneously herewith executing a Conversion Agreement (the “Conversion Agreement”) which provides, among other things, that Borrower shall have the right at any time after the expiration of three (3) full calendar months after the Note date to convert the interest rate on this Note to a fixed rate (the “Fixed Rate Conversion Option”). If Borrower timely exercises the Fixed Rate Conversion Option, the applicable interest rate under this Note, beginning on the date the conversion to a fixed rate becomes effective and continuing until the Maturity Date as the Maturity Date may be modified as reflected in an amendment to this Note, shall not be the rate determined in accordance with subsection (c) above, but shall be the fixed rate established in accordance with the terms of the Conversion Agreement. Such fixed rate shall be reflected in an amendment to this Note.

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

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

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

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

4. Application of Payments. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order

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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. If Lender accepts a guaranty of only a portion of the Indebtedness, Borrower hereby waives its right under California Civil Code Section 2822(a) to designate the portion of the Indebtedness which shall be satisfied by any guarantor’s partial payment.

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

6. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any prior notice to Borrower. Lender may exercise this option to accelerate regardless of any prior forbearance.

7. Late Charge. MONTHLY PAYMENTS UNDER THIS NOTE ARE DUE ON THE FIRST DAY OF EACH AND EVERY MONTH UNTIL THIS NOTE IS PAID IN FULL. BORROWER HEREBY AGREES THAT SUCH PAYMENTS SHALL BE MADE TO THE LENDER ON THE SERVICING PAYMENT DATE. THERE IS NO “GRACE” PERIOD FOR ANY MONTHLY INSTALLMENTS DUE HEREUNDER. If any monthly installment due hereunder is not received by Lender on or before the first-day of each month or if any other amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender before or on the date such amount is due, counting from and including the date such amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such monthly installment or other amount due. Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan and that it is extremely difficult and impractical to determine those additional expenses. Borrower agrees that the late charge payable pursuant to this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment. The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8.

8. Default Rate. So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at the Default Rate. If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any monthly installment or other payment due under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk. Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate

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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.

9. Limits on Personal Liability.

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

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

(1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence;

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

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

(4) fraud or written material misrepresentation by Borrower, Key Principal or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedness or any request for any action or consent by Lender; or

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

(c) Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default:

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

Page 6

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

(d) To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. If Borrower is a married person, then Borrower agrees that Lender may look to all of Borrower’s community property and separate property to satisfy Borrower’s recourse obligations under this Paragraph 9. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

10. Lockout; Voluntary and Involuntary Prepayments.

(a) Borrower may voluntarily prepay all (but not less than all) of the indebtedness evidenced hereby subject to the prepayment provisions and any Prepayment Lockout Period described in Schedule A.

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

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

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

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

Page 7

Day of the Month in which such prepayment occurs. If the Last Day of the Month is not a Business Day, then the Borrower must make the payment on the Business Day immediately preceding the Last Day of the Month.

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

(iv) If, for any reason, Borrower fails to prepay this Note within five (5) Business Days after the Intended Prepayment Date, then Lender shall have the right, but not the obligation, to recalculate the prepayment premium pursuant to Schedule A based upon the date that Borrower actually prepays this Note. Notwithstanding the foregoing, if the delayed prepayment occurs in a month other than the month stated in the original Prepayment Notice, then Lender shall (a) have the right, but not the obligation, to recalculate the prepayment premium pursuant to Schedule A based upon the date that Borrower actually prepays this Note and (b) recalculate the amount of interest payable. In either instance, for purposes of recalculation, such new prepayment date shall be deemed the “Intended Prepayment Date.”

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

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

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

(d) Schedule A is hereby incorporated by reference into this Note.

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

(f) Borrower recognizes that any prepayment of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from a default by Borrower, will result in Lender’s incurring loss, including reinvestment loss, additional expense and frustration or impairment of Lender’s ability to meet its commitments to third parties. Borrower agrees to pay to Lender upon demand damages for the

Page 8

detriment caused by any prepayment, and agrees that it is extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges and agrees that the formula for calculating prepayment premiums set forth on Schedule A represents a reasonable estimate of the damages Lender will incur because of a prepayment.

(g) Borrower further acknowledges that the prepayment premium provisions of this Note are a material part of the consideration for the loan evidenced by this Note, and acknowledges that the terms of this Note are in other respects more favorable to Borrower as a result of the Borrower’s voluntary agreement to the prepayment premium provisions.

11. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

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

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

14. Loan Charges. Borrower agrees to pay an effective rate of interest equal to the sum of the interest rate provided for in this Note and any additional rate of interest resulting from any other charges of interest or in the nature of interest paid or to be paid in connection with the loan evidenced by this Note and any other fees or amounts to be paid by Borrower pursuant to any of the other Loan Documents. 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 permitted to be charged under applicable law. 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

Page 9

deemed to be allocated and spread ratably 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.

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

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

17. Governing Law. This Note shall be governed by the law of the jurisdiction in which the Land is located.

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

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

20. Consent to Jurisdiction and Venue. Borrower and Key Principal each agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note. Borrower and Key Principal each irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

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

ATTACHED SCHEDULES. The following Schedules are attached to this Note:

x	Schedule A	Prepayment Premium (required)
x	Schedule B	Modifications to Multifamily Note

Page 10

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

BORROWER
DOUGLAS EMMETT RESIDENTIAL 2006, LLC, a Delaware limited liability company
By:	Douglas Emmett Management, Inc.,
	a Delaware corporation, its Manager
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
20-5945327
Borrower’s Social Security/Employer ID Number

Fannie Mae Commitment Number:                     

Page 11

PAY TO THE ORDER OF                             

WITHOUT RECOURSE

DEUTSCHE BANK BERKSHIRE MORTGAGE, INC.,

a Delaware corporation

By:

Name:

Title:

By:

Name:

Title:

Date:                             , 2007

Fannie Mae Commitment Number:                     

Page 12

ACKNOWLEDGMENT AND AGREEMENT OF KEY PRINCIPAL TO

PERSONAL LIABILITY FOR EXCEPTIONS TO NON-RECOURSE LIABILITY

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

The obligations of Key Principal shall be performed without demand by Lender and shall be unconditional irrespective of the genuineness, validity, or enforceability of the Note, or any other Loan Document, and without regard to any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Key Principal hereby waives any and all benefits and defenses under California Civil Code Section 2810 and agrees that by doing so Key Principal shall be liable even if Borrower had no liability at the time of execution of the Note, the Security Instrument or any other Loan Document, or thereafter ceases to be liable. Key Principal hereby waives any and all benefits and defenses under California Civil Code Section 2809 and agrees that by doing so Key Principal’s liability may be larger in amount and more burdensome than that of Borrower. Key Principal hereby waives the benefit of all principles or provisions of law, which are or might be in conflict with the terms of this Acknowledgment, and agrees that Key Principal’s obligations shall not be affected by any circumstances which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Key Principal hereby waives the benefits of any right of discharge and all other rights under any and all statutes or other laws relating to guarantors or sureties, to the fullest extent permitted by law, diligence in collecting the Indebtedness, presentment, demand for payment, protest, all notices with respect to the Note including this Acknowledgment, which may be required by statute, rule of law or otherwise to preserve Lender’s rights against Key Principal under this Acknowledgment, including notice of acceptance, notice of any amendment of the Loan Documents, notice of the occurrence of any default or Event of Default, notice of intent to accelerate, notice of acceleration, notice of dishonor, notice of foreclosure, notice of protest, notice of the incurring by Borrower of any obligation or indebtedness and all rights to require Lender to (a) proceed against Borrower, (b) proceed against any general partner of Borrower, (c) proceed against or exhaust any collateral held by Lender to secure the repayment of the Indebtedness, or (d) if Borrower is a partnership, pursue any other remedy it may have against Borrower, or any general partner of Borrower, including any and all benefits under California Civil Code Sections 2845, 2849 and 2850.

Key Principal understands that the exercise by Lender of certain rights and remedies contained in the Security Instrument (such as a nonjudicial foreclosure sale) may affect or eliminate Key Principal’s right of subrogation against Borrower and that Key Principal may therefore incur a partially or totally nonreimburseable liability under this Acknowledgment. Nevertheless, Key Principal hereby authorizes and empowers Lender to exercise, in its sole and absolute discretion, any right or remedy, or any combination thereof, which may then be available, since it is the intent and purpose of Key Principal that the obligations under this Acknowledgment shall be absolute, independent and unconditional under any

Page 13

and all circumstances. Key Principal expressly waives any defense (which defense, if Key Principal had not given this waiver, Key Principal might otherwise have) to a judgment against Key Principal by reason of a nonjudicial foreclosure. Without limiting the generality of the foregoing, Key Principal hereby expressly waives any and all benefits under (i) California Code of Civil Procedure Section 580a (which Section, if Key Principal had not given this waiver, would otherwise limit Key Principal’s liability after a nonjudicial foreclosure sale to the difference between the obligations of Key Principal under this Acknowledgment and the fair market value of the property or interests sold at such nonjudicial foreclosure sale), (ii) California Code of Civil Procedure Sections 580b and 580d (which Sections, if Key Principal had not given this waiver, would otherwise limit Lender’s right to recover a deficiency judgement with respect to purchase money obligations and after a nonjudicial foreclosure sale, respectively), and (iii) California Code of Civil Procedure Section 726 (which Section, if Key Principal had not given this waiver, among other things, would otherwise require Lender to exhaust all of its security before a personal judgment could be obtained for a deficiency). Notwithstanding any foreclosure of the lien of the Security Instrument, whether by the exercise of the power of sale contained in the Security Instrument, by an action for judicial foreclosure or by Lender’s acceptance of a deed in lieu of foreclosure, Key Principal shall remain bound under this Acknowledgment.

In accordance with Section 2856 of the California Civil Code, Key Principal also waives any right or defense based upon an election of remedies by Lender, even though such election (e.g., nonjudicial foreclosure with respect to any collateral held by Lender to secure repayment of the Indebtedness) destroys or otherwise impairs the subrogation rights of Key Principal or the right of Key Principal (after payment of the obligations guaranteed by Key Principal under this Acknowledgment) to proceed against Borrower for reimbursement, or both, by operation of Section 580d of the California Code of Civil Procedure or otherwise.

In accordance with Section 2856 of the California Civil Code, Key Principal waives any and all other rights and defenses available to Key Principal by reason of Sections 2787 through 2855, inclusive, of the California Civil Code, including any and all rights or defenses Key Principal may have by reason of protection afforded to Borrower with respect to any of the obligations of Key Principal under this Acknowledgment pursuant to the antideficiency or other laws of the State of California limiting or discharging Borrower’s Indebtedness, including Sections 580a, 580b, 580d, and 726 of the California Code of Civil Procedure.

In accordance with Section 2856 of the California Civil Code, Key Principal agrees to withhold the exercise of any and all subrogation and reimbursement rights against Borrower, against any other Person, and against any collateral or security for the Indebtedness, including any such rights pursuant to Sections 2847 and 2848 of the California Civil Code, until the Indebtedness has been indefeasibly paid and satisfied in full, all obligations owed to Lender under the Loan Documents have been fully performed, and Lender has released, transferred or disposed of all of its right, title and interest in such collateral or security.

Key Principal acknowledges that Key Principal has received a copy of the Note and all other Loan Documents. Neither this Acknowledgment nor any of its provisions may be waived, modified, amended, discharged, or terminated except by an agreement in writing signed by the party against which the enforcement of the waiver, modification, amendment, discharge, or termination is sought, and then only to the extent set forth in that agreement. Key Principal agrees to notify Lender (in the manner for giving notices provided in Section 31 of the Security Instrument) of any change of Key Principal’s address within 10 Business Days after such change of address occurs. Any notices to Key Principal shall be given in the manner provided in Section 31 of the Security Instrument. Key Principal agrees to be bound by Paragraphs 20 and 21 of the Note.

Page 14

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

(Remainder of this page intentionally left blank.)

Page 15

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

KEY PRINCIPAL
DOUGLAS EMMETT PROPERTIES, LP, a Delaware limited partnership
By:	Douglas Emmett Management, Inc.,
	a Delaware corporation, its General Partner
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
Address:		808 Wilshire Boulevard, Suite 200
		Santa Monica, California 90401
		Attn: Jordan L. Kaplan and William Kamer
Employer ID No.: 20-3213411

Page 16

SCHEDULE A

PREPAYMENT PREMIUM

STRUCTURED ARM LOAN - GRADUATED PREPAYMENT PREMIUM

Any prepayment premium payable under Paragraph 10 of this Note shall be computed as follows:

(a) Borrower may voluntarily prepay all (or any part) of the indebtedness evidenced hereby at any time during the Loan term, subject to the requirements of subparagraph (b) below.

(b) If Borrower makes a voluntary prepayment of this Note, Lender accelerates the unpaid principal balance of this Note, or the Lender applies collateral held by Lender to the repayment of any portion of the unpaid principal balance as permitted in Section 10(b)(3) of the Note (if any), the prepayment premium shall be equal to the following percentage of the amount of principal being prepaid at the time of such prepayment, acceleration or application:

First Loan Year	3.00%
Second Loan Year	2.00%
Third Loan Year	1.00%
Fourth Loan Year	1.00%
Fifth Loan Year	1.00%
Sixth Loan Year	1.00%
Seventh Loan Year	1.00%
Eighth Loan Year	.50%
Ninth Loan Year	0.00%
Tenth Loan Year	0.00%

Borrower Initials

Page A-1

SCHEDULE B

MODIFICATIONS TO MULTIFAMILY NOTE

The following modifications are made to the text of the Note and the Acknowledgement of Key Principal that precede this Schedule:

1. The definition of the term “Index” appearing in Paragraph 1 is hereby modified by inserting the words “, in its reasonable discretion,” immediately following the word “Lender” appearing in the second sentence thereof.

2. The definition of the term “Prepayment Lockout Period” appearing in Paragraph 1 is hereby modified to provide as follows: “None.”.

3. The definition of the term “Prepayment Premium Term” appearing in Paragraph 1 is hereby deleted.

4. Paragraph 3(a) is hereby modified by deleting the words “simultaneously with the execution of this Note” and replacing them with the words “on the Disbursement Date”.

5. Paragraph 3(c) is hereby modified by inserting the word “monthly” immediately preceding the words “in arrears” appearing in the third sentence of said subparagraph.

6. Paragraph 3(f) is hereby modified by deleting the word “Before” and inserting the words “Not less than three (3) Business Days before” in place thereof.

7. Paragraph 3(g) is hereby modified by inserting the word “promptly” immediately following the word “thereafter” appearing in subparagraph (ii) thereof.

8. Paragraph 6 is hereby modified by inserting the word “applicable” immediately preceding the words “prepayment premium” appearing in the first sentence thereof.

9. Paragraph 9(a) is hereby modified by deleting the words “Borrower shall have no” and inserting the following words in place thereof: “neither Borrower, nor its members or non-member manager, or their respective partners, members, managers, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns, shall have any”.

10. Paragraph 9(b) is hereby modified as follows:

The following words are inserted immediately after the word “Borrower” appearing in the first line of said subparagraph:

“, but not its members or non-member manager, or their respective partners, members, managers, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns,”.

Page B-1

The following words are inserted immediately following the word “Rents” appearing in subparagraph (1) of said paragraph 9(b): “due after the earlier of (i) a declaration of default, or (ii) the occurrence of an Event of Default,”.

The following words are inserted immediately following the word “Rents” appearing in the first line of subparagraph (5) of said paragraph 9(b): “due after the earlier of (i) a declaration of default, or (ii) the occurrence of an Event of Default”. Paragraph 9(b)(5) is hereby further amended by replacing the words “Debt Service Amounts” appearing immediately preceding the words “, except that Borrower” with the words “the Indebtedness” and the words “Debt Service Amounts” appearing in subparagraph (ii) thereof with the words “Required Monthly Payments”.

11. Paragraph 9(c) is hereby modified as follows:

The following words are inserted immediately preceding the word “shall” appearing in the first line of said paragraph:

“, but not its members or non-member manager, or their respective partners, members, managers, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns,”.

The following words are inserted immediately following the word “Instrument” appearing in subparagraph (1) of said paragraph 9(c): “, or otherwise consented to by Lender;”.

The following words are inserted immediately following the word “Instrument” appearing in subparagraph (2) of said paragraph 9(c): “, unless consented to pursuant to Section 21(c) of the Security Instrument”.

12. Paragraph 10(a) is hereby amended by deleting the words “(but not less than all)” appearing therein and inserting the words “(or any part)” in place thereof.

13. Paragraph 10(b)(1) is hereby amended by deleting the words “after the expiration of the Prepayment Lockout Period” appearing therein and by deleting the words “(but not less than all)” appearing therein and inserting the words “(or any part)” in place thereof.

14. Paragraph 10(b)(1)((ii) is hereby amended by inserting the words “on the amount prepaid” in the second sentence of said subsection immediately following the words “will include interest”.

15. Paragraph 10(b)(1)(iii)(B) is hereby amended by inserting the words “on the amount prepaid” immediately following the words “accrued interest”.

16. Paragraph 10(b)(1)(iv) is hereby amended by inserting the parenthetical “(unless requested by Borrower)” immediately following the words “but not the obligation” appearing in the first and second sentences of said subparagraph.

17. Paragraph 10(b)(3) is hereby amended by deleting the words “a prepayment premium” appearing therein and inserting the words “the applicable prepayment premium, if any” in place thereof.

Page B-2

18. Paragraph 10(f) is hereby amended by adding the parenthetical “(and Lender by acceptance of this Note)” immediately following the word “Borrower” appearing in the third sentence of said subparagraph.

19. Paragraph 14 is hereby modified as follows:

By inserting the words “pursuant to the Loan Documents” in the first sentence thereof immediately preceding the words “in connection”.

By adding the words “without penalty or premium to Borrower” to the end of the fourth sentence of said paragraph immediately following the word “Note”.

20. Section 19 is hereby modified by inserting the words “, or Borrower to Lender,” immediately following the word “Borrower” appearing therein.

21. The Acknowledgement of Key Principal is hereby modified as follows:

The following new paragraph is hereby inserted immediately following the fourth paragraph:

“Key Principal’s director’s, officers, employees, and shareholders and their respective direct or indirect partners, members shareholders, managers, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors and assigns, shall have no personal liability under this Acknowledgement for the performance of any of the obligations of Key Principal under this Acknowledgement.”.

The sixth paragraph is hereby deleted in its entirety and the following new paragraph is hereby inserted in place thereof:

“In accordance with Section 2856 of the California Civil Code, Key Principal agrees to withhold the exercise of any and all subrogation and reimbursement rights against Borrower, against any other person who is a guarantor or surety with respect to the Indebtedness, and against any collateral or security for the Indebtedness, including any such rights pursuant to Sections 2847 and 2848 of the California Civil Code, until the Indebtedness has been indefeasibly paid and satisfied in full and the lien of the Security Instrument has been reconveyed or Lender has otherwise released, transferred or disposed of all of its right, title and interest in such collateral or security.”

The seventh paragraph is modified by adding the following words to the end of the fourth sentence of said paragraph immediately following the word “Security Instrument”: “at the address of Key Principal set forth below or such other address as to which notice of change of address has been given in accordance with Section 31(b) of the Security Instrument”.

Page B-3

The following new sentence is added to the end of the Acknowledgement and Agreement of Key Principal: “All authorizations and waivers contained in this Acknowledgement are made by Key Principal for itself only and not on behalf, or in its capacity as a member of, Borrower.”

Borrower’s Initials

Key Principal’s Initials

Page B-4

EX-10.8

Exhibit 10.8

ADJUSTABLE RATE MULTIFAMILY NOTE

(1-Month LIBOR Index Structured ARM)

US $3,100,000 June 1, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) jointly and severally (if more than one) promises to pay to the order of DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation, the principal sum of Three Million One Hundred Thousand and 00/100 Dollars (US $3,100,000.00), with interest on the unpaid principal balance from the Disbursement Date until fully paid at the rates applicable from time to time set forth in this Adjustable Rate Multifamily Note (“Note”).

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

Amortization Period: 0 months.

Adjustable Rate. The initial Adjustable Rate shall be 5.94% per annum until the first Rate Change Date. From and after each Rate Change Date until the next Rate Change Date, the Adjustable Rate shall be the sum of (i) the Current Index, and (ii) the Margin, which sum is then rounded to three decimal places, subject to the limitations that the Adjustable Rate shall not be less than the Margin.

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

Current Index: The published Index that is effective on the Business Day immediately preceding the applicable Rate Change Date.

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

Disbursement Date: The date of disbursement of Loan proceeds hereunder.

First Payment Date: The first day of July, 2007.

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

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

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Initial Adjustable Rate: 5.94% per annum until the first Rate Change Date.

Lender: The holder of this Note.

Loan: The loan evidenced by this Note.

Loan Year: The period beginning on the Disbursement Date and ending on the day before the twelfth Rate Change Date and each successive 12-month period thereafter.

Margin: .62%.

Maturity Date: The first day of June, 2017, or any earlier date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise.

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

Prepayment Lockout Period: That period of time as may be stated in Schedule A attached hereto, if any.

Prepayment Premium Term: The period beginning on the Disbursement Date and ending on the last calendar day of the 4^th month prior to the month in which the Maturity Date occurs.

Property Jurisdiction: The jurisdiction in which the Land is located.

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

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

Servicing Payment Date: Two (2) Business Days prior to the date each monthly payment is due under this Note.

Event of Default, Key Principal and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Security Instrument.

2. Address for Payment. All payments due under this Note shall be payable at One Beacon Street, 14^th Floor, Boston, Massachusetts 02108, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3. Payment of Principal and Interest. This Note will accrue interest on the outstanding principal balance at the Adjustable Rate. Principal and interest shall be paid as follows:

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

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(b) Interest Accrual. Interest shall accrue on the unpaid principal balance of this Note at the Adjustable Rate. The Adjustable Rate shall change on each Rate Change Date until the loan is repaid in full. Interest under this Note shall be computed on the basis of a 360-day year. The amount of each monthly payment made by Borrower pursuant to Paragraph 3(d) below that is allocated to interest will be based on the actual number of calendar days during such month and shall be calculated by multiplying the unpaid principal balance of this Note by the applicable Adjustable Rate, dividing the product by 360 and multiplying the quotient by the actual number of days elapsed during the month. Borrower understands that the amount allocated to interest for each month will vary depending on the actual number of calendar days during such month.

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

(d) Monthly Payments. Borrower acknowledges and agree to pay all Required Monthly Payments (defined below) due under this Note to the Lender on the Servicing Payment Date even though such Required Monthly Payments are due on the first day of every month. Select one only:

¨ Amortizing Loan. If the Loan is an amortizing Loan, consecutive monthly installments of principal and interest, each in the amount of the Required Monthly Payment (defined below), shall be payable on the First Payment Date and on the first day of each month thereafter until the entire unpaid principal balance evidenced by this Note is fully paid. The initial Required Monthly Payment shall be the amount required to pay the unpaid principal balance of this Note in equal monthly installments, including accrued interest at the Initial Adjustable Rate over the Original Amortization Period. The initial Required Monthly Payment shall be                                                               Dollars (US $                                         ). Thereafter, to the extent that the Adjustable Rate has changed, the Required Monthly Payment shall change on each Payment Change Date based on the then-applicable Adjustable Rate, and shall be in an amount equal to the sum of (i) a principal payment equal to                                                               Dollars (US $                                ) plus (ii) an interest payment calculated utilizing the accrual method stated in Paragraph 3(b) above.

x Interest Only Loan. If the Loan is an interest-only Loan, consecutive monthly installments of interest only, each in the amount of the Required Monthly Payment (defined below), shall be payable on the First Payment Date and on the first day of each month thereafter until the entire unpaid principal balance evidenced by this Note is fully paid. The entire unpaid principal balance and accrued but unpaid interest, if not sooner paid, shall be due and payable on the Maturity Date. The initial Required Monthly Payment shall be Fifteen Thousand Three Hundred Forty-Five and 00/100 Dollars (US $15,345.00). Thereafter, to the extent that the Adjustable Rate has changed, the Required Monthly Payment

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shall change on each Payment Change Date based on the then-applicable Adjustable Rate. The amount of the initial and any changed Required Monthly Payment shall be calculated utilizing the interest accrual method stated in Paragraph 3(b) above.

(e) Conversion Option. Borrower is simultaneously herewith executing a Conversion Agreement (the “Conversion Agreement”) which provides, among other things, that Borrower shall have the right at any time after the expiration of three (3) full calendar months after the Note date to convert the interest rate on this Note to a fixed rate (the “Fixed Rate Conversion Option”). If Borrower timely exercises the Fixed Rate Conversion Option, the applicable interest rate under this Note, beginning on the date the conversion to a fixed rate becomes effective and continuing until the Maturity Date as the Maturity Date may be modified as reflected in an amendment to this Note, shall not be the rate determined in accordance with subsection (c) above, but shall be the fixed rate established in accordance with the terms of the Conversion Agreement. Such fixed rate shall be reflected in an amendment to this Note.

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

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

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

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

4. Application of Payments. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order

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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. If Lender accepts a guaranty of only a portion of the Indebtedness, Borrower hereby waives its right under California Civil Code Section 2822(a) to designate the portion of the Indebtedness which shall be satisfied by any guarantor’s partial payment.

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

6. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any prior notice to Borrower. Lender may exercise this option to accelerate regardless of any prior forbearance.

7. Late Charge. MONTHLY PAYMENTS UNDER THIS NOTE ARE DUE ON THE FIRST DAY OF EACH AND EVERY MONTH UNTIL THIS NOTE IS PAID IN FULL. BORROWER HEREBY AGREES THAT SUCH PAYMENTS SHALL BE MADE TO THE LENDER ON THE SERVICING PAYMENT DATE. THERE IS NO “GRACE” PERIOD FOR ANY MONTHLY INSTALLMENTS DUE HEREUNDER. If any monthly installment due hereunder is not received by Lender on or before the first-day of each month or if any other amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender before or on the date such amount is due, counting from and including the date such amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such monthly installment or other amount due. Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan and that it is extremely difficult and impractical to determine those additional expenses. Borrower agrees that the late charge payable pursuant to this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment. The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8.

8. Default Rate. So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at the Default Rate. If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any monthly installment or other payment due under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk. Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate

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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.

9. Limits on Personal Liability.

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

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

(1) failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence;

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

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

(4) fraud or written material misrepresentation by Borrower, Key Principal or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedness or any request for any action or consent by Lender; or

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

(c) Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default:

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

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

(d) To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. If Borrower is a married person, then Borrower agrees that Lender may look to all of Borrower’s community property and separate property to satisfy Borrower’s recourse obligations under this Paragraph 9. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

10. Lockout; Voluntary and Involuntary Prepayments.

(a) Borrower may voluntarily prepay all (but not less than all) of the indebtedness evidenced hereby subject to the prepayment provisions and any Prepayment Lockout Period described in Schedule A.

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

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

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

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

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Day of the Month in which such prepayment occurs. If the Last Day of the Month is not a Business Day, then the Borrower must make the payment on the Business Day immediately preceding the Last Day of the Month.

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

(iv) If, for any reason, Borrower fails to prepay this Note within five (5) Business Days after the Intended Prepayment Date, then Lender shall have the right, but not the obligation, to recalculate the prepayment premium pursuant to Schedule A based upon the date that Borrower actually prepays this Note. Notwithstanding the foregoing, if the delayed prepayment occurs in a month other than the month stated in the original Prepayment Notice, then Lender shall (a) have the right, but not the obligation, to recalculate the prepayment premium pursuant to Schedule A based upon the date that Borrower actually prepays this Note and (b) recalculate the amount of interest payable. In either instance, for purposes of recalculation, such new prepayment date shall be deemed the “Intended Prepayment Date.”

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

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

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

(d) Schedule A is hereby incorporated by reference into this Note.

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

(f) Borrower recognizes that any prepayment of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from a default by Borrower, will result in Lender’s incurring loss, including reinvestment loss, additional expense and frustration or impairment of Lender’s ability to meet its commitments to third parties. Borrower agrees to pay to Lender upon demand damages for the

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detriment caused by any prepayment, and agrees that it is extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges and agrees that the formula for calculating prepayment premiums set forth on Schedule A represents a reasonable estimate of the damages Lender will incur because of a prepayment.

(g) Borrower further acknowledges that the prepayment premium provisions of this Note are a material part of the consideration for the loan evidenced by this Note, and acknowledges that the terms of this Note are in other respects more favorable to Borrower as a result of the Borrower’s voluntary agreement to the prepayment premium provisions.

11. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

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

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

14. Loan Charges. Borrower agrees to pay an effective rate of interest equal to the sum of the interest rate provided for in this Note and any additional rate of interest resulting from any other charges of interest or in the nature of interest paid or to be paid in connection with the loan evidenced by this Note and any other fees or amounts to be paid by Borrower pursuant to any of the other Loan Documents. 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 permitted to be charged under applicable law. 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

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deemed to be allocated and spread ratably 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.

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

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

17. Governing Law. This Note shall be governed by the law of the jurisdiction in which the Land is located.

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

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

20. Consent to Jurisdiction and Venue. Borrower and Key Principal each agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note. Borrower and Key Principal each irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

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

ATTACHED SCHEDULES. The following Schedules are attached to this Note:

x Schedule A Prepayment Premium (required)

x Schedule B Modifications to Multifamily Note

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

BORROWER
DOUGLAS EMMETT RESIDENTIAL 2006, LLC, a Delaware limited liability company
By:	Douglas Emmett Management, Inc., a Delaware corporation, its Manager
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
20-5945327
Borrower’s Social Security/Employer ID Number

Fannie Mae Commitment Number:

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PAY TO THE ORDER OF                                                              

WITHOUT RECOURSE

DEUTSCHE BANK BERKSHIRE MORTGAGE, INC.,

a Delaware corporation

By:

Name:

Title:

By:

Name:

Title:

Date:                         , 2007

Fannie Mae Commitment Number:

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ACKNOWLEDGMENT AND AGREEMENT OF KEY PRINCIPAL TO

PERSONAL LIABILITY FOR EXCEPTIONS TO NON-RECOURSE LIABILITY

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

The obligations of Key Principal shall be performed without demand by Lender and shall be unconditional irrespective of the genuineness, validity, or enforceability of the Note, or any other Loan Document, and without regard to any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Key Principal hereby waives any and all benefits and defenses under California Civil Code Section 2810 and agrees that by doing so Key Principal shall be liable even if Borrower had no liability at the time of execution of the Note, the Security Instrument or any other Loan Document, or thereafter ceases to be liable. Key Principal hereby waives any and all benefits and defenses under California Civil Code Section 2809 and agrees that by doing so Key Principal’s liability may be larger in amount and more burdensome than that of Borrower. Key Principal hereby waives the benefit of all principles or provisions of law, which are or might be in conflict with the terms of this Acknowledgment, and agrees that Key Principal’s obligations shall not be affected by any circumstances which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Key Principal hereby waives the benefits of any right of discharge and all other rights under any and all statutes or other laws relating to guarantors or sureties, to the fullest extent permitted by law, diligence in collecting the Indebtedness, presentment, demand for payment, protest, all notices with respect to the Note including this Acknowledgment, which may be required by statute, rule of law or otherwise to preserve Lender’s rights against Key Principal under this Acknowledgment, including notice of acceptance, notice of any amendment of the Loan Documents, notice of the occurrence of any default or Event of Default, notice of intent to accelerate, notice of acceleration, notice of dishonor, notice of foreclosure, notice of protest, notice of the incurring by Borrower of any obligation or indebtedness and all rights to require Lender to (a) proceed against Borrower, (b) proceed against any general partner of Borrower, (c) proceed against or exhaust any collateral held by Lender to secure the repayment of the Indebtedness, or (d) if Borrower is a partnership, pursue any other remedy it may have against Borrower, or any general partner of Borrower, including any and all benefits under California Civil Code Sections 2845, 2849 and 2850.

Key Principal understands that the exercise by Lender of certain rights and remedies contained in the Security Instrument (such as a nonjudicial foreclosure sale) may affect or eliminate Key Principal’s right of subrogation against Borrower and that Key Principal may therefore incur a partially or totally nonreimburseable liability under this Acknowledgment. Nevertheless, Key Principal hereby authorizes and empowers Lender to exercise, in its sole and absolute discretion, any right or remedy, or any combination thereof, which may then be available, since it is the intent and purpose of Key Principal that the obligations under this Acknowledgment shall be absolute, independent and unconditional under any

Page 13

and all circumstances. Key Principal expressly waives any defense (which defense, if Key Principal had not given this waiver, Key Principal might otherwise have) to a judgment against Key Principal by reason of a nonjudicial foreclosure. Without limiting the generality of the foregoing, Key Principal hereby expressly waives any and all benefits under (i) California Code of Civil Procedure Section 580a (which Section, if Key Principal had not given this waiver, would otherwise limit Key Principal’s liability after a nonjudicial foreclosure sale to the difference between the obligations of Key Principal under this Acknowledgment and the fair market value of the property or interests sold at such nonjudicial foreclosure sale), (ii) California Code of Civil Procedure Sections 580b and 580d (which Sections, if Key Principal had not given this waiver, would otherwise limit Lender’s right to recover a deficiency judgement with respect to purchase money obligations and after a nonjudicial foreclosure sale, respectively), and (iii) California Code of Civil Procedure Section 726 (which Section, if Key Principal had not given this waiver, among other things, would otherwise require Lender to exhaust all of its security before a personal judgment could be obtained for a deficiency). Notwithstanding any foreclosure of the lien of the Security Instrument, whether by the exercise of the power of sale contained in the Security Instrument, by an action for judicial foreclosure or by Lender’s acceptance of a deed in lieu of foreclosure, Key Principal shall remain bound under this Acknowledgment.

In accordance with Section 2856 of the California Civil Code, Key Principal also waives any right or defense based upon an election of remedies by Lender, even though such election (e.g., nonjudicial foreclosure with respect to any collateral held by Lender to secure repayment of the Indebtedness) destroys or otherwise impairs the subrogation rights of Key Principal or the right of Key Principal (after payment of the obligations guaranteed by Key Principal under this Acknowledgment) to proceed against Borrower for reimbursement, or both, by operation of Section 580d of the California Code of Civil Procedure or otherwise.

In accordance with Section 2856 of the California Civil Code, Key Principal waives any and all other rights and defenses available to Key Principal by reason of Sections 2787 through 2855, inclusive, of the California Civil Code, including any and all rights or defenses Key Principal may have by reason of protection afforded to Borrower with respect to any of the obligations of Key Principal under this Acknowledgment pursuant to the antideficiency or other laws of the State of California limiting or discharging Borrower’s Indebtedness, including Sections 580a, 580b, 580d, and 726 of the California Code of Civil Procedure.

In accordance with Section 2856 of the California Civil Code, Key Principal agrees to withhold the exercise of any and all subrogation and reimbursement rights against Borrower, against any other Person, and against any collateral or security for the Indebtedness, including any such rights pursuant to Sections 2847 and 2848 of the California Civil Code, until the Indebtedness has been indefeasibly paid and satisfied in full, all obligations owed to Lender under the Loan Documents have been fully performed, and Lender has released, transferred or disposed of all of its right, title and interest in such collateral or security.

Key Principal acknowledges that Key Principal has received a copy of the Note and all other Loan Documents. Neither this Acknowledgment nor any of its provisions may be waived, modified, amended, discharged, or terminated except by an agreement in writing signed by the party against which the enforcement of the waiver, modification, amendment, discharge, or termination is sought, and then only to the extent set forth in that agreement. Key Principal agrees to notify Lender (in the manner for giving notices provided in Section 31 of the Security Instrument) of any change of Key Principal’s address within 10 Business Days after such change of address occurs. Any notices to Key Principal shall be given in the manner provided in Section 31 of the Security Instrument. Key Principal agrees to be bound by Paragraphs 20 and 21 of the Note.

Page 14

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

(Remainder of this page intentionally left blank.)

Page 15

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

KEY PRINCIPAL
DOUGLAS EMMETT PROPERTIES, LP, a Delaware limited partnership
By:	Douglas Emmett Management, Inc., a Delaware corporation, its General Partner
	By:
	Name:	William Kamer
	Title:	Chief Financial Officer
Address:		808 Wilshire Boulevard, Suite 200
		Santa Monica, California 90401
		Attn: Jordan L. Kaplan and William Kamer
Employer ID No.: 20-3213411

Page 16

SCHEDULE A

PREPAYMENT PREMIUM

STRUCTURED ARM LOAN - GRADUATED PREPAYMENT PREMIUM

Any prepayment premium payable under Paragraph 10 of this Note shall be computed as follows:

(a) Borrower may voluntarily prepay all (or any part) of the indebtedness evidenced hereby at any time during the Loan term, subject to the requirements of subparagraph (b) below.

(b) If Borrower makes a voluntary prepayment of this Note, Lender accelerates the unpaid principal balance of this Note, or the Lender applies collateral held by Lender to the repayment of any portion of the unpaid principal balance as permitted in Section 10(b)(3) of the Note (if any), the prepayment premium shall be equal to the following percentage of the amount of principal being prepaid at the time of such prepayment, acceleration or application:

First Loan Year	3.00%
Second Loan Year	2.00%
Third Loan Year	1.00%
Fourth Loan Year	1.00%
Fifth Loan Year	1.00%
Sixth Loan Year	1.00%
Seventh Loan Year	1.00%
Eighth Loan Year	.50%
Ninth Loan Year	0.00%
Tenth Loan Year	0.00%

Borrower Initials

Page A-1

SCHEDULE B

MODIFICATIONS TO MULTIFAMILY NOTE

The following modifications are made to the text of the Note and the Acknowledgement of Key Principal that precede this Schedule:

1. The definition of the term “Index” appearing in Paragraph 1 is hereby modified by inserting the words “, in its reasonable discretion,” immediately following the word “Lender” appearing in the second sentence thereof.

2. The definition of the term “Prepayment Lockout Period” appearing in Paragraph 1 is hereby modified to provide as follows: “None.”.

3. The definition of the term “Prepayment Premium Term” appearing in Paragraph 1 is hereby deleted.

4. Paragraph 3(a) is hereby modified by deleting the words “simultaneously with the execution of this Note” and replacing them with the words “on the Disbursement Date”.

5. Paragraph 3(c) is hereby modified by inserting the word “monthly” immediately preceding the words “in arrears” appearing in the third sentence of said subparagraph.

6. Paragraph 3(f) is hereby modified by deleting the word “Before” and inserting the words “Not less than three (3) Business Days before” in place thereof.

7. Paragraph 3(g) is hereby modified by inserting the word “promptly” immediately following the word “thereafter” appearing in subparagraph (ii) thereof.

8. Paragraph 6 is hereby modified by inserting the word “applicable” immediately preceding the words “prepayment premium” appearing in the first sentence thereof.

9. Paragraph 9(a) is hereby modified by deleting the words “Borrower shall have no” and inserting the following words in place thereof: “neither Borrower, nor its members or non-member manager, or their respective partners, members, managers, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns, shall have any”.

10. Paragraph 9(b) is hereby modified as follows:

The following words are inserted immediately after the word “Borrower” appearing in the first line of said subparagraph:

“, but not its members or non-member manager, or their respective partners, members, managers, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns,”.

Page B-1

The following words are inserted immediately following the word “Rents” appearing in subparagraph (1) of said paragraph 9(b): “due after the earlier of (i) a declaration of default, or (ii) the occurrence of an Event of Default,”.

The following words are inserted immediately following the word “Rents” appearing in the first line of subparagraph (5) of said paragraph 9(b): “due after the earlier of (i) a declaration of default, or (ii) the occurrence of an Event of Default”. Paragraph 9(b)(5) is hereby further amended by replacing the words “Debt Service Amounts” appearing immediately preceding the words “, except that Borrower” with the words “the Indebtedness” and the words “Debt Service Amounts” appearing in subparagraph (ii) thereof with the words “Required Monthly Payments”.

11. Paragraph 9(c) is hereby modified as follows:

The following words are inserted immediately preceding the word “shall” appearing in the first line of said paragraph:

“, but not its members or non-member manager, or their respective partners, members, managers, shareholders, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors or assigns,”.

The following words are inserted immediately following the word “Instrument” appearing in subparagraph (1) of said paragraph 9(c): “, or otherwise consented to by Lender;”.

The following words are inserted immediately following the word “Instrument” appearing in subparagraph (2) of said paragraph 9(c): “, unless consented to pursuant to Section 21(c) of the Security Instrument”.

12. Paragraph 10(a) is hereby amended by deleting the words “(but not less than all)” appearing therein and inserting the words “(or any part)” in place thereof.

13. Paragraph 10(b)(1) is hereby amended by deleting the words “after the expiration of the Prepayment Lockout Period” appearing therein and by deleting the words “(but not less than all)” appearing therein and inserting the words “(or any part)” in place thereof.

14. Paragraph 10(b)(1)((ii) is hereby amended by inserting the words “on the amount prepaid” in the second sentence of said subsection immediately following the words “will include interest”.

15. Paragraph 10(b)(1)(iii)(B) is hereby amended by inserting the words “on the amount prepaid” immediately following the words “accrued interest”.

16. Paragraph 10(b)(1)(iv) is hereby amended by inserting the parenthetical “(unless requested by Borrower)” immediately following the words “but not the obligation” appearing in the first and second sentences of said subparagraph.

17. Paragraph 10(b)(3) is hereby amended by deleting the words “a prepayment premium” appearing therein and inserting the words “the applicable prepayment premium, if any” in place thereof.

Page B-2

18. Paragraph 10(f) is hereby amended by adding the parenthetical “(and Lender by acceptance of this Note)” immediately following the word “Borrower” appearing in the third sentence of said subparagraph.

19. Paragraph 14 is hereby modified as follows:

By inserting the words “pursuant to the Loan Documents” in the first sentence thereof immediately preceding the words “in connection”.

By adding the words “without penalty or premium to Borrower” to the end of the fourth sentence of said paragraph immediately following the word “Note”.

20. Section 19 is hereby modified by inserting the words “, or Borrower to Lender,” immediately following the word “Borrower” appearing therein.

21. The Acknowledgement of Key Principal is hereby modified as follows:

The following new paragraph is hereby inserted immediately following the fourth paragraph:

“Key Principal’s director’s, officers, employees, and shareholders and their respective direct or indirect partners, members shareholders, managers, directors, officers, employees, trustees, beneficiaries, constituents, legal or personal representatives, successors and assigns, shall have no personal liability under this Acknowledgement for the performance of any of the obligations of Key Principal under this Acknowledgement.”.

The sixth paragraph is hereby deleted in its entirety and the following new paragraph is hereby inserted in place thereof:

“In accordance with Section 2856 of the California Civil Code, Key Principal agrees to withhold the exercise of any and all subrogation and reimbursement rights against Borrower, against any other person who is a guarantor or surety with respect to the Indebtedness, and against any collateral or security for the Indebtedness, including any such rights pursuant to Sections 2847 and 2848 of the California Civil Code, until the Indebtedness has been indefeasibly paid and satisfied in full and the lien of the Security Instrument has been reconveyed or Lender has otherwise released, transferred or disposed of all of its right, title and interest in such collateral or security.”

The seventh paragraph is modified by adding the following words to the end of the fourth sentence of said paragraph immediately following the word “Security Instrument”: “at the address of Key Principal set forth below or such other address as to which notice of change of address has been given in accordance with Section 31(b) of the Security Instrument”.

Page B-3

The following new sentence is added to the end of the Acknowledgement and Agreement of Key Principal: “All authorizations and waivers contained in this Acknowledgement are made by Key Principal for itself only and not on behalf, or in its capacity as a member of, Borrower.”

Borrower’s Initials

Key Principal’s Initials

Page B-4

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jordan L. Kaplan, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Douglas Emmett, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2007	By:	/s/ JORDAN L. KAPLAN
		Jordan L. Kaplan
		President and Chief Executive Officer
		Douglas Emmett, Inc.

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, William Kamer, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Douglas Emmett, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officers and I have disclosed, based on our recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2007	By:	/s/ WILLIAM KAMER
		William Kamer
		Chief Financial Officer
		Douglas Emmett, Inc.

EX-32.1

EXHIBIT 32.1

OFFICERS’ CERTIFICATIONS

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Douglas Emmett, Inc. (the “Company”), hereby certifies, to such officer’s knowledge, that:

(i) the accompanying quarterly report on Form 10-Q of the Company for the period ended June 30, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2007	By:	/s/ JORDAN L. KAPLAN
		Jordan L. Kaplan
		President and Chief Executive Officer
		Douglas Emmett, Inc.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Douglas Emmett, Inc. (the “Company”), hereby certifies, to such officer’s knowledge, that:

(i) the accompanying quarterly report on Form 10-Q of the Company for the period ended June 30, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2007	By:	/s/ WILLIAM KAMER
		William Kamer
		Chief Financial Officer
		Douglas Emmett, Inc.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.